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Don’t Ask Permission to Access Your Money

So you’re ready to request a policy loan and you’re wondering exactly what’s going to happen. You may be wondering how do you request a policy loan and what does that look like? It depends on the company. And some companies allow you to request a policy loan via a phone call, a physical form, or a web form.

Now, a key distinction between a policy loan and a regular conventional loan is that you’re not asking permission to access this money within your policy. You’re giving an order to the insurance company. You’re saying, “Hey, I have cash value in my life insurance policy, I have equity. I’d like to take a loan against that equity, send me a check.” And they’re saying, “Oh, I’m checking this money. You have it. Here you go. Take the loan and we’ll talk to you later.”

A policy loan will not reduce or go against your credit score. And whether or not you make a payment or you’re late on a payment on a policy loan won’t affect your credit score. Again, you’re giving an order versus asking permission. This is a big deal when it comes to, let’s say, losing your job or becoming disabled, because when you’re applying for a loan conventionally in these circumstances, you’re asking permission.

You’re going to the bank or the credit company and you’re saying, “Hey, this is what I have. Can I have some money?” And they’re going to say, “How are you going to repay it? Can you prove that you can repay this money? And if not, they’re not going to allow you access to their capital.” But with a policy loan, that’s irrelevant.

You see, the key here is that the entity, the life insurance company that is giving you the loan is also the entity that’s guaranteeing the collateral. They’re actually figuring out how much equity you have in your policy and loaning to you against that equity. It’s called a collateralized loan. Not only is it a collateralized loan, but it’s also an unstructured repayment schedule. And what that means to you as the policy owner is there’s no payment schedule set up for you.

A lot of times clients will come to us and say, “Hey, I have X amount of money to put towards my policy loan per month. How long is it going to take?” Or, “Hey, I want to pay off this policy loan in two years or five years. How much do I have to pay to accomplish that goal?” And you see, this is key because being unstructured or having an unstructured loan repayment allows you to pay back the loan within your cash flow. You’re not pinching your cash flow to fit into the amortization schedule or the terms and conditions that a bank or a credit company gave you. You’re literally fitting the monthly payment into your cash flow to accommodate your life, not somebody else’s.

There’s a delicate balance between paying your policy loan back too slowly and paying your policy loan back too quickly. When you pay back too slowly, you run the risk of the interest accruing and not covering the interest expense. And what happens is if you don’t pay it at the end of your policy year, it gets tacked on to the balance.

However, when you pay yourself back too quickly for your own cash flow, you do have the option of just taking another policy loan so you feel less pinched going forward. But the key is now you’re in control and you make the decision as to how soon or how long it takes you to pay back the loan. You also make the decision if you want to take another loan. The key benefit of repaying your policy loan is freeing up that cash to be available for you and your financial goals in the future.

Another thing that happens when you take a policy loan is uninterrupted compounding of interest. Now, this only occurs with certain types of companies. They have to be mutually owned by the policy holders, and they need to recognize non-direct recognition so that dividends aren’t affected by a policy loan balance. But the key is your money is continuing to grow at the same pace that it would have had you not borrowed. So the only cost is the interest cost.

Basically what this means in plain English is that your policy will continue to grow the exact same way with the policy loan as if there was no policy loan at all. So your money could in essence be in two places at one time because you never drained the tank. The money is still within your life insurance policy, but you have a separate loan where you have access to that money to accomplish your financial goals, whether it be taking advantage of an opportunity, paying off your debt, or sending your kids to college.

And that’s the key. With a collateralized loan, your equity stays in the policy. The insurance company puts a lean against your equity, and they give you a separate loan from their general account. And as you pay that loan down the equity increases, it’s really that simple. Because a policy loan is a collateralized loan and your money continues to grow uninterrupted compounding, you’ve literally tapped into what’s known as multi duty dollars. It’s as if your money is in two places at once because quite frankly, it is. Your money still growing in the policy as it would have had you not borrowed and you were able to obtain a loan to do whatever you want, whether it’s to make an investment or to pay a bill or to pay off an emergency. Talk about efficiency.

When you take a policy loan, you’re taking a collateralized loan against the cash value. But think about this. You still have all the benefits of your life insurance policy. Now, the death benefit is reduced dollar for dollar, but you still have that death benefit. You may have other riders like a terminal illness, a critical illness, or a disability waiver of premium. Plus, you’re able to use that loan for whatever you want. Maybe it’s growing your business, maybe it’s taking advantage of a market opportunity or investing in real estate or anything else that you may see as an opportunity out there.

So this is what we mean when we’re talking about multi duty dollars. Your money is in the policy. It gets all the benefits of the policy, the death benefit, any additional riders. And you’ve used it to either make an investment, take advantage of an opportunity, or to clean up an emergency.

When you’re thinking about taking a policy loan or you’ve taken a policy loan, keep these issues in mind.

Number one, you’re giving an order, not asking permission.

Number two, unstructured loan repayments, which means you can pay it back within your cash flow and on your timetable.

Number three, uninterrupted compounding. Your money continues to grow as if you never tapped into it.

Number four, multi duty dollars. You’re getting $1 to do the job of three, four or sometimes $5.

You see, it’s all about maintaining control and efficiency of your cash flow and your money. You want to maintain complete liquidity use and control of your money so that you’re able to continue to grow the money and still accomplish your goals like sending your kids to college or taking advantage of opportunities.

