Originally Posted by mum4boys
I still do not see the need for credit when one plans and has an emergency fund in place for unexpected emergencies.
Because no matter what, something could come up that would exceed your emergency fund.
Let's say you have $2M in cash (money market, stocks, whatever - easily made liquid) and you have a catastrophic medical issue. You can no longer work and in a couple of years you've hit your lifetime cap on insurance. Your medical costs are....let's say $300K a year. What do you do once you run through that $2M? If you can't borrow against your house or finance those medical costs where will you be? Yes, you can declare bankruptcy but you still need something to live off of, as does your family.
Smaller scenario - you are on vacation, stuck without access to a commercial flight and your only option is to charter a plane. Can you do it? Do you have the available credit? We came within about 20 minutes of doing this once. It was going to be $8K. You aren't going to have that much cash on you and they aren't fueling the jet without payment.
We've been without income for about 18 months now. Our cash reserve is probably a bit more than most but we still have expenses. Knowing we have a lot of equity in the house we could tap into if needed is comforting. In fact, before we sold our old house, that was part of our long term "SHTF" plan - pull a mortgage on it. If needed, that would have solved a lot of problems. Knowing we have the means to finance a car if something happens to ours is good. I don't want to write a check for a car right now, I'd rather have the cash until we have income again.
No matter how much you have (let's say within reason, assuming you are not independently wealthy in the over 20 million in cash category) there are scenarios where you may need to finance something.