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How Can My Business Increase its Cash Flow?

Whether you have a service business, distribution business or manufacturing business, your problem remains the same. It’s all about cash flow.

We all know that cash flow is the lifeblood of any business. When cash flow is good, it could feel like your business is doing great. On the other hand, when cash flow is bad, it could feel like your business is falling apart. Cash flow is bad when you have more outgo than inflow. So how do you manage the challenge of daily cash flow?

As a business owner, you know how important it is to use money and credit efficiently so that you can avoid cash flow problems and more importantly, avoid having to make hard choices.

Do you realize that over 74% of businesses either have chronic or cyclical cash flow problems? And this all comes from using cash flow to your detriment. This forces them to either reduce their overhead or increase revenue, increase sales in order to address the cash flow problem. In essence, it puts them in a situation where they have to choose between their business or their family. No business owner should have to make that choice.

Most business owners don’t realize that they have a choice to increase cash flow without increasing revenue and without having to reduce overhead. This is exactly why we’ve developed a process that focuses on how you’re using your money and how to make that cash flow more efficient so that you don’t have to choose between your family and your business. There are no hard choices.

A lot of times when people think about finances, they focus on the product or where their money is parked. But it’s not what you buy that really matters. It’s how you pay for it and how you’re using your cash flow.You see, what you buy is the equivalent of a golf club, but how you pay for it is the equivalent of the golf swing. And we think that you can improve your finances by focusing on how you’re using your money, just as you can improve your golf game by focusing more on how you swing the club and less on the actual club.

Our process focuses on the five major areas of wealth transfer that we all experience to help make your money more efficient. Those five areas include taxes, mortgages, how you’re funding your retirement, how you’re paying for your children’s college education, and how you’re making major capital purchases.

By focusing on these five areas, we’re able to show our clients how to regain control of their money so that they’re giving away less and less of their cash flow. And they’re able to save more and more to accomplish their financial goals. Focusing on these five areas translates into more cash flow for your business, which can be utilized to get you through times when revenue isn’t coming in as quickly as possible or times when overhead is a little higher than usual.

If you’re a business owner and looking to regain control of your finances and your cash flow so you’re able to achieve more of your financial goals, be sure to visit our website at Tier1Capital.com. Feel free to schedule your free strategy session today or if you’d like to learn more about how our process works for our clients, check out our webinar, The Four Steps to Financial Freedom.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

When is My Policy Most Beneficial?

A lot of times when people come to us, they have short term financial goals that they’d like to accomplish using a specially designed whole life insurance policy designed for cash accumulation. But the real magic tends to happen as these policies mature.

There are certainly a lot of reasons why you could use a specially designed whole life insurance policy, designed for cash accumulation on a short term basis to achieve your short term financial goals, like getting out of debt, sheltering money for your children’s college education, or just regaining control of your cash flow.

As with any whole life insurance policy, a policy specially designed for cash accumulation, the insurance company is making two promises. The first promise is that should you die while you own the policy and you’re the insured, the insurance company will pay your beneficiary the death benefit.

The second promise is simple at the age of maturity, which is typically age 121, the insurance company is going to have cash set aside equal to the face amount of the policy. So what does that mean? Well, year after year, the insurance company has to build up the cash value in that whole life policy. So they could make that second promise. By making that second promise, by having the money available at the age of maturity, the policy gets better and better and better with each passing year. The longer you have the policy, the better it gets.

You see, these policies are actually designed to build cash value over time, and that’s not counting any paid-up additions riders or dividends on that policy. When we design a whole life policy for cash accumulation, we add on paid-up additions riders which are going to increase the cash value availability in the early years of the contract. And we’re placing these policies with mutually owned life insurance companies.

When you purchase a policy with a mutual insurance company, you are literally the owner of the company as it relates to the profits or the profitability of your policy. And what does that mean? That means any profits the insurance company makes on your policy will be returned to the owner, you. And they do so in the form of tax deferred dividends.