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

If you’d like to learn more exactly how we put this process to work for our clients, check out our webinar, The Four Steps to Financial Freedom. Or if you’d like to learn how to put this process to work for college tuition. We have a webinar specifically on that. The Three Keys on How Not to Overpay for College Tuition.

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

When Can I Borrow from My Policy?

Have you heard about life insurance policy loans and wondering what they are and how they work? A policy loan is a collateralized loan against the equity or cash surrender value in your life insurance policy. And this is a key distinction, because several times I’ve spoken to people who were misinformed, on exactly what a policy loan is.

They were told that a loan against your policy is a loan against the death benefit, that is technically not correct.

 

Although policy loans will decrease your death benefit dollar for dollar if you’re to die with a policy loan balance, it’s technically collateralized against the policy cash value. And this is a big difference because you don’t have access to that full death benefit while you’re alive, but you do have access to the amount of cash value that has collateralized and built up in your policy throughout your policy years.

Now, it doesn’t matter which insurance company you’re working with as long as you have a cash value building life insurance policy like a whole life universal or variable universal life policy, you have access to the policy loans via the policy loan provision included in those contracts.

So the next issue with policy loans is when or how soon can you take a loan or borrow against the equity of your policy? And the answer is it depends. It depends on the company. Some companies allow for loans after ten days or within the first 30 days. Other companies discourage policy loans in the first year.

It’s important to address these questions before placing your policy in force, because the last thing you want to do is plan on using that policy value during the first year and not have access to it to accomplish your short term goals.

The next question is how much cash are you able to get your hands on and that again, depends on the policy. If you have a policy designed for cash accumulation, typically it has some type of rider and the rider allows you to build up that cash value quicker so you have access to it sooner.

You can expect about 85 to 95% of the contribution that’s going towards the rider to be accessible immediately. However, if you have a regular or whole life insurance policy or other permanent life insurance policy, there’s likely some cash value in it, especially if you’ve had it for several years. And typically you could get your hands on about 90% of that cash value via the policy loan.

So you’ve decided that you’re ready to take a policy loan. How do you go about accessing that money? Well, it’s real simple. You’re giving an order to the insurance company with either a form, a phone call or going online and requesting that policy loan. They’ll either send you a check or put the money right into your bank account.

But then the next question becomes, how do you pay that loan back? And do you have to? You see, life insurance policy loans are unstructured loans, which means there’s no coupon booklet or payment schedule that goes along with the loan. It’s completely up to you as to when or whether you pay the loan back.

And the reason is the entity, the insurance company that is making the loan is also the entity that is guaranteeing the collateral, the equity in your policy. The insurance company is literally verifying to themselves whether or not you have equity in your policy. As the equity appears or when you have equity, the insurance company can release that money to you through the loan provision. Since it is a loan, a separate loan from the insurance company against your cash value, the policy loan will accrue interest.

And what that means is basically on your policy anniversary, the insurance company will send you a bill for interest if you have a loan outstanding. It’s typically anywhere between 4 and 6%, maybe a little more, maybe a little less, and it can fluctuate.

But every year you’ll get that policy loan interest bill and you have the option to pay it. And as long as there’s enough cash value within the policy, you don’t have to pay it and it will accrue onto your loan balance. But we do recommend that you at least repay the loan interest so your loan balance doesn’t continue to grow year after year.

And this is important, you understand, because the loans are unstructured, the decision to pay back the interest or to pay back the principal is completely yours. The interest is charged, but the decision to pay it is yours. And that’s why we utilize policy loans to help our clients regain control of their money.

Now, you may be wondering why would you want to pay that policy loan back? And the answer again is control. As soon as you pay that policy loan back, you’re releasing equity within that policy. So you’re able to access that money again in the future.

This is very different than when you’re repaying your loan to, let’s say, a credit card or other loan, because once you give that payment to that other entity, you no longer have any access or control or you’re giving up opportunity costs on each one of those dollars.

You see with policy loans if you take a policy loan, this becomes your loan balance. Your equity is reduced dollar for dollar by the loan balance. Every payment you make on the loan reduces the outstanding loan balance and increases your equity. And that’s the key. Now you control that money because you’re the owner of the policy. You could ask for another loan, and another loan, and another loan, as long as there’s equity you can borrow.

Now, at this point, you may be wondering, what do people use policy loans for? And there’s a variety of reasons. We have people who are buying real estate, investing in their business, doing other investments in the marketplace, earn an external rate of return as well as their internal rate of return within the policy.

We have other people who are trying to get out of debt and they’re building their savings in the policy and also getting out of debt simultaneously. And what this allows to happen is they’re able to get out of debt often faster and still build their savings within the policy so they don’t have to put themselves in that situation going forward.

Another reason why people would borrow against their life insurance cash value is to create a volatility buffer against their retirement portfolio. We’ve done a previous video that explains how a volatility buffer works, but real simply, instead of taking money out of your retirement portfolio in the year that the market is down, you would forgo taking money out of that account, borrow money against your life insurance to supplement your income and give your portfolio an opportunity to regenerate or regrow itself.

Another great use of policy loans could be sending your children to college and funding the tuition through the policy loans. Did you know that accessing money from your life insurance policy and building that equity within your policy is completely off the FAFSA calculation in most cases?

