Graduation

 

"Yeah, yeah—Dave, my boy, climb up into the chair and let's get started. There are four miscellaneous topics I want to touch on and then, of course, there's my world-renowned wrap-up speech.

"Now, it really doesn't matter which of the four topics we start with. Let's kick off with emergency funds—"

"I was wondering when you would get around to that topic," Cathy jumped in. "Don't they always say that the average person should have a readily available emergency fund equivalent to four to six months of their gross income?"

"Ah, the mysterious 'they' again," Roy sighed. "Many financial planners do recommend building and maintaining an emergency fund of that size, Cathy. However, I think for a lot of us that blanket advice is inappropriate. To me, it makes little sense to have upwards of ten thousand dollars sitting around earning fully taxable, low rates of return. In most cases, you would be much better off using those funds to pay down your consumer debt or to fund your retirement plan. Really, with the exception of a job loss or, for the business owner and commissioned employee, an extended 'down period,' what emergency could possibly call for ten thousand dollars?"

"What if the wind blows the roof off your house one night?"

"You're covered by insurance."

"What if your car breaks down and needs repairs?"

"Ten thousand dollars' worth?"

"What if your furnace dies on the coldest night of the year?"

"Get it fixed," was Roy's uncomplicated advice. "It sure won't cost you ten grand. Look, I'm not opposed to