Is our emergency fund big enough?

Ask NJMoneyHelp

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Q. We are buying our first house and my wife is very, very conservative. We have enough cash to put down a 20 percent down payment and we would still have $25,000 in cash left over, but she’s afraid that’s not enough for emergencies. What do you think?
— Trying to buy

A. Exactly the right amount for your emergency fund is a very personal decision.

Your income, your assets, your risk tolerance, your debt load, your job security – these factors all come into play.

Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton, said he generally likes to have six months of money in reserve.

Cash in the bank is a great emergency fund, but you can also consider a home equity line of credit, credit cards or 401(k) loans to be there for you if times get tough.

Those others aren’t great options, but they are options nonetheless, he said.

Lynch said it’s critical that you always plan for something bad because something bad will always happen at some point of your life.

For example, you may lose a job, have a baby and have extra costs for childcare or someone may get sick. Stuff happens.

“If you plan for something bad and it doesn’t happen, you really have not lost anything,” he said. “If something does happen, you now have options. Options are good as you now don’t have to have a fire sale to get cash.”

The tortoise always wins!

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