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Archive for August, 2009

Earning interest on cash

August 29th, 2009 at 03:29 pm

After tracking our spending for August, I took a glance at the various accounts we have at E*Trade. We sure have a lot sitting in cash, and getting lousy interest rates:

Money Market: $33k @ .4%
DH investment: $20k @ .4%
Savings: $17k @ .8%
Checking: $ 7k @ .4%

I like having everything in one place so I want to stay with E*Trade, but I think it's time to look at some better options for how we are holding the cash.

The money market holds our emergency fund ($19k) and the proceeds from a recent sale of ESPP stock and stock options ($14k). I'm thinking perhaps we should move the emergency fund into CD's -- it's only to be touched in a major emergency like a job loss.

DH has his own account for stock trading. He just hasn't been active lately and is letting it sit in cash. That's fine, his choice. I just wonder if there are more money market options where it could sit and earn more interest until he spots a stock he wants to buy...

The savings account currently holds money for the following:
* $4k money accruing for the semi-annual bills (property tax, insurance, etc.)
* $4k money accruing for estimated tax payments
* $3k reserve to cover minor emergencies (car repair, home repair, medical deductibles)
* $6k short-term savings (Christmas, birthdays, vacation fund, etc.)

The balance in the savings account has fluctuated between $7k - $33k in the last year. I don't want to tie it up in anything where I have to remember to transfer balances around when big bills come due...

The checking is of course just a holding place for all our monthly spending. Paychecks come in, a portion gets sent to savings, and the rest flows out to pay bills. Any interest earned here is just a bonus.

Just checked the E*Trade CD rates -- not very promising:
Term Length 3-month 6-month 1-year 1.5-year 2-year 3-year 5-year
APY1
3 month: 0.15%
6 month: 0.20%
1.0 year: 0.45%
1.5 year: 0.55%
2.0 year: 0.65%
3.0 year: 0.75%
5.0 year: 1.40%

Any suggestions?

Passing on a sweet house

August 15th, 2009 at 01:27 pm

I love our current location. DH works 5 minutes away, and we're in a little sweet spot that is a reverse commute from most areas of the city. We're on a canyon, and get breezes that come in from the ocean keep our house cool enough that we almost never run the A/C. The beach is a 10 minute drive, and my mother lives one street away, making free babysitting readily available.

The only real downside is the school district. I've been told our elementary school is ok, but to avoid the middle and high schools. The district is very large and does have a lottery to transfer to other schools within the district, so I'll be looking into that.

With DS here and the twins coming, and my working from home, I'd really like to have one more bedroom. We have 4 bedrooms, 1900 sq ft, so it won't be crowded or anything, but my ideal would be to have one more room.

Anyway, a house went on sale two doors down from my mother. I hadn't seen that floor plan in our subdivision, so I went through the open house out of curiosity. It would be perfect for us! Well, other than the school district and convincing my DH to live two doors away from his mother-in-law!

The house had all the things on my wish-we-had list: 2300 sq ft, 4 bedrooms + separate office, separate spots for kitchen and dining room tables, small pool in the backyard with safety fencing, grass area with a swingset, room for a vegetable garden, and a hillside where you could plant a bunch of fruit trees. For this area it has a really big lot, and the front yard had been landscaped with low-water plants.

It was listed for $890k. Our house would probably sell for $600k, so the difference would put this house out of reach. Plus I'm planning on taking a year or two off once the twins are born. So it's not the right time. But if this house had come on the market when the twins were 5 and I was working again and we'd won the school district lottery...a girl can dream!

Great return on ESPP

August 4th, 2009 at 10:06 am

DH invests 12% of his salary into the company employee stock purchase plan (ESPP). Every six months, the plan purchases shares. My understanding is that they look at the market prices on the first and last day of the plan period, and then take an additional 15% off the lesser price.

The latest period closed on 7/31, and was one of the best periods we've seen. The ESPP purchase price was $29.99, and the current market price is $46.97. This period, DH put in $7827, and if he sells now will realize a gain of $4432. 56%return for a six month investment!

Of course this isn't typical, but in general we can count on a 15% return, although there is always the risk with stocks that a very sharp downturn could turn it into a loss in the few days between purchase and when the shares reach our account.

The one wrinkle is taxes. We could hold it for two years, and then only have to pay long-term capital gains tax. Since it's a high-tech stock, this is kind of a risky move. If we sell it within a year, we'll pay income tax on the 15% discount, and short-term captial gains on the rest.

It does make it a little more complicated when we go down to one income, since I need that $1300/mo to make our budget work. If we sell immediately, I'll set aside $7800 and treat it for budget purposes like $1300/mo income. If we don't sell immediately, I'll "borrow" the money from the emergency fund and repay it when we sell.

DH and I need to talk about what do do with the $4400 gain. After setting aside some for taxes, the rest could either go into his stock-trading account, or into our vacation fund. He wants to take a big trip (possibly a Mediterranean cruise) when we turn 40 next year, but I don't currently have funds allocated toward that, nor room in the budget to save the amount we'd need.

Other good news -- with the stock market recovery, our net worth just topped 1 million again.

Not impressed with the farmer's markets

August 3rd, 2009 at 07:18 am

A new farmer's market recently started on Tuesday afternoons near my son's preschool, and I decided to check it out. I was not impressed to say the least. First of all, half of the market wasn't even food -- just junky impulse purchase stuff, tupperware, etc. The next quarter was food booths -- gyros, crepes, etc. Only the last quarter had actual produce, and it didn't appear to me to be much cheaper than the supermarket, nor was the quality noticibly better. I picked up some tomatoes, but they certainly didn't match the home-grown taste I was hoping for.

This is the 4th farmers market I've checked out, and they all seem pretty much the same. Maybe I live just too deep in surburbia to get really good quality stuff at a market.