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Money Management Tips: Save Money on Mortgage Payments

Some so-called financial experts recommend making extra mortgage payments on your balance. If you’re considering this, you need to stick around to the end of this blog because today we’re going to go over three reasons why this may not be the best decision for you and your financial security.

If you’ve been following our blog for a while, you know that we always preach how important it is to control your cash flow. A lot of times conventional wisdom will tell us debt is bad. In the case of a mortgage, that’s often several hundred thousand dollars of debt on your balance sheet, and that could feel heavy. So it makes sense that people want to pay that off as soon as possible.

But the number one reason why that may not be a good idea for your situation is that every dollar that you pay extra on that mortgage is a dollar that you no longer own and control. The question is, is that really leaving you and your family in a safe financial position. Thinking about this logically, today, you own a dollar and you take that dollar and you put an extra dollar on your mortgage. Today, you controlled it. The day you give it to the bank, they control it. Now, if you get disabled, if you lose your job, or if the economic situation in this country changes, now you’ve got to go to the bank to ask permission to get your money.

Are you in control or is the bank in control?

Here’s the first question you should ask yourself: Does paying off your mortgage faster increase your net worth? And the answer is basically no. Think about it. If you had a $400,000 mortgage and you had $400,000 of cash, your net worth is zero. If you pay off the mortgage with cash, your net worth is zero. So you’re not increasing your net worth. But here’s the issue. Before you paid off the mortgage, you owned and controlled, $400,000 of cash and you had a $400,000 mortgage. After you paid off the mortgage, you have zero in cash and a $400,000 house. If you need to get that money, who’s in control, you or the bank?

Here’s the second question to consider: Does paying off your mortgage sooner increase the value of your home? And again, the answer is probably not. So you see, your house will either appreciate in value or depreciate in value. It doesn’t matter whether you have a mortgage, whether you have no mortgage, or you have a big mortgage or a small mortgage. The value of your mortgage doesn’t increase or decrease the value of your home.

Here’s the third question to consider: When you pay off your mortgage faster, is it increasing your financial security or the bank’s financial security? And to answer that question, think of this question. When you go shopping for a mortgage, isn’t there a lower interest rate on a 15-year mortgage versus a 30-year mortgage? And doesn’t that tell you that the bank is incentivizing you to pay off your mortgage sooner? Why? For your benefit or for their benefit? Won’t they get their money back sooner and won’t they be able to turn that money over and loan it again? Is that making your position better or the bank’s position better?

Knowing what you know now, if you have extra money to put on your mortgage, does it really make sense to put it on your mortgage? Or does it make more sense to put it in a place where you have complete liquidity, use, and control of that money to take advantage of opportunities or in the case of an emergency? If you’re to lose your job or become disabled and unable to work, does it make more sense to put it in a place where you own and control it or where you have to ask permission from the bank to access that home equity again? And you see it’s all about control of your money and using your money to increase your security. Keep this in mind:

Whoever controls your cash flow controls your life.

 

So you want to guard it so that you’re not willingly giving up control of that money to the banks, the government, and to Wall Street.

If you have extra cash flow and you’re thinking about putting it towards your mortgage or you already are, and you’d like to learn more about how our process can help you regain control of your cash flow, visit our website at tier1capital.com to get started today.

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

College Funding Tips: How To Make Your Money Work For You

Wouldn’t it be great if you could get $1 to do the job of multiple dollars? Are you wondering how this could be possible? Well, stick around to the end of this blog, because today we’re going to talk about multiple duty dollars and how to get your money to work harder for you and your family.

For most of us, our income is limited every month. We only have so much money coming in, so it’s important, and this is why we always preach: 

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

 

It’s also very important to make that money as efficient as possible – to make it work as hard as possible for you and not for the other guys. 

Let me share with you an example of a client who got hit with some extraordinary expenses. He has two children. His first child was a junior in college, and for the first two years, no problem. $60,000 – he was easily able to afford that out of cash flow. But now when he had the second child in school, it was going to cost him $120,000. This was really choking his cash flow. He felt suffocated and the things that they had been accustomed to doing previously now became difficult. So he called me and said, “Hey, what can I do to get some cash flow relief?” So when he came to us, he was feeling suffocated. There was no way he got another $60,000 out of his cash flow this year. But what we gave him was cash flow relief. And that cash flow relief started by having him borrow against his existing life insurance policies to pay for college.

Instead of taking $120,000 out of cash flow to pay for college, he borrowed $120,000 against his life insurance. The $60,000 that he was easily able to afford went back into the policy to pay for policy loans and all we did in essence was extend his amortization schedules. But he was able to do this because he had access to his money. We got $1 to do multiple jobs.

How do we do that? Well, the same money that he was using to pay for college, $60,000 per year was now paying for college, paying for life insurance, a disability waiver benefit, chronic illness, terminal illness, and retirement supplement. That’s $1 doing five or six jobs. That’s the power of multiple duty dollars. 

The moral of the story is we transformed this guy’s problem into an opportunity. If you’re in a situation where you’re feeling stuck and suffocated financially and are looking for some creative ideas on cash flow relief, schedule your free strategy session today.

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

 

How To Fund Your Retirement

Are you wondering what the best type of account is to use to fund your retirement?

There are so many accounts and so many rules, it could all get a bit confusing. But if you’re wondering how to use a cash value life insurance policy to help supplement your retirement income and why it’s a good move, make sure you stick around to the end of this blog.

Conventional wisdom tells us that we should be saving in tax-qualified retirement plans: 401ks, 403Bs, and IRAs. But keep in mind that these accounts didn’t come into fashion until the 1970s. Prior to that, everybody saved in passbook savings and cash value life insurance. Before the 1970s, only the “rich people” had financial advisers, had stockbrokers. But with the introduction of these new qualified plans, it made investments accessible to everyone. I mean, almost everyone either has a retirement plan or could very easily open one up. The way they enticed us to invest in these accounts is with the tax deferment – the tax benefits. 

