Comments on: Coping with Unexpected Expenses http://moneyminding.com/blog_mm/2008/11/coping-with-unexpected-expenses/ News and Views from MoneyMinding Headquarters Fri, 18 May 2012 09:52:40 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Eugenio Rodina http://moneyminding.com/blog_mm/2008/11/coping-with-unexpected-expenses/comment-page-1/#comment-25144 Eugenio Rodina Wed, 29 Jun 2011 09:15:57 +0000 http://moneyminding.com/blog_mm/?p=59#comment-25144 I’ve been exploring for a little for any high-quality articles or blog posts on this kind of area . Exploring in Yahoo I at last stumbled upon this site. Reading this information So i’m happy to convey that I've an incredibly good uncanny feeling I discovered just what I needed. I most certainly will make certain to don’t forget this website and give it a look on a constant basis. I’ve been exploring for a little for any high-quality articles or blog posts on this kind of area . Exploring in Yahoo I at last stumbled upon this site. Reading this information So i’m happy to convey that I’ve an incredibly good uncanny feeling I discovered just what I needed. I most certainly will make certain to don’t forget this website and give it a look on a constant basis.

]]> By: Travis Mitchell http://moneyminding.com/blog_mm/2008/11/coping-with-unexpected-expenses/comment-page-1/#comment-1289 Travis Mitchell Tue, 11 Nov 2008 06:02:13 +0000 http://moneyminding.com/blog_mm/?p=59#comment-1289 Tracy, Thanks for a great topic. One of the strategies that we teach our clients goes along with having systems in place as you pointed out in tip #1. We coach all of our clients to have lines of credit in place that can be used in the case of unexpected expenses/emergencies. The worst time to go looking for money is when you need it. If that decision has already been made, and that "system" is already in place, you can pay the expense/s without making decisions based on necessity or emotion. You simply pay the expense using the line of credit and then focus on paying that debt down. This makes it possible to maintain a reasonable credit score and benefit from unused resources, like that good credit score. Of course, having a liquid asset like cash available may be the best and most lucrative way to address an unexpected expense. For many of our clients however, here's the challenge with accumulating 3-6 months of living expenses in cash. If you think about it, assuming that a client is capable of saving 10% of net income per month, 3 months of net income saved would take apx. 30 months to accumulate; 6 Months would obviously take around 60 months. That is, of course, providing there weren't any set-backs along the way. I'm not saying that having the cash on hand wouldn't be ideal, but unless the client has no other debt, including mortgage debt, we find that in almost every situation it makes more fiscal sense to use discretionary monies to leverage debt pay down and use lines of credit to fund emergencies and unexpected expenses. After all, paying interest at 4%-24% while earning interest at .25%-4% in most cases isn’t the best use of resources. I should note, there is a level of discipline involved with this strategy, so it is not for everybody. If you constantly overspend, lines of credit may not be the best choice for you. Once again, it's about having the proper systems in place and then using those systems appropriately. This is one of the reasons that we promote the Money Merge Account® software from United First Financial® so arduously. It will manage this process for each client, based on their individual circumstances. When unexpected expenses arise, the client puts the information into the system and it recalculates how they should allocate their resources, maximizing the potential of those resources. Again, great topic. Cheers, Travis Mitchell Certified MoneyMinding Advisor Founder/Director of Debt Free Project International http://www.DebtFreeProject.com 1.888.332.8334 ext. 719 PS.. Working with a good financial planner will also ensure that the proper insurances and protections are in place in the case of catastrophic expenses. Tracy,
Thanks for a great topic. One of the strategies that we teach our clients goes along with having systems in place as you pointed out in tip #1. We coach all of our clients to have lines of credit in place that can be used in the case of unexpected expenses/emergencies. The worst time to go looking for money is when you need it. If that decision has already been made, and that “system” is already in place, you can pay the expense/s without making decisions based on necessity or emotion. You simply pay the expense using the line of credit and then focus on paying that debt down. This makes it possible to maintain a reasonable credit score and benefit from unused resources, like that good credit score.

Of course, having a liquid asset like cash available may be the best and most lucrative way to address an unexpected expense. For many of our clients however, here’s the challenge with accumulating 3-6 months of living expenses in cash. If you think about it, assuming that a client is capable of saving 10% of net income per month, 3 months of net income saved would take apx. 30 months to accumulate; 6 Months would obviously take around 60 months. That is, of course, providing there weren’t any set-backs along the way. I’m not saying that having the cash on hand wouldn’t be ideal, but unless the client has no other debt, including mortgage debt, we find that in almost every situation it makes more fiscal sense to use discretionary monies to leverage debt pay down and use lines of credit to fund emergencies and unexpected expenses. After all, paying interest at 4%-24% while earning interest at .25%-4% in most cases isn’t the best use of resources.

I should note, there is a level of discipline involved with this strategy, so it is not for everybody. If you constantly overspend, lines of credit may not be the best choice for you. Once again, it’s about having the proper systems in place and then using those systems appropriately. This is one of the reasons that we promote the Money Merge Account® software from United First Financial® so arduously. It will manage this process for each client, based on their individual circumstances. When unexpected expenses arise, the client puts the information into the system and it recalculates how they should allocate their resources, maximizing the potential of those resources.

Again, great topic.

Cheers,

Travis Mitchell
Certified MoneyMinding Advisor
Founder/Director of Debt Free Project International
http://www.DebtFreeProject.com
1.888.332.8334 ext. 719

PS.. Working with a good financial planner will also ensure that the proper insurances and protections are in place in the case of catastrophic expenses.

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