Where to put a year's worth of living expenses?

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ThankYouJack
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Where to put a year's worth of living expenses?

Post by ThankYouJack »

My money market fund currently pays 1.4%. Is there anything that pays a significant amount more? I'll need liquidity as I'll be spending down the amount over the course of the year.
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JoMoney
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Re: Where to put a years worth of living expenses?

Post by JoMoney »

A money-market account or fund is what I would use.
Most of my short-term money is in Vanguard's Federal Money Market Fund VMFXX, which is there default brokerage settlement account.
The 7 day SEC Yield is currently 1.94%

I like it because I already have an account at Vanguard, it's consistently quite competitive, and I'm too lazy to go opening new accounts every other month to chase a few basis points.

Here's a good link for finding various banks offering high yield savings and money markets:
https://www.depositaccounts.com/moneymarket/

One factor to be aware of, is that a money market "account" from a bank are often FDIC insured, whereas a money market "fund" from a brokerage house only has SIPC coverage against fraud by the brokerage, the risk of the securities in the fund can vary widely.
Also be aware that bank savings/MM "accounts" will typically have a statutory limit on the number of withdrawals per month (6).
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MotoTrojan
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Re: Where to put a year's worth of living expenses?

Post by MotoTrojan »

Auto-rolled t-bills at Fidelity would meet your criteria and likely be the best after-tax yield, especially if you have moderate to high state tax.
TruthHurts87
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Re: Where to put a year's worth of living expenses?

Post by TruthHurts87 »

I personally use Ally high yield savings (1.90%) and Marcus high yield savings (2.00%). Opened the Marucs account recently to take advantage of the 1% bonus.
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ThankYouJack
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Re: Where to put a year's worth of living expenses?

Post by ThankYouJack »

Thanks all. I think I'll go with VMFXX for similar reasons as JoMoney. It does have an expense ratio of .11 but I figure even after taxes, I'll make an extra couple hundred or more compared to my current money market account.
sport
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Re: Where to put a year's worth of living expenses?

Post by sport »

ThankYouJack wrote: Sat Sep 28, 2019 2:12 pm Thanks all. I think I'll go with VMFXX for similar reasons as JoMoney. It does have an expense ratio of .11 but I figure even after taxes, I'll make an extra couple hundred or more compared to my current money market account.
The quoted yields on Vanguard MM funds are net of expenses. So, if you like the yield, the ER is not a consideration.
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ThankYouJack
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Re: Where to put a year's worth of living expenses?

Post by ThankYouJack »

sport wrote: Sat Sep 28, 2019 3:13 pm
ThankYouJack wrote: Sat Sep 28, 2019 2:12 pm Thanks all. I think I'll go with VMFXX for similar reasons as JoMoney. It does have an expense ratio of .11 but I figure even after taxes, I'll make an extra couple hundred or more compared to my current money market account.
The quoted yields on Vanguard MM funds are net of expenses. So, if you like the yield, the ER is not a consideration.
Good to know, thanks
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Re: Where to put a year's worth of living expenses?

Post by abuss368 »

Consider Vanguard Prime Money Market which I believe yields around 2.00% (but you could check the website for the recent yield).
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Mister A
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Re: Where to put a year's worth of living expenses?

Post by Mister A »

For liquidity over the course of *this* year, IE a time horizon of "now", I would use high-yield savings. AmEx - my personal choice - is paying about 1.9%.

I don't mistrust money market funds but if it was literally my current living expenses, I'd prefer FDIC coverage.
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Re: Where to put a year's worth of living expenses?

Post by Jack FFR1846 »

Any number of high yield savings and money market accounts are in the 2%+ range. I keep the max ($50k) at Redneck for 2.4% currently. I keep some in my credit union and some at Ally. The vast majority of my emergency fund is in savings bonds and is also counted as bond in my AA.
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Tdubs
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Re: Where to put a year's worth of living expenses?

Post by Tdubs »

Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
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ThankYouJack
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Re: Where to put a year's worth of living expenses?

Post by ThankYouJack »

Revisiting this thread. I went with VMFXX but it's now way down to 0.29% - https://investor.vanguard.com/mutual-fu ... ions/vmfxx

My money market at my bank is at 0.5%. I think I'll just transfer it there...unless there's something significantly better.
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ThankYouJack
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Re: Where to put a year's worth of living expenses?

Post by ThankYouJack »

Tdubs wrote: Sat Sep 28, 2019 3:47 pm Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
I didn't want to open up another account, but hindsight 20/20 it might have been worth it
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gr7070
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Re: Where to put a year's worth of living expenses?

Post by gr7070 »

Put half of it in VTSMX.
ChiKid24
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Re: Where to put a year's worth of living expenses?

Post by ChiKid24 »

ThankYouJack wrote: Mon Jun 08, 2020 8:03 pm
Tdubs wrote: Sat Sep 28, 2019 3:47 pm Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
I didn't want to open up another account, but hindsight 20/20 it might have been worth it
I play the savings bonus game with my emergency fund, which covers a year plus of expenses. Usually split between 2 or 3 at a time depending on the offer. This past 12 months alone I've done Citi, Chase, PNC, Marcus, and am currently in process on CapitalOne. It takes about 20 minutes of time to locate and research the requirements of my next offer (doctorofcredit.com), open an account and tranfer funds, then transfer the funds elsewhere and close the account after meeting the requirements and getting the bonus. In today's day, it's all done online with simple clicks and no need for time in a branch or on the phone.