Another reason why people would take a policy loan would be to buy a car or to remodel their home. And finally, for a medical or financial emergency, you see the key in life is having access to capital. And one of the things about life insurance, cash values is that money is liquid and you can use it and you control it. We call it liquidity use and control or “the luck factor.”

If you’re ready to get started with a whole life insurance policy designed for cash accumulation or could use some more guidance on using your existing life insurance policy, be sure to visit our website at Tier1Capital.com.

Feel free to schedule your free strategy session or if you’d like to learn more about how our process works, check out our free webinar, 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.

 

Growing Your Circle of Wealth

Are you looking to start down the path of financial freedom and wondering where you’re going to find the money to start saving?

This circle represents all the money that will pass through your hands throughout your life. Your circle is larger than some and others are larger than yours. But we all have one thing in common, and that is we want our circles to grow.

 

Every dollar in your circle of wealth is broken up into three categories.

First is accumulated money. That’s the money you have saved and invested. Second is lifestyle money. That’s the home you live in, the car you drive, the schools or the colleges that your children go to. They’re all lifestyle expenses. And finally, there’s transferred money. Transferred money is money you’re giving up control of unknowingly and unnecessarily. Two key words unknowingly means you don’t realize it and unnecessarily means that working together, we can fix it for you.

You see, our focus is on making your money more efficient. How do we regain control of that transferred money and put it to work for you, your business, and your family.

Have you experienced this?

You sit down with a financial advisor and the first thing they say is, show me what you got. So you give them all your statements and a listing of all your accounts and assets. And the next thing they say is, well, you’re earning X. We can show you how to earn X plus something else, but you’ll probably have to take a little more risk to do it. Now you have to make a decision. Do you want to take more risk in order to build your wealth?

Let me ask you this question. Have you ever taken risk and not gotten the reward in the past?

The second scenario you may have experienced with a traditional financial advisor is looking at your lifestyle, cash flow and seeing where you could cut back so you’re able to save more. But let’s face it, if you could be saving more, you probably would be. How many subscriptions can you cut out a month to save more, and will that really help you reach your financial goals?

So if you’ve ever had an experience with a traditional financial advisor, the two bullets they have is move your accumulated money to them because they’re going to manage it better or reduce your lifestyle in order to save more for the future.

But nobody’s talking about this third piece of your circle, and that’s transferred money. And this is where we can help you. This is where we have been uniquely trained to identify exactly where you’re giving up control of your money unknowingly and unnecessarily.

What if there was a way to achieve your financial goals no matter what they are, without reducing your lifestyle or without taking on additional risk? Wouldn’t you want to know about that?

Our unique ability is to point out exactly where you’re giving up control of your money. The question is, will you stop doing it? Because understand, it’s things that you’re doing that you think are moving you forward but in fact, are actually holding you back.

No one wakes up in the morning and says, “Hey, how can I mess up my finances today?” No, we all think we’re making the best decisions that are moving us forward to reach our financial goals. But we’re here to say that there are some areas where you may be giving up control of your money, and there are five areas of wealth transfer that we help identify.

The five areas of wealth transfer are taxes, how you pay for your mortgage, how you pay for your retirement, how you’re sending your children to school, whether it’s college, high school or grade school, and how you’re funding major capital purchases like cars, weddings, or anything else that you can’t pay out of monthly cash flow.

Our process is really simple. It’s four simple steps.

Number one, we identify where you’re giving up control of your money.

Number two, and this is the hardest step. You have to agree to stop doing it. Now, think of this. What would happen to your circle of wealth if you were giving up control of your money and you stopped doing it? Wouldn’t that have a positive effect and grow your circle of wealth?

Step three is to save the money in a specially designed life insurance policy so that you have access, liquidity, use and control of that money whenever you want, for whatever you want. No questions asked.

And step four is where the magic happens. This is where you borrow from yourself and pay interest back to yourself for things like major capital purchases, sending your children to college, buying vehicles, going on vacation, whatever a major capital purchase would be for you.

If you’re saving and growing your circle of wealth, using your savings to fund your lifestyle, your money never leaves your control. And what effect do you think that would have on your circle of wealth? By using our system, you can regain control of your money to grow your circle of wealth. And if you understand how this works, your money never leaves your control.

When thinking about growing your circle of wealth. We always say it’s not what you buy, it’s how you pay for it that really matters.

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

We also have a Four Steps to Financial Freedom webinar on our website where you could learn exactly how we put this process to work for our clients.

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

Can Life Insurance Help Pay for My Home Renovations?

Are you thinking about renovating your home and wondering what the best way to finance that purchase would be? Whether it’s paying cash or taking out a home equity line of credit?

It’s a foregone conclusion, you are going to do some renovations or remodeling around the house. Whether it’s adding on a deck, redoing the kitchen or a bathroom, getting new windows and siding. Either way, remodeling your house is a major capital purchase, and you’ll always hear us say, it’s not what you buy, it’s how you pay for it that really matters.

So the question remains, what is the best way to make this major capital purchase so that you will come out ahead on the other end? Our unique ability is to see things through the lens of being in control of your cash flow or not being in control of your cash flow.

So with every financial decision we look at the question, is this putting you in more control of your money or giving control to someone else and leaving you in a weaker financial position Let’s take a look at how you could be in control of your money and still buy the things you want, like renovating your house.

First, let’s assume you have enough cash or enough savings to pay cash for the renovations that you’re planning on making. So in this scenario, what happens is you have all the cash sitting here that you own and control, and then as soon as you make the purchase, the control is gone, your bucket is empty, and now all that cash is given away to an outside entity.

