In Be prepared for the unexpected with an emergency fund I discuss why you need an emergency fund and the benefits of having one if your looking to simplify your finances. The questions now is how will you fund your emergency fund?
I believe you need to have a cash emergency fund instead of relying on credit cards or home equity lines of credit.
Here are reasons why credit card and lines of credit are not reliable sources of emergency fund:
Credit Card Issuers: Buy Something or Else! – credit card companies are cutting credit card limits as well as closing credit cards that because of non-use. So if you have a credit card for emergency purposes and you have not used it recently it may be at risk closing. This can have significant impact on your personal finances.
Can’t borrow from home equity line of credit – Some financial institution may block you from borrowing from your line of credit. Make sure you read your loan documents to see if this can happen to you.
Credit Card holders are being squeezed – So that means it is possible that your credit card company has cut your credit limit in half thus reducing your available funds for emergency.
More lowering of credit card limits – Hope I get my point across. Relying on your credit card to get you through an emergency may not be the wise thing to do.
Homeowners losing equity lines – Home equity lines of credit are not what they used to be.
Home equity lines of credit next – Why you do not want to rely on home equity to fund your emergency.
Lenders cut lines off – Its not just home equity lines of credit. If you have a personal line of credit you want to make sure its still available to be used.
BOA No credit for you – One more story to think about. This could be you.
Here are more articles discussing ways to funded your emergency fund:
Emergency Fund Math -How much have you saved in your emergency fund and how did you come up with that number?
21 strategies for creating emergency fund – I am sure you can implement one of these strategies to fund your emergency fund.
Figuring the size of emergency fund – Wisebread explains how to size up your emergency fund.
Steps to build you emergency fund – Five simple step to build your cash emergency fund.
How much cash do I need for E-Fund – Money Under Thirty shows you how to calculate you emergency fund as well as provides a free spreadsheet to help.
Hope these articles makes you rethink how you will fund your emergency fund and why the prefer funding method is cash. So take action and begin to fund your emergency fund with cash in a high yielding savings account.