If It's Paid For, Do You Sell It?

Eric is debt free and has a good truck. Should he sell it and set up an emergency fund?

QUESTION: Eric is debt free and wants to know if he should get rid of his truck even though it is paid off. The truck is worth over $30,000 but he wants an emergency fund worse than the truck. He makes $120,000 a year.

ANSWER: A good rule of thumb is to not have more than half your annual income tied up in vehicles, which go down in value like a rock. You’re right at that point. There’s nothing wrong with those numbers; it fits the guidelines that I use. The key here is, if you wouldn’t buy the truck again, then sell it.