What should I do with my money?

bardiya27

bardiya27

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Hey, I have about 15,000 in my savings account at Union Bank of California. And I know I am not gaining very little interest out of it. Any advice on what I should do with it?

That 15,000 is not getting touched for a few years, and I am adding a thousand to it every two weeks.

Stockmarket? Bonds? CD? ING savings account.. I dunno help out.

I am just saving that money to eventually have enough for a downpayement on a house in the future.

Thanks
 
Homer rotts around in the sofa cushions.

Homer: Aw, $20! But I wanted a peanut!

Homer's Brain: $20 can buy many peanuts.

Homer: Explain how!

Homer's Brain: Money can be exchanged for goods and services.

Homer: Woo-hoo!
 
well you could max out your a Roth IRA for this year, and then if you unsure on the stock market, just put it in a an online bank like GMAC they pay 5.10% until u think of something better
 
I'm in a similar situation too, I have a nice chunk of change saved up, and it's gaining virtually no interest. I don't plan on touching it for another ten years, I'm not sure what to do with it.
 
[quote name='JimmieMac']Is this just to brag?[/QUOTE]

Maybe a dumb person doesn't save 15k by accident.

Anyway a lot of online places offer 5%.
 
If you don't have an IRA, open one. Dump the max you can into it (should be $4000-4500). Take part of the rest and move it to an online bank that gains at least 5%. I personally use ING. Keep a few months worth of expenses in your current bank savings account and let that grow.
 
I'd do a mutual fund(s) or ETFs (i.e. stocks) and put some of that grand every two weeks into the fund(s) each month. mtx has some good advice there although I'd do some of that regular inflow into stocks over and above the IRA. If you already put a lot into retirement, you might not need to do an IRA.

I like Vanguard as a mutual fund company.

Chris in Cali - for money you won't be touching for 10 years it really should be in stocks (meaning a mutual fund, ETFs, etc) IMO.

If you want to read up on stocks, etc for yourself (do this) check investopedia.com tutorial section. http://investopedia.com/university/

But remember, stocks can go down. Don't buy in if you are going to freak out and panic sell on a dip.
 
take it out in one dollar bills, fill a pool with it and rent swimsuit models, video tape it and put it on youtube.
 
Okay. . .
First - You need an emergency fund of at least three months (six if you are married, eight if you have dependents) in an easy to reach account. ING Direct and other non traditional banks give great interest (4%) compared to brick and mortar banks.

Second - You need to max out any company offered retirement plan that matches your contributions. If a compnay matches 2 % into a 401K plan, put in 2% of your income. Why? Because you are making a 100% return on that money.

Third - Diversify your savings. Bonds returns are shit. If you want you can still invest something make it small until interest rates increase. If you don't know what you are doing with money (no offense but 15000 earning 1 % a year is a clear example of that), I would suggest opening a discout broker account, and investing in INDEX FUNDS. Index funds are a great investment due to their low annual fees. Example - you earn 10% in your mutual fund of choice, and the DowJones returns 8 %. If you had an index fund for the Dow Jones you would earn 8% - annual fees of say 0.5% total return 7.5 %. Mutual funds on the other hand have a huge annual fee (several percent) so even with a modest 3 % annual fee (some are as large as 5%) you would only have a total return of 7 % (now with a larger annual fee it drops even more). See how index funds can work to your advantage. The best tax shelter that you will probably have access to is a ROTH IRA. You put $4000 a year into any kind of investment account you want and when you retire you can withdraw this money tax free. I wouldn't put all you money into the ROTH IRA, since I assume you are interested in buying a home sometime down the road. You can open ROTH IRAs through your local bank, or discount brokerage.

I hope this helps. Go out and do a little research and I think you will come to the same conclusion.
 
Why pay off the house? It's a great tax shelter?

[quote name='Dr Mario Kart']1. Make sure you are debt free
2. Down payment on a house if you dont own one.
3. Work on paying off the house[/quote]
 
Those are some pretty good ideas! I have some saved (not quite 15k) that would like to manage more smartly.
 
IRA is a must if you don't have it already. You can throw $4000 in for the 2006 tax year if you do it in the next couple weeks. I've made $100 on mine in a month so far, can't complain. :D

I can't say anything for online banking, but many banks have higher-yield savings accounts for higher balances. I used to be making 1-2% at Fifth Third, but when looking into a money market account, since I had more than 10k, I was told I could switch my savings over to a high-yield account (minimum 10k) that's now making me 4.25%.

You'll probably want to have quite a bit of money available to you. You can say you're not going to touch it for 10 years, but unless this is some extraneous account you have, you need at least 6 months worth of salary at your fingertips as emergency money should you lose your job, or who knows what.
 
[quote name='gweenpea']Why pay off the house? It's a great tax shelter?[/QUOTE]

Security is one reason to pay off the house. Another reason? Sure the interest is tax deductible, but having no interest is even better.

