Every dollar you have should be working for you, not sitting in a chequing or savings account that pays next-to-zero percent.
Now, in an ideal world, you’d have a plan for every dollar and a system for moving that money into all the right places automatically. And to some extent, that can be done.
But the real world is also messy. Plans change. Prices go up and down. One month you might make more. One month less. One week you might have fancy dinner plans, and so on.
So in reality, you need to have some flexibility in your system, and to make sure that by default your money is sitting in places where it earns a decent return.
Three good ones:
1. A standard high interest savings account, where rates are especially good right now
2. If you own a home with some equity, an all-in-one mortgage and checking account is a no-brainer, because that way every dollar you earn automatically reduces your mortgage balance. So depending on your mortgage rate, it’s like earning 5 or 6% on your cash. (If you want to chat more about the details and see if the math makes sense for you, just shoot me a message.)
3. Finally, a whole life insurance policy that’s optimized for early cash value is also a great option. Your money will grow every year, uninterrupted, until the day you die, and in the meantime, you’re able to use loans against the policy to access your cash in a tax-advantaged way. It’s better than taking a loan from a bank or car company, and over the long run, it’s even better than using cash.
It all depends on your situation, your goals, and the type of system you want to build for yourself, but having some combination of these or all three will help ensure you’re not leaving any money on the table and that your money is working as hard for you as it should be.