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November 15, 2023November 15, 2023

A Troubled Bank in Texas – Part I

Editor’s Note: A version of this story ran in the San Antonio Express News and Houston Chronicle on September 17 2023. Since this is an ongoing (and soon to be updated story) I figured Part 1, although a few months late, needed to be posted here.

Following the 2nd, 3rd, and 4th largest bank failures in US history – that all occurred in Spring 2023 – a natural question is: What happens next?

I’ve never thought it likely that only failed banks First Republic, Silicon Valley, and Signature made major errors last year when the Fed aggressively hiked rates, while the other 4,697 banks in the country did not. Only one other tiny bank in Kansas has failed since then. It’s the dog that, eerily, hasn’t barked in the night.

Industry Bancshares Inc is made up of 6 smaller banks in rural Texas counties

Industry Bancshares Inc, has 6 subsidiary banks and 27 branches just a few hours’ drive from each other in the rural counties between the Texas triangle formed by Houston, Dallas, and San Antonio.

The six subsidiary banks of Industry Bancshares, Inc are Citizens State Bank of Buffalo, TX, Bank of Brenham NA, Fayetteville Bank, First National Bank of Bellville, First National Bank of Shiner, and Industry State Bank of Industry TX.

Industry Bancshares Inc Org Chart, as of 2019

Since at least December 2022, and including through their latest public filing of financial data in June 2023, all six of the banks that together make up Industry Bancshares has reported a significant negative net worth, using traditional accounting standards.

Bank Solvency

I don’t mean to be alarmist. Like shouting “fire” in a crowded theater, shouting “insolvent!” in a crowded bank lobby is neither kind nor prudent. Hopefully you watched the movies “Mary Poppins” and “It’s a Wonderful Life” so you have an intuitive sense for the fragility of all banks, especially to the extent that the FDIC only guarantees deposits up to a certain point.

its_a_wonderful_life — From: “It’s a Wonderful Life”

The people who should be alerted to the financial stats I’m citing, however, are the 3,216 depositors at these 6 banks who have a reported $2.2 billion in accounts over the $250 thousand FDIC guaranteed limit, as of June 2023. This post is aimed specifically at those folks with billions of dollars in under-insured deposit accounts. Shareholders and board members of course should stay alert as well.

A spokesperson for Industry Bancshares Inc responded to a series of my questions, “Industry Bancshares, Inc. and our six chartered banks have capital levels that significantly exceed the required regulatory minimums, are financially strong and well positioned in the current environment to continue to serve our customers throughout the communities we operate in Texas.”

Not credit mistakes, but interest rate mistakes

Unlike past banking crises, the banking crisis of 2023 is not about losses in credit portfolios, meaning loans banks made to businesses or real estate that went sour. Industry Bancshares in fact has a pristine loan portfolio, with each subsidiary reporting less than 0.25 percent of non-performing assets at the end of 2022. This is very clean.

Instead, banks are showing losses on their bond portfolios. Most banks hold lots of bonds, and most bonds lost money in 2022, when interest rates went up quickly. So most banks have losses to report this past year on their bond portfolios. Banks publicly report, every quarter, how much they’ve lost (or gained) on bonds that they hold.

Says the bank’s spokesperson, “Over the past 30 years, our bond portfolio strategy has enabled us to maintain strong earnings and bolster our capital position. The bond portfolio is comprised of high-quality, performing investments such as U.S. government treasuries and agencies and highly rated Texas municipal securities. The current unrealized losses in our bond portfolio are just that – unrealized. Our high credit quality, highly rated bonds continue to perform as agreed.”

Federal Reserve of Dallas overseas bank holding companies

The bank declined to respond to my question about what changes if any have occurred in the bond portfolio, or the value of the portfolio, or hedging strategy, or interest rate posture since the bank last publicly reported numbers on June 30, 2023.