You see, in life insurance a dividend is literally a return of overpaid premium. When you use those dividends to buy paid-up additions or paid-up additional life insurance, those dividends accrue on a tax favored basis. By designing the policies with the paid-up additions rider and with a mutually owned life insurance company, you’re able to turbo charge the access to cash in your policy. And as your cash value grows, your access to cash is going to increase and you’re going to be able to access more and more to achieve bigger and bigger financial goals for you, your business and your family.

So in the short term, you can get out of debt quicker. You can save for your children’s college or use it to make major capital purchases. But as time goes by, you get greater access to cash, greater annual increases in cash, and greater death benefits.

Nelson Nash’s number one rule was to think long term. He was trained as a forester. He thinks 70 years in advance and like Nelson would say, I may not be here and neither may you, but somebody is going to be there and they’re going to reap the benefits of our good decisions today. But the long term benefits of using a specially designed life insurance policy could never be counteracted. You see, these policies could allow you tax free access to cash value to accomplish your financial goals, tax deferred growth within the policy, and a tax free death benefit to your family when you die.

If you’d like to get started, with a specially designed whole life insurance policy designed for cash accumulation to accomplish both your short term and your long term financial goals, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today. Also, if you’d like to see exactly how we put this process to work, check out our Four Steps to Financial Freedom webinar.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Can I Qualify for Life Insurance Without a Physical?

Have you considered getting a life insurance policy but you’re turned off by the idea of an insurance physical? When it comes to life insurance underwriting, there are two main components that the insurance company looks at.

The first is financial. They’ll either look at a loan, your net worth, or your income to determine how much death benefit you qualify for. Just as you cannot over insure a building for more than it’s worth, you can’t ensure a human being for more than they are worth.

The second component of life insurance underwriting is the medical component. This is where the insurance company will assess your risk from a medical standpoint. They’ll do a deep dive on your medical history and review questionnaires and often order medical records or an insurance physical.

However, with these new advancements in technology, a lot of companies are using algorithmic underwriting where you don’t necessarily need an insurance physical. Especially if you’re young and healthy. We’ve managed to foster a few relationships with insurance companies who offer an express or algorithmic underwriting process, which means that the insured doesn’t necessarily need an insurance physical if they meet the qualifications of these program.

How the process works is we fill out medical questions, send it to the insurance company. The underwriter determines whether or not they need an exam, and if they don’t need an exam, the policy is issued within a day or two. If they need an exam, then they go through the process. But the key is you might have that option where you don’t need an insurance physical.

One caveat to this process is sometimes the insurance company will still order medical records, which can take more time and still allow them to go through the express program without an insurance physical. The key is to save you time and headaches of having to schedule an insurance physical. Most companies allow this to happen between the ages of 18 and 60 and for up to $1 million of coverage.

So if you’re looking to get started with a life insurance policy, whether it’s term whole life or a specially designed whole life insurance policy designed for cash accumulation, this may be the solution for you without an insurance physical.

If you’d like to see if you qualify for this program, check out our website and schedule your free strategy session today at Tier1Capital.com. If you’d like to see exactly how our process works to put people in control of their cash flow, check out our webinar, The Four Steps to Financial Freedom, found right on our homepage.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Are You Insuring Your Key Employees?

Are you a business owner who is insuring your PCs for more than your VPs? You see, there are three main reasons why you would want to insure your key employees.

First and foremost is the fact that they are the people who are adding to the growth and profitability of your business. Let me give you an example. About 25 years ago, I had a business owner client whose building burned to the ground. And it wasn’t till after the fire that he realized that his building, which was worth over $250,000, was only insured for $68,000.

Most business owners would have seen that as a problem. But he along with his key employees, kept the business going and profitable throughout the time it took to rebuild the building.The point was he didn’t have proper insurance on his building, but he was able to grow the business and came out much further ahead than he would have had he lost a key employee. You see those key employees were the people responsible for keeping that business alive, even when he didn’t have enough insurance to rebuild the building.

