So liquid assets are pretty obvious but how do you incorporate non-liquid assets such as stocks, mobile and immobile valuables into this software?
Or are you perhaps not even supposed to do that?
I don’t use ActualBudget myself, but I would say that stocks shouldn’t be considered a part of your budget. Not because of their liquidity, but because of their tendency to change in value. Market gets a little spooked and suddenly you’ve budgeted a bunch of money you don’t actually have.
Publicly traded stocks are largely considered liquid assets. Art, cars, houses etc are illiquid.
That somehow seems short sighted? If the exchanges are closed, your stocks are all but liquid.
If someone held you at gunpoint and wanted $2000, you couldn’t fulfil their request and die if your assets were stocks; how is that “liquid”?
Anyhow, what I meant with “liquid assets” was “assets that I could go and exchange for pretty much any other asset, service or thing without uncertainty about its worth or time of use” while the non-liquid ones would be the opposite of that.
Yes, that’s exactly it. You know the value of your stocks, more or less to the penny, all the time. That isn’t true for a house or a car.
You can turn your stocks into cash within 24-48hours at a known price. You can also instantly borrow against their value through margin.
You, for the purposes of financial planning should treat them as liquid. For the purposes of stick ups, you can offer to transfer them to their brokerage.
You can turn your stocks into cash within 24-48hours at a known price.
As far as I understand it, you can trade stocks for cash at either a known value but unknown (possibly infinite) time or at a known time for an unknown value. In case #2, you can reasonably expect a certain range but the stock market is still notoriously unpredictable.
Anyhow, for my case, I’m accounting stocks as non-liquid because I don’t intend on selling them any time soon. The only way I see myself using them is as collateral for a larger investment as you mentioned.
I did not know you could be rather liquid this way though, so I’ll have to look into that. Thanks for the impetus.
My previous assumption was that I’d need to hold back some amount of cash in order to stay afloat in exceptionally dire times; missing out on some long-term yields. If I could simply take (practically) as large as a loan as I could need at that time using a a couple dozen shares of the index fund shares I own anyways, that would pretty much obviate my cash savings accounts for long-term use and would be more flexible.
Even if the worst case were to happen and I’d “lose” the collateral (practically “sell” them quite a bit under value), that would likely still be worthwhile long-term because I’d expect an event where I’d even be in a position to be required to advantage of such a credit to happen less than once in a lifetime.Am I missing something obvious here?
