My small business is very hit or miss. In the boom times I pay myself lump sum bonuses and life is good, in the lean times I take 0 salary. This can go for months (and sometimes months and months and months). Because of this I need more liquid savings than the avg Joe. Reading around on SW it seems like a lot of dancers face the same kind of boom or bust cycles I do so I thought I'd share my little trick.
It's pretty simple and I highly doubt I'm the first person to think of it. Keeping more than two or three months expenses in checking or a .05% savings account is just giving money away, so I stagger CD's. Right now I have 8 CD's, 4 1 year CD's that mature about every 3 months, and 4 2 year CD's that mature about every 6 months. So if times are bad I'm never more than 3 months away from a cash infusion, or 6 months away from a more substantial chunk. It's not perfect as I'm up to 2 years away from cashing it all out (w/o penalty) but cashing it all out is not in my plans or something I think I'll be forced to do, so it's kind of perfect for me.
Say you've got an extra $40K sitting in checking right now and you want to do something like this. I'd advise putting $10K in a 1 year, $20K in a 6 month, and $10K more in a different 6 month in 3 months. When the first 6 month matures open a new 1 year with $10K. Now you've got a $10K 6 month CD maturing every 3 months, and a 1 year every 6 months.
You can play around with the numbers based on $ amounts and how often you want cash available. If you don't need to be as liquid as my example you can forgo the lower interest 6 month CD's and plop more of it in 1 or 2+ year CD's. If you want to be more liquid you could just spread everything into (6) 6 month CD's, and so on and so forth.
As an added benefit I've found this helps cut down on dumb spending and is a good way to save for a house. Just make sure you start cashing these out and back into checking/savings in time to actually use the money for a house or any other major purchase.



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