The WorryFree Retirement® Blog

Liquid or ILLiquid? Find out why cash is still king.

By July 12, 2018 No Comments

In my 34 years in this business, the biggest mistake I see savers make with their money is thinking that having access to money– something we in the financial industry refer to as “liquidity”– even that it is making no interest, money sitting in the banks or whatever, that this is a bad thing. Well, today I’m going to explain to you why cash has always been king. Regardless of what interest rate you are currently making on your money, it still is.

Now, assuming you just didn’t arrive from Mars, the easiest way to explain what the printed piece of paper issued by the US Treasury represents, you’d say, “Hey Tony, isn’t that called cash?”

Or what my granddad used to call cold, hard, tax-free cash. With all the credit cards and debit cards you actually don’t see as much cash flying around as you used to.

Don’t believe me? Just keep an eye out at the local mall or the grocery store. Just sit there and watch people check out and you’ll actually see very few people pay cash. Now, why is this? Why don’t people pay cash anymore? And possibly, why is it– now, this is just a theory–that people don’t throw cash around and produce cash like they used to or consider cash as king like my granddad used to? That’s because, let’s face it, we are moving to more of a cashless society.

In fact, I’ve often said that we could easily go cashless. The technology is there. We see this happening with things like Bitcoin, which I’m not saying you should invest in Bitcoin. I’m just saying it’s obvious that there are mediums of exchange, goods and services, that don’t require currency, that don’t require a traditional debit card or even a credit card.

You might be saying, “Exactly, Tony. So why in the world are you talking about cash being king?”

Well, in actuality, today’s topic is less about cash and more about liquidity. Over the past 34 years, no matter what the stock market is doing, no matter what interest the bank is paying on current CD rates, no matter what your job situation is or how much is in your 401(k) plan, cash– or the ability to get access to your money very quickly with no risk– is one of the key components of worrying less about money.

Now, why is this? Because, again, as my late great father used to say, nothing stays the same. What you have today may totally change tomorrow. With that being said, it is not only prudent but I believe it is wise for all of us, especially savers, to remember that if all heck breaks loose, whether it’s the economy or maybe even in your own personal lives, we must have some money that we can get our hands on very quickly.

Now, some of you might be saying, “There you go, Tony. Preach it, brother! That’s what I’ve been talking about. That’s why I’ve stocked up on gold, booze, and ammo!”

Now, before we turn this into a dark, dreary subject of gloom and doom, this is not what I’m talking about, folks. My point today to reveal to savers is this. It’s reasonable to have a liquid amount of cash available– I’m talking banks, and we’ll talk about this in a minute, other forms– even if you’re not making a lot of interest.

The interest is not the issue, folks. Again, it’s the security and confidence in knowing you’ve got access to your money. So before we explore my thoughts on how we can be more WorryFree by being more liquid, let’s define exactly what liquidity means. Now, of course, if you Google this word “liquidity,” you’re going to see all kinds of takes on it. But here in my 34 years in the financial trenches, here is my definition of liquidity.

Liquidity: access to your money that you can get at lickety-split. For those of you not from Kentucky, that means immediately. So liquidity is defined as access you can get immediately and without risk of principal. Without risk of principal, very important.

So with this definition in mind, obviously this $100 bill in my pocket is probably right now, at this very moment, the most liquid thing in my possession. I’ve got it. It’s with me. It’s a $100 bill. I can run out here and spend it immediately. If you choose to meet with me in person, I can easily show you all of the different assets you might own — how liquid are some of these assets? — some of this is going to really surprise you.

And as a saver– remember, the WorryFree Retirement® process is dedicated to savers, not investors and speculators, what should you be focused on? And then through the WorryFree Retirement® process, as retirement specialists, how can we sit down to help you figure out for you personally– remember, there’s no one-size-fits-all– how much to have liquid and how much to have socked away for your future?

If you feel like you are not liquid enough when it comes to your hard earned money, schedule an appointment with me today. Go to our Let’s Get Started page, fill out the form, and one of our full-time employees will be in contact with you shortly to set up a time that is best for you.