Over the course of 13 seasons in the NBA, basketball star Antoine Walker of the Boston Celtics made a mind-numbing $110 million. Now Walker is practically broke. How did a renowned star blow through so much money in such a short time? ESPN’s interview with Walker provides the sad story.

Walker’s outsized spending was legendary in a league where high rollers are the norm. Think racks of custom-tailored suits, a driveway littered with Bentleys and Hummers, and mansions for himself and his family.

Add to that Walker’s entourage of 8 or 9 buddies who would travel the world with him in high style. Walker blew $2.5 million on a Chicago mansion for his mother with an indoor pool and – count ‘em – 10 bathrooms. Another $3.1 million went for a Miami home and yet another $4.1 million went for a downtown Chicago condo, both of which are now for sale.

And then there was the gambling. He would regulalry play blackjack for a couple of thousand dollars a hand. He finally surrendered to authorities in South Lake Tahoe for bouncing checks totaling $1 million at Harrah’s Casino.

With all that spending came numerous creditors including his former agent who won almost $600,000 from Walker for unpaid fees. To compound Walker’s woes, a $10 million real estate investmen in Chicago is in the process of going south.

If there is a moral to be had from the sad tale of Antoine Walker it is this: how you spend your money is just as important as how much money you make. Unfortunately for Antoine, he found out the hard way.

The Bottom Line: no matter how much money you make, always be careful with how you spend and invest it.

photo credit: Keith Allison

But what if you don’t want to lock in your money for the full five year period? Most banks, including Ally, will charge you an early withdrawal penalty if you pull your money out before the term of the CD is over. In Ally’s case they charge a penalty of the last 60 days of interest.

But with the dramatic difference in yields between the 1-year and 5-year CDs, you would actually come out ahead by only keeping your money in the 5-year CD and pulling it out after a year if you needed. If you factor in the withdrawal penalty you would still be making an annualized rate of 2.57% after one year in the 5-year CD. There is no bank that will pay you anything close to 2.57% for a one-year CD.

After 2 years your annualized rate, factoring in withdrawal penalties, is 2.83%, which still beats Ally’s current 2-year CD rate of 2.00% APY.

After 3 years your big yield advantage starts to drop off. You annualized rate for 3 years is 2.91%, which is an excellent rate although a few banks do offer 3-year CDs around that level.

Here is a chart from My Money Blog that shows the annualized rate of return with and without a withdrawal penalty:

Now one thing to watch out for with this strategy is whether Ally (or whichever bank you go with) changes their early withdrawal rules. If this changes to 180 days worth of interest then the advantages of breaking a 5-year CD term are probably gone.

One strategy for maximizing your savings would be to buy several CDs in smaller denominations. If you wanted to put $100,000 aside, for example, you could buy five $20,000 5-year CDs. If you needed to withdraw $20,000 you would only need to break one CD and would leave the other four intact. You would be maximizing your short-term yield while minimizing your withdrawal penalties.

The Bottom Line: If you’re looking for better short-term CD rates, put your money into a 5-year CD with small withdrawal penalties. If you need to pull your money out sooner than five years you’ll still be making a much better yield than a 1 or 2 year CD.

While the Dow Jones Industrial Average flirts with the 11,000 mark, an increasing number of signs are pointing to potential trouble ahead. The markets have been on an incredible run over the last year with the Dow up more than 60 percent from its lows 12 months ago and the Nasdaq up a whopping 90 percent.

Despite the run-up, there are a few reasons to think that we’re close to a short-term peak in the market:

Price to earnings ratios – perhaps the most basic measurement of the market – are significantly above their average. Ratios in the Standard & Poors 500 index are 13 percent above the average since 2005. In contrast, just a year ago they were 40 percent below the average, suggesting that the market has come too far too fast.

Based on data going back 90 years, whenever the Dow has experienced a rate of change exceeding 40 percent in a 12 month period, it has often been a sign of a market peak (see the chart above). According to Bloomberg, in three cases when the market has experienced a rate of change above 40% it has only signaled a short term pause, after which the market went higher. However, in 11 other cases a rapid rate of change has been followed by sizable downturns, including the 1929 crash.

