Hey all, looking for some advice on how to handle a home renovation that went over budget. I’m dealing with about a $20k overage, and I’m trying to decide the best way to cover it.
Here’s my situation:
- Monthly expenses: ~$9,000 (including mortgage)
- Current emergency fund: ~4 months of expenses (~$36k)
- If I pay cash, that drops to ~2 months (~$16k)
- I can either rebuild savings or pay down debt at about $1,500/month
- No other debt (other than mortgage)
Options I’m considering:
- Pay cash and avoid debt, but temporarily reduce my emergency fund to ~2 months. Based on my cash flow, I would expect to get back to 4 months of expenses after about 1 year.
- Take on debt to preserve cash reserves:
- 0% APR credit card (18-month promo period)
- Personal loan at ~5.8% over 2 years
For some additional context, I’m a software engineer, and while my job is currently stable, the broader tech market has felt a bit uncertain lately, which is part of why I’m hesitant to let my emergency fund drop too low
Given this setup, what would you do? How should I weigh a larger emergency fund vs. avoiding debt?
Appreciate any insight or experiences!
Emergency fund vs taking a loan for $20k renovation overage
byu/_KingCharles inpersonalfinance
Posted by _KingCharles
2 Comments
Keeping it simple, I’d use the emergency fund and build it back up.
With the 0% APR card, can you even charge the overage to it? You could charge normal expenses to it and allow your emergency fund to build up more quickly then pay off the card once the fund is built back up (I imagine 6 months or less), but you need to be really disciplined in that scenario – probably wouldn’t recommend.
Avoiding interest is a good reason to use the emergency fund, especially since you’re not fully depleting it. It doesn’t have to be a true “emergency” to warrant using your savings.