An outlier in AOCI

The losses that banks have on many of their bonds classified as “available for sale” are reported as an accounting line item called “Accumulated Other Comprehensive Income” (AOCI). In plain language this means “how much are our bonds worth today, if we were forced to sell them, compared to when we bought them?” If they are worth less today, then AOCI is a negative number.

Two other important accounting line items matter to this story, before I explain how much of an outlier Industry Bancshares is among US banks.

First, banks calculate and report their net worth in two different ways. One is called “Total Equity Capital” and is calculated according to regular business accounting standards (aka generally accepted accounting principles, or GAAP.) You could think of this as the difference between what they own, and what they owe. Standard stuff for how we would calculate the net worth of any business.

A different calculation is called “Common Equity Tier 1 Capital” (aka CET1) which follows specific bank regulatory rules, and it basically allows banks (and their regulators) to more or less ignore bond portfolio losses, in most cases. When a regulator looks at CET1 instead of GAAP results, a bank will look fine, even as it reports extraordinarily negative AOCI numbers.

Here’s where Industrial Bancshares’ quarterly reports from June 2023 are very interesting. (What I mean is now is the point to unglaze your eyes from my accounting lesson, and sit up straight in your chair.)

Industry Bancshares’ Unusual Situation

Using data from official bank accounting reports, just a mere 15 banks in the entire country had a negative “Total Equity Capital” number at the end of June 2023. Interestingly, the top 5 worst banks on the list, or in other words the banks with the lowest net worth on the list of 4,697 banks in the country are actually part of the same bank holding company. Number 7 on this ignominious list is also part of the same holding company. Yes, you guessed it, they are the 6 banking subsidiaries of Industry Bancshares Inc of Texas. All 6 subsidiaries have a negative net worth, and as a result so does the consolidated bank holding company. All-in, Industry Bancshares is currently supporting $5.8 billion in assets but has a combined “Total Equity Capital” of negative $128 million, as of its June 2023 report, or $108 million at the holding company level.

Line 15 from June 30 2023 FR Y-9C for Industry Bancshares Inc shows negative $108 million net worth on a GAAP accounting basis

In the plainest language, what does negative total equity capital mean? It’s not just an accounting problem. If depositors and lenders to the bank all wanted their money back tomorrow, and if the bank managed to sell all of their assets (including their bonds) to give that money back, negative equity simply means there wouldn’t be enough money. In simplest terms, they’d be short $128 million. At current prices, their bonds lost so much value last year that there isn’t enough to cover depositors and lenders to the banks. And the bonds didn’t recover enough in the six months from December 2022 to June 2023. They reported negative $159.7 million total equity capital in December 2022.

The fact that there are only 15 banks out of 4,697 in the country with a negative net worth, but 6 of those banks are actually the same bank holding company, makes Industry Bancshares a strong outlier on this measure, according to publicly reported data in June 2023.

And look, I’m not your licensed financial advisor, and your mileage may vary, but personally I like to bank with an institution that has a positive net worth. Actually I’d be fine because, sadly for me, I don’t have balances over $250 thousand at my bank, but you know what I mean.

In response to my query about their $2.2 billion in 3,216 underinsured deposit accounts as of June 2023, the spokesperson for the bank replied “We have a growing, diverse, stable, and loyal deposit base. Our team of bankers use their experience and industry best practices to counsel our customers on how to safeguard their large cash balances…With six chartered banks we can increase FDIC insurance for customers across our affiliates. In addition, we utilize IntraFi Network, a solution that helps bank depositors access FDIC insurance above $250 thousand, to ensure our customers have access to FDIC insurance coverage.”

Another independent ranking

Bauer Financial, a bank rating group, assigns ratings every quarter to banks based on their financial strength.

