tag:blogger.com,1999:blog-5465015914589377788.post5560301560883557423..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: Money RulesMichael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5465015914589377788.post-60684684453512514242014-12-16T12:11:49.486-05:002014-12-16T12:11:49.486-05:00@Greg: It's certainly true that security has ...@Greg: It's certainly true that security has its price. Keep in mind that events could happen in a different order. If we had liquidity problems like the US had in 2008, banks could easily decide to cap some LOCs and not permit any more withdrawals. Losing your job after that would be a problem. It would take a much more extreme event for banks to block access to cash savings. In the end each person has to decide what risks to take. Where I have an issue is where people offer broad advice saying that cash savings and LOC room offer equivalent security. You made a choice for yourself and that's fine.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-27051966581288246412014-12-16T11:34:04.984-05:002014-12-16T11:34:04.984-05:00@Michael If I had lost my job I would have reacted...@Michael If I had lost my job I would have reacted quickly and drawn out cash to tide me over. As long as that doesn't happen I get to save an extra $1000 a year or more in after tax interest payments. For me the reward was worth the risk. If things become bad enough you can't even count on access to cash savings in the bank and are better with a guarded stash of gold. Security has its price. Gregnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-8773705026475740282014-12-15T22:19:33.591-05:002014-12-15T22:19:33.591-05:00@Greg: Under normal circumstances your approach wo...@Greg: Under normal circumstances your approach would be fine. But what if you had lost your job? If the bank knew you had lost your job, they could have eliminated your ability to borrow more on your LOC. That would have left you with no way to access the equity in your home without selling it. With no cash savings you wouldn't have had any way to buy food or make minimum LOC payments while you looked for new work. When things become very bad, there is no substitute for cash savings.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-39143535844570775542014-12-15T21:09:22.251-05:002014-12-15T21:09:22.251-05:00In the tail end of my mortgage days, I put all my ...In the tail end of my mortgage days, I put all my mortgage debt on a house secured line of credit on which I used to dump my pay checks into and pay my bills out of. That way, every cent I had was used to reduce the interest on the house loan for every day I had it in my account, kind of like a Manulife One account today. I had no qualms about having no separate emergency fund. For the financially disciplined, this is optimal. I don't think this is any less safe than a cash emergency fund, even in a financial crisis, as long as you have enough equity in your home to back it up if housing prices fall. Gregnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-22833643169978455672014-12-15T17:58:59.158-05:002014-12-15T17:58:59.158-05:00@Bet Crooks: I agree that there is no replacement ...@Bet Crooks: I agree that there is no replacement for a cash cushion. I find that Gail's argument that a LOC is "debt waiting to happen" is more to the point than anything I've come up with.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76558517465560742912014-12-15T16:23:44.532-05:002014-12-15T16:23:44.532-05:00It's scary how many people think a LOC is bett...It's scary how many people think a LOC is better than a cash emergency fund. And they still think that even after the USA credit crisis. <br /><br />Of course, they are often the people who are using a HELOC based on the inflated value of their mortgaged house to do the Smith Manoeuvre while buying venture stocks, and trying to perpetuate hedging and futures schemes. I just hope they never convince anyone sensible to use a LOC instead of keeping a few thousand waiting in cash on the sidelines ready to deploy if and when needed.BetCrookshttp://financialcrooks.comnoreply@blogger.com