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“But I earn $300/year from switching banks!”

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A little comment exchange on yesterday’s post about not switching banks to get an extra 0.25% interest:

Mike:

I’m one of those rate-chasers, so [with $40k in emergency savings], I’ve consistently been earning anywhere between 0.65-0.85% higher than my operating money market account… That’s an extra $300/year in interest, which is definitely worth changing banks every 4-6 months for me.

My response:

Mike: If you were smart enough to sock away $40k in an emergency fund (which is really impressive, btw), I bet you’re smart enough to spend your time doing something better than earning $300 year — something that will sustainably let you earn much more. You’re only earning $0.82/day doing that!

How about spending the same time optimizing your asset allocation? That step alone is probably worth thousands per year. Or starting a side business? Have you considered reading 5 new books about personal finance, entrepreneurship, psychology, whatever? Or even spending those few hours with your family? I don’t know what you value, but in my eyes, any of those things would produce more value than $300/year…especially for someone who’s so far ahead of everyone else, like you are.

This is just my 2 cents…~1/40th of what you earned today (sorry, couldn’t resist).

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37 Comments

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  1. I don’t understand. While your suggestions are sound in general, I don’t see anywhere in Mike’s response where he said he didn’t do any of those things. Nor did I see anywhere in Mike’s response where it said his constant switching of banks cost him a lot of time. What if he does all of those things? Isn’t that extra $300 worth it then?

  2. You are carrying the same logic as the people who receive minimal interest with their local banks… “It’s just a few cents more PER DAY!”

  3. It’s not 82 cents per day if it only takes him a few minutes three or four times a year to do it.

    And how do you know he’s not optimizing his asset allocation, starting a side business, or reading finance books, as well?

  4. Dude! You are assuming that Mike is a young man…
    What if he is a 65 year old man who has enough in his 401k and does not want the market to do any more damage to his net worth?

  5. It’s not like it really takes all that long to switch your savings account. Why not take a few minutes to get an extra $300 or so?

    Anyway, the posts here have been pretty bad lately and this is just another example. Unsubscribed.

  6. Ramit, sometimes you come across as a real dick. This is one of those times. Let the guy do his thing, and try not to accuse him of being a horrible father, person, idiot, etc.

  7. Well, I know the other people are saying Ramit is coming across as a dick, but that’s the reason I like him: he doesn’t sugar coat it. The guy should really consider diversifying, or just putting it all in a good long term stock. Berkshire Hathaway typically does 5-10% of growth a year, and right now it’s at an extreme discount. Put his 40k in a few shares of BRK.B, come back in a few years, and he’ll be doing much better than $300/yr.

  8. Lets see,
    First off, yeah, the posts have been quite sucky of late. I demand a full refund of the $0 I paid. But seriously, can we have more cowbell please?

    Second, yes, the we do not have enough details to draw an informed conclusion. That said, in 90% of the cases, I’d say its a bad idea to jump around banks.

    Umm… when did Ramit accuse the guy as being a horrible person? Saying that you could spend more time with family does not imply that I think you are a horrible dad. Family is like ice cream, theres always (more) room for it 🙂

  9. @Tom

    The money is his emergency fund. He needs it to be liquid. Investing it in stock kind of defeats that purpose.

    I don’t even know what the reason was behind Ramit’s surly response, but it was uncalled for IMO. There is a big difference between not sugar-coating something and being an a**hole.

  10. Wow…everyone’s being harsh here, including the commenters. I think Ramit’s trying to point out that sometimes we have to consider if the money is worth our effort.

    And Ramit, I agree that your posts have been under-par recently, but perhaps that’s because you’ve set the bar so high in the past. Keep up the good work.

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