Do you keep score? By keeping score it just might motivate you to save money save for goals, become debt free, and pay your house off. If you are a gamer you might be motivated by turning it all into a game. But the game is only fun if we are winning, do you have a winning plan? (If not please read my getting out of debt article.) Have you been taught to stay away from debt, save for retirement or as I call it make your money work harder work for you.
Each month I make a habit to look at our families financial statement to see if the balance improving.
Then I take a furturistic look at my next goal.. which is paying off my home mortgage. I really like the what the cost website. I plug in all my numbers and see how long it will take to get to my goal by doing what I am currently doing. It tells me that I will have my home paid off in 13 years. Then I plug in paying double payments it says 6 years and my home will be paid off. Just seeing the numbers and having a writing plan (or map) Really motivates me. So if I aim for 6 years and don't quite make it I am better off than if I never played the game at all. My prize if I sacrafice my income now is that I could help my children with college and their weddings. Then save for retirement for the rest of the years that I work. Plus have freedoms to take vacations, travel and more time to help others with their money. I keep thinking keep my eye on the prize. Or in other words what is my WHY. Each month can be the budget game and each month I can play again and maybe get a better score by not spending as much and paying more down on the house and in about 6 years I will beat this game. Then I get to try onther game save for retirement and learning to invest.
good luck everyone
Your debt freedom coach
Gina
Tuesday, August 30, 2011
Tuesday, April 5, 2011
What is your financial foot print
What is your financial foot print? Are you taking steps forward or going backwards or are you at a stand still.
I know that before we refinanced our home loan we were owning our house more each month by $80.00. Now that we are at a shorter term and a smaller interest rate we are owning our house by $200.00 each time I make a minimum monthly payment. My foot print forward is bigger now. Another item that would add to your financial foot print forward is how much you are putting into our 401k and IRAs each month. Because we are trying to get out or debt we are only putting 300.00 away each month towards saving products.
Another piece of your financial foot print forward is how much debt you are paying off.
To really see how much your equity is increasing put together your financial statement, then up date it every three to six months. I just updated my financial statement and just running the numbers of how much less debt we have now compared to January really has motivated me to keep on with my financial goals. I can see progress and if I keep going at this same rate I can see the light at the end of my getting completely out of debt tunnel. I can also see that if I save and invest this same money that is now being used to get us out of debt it can fund our retirement. Retirement is another place that seems very hard to do when starting out. I now feel like I can do it now I have a plan or should I say a map to follow.
I always remember the quote that if you fail to plan you plan to fail. Please just think about planning your financial life. Map out where you are at now then make a goal then make a map on how to get where you want to go financially. You can always adjust it when life throws something your way good or bad.
Like a raise you can choose to put it all away for retirement. If you get a windfall you can pay down you debt or save it in your emergency fund. Another quote I just have to share with you is that if you plan for bad times you will only see good times. I think of this quote every time I fill my food storage pantry. And every time I strive through a short on money time without getting into my emergency fund money. I try not to use that emergency money until the last last last resort. I kind of pretend it doesn't exist. That way it can stay saved.
I hope this article keeps you motivated to run the numbers in your families financial statement to see if you are stepping forward and how big of steps you are taking and how to improve your financial foot print to make it the biggest step possible in your financial life.
I know that before we refinanced our home loan we were owning our house more each month by $80.00. Now that we are at a shorter term and a smaller interest rate we are owning our house by $200.00 each time I make a minimum monthly payment. My foot print forward is bigger now. Another item that would add to your financial foot print forward is how much you are putting into our 401k and IRAs each month. Because we are trying to get out or debt we are only putting 300.00 away each month towards saving products.
Another piece of your financial foot print forward is how much debt you are paying off.
To really see how much your equity is increasing put together your financial statement, then up date it every three to six months. I just updated my financial statement and just running the numbers of how much less debt we have now compared to January really has motivated me to keep on with my financial goals. I can see progress and if I keep going at this same rate I can see the light at the end of my getting completely out of debt tunnel. I can also see that if I save and invest this same money that is now being used to get us out of debt it can fund our retirement. Retirement is another place that seems very hard to do when starting out. I now feel like I can do it now I have a plan or should I say a map to follow.
