Emergency Fund: To Do or Not to DoYou’ll never know when emergency strikes and the last thing you want is be caught off-guard when it happens as it happens. One of the worst ways to be caught unprepared is when you do not have money to react to and pay for whatever urgent situation you are in.
Thus, this raises the question on whether or not you should get an emergency fund or pay off your mortgage debt. Would you rather keep paying for a monthly mortgage that you could long have paid off with your money for an emergency fund or would you rather live with no security money in the bank or elsewhere just to be free from your mortgage debt?
This is a very challenging question posed on practically every homeowner around. We can’t really blame them if they cannot give you an answer. Living off of debt somehow means you’ll have enough chance sooner to save up while having an emergency money gives you a bit more assurance that you are somehow covered no matter what happens. A good realtor will definitely help you out as you plan your finances. It will take off some burden, at least.
Benefits of Getting an Emergency Fund
Investment and savings gurus advice on people to save up for at least three to six months of emergency money. But is it really worth getting and saving up for? One of the best ways to start this discussion is to identify the benefits of setting up an emergency fund.
· It keeps you covered. If you have a ready-stash of money for whatever situation. Whether your air ducts are busted or you get injured, you would not have to worry nor waste time looking for money because you know you have it ready and easily accessible.
· Your regular finances do not suffer. Emergencies and unexpected expenses would have to be paid off using regular money for other regular bills without an emergency fund. That means that money that was supposed to go to the kids’ tuition or house bills will have to be put to pay off the emergency expense. That should hurt your budget greatly.
· Saves you from further debt. Oftentimes, in cases of emergencies, the first place we turn to for funding is loaning. More loans mean more things to pay. And that would have been avoided if you have an emergency fund to run to. With an emergency fund, you are not only getting yourself covered during emergencies, but you are also saving yourself from further expenses.
Best alternatives/places to keep an emergency fund
The thing is, a savings account is not the only place where you can keep yourself and your family covered. For one, insurance is a great place to go. On top of saving up for an emergency stash, an insurance policy can cover bigger expenses without having to eat off your daily budget too much.
Another is to keep a stable investment of some form. This allows you to keep some money for emergencies while letting you roll off the money for chances of gaining interests. Again, consult your local real estate agent for more tips on how to get different alternatives that can definitely help you out.
If you should decide to pay off some debts, look into paying off shorter-term, higher-interest debts like personal loans and credit card bills.
Whatever decision you’re making, whether you choose to get an emergency fund or not, the secret is to use your money wisely.