Have you met with a financial adviser who turned you away because you didn’t meet their account minimum? Well, today’s your lucky day, because today we’re going to take you through exactly how to go from having nothing or not enough to being abundant and living financially free.
So the first question you should ask yourself is: why don’t you meet their account minimum?
And it’s probably because you’re following conventional wisdom, but that’s the good news – you probably also have money that’s hiding in plain sight. Our process seeks to put you back in control of your money. We do a deep dive into your finances and find money that you’re giving up control of unknowingly and unnecessarily.
Unknowingly means that you don’t know you’re doing it. You don’t wake up and say, “Hey, I’m going to make a bad financial decision today.” No one does.
Unnecessarily means that you don’t have to continue down that path. Making some simple shifts within your finances could put you back in control of your money and leave you in a better financial position going forward.
We have been trained to find, on average, $24,000 per year of money that’s hiding in plain sight. That’s money that you can use to move forward financially. Our process looks at five major areas of wealth transfer where money is leaving your control each and every single month. Those areas include:
By looking at these five areas, we’re able to identify money that’s leaving your control. Then we can redirect that money back into an account that you own and control and have full liquidity use of that money in order to achieve your financial goals.
And you see, we don’t have an account minimum. We would never insult somebody by telling them that they’re not good enough. Everyone thinks they’re doing the best that they can with what they have, but what if there was a way to make your money more efficient. What if instead of just paying down debt or paying cash for purchases, you were actually accumulating wealth for you and your family? Wouldn’t you want to know about that? This is where financial advisors get stigmatized as only being there for the wealthy.
Are you a millennial saving for retirement in your employer-sponsored retirement plan? Did you know that the average age millennials started saving for retirement was actually between ages 22 and 23? Why? Simple, automatic enrollment. 95% of those enrolled don’t opt out. If you’re wondering if there are better ways to save for your financial goals and retirement, stick around to the end of this blog.
When it comes to saving for retirement, use your employer-sponsored plan to contribute up to the level that the employer matches. But over and above that, you may want to consider alternatives that put you in control of your money so that you could access that money somewhere along the line. In case there’s a financial emergency, a medical emergency, or an opportunity that you want to take advantage of.
Now keep in mind that these strategies may be different from the ones that your parents, your grandparents, your mentors, or even your friends are using.
But they seek to keep you in control of your money because whoever controls your cash flow controls your life. And we have seen too many times people trying to put as much money as possible into their government-sponsored or employer-sponsored retirement plan. And you see, it’s not about having the biggest statement or the largest value on your statement. It’s about being in control of your money. And yes, you might have a large statement or a large balance in your retirement account. But who really controls it? Is that all your money or is part of it controlled by the government?
And you see, that’s the key. Putting you in control of your money. Have you considered what the taxes are going to be in the future when you go to access that money, or if you have to access it before the government says you’re allowed to? What the penalties are going to be on that money? And you see then this brings us back to the basic question: Do you think taxes are going up in the future?
Do you think taxes have the potential to go up a lot in the future? Is it better to defer a small amount of tax into the future when it could potentially be a large tax? Or is it better to pay a small amount of tax on your income now and let it grow on a tax-deferred basis so you never have to pay taxes on it again?
So you’re going to always want to contribute up to that employer match. But anything over that, you have a choice. Where is the best place for you to save that money? And that’s where we can help you. We can help you assess where the best place to put the money would be to fit your circumstance. You’re going to want to keep full liquidity use and control of any excess money that you’re saving. You’re going to want to save it in the place that it’s allowed to grow on a tax-deferred basis, and that allows you access to anything you need, no questions asked. So you could use it to renovate your home, go on vacation, send your kids to college, take advantage of opportunities, or anything else you could think of.
And here’s the point again. You have choices, and keeping those options open allows you to access that money prior to retirement so that now your money is working in two places at once.
