Newsletter for Dec 22, 2024: Flexing, Spending, Financial Aid

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Dear Financial Samurais,

I hope everyone gets a chance to relax and enjoy the holidays next week. My family and I will be heading to Oahu to visit my folks—looking forward to some quality family time and sunshine!

The market selloff on Wednesday, December 18, following the Fed's decision to cut the Fed Funds rate by another 0.25%, was a reminder of the power of expectations. With the S&P 500 trading at 22–23X forward earnings, compared to the historical average of ~17X, valuations are undeniably stretched.

Looking ahead to 2025, if S&P 500 earnings grow to $288/share by 2026 and valuations revert to historical averages, the index could fall to 4,896—about 17% lower than current levels. This highlights how high expectations for earnings growth leave little room for disappointment.

The Fed has also struck a more cautious tone on inflation, signaling just two potential 0.25% rate cuts in 2025. Suddenly, my market-low forecast for only a 4% return for the S&P 500 in 2025 no longer seems farfetched.

Financial Samurai newsletter December 22, 2024: Fed Funds rate expectations

Spend Some Of Your Stock Market Winnings

Personally, I’ve always considered stocks to be a bit like “funny money” due to their lack of intrinsic value. That’s why I believe it’s wise to periodically capitalize on gains by taking profits and investing in things that improve your quality of life.

I recently put together a list of fun and practical purchases you can make with your stock market returns. Most items are surprisingly affordable, though there’s one big-ticket item I’d gladly pay 5–10X its cost for because of the incredible value it provides.

See: Cheap, Fun, and Practical Things To Buy With Your Stock Market Returns

More Money For College Than You Think

After speaking with John Durante, host of The College Admissions Podcast and a high school principal in Long Island, I’m convinced there’s far more free financial aid available for college than most people realize.

Many of us, as responsible savers and investors, assume we’re “too good” or “too wealthy” to qualify for financial aid. It’s easy to think aid is reserved solely for low- or middle-income families. But by definition, most of us fall into the middle class—and financial aid is more accessible than we might think.

If your household income is up to $300,000 per child and you have up to $1.5 million in assets per adult, your child could still have a strong chance of receiving grants and scholarships. I even spoke with a parent whose private grade school in San Francisco provides financial aid to families earning up to $500,000 per parent!

So if your income and net worth fall within these ranges, don’t hesitate to apply for financial aid. The financial aid office isn't going to judge you, something I think many families earning six figures worry about.

See: The Biggest Financial Misconception About Applying For College. The post contains my conversation with John, a budget about a family earning $500,000 who is receiving financial aid, and more examples.

Traditional Gender Roles Are Changing

With females projected to earn 60% of all college degrees by 2027, compared to 40% for males, it’s logical to anticipate a rise in households with female primary or solo breadwinners. But I'm not sure how well this logic is making it through society.

There seems to be a growing movement toward traditional gender roles, with men taking on the breadwinner role and women staying home to manage the household. Movements like #tradwife and the “manosphere” promote the idea that the ultimate flex for a man is to fully provide for his wife so she doesn’t have to work.

Since 2010, however, I’ve embraced the opposite perspective. In my view, the bigger flex is for a man not to have to work because his wife is providing for him. This dynamic is increasingly visible in the FIRE movement, where some men claim to have retired early while their wives continue working.

Sadly, many of these men fail to acknowledge their wives’ contributions in podcast interviews or media features about their financial success. The reason is likely due to feeling embarrassed by their role in the household.

In my post, The Biggest Flex By Men Is Not What You Think, I challenge traditional roles and stereotypes because the world is evolving. There are countless men who would excel as homemakers but avoid the role out of fear of societal judgment. Similarly, there are many women who aspire to long, fulfilling careers but hesitate due to similar fears of criticism.

Forget what others think. The healthiest relationships thrive when both individuals choose the roles that best suit them, free from societal expectations. The comments in the post are great and please answer the one-question survey.

Going Into Reflection Mode

As the year comes to a close, I’ll take some time to reflect on what transpired—the hits, the misses, and everything in between. I hope you’ll also find a moment to look back on your year and appreciate how far you’ve come.

Above all, I feel incredibly grateful to still be here, doing what I love and engaging with all of you. In a world that’s constantly buzzing with activity, it’s refreshing to tackle important topics together and hear your unique perspectives.

Wishing you a wonderful week ahead!

To your financial future,

Sam

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