I always remember the quote that if you fail to plan you plan to fail. Please just think about planning your financial life. Map out where you are at now then make a goal then make a map on how to get where you want to go financially. You can always adjust it when life throws something your way good or bad.
Like a raise you can choose to put it all away for retirement. If you get a windfall you can pay down you debt or save it in your emergency fund. Another quote I just have to share with you is that if you plan for bad times you will only see good times. I think of this quote every time I fill my food storage pantry. And every time I strive through a short on money time without getting into my emergency fund money. I try not to use that emergency money until the last last last resort. I kind of pretend it doesn't exist. That way it can stay saved.
I hope this article keeps you motivated to run the numbers in your families financial statement to see if you are stepping forward and how big of steps you are taking and how to improve your financial foot print to make it the biggest step possible in your financial life.
Debt Freedom Calulator link
New tool to track your debt
As your debt freedom coach everyday I am reading blogs, I listening to Dave Ramsey helping others on his radio show. I am trying to find the best information to save money and use it wisely. Every time I leave my 22 month old daughter to work a long day I pray that I can use the money I earn in the best way possible and not waste any of it. I want to provide the best for her and my other children.
I want to teach them as well as everyone who reads my blog about money so they can start early and not make very many money mistakes. As with anything mistakes are made they are sometime a big part of learning. My personality is, if I read about money mistakes I learn form them as well. We should always learn from every mistake, openly tell others about them and how you learned from them this way your mistake could benefit so many others in my personality type. I hope they is more people like me out there.
Well I just have to tell you about a new debt tracking tool I found on line your just plug in your debts ( your balances interest rates and min payments)and it makes your personal debt freedom plan. It is soo cool!
After entering in all my information I could plan to have my all my debt including my house paid off in 5 to 6 years. That would be awesome!!
You have got to try it…
Her is the link
http://www.whatsthecost.com/snowball.aspx?country=us
It the top just remember to put in the all the minimums you are paying plus the extra you are putting into getting out of debt.
Example car payment 190.00 house payment 550.00 credit card 50.00 plus the 200.00 extra you are snowballing in to the smallest debt.
So the top number would be 990.00 in this case
I also made the error of putting my house payment including the escrow so I had to refigure it again with the correct figures.
After you put in all your info print it out and track every payment you make that what I am going to do.
If you have any questions or comment just let me know.
Thanks for reading.
As your debt freedom coach everyday I am reading blogs, I listening to Dave Ramsey helping others on his radio show. I am trying to find the best information to save money and use it wisely. Every time I leave my 22 month old daughter to work a long day I pray that I can use the money I earn in the best way possible and not waste any of it. I want to provide the best for her and my other children.
I want to teach them as well as everyone who reads my blog about money so they can start early and not make very many money mistakes. As with anything mistakes are made they are sometime a big part of learning. My personality is, if I read about money mistakes I learn form them as well. We should always learn from every mistake, openly tell others about them and how you learned from them this way your mistake could benefit so many others in my personality type. I hope they is more people like me out there.
Well I just have to tell you about a new debt tracking tool I found on line your just plug in your debts ( your balances interest rates and min payments)and it makes your personal debt freedom plan. It is soo cool!
After entering in all my information I could plan to have my all my debt including my house paid off in 5 to 6 years. That would be awesome!!
You have got to try it…
Her is the link
http://www.whatsthecost.com/snowball.aspx?country=us
It the top just remember to put in the all the minimums you are paying plus the extra you are putting into getting out of debt.
Example car payment 190.00 house payment 550.00 credit card 50.00 plus the 200.00 extra you are snowballing in to the smallest debt.
So the top number would be 990.00 in this case
I also made the error of putting my house payment including the escrow so I had to refigure it again with the correct figures.
After you put in all your info print it out and track every payment you make that what I am going to do.
If you have any questions or comment just let me know.
Thanks for reading.
