Comments on: Feeling Out of Touch with Finances http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/ Debt free, financially independent and retired early Wed, 07 Jan 2009 16:59:41 +0000 http://wordpress.org/?v=2.6.5 By: Mark Andersen http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9872 Mark Andersen Wed, 08 Aug 2007 19:15:19 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9872 One of the ads Google was putting on my site when I did the banking products was for an 8% CD, which is where I got the number from. The place I work tops out at 5.10 right now I think. It still beats inflation considering it was only 1.9-2.4 (depending on your source) this past year. One of the ads Google was putting on my site when I did the banking products was for an 8% CD, which is where I got the number from. The place I work tops out at 5.10 right now I think. It still beats inflation considering it was only 1.9-2.4 (depending on your source) this past year.

]]> By: mnc http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9869 mnc Wed, 08 Aug 2007 18:36:36 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9869 The last time I looked at CDs the rates were nowhere near 8% and were actually paying less than many of the top online savings options that are available. This is a great summary of establishing a CD ladder though. I was actually thinking of turning your comment into a post of its own but I would love for you to write a guest post here! The last time I looked at CDs the rates were nowhere near 8% and were actually paying less than many of the top online savings options that are available.

This is a great summary of establishing a CD ladder though. I was actually thinking of turning your comment into a post of its own but I would love for you to write a guest post here!

]]> By: Mark Andersen http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9852 Mark Andersen Wed, 08 Aug 2007 13:16:39 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9852 Well, the best way I've found is with laddered certificates, unfortunately to do them effectively you really need a good amount of startup capital ($20,000+). The purpose behind laddering is to give a more frequent payout than just putting all your cash in one large CD. This also helps make a CD-heavy portfolio more liquid. So let's say you have $20,000 you want as a safe no way to lose it type of investment you put it all in a CD you saw advertised for an 8% apy over a 12 month time period hoping for $21,600 in a years' time. Month 11 rolls around, and your son is in a major car accident, he forgot to pay insurance and the other driver didn't have any. You need an extra $6,000 beyond your emergency savings. Now you've lost all the interest because you had to break the CD early. With a laddered portfolio it's a bit different. Instead of putting it all in a 12 month CD, you split it up into $5000 chunks and put it in 3, 6, 9, and 12 month CD's respectively. Now, when each CD matures, you open a new one at the 12 month rate (you can even do 11 or 13 months if there's a rate special). Once the first cycle is complete, it will seem like you are getting a higher interest rate on a short-term CD. Lots of retired people do this, sometimes monthly, and they just have the interest deposited into their accounts. I would not be comfortable doing something like this outside of a brick and mortar institution though, because I would want someone inside monitoring rates for me. I would love to write a guest post on this sometime as well, banking is one of my biggest passions. Well, the best way I’ve found is with laddered certificates, unfortunately to do them effectively you really need a good amount of startup capital ($20,000+).

The purpose behind laddering is to give a more frequent payout than just putting all your cash in one large CD. This also helps make a CD-heavy portfolio more liquid.

So let’s say you have $20,000 you want as a safe no way to lose it type of investment you put it all in a CD you saw advertised for an 8% apy over a 12 month time period hoping for $21,600 in a years’ time. Month 11 rolls around, and your son is in a major car accident, he forgot to pay insurance and the other driver didn’t have any. You need an extra $6,000 beyond your emergency savings. Now you’ve lost all the interest because you had to break the CD early.

With a laddered portfolio it’s a bit different. Instead of putting it all in a 12 month CD, you split it up into $5000 chunks and put it in 3, 6, 9, and 12 month CD’s respectively. Now, when each CD matures, you open a new one at the 12 month rate (you can even do 11 or 13 months if there’s a rate special). Once the first cycle is complete, it will seem like you are getting a higher interest rate on a short-term CD.

Lots of retired people do this, sometimes monthly, and they just have the interest deposited into their accounts. I would not be comfortable doing something like this outside of a brick and mortar institution though, because I would want someone inside monitoring rates for me.

I would love to write a guest post on this sometime as well, banking is one of my biggest passions.