 

You see, people don’t do business with you because of your building. They do business with you because of the people you have working and supporting your business and your operations. If something was to happen to one of them, what impact would that have on your business? And are you willing to take on that cost?

The second reason why you would want to insure your key employees is because with life insurance, it’s the only product that allows the problem the death of your key employee, to also trigger the solution, the death benefit and the cash flow that comes with this life insurance. Think about the devastating effects it could have. Losing a key salesperson, for example, on your business. Think about all of the revenue that your key employee brings in for the business and how many people within the business depend on those sales.

You see, in a lot of situations, the key employee is the founder or the owner of the business, somebody who might be older and the next generation is going to need two things, time and money. Time to make up the mistakes that they might make, and money to gloss over those mistakes.

So again, with life insurance, the problem also triggers the solution. When the key employee dies, it also triggers the solution of money that allows you to make mistakes during the time of transition.

The third reason why you would want to insure your key employee is is because life insurance is the only product that allows you to buy dollars at a discount. Think about it this way. If you had a key employee that passed away, you would need money to attract and retain a new key employee to replace them.

Again, only life insurance allows the problem, the death of that key employee, to also trigger the solution, an influx of cash into your business, exactly at the time you needed it most, on a tax free basis. Now, here’s the best part. If you’re using a specially designed whole life insurance policy designed for cash accumulation to insure these key employees, you, the owner of the policy, the business owner, has access to the cash value via the policy loan provision on a tax free basis. And you’re still able to earn continuous compound interest on that money all along the way.

So you’re able to access that money, let’s say, to reinvest in your business, maybe make a major capital purchase like new equipment for the business or new cars for your team. Or we had one of our clients access the cash in their policy to buy out a competitor.

You see, there are no restrictions on what you could use that cash value for. So it’s great for business owners who want to be able to access cash and still be responsible and ensure their key employees.

If you’d like to get started putting this strategy to work for you and your business, check out our website at Tier1Capital.com to get started with a free strategy session today.

Also, if you’d like to see how we put this practice to work for businesses and small business owners, check out our Four Steps to Financial Freedom Free webinar right on our homepage.

And remember, it’s not how much money you make, it’s how much money you keep that really matters.

What are Opportunity Costs?

As business owners, we make financial decisions every single day. But when speaking with business owners in our office, it’s apparent that many of them fail to consider opportunity cost. What effect is this decision today going to have long term on your business cash flow and ability to grow?

When you’re first starting out in business, it’s all about survival. What can you do to get sales and maintain efficiency so your business doesn’t go under? But as your business matures, it’s important to make adjustments for longevity and efficiency within your business.

We always say it’s not what you buy, it’s how you pay for it. And the key is making the proper decisions with the information that you have to increase your efficiency and therefore stabilize the longevity of your business. One of the keys to efficiency is recognizing the difference between costs and opportunity costs.

 

Back in the 1800s, there was a French economist named Frederic Bastiat. Frederic Bastiat pointed out the difference between that which is seen and that which is unseen. And what does that mean?

Well, basically what we see when we’re making purchases are the costs. What we don’t see are the opportunity costs. The other things we could have done with that money had we not deployed that capital in the way that we did. And one of our tag lines or one of the things that we always tell people is that you’ll never see the interest you don’t earn by paying cash to make major purchases.

You see, as business owners, we make financial decisions every single day, and a lot of those decisions are based on cash flow. Can I afford this payment? Do I have enough capital to pay cash for this expense? But what’s not considered is, is there a more efficient way to use your money that will leave you in more control and leave you in a better position in the long run?

You see, we finance every single purchase that we make. What do we mean by that?

Well, whether you pay cash or finance, either way, you see the interest that you’re going to be charged. But when you pay cash, you never see the interest that you don’t earn on that money. And what we mean by that is basically, if you invested that money, what kind of rate of return are you giving up by giving up control of that pool of cash?

And once we understand the unseen or the opportunity cost, that helps us to make our decisions much, much more clear. Let me give you an example.