But what does that really mean for you financially? Well, you’ve drained the tank. You’ll never see the interest you’re not earning on your pile of cash because you drained the tank and it could no longer earn any compound interest for you. We call that opportunity lost.

The second way you could pay for your renovations is to do traditional financing, whether it’s an installment loan, whether it’s a home equity loan, whether it’s a total refi or a cash out refi to pay for the renovations. Either way, you’re asking permission to get the loan and now you have an additional payment to make out of cash flow.

So what this looks like is you had these payments going towards your savings or investments and now you have to redirect that cash flow to pay this installment loan, home equity, loan, mortgage, whatever you chose. So based on what we just said, whether you finance or pay cash, you’re either going to pay interest if you finance or give up your interest if you pay cash.

So the question remains, what’s the best way to pay for your renovation and how can you be in control and continue to earn interest even while you’re using that money for your renovation?

The answer may be a specially designed, whole life insurance policy designed for cash accumulation so that you could build up a pool of cash that you have full liquidity use and control over so you could access the cash through a collateralized policy loan, a contractual guarantee, and still continue to earn continuous compound interest.

Now you’ll have a loan against the policy and you could make payments back to the policy loan and rebuild access to that cash value. So you could use it again in the future instead of giving away control to an outside entity.

So again, looking at things through the lens of you being in control of your money and showing you how to regain control of your money, it’s very simple. You build up a pile of money that you are in control in your life insurance policy. You pledge that, as collateral through a collateralized loan, all they do is put a lean against your policy and they give you a separate loan. Now, when you make a payment, every payment you make increases the equity that you have. You stay in control of the cash. It’s always earning compound interest and you’re in control of the loan payments that you’re making because every loan payment reduces the outstanding policy loan, increases your equity and is completely accessible to you through the contractual loan provision.

Let’s look at this for a second. What’s the difference between building equity in a life insurance policy in the cash value versus, let’s say, building equity in your home? And there’s a very distinct difference, and that is you have guaranteed access to your cash value. There is no ifs, ands or buts or qualifications of any kind to access that money. It’s simply giving an order to the insurance company. “Hey, I want a policy loan against this cash value,” and then they send you the money versus going to the bank and saying, “Hey, I’d like a home equity line.” And they say, “Okay, show me everything you got and prove that you could repay this loan.” It doesn’t work like that with a policy loan, and that is a very distinct difference.

So it basically comes down to this: with a policy loan, you’re giving an order. With a home equity loan, you’re asking permission. Which position gives you more control when you’re giving an order or when you’re asking permission? So when you take a policy loan against your cash value, it basically is giving you the best of both worlds. The aspect of paying cash and financing.

 

So what do we mean by the best of both worlds? Well, it’s really simple. If you were to pay cash, you would have first had to have saved money. But when you pay cash, you drain down the tank. You don’t want to do that because you’re giving up control to the contractor.

Borrowing against your cash value, you don’t drain down your cash. You still access it through the loan provision, but now you have a payment. But now that payment is yours. Every payment you’re making goes back to reduce the policy loan and increases your equity. So you’re controlling your cash because it’s continuing to earn compound interest and you’re controlling the monthly payment to pay back the loan against your policy. The best of both worlds.

If you’d like to see whether or not a specially designed whole life insurance policy designed for cash accumulation makes sense in your situation. Be sure to visit our website at Tier1Capital.com and schedule your free strategy session today.

On our website, we also have a free web course, The Four Steps to Financial Freedom, where we do a deep dive on exactly how we use this process to achieve our clients financial goals.

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

How Do I Become a Wealth Creator?

Have you recently received an inheritance or anticipate receiving one soon? For the past 37 years working in financial services, I’ve seen many people receive inheritances and they generally fall into one of two categories. First, they’re either a spender, or second, a saver.

The first type of person who would receive an inheritance is a spender, and the spenders finances typically look something like this. They start at the zero line, and when it comes time to make any major capital purchase, they’re forced to borrow because they have no savings, they’re at zero.

And so they dig themself a hole in debt and all of their extra cash flow, instead of going towards savings, goes towards repaying that debt and filling in that hole. So when they receive their inheritance, it makes sense that they first, pay off their debt and then would drain down that tank, draining down the rest of that inheritance to make other major capital purchases.

The second type of person who would receive an inheritance is a saver and savers start at the zero line and they save and save and save. But when it comes time to make a major capital purchase, they drain down the tank or reduce their savings back to zero. And then they start saving again for, let’s say, the next automobile or the next major capital purchase.

So if you’re a saver and you receive an inheritance, it would make sense that you would use your inheritance to make major capital purchases and pay cash for everything.

Now, it may seem to you that the saver and the spender are two very different people, but they have something in common, and that whether you’re a debtor or a saver, you spend a lot of time at the zero line and you never get to experience the magic that comes with continuously compounding interest on your money. The other thing that neither the spender nor the saver receive or experience, is being in control of their money. Which brings us to the third type of person who can receive an inheritance. And that’s the wealth creator.

The wealth creator is a very unique individual. They save, as a matter of course, just like the saver. The only difference is, unlike the saver who drains down the tank to make purchases, they continue to earn uninterrupted, compounded interest by borrowing against their savings. And when they borrow against their savings, they’re making their money more efficient.

