A reader wrote in concerned about having money in a non-FDIC money market.
Money markets at brokerage firms may not (and probably are not) FDIC insured. Historically, only two money market funds have lost money. In each case, account holders lost small amounts of money (3 cents on the dollar in one case).
If you have money in a non-FDIC insured money market fund and it worries you, go ahead and move it to an insured savings account. I believe you should handle your money in a way that you are comfortable with.
In the past year or two, I opened a Vanguard Money Market fund for my “house, car, or other large expense” account. I decided to go with the Vanguard Money Market instead of opening CDs or chasing rates in FDIC-insured accounts because (1) the rates were good historically and (2) the money is accessible with a short delay. It would take about a week to get cash out, but there is no penalty for an early withdrawal.
Also, I thought that if a Vanguard money market loses money, things must be pretty bad in the world. I am surprised that a money market fund has lost money because I do not yet grasp what is happening in the economy.
Reader Question: If you met someone who only feels stressed & burdened by thinking about money, what would you say to rope her in?
Try thinking about money differently.
I have a friend who, though she does not care about money, is very good with her money. Her financial goal is to not worry about money. If she has enough to pay the bills and save a little, then she is happy.
Not to “go Oprah” on you, but think about why money is stressful or burdensome and figure out a way to mitigate the cause.
If there is a fear of not having enough, find a part time job. From previous conversations, I know that the reader who submitted the question can easily pick up hourly work starting at $35/hour. That adds up very quickly!
I used to get stressed out that I was not saving enough for retirement. Looking at growth projections, I am in good shape. But as a fraction of total retirement savings, I am only at the 3% mark. 3% out of 100% is not very much.
When I started thinking about my dream lifestyle, I realized that I could support myself for 3-4 years without working (or longer if I were to move to a cheaper town in the South or Midwest).
Realizing what I had already accomplished gave me some perspective, and now I think much less about my net worth.
I recently had a conversation with a friend about reading financial news. She said it was not worth reading the news; she has an investment plan and sticks to her target asset allocation.
Generally, I agree that it is a waste of most people’s time to follow financial news on a daily basis. There are several things going on right now, though, that I follow in the news.
This is what I am paying attention to now.
- Home heating costs
Last year I spent twice as much money on oil for my home (around $1,000) as gasoline for my car (around $500). At my old apartment in New Jersey, a giant oil tank in the basement was used to generate hot water and heat in the winter. Each time the tank was re-filled, I got a bill for at least $600. With higher oil prices, these re-fills will cost even more. For example, in New Hampshire, “retail heating oil costs about $4.50 a gallon, up from $3.30 last winter.” - Nearing retirement in a downturn
I care about this topic because my parents are in/near retirement (my father is retired, my mother is still working). There is compelling advice to near-retirees that it makes sense to work longer, giving retirement accounts time to bounce back before withdrawals begin. (NYT) - Changes in the tax law
Specifically, changes in capital gains tax, the Alternative Minimum Tax, and limits on retirement account contributions. - The housing market
I may (or may not) buy a condo in the next few years. If prices decrease significantly in the DC area, I probably will buy. (Washington Post) - Which Wall Street firms are closing
Since I have friends on Wall Street, I am curious about how the major companies are faring and who is planning lay-offs. (TheStreet.com)
There are some things I am intentionally not paying attention to.
- 529s/ ESA
I will most likely not have children within the next few years, and when/if I do have kids, I may live in a different state. Also, these accounts have only existed for a short amount of time. If the laws change, it may not make sense to use these anymore (or it may make more sense) - News about “hot” funds/sectors/stocks …
Here I completely agree with my friend — follow your asset allocation and ignore the market fluctuations.
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