Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
A large cash emergency fund is not a good idea. Prudent cash management reduces the need for one.

First of all, one should have a credit card (or credit cards) with large credit limits. As long as you don't use the credit, it costs you nothing but you have it handy as a cash management tool.

Second, one should have a margin account with the broker. Again, the margin costs you nothing as long as you don't borrow but it is there as a cash management tool for when you need it.

Now that you have your tools lined up, here is how you use them. You pay everything you can with the credit card and pay it off monthly so as not to have any credit charges. I pay mine with an ACM transfer from my brokerage account. In an emergency you have lots of instant credit available. Should you have such an emergency, put it on the card and pay off the card with margin from your broker. The card credit (about 15 days) is going to be free. Of course, now you have margin debt and you should start pruning the portfolio to pare it down and it can be done in an orderly fashion.

Better yet, don't have emergencies. LOL

Denny Schlesinger
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.