Rate of Return is not only a publication about investing and the world economy ā we also talk about smart money habits and personal finance.
Introduction
In case you missed our last personal finance-focused post ā Be Better with Your Money in 2023 ā Iāve shared it below.
We walk through creating your first budget, investing toward retirement, and paying off high-interest debt.
This post is going to be sort of a follow-up to that one ā but this go-around Iām going to assume youāve been able to build that budget and youāre beginning to find extra money in your bank account every month that youāre not too sure what to do with.
Transparently, This is What I Do
As you all know, Iām a full-time content creator.
I make my living by writing this newsletter, sharing short-form videos on social media, hosting podcasts, and consulting fintech companies on their go-to-market strategies.
As you could imagine ā thereās a ton of uncertainty with all of that.
Will Biden ban TikTok?
Will all of my Substack subscribers unsubscribe?
Will the companies I consult for lose interest?
These are all questions I ask myself ā causing me to sort of live my life on my heels. Having to always be prepared for what might be lurking around the corner.
This is much different than when I was working my corporate finance job before the pandemic. I had a paycheck, health insurance, PTO, and even a 401(k) ā in other words, stability and predictability.
On the contrary, Iām incredibly grateful Iāve been afforded the opportunity to do what I love every single day ā create content and tell stories that educate people about personal finance and investing.
How I Save Money
As you all might know ā Iām an unmarried 26-year-old with no kids living in Nashville, TN. I can only speak toward my experiences and unique circumstance ā so I apologize in advance if my perspective doesnāt provide value.
With that being said, this is my current gameplan:
Pay myself a reasonable annual salary ($70K).
Live on less than I make.
Save for emergencies.
Invest the rest.
This post, however, isnāt about my salary or my budget ā that was the purpose of the post linked above.
This post is all about those last two bullet points ā saving for emergencies and investing the rest.
So hereās the deal ā Dave Ramsey preaches his ā7 Baby Steps,ā and they work for a lot of people. āBaby Step 3ā is to build an emergency fund worth 3-6 months of expenses ā and for most people is this $15-20K.
Itās a great idea, and everyone should have an emergency fund / rainy day fund.
When it rains, it pours ā and the only thing I know for certain in this world is that itās gonna rain..
However, because of the inconsistencies with how often I get paid ā I wanted to bump up my savings to 9-12 months of expenses, especially if there might be a recession in the back-half of the year.
For me, that looks like $50-60K sitting in a savings account.
If your job is also cyclical or sales-driven in-nature, you might want to consider doing the same thing!
As someone who is always looking to maximize their financial situation ā having $50-60K sitting on the sidelines is a terrible idea.
Sure, itās āinsuranceā against the unexpected ā but inflation is also eating away at it to the tune of 6% annually.
However, this is what Iām doing to hedge against inflation..
Introducing Treasury Bills (T-Bills)
āA Treasury Bill (T-Bill) is a short-term US government debt obligation backed by the Treasury Department with a maturity of one year or less.ā ā Investopedia
Think of it like this ā your Uncle Joe asks to borrow $100 from you so he can get his oil changed. You lend him the money and a week later he pays you your $100 back ā interest free of course be youāre family.
Now this time, itās not Uncle Joe ā itās the US Government.
So, instead of āgetting an oil changeā it might be āhelp fund public programs.ā
And unlike your Uncle Joe who just needed the money until he got his paycheck on Friday ā the US government needs the money for exactly 6-months.
However, after the 6-months are up the US Government buys the the Treasury Bill back from you for more than you paid ā allowing you to collect āinterestā on your loan.
Essentially, theyāre giving you back all of the money you lent them for 6 months with āinterestā on top.
Now hereās the important part ā if youāre sitting on $15-20K in savings right now, itās likely earning you between 3-4% interest assuming itās in a high-yield savings account.
But how do you think Wealthfront, M1 Finance, and Robinhood are able to pay you that 3-4% APY on your deposits?
Because they use your money to purchase these same T-Bills paying 4.7% ā pay you 3-4% and then pocket the difference.
Donāt get me wrong ā buying T-Bills on TreasuryDirect.gov is hard and no one wants to actually learn about auctions, bids, issue dates, and the complicated jargon that comes with purchasing these things.
It makes a lot of sense to just collect your 3-4% and go on with your day ā until now..
How to Easily Convert Your Savings into T-Bills
Announced just a few weeks ago, Public.com introduced a new product feature called Public Treasuries ā unlocking access to 6-month T-Bills paying 4%-5% for everyone.
Hereās how it works:
āEnableā their Treasuries product
Purchase the Treasuries and collect the āinterestā
Itās so simple, Iāll do it right now to demonstrate.
Mind you, only $5.2K of my $15.2K deposit cleared last week ā the other $10K is still pending (as you can see below).
Once youāve opened your account, youāll see a āStart earning 5.3% yieldā banner on the right side of your screen ā click the āBuy Treasuriesā button.
Youāll be prompted to āEnableā Treasuries ā AKA agree to Public.comās terms and conditions ā once you agree, click āBuy.ā
Input however much you want to purchase ā in this case, Iām going to purchase another $200 worth.
Congrats!
You just purchased 6-month T-Bills from the US Government that will yield you 4-5% on your savings.
Are T-Bills on Public.com Safe?
Yes, theyāre held securely in custody at The Bank of New York Mellon ā the worldās largest custodian bank and securities services company.
Other Perks:
Unlike interest earned in a high-yield savings account, you are exempt from state and local income taxes on your interest income from T-Bills.
There is no lock-up period, which means you can sell the T-Bills at anytime and initiate a withdrawal back to your checking account whenever you might need the money.
In Conclusion
To be honest, a lot of people are rightfully shaken after what happened to Silicon Valley Bank. Itās hard to tell what bank might be sitting on billion dollars in unrealized losses from interest rate risk.
Despite the Fed and the FDIC guaranteeing depositorās funds, a lot of people are withdrawing their money from regional banks and moving it into the ātoo big to failā banks like JPMorgan Chase.
Personally, Iād rather move my money into the largest ātoo big to failā bank ā the United States Government.
These T-Bills are backed by the full faith and credit of the United States, all while guaranteeing us a healthy yield in that 4-5% range.
Hereās a link for you to sign up.
Have questions?
Drop a comment below ā Iād be happy to answer them!
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Austin, truly appreciate your efforts, diligence, detail to investing strategies.
I have a question about something I never hear discussed on CNBC or other bloggers: $8 dividend with IEP accounting for 15% yield.
Is there a place in a retail investors strategy to include this seemingly juicy deal?
is there a way to take the money back within 6 months . i guess we will lose the interest but is it possible to cash in T bill within 6 month