Should I Stay or Should I Go? 7/20/23

Hello NFC Clients and Friends,

Several of you have joined many Americans in applying The Clash’s famous interrogatory (see title above) to their recently acquired Series I Bond position. “Whoa, whoa, whoa Norman! You claim to help us deconstruct the Wall Street gobbledygook in an effort to facilitate sound financial fitness decisions. Why would you open with such a tortuous sentence?” My apologies, but clicking the link above and watching the epic early 80’s video should improve your mindset as I attempt to explain below.

As a hedge against last year’s spike in inflation many investors purchased I Bonds. Friends and clients of NFC who took advantage of this opportunity were reminded that we assign all of our dollars to do a job, whether we are aware of this or not. In this sense, investing in government security is no different than buying a Cook Out milkshake. The money is directed to accomplish an objective in both instances, and provided the decision was made with intentionality, there is no place for judgment here. I, for one, decided to have my milkshake and eat a Series I Bond too.

On April 28, 2022, I purchased a $10,000 I Bond (max allowed per person per year) locking in 7.12% interest rate for 6 months, followed by 9.62% for the next six months, then 6.48%, then 3.38% as inflation has moderated (I bond rates adjust with inflation). My bond is now worth $10,856—- not bad “work” done by Norman dollars in 12 months time! These dollars continue to work while I sleep and slurp down the occasional milkshake. Thanks Uncle Sam! As the Fed continues its mission to bring inflation down to its 2% target, one might ask if it is time to sell this inflation correlated bond. While I cannot intelligently answer this question for anyone else, I can answer it for myself. Why? Because I assign my dollar bills a job. This particular job for these particular dollars is to continue compounding for the next 3.5 years at which point they will be used to pay for a semester of our second child’s college education. A really nice bonus feature of this particular work assignment is that we will pay NO taxes on any of the earned interest! What a country! But this is my situation, my job assignment, for our Norman dollars.

For those of you considering cashing out your I Bond(s), I highly recommend your read and/or watch this first. Your decision tree should be based on your personal situation, starting with the intended purpose for your investment. One catch with I Bonds–the logistics involved– which includes coping with the epically antiquated Treasury Direct website. As with all investments, only invest in what you understand. When in doubt, keep it simple.

So, when asking yourself “Should I Stay or Should I Go?”--- you may want to remind yourself of why you came to I Bonds (or any other investment) in the first place. All personal finance is, well, personal. If you need help answering this question, or are wondering if it is too late to take advantage of I Bonds, I am here to help.

Yours in Financial Fitness,

David

Norman Financial Coaching