EMERGENCY MONEY OR PAY DOWN MORTGAGE? WHY NOT BOTH.

After losing enough sleep over personal/family finance issues, I am glad to report that I have made some decisions.  I have prioritized my goals, which include short-term emergency money, long-term emergency fund and paying off my mortgage as soon as possible.

WITHOUT A DOUBT,  AFTER MUCH THINKING AND READING, THE TOP PRIORITY IS…  SURVING EMERGENCIES.

Emergency Funds:

1) Short-term: $2,000.  (Maxed).  This includes unexpected emergencies, such as having to replace a tire that I didn’t know was going to cause my truck to fail safety.  I keep this savings account within reach, use it for unexpected, small emergencies, and pay it back as soon as possible.

2) Long-term:

After finding many different opinions on how long a long-term emergency fund should be able to last, I have decided that 2 years is the best answer.

* Current Balance: $9,111

* Amount needed:  I am not sure, I am going to start with a goal of $50,000 excluding mortgage.

* Two-year mortgage payment:   As of today (2010/01/22), my next mortgage payment is due in 14 months.  I will stop with the early payments once I reach 24 months.

Debt:

1) Furniture:  (We owe about $1,800 at 0% interest at the moment. )

2) HELOC: $9,800

3) Mortgage: $155,587.18   (Yes, a mortgage is a debt!  A good debt is one you don’t have!)

Car Replacement: Talk about a neglected item in most people’s financial planning.

* Balance: $1,500

Target date for replacing  car:  4.5 years from now.

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