Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I currently have $32K in my checking account. I get some interest but it's extremely low that it might as well be non-existent. I'm ready to start moving my money around to start making even more. Here's my situation:
- I'm single, not married, and no kids.
- Mid 20's.
- Already investing 6% of my salary into a 401K.
- I make $70K a year, but seriously considering opening my own business one day (computer programming services) and quit the job.
- Currently renting and not interested in buying at this time.
- Only $8K left on my car loan. I would only save about $1K over 2.5 years if I payed it off today.
I like the idea of putting the money into a CD of some sort. I don't mind not being able to touch the money until the maturity date. I was thinking about throwing in $10-15K for a fixed rate CD. My bank offers ****ty interest rates (BofA) but I see other places making it worth the effort. What would be the best real return rate (including taxes) of say a 9 month fixed rate CD? Is it even worth it?
Maybe I should partition the money out in such a way that:
- 25% of it is in the checking account.
- 50% of it is in longer term savings such as a CD.
- The remaining is in a regular savings account.
What would you do in my situation? I definitely would like to having a large amount of savings for starting out in my business one day. Just looking for some extra opinions. Thanks!
I currently have $32K in my checking account. I get some interest but it's extremely low that it might as well be non-existent. I'm ready to start moving my money around to start making even more. Here's my situation:
- I'm single, not married, and no kids.
- Mid 20's.
- Already investing 6% of my salary into a 401K.
- I make $70K a year, but seriously considering opening my own business one day (computer programming services) and quit the job.
- Currently renting and not interested in buying at this time.
- Only $8K left on my car loan. I would only save about $1K over 2.5 years if I paId it off today.
I like the idea of putting the money into a CD of some sort. I don't mind not being able to touch the money until the maturity date. I was thinking about throwing in $10-15K for a fixed rate CD. My bank offers ****ty interest rates (BofA) but I see other places making it worth the effort. What would be the best real return rate (including taxes) of say a 9 month fixed rate CD? Is it even worth it?
Maybe I should partition the money out in such a way that:
- 25% of it is in the checking account.
- 50% of it is in longer term savings such as a CD.
- The remaining is in a regular savings account.
What would you do in my situation? I definitely would like to having a large amount of savings for starting out in my business one day. Just looking for some extra opinions. Thanks!
1. I'd have that car loan paid off immediately. Whatever you save in interest is more than you'd make in bank account/CD interest at this point. And what little interest you earn is going to be taxed. Better to pay off the loan first.
2. Get an online savings account. I'd open a CD online, too.
I use FNBO Direct for most of my savings (currently pays 1% with no minimum), but I do have an account at a local credit union as well.
I would only keep a minimal amount in my checking account. I keep just enough for my bills plus $100 cushion. Then I'd keep maybe up to 5K in my local savings account. The rest would be in online savings/CDs. I'm not sure if 9 month CDs are even worth it. Sometimes an online savings account will pay more than a 9 month CD. You might have to have a 1 year CD for it to be worthwhile...and even then, the gains will be marginal. Check out the web sites and see for yourself.I'd have 6 months worth of living expenses put aside before I'd put anything in a CD, though.
Personally, I would ditch B of A. I HATE the big banks. They are evil and I thought that long before the financial crisis. They are always wanting to hit you with new fees and never pay competitive interest on your savings.
Last edited by mysticaltyger; 05-30-2011 at 01:14 PM..
I Would fund a Roth IRA with 5K per year. Would re-think going off on your own as a computer pgm Consultant, Unless you have supper skills you will have a hard time getting contracts. I would suggest that you take on some contract work 10hr a week or so you can do at night. Bank up about 1 year of emergency savings. Also factor in things like health care will run 12-15K a year. You will need to fund your part of SS, also your retirement fund.
So how does a CD work? Do you have to wait until the maturity date to even get the interest out of the account? For example, if I do a 5 year CD, do I have to wait 5 years until I get anything back from it? How much taxes would I be paying on the interest of such a CD?
So how does a CD work? Do you have to wait until the maturity date to even get the interest out of the account? For example, if I do a 5 year CD, do I have to wait 5 years until I get anything back from it? How much taxes would I be paying on the interest of such a CD?
How it's taxed depends on your income and tax rate.
CD's are redeemable when they mature.
If you do it early you generally loose a couple months interest. (I had one mature when I was deployed. They rolled it over automatically, and when I got back I paid an 'early penalty' of 2 months.)
So how does a CD work? Do you have to wait until the maturity date to even get the interest out of the account? For example, if I do a 5 year CD, do I have to wait 5 years until I get anything back from it? How much taxes would I be paying on the interest of such a CD?
CDs have maturity dates, after which you can withdraw your funds in full. If you choose to withdraw before that date, you'd have to pay an early-withdrawal penalty. Bank penalties are different, so you need to check around.
Interest compounds and is untouchable. Although I heard that there is a type where you can get the interest out - I know nothing about those. Why would you want to take it out? You're saving for a specific purpose.
You pay taxes on interest yearly, just like a regular savings account. Tax amounts would depend on your specific tax bracket.
If you don't like how this all sounds - not being able to touch it - you could also consider a money market account instead. It wouldn't earn as much interest, but you'd have access to the funds (but also limited - a certain amount of check writing per month or per quarter). But wouldn't that defeat the purpose of your saving?
Well I basically just want to make the most of the money I currently have so that when it's time to jump ship from the job I have the most I can possibly have at that time.
^I would not put any money into any CD with longer than a 1 year term.
Interest rates are near historic lows right now. They can't go down anymore, which means that they can only stay steady or (most likely) rise in the near future. If you locked your money into a 5 year term for, say, 2.3%, you cannot touch it for 5 years (without penalty). If I were to guess, I would say that, within the next five years, interest rates will get above that, meaning you would not be earning very much while everything else (including price inflation) jumps faster.
I would suggest you have an online savings account (I use Ally) and, if you want, put some money into 6 mth-12 mth CDs. I currently have money in a 11-mth No Penalty CD (maturing in 2 months), which is nice because, while I locked in a "higher" interest rate (relative), I also had the chance to pull it out in case interest rates suddenly rose.
You should also open a Roth IRA and invest up to the max you can ($5K/yr). You have the option to run the 1 year term either a calendar year or a tax year. Some people choose the latter because bonuses tend to be given out in Dec/Jan. However, your best bet is always dollar-cost averaging into your Roth - meaning, add a predetermined amount per month and per investment (mutual funds and/or ETFs). That way, as you go you are buying shares all the time, including times the market drops and times it rises. You can of course pull "audibles" during high/low times in the market. But continue supplying money into the Roth anyways (just put it into a cash/money market fund to store for investments).
I agree, committing to a 5 year CD with rates where they are right now is just foolish. I DO agree that a ROTH is a good idea. I would bump your retirement investments up to as much as you can tolerate for now-20-30% of your income if you can do that. With no debt (pay off the CAR!!!) and a committed saver, you could help yourself tremendously buy putting away as much as you can now-and back off some later as you get married and have kids. Time value of money is always a good thing.
I would keep at least 1/2 of what you have saved pretty liquid now, money market accounts or maybe some low risk mutual fund-maybe some muni-bond funds??
Keep just enough in your actual savings accounts to cover 2 months of expenses-rent, food, bills, entertainment, etc. and put the rest into higher rate accounts.
It is probably a good idea to meet with a financial planner to set up some medium and long range planning too.
I know you said you were not interested in buying a house, but it is something you should consider, especially if you live in an area where rental properties would be a good investment.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