Wednesday, December 15, 2010
How to become a Millionaire (just in case you wanted to know)
This ariticle is from Frugal dad it is worth reading and tells us how to become a millianire. Just think..what if we taught our children to follow this plan even if they had some set backs they would still acheive wealth.
This is frugal dads 10 year plan:
Imagine in just ten years you could have one million dollars socked away in a high-yield savings account, spinning off enough interest to live comfortably for the rest of your life. Short of hitting the lottery or receiving a lofty inheritance from a long-lost uncle, this might seem an impossible goal. Well, it nearly is, given the short time frame. However, if you are willing to make an incredible sacrifice, and catch a nice wave from a rebounding market, you just might enjoy becoming a millionaire in less than a decade.
$996 a Week for 10 Years
That is roughly the amount you would have to invest to save one million dollars in ten years, assuming an average 12% earnings rate. Historically, 12% is a realistic figure, albeit optimistically on the high side. Here is a look at how your $996 weekly contributions to your favorite investment account would add up each year:
source: DinkyTown.net
Carving Out $996 a Week
I nearly laughed out loud when I typed that heading. I often read topics like “carving out $50 a month” or “shaving $20 off weekly expenses,” but rarely do we hear someone suggest “carving out $996 a week!” That is nearly $4,000 a month! If you are like me, that is more than I have to carve! So how does the average person go about contributing nearly $1,000 a week to savings? Using the principles discussed in books like I Will Teach You To Be Rich, you can discover ways to cut your expenses significantly while boosting your income.
Get a Side Hustle
A reader once wrote in that a friend told him “everyone needs a side hustle,” something to supplement their full time job. That’s great advice! It could be a small, home-based business opportunity that generates a few hundred dollars a month, an investment opportunity with a great passive income, such as peer-to-peer lending, or a substantial part-time career that you can cultivate in your off hours.
Either way, this “side hustle” could represent the majority of that $996 you have to come up with to make a million dollars in ten years. Obviously, some of the profits from this side gig will have to be reinvested to help it grow, but for the most part, your goal should be to try to save as much of those profits as possible.
Pay Off the Mortgage Early
If you have a $1,000 mortgage payment, paying it off early buys you one week’s worth of savings each month towards your millionaire dream. Eliminating a $2,000 mortgage provides two weeks. Pay off the mortgage early, and instead of sending a payment to the bank each month, send a deposit in that same amount. This step alone will put you on the fast track to building significant wealth.
Two Income Households-Save One, Spend One
In households with two working spouses, make an effort to live on one income and invest the other. Open a high-interest online savings account at one of the best online banks, and point one spouse’s direct deposit there. All further investments, such as transfers to a top online brokerage can be automatically deducted from that account.
If one spouse brings home $4,000 a month you just found the source for your $996 a week contributions. Living on one income may require downsizing homes and cars, and living way below your means, but the payoff is well worth it in the long run. Invest some of this money in equities, either in single stocks or in broader mutual funds. Sign up for a quality online brokerage such as Zecco (check out Zecco Trading – $0 Trades offer) to put a little bit of those saving to work for you.
I don’t mean to trivialize the amount of sacrifice (and luck) required to make this plan work. $996 is a significant amount of money, and at this phase in my life I could barely afford to contribute half that amount on a weekly basis. But it is a goal–something to strive for.
It is also important to point out that there is nothing magical about the one million dollar mark. You may find that you could live quite comfortably on the interest generated from $750,000, or even $600,000. Your “number” is a personal choice, but figuring out how to make a million .dollars provides most of us a stretch goal.
This is frugal dads 10 year plan:
Imagine in just ten years you could have one million dollars socked away in a high-yield savings account, spinning off enough interest to live comfortably for the rest of your life. Short of hitting the lottery or receiving a lofty inheritance from a long-lost uncle, this might seem an impossible goal. Well, it nearly is, given the short time frame. However, if you are willing to make an incredible sacrifice, and catch a nice wave from a rebounding market, you just might enjoy becoming a millionaire in less than a decade.
