So, I’m a little in love with Worthy Bonds, and I want everyone I know to sign up for their services using my link so we both get a free $10 bond, but I’ve realized – this means I need to convince you to buy even $10 worth of bonds.
First, Manage Debt
The first few financial priorities are likely the same for most of us: pay off debt (student loans, I’m looking at you), save up at least a few months of living expenses, then worry about more complex goals like investment, real estate, and eventual retirement.
In fact, some of my favorite people have financially… pessimistic… outlooks: I‘ll never pay off my student debt, so anything beyond that is hopeless.
You should focus on getting out of debt, especially if any of it is high-interest. You should focus on spending less than you bring in. (The two basic approaches to this are spend less, or earn more.)
Then: Save
But once you can breathe, once you’re spending less than you make each month, you should expand your goals to include 3-6 months of emergency living expenses.
This needs to be highly liquid, or easy to get to in case of emergency. Perhaps a savings account.
The very best banks–generally online savings accounts–offer around 1% interest, these days. My preferred bank, Ally, is currently around 1.1%, but emails me with every change. Checking accounts are even worse, generally earning under 1% per year.
The reason that even 1.3% interest kind of, well, sucks is inflation: if money decreases in value every year, money stuffed under the mattress will be perpetually worth less. If inflation averages around 3%, then we need an interest rate to at least match that, or our money is deflating.
The stock market averages around 7% over the long-term, after inflation. But that means some years stocks earn 10%, and some years they earn 1%–before inflation. Stocks are the best choice for money that you won’t need for decades, but what about money you’re saving for 5-10 years from now?
Enter Certificates of Deposit. Agree that you won’t withdraw your money (unless possibly with hefty fines) for a certain period of time, and earn higher interest.
Wait, no: Ally is currently offering a 5 year CD at 1.15% annual interest. That’s still below inflation.
Let’s Try Bonds
Enter bonds? Government bonds are currently paying around 2-4% interest, depending on the length of time to maturity. I’ll admit I don’t entirely understand how or where to buy government bonds, but as I learn, I’ll share.
Worthy Capital, the company who issues Worthy Bonds, is currently offering 5% interest, and has no plans to ever change that amount. Come hell or high water, excepting the company going under, 5%.
That’s incredible, in this day and age.
They offer loans to small businesses, local businesses (well, local to someone!), and charge more than 5%. Therefore, they can pay out 5% calculated daily and still profit.
Technically, a Worthy Bond is a 3 year bond. However, the company makes it possible to cash out at any point, without any fees. The simplicity is just one more reason I’m in love with this company.