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Author: yobria Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Help with 403b/457b and Roth IRA Date: 2/26/2004 7:54 PM
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Nick, with all due respect I think it would be a bad choice to rely on cash advances to cover an emergency. Typically the interest rates on cash advances are near 19% and it could result in one quickly falling into deep debt.

You have to look at probabilities. There's less than a 1% chance that over the next three months both people will lose their jobs and have to tap in to a 19% cash advance line. But if they don't pay off their credit card debt, there's a 100% chance they'll have to pay 9% interest. Would you rather have a 100% chance of paying me $900 or a 1% chance of paying me $1900?

I think the e-fund, like dollar cost averaging, is sometimes misunderstood and blindly followed. Yes, a cash buffer is a good idea in case of emergency. But if, for example, you're laid off, ask your self if some of the following might apply to you:

-You'll get serverence
-You'll get unemployment
-You can liquidate your taxable assets as needed
-You'll get a bigger tax refund since your withholding was based on a full year of employment
-Your spouse will still be employed
-You'll be able to find a new job

And keep in mind the cost of an e-fund. A $6,000 e-fund invested at 10% for 30 years is worth over $100,000.

Nick
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