NerdWallet's Smart Money Podcast - How Get Rich Slowly's Founder Retired at 40. Plus, What Higher Bond Yields Mean for Savers

Episode Date: September 3, 2026

Learn how Get Rich Slowly creator JD Roth paid off $35,000 in debt and retired at 40. Then, learn what rising bond yields mean for savers and investors. Hosts Sean Pyles, CFP®, and Elizabeth Ayoola talk with JD Roth, founder of the personal finance blog Get Rich Slowly, about paying off $35,000 in consumer debt and eventually selling his blog to retire at age 40. JD explains the psychological shifts that got him out of debt, why growing his income mattered as much as cutting his spending, how he built one of the internet's first personal finance blogs, and how he's now helping his girlfriend, Kim, navigate her own path toward financial independence. Then, NerdWallet investing writer Sam Taube joins senior writer Anna Helhoski to break down why long-term Treasury yields have jumped to their highest levels in years — the 10-year Treasury is hovering around 4.8% and the 30-year yield has topped 5% — and what that means for anyone with a mortgage, a savings account or a bond portfolio. Sam explains why rising yields are good news for savers and bond buyers but bad news for people who already hold bonds, and why T-bills might be worth a look right now. Read NerdWallet's picks for the best brokers for investing in Treasury bills, bonds and notes at https://www.nerdwallet.com/investing/best/best-brokers-for-treasury-bills-bonds-notes Curious about automated Treasury investing? Check out the Treasury account powered by Atomic at https://www.nerdwallet.com/lp/treasury-account-powered-by-atomic Read NerdWallet's review of Public.com: https://www.nerdwallet.com/investing/reviews/public Subscribe to our podcast’s free email newsletter for bonus content and more from our hosts at https://smartmoney-nerdwallet.beehiiv.com/  Want us to review your budget? Fill out this form — completely anonymously if you want — and we might feature your budget in a future segment! https://docs.google.com/forms/d/e/1FAIpQLScK53yAufsc4v5UpghhVfxtk2MoyooHzlSIRBnRxUPl3hKBig/viewform?usp=header Smart Money’s YouTube Channel: https://youtube.com/@nerdwalletsmartmoney To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend. *The show notes were created with the assistance of AI. They have been reviewed by our editorial team for accuracy and quality. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's episode is brought to you by Vinted. Sean, do you have clothes in your trunk that you've worn but have no idea what to do with? You know what? I do not because my car is super clean right now. But I'm betting that you do, Elizabeth. I sure do, Sean, unfortunately. And I've been wondering what to do with these clothes. And then I found out about Vinted. So they're like this secondhand marketplace app and their mission is to make secondhand

your first choice. Yeah, Vinted helps their members find great deals and easily sell the clothes they no longer wear, and that helps give quality items a second life again and again. And it helps the planet, too, and we care about the planet, don't we, Sean? We do. Well, Elizabeth, whether you're clearing out a bag of clothes in your trunk that's been sitting there for months and months, or you just have pieces in your closet you don't want anymore, Vinted makes it super simple to refresh your wardrobe, earn extra cash, and give your clothes a second life. Plus, there are no seller fees, so you keep what you earn from every sale. And also, the app is free to download. I think

that's a great perk. Vinted makes listing items quick and simple, and once an item sells, Vintage creates a pre-paid shipping label for you, which takes out a lot of the burden of sending your items. See what's hiding in your closet, or like me, your trunk, and you might be surprised how much you can earn with Vinted. Download the Vinted app for free to start listing with absolutely no seller fees. How do you go from having over $35,000 in consumer debt to having enough to retire early? Well, that doesn't happen overnight, but today we are going to be sitting with someone who has actually achieved this. Welcome to Nerd Wallet's Smart Money Podcasts, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

And I'm Elizabeth Ayola. Today we are shooting from the beautiful Portland, Oregon, and we have a very special guest in the studio. Now, this episode's a little different from the other ones. Usually you guys are sending us your money questions, but today, we're going to be a very special guest in the studio. but today we have money questions for our guest. Right, we're joined by J.D. Roth. J.D. Roth is one of the originals, one of the pioneers of what you might call confessional, personal finance, while also instructing others about how to manage their finances.

