I didn't plan on it, but it happened. Earlier this year, a tree fell on my home and I ended up paying for repairs and dealing with the costs after deductions are accounted for. This leaves me with a little debt on my credit cards. My normal approach with credit cards has generally been to pay them in full at the end of each month. Unfortunately, I have to deal with some additional budgeting to pay off a larger balance than usual. I was hoping to keep this streak of not having any consumer debt as retirement nears and of course, when I'm fully retired. But these things happen.
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| Fallen Tree |
One way I could combat these in the future is to have some of the following in place.
- EMERGENCY FUND - I'm told from others and reading financial posts, is 3-6 months of monthly expenses saved. These are hard to have on hand as I tend to invest more with my extra money. I need to probably divert some into this account to avoid any "emergencies" hence a tree falling on my roof and deal with repairs. Using a high yield savings account certainly helps to keep emergency funds in tact and also easy to access but harder to avoid temptation in using for other reasons besides emergency. That is a very helpful tip.
- HOME EQUITY LINE OF CREDIT (HELOC) - I'm not a big fan of these times of loan. As it's borrowed against the equity of your home. But it's good to have on hand just in case you need to do any home improvements and repairs. Rates are variable and usually you have a time frame to pay off the loan on the principle amount only.
- DESIGNATED CREDIT CARD - This route may be much more ideal. If you have a credit card with a low interest rate, charges can be placed on this card for repairs. Be sure to pay them off in a timely manner as interests can add up.
- BALANCE TRANFSERS - If you shop around with current credits that you have, you can look for any offers that they offer for balance transfers be made with no interest rates after a certain period of time. This one you'll need to be on top of it as well as once the end date occurs, high interest rates will kick in and that be dangerous, it would have defeated the whole purpose in a breathing room to pay off your balance without incurring any interest changes. Caveat on this route, is that the credit card company will charge a percentage of the amount of each transaction or $5 minimum, whichever is greater.
Overall, we have choices in combating debt that may arise, these strategies, can really help take the stress out of any temporary inconveniences. Hopefully I won't have very many of these during retirement, but if I do, I'll be armed with some options to consider.