In their June 2023 ranking, five out of 487 of banks in Texas merited 2 out of 5 stars, indicating a rating of “problematic.” Twenty-three banks out of 487 got 3 stars, indicating “fair” financial health. All 6 subsidiary banks of Industry Bancshares received 3 out 5 stars in June 2023. That’s a rating on par with San Antonio-based insurance and banking giant USAA. Although Bauer is indicating some cause for concern, they are not highlighting Industry Bancshares as an outlier the way the AOCI measurement I cited does.

Bank ranking company

So why haven’t regulators shut them down?

So if these banks are such outliers, when considering their bond portfolio losses and their overall business value, and this information is known and public, why do regulators allow them to be in business?

I mean, one would assume and hope regulators are paying attention. The Dallas Federal Reserve would have responsibility for the bank holding company. In response to my query, the Texas Department of Banking replied formulaically that they could not comment, among other things, on “information related to a regulated entity’s financial condition or business affairs.”

So I’ll speculate instead. The answer is likely a combination of:

1. A bank accounting technicality,

2. A purposefully gentle treatment of bond portfolio losses by regulators, and

3. Depositors over $250 thousand being blissfully unaware of the risks they currently run.

The bank accounting technicality issue is that regulators essentially have turned a blind eye to AOCI losses, and instead use the special banking health measure – CET1 – that ignores it. The thought process I guess is that as long as banks don’t have to sell their bonds at current market prices, they do not have to lock in their losses. And if depositors don’t flee, and the bank doesn’t sell the bonds at a loss, and other problems don’t crop up like credit losses, everything is fine in the long run.

The regulatory treatment of CET1, which ignores bond losses, allows the spokesperson for the bank to truthfully say in response to my query: “We have increased our Tier 1 leverage capital levels in each of the last 15 years, and in 2023 those levels have continued to increase. As of July 31, 2023, Industry Bancshares, Inc.’s Tier 1 leverage capital is 11.7% and total risk-based capital is 29.7%, which is in the 99^th percentile of our peer group and is well above the regulatory definitions of well capitalized.” The bank, like regulators, focuses on CET1.

Page 54 of June FR Y-9C. Showing positive CET1 capital of $676 million and healthy 11.5925% leverage ratio. This is likely why regulators have given Industry Bancshares a pass in 2023, as CET1 ignores bond losses.

In fact a special program called the Bank Term Funding Program was created in March 2023 in the wake of the Silicon Valley and Signature failures – failures due to their bond portfolio losses and subsequently depositors fleeing! – to save banks from having to abruptly sell their bonds if they started to lose depositors or needed liquidity for any other reason. It’s a program put in place on an emergency basis that shields banks from the consequences of their losses on their bonds. In plain language, under this program, banks can borrow from the Fed against their bonds in amounts just as if they haven’t had any losses. In the banking world there’s a concept called “extend and pretend” that banks sometimes offer to their borrowing customers who have trouble paying back their debts. This program is a bit like the Federal Reserve offering “extend and pretend,” but for banks with bond portfolio losses.

The positive case for Industry Bancshares

What could a bank like Industry Bancshares, Inc and its subsidiaries do in this scenario to improve their lot and protect their uninsured depositors? The prudent short-run solution is to either merge with a stronger bank or sell to a stronger bank. Were I the acquiring bank, I would look very closely at the negative net worth and bid accordingly. Acquiring banks understand bank accounting very well.

Another short-term fix is to raise more capital from investors, which can then be used as a cushion against losses or fleeing deposits. Industry Bancshares last raised equity capital in 2017, according to SEC filings. Were I a current or prospective investor, I’d want to know their current position, but maybe they already do? The bank declined to respond to my question of whether it had sought to raise additional capital to bolster its negative net worth.

Were I an uninsured depositor with a commitment to sticking with one of these banks, additional capital would be the main thing I’d demand. The bank did not to respond to my question of whether the bank had paid investors dividends in 2022 or 2023. Documents I reviewed showed the bank did pay dividends to investors at least from 2014 to 2019.