The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
sycamore
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Re: Where to put a year's worth of living expenses?

Post by sycamore »

ChiKid24 wrote: Tue Jun 09, 2020 5:01 am ...
The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
To clarify, that 500 bonus requires 50k deposit and the rates aren't guaranteed -- CapitalOne recently lowered their rates on the 360 Performance Savings accounts from 1.3% to 1.15%. Still worth it over money market funds though.
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nps
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Re: Where to put a year's worth of living expenses?

Post by nps »

ThankYouJack wrote: Mon Jun 08, 2020 8:02 pm Revisiting this thread. I went with VMFXX but it's now way down to 0.29% - https://investor.vanguard.com/mutual-fu ... ions/vmfxx

My money market at my bank is at 0.5%. I think I'll just transfer it there...unless there's something significantly better.
Online savings is significantly better.
BogleMelon
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Re: Where to put a year's worth of living expenses?

Post by BogleMelon »

ChiKid24 wrote: Tue Jun 09, 2020 5:01 am
ThankYouJack wrote: Mon Jun 08, 2020 8:03 pm
Tdubs wrote: Sat Sep 28, 2019 3:47 pm Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
I didn't want to open up another account, but hindsight 20/20 it might have been worth it
I play the savings bonus game with my emergency fund, which covers a year plus of expenses. Usually split between 2 or 3 at a time depending on the offer. This past 12 months alone I've done Citi, Chase, PNC, Marcus, and am currently in process on CapitalOne. It takes about 20 minutes of time to locate and research the requirements of my next offer (doctorofcredit.com), open an account and tranfer funds, then transfer the funds elsewhere and close the account after meeting the requirements and getting the bonus. In today's day, it's all done online with simple clicks and no need for time in a branch or on the phone.

The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
Good luck closing Citi account with few clicks! I personally had to do tons of calls to get it done, yet saw a statement one month with negative balance (overdrafting due to fees despite thought it is closed)! Tons of more calls solved the issue though.
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ChiKid24
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Re: Where to put a year's worth of living expenses?

Post by ChiKid24 »

BogleMelon wrote: Tue Jun 09, 2020 7:27 am
ChiKid24 wrote: Tue Jun 09, 2020 5:01 am
ThankYouJack wrote: Mon Jun 08, 2020 8:03 pm
Tdubs wrote: Sat Sep 28, 2019 3:47 pm Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
I didn't want to open up another account, but hindsight 20/20 it might have been worth it
I play the savings bonus game with my emergency fund, which covers a year plus of expenses. Usually split between 2 or 3 at a time depending on the offer. This past 12 months alone I've done Citi, Chase, PNC, Marcus, and am currently in process on CapitalOne. It takes about 20 minutes of time to locate and research the requirements of my next offer (doctorofcredit.com), open an account and tranfer funds, then transfer the funds elsewhere and close the account after meeting the requirements and getting the bonus. In today's day, it's all done online with simple clicks and no need for time in a branch or on the phone.

The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
Good luck closing Citi account with few clicks! I personally had to do tons of calls to get it done, yet saw a statement one month with negative balance (overdrafting due to fees despite thought it is closed)! Tons of more calls solved the issue though.
Thanks for the heads up! That bonus is supposed to post next month. Will report back.
ChiKid24
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Re: Where to put a year's worth of living expenses?

Post by ChiKid24 »

sycamore wrote: Tue Jun 09, 2020 5:36 am
ChiKid24 wrote: Tue Jun 09, 2020 5:01 am ...
The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
To clarify, that 500 bonus requires 50k deposit and the rates aren't guaranteed -- CapitalOne recently lowered their rates on the 360 Performance Savings accounts from 1.3% to 1.15%. Still worth it over money market funds though.
Correct. For me it was 40% of my emergency fund which has to sit somewhere. If that's too big a pill to swallow you can put in lower deposit for a lower bonus. Rate of return as you point out still beats a MMF for mininal incremental work.
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BroIceCream
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Re: Where to put a year's worth of living expenses?

Post by BroIceCream »

Tdubs wrote: Sat Sep 28, 2019 3:47 pm Why not a no penalty CD? Locks in a rate for a year in a declining interest environment.
I like this idea. One could also break it up into different maturity durations, so you could get a "paycheck" every quarter or any other timeframe, as they mature. This could allow one to take advantage of interest rates that may go up [or down]. I do this to set aside money (in the same account) from my other expenditures for very short term periods (<1yr), for a special purpose (vacation, est.taxes).
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Kintora
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Re: Where to put a year's worth of living expenses?

Post by Kintora »

sycamore wrote: Tue Jun 09, 2020 5:36 am
ChiKid24 wrote: Tue Jun 09, 2020 5:01 am ...
The implied return rates are higher than any money market, there is no market risk, and the money is FDIC insured. My CapitalOne in process will pay me a $500 bonus, plus 1.3% interest (currently) on the balance, simply by keeping the money there for roughly 6 months. That's over a 3.3% annualized pre-tax return with minimal risk. When that pays out those funds will move to the next offer.
To clarify, that 500 bonus requires 50k deposit and the rates aren't guaranteed -- CapitalOne recently lowered their rates on the 360 Performance Savings accounts from 1.3% to 1.15%. Still worth it over money market funds though.
Just FYI, CapitalOne 360 Performance Savings accounts are now down to 1.0%.
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