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Dude, Where’s My Money?

Dude, Where’s My Money?

In today’s episode, Matt Robison and I delve into the exciting topic of financial flexibility, focusing on the importance of knowing where your wealth resides and ensuring it’s accessible for both current and future needs. 

Asset Locations

So, where is your money? Most listeners are pretty savvy when it comes to asset locations, especially after last week’s episode. Your money is likely distributed between things like home equity, retirement accounts, and brokerage accounts. Go ahead and take a look, I’ll wait. 

Now that you know where your money is, it is time to address the how. How accessible are your funds? If you need $60k in cash tomorrow, you are unlikely to get it from your home (sort of, keep reading to learn about home equity line of credit (HELOC) options). It would also cost you to take it from retirement accounts between tax obligations and penalties. The main point I am trying to make is that it is important to strike a balance between locked-up assets and liquid funds to maintain financial agility.

Sample: Let me give you an example

Let’s talk about my real clients, John and Jane (not their real names). Together, they make a good income, about $300k / year. They have 2 kids, ages 12 and nine. They have been saving, and live in a large home that they share with an aging parent. When I evaluated their asset locations, I found they had $750k in their home, $750k in their retirement accounts, but only $40k in their brokerage account. That’s almost $2 million, so what’s the problem? Well, what if there is an emergency? What if they want to go on an epic trip when the kids are in high school?

This is where the location of assets really makes a difference. Despite substantial wealth, John and Jane have their money tied up in their home and retirement accounts, thereby limiting their liquidity. It will take very careful financial planning to meet current expenses and future aspirations.

A Home Equity Line of Credit (HELOC) as a way to liquefy assets

As teased above, one way to release “locked up” assets in a home is to take a HELOC. This is not a loan. It is a line of credit offered for you to borrow against the equity you have in your home. You only take what you need, even if the HELOC allows you $100k, for instance. The downside is the interest accruing on the money borrowed is usually pretty high, somewhere around 9%-11% with today’s current rates. 

Show me the money

As Matt loves to say: this week’s episode is brought to you by math. Have a financial question? Try math!

What does math have to do with asset locations? As humans, it’s often easier to understand a story or a chart.  So, let’s use some math to put the above sample, example, into action:

Find your money and make a plan

Once you have your asset locations, making small tweaks for liquidity’s sake can be as easy as 1-2-3:

  1. Ask yourself: Do you have enough access to money if you need it?
  2. If not, where will you get that cash?  Can you open a HELOC?
  3. Create a graph like the above to track it over time and give yourself peace of mind!


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Dude, Where’s My Money?

Episode 136 •

12th March 2024