When I play games with how I save money, I'm less inclined to spend it
I have CDs.
I have treasury bonds.
I have a high yield savings account.
I have investment accounts, stocks and ETFs.
I have (for the time being) a small pool of crypto.
(I am slowly selling off my crypto at a profit with the goal to get away from it completely.)
And I have a couple of different spreadsheets, all different approaches and rebuilds of looking at the money.
It's usually easier to start over from scratch than it is to revise an existing one when I want to change how it works or how it looks.
It's really not even that much money.
I've talked in the past about gamification (though admittedly not here on this blog (as of this writing, yet), or any blog that still exists). Making things fun (by any personal definition of the word) means it's easier to do them.
And that's just as true for adults as it is for children, if not more so.
Adults need more fun in their lives, severely enough that we ought to be able to get a prescription for it.
The dopamine rush from spending money and getting new things is well-documented. (Or rather, I assume it is, but I'm not going to go look.) But I also get one from the satisfaction of a well-designed infographic or spreadsheet or data dashboard. All the pretty charts and numbers and everything, seeing how it merges together to spell out how unlikely I am to be able to retire ever...
Even bad news can wear a pretty outfit.
Actually, personal experience tells me that bad news is almost always far better dressed than good news.
It's not about how much money you have.
It's about what you can do with it.
And if you're not spending it on frivolous things just for a brief hit of dopamine, you might even be able to make it grow.
Case in point:
I discovered CD laddering on accident.
And then I took it to an extreme because I thought it would be neat. And because it made more sense in my head with respect to real-world applications.
So the material I've read on CD laddering references yearly or quarterly intervals, but for some reason never more frequently than that. That seems silly. It makes more sense to me to set the interval as close as possible to the same rate as my bills, which are predominantly monthly (with very few exceptions), which is completely doable given that things like FDIC insurance and bank limitations are more concerned with the total amount of money than the quantity of accounts.
In the same way that all the legislation I've read about carrying a knife focuses on the type of mechanism attached to the knife and the length of the blade, but I've yet to see a single mention of the quantity of knives... which seems like a grand oversight to me that I'm more than happy to take full advantage of until policymakers rectify that loophole.
I'm laddering CDs on a monthly schedule.
Seventeen complete, one more to establish at the end of October.
And then I will have eighteen 18-month CDs.
They'll auto-renew, and so I won't touch them as long as I don't need the money. Just spin and spin and spin and spin and spin... slowly building compounding interest.
And if a month should come when I can't make ends meet, I'll crack them open.
The money is evenly distributed (not counting earned interest) across all the accounts, and that's done deliberately to minimize the loss in earnings if I should have to break any of them open prematurely.
If you cash out a CD before the maturity date, you'll pay a penalty on the interest (at my bank it's 3 months-worth). If I had fewer CDs with higher value, but I don't need the full value to make ends meet, I'm losing out of potential gains. By dividing the money out into more CDs, I only need to cash out on enough of them to reach my need.
Let me know if it would help me to go through this with better examples and a longer explanation.
And yes, even with compounding, the interest rate still pales in comparison to inflation, but it beats sitting under my mattress.
And I have stocks and ETFs that are making better headway against inflation than my interest-bearing accounts, but diversification is key.
Every investment advisor worth their salt advises diversification, but I'd say they don't go far enough with it.
Banks fail sometimes, and yes, in the US as long as it's an FDIC-insured institution, you're going to get it back... you know... eventually. A quick web-search says in most cases it can take a few days to a few weeks to process claims, but that might be too long with a due bill hanging over your head.
I have accounts at 6 different banks, only one of which has a minimum account balance (and that's the one where my checking account sits, which serves as the "gateway" for transferring money among my other accounts, and is also the destination for my paychecks).
Is that overkill?
Absolutely.
Was setting it all up worth it?
Probably not.
But was it fun?
Yes. And keeping track of it all is also fun for me (sometimes both tedious and fun at the same time).
So what's next after you complete the set of 18x 18-month CDs?
I don't know yet. Nothing, probably, until I get another job. The money for these last few CDs was set aside about a year ago, it's just been sitting in my savings account waiting for the calendar to roll around to the right date to get them lined up with all the others.
Maybe I'll go back to buying treasury bonds, which stopped when TreasuryDirect ended their Payroll Savings Plan program (and when I stopped being on a payroll to fund the savings plan).
Leave a comment or continue reading: other Wednesday posts, additional analytics addendums or more money messes.
