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Should You Manage Your Money Like President Obama?

Posted By Miranda Marquit On 06/16/2011 @ 12:08 pm In Personal Finance | 24 Comments

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 [3], 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 [4]. 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 [5]. 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 [6], and in a 529 plan [7] 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.


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/manage-money-president-obama.html

[3] CBS Moneywatch: http://finance.yahoo.com/banking-budgeting/article/112763/where-obamas-invested-money-moneywatch;_ylt=Ag_nhptdmpR35Y.8svcGqbEJo9IF;_ylu=X3oDMTE2NTUyNDRyBHBvcwMzBHNlYwNmZWF0dXJlZEFydGljbGUEc2xrA3JlYWRtb3Jl

[4] income diversity: http://www.bargaineering.com/articles/book-review-multiple-streams-of-income.html

[5] savings rates: http://www.bargaineering.com/articles/top-5-online-banks-savings-or-checking-accounts.html

[6] SEP IRA: http://www.bargaineering.com/articles/introduction-to-sep-iras.html

[7] 529 plan: http://www.bargaineering.com/articles/saving-for-college-529-plans-coverdell-esas.html

Thank you for reading!