Whenever I attend a conference I look for things the crowds pass by. The mainstream information is still absorbed, but there always seems to be something most people pass that contains a lot of potential.
Last year at FinCon such an opportunity screamed to me. Several companies were offering 5% on savings investments with few strings attached. One was geared toward military people, but had some fees and restrictions I felt uncomfortable with.
The company that impressed me the most was Worthy Financial Inc. (Before you run out and invest with Worthy you might want to read the entire review first. There are some caveats.)
Worthy is a simple concept. You invest in $10 increments buying 3-year Worthy bonds that pay 5% interest. You can withdraw funds at any time without fee. The process looks and acts much like a savings account, but there are some unique feature you need to be aware of.
Sally Outlaw (yeah, the name does cause one to pause) is the co-founder and CEO. She has experience coming from 5 years as CEO of peerbackers.com and several security licenses. I had several long conversations with Sally at FinCon.
They also have Alan Jacobs, a securities attorney with 40 years of experience.
There are additional team members. The CEO and experienced securities attorney on the team are of vital interest for those wishing to invest in Worthy bonds and therefore mentioned.
The business — the entire concept of Worthy — is relatively new. They have only been in business since February 2016.
How it Works
Worthy invests money from the bonds making business loans backed by inventory of greater value than the loan. Interest paid by the business loans is used to pay the interest on Worthy bonds.
How You Can Invest
There are several ways you can buy Worthy bonds.
The idea, as Sally pointed out to me at FinCon, was to make it easy to invest small amounts of money with Worthy. They have this neat little app (which your favorite accountant does not use) that rounds up all your purchases from a credit card, debit card or checking account.
Example: You fill your car with gas with a total charge of $27.50. The app rounds up the purchase to $28 and the extra 50 cents goes to Worthy. When the rounded up funds reach $10 you automatically buy a bond and start earning 5% interest.
This seems like a lot of horsing around for minor amounts of money unless you are just starting out. In my opinion you shouldn’t be spending that much if you don’t have much money so there shouldn’t be much to round up. And if you do have money, the extra nickles and dimes might be a nice forced savings account, but folks around here generally are responsible with their money and don’t need such tricks to save.
A second way to invest in Worthy bonds is with recurring investments. In this situation you just link the bank account you want money drawn from at the interval you choose.
I don’t use the recurring investment feature either as it doesn’t fit my financial situation, but may prove valuable to you. A good example of using the recurring investment feature might include saving a monthly amount toward your annual property tax bill.
The final way to buy Worthy bonds (and the way this accountant buys them) is manually. You go online and set up a lump-sum amount to be transferred when you want. Simple as that.
I made two small purchases over the last six months. The process was smooth, as you would expect from any money transfer. And the interest keeps growing.
Note: When you open your account be sure to set the “Automatic Reinvestment” in the Account Settings to “active”. Your interest will not earn interest if you don’t, which means you lose compounding!
It cannot be stressed strongly enough that this is not a guaranteed investment. While the loans Worthy makes to businesses are secured by inventory, there is no guarantee a loan could not go bad and the sale of inventory insufficient to cover the remaining loan balance.
In this accountant’s opinion, you should only invest a portion of your liquid funds with Worthy. I have no reason to believe Worthy will default, but it is prudent to include Worthy bonds as a part of your portfolio mix only.
Investing Accountant Style
I use Worthy for a portion of my working capital in my tax practice. The remainder sits in the Vanguard Prime Money Market fund. Both are easily accessible, but the MM is far more secure than Worthy in my opinion because MMs are far broader in their investments.
Worthy is a good tool for saving for recurring expenses, such as: property taxes, insurance, planned medical expenses and the maintenance account for landlords. The recurring investment feature works well for people with these needs.
Dave Ramsey fans might find Worthy bonds a great place to hold their emergency fund or portion thereof (as long as this is only a minor part of your liquid cash and others funds are easily accessible should an emergency occur).
In my office I dropped in a lump sum. There is no scheduled need for these funds. They are there, growing 5% per year, while I decide what I want to do with the money. It is also a buffer for the end of the year when fiscal needs are greater in the office (property taxes, year-end training of employees, client mailings).
Worthy bonds might be a good fit for your situation. Check out their website and do your research before investing. Since bank and money market accounts earn only token interest, Worthy bonds are an option with potential for at least a reasonable rate of return that is greater than the rate of inflation.
Finally, please share your experiences with Worthy in the comments. This posts will have a long shelf life and you might know something about Worthy before I do.
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