I personally read as many financial advisors as I can to ferret out what is the best plan for money management. Today I read that Dave Ramsey was being called out by Caleb Hammer for saying a person should have on hand $1000 for an emergency fund. It was in Hammers opinion an outdated amount in today’s economy. My view is that absent a laundry list of what to do before the emergency no amount is correct. Ramsey is a believer (as am I) that one’s first goal should be to be debt free. He believes that excepting a home mortgage debt is unacceptable.
Readers of this blog know that I advise you should save on a regular and consistent basis. This means simply a set amount and a set time. Every paycheck or income check is when. The dollar amount is different for each individual but no less than an hour’s wage per week. The sooner started the better because of ‘the magic of time and compound interest”! What I don’t understand is that most of the financial gurus rarely tell their readers how to get to being debt free. Firstly, it starts with marshaling debt and then attacking it in a sustainable way. Being well on in years I have I think mastered the use of credit cards to be a tool for my benefit and to give the issuing banks as little of my money as possible. So, here’s my problem with that “emergency fund” concept.
In times past and in my youth emergency funds were kept in a savings account. Today my emergency fund is a couple of no fee credit cards without balances. This is so the savings accounts and other income producing accounts continue to grow and produce more income. Once the emergency passes a person can then decide how to retire that debt.
Curiosity this week made me reach out to my niece (a math teacher) who calculated for me what $5000 saved at various rates would be after compounding over 80 years. The rates were 2%, 3%, and 5%. The amounts were $24,000+, $52,000+, and $257,000+! Suspicions confirmed even at an expected low design rate and a life expectancy of 80 years newborns who are placed in the Mathmatecum should receive upwards of $30000 at final distribution.
JAI BABA
TTFN
JU
