Episode 127: The 3 Worlds of Money

Today’s Prep:

What are the three worlds of money and how do they fit in your financial plan? David discusses each world and their pros and cons in today’s episode.

(Click the featured times below to jump forward in the episode)

Equipping Points:

If you understand the three worlds of money, you will have a better understanding of how financial planning works. So today, we’ll remove the financial terms and extra jargon in order to focus on the three worlds of money: banking, insurance, and Wall Street. They serve significantly different purposes, and it’s important to understand how each fit into your financial world.

In each of these worlds, you want to look at the SLY principle: safety, liquidity, and yield. Each of these worlds contain at least two of those, but not all three. In banking, you’ll find safety and liquidity, but not yield. These accounts include things like checking accounts, savings accounts, CDs, and money markets. This is a world many of us have been familiar with from a young age. The two biggest mistakes people make in the banking world are incurring unnecessary fees and having too much of your money in the bank.

Many people are unsure of insurance. Beyond life insurance and health insurance policies, there are several different types of annuities. Insurance tends to be safe and provide yields, but are not liquid. David talks about the downsides to insurance when it comes to penalties for early withdrawal.

Wall Street gives you liquidity and yield, without the safety. From mutual funds to ETFs, stocks and bonds, David talks through some of the pros and cons that you should be aware of when investing in the stock market. The hope is to gain a significant amount of yield and not a significant loss.

How do you strike the right balance between these three worlds? It’s important to find out your risk tolerance. An advisor can help you understand and invest in the right combination of each of these worlds in your plan.

Listen to the entire episode or click ahead to hear more about a particular world with the timestamps below.

[0:32] – Happy June!

[1:59] – What are the three worlds of money?

[4:14] – What are the pros and cons of the banking world?

[8:28] – Can mistakes really be made in the banking world?

[9:45] What should you know about the insurance world?

[14:53] – What’s in the Wall Street world?

[20:05] – Do David’s clients tend to be in one world too much?

Today’s Takeaway:

Is there something that I need to know before I go another year toward retirement?”

– David Dickens

Additional Resources:

PODCAST: What’s Your Retirement Income Literacy?

PODCAST: 4 Terms from the Financial Dictionary

PODCAST: How Much Should You Invest in One Stock?


More From David:

The host: David Dickens

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