J.D., welcome to smart money. Thanks. Thanks for having me. Now, J.D., I'm so excited to have you here today because listeners and views of the show know that I love fire because I am trying to get out of workforce. Don't take that personally. I would love to retire early, so I am here advocating. and learning everything I can, and you actually achieve that. You also have a book on Audible about Fire, which is pretty awesome.

I'm really excited about that book. I recorded it during COVID, so it was released long, long ago. But it was really the climax of my entire personal finance writing career was that book. It's like I took everything I'd been reading and writing about for 15 years, and I distilled it into that. Honestly, I had never gone back and reread it or re-listen to it until the drive up here to Portland this morning. and I was listening to it, I'm like, dog on it. I did a good job. I love that.

Well, that's good. Yeah. Well, let's rewind the clock a little bit to when you first started writing about personal finance. I believe it was 2006 or so. Yeah, that's right. And you had a good amount of consumer debt, $35,000 across, I believe it was credit cards, personal loans, auto loan. Talk with us about the debt that you had and how you got out of it. I didn't have any kind of financial education.

And growing up, my parents, they didn't know how to handle money. My father came from a very poor background. I don't really know what my mom's background was financially. But growing up, they fought about money constantly. When they had money, they spent it. But most of the time, they just didn't have money. And so they struggled to get by. And so the money scripts, the invisible underlying beliefs that I had about personal finance

where if you had money, you spent it. And that's pretty much what I did. I got to college. and, you know, in college, at least back in the 80s, they will give a credit card to anybody. And I think college students are a great risk because they're going to earn money eventually and let's get them in debt now. But they couldn't really pay off their credit cards when they were in college because they were broke college students and thought, hey, I can go get a bunch of beer and pizza and it's free on this credit card. Next thing you know, that bill comes to do. It's exactly what it was like.

It's like it was free. And for me, I like books. So, you know, I would buy a lot of books. What a responsible way to get in debt. Oh. I like the way you think. So anyway, I ended up just racking up a lot of credit card debt. So I had over $25,000 in credit card debt by the time I was four years out of college, which was 1990.

And what did that feel like? Because I know it can be very heavy, especially being so young, having all that debt. It felt awful. And yet at the same time, I couldn't stop myself. I would pay it down a little bit on the credit card when I got a little bit extra money, and then I'd just go right back out and spend more. And that's tied to the money script you learned from your parents around. spending when you have money, but also spending even when you don't have money.

I did not handle my money well. And I'm up front about that. I made poor choices, and that's how I got into debt. So how did you get to the point from realizing, okay, I'm not great with my money? I've carried this debt for a while now. I need to turn things around and actually write about it. I had always wanted to be a writer. But I always thought I would write science fiction or poetry or something like that.

I'd never set out to write about personal finance. And I was also a nerd. And I was also deep in debt. So these three things all magically came together with the advent of the Internet. And so in early 1997, I started writing a blog. This is what we called it a web journal back then because the word blog had not been invented. I was not writing about money. I was just writing about my daily life.

And eventually in 2004, I decided I've really got to turn my financial life around. And I started going to the public library of all places and checking out books about personal finance. and being the nerd that I am, I took notes on them, and then I, like, try to consolidate, what are all these books saying? Are there common threads? And I decided the one common thread between all of these books was,

there's no reliable way to get rich quickly, but there is a reliable way to get rich slowly. And that was the name of your blog eventually, get rid slowly. Yes, yes. And so on my personal site, I wrote an article called Get Rich Slowly that basically tried to summarize everything I had learned.

This is back in 2004, 2005, that I wrote that article. And it went the 2004-2005 version of viral. There wasn't really viral anything at that time. But it was being spread through email chains or other blogs were sharing it. Why do you think that resonated with people so much? Because I think a lot of people struggle with personal finance. A lot of people grow up with these broken money scripts. They don't really know how to handle money.

It seems mysterious or overwhelming. I know that there are plenty of people who grow up in families where the parents are responsible with money and they are able to demonstrate good financial behaviors. But I think that's the exception rather than the rule. And so after that was successful, I did eventually say, oh, people really like this, so why don't I start a blog about personal finance and call it get rich slowly?

