Last week, news outlets reported the release of minutes from the Federal Reserve's meeting in January.
We all know that when the Fed meets, it's usually big news. Since the financial crisis, the central bank has been ever-so-gradually raising interest rates, from zero, to where they now sit, in a range of 2.25% to 2.5%.
But ever since equities markets fell sharply to end 2018, the Fed has been sending mixed signals. I won't bore you with the details, but the short version is that Fed Chair Jerome Powell seemed committed to gradual increases... until things got a little ugly.
So the question became whether the Fed would continue raising rates gradually or take an even softer stance going forward. So here's what we learned from the official notes from the meeting...
Still with me? Good, because here's the key part...
The Fed signaled that it would take a "patient" approach to further interest rate hikes as it assessed the economic data going forward, adding that the current federal funds rate "posed few risks at this point."
Now , I'm not here to debate whether the Fed is right or not. We simply don't know for sure.
Yes, inflation is low, and yes some of the data out there looks troubling. On that front, it would seem wise to take a pause and reassure markets. But you could also argue that if growth is indeed slowing globally and here at home, and if a major recession hits, then the Fed will not have much in its tool belt, policy wise, to spur growth again. Either way, the Fed is caught between a rock and a hard place.
But instead of getting caught up in things you and I can't control, let's face some reality here. And that reality is this... It looks like interest rates are going to stay low for quite a while longer. In short, no relief in sight for any income-seeker, any saver, any retiree.
In case you haven't figured out by now, it's not going to be easy.
Make Sure You're Getting Paid
I bring up this because it's never been more important to make sure you're getting paid.
The Fed isn't going to pay you. Thanks to its policies, Treasury rates are a joke. A 1-year note will get you 2.5%, sure. But a 10-year T-bill? 2.7%. Hardly worth it.
The average S&P 500 stock, at a yield of 2%, isn't going to pay you, either.
You're going to have to work for it.
Tomorrow, I'm going to tell you about a way to juice those paltry yields from the stocks you already own. It's safe, easy, and with my colleague Amber Hestla's help, you'll be earning hundreds -- possibly even thousands -- of "bonus dividends" in no time.
But first, here's a little tip...
Fire Your Banker
If you're like most Americans, you just have a regular savings account. If it's with one of the big banks (or a credit union), you're probably earning next to nothing.
The average savings account pays 0.09% a year. Money market accounts are no better, while the average 5-year CD pays 1.5%, according to Bankrate.com.
Wait a second, you might think... You just told me that the fed funds rate has gone up from zero to 2.5% during the past few years. So why are the banks still paying like it's 2009? What gives?
In short, the banks are greedy bastards. Shocker, I know. You can't blame them for that. It's their job -- a tale as old as time.
They're paying you nothing because they know they can get away with it -- for now. They're taking your money, giving you essentially nothing for it, and then loaning it out at 4.4% for the average 30-year mortgage, according to Freddie Mac. They're making even more from auto loans, especially from subprime loans, which can go for 7% or higher, depending on the FICO score of the borrower.
That's quite the spread, and it's enough to make you want to spit nails. But again, you're letting them get away with it. It's time to consider firing your banker.
The good news is, thanks to technology, you don't have to settle.
I know a number of people who use online savings accounts. They're easy to open, they pay far better than traditional banks, and you have no excuse for not using one -- other than taking the time to do it. (To compare rates, check out this page.)
As for me, I'm considering opening a Marcus by Goldman Sachs savings account. It offers a 2.25% rate with $1 minimum balance.
In this low-rate world, I think I'll take it.
I don't know about you, but I've had enough with not getting paid. I'm putting this at the top of my financial to-do list. I want to have this taken care of before I do my taxes this year or make a single change to my portfolio.
I'm serious -- it's so easy to ignore the easy wins right in front of you. If you feel like I do, then do yourself a favor and don't put this off.