Dear Penny: Should We Use Our Emergency Savings to Pay for a New Roof?

Dear Unicorn,

It isn’t often that I get to mediate when two unicorns
disagree. So here goes.

I’m with you about when you should spend emergency savings.
Ideally, you only
use your rainy-day fund
for expenses that are necessary,
unexpected and urgent. Yes, it’s necessary to replace the roof at
some point, but it’s definitely not unexpected or particularly
urgent, at least as you describe it. 

Of course, this would be a different situation if, say, the roof
was already caving in, or it were in such bad shape that it could
put your safety or belongings at risk.

But with the average new roof costing $7,753, according to Home
Advisor, you could expect the replacement to eat up about a quarter
of your emergency savings — money that’s supposed to be there
for something catastrophic, like an illness or a job loss. 

Without knowing your monthly expenses, I can’t say whether
that would leave you with sufficient reserves. But keep in mind
that financial planners typically recommend that you have enough
savings to cover at least three to six months’ worth of expenses
for emergencies.

So does that mean the tie is officially broken? Well, not
exactly.

In a perfect world — as in, the land inhabited by financial
unicorns — you wouldn’t take out a loan or refinance to pay for
an expense you know is coming. You’d estimate how much time you
have and work a line item into your monthly budget to save up for
it. 

So, for example, if you plan to replace your roof in two years,
you could each start putting $150 to $200 per month in a separate
savings account,
known as a sinking fund
, designated for a new roof.

But if you need to replace the roof before you can save for it,
I vote for leaving your emergency funds intact and financing the
cost. 

Because your credit score is, as you put it, a beautiful 836,
you could probably qualify for a personal loan at just 5% or 6%
interest. You mentioned the option of refinancing, but I’d advise
against that. Considering that when you refinance, closing costs
typically add up to 2% to 4% of your total mortgage, a loan would
likely be a better way to pay for this expense.

A final thought: If you’re truly committed to keeping your
finances separate, this could be a situation where you don’t
really need a tiebreaker. You could simply agree that you’re each
responsible for paying for half of the roof. So if the roof will
cost $8,000, you could take out a $4,000 loan, while he withdraws
$4,000 from his emergency fund.

But I don’t think this will be necessary. You are both
financial unicorns, after all, so I think you can work out a single
solution — and maybe use this as an opportunity to have a larger
conversation about your philosophies surrounding money.

Ultimately, though, this is a problem where you have plenty of
decent options. Better yet, you’re planning plenty in advance for
this inevitable expense. That makes you a financial unicorn in Dear
Penny’s eyes.

Robin Hartill is a senior editor at The Penny Hoarder and the
voice behind Dear Penny. Send your questions about budgeting to
AskPenny@thepennyhoarder.com.

This was originally published on
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Source: FS – All-News2-Economy
Dear Penny: Should We Use Our Emergency Savings to Pay for a New Roof?