You've seen the commercials. Ordinary people, like you and me, talking about retirements being put off, moving in with their children and putting off children's college educations. For many of us, this is the reality after twenty-four months of the worst recession we've seen in decades. You've seen friends and neighbors lose their jobs and their homes. Words like foreclosure, downsizing and bankruptcy have crept into our daily vocabulary. But, the word that should be creeping into your vocabulary is CD Ladder.

"CD Ladder?" you say. I've never even heard of it. I know what CD's are, but I've been burned with CD's before. I've had my money tied up when interest rates went up, but I couldn't take advantage of the increase without incurring huge penalties for early withdrawal on my CD. A CD ladder is a series of CD's that mature at regular intervals. A CD Ladder could be the best way to protect yourself against fluctuation in interests rates and not having all of your money tied up for long periods of time. As you'll learn, a bad CD rate lasts only as long as the rung span, the other CD's in the Ladder even out the peaks and valleys of the rates.

Is this some exotic investment strategy that's going to make me an overnight millionaire? Do I have to pay my broker exorbitant commissions to get the best return? Is this a club I need to be a member of to get the best rates? The answer to each of the previous questions is a resounding NO. In fact, with interest rates readily available on many sites on the Internet, researching where you need to put your money to work for you is easier than ever. Let me show you how to make a CD Ladder work for you.

In order to make CD Laddering a valuable part of your total portfolio, you'll need to know two things to help you figure out which CD Ladder is best for you: 1. The amount of money you have available to put into CD's and 2. The length of time you want your money tied up for. Once you have these two questions answered, you can begin your research.

As you already know, a CD is loaning your money to a bank (or other financial institution*) for a fixed period of time in return for a fixed rate of return. Yes, there are variable CD's, but for CD Laddering it is best to use a fixed rate of return. Usually, the longer CD's have larger rates of return.

In order to show you how to work a CD Ladder, I am going to use a 1-year rung, meaning that every year one of my CD's matures. Your initial investment will depend on your financial situation and the minimum deposit requirements. The difference will be the length of the CD's. I am going to buy the CD's to make sure I have one maturing every year for the next 5. At the end of the first year, you will roll over the 1 year CD to a 5 year CD, and each CD after that which matures you then convert to a 5 year CD, so you have 5 rungs on the ladder full at all times. We'll use Year 1 as our starting point so you will see the progress.

Initial Investment (Beginning of YOUR Ladder), Year 1

Rung 1: 1 year CD, CD A

Rung 2: 2 year CD, CD B

Rung 3: 3 year CD, CD C

Rung 4: 4 year CD, CD D

Rung 5: 5 year CD, CD E

Year 2, CD A has matured

Rung 1: CD B

Rung 2: CD C

Rung 3: CD D

Rung 4: CD E

Rung 5: Purchase 5 year CD F

Year 3, CD B has matured

Rung 1: CD C

Rung 2: CD D

Rung 3: CD E

Rung 4: CD F

Rung 5: Purchase 5 year CD G

Year 4, CD C has matured

Rung 1: CD D

Rung 2: CD E

Rung 3: CD F

Rung 4: CD G

Rung 5: Purchase 5 year CD H

Year 5, CD D has matured

Rung 1: CD E

Rung 2: CD F

Rung 3: CD G

Rung 4: CD H

Rung 5: Purchase 5 year CD I

Year 6, CD E has matured

Rung 1: CD F

Rung 2: CD G

Rung 3: CD H

Rung 4: CD I

Rung 5: Purchase 5 year CD J

CD's F, G, H, I, and J are all 5 year CD's that mature at 1 per year.

Remember that you create a ladder or ladders of whatever length you would like. In a low-rate environment, you might want to keep the length of the ladder fairly short so you can take advantage of rates when they begin to rise.

Please understand that times are changing fast and so should your portfolio. It's a great investment of your time to understand the best ways to make your money work for you and your financial future. So, the next time your water cooler talk turns to finances add CD Ladder to someone else's vocabulary. They will thank you for that later.

*Other financial institutions do not have the $100,00 FDIC guarantee as banks do, so I recommend using a bank for your CD Ladder.