There is a battle, a tug-of-war if you will, in between savers and customers in this nation.

Savers Lament

On the saver's side, conditions are dreadful. Rate of interest on certificates of deposit (CD) have actually dropped considerably to the point where the typical rate for a 1-year CD is 0.55% and simply 1.63% for a 5-y CD.

Assess that for a bit ... your money locked-up for 5 years earning just 1.63%!

Other cost savings automobiles are having a hard time too. For example, a popular fund that contains business bonds from Wells Fargo, AT&T, Wal-Mart, and other blue-chip American companies has a typical maturity of 12 years and currently yields about 3.75%.

That's 3.75% of taxable interest earnings. Assuming your tax rate is 33%, you're entrusted to an efficient, after-tax yield of 2.5% which, my buddy, is less than the historical inflation average of 3%.

So, while your bond financial investment is much better than money in the bank and safeguards you to some level versus inflation, you still end up with 0.5% lower buying power every year.

So savers can't be too pleased about this.

While Borrowers Rejoice

Debtors, on the other hand, are having the time of their lives. Recently, the average 30-year fixed-rate home mortgage struck its lowest level of 4.19%. The kicker here is that mortgage rates should in fact be more than 0.5% lower - in the 3.8% range - based on their correlation with interest rates on Treasury bonds.

However, rates are unlikely to go much lower so here's a suggestion: If you are in the market to re-finance, waiting is probably not going to help you much.

In addition, clients of mine are borrowing millions at 2.15% to fund their business activities.

Seems a Little Unfair

Without taking an ethical stance, it does seem a bit unjust that savers, who in a sense are the "good guys" building wealth for their future, contributing capital for economic development new fidelity funding address and saving for a rainy day, are being penalized for the actions of irresponsible borrowers and greedy lenders. Borrowers got in over their heads, didn't take sensible safety measures, and are now getting loan adjustments and reduced rates on the cash they owe. Banks experienced huge losses since of bad lending practices and caused this drop in rates to ultra-low levels.

However, this sort of conversation doesn't get us anywhere. What has actually taken place, has happened - reasonable or unreasonable.

So where do we go from here, and how do we benefit from all this?

What Customers Can Do

Have a look at your finances from a debtor's viewpoint.

First: refinance your home mortgage NOW if you can because rates probably aren't going to fall much lower.

Second: store, shop, shop for a better rate on your credit card. Loaning costs are dropping all around so why should you pay the usual high rate on your credit card? Find banks that are starving to provide you cash such as smaller sized institutions and Cooperative credit union, and prevent mega-banks that usually have all the cash they require.

Third: take out an organisation loan if you require the money. Banks are chilling out and making loans at relatively low rates that are really compelling regardless of the risk of slower service in this weak economy.

Nevertheless, utilize sound judgment and profundity as you take on more financial obligation. Take on "excellent" financial obligation that funds your home purchase or possessions that value in value. Keep away from handling "bad" financial obligation for diminishing possessions you can ill pay for such as a new car or boat. If you should handle "bad" financial obligation, make certain it is short term and pay it off really rapidly.

What Savers Can Do

Now the tough part: discovering deals as a saver.

First: look for a longer-term CD that will change greater if rates increase. There is little even worse than locking your cash in a 5-year CD at 1.50% only to see rates rise to 5% 2 years from now.

2nd: consider purchasing business bonds with maturities of 5 years or less. These bonds still yield more than CDs, but make certain you know what you are buying - if the corporation goes bankrupt, you might lose an excellent portion of your "safe" financial investment.

Third: consider buying high dividend-paying blue-chip stocks. Warren Buffet just recently said that stocks are cheaper than bonds right now, and he's right. There are lots of solid business out there whose dividend yields are above 3%. For instance, Altria currently has a dividend yield of 6% and a strong history of consistent dividend payments.

So ... it depends on you to be a winner or loser in the savings and loaning game. All you need to do is understand the truths, choose to act, get on the phone or in your car, and start getting your affairs in order.