Bank Yourself

If I had to pick only one investment idea, to explain in two words, which stands the test of time the very best, it would be to “bank yourself.” We have three charts to illustrate this powerfully simple math, overlooked by most investors, that we work on every day to engineer Freedom Days for our partners.

The average bank account savings rate (red line at bottom) is now 0.37% annually. Notice during this latest surge in interest rates and inflation, how well those savers have been rewarded. We will come back to those other two lines in just a minute. But first, to solve a great murder mystery like that, let’s follow the money. There is one question that affects the most dollars of any other. I ask it of the high school finance class I teach, and the most sophisticated investors before they hire us – “Where exactly does money go after being deposited into a bank account?” And we are talking about a LOT of money to follow here…

The answer is very simple. Banks are required to keep a large portion in risk-free bonds – U.S. Treasuries and Municipal Bonds.  The blue line in the first chart shows the current yield of the benchmark 10-Year Treasury. That individual bond interest rate has more than tripled in the last five years, while banks have passed none of that along to their customers (again). The bank is receiving a yield 14x higher for its balance sheet than what it is paying its customers, quite a profitable spread! Fair disclosure, I escaped from the largest bank in the world in 2006, so that I could share better math and simple truths with zero conflicts of interest. Their compliance department would have shut this letter down before reading the first sentence, the title would have been enough. I escaped after learning from the best for 10 years, with nothing but gratitude for that opportunity. Freedom Day Solutions is a truly independent, family-owned and operated firm, and we can take care of other families exactly like we do our own. We have no customers. Families trust us completely as their partners instead. Banking yourself means our partners own the exact same safe bonds the banks do, in their own accounts, and they keep the yield. There is not a simpler page in our playbook, with more profound results than this massive increase in yield in our partners’ pockets. In non-retirement accounts, tax-free municipal bonds’ net yield is even better!

But why stop there?! Following that money solves an even more lucrative mystery!  What does the bank do with the remainder of those deposits they can take risks with to be compensated with even bigger returns? The good banks use those deposits for mortgages or commercial loans and make 6%,7%, 8%, or more. That is exactly what you can do yourself in the form of the highest quality dividend streams. Since you got to see that profitable spread between what a bank is earning on all those deposits compared to what very little it shares with its customers, let’s look at just one of many great examples. JP Morgan has been around for more than 150 years, benefiting from this simple math. They are an exceptionally well-run bank. My first and only boss was Jamie Dimon, who runs JP Morgan very well. Over the same five years shown above, the bank’s operating income (benefiting in part from that spread) has increased close to 50% and they have rewarded owners of the bank with dividend pay raises close to 50%. It is better to be a stakeholder owning shares in the bank than a customer of a bank. You are banking yourself! Knowing that $19 trillion in bank customer savings accounts (and climbing) is not reading this blog helps us. We call it “Secrets of the Merely Wealthy” for many fun and fulfilling, and uncrowded reasons. We know those banks will keep printing profits from all those customers who do not know how to bank themselves.

The favorite calculator in our offices is “Mailbox Math,” which shows the compounding magic of a rising dividend, even from a modest original dividend yield at the time of investment. To explain that other green line on the first chart, which shows the JP Morgan Dividend yield on cost, here is how that beautifully boring math works. If you bought one share of JPM five years ago at $165 and received dividends totaling $3.70 per share, that was a 2% current yield at that time (just like it happens to be once again, today). In 2026 the dividend is $6.15 per share. So, the yield on that cost basis from 5 years ago now is 3.7%, calculated from $6.15 divided by $165. We call it Mailbox Math because over 234 years since the New York Stock Exchange opened, a dividend is the only investment metric you can hold in your hand to know what is real. Also, because we like explaining to partners trusting us that this math is so simple, anybody can do it on the back of an envelope with a pencil.

Let’s do it! If you grab an envelope right now, I promise you will never be able to look at or listen to any update on the stock market the same way again. And any predictions of what might happen next can also be ignored as the distractions they are, because a dividend is clear evidence of what is happening. Write down $6.15 on that envelope, which is the total of the four dividend payments held in hand for one share of JPM in 2026. Now write down $67, which is the price of one share of JPM ten years ago. If you want to grab your iPhone calculator and divide $6.15 into $67, it is 9.2%, which you see in this Mailbox Math chart above. One share cost $30 fifteen years ago, so that $6.15 today is rewarding those stakeholders with a 20.4% yield on their cost.

Getting paid 20.4% annually (and climbing) without counting one penny of stock price appreciation (or worrying about any stock price decline) is what I meant by that promise of never being able to look at the stock market the same way again.

That bank is just one of many businesses capable of growing their dividend no matter what the bond or stock markets are doing. If you happened to use an iPhone to do that calculation, and if you own a stake in Apple, here is one more smile from the magic of Mailbox Math for you. Most investors do not even notice Apple’s current dividend yield of 0.3% (one yield the banks’ savings accounts beat, to be fair and equal!).  For the partners who trusted us when we first opened our doors after escaping the bank to do our own research, we bought shares of Apple starting in 2007.  The current annual dividend is $1.06 per share in 2026.  The Mailbox Math on those original shares is now a 35% annual dividend yield on cost (and climbing).

Now you know why I take photos of my favorite vintage mailboxes on hikes. Here is one from Scenic Road in Carmel, CA.

Banking Yourself means keeping all these yields yourself, from the safest bond yields to the best growing dividend yields. When those combined income streams exceed all needs and wants, that is how we define your Freedom Day, and it can happen at any age.

If you’ve stuck with us this far, through all this nerdy math, here is a giant bonus reminder, not included in those yields.  Every penny of principal and profits is all still there for unplanned expenses and even bigger dreams, unlocked thanks to peace of mind.

                                                                                                            -Ryan