Double Whammy: mid term investion opinion and Bill Paying Strategy

[amarowsky]

OK 2 part post:

***Planning on saving for a different house in the next 5-8 years. Trying to get at least 40K before I really start looking. I been saving about 20% of my current net income which should average about $6500-8000 annually. Currently I'm just dumping it into my EF .85% online bank account, but once it reaches a couple grand I would like to see it start growing faster. I was thinking of a first account to start off in as something like this vanguard bond fund https://personal.vanguard.com/us/fun...T#hist=tab%3A0 My 401k is though vanguard so I'm familiar with the site and their customer service. And I have always liked their performance. Let me know what you think and any suggestions about how I should approach it, divide it, or differently allocate it.

***Bill paying:
I worked it out and my monthly bills less my current mortgage are like 642 roughly a month, this is rough breakdown.
145 cell phone (mine plus my moms i pay),
100 for electricity,
100 (month avg over a year) gas,
167 AAA car insurance (2 cars, bout to drop a ton cuz turning 25 in 10 days),
70 internet
30 water break down monthly
30 medicine
Because they are all automatically withdrawn from my account, I was thinking I should open a seperate specific Credit Card that has a solid reward, like the 2% some people talked about a while ago, and then just simply have that card automatically paid off in full from the account that normally is drawn out of. I figure 2% of $7704 a year is still $154. So its like paying one large bill for free everymonth, and correct me if I'm wrong but this frequent activity would most likely improve my credit steadily.
Ideas/thoughts/opinions/concerns?

Thanks a bunch gang, you guys are always my go to source of opinions and ideas

[Slug]

There's no reason not to put those bills on a credit card and reap the rewards. I really don't think the number of transactions has any bearing on your credit score though.

Putting some of your EF/down payment in a short-term or intermediate-term bond fund should be fine. I plan on doing the same at some point. I always plan to have about $20k in an easily accessible bank account though.

[YLTL_Dan]

Originally Posted by amarowsky

OK 2 part post:

***Planning on saving for a different house in the next 5-8 years. Trying to get at least 40K before I really start looking. I been saving about 20% of my current net income which should average about $6500-8000 annually.

Great job on your savings! You're right at the time threshold for keeping it liquid vs investing it. I would be very careful with the money because you don't want to risk losing any of it. Do you have a full emergency fund in liquid savings (3-6 months of bills)? If so, I'd be ok with investing that money for the long term (I like Vanguard index funds). If not, you might want to keep that amount in your liquid savings and move the rest to Vanguard.

Originally Posted by amarowsky

***Bill paying:
I was thinking I should open a seperate specific Credit Card that has a solid reward, like the 2% some people talked about a while ago, and then just simply have that card automatically paid off in full from the account that normally is drawn out of. I figure 2% of $7704 a year is still $154. So its like paying one large bill for free everymonth, and correct me if I'm wrong but this frequent activity would most likely improve my credit steadily.

I use a credit card to pay my recurring monthly bills mostly out of convenience. However, I wouldn't do it to try and 'make money' off of it because more than likely you'll have to pay an annual fee plus pay taxes on your 'rewards'. I would only do it if you're *certain* you'll pay it off every month. Also, it could help your credit report unless your 'available credit' is too low. For example, if your credit line is $500 and your monthly bills are around $450, it will look like you're using your maximum credit line every month (it doesn't matter if you pay it off every month) and hurt your score.

[Petunia 100]

Credit card rewards aren't taxable. (If you have seen the recent news story about Citibank 1099ing people for air miles, note that it is for air miles awarded as a bonus for opening checking/savings accounts, not for opening a credit account.)

There are plenty of rewards cards which have no annual fee, so look for one of those. Chase Freedom is my personal favorite.