Mistake

Welcome to reThinkable - my Sunday newsletter where I share actionable money tips, strategies, and resources to help you make smarter money moves.

Read time: 3.2 minutes

Hey friend,

The Federal Reserve bank recently hinted something important that 90% of people will miss. Big mistake. 

Who’s the Federal Reserve Bank?: They’re basically like the supervisors of the US economy. They try to make sure the economy is running smoothly. 

What’s happening?: The Federal Reserve Bank gave its strongest signal that rate cuts may be coming.

Why?: The Federal Reserve is a bit worried about the weakening job market, so they’re considering lowering rates to get the economy pumping again.

What that means for you: It’s kind of a double edged sword. Lower rates mean it’ll be cheaper for you to borrow money (mortgages, student loans, etc.) but it also means you’ll also earn less money in your High Yield Saving Accounts. 

The difference between winning and losing comes down to making the right moves in the next few months.

That’s why I’m breaking down exactly what this means for you and how you can take advantage of it to maximize your money today.

3 money moves to make before rate cutes

1. Lock in your gains

If you have money in a High Yield Savings Account (HYSA), you're gonna earn less interest on your money. I know, sad.

But there’s a trick to make sure you can continue to earn high interest on your money. Introducing… “Certificate of Deposits (CD)” 

Here’s how it works: When you open and put money into a CD, you’re basically agreeing to leave your money there for a set period (anywhere from 3 months to 5 years). In return, you LOCK IN today’s HIGHER interest rate. So even if rates fall next month, you still get the HIGHER interest rate.

Here’s what I’m doing: I’m still keeping my emergency fund in a HYSA but I’m moving my extra cash into a 4.00% CD to maximize my returns. Here are some of my favorite CDs that still offer 4.00% returns, but you need to lock your rate soon.

2. Boost your savings

If you're planning a big purchase like a car or home, signing that loan at the right time could save you thousands in interest.

Car loan rates typically drop after Fed cuts - sometimes even before banks officially announce the changes. And while the Fed doesn't directly control mortgage rates, their decisions heavily influence what lenders charge. Don't expect a dramatic dip, but keep an eye out for lower rates in the next couple of months.

Here’s what you might want to do: If you're planning to buy a house or car in the next year or two, now's the time to really aggressively save for that down payment. The more you can put down, the less you'll need to borrow - and when those lower rates kick in, you'll be in the perfect position to take advantage of them.

3. Boost your contributions

Rate cuts tend to send money flowing into the stock market. 

Here’s how it works: When it gets cheaper for businesses to borrow money, businesses can expand more easily. Investors like to see growth so they’ll tend to invest more money. 

Here’s what you might want to do: If you're already investing regularly, consider bumping up your contributions. Even an extra $25 or $50 a month adds up over time.

If you haven't started investing yet, it’s a great time to learn. You don't need to be a Wall Street expert - you can start with something simple. I have a bunch of free videos teaching you how to invest on my Youtube channel. Here’s my favorite one for beginners.

To making smarter money moves,

— Vincent Chan

Vincent Chan

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