I flew down to Sitka early (planned for Friday, arrived Tuesday) and have had a good time hanging out with my folks. It’s always a pleasure to talk business and finances with my Dad, and we got onto the subject of inflation yesterday. I thought I’d dig up a little more info on the rate of inflation today, and remind myself (and friends) to put our money in a better spot ūüôā¬†According to InflationData.com, the inflation data for¬†Jan.-Nov. 2007 shows an average rate of inflation of 2.49%. What does that mean to you? Well, if you choose to keep your entire savings in a general savings account (currently giving 1.51% at MatValley Federal Credit Union), you’re loosing 1.5% of your money’s value each year. Ouch! That only equates to $15 a year on a $10k savings, but I’m not a big fan of any type of loosing situation, whether it be $5 or $500. And, if like me, you thought you were fairly safe in a good ‘ol money market account (2.8% on $10k at MVFCU), be warned that we’re just staying ahead of inflation. So, to quote Jimmy on his latest saying, “What to do?”¬†¬†¬†Here’s what we at MaxwellHouse do when it comes time to shuffle around the Benjamins. First we determine how much money we want to keep at each risk/liquidity level. We like to keep some in our Money Market account just for ease of use, and then transfer it when needed into checking. Next, we throw an “emergency fund” into CD’s at our local bank. These earn around 4% annually, still not great but at least ahead of inflation. They’re easy to access in an emergency (although a penalty is assessed). If you feel comfortable, you can search on Bankrate.com for who is providing the best rates for these investments. Often times, an “internet only” bank can provide a better return than the local guys. ¬†¬†Finally, with any remaining money that will not foreseeably be needed in 5 or more years, I recommend utilizing a portfolio of funds. I like Fidelity, but there are other great companies that offer this service. This money is intended for distant future purchases: car upgrade (possibly), ¬†buying a house, starting a business, etc. Note, I didn’t mention education. I plan on talking about that in a later post.¬†¬†Retirement also has to be figured into this equation, but I’m not going to include that topic here.¬†¬†All in all, just a reminder to myself, and encouragement to stay ahead of inflation and keep your resources working hard ūüôā¬†

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