THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.
On Monday, I wrote about how we are looking around at houses a bit farther out and trying to decide where to live. I think this will probably be a long process. But since we aren’t in a big rush, neither one of us is too worried. As most of you know, we paid off our mortgage. We’d love to pay cash for the next house that we buy. Paying off our mortgage was by far the best thing that I’ve ever done in my financial life. So, I’d love to stay mortgage-free if at all possible.
Too Much Noise
As you know, we’re looking for something out west, a little further out from the city, and a little more quiet. I have lived next to major thoroughfares most of my life. As a result, I would love the opportunity to escape the constant noise from those roadways. I’m so ready for a little peace and quiet.
My wife and I currently live close by to a hospital. It’s terrific when your wife is in labor and you need to get to the ER quickly, but not so great when ambulance sirens go off in the middle of the night. Quick side thought– why do ambulances have to put on their sirens at full blast at 4 am when nobody is on the road? They must get a perverse sense of joy letting everyone knowing that they are awake and doing something more important than us lazy, sleeping folk.
On top of the noise, our house is so dusty. We find dirt build-up on the outside windows all the time. My wife constantly complains that she feels like the house is never clean enough as the dust accumulates daily. I bought her a super nice Dyson vacuum cleaner, which she uses every day. Even so, between our polluted environment and our one-year-old scampering around the house, I’m not sure her cleanliness standards will ever be met.
Before I continue, I want to go on record saying I am incredibly grateful for my home. It’s been an amazing place over the past 13 years. I am perfectly content to live here the rest of my life if need be. But given that I have switched jobs, which gives me the freedom to move farther out, I figure it’s worth exploring our options.
I know some are reading this right now with their eyes bugged out. Buying a new home would most likely delay our FIRE plans big time. While I’m not really excited about the possibility of not reaching FIRE soon, I don’t want to pass up on an opportunity to move into a home with more space and land for my family to grow into. I figure, why not find something that my wife and I both can enjoy now, instead of waiting until FIRE?
So, my wife and I have been socking away cash for the past two years. The initial goal was to save up enough so that we’d be able to afford just about anything, within reason. (My wife has informed me multiple times that she has no interest in living in a huge house, which is a huge relief to me as we’re not anywhere close to being able to afford one). And of course the hope would be to avoid a mortgage. We are getting closer and closer every day to reaching that goal.
No Stock Market Investing
However, our accumulating cash isn’t going into the stock market, like I would ideally like it to. I purposefully wanted the excess money to remain as cash so that we’d be able to quickly execute on buying our dream home if it became available to us.
Of course, the stock market comes with risk. If I had put all of our excess cash into the market, and it dropped by 20%, that would hurt badly. So I figured we’d keep putting away money and not worry about the gains of the market.
Although, watching the Trump bump from the election has hurt a little bit. Even without the 11% gain since Trump was elected though, I feel at peace knowing that at any time I can immediately access my money.
Online Savings Account
Most of the cash is currently in an ALLY bank account with a 1% yield. About a year ago, I actually switched savings accounts from Capital One 360 to Ally since Capital One lowered the interest rate by 0.25%. When I ran the math, 0.25% was a large enough difference for me to make the switch.
While I know that 1% is peanuts, I haven’t come across a better account where my money wouldn’t be locked up. I have been checking out other online savings accounts, but nothing has exceeded the 0.25% difference.
I’ve also looked into the various Money Market Funds as well, and there isn’t much difference between those and the online bank rates. So, I pretty much hit a dead end in terms of trying to stretch my money in that regard.
Certificate of Deposits
After exploring the various online savings accounts, I then checked out short-term Certificate of Deposits (CDs).
The best three-month CD rates I’ve seen provided an annual yield of 0.85%. It made me wonder, why bother with a CD when I can get 1% from my bank without locking in my money for three months? I might understand using this type of CD if you have more than the $500,000 FDIC limits. But, I definitely don’t have that much. So if someone could explain the logic to me in investing in a three-month CD below the $500,000 mark, I’d love to hear it.
The best that I’ve seen for six-month CD rates is 1.11%. But again, why lock up for six months for just 0.11% more? Finally, a one-year CD rate yields 1.42%. While this is the best option available, it doesn’t provide me the flexibility and liquidity that I desire.
Safe, Liquid, and Interest-Bearing
Having explored all my options, while a larger yield would be great, I’m not sure where else to turn. I guess that’s the price that you pay in order to essentially have a risk-free asset.
So readers, do you have any tips on squeezing out some extra cash from your savings stash? Do you think I’m being too conservative? Share your thoughts below.