Let’s assume you’re going to invest $50,000 for a major capital purchase to your business. Now, if you finance, the bank tells you that you’re going to pay 8% to borrow their money, but you also have $50,000 of cash laying around in your corporate checking account and you say, hey, if I use this cash, it won’t cost me anything. Big mistake, because it will cost you money. You just don’t see the interest that you’re not earning on that money.

So, if your decision is to pay cash because you’re saving 8% on interest, that you’re not being charged. That, again, is a mistake because you’re not recognizing what the opportunity cost can be for that money that you have sitting in cash.

So you may be wondering how should you be making these purchases if everything all purchased is financed? What is the best way to use your money and make it as efficient as possible for your business and your family?

And that’s where we come in, because we can help you make the proper assessments that take into consideration not only the costs that which is seen, but also the opportunity cost that which is unseen. And again, once you understand the difference between the seen and the unseen or the cost and the opportunity cost, your decisions will become much, much more clear and much more focused.

Our solution uses a specially designed whole life insurance policy designed for cash accumulation. This allows you access to your cash value via the loan provision so you’re able to self-finance and earn uninterrupted compound interest within the policy.

If you’d like to get started with an analysis of your business cash flow and see if this is a solution that makes sense for you, check out our website at Tier1Capital.com. Feel free to schedule your free strategy session, or check out our webinar: The Four Steps to Financial Freedom. It’s free and right on our homepage.

And remember, it’s not how much money you make, it’s how much money you keep that really matters.

How can I Combat Inflation?

We all know that inflation is running rampant these days and the federal governments national debt is now $31 trillion and counting.

Today, we’re going to cover the three things you can do today to protect your family and your business from the effects of inflation down the line.

The first thing you can do to battle the effects of inflation is to go long on your debt, and to go long, particularly, on your mortgages. You may be wondering why that is. Well, it’s real simple. When you go and take a loan from the bank and extend it as long as possible. You’re locking in those payments for that whole term. And what this allows you to do when you pay back your mortgage, the longer you can go on the mortgage, the dollars are worth less and less the longer you can stretch it out. Inflation is affecting those dollars just as it’s affecting your gas bill, your electric bill and your water bill.

In a nutshell, a dollar today is going to be worth less in the future, and 30 years down the line, it’s going to be worth potentially a lot less. So it’s going to feel like you’re paying pennies on the dollar because, quite frankly, you are.

 

Another reason why you want to go long on your mortgage is because if interest rates go down in the future, you can always refinance to create more cash flow. However, if interest rates go up in the future, you’re locked in at a lower rate and now the bank has the interest rate risk, not you.

Third reason you would want to go long on your mortgage is really simple. If you qualify for the interest tax deduction, you will be paying more interest with a longer mortgage. And the more interest you pay, the higher your tax deduction. So that tax deduction can offset the effects of inflation by giving you back more of the money that you spent.

The second way you could combat the effects of inflation is by deferring taking your Social Security income. Preferably at least until age 70. Now, a lot of people say, I don’t want to wait that long because I’m not sure Social Security’s going to be around. Well, let’s face it, if Social Security truly isn’t going to be around, does it matter whether you take it at 65 or 67 or 70?

So the point is this if you defer taking Social Security, that means you’ll get a larger check every month. And that larger check can allow you to counteract the effects of inflation.

The second reason you want to defer taking Social Security is because it will leave a larger survivor benefit for your spouse.

And finally, the third reason why you would want to take Social Security at a later age is because by getting a larger check, you now get cost of living adjustments on a larger base. That larger base, with the added cost of living adjustments, can help counteract the effects of inflation on your monthly retirement income.

Inflation erodes the buying power away from our dollars, but in retirement, we’re no longer working. So it’s important to make sure those dollars that we have are working as hard as possible for us and that we’re setting ourselves up and the best possible solution in retirement. By deferring, taking Social Security, you’re increasing your benefit amount and helping counteract the effects of inflation on your retirement income.