$996 a Week for 10 Years
That is roughly the amount you would have to invest to save one million dollars in ten years, assuming an average 12% earnings rate. Historically, 12% is a realistic figure, albeit optimistically on the high side. Here is a look at how your $996 weekly contributions to your favorite investment account would add up each year:
source: DinkyTown.net
Carving Out $996 a Week
I nearly laughed out loud when I typed that heading. I often read topics like “carving out $50 a month” or “shaving $20 off weekly expenses,” but rarely do we hear someone suggest “carving out $996 a week!” That is nearly $4,000 a month! If you are like me, that is more than I have to carve! So how does the average person go about contributing nearly $1,000 a week to savings? Using the principles discussed in books like I Will Teach You To Be Rich, you can discover ways to cut your expenses significantly while boosting your income.
Get a Side Hustle
A reader once wrote in that a friend told him “everyone needs a side hustle,” something to supplement their full time job. That’s great advice! It could be a small, home-based business opportunity that generates a few hundred dollars a month, an investment opportunity with a great passive income, such as peer-to-peer lending, or a substantial part-time career that you can cultivate in your off hours.
Either way, this “side hustle” could represent the majority of that $996 you have to come up with to make a million dollars in ten years. Obviously, some of the profits from this side gig will have to be reinvested to help it grow, but for the most part, your goal should be to try to save as much of those profits as possible.
Pay Off the Mortgage Early
If you have a $1,000 mortgage payment, paying it off early buys you one week’s worth of savings each month towards your millionaire dream. Eliminating a $2,000 mortgage provides two weeks. Pay off the mortgage early, and instead of sending a payment to the bank each month, send a deposit in that same amount. This step alone will put you on the fast track to building significant wealth.
Two Income Households-Save One, Spend One
In households with two working spouses, make an effort to live on one income and invest the other. Open a high-interest online savings account at one of the best online banks, and point one spouse’s direct deposit there. All further investments, such as transfers to a top online brokerage can be automatically deducted from that account.
If one spouse brings home $4,000 a month you just found the source for your $996 a week contributions. Living on one income may require downsizing homes and cars, and living way below your means, but the payoff is well worth it in the long run. Invest some of this money in equities, either in single stocks or in broader mutual funds. Sign up for a quality online brokerage such as Zecco (check out Zecco Trading – $0 Trades offer) to put a little bit of those saving to work for you.
I don’t mean to trivialize the amount of sacrifice (and luck) required to make this plan work. $996 is a significant amount of money, and at this phase in my life I could barely afford to contribute half that amount on a weekly basis. But it is a goal–something to strive for.
It is also important to point out that there is nothing magical about the one million dollar mark. You may find that you could live quite comfortably on the interest generated from $750,000, or even $600,000. Your “number” is a personal choice, but figuring out how to make a million .dollars provides most of us a stretch goal.
My Take on the Houshold Budget AKA Spending plan
I believe deep down we would all like to have wealth. From my friends seven year old who says when I grow up I want to be rich. To us adults who would like to have enough money to have all of our needs met. The secret that noboby tells us til it is too late is that no matter how much you make you can always spend it. When I was younger and I got my first w2 in January from my employer and it said I made 18,000 dollars that year and I didn’t even save a dime. I vowed to do better and many years later I study money and how it works for my hobby. I am love to tell others all the money secrets I find along the way. I think it is a shame that we are not teaching our youth how to achieve wealth in there lifetimes. Another secret is to start young but what if they forgot to tell us till we are older. We teach nothing about how to handle money in our school Systems. Yet we are the richest nation on earth.
Building your house of wealth
Your foundation is to live within your income, stay out of debt, learn to keep your money and learn how to have it work for you.
To learn to stay within your income you need to have a budget, the new term is a spending plan.
Everything in your spending plan needs to fit in your take home income.
If it doesn’t you are in danger of going into debt to make up the difference and debt takes you money away from you and then your money can’t work for you.. It is working for them.
After writing your spending plan make sure it fits within your take home income it has to fit either by lowering your bills or you need to make more income. You may have to 2nd job to fill in the gap.
Then once you have a spending plan tweak it you might find some hidden money call all insurance companies and make sure you are not paying too much for your services. Companies will lower rates but do not tell their current customers about the changes it is kind of like if we don’t ask they don’t tell.
