In the midst of an emergency- would you tap into emergency fund or use 0% cc?

[SPlum]

So, we have found ourselves in the midst of an emergency.  Unexpected surgery with 8 weeks out of the office. We both work for the same group and the pay structure is production based with a 2 month delay.  When the surgery occurred in April, we were both out for 2-3 weeks, and then spouse was out for another 6 weeks, so that is a lot of lost production/pay.  We are now at the point where the pay hit will be coming, and I am finding myself not wanting to touch the emergency funds.  We have 6+ months of cash reserve which could cover us but I am finding that I do not want to touch it and thinking of other ways around our lack of pay gap... as production pay should kick back in in 6-8 weeks. We have mortgage debt but no other debt.  We are considering using a 0% credit card to cover us for the next 8 weeks, as our credit is fine, and when the production pay resumes, we should be able to pay if off immediately. We have never been credit card users in this way, but I can see it might make sense... as I really like holding onto my cash.

Thank you for any thoughts!

[CordMcNally]

You say you have an emergency...and you have an emergency fund. I would use that and then you could use a credit card for anything else unexpected that pops up. I would question why you have an emergency fund if you're not going to use it for emergencies.

[DMFA]

Sounds like it doesn't really make a difference either way. I make almost all of my purchases with a CC anyway other than what has to be paid with actual money. But yes, this is exactly the point of having the "emergency" fund. Obv if you can spend less, do.

[Zaphod]

SPlum wrote:

We have 6+ months of cash reserve which could cover us but I am finding that I do not want to touch it and thinking of other ways around our lack of pay gap… as production pay should kick back in in 6-8 weeks. We have mortgage debt but no other debt.  We are considering using a 0% credit card to cover us for the next 8 weeks, as our credit is fine, and when the production pay resumes, we should be able to pay if off immediately. We have never been credit card users in this way, but I can see it might make sense… as I really like holding onto my cash.

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I simply do not understand where you are coming from. Honestly, the two different scenarios you present are exactly the same. Money is fungible and a 0% card is simply cash on a delay, there is no difference except in our heads to using the emergency fund. There is no difference between efund money and cash flow paying the card.

Whats the point of your emergency fund then? Cant you just cash flow the majority of this anyway?

Option 1: use efund

Say 20k used for ease of comparison. Its down 20k and you refill it in two months.

Option 2: card

Use 20k on card and pay with cash flow in next two months.

Its the same, even if you change the amounts and times, you have just made irrational boundaries between different categories of cash that make no sense in reality since its all one big pile. This is making you view things like the options are materially different when it isnt.

Use your efund, this is literally what its for.

 

[SPlum]

Thank you. I realized I forgot to include a major contributing factor. We had been considering moving to downsize and reach FI sooner and this surgery reinforced that we do want to move.  The move would be ideally to a less physically demanding house (less property upkeep) as well as a house which will allow us to reach FI much sooner. They scare of this surgery has really made us realize our time is precious. Medicine has been jealous and we want the freedom to live and travel and enjoy our lives while we still have our health. That being said, keeping our emergency fund intact gives us cash reserves in case a property opens up during this pay lag. Otherwise, I would use our fund.

[VagabondMD]

I would just use the cash and not worry about it. I think you are adding unnecessary complexity to a simple problem. One year from now, it will not matter how it was handled.

On a more personal note, I am sorry that you have the medical issues and return to good health sooner than you expect. ????

[jfoxcpacfp]

I'm not a big fan of using a credit card to fund an emergency. If a property should open up, surely you'll need less than $100k for a deposit, and will have your cash flow back up before you need much more cash. That is, if you're really downsizing.

Either that $100k is for a downpayment and you do not have an emergency fund (and need to use a credit card) or you have an emergency fund and you haven't saved for your downpayment. Get a plan and follow it, but don't make a financial plan based on your emotions.

PS, I'm sorry you both had to go through surgery at the same time! Hope you have had some good family/friend support.

[Hatton]

Use the card especially if it is a cash back card or travel points.  Quit worrying.  I hope you are back up to speed soon

[q-school]

Don't overthink it
Concentrate on recovery.
Good luck.

