A country’s credit downgrade happens when a credit rating agency, like Moody’s, Fitch, or Standard & Poor’s (the big three), decides that a country is less likely to pay back its debts, lowering its credit rating. Countries like the United States sometimes need to borrow money to fund projects like infrastructure, social services, or managing the national debt.

WHAT IS A CREDIT RATING?

Credit ratings give investors an idea of how risky it is to lend money to a specific country. Triple A (AAA) being the best grade and a D being the worst. A “credit downgrade” is essentially the equivalent of your grade slipping from an A to a B or even a D. Now, imagine that concept globally, with billions (if not trillions) of dollars at stake.

A high credit rating is excellent for a country because it implies that it is reliable and more likely to pay back its debts. It’s like having a perfect credit score when applying for a home loan; you’re considered a less risky borrower. But if that rating gets downgraded, it can mean trouble for the borrower. A lower credit rating often means higher borrowing costs because lenders typically want more return for taking on more risk.

A country’s credit downgrade isn’t just a financial issue—it can also influence politics and policy decisions. Leaders may have to make unpopular decisions to improve the country’s economic health, which may not always resonate well with the citizens. Policymakers may argue for increasing taxes or managing public spending, which can impact the country’s citizens.

WHAT IS THE RIPPLE EFFECT?

Moreover, there’s often a ripple effect to a country’s credit downgrade. Investors might withdraw or decrease investments due to the increased risk leading to lower economic growth and, potentially, higher unemployment rates. Plus, a downgrade can impact the strength of a country’s currency in the foreign exchange market.

A country’s credit downgrade is often a complex, intricate implication of economics, which plays a significant role in global finance. Here are some ways the U.S.’s credit downgrade may impact citizens:

• Higher mortgage rates
• Higher credit card interest rates
• The stock market may experience volatility.
• Higher loan rates on cars, etc.
• The rating may impact the bond market.
• The economy may slow.

DOES DOWNGRADE MEAN DEFAULT?

Government credit ratings are like personal credit scores for individuals since they provide helpful information to lenders. However, it’s important to understand the potential risk and that a credit downgrade is not a guarantee of default.

SWG3054142-0823a The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

For those who are looking for financial advice, there are many options. Deciding who to work with is a challenging problem. At The Whisler Agency, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

Have you ever wondered how some families maintain their intergenerational wealth? What’s their secret sauce? The answer may lie in using life insurance to establish a legacy that lasts over multiple generations.

Determining if life insurance as an intergenerational wealth-building strategy is suitable for your family is the first step. Here are some other things to know about life insurance:

UNDERSTANDING TERM VS. PERMANENT LIFE INSURANCE

Term life insurance

Many people purchase a term life insurance policy because it’s cheaper. But term life insurance won’t help create wealth since it lasts only for a predetermined period. Once you outlive that term, the policy doesn’t exist anymore.

PERMANENT LIFE INSURANCE

Permanent life insurance is a permanent, lasting insurance that lasts until death as long as premiums are paid. It’s more expensive but also has a cash value accumulation feature. The cash value grows over time, and when you pass away, your beneficiaries receive the policy’s face value and accumulation tax free.

The cash value of permanent life insurance can be a source of retirement income when taken through policy loans. When you pass away, your beneficiaries receive the policy’s face amount minus any policy loans – tax-free.

COMMITMENT

Creating intergenerational wealth through life insurance is all about long-term commitment. If you start your policy at a younger age and consistently pay your premiums, the policy’s cash value may become a significant financial resource. You could use it for retirement or let it grow, leaving behind a substantial death benefit for your heirs.

The premiums for permanent life insurance can be significantly higher compared to term life. However, if your goal is to build intergenerational wealth, the cost may be justified since it’s a strategy for building wealth for future generations.

