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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Double Yu on February 03, 2018, 10:24:20 PM

Title: CD ladder advised for this situation?
Post by: Double Yu on February 03, 2018, 10:24:20 PM
[note: I am not (yet) investment savvy, so simple explanations/suggestions are probably a good idea]

I am in the process of saving an amount equivalent to one lean year's worth of income to prepare for my husband's projected end of contract at his current employer. [short version: there are job applications in the works and a potential career change if the remaining applications don't pan out but no guarantee of anything after August 2019. The by-that-point burnt-out husband will benefit from a 1yr reprieve from job idiocy (while continuing to search) and this fund will allow for that. I'm self-employed and work part time as well - making supplemental income that I anticipate still making even if he's unemployed].

Now, how to arrange the stash of "Deferred Income"?

I'm thinking a CD ladder is the way to go but am not sure how to structure it.

Withdrawals would need to start in 18 months and end in 30 months (12 months).
I have 5 months worth of money currently saved and can start by funding multiple CDs - starting perhaps with an 18 month CD to get the 1st month's money so it's available at the right time.
I'm only able to set aside 39% of each month's income to this purpose so it takes me just under 3 months to save 1 month's amount; therefore I won't be able to open a new CD every month after the first stash is in place. This might not be important since CDs in this timeframe come only in 18 or 24mo increments.

Should I just go for all 18mo CDs or take advantage of 24mo interest rates? Open some at 24mo rates, then just pay attention to how far out the access dates are and work my way backward down to a 12 month CD?

Or is this just overcomplicating things and I should do something completely different?

Thanks for considering this and for any ideas you can think of!
Title: Re: CD ladder advised for this situation?
Post by: Lobo on February 04, 2018, 01:53:24 AM
You might be overthinking things for 1 years worth of expenses.  Probably better off just going with a high yield online savings account.  This Money Market would be a good choice -
Title: Re: CD ladder advised for this situation?
Post by: Double Yu on February 04, 2018, 08:05:40 AM
It wouldn't be the first time, Lobo! :)

I currently have it in a savings account at 1.35% which will earn me about $70-100 less. Not sure I want yet another bank to keep track of so I might consider a 12mo CD at the same bank it's already with... Yeah, the ladder thing is too much perhaps.