Available assets are simply items that have a verified financial value that may be sold and converted into cash when the need for additional funds arises. Typically, the assets available for this type of quick conversion will be goods or property that has a demonstrated market value, and will not require a long period of time before a sale is executed. Here are some examples of the type of items that may be considered as available assets, and why it is a good idea to keep a few of these types of assets on hand.
One of the most common types of available assets would be in the form of real estate. This would not include properties that are being actively used as living space by the owner or to house the business that is owned and operated by the individual. Instead, this would include such properties as undeveloped land, rental properties, or second homes such as a vacation home or interest in a time-share arrangement. Real estate is usually very easy to place on the market and realize a quick sale, resulting in an influx of cash to meet an unexpected emergency.
Another example of available assets is vehicles. Again, this would typically not include the family car, since the vehicle would normally be an asset that is used frequently for the well being of the household. However, recreational vehicles that are used for weekends, motor homes, and any vehicle that would be considered an extra for the family could properly be classified as an available asset.
Investments also may be considered to be available assets. This would include stocks, bonds, mutual funds and the cash value of a life insurance policy. All these types of assets could be converted into cash with little or not trouble, allowing the individual to meet unexpected expenses in a very short period of time.
An important thing to keep in mind is that available assets should be free of any type of current debt if at all possible. Thus, it is not a good idea to think of cars that are not paid for or second homes that have no equity as being available assets. The point of having available assets is to have the means to sell off assets and acquire resources that can be used to pay off indebtedness quickly. Usually, the act of selling off a home carrying a mortgage will take longer, and often requires the owner to pay off the existing mortgage before the title can be transferred. The time and expense involved with these sorts of transactions are less likely to generate enough revenue to pay off unexpected expenses, and should be avoided if at all possible.
Having at least one or two available assets is another example of sound financial planning and management. Having access to resources that can be designated as available resources will allow an individual or business to settle unexpected expenses without endangering the current status. While it is never possible to anticipate what type of unexpected expenses may occur, it is a good idea to maintain available assets that equal basic ongoing expenses. This would include such expenses as the deductible amounts on health insurance and auto insurance, as well as at least a year’s worth of payments on any outstanding mortgages.