credit card living?

[llane1969]

Hi all,

So I have a lot of money open on credit cards. Most if not all have the option of writing a check for 3%.

Here's the question.....in event of when the market tanks, would you consider living off your credit cards for a few years til the market comes back. This would be instead of cashing out stocks/bonds.

Any opinions would be appreciated!

[prognastat]

I probably wouldn't take out credit card debt unless I can pay it off before the billing cycle ends.

If you are FIREd already in the event of a severe crash(1 year or more) I would probably reduce spending to the minimum necessary until things have recovered. For most shorter crash's unless they occur just before you withdraw your annual amount you can probably ride it out with the cash you still have until recovery.

If you are still working then it's not much of a concern since cash is coming in.

[gocurrycracker]

So I have a lot of money open on credit cards. Most if not all have the option of writing a check for 3%.

This is debt. Debt is leverage. Leverage amplifies gains and losses.

If we were to experience a prolonged period of poor market return, amplified losses could be catastrophic.


I agree with everything prognastat said. While working I used some of these low interest (actually 0% interest and fees) to help pay down a mortgage and car loan, so they can be beneficial with a clear plan to pay off before interest rates jump.
https://www.gocurrycracker.com/clawing-out-of-debt/

[prognastat]

Good point on the 0% offers, in those cases I would agree with paying it off before interest starts accruing.

[Jim]

I would agree with what Prognastat said as well as GCC.  In theory, the low fee of getting access to the money is market timing on steroids.  What happens if after the introductory period (say 15 months or so) the market has declined further than when you originally took the money out?  You would then be forced to sell at an even steeper discount.

My plan once I FIRE is in the case of a prolonged downturn is to cut expenses to the core minimum (i.e. no travel, discretionary, etc.) and if it continues to be painful, supplement some income with potential side hustles/part time gigs (barista, tutoring, gig economy, daily manual labor, even donating plasma) would all help damped the blow to the portfolio and increase its survival rate.