No, really… can you? Because I am totally not sure what to do here and I’ve noticed it’s become a trend among the late twenty/thirty something bloggers – medium term financial goals.
Retirement is an easy one for me – it’s ages away and the stock market is clearly the way to go. It will have plenty of time to recover from whatever the heck is going to happen to it over the next 35-ish years and I’m going to have trouble finding anything else that can top that kind of interest rate.
Short term is also an easy one. Emergency funds, savings for anything being bought within 1 year, those all live in a savings account with the highest interest rate I could find… which, quite honestly, won’t be much. The point of most of that money though is to act as a safety net and a safety net isn’t much good at all if you can’t get it under you before you fall.
But medium term… if I’m ready to take out money for a house down payment 5 years from now, there is considerably less guarantee that the market won’t be in a total slump.
If I trap it in a CD, I may change my plans, want to settle down sooner and lose all the interest by cashing it in early.
And, let’s face it, I almost might as well stuff the money in a shoebox in my closet as store it in most savings accounts based off of average savings account interest rates.
Confession: It’s totally in a savings account right now. I consider my house down payment and car savings both as medium term goals (money I plan to try to access in 5-10 years).
Considering fees and everything, I don’t think it’s a problem to save up a decent size chunk and then roll it over into a CD or invest it, but that’s why I’m beginning to consider the issue now, before I hit that magic number (my magic investing number is usually increments of $1,000).
What I’m leaning towards is a general fund that covers the entire stock market or the S&P 500. My current math for the car down payment is based off a purchase I’m hoping will be roughly 7 years away. When I hit the 2 years away mark, I’ll start transferring the money back into savings accounts.
I feel more confident in this plan because based off of the average life of my car, the fact that I don’t drive it all the time due to my weird lifestyle and my ability to keep it moderately well maintained, I think 7 years is reasonable.
That being said, you really never know what the future holds. She could just up and die on me 3 years from today, with the market tanked.
All of life is a gamble.
The account I’m even less sure of is my house down payment savings. I honestly have no immediately or even near immediate plans to buy a home… but I do have a really strong urge to be able to when I do want to.
And with that super vague time commitment, I really have no idea what to do with that money. I mean, probably the same thing as the car payment, but, woah. Stressful.
Just when you start to think you have a few money answers sorted, more pop into view. But considering how tackling those first questions have left me in a much better place than before… I’m going to keep trying to tackle these confusing questions.