So if you’re enrolled in your employer-sponsored plan and contributing over the match and you’re looking for some alternatives of where you could save, that would leave you in control of your money so that you could access it when you need it for what you need. Be sure to visit our website and 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.
So, you’re purchasing a whole life insurance policy specially designed for cash accumulation, and you’re wondering how much money exactly is going to be available within the policy during those first few years. If that sounds like you stick around to the end of this blog post because today we’re going to do a deep dive and you’ll know exactly what to expect going forward. The first step is understanding how the policy is designed and the three key components.
The first is the base policy. It’s the actual whole life insurance policy within your contract. And with that, during the first few years, there’s not going to be much cash accumulation. But that’s why we have the other two components.
The second component is the term rider. And with the term rider, we increase the death benefit, but it allows us to put extra cash within the policy.
And the third piece is a paid-up additions rider. And that’s where the actual cash value is growing, in that paid-up additions rider.
So again, the three components are: the whole life policy, which allows us to do all of this magic, the term rider, which allows us to stuff more money into the policy, and then the paid-up additions, which are actually the equity that we get in the early years.
And it could be thought of as a single premium whole life policy under the cover of a term policy within the whole life policy. So, as we mentioned earlier, the base policy and that term rider, they’re not going to have much cash availability within those first few policy years. But with the paid-up additions rider, the amount that you’re contributing to the rider on a monthly or annual basis, you can expect about 85 to 95% of that to be available immediately for access via policy loan. You see, that’s the money you could access to pay off debt, make a major capital purchase like a car, a wedding, a vacation, or use to take advantage of an opportunity that presents itself.
So, here’s the key: With or without the riders, the paid-up additions, and the term rider, the whole life insurance policy would eventually become efficient. After the first few years, that base policy is going to become efficient and generate cash value within itself on a guaranteed basis. But, the paid-up additions rider allows us to supercharge the policy so you have immediate access to cash value.
And keep in mind, when Nelson Nash discovered the infinite banking concept, there was no such thing as paid-up additions riders. So, he was looking at it purely from a perspective of a base policy, and he was starting policies out that had no cash for two or three years. And that’s the key. He was thinking long-term.
You see, this is a long-term concept that will put you in control of your money, your cash flow, and, ultimately, your life. So walk away from this blog knowing this, you’ll have access immediately to 85% to 95% of whatever you’re contributing to that paid-up additions rider, whether it’s on a monthly basis, an annual basis, or a one-time jump in. But also keep in mind that the longer you have the policy, the better it gets. And because of that, over time, you’ll have access to more and more of the money you put in, as well as the earnings on that money.
Additionally, you have to keep in mind that as that base policy matures, the paid-up additions rider may not make sense anymore. So you’ll want to look at this in a few years. And then once we drop that paid-up additions rider, you may want to start a new policy and begin this process all over again.
If you have a policy and you’re wondering how to access the cash or what the growth is like within it, be sure to visit our website at tier1capital.com. Also, if you don’t have the policy and you’re thinking about starting one, we’d be happy to help. You can schedule your free strategy session at tier1capital.com today.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Today we’re going to share with you ideas and strategies that transcend finances. It will be information that can impact your life on a much bigger and deeper level than just financially. Implementing these strategies can give you back control of your money, your cash flow, and your life. No longer will you be dependent on and therefore obligated to the banks for credit and access to cash. No longer will your financial success be tied to the vagaries and whims of the Wall Street rollercoaster. So if you want to get back control over your life and experience the liberating feeling of independence and freedom that come with it, stick around to the end of this blog to find out.
Today we’re going to talk about the concept of money that is hiding in plain sight. And you may be wondering: “How could money be hiding in plain sight? Every day I wake up, I make the best financial decisions for myself. I pay off my debt as soon as possible. I have a 15-year mortgage and I’m paying extra on it. I’m paying off my credit cards as fast as I can. I’m maxing out my 401K’s. I’m paying cash for purchases when I can. I’m saving for my children’s college education.”
