What method do you use for tracking multiple off budget CDs?

I'm getting ready to start getting some CDs going, and I'm curious how others are tracking multiple CDs that are Off Budget.

Do you use a single tracking account and track them all there, or do you make a tracking account for each individual CD?

Thanks!

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    • Technicolor Cheetah
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    • technicolor_cheetah
    • 1 yr ago
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    I use a different account for each one right now.  I'm in the process of opening a CD ladder and this will help me remember where I am in the process, i.e. hopefully not forget to open CD #3.  In the future, who knows?  But probably not unless I have a multiple CD ladders.  In which case maybe I'll group together all the ones that will mature in March, in June, etc, even if they are in different years.  Might give me a better chance to remember to review the numbers to determine if the current bank is offering competitive terms before it rolls over into a new term.  

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  • First, one account in YNAB per account is the easiest way to track balances. I've done CD ladders, and started with a single account, but moved to individual accounts after a couple of months.

    Second, what money do you have off-budget where the ideal place to hold it is a CD? Not necessarily a wrong decision, but something to ponder.

    Finally, unless you are doing large CDs or the money in the CD is for a specific spend many years down the line and you know you won't tap it, it's not worth it. I was in the process of building CD ladders but realized it was more trouble than it was worth for the relatively small amounts I was putting it in.

    Instead, I have been moving to I Bonds (inflation protected, state tax-exempt and tax deferred) and using Vanguard Prime Money Market Fund (partially state tax exempt) .

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      • TechieM2
      • IT Professional and General Geek
      • techiem2
      • 1 yr ago
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      nolesrule Currently the money is on budget (in a CD Funding Category), but it would be off budget when moved to a CD, just like my investment accounts.  My plan was to start collecting $100 CDs from Ally as I have the spare funds, to eventually build up to bigger ones. 

      I didn't know about I Bonds though, and looking at the site they are currently returning 2.83%, rather than the 2.75% of Ally's 12 month CDs, plus there's the tax benefits you mentioned.  Looks like that may be a better choice.

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 

      TechieM2 said:
      My plan was to start collecting $100 CDs from Ally as I have the spare funds, to eventually build up to bigger ones.

      If this is your plan, don't bother. The interest at these small increments is negligible. compared to just keeping the money in a savings account. You're talking about $0.55 per year difference for a $100 CD. The extra work to manage it at the bank and in YNAB isn't going to cost you more than that with all the additional accounts, even if you track them as a single account in YNAB. I was doing $1200 CD rungs in my CD ladder and found the additional interest to not be worth it.

      Just keep in mind that the I Bonds are indexed to inflation and the rate is a cross between a fixed rate set at time of purchase and an inflation rate that is adjusted every 6 months on May 1 and November 1. It's possible the rate may drop next month due to low inflation in the previous 6 months. It's also possible the fixed component will drop. There is also a 3-month penalty during the first 5 years.

      Finally, what's the money for that it's going off-budget? I might be able to help you with some more tax-efficient ideas for your money.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Basically I'm trying to find ways to start safely saving and generating interest/returns at a higher rate than just the savings account in relatively short time periods (currently) - thus the initial thought of low value 12 month CDs to be eventually combined into larger value ones (and now possibly considering I bonds rather than CDs). 

      My investments are doing well currently, but as we all know the market tends to bounce up and down, and that's supposed to be long term, ideally with any dividends directly reinvested until there's enough dividends being generated to make it worth withdrawing some now and then (I'm nowhere near that point obviously).  A small portion of my investment account is targeted at dividend producers, with some of that being specifically the low risk areas such as Bonds.

      Ideally I'd have loads of money in both investments and safer short term methods like CDs/I Bonds, but that's not exactly doable at this point - but I have to start somewhere!  :)

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 You didn't really answer my question. What is this savings for?

      If it's for your long-term portfolio, then figure out the asset allocation you want and invest in bonds in your tax advantaged accounts, and use this money to invest in tax-efficient stock funds. Bank interest is not tax efficient, so you should limit it's presence to only money you need.

      But if this money is for spending, keep it on budget, put it in categories reflecting the plan for the spending. I wouldn't bother chasing return on such small increments. Maybe buy CDs once you accumulate larger amounts.  At the spread between Ally's savings account and 1 year CD, buying $100/month results in an extra $3.30 in the first year, and $6.60 per year in rolling years before taxes. Is that really worth the extra hassle of the account management?

      Also, in order to redirect the multitude of small CDs into one larger CD, you would either need to break CDs early or when the CDs mature they go back to sitting in the savings account while you wait for more CDs to mature.

      For long-term savings, I've been using Vanguard TSM funds and for budget savings I've been moving to a mix of I Bonds (not to exceed 50% of my income replacement category) and Vanguard Money Market funds, since they generally beat savings accounts and are partially state tax exempt. It's also simpler to manage.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Ah ok.  For these funds my goal is primarily for short to medium term saving for spending, thus the idea of using primarily short term strategies for interest.  My Investments are more targeted towards long term savings currently.

      And yeah, I'd considered the whole issue of merging CDs.  That does make things a bit more complicated to determine which ones to merge when they mature and which ones to just roll over or cash out when they mature and wait for the next one to mature to combine..that is quite a bit of work.

