Hello everybody, it's Sam from financial samurai and in this episode I want to talk about how homeowners can live for free So in the previous episode I talked about safe havens specifically buying three-month Treasury bills because they're yielding 3.3 3.4 percent now and that's pretty darn good online savings accounts yielding a little bit over 2% APY Not bad if we're gonna go deeper into recession if you noticed Federal Express FedEx they reported disappointing results and removed their forward-looking guidance because They think we're gonna go into a deeper recession The CEO was quoted as saying he believes we're gonna go into a worldwide recession therefore focusing on your cash Your cash hoard and the return on your cash is probably really prudent right now Over the next 6 to 12 months.

I'm gonna be building my cash hoard Especially since it's gonna be receiving a higher interest rate and here's something else I just realized as my mind is going through this protective mode right now, you know, I'm father I've got to look after my wife and two children and my parents if need be and I'm all thinking about okay capital preservation I've thought about capital preservation ever since I left in 2012 My net worth allocation has never been too extreme Never focused more than 50% in one asset class and never really chased The super hot high flyers just a little bit 5 to 10 percent of my investments, but now you know, it's serious, right?

We've had good times and we could go through rocky times for another one to two years It's very possible. So if you look at the yield curve right now, it is inverted It's inverted because the one year and two year Bond yields are higher than the 10-year bond yield.

The 10-year bond yield is around 3.45% Maybe it tops out at 3 5 3 6. I'm not sure but I think that's about where it's gonna top out But the one year one year Treasury bill is at three point nine five percent It's almost at four percent and similar with the two-year.

So it's an inversion and Inverted yield curves are a prescient indicator for a recession Almost four percent on a one-year Treasury bill is very attractive in my opinion over 90% of homeowners with mortgages have a mortgage interest rate below 5% and about 56% of homeowners with a mortgage rate have a mortgage rate below 4% We've all been able to refinance to under 4% for our mortgage over the past three years right in 2019 2020 2021 We were bombarded with the message to refinance and I was telling y'all to refinance I refinanced and I got a new mortgage in 2020 So for a 30-year fixed-rate mortgage You should have been able to get three percent or less and for a 7-1 arm or a 10-1 arm or a 5-1 arm You should have been able to get two point five percent or less So as a result, I think it's very prudent to buy one year Treasury bills at about four percent This is the perfect arbitrage to allow you to live for free now Obviously, you're not perfectly living for free if you don't have as much cash in those T bills Equal to your mortgage and other expenses other housing expenses, but as a personal finance enthusiast, it's all Incremental gains, right?

So if you have that ten thousand twenty thousand fifty thousand hundred thousand dollar lying around if you don't need that money Four percent on a one-year T bill Sounds pretty good. Now if you look at Ford Futures inflation expectation rates It's expected to go drop down to under four percent three and a half percent three percent in one year's time But you don't really know right?

Nobody really knows it does seem like inflation is peaking But for now what we do know is you can get a four percent Guaranteed yield over a one-year time period further if you buy Treasury bonds or Treasury bills There is no state income tax. So if you live in California, New Jersey, New York Hawaii states with high income tax rates Then you're getting an even better deal buying US Treasury bonds and bills as a financial samurai I always want you to be thinking about what are the positives of the current economic situation any Situation frankly, so the positive of an aggressive Fed rate hike policy is that the short end of the curve is going up and so we're going to be able to get higher Returns on our savings so we should absolutely take advantage while also being cognizant of Investing through a downturn, you know, I'm still nibbling on stocks when the S&P 500 is below 3900 who knows where it could bottom the most recent bottom was around the 3600 level It could go there.

It definitely could with all these indicators showing, you know, things are slowing down It's definitely a possibility what you obviously don't want to do is spend way more money than your income growth Projections. I mean this is what we're seeing at every single tier of income in the United States people are spending out Of their minds and I guess it's good for corporate profits for now However, if you're not anticipating a slowdown and you're still spending like this It's gonna come back and bite you in the bum bum So if you want to buy Treasury bills or bonds you can allocate a portion of your cash to them through Treasury Direct or through your online brokerage account and Finally, let me share a really nice podcast listener review as I'm thinking about how to best spend my time in 2023 and these reviews are motivating and if there are no more reviews, it's okay I'm gonna spend my time elsewhere and that's all good Payton Kolo said Sam I wanted to let you know how much I enjoyed your new book by this not that I've read a lot of financial books over the last five years and so far your book relates to the middle class Better than anyone when I started reading the book.

It was hard to put down I know you were not excited about writing a book, but I am glad you did. I highly recommend the podcast and book Thank You Peyton so much for your kind review of the podcast and book What really makes me happy is that Peyton says I relate to the middle class better than anyone Because this was not always the case In fact a lot of listeners and a lot of readers over the years said I was simply out of touch with reality Because here I was living in San Francisco where the median home price is over 1.8 million dollars and there are different types of incomes here where 22 year old kids College graduates are getting a hundred eighty thousand dollars all in right out of school But this is the reality that I've been living in from two years in New York City To now 20 years in San Francisco, and so I'm not gonna make things up I'm just sharing things the way they are and I've always hoped that people can recognize different realities that people experience in America and around the world and to just take it in and See if you can learn from different perspectives I think that's one of the funnest things about listening to a podcast Listening to people from different backgrounds and more during the two years of writing by this not that I was very intentional about writing for the middle class for the aspirational class for the people who cared Enough about their finances to read and listen about personal finance I wasn't just including stories about people making multiple six figures a year I was talking about people making $40,000 a year and close to the median household income of $75,000 a year.

I wanted the book to be relatable and helpful to as many people as possible So thanks so much for listening reading leaving a great review They're all really helpful and motivating and thank you for letting me evolve and learn from all of you It really is an honor if you'd like to pick up a copy of by this not that you can go to financial samurai.com forward slash BT and T.

Thanks so much everyone