Advice for the Young from the Old

The first of the lecture series starts by discussing how banking through a regular bank or a credit union fits in as a part of an overall savings strategy. A brief overview of the entire lecture series is on this page. In this first slide deck, we look at what can lead to an escalating debt or cash crunch, discuss the establishment of a buffer to create a “Moat around your financial castle”, and budgeting to address these.

The entire slide deck is available through this download link. What follows is a discussion about one slide concerning contexts where investing in stable income investments at banks may be considered together with stock and bond investments. This looks at movements in interest rates – whether they are falling, in a flat plateau or valley, or rising; and the level of interest rates – high or low. Currently, in the USA about 2% or higher would be considered high and about < 2% would be considered low.

The guidance in the table follows based on the following observations:

  • Bonds do well when interest rates fall.
  • Newly issued bonds tend to have high periodic coupon payments when interest rates are high.
  • Stocks tend to falter when interest rates are high and when they are rising. Interest rates are sometimes increased by the federal reserve when there is a sense that the market is “overheated”.
  • Bank investments could do well when the interest rates are high or have the potential for increasing, as these can be associated with increased market volatility making risk-free investments worthwhile.
  • Note further that paying down debt is like a ROTH stable income investment.

As noted in the footnote to the table, it is very hard to gauge if interest rates are low/high or in a rising/falling pattern and the guidance in the table should usually not be used to veer too far off a planned savings and investment strategy. It is usually hard to gauge expressed opinions of the federal reserve about such patterns except on some rare occasions such as when the former federal reserve chairman Mr. Greenspan commented on “an irrational exuberance” in the financial markets. Further, the financial markets adjust rather rapidly to interest rate movements and only experts can make substantial gains from it. But the table should help during periods of strong subjective or objective apprehension about volatility in financial markets or when interest rates appear to be at one of the two ends of the range – the lower or higher end.

There is additional content on a cash crunch, debt, building a buffer and budgeting in the slide deck. You can reach us at or at 551-233-6768 for more personalized advice or a group course offering. Details on our fee schedule are in the FAQ page.