I always encourage people to take a holistic view on any situation. This thinking may apply to your entire life, your career, and of course the management of your wealth. On this topic, a critical point is to keep your money in motion.
Money that lies still and is not able to move about does not create new wealth through cash flow. By just staying put it is not able to serve more than one purpose. This principle applies equally to individuals and the economy in general. When money flows freely within a country, the economy booms. When it stops flowing, as in the 2008 credit crunch, we are quickly in a recession. The banks also use this concept to their advantage. They are very happy to pay you 2% on your money and then keep their money in motion by loaning it right back out to someone else at 8%.
There are several investments where your money becomes illiquid. A parcel of undeveloped land, a GIC, a home, and an annuity are all examples of assets that serve only one purpose. In order to get the most out of your money, you should ensure that it produces a second return that can be kept in constant motion. This way it doesn’t become stagnant and cause you to miss the chance to create returns with another opportunity.
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