Comments on: Why Using a HELOC as an Emergency Fund http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/ This is where your finance takes place Thu, 20 Nov 2008 18:07:13 +0000 http://wordpress.org/?v=abc By: The Financial Blogger http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1944 The Financial Blogger Sat, 01 Mar 2008 18:20:36 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1944 Ana; this is in loonies so it might become interesting in a year or so ;-) Ana; this is in loonies so it might become interesting in a year or so ;-)

]]> By: traineeinvestor http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1942 traineeinvestor Sat, 01 Mar 2008 06:44:19 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1942 As a person who firmly believes that emergency funds are wasteful (low returns compared to the alternatives), allocating the money that would otherwise be parked in a low retrun emergency fund to other investments wins my vote. An additional point in favour of this strategy is that it gives you a choice: if you need the money you can draw on your HELOC or you can sell some of your investments. Which one? That will depend on your circumstances at the time. As a person who firmly believes that emergency funds are wasteful (low returns compared to the alternatives), allocating the money that would otherwise be parked in a low retrun emergency fund to other investments wins my vote.

An additional point in favour of this strategy is that it gives you a choice: if you need the money you can draw on your HELOC or you can sell some of your investments. Which one? That will depend on your circumstances at the time.

]]> By: Debt Free Revolution http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1941 Debt Free Revolution Sat, 01 Mar 2008 04:51:37 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1941 FP-Mike, I never said everyone up there was named Mike...but both you are named Mike, both wrote a rebuttal to the same blog post within 24 hours of each other! Oh, and you're both Canadian LOL Add to that a cousin and an uncle and a couple friends here locally, plus about a handful of American Mikes who are pf bloggers ... and I gotta do something to keep y'all straight :D Or are you two just yanking my chain here...? Oh, Mike-TFB (is that better?) when you say you barely net that much after taxes, is that in USD or in Loonies? If it's in Loonies, you probably make more than we do now.... FP-Mike, I never said everyone up there was named Mike…but both you are named Mike, both wrote a rebuttal to the same blog post within 24 hours of each other! Oh, and you’re both Canadian LOL Add to that a cousin and an uncle and a couple friends here locally, plus about a handful of American Mikes who are pf bloggers … and I gotta do something to keep y’all straight :D

Or are you two just yanking my chain here…?

Oh, Mike-TFB (is that better?) when you say you barely net that much after taxes, is that in USD or in Loonies? If it’s in Loonies, you probably make more than we do now….

]]> By: The Financial Blogger http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1928 The Financial Blogger Thu, 28 Feb 2008 11:34:46 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1928 Ana - some of us are named michael or mikael as well ;-) we only have 3 different names in Canada ;-) LOL! Ana - some of us are named michael or mikael as well ;-) we only have 3 different names in Canada ;-) LOL!

]]> By: Four Pillars http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1926 Four Pillars Thu, 28 Feb 2008 05:04:44 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1926 Interesting take on this FB. Ana - we are not all named "Mike" up here. :) CR - good point about the liquidity of a large emergency fund. B&C - good point as well - the blog post might have been Queer Cents http://www.queercents.com/2008/02/04/countrywide-suspending-equity-lines-of-credit-heloc/ Interesting take on this FB.

Ana - we are not all named “Mike” up here. :)

CR - good point about the liquidity of a large emergency fund.

B&C - good point as well - the blog post might have been Queer Cents http://www.queercents.com/2008/02/04/countrywide-suspending-equity-lines-of-credit-heloc/

]]> By: The Financial Blogger http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1924 The Financial Blogger Thu, 28 Feb 2008 01:37:06 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1924 Ana; You may be able to save money at this pace, but you will probably agree that most people can't (I barely make this much net of taxes!). I agree with you when you say that we are living in two different systems in term of taxation, banks and insurances. I guess this is the beauty of having bloggers communicating to each other; we can express opinions and learn more about what is going on in the world :-) CR; I just can't agree more with you, having one of two months of income in a savings account won't hurt you much while the HELOC can be used for major events. B&C; That's crazy, I actually never considered having the bank canceling my HELOC... On the other side, mine is at 80% of my property value so I have quite a buffer. If I understand correctly, you could get a 100% HELOC in the US. This would definitely be a problem if banks start canceling them! Ana;
You may be able to save money at this pace, but you will probably agree that most people can’t (I barely make this much net of taxes!).

I agree with you when you say that we are living in two different systems in term of taxation, banks and insurances. I guess this is the beauty of having bloggers communicating to each other; we can express opinions and learn more about what is going on in the world :-)

CR;
I just can’t agree more with you, having one of two months of income in a savings account won’t hurt you much while the HELOC can be used for major events.

B&C;
That’s crazy, I actually never considered having the bank canceling my HELOC… On the other side, mine is at 80% of my property value so I have quite a buffer. If I understand correctly, you could get a 100% HELOC in the US. This would definitely be a problem if banks start canceling them!

