How to Build an Emergency Fund – 4 Reasons You Need One Now

Why you need an emergency fund

Do you know how to build an emergency fund? It’s easier than you think to start building an emergency fund. But, you need to start now!  Having an emergency fund is an essential part of everyone’s financial planning. There are many reasons that you need an emergency fund, and there has never been a greater need to protect yourself and your family than today because of the often chaotic economic climate lately. How to Build an Emergency Fund With the economy often unpredictable, it is even more crucial to be prepared for the unexpected. You never know when Murphy will strike, and you can always expect it at the worst possible moment. An emergency fund is the best way to … Read more

Reader’s Question: Should You Invest Emergency Fund in Mutual Funds?

Is It Better To Save For Closing Costs Or Pay Down Loan?

This is a Reader Question in our the Reader’s Questions Series which highlight questions emailed to me by you, the readers of Money Q&A. Be sure to find out at the end of this article how you can receive a free copy of Dave Ramsey’s book, The Total Money Makeover if your money question is chosen to be featured on a future blog post. If you’re not familiar with Dave Ramsey’s book, you should run right out and get it. It is one  of my top ten best personal finance books that everyone should read. Now…on to our reader’s question. This week’s featured question is from Jen who asks, “Should you invest an emergency fund in mutual funds?” Invest Emergency Fund Should you invest emergency … Read more

Cash in a Flash: Why You Need to Start an Emergency Fund Today

Dave Ramsey’s Baby Step One - $1,000 Emergency Fund In The Bank

One of the most important pieces of financial advice around there is to start an emergency fund. Most people are aptly aware of it but still choose to do nothing about it. They are not sure how to start an emergency fund. There could be many reasons for this as to why no one has acted on this advice yet. But, because of this over a third of Americans are unable to pay for unexpected emergency expenses, as their savings is simply not there. There is a lot of reasons to start an emergency fund today. How to Start an Emergency Fund Starting the Fund There are strategies and various reasons behind starting an emergency fund. You’ll need to stack … Read more

Dave Ramsey’s Baby Step Three – Fully Funded Emergency Fund

Why you need an emergency fund

The other day I wrote an overview of Dave Ramsey’s baby steps system from his book, The Total Money Makeover. There are seven baby steps that you should follow in order that will lead you to financial peace that he discusses in his book which is one of the Top Ten Personal Finance Books of all time that you should be reading. Today, we’re going to focus on baby step 3. Dave Ramsey’s baby steps are… Baby Step 1 – $1,000 Emergency FundBaby Step 2 – Pay Off All Of Your Debt With A Debt SnowballBaby Step 3 – Fully Fund Your Emergency FundBaby Step 4 – Save 15% of Your Income For RetirementBaby Step 5 – Save For Your Children’s College EducationBaby Step 6– Pay Off Your … Read more

Dave Ramsey’s Baby Step One – $1,000 Emergency Fund In The Bank

Dave Ramsey emergency fund of $1,000 to start

The other day I gave a brief overview of Dave Ramsey’s baby steps system to financial freedom that he outlines in his book, The Total Money Makeover. There are seven baby steps that you should take in order to gain financial peace. Baby Step 1 – $1,000 Emergency Fund Baby Step 2 – Pay Off All Of Your Debt With A Debt Snowball Baby Step 3 – Fully Fund Your Emergency Fund Baby Step 4 – Save 15% Of Your Income For Retirement Baby Step 5 – Save For Your Children’s College Education Baby Step 6 – Pay Off Your Mortgage Early Baby Step 7 – Build Wealth And Give Today, I will show you the ins and outs and the method behind the madness of only establishing a … Read more

Your 401k Retirement Plan Is Not An Emergency Fund

Your 401k Retirement Plan Is Not An Emergency Fund

Your 401k retirement plan is not an emergency fundRecently, one of my coworkers asked my opinion about taking out a 401k loan to help replace a blown engine in his wife’s car. This is a horrible idea. Your retirement plan is not an emergency fund.

Car troubles, uninsured medical expenses, house renovations, and other everyday items are not great uses for money that you have invested in your retirement fund. You should not use your 401k as an emergency fund.

It was not designed for that, and you potentially ruin the benefits that the retirement plans were designed to give you. Some studies estimate that as many as 28% or more 401k retirement plan holders have taken out loans against their 401k plans.

Your 401k Retirement Plan Is Not An Emergency Fund

Ruins Future Earnings

Many people think that borrowing money from their 401k retirement plans is no big deal because they are simply paying themselves back with the interest on the loan. While that is true, borrowers are missing out on compounding interest that that loan amount would have produced over the life of that investment while it is not in the account.

One of the biggest mistakes I made was borrowing about $10,000 from my 401k retirement plan after only having graduated from college for five years. I paid back my loan with interest over a three year term. But, not only was my $10,000 not earning interest during those three years.

That interest does not compound over the course of my future career. And, after just five years out of the gate from college, I have probably another good 40 years of work in my future before I fully retire.

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