So when you wrote this viral article, where were you on your debt paydown journey? Had you already completed it? At the very beginning. No, no, no, no, no. I was trying to figure out how the heck am I going to get out of this? I had $35,000 in consumer debt, which looking back,

I mean, that was 20 years ago. And so it probably doesn't sound like that big of a deal to people nowadays. But, you know, it's probably equivalent to $7,500,000 something. It was overwhelming for me. It was just overwhelming. What were some of the main themes from the material that you were synthesizing through your blog that really stood out to you and helped you begin to change the course of your financial journey? Well, the very first thing that really resonated with me was Dave Ramsey's debt snowball method.

And I know that nowadays it's part. popular to hate on Dave, but I don't hate on Dave. I really like Dave Ramsey's approach to personal finance, especially because he addresses the psychological side of things. The math of personal finance is very simple. That's not the hard part. It's the psychology that's difficult. That's so true. And so Dave Ramsey's debt snowball, when I learned about that and we actually began applying it to my life and saw that, oh my gosh, this is actually working, that was a big moment for me. And so for those who don't know with the debt snowball, you focus on paying off your debt with the smallest balance first while making minimum payments on your other account. And then

once you knock out that smallest debt, you roll the amount you're paying on that into your next biggest debt and so on gaining momentum like a snowball rolling down a hill. And so that is a really effective mathematical way to pay off your debt. Some people like the debt avalanche, which is kind of the inverse where you focus on the highest interest rate debt first, that might be able to save you some money in interest. But it's not as rewarding psychologically as the debt snowball for some people. So it's a kind of personal decision there. But getting into the psychological aspect of it, something that has made me bristle about some personal finance bloggers and, you know, Dave Ramsey a little bit too, is the shaming aspect of it because there can be a lot of shame

around how people are spending money and that can be a motivator for some people. How were you feeling with your debt? Was it a shameful process of getting out of it? Or how did you actually navigate the emotions you were feeling? You know, at the time I didn't identify it as shame. I never named it, but I did feel shame. I felt guilty. I felt as if I knew I shouldn't be in debt, and I knew that I was making poor decisions, and I knew that I was hamstringing my future

by staying in debt and buying stupid things. How long did it take you to pay off that $35,000? So from the moment I really got serious about it, which I think was 2004. It might have been 2005. I'm old now, so I forget these things. So I remember exactly what I did. I went in and I created a text document.

It wasn't even a Microsoft Word. It was just in a text editor. And I listed all my debts and I laid them out and I made this projection. If I do this right, then I'll be debt free. I remember it was in 2007. I don't remember the month, like September 2007 or March 2007, something like that. And I just kept at it, kept doing the things I was supposed to do. And sure enough, like right on schedule, I was three months late, I think, pay not

the debt. But it was pretty much right on target by following that schedule that I had set out for myself. In one year, you paid off $35,000? No, no, no, no. Oh, I see what it sounds like it based on that math. No, it was 2007 when I paid it off and it was 2004 when I started. So it was three years. Okay. So roughly $10,000 a year that you were paying off. Yes. But it was a snowball. It wasn't 10,000 each year or 12,000 each year. The first year was a much lower amount, but as time went on and I was building better financial habits. And honestly, we need to talk about income because that's a very key piece. I was increasing my income at the same time. And that is what helped me pay off the debt. That's a key thing because sometimes people are

trying to pay down debt and the bills are still continuing. You still have things to pay. And if your income is not high enough, that debt just racks right back up. So that's such a key point you brought. Sometimes you just need to increase your income so that you can pay down the debt. Yeah, and I did at the time, too. I was working extra jobs, and it sucked. But I also knew it was short term. And I started the blog and tried to make money with the blog and did make money with the blog. And that helped. The income side of things is so important and yet it's often neglected, or people just kind of hand-wave it away. Among personal finance writers, we often joke that, you know, There's only like 16 topics you can write about.

