Two Minimalist Methods to Maximize Your Savings
By: Jesse Khachmanian
Money…we all want it, we all need it, and yet most people have no idea what to do with it.
I’m going to teach you two very simple and minimalist style methods of investing your hard earned cash, that requires little effort and can bring in huge multiples over the years
Up until one year ago, I’ve had all my money sitting in a regular savings account earning me a shocking..wait for it..0.05% per year, also known as APY (annual percentage yield).
If you crunch some numbers this is getting you a 0.0005x multiple on your money every single year, you can thank my engineering major for that math.
Let’s say you have 10,000 dollars in that account, you’re making a whopping 42 cents per month.
So, If you want to maximize the amount of money you have, a simple savings account is not gonna cut it.
Just to put it in perspective, the USD inflates 1-2% per YEAR. You’re not even making enough back to beat inflation.
Therefore, let me talk you through some methods I’ve learned that help you not only beat inflation, but make you a crap ton more money, with very minimal effort.
The first and most common thing I’ve done and many people do is using a HYSA, that is, a high yield savings account.
See, traditional brick and mortar banks barely give you an incentive to keep your money in their savings accounts besides convenience; but even that isn’t good enough these days.
There are a bunch of “online” only banks that take their APY and stomp all over it. For example, I use Ally Bank, they’re giving me currently a 1.7% APY; that’s like….a lot more than what traditional banks give you.
Now don’t let online scare you, these banks are legit and as long as they are FDIC insured you have nothing to worry about.
Now if I want to get my money I can do it in two ways, either I can use Zelle to transfer the money from Ally to my local bank, or I can use my Ally checking account and use a debit card at an ATM.
And, to top it all off, Ally covers ATM fees up to a certain amount per month.
There’s different options besides Ally but I’m using it as an example because of my knowledge on it.
It’s a great way to make much more return on your savings, while literally risking nothing.
The second thing that I’ve done is begin investing.A lot of people really dislike investing because of the risk factor of it, and that’s completely reasonable.
However, this is going to give you the biggest return on your money over the course of years.
Please though, only invest what you can afford, it’s too often where people mistake mutual funds or exchange traded funds for a “savings account”.
This is not the case! Only invest what you can afford, I’m going to say it again, only invest what you can afford.There are two ways I love to invest, because they’re really minimal effort.
One way is mutual funds, which is the method I use. Mutual funds are a bundle of stocks, bonds, or other forms of investments managed by somebody else.
By investing in a mutual fund, you are technically investing in a whole lot of stocks and bonds without doing anything.
Therefore, you are diversifying your portfolio, while only purchasing one thing, very simple and easy.
The other method is exchange traded funds. This is kinda the same thing as mutual funds, but the differences are a little hard to explain, so I’d recommend google.
Investing, though, is really where the big money starts coming in. In the past 5 months I’ve made a 6% return on my money which is great.
However, most of these funds do have a small fee for the portfolio manager, so just look into that percentage before choosing a fund.
You could also look at websites that show you risk factors of certain funds, as well as the average returns over the past year, 3 years, 5 years, 10 years, etc.
These tools really help you in picking something to invest in. It’s just also really risky, which is why you’ve probably seen the saying “Time in market > timing in market”.
This is a long term thing, don’t expect to make a quick buck and sell your funds, it just doesn’t work that way.
Use your HYSA for money you can see yourself using, and funds for money that you don’t need and are willing to risk.