Understand Invoice Notes and Terms Example for Government

Invoice notes and terms example for Government

in this video I'll explain exactly how a t-bill lettering strategy works the advantages and disadvantages of laddering your t-bills and last but not least the strategy I am implementing in building a t-bill ladder for myself one of the most difficult parts of investing in t-bills is deciding which maturity date is the right one to invest in after all there are five different maturity Linux for t-bills and possible advantages and disadvantages to choosing any one of the five thankfully there is an easy strategy that lets us have the best of both worlds with any maturity date that is by laddering our t-bill investment so first and maybe most importantly what is a t-bill ladder it's likely you've probably heard of a bond letter or a CD letter before but maybe you don't really know exactly what that means or how it works basically what you're doing is buying multiple bonds or multiple CDs with different maturity lengths for instance if you wanted to build a five-year Bond ladder or CD ladder you'd set it up in the following way right off the bat when you make your initial investment you're going to buy five different bonds or CDs a one-year maturity two-year maturity three year four year and five year then after the first year when your one year bond or CD is maturing you're gonna take all that money and the interest you've earned over that year and buy a brand new five-year with it then the next year when the two-year bonder CD matures you repeat the process and so on and so on the reason you'd want to implement a laddering strategy is so that a you can manage your cash flow better when you're investing in these defined length Securities like in the example I just gave of the five-year ladder you'd always have cash from your bond ladder becoming available to you each year so you could choose to continue the latter if you didn't need that cash for anything else or you could take that cash out of the ladder and put it to use somewhere else if on your initial investment you'd load it up on all five-year maturities you'd have to wait the full five years before being able to get any of your money out and B the second reason you'd want to implement a bond or lettering strategy is because it allows you to respond to changing interest rates more rapidly again because money is becoming available to you at regular set intervals you always have the choice to reinvest it into another Bond or CD at a higher interest rate or just take that money out and invest it elsewhere if the interest rates aren't to your liking anymore if you wanted to sound sophisticated and impress your friends you could just tell them you're dispersing your risk along the interest rate curve true story I got a lot of dates with that line back in the day the lie detector determined that was a lie and you can implement this strategy with t-bills treasury notes CDs or even I bonds if you like I've decided to take some of my cash and build a t-bill ladder instead of building a CD ladder or investing more in i-bonds for a couple of reasons first off I think t-bills have some distinct advantages over both CDs and I bonds t-bills generally pay higher interest rates than Bank CDs do T bills are shorter maturity length than I bonds so it's a shorter term commitment there are no estate or local income tax is due on the money you earn from T bills the same is true for i-bonds but not for CDs and while it doesn't affect me personally there are higher purchase limits for t-bills with a maximum of 10 million dollars with I bonds it's fifteen thousand dollars only if you're getting a tax refund and while there is no hard and fast limit on CDs you are only FDIC protected up to 250 000 per CD and T bills are by far the most liquid when bought through a stock brokerage t-bills can be sold at any time on a secondary Market without penalty which is untrue for both eye bonds and CDs and the other reason I've chosen to build a t-bill ladder with my money has less to do with the technical aspects of T bills themselves and more to do with how this is going to fit into my personal finances and my short-term cash strategy first and foremost as I just said this is a short-term cash strategy I still make regular monthly investments into this stock market and I won't be stopping that anytime soon as I believe this is also a great time to be buying stocks but I strongly believe that the stock market is a long-term investment I don't want to put a single dime into the stock market that I think I might need to use for any other purpose in the next five to ten years the second reason is I've maxed out my eye bonds for the year and even still I view those as more of a medium to long-term solution for my cash my eyebond Holdings are a backup to my emergency fund a true break glass in case of emergency when all other outlets have been exhausted kind of emergency fund and the third reason is t-bills pay much better interest rates than my high yield savings account and most importantly on this point I'm comfortable running my savings account a little lean for the time period between maturing t-bills in the latter I've got set up as you'll see in just a minute so now let's get into the t-bill ladder that I chose to build and why I wanted to keep this Bond ladder as liquid as possible so I I stuck to the shortest maturity dates available that way if interest rates continue to rise as I suspect they probably will for the foreseeable future I'm not locked up for too long at a subpar rate and I can react quickly or if I see a new pinball machine I want to have sitting here behind me I can have the money available to make that purchase relatively quickly as well so I'll be sticking to the three shortest maturity periods and essentially after the first eight weeks after my initial investment this t-bill ladder will have money being available to me every five weeks it's kind of annoying that the maturity periods jump from eight weeks to 13 weeks because I'd love to be able to structure this so I have something coming available every month but what can you do five weeks it is I'm going to be buying all of my t-bills through treasury direct and holding each one until maturity if you prefer or if you think you might want to sell out of some of your T bills early you can also do the exact same thing through your stock brokerage yet so the first step when I make my initial investment is I'm going to buy a four week t-bill eight week TV Bill and a 13-week t-bill then after that first four weeks is up and my first t-bill matures I'm going to take the initial investment in that t-bill and the interest it's earned in that month and I'm gonna buy a new 13-week T bill then in another four weeks when that eight week t-bill matures I'm going to repeat the process and buy a new 13-week t-bill with that money after that every five weeks I'll repeat the process or I'll have the option to take the money out and do something else with it t-bills have maturity dates of four weeks eight weeks 13 weeks 26 weeks and 52 weeks and if you wanted to get into something longer term you could even include some treasury notes which have maturities of two three five seven or ten years the longer maturity rates on any of these the higher interest rates you're going to get paid so you can really mix and match and tailor this strategy to suit your exact needs if you're willing to hold some longer maturity Bonds in exchange for a higher overall yielding Bond ladder let me know if you plan to build a t-bill ladder or a CD ladder don't forget to subscribe to the channel if you haven't already for more content just like this thanks for watching and I'll see you next time