And there's only really one thing you need to know, and that is spend less than you earn. And it sounds like we're being flip, but it's the truth. The only thing that matters is spending less than you earn if you're trying to accomplish some sort of goal like paying off debt or becoming financially independent. And there's only so much you can decrease your spending, right? You can't go, you can never go below zero on your spending. And most people can't go below like $24,000 at a bare minimum a year. But your income, in theory, has no ceiling.

Again, in theory. Practically, it can be quite hard to actually earn more money. Yes, yes. But there are ways to earn extra income. And they have a profound impact on getting out of debt or achieving any other financial goal. What made the difference in terms of actually spending less? How did you get to that point? Because it can be a really hard challenge to people to overcome is adjusting your lifestyle

when you're used to a certain amount of spending and pulling that back to focus on paying off debt. For me, it was getting clear on what mattered to me, what was important to me, and understanding that at that time, getting out of debt and that just overwhelming sense of burden, just becoming clear that that was what was important to me and reminding me of that all the time,

that was the most important thing, I think. in my work over the years, I eventually did develop a financial philosophy and a framework and things that I thought were important. And one of the things I talk about often is finding a purpose in setting a personal mission statement and aligning your spending and your financial decisions with the things that are important to you. And I didn't know that was what I was doing at the time, but that was what I was doing at the time. It was getting clear on what was important to me and then aligning my spending with that. J.D., in that process, is that when you discovered fire? when you decided to get clear about what matters to you and what you wanted?

Yes, kind of is my initial answer. So one of the books that I read was Your Money or Your Life by Joe Dominguez and Vicki Robin. That book is probably the book or the work that has most popularized the concept of financial independence in the modern world. And there are other things that have happened that have popularized financial independence even more. But for me, it was your money or your life. So I did discover it back in 2004 when I was reading on these books in the library, but it didn't really sink in. It never seemed like a goal that I could achieve. And there was no fire movement back in 2004 or 2006.

That didn't really begin until the early 2010s. But eventually you began to work toward some idea of fire, even if that term wasn't really, you know, in your mind or in your books that you were reading. How did you begin to do that? Honestly, I didn't work toward it. I was very fortunate in that I developed a broad readership very quickly and I was able to make some money with it. And eventually, by late 2008, early 2009, I was making a substantial amount of money with the blog. And a company approached me and asked me if I would want to sell the blog. And I said, okay.

I mean, I didn't know whether I wanted to sell it or not, but I thought it wouldn't hurt to hear what they had to offer. and then they came back and they offered a large amount of money. And so for me, my story is different than almost anybody else because I was able to achieve it like that. For most people, it's a very gradual process of tucking away, you know, 50 to 70% of your income into different retirement or investment accounts. And just hustling in that way for years depriving yourself of all the fun books and deer and pizza that you want. So, yeah, you had a very unique path. Yes. But I get to see my, right now I get to see my girlfriend as she's working towards financial independence.

and I could just see it from her perspective. She's on that more traditional fire path. Yes. And I also want to point out how the timing of life, I'm going to get a little woo here. At the time that they offered you that money for that blog, you already had built such a strong foundation. And I'm sure if you ran into that kind of money before you did the work to change your financial habits and to learn about your money stories

and develop those strong habits, you might have spent the money a lot differently. 100%. I'm certain that if I had, I can't imagine a world. where I would have started a personal finance blog before reading all these personal finance books. But if I had, and I sold it and then made a lump sum of money all at once, before reading the books, I would have done dumb stuff with the money. There's no question.

But I hope you still did a little bit of dumb stuff with that one once you got it. Well, I took my own advice. By that point, I had developed the rule of thumb that when you get a windfall, it's okay to spend 1%. 1%. I've heard 10%. So you're being very frugal. I guess 1% depending on how much you get,

It could be substantial. Yeah, it depends. Right now, this is a tangent, but it's related. Right now, my girlfriend and I, we spend most of our weekends watching Star Trek and sorting this huge collection of magic, the gathering cards that I was left when my cousin died. He left me his collection of cards, and there's about 200,000 of them. Wow. In order to sell them, they need to be sorted.

And we've already decided that this money, once we're done sorting and selling, it's going to go into savings in our travel fund, basically. but we're allowing ourselves a certain amount. I don't know. We haven't decided exactly what the amount is. It won't be 1%. It'll be more than 1%. And we're going to allow ourselves to spend it on something completely frivolous.

