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Question: The rule of thumb is that you should have 50% of your annual income in >>>cash for emergencies.
>>Glad I never used your advice. Having 50% cash is a sure way to never >>get ahead – equal and maybe worse than having credit card debt..
>That’s 50% of your annual income, not 50% of your assets. If you make >40 grand a year, having 20 grand available for emergencies is a good >idea. What if you lose your job? It would save you from selling >yourself into debt slavery.
>By the time you hit retirement, that 20 grand better be about 5% of your >savings.
Answer: It would take someone earning $40k a rather long time to amass $20k via savings accounts. As I commented elsewhere, it would be a lot wiser to have a month, maybe two in quick cash, but save the other 10 months paying down mortgage where one could effectively earn (save) perhaps 6% vs. the 1-2% typical of savings account. The same money could be available via home equity loan, plus perhaps an additional 4-5% growth /year with no added risk or work.
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