First year interest on a 30 year 200000 mortgage at 6% is $11933.19. If you are single your standard deduction is $5150 (difference of $6783.19). Married standard deduction is $10300 (diff of $1633.19). Figure the difference will knock off 20-30% from your tax bill. Your standard deduction would increase every year while your interest deduction will decrease and you can see that you standard deduction will surpass your tax deduction in a few years. Of course this is simplified as you may be able to deduct other things if you itemize but my point is that it is not necessarily a slam dunk that you are going to save tons with a interest tax deduction. And, as I pointed out, paying the house off early can give you extra security.

Everybody assumes that buying a house is the best move you can make because that is what they are told by so many others. Yes, it is a great way to build wealth but not always the best way. I look at it more as a forced savings account. The actual payback on your investment is not as great as many people think when you take into account all the expenses involved. Check here http://business.fullerton.edu/finance/jrepe/pdf/2005Vol8N1/01.1_24.pdf for more info on average return, skip to page 4 for historic nominal and real historical real estate appreciation.

The last few years have been a historical anomally as far as appreciation goes.
 
Huh? Itemized deductions include infinitily more then mortgage tax. Standard deduction is just a fixed amount it does not increase every year. But overall you mention that mortgage interest is good in the first few years. (BTW some people just pay interest so that interest never decreases and thus there deductions never go down).

Security from what? The bank can not can't your house away from you if you pay your mortgage. If you lose your job the money you paid extra into to "pay off your house" is tied up in your house, the bank WILL NOT give a jobless person another mortgage on their home. Therefore paying ahead wipes out savings you could have to live off of when you loss a job.

Not to mention the fact that the bank is not paying you any extra money on the money you give them. IE An interest rate of 6 % can be beaten (you are good at crunching the number so go ahead) by a modest 8 or 9 % return on an investment when you can into account the tax break. The bank isn't giving you any sorta return on the money you pay extra on your mortgage.

I am not saying you shouldn't pay ahead in some cases, but with 15,000 to your name you best start some sort of investment that will return money. Not pay ahead on tax deductible shelter. Come on. . .

[quote name='bmsdaddy']Security is one reason to pay off the house. Another reason? Sure the interest is tax deductible, but having no interest is even better.

First year interest on a 30 year 200000 mortgage at 6% is $11933.19. If you are single your standard deduction is $5150 (difference of $6783.19). Married standard deduction is $10300 (diff of $1633.19). Figure the difference will knock off 20-30% from your tax bill. Your standard deduction would increase every year while your interest deduction will decrease and you can see that you standard deduction will surpass your tax deduction in a few years. Of course this is simplified as you may be able to deduct other things if you itemize but my point is that it is not necessarily a slam dunk that you are going to save tons with a interest tax deduction. And, as I pointed out, paying the house off early can give you extra security.

Everybody assumes that buying a house is the best move you can make because that is what they are told by so many others. Yes, it is a great way to build wealth but not always the best way. I look at it more as a forced savings account. The actual payback on your investment is not as great as many people think when you take into account all the expenses involved. Check here http://business.fullerton.edu/finance/jrepe/pdf/2005Vol8N1/01.1_24.pdf for more info on average return, skip to page 4 for historic nominal and real historical real estate appreciation.

The last few years have been a historical anomally as far as appreciation goes.[/quote]
 
A CD, you might be able to invest a short term jumbo CD.

If you want to keep it completely liquid then I recommend an Orange ING direct online savings account.
 
Just to go into further detail about the whole IRA thing others have mentioned.

You have until April 17 to put in $4000 to a IRA for the year 2006. That means you have to make a decision right now before it is to late. If you open a Roth IRA (as opposed to a Traditional IRA) it wouldn't be tax deductible but you can withdraw the earnings anytime after 5 years for a first time home purchase (someone correct me about the years if I'm mistaken). In between now and 5 years that money will be growing tax free. Remember you can withdraw the principle at anytime since you already paid taxes on it. This seems like the best thing for you if you are saving for a house. After you set up the Roth IRA you can worry about what to do with the rest of the money. For now go ahead and open the Roth IRA. I recommend opening the account with www.vanguard.com but you can open one at your bank if you feel safer doing that. Do this ASAP, today if you can. Don't put it off or else you might miss the 2006 window for contributions.
 
[quote name='soonersfan60']Buy 25 Playstation 3 to sell on eBay... :p[/QUOTE]

Yeah! this is the only guaranteed way to turn that 15,000$ into 13,500$ quickly.
 
Honestly if I had $15,00 in the bank right now I would just road trip across the country. Take a couple friends and get in a car and just take off, see the country.
 
[quote name='gweenpea']Huh? Itemized deductions include infinitily more then mortgage tax. Standard deduction is just a fixed amount it does not increase every year. But overall you mention that mortgage interest is good in the first few years. (BTW some people just pay interest so that interest never decreases and thus there deductions never go down).

Security from what? The bank can not can't your house away from you if you pay your mortgage. If you lose your job the money you paid extra into to "pay off your house" is tied up in your house, the bank WILL NOT give a jobless person another mortgage on their home. Therefore paying ahead wipes out savings you could have to live off of when you loss a job.

Not to mention the fact that the bank is not paying you any extra money on the money you give them. IE An interest rate of 6 % can be beaten (you are good at crunching the number so go ahead) by a modest 8 or 9 % return on an investment when you can into account the tax break. The bank isn't giving you any sorta return on the money you pay extra on your mortgage.

