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We’re in an interesting cycle of the economy right now. Things are looking good, which helps boost the value of your money. When it comes to investments, stock prices and property values are generally up.
And if you’re selling, that’s a good thing. Retirees and folks selling their houses or some of their stock investments are partying it up during these times.
However, if you’re still in the wealth-building phase of your life, this isn’t as exciting. Sure, it makes your portfolio look good, but if you don’t need the money right now, it’s taking its toll on your buying power.
Using your money to buy new shares in the stock market is expensive right now. Expensive is a subjective word, of course. The market might surprise all of us and keep going up and up. We might look back a few years from now and think that today’s prices were a steal.
However, if your money is just sitting waiting for the next good deal to come along, it’s possible you might be waiting for a while. So what should you do?
Let’s start with what this isn’t about…
Because no one knows what the future will bring, the smart move is to continue contributing to your retirement accounts.
Although we’d all like to think we’re smarter than the market, we’re not.
Trying to time it is not something even the most masterful are usually successful with. In fact, going down that path will likely lead to you lose money over the long haul.
So that’s not what this post is about.
What it is about…
However, maybe you’re doing all the right things with funding your investment accounts. And, if you’re in a good position financially, you might have a little extra leftover. If that’s the case, it’s probably time to think about some ideas of what to do with that money.
Maybe it’s bugging you because you don’t want to throw it into the stock market right now with the prices seemingly high. Or it’s possible you can’t find a good deal in another avenue you may be looking at.
My personal struggle is along the lines of the latter. I’m looking to find a new rental property and, although there are still some deals out there, they’re much harder to find right now.
Everything seems a little over-priced and it’s become a bidding war on properties that are available. They’re selling in days rather than weeks or months.
So right now, the money is slowly building up in my online savings account with nowhere to go (not a bad problem to have).
Let me first remind you that I’m not a financial advisor. However, here are a few ideas of what I’m focusing on…
Build up your emergency fund
If you’re struggling to find a place for your money because things seem too expensive, that’s a good sign that the economy is thriving. Great for sellers, not so great for buyers.
Have you built up your emergency fund?
If not, an emergency savings should definitely be a priority and now is a great time to make sure that it’s where it needs to be. When everyone’s spending, that’s when you should be saving.
We all have different situations so where you keep your money is going to be a personal decision. Maybe it’s a higher yield online bank like Ally (my favorite!) that pays you much more than a regular savings account.
Alternatively, maybe the right move is to look at building a CD ladder or investing in short-term bond funds.
Whatever you decide, just keep building it up so you have it available should you lose your job or something tragic otherwise should happen.
Right now, I’m trying to build up my short-term savings to hold us steady for when we pull the trigger on leaving the 9-5. Even though we’ll have some rental income coming in, we’ll need some cash while we wait out the required five years for our Roth IRA Conversion Ladder to saturate.
Make yourself ready
Eventually, the tides will change (they always do). The stock market will have a correction or a major downturn. The real estate market will eventually become a buyer’s market. Business deals will become more readily available.
This might be tomorrow or it might be years from now.
Will you be ready when this happens?
There are so many times in life that everyone and their brother seems to utter a phrase similar to…
“If I had only had money at the time, I would have jumped on buying that… we would have made a killing!”
Don’t be that guy or gal! Have some extra money set aside so you can jump on the opportunity when it presents itself.
I’m hoping for a dip in the real estate market so I can get my hands on another duplex or two. Because of that, I keep building up my savings for the down payments. It’s a slow process, but at least it’s growing.
I’m also waiting for a market correction to invest some additional funds. Mrs. R2R recently left her job and we rolled over her 401(k) into a traditional IRA. However, it’s just sitting in cash right now.
Am I aiming to time the market? Not really – I’m just giving it a month or two before I pull the trigger on investing the money. Since October is usually the rockiest month of the year for the stock market, I’m willing to risk a month or two of growth.
If the market slips, I’ll be ready to pounce and buy. If that doesn’t happen though, we’ll be buying right after regardless.
Pay down debt
It’s a great opportunity to look at some of your debts that carry a higher interest rate and re-evaluate them. Maybe you can find a cheaper alternative. Perhaps it might be transferring your debt to a lower interest card, refinancing your mortgage, or taking a step back to think of some creative ideas.
That creativity option might be a good way to save you a lot of money.
I keep looking for those creative ideas in our household. My mortgage for my primary residence is 2.875% so I’m just going to leave that one alone (hard to beat!).
However, I started trying to think of some other places where I might be able to move some money around and here’s what I came up with. I had paid off one of my higher interest rental properties with a HELOC a while back.
That was at a variable rate that started floating up past 4.75% recently. That rate doesn’t sound horrible, but it’s not great either.
In the meantime, we’d been saving up for a down payment for another rental property. Because the deals are so scarce right now where we’re looking, I questioned whether the 1.2% interest rate we were getting at Ally was the best bang for our buck.
That’s when I got a little creative and decided to pay off the HELOC with money from our rental property savings. I owed less than $30k on it and a 4.75% debt payoff is much better than a 1.2% interest rate.
We’ll likely save over $5,300 in interest on the HELOC versus the $550+ in interest that we’d get by just keeping it in the bank… I’ll take that any day!
Plus, as a backup plan, if a good deal comes along and we haven’t rebuilt the rental property savings enough yet, we can always draw on the HELOC again if needed.
It’s your money!
Regardless of what you decide to do, make sure that you always have your money working for you in one way or another. There are always great opportunities out there – you just need to find them!
Are you doing anything special with your money right now?
Thanks for reading!!