The third thing you could do to decrease the effects of inflation on your life is by purchasing a specially designed whole life insurance policy designed for cash accumulation. And you may be wondering why is that? And the reason why is simple. Because specially designed whole life insurance policies designed for cash accumulation have the power to make all of your other assets even more efficient.

So one of the ways that a specially designed whole life insurance policy can increase the efficiency of your other assets. Let’s take, for example, your house. Your house is there. You’re living in it. It’s not producing any income for you. So what if you took a reverse mortgage against your house?

The problem with that is most people say, “Hey, we’re leaving the house for our kids.” No problem. The kids might have moved out of the area. They probably don’t want the house, but they do want the money that the house is worth. Having life insurance gives you the permission to spend the equity in your house and you can leave them the money from the life insurance. So that’s one reason.

The second way a specially designed whole life insurance policy can make your money more efficient is by using it as a volatility buffer. Well, what does that mean? In the years that the market is down, you don’t want to take money out of that portfolio and have a down year. So what you do is you take money from the life insurance policy instead of from your portfolio, and that gives your portfolio some time to regenerate it`self, gain back the money that you lost in the year that it was down.

Another way you could use your policy to combat the effects of inflation is by using the dividends to help supplement your retirement income, often on a tax favored basis. And think of this, dividends from a whole life insurance policy should not be subject to federal income tax or State income tax. They won’t subject you to a Social Security offset tax, and they won’t contribute to a higher Medicare premium. And in most states, the death benefits will pass to your children, inheritance and or estate, tax free.

Another point to consider is when you buy a whole life policy, you’re locking in those premium payments. So it’s just like the mortgage, the dollars that you are spending on the premiums today are going to have a lot less buying power in the future. And so it’s not going to be as painful making those payments.

And finally, another way that whole life insurance can counteract or help reduce the effects of inflation. If inflation is higher, that means interest rates are higher. And if interest rates are higher, that means your dividends should be higher. As we mentioned earlier, those higher dividends could help supplement your retirement income on a tax favored basis.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

How can I Protect Myself from Inflation?

If you are making any type of purchase these days, you’re without a doubt experiencing firsthand the effects of inflation. Today, we’re going to talk about inflation in our economy and the impact of inflation and the national debt on our country.

Currently, the national debt in the United States is about to exceed $31 trillion. You see, it really doesn’t matter how we got here. That’s water under the bridge. The question becomes, what does $31 trillion in debt mean for you and me?

Having $31 trillion in debt really limits the options that our government has to combat things like inflation. You see, prior to 2022, the Federal Reserve, our central bank here in the United States, was artificially holding interest rates down to try and stimulate the economy. Well, what that causes or creates is inflation.

You see, by printing more money to stimulate the economy, all they really did was flood the economy with more money, chasing the same amount of goods and services. And when there’s more money chasing the same amount of goods and services, you’re pushing prices up, which causes inflation. So in order to combat inflation, the Federal Reserve, with the help of our government, is looking at increasing incrementally interest rates over time.

Here’s the problem, with $31 trillion in debt and inflation at around 8%, you have to raise interest rates at least to the level of inflation, about 8%. Now, here’s the problem. Our choices as a country of addressing this inflation crisis are really limited. And here’s why. At 8% interest on $31 trillion of debt, you’re looking at over $2.4 trillion of interest alone. Well, what does that mean? Think of it this way. $2.4 trillion of interest represents about 40% of all the revenue our government brings in. And that is a huge problem.

Well, let’s take a look at what that could mean for you and me. Let’s start with the question what is the government’s source of revenue or income? Well, it’s really easy. It’s our taxes. What would it mean for our country if 40% of our taxes was going just to interest on debt alone? Now, although these are huge numbers, it kind of relates to what happens in a household when there’s too much debt. A lot of times it’s hard and it becomes suffocating. And I’m sure we’ve all experienced that.

So you may be wondering how does that impact you and me? And the question is, what does the government normally use the revenue to do? Well, it’s to support government funded programs, things like Medicare, Medicaid, Social Security and other government funded benefits.