Interest rates will likely rise. Numerous factors are pointing to the Federal Reserve having to increase interest rates over the next year. While the exact timing isn’t known, it’s almost certain that rates will be higher in a year than they are now. Higher interest rates could pull some investors out of the stock market due to the higher yields offered.

Housing may not recover. The nascent housing recovery may have started to stall in many areas of the country. Rising interest rates, continued foreclosures, and the end of the federal first-time homebuyer rebate program will only make the situation worse.

The big question that no one can answer is: if the market falls, how much will it fall? Are we looking at a mild correction or another serious downturn?

The Bottom Line: with the stock market reaching new highs it’s time to exercise healthy caution. Several factors point to trouble ahead.

Becoming a parent means getting your financial house in order. While you could let your finances slide a bit when you were single, you now have people depending on you. Doing some basic financial planning today can mean the difference between making your golden years happy and productive or stressful and uncertain. Whether it’s your your mortgage, insurance, or savings, every aspect of your finances should be reviewed to make sure your family is safe and secure.

Here are the 8 most important financial steps you can take for your family:

1. Buy life insurance. When you were a swinging single you didn’t have to even think about life insurance. Now that you have a family that’s depending on you, it’s imperative that you and your spouse get a life insurance policy. Term life insurance is usually sufficient and you want to make sure you get enough that your family can continue to live comfortably if you pass away, so think about at least $500,000 in coverage. If you’re healthy, term life insurance is not a huge monthly cost and it can really put your mind at ease. Use one of the many life insurance comparison websites to instantly get a rate quote.
2. Build up a rainy day fund. Life is unpredictable and having a family multiplies that unpredictability. Unforeseen medical expenses, automotive costs, or even natural disasters can quickly put a dent in your monthly budget. Take the time now to sock away at least three to five months worth of living expenses and put that money in a savings account that is accessible. But remember – this is emergency money only, so don’t go blowing it on a big vacation.
3. Review your health insurance. Medical expenses are eating up an increasingly huge chunk of the average American family’s income. It’s time to review your health insurance to make sure you have enough coverage and that your deductible isn’t too high. If you have children, chances are you’re going to the doctor on a regular basis. While having a high deductible is a good way to save money on health insurance while you’re single, frequent doctors visits will mean a lot of money out of your pocket. Review last year’s medical costs, see how much you had to pay, and adjust your deductible accordingly.
4. Buy a house. Although the housing market has been in a tailspin for the last several years, buying a house has traditionally been one of the best investment vehicles for families over the long term. Take advantage of today’s historically low interest rates to lock in a lower cost 30 year fixed mortgage. While it might feel like a stretch to pay for it now, chances are in 30 years you will be very happy about making the decision to buy.
5. Start a college fund. Sure, when your kids are toddlers college can seem like a lifetime away. But the years pass by faster than you can imagine, so start saving up for college now. Putting away even a small amount every month or quarter can allow the power of compounding to take hold and build up your savings over the long term.
6. Get a will. No one likes to think about death, but if it happens your family needs to be ready. Having a will prepared does not have to cost an arm and a leg – ask around to see which lawyers specialize in this type of work.
7. Plan for retirement. Saving for retirement on top of all your other family expenses can seem like an overwhelming burden, especially in the current rough economy. But like starting a college fund, time is your friend. The sooner you start saving, the longer your money will have to grow. Make sure you take full advantage of any 401k plans offered through your work.
8. Create a budget and track it. You can’t control your expenses unless you know exactly where your money goes each month. Use a program like Quicken or Mint.com to track your expenses and see what the trend is. Are you spending too much on entertainment or groceries? Find where the big expenses lie and figure out ways to cut back. You can also use these programs to monitor your budget month to month. The nice thing about a program like Mint (which is free, by the way), is that your accounts are linked together so there’s little to no manual entering of data. Login at anytime to check how close to your budget you are.

While these eight steps may seem like a huge amount of extra work, you don’t have to do them all at once. Take one item from the list to complete per week and eventually you will get through them all. By the end, you’ll know much more about your present financial condition and will be able to successfully plan for the future.

photo credit: Sukanto Debnath