Where To Store Your Cash – Episode 584

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. On this episode, we’re gonna be talking about where to store your cash. And this is, we’ll call it a community question. And the reason why we align this as a community question because it’s coming in through the form of through social channels, through conversations with clients and prospects, through emails, meaning this is something important right now in 2024 Kim, I know you’ve got some really good answers about this. Well, it’s such an awesome question. First of all, where do you store your cash? Because it indicates that people have liquid savings. When people are asking that question about storing cash, it’s not for investment dollars typically.

[00:54] And I think over my career in my early years, I did not separate out the difference between investments and savings. Yet now after 30 plus years of helping people with their personal finances, I’m so clear on the difference. And I think clients are clear. Clients and people that listen to us use our guidance for implementation in help at their personal financial level. And in the past, I’m not sure that people made that distinction. So it’s awesome that this is coming up. So this is liquid savings, emergency and opportunity money. It’s so important to add in that extra element because really good investments require typically larger lump sums. And yet our lives operate monthly. So you must have some basic place.

[01:47] It’s very boring, very liquid where you can just put money every month. And ideally, the more automated it is, the better. Yet you still have the question of where do you store this liquid wealth? And I just recently saw in a financial planning magazine huge long article about high yield savings accounts and money markets here and credit union accounts there. And this is gonna fall under a category that I call chasing interest rate. And it’s futile. It is such a waste of time. It creates havoc at tax time, right? Because we have a 1099 from these three or four different accounts that we use throughout the year all in an effort to get 4.2% instead of 4%. Or maybe depending on the month because it does move around a bit,

[02:43] it’s 6.1% instead of 5.8% or 5.5%. I mean, it’s just crazy. And typically we’re not talking about super large amounts of money. Maybe it’s 50 grand, 100 grand. Maybe it’s only 10 grand. But you have these people that are chasing interest rates and yet still feeling like, well, where do you store your cash? And there is an age old product and people that have been listening to our podcast for a long time, of course, Spencer know that it’s whole life insurance. And yes, it has commissions. And yes, it has a death benefit which a lot of people think they don’t need. And I won’t get into that in this conversation. And yes, it is often talked about in the internet space as a scam, which just cracks me up.

[03:34] Or it’s not talked about at all. So back to this other article that I read, it’s this long commentary on all these high yield savings accounts, maybe mentioning bonds just a little bit, although people are quite afraid of those these days for liquid cash because they realize, oh my gosh, that account can actually go down, a bond account, like a bond mutual fund or something like that. And so again, it comes back to this age old product of life insurance cash value at a mutual company. Imperative that you use whole life insurance if you’re going to use life insurance to store cash, not universal life, not index or variable or any of the other terms that have been created that are marketing languages for fancy hybrid products

[04:28] that are basically still universal life. But whole life insurance, WHLE from a mutual company of which there are only about 20 left in the United States, all of them over 100 years old. And if that space doesn’t work for you, then pick I think a credit union, maybe a medium size bank, maybe even a local community bank, pick one savings account and put your extra cash there. And then I have one additional suggestion, but I’m curious how you would answer the question that is coming up in our community so often, which is where do you store your cash? That’s an interesting question. To give you context, I’m always aware of where the question originates. So if we are in the Twitter verse or X verse,

[05:21] whatever you want to call it now, you’ve got a lot of people that will say, hey, look, Warren Buffett is very cash heavy. So I need to be cash heavy. That’s where a lot of the conversation happens. And then I’ve been a big fan of crypto for 12, 14 years now, a long time, a very long time. And specify crypto, like when you say that, what do you mean? Okay, so I’ll give context. I started buying Bitcoin back in 2012 when Bitcoin was $230 a coin. That’s when I started buying it. I had the chance to buy it earlier. I didn’t listen. I regret, but that’s life. I think there’s a really big difference between Bitcoin and crypto. So just go on now with your context. Yeah, so coin is one thing. And I will often think of Bitcoin as gold.

[06:23] And there’s a lot of people right now that are, call it more libertarian, the Peter Schiff’s of the world and others that are very much like, hey, you need to be stacking gold. And it’s true that gold cannot be broken down to, it’s not an algorithm. It’s tangible. It’s harder to get rid of. It’s harder to stack. There’s good to it. And I think everyone should have some. Does it mean that we need to have tons and tons of vaults of gold? No, I don’t necessarily believe in that way. It’s pretty hard to transact with. Bitcoin is like that. The other cryptos have value if we look at them from the utility that they are. And then there are some other cryptos that are just garbage, but it’s as though a day trader will trade garbage.

[07:17] They don’t really care what sector it is. I’ve done all of the following. And as you mentioned at the beginning, it’s very complicated. You got a lot of different tax documents and your accountant will hate you. And if you hate yourself, then you’ll probably do a lot of that. But where to store capital, credit unions are amazing. I have a lot of friends that are storing their money into investments that make sense, that they really understand. T-bills, what’s your opinion on T-bills? I think they can be a great addition. And I still think they often can fall under the category of chasing interest rates. And then you do have some tax issues, obviously. Some are tax free, tax deferred, depending on what type of account.

