[Mr McGillycuddy]

Brethren,

I have a bit of a finance/investments question for you guys.

In an effort to control my money spending, I have been simply depositing all money I earn into a savings account and then distributing it on a recurring basis into my checking account. Right now, I simply drop $2k into my checking account on the first day of each month and that is my budget for the month.

(I know some of you are probably saying how the hell does this guy live off of $2k per month but that's a subject for another thread...)

This has been a great system and it's really helped me reign in my spending. So I am still looking to have the $2k moved into my checking account every month but I am reconsidering the ways that I hold the "principle" in order to earn a bit more off of interest.

My savings account is earning 0.84% APY so anything that beats that is good.

The strategy that I am leaning towards is to create a CD portfolio. The same bank that I have my checking and savings accounts with has no penalty CDs that are currently paying 0.93% APY that I can automatically set to withdraw into my checking account on a monthly basis. That's a huge plus for me, the minimal time to manage and setup, as that is essentially a set-it-and-forget-it setup. I also don't have to open any new accounts this way.

But my question to you guys is do you see a better alternative? I am willing to take on a little more risk (i.e. move into some fixed income/non-cash) but I don't know which would a) pay more interest and b) would be easily manageable, could be withdrawn on a monthly basis, and generally makes sense. Ease of use is equally important as extra interest/income.

So let's hear it: stick with the CDs or try something else?

[Anon-A-Moose]

(03-15-2012 03:39 PM)Mr McGillycuddy Wrote:  

Brethren,

I have a bit of a finance/investments question for you guys.

In an effort to control my money spending, I have been simply depositing all money I earn into a savings account and then distributing it on a recurring basis into my checking account. Right now, I simply drop $2k into my checking account on the first day of each month and that is my budget for the month.

(I know some of you are probably saying how the hell does this guy live off of $2k per month but that's a subject for another thread...)

This has been a great system and it's really helped me reign in my spending. So I am still looking to have the $2k moved into my checking account every month but I am reconsidering the ways that I hold the "principle" in order to earn a bit more off of interest.

My savings account is earning 0.84% APY so anything that beats that is good.

The strategy that I am leaning towards is to create a CD portfolio. The same bank that I have my checking and savings accounts with has no penalty CDs that are currently paying 0.93% APY that I can automatically set to withdraw into my checking account on a monthly basis. That's a huge plus for me, the minimal time to manage and setup, as that is essentially a set-it-and-forget-it setup. I also don't have to open any new accounts this way.

But my question to you guys is do you see a better alternative? I am willing to take on a little more risk (i.e. move into some fixed income/non-cash) but I don't know which would a) pay more interest and b) would be easily manageable, could be withdrawn on a monthly basis, and generally makes sense. Ease of use is equally important as extra interest/income.

So let's hear it: stick with the CDs or try something else?

0.84%APY doesn't even cover inflation.

Have you tried low-risk stocks or a "shotgun market" approach (using natural market growth gets a ~5% gain on average)? Berkshire Hathaway stock is usually pretty solid; is that an option? A high interest account? Physical assets? Angel investment?

I guess the real question is, how much are you willing to risk?

[AntiTrace]

Your just as good as hiding your money under your mattress for 0.84%.

Id look into good dividend stocks. AMSWA is a decent one I hold. There's bound to be more out there.

Something with little to no debt, decent return on equity/assets, and dividends would be a good long term hold

[rozayINTL]

Good dividend stocks are not the answer. In fact when you start getting advice like this, you know blue chips are getting overvalued.

$3,000 in dividends every quarter will not account for the $30,000 worth of losses that you could very easily (given market conditions) lose on your investment in that period.

Interest rates are horrendously low. It's impacting investors right now everywhere, there's no perfect solution. Higher return = more risk. Look at various corporate bonds if you have to. I personally wouldn't go into equities solely for dividends.

[Lothario]

How about paying off the loans, Cars, House etc, any where from 3.5 - 6 %, that's about an easy savings of 3.5 - 5 % which I do not hink I can do with any other vehicle at this time ........

[WestCoast]

Please go to my thread not to be a bastard but trying to keep it all in one spot. 0.84 is not the best rate anyhow. Finally depending on how much $$$ you have, definitely read the entire thread. Will be right below this post.

Regarding the comment on here on dividends. I reiterate again, buy what you know.

Finding good dividend stocks does not necessarily mean all blue chips are over valued... the world has changed and we should adapt accordingly. I don't know about you guys but it's clear to me that we'll slowly but surely see a resurgence of high yield reward credit cards which for the 90% of people in the world will be a gold mine for playing the credit system for what it is... a bunch of idiots with no education trying to reign in the cash without understanding a person with strong financial knowledge will take him for a ride.

[Mr McGillycuddy]

I don't think I explained what I was looking for very well, so let me try again (I actually have a degree in finance so I'm not a complete newb to this but I haven't dealt much with personal investing so this side of things is a bit new to me...)

I am simply looking for the best way to carry $12k (or six months of living expenses at the $2k I am spending each month). I want to live off of that $12k for the next six months and in six months I can reevaluate. This is a small piece of my portfolio and it's just my cash/cash-equivalents. Most people would carry their living expenses in a checking/savings/money market account so that they are highly liquid and very safe.

However, I am fully/stably employed and post-tax I take home about $4.5k each month. The goal is to be able to live off of the $12k for six months and thus be able to use the $4.5k I take home each month to place into other investments, which can be less liquid and more risky and align to a better investment strategy.

But because of the "insurance" I get from having that stable income, I am somewhat willing to be slightly less liquid and slightly more risky in how I am holding the $12k in living expenses/cash. That's why I was looking into alternatives that would pay slightly more than the .84%. I'm trying to maximize the loss to inflation over the six months. I realize its not much but Ilike money so every little bit is good.

[AntiTrace]

1% would give you $60 over the span of 6 months. I would not even bother with that. Just open a new checkings account with a bank that gives a cash bonus for opening a new account.

I would invest the 12k you have saved up now. While adding the extra income every month. That should give you 2.5k extra a month to add to your investments. And the 12k you have already saved starts making more interest right away.

What are you motives for living off the 12k and investing 100% of your work income? Your just delaying the returns on your investment which is going to cost you more than the $60 or so you are looking to get.

[Brian]

tying up the money in CD's isnt worth the 1% in my opinion.