And this is hard for Kim because she doesn't spend frivolous money. Okay. I'm like, no, you're going to spend this on something completely free. Yeah, go on a good vacation. Yeah. I want to ask a little bit about you and I know her name is Kim, but she's on her own fire journey. You by accident came on your fire journey.

In what ways do you lend your wisdom to Kim? on her current fire drain. Well, that's a great question because, as you know, relationships can be complicated. Yes, yes. So I try not to say, oh, you should do this or you should do that. If I think that she's making some sort of mistake, I will point it out. But otherwise, I just let her make her decisions when she comes to me and asks advice, then I will give her feedback.

An example is just the other day. So right now, I'm the one paying the mortgage on the house. I've done that because I want her to accelerate her journey to financial independence. And just the other day she came to me, she's like, hey, J.D., what if I put $500 a month towards the mortgage, that would help you to make it so you're not paying the entire mortgage payment yourself? I'm like, well, that's awesome. But the mortgage, our interest rate is only 2.6%. I would rather you kept that money invested in the stock market to accelerate your financial independence journey. And also, based on historical averages, you're going to make so much more than 2.6% by investing that money.

So she's like, oh, okay. So in that respect, I was able to offer some advice. But it was solicited. Yes, yeah. I try not to volunteer information. It's a fine line. You know how relationships are. Yeah, yeah.

I want to go back to those principles that you mentioned that sort of flesh out your financial worldview and way of thinking. You mentioned knowing your purpose, knowing your values, your motivations. What else drives your financial philosophy? I think one key aspect is understanding that this is more of a marathon than it is a sprint. Because I think a lot of people get frustrated at how long it takes to do some of this stuff. You're in it and you're slogging away for years and years. And you see progress, but it feels like it's never going to come. And one thing comes along and interrupts your finances.

You have a big emergency expense. and that can derail you and be demotivating, but that's why you have to keep going back to that motivation. Absolutely. Well, that's a natural segue into your own book, how to achieve financial independence and retire early. Can you talk with us about some of the main points that you lay out in that book?

That book, which technically is a course, because it's for the great course, is through Audible, that pretty much tries to take everything I'd learned about money, writing about money over a course of 15 years, and tries to distill it into this, like, actionable plan and an actual coherent philosophy regarding money. And so I talk about these things about learning to identify your money scripts, learning why the psychology of money is so important,

creating a personal mission statement. I often say, or I don't anymore, but I used to say that I want people to act as the CEO of their own life or the CFO. I want you to treat your life like a business. And so that's the metaphor that I use throughout that course actually. is learning to treat your own personal finances as if you were a business and learning to view your income and your expenses and then the difference between that as profit rather than his savings. Because I think for a lot of people, savings sounds so tedious, right? Yeah.

It's like, it's just boring. What do I want to do with savings? But when you hear profit, at least for me, there's something that energizes me about it. I think of profit. I'm like, oh, yeah, I'm a good capitalist. I'm making profit. And even though you are not a business, savings is actually profit. What a business would call profit is savings. And so if you think of it for yourself as profit, I think it's much more motivational.

And for me, actually, after I had achieved financial independence and was continuing to make money, I did start looking at it as profit. And I've tried to encourage other people. For a long time, I was doing speaking gigs, and I would go out and I would meet with people one-on-one. I would encourage them to look at their own personal finances as if they were earning a profit and just trying to get that as high as possible. J.D., how old were you when you retired, and what have you been doing since then? We all talk about retiring early, but then it's like, well, what do you do with all this free time and all this money? Well, that's a great question.

So I achieved financial independence at age 40. All right. I've got five years. There you go. And for the first few years of financial independence, I wasn't actually retired in a traditional sense. I continued to work. Actually, I would say it was like that for the first 10 years. And were you still saving?