The next question is who’s going to elect the officials that are going to say, “Hey, yeah, no, cut back government spending. We don’t need those programs for our citizens anymore.” You see, our government only has two ways that it could address a crisis. It could address it legislatively by increasing taxes, having more money that they can use to solve the crisis. The second way is to print money or do it administratively through the Federal Reserve.

Here’s the problem. We’ve printed money and printed money and printed money. That’s always been the answer because you see, to raise taxes, people see that and feel that immediately. But printing money creates inflation, which we don’t necessarily see at least immediately. We see it ultimately in the form of inflation. And that’s where we are right now.

This is why we call inflation the stealth tax. It’s because it’s real sneaky and it sneaks up on us and all of a sudden our dollar has less purchasing power. Well, it doesn’t necessarily make sense to print more money when you’re trying to combat inflation, because that would just cause more inflation.

So that leaves us with one thing, and it’s raising taxes to solve this problem. So the question really comes down to this how do you protect yourself, your family, your business and your money from the devastating effects of both inflation and the potential for taxes to go up in our country?

If you’re interested in learning how to protect yourself, your family, you business, and your money, make sure to contact us for your free strategy session at Tier1Capital.com.

And remember, it’s not how much money you make it’s how much money you keep that really matters.

How Can My Business Easily Increase Cash Flow?

If you’re a business owner, then you know that your success or failure all comes down to one thing: cashflow. Are you wondering how you could increase your cash flow without making more sales or reducing your overhead?

We meet with business owners every single day. Those conversations revolve around three areas.

First, how to operate their business more efficiently by using the cash flow that they have.

Two, how to reinvest in their business, to grow their business so that they can have a better future.

Or three, how can they utilize their business, and the cash flow from their business, to enhance their personal lifestyle and meet their family obligations?

Let’s face it, if you got into business on your own, you did it to become financially free. But whether you’re trying to expand your business, maintain your business or increase your lifestyle, it all comes down to one common denominator, and that is how you’re using your cash flow. You see, we discovered over 20 years ago that it’s not what you buy, it’s how you pay for it. It’s how you use your cash flow that determines the success of controlling your cash flow.

Here’s a simple example. Most business owners don’t like debt. They think debt is bad and hate having that weight on their plate. So they’ll accelerate their debt payments and get that debt off their balance sheet as quickly as possible. But what they don’t realize is that by giving up that cash flow every single month to that outside entity, it’s leaving you in less control and less financially stable position.

Think of it this way if you had one extra dollar at the end of the month, that dollar represents profit that you earned during that month. Now you have this dollar that you own and control or your business owns and controls. You make the decision because you don’t like debt, to take that dollar and throw it on one of your loan balances before you pay down that debt.

You owned and controlled a dollar, after you paid down that debt, the bank owns and controls that dollar. It’s your dollar and you willingly gave it to somebody else under the premise that it was advancing your financial position.

So here’s the kicker. By making that financial move, your net worth did not change at all. All that you did was transfer control of that $1 from you to an outside entity. So the question is, did it really move forward or did it just feel good?

So let’s go back to our original question.

How can you increase cash flow without having to increase revenue or without having to reduce expenses?

Well, it’s really simple. You make your money more efficient by making sure every dollar you use is leading you to financial freedom instead of advancing those other guys, the credit cards, the banks and the outside financiers, we take a step back and look through this lens of control. And we say, “Will this move leave you in more control of your money or will it give away control to an outside entity?” And when you look at it from this frame, the decisions are so much more clear.

The first step in increasing your cash flow as a business owner often comes down to a simple move, like refinancing your debt and extending the amortization schedule. What that’s going to do is free up cash flow every single month. Yes, it will pay down your debt at a slower pace, but you’ll have cash flow to save and build a pool of cash that you own and control and have access to while still earning continuous compound interest on that money, even when you access it to do things like grow your business or finance your lifestyle.