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 In that case, open up a brokerage account at vanguard. Put money in the settlement fund. Don't use it for any other investing. Treat it like an on budget savings account. When you have accumulated $3000 in the account you can move from the settlement fund to VMMXX which has a higher return than the settlement fund. You can still treat it as a single on-budget account. Both of these funds (settlement which is VMFXX, and VMMXX) have higher interest than savings accounts, and if you live in a state with income tax, some of the interest will be state tax exempt.

      Much simpler than dealing with a bunch of CDs and trying to reach for small extra yield through a ton of extra accounts.

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      • bevocat
      • Sometimes, It Just Sucks to Be You
      • bevocat
      • 1 yr ago
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      nolesrule Sorry for butting in, but I don't have one of these yet and I think it might be time. Is this also like the Fidelity cash management account others (@Patzer?) have talked about? I totally get cash, checking, savings and credit card accounts, but beyond that I haz the dum. I have had several bogleheads tabs open for like a month now and I probably will get time to read them sometime around the 53rd of Nevember!

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      bevocat No, it's not a cash management account. It essentially using a brokerage account like a savings account to take advantage of higher yields in the money market funds.

      Cash management accounts are essentially for replacing your bank accounts.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Looking at the fund page for VMFXX and it says Minimum investment is $3,000, does that not apply if you are buying into the fund through a brokerage account?  I'm a bit confused by that.

      Thanks!

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 The settlement fund uses VMFXX as the "core position". There's no minimum in the settlement fund. If you were to explicitly buy it,( and I'm not sure why you would bother) then there would be the minimum initial position.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Aaah OK that makes sense.  Thanks!

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule So just to make sure I (and anyone else following this) am totally clear on how this works:

      You open your personal account and fund it.

      All funding you put in is by default held in the Settlement Fund which uses VMFXX.

      Once your account has a balance of at least $3000, you use it to buy VMMXX for better returns.

      At that point you then decide whether to have dividends reinvested into VMMXX or transferred to the Settlement Fund.

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      • mamster
      • mamster
      • 1 yr ago
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      TechieM2 This sounds right to me. The only thing to watch out for with the money market fund is that there can be market conditions (e.g., for years after the 2008 financial crisis) where MMFs pay much less than a savings account or CD. Even if you didn't notice this for months, however, the cost would be extremely minor, missing out on a few bucks in interest.

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      • mamster
      • mamster
      • 1 yr ago
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      I also second nolesrule 's recommendation of I Bonds. You can easily set up an automatic monthly investment.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      mamster Yeah I'm still considering using those as well for the stability and medium range (3 years for no lost interest at withdrawal).

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 Once you have enough for the minimum purchase, future additional purchases can be as little as $1. And you should just go ahead and reinvest the dividends in VMMXX once you've opened that position.

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      • mamster
      • mamster
      • 1 yr ago
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      TechieM2 I think it's 5 years for penalty-free withdrawals from I bonds. (Note that you can do partial withdrawals, so don't worry about making large individual bond purchases if/when you have the opportunity.)

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      mamster Yes, it's 5 years. But it's only a 3 month penalty. hard to find a 3 month EWP on a CD these days.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      mamster Yeah that's right.  I just rechecked.  For some reason 3 stuck in my head.  *shrug*

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Yeah that's really not bad if you find you really need to withdraw early.

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      • mamster
      • mamster
      • 1 yr ago
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      TechieM2 Yep, I bet you were thinking of the 3 month interest penalty. Anyway, they're a great deal!

      One other thing to consider, although not right now: sometimes the spread between TIPS and I bonds gets big enough that it's worth the hassle of buying individual TIPS, which you can do in $100 increments at TreasuryDirect or $1000 increments at brokerages. Right now they're both yielding about 0.5% real, so it's not worth it, but a few months ago I bonds were at 0.5% and TIPS at over 1%, so I bought some TIPS.

      (Some downsides of TIPS compared to I bonds: principal fluctuation; no tax deferral on coupon payments; no education benefit.)

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      mamster TIPS are generally better held in a tax-deferred account. The fact you can lose money and still pay taxes on them when held in a taxable account is a pretty large con.

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      • mamster
      • mamster
      • 1 yr ago
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      nolesrule True, and the vast majority of my TIPS are in tax-deferred accounts. The spread here was just too much for me to ignore.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Looks like I need to set it up as an unlinked account in YNAB.  I added it as a linked savings account and it looked ok until the funds actually hit Vanguard fully and it recorded a Sweep transaction as outgoing (I'm guessing that's the transaction for moving the funds from the raw account into the Settlement Fund).  Or I just set it up wrong in YNAB to begin with...lol

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      • nolesrule
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      • nolesrule
      • 1 yr ago
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      TechieM2 YNAB doesn't know how to handle many investment accounts with Direct Import.

      For your purposes it's easy enough to manage the account as unlinked. The interest usually posts on the last business day of the month. Just do a reconciliation on the first of the month and let it auto-adjust. For accuracy, change the adjustment transaction date to the last day of the previous month.

      Same for a Treasury Direct account (I Bonds), but the interest posts on the first, so no need to adjust the date.

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      • TechieM2
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      • techiem2
      • 1 yr ago
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      nolesrule Ok thanks.  That's how I handle a couple of my banks that it either can't link to, or that have horrible auth systems and won't stay authed with Direct Import for more than a day or two (which makes it basically useless).

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