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Tybee
3-11-17, 11:07am
I posted a while ago if anyone has a cd ladder. I got some excellent responses and it was correctly pointed out that the interest I would get on the money market checking would be more than what I could get at a cd ladder. I thought about it long and hard but I went ahead and did the illogical thing and set up a one year ladder, a very simple one year ladder with a cd maturing each month.

I finished it last week. Even though it will not earn as much interest now, I figure that going forward, as rates rise, it will earn more . But that was secondary; the real reason I did it was to get that money out of the system of what I consider available to spend, and to add to my feeling of security. It's like I heard Bob Brinker say last week about paying off your house--it yields "psychic income." Well, the cd ladder yields psychic income, too.

I have wanted to do this for about 20 years, ever since reading YMOYL. I am SO HAPPY I did it-- best of all, this money is earmarked for emergency fund only, as in I can't spend it on anything else, and it feels wonderful to have a little buffer between me and the world of emergencies. It also means I am finally through Dave Ramsey's Baby step 3, for those of you who follow Dave Ramsey.

So seriously, if you have a big emotional need for security, as I do, or you are frequently having to come up with money for family, as I sometimes am, consider a cd ladder. I'm thrilled to finally have one.

Zoe Girl
3-11-17, 12:53pm
Hey that is a great way of explaining it to me. I also have had CD ladders for years. I shopped around for the best rates (hint not my bank or credit union) at first. I had a money market that made no money in the recession, probably lost money, and moved that over into chunks. I do one maturing every 6 months, they are now all at least a 3 year term, and I get a boost for continuing mine in the same bank.

I have a high need for security as well! There are so many changes right now I want it all to settle it down before I change what I am doing. I also like that it is a bank without a local branch. That keeps me from having too quick of access to the money.

iris lilies
3-11-17, 1:09pm
So Brinker is still on the radio? 30 years ago he was talking about "reaching critical mass" to mean Financial Independence of work. I heard Brinker long before I read Your Money or Your Life, but I was already working the program anyway.

Tybee
3-11-17, 1:56pm
So Brinker is still on the radio? 30 years ago he was talking about "reaching critical mass" to mean Financial Independence of work. I heard Brinker long before I read Your Money or Your Life, but I was already working the program anyway.
He sure is. I used to listen to him twenty years ago driving back from work at IKEA, when I lived an hour away from work. I was kind of surprised to hear him tell folks to pay off their houses--again, that is not always the dollar-sensible way to do it, but I liked his point about "psychic income."

Zoe, you are smart to have done this a while back and do the 3 year term!! You are getting a lot more interest this way. I am setting a goal to do a second one with something similar, longer time frames. But your way is very smart money management.

frugal-one
3-11-17, 2:02pm
So, if I understand, this is your emergency fund? If you need the money you have to take it out and are penalized for doing so?

Tybee
3-12-17, 1:42am
So, if I understand, this is your emergency fund? If you need the money you have to take it out and are penalized for doing so?

It is one emergency fund, set up so that I can pay living expenses for 12 months in a bare bones fashion.

I have a smaller cash emergency fund on hand for the other kind of emergencies, where you need to access cash fast.
So hopefully, I would not have to pay a penalty to get at cd's, as one matures per month.

Zoe Girl
3-12-17, 10:13am
If it is a true emergency then I think a penalty is better than debt,

Tybee
3-12-17, 10:45am
If it is a true emergency then I think a penalty is better than debt,
Absolutely, Zoe! Some people just go with long term ones and figure out what the penalty would be--penalties are something to look at because they vary by bank. If it 60 days interest, then in a real emergency, so what?