 

Now, if you’ve recently received an inheritance or anticipate receiving one soon, you may want to look into becoming a wealth creator. Keep this in mind, the saver, spender, and the wealth creator are all making the same exact purchases. And we say this all the time. It’s not what you buy. It’s how you pay for it that really matters. The wealth creator is still able to make that purchase without draining the tank and without giving up control of their money, all the while making their money as efficient as possible. They’re never jumping off that compound interest curve. That is a huge deal.

If you’re using a specially designed whole life insurance policy with a mutually owned life insurance company, you’re automatically building in a legacy for the next generation and being a great steward of your money.

If you want to make your inheritance work for you, your business, and your family and last for generations. Visit our website at Tier1Capital.com to get started.

Feel free to schedule your free strategy session today or check out our free web course, the Four Steps to Financial Freedom to see exactly how we put this process to work for our clients.

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

How Can I Utilize My Policy Loan Provision

Do you have a cash value life insurance policy, but you’ve never accessed the cash value? Well, that’s kind of like having a Ferrari in your garage and never driving it.

Did you know that every single cash value life insurance policy has something called a policy loan provision, that allows you to have full liquidity use and control and access to that cash via a policy loan?

So the questions remain, why would you want to use a policy loan? Why would you pay somebody to access your own money?

Well, it’s real simple. It isn’t your own money that you’re getting. You see, your money will continue to stay in the policy and grow on an uninterrupted compounding interest basis. The insurance company will use the equity in your policy and put a lean against it. They’re going to give you a separate loan outside of your policy so your policy continues to grow. But now you have this extra loan and now you can use it for whatever you want, whether it’s to pay off a bill to buy an asset or just to go on a vacation.

So the next question is, who is showing you how to use this asset? Who’s showing you how to utilize this tool in your financial game plan?

For the past 37 years I can’t tell you how many times people have come to my office and they show me their assets and they have these life insurance policies and they say, “You know, my brother in law sold me this policy. He’s probably ripping me off, but it’s my wife’s brother. So I did him a favor.” At the end of the day, what they don’t realize is that the best asset they have ever owned is that life insurance policy.

It takes a little education and becoming familiar with the ability or what you can do with that policy. But once we show them how to utilize that policy, they never go back and they always want more life insurance rather than getting rid of what they thought was a bad asset.

So think about the assets that you own, whether it’s a bank account, an investment account, real estate or even insurance policy, they were all purchased through a financial institution. But you see financial institutions have rules, and those rules center around getting our money and keeping our money for as long as possible. But what if you are able to maintain full liquidity use and control of your money so that you’re able to achieve your financial goals and still maintain that continuous compounding of interest that we all want so badly so our money could be working for us instead of against us.

Well, that’s exactly what you get with a cash value, life insurance policy. Full liquidity use and control and access to achieve your financial goals. You see, when you’re accessing the cash value in your life insurance, you’re following a simple law of nature. You see, in nature, everything has to flow. And when you are accessing your money, your money is flowing. But when you leave your money somewhere, it is stagnating. And guess what? Wherever you left that money, that institution is earning interest on that money.

The key is to utilize your cash value, to utilize that policy loan provision, that contractual guarantee that allows you full liquidity use and control of your cash value so that possibly maybe you could take that cash and invest it somewhere, so you have the internal rate of return within your contract, as well as an external rate of return on an investment.

 

Another option to utilize your policy cash value is to take a policy loan to repay debts. Whether that’s a high interest credit card or possibly some student loans. Once you take the policy loan, you now have free cash flow from the payments that were going to your credit cards or student loans that you could redirect back to your policy loan payment. And what that’s going to do is rebuild and reestablish that equity in your policy so that you can access it again in the future. All the time never interrupting the compound interest curve within your life insurance policy.

Let us know how you use your cash value within your policy or if you’ve never accessed it before, and have this Ferrari sitting in your garage. How we can help you the most is to show you how to unlock this stagnant money, how to utilize this asset, how to drive this Ferrari as fast and as far as you want.

If you’d like to get started with our process, be sure to visit our website at Tier1Capital.com to get started today. We show people how to use cash value life insurance policies, whole life insurance policies designed for cash accumulation to achieve their short term, long term and other financial goals.

Feel free to schedule your free strategy session today or check out exactly how we put this process to work for our clients in our free 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.

Pay Yourself First

Nowadays there is so much competition to get in our checkbooks every single month. Between subscriptions, utilities, credit card bills, student loans, rent or a mortgage the competition is fierce. Not to mention the increasing rate of inflation that could be detrimental to our cash flow each and every single month.

Today, let’s look at why it’s more important than ever to pay yourself first.

The Golden Rule in personal finance is to pay yourself first, but the question becomes, how do you do that? There’s never been more competition. It’s never been easier to give away control of your cash flow.

With as many subscription options as we have today, whether it’s a large corporation, a small company, a financial institution like an investment firm, a bank or an insurance company, or the government, they all are experts at getting into our checking account and getting into making sure that we’re paying them first rather than paying ourselves first.

So the question remains, how do we pay ourself first? The answer is simple. It’s to get $1 to do multiple jobs. If you were able to get $1 that you were using to repay a credit card with, to do multiple duties so that it’s also able to continuously compound interest and be working for you at the same exact time, that’s the secret.

Think of this question. What’s the rate of return? I’m getting $1 to do several jobs. The answer is that it’s almost infinite, and that’s the key. Making sure your money is much more efficient than just doing one job. That takes us back to the original question.

