The Importance of Liquid Assets in Financial Planning

The idea of liquidity really comes in. Because liquid assets are easy, you can always just sell little piece of them and be on your way and use that for expenses. But if you have an illiquid asset that is not generating income, it typically does not belong in your big asset pool to cover annual expenses. So then what you're hopefully looking at is a liquid pile of assets to be invested however you choose out of which you are taking enough to cover the residual expenses we're talking about. And so that's generally how I'll divide up the three asset pools, assets that are currently income generating and are likely to continue to generate net income.