The Lincoln Guide to Personal Finance

Photo: Phil Roeder

The Treasury Building is just a short walk from the White House, making it an easy stop for any president to visit.

President Abraham Lincoln, who invested most of his presidential salary in Treasury bonds, didn't visit the Treasury Department often. But he did get there often enough to save most of his salary for three years. (See also: Receiving Your Tax Refund in Savings Bonds)

The movie "Lincoln" opens nationally on Nov. 16, and while it provides historical lessons, the former president's investment methods can be a good study of sound personal finance advice.

Saving almost all of your salary is nearly impossible, but as the president showed, regular investments are a good start to a healthy portfolio.

Lincoln stopped by the Treasury Building each month and "counted out what money he was able to spare from his salary" and invested in bonds, according to then-Treasury official Levi Gould, who helped Lincoln with his investments, as quoted in the 2006 book "Personal Finances of Abraham Lincoln."

Lincoln invested almost all of his $25,000 annual salary in governmental bonds, with $68,000 in total assets from his three years in office, according to a website run by the Lincoln Institute.

One day the president arrived at the office of the Secretary of Treasury and threw a mass of governmental notes on the secretary's desk, instructing that they be converted into bonds. His holdings in government obligations totaled $54,515, along with a bag of gold worth $883 that he brought to be Treasury Department. The assets were: $16,000 of 7-30 notes, $26,181 of certificates of deposit, $8,000 of 5-20 bonds, $4,044 in salary warrants, and $489 in cash.

Anyone who has received a savings bond certificate as a birthday gift — though they're now all electronic and can be given as a gift certificate to be redeemed — knows that getting a $25 savings bond is almost as exciting as getting new socks. While the payments for the various Treasury securities aren't exciting, they do provide long-term interest and give you the satisfaction that you're helping the country account for its debt. Even children can understand it.

Treasury bonds, for example, pay a fixed rate of interest every six months until they mature in 30 years. The types of Treasury notes that Lincoln bought can still be bought today, though at different rates. T-Notes also pay a fixed term of interest every six months until they mature. They're issued in terms of 2, 3, 5, 7, and 10 years. Recent rates on bonds and notes ranged from 0.375% interest rate for a 3-year note to 3% interest on a 29-year bond.

Lincoln did well with his bonds. The 7-30 notes, called "seven-thirties," paid at a rate of 7.3% — two cents a day on $100 — that was payable in gold semi-annually. The government issued $140 million in Treasury Notes in 1861 to finance the Civil War.

The 5-20 bonds that the president bought were redeemable after five years and matured at 20 years. They paid 6% interest payable in gold on May 1 and Nov. 1.

Lincoln followed the rule billionaires such as Warren Buffett have followed — reinvest any interest payments. Whenever Lincoln, according to the book on his finances, was paid interest in gold, he sold the gold to the Treasury Department and used the proceeds to buy more bonds or loans to the government at interest rates of 4 to 6%.

The president received almost $10,000 in interest and premiums on savings from his salary that he reinvested almost in its entirety, according to the book.

Like any busy president, Lincoln apparently didn't have time to get to the bank often enough. He must have been doing well enough not to need to cash his pay "warrants," according to biographers, with four uncashed paychecks found in his desk after his death.

If you have four paychecks sitting in your desk that you haven't deposited yet, follow Lincoln's likely advice and go invest them in some government bonds.

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