A Look at Liquid Assets and Their Effects on Debt Management

Debt ManagementA number of things can happen with debt consolidation, as far as service providers like RapidLoans.co.nz are concerned. That said, it is important to know about specific basic concepts that can help ease the process further. Case in point: liquid assets.

For starters, liquid assets are a specific type of valuable possessions. Assets can be anything from savings accounts, stocks, jewellery, and other property, but each can be separated by its liquidity. An asset is considered ‘liquid’ if it has cash value, or is easily converted to cash. But why cash? In a world where convenience is everything, cash is heralded because there’s actual, easy-to-distinguish value in it. It is also easily transferable, which is why the world has abandoned barter long ago.

Now, what does this have to do with debt management? Simple. If you actively maintain a liquid savings account, several debt payoffs are made easier. For instance, refinancing a mortgage. Doing so at a lower rate using liquid savings is a smart move. In addition, when you need to pay out-of-pocket closing costs, liquid savings can be useful. But, this move is only ideal if rebuilding savings can be done immediately.

The importance of asset liquidity can’t be overshadowed. Here’s why: whenever a financial emergency occurs, non-liquid assets like land, pricey paintings, and the like can’t be used to pay something off — for instance, a debt. Should you decide to sell the assets, it’ll take you longer than usual, which could’ve been used for something else. Take this analogy for a nifty explanation: when you’re thirsty, you need to drink water straight away. You can’t use a machine that slowly distils water droplets from the air, only to have a full glass a day later.

Barter has been largely abandoned for a long time, and for a good reason. The degree of convenience that actual cash offers is of massive help in debt management, and there’s no other way around it. Creditors need money, not other types of valuables. And the sooner you get them what you owe them, the better.