But what if we were to tell you that the things you’re doing could actually end up holding you back financially in the long run? When would you want to have that conversation?
So, let’s start with a simple example of having $500 extra at the end of the month and making the decision to put $500 on your credit card. Why? Because debt is bad. And the first question you need to ask yourself is that by putting that extra $500 on the credit card, does that increase or decrease your net worth? The answer is neither. You see, before you put the money on the credit card, you owned and controlled $500 and you had the outstanding balance on the credit card. Now you have a lower outstanding balance by $500, but no cash. It hasn’t impacted your net worth by one penny. But the key is now who controls that $500? And the answer is, it’s not you. That’s just one example of where you could be giving up control of your money unknowingly and unnecessarily.
We found that there are five major areas of wealth transfer: taxes, how you fund your retirement, your mortgage, how you’re saving for your children’s college education, and how you’re making major capital purchases like weddings, vacations, or buying a new car. And, you see, this money is actually hiding in plain sight. And what we have found is that the average family has about $24,000 year over year that is hiding in plain sight. Again, it’s money you think is moving you forward. It’s actually holding you back. And because of that, we’re able to identify that money and return it to you so that you can be in control of that money.
Let’s face it. No one wakes up in the morning and says, “Hey, how can I mess up my finances today?” We’re making decisions that we think are right for us because that’s what conventional wisdom told us, or that’s what our parents told us, or that’s what our grandparents told us. But we’re here to tell you that there may be a better way that leaves you with more control of your finances so that you’re less dependent on these institutions going forward. And you see, that’s the key to putting you back in control of your money. Once you start chasing returns or looking at interest rates, you’ve taken your eye off the ball. And that’s where we could find the money that’s hiding in plain sight.
Now, finding the money is only step one. And if you find the money and you just increase your lifestyle or you increase your spending, that’s not going to move you forward either. The second part of the equation is to start saving that money and to start saving it in a place where you own and control it so that you’re able to make better financial decisions going forward and be less dependent on these institutions in the long run.
And you see, we have found that a specially designed life insurance policy will give you access to your money when you need it, no questions asked. So that’s the first issue of control. The second issue is that by accessing that money and using the loan provision now, your money will continue to earn uninterrupted compounding interest. And now that’s the second level of control that returns back to you. And again, what could be more empowering or more liberating than setting up an account that only you could access and you can use for whatever you want, whenever you want. That, to us, is control.
You see, when you’re in control of your money, you’ll have less dependency on banks for access to credit, and you’ll have less exposure to the risks of the Wall Street rollercoaster. If you’d like to get started in finding the money, hiding in plain sight in your finances, 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.
Did you ever think about what would happen to your retirement nest egg if you happened to retire during a down market? Everyone knows the cardinal rule: never do a double negative. Never take money out of your investment account during a down year. But where does that money come from if it’s not coming from your investments? Stick around to the end of this blog to find out.
Will you be retiring in a down market? Keep this in mind. Since 2009, the market’s been only down once, and that was 2018 when the market was down about a little over 4%. Now, the average bull market lasts seven years. But here we are 13 years later and the market’s still chugging along. So the question again is, will you be retiring in a down market? Now, conventional wisdom tells you to either invest in safe assets if you’re concerned about a down market or to balance your portfolio. Maybe 40% bonds and 60% stocks or 60% bonds and 40% stocks. But they don’t tell you what happens if the bond market is down at the same time the stock market is down.
Here’s a question, where is it written that you have to lose 50, 60, 70% of your portfolio in order to earn money? Why not choose an asset that’s not correlated to the stock or bond market? So that you’ll get a reasonable rate of return and you’ll have liquidity, use, and control of that money so you could access the cash to supplement your retirement income when there’s a down market giving your portfolio a chance to regenerate or to regrow itself without having the double negative of a market loss and an annual withdrawal.