How do you pay yourself first? Well, first and foremost, you have to prioritize savings. And it’s really simple, but it’s also very hard. So think of this. I’ll never forget when my son got his first real job after college and after he got his paycheck. He was figuring he was going to make about $2,000. When he got his first check, it was closer to $1100. I’ll never forget what he said to me. He said, “Dad, who in the world is FICA?” And I said to him, “Welcome to the real world, son.”

So again, how do we pay ourselves first when we’re only going to end up with 50 or 55% of what we think we’re going to get in the first place? Well, it’s real simple. You’ve got to make sure that you’re understanding how much you get and also prioritize, and say, “Okay, whatever I get, 10% is going into my savings, could be 5%, could be 3%”, whatever you choose. You just need to start somewhere.

So when it comes to compounding interest, there are two factors and only two. Time and money. We can never get the time we lose back. So it’s important to start saving now, and make a habit out of saving. Save month after month, week after week, and never drain that tank so that you can experience the eighth wonder of the world: compound interest.

When we talk about not draining down the tank, what does that mean? Well, typically what happens is people save with great intentions, and then all of a sudden a disaster hits them. They have a financial or a medical emergency, so they wipe out their savings. Another example is that they’re saving money, and they need a down payment to buy a house. So what do they do? They drain down their savings and use it to pay for that emergency or they use it for that down payment on the house. Well, what happened is you drained down the tank and you stopped compounding interest on that money.

So again, the key is getting $1 to do two things. Have it in a place where you can utilize it to do whatever you need, whether it’s a financial or a medical emergency, a down payment on a house, paying cash for a car, things like that. But also, still make that money continue to grow and earn uninterrupted compounding of interest. Because if you drain that tank and deplete all of your savings, you lose all the opportunity that that money could have earned you. You’ll never see the interest that you don’t earn on that savings. But more importantly than the opportunity, you just lost all the time it took you to build that money up. Now you’ll never get that time back either.

So when you look at a compound interest curve, and in the beginning years you don’t see much growth, keep this in mind. Compound interest is when you are earning interest on the interest. That interest continues to compound and grow every single year. If you continually drain down that tank, knock yourself back down to zero, and start all over again, you’ll never experience the real growth on your money, which takes place in the later years.

It’s so important to never get off that compound interest curve, because by the time you realize the detrimental effects this is going to have on your finances and your ability to achieve your financial goals, it’s going to be too late.

This is where we always say the future you needs to have a sit down discussion with the present you about how you’re using your money, because the present you could really be shortchanging the future you out of a comfortable retirement.

So here’s the key. Pay yourself first and never stop. Pay yourself as a matter of course and never drain that tank. One of the ways we help our clients achieve this goal of paying themselves first is with a specially designed whole life insurance policy designed for cash accumulation. So, they’re able to meet their short term goals of paying off their credit card debt or paying off their student loans, as well as their long term goals, such as paying for a wedding, sending their kids to college, or saving for their retirement.

If you’d like to get started with this specially designed whole life insurance policy for cash accumulation, to help meet your short term and long term financial goals, so that you can save and pay yourself first and never drain that tank. Be sure to visit our website at Tier1Capital.com.

Feel free to schedule your free strategy session today or check out exactly how we put this process to work for our clients in our free 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.

Is the Death Benefit Better for the Beneficiary?

We often talk about the living benefits of life insurance, but we’re skipping out on a huge benefit,
and that’s the death benefit that comes with every single life insurance policy. So let’s start at a very high level. What is a life insurance policy?

Quite frankly, it’s a unilateral contract between the insurance company and the owner of the policy. So what’s a unilateral contract? Well, think of it this way. There are two parties to this contract. There’s the policy owner and there’s the insurance company. The policy owner has one job and one job only, and that is to pay the premiums on time. When the policy owner fulfills that obligation, the insurance company has all of the rest of the obligations.

That is, pay a death claim when the insured dies, make sure that all the other ancillary benefits, whether that be cash value, whether that be disability waiver of premium terminal illness or chronic illness, any benefits that are extra to the policy the insurance company is guaranteed and obligated to deliver.

Now, you can’t just demand a life insurance policy. You must first qualify. And there are two main ways that the insurance company is going to qualify you. The first is medical underwriting. They’re going to look at the insured’s health and determine that they’re healthy enough that the insurance company will take on their risk. The second piece is financial underwriting. And basically what this means is that you can’t over insure someone. The insurance company is not going to give you as much death benefit as you want and they’re not going to give you more death benefit than that person is worth. Just like when you’re insuring a car, you can’t get more money for the car if it gets totaled than the car is worth.

So there are three ways that an individual can qualify for more or a larger legacy or larger death benefit. First is based upon their income, and usually it’s a multiple of their income that they can insure themselves for. Second would be based upon their net worth. If they have a $2 million net worth, then theoretically the insurance company would be willing to issue $2 million of death benefit, and the third would be based upon business needs, whether it’s insuring your business interest or insuring your business debt.

Now that we’ve talked about how to qualify for a life insurance death benefit, let’s talk about why you would want life insurance death benefit to insure your legacy versus buildings, your business, or an investment account for that matter.

The answer is real simple: liquidity, use and control. We talk about it all the time and it’s more important via the death benefit than ever. You see, when the insured dies, it triggers something in the contract and the insurance company is now obligated to pay the death benefit, whatever it may be in that contract.