At least once a year we should dissect your budget to make sure you are not paying more than you need to for the same services.
On my personal spending plan I have what I am saving as well so I don’t forget to save some of the money I am making.
Here is an example of my budget sheet that I use, it is just missing the grid lines. At the bottom there is space to write three financial goals. Your goals could be to get something paid off in the next 6 months of to save more money. I revise my budget every six months and look at my goals and see if I am making progress or if I need to adjust my goals a little.
There is also an area for the once a year expenses like car tabs and the items my escrow pays for like my home insurance and my taxes.
Budget Sheet
Payment Jan Feb Mar April May Jun Jul Aug
Tithing/giving
House (due the 1st)
Elec/gas (due the 11th)
Water (due the 20th)
Trash
Daycare
Cell phone
Car ins
Phone
Cable
Internet
IRA or 401k
SAVINGS
COLLEGE
Aflec
loans
Gym membership
TOTAL TOTAL NEEDS TO BE BE LESS THAN YOUR INCOME Income_____________________
Taxes
Vehicle Tabs
House Ins
Financial goals
1
2
3
Building your house of wealth
Your foundation is to live within your income, stay out of debt, learn to keep your money and learn how to have it work for you.
To learn to stay within your income you need to have a budget, the new term is a spending plan.
Everything in your spending plan needs to fit in your take home income.
If it doesn’t you are in danger of going into debt to make up the difference and debt takes you money away from you and then your money can’t work for you.. It is working for them.
After writing your spending plan make sure it fits within your take home income it has to fit either by lowering your bills or you need to make more income. You may have to 2nd job to fill in the gap.
Then once you have a spending plan tweak it you might find some hidden money call all insurance companies and make sure you are not paying too much for your services. Companies will lower rates but do not tell their current customers about the changes it is kind of like if we don’t ask they don’t tell.
At least once a year we should dissect your budget to make sure you are not paying more than you need to for the same services.
On my personal spending plan I have what I am saving as well so I don’t forget to save some of the money I am making.
Here is an example of my budget sheet that I use, it is just missing the grid lines. At the bottom there is space to write three financial goals. Your goals could be to get something paid off in the next 6 months of to save more money. I revise my budget every six months and look at my goals and see if I am making progress or if I need to adjust my goals a little.
There is also an area for the once a year expenses like car tabs and the items my escrow pays for like my home insurance and my taxes.
Budget Sheet
Payment Jan Feb Mar April May Jun Jul Aug
Tithing/giving
House (due the 1st)
Elec/gas (due the 11th)
Water (due the 20th)
Trash
Daycare
Cell phone
Car ins
Phone
Cable
Internet
IRA or 401k
SAVINGS
COLLEGE
Aflec
loans
Gym membership
TOTAL TOTAL NEEDS TO BE BE LESS THAN YOUR INCOME Income_____________________
Taxes
Vehicle Tabs
House Ins
Financial goals
1
2
3
Wednesday, August 25, 2010
Where do you put your emergency fund?
I am currently putting my emergency fund into a cd ladder.
This way the money isn't easy to get to and can earn more interest than a regular savings account. Currently I have 5 months of living expenses in cds. I have them maturing every other month so if a bad month comes along I could catch up with a cd. Plus the money is harder to access so I try not to use this money. Currently the sixth month of emergency fund is in the savings account for easier access. If savings get to large than I can make a new cd. For security my husband wants to strive to have 12 months set aside in emergency fund cd ladder.
Let me tell you how to set this up
First start saving then after you get to five hundred put it in a cd maturing when you feel comfortable. For this example we are going to pick a year term. lets say it takes me two months to save five hundred dollars. So in two months I open a cd with one year term. I then name that cd my March cd, two months later I put another five hundred in a cd then name it my May cd. I than repeat the process til the end of the year or after a year. Then in March I can add another five hundred to my March cd and Keep doing this to every cd for the next year you now have a thousand dollars in each cd. keep going til you have enough money in each cd to cover a month of expenses. Then you can do the fill in months to get to a twelve month emergency fund. Having this money set aside will totally change your life. You will have learned to save and are financially prepared. I believe that if you plan for bad times you will only see good times.