The point is that conventional portfolio solutions have downsides, and those downsides can be detrimental to your nest egg. A better solution may be using a specially designed whole life insurance policy as a volatility buffer to protect your nest egg so you don’t have to make a withdrawal in a down year ever again. It allows your portfolio to regenerate itself, to grow back, and it still gives you the income you need in retirement.
We’re going to take a look at why you would want to utilize cash value life insurance as a volatility buffer to supplement your portfolio. Let’s say you have a hundred-dollar portfolio and your portfolio loses 20%. Well, now you’re down to $80. But did you ever think how hard you have to work on that $80 in order to get back to even? You lost 20%, but you got to earn 25% of the $80 in order to get back to $100.
Now, let’s throw in taking money out of the portfolio to supplement your retirement. You have the same hundred-dollar portfolio, the same 20% loss. Now you’re down to $80, but you take out $10 to supplement your retirement income. Now you’re down to $70. You have to earn 42% on the $70 just to get back to even. As you could see your money has to work that much harder just to get back to even or else you’re going to run out of money faster. Here’s the key, make sure your money is working smarter, not harder. Using a specially designed whole life insurance policy as a volatility buffer is a great way to get the most out of your retirement savings.
If you’d like to get started with a specially designed full life insurance policy for accumulation as a volatility buffer in your situation, be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.
What would be the safest way to make your money last longer in retirement? Wouldn’t it be to reduce or eliminate your tax obligation? Stick around to the end of this blog and we’ll show you how to use a specially designed life insurance policy to reduce or eliminate your tax obligation and keep the government’s hands out of your retirement.
When people come to me with their yet-to-be-taxed retirement accounts: 401K’s or IRAs, they’re literally shocked as to how much taxes they’re on track to pay in retirement. The reason they’re shocked is that that’s not what they were told. They were told that they were going to be in a lower tax bracket in retirement. So let’s take a look at exactly what happens when you’re making contributions to your IRA, 401K, 403B, or your other qualified retirement accounts.
Basically, you’re putting a piece of your income into these accounts and you’re deferring the tax into the future. As your account grows and the interest accumulates, eventually you’ll have a large pile of money to use for your retirement. But what happens is, as that money is growing, so is your tax obligation. Here’s the key to utilizing specially designed life insurance to help supplement your retirement. We know what taxes we have the potential to avoid. We just don’t know what the rates are.
There are six potential taxes you could avoid by using these specially designed whole life insurance policies. That includes:
Federal income tax
State income tax
Social security offset tax
There’ll be no increase in your Medicare premium
In most states, you’re going to avoid probate and state inheritance tax.
So what would it look like and how would we proceed to move money from forever taxable in a qualified retirement account to never taxable in a specially designed whole life insurance policy? Basically, after age 59 and a half (so you could avoid the 10% penalty for withdrawals prior to age 59 and a half), we would start taking distributions to fund the annual premium on your life insurance policy.
The key questions you need to ask yourself are basically, do you think taxes are going up in the future? Do you think that with everything that’s going on in our country, and keep in mind we’re $30 trillion in debt, do you trust the government to do what’s in your best interest or what’s in their best interest? And if you think taxes have the potential to go up really high, here’s the question, do you want to pay those taxes? And I bet there’s not a lot of people that asked you that question. But the key is you have a choice. What choice will you make to make sure that your money lasts longer in retirement?
If you’d like help designing a specially designed whole life insurance policy for cash accumulation to help your retirement go further and keep the government off your payroll. Be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Have you ever heard of a modified endowment contract or a MEC?
Well, stick around to the end of the blog, because today we’re going to do a deep dive into the nitty-gritty of MEC contracts.
