Static to Dynamic: What's a Sweep Account?

What normally happens when you get your paycheck?  If you're like a lot of people, it gets deposited into your checking account.  From there, you manage all of your spending.  You first make sure that you meet all of your monthly obligations (credit).  These are static obligations.  Then, you probably have a pre-determined amount that you allocate to savings for vacation, college, and unforeseen expenses.  Then there's the long-term investments that you don't plan to touch until retirement.  The money that's left is what you spend on groceries, coffee, dining out, and clothing.  This money is your everyday spending.  You've been doing it for so long that it's practically automatic.  You've got it figured out.  It's called a budget.

What if there were an easier way to make your money work harder for you?  Check this out. This chart shows you how businesses and higher-net-worth individuals manage their cash flow using sweep accounts.

What does this mean to you?  Well, your home is likely the biggest investment you'll ever make, and the Home Ownership Accelerator is a sweep account linked to your mortgage.  It works for ordinary people with ordinary income, generally positive cash flow, and equity in their home.  It makes the money that would have gone to interest go to principal instead.   The result is a significant interest savings over the life of the loan, and more rapid equity buildup in your home.   The last and most important benefit is your mortgage is  "cheap money".   You can also systematically divert a portion of the equity you are rapidly accumulating to outside investments and still watch your mortgage shrink and your supplemental nest egg grow.

You've done it by switching your biggest investment from a static obligation to a dynamic tool to manage your money more effectively without any extra effort or change to your spending and lifestyle.