Good luck!
More articles on the CD Ladder
Here is how the Simple Dollar tells it
his rates are old rates are at there lowest in August 2010
How Are You Doing It?
I started my CD ladder in September by purchasing three $1,000 CDs out of my cash emergency fund. The total was a bit less than a month’s worth of living expenses. I bought a 6 month CD that returns 3.75%, a 12 month CD that returns 4%, and an 18 month CD that returns 4.5%.
So, in September, I held these CDs:
A $1,000 CD that matures in March 2009 at 3.75%
A $1,000 CD that matures in September 2009 at 4.00%
A $1,000 CD that matures in March 2010 at 4.50%
and Frugal Dad Says his rates are closer to what we have now and is a little more doable because of the smaller amount in each one.
July Purchases ($2,000):
■$500 3-Month CD matures in October 2010 (0.75%)
■$500 6-month CD matures in January 2011 (1.15%)
■$500 9-month CD matures in April 2011 (1.15%)
■$500 12-month CD matures in July 2011 (1.50%)
August Purchases ($2,000)
■$500 3-Month CD matures in November 2010 (0.75%)
■$500 6-month CD matures in February 2011 (1.15%)
■$500 9-month CD matures in May 2011 (1.15%)
■$500 12-month CD matures in August 2011 (1.50%)
September Purchases ($2,000)
■$500 3-Month CD matures in December 2010 (0.90%)
■$500 6-month CD matures in March 2011 (1.25%)
■$500 9-month CD matures in June 2011 (1.50%)
■$500 12-month CD matures in September 2011 (1.65%)
*Note, I am using a 3-6-9-12 month maturity schedule to build a 12-month CD ladder. You could use a 6-12-18 month maturity schedule (or greater) to build an 18-month (or longer) ladder. A longer term ladder will earn higher rates, but will take longer to get going and will tie up your money for a longer period up front. It’s up to you to determine how much of your savings you can tie up, and for how long.
Beginning in October 2010, when our first 3-month CD purchase matures, I will use that original $500 (plus accumulated interest) to purchase a 12-month CD at a higher interest rate. In November, when the second 3-month CD expires, I’ll roll it into a 12-month CD purchase, and so on. In one year, I’ll have a rolling 12-month CD ladder of twelve one-year CDs.
One advantage of using these shorter terms is that when rates are rising, which I suspect they will be doing slowly over the next year or two, you can quickly take advantage of these new, higher rates without having to wait for a 6-month CD at a lower rate to expire.
Notice that the shorter-term CDs don’t return quite as well. Specific rates vary all the time, but it’s a rather constant rule of thumb that longer term CDs return better than shorter term CDs. Thus, instead of just buying a single six month CD, I decided to spread things out to get a better return on at least some of the money.
During September, I kept building our emergency fund as I usually do, putting around 10% of our income into it (which is around 15-20% of our monthly living expenses). I’ll keep doing this for the time being.
At the start of October, I bought three $1,000 CDs again out of the cash emergency fund. This left me with six CDs:
A $1,000 CD that matures in March 2009 at 3.75%
A $1,000 CD that matures in April 2009 at 3.75%
A $1,000 CD that matures in September 2009 at 4.00%
A $1,000 CD that matures in October 2009 at 4.25%
A $1,000 CD that matures in March 2010 at 4.50%
A $1,000 CD that matures in April 2010 at 4.25%
You can probably see where this is going. According to my calculations, we’ll have about four months’ worth of cash living expenses in our emergency fund in February 2009 after buying the CDs each month (remember, I’m still adding cash to my emergency fund). Each month after that, a $1,000 CD matures. I’ll then buy a single 18 month CD for $3,000, which would be enough to sustain my family for a month. And I’ll repeat that for eighteen months.
In August 2010, I’ll own eighteen 18 month CDs which will mature in one month intervals, just like clockwork. If I have my calculations correct, we should still have roughly a month’s worth of cash emergency fund at that point. So, I’ll basically have 19 months worth of emergency fund, almost all of it returning 4.25-4.5% or so.