Basically, a modified endowment contract or a MEC is a life insurance policy that gets stripped of its tax advantages because it doesn’t pass the seven-pay test. The seven-pay test is a test used by the IRS to determine whether or not your policy will become a modified endowment. And the seven-pay test is really simple. It compares the amount of premium needed for you to pay up the policy in the first seven years. If the premium you actually put into the policy exceeds that, then your policy is determined to be a modified endowment contract. Once a MEC, always a MEC. If you put one penny more than is allowed by that seven-page test, your policy will always be a MEC and it will always be stripped of its tax advantages. So what are the tax implications of having a modified endowment contract or a MEC?
Basically, once the policy goes from being a life insurance contract and crosses that imaginary MEC line, it goes from being a life insurance contract to being treated as a non-qualified annuity. As with any non-qualified investment, a MEC, any distribution taken from a MEC will be considered ordinary interest or a return of the interest earned. That goes for any distribution, whether it’s a dividend distribution or a policy loan, which generally aren’t taxable. But if your policy is a MEC, the distribution can be taxable.
Additionally, just like a non-qualified annuity, any distributions or policy loans or surrenders prior to age 59 and a half are subject to that 10% penalty. Despite losing some of the tax advantages of life insurance when you have a MEC, there are some situations where it makes sense to go for the MEC. Particularly, if you don’t plan on accessing the cash value prior to age 59 and a half. Or a lot of times it makes sense if you have assets that you need to shelter from the expected family contribution, FAFSA calculation.
So when wouldn’t you want your contract to be a modified endowment contract? You wouldn’t want your policy to be a modified endowment contract if your plan is to access the living benefits of the policy, whether it’s to make major capital purchases, educate your children, or supplement your retirement. If you have enough time to do the planning and you plan on accessing the living benefits of a life insurance policy, you would want to avoid a MEC at all costs.
It’s easy with the way we designed the life insurance contracts for cash accumulation to avoid that MEC. But sometimes people have a large lump sum of money that they want to put in immediately, and we have to split that up over several years so that the policy doesn’t become a MEC and we could take advantage of the tax advantages and the tax shelter offered by a life insurance policy.
But one of the things that I’ve found is the MEC issue is much to do about really, not a lot. The key is this number one, the MEC status could be avoided with proper planning and design, and that’s where we can help you. Secondly, keep this in mind. Whether your policy is a MEC or it’s not a MEC, you still enjoy the tax-free death benefits that are given to life insurance policies. And because of that, it still creates a nice little tax advantage.
If you’d like help designing a life insurance policy for cash accumulation or a modified endowment contract, 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.
When it comes to the Infinite Banking Concept, there’s one major key to consider before you get started. Is your company a direct recognition company or a non-direct recognition company? Today, we’re going to take a deep dive into this.
A lot of times people are looking to get started with IBC and a huge mistake they can make is choosing a company that uses direct recognition. You may be wondering, what does direct recognition even mean?
Basically, the insurance company recognizes the fact that you have a loan against your policy and they credit you a lower dividend on the loaned balance. That’s analogous to having money in a CD with a bank that’s paying you, let’s say, 2% interest and at the same time borrowing from that same bank for a car loan. Let’s say they’re charging you five and a half percent interest. Then the banker says, well, you know because you have a car loan with our bank, we’re going to give you a lower interest rate on the CD. Would you want to do business with that bank? Here’s the point. If the purpose of getting an insurance policy is to borrow against the cash value, why in the world would you want to be penalized for doing what you want to do with your policy?
At the end of the day, the insurance company has to invest that money somewhere and they’re limited as to where they’re able to invest. They could invest in commercial real estate, bonds, or policy loans. And most of the investments are in bonds and commercial real estate. But at the end of the day, policy loans are one of the best places for insurance companies to earn interest.
The reason why policy loans are the best investment for insurance companies is that the entity that is making the loan – the insurance company – is also the entity that is guaranteeing the collateral – the cash value in your policy. They don’t have to pay somebody to do an appraisal or to do an audit. They know it. That’s their job. They’ve already done the administration. So it’s a no-cost or low-cost way for the insurance company to pick up a guaranteed rate of return. When it comes to direct recognition, they’re really just increasing their already guaranteed rate of return because you’re paying interest on that loan. So by lowering your dividend, it’s just increasing their gains. We always preach to our clients – regain control of your money. Are you regaining control of your money if the insurance company is penalizing you for borrowing against your policy?
