Observations on life

Cash Is King – HumbleDollar Yes, you do need an emergency fund‼️

Experts advise an emergency fund to cover six months of living expenses. Few people have that, but what about enough set aside for a more modest emergency?

Set a goal for yourself … $1,000 in the bank … just in case‼️

That brings us to a question I’m often asked: Why do financial advisors insist clients establish an emergency fund? After all, that cash will likely sit in a low-interest checking or savings account, where it lags behind inflation. You might be wondering whether the money could be put to better use by, say, paying down debt or investing through a brokerage account. My response: No matter how good your financial plan, the steady progress you’ve made over the years could come to a screeching halt if times turn bad. A financial emergency is just that—an emergency. Often, the bills are high and need to be paid promptly. If you put off payments, you could wreck your credit score, get hit with financial penalties and you might be charged hefty amounts of interest. This can leave you in a financial hole that’s difficult to escape.

Source: Cash Is King – HumbleDollar

Advertisements

3 replies »

  1. I am 63 and never had an emergence fund, until now. I have paid off $18,000 in credit card debt in the last 15 months. I now have $3,000 in cash and $2,500 in silver at home. Thanks to Social Security benefits. What if there is a financial crisis and the banks are closed, for a short time and your ATM / Credit Cards do not work? I will be adding more cash and silver to my emergency fund,
    I hope to have enough in my emergency fund to cover 1 year of household expenses $15,000, by the summer of 2020.
    I think paying off high interest Credit Card debt should be everyone’s goal before any money is set aside for an emergency fund. Cash is King, Credit Card debt is stupid and the banks will never get any more credit card interest from me.

    Like

    • Paying off credit cards certainly is a top priority. But I think having an emergency fund is still number one or the credit card may be used again.

      Like

  2. But, what if your choice is only between a contribution to a 401k that earns you a non-elective contribution plus a match or an emergency fund. Say you contribute $1,000 pretax to a safe harbor plan and receive a 3% of pay nonelective contribution and a 50% match on your contributions, so that after six months you have $1,000 + $1,200 + $500 or $2,700 – and the plan allows you to borrow the full amount in an emergency (full vesting), versus $750 (after taxes) in a passbook savings account? Those who have plenty of disposable income can and should establish an emergency account. Those living payday to payday should change our financial behaviors, but until we do, it is not always clear that an emergency fund is the place to start. If there is concern about market swings, most 401k plans have s money market option too !

    Like

What's your opinion on this post? Readers would like your point of view.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s