how individuals can manage liquidity risk
liquidity risk is a very real threat for individuals in their personal finances job loss or an unexpected disruption of income can quickly lead to an inability to meet bills financial obligations or cover basic needs individuals face heightened liquidity risk when they lack adequate emergency savings rely on accessing long term assets like home equity to fund short term spending needs over utilize credit lines and cards or have an excessive debt service burden relative to income unexpected costs from medical bills home repairs etc can also quickly create liquidity crunches if proper precautions are not taken individuals can manage liquidity risk by maintaining a reasonable budget and living within their means having an emergency fund with sufficient cash to cover living expenses for several months is a prudent strategy additionally individuals can diversify their investments and ensure they have access to liquid assets or credit facilities to meet unexpected financial needs 