Here’s what things will look like at that point. I’ll have a savings account with one month worth of living funds in it. Each month, an 18 month CD will mature and the proceeds will go into that account – both the principal and the interest on that CD. At the start of the next month, I’ll buy another 18 month CD worth roughly a month’s worth of living expenses. And as long as we’re able to get by just fine on our normal income, I’ll keep this cycle going, as it’ll serve as a huge emergency fund that also returns at a pretty solid rate.
This way the money isn't easy to get to and can earn more interest than a regular savings account. Currently I have 5 months of living expenses in cds. I have them maturing every other month so if a bad month comes along I could catch up with a cd. Plus the money is harder to access so I try not to use this money. Currently the sixth month of emergency fund is in the savings account for easier access. If savings get to large than I can make a new cd. For security my husband wants to strive to have 12 months set aside in emergency fund cd ladder.
Let me tell you how to set this up
First start saving then after you get to five hundred put it in a cd maturing when you feel comfortable. For this example we are going to pick a year term. lets say it takes me two months to save five hundred dollars. So in two months I open a cd with one year term. I then name that cd my March cd, two months later I put another five hundred in a cd then name it my May cd. I than repeat the process til the end of the year or after a year. Then in March I can add another five hundred to my March cd and Keep doing this to every cd for the next year you now have a thousand dollars in each cd. keep going til you have enough money in each cd to cover a month of expenses. Then you can do the fill in months to get to a twelve month emergency fund. Having this money set aside will totally change your life. You will have learned to save and are financially prepared. I believe that if you plan for bad times you will only see good times.
Good luck!
More articles on the CD Ladder
Here is how the Simple Dollar tells it
his rates are old rates are at there lowest in August 2010
How Are You Doing It?
I started my CD ladder in September by purchasing three $1,000 CDs out of my cash emergency fund. The total was a bit less than a month’s worth of living expenses. I bought a 6 month CD that returns 3.75%, a 12 month CD that returns 4%, and an 18 month CD that returns 4.5%.
So, in September, I held these CDs:
A $1,000 CD that matures in March 2009 at 3.75%
A $1,000 CD that matures in September 2009 at 4.00%
A $1,000 CD that matures in March 2010 at 4.50%
and Frugal Dad Says his rates are closer to what we have now and is a little more doable because of the smaller amount in each one.
July Purchases ($2,000):
■$500 3-Month CD matures in October 2010 (0.75%)
■$500 6-month CD matures in January 2011 (1.15%)
■$500 9-month CD matures in April 2011 (1.15%)
■$500 12-month CD matures in July 2011 (1.50%)
August Purchases ($2,000)
■$500 3-Month CD matures in November 2010 (0.75%)
■$500 6-month CD matures in February 2011 (1.15%)
■$500 9-month CD matures in May 2011 (1.15%)
■$500 12-month CD matures in August 2011 (1.50%)
September Purchases ($2,000)
■$500 3-Month CD matures in December 2010 (0.90%)
■$500 6-month CD matures in March 2011 (1.25%)
■$500 9-month CD matures in June 2011 (1.50%)
■$500 12-month CD matures in September 2011 (1.65%)
*Note, I am using a 3-6-9-12 month maturity schedule to build a 12-month CD ladder. You could use a 6-12-18 month maturity schedule (or greater) to build an 18-month (or longer) ladder. A longer term ladder will earn higher rates, but will take longer to get going and will tie up your money for a longer period up front. It’s up to you to determine how much of your savings you can tie up, and for how long.
Beginning in October 2010, when our first 3-month CD purchase matures, I will use that original $500 (plus accumulated interest) to purchase a 12-month CD at a higher interest rate. In November, when the second 3-month CD expires, I’ll roll it into a 12-month CD purchase, and so on. In one year, I’ll have a rolling 12-month CD ladder of twelve one-year CDs.
One advantage of using these shorter terms is that when rates are rising, which I suspect they will be doing slowly over the next year or two, you can quickly take advantage of these new, higher rates without having to wait for a 6-month CD at a lower rate to expire.