The long-term fix, or no fix at all, is to wait. Given enough time, a successful bank franchise can earn money and climb its way out of a financial hole. Not counting their bond losses, the combined banks earned $76 million in 2022. At this pace of earnings, and assuming no change in their bond portfolio, they could climb back to a roughly breakeven, a zero net worth, in about two years.

Their bond portfolio may recover in time. As long as depositors do not flee and regulators give them time, these banks may eventually survive and thrive. But for anyone with more than $250 thousand in your account, you’ve been warned.

Please see related posts:

USAA Bank reports 2022 results – Not Great

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June 13, 2023June 13, 2023

USAA Wobbles

Tell me: do you want the good news first, or the bad news? Fine, we’ll start with the bad news.

In 2022, USAA reported its first yearly “net income” loss since 1923 – the first loss in one hundred years! – of $1.3 billion.

Next, the CFO reported that the company’s own measure of its “net worth,” the difference basically between what it owns and what it owes, dropped dramatically from $40.1 billion to $27.4 billion from 2021 to 2022.

That’s a $12.7 billion drop in net worth, or a 31.6 percent drop year-over-year. Not great.

Finally, USAA had reported a line in its consolidated statements called “Other comprehensive income (loss), net of tax,” a loss of $10.5 billion. Since that was 8 times bigger than its “net income” loss, and roughly the size of its reported drop in “net worth” over the year, I reached out to the company to tell me what the heck “other comprehensive income (loss), net of tax” actually means. It’s not an accounting term with which I was previously familiar.

Brett Seybold, Corporate Treasurer, responded to my query. “The ‘other comprehensive income loss’ was due to unrealized losses in our investment portfolio across all lines of business, about half of which is in our bank. This is the result of lower market valuations from rising interest rates, which impacted the full financial services industry last year. It’s important to note that this accounting value change is temporary and has already improved in 2023 – and any undervalued securities can simply be held to maturity.”

This makes sense (in fact this was my best guess before Seybold confirmed it). It is also worth contextualizing his response with what’s happened lately with other banks.

The larger US banking context

The recent failure and seizures of First Republic Bank, SVB, and Signature Bank by the FDIC (the 2nd, 3rd, and 4th largest bank failures in US history, respectively) have bank customers (and regulators!) on edge a bit these days.

Listed as the largest Texas-headquartered bank by both assets and deposits, USAA carries a sort of flag for the industry in the state.

Unlike past eras of finance wobble, recent bank failures haven’t happened because of crazy risk-taking or irregular accounting or any number of traditionally morally questionable actions for which we might judge bank executives harshly.

Instead, a simple and simplified model of recent bank failures is this.

Step one is that banks like SVB held lots of super-safe assets like US Treasurys which lost their current market value when interest rates rose rapidly throughout 2022. Fixed income assets – the finance term for bonds and similar investments – drop in price as interest rates go up. As long as a bank still holds these super-safe assets and doesn’t sell them, the losses aren’t necessarily locked in. That’s what USAA’s Seybold confirmed made up what happened at USAA with the $10.5 billion loss under the line item “other comprehensive income (loss).” Roughly half the number for the bank portfolio, and half for the insurance portfolio.

The not-necessarily-market-value generally is not a problem because depositors don’t all ask for their money at once. These super-safe bonds will all pay out in full eventually. Regulators are cool with it too. Usually.

Step two with SVB, Signature, and First Republic Banks, however, was that they catered to customers who held large deposits, with a (now we understand to be an overly) large proportion above the FDIC-guaranteed $250 thousand threshold. Those large and relatively sophisticated depositors moved their accounts too rapidly for the banks to sell their assets in an orderly way. Because a significant portion of bank assets were actually worth less than their value on the books of the banks, and the withdrawals happened fast, the market value of the banks – roughly their “net worth” was wiped out just as they faced a liquidity crunch. So, we got FDIC receiverships and forced sales over a weekend for the 2nd, 3rd, and 4th largest bank failures in US history.

