Budgeting 5% Return on all Cash In 2025
Joe Rulison
To budget effectively for 2025, particularly regarding interest income from cash reserves, it is crucial to take proactive steps now. Here’s a comprehensive approach based on the current economic outlook:
- Monitor current short-term interest rates. I expect them to stay around 5.0% for the remainder of 2024, due to ongoing inflation management by the Federal Reserve. In regard to 2025, you should anticipate a decrease in short-term rates, averaging between 4.0% and 4.5% as the economy softens without entering a recession
- Proactively manage liquidity by incorporating data analytics. Thoroughly review the time horizon for all cash reserves and assess any potential stress scenarios. This should also be coordinated with your financial institutions and advisors. In doing so, look to extend the maturities of your cash investments, aiming to lock in higher rates (above 5.0%) now to average out at 5.0% throughout 2025.
- Take these action steps: Review and act now! Immediate action is needed if you haven’t already started. By locking in higher rates now, you can ensure better returns for 2025. Ensure that your liquidity management is allowing for safe and accessible cash for day-to-day needs.
By following these steps, you can maintain strong interest income from your cash reserves, and benefit taxpayers and students with favorable rates on taxes or tuition for 2025.
