[USER]

Covering a major expense – When would you use savings, vs. when would you sell investment shares?

Savings are in a money market account paying 5%+, and index fund shares in my taxable account have all increased in value. What would be your thought process to decide where to pull from?

[Jeremy]

Here’s a thought experiment: if it were better to sell investments rather than use cash, why do you have investments instead of carrying it all in cash?

[Josh]

I cover as much as I can from current cash-flow (if I have a major expense, my first gut reaction is to cut back in other areas). If it’s not going to deplete my savings, I’d pull from savings next and then work on replenishing those asap.

Ideally, you don’t have money invested that you need in the next 5+ years, so I wouldn’t expect to tap investments unless it was a really big expense and I couldn’t figure out a way to pay for it otherwise.

[Lacey]

Pulling from investments would be a last resort for me.

Echoing another commenter…

• First I would cut back in other areas and try to cover as much from cash flow as possible
• Then I would tap sinking funds and maybe a little emergency fund (though not all, as e-fund is to support a sudden income loss)
• Then I would use interest-free debt (credit cards that offer 12-21 month interest-free promotional periods), and obviously pay it off inside of the promo period.

[Golden]

I never pull from investment shares. When I put money away for investments, it is not to touched until retirement. That’s my philosophy. Build up a strong cash cushion and use that when needed.

[Jessica]

If you have the funds in savings, I’d look into a 0% credit card and keep the money is savings. Pay it off with cash flow. However don’t do this if you don’t already have the funds in savings and could pay the card off tomorrow if needed.

I’m not advocating incurring debt as much as leveraging interest rates.

[Author]

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