Jerome: You can now say I think for the first time that the disinflationary process has started. We can see that and we see it really in goods prices so far.

Amy: Tonight, Fed Chair, Jerome Powell, making a big statement that could mean some light at the end of the tunnel in the fight to lower inflation. You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner along with Steve Sprovach. It is Groundhog Day. And for the past year, well, it has felt like Groundhog Day when it comes to the Federal Reserve and raising interest rates. Of course, we started with that soundbite with Fed Chair Powell. This is not a man who gets super psyched about anything, right? I mean, it's not like the most exciting soundbite in the world, but maybe you should be excited about what he's saying.

Steve: You know, investors pay attention to, did his eyebrow twitch? What tie is he wearing? And just the fact that he didn't say anything along the lines of, "I don't know what the markets are doing. They're expecting a pivot. We're not gonna pivot." He didn't say anything like that. And he didn't exactly say happy days are here again, but just the fact that he didn't come out and say, "We're gonna keep raising rates. We gotta keep raising rates. Don't expect us to do anything less." Just the fact that he didn't go that far, Amy, that was good news, and it made markets go from being down almost 400 points to actually being in the green while he was talking. This is the guy who normally as soon as he opens his mouth up, markets tank.

Amy: Absolutely. A free fall.

Steve: Yeah, they were very happy. I was very happy to hear his tone. I think it's a good sign that maybe the light at the end of the tunnel is not an oncoming train.

Amy: I think it's so interesting, though, how these experts, these analysts, these economists dissect the tone of what he says, right? He didn't say, "We're backing down" in any way, shape, or form.

Steve: Not at all.

Amy: He maybe kind of opened the door to a kind of a more wait-and-see approach. I think most economists would say, "Okay, probably the next time they meet in March, we'll still have another interest rate hike," and then kind of see where they go from there. But I thought it was really interesting because I was reading kind of one analyst and he said, "Powell didn't bring his A game. He had COVID last month and I think he's still not feeling well." And I thought, "Oh, my gosh. This is just how closely watched everything this man says is." And, you know, from a few different standpoints, it's what they end up doing, right, raising interest rates. And then, of course, it's what he says during the press conference. And then a few weeks later, when minutes... Like, all of those things are parsed with a fine tooth comb to try to figure out, okay, where are we going from here?

Steve: Well, and you have to. I mean, just to back up a little bit, he did announce that interest rates went up 0.25%. And that's what everybody was expecting.

Amy: Very much what expected. Yes.

Steve: Yeah. And I love when the Fed does exactly what everybody's expecting because surprises, they tend to be bad for my 401(k) and your 401(k).

Amy: Markets still like that surprises, right? They don't like uncertainty.

Steve: No. No. So, okay, they did raise interest rates a quarter of a percent, but it's what is going to happen in the future because whether you're, you know, just a regular person, you know, looking at your 401(k) or run this huge Fortune 500 company and you're borrowing tens of millions of dollars at a pop every month, and a quarter-point interest increase can cost your company tens of millions of dollars. You really have to have a rough idea of what to expect if you're gonna plan your expenditures over the next year to two years. And, you know, obviously, it affects the market. So, any manager of any mutual fund, ETF, pension, whatever the case is, they wanna know where are they going with this. And, you know, he wasn't exactly dovish. I mean, a hawk is somebody on the Federal Reserve that wants to keep raising interest rates very aggressively.

Amy: Yes, very aggressive.

Steve: Yeah, a dove is somebody who says, "Let's take it a little bit slower." He's not a dove by any stretch. And he is certainly keeping in mind the mistakes of the late '70s, where the Federal Reserve became dovish and reduced interest rates way too soon, and they had to change course and, you know, raise them aggressively. That was bad for the economy. But he didn't exactly say, "We're gonna keep raising rates and raising rates." He said, more or less, "Let's watch the data. We're probably gonna continue to raise rates," and he did say plural, but he didn't say, "We have to keep doing this until we get a handle on it." And I think that's what everybody was fearful of. He said, "Let's watch the data. It looks like we're having an impact," I'm paraphrasing, "But it looks like we're having an impact. And these rate increases are starting to do what we wanted them to do, slow down the economy, which slows down demand, which reduces inflation." And we are seeing inflation coming down.

Amy: You're listening to "Simply Money" tonight here on 55KRC as we take a close look at the Federal Reserve, right, what came out of yesterday's meeting and announcement of a quarter-point interest rate hike. It's interesting to me, and I think this is just kind of a behind-the-scenes sort of look, okay? During the press conference yesterday, one reporter asked Fed Chair Powell, "Hey, what kinds of conditions need to be in place for you to say, 'Okay, our work here is done. We can pause raising these interest rates?'" Right? And he just kind of responded, "I'm not gonna address that right now but you can get the minutes of the meeting. Those come out in three weeks." And the reaction to that was, well, they must have talked about it if it's going to be in the minutes.

Steve: Sure, they did.

Amy: You know what I'm saying?

Steve: Yeah.

Amy: But it's just so funny, like, down to which degree. Like, even what reporters ask, and the tiny little responses to those things, everything is dissected to look at, okay, really, what is this gonna mean for us? And to your point, Steve, businesses, but the trickle-down effect of that on all of us and what it means, you know, is something really worth looking closely at because it affects all of us on a daily basis.

Steve: Yeah, it does. And, you know, what's interesting, two years ago, I think you would have answered that question honestly and bluntly. He's learned. He knows it and he said, you know, "Something that markets didn't like, you would have seen an immediate drop in markets." And he's trying to avoid that. Hey, you know, we're not through this yet, Amy. You know, they're gonna meet again in March, and the bet is, okay, another quarter point then. And, you know, the question I think all investors have is, first of all, only gonna be a quarter point in March? Is that the end for a while or are they gonna relax and see what impact all of these rate increases have had on the economy? Are they producing the desired effect? If so, maybe then they can do what we've been talking about for months and consider a pivot.

And a pivot is just a fancy way of saying, okay, the economy is slowing down more than we really needed it to. Maybe we need to start dropping interest rates, reducing interest rates. And you'd see bond markets go crazy if that were the case, in my opinion, and, you know, stocks would do well. I just hope he doesn't go out shopping for eggs between now and the next Fed meeting.

Amy: He'll see how much inflation really is under control at that point.

Steve: Know why. Yeah. Yeah.

Amy: I think it's interesting, too, because December feels like it was a long ways to go but it really wasn't. And it was in this December meeting that every member of the Federal Reserve said, "Hey, we don't see ourselves cutting rates at all this year." Markets, though, had said, "Oh, well, I think we've probably two times," kind of a deaf ear to what they were saying at the Federal Reserve. What we also, though, didn't hear from Powell yesterday was it is off the table that rates could be cut this year. He kind of said, "We're gonna take a wait-and-see approach, you know, as the data comes in, maybe mid-year, and kind of reassess where we are, and if it's maybe pointing strongly in that direction, we'll look at it." But keep in mind, he's worried about kind of taking his break off the bigass too soon and then not reaching the destination of really getting inflation under control.

Steve: That was my big fear. I mean, you hit the nail on the head right there is, you know, last couple of times, especially during the three-quarters of a percent rate increases, he just continually said, "I don't know what markets are thinking. They're expecting a Fed pivot. We're not gonna pivot." I mean, he was crystal clear on his, you know, intent going forward. And I think that's why this was kind of a huge sigh of relief yesterday is he didn't take that hard line. And it's because inflation is coming down.

I mean, Andy Stout, Chief Investment Officer of Allworth Financial said just a week and a half ago, "We had peak inflation back in June of 9.2%. Inflation was around 5% at the end of 2022." And his expectations, and I've seen this with other analysts also, are that we probably are gonna be maybe even a touch below 3% by the end of this year. If that's the case and the targets, too, you know, we're going in the right direction. I hope the data pans out this way, but that tells me the Fed has done exactly what it needs to do, and maybe we are close to the end here.

Amy: But here's where they're scratching their head because as these interest rate hikes occur, you would expect the labor market to seize up a little bit. You would expect companies to say, "Okay, let's put the brakes on not only hiring people, but maybe we need to look at even laying people off," right? And so that's where Powell keep saying, like, "I'm scratching my head on this one. But, you know, I don't understand these rate hikes aren't having kind of the anticipated effect on the labor market that you would expect." In fact, we've got more evidence of that. U.S. jobless claims are now at a 9-month low, 183,000. job claims last month. Like, that's insanely low for what the Federal Reserve is trying to do here.

Steve: It is. And that's making everybody, not just Jerome Powell, scratch their heads. I'm wondering if there's a demographic component.

Amy: I think you're right. I think...

Steve: You know, people aren't having...

Amy: ...it's just an overall shift.

Steve: Yeah. I'm one of four kids in my family. My wife is one of 11. I'm sorry, one of nine.

Amy: Big families.

Steve: Yeah, there aren't as many kids...

Amy: And you have how many kids?

Steve: ...in the workplace. Yeah, I've got two and, you know, one of them has two and the other has three. So, yeah, I'm wondering if that's the case. You know, maybe there is a demographic shift, but I'm real nervous whenever I say, "Okay, this may be the new normal" because the new normal tends to not stick around.

Here's another one, Meta, the parent of Facebook, they made a big announcement. They came out with fourth-quarter numbers. You think we're heading into a recession and ad revenues are drying up? No. At least not for Meta. Their fourth-quarter revenues were $32 billion with a B, $32 billion. That's a full billion dollars more than estimates. Those are big numbers. And that's with, you know, that crazy metaverse, you know, augmented reality, virtual reality headset that you can put on...

Amy: That I cannot even wrap my brain on it really. I don't even understand that.

Steve: No, they think people are really gonna live with these things and work with these things. That lost them in that one quarter over $4 billion. And yet, they still show these huge revenue increases in numbers. And because of that, the stock, when the announcement came out, was up 14%. So, you know, there are some good numbers out there and, you know, these concerns about a recession, well, maybe we don't have to have a recession with a big bear market.

Amy: Well, another thing out of Meta, too, is they announced a $40 billion stock buyback plan. This is what a company does when they're flush with money, when they're not worried about money. And so I think that goes to show that, hey, a major company like this probably isn't sweating it so much. We'll certainly see. Maybe we should be sweating it, though, because, of course, the groundhog, Punxsutawney Phil, if you wanna believe what he says, saw his shadow, which is apparently not only what is an extra six weeks of winter, which I can't handle, it also apparently means bad news for stocks.

Steve: Okay. Yeah, I saw this study too.

Amy: Whatever.

Steve: The Financial Research Institute of the Russian Ministry of Finance, I think this was a test of American gullibility, but they said, "Yeah, stocks go up when he sees his shadow. And there's a correlation." I'm sorry, if you're taking your advice from a groundhog, and when, and which stocks to buy, you got other issues that need to be addressed first, but it made the news, so we'll talk about it.

Amy: No kidding. Here's the Allworth advice. There appears to be maybe light at the end of the tunnel in the fight against inflation. Don't, though, get greedy with your financial decision-making. Just stick to that long-term game plan. Congress just accidentally, yes, did something that could hurt you when you're trying to save for retirement. We'll tell you what it is next. You're listening to "Simply Money" here on 55KRC, THE Talk Station.

You're listening to "Simply Money," presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. If you can't listen to our show every single night, well, you can get our daily podcast, listen to it anytime. Spread the word to friends who maybe could use a little money help as well. All you've gotta do is search Simply Money on the iHeart app or wherever you get your podcast.

Coming up at 6:43, should you dip into that emergency fund or not? We'll help you figure out, is it truly an emergency? President Biden and Republican House Speaker, Kevin McCarthy, well, they met at the White House yesterday. And I'm just gonna stop there because we've got two different politicians from two different parties, you can imagine. First of all, that was a fun conversation, and also that they probably didn't get a lot done, but they were there to discuss the debt ceiling.

Steve: And they have to because we're already going through what Treasury Secretary Yellen is calling extraordinary measures. I mean, it's basically the same thing you and I would do if, oh, okay, these bills came in. I don't have that. You know, so let's just pay minimums, let's shuffle. Let's make some phone calls, "Hey, you know, we'll pay you next week. I hope you can deal with that." That's what we're doing on the national scale. And, you know, we've done this before. I remember when Ronald Reagan and Tip O'Neill, and you could not have two people on, you know, completely...

Amy: More different...Yeah.

Steve: ...opposite endsof the spectrum. And yet, they treated this as it should be treated. Kind of akin to the country's at war and we gotta set political differences aside and fix that. That's what we need to do with this issue because if we don't do something by June, it's not gonna be pretty.

Amy: Yeah. I mean, if you can imagine, like, calling everyone that you owe debts to, it's like, "How can I figure out how to spread myself as thin as possible to get all of these bills paid and still keep my nose a little above water?" I mean, that is exactly what the federal government is trying to do here for the next few months just to try to stay afloat. But at some point, yes, some things have to give. And here's the problem. Republicans are saying. "We're not gonna raise this debt ceiling. Like, President, you're going to have to get spending under control." And the President is saying, "No, I'm not changing a thing. You're just going to have to..."

So, it seems like, I mean, to your point, you know, back in the '80s with Social Security, that was amazing that they were able to accomplish that, put differences aside, but we don't seem to be yet at the point, even though we are, yes, taking extraordinary measures where people are willing to put those political differences aside and say, "What's really best for America right now?"

Steve: Yeah. And I wanna put this in perspective, I am as far from being an alarmist as anybody out there, but this is something I'm alarmed about.

Amy: It's a big deal.

Steve: It really is. And we're not blue, we're not red, you know, we're not yellow. We care about the financial health of this country and the people listening. And here's the problem, when you go back during the Reagan years... And I remember they used to call it voodoo economics. And, you know, I happen to like Reagan, a lot of people don't. But you know what? There was a big concern about, wait, our national debt is at a record. We gotta do something about it. When people were screaming about that and he was cutting revenues when we were in the hole by a bunch of money, the national debt was about 30%, maybe tops 40% of our gross domestic product. You know, if the economy grows, Amy, it's okay to have more debt. Every country does that, but you've gotta watch, what's the percentage of the gross domestic product?

We're not a 30% to 40% of GDP with our national debt. We're at 120%. I mean, we have seen our national debt grow double, and actually, double since 1990, and as a percentage of GDP triple if you go back 20 years before that as a percentage, not in dollars, as a percentage. We are now paying over $1 trillion a year in just interest, just basically paying the minimum on the credit cards. So, if we don't do something by sometime in June, we will not be able to pay our bills, and that would be default. And you think interest rates are high now? Watch out. Watch out. We wouldn't be able to have people buy our bonds for anywhere close to the interest that we're paying right now, which is about three times higher than the interest we were paying two years ago.

Amy: I wanna stay in Washington now and talk about something, again, political, and, actually, something that ended up being a big mistake. Congress just accidentally did something, didn't mean to, unintentionally, but could have a huge impact on all of us when it comes to saving for retirement, like, a huge oops, we didn't mean to do that.

Steve: Yeah, when they passed the Secure Act 2.0, which they passed, I think it was December 27, so it got buried in the news and all the features, there were a lot of... It was kind of a mishmash of, okay, we're gonna address this. We're gonna address this, and here's a different item, totally unrelated. We're gonna address that. It was a mishmash of a bunch of different things. Honestly, from a financial standpoint, I like most of what was passed. Well, they missed something. They missed the catch-up ;provisions that people like myself that are over age 50 use to be able to catch up, to be able to put more money away for retirement that we just didn't have the money to when we were younger, with kids, or college, or whatever the reason was.

So, in 401k, for instance, if you're over the age of 50, you can put about $7,500 additional in it. Somebody under 50 years old can't put into your 401(k). And the provision was supposed to say, "Yeah, but that $7,500 catch-up needs to go into the after-tax or the Roth portion," which I think is kind of a cool thing. They forgot. It's not in there. And starting in 2024, catch-up provisions go away as the law currently reads. That's a problem.

Amy: Well, and let's talk about, like, why would Congress say it should be in a Roth? Well, they wanna be paying the piper right now, right? I mean, the thing about all these tax-deferred accounts is, you know, they're just standing there watching this money balloon in everyone's accounts and they can't get their paws on it. Well, at least if they're saying, ''Okay, yes, you can put this extra money into that account, but you have to pay taxes now," well, then you're paying the piper now, and that's good for Congress, again, who have a few money issues to deal with. So, that made sense. It just never got the wording of the law, never came across that way. Now, there's a lot of people who are saying the IRS understands, right, the intention, even though it wasn't worded exactly the right way. But it remains to be seen, and to get, again, all of these politicians back together to vote and say, ''Oops, we made a mistake here,'' that's not an easy thing to do.

Steve: They need to do what's right. And what scares me is either they don't know what they're doing or maybe they knew exactly what they're doing. That's the scary part.

Amy: By the way Congress's approval rating right now at about 20%.

Steve: Doesn't deserve to be that high.

Amy: No surprise there. Here's the Allworth advice. Check in with your financial planner and your tax pro periodically. They're keeping a close eye on whether this Congressional mess up can be cleaned up and how it will affect you. Next, we're gonna check in on the state of the local housing market. Is it time for buyers and sellers to pull that trigger? You're listening to ''Simply Money'' here on '55KRC, THE Talk Station.

You're listening to ''Simply Money.'' I'm Amy Wagner, along with Steve Sprovach. If this was the year you were planning on buying or selling that home but now maybe you're wondering, is it still a good idea? Because, man, a lot has changed even since this time last year. Well, we are joined by a real estate expert right now, Michelle Sloan. You can listen to her show, ''Sloan Sells Homes,'' right here on 55KRC, of course, every Sunday afternoon. She owns RE/MAX Time, and she knows all things real estate when it comes to the tri-state. Michelle, what's the latest? Where are we right now?

Michelle: Well, it's interesting because on the federal level, you know, across the United States, the headlines say that the home prices are continuing to come down as higher mortgage rates bite. So, that sounds a little bit scary, right, that home prices are down, but they're down, like, 0.6%. They're not down tremendous numbers. We've had tremendous growth over the last couple of years, anywhere between, you know, 5%, 10%, 15%, or more. And so if we're looking at a little tiny adjustment, it's really not as bad as the headlines may have you believe.

Steve: Well, and it's interesting you say that, Michelle, because, I mean, when we were looking at the really crazy boom times that were, you know, hitting places like Phoenix, we were talking on this show about how Cincinnati was getting caught up in that, not necessarily on price increases, but it was one of the fastest markets in the country on turnover. I mean, houses were, you know, sitting for a day or two, and then selling after multiple offers. Has that slowed down or?

Michelle: Yes, absolutely. It has slowed down in the tri-state area that we're not seeing as many multiple offers and we're not seeing that frenzy where buyers are willing to pay so much more over list price, more than the house is really even worth at this point. And the Fed has done what it was supposed to do. It's sort of tamped down things a little bit, slowed things down. So, the higher interest rates have forced some buyers out of the market, while others are still interested in getting back in.

So, a year ago, when we were going through this entire frenzy, a lot of buyers decided, okay, I'm out. I'm gonna take a break. I'm gonna go ahead and rent or I'm gonna live in my parent's basement, or whatever the heck they're gonna do. But now they're back and they're reevaluating, should I get into the market or should I not? And many would-be buyers are saying, ''Okay, let's take a look at this again. It's not as bad as you might think.'' The next thing is, too, interest rates, on average, are going down. They've gone down for the last three weeks in a row. So, you know, we're gonna hover around 5%. Now, is it the 3% of last year? No. But 5% is not bad.

Amy: Yeah, a little historical context there, right?

Michelle: Exactly. Exactly.

Amy: So, let's level-set here, Michelle. If someone is saying, ''Okay, I'm ready to jump back in, I'm feeling okay about this," what can they actually expect when they go to buy a house now?'' I'm assuming it's still incredibly different than it was just a year ago.

Michelle: It's different, but yet it's the same. We still have very little inventory. We still have very, very few homes on the market to sell, especially, and I say especially in the lower price ranges. So, those lower price ranges I think are going to be a struggle for a long time to come. And so, usually, our first-time homebuyers, right, they are in that lower price range. Maybe they can only afford up to a $250,000 home. If I look across the entire Cincinnati market and the Cincinnati MLS, you know, there's a handful of homes for sale in that price point. And depending on the area that you want to be in, you know, if it revolves around schools, or if it revolves around your work, or whatever, you have to take all of that into account to decide, is it time to jump back in? Be patient because it may take a little bit of time.

And I predict, this is my prediction for the rest of the summer, we're gonna get back into multiple offers again and possibly a little bit of a frenzy. I don't care what the prognosticators say. I think that we are gonna have a little bit of bidding wars going on again this summer.

Steve: So, it's kind of interesting what you said. I wanna revisit this a little bit because we saw mortgage rates, 30-year mortgages go from, you know, low 3% range in about 3, 4, or 5 weeks, ran up over 7% at one point.

Michelle: Correct.

Steve: You said they've settled down to the 5% range?

Michelle: Well, we are worried about... We can see some mortgages around 5.5%.

Steve: Wow. Okay.

Michelle: The expectation is that it could hover back around 5% to 5.5%. You know, maybe as high as 6%. Again, and it's not these giant jumps that we saw, the big, big jump that happened when we went from 3% to 7% and everyone was like, ''The sky is falling.'' But the sky is not falling. So, we went up to 7%, and now we have slowly, slowly settled down to about 6 % to 5.5%, depending on your credit, depending on how much you wanna borrow, depending on your down payment. There are so many factors. But the thought process is you may be able to get something around that 5%. And it may take time. You may need to float it, but there are some options out there.

Steve: Well, I think we just need stability because I think there were a lot of sellers that were, ''You know, I wasn't really thinking of getting rid of the house but did you hear what the house down the street sold for?'' And by the time they got the gumption to actually think about listing their house, all of a sudden the market dries up because mortgage rates went up. So, you know, maybe they just stayed out of the market. And if we see stability around 5%, 5.5%, maybe the sellers will come back. I mean, you're the expert. Do you think that'll be the case?

Michelle: Absolutely. I hope so. But, you know, the same thing has happened year after year. When sellers sell their home, they have to have someplace to move to.

Steve: Exactly.

Michelle: Yeah. And again, there's no inventory, there's no place for them to move to, so there's your frustration if you're gonna move out of state or something, you know. There are so many parts of the country that still don't have inventory. And so that's gonna be I think, 2023, again, repeat of low inventory, more buyers than sellers. It continues to be a seller's market. Maybe sellers aren't getting the top, top, top dollar right this minute that they got or would have received last year if they put their home on the market but it's still gonna be darn good. Let's just put it that way.

Amy: Well, and I think it's really interesting that you're saying, ''Hey, you think maybe even this summer sellers who maybe were like, 'Oh, I could have gotten so much last year, but I'm not even gonna bother this year because it's just not the way that it was.'" But if you're talking about multiple offers, competitive offers, they might not have to wait too much longer to be not maybe where we were before but in a better place than we were just a few months ago.

Michelle: Absolutely. And as it goes, right, as the world turns with real estate and pretty much everything, change is a constant. So, I say stay tuned. I definitely think, to me, if you have a house to sell, I personally wouldn't wait because we don't know what's really around the corner. But if I had to guess, you know, there are good things happening still. And if you wanna sell for a really good price... Just imagine, though, prices have gone up15%, 20%. You're still gonna be making a heck of a dollar if you bought your home 10 or 20 years ago.

Amy: Yeah, just a little perspective, right? Maybe not where we were, but still in a pretty good place.

Michelle: Very strong.

Amy: Great perspective, as always, from a real estate expert, Michelle Sloan. You're listening to ''Simply Money'' here on 55KRC, THE Talk Station.

You're listening to ''Simply Money,'' presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. Do you have a financial question that's maybe bothering you, you want us to talk about here on the show? Easy way for you to do that. There's a red button you can click on while you're listening to the show. It's right there on the iHeart app. You can record that question and it's coming straight to us. We'd love to talk about it.

Straight ahead, gas prices, oh, it's like when they're down, we all feel better about life, but when we start to see them creep up, it makes everyone uncomfortable. What can we expect as we go further into 2023? We'll take a closer look at that. So, there is a fine line, the first line of defense, right, when everything starts to hit the fan, and we all know that at some point it does, you can have the best-laid plans when it comes to your money, but if you don't have that emergency fund, well, it just all can be blown away really quickly. But I think the question, Steve, for a lot of people is, when do I dip into that emergency fund? What constitutes an actual emergency? Is it the shoe sale going on at Dillard's? Probably not.

Steve: You know me. You do know me. And, you know, I'm glad we're talking about this because it's one of the pillars. Having an emergency fund is a foundation of anybody's financial house. I mean, there's no question about it. I think the problem that I have with it is calling it an emergency fund. I am gonna start calling it...I don't know, you've got options fund because emergency sounds like, well, is this really an emergency? Not really. I need brakes on the car. That's not really an emergency. But it really is there so that you don't have to dip into credit card debt that you may not be able to pay off that month. I think that's one of the ideas behind an emergency fund is, okay, that's what that money is there for. It's a rainy day fund. Something came up that's unexpected that I, you know, have to use this money for. And we all need it. And the question is, how much, and when to use it.

Amy: There's three questions I think that make a lot of sense for you to ask yourself if you're thinking about dipping into that money. Is it urgent? Is it unexpected? And is it necessary? New shoes, if you run in through those three questions, you're probably gonna come up with no, you know, it's not urgent. It's not unexpected. The vacation that you wanna go on, probably not worth dipping into the emergency fund. It's not urgent, it's not unexpected. Yes, to your point, the brakes going out in the car, or you come home, and it's really cold in your house, and you're wondering, "Oh, yes," like, those kinds of things, the unexpected medical bills, the diagnosis that no one was expecting, those things, yes, that's exactly what that emergency fund is there for.

Steve: Well, and there's emotion tied into this also, don't you think?

Amy: Without a doubt.

Steve: Yeah, you know, is it really an emergency? Do I really need it for that? How about something like, ''Okay, a home repair you weren't expecting, the water boiler going out, you know, drywall needs to be replaced, or something like that.'' What you forget is that the emergency fund can be replenished. It doesn't mean this is the 20 grand or 30 grand it's gonna last you the rest of your life. You use it when you need it and then build it back up, either from savings or if you're retired, distributions from investment accounts, you know. That's the purpose is get it back to where it was in a reasonable amount of time, but you need it all at once. And that's why it's there. It's the bucket of money that you're gonna fall back on. Amy, I'll give you a real-world experience that a lot of people went through in the past year. You're retired, you're drawing money from your investment accounts to supplement cash flow, and the market goes down like it did last year.

Amy: Yeah. So, you're locking in those losses if you'd pulled the money out of those accounts.

Steve: Yeah. Which do you do? Do you pull from that emergency fund that, hopefully, is at least a year or two years of expenses, or do you continue drawing from investments that are going down and selling when they're down, instead of when they're at a peak? That is a perfect example of let's use your emergency fund, and then replenish that emergency fund when the investments go back up. That helps an awful lot with planning.

Amy: I think another question to ask yourself on that kind of front is how quickly can you replenish that money, right? I mean, 2023, there are some experts out there talking about a recession, and how bad will it be? Like, if you do have concern, maybe there's talk of cutbacks at your work and things like that and you're thinking, ''Okay, I could use the money for this, you know, is it really an emergency?" Maybe you do hold off if you're in that situation. You know, if you're worried about whether the job is going to be there in a few months, that emergency fund, it is peace of mind, it is being able to sleep at night, it is a lot of things. So, I think not only do, like, assess, you know, how urgent is it but also how quickly would I be able to replenish this money? How much would I need maybe even more a little further down the road if I were to lose my job or something like that?

Steve: And it's a lot easier to stomach now than it was even a year ago. I was getting calls in 2021, you know, in some cases, from elderly people that, ''Oh, Steve, I've got this money sitting in the bank, it's not doing anything, I'm earning no interest, let's get that working in the market.'' And if you put it in the market in December of 2021, that was not a real good decision, especially if it was your fallback safety, I need this money in an emergency fund in order to sleep at night money. That would be bad. It's a little different now. I mean, you should... And by the way, if you're not getting at least 2%, 2.5%% in your emergency fund, start shopping around because we're...

Amy: That's a great point.

Steve: Yeah. We're noticing a lot, not a lot, some local banks are still sticking at 0.1% on their money market funds, but others are paying upwards of 2%. And if you go online, you might be looking at 3% interest. If you got 50 grand, 60 grand, 80 grand that you socked away, that's a big difference on the amount of interest that you're saving. But my point is, yeah, it might be tough to rebuild, but you didn't build it up to that level overnight. So, if you have to spend it overnight because of an emergency, give yourself a little leeway. I know it's emotional, but, you know, build it back up over time to what you need to. I love the phrase, "Sleep at night money," so that you don't lose sleep when we're seeing some market volatility or, you know, if something goes out on your house or in your car.

Amy: I wanna ask you this question, though, what if someone comes to you and they do have a lot of high-interest credit card debt and they have an emergency fund sitting there as well? What do you say to them? Should they use that emergency fund like that?

Steve: Yes. I mean, you're basically going from almost no interest to a 20-plus percent rate of return because that's probably what you're paying on your credit card. Yeah, get rid of the credit card.

Amy: Here's the Allworth advice. What is the time to use that emergency fund? When it's urgent, when it's unexpected, and when you have no other options. So, what can we expect from gas prices in the months ahead? We're gonna look at that next. You're listening to ''Simply Money'' here on 55KRC, THE Talk Station.

You're listening to ''Simply Money,'' presented by Allworth Financial. I'm Amy Wagner, along with Steve Sprovach. I'm not gonna ask if you've noticed this because I know you have. We all do. Every time gas prices fluctuate even a few cents and I'm driving by the signs I, like, have this, like, blood pressure rising because I'm like, "Here we go again." And you've probably noticed that, yes, gas seems to be on the rise yet again.

Steve: Yeah, I speculated in oil futures the other day. In other words, I filled up my tank.

Amy: You filled up.

Steve: You know, it's getting crazy again, where, okay, we saw it come down. I'm starting to be happier. We're getting closer to three bucks a gallon, and it's creeping up. And, you know, should I buy on Monday or Tuesday? You know, when am I gonna get the best deal? And that's what I mean by speculating on oil futures. I think the trend may be up a little bit, Amy. I hate to say it, but, you know, China shut down their COVID shutdown policy. So, China's back operating. Believe it or not, that's important to us, because...

Amy: Demand is up.

Steve: Yeah, they're a big user of energy. People in this country and in developed countries around the world, we're normalizing. We're back to doing what we were doing before the pandemic, and part of that is burning fuel. We're, you know, going on flights places, we're filling up gas tanks, we're traveling more, and the demand is up. And with the demand up and production basically the same, you know, economics 101, prices will increase.

Amy: There's so many factors that affect this. I mean, you're talking about, yes, we're all out driving more, and China has opened up again, they're out driving more. But some of this is even seasonal, oil refinery, right? Oil refineries haven't completely recovered from cold weather that we had in December, and then refineries typically, like, will go offline for a few months in the coming months to perform routine maintenance, so we're coming up on that.

Steve: New formulations for summer. That's something else we'll be doing soon, yeah.

Amy: It's all of these factors that come together. But I mean, if you wanna know, okay, what does this mean for me? Well, the average price for a gallon of regular unleaded right now, about $3.50 nationwide. A month ago it was $3.20. Cincinnati, it's about $3.37. I live in Northern Kentucky, a little cheaper here, about $3.29. Keep in mind, though, it was under $3 a gallon just a month ago.

Steve: I know. Remember, like, two and a half years ago, three years ago, it was actually down around two bucks in some...

Amy: It was such a beautiful time.

Steve: Whatever they did to get it down to two bucks, I wish they would do again. I mean, I almost enjoyed going to fill. That was only 45 bucks. Now, you know, it could be 100. It could be 110 bucks.

Amy: It's just ugly. Yes. And we expect oil prices to continue to hover around $80 a barrel. You know, we were down to about $50 a barrel, we were seeing those lower prices. I wouldn't expect to see a dip again in the next few months. There's all kinds of tips out there about what you can do, but I honestly think it's just...

Steve: I can't drive 55.

Amy: It's the minimal difference.

Steve: That would make a good song.

Amy: Yeah. The best advice I can give is, like, an app like GasBuddy because I think when gas is a little higher, it does make sense to maybe drive another mile in this direction or in that direction to a specific pump. We noticed just a few weeks ago right across the street from each other on Buttermilk Pike, two gas stations, 20 to 30 cents difference for several days. It makes sense to look around.

Steve: Amy, I love GasBuddy. If you haven't downloaded the app, do it. I'm not getting paid for this.

Amy: Yes, it's not paid endorsements.

Steve: I have one vehicle that is diesel and there literally was a one-dollar-a-gallon difference.

Amy: Thanks for listening tonight. We hope you'll tune in tomorrow. We've got a history lesson you need to hear. You've been listening to ''Simply Money,'' presented by Allworth Financial here on 55KRC, THE Talk Station.