I am not saying you shouldn't pay ahead in some cases, but with 15,000 to your name you best start some sort of investment that will return money. Not pay ahead on tax deductible shelter. Come on. . .[/QUOTE]

I realize that mortgage interest is not the only thing deductible when you itemize your taxes, I even mentioned that in my post. However, for most people, it would be by far the largest item. Also, the standard deduction is adjusted every year, by law, for inflation.

Depending on what part of the country you live in would also greatly affect things. If you live in a high value state such as California then your mortgage interest is going to be quite high for many years. If you live in a low value state you could have a mortgage where the interest may be less than your personal deduction and you may never itemize.

I know that a jobless person would not be able to get a mortgage and probably not any other loan either. I agree that you should have an easily liquidated savings to tap in an emergency. As well as having cash on hand or other liquid assets it is also not a bad idea to keep an open line of credit in case of job loss or other emergency, especially if you anticpate job loss. Assuming of course a person has the willpower not to use it for every little thing that comes along.

When you say you can get a higher return investing elsewhere, don't forget to include paying taxes on any profits you get, if any. The money you save by not paying interest may not be astronomical, but it would be guaranteed.

Now, I am not saying paying off is best for everybody. My point is that a blanket statement that you shouldn't pay off a house because of the tax shelter is not always so simple. Taxes are extremely complicated and everybody has a different situation.
 
I agree with both gweenpea and bmsdaddy to some extent. For the first few years it would be wise to take the tax break offered by your mortgage, however a threshold is crossed eventually where you don't benefit further. A thing to note is that (on average) if you make one additional payment per year on your mortgage, you will pay off the loan about 6-7 years earlier (assuming a 30 year fix).

Personally I can afford about 3X more than what my mortgage is now, but that doesn't mean I send the bank the extra every month. It's important to have both long and short term goals when dealing with money. Everyone will have different goals.
 
buy a russian bride and some of those young asian girls from poor asian countries ad live your fantasies to the fullest. or invest in some stock or buy some land or maybe find some othert folsk with money and invest in a business like a food chain or something.
 
[quote name='lokizz']buy a russian bride and some of those young asian girls from poor asian countries ad live your fantasies to the fullest. or invest in some stock or buy some land or maybe find some othert folsk with money and invest in a business like a food chain or something.[/quote]Why doesn't he just do all those things, buy a spot of land, and build a brothel on it that serves Russian and Asian chicks.
 
[quote name='VanillaGorilla']Why doesn't he just do all those things, buy a spot of land, and build a brothel on it that serves Russian and Asian chicks.[/quote]

I'd hit that! Just remember to build it in Nevada. You don't want those pesky feds ruining your perfectly good whorehouse.
 
[quote name='VanillaGorilla']Are you bragging about 15K not being something to brag about?[/quote]

Well, yeah, actually. ;)

Okay, not bragging, really, but pretty much saying that in today's world, it's nothing to write home about. Especially if you reside somewhere where the cost of living is very high.
 
Can't believe I missed this post weeks ago.

First thing, what is the 15K for? You have it in a savings account, so are you saving it for a car or is this just real savings (so you'll never be broke).

If it's for something short term (less than 5 years) avoid the stock market. A CD might be best. You can get decent rates on them, and you can get your money out (I wouldn't put it in for longer than a year unless you are getting a better rate and you know you won't need it). Plus, with a CD, if you need the money early, it's only a 3 month interest penalty.

If it's for longer term, it really depends on where you are in life.

If you are on your own, and have bills, having an emergency fund is a must. 3-6 months of bills, depending on how stable your job situation is (and how quickly you can find a new one).

After that, lots of options. IRA's are great. If you don't want to research much, just open a Vanguard 500 fund, this tracks the S&P 500, and even though it can fall, this is one of the few ways you are very likely to gain money over time (the S&P 500 has averaged at least 6 percent up over any 30 yera period since its inception. It averages far closer to 10% a year). So, over time, this will grow. If you open a Roth IRA, you will get the money tax free when your 62 years old (I think it's 62.5 years).

There are other options too. The worst thing you could do is just blow it. 15k is hard to get, and those that say just to blow it will likely never have much in their account until they see things differently.
 
[quote name='lilboo']I'll be your slut[/quote]

Mine? Sorry, I have a wife (and tons of other offers). Thanks for the offer though (if that was directed at me).
 
[quote name='mr ryles']Honestly if I had $15,00 in the bank right now I would just road trip across the country. Take a couple friends and get in a car and just take off, see the country.[/quote]
Hence why you don't have $15K to spend ;)
 
[quote name='karkyco']Mine? Sorry, I have a wife (and tons of other offers). Thanks for the offer though (if that was directed at me).[/QUOTE]

lmao, well if u got 15K then the offer stands, but it was for the OP.
 
I made a good amount on my CD account this year. Thanks to higher interest rates ^_^ (down with real estate). Even made back a nice chunk of change in my mutual funds that took a huge spike down in 2001. I think a 6 month CD account is good. After that interest rates will likely slow in groth.
 
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