[08:06] And that’s, I think, an important distinction that we should have made at the beginning of this conversation, which is, are we talking about retirement account dollars or regular dollars? And I’ve been, during this conversation, only talking about regular dollars. But I’m having a lot of people also ask the question about retirement account dollars because they may not want to be in the typical mutual fund stock market environment today with retirement account dollars. And so we’ll handle that on another conversation. But we’re just talking about after-tax cash, liquid dollars right now. So let’s play the context of this. I think it’d be really helpful. You know, we’ll bucket into categories

[08:47] of someone that say they’ve got their emergency fund set for the year. So they did really good. Whatever that number is, you’ve mentioned, and you’ve been great at mentioning that on the podcast because you’ve said, I think it was Oprah Winfrey example, it’s, you know, maybe her emergency fund’s like, you know, $10 million or something. It’s 7 million, publicly stated. But that was like 10 years ago. Maybe it is 10 million today. Oh, with inflation, it’s for sure gotta be 10 or more like 20 million. But you know, that’s the runway. So we’ll assume our listener has the emergency fund taken care of. Let’s say they’ve got a quarter million dollars of, you know, investment cash that they can move around with,

[09:28] up to a quarter million. Where would you bucket that person? And then we’ll go to, you know, different categories from there. Sure. Well, I really see that as opportunity money. So that emergency fund already handled whatever your family’s level is. And please have a conversation around that because it’s important that, especially if there’s a married couple, that both spouses are on page with that number because there may be one spouse that wants a lot more liquidity and cash for their peace of mind and a different opinion from the other spouse. So good thing to have a conversation on. But then from there, there are all types of different spaces to look for investments. But I’m still gonna go back to

[10:11] an investment may not be liquid. And I think we could absolutely argue, for example, that T-bills are, and that’s fine. But if you have to be looking at your liquid accounts every other month or so, oh, where do I go? Where do I go? Where do I go? I’m talking about the opportunity type money, right? That doesn’t typically serve you well. People don’t typically have the time to do that. Then they end up forgetting about it. And they may be chasing these interest rates and being in T-bills and then in this credit union account and then that high yield savings account. And then, oh, let’s throw 10 grand in iBonds or some weird thing that comes up like that. Gosh, when I look back over that long period

[10:54] of helping people with their finances, I just continue to go back personally with my own dollars and for most of our clientele to the mutual life insurance company space. That’s where those larger figures of liquid opportunity money, if you wanna have your emergency money there, that works as well, but really it’s all about habits. And so what is your habit around this kind of money? Are you super confident about the place where you have placed it and about your system or your structure where you are letting that cash flow through your environment so that when you do find that perfect investment, you can turn on a dime and invest. That’s the liquidity that’s necessary to really pursue those really good opportunities.

[11:52] 100% and if we look at the ability to pounce on the opportunities, that’s where you’re absolutely right. And I look at so many people are chasing and if we inverse the thinking of all of them, this is Warren Buffett, which is we definitely don’t want to go to zero. And so any investment where we’re speculating where it can go to zero, like that’s what we avoid at all costs. How many of those life insurance companies have gone to zero that you know of? I would say less than a handful. I am aware of one or two. Typically they get bought out and this is the beautiful thing. The guaranteed cash value and once your dividend has been paid, even that is part of your guaranteed cash value. The dividend itself isn’t,

[12:48] but once it’s been paid, it is going to be protected from those mutual companies. And this is what’s so interesting. It’s not in an FDIC space, but all the FDIC protection is the ability for taxpayers to pony up. Our government has a structure there called, unfortunately, Federal Deposit Insurance Corporation, but it’s not a corporation, it’s not insurance. It’s just taxpayer ability. And it’s a, I don’t know, $10 million these days now because you can kind of combine banks and what? I don’t know, maybe it’s 3 million. I’ve lost track because it’s so unimportant. What’s more important to me is that if we do have some type of failure, either an insurance company failure, an economic failure, a stock market failure,

[13:37] a situation like was in the depression or back in 08, all of those are potential and then there’s the black swan that we have no idea about, right? I have more confidence in the guaranteed aspect of cash value of whole life insurance at a mutual company than anything else out there, other than like guns, water and food, right? Because, and yeah, if you wanna have a little gold because that helps you sleep at night, great, do that too. Whatever is important for your base piece of mind, do that. It’s so critical to check that off your list. I’m not that way. I would rather have water and food stored, but for that opportunity money, you still have to have a place for that. And that goes back to the guarantees with a big G

[14:27] of a mutual life insurance company. And they’re just unknown about. The writers that are out there, the Twitter and ex authors, the people that have the commentary in the magazines and the newspapers and the social media space just don’t speak about them because they truly don’t know how they work. And I can tell this because when occasionally they’ll cross over and start to speak about like the whole life insurance product or a mutual company, it’s two thirds correct and one third categorically wrong which tells me that they truly don’t understand the space. Yeah, or they’re selling a lie and that’s what happens a lot of the time. A lie can be told in one sentence. It often takes an entire paragraph

[15:19] to explain the whole truth. That is so true. I think one other piece that I admire about that product is that there is a threshold to be able to participate meaning you have to go through someone that is knowledgeable, that can educate you or I should say you should go through someone that’s going to educate you. There’s a medical threshold that you have to go through meaning there’s an actuary. Some computer algorithm or a nerd has figured that out. That’s valuable, that’s really valuable. And then it’s one of those products that you’re not just doing it for the next six months. This is a product that you’re gonna live with for the rest of your life. And too often when we’re young or we have a windfall or whatever,

[16:14] we’re in it for the short term and this all is long term and that’s what prosperity thinking is. It’s very long term. Kim, thank you for sharing the product and the methodology behind it. What are some parting words that we can give our listeners that will help them out? Well, I love how you added in the element of your whole life because think about the peace of mind that you can install in your personal finances by choosing a product in your 20s, 30s, 40s, 50s, 60s, 70s, but ideally in your younger life that you can use for the rest of your life where you no longer have to spend time searching for that elusive place to store cash and chasing interest rates in order to try to get a better deal

[17:08] because the whole life insurance companies move with the economy. The dividends that they pay historically every single year move with the economy, meaning they’re on the lower side right now and when our economy rises, not our stock market, our economy, then they will rise too and it is so peace of mind oriented to know that part of personal finance is handled. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.