So we’ve created a cheat sheet for choosing the best company to work with for an infinite banking concept policy. We have five criteria that we’ve used when choosing an insurance company.
First, it’s got to be a mutual company. Why? Because mutual companies share the profits of the company with you, the policyholder. In essence, you’re the owner of the company as it relates to your policy.
Second, the company has got to have been around for over a hundred years.
Third, it’s got to have been able to have paid dividends for over 100 consecutive years.
Fourth, it should be non-direct recognition, meaning that they’re not going to penalize you if you borrow against your policy.
And fifth, the company should be licensed to do business in the state of New York. Why is that important? Because New York has the highest level of regulatory protection for the policyholder. And in insurance law, if you want to do business in New York, you have to follow New York law in the other 49 states.
If you look at these five criteria, you’ll be able to choose an insurance company that will best benefit you for the infinite banking concept. If you’re shopping around and looking for the best company to use for the infinite banking concept, check out 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.
So you’ve been looking into the infinite thinking concept and you’re wondering when is the best time to get started? Well, age is an important factor and today we’re going to do a deep dive on what the best age to start a policy is.
First and foremost, why is the infinite banking concept a great thing? Well, the reason is we use a specially designed whole life insurance policy to get and keep you on the compound interest curve. We start that compound interest curve for you and your family and never let you fall off. You have complete liquidity, use, and control of your money along the way. Also to accomplish your short-term, long-term, and intermediate financial goals. The infinite banking concept is literally a method of making purchases. We always say:
“It’s not what you buy, it’s how you pay for it that really makes the difference.”
With this concept, you’re literally able to turn liabilities into assets and leave you and your family, or your business, in a more secure financial position than when you started.
As we noted, the infinite banking concept is a method of making a purchase. So let’s look at the other ways that you could make a purchase.
You could pay cash, in which case you’re draining down the tank and no longer earning interest on the money you used for the purchase.
You could lease, which is even worse than financing because you don’t even own the product that you purchased.
Or you can use the infinite banking concept, in which case you’re borrowing against your own money, continuing to earn uninterrupted compound interest, and being in control of the terms and conditions of the loan.
So let’s get back to the question of when is the best time to get started with a policy for infinite banking? The answer is as soon as possible. A lot of times younger people will come to us and they’ll get hung up on the fact that we use whole life insurance for this concept because they are either single or they are a young family and don’t have children yet. What happens is they don’t move forward and that could be a huge mistake.
When’s the best time to start saving? Really, that’s the question. The answer again is as soon as possible. The trick is to always pay yourself first. A lot of times people get in the habit of paying for a million subscriptions or paying a lot for a car payment or their rent, and they forget the importance of starting that compound interest curve as soon as possible. With the compound interest curve, it needs time and it needs money. These policies allow us to save as a matter of course and still have access to that money to achieve our financial goals. You don’t have to start by putting a lot of money into a policy. You could start out at $50 a month or $100 a month. The key is to get started.
On the other end of the spectrum, are people in their fifties or sixties or even in their seventies, who say, “Gee, I wish I’d started a policy 20 years ago. I wish I knew about this”. Well, if you’re not done making purchases, you’re not too old to start an infinite banking concept policy. Whether you’re young or whether you’re old, it’s important to get started before your health is compromised. If you find out about this method after your health is compromised and you can’t get insurance, you may be able to purchase insurance on someone else’s life and still use this method and you just won’t be the insured. Keep this in mind. I have a gentleman who was 83 years old when he started his first IBC policy. So you’re probably not too old.
