Why is Liquid Capital Important?

Do you have liquid capital available?

What is liquid capital?

Liquid capital is money and assets that are easily accessible and free of penalty or restrictions for use. Having liquid reserves is crucial to be able to capitalize on the unforeseen opportunities that appear in front of us throughout life.

Nelson Nash said that opportunities will seek out capital. The polar opposite thought that prevails in the world today is that you have to seek out opportunity, but this is not the truth. When you have access to capital, the opportunity will come to you. Opportunity is also much more apparent when you have a growth mindset and a pile of money ready to be deployed. Think about this.

Are you more likely to see a piece of land or rental property as an investment opportunity when you have $2,500 dollars in your account or $50,000?

Let’s get into some examples of liquid and non-liquid assets.

Liquid Assets

Cold hard cash is the most liquid asset because it is right there in your hand and can be exchanged immediately with anyone.

Checking/savings accounts are also very liquid and can be exchanged in only a few steps. Money market accounts and CDs (Certificate of Deposit) are also fairly liquid. Minimum balance policies or early withdrawal fees may apply to these accounts, which makes them not the most ideal for your opportunity/emergency fund.

The cash surrender value in your whole life insurance policy is also extremely liquid. You can send in your policy loan request over the phone or through the internet and receive either a check or a wire to your account in 3-10 days (We have received funds personally in as little as 2 days, but want to be conservative). This is a loan and interest costs occur, but as we have discussed in previous blogs, your cash value is still earning uninterrupted compound interest on a tax-deferred basis which can be accessed tax-free (if properly designed and implemented).

Non-Liquid Assets

Your home, along with other forms of real estate are non-liquid assets. It takes time and is often expensive to sell these assets.

Vehicles are also non-liquid assets. In tough times you cannot go down to the power company and give them your vehicle to cover your power bill. Vehicles also depreciate, so your value stored in them decreases over time.

Stocks and mutual funds can be liquid or non-liquid depending on how you look at them.

Stocks can usually be bought and sold quickly, but if your value depreciates 50% because of a market crash, are you really going to want to pull your money out at that time?

Finally, QRPs (401ks, IRAs, etc.) are also non-liquid. You not only have to pay taxes on the gains, but also a 10% penalty on all funds that are withdrawn before age 59.5.

Having the ability to capitalize on opportunities

At Cash Value Solutions, we strongly believe in and want to position you so that you’re able to capitalize on opportunities. Whether those opportunities present themselves as land, real estate, business, or equipment, you must have access to capital to take advantage of these opportunities.

We believe that properly structured whole life insurance is the best place to create your opportunity fund. Your capital is extremely liquid, you have complete control of it, and it's guaranteed to grow every day!

We believe that implementing the Infinite Banking Concept and performing the banking function is the single most important thing anyone can do financially and is more profitable than any form of investing.

We educate people on how they can use these policies to create wealth through their external rate of return (ERR). This ERR comes from the readily available capital that allows you to take advantage of those profitable opportunities that come your way.

Being prepared for emergencies

You never know when emergencies will come into your life. Accidents, health problems, and legal problems can and will happen without warning.

You do not want to sell your house or other assets to pay for these expenses. A properly structured whole life insurance policy is the ideal place to “self-insure” or prepare for unexpected emergencies. The cash value and its growth are guaranteed so there are no worries of a market crash or a bank run.

With the implementation of the IBC, you will have peace of mind knowing your liquid capital is always there growing, and you’re preparing for life’s opportunities, emergencies, and the twists and turns you and I don’t even know are coming.

If you have any questions, please don't hesitate to reach out to us today!

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