The main problem with this approach is that when things get bad, banks are looking to reduce their exposure which usually means reducing/closing outstanding available credit. Not saying that it's a bad idea, but a backup plan is certainly warranted.
I've been with the same bank for 29yrs and never had so much as a cancelled cheque. Not saying they can't shut down my LOC, but by the time that happens there will be riots in the streets because I will not be the first person whose credit they will take away.
My back up plan is:
- GF with a steady Gov't job
- I live in a country with universal health care and pharmacare for low income folks
- I have a wide range of employable skills and I'm not too proud to flip burgers
- I have home equity if I choose to sell the house or rent out a room
- I've got a few vehicles and other valuable items that I could sell
- I've got a large investment portfolio which even at 2008 crisis levels would still be worth a significant amount
If I can't make life work with that then stuff has gotten really bad.
Reading this old 2008 crisis thread over at Boggleheads ----->>
https://www.bogleheads.org/forum/viewtopic.php?p=432493#p432493It was interesting to note that Market Timer who was highly leveraged and wiped out my equities losses kept getting more and more credit all throughout the panic. They only cut him off when he was hundreds of $K's in debt.
I think a LOC as an EF makes a ton of sense and I think the risks are being overstated. I'd rather be in that situation than having $100K under my mattress losing value and losing out on the potential market returns it could earn just in case someday somehow I need some $$.
-- Vik