Considerations for Dipping Into Your Emergency Fund – Presented by Mark K. Lund, Utah Financial Advisor

Financial Advisor Utah

The AP reported that a Euclid, Ohio woman called 911 to report a crime. She had ordered eight pieces of chicken at a KFC drive-thru but the restaurant had given her only four pieces.1

“I want my chicken,” the woman was heard telling a dispatcher. She then requested that law enforcement come to the restaurant to assist in “getting all her chicken.”

Authorities responded to the KFC on Euclid Avenue, not to help the women get more drumsticks, but to explain that an incorrect drive-thru order is not a police matter.

Obviously, the woman was lacking in common sense when she placed the 911 call. But in her own defense she would no doubt say that at the time being shorted half her chicken order certainly felt like an emergency.

This kind of self-delusion can easily happen in financial matters.

One of the keys to long-term financial success is organizing your spending through a pre-determined budget. And one of the most important components of a household budget is your emergency fund. The rule of thumb is to set aside $1000 for unforeseen expenses, then adding to that amount monthly until it can cover 3-6 months of living expenses.

The emergency fund is intended to pay for things like unexpected home repairs, an unanticipated rent hike, or living expenses following an interruption in expected income.

But having a sizeable chunk of cash sitting in your checking account can be a source of temptation. And in order to get at it with a clear conscience, people can stretch the definition of an emergency.

Financial Advisor Rachel Fox has compiled a list of things that often tempt people to unwisely dip into their emergency funds.

At one end of the spectrum are the things that are obviously not emergencies—these are luxuries to be saved up for such as a new iPhone, Taylor Swift tickets, or a vacation.

Next are the items that are legitimate expenses, but because they can be predicted, they should be planned for and funded through the budget. These include car insurance, memberships, and gifts. As Dave Ramsey famously said, “Christmas is not an emergency.”

Finally come the expenses that are compelling, but still should not be treated as an emergency. For example, when a family member asks for financial help, compassion is always appropriate. But it’s important to remember that you should not put your own family’s finances in jeopardy in order to bail someone out.

Also, debt is not an emergency. Paying it off should be accomplished with long-term planning and discipline. To the extent you can prioritize, paying off debt should be done without sacrificing the assets set aside in your emergency fund.

Life is full of unexpected challenges that come with financial consequences. When the next one of these pops up, you’ll be glad you saved your emergency fund for a real emergency.

If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.

Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020

Sources:
1. http://go.pardot.com/e/91522/national-article259740255-html/946c1v/2141760580/h/PpydtTzyfxSEyoLU_kVa-1CLIuymI2U0YSuUfzZ_Upg
2. http://go.pardot.com/e/91522/s-dont-use-emergency-funds-on-/946c1y/2141760580/h/PpydtTzyfxSEyoLU_kVa-1CLIuymI2U0YSuUfzZ_Upg

Disclosure:This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

Category: Blog, Newsletters

About the Author ()

Mark K. Lund is the author of The Effective Investor, a #1 Best Seller, and founder of Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisory firm. He has provided articles for or been quoted in: The Wall Street Journal, The Salt Lake Tribune, The Enterprise Newspaper, The Utah Business Connect Magazine, US News & World Report, and Newsmax.com, just to name a few.  Mark publishes two newsletters called, “The Mark Lund Growth Report” and “Mark Lund on Money.”  Mark provides CPE (continuing professional education) courses for CPAs.  You may also have seen him on KUTV Channel 2, or as a guest speaker at a local association or business. Mark provides investment and retirement planning services for individuals and 401(k) consulting for small businesses. In his book, The Effective Investor, Mark exposes the false narrative magazines, media, big Wall Street firms, and most advisors want you to believe. The good news is that Mark will show you that you don’t need their speculative ways of investing in order to be a successful investor. Get a free copy when you schedule your initial consultation.

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