What to do??

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simtech
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What to do??

Postby simtech » Thu May 27, 2010 11:55 am

Hello and great site, I’ve found alot of info here!! First off a little background. I’m married, we are both 31 and have no kids. Our vehicles are paid for, our house will be paid off in 5 more years (double payments every month), we have no CC debt, or other loans. We both contribute to a 401k at work that is matched 50% up to 8% contribution with a combined value of 45k. Aside from that I also have a Roth IRA that I own shares of BRK/b and shares of FFFFX (which equals roughly $6700). On top of that we have about 55k just sitting in a savings account making a dismal .010%.

My concern is the $50k just sitting there doing nothing. We add to it every month but it is really not earning anything and I feel it can be doing alot more. We have no real plans other than to save money and live easy. What can I do with that money that can earn more but still be somewhat liquid? I don’t mind tying up a large chunk but I want it to be rather safe. My IRA is in the red and I sometimes feel as though I should not have gotten into the Fidelity lifecycle fund but I guess it is for the long haul and I keep contributing to it every payday religiously. I would like to retire early just not sure how early I can do it yet. Would somebody mind steering me in the right direction. Thanks for your help!

peachy
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Re: What to do??

Postby peachy » Thu May 27, 2010 12:04 pm

You could put your money in a CD. That way it's fairly liquid and when the month or year expires, you can put it back in for another year/6 months/whatever if you want, or put it back in your regular savings account.

You should look into Ally Bank or ING. Their savings rates aren't the highest, but they're better than .010%.

I hope you and your spouse are having some kind of fun. Why save all your money to watch it? You don't want to turn 70 and realize you haven't done anything because you've been hoarding money all your life.

Best wishes.

simtech
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Re: What to do??

Postby simtech » Thu May 27, 2010 12:13 pm

Yeah I thought about CD's but the rates seem so low, although they are better than my savings! I looked into CD laddereing but not sure yet. I am scared with Alley because I here of people online with so many problems getting thier money back out. But I still consider them. We travel to cozumel every few years but for the most part we are hoarding. I used to be a big spender but then in my studies I learned of opportunity cost. I would rather live tight now and be more free when Im older. But dont get me wrong we spend for ourselves and enjoy life we are just not big balling when we do. I also feel as if I might be behind in saving for our retierement too. At times I feel like we are doing good then other times I feel that we are behind. I guess the no real plan for the money is what might be making me feel the way I do, I dont know. We are opening up a business too and are doing it without any loans which is great and our savingin is un touched my it as well.

Savarel
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Re: What to do??

Postby Savarel » Thu May 27, 2010 12:19 pm

Definitely move it into a different savings account. 0.01% interest is basically nothing. You earn about 50 cents on that $50,000 each year. Switch to a bank getting even a moderate 1% and you would earn $500 a year. In a 12 month cd, you could probably earn 2-3%, which would be $1000 to $1500 a year.

Pretty much anything is better than just leaving it there to earn .01% interest. You could also look into AAA rated bonds and get 4-5% a year. That woul reduce the liquidity, but having $50,000 in cash seems unneccessary.

simtech
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Re: What to do??

Postby simtech » Thu May 27, 2010 12:27 pm

I just looked up CD rates at my bank and to even get into 1%'s or higher you are looking at 18-23 months. That just dont seem worth it to me. But I could be wrong, the money has sat in savings for at least 4 years untouched just adding so that would have been better than nothing huh.

DoingHomework
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Re: What to do??

Postby DoingHomework » Thu May 27, 2010 12:39 pm

I don't really like CDs. You can buy US Treasuries through Treasury Direct and get a better return than you are getting now at the bank but it would not be as good as a CD. Personally I would go with a short term bond fund though I am not a fan of bonds for the next few years. A short term fund though will keep you liquid and give you about the same return as a CD.

simtech
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Re: What to do??

Postby simtech » Thu May 27, 2010 12:59 pm

Why do you not like CD's but rather short term t-bonds for the same rate?

kombat
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Re: What to do??

Postby kombat » Thu May 27, 2010 1:03 pm

Congrats, you guys are doing great!

It sounds to me like you guys need some goals. You say you have no car payment. That's great, but what's your plan for when your current car dies? Are you setting aside some money every month to replace it when it inevitably croaks?

You guys like to travel too, that's awesome. Again, make sure you're setting aside some money every month for this so that when you get the itch to travel, you don't have to borrow money to make it happen.

Now, what to do with your current $50,000? First, I would calculate how much your monthly expenses are. Then multiply by 3. That represents 3 months' expenses for you. Take that amount and stick it in a CD to improve the amount you're earning on it. That's your emergency fund.

Next, take whatever's left and make sure you're maxxing out your Roth IRA's. If there's anything left, put it against your mortgage, since it seems like that's a high priority for you. Once your mortgage is paid off, come back and we'll give you advice for what to do with the huge surplus of cash you're going to have every month.

Oh, and we'll expect to see some recent photos of Cozumel, too. ;)

DoingHomework
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Re: What to do??

Postby DoingHomework » Thu May 27, 2010 1:08 pm

simtech wrote:Why do you not like CD's but rather short term t-bonds for the same rate?


Liquidity.

Plus I don't really like banks. I think they are fee greedy.

peachy
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Re: What to do??

Postby peachy » Thu May 27, 2010 3:45 pm

I forgot to mention a Roth IRA. Do you have one? The max. for each of you is 5000/year, and funded with after tax money. If you are worried about retirement not being funded, that's an additional way to put money aside for retirement.

simtech
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Re: What to do??

Postby simtech » Thu May 27, 2010 4:14 pm

Okay I can see that. What about money markets for liquidy? You know I don't see Cozumel in our plan this year as much as I would like. I love to dive there, it is beautiful!!! Starting our business is taking some time right now but hopefully once it gets up and going summer time will be our down time so we will go then. Plus it is almost honey extraction time, I started beekeeping last year, so see I get to enjoy myself and money(and my wife enjoys them too). Bees are not cheap and now I realize I would have been better to just buy honey in stead of having bees. Oh well now I get to sell honey to fund my addiction. I'm getting off topic now sorry! haha


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