OMG. My best friend from childhood lost her job yesterday. Of course she was in the mortgage industry and did sub-prime loans. So these past 5-6 years she has been rolling in the money. Fortunately my nagging did some good. We're like sisters, she's an only and well I'm closer to her than my own siblings. We've known each other pretty much since birth.
What you say? In college my best bud use to be deeply in CC debt and ran up a ton of bills. However since she meet her boyfriend 3rd year in college, he cut up her CC and made her pay them all off. Since then she never abused CC again. I also nagged her about savings, starting her retirement, and putting money aside. So I told her how to invest her retirement money and stuff and got her turned onto coupons for makeup.
Anyway I was a bit worried but my nagging worked. She can live for 3 years at least at her current spending habits without changing a thing because of her money in the bank. A nice $100k. Yes! So while she'd rather not touch her savings, she can not work if she chooses.
I'm hoping she instead chooses to go back to school and retool her career. Right now what would have happened if she had followed Dave Ramsey's advice and put that $100k on her mortgage and only had 6 months of living expenses? Well she'd be desperate to find a job and her mortgage payment would still be there because her mortgage would not be paid off, only the amount of time shortened. Right now she's in the position of choosing a job. And pretty much any job she works at will supplement her savings, and she's getting unemployment. Plus her BF is picking up some slack on the household bills.
But what would most people do? Do they really pay off their homes? I realize we're in unique situation of buying $500k townhouses, but still money in the bank buys time to choose a job without stressing as much. I'd personally rather have 3 years of potential job hunting and retooling than going back to work within 6 months. Plus it's longer if you trim the budget.
How long could we live 6-12 months depending on how frugal we are. I'd really like to have more cash, but we keep spending our "savings" right now on school. It's eating up $30k/year which we would be saving otherwise.
Moral of the story? Stockpile cash until you can pay your mortgage in full, otherwise you tie up too my liquidity in the house. I guess overall it's personal choice. Will you choose to tap an EF for something like home repair or would you have saved cash and touch that and leave an EF basically for sacred things like death and job loss?