Does it really make sense to use a line of credit as your emergency fund?
QUESTION: Tim is working on his debt snowball and has one or two month’s worth of expenses for emergency savings. He’s not worried about emergencies because he has a line of credit that he would use. Is a line of credit a good emergency fund?
ANSWER: Do you really think it’s a good idea to go into debt in the middle of an emergency? A line of credit is not a good emergency fund. You should have cash available – three to six month’s worth of expenses. Then pay your house off and invest in real estate. You’ve got to do this in the right order.
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