Well, where are you saving towards retirement at that time? Or did you stop saving and kind of just live off of your profits and work? I was working. And so I was continuing to write for two or three years. after I sold the site, I was contractually obligated to keep writing. I was earning income from that. Not a big income, but it covered my expenses. My expenses weren't high. And then eventually I started a new website and I was earning some small amount of money from that. And then this course was like the last thing I did. And that was during COVID was when I was writing it and recording it. And so in 2020,

after that, I guess you could say I did retire. And since then, I haven't done any. with personal finance. I mean, other than manage my own personal finances. Is there a reason for that? It's just a shift in direction, I guess. And so I found myself for a couple of years, as many retirees do, I floundered. I didn't actually understand why do retirees flounder. I get it now. I just sat around doing nothing and trying to figure out, what am I doing? Because I had not prepared for that. Yeah. And then eventually, I decided I wanted to start a personal finance, comic strip of all things. Oh. But I have no art.

That's creative. I have no artistic skills. I've never taken an art class in my life. My girlfriend Kim, she encouraged me to take an art class through the community college. So I just randomly picked watercolor. And now for almost three years, I've been taking art classes, mainly watercolor, but the summer I've discovered oil painting. Oh, boy, do I love oil painting? See?

But this is the lure of fire. It's not just about not working, but sometimes your working years take so much out of you that you don't have the time that you want to explore hobbies and discover things that you enjoy. And it sounds like you've been given this space to do that because now look at you, your painting. And you're doing all painting down too. And, you know, it's kind of too bad. I feel like a lot of people don't take the opportunity to explore this kind of thing.

I didn't. They don't take the opportunity to explore this kind of thing when they're younger or when they're working. And it's too bad that we don't. I know that there are some concepts like, what is it called, mini-retireance? Is that Tim Ferriss? I think Paula Pant talks about it too, some, where you just take sabbaticals, basically, two, three months at a time and go explore different things.

But I think it would be awesome if more people took the time to explore creative endeavors or to explore hobbies so they would have some idea of what they're going to do when they reach retirement, whether it's traditional retirement age or early retirement. Do people still come up to you and ask for personal finance advice? Oh, yeah, yeah. Do they email you? No, not so much anymore, but that's partly because the email addresses that they would have done so at are dead. It used to be very odd to have people come up and say, oh, I read your blog.

I remember I was walking to a Portland Timbers game once, and walking into the stadium and somebody said, are you J.D. Roth? I'm like, what in the world? But now every once in a while, somebody still will ask for advice. And now it's even weirder because I'm like, I haven't done. this in six years. If you could leave our audience with one lesson from everything that you've done and learned, what would that be? When you're thinking about personal finance, I know I've mentioned a couple of times already, getting clear on your purpose and mastering the psychology of it, these things are so important. I think if you can understand why is it you want to get out of debt,

why do you want to be financially independent? I don't think it's good to just have the goal to be out of debt or to be rich. To what end? Why do you want to do this? Knowing what your why is. And you say you've talked about the before on the podcast. I think it's very important. Just to have like this guiding North Star.

I don't know. Use some weird metaphor like that. I think that's just a very important thing because it helps you stay the course when things get rough. If you know why you're on the journey you're on, then you will continue even when things happen that look like you're going to derail you. Well, J.D. Roth, founder of the Get Rich Slowly blog and Budding Local Painter. Thank you for coming on Smart Money. Thank you for having me.

Long-term treasury yields are spooking the markets. Is this an investment opportunity or cause for concern? We're going to find out during this week's money news after the break. Stay with us. Don't you wish you could just hit skip on the worst parts of your life? You know the same way you can skip an ad? I get it. I'm Seattle. and I live in Ice Cove. I've made some questionable decisions that didn't end up the way I planned. And today, I'm still figuring it out. Somehow things usually get worse before they get better.

Apparently, that's how I roll. So bundle up and come along for the bumpy ride. Stream a new episode of North of North Tuesdays on CBC Gem. All right, let's get to this week's Money News Roundup, where we break down the latest in the world of finance to help you be smarter with your money. Today we're talking about bond yields, which you may have noticed are having a moment in the news.