When we sit down with business owners, we’ll have a general discussion about how they’re actually utilizing their cash flow, how they’re using their money. And we think how they’re using their money is much, much more important than where their money actually resides. And the reason is, is because that generally creates patterns of profits or cyclical cash flow versus times where there’s no cash flow.

Once we have a good understanding of how the business owner is using their money, it’s easy to make some simple shifts that make their money more efficient and have it working for them to leave them in a stronger financial position from a cash flow perspective for their business and their family.

Just by making their money more efficient, by understanding how they’re using their money and making small adjustments to how they’re actually using their money. They don’t have to increase sales, which usually cost money, or reduce expenses which usually reduces services. We could increase their cash flow without increasing sales and without reducing expenses, and that’s the value that we can bring to any business.

If you’d like us to take a look at your business’s cash flow, feel free to visit our website at Tier1Capital.com to schedule your free strategy session today. We’d be happy to take a look.

Also, if you’d like to see exactly how we use this process for families and businesses, check out our free webinar, The Four Steps to Financial Freedom, found right on our website.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

Can My Policy Handle All of My Expenses?

When people find out how powerful, specially designed whole life insurance policies designed for cash accumulation are, oftentimes they want to put in as much money as possible on a monthly basis. Today we’re going to answer the question of how much premium is too much premium?

Just the other day we got a phone call from a client and they said, “Hey, I would really like to run all of my lifestyle expenses and all my major capital purchases through this policy. Is that possible and what would the benefits of that be?” In order to answer that question. We need to first step back and take a look at how things are done normally without the infinite banking concept or without a specially designed whole life insurance policy.

So every week or every month, money flows into your life. Money flows into your household or to your business. It could be your income from work, your income from your business. It could be passive income from real estate or other investments. It could even be an inheritance. Money comes into your life, and from there you pay your expenses. So think about it. Once the money gets into your account, into your checking account. There’s only four things you can do with it.

Number one, you could spend it.

Number two, you could save it.

Number three, you could invest it.

Or number four, you can defer it into the future through a qualified retirement plan. Things like IRA’s, 401K’s, 403B’s are examples of qualified retirement plans. And with those, you defer the taxes into the future.

Another word for defer is postpone, so that money comes into the account tax free. But when you take it out, it gets taxed.

The key here is you’re not necessarily saving taxes. All you’re doing is postponing the tax into the future when hopefully you’ll be in a lower tax bracket. But that begs the question, is that really what you want? Do you really want to be in a lower tax bracket in the future? And if you are, wouldn’t that indicate that you weren’t really successful at saving money?

So now that we’ve identified the four things that could happen to your money once it comes into your life, let’s just focus on, the spending aspect. Once what money comes into your checking account and you spend it on your lifestyle, necessary expenses, your mortgage, your rent, that money is lost and gone forever. And what we mean by that is you no longer have the opportunity to earn interest on that money.

So money comes into your life and you use it for lifestyle. You make any type of expenditures, regular bills, etc. Once you do that, the money’s gone, never to return. So what can you do to change that? To make it advantageous to basically pay your bills?

Well, it’s like this. When the money comes in, take a portion. Not all of it. Take a portion of it and put it aside in a specially designed life insurance policy and then you could access that cash value through the loan feature to pay for major capital expenditures like paying for a car, a vacation, or maybe your children’s college education.

The key here is you got to make payments back. But once that policy is built up and capitalized, maybe you’ll be in a position where you can save more money and start a second policy or a third policy. And then as those policies build up, then you’ll be able to access more and more of the cash value through the loan feature and utilize that to offset some of your lifestyle expenses. So this process allows you to both make your regular purchases and save so you’re never draining that tank and you are able to earn uninterrupted compound interest on your money. Because once you drain that tank, you’ll never see the interest you don’t earn on that money.

So now you always have a portion of that money working for you rather than for someone else. A way this could practically be implemented in your life may be paying off credit card debt. Maybe you have a credit card debt and you’re paying as much as you can every month and you’re putting hundreds or thousands of dollars towards this credit card debt, trying to knock it out.

