- The Finance Gourmet

Marcus High Interest Savings Account Review

October 11, 2024 by Finance Gourmet

Update: As of January 2024, the current interest rate Marcus accounts is 4.50% Update: As of July 2024, the interest rate on the Marcus High-Yield Savings Account is 4.40%. Update: As of 10/11/24, the interest rate on Goldman Sach’s Marcus High-Yield online savings account is now 4.10% after recent rate cuts by the Fed. High Yield Savings Worth It Again After a few years decades of the Fed running along with near zero interest rates yielding high-yield savings account earning only a few cents more, online high yield savings accounts are back. With interest rates up over 3% for the first time in a long while, watching that monthly interest payment hit is a whole lot more fun now. As someone a little older and with more finance experience the return to 6% mortgages and savings accounts paying at least a few percentage points feels like normal. However, it’s been over 20 years since the Fed Funds rate was this high, so this might all be new to you if you are in your 30s, or younger. While the cost of your borrowing has gone up, whether it’s mortgages, credit cards, auto loans, or personal loans, taking out a loan …

What Will Interest Rates Do Now?

January 22, 2024 by Finance Gourmet

It’s January 2024, and nobody expects the Fed to cut interest rates at its January meeting. Interest rates will stay the same until the March meeting, when the only option is to stand pat, or to cut rates. An interest rate hike is off the table under all foreseeable scenarios. What Should I Do About Interest Rates Now? Under these conditions, it is important to understand two concepts. First, some interest rates move only when the Fed cuts or raises interest rates. Other interest rates move with the market. The first kind of interest rates are generally most types of revolving debt such as credit cards, home equity lines of credit, and personal loans. These kinds of credit are almost always tied to the Prime rate. The Prime rate is set banks, and typically moves in lock step with the Federal Reserve Fed Funds Rate. The second category of interest rates moves with the market. When people talk about interest rates and the market, they mean the bond market where all manner of debt trades hands just like stocks in the stock market. Just like stocks, these rates move every day, and just like stocks, more than a little bit …

What Is the Normal Mortgage Interest Rate

November 8, 2023 by Finance Gourmet

With articles and talking finance people constantly talking about mortgage rates, rising mortgage rates, and highest interest rates in 20 years, you might be wondering what the normal mortgage interest rate actually is. There are actually many different types of mortgages. When people talk about mortgages generally, or generically, they are typically talking about the standard 30-year mortgage with a 20% down payment. As it turns out, mortgage rates aren’t as typical as some people might have you believe. The 30-Year Fixed Rate Mortgage Average Chart As someone who has clocked in nearly a half-century here on Earth, the days of 3% and 4% mortgages were crazy town bonkers. To me those interest rates were comically low, and certainly not the normal interest rates for mortgages, but it isn’t that simple. This chart shows the 30-year fixed rate mortgage average in the United States. As someone who became aware of finance around 1990, you can see where I got the idea that 7% and 8% mortgages were normal. In fact, if you want the average of this graph, it is around 8%. Although, there is no one on this planet who considers the disastrous interest rate of the early 1980s …

Real Power of Compound Interest

January 2, 2024August 17, 2023 by Finance Gourmet

I have a full follow-up coming in response to some of the questions I received on a recent post about how to get rich fast investing in the stock market. In that post, I showed how it is nearly impossible to get rich investing in less than a decade or two, unless you start out with a sizable amount of money in the first place. The reason this is so shocking to people is that they hear all the time about the power of compound interest. While it is true that over the long-term, compound interest is very powerful, it takes a long time to get going. Imagine the trickle of a mountain stream building slowly over miles and miles until it becomes the Mississippi River, and you get some idea of what the real power of compound interest looks like. In the meantime, I stumbled across this instructive comic from xkcd.com about the power of compounding interest.

Should the Fed Stop Now?

July 30, 2023 by Finance Gourmet

Below is a quick belt out of information and opinion before I head off with the family on a last-of-summer vacation. Don’t bother letting me know about other links, grammatical errors, or the like. I’ll go back to normal when I get back next week. Should the Fed stop raising interest rates now? Even the staid financial press is starting to ask the question that obsequious interest rate hawks insisted was off the table, is it time to stop raising interest rates? Inflation Is Down In the carefully written narrative of the Federal Reserve fighting inflation, the Fed bank must raise interest rates, longer, and more painfully than the lesser economic hawks can stomach. Only then can inflation be brought under control by the tough love of inflation hawks. But, as they like to say, a funny thing happened on the way to the forum. It seems that if the economy were overstimulated into inflation by various temporary economic measures such as government checks from a larger child tax credit, and student loan borrowers unleashed temporarily from their burdensome payments, then the boost to inflation was temporary as well. The result is that with a tap on the brakes in …

Should I Open a CD Now Before the Next Fed Meeting?