Now, if you've been wondering how dire the situation is, or maybe even what a bond yield is, our news colleague, Ana Hill Hoski, is back to talk about it. Hey, Anna. Hey, Sean Elizabeth. That's right. Bond yields are back in the spotlight. And as of this recording,

the 10-year treasury is hovering around 4.8%, and the 30-year yield is above 5%. And both of those are levels that we haven't seen in years. Now, for context, the bond market is where investors buy and sell debt, including U.S. government bonds. Now, the yields that those bonds offer help set borrowing costs across the economy. So, in other words, the bond yield market doesn't just matter for investors. It can also affect mortgage rates, borrowing costs, and returns on your savings.

So it's worth paying attention to. Today, I'm speaking with my colleague, Investing writer Sam Taub, to dig into what's going on with bond yields. Sam, welcome back to smart money. Always good to be here. Let's back up. How unusual is this level of long-term yields and, What does it tell us about the economy right now?

These are some of the highest long-term yields we've seen in several years. The 10-year is up to, I think, the highest rate it's been since at least the beginning of 2025, and the 30 years up to an even longer-term high. And yields actually spiked even more on the morning of this recording. What that means is that investors expect rates to stay high for the long-term because they expect inflation to stay high for the long-term or because they're worried about the government carrying a heavy debt burden, and frankly, it's kind of both of those. All right. Investors are trying to figure out why yields are so high. What's your read? Is it Fed policy, government borrowing, something else?

It's both of those and then also inflation expectations. Markets now strongly expect the Fed to raise rates at the September meeting, which is boosting short-term rates like the three-month, six-month, and one-year T-bill, because those kind of reflect near-term. interest rate expectations. And then when it comes to longer-term yields, Fed Chair Kevin Warsh recently made some comments that have kind of spooked investors into thinking that high inflation may just kind of be the status quo for the time being. And on top of that, the national debt recently hit this big spooky number, $40 trillion. And the government's swelling debt is fueling concerns about its creditworthiness, which is also influencing investors to demand higher yields on.

on government bonds. So there's a lot of different factors going into this. So from what I'm hearing from my limited understanding, for investors, the bond market seems like a bit of a good news, bad news situation. Please explain. So the good news for savers, for new retirees and others who are looking to buy bonds right now for income is that higher yields mean that you earn more money. The bad news is that when bond yields go up, bond prices go to.

down. They inherently move in opposite directions. So if you own a lot of bonds, you're sitting on some losses because of this. Now, the Fed has not raised rates yet this year, but as you mentioned, there's pretty good speculation that rate increases are coming even as soon as the next meeting later this month. What is the bond market saying about where it expects interest rates to go? Again, short-term bond yields, like the Treasury bills, reflect short-term interest rate expectations, whereas long-term yields, like the yields on the 10-year and 30-year reflect longer-term expectations. The three-month, six-month, and one-year bills, they tend to move in line with investors' expectations of where interest rates are going to go in the very near future. And yields on those have jumped in the last week because it's looking increasingly likely that the Fed is going to raise rates this month.

Now, on the flip side, in the less likely scenario that the Fed were to cut rates, would long-term treasury yields necessarily fall to? That's a good question, and the answer is not necessarily. The Fed influences yields with its policy, but it doesn't control them. The market ultimately sets the yields on treasury bonds. And when it comes to long-term yields, those reflect investor expectations of where interest rates are going to be years from now. And the last meeting is kind of an instructive example here. At the last meeting, the Fed held back from raising rates, but long-term yields spiked

afterwards anyway. And the reason why is because people felt that the Fed was kind of just kicking the can down the road, that they weren't keeping up with inflation. And so there was still this expectation that rates are going to be higher in the long term. So yields went up. I'm curious about the relationship between the federal deficit, like you mentioned, and long-term treasury yields. How does more government borrowing translate into higher yields? I think that we can kind of compare this to like a person with a credit card. If you're carrying a big credit card balance month to month, that's not a good sign of your credit worthiness. And that's going to hurt your credit score.

And if you have that situation and then you take on even more debt like you apply for new credit cards, you're probably only going to get approved for cards that have higher interest rates, right? Okay. So when the national debt hits really big numbers like $40 trillion, and then the government goes to borrow even more, investors demand higher interest rates on the new debt. Okay, that makes a lot of sense. Now, why should a stock investor care about what's happening in the treasury market? Investors generally shouldn't be 100% in stocks.