There were things these failed banks could have and should have done better, we now know in hindsight. Financial institutions can use interest rate swaps to hedge their declining bond values. They can underwrite or hold shorter-maturity assets that allow them to pivot more nimbly when interest rates rise. They can diversify away from an over-concentration on high-deposit customers, although that last move takes time, and for bank executives is probably counter-intuitive. (Banks generally love and want to attract high-deposit value customers!) But that’s all in hindsight for those particular banks.

What we should concentrate on are banks today. Specifically today, what should we think about USAA’s 2022 performance?

The Good News, or Why I’m Not Worried About USAA

Without insider insight into their fixed-income hedging strategies (although again in hindsight they maybe did not hedge rising rates enough in 2022) two things about USAA seem true, and comforting.

First, USAA is not simply a bank but a diversified financial services company. They are foremost a property and casualty insurance company, and also a life insurance company, and then also a bank. Insurance had its own specific 2022 problems like higher loss claims due to inflation and supply-chain bottlenecks. But in general, with 77 percent of annual revenues coming from insurance premiums, they operate in a different category than traditional banks. Insurance companies always run and manage risks, but bank runs aren’t really their main worry.

More broadly, their banking customer base is not primarily high-net worth individuals, but rather active or retired military personnel and their families. As Seybond confirmed, “Our bank is consumer based, 93% of deposits are within the applicable FDIC insurance limits, and we have access to excess liquidity to serve the needs of our members.”

I’m not at all worried about USAA personally as my bank, since I (sadly for me) do not have balances larger than the FDIC-guaranteed $250 thousand. Mo’ money, mo’ problems as the saying goes, and the inverse is also true when it comes to this specific consumer-banking risk: less money, less problems. Alas for me.

Maybe I should have mentioned, I bank with USAA. My checking, savings, credit card, home mortgage accounts, plus my kids’ bank accounts, are all with the company.

I insure with USAA as well: auto insurance, home insurance, and term life insurance.

I live in the hometown of their headquarters, and have many friends and acquaintances who work for USAA. I wish the company tremendous success but also I am self-interestedly curious about their setback years as well.

People are nervous right now about financial institutions. A once-in-a-hundred-year loss naturally prompts a question of whether it is anomalous bad luck or a trend. As the largest bank headquartered in Texas, USAA enhances public trust by explaining even the bad years when they occur. And even the obscure accounting lines when asked. I appreciate their letting me dig in a bit. Ninety-nine years before hitting a loss year is a pretty good track record.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

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February 10, 2020February 10, 2020

Savings on Auto Insurance

I conducted an experiment last week to test a long-held theory. The ubiquitous funny advertisements with the green lizard have led me to believe I could save money by calling up my automobile insurance provider and asking them to reduce my costs. (FWIW I don’t use that company. I have a different one, and I’m loyal to mine.)

Long story short, it worked. At the end of my phone conversation with my provider I’ll pay $20.07 less per month. To state some obvious math, that’s $240.84 per year.

I think my choices are prudent for me, but they are not free-lunch choices. I made a series of calculated gambles based on what I know about insurance in general, my particular car, and my personal financial situation.

This all started from a conversation over coffee with a reader two weeks ago. He mentioned that since the 1980s he’d declined to pay for collision insurance on his car, and that he calculates having saved at least $30,000 since then as a result. That got my attention. I realized I haven’t deeply studied the different components of auto insurance. Maybe you haven’t either. Now’s your chance to get a little nerdy with me.

For starters, auto insurance is required by law in every state. The required part of auto insurance is liability insurance. That’s for when you damage someone else’s body, car, or property. In Texas you’re allowed to buy a minimum of $25,000 in coverage per person or car, and $60,000 per incident. I pay to insure well over the minimum amounts and I didn’t mess with this liability part of my auto insurance policy.

The second part of auto insurance – which turns out to be optional in some cases – is collision insurance. That’s the amount you’ll receive if your car gets damaged.

