“Above Water” refers to a financial statement where assets are stable and not losing money, even in adverse economic conditions. It can be difficult to maintain, but being above water makes an individual a good credit risk and better equipped to withstand financial crises.
“Above Water” is a term often used to describe a financial statement in which the assets an individual owns are deemed financially viable and stable. The term conveys the idea that the assets are currently performing at or above expectations and are not losing money for the investor or owner. Being in a state above water means that the individual is managing to maintain the value of their assets and manage debt even in the face of adverse economic conditions that threaten to overwhelm others.
The term is sometimes expressed as keeping your head above water. In this application, the implication is that there is some danger that the assets will lose value to the point that the owner suffers a net loss, effectively reducing the owner’s net worth. When the owner can keep their head above water, this means that the issues that threaten to drag the owner under the water, or reduce portfolio net worth, are being dealt with effectively and the owner is managing to at least maintain An equitable net worth despite what happens in the market.
The benefit of being considered above water is that the individual is likely to be considered a good credit risk and may be able to obtain additional financing to help meet an impending financial crisis. This in turn strengthens the individual’s financial reserves and makes it more likely that he or she will be able to withstand upcoming adverse conditions. For this reason, the act of staying above water sometimes requires proactive planning that includes successfully forecasting an impending crisis and taking steps to minimize its impact before the crisis actually hits.
Staying above water can be a difficult task, especially when the broader economy is experiencing a downturn. For example, if a recession occurs and unemployment rises, households that have lost their main source of income may find it very difficult to keep up with debt obligations, even if spending is kept to a minimum. People who anticipated the recession and took steps to reduce debt and save financial reserves before the recession hit will be better equipped to stay above water during the economic crisis, and will be prepared to replace depleted reserves once they the economy improves.
Smart Asset.
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