Living with Liquidity: The Best Method of Going with the Flow

If you have been following the blog even remotely lately, you’ll know that I’m on a HUGE accounting kick- in fact, my summer managerial accounting class is currently one of my favorite things. I’m getting high off the content of this class, ya’ll (figuratively, of course), and nothing gets me more excited for homework than a set of problems to determine preferred stock dividends with arrears! I’ll just see myself out now….

Anyways, I’m not lying when I say I love financial math and accounting, and I think it’s for two very basic reasons: 1) It’s interesting to me and 2) it’s applicable to real life. Think about it- if we had all been introduced to the concept of diversified investing portfolios, pensions, and preferred stockholders when we were in middle school do you know how much more financially stable my generation would be? One of the most important lessons I have learned in my accounting classes and my own personal finances is the need to have liquidity.

Unfamiliar with the term? Liquidity means you have enough easily-accessible assets, like cash, to cover all necessary expenses. In a real life situation, this means having enough money in the bank to pay your bills each month without taking on debt. It’s a pretty darn important concept. The more liquid you are, the better off you or your business is financially.

The best way to become more liquid is pretty simple: get more cash. Or, should I say keep more cash. The more cash you have saved in reserves, the more you’ll have to use to cover expenses, even if they aren’t expected. And this, kids, is why we save money!

“Okay, Emily, that’s great. But this isn’t an accounting blog and I don’t care about finances. Why does ‘liquidity’ matter?”

Just hang tight, I’m getting there..

So it’s pretty easy to brush off an unexpected expense, whether it’s fixing a chipped tooth or a last-minute weekend getaway. Assuming you’ve got the cash, you write the check and forget about it. But what happens when something that’s unexpected but not financial happen? Your friend goes through a breakup. Maybe you lose your job. Or, maybe you just have a week where a few little struggles combine one big mess. What’s the key to handling those situations with grace?

Emotional Liquidity. You’ve probably never heard of it. Emotional liquidity is the ability to have enough “internal capacity” reserved to handle whatever is thrown at you- the means by which a person “goes with the flow.” Being emotionally liquid is the difference between someone who can tackle life’s most unfortunate situations and those who… can’t.

I think it’s safe to say everyone knows that being able to go with the flow is a great skill to have. But how does one become emotionally liquid? Well, just like you need to have enough cash in reserves for financial obligations, you need to have enough mental capacity in reserves to help handle what life throws you unexpectedly. Self. Care. People. Much like saving money for a rainy day, a little self care today can help keep you afloat when things start to go south. Getting enough sleep, doing little things for yourself- whatever it takes to build your reserves. And those past learning experiences you’ve had? The ability to handle life you’ve gained through those also help increase your emotional liquidity.

The key to “going with the flow” through life is handling whatever comes your way. Unexpected situations in life are a little like debt, and you need to be able to cover them. The best way to ensure this? Setting yourself up with sufficient emotional liquidity.