He's got an idea for emergency funds

D

EAR HARRY:

I'm 28; my wife is 25. We have been married for about a year, and we've started to build up an emergency fund.

We each contribute enough to get a full company match on our employers' 401(k) plans, and we have some money left over at the end of each month, which we add to our emergency fund.

My older brother suggested that we get a backup plan until we get enough in that emergency fund. He said that he got a home equity line of credit (HELOC) until he was able to have his own fund. We own our home with about $35,000 of equity. Both my wife and I have very good credit scores, so we should be able to get a HELOC and with a decent interest rate.

What do you think of this plan?

WHAT HARRY SAYS: I like it. With good credit ratings and substantial equity, you should be able to do this at a very good rate of interest. In your negotiations, go for the lender to waive closing costs and inactivity fees. The danger here is that your home is on the line.

Some people get "money happy" and use the credit line for unnecessary luxuries like fancy travel or cars. However, from what you have said about your handling of money, I don't see you in that situation.

Good luck!