Here’s where insurance theory and two other personal finance theories came into play. I’ll hit you with all three theories. First, insurance is expensive, so buy the least you can while still avoiding catastrophic financial risk. Second, don’t buy too much car. Third, try to buy so little car that you can avoid having a car loan. This third part is admittedly rarely achieved, but something to strive for. Because if you can eliminate your car loan, you have more options with collision insurance.

(Not meant as an advertisement. Just the pictures was BIG!)

If you have a car loan, your lender makes you buy collision insurance, naturally, because the car acts as collateral for your loan. A smashed up car makes for poor collateral. If you don’t have a car loan, however, you can decline collision insurance.

I don’t have a car loan. I also don’t have a valuable car. In combination, that means I’m not terribly worried about losing many thousands of dollars in value if I wreck it. During this process I looked up trade-in value [LINK to Kelly Blue Book https://www.kbb.com] for my 11 year-old Hyundai Elantra with 95,000 miles and learned it’s worth $1,800 to $2,5000. I don’t expect my insurance company to shower me with much more than that amount, in the event of a total wreck. And I’m not dropping $7,000 in repairs into this automotive beauty in that event either. Both of these factors mean I should keep my collision insurance to a minimum. I declined to pay for any collision insurance this week, because that suits my particular circumstance.

A fourth rule of personal finance came into play on the issue of comprehensive coverage. The rule is that it helps to have money in order to save money.

I saved a small amount when I upped my comprehensive coverage deductible from $500 to $1000. A few definitions might be helpful to explain what this means. Comprehensive coverage protects me if something other than another motorist hits me, such as hail damage, a tree falling, or flooding. The deductible is the amount I’m on the hook for, in the event of needed repairs. My upping the deductible is really a result of being able to handle the financial hit if a bad thing happens. If I didn’t have either savings or decent lines of credit, I wouldn’t be able to responsibly increase my deductible. But I do, so it’s cool. That’s the “it takes money to save money” thing.

A few other fine-print things I considered during my auto insurance conversation.

I continue to pay for vehicle damage if I’m hit by an uninsured motorist, although I lowered my coverage to the Texas state minimum of $25,000. As I mentioned, my car ain’t worth $25,000, so I’m probably over-covered there.

I continue to pay $1.65 per month for towing and labor. Between a history of dead batteries and flat tires, it feels like I need a tow or jump start more than once a year. So I’m getting my full money’s worth there, if history is any guide.

I also learned that our household auto insurance premiums won’t jump in six months when my eldest gets her learner’s permit. But they will jump in 1.5 years – quite a bit – when she gets her full license. I could hear the empathetic pain over the phone in the auto insurer representative’s voice when I told her my daughter’s age.

So that will be a future auto insurance cost increase. In the meantime, I was happy to squeeze out a bit in savings while I could.

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January 22, 2018

Automatic For The People

For getting started with basic finance goals, we need robotic automation, not human resolution. I’ll explain.

Did you know that January 17^th of each year is officially “Ditch New Year’s Resolutions Day?” This post lands squarely in the spirit and timeline of that tradition. Resolutions never work. Instead, automation works.

I’m a finance guy so my “automation, not resolution” idea pertains to your savings and investment goals. Like most sentient beings, you’d like to save more money and invest more money. But your best financial intentions for savings and investment in 2018 have already been ditched in advance of Ditch New Year’s Resolutions Day.

And I’m so, so sorry to learn your other 2018 New Year’s resolutions about eating clean, exercising more, and paying closer attention to family members isn’t working anymore. Same here.

If only I were a robot, I think, I would fulfill my resolutions so much better. Robot-Mike would never miss leg day at the gym. Robot-Mike would never eat those donuts. Robot-Mike would pay close attention to his beautiful children, instead of reading Twitter on his phone.