What if instead, you took that excess payment, put it towards the policy, and built up cash value to then repay the credit card debt with a policy loan? Then as you repay the policy loan, you’re rebuilding your own capital instead of Visa’s or MasterCard’s.

So let’s back up to the question we started with. How much premium is too much premium? And it’s all about your cash flow. The last thing you want to do is overextend yourself with a monthly premium payment and not be able to sustain this policy.

Once you start a policy, you never want to get rid of it because the longer you have it, the better it gets. Most of the big benefits are on the back end. Nelson Nash used to tell me, “Tim, this is not a get rich quick type of strategy. This is a long term.”

He used to say, “Remember, I was trained as a forester. Foresters think 70 years in advance.” I may not be here, but somebody will. And if we set this up properly, somebody can benefit dramatically from that planning that you’re doing today. But the key is you’ll also be able to have access, liquidity, use and control of that money and continue to earn dividends and uninterrupted compounding of your money.

So the answer is, it will depend on your specific situation, your cash flow coming in, and your monthly expenditures that aren’t really changing things like your utilities, your food bill, your mortgage. You don’t want to run everything through the policy, but you have the ability to run some major capital purchases through the policy.

If you’d like to get started and learn how to put this practice to work for you and your specific situation, we’d be happy to talk to you. Hop on our calendar at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about how we put this process to work for our clients, check out our Web course the Four Steps to Financial Freedom.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.

What Happens if I don’t Qualify for a Policy?

So you wanted to get started with the infinite banking concept and you went through the underwriting process and lo and behold, you didn’t qualify for the insurance. What next?

Not everyone who applies for a life insurance policy will qualify. There are two pieces of underwriting that you go through to get an insurance policy. First piece is financial, where they’ll look at your income and other assets to determine if you qualify financially.

The second piece is medical, where they’ll look at your overall health, maybe do a blood test, medical history, order your medical records to determine what the risk is of insuring your life, what is the risk of dying on time or prematurely from an actuary standpoint?

So you didn’t qualify medically or maybe even financial. So what does that mean? Well, it means that the insurance company won’t issue a policy on you, but that doesn’t mean you can’t get a policy on somebody else. Maybe your wife, your business partner, one of your children, and utilize the cash value in those policies. You see, all you really want to do is be the owner of the policy so that you can control the cash value and use the cash value through the loan feature to buy whatever you want, whenever you want. No questions asked.

You see, with a life insurance policy, there are two key players, the insured, whose medical information is used for the policy, and the owner, the person who has all of the benefits, the death benefit, but they’re also responsible for paying for the policy. But as the owner, you’re able to take policy loans out against that cash value, even though you’re not the insured.

 

So what that means is you can still implement the infinite banking concept. It just means that you’re not the insured. No big deal. You still own and control the policy and could again use it for whatever you want.

So what qualifications need to be met to ensure someone else and at the time of underwriting, that’s real simple. We need what is called insurable interest. Basically, you need to be able to suffer a loss from the insurance company’s perspective once that insured dies.

Think of it this way. I can’t insure my neighbor’s home because I don’t have an interest in that home. And similarly, I can’t insure some strangers life because I don’t have an interest in that person’s life. But I can insure my spouse, I can insure my business partners, I can insure my children or anybody else that I literally have an insurable interest in.

Other examples may be a roommate, someone that you split monthly expenses with or a cosigner on a loan. Another person you may want to consider insuring may be one of your parents. You’d have insurable interest and once they die, which statistically would be before you as their child, you would receive the death benefit. And keep in mind, life insurance, death benefits are always received income tax free.

If you are still interested in implementing this process with a specialty designed whole life insurance policy designed for cash accumulation, be sure to check out our website at Tier1Capital.com to schedule your free strategy session today.

Also, check out our free web course to see how we put this process to work for our clients. The Four Steps to Financial Freedom.

And remember, it’s not how much money you make. It’s how much money you keep that really matters.