]]> By: mnc http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9845 mnc Wed, 08 Aug 2007 04:45:35 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9845 That is something that I miss since I switched the bulk of our eFund over to HSBC from ING, as the ING account updates the accrued interested on a daily basis. It was always nice to log in and see how much more interest I had than a day or two before. While I know this can be computed in a spreadsheet, it is more fun to do online. :) Have you figured out any great ways to optimize your interest returns? That is something that I miss since I switched the bulk of our eFund over to HSBC from ING, as the ING account updates the accrued interested on a daily basis.

It was always nice to log in and see how much more interest I had than a day or two before. While I know this can be computed in a spreadsheet, it is more fun to do online. :)

Have you figured out any great ways to optimize your interest returns?

]]> By: Mark Andersen http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9844 Mark Andersen Wed, 08 Aug 2007 04:37:26 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9844 I'm an online banking junkie, I check my accounts daily and enjoy figuring out ways to optimize my interest returns etc. I’m an online banking junkie, I check my accounts daily and enjoy figuring out ways to optimize my interest returns etc.

]]> By: mnc http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9825 mnc Tue, 07 Aug 2007 19:57:19 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9825 Lol, I know what you mean. I used to check my accounts twice per week but have learned to adapt to once a week to feel comfortable. Things like my savings accounts and retirement accounts are only checked once a month when I update my net worth statement but those accounts are typically deposits only and are on auto-pilot. Thanks for sharing your experience! Lol, I know what you mean. I used to check my accounts twice per week but have learned to adapt to once a week to feel comfortable.

Things like my savings accounts and retirement accounts are only checked once a month when I update my net worth statement but those accounts are typically deposits only and are on auto-pilot.

Thanks for sharing your experience!

]]> By: SavingDiva http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9824 SavingDiva Tue, 07 Aug 2007 19:25:17 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9824 I check my accounts online at least a few times a week. I'm a little crazy when it comes to checking them. I think I might be TOO in touch with my money. I check my accounts online at least a few times a week. I’m a little crazy when it comes to checking them. I think I might be TOO in touch with my money.

]]> By: mnc http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9818 mnc Tue, 07 Aug 2007 14:15:32 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9818 That sounds like a great idea to mark the calendar on days when you meet your goal and challenge yourself to go as long as possible. We've been pretty bad about eating out this summer. We tend to eat out more in the summer as nobody wants to be in the kitchen cooking. I'll have to suggest your idea to my wife. Hope your wife does well on her exam and thanks for sharing your feedback! That sounds like a great idea to mark the calendar on days when you meet your goal and challenge yourself to go as long as possible.

We’ve been pretty bad about eating out this summer. We tend to eat out more in the summer as nobody wants to be in the kitchen cooking. I’ll have to suggest your idea to my wife.

Hope your wife does well on her exam and thanks for sharing your feedback!

]]> By: mnc http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9817 mnc Tue, 07 Aug 2007 14:12:06 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9817 You might be on to something with regards to the cash cushion. We've had a large cash cushion in our account that coincides with these last few weeks where I feel out of touch. You also touch on an important thing in that communication is essential. If one partner doesn't check accounts on a regular basis, communication is even more important. Thanks for the feedback! You might be on to something with regards to the cash cushion. We’ve had a large cash cushion in our account that coincides with these last few weeks where I feel out of touch.

You also touch on an important thing in that communication is essential. If one partner doesn’t check accounts on a regular basis, communication is even more important.

Thanks for the feedback!

]]> By: Eric http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9816 Eric Tue, 07 Aug 2007 14:11:49 +0000 http://www.mynewchoice.com/2007/08/06/feeling-out-of-touch-with-finances/#comment-9816 I think that's the hardest part is to build the habits. My wife is studying for a professional exam for her career. The exam is really difficult and she's studying 2 hours a day for 6 weeks to take the exam. She's been keeping a calendar by the door that she has to see everyday. She puts an x on it everytime she studies. We're trying to do the same thing about eating out. Every day we don't eat out, we put an x up and see how long we can go. I think that’s the hardest part is to build the habits. My wife is studying for a professional exam for her career. The exam is really difficult and she’s studying 2 hours a day for 6 weeks to take the exam. She’s been keeping a calendar by the door that she has to see everyday. She puts an x on it everytime she studies. We’re trying to do the same thing about eating out. Every day we don’t eat out, we put an x up and see how long we can go.

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