Do You Need 3 to 6 Months of Savings Before You Start Dynamic Banking?

A commenter on one of my videos said he used a $15,000 personal line of credit to knock out $40,000 of principal in his first year of Dynamic Banking. He also said he'd recommend having three to six months of expenses saved before you start. I agree with the first part. I disagree with the second.

I think almost everybody can benefit from some form of Dynamic Banking right away. What changes from person to person is how. Waiting until you have six months of savings could mean waiting years, and meanwhile your paycheck sits in checking, earning close to nothing, while the interest on your debts keeps running.

Maybe you can't qualify for a line of credit yet. That doesn't rule you out. Most people have access to a credit card, and a card can do part of the job. If you charge your bills to a card and pay it off in full every month, you borrow that money for free through the billing cycle. You can also pay a portion of your income onto a card ahead of the bills you plan to put on it, so your balance and the interest charged on it are lower in the meantime. It isn't as strong as a line of credit, but it works, and it costs nothing to try. The post on the credit card grace period explains the free-borrowing piece.

What about emergencies? You don't skip that part. You plan it differently. I keep a small amount of cash on hand and a few thousand dollars in checking. With a line of credit in place, its unused space adds to my cushion. Before you count on that, read whether paycheck parking replaces an emergency fund. A bank can cut a line, especially in a bad economy, so I keep my own cash for the first hours or days.

And if you're running a budget that's tight or even slightly negative, there are still ways to start. I covered one in Dynamic Banking with a budget $28 in the red.

The commenter's note, and my reply, are in a short video on whether to build an emergency fund before Dynamic Banking.

Pick your starting point today. Write down how much cash you'll keep outside the plan, then ask your lender or credit union what it would take to open a line.