How Much Cash Do I Need?

by Tom Tousignant

in Blog, Financial Safety, Wealth Building

You often have to choose how to balance your savings between “liquid” cash, paying off bills, saving for retirement or college and paying down the mortgage. If the Great Recession has demonstrated anything, it’s that home equity is a poor choice. You can find out a lot more about this in previous blog posts.  I’ve written at some length on this on my blog.

Here’s a sobering statistic from last months ‘good’ jobs report:  44% of unemployed persons were out of work for 27 weeks or more. When someone loses their job, they’ll never say, “I’m so glad I have a 15 year mortgage and have paid $50,000 extra towards principle”. No, at this point, the higher mortgage payment and the equity suddenly trapped in their house is frozen from them.Image

With a mortgage payment and the need to eat and pay utilities, could you go half a year without a pay check? In today’s ‘new normal’ economy, you need to work towards the day where you can confidently answer ‘yes’ to that question.

If you can’t, often times the mortgage currently in place is a good place to start – either by getting a lower payment to grow savings faster and reduce expenses, or maybe by taking cash from the house and putting it where it can grow, be safe, and be available.

If you haven’t looked at your house equity in light of how much cash do you have available, maybe that is a good place to start.

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