Emergency funds or loan repayment which comes first
Every individual should have a decent amount of money as emergency funds that would help them during tough times. Most of the time these funds are kept only as liquid funds or easily accessible funds. If there are many members in the family the emergency funds value will also differ. It will initially look like the funds are to be reserved only for one individual as not all the individuals in the family would need it at the same time. But we have had situations where at least two members of the family would need emergency funds. It is safe to keep sufficient funds for emergencies.
I recently got a loan and in order to process things faster, I decided to touch my emergency funds. I was thinking so much about this and even thought that I should never touch the emergency funds. Mostly these emergency funds are used only for medical emergencies but there can be situations where the funds would be required for other emergencies too. Even though I have used my close to 5k dollars worth of funds to invest in something, I was wondering if I should continue to repay the loan or push those funds to my loan amount and make sure my loan is closed as early as possible.
According to me, an emergency is a situation when there is a dire need for funds and sometimes how much money we try to save may not be sufficient at all. Even in the worst case, there is a high possibility that we can pay with funds that we can borrow from another investment or with the closure of some of the fixed investments. Someone in our family had a health issue recently and luckily the kid also had health insurance taken which took care of most of the bigger expenses. But depending on the situation, it can be hard for us to decide if the money we are holding would be helpful or not. In that case, borrowing would be helpful with a discipline that we would pay it sooner.
I would say it would be great to reduce the Loan amount first with part payments so that in the long run the burden would be lesser. This way it is quite possible that we can also keep looking for other investment opportunities and at one point we would have balanced out and that can be a good time to maybe create some emergency funds. This way the main task is also not burdening and at the same time we would also have some emergency funds to take care of the expenses.
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