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Post-transaction Finances

If you sell your house and don't immediately buy another one, you need to find a safe place to park your proceeds. You don't want to put that money somewhere volatile, such as the stock market, where a market crash on any given day, week, month, or year can delay the purchase of your new home for a long, long time. On the other hand, you also don't want tens of thousands of dollars languishing in a low- or no-interest checking or savings bank account.

Money market mutual funds offer you the best of both worlds -- safety and reasonable rates of return. Although money market funds are not insured by the Federal Deposit Insurance Corporation (FDIC), no money market fund has ever lost retail shareholder principal in the history of the fund business. In recent years, money market funds have yielded in the 5 to 6 percent range.

Like bank savings accounts, but unlike certificates of deposit, money market funds offer daily access to your money without penalty. Most money market funds also offer free check-writing privileges, usually with the stipulation that the checks are for at least $250 or $500.

If you're in a high tax bracket, consider a tax-free money market fund that may end up netting you a higher effective return than a taxable money market fund on whose dividends you must pay federal and state income taxes.

Double-check the tax rules for excluding tax on profits

A recently passed tax law allows you to exclude from tax a significant portion of the profits from the sale of your primary residence. Congress can't ever seem to leave things alone, though, so keep your eyes and ears open for possible changes to the real estate tax laws. If you base important decisions on outdated rules, you risk losing money.