So keep this in mind. We’ve seen so many times where people pass away and their children have moved out of town and they leave their home to their child who lives four states over. The kid doesn’t want the house. The kid moved to Ohio or Maryland or Massachusetts for a reason. He didn’t want to be here. And because of that, the first thing they’re going to do is sell the house. Well, if the house is worth $200,000 right away, they have to pay a 7% real estate sales tax, plus a transfer tax, plus a probate tax. They thought they were leaving their kid $200,000. It’s only going to be about 150,000 after everything is said and done.

Now, let’s look at if the parent dies with an investment account. Same thing. There’s management fees, there’s liquidation fees. And again, there’s taxes and probate, probably end up with maybe $160,000.

So now let’s look at an investment account. Same thing. They’ve got to pay somebody to manage the money. They got to pay somebody to liquidate the money. They got to pay taxes on it. And it’s going to go through probate.

When all said and done, they’re going to end up with way less than $200,000. Now, if you really want to get sick to your stomach, let’s have the parent die and leave the child a retirement account. Same management fees, same liquidation fees, same probate fees. But now they got to pay income tax on top of it. And that income tax is in the kids tax bracket, not the parent’s tax bracket. So when all is said and done, they’re left with pennies on the dollar.

Well, how does this contrast with a life insurance contract? Well, first of all, it’s a contract between the insurance company and the policy owner. So it doesn’t need to go through probate. There’s no income tax. In most states there’s no state inheritance tax. It’s simply a claim form to the insurance company. And whatever the death benefit states is how much the beneficiary is going to get. So you know exactly how much money you’re passing on to your heirs and you get to determine where that money is going at your death. You’re completely eliminating the middleman. There’s no management fees, there’s no taxes. There’s no probate fees.

Like so many other times, when you’re dealing with an insurance company, you’re giving a direct order. You’re not asking permission. You’re saying, hey, when I die, I want my money to go to this person. And so that person fills out a claim form and they get a check from the insurance company.

Oftentimes when you’re dealing with a life insurance claim, the first money that the beneficiaries are able to get their hands on are from the insurance contracts, not from the bank account, not from the investment account, certainly not from the real estate. This money is going directly to that beneficiary as soon as possible.

And keep in mind, one thing about life insurance, it is the only financial vehicle, the only asset that you will own that guarantees that what you want to have happen will happen, even if you’re not here to see it happen.

So what does that look like? Well, let’s say you’re alive now and you’re young and you have a child and you want them to go to a good college. So you’re saving for retirement. But let’s say you die in five years. How is your child going to afford college now that they don’t have the savings that you’ve been accumulating for them? So one way to do that is to take out an insurance policy to make sure your child has the money to go to a good college, even if you’re not there to see it happen.

Another reason why you’d want to buy life insurance for the death benefit is for income continuation. If you’re a breadwinner or a dual household income, wouldn’t you want to make sure your spouse could maintain their current standard of living even if you’re not there working with them?

Another reason to buy life insurance is if you’re a business owner, and we see this so often, where a business owner will insure his business interests or the value of his business interest
so that his spouse doesn’t have to run a business they’re not familiar with. They can utilize the cash to create the lifestyle that the business created when the husband was operating the business.

So it all comes down to, once again, having full liquidity, use and control of your money even after your death.

If you’d like to get started with a life insurance policy to protect your family or your business, visit our website at Tier1Capital.com to get started today.

Feel free to schedule a free strategy session and get right on our calendar.

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

Ready to Expand Your Financial Knowledge Circle?

You hear us talk about wealth transfers and how you’re giving up control of your money all the time. But what does that actually mean? Where do we find this money and how? Where is there money hiding in plain sight in your financial life?

Let’s face it, we’re all trying to make the best financial decisions possible. When we wake up in the morning, we don’t say, “Hey, how could I screw up my finances today? “No, we say, “How can I move myself forward financially? How do I get from point A over here to point B, Financial security?”

Everything we do, we think, is moving us forward. But here’s the question. If what you thought to be true turned out not to be true, when would you want to know? Wouldn’t the answer be as soon as possible, so you could start on the correct path to financial freedom? A path where you have complete liquidity use and control of your money so that you don’t have to ask permission to access your money to make purchases in your life.

Let’s face it, every purchase we make is financed, whether we go to a bank for a loan or we pay cash. But what if there’s a better way, a way that leaves you in control of more of your money for a longer period of time?

All the decisions we make are based on the knowledge and the information that we have at that time. We call this the circle of knowledge. This circle represents all of the information that exists in the universe today. It’s everything that’s known by everyone in the universe. Your slice may just be a small slice of everything.

Then, there’s another slice of that circle of knowledge, and it represents everything that we know exists, but we just don’t know anything about it. It’s things like brain surgery or nuclear physics.

What we often forget is that there’s a whole universe of knowledge out there and not one person could know everything in the entire universe. It’s simply impossible. What we’re able to do is leverage the knowledge of other people, that’s the easiest way to expand your slice of knowledge.

So here’s the problem. All of the rest of the information, the rest of that circle is information that we don’t even know exists. It’s stuff that we don’t even know that we don’t know. And this is the information that can be holding us back from making huge strides personally and financially.

