Today we celebrate. 2022 was an incredible financial year; therefore, we can ring in 2023 with a bang. My high-yield savings account is one of my favorite investment vehicles of 2022, so I want to explore it more in-depth.
Discover did me a solid by sending me an email summary of my HYSA. This also included my favorite debit card that pays one percent cashback. Let’s take a look.
Interest rates increased. The most significant event of 2022 was when the Federal Reserve made it a goal to raise interest rates.
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The Federal Funds Rate directly impacts treasury bonds, mortgage rates, credit cards, auto loans, and (that’s right) savings accounts.
My Discover HYSA ended the year at 3.3%, which is impressive because it started at 0.4%. That’s a whopping eight times more interest.
I earned a total of $47.62 in interest in 2022. This $47 can now start compounding on its own, creating its own snowball of interest accrual.
Cashback for the win. In 2022, I also started to take advantage of my cashback debit card. I was in Japan in 2020 and 2021, so I couldn’t use my card too often.
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Now I am in San Diego and can use the card as part of my daily budgeting plan. I transfer $1,500 to my debit card monthly, equaling $50/day.
I use this account to pay for my daily food (salads, Lunchables, granola bars, sushi), gas, and entertainment.
I also transfer $200/month to the card for things like Netflix, Hulu, Microsoft Office, and Kindle Unlimited.
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At the end of the month, I receive between $13 to $16 in cashback rewards. This money goes directly to my HYSA to start earning interest throughout the next month—a pretty sweet setup.
How much do I have in my account? I have roughly $6,100 in my HYSA to start in 2023. I aim to get this to $10,000 in the year’s first half.
From there, I can start working towards my Tier 3 emergency fund (six months’ worth of expenses or roughly $30,000).
I have money spread across another five savings accounts to protect from using my HYSA and emergency fund. You should only use emergency funds during “actual” emergencies.
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Therefore, I have another $5,000-$7,000 in standard savings accounts that I can use for annoying inconveniences that always pop up.
The power of an HYSA. A high-yield savings account may be your introduction to earning interest and passive income—it was for me.
My first attempt at passive income was depositing $100 into my HYSA in June 2019. At the end of the month, Discover paid me $0.06 for my trouble.
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These moments are vital to convincing yourself to save and invest. How you handle six cents is how you handle $600,000.
You must start somewhere, and HYSA and cashback debit cards are excellent tools to make the transition.
Count every penny. Unfortunately, you will need to count every single penny as you transition from a spender to a saver.
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Does it suck to follow a budget, document every outbound penny, and record every penny of interest earned? No, because it’s great to watch your debt disappear and your passive income increase.
It is humbling to watch $77,000 in debt go away (rather quickly) and transform into receiving $1,800/month in dividends.
The devil is in the details. What you measure, you manage. As you transfer your online budget payments to your cashback debit card, you will start to see the numbers.
If you spend $2,000 on your debit card, you’ll receive $20 back. It’s best to get as many little ankle-bitter bills onto your debit card as possible.
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The maximum amount you can get cashback is $3,000, so up to $30 back. I want to achieve this amount every month.
I set up most of my major bills (electric, internet, water) to come directly from my Wells Fargo checking account. This prevents me from constantly changing my setup as new cards arrive.
It’ll be painful to get these bills onto the card, but it will be worth it. Hey, a free $30 can buy me a couple of McDonald’s iced coffees per month.
Reward yourself. The most important part of building passive income is rewarding yourself. What you reward, you repeat.
So don’t feel guilty if you want to use your $30 in interest to buy something you want. Most people try to go all in on reinvesting, but then they burn out.
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I like to spend at least 25% of my monthly interest or dividends. It excites me to add more to the top level to get more at the bottom (like a funnel).
Pair with a Dividend Debit Card. Finally, you can pair your HYSA and cashback debit card with a Dividend Debit Card (Cash app card with a brokerage account).
I have my budget on my debit card, and I have fun with my dividend debit card. I receive roughly $210 per month on a dividend debit card.
I can spend this money any way I want. My wife also has a dividend debit card. I love using my two cards in tandem.
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If there is something I want to buy outside of my budget, I use my dividend debit card. This can be things like video games or fast food.
I also tend to find myself having large sums ($300) remaining on my budget. It is empowering to control your spending and genuinely appreciate the small things in life.
Conclusion. We all tend to be consumers who over-consume. The media teaches us that working, wanting, buying, and owning are our daily grind’s most important feedback loop.
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Thus, it is exceptionally challenging to break the cycle. It happens in small pieces and on a slow timeline. The best place to start is with an HYSA.
You can start an emergency fund while watching it earn some interest. Discover is a great way to go, but many online banks offer attractive interest rates.
The actual feedback loop is budgeting, saving, investing, and spending (your passive income). Once you hit this cycle, your life will change.
Do you know what you can truly afford? Whatever your dividends pay you. My Dividend Debit card pays me $210/month, which is my “real” discretionary income fund.
I look forward to writing this article next year. Hopefully, I will have much more interest and cash-back rewards. Life is good when you understand finances. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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