What happens is we avoid the taxes today, but we are actually postponing them into the unknown future. Thinking about where our economy is, where our government is today, and where they could be going in the very near future, perhaps before we hit retirement or when we hit retirement age – is postponing taxes really a good idea for us?

It may be a good idea for the government because they get to determine what the tax rate is when we go to pull that money out. They say, “How much money do we need in tax revenue?” And then they say, “Oh, let’s just adjust the tax brackets to accommodate our needs so we could fulfill all these promises that we’ve made”.

The key is, that once the government gets us in these accounts, they can do whatever they want. Basically, there are two strategies you can employ for saving for retirement.

Strategy A is to take a tax deduction on a small amount of money today, put it in a place where you can’t touch it until age 59 and a half, and then the government could tax you on every dollar that comes out of there at whatever rate the government sees fit to pay its bills. 

Strategy B is to pay tax on a small amount of money today and let it grow on a tax-deferred basis, but you’ll have complete liquidity use and control of that money to use it for whatever you want, whenever you want, no questions asked. But then when you get to retirement, the government could never tax that money ever again unless you choose for them to tax it. 

Which strategy would be better for you? Strategy A or Strategy B? 

In case you’re new to this blog, Strategy B is a specially designed whole life insurance policy designed for cash value accumulation, and the key is to start this policy as soon as possible. Why? It’s simple: compound interest. Compound interest takes time and it takes money. Once time is gone, we can never get it back. But these policies allow us to save consistently – month after month, year after year. We’re stashing money away in these policies so we could build that compound interest curve. On top of that, there are added benefits like the disability waiver of premium, where if you were to become disabled and unable to work, the insurance company is going to pay your premium for you. We also have the death benefit, guaranteed cash value growth, and guaranteed liquidity use and control via the policy loan provision.

So how do you access your money in retirement from a life insurance policy? Well, it’s very simple. Tax-free distributions are available up to your cost basis. What does that mean? Basically, it means that the amount of money you put in will come back to you tax-free. If you put in 100,000, the first 100,000 that comes out of the policy is tax-free. Over and above that, you can access the money through a loan feature. 

Now, if your distributions from a life insurance policy are tax-free, what does that mean? It means that there’s no federal income tax, there’s no state income tax, there’s no Social Security offset tax, there’s no increase in Medicare premium, and in most states, life insurance death benefits pass outside of state inheritance taxes. So that’s five taxes you’ll be able to avoid in retirement.

Another way that life insurance can be used to supplement your retirement is to act as a volatility buffer in conjunction with your investment portfolio. So how does that work? Basically in a down year, instead of taking money out of your retirement account, you take the money out of your life insurance account. What that allows you to do is it allows your portfolio an opportunity to regenerate itself after a down year. One of the worst things you could do for your investment portfolio is taking a distribution in a down year. By instead taking money from the life insurance policy, it allows your portfolio a chance to regenerate and recover instead of taking that double hit in a down year.

As an added bonus if you’re saving for retirement using life insurance, you’ll have access to that money everywhere along the way. So you can use it to pay for a wedding, to pay for your children’s college, to buy a car, to invest in a business or the stock market. Again, complete liquidity, use, and control of your money. Complete liquidity, use, and control of your money on top of uninterrupted compounding of interest. That means the performance of your policy won’t be affected even if you have a policy loan. As long as you’re with a company that uses non-direct recognition, meaning the dividends credited to your policy won’t be impacted even if you have a policy loan. 

In conclusion, a specially designed whole life insurance policy for cash accumulation is a great way to save for retirement, but it’s also a great way to protect your family and your business along the way because you have full liquidity use and control of your money and the ability to access that money without interrupting compound interest.

If you’re ready to get started with a whole life insurance policy for you and your family, schedule your free strategy session today. 

Money Management Tips: Regain Control Of Your Money

Are you finally ready to get on track with your finances but aren’t quite sure where to start? 

Well, stick around to the end of this blog, because today we’re going to take a deep dive on how to budget and how to finally get on track to pay off your credit cards, your student loans, and how to finally start saving to accomplish your financial goals. 

The first step in any journey is to see where you are now. In the case of cash flow, that means seeing where your money is being spent every single month. We suggest that you track for three to six months where every dollar has been spent. Whether that’s in a journal, writing down every purchase you make, or in the case that you spend your money from a debit or credit card, you can take a look back in your history for the last few months and see where all your money is being spent every month. Here’s the rule of thumb, 

If it’s not monitored, it can’t be managed.

 

The next step is to manage. The way we do that is with a budget. First, you’re going to want to track your inflows. What money do you have coming in every month? Do you have child support? Do you have a job? Do you have commission income? What can you count on every single month coming in? And then on the other side, you want to be looking at what’s going out every month. How much do you want to be spending on entertainment, dining out, groceries, gas, bills for your home, your mortgage or your rent, or your car payment? You want to look at every single dollar that’s passing through your hands every single month. The point of the budget is to be making sure more money is not going out than is coming in. And then we could start looking at how to save, how to get on track financially, and how to manage our money so we could reach each of our financial goals. 

Once you’ve determined that there is excess cash flow, meaning that there is more money coming in than is going out, then you can decide how much you can consistently save on a monthly basis towards meeting your financial objectives. 

As a general rule, we suggest you should be saving at least 20% of your income. Now we understand, we’re American, and most Americans are spending 95% to 110% of what they’re bringing in every single month. I mean, think about the competition that’s going on to get in your checkbook every single month. We have TV subscriptions, drink subscriