An important lesson from Facebook and Stripe layoffs
You may have seen the headlines about massive layoffs at some of the country’s most recognizable companies. Stripe, Lyft, and Meta (aka Facebook) all laid off between 10-15% of their staff. Twitter has reportedly laid off 50% of their staff. For many years, these companies could do no wrong. During the peak, workers at these firms received lavish benefits like free food, free dry cleaning, free childcare, personal training. One former employee described Meta (Facebook) as a Disneyland for adults with all of the cool stuff they received. Unfortunately, all good things eventually come to an end. While your first feelings of watching these tech giants stumble may be Schadenfreude, there may be some lessons you can learn from their failures.
This can be seen as a form of hot hand fallacy. Looking at the recent performance and believing it will not drop in the future. Rookie mutual fund or stock investors know this mistake well. They see a stock or mutual fund offering huge returns in the last year and invest, assuming they would also get the same return only to see performance drop.
~freefincal
This post by freefincal looks at the causes that led up to these tech company layoffs. Interestingly, they shared quotes from the company’s CEOs of Meta and Stripe. They both said that they noticed revenue increasing with the start of the pandemic. They had assumed that this was a permanent structural change to a more online economy, and tried to grow their workforce to accommodate this change. Unfortunately, this left them exposed when the economy became a little choppy in 2022. The remainder of the article shares how average investors like you and me can also suffer from this same optimistic thinking and shares tips on how to stay grounded when thingsk
5 Fun Ways To Teach Kids About Money
Financial literacy is one of the most important concepts you can teach your children. Without an understanding of how concepts like investing and debt work, they may inadvertently learn lessons the hard way later in life when they’re struggling with bills or are unable to retire when they want. While money can’t buy happiness, money can provide peace of mind and enable you to pursue the activities that bring true happiness. Given its importance, you would think that parents would be having daily money conversations with their kids. However, in many families, money is a forbidden topic for a number of reasons.
Sharing financial knowledge with our little ones will help them to manage their own money in the future. Parents have the most influence on their kids about personal finance.
Sammie Ellard-King
If you want to start money conversations with your children but don’t know where to start, you may wish to check out this article by Sammie Ellard-King. One thing he points out is that children are hungry for this information. And that if you don’t have honest conversations with kids about money, then they will try to understand money from TV shows, and friends, and fragments of conversations you have with your spouse that might not be representative of the lessons you want to teach your children. The article then shares 5 different techniques you can use to have family money conversations to teach your children solid financial skills.
What Does It Mean When the Fed Raises Interest Rates?
If you follow the financial markets at all, you know that all eyes have been on the Federal Reserve in 2022. The Federal Reserve has 2 goals: to keep unemployment low and to keep inflation low and stable. When the pandemic hit in 2020, both the Fed and Congress worked hard to soften the economic impact of inflation and keep unemployment low. However, all of those efforts have resulted in a high inflation in 2022. To deal with this record setting inflation financial analysts have been (correctly) predicting that the Fed will raise interest rates. But what does it actually mean that the Fed raised interest rates and how will it impact ordinary people like you and me?
In the long run, a Fed rate hike should theoretically be good news for everyone. Why? Because it’s meant to keep inflation in check. As more dollars are taken out of the economy, prices should go closer back to normal.
But in the short term, this means pain.
~Kumiko- The Budget Mom
The “interest rate” that the Federal Reserve raises when it raises interest rate is called the “federal funds rate”. This is the interest rates that banks pay the Federal Reserve if they need to borrow money from the Fed. This might not seem like an important interest rate– only banks can use it to borrow money from the Federal Government overnight in case they don’t have enough currency reserves on a given day. Despite the fact that almost no one can borrow money from the Federal Reserve, this interest rate has huge implications for the economy. Banks base their own interest rates based upon expected risk and other available returns. Since the federal funds rate is risk free, it sets the baseline upon which their other, higher-risk loans are set. A high federal funds rate makes it more expensive for companies and people to borrow money and more lucrative for people to save money. These changes cause businesses and people to spend less money, which can lower demand and therefore lower inflation. Want to learn more about how all of this works? The Budget Mom’s article is a great place to start.