Thursday, January 17, 2008

where to park your money

I found the most awesome blog today. The Finance Buff, who has these amazing calculators just built right in to help you make financial decisions.

I know a lot of people go rate-chasing, after EmigrantDirect or HSBC or whatever bank of the moment is offering the highest rate, but I'm way too lazy to move my money around that much. In addition, I did a bit of calculation a while back, and I found that those rates aren't even comparable to Vanguard's CA Tax Exempt Money Market Fund (for me). The thing that most people don't realize (and honestly, probably don't have to think about because they are in fairly low tax brackets) is that what you really need to look at is after-tax return. I'm in a high tax bracket right now, and also in a state with a high income tax, so basically no matter how I dice it (excluding AMT, which I don't want to go into right now) I shouldn't even bother rate-chasing since Vanguard's fund is so awesome after taxes. If you're in CA, NJ, NY, OH, or PA, you should think about this too. And the finance buff guy person has this super cool calculator so you can figure out what's best for you! He He/She even links to all the funds' pages so you can find current rates, and shows you how to add in AMT (just leave that part blank if you don't know what AMT is. It probably doesn't apply to you).

Anyway, what I found was that right now I'd need to get something like 5.3% in a taxable account to make it worthwhile to move my money from Vanguard CA Tax-Exempt, and no one is even offering that. The best I found from was Countrywide, which is offering 5.11%, and Countrywide is scary and possibly evil. I don't understand why more people in CA don't use the Vanguard fund -- it's so much easier than shifting money between banks and paying attention to teaser rates.

Back to the AMT thing -- the finance buff guy person also has this great explanation of marginal tax rates in AMT. Marginal rates are confusing. Explanations are good. Yay.

oh btw ianal ianafp etc etc etc. aka this is not financial advice, you probably shouldn't make any decisions whatsoever based on what i say.

Oh, and of course the way I find all this stuff is through postings on an internal mailing list. I need to figure out how to mine this data better -- half the time someone emails something, I glance at it, and it enters into the deep abyss that is all the email that's not in my inbox. There's so much valuable stuff in there.

Edit: I made assumptions about this person's gender, which are totally unverified. Fixed.


  1. Note: The Vanguard CA TE MM fund is not fully AMT-tax free. Also, more people don't use the fund because most people aren't making as much money are you are. :-)

  2. Well, ok, fine.

    And I totally know that it's not AMT-tax free, and that calculator takes that into account (I think 17 or 17.7 percent is taxable under AMT). But I hate going into AMT, and I'm certainly not going to do it in a random blog post unless forced :)

  3. I think a more important point that many of my friends are not paying attention to is that their purchasing power is being smashed. _Any_ dollar denominated asset is a bad idea right now.

    I highly recommend reading Peter Schiff's discussion of our current financial predicament.

    We're in dire straights in the US. 2008 is going to bring one of the worst recessions in modern American history.

    I've been advising all my friends to prepare for this for almost a year. I hope you'll consider this advise and make necessary changes to your portfolio.