]]> By: brokeandclueless http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1922 brokeandclueless Wed, 27 Feb 2008 23:45:33 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1922 Hi Mike, I kind of see what you're saying here and I agree with you, although depending on a HELOC for emergency funds still makes me a little nervous. One of the main reasons why was a situation posted on another PF blog (sorry, i cannot seem to remember at the moment whose it was): the person was depending on his HELOC for emergency funds and using it like a chequing account (sort of like the ManuOne account here in Canada), so he was paying everything towards the outstanding portion instead of, say, paying half into paying back the HELOC and putting half into cash savings. Unfortunately, the housing market in his area plummeted and the bank cancelled his HELOC because he no longer has enough equity in his house based on the current market value. Now, granted he had actually used his HELOC rather than just saving it for an emergency and the US housing market isn't doing as well as the Canadian housing market, but who's to say that we won't have the same problems in the future and the bank won't cancel your HELOC? I guess it depends mostly on how much equity you have in your home. If you have the bare minimum, but enough to qualify for the HELOC, perhaps it's not good to rely on it in the event of an emergency. Wow, I wrote HELOC a lot! I love acronyms LOL B&C Hi Mike,
I kind of see what you’re saying here and I agree with you, although depending on a HELOC for emergency funds still makes me a little nervous. One of the main reasons why was a situation posted on another PF blog (sorry, i cannot seem to remember at the moment whose it was): the person was depending on his HELOC for emergency funds and using it like a chequing account (sort of like the ManuOne account here in Canada), so he was paying everything towards the outstanding portion instead of, say, paying half into paying back the HELOC and putting half into cash savings. Unfortunately, the housing market in his area plummeted and the bank cancelled his HELOC because he no longer has enough equity in his house based on the current market value. Now, granted he had actually used his HELOC rather than just saving it for an emergency and the US housing market isn’t doing as well as the Canadian housing market, but who’s to say that we won’t have the same problems in the future and the bank won’t cancel your HELOC? I guess it depends mostly on how much equity you have in your home. If you have the bare minimum, but enough to qualify for the HELOC, perhaps it’s not good to rely on it in the event of an emergency.

Wow, I wrote HELOC a lot! I love acronyms LOL

B&C

]]> By: Customers Revenge http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1921 Customers Revenge Wed, 27 Feb 2008 15:28:15 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1921 Why does an emergency fund of six months need to be in cash? If the emergency fund is to cover expenses while you can't work then all six months doesn't have to be totally liquid. Maybe just one or two months with the rest in something a little less liquid. If, on the other hand, it is to cover large unexpected bills then a HELOC is totally compatible. You're still working, you just had a large bill. Pay for it from the HELOC, and then decide how to repay the HELOC .. either from investments or over time from the paycheck. Your resources are all your assets combined. You put them in a form that makes the largest benefit for you, which is not usually cash. Borrowing, selling, buying, working, bartering, are all ways to convert assets into benefits you need at the time. Having a huge pile of cash just doesn't seem to be optimal. Why does an emergency fund of six months need to be in cash? If the emergency fund is to cover expenses while you can’t work then all six months doesn’t have to be totally liquid. Maybe just one or two months with the rest in something a little less liquid.

If, on the other hand, it is to cover large unexpected bills then a HELOC is totally compatible. You’re still working, you just had a large bill. Pay for it from the HELOC, and then decide how to repay the HELOC .. either from investments or over time from the paycheck.

Your resources are all your assets combined. You put them in a form that makes the largest benefit for you, which is not usually cash. Borrowing, selling, buying, working, bartering, are all ways to convert assets into benefits you need at the time. Having a huge pile of cash just doesn’t seem to be optimal.

]]> By: Debt Free Revolution http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1920 Debt Free Revolution Wed, 27 Feb 2008 13:48:51 +0000 http://www.thefinancialblogger.com/why-using-a-heloc-as-an-emergency-fund/#comment-1920 Mike2, I appreciate the link and the conversation. I'd also like to point out cash emergency funds are to be saved up quickly :) I am starting in on building mine now that I have paid off all my consumer debt. So instead of $377 per month and taking four years, I will be saving $1500-2200 per month, and would reach $25k in maybe one year (I am actually intending to save $10k more by the middle of summer). And when I mentioned death, I said "death in the family." Also, I speak from experience when I say it is a pain to get any form of disability going after an injury, and in cases of an accident (usually of the auto variety) insurance companies tend to try to lowball with their initial settlement offer. I notice you are Canadian (as is FP-Mike) and that may be at the root of our little debate since I am American and under a different insurance, disability, medical, and banking system. Mike2, I appreciate the link and the conversation. I’d also like to point out cash emergency funds are to be saved up quickly :) I am starting in on building mine now that I have paid off all my consumer debt. So instead of $377 per month and taking four years, I will be saving $1500-2200 per month, and would reach $25k in maybe one year (I am actually intending to save $10k more by the middle of summer).

And when I mentioned death, I said “death in the family.” Also, I speak from experience when I say it is a pain to get any form of disability going after an injury, and in cases of an accident (usually of the auto variety) insurance companies tend to try to lowball with their initial settlement offer. I notice you are Canadian (as is FP-Mike) and that may be at the root of our little debate since I am American and under a different insurance, disability, medical, and banking system.

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