Friday, July 6, 2007

#10 Start Emergency Savings CD ladder

Jim and I are compulsive savers and particularly interested in having lots of money to retire with. I am actually a bit of a closet fanatic about retirement savings and personal finance and read everything I can find on the topic (that isn't extremely boring). To that end, we have spent a lot of time since we've been married learning about saving for retirement and actually saving for it. Over the last 5 years, however, we have paid more attention to saving for retirement and less attention to some of our closer to home needs, like an emergency fund. With the birth of our daughter and some unexpected expenses (including Jim losing his job while I was 5 months pregnant and in the middle of a Master's degree), we found ourselves with large retirement portfolios but very little liquid cash. That is not an experience that we would ever like to repeat. To that end, we recently decided to open a money market fund, specifically for emergency savings (which I opened a couple weeks ago) and a CD ladder. We will create the CD ladder by opening one 5-year CD each year for the next 5 years. They'll mature in July so that, any emergency that used up money in the money market would also have more funds coming available soon. We don't have enough money right now to put the full amount in the CD that we want to but we put something. In the meantime, we are putting a regular amount of money every month into the money market account and next year, we'll be able to be closer to the amount we want to put in to next year's CD and we can beef up this current CD when it matures in 5 years. Emergencies, we're almost ready for you.

(Disclaimer: I really did this on Friday since that is when the bank is open but decided to post it on Saturday so I could look like I'm doing something everyday. ;-) )

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