I just want to describe for you three automation things for savings and investment that worked for me in the past year. The beautiful thing about automation is that it brings that steely robotic resolve to solving the squishy human problem of savings and investment. Each one took about 10 minutes (maximum!) to set up. Then the automated process just hums in the background of your life. Human weakness regarding sugar, carbs, exercise-laziness and Twitter-distraction can’t knock these financial bots off track.

In the beginning of June 2017 I signed up for an automated savings program offered by my bank called “Tracker.” This is a goofy and effective savings scheme in which my bank slips a varying amount, between $1 and $9, out of my checking account and into my savings account, every Monday, Wednesday and Friday. The amount varies according to the bank’s own proprietary system, although it will not transfer any money if my checking balance drops below $100.

The “Tracker” app, with a picture of a dog, then sends me an encouraging text message to my phone every day about how much I have in my checking account, or how much I’ve saved, or some dumb factoid about either dogs, or money. This is silly except that I saved $504 over the course of 6 months without even noticing how. (Well, I noticed the text messages.)

And I know, $504 is not life-changing, but it’s also much better than not having that extra $504 in my savings account, without even trying. My bank built the Tracker app but I’m pretty sure any bank you may use in 2018 will let you set up an automatic transfer program to slip small amounts out of your spending account and into a harder-to-spend-from savings account.

In May 2017 I wrote about a funny savings app called Qapital (which I enjoy pronouncing incorrectly as Kwapital.) Qapital, like Tracker, slips small bits of money – you determine the amount and timing – out of your checking account and into a Wells Fargo account you access through the app. Qapital encourages you to set final goals for your savings (I chose to save $500 in order to purchase shares of stock for my daughters) and to pick the triggers for transferring. My trigger was a “52-week rule,” which started with $1 in the first week, and increased by $1 each week that followed. By November 2017, right on schedule, my Qapital savings account reached $500. The beautiful thing about Qapital, like the Tracker app, is that the tiny amounts of weekly money never pinched. I never missed the money removed from my checking account.

In May 2016 I downloaded and started investing through the Acorns app. Like Qapital, Acorns lets you determine an amount you’d like to automatically transfer from your checking account on a daily, weekly, or monthly basis. After a bit of prodding from the app, I settled on a plan to transfer $5 per day to Acorns according to their “Aggressive” (aka risky) portfolio of ETFs. Why $5?

Like many caffeine addicts, I can easily spend $5 or more on coffee and other non-essentials per day, so I decided $5 was the right “punishment” amount to contribute to Acorns. 21 months later I have $5,875 in my Acorns account. Most importantly, I’ve never missed the daily $5 hit to my checking account.

Maybe you’re thinking that $500 of savings ($1,000 if you count both Qapital and Tracker!) or $5,875 of investments doesn’t make a whole lot of difference in one’s life. You’re not impressed.

“Big deal, finance blogger,” you’re thinking, “what about the real money?”

“Ok, Big Shot,” I’d respond to you, “fine.” All of these automated processes work at a larger scale as well. Crank it up to 11. Make my day. Go for the real money. That would really show me up. But also, the Acorns app has a neat little projection graph that shows my dumb $5 per day building up to a $100,000 portfolio by age 65 and a $400,000 portfolio by age 85. Which could matter some day.

The point here isn’t that your favorite finance blogger is really good at savings and investments. Rather, the opposite. The point is that anyone not very good at savings and investment could produce similar (or far better!) results while hardly trying. The further point is that automation of savings and investments means you don’t have to be disciplined throughout the year. You don’t have to stick to any resolutions. You make the robot do the thing for you.

After the initial 10-minute set-up of automated transfers, just literally do nothing the rest of the year. Heck, the rest of your life. Doing nothing becomes, in fact, the key to your success. “Doing nothing” feels like a New Year’s resolution we can stick to, long past January 17^th.

A version of this post ran in the San Antonio Express News and Houston Chronicle

Please see related posts:

Whoa…Acorns is really good

Qapital is goofy but might help kickstart savings

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