The Value of Liquidity

Joel McGriff
By Joel McGriff - November 10, 2016

The Value of LiquidityAre you prepared for an emergency? How about an opportunity?

How will you buy if you lose your job? Will you be able to take advantage of the chance to make a safe and smart investment? Can you access your money on demand?

If your assets are liquid, the answer to each of these questions should be a resounding "Yes!"Unfortunately, most investors don't have a lot of liquid assets. They're more focused on ROI, so they put their money where it's inaccessible, locked away and no longer liquid. In other words, they can't spend it when they need it. This can actually limit their their opportunities to leverage their money for larger, lucrative returns.

Consider the most common places people put their money:

  • Retirement plans hold onto your money for years and even decades.
  • Educational savings plans typically can't be touched until you need the money for tuition.
  • Real estate keeps a firm grasp on your money until your investment property or land is liquidated.
  • Automobiles and other toys typically depreciate over time, unless you get extremely lucky.

Each of these investment opportunities lock up your money for long periods of time, meaning you can't use it to address an emergency or investment opportunity until you either liquidate your assets or divest yourself. It's really an "either/or" proposition—either you earn interest on your savings or you liquidate them to spend or invest the money when you need it.

But what if there was a better way? If you practice prosperity economics, there is!

Life Insurance: The best of both options

It has been said that most assets offer only "either/or" propositions. This includes stocks, 401(k)s and real estate, which are the most common places people put their money. But, as people who practice prosperity economics know, cash value life insurance is a "both/and" asset. In other words, it's the best of both options.

Cash value life insurance grows at a steady rate as you fund it. Over time, its value increases to the point that gives you access to your money—and a lot of options. Lose your job or need to pay off expensive medical bills? No problem; you can use your life insurance policy. See a lucrative investment opportunity but need cash to take advantage of it? You can use your life insurance money.

The bottom line is that you are in control of your money. You can either withdraw your money when you need it, or you can leave the cash value in your policy and borrow against it. Either way, your assets are liquid. And if you borrow against your assets, you can pay it back on your timeline, not some arbitrary timeline created by government bureaucrats.

Liquidity gives you opportunities. And when your assets are liquid, opportunities seem to find you.

Five ways opportunities find you when you're liquid

  1. Cash is king. Some of the best opportunities involve cash transactions. Every day, people in need of quick cash try to sell items below their market rate—simply because they need the cash in a hurry.

    Imagine if someone who needs money fast approaches you with an offer to buy a classic car. The car may be worth $30,000 to the right buyer, but a buyer isn't readily available, and it would take several months to find one. So the seller offers it to you for $20,000, just to get the money and move on.

    If you have cash value life insurance, you can borrow against your policy, purchase the car, pay about 8 percent interest until you can find a buyer and then sell it. If you sell the car for $27,000 in six months, you'll have paid $785 in interest and earned a $6,215 profit. That wouldn't be possible if your assets weren't liquid.

  2. You can be (and beat) the bank. Sometimes it is less expensive to borrow from yourself than it is to borrow from a bank. For example, if you need new equipment for your business, leasing them will could cost you the equivalent of a three-year loan at an annual interest rate of 21 percent. And you still have to pay a steep financing fee.

    But what if you could be your own bank by borrowing against your cash value life insurance policy?

    A $20,000 lease with a 21 percent annual interest rate will cost you $27,126 over the course of an agreement while an 8 percent annual interest rate will only cost you $22,562. Being your own bank is a smart decision—and making smart decisions is what prosperity economics is all about.

  3. Cash flow. Speaking of being (and beating) the bank, cash flow allows you to accomplish both by offering to lend money to people you know—and making a tidy profit on it.

    For example, if you are able to lend money to someone and charge 12 percent annual interest while paying only 8 percent interest, you could conceivably earn thousands of dollars while taking on very little risk (as long as you are wise about who you're working with).

  4. Passive income opportunities. Creating multiple income streams is key to successfully practicing prosperity economics, and liquidity allows you to develop more than one.

    When you use your cash value life insurance policy to invest in things such as commercial real estate, you'll be earning money from your investment that you can use to pay back the amount you borrowed. Once you've paid back the loan, all the income you earn from your real estate investment becomes another income stream, which you can then save, spend or invest in other opportunities. Plus, you'll be better positioned to deal with future emergencies or opportunities that arise.

  5. Living long and prospering. Sometimes the return on your investment isn't about dollars. Sometimes it's about living a rich, full life. Having liquid assets not only allows you to take advantage of investment opportunities; it also lets you take advantage of opportunities to do things you've always wanted to do.

    After all, what's the point of practicing prosperity economics and building wealth if you are not going to enjoy yourself?

    Having cash flow and multiple income streams makes it a lot easier to splurge on a new toy or take the trip you've always wanted to take. It also reduces your stress levels, which means you'll be at a lower risk of developing heart disease and other ailments associated with excess stress.

Cashing out in order to cash in

Most people consider their 401(k) accounts to be sacred, and for good reason. Cashing them out comes with steep penalties in the form of fees and taxes. This means that you can't touch your money without paying dearly.

But if you put your money into cash value life insurance, the money is always there, ready when you need it. In other words, you're liquid—and you get to enjoy all of the opportunities that come with being liquid.

Prosperity economics involves being in control of your money. It doesn't require you to choose between investing, saving and scrimping to get by. It gives you the power to control your financial future. But in order to do that, you have to make smart decisions about your money. You have to put your money where you can get at it—so that you can cash it out when you need to cash in.

So strongly consider cash value life insurance rather than simply putting your money in products that are prohibitive. When you do, you will be prepared for emergencies and opportunities alike.

Sent from the Land of Possibilities!

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