Personal Finance 

Should You Manage Your Money Like President Obama?

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Not too long ago, President Obama and the First Lady disclosed their financial assets publicly. Their balance sheet showed no liabilities — the First Family is debt-free. Additionally, the financial disclosure includes money made on book royalties, as well as information about where the Obamas are investing some of their cash. When you look at the numbers, provided by CBS Moneywatch, it becomes evident that you can learn a few things from the Obamas.

Some things that Obamas are doing, like investing in a low-cost index fund, make sense. Other items the Obama family are doing, though, like parking a large chunk of capital in a bank account that yields very little interest, aren’t the best ways to maximize your money. After reading about what President Obama is doing with his money, I’ve come up with a few lessons that I can learn.

Cultivating Passive Income Can Be a Great Idea

One of the best things you can do is cultivate income diversity. This way, you aren’t relying on only one source of income — just in case your primary source of income is lost. The Obamas have passive income in the form of book royalties. If you can do something creative like that to earn passive income, go for it. President Obama earned millions from book royalties.

You don’t have to write a book to build up passive income, though. I earn passive income through residuals on articles written in the past, traffic bonuses from some of my clients, and from AdSense. This money that keeps coming in — without me having to do any more work for it. I’m also working on building up an income portfolio with help from dividend stocks and other income investments. While these things take work at the begin, eventually, the earnings become passive.

Get the Most Out of Your Emergency Fund

According to the CBS Moneywatch article, the Obamas earned less than $1,000 in interest on an account with at least $250,000 in it. If that number is right, they are earning a horrifyingly low yield on their account. Sure, savings yields are really low right now. But that doesn’t mean you shouldn’t be getting what you can. The Obamas may not need to be earning a great deal in interest, but they should be trying. Instead of sticking with such low yields, they could shop around for better savings rates. The same is true of the rest of us. My emergency fund is in a high yield account, and while I wish the yield were higher, it still beats the rate at my local bank.

Prepare for the Future

I like that the Obama family is preparing for the future. The President invests in a SEP IRA, and in a 529 plan for each of his daughters. You should always prepare for the future, since you don’t know what might happen next. The earlier you start saving, the more time compound interest has to work on your behalf. It’s also great that the family doesn’t have any debt. There are few better ways to prepare for the future than to pay off your debt as soon as you can. And to stay debt free. While the Obamas clearly have more means than many of the rest of us, it’s still admirable that they are living within them.

{ 24 comments, please add your thoughts now! }

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24 Responses to “Should You Manage Your Money Like President Obama?”

  1. Annie says:

    I found this article interesting. The president and family can manage their own personal assets well yet he keeps proposing spending that increases the US deficit. What he is doing for himself and family make sense. He should try to steer the country in the same direction. A 14 trillion deficit is not only scary but shows poor financial management skills. When you have only $10 you can’t spend $1,000. Printing dollars is not real and does not help.

    • zapeta says:

      Lets not pretend that Obama is completely responsible for the deficit. At least he seems to understand that you can’t keep spending money you don’t have which was apparently lost on previous presidents and congress.

      • Courtney says:

        Let’s also not pretend that macroeconomics is the same as microeconomics.

      • sophomore says:

        Let’s also not pretend that it’s OK to continue to build deficits just because someone else did it first.

  2. MacKenzy says:

    with QE 1 and QE 2, you don’t know the factors that are driving growth–or no growth. Therefore, low-cost index fund makes perfect sense until the QE era is over.

  3. zapeta says:

    Yeah, they really missed the boat on the interest on their savings. Maybe someone should send them an ING invite?

    • cubiclegeoff says:

      I’m sure you can find his email somewhere. That would be awesome, especially if he accepted and opened an account.

    • skylog says:

      that is just hilarious. you have almost inspired me enough to actually make a real effort to get through to him on this.

  4. Davito says:

    He’s probably afraid to risk that $250K in our stock market for the simple reason average americans are loosing their shirts on this nations enconomic policy blunders. Managing your money is common sense policies like you noted in the article but I think someone skipped the class on economics 101. I’ll stick to my own plan.

  5. Mike says:

    You have to realize that these people don’t become rich by being stupid with their money. They become rich by being stupid with yours.

  6. billsnider says:

    In your intro you note that investing in low cost index funds makes sense. I guess you haven’t looked at their performance over the last ten years. that is a losing strategy.

    Bill Snider

  7. Ryan says:

    Should you manager your money like Obama manages your money?

    • Jim says:

      Ha, technically Congress manages your money since they vote on the budget. 🙂

      • billsnider says:

        Not exactly. He still has administative responsibility.

        Bill Snider

        • Jim says:

          True, but he’s hardly 100% responsible.

          • Donald says:

            I’m impressed by the general good sense displayed by commenters here. The web is full of diatribe by people who have apparently no memory of any time before January 2009. To hear them talk you would think everything was just fine up till then.

          • Ryan says:

            No president is 100% responsible, but their ideas and plans are put in motion by the party that supports him. He’s their leader, he pushes his agenda whether Congress agrees or not. The party is the problem, the President is their leader. Donald, this was broke long before 2009, you made the assumption that I am placing blame for our broken economy on Obama, today I am, but I’m not so short sighted to think that it was only him that put us in this place. Don’t project what you think I’m saying only because it fits your biased opinion of people who don’t support the President today. Get over yourself.

          • Jim says:

            It’s just how Washington works and it’s broken.

  8. Brian Woods says:

    I would hope they were debt free. Currently they are spending 0 dollars for housing, travel, food, vacations, home security, utilities and everything else a normal family would. I cant really fault him for his investments because they sould be in a blind trust to prevent insider trading.

    • Texas Wahoo says:

      He still have to pay for his vacations and food (just not as much as the U.S. has to pay for his vacations and food).

  9. Regarding maintaining a large cash balance with a low yield, he may have that cash earmarked for some expense and wants easy access. If inflation kicks up soon, cash yields will also increase.

  10. Ben says:

    Many Americans have bills the first family currently know nothing about: Housing, utilities, transportation, education, insurance, food, clothing, entertainment. All these are provided for the first family by the American taxpayer. By one estimate the average American has a personal debt load of over $ 117,000. The Obama family better be debt free! We are paying for the finest the world has to offer of everything for them! The comparison of the Average American to the Obama family is like comparing apples to hand grenades!

  11. Julie says:

    I remember reading the Obamas were in quite a bit of debt until the his books paid big. they were scrambling to pay school debt even though they were both making 6 figures. I’d be debt free to if I had royalties for a couple of book deals and all expenses paid. I might even have savings and pay for my own health care.

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