Notice that the shorter-term CDs don’t return quite as well. Specific rates vary all the time, but it’s a rather constant rule of thumb that longer term CDs return better than shorter term CDs. Thus, instead of just buying a single six month CD, I decided to spread things out to get a better return on at least some of the money.
During September, I kept building our emergency fund as I usually do, putting around 10% of our income into it (which is around 15-20% of our monthly living expenses). I’ll keep doing this for the time being.
At the start of October, I bought three $1,000 CDs again out of the cash emergency fund. This left me with six CDs:
A $1,000 CD that matures in March 2009 at 3.75%
A $1,000 CD that matures in April 2009 at 3.75%
A $1,000 CD that matures in September 2009 at 4.00%
A $1,000 CD that matures in October 2009 at 4.25%
A $1,000 CD that matures in March 2010 at 4.50%
A $1,000 CD that matures in April 2010 at 4.25%
You can probably see where this is going. According to my calculations, we’ll have about four months’ worth of cash living expenses in our emergency fund in February 2009 after buying the CDs each month (remember, I’m still adding cash to my emergency fund). Each month after that, a $1,000 CD matures. I’ll then buy a single 18 month CD for $3,000, which would be enough to sustain my family for a month. And I’ll repeat that for eighteen months.
In August 2010, I’ll own eighteen 18 month CDs which will mature in one month intervals, just like clockwork. If I have my calculations correct, we should still have roughly a month’s worth of cash emergency fund at that point. So, I’ll basically have 19 months worth of emergency fund, almost all of it returning 4.25-4.5% or so.
Here’s what things will look like at that point. I’ll have a savings account with one month worth of living funds in it. Each month, an 18 month CD will mature and the proceeds will go into that account – both the principal and the interest on that CD. At the start of the next month, I’ll buy another 18 month CD worth roughly a month’s worth of living expenses. And as long as we’re able to get by just fine on our normal income, I’ll keep this cycle going, as it’ll serve as a huge emergency fund that also returns at a pretty solid rate.
Car loans 101
A While back my husband and I chose not to have car loans. I paid my van of three years ago and he drives a $600.00 car that he loves. We also own a truck so if we buy anything from Home depo that won't fit in the car or van we can get it with out having to find someone with a truck. The truck also doubles as a back up vehicle if the car is in the shop. Vehicle wise we are pretty set. Our car and truck is worth more to us than we would get if we sold them. So as me and my husband talked our plan over we thought we would take our car payment money about $200.00 per month and pay down our mortgage faster.
I than was reasearching my favorite topic, getting out of debt/money, I found this awsome presentation on the Dave Ramsey Website that I just have to share with you it my change your life.
here is the link http://www.daveramsey.com/articles/article/articleID/drive-free/category/lifeandmoney_automobiles/
It really makes sense to me and is kind of what we were thinking but on a smaller scale because my highest car payment was $310.00. After surviving that car loan and being upside down on that car I will never go over $200.00 a month for a car payment.
My reason being cars need fuel, cars need insurance, and to have a payment on top of that is just too big of a chunck of my buget to be any bigger than that. But watch out lenders want to lend only for newer cars because of their value. So they kind of make it easier to get a huge loan with a big payment. It is harder to get money for a car that has too many miles or is too old or better in price.
I than was reasearching my favorite topic, getting out of debt/money, I found this awsome presentation on the Dave Ramsey Website that I just have to share with you it my change your life.
here is the link http://www.daveramsey.com/articles/article/articleID/drive-free/category/lifeandmoney_automobiles/
It really makes sense to me and is kind of what we were thinking but on a smaller scale because my highest car payment was $310.00. After surviving that car loan and being upside down on that car I will never go over $200.00 a month for a car payment.
My reason being cars need fuel, cars need insurance, and to have a payment on top of that is just too big of a chunck of my buget to be any bigger than that. But watch out lenders want to lend only for newer cars because of their value. So they kind of make it easier to get a huge loan with a big payment. It is harder to get money for a car that has too many miles or is too old or better in price.
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