July 12, 2023 by Finance Gourmet

The Federal Reserve has been highly predictable for the last few years thanks to Covid and a brittle economy, but high inflation changed the game. Now knowing if you should open a CD before the next Fed meeting is a little trickier. However, this Fed hasn’t changed its stripes and predicting the Fed’s moves in the short term is still easy enough to make decisions with your money. Should I Open a CD If the Fed Is Raising Interest Rates? If you bought a 5-year CD paying 1.45% a year or two ago, that probably feels like a bad move buying a CD. Don’t feel too bad you aren’t the only ones. Professional asset managers bankrupted a favorite Silicon Valley stock by buying long-term treasuries when they were paying pennies. Like you, they took what they could get. Ideally, you want to wait until the Fed raises interest rates before buying a CD. Higher rate CDs mean more interest for you. However, you have to remember about opportunity cost. Opportunity cost is the value of what you could have been doing with your money while you were doing something else, like waiting for the Fed to raise interest rates. That …

Interest Rates, Mortgages, HELOCs, Credit Cards, and the Fed

January 20, 2024December 17, 2022 by Finance Gourmet

Originally published 12/17/2008, this post is being kept for its historical value, as the economy was still reeling from the housing market collapse and subsequent market swoon. For fun (and education), pull out your favorite charting tool and set the dates to either side of this date. This rate cut will mark the bottoming of the stock market (by March of 2009). Days like yesterday and today are why I write the Finance Gourmet. For those of you who didn’t see it, the Federal Reserve, or Fed cut interest rates to between 0% and 0.25%. All day today, the media has been droning on about what it means for consumers, homeowners, and the economy. Unfortunately, they are in such a hurry to do so, that they skip over all the details. So, here it is, what the Fed’s rate cut means to you. What To Do Now That Interest Rates Have Been Cut After reading the above, you should be aware that there are no quick and easy, or automatic solutions coming based on this rate cut. Frankly, that isn’t really what it is supposed to do. But, that doesn’t mean there is nothing you can do. First, don’t count …

S&P 500 Hits 52-Week Low

May 9, 2022 by Finance Gourmet

Now, things are getting interesting. There is a new SP500 52-week low. I’ve spent most of the first part of this year making the argument that the 2021 stock market run, especially the October 21 to January 22 was overdone and that the corresponding downturn in the markets from around February 2022 to April 2022 could be considered more of a return to “normal” than any sort of market correction. Reasonable minds may differ. Market Downturn Gets Real Today, the S&P 500 took out its 52-week low. From here on out, everything down, is truly down. Our one big sideways stock market ends here, and we really are heading for a potential correction here. This is why people calling for the Fed to raise interest rates so fast are dead wrong. The signs of the economy slowing, but not declining, are everywhere. That is exactly where you want to be. That is what a soft landing is. An economy gliding back to normal growth, normal employment, and normal interest rates all without triggering layoffs, housing crashes, and so on. All the Fed needs here is a little tap on the brakes. If it were me, I would skip a rate …

Did Mortgage Rates Hit 12-Year High?

April 21, 2022 by Finance Gourmet

The press loves a good scare story, and mortgage rates hitting a 12-year high is just the ticket. Mortgage rates did hit a 12-year high, and I suppose for those who are newer to the world of finance that probably seems like a big deal, but the reality is a little different. The 30-year fixed mortgage averaged 5.11% last week. That isn’t remotely a historically high mortgage interest rate. In fact, it wasn’t that long ago that a 5% mortgage was a great rate. It still is. But, these haven’t been normal times. The U.S. economy seems to lag on differently than it once did. The inflation we see today is the only real inflation we have seen in decades. Every time the American economy looked it like might get going back to “normal” something happened to smack it back down turning what used to be crazy, historically low interest rates into normal interest rates to the newest generation hitting financial literacy. This 10-year chart of the Federal Funds rate shows that we haven’t seen a Fed Funds rate above 2.5% in the last decade. In fact, just when we got close to something that might be considered normal or …

The Fed’s Balance Sheet

April 6, 2022 by Finance Gourmet

The Federal Reserve is best known for setting the Fed Funds Rate which is the interest rate that the Federal Reserve charges banks for overnight loans. That, in turn, influences, or outright directly adjusts, several other interest rates that have a meaningful impact not only on business, but American citizens and consumers as well What Is the Fed’s Balance Sheet? What is the Federal Reserve’s balance sheet? Well, that’s a tiny bit complicated. To understand you have to accept the concept that there is a certain amount of money floating around in the U.S. economy at any one time. That amount is not fixed. One day, you have $50,000 in your checking account, and a $50,000 loan, for a total of $100,000 floating around in the overall money supply. The next day, you use that $50,000 in your checking account to pay off the loan, essentially removing that $50,000 from the economy. The U.S. economy is enormous, and at any one time there are trillions of dollars floating around in the economy. However, some of that money is moving and doing something and some of it is stuck. Think of all those gold coins in Scrooge McDuck’s vault. They exist. …