9. The Third Factor: Liquidity—Follow the Money
If you don’t have it, you can’t spend it.
That’s one of those life lessons that all of us learn at some point along the way, together with the ugly inevitability of death and taxes. Money is a finite commodity, and all of us must consider that whenever we make our spending decisions. In other words, before plunking down the cash for that Hawaiian vacation, you need to consider your liquidity position. Do you have that money available to spend? If you spend it on that vacation, what will you not be able to spend it on? Will you be able to replace that cash through fresh earnings and, if so, how quickly?
These are just some of the questions that a discussion of liquidity sparks at the personal level. ...
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