Comments on: The only emergency is the drain on your finances …

By: More on Emergency Funds … « How to Make 7 Million in 7 Years™

More on Emergency Funds … « How to Make 7 Million in 7 Years™ — Wed, 13 Aug 2008 10:30:41 +0000

[...] I wrote a couple of posts on Emergency Funds; my goal was to blow a hole in the standard “save a 6 month Emergency [...]

By: Why the ‘wrong’ people are rich! « How to Make 7 Million in 7 Years™

Sat, 02 Aug 2008 08:54:28 +0000

[...] make one additional point, and I’ll do it in response to a comment that Moom left me on that original post: Aren’t HELOC rates above 1st mortgage interest rates? Or if you have no first mortgage you can [...]

By: Different horses for different courses … « How to Make 7 Million in 7 Years™

Fri, 01 Aug 2008 08:55:52 +0000

[...] horses for different courses … Published August 1, 2008 Rich I posted recently on using a HELOC as part of your emergency fund strategy and Diane noticed that I had [...]

By: Is this what a transition to Money 201 should look like? « How to Make 7 Million in 7 Years™

Fri, 25 Jul 2008 16:20:19 +0000

[...] By all means keep a couple of months of expenses in the bank, but can you find something better to do with 6 months worth of expenses than having it just sit in [...]

By: AJC

AJC — Tue, 08 Jul 2008 15:24:37 +0000

@ Meg – I like your strategy – the first half: having a generous grandfather is great (can I ‘borrow’ him?), but it looks like you would have cashed out anyway, which is the important point for the grandfatherless-rest-of-us … let’s explore further (stay tuned).

By: Meg

Meg — Tue, 08 Jul 2008 04:50:40 +0000

I hate having loads of cash sitting around earning less than the rate of inflation. And I consider 3 months of expenses for me to be loads of cash. Plus I have tons of liquidity in the form of a total stock market index fund. This is from where I have drawn money when I totaled my car unexpectedly (ins only covered half the value of a comparable newer car), when I needed a down payment for real estate purchases, etc.

That has worked great over the last 5+ years of a bull market. But 2 weeks ago I was presented with an unexpected real estate investing opportunity, which I jumped on. I was of course going to put 20% down (to minimize the rate, avoid PMI, be conservative, etc). Then the market began its tumble. I was AGONIZING over the loss (it would still technically be a gain to sell, but still it sucks to sell at a market cycle low).

Luckily for me I have a wealthy and generous grandfather who volunteered completely unprovoked to lend me the money for the down payment rather than have me sell stocks at a cycle low. He has plenty of money sitting in bonds and cash that he doesn’t have any better use for, I suppose, than to thrill a granddaughter with a 2.5% loan.

I would never have counted on such generosity and would have still sold my funds for this RE investment, but come to think of it having family members with money is kind of an EF in itself. Even if I lost my job it’s not like my parents, grandparents, siblings, or even my myriad of extended relatives (who aren’t all wealthy by any means) would allow me to go hungry or miss mortgage payments. Naturally I wouldn’t allow them to do the same either, though.

By: Jeremy W

Jeremy W — Mon, 07 Jul 2008 16:46:20 +0000

Adrian, Thanks again for turning conventional wisdom on its head and helping me to think outside the box. Not sure If I will be able to convince the wife on this, but I already have some of my emergency fund in still liquid but more riskey investments, but the good thing about a balanced portfolio is you usually have something ready to sell anyway to balance it back out.

Diane, I think Adrian’s 20% rule is not to have more than 20% of your NETWORTH in ONE investment (i.e. your house) versus having 20% equity.

By: AJC

AJC — Sun, 06 Jul 2008 16:46:24 +0000

@ Moom – You are partially correct: at my level, tax deductibility of the home loan portion is limited. Having said that, I look primarily at UTILITY, which I will address in an upcoming post.

By: MOOM

MOOM — Sun, 06 Jul 2008 08:21:02 +0000

Aren’t HELOC rates above 1st mortgage interest rates? Or if you have no first mortgage you can get a lower rate? Diane: At AJC’s level mortgage interest on owner occupied property is not tax deductible I think, while interest on investment loan is. Which might explain the HELOC strategy?

By: AJC

AJC — Sat, 05 Jul 2008 20:26:55 +0000

@ Di – a mortgage is ‘permanent’ … a HELOC is ‘temporary’ (you can turn it off/on, decrease/increase as you like). Different horses for different courses … worth a f/u post, don’t you think?