UNDERSTANDING POLICY LOANS

Policy loans are the funds you can borrow against the cash value of your permanent life insurance policy. For instance, if a financial need arises, you could take up a policyholder loan instead of withdrawing from your retirement savings. The interest rate may be lower, and you may have flexibility over the repayment schedule. However, the death benefit may be reduced if the loan is outstanding and the policy owner dies.

IRREVOCABLE LIFE INSURANCE TRUSTS (ILIT)

Using life insurance as a wealth creation strategy may involve irrevocable life insurance trusts. An irrevocable life insurance trust (ILIT) is a trust created during an insured’s lifetime that owns and controls a term or permanent life insurance policy or policies.

We’ve already established that one life insurance benefit is its tax-free death benefit. However, if your estate is considerably large, it may be subject to estate taxes, including your life insurance proceeds. An ILIT can help keep your life insurance out of your taxable estate. Using this strategy, you can pass on more wealth to your heirs.

IN CONCLUSION INTERGENERATIONAL WEALTH

Life insurance as part of your estate plan may be an appropriate strategy for creating intergenerational wealth. With your financial, legal, and insurance professionals’ help, you can objectively determine how to leverage life insurance for your intergenerational wealth creation goals. Just remember, as with any wealth-building plan, starting early is essential.

SWG3054142-0823c The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

For those who are looking for financial advice, there are many options. Deciding who to work with is a challenging problem. At The Whisler Agency, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!

For some people, managing their finances may feel like walking on a tightrope, juggling endless expenses. But with accountability, you can turn managing money into a positive endeavor.

Accountability in finance refers to being responsible enough to track, manage and optimize your spending and savings. Finally, here are some ideas to get started managing your finances with accountability:

MAKE YOUR BUDGET YOUR COMPASS

Budgeting is the starting point for managing money responsibly. Creating a monthly budget allows you to allocate funds to different categories like a mortgage or rent, groceries, utilities, entertainment, and savings. A budget gives you a clear picture of how much money is coming in and where it is going. You may not need complicated calculators, just a simple budget layout to serve as your compass, helping you navigate through your financial world. A budget is a great tool to add accountability to your financial life.

TRACK YOUR SPENDING

After establishing a budget, the next crucial aspect is tracking your spending. Keep receipts or use modern, sophisticated mobile apps to track your expenses across categories automatically. Either way, you’ll hold yourself accountable for every dollar spent by reviewing your spending. In conclusion, there can be no accountability without tracking your spending.

ESTABLISH EMERGENCY FUNDS

Life’s unpredictable; losing a job or having an unexpected expense can leave a massive dent in your budget. As well as building an emergency fund acts as a safety net against these unpredictable events. Including a regular contribution to your emergency fund in your budget symbolizes financial accountability.

INVEST APPROPRIATELY FOR YOUR SITUATION

Investing your money appropriately for your situation is another facet of financial accountability. Consistent contributions into your retirement savings plan, stocks, bonds, or mutual funds can help accumulate wealth over the years, enabling you to pursue your long-term financial goals. Before investing, meet with your financial professional to help ensure the investment is appropriate for your risk tolerance, timeline, objectives, and situation.

GET REGULAR FINANCIAL CHECK-UPS

Like our health, even our finances need a routine check-up. It’s not just a one-time thing to set a budget, track spending, or invest wisely. Review your financial health regularly and adjust according to your financial situation. It’s like going to the gym; you don’t get fit by just turning up once! In addition, make sure to schedule regular checkups with your financial and insurance professionals.

In addition, managing finances with accountability can sometimes feel daunting, especially when we face financial setbacks. It’s easy to lose track and be overwhelmed. Begin with small, manageable steps, and responsible habits may evolve over time, ensuring you are financially accountable.

CONSULT A PROFESSIONAL

The art of managing your finances doesn’t require you to be a mathematical genius or a finance guru. It’s all about adding accountability, keeping a close eye on your money, and making appropriate decisions.

SWG3054142-0823e The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

For those who are looking for financial advice, there are many options. Deciding who to work with is a challenging problem. At The Whisler Agency, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!