Whatever asset class you invest in, it’s always go to optimize the return. Even if you are just saving money in a money market account, you should optimize the return when you can.
Data by the Federal Reserve Bank of St. Louis (FRED) reports the national average on non-jumbo money market accounts deposits (i.e. less than $100,000) is a miserly 0.1% in 2022.
That’s no good when you can optimize the return on your savings with an online bank. But rates are finally going up to counteract ~7% inflation post pandemic.
CD rates have also plummeted. The current national rates for CDs are only 0.22% for 1-year, 0.49% for 3-year and 0.78% for 5-year. That’s a far cry from the 4.1% I used to get in a CD that sadly expired in 2017. Thankfully, I reinvested the CD proceeds into stocks, real estate crowdfunding, and bonds, which have all done well since.
Given the low rates, investors have bid up income producing assets such as rental properties, REITs, and bonds. Stocks have certainly been a beneficiary as well. The question on every investor’s mind now is: how much have income-producing assets risen due to fundamentals versus a Fed-induced frenzy? And should I optimize the return on my savings instead of continue to invest in higher-risk growth stocks?
Cash Optimization Plan
In order to optimize the return on my cash, I’ve conducted a deep dive on my current cash holdings. I am aggressively saving in anticipation of a two-year fade. Given I’m in cash hoard mode, I’ve been looking for better ways to optimize my $200,000+ in savings.
The quick skinny is the CIT Bank savings account pays a leading 0.4% interest with no fees for account balances of $10,000 or more. That’s a great rate compared to the <0.2% I’m currently earning at Citibank.
Now that I think of it, I’ve already forgone over $1,500 in savings interest income because I’ve been so focused on saving cash and forgot that I should also be optimizing my cash as well!
My plan is to keep $200,000 – $250,000 in savings through the end of the year in order to potentially buy a higher end home that has declined by 10% in value or take advantage of other investment opportunities. Any cash accumulated beyond $250,000 will be used to pay down mortgage debt or invest in tranches when there is a greater than 3% correction in the S&P 500.
If I don’t optimize my $200,000 – $250,000 savings over the next two years, I’ll be missing out on $4,000 – $5,000 in interest income. What a waste. It’s time to make a change.
Interview with Katie Linendoll – Optimize The Return On Life
As part of Capital One’s outreach I got to interview Katie Lindendoll, a TV host, speaker and journalist, focused on technology and gadgets. Katie is best known in her role as tech contributor to the TODAY Show and for winning an Emmy Award for her work on ESPN’s SportsCenter.
In addition, Katie owns her own content production business, hosts a tech podcast (www.katie.show) and travels the world as a keynote speaker. It’s always fun to learn from successful people in different fields.
You’ve had quite an exciting career. Tell us about a couple of your most memorable and unusual work experiences.
I am always on the hunt for a captivating story that I can share with my audiences.
Some of the most unique opportunities include:
- Meeting with a native tribe in the Serengeti. I am fascinated by cultures and I was so intrigued to learn they sustain on a half a cup of blood and half a cup milk everyday until late evening.
- I’ve covered a lot of unique underwater reports including diving with NASA and European Space Agency astronauts in the world’s only underwater laboratory off the Florida Keys in a semi annual program called NEEMO (NASA Extreme Environment Mission Operations) where astronauts live underwater to simulate microgravity and perform select tasks and operations from 6-18 days.
- Lived cumulatively for several weeks on the island of Bermuda to tackle a story for CNN on the invasion of the lionfish (an invasive predator species native to the Pacific and now devastating Atlantic eco-systems).
- What I find interesting and an on-going challenge is packing for these adventures – compact technology is key for long days and unique terrains. The breadth of options to film with alone these days still blows my mind and fortunately now I can pretty much get hands on anything I need from drones to custom underwater housing as its incredibly important to bring back the best visuals to fully tell the story.
Often my curiosity leads to the next story. I have to be truly fascinated in the piece to cover it. Also, I love to optimize the return on my savings and investments as well.
What do you love about Capital One that led you to partner with them?
I’ve been a Capital One client for years. I have nearly 30+ freelancers working under me and finances must be kept organized. When I have a finance question, I don’t have a lot of time to get to the bottom of it. Capital One has always made it easy and accessible for me. Capital One also helps optimize the return on my savings.
Describe two of your own financial hacks that can help people achieve financial freedom faster.
1. Declutter and digitize. How many people have stacks of magazines cluttering up their house? Why not get an unlimited digital subscription to more than 175 top magazines (including back issues) for just $10 a month (vs. nearly $10 for each year-long subscription) – which is even accessible on up to five devices! Not to mention eco-friendly.
2. Automate your bill payments. You work hard for your money. Don’t lose it to late fees! By scheduling automatic payments with features such Capital One’s Online Bill Pay, you’ll have better peace of mind that your bills are being paid on time, every time.
What are some ways we can leverage technology to improve our financial well-being and happiness?
Technology is continually evolving and giving people more ways to make their lives easier so you can enjoy what matters most to you. Voice-activated technologies hold a lot of promise to make our lives easier. With Amazon Alexa-enabled devices like the popular Amazon Echo, you can download “skills” that allow you to get the weather, sports scores and even news updates.
What changes would you like to see in the realm of personal finance in the U.S.?
Outliving means is certainly a problem. Swiping a credit card in the moment will work, but in the long term, many face the reality of accumulated debt.
I would love to see people be more responsible in their purchases and spending. Using alerts, like the personalized account alerts from Capital One, allow you to keep up on all your banking activity, and will help keep you honest and accountable.
How do you use technology and gadgets to keep your own finances in check?
I’m a very visual and hands on learner, but it can be hard to stay organized when I’m always traveling on-the-go. I best comprehend my spending habits when I can see where I should be cutting back and when it is all laid out for me. When it’s in front of me in a pretty chart, it’s hard not to acknowledge!
I like to use something called Capital One Enhanced Transactions, which helps me track my how much I am REALLY spending and when.
What are some valuable lessons you’ve learned from starting your own business?
It took me a few years to really understand the cycles of technology. It’s pretty much always busy, but sometimes like during Q4, it can be especially crazy – I know I cannot book any downtime during this time. It’s the opposite with summer months. Things slow down a bit but pick up every year after Labor Day signified by iPhone’s new launch. It’s important for me to get family time but also know in advance when is best to schedule so I can truly have off and not have to work through breaks.
What are some of your top tips on building one’s personal brand?
Stay true to you. I will never do anything I am not comfortable with or that doesn’t sit right with me. In the early stages of building your brand you will be challenged – people have opinions and you don’t want to come off like a diva. However, it is always the right answer to stay true to you.
Readers, what is the current rate on your money market account? Have you been so focused on saving cash that you forgot to optimize your cash returns like me? What are ways in which you optimize the return on your savings?
Optimize Your Returns With Real Estate
Stocks are very volatile compared to real estate. Therefore, if you want to dampen volatility and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
The combination of rising rents and rising capital values is a very powerful wealth-builder. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
Recommendation To Build Wealth
In order to optimize your finances, you’ve first got to track your finances. I recommend signing up for Personal Capital’s free financial tools so you can track your net worth, analyze your investment portfolios for excessive fees, and run your financials through their fantastic Retirement Planning Calculator.
Those who are on top of their finances build much greater wealth longer term than those who don’t. I’ve used Personal Capital since 2012. It’s the best free financial app out there to manage your money. Always optimize the return on all your investments. This includes all your passive income investments.
Optimize The Returns On Your Savings is a FS original post.