Why Cash Is Not Always King – Episode 646

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[00:01] Welcome to the Prosperity Podcast. Hey, prosperity thinkers, welcome to the podcast. We’re gonna be talking about the myth of safety and why cash is not always king. Some people think it is. Kim, I think you have some and opinions. I like that, because it’s not a but. It’s like, hey, that can work and here’s a different approach. Take it away. Well, you know, the myth of safety is the fun part because it cracks me up when I ask somebody how much liquid money do you have? Savings, dollars, and now I’m like, savings, money markets, bonds, like not investments. And still some people will say, well, you know, my brokerage account is whatever dollars and I’ll ask a little bit more and it’s fully invested.

[00:57] Like that is not safe money. That’s not liquid money. That’s not boring savings, money market style money. And so it’s just an interesting aspect. Now, what’s the second part of this? The myth of. So it’s the myth of safety and this is why cash is not always king. So that’s the second part. So the cash is not always king space is I think an interesting and I’m gonna go with, I think cash flow is king and cash should be queen because cash itself absolutely solves the problem. I mean, I think we could debate this all day long which should be which, but cash absolutely can solve some problems but there’s usually limited amounts of it. So for our listeners, here’s the coolest thing that I have realized

[01:54] in my adult life and that is that as long as I can be a value creator I can be confident in cash flow. Now it may take some time, right? But if I can create value, I can generate cash flow and what creation of value usually looks like is working. Right? It’s serving, it’s showing up, it’s doing what I’m good at. It’s utilizing the talents that God gave me. Those things create cash flow without a shadow of a doubt. Absolutely. You know, you mentioned something in my, you said the words in my adult life and I think that’s, as I sat with that I paid attention to all the words but I said, why was that used? Because the adult life means that it takes a little bit of time to prove it to ourselves and to prove to others how we create value.

[02:57] So it’s not instant. What was your reasoning? Was it, because you were really particular in the way you said that. Well, it’s because in my earlier years it was something that I wasn’t as confident in and though I saw evidence of because I’ve been basically an entrepreneur all commission sales person since 24 years old. And so my first job right out of college was not that way but pretty much ever since. And because I think of that space, cash flow was a concern for many years. Like literally, you know, we would get into a new mortgage and I would be afraid of not being able to pay the mortgage or whatever. So it’s something that in the earlier years I wasn’t as clear on. But as I have progressed,

[03:47] I’ve become more and more clear just because I’ve seen it happen over and over again. I mean, you know, you run a business for 30 years. Most businesses, especially the smaller ones are not gonna just exist perfectly. They’re gonna have ebbs and flows and high points and low points and medium points and everywhere in between opportunities, challenges, you name it. And so when I think about what’s really solved the emergencies and helped us take advantage of the opportunities, yeah, it’s cash, but it’s also cash flow. And it’s that cash flow, that movement of money, both money in and money out that have created the consistent good. It looks different in various phases of the business from year to year, from decade to decade,

[04:33] how we brought people in, how we served people, how we essentially graduated people or didn’t, right? Because some businesses don’t graduate. Like when you buy whole life, that’s pretty much for your whole life. So your person that helps you buy that needs to be there to help you or help you know how to get the help. And as we know, 800 numbers are only as good as the $10 an hour clerks that they hire. So please don’t call them. I mean, yeah, they’re there, they’re helpful, but still it’s necessary to see the ongoing nature of what cash flow can create. You mentioned the one with the cash flow. So I think from conversations that I hear others talk about, they typically talk about the one side of the cash flow,

[05:18] you know, the cash flow coming in and call it the different paths of where to create it. So it’s, hey, we’re gonna do this through real estate or we’re gonna do this through a small business or whatever it would be. But you used one point, it’s the cash flow going out. An important piece to that and having a really good, call it coach or someone around you, someone to give you guidance is that using your life insurance policy makes it possible to participate. Whereas bank kind of stuff, CDs kind of stuff, boring, and there’s no one there participating in the movement. It’s really well said and the amazing thing about our life insurance portfolio, which we now have 21 policies, we had grown up to 30 and then gotten rid

[06:14] of a bunch of term insurance, shrunk down to under 20, and then I had two grandchildren, so two more got added to the portfolio of policies. What’s amazing about that portfolio of policies is the unbelievable amounts of work that it has gotten done over our lifetime, barring against it, paying back, barring against it, paying back. And that’s why I think about cash flow going both directions. And I should say paying premiums, right? Oh my gosh, I can’t encourage our clients enough to stop thinking in terms of stopping your premiums. I mean, yes, you’re going to at some point in your 70s, 80s, ideally as late in life as possible because the value of continuing to pay those premiums means the cash value keeps on rising

[07:01] and that enables you to bargains pay back. So yes, it is tricky to balance. Sometimes you’ve got premiums due, you’ve got interest on your loans, which must be paid every single year. And then of course, you have the principal on your loans, which doesn’t have to be paid every single year, but really should. And so you have to navigate those decisions. And the order of operations we’ve talked about before, we’ll just bunny rabbit trail on it quickly is interest on your loans. And then ideally premiums and then principal on your loans. However, I can’t encourage people enough to make sure they are paying their loans back. There’s just way too many people on YouTube these days saying you don’t have to pay your loans back.

