Doubling Down on Savings
We often think about getting a return on our investment and measure that return by the % we get. For example, 3 month Treasuries are paying 5.49%. 10 year Treasuries are currently paying 4.74%. Short-term 6-month CD’s are right around 5.56% (at least that’s what we are getting for our clients on the Schwab platform).
I like to “double down” so to speak. And by double down I mean that I utilize my savings to get an additional return. I’m talking about carrying a higher deductible on my car and home insurance. In doing so, I pay a lower premium on my insurance, leaving more money in my pocket. Of course, if I ever have to make a claim, I have to pay the higher deductible. But part of living a “safe” life is being conservative and careful with choices and that includes driving and habits at home. These two things have, knock on wood, minimized our claims. In 28 years of owning a home, I’ve had one claim. And in 35 years of driving, I’ve had zero tickets and one claim.
Let’s use an example. My current premium for 3 vehicles through Progressive is $1,386/year. I have a $2,000 deductible on comprehensive and $1,000 on collision. If I moved those deductibles to $250 and $100 respectively, my daily premium would go up $4.17 or a whopping $1,500/year! Since I have money in a safe place - Treasuries and CD’s - I have a cushion I can tap into if I ever would have an accident. In the meantime, I’m saving $1,500/year in premiums I’m not paying! Recall that I’m increasing the deductible because I have money in savings. Let’s say I have $100,000 in a savings account earning 5%. If having that savings allows me to increase my deductible and lower my premiums by $1,500/year, that’s like getting another 1.5%. I’ve just increased the return on my money from 5% to 6.5%.
If you are interested in learning more, give me a call at 513-768-2238 or email me at jared@kellettwealth.com
What’s your financial story?
Jared
Brian Kellett, brian@kellettschaffner.com. Phone 513-312-6067
Dave Bodnar, david@kellettschaffner.com. Phone 513-258-6973
Jared Kline, jared@kellettschaffner.com. Phone 513-768-2238
Kellett Wealth Advisors LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Kellett Wealth Advisors LLC and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Kellett Wealth Advisors LLC unless a client service agreement is in place.