What does divertly monthly savings mean? Is that money saved through my ETF?
Just for round numbers:
- your take home pay is $5K
- your savings rate is 50%
- so you typically put $2.5K into investments each month
If your roof needs replacing for $5K
- you pay $2.5K this month instead of investing [diverting savings $$ from investments to emergency]
- use your CC or LOC to pay the remaining $2.5K
- pay off that balance the following month with your diverted savings of $2.5K
You lose your job and it takes 6 months to find another one:
- take last month's $2.5K savings and use for first month of non-working expenses
- trim budget down to $2K/month expenses over first month as you re-group
- get part-time job at start of 2nd month [say $1K/month take home]
- 2nd month $2K - $1K = $1K on LOC
- 3rd month $2K - $1K = $2K on LOC
- 4th month $2K - $1K = $3K on LOC
- 5th month $2K - $1K = $4K on LOC
- 6th month $2K - $1K = $5K on LOC
- assuming you get similar job you divert $2.5K of savings each month to pay off LOC in 2 months
I wouldn't start selling investments until I had exhausted all other options assuming my LOC interest rate wasn't crazy high relative to my investment returns.