Today's Hack

What are the three worlds of money and how do they fit into your financial plan? Phil shares where you should have your money and why.

Other Retirement Facts:

Where should your money go? First you need to understand the three worlds of money: banking, insurance, and Wall Street (or stock investing). On today’s episode of the podcast, Phil shares more about each world and striking the right balance of them in your financial plan.

What are the best uses of the banking world? You may keep your emergency funds, savings, and money market here. Keep in mind, that there are three qualities of money. You want to have safety, liquidity, and growth. You can have two of those things in each world of money, but not all three. So, the banking world provides safety of principal and easy access or liquidity.

The insurance world is pretty broad. A lot of people think about life insurance, but from an investing standpoint, annuities come into play. Depending on the product, this gives safety and some growth potential. You will lose out on liquidity and will have to pay a penalty to get that money out early. Do the pros and cons fit into your scenario? Be sure the person talking to you about these products are licensed to sell more than one thing and can really keep your best interests in mind, like a fiduciary.

The Wall Street world or stock market is where you’ll find growth and some liquidity. So, what’s the best mix between the three worlds? There’s no perfect blend that fits everyone. Once you define what you want your investments to accomplish, then you can put your money in the right buckets in each of these three worlds.

We wrap this episode up with a question from Jerry who has two daughters in their twenties. How should he invest or save for something like this where he may need the money fairly soon?

Listen to the entire episode or use the timestamps below to skip ahead.

[0:49] – What are the three worlds of money?

[1:32] What are the pros and cons of the banking world?

[5:14] – What do you get with the insurance world?

[11:16] – We have to understand how all three worlds fit.

[13:40] – Do you have the right tool for what you need?

[16:46] – What’s the proper mix?

[18:14] – Mailbag: How can I save and plan for a wedding?

A Quotable Moment:

“What are we trying to have our investments accomplish? Now I can take the investments, put them in the buckets, look at these three worlds, and see what fits to make that plan work.”

-Phil Putney

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