Here’s something to consider, when you purchase a whole life insurance policy, the insurance company is making two promises. The first promise is to pay the death benefit when you die anywhere along the way throughout your whole life. The second promise is to have a cash value equal to the death benefit at the age of maturity, which is usually at age 121. So the difference between a young person purchasing life insurance and an old person purchasing life insurance is the cost of insurance because, with an older person, the insurance company has less time to reach that same death benefit cash value equilibrium. Another way to look at this, though, is the fact that with older people, the insurance company has to put more money away sooner, which means you’ll have more access to cash sooner for an older person versus a younger person. This is very important when it comes to the infinite banking concept because with this concept, typically the insured isn’t looking at the death benefit. They’re looking more so at the cash value.
Another thing to consider for younger people is the policy design. There are riders that allow us to stuff more cash into the policy sooner to make that policy for a younger person much more efficient than the traditional way of purchasing insurance.
So here’s the point, whether you’re young without a family or old with a family or anywhere in between, the best time to get started with the infinite banking concept is yesterday. If you’re ready to get started with an infinite banking concept policy designed for you to meet your cash flow and your needs, visit our website at tier1capital.com. We have a free web course there which you’re welcome to watch. It goes into a deep dive into how our method works. If you’re ready to get started, feel free to schedule your free strategy session today.
Remember, it’s not how much money you make, it’s how much money you keep that really matters.
Are you buried in credit card debt or student loans? And you’re looking for the best way to pay them off as soon as possible? If that sounds like you stick around to the end of this blog because today we’re going to go over a few methods of how to get out of debt and put you in a financially secure position along the way.
So there are two main methods of paying off debt. The first one we’re going to talk about is The Avalanche. With The Avalanche, you order your debts in order of highest interest rate to lowest interest rate, and you put all of your excess payments on that highest interest rate loan. A slight issue with this method is that it could cause delayed gratification because a lot of times the loan with the highest interest rate also has the highest balance. So it could feel like you’re not really getting anywhere. This is why we suggest using The Snowball.
With The Snowball, you order your debts in order of lowest balance to highest balance, and you put all of your excess payments on that lowest balance. Then as your small debts get paid off, you add those payments to the next one down, the next one down, the next one down, until eventually, you’re putting a lot of monthly cash flow towards your highest debt. This one’s great because it feels very gratifying to get all of those debts paid off, even if they’re small amounts.
The problem with The Avalanche and The Snowball is really that you are giving your excess cash to the bank or the credit company. So you go from a situation where you have a lot of debt and little cash flow to a situation where you have no debt and no cash. Either way, you don’t have access to money.
I can’t tell you how many times we get the question:
Should I start saving first or should I pay off my debt first?
We always suggest you start saving because the sooner you start saving, the sooner you jump on the compound interest curve. That means your money is going to be working for you 24/7. We always suggest saving in a specially designed life insurance policy.
Now here’s where The Snowball comes into effect. We borrow against the policy to pay off the smallest debt, and then that payment that we were making on the smallest debt goes back to the policy. You see, if you make that monthly payment directly to the credit company, the credit company owns and controls that cash flow. But when you make that payment back to the insurance policy, you own and control that cash flow, which means you could use it again. Then when there’s enough cash to pay off the second debt, you can take that money, pay off the second debt, and now you have two payments coming back to the policy which you own and control. Eventually, you’ll have all of your debt paid off and all of your debt will be paid off sooner than if you just did the regular snowball. That’s why we call this method The Snowball on Steroids.
After you use this method, what you’re left with is a policy with a ton of cash value that you don’t need to access money from the banks anymore. You’re able to access it from your own policy without any questions asked. You have complete liquidity, use, and control of that money whenever you want for whatever you want. You increased your net worth and increased your security all with the same dollars you were using to pay off your debt.
Here’s the point – it’s important to get out of debt, but it’s more important to put you and your family in a secure financial position. This Snowball on Steroids method does both simultaneously. If you’d like to get started, watch our free web course on our website where we go through exactly how we put this to work for our clients. If you’re ready to get started, 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.