[hightower]

Yeah, agree nothing to worry about with either option.  O% card is same as cash as long as you are disciplined to pay it off before interest kicks in.  Sorry to hear about your medical troubles.  Can you imagine how much more stressed you'd feel if you didn't have an emergency fund?  This is a good lesson for those of us sitting on $20k wishing we could invest it

You guys have obviously done a good job and are in good shape financially.  Focus on recovery and enjoying yourselves once you're back on your feet as you mentioned you want to do.

[adventure]

Hope you feel better soon.

At risk of sounding callous, did the cash flow/budget implications get discussed in April? Without knowing the details, perhaps hiring some other help, or working part time would have been advisable (or at least financially preferable if not emotionally).

Is there any short term disability that can/has kicked in?

How much are monthly expenses? Hopefully a low amount of the 100k. Is the 100k enough for 6 months of expenses? Is it too much? Perhaps you don't need 100k.


I'd agree, you either are saving for a house, or have an emergency fund, not both. Pick one. (And given your attraction to cash or gold in the ground, would you part with it for a new house?) can you afford to buy the new house before the old one is sold, etc?

If you can cash flow stuff, great. If not, pay the bills. How doesn't really matter how... but spend the cash if you need to pay bills. That's why we have money, to use it.

Also, minor note here, but depending on how much you plan to put on the card, your credit score (debt to limit ratio) will be negatively affected, thus your score will dip slightly for some months until it's back and paid off. This should let rule one way or another, but something to keep in mind.

Don't forget the peace of mind gained by just laying the bills and then not having bills to pay. That is worth something.

[StarTrekDoc]

health first.  finance second.  will moving add stress on the health...a lot in a move beyond address changes.

either way it doesnt matter on then house as underwriters will factor in the credit debt and opening a zero may bump down the credit score too, so run your credit score to see what you are in from that perspective.

KIS.  tap the emergency fund and that will keep your calculations honest and weigh the downsize correctly.  also contingency offer may be an issue/option with the finances .

heal up

[SPlum]

Vagabond MD wrote:

I would just use the cash and not worry about it. I think you are adding unnecessary complexity to a simple problem. One year from now, it will not matter how it was handled.

On a more personal note, I am sorry that you have the medical issues and return to good health sooner than you expect. ????

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Thank you all for your thoughts. Thank you for the well wishes.

It is emotionally, physically and psychologically tough being on the other side of things, and it is difficult to "heal well" when your mind races with the possibilities of why the recovery is taking so long. Vagabond MD, thank you. This is exactly what I needed to hear.

Despite our best plans to electively plan for this, the surgery demanded itself  sooner than expected- we knew what it would involve financially, especially as we chose to not rush back into work as to allow as complete a physical healing as possible.  I am so thankful we were in a place financially to take the time needed, and ease back into work slowly. We just had NO idea of the psychological toll it would take, and how suddenly every decision would become a major decision in an effort  to try to gain control when everything feels out of control while waiting for the healing process to be complete.  It is tough to be patient sometimes... and you can find yourself not sleeping, worrying and freaking out over things that would not usually bother you. So thank you for your voices of reason.

[SPlum]

 

Star Trek Doc, Thank you. This is what I would tell myself with emotions removed.

[PhysicianOnFIRE]

SPlum wrote:

We had been considering moving to downsize and reach FI sooner and this surgery reinforced that we do want to move. The move would be ideally to a less physically demanding house (less property upkeep) as well as a house which will allow us to reach FI much sooner. They scare of this surgery has really made us realize our time is precious. Medicine has been jealous and we want the freedom to live and travel and enjoy our lives while we still have our health.

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It's fascinating to hear the triggers people have that stir up a desire for Financial Independence. A health scare would definitely be right up there at the top of the list.

I'm glad to hear you've recovered, are back on your feet, and pursuing FI.

I'll echo the sentiment that you've got redundant emergency fund plans, and it doesn't make much difference which one you choose.

Cheers!

-PoF