Sometimes you just need emergency money. Whether you are gathering funds for a downpayment on a house, or paying a medical emergency, you may need a pile of money RIGHT NOW.
Where does that come from? Let me count the ways:
- Check your cash accounts first: checking, savings, money markets, Certificates of Deposits. This, of course, is your first option.
- Borrow from your 401k. (There will be limits and a payback.)
- If you are a first-time homebuyer, and need help with down payment, you can take $10k from your IRA without a penalty.
- If you already own a home, and have equity, your bank will most likely give you a Home Equity Line of Credit (HELOC). (Divide your mortgage balance by the current value of your home. If it’s less than 70%, you probably can get a loan.)
- You can borrow from your cash value life insurance policy – tax free, and possibly never have to pay it back. But it will reduce your death benefit.
- If you have an inherited IRA, take your RMD from that account. It’s going to come out this year anyway. If you need the money, take it out now.
- Sell something. We all have more stuff than we need.
It’s hard to think straight when you are under the gun. But if you can, take a deep breath and evaluate this step with a cool head. In some of these options, you end up with more debt. That often means an extra payment in your budget. Is that a good idea? Only you can tell.
My philosophy has always been to have plenty of money in cash. My book, Hidden Figures: Seven Numbers Women Must Know for Financial Success, gives specific formulas for knowing how much cash is right for your circumstances.
I also created Success Matrix, a series of online calculators, that shows the immediate Cash Flow and Net Worth effects financial decisions. If you liquidate some of your assets, or you add a liability, your Net Worth will automatically drop. Additionally, if you add a Liability, your Expenses will go up, because you now have another payment. The Success Matrix will show this in a powerful, visual way. Long term effects can also be demonstrated. After you spend your hard-earned assets on this new THING, will it go up in value, down in value or does it disappear? What is the likely scenario in months, years to come? It is important to look at all of these perhaps “unintended consequences.” Make sure you make your decisions with eyes wide open.
I have created the Success Matrix for my coaching clients and purchasers of my books. You can gain access either way here: www.myhiddenfigures.net
My wish for you always, is to be Safe, be Knowledgeable and be Prepared!