So how does this relate to the money we’re giving up control of unknowingly and unnecessarily? Think of it like this. The information that we don’t know exists is stuff that is literally sitting in our blind spot. Now, when you’re driving down the road and you look in the rearview mirror and you see nothing, and then you look in the side view mirror and you see nothing. And then you peek your head around and you see a 4,000-pound truck traveling down in the lane that you wanted to turn into.

That’s your blind spot. And this could be your blind spot financially as well. The information that we don’t know exists is stuff that is literally sitting in our blind spot. That car didn’t just appear out of nowhere. It was there the whole time, we just didn’t see it until we changed our perspective.

So if the decisions we’re making are based on the information that we have, the information we know and believe to be true, the best way to make better decisions could be as simple as expanding your circle of knowledge, making your slice a little bit bigger, and creating new beliefs that could actually move you forward financially instead of what the conventional wisdom is telling us to do.

It’s very simple. There are only three ways we can expand our knowledge. The first is the experiences we receive by the places we go. The second is the knowledge we gain by reading books. And the third is the transfer of knowledge from one person to the next.

That’s where we come in. We could help you because the key here is the things that might be in your blind spot are literally in the slice of the circle that we know, and we know that we know it. If you meet with us and we share our piece of the circle of what we know, it could help expand your circle of knowledge so you can make the best financial decisions for you.

There are five major areas of wealth transfer that we could help identify where you’re giving up control of your money unknowingly and unnecessarily, with 100% certainty. Those five areas are…

  1. Taxes
  2. Retirement
  3. Real Estate
  4. Capital Purchases
  5. Education

After we identify these areas where you’re giving up control of your money. It’s really simple. This is money that’s literally hiding in plain sight. It’s in your cash flow. You think it’s moving you forward, but it’s actually holding you back. Once we go through this process, you’re able to utilize that money to move you forward.

If you’d like to get started with a custom plan on how to move yourself financially forward, visit our website at Tier1Capital.com to get started today.

You could schedule a free strategy session if you’re ready to speak with us or we have a free webinar where we do a deep dive on our Four Steps to Financial Freedom.

Feel free to click that button and register for our webinar today.

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

How Buy-Sell Life Insurance Can Benefit Your Business

There are a lot of things to consider as a business owner with a business partner. And one question that should be answered by any successful business owner is what will happen when my business partner dies?

When you go into business with a partner and they die, you’ll have two choices without a properly drafted agreement. Those options are really simple.

    1. Option one you’re now in a partnership or in business with your former partner’s family.
    2. Option two, you’ve got to come up with enough cash to equal the equity interest that your partner had.

So the simple solution is to draft a buy-sell agreement, which will detail exactly what you want to have happen when each partner dies. The buy-sell agreement is an obligation that literally tells what has to happen when one of the partners passes away. This brings us to the second part of buy-sell planning, which is funding. Where’s the money going to come from to buy out the partner? Do you have enough cash on hand or are you going to have to liquidate assets in your business? But if you liquidate the assets, how is your business going to function? This brings us to our next option and the best option for funding any buy-sell agreement, which is life insurance purchased on each of the partners that would produce liquidity at the time of death.

 

The buy-sell life insurance policy is the only option where the problem, the death of the partner, triggers the solution: instant liquidity to buy out their shares. Think of it this way, if you pay cash, you’re giving up that cash amount plus the interest that cash could have earned. You’ll never see the interest you don’t earn on that money. If you pay out over time it’s the same thing. You’re giving up control of the money, plus what that money could have earned. That would be an installment sale. But the third option, life insurance literally gives you a discount. You should never pay more for the business interest than you do for the insurance. The insurance should be discounted from what the principal or the death benefit is.

So the buy-sell agreement creates the obligation. The obligation can be paid either in cash if you have the money, in which case you’re giving up control of the cash, plus what that cash could have earned: opportunity cost. The second way you can buy out your partner is to borrow money from a bank to pay for his business interest. But will you qualify for a loan when you’re down one business partner? Will the business still continue to perform at peak level once that business partner is gone? And the third way is to buy life insurance. Life insurance could literally give you a discount on the amount of money that you need to buy out the partner. Often people look at insurance premiums as a cost, an obligation to dish out money to the insurance company every year. And no one wants to do that. But a simple reframe could shift it into an asset.

First of all, you have full liquidity use and control of any cash value via the policy loan provision that you have access to throughout the policy’s life. And number two, once your partner dies, it triggers an automatic death benefit to fund the problem of the buy-sell agreement. Your obligation to buy out your partner is solved with a snap of a finger. The event that triggers the problem, the death of a partner, is also the event that triggers the solution: life insurance death benefits.

I can’t tell you how many times I’ve seen very successful businesses, businesses that have been around for 40, 50 years that never address the buy-sell issue or they had a buy-sell agreement and it wasn’t funded. I could tell you of a manufacturing company been around for over 50 years – they never addressed the buy-sell issue. When one of the partners died, they didn’t have enough money to buy out the partner, so they had to borrow money. They borrowed money in 2005. Well, when the financial crisis hit, business went down. They didn’t have enough cash flow to pay for the loan and ultimately went bankrupt. That business had been around for over 50 years and went out of business like that because they never addressed the buy-sell issue.

It’s our mission to help as many families and businesses as possible to make the best financial decisions possible. If you’d like to get started with this conversation today, visit our website at Tier1Capital.com to schedule your free strategy session where we could do a deep dive into your situation and how we could meet your needs with a buy-sell life insurance policy.

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