Most advisors recommend balancing out any portfolio with a small bond allocation, even if it's only 10% of your overall portfolio. You know, I guess one kind of silver lining of this current situation is if you don't own any bonds or you're looking to add to that part of your portfolio, this could be a time to buy the dip. The other thing is that bond market volatility tends to bring about stock market volatility, in part because a lot of large companies hold treasury bonds and in part because many of the same things that affect the bond market, like inflation, Fed policy, those also affect stocks.

When yield spike, stocks tend to have a rough day too. What does a higher yield environment mean for people who have their money in places like money market funds or savings accounts? So the good news for savers is that higher treasury yields can pull yields up on savings accounts and money market funds. Those products kind of compete with bonds and in particular short term treasury bills as fixed income savings vehicles. Given where yields are right now, should investors be changing how they think about bonds in their portfolios? You mentioned this might be a good time to buy that dip. Yeah, I mean, you know, we're not giving financial advice here, but like, given that bond prices are down, you know, if this might be a time to consider buying the dip or talk about that with your financial advisor if you're looking to add to your bond allocation. And then going over to the savings angle again, another thing to consider when yields are high is potentially looking into using T-bills as a savings vehicle.

Right now, the three-month, six-month, one year, and two-year treasury bills and notes are paying rates that are comparable to a lot of high-yield savings accounts and CDs and money-market accounts. Again, that's part of why this situation could pull the yields on those savings vehicles up. But T-bills have the additional benefit of being exempt from state and local taxes, and they offer more flexibility than a CD when it comes to pulling your money out early, but a little, less than a savings account, but they have some unique perks. Now, if that's something that interests you, there are a few different ways that you can invest in T-bills. You can do it in a brokerage account, and we have a roundup of the best brokers for treasury bills and bonds and notes that we can link in the show notes.

And then nowadays, there's also something called a treasury account. This is a newer type of product that on the front end, it looks and feels just like an online savings account, but on the back end, it automatically invests your money. in treasury bills for you so that you lock in the market yield on treasury bills at the time of each deposit and you still get those state and local tax benefits. NerdWallet offers a treasury account that is powered by Atomic. And then also one of the brokers we review, public.com, offers a treasury account of its own. We can link all those pages in the show notes.

Now, Sam, are there any downsides right now to doing anything that you just talked about? One thing about using treasury bills or notes as savings products is that you don't pay an early withdrawal penalty if you cash them out early like you would with a CD, but they are technically investments. And if you pull your money out early, what you're actually doing is selling the bill or note before it matures. And you might pay a higher or lower price for it than what you bought it for. And if the price is higher than what you paid for it, you earn a profit, but that profit is probably going to be a taxable capital gain. Whereas if you pull your money out and you're selling the bill or note for a lower price than you paid for it, you're losing money on that. But that might be a tax deductible capital loss. So again, it's more flexibility than a CD, but it's not quite as much flexibility as you get with like a savings account as far as savings vehicles go.

One more question. What could cause yields to move significantly higher or lower from here? What are you keeping an eye on? The government debt thing is kind of going to be a persistent issue. But another part of why yields are high is because inflation is high. And inflation is staying high in large part because of this war in the Middle East raising oil prices. So I think that that's kind of the most dynamic part of this. That's the part that could change most quickly and potentially, kind of reverse the course of all this. I'm not an expert on the situation over there. The latest I've heard, the U.S. has started bombing Iran again this week. So it does seem like the conflict is continuing for the time being. But if it were to come to some kind of resolution in the near future, that would be good for a number of reasons, one of which being that it might reduce the price of oil and that might reduce some of these inflationary pressures, and that could take some pressure off of bond yields. All right, Sam Tav, thank you so much for coming back today.

for having me on. And thank you, Anna. So, Elizabeth, is any of what we just heard going to change your investment strategy? Are you considering getting some bonds now? I almost did. Then I remembered I'm too lazy for all of that. I feel like my investments are diverse enough. I ain't got time for that. But I think, you know, if it's right for you, you should go get you some of those. Yeah. I feel that. I'm not about to try to time the market, especially around a really volatile bond market and a volatile war in the Middle East. So I'm sticking the course and also I'm going to be lazy with my investments. I'm checking that.

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