I Have a Really Big Emergency Fund to Carry Me Through My Unemployment. – Ashlee


“Dear Steve,

I was laid off in March 2009. I’ve been collecting unemployment and haven’t found a new job yet. I built up a large emergency fund so I’m alright until 2011 if needed (covering my mortgage, bills etc). I have a car loan and I owe around $4000 on it, however; I have the money sitting in that bank account and I’m just too afraid to pay it off completely and that’s why I’ve been keeping it liquid in the bank. I want to know if what I’m doing is correct given the circumstances or if I should just pay it off and be done with it?

Should I pay my car loan off completely or keep it liquid until I find a new job?


Dear Ashlee,

Wow, thank you for reaching out to me before you did anything.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

I can certainly understand the motivation to pay off the car, but, here is an alternative view.

Right now your emergency fund is like a giant jug of water that you need to cross a hot and stagnant desert. If I asked you to pour out half of it now so you’d get a more comfortable camel to ride, would you? Would you risk being on a soft camel but halfway across and out of water? I hope not.

I think you are much, much better off preserving each dollar in your emergency fund as you cross the desert of unemployment. Once you get to the other side, if you still want to pay off the car, do it then.

There are some other reasons as well, but I think you get the point. Don’t.

By the way, can I tell you how refreshing it is to get a question from someone with an emergency fund. Good for you.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

See also  Having An Emergency Fund
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