[07:43] And you don’t when you’re in your 90s. But when you’re in your 40s, 50s, 60s, you better be paying those loans back because you don’t want that loan to set on the books for another 50 years. And if death occurs when you’re 70, the loan can sit there. But if death occurs when you’re 100, that loan sitting there is just gonna eat in time the growth of the cash value because the interest rate on the loan is higher than the growth of the cash value. Yeah. So you actually went down a trail of some of the bullet points that I have. Oh, wonderful. So here are some of the myths why cash isn’t always king. And these are the hidden lessons we’ll say. So first one is inflation. And I have it written out as

[08:33] the silent partner you didn’t choose. So talk to about inflation and then use if you can the framework of inflation with the whole life policies and what that looks like in that environment because I think those two often get really muddy like in gray from most people because they’re trying to get clicks or they’re trying to get views and they’re selling part of the truth but not the whole truth. Yeah. Well, inflation is something that we all deal with and you said it so well, it is the silent partner that we didn’t choose. So what that means is that it’s impacting our dollars and there is not a lot that we can do about it. We can keep earning income. That’s truly the best thing to combat inflation

[09:22] and you can see this, we’ve got family members in their 80s and some of them are working, some of them are not. Those that are working, not impacted by inflation. Those that are not impacted by it. And so it’s just a space that we need to be aware of and because it affects everything, it’s one of those things that I don’t like it when people are overtly focused on and there’s truly only two things that inflation benefits. One of which is your life insurance premiums because those never change so inflation actually helps them. The other are fixed mortgage payments which again never change so inflation actually helps them. So it’s something that we just need to be conscious of and keep working as long as we can

[10:06] and understand that unless we just shift everything to Bitcoin which is not gonna happen in any short time in our lives, we absolutely can keep earning and serving and that will help us overcome inflation. Yeah, so true. You distilled it down to two things which was really nice because you said it’s actually to our advantage when we have our whole policies or fixed mortgages, things like that. And I think of that because last night I was actually doing some additional research. I’m telling you how exciting of a person I am so the audience knows. I was reading about the inflation in Japan and how they just raised it to like 1.7% interest and how it’s gonna cause X, Y and Z. And while I was reading that article

[10:56] I’m like, oh man, what’s gonna happen? And I just had to stop and I go, this is so dumb. This is like, I’m going down and reading these things that may happen and for you as a listener, you may read down the financial articles and may read these things that get you all worried and Kim, you just boiled it down to the simple truths. That was nice. I’m gonna share one more lesson in here that will round this episode. And it was the other myth, the other lesson myth which was false security by having too much cash. It gives us the false security and on the other side of that is that it can cost us opportunities of growth be it personal growth, financial growth. Do you agree with that or disagree and love some context?

[11:50] Yeah, it is an interesting statement and it is made often. And I absolutely know that people can’t have all their money in cash and get anywhere unless there’s just so much of it that it doesn’t matter. Yet it’s really, cash does enable us to take advantage of opportunities. And so there are times in our lives when we might be in a very high position of cash because we’re seeking the next opportunity. And so I think we need to be okay with that and people find their investment quest is chomping at the bed. It’s the burning the hole in their pocket, that proverbial statement about cash and they wanna make their investment decisions quickly and that’s not wise either. There’s nothing wrong with sitting on some cash

[12:41] to make careful choices as it relates to that next marketing program you’re gonna do with your business, the next investment you’re gonna put your IRA dollars in or what have you. So it’s an interesting space. I know people that sit with 30, 40%, even 50% of their overall asset base in, let’s just call it liquid dollars. And they’re fine with that. Maybe it’s actual cash, maybe it’s cash value, maybe it’s treasury bonds or something like that. And they’re completely fine with that because they know it doesn’t rollercoaster ride. They know they’re positioned for an opportunity should it arise and they’re good with that allocation. So it’s as all things financial are, difficult to make some generic statements about it

[13:24] that apply to everybody but be purposeful in your own utilization of cash and your own thinking about cash and your cash positions and align them with your own values and your time of life and what’s important to you right now. Perfect, that’s super good. Of the books that you’ve written a ton, what is the one book that makes you say, hey, this will compliment this episode the most? Interesting, thanks for asking. I’m gonna go with Busting the Financial Planning Lies which is one of the original books because it goes over The Seven Principles of Prosperity where we talk about the importance of cash flow. It goes over the idea of that overall structure, the prosperity ladder is in there and that talks about working some.

[14:17] So Busting the Financial Planning Lies is gonna be the best match. Okay, cool. Kim, thank you for sharing your insights. Really appreciate you distilling things down to simple terms and I hope no one goes down the Japanese rabbit trails of trying to follow interest rates, don’t do it. Just follow the principles that you’re sharing. Kim, thanks for spending time with us today. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.