What do you think about the idea of taking money out of your emergency fund in order to pay off your home early?

Dear Dave,

What do you think about the idea of taking money out of your emergency fund in order to pay off your home early?

Evans

Dear Evans,

Trust me, I understand how it can be very tempting to throw a bunch of money at your house, get rid of the mortgage payments and own it outright. Especially if you’re plowing through the Baby Steps, and you feel like you’re making great progress in terms of gaining control of your money.

But, I wouldn’t drain my emergency fund to make it happen—even if it meant being completely debt-free sooner. To be honest, I wouldn’t even deplete it to pay off the house. You know how life always seems to throw a curveball at you when you least expect it? The moment you write that big check and weaken your emergency fund, your car will develop transmission issues, the central unit will go out and your roof will spring a leak.

Okay, so maybe I’m having a little fun with you in order to make a point. But the truth is the only time I would even consider dipping into your emergency fund—for anything that isn’t an actual emergency—is if your emergency fund has become way too big, and you have a very small amount left to pay on the house. Keep in mind, your emergency fund should be three to six months of total household expenses, not three to six months of income. Besides, paying off the house is nothing even close to an emergency. The fact that you have to make payments on your home every month doesn’t catch anyone with a mortgage by surprise.

Remember Murphy’s Law, and how it says if something can go wrong it will go wrong? Evans, when you do things like your suggesting, you’re just begging for Murphy to come visit for long, long time. And buddy, that’s not my definition of financial peace!

-Dave

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