abcInvesting Logo
Retirement plan decisions made easy


Emergency Cash Reserve

Chuck asked me to post his recent suggestions about an emergency reserve:

Get serious about an emergency fund: If you suddenly lost your home, your job, or were disabled with limited health or disability benefits, how would you afford a hotel, transportation or medical bills? How would you pay for all that? Credit cards? Okay, but how would you pay off those cards? An emergency fund needs to be three to six months worth of cash at a minimum kept in an easily accessible place—not as accessible as a mattress, but not in a stock fund or some other investment that might fluctuate in value and then be tough to access for a week or more. You need to treat that cash as money that isn’t there unless a disaster occurs.  And try to open it with a high enough balance so you’ll keep it from being eaten away by any account maintenance fees.  Write down a list of things that are potential emergencies and sign it as a personal contract with yourself. That agreement should state that you will not touch the funds except in case of some of the following:

  • Loss of employment;
  • Medical bills that exceed your insurance payments (if you have insurance);
  • Emergency home or car repairs in excess of insurance that are required to make the home livable or the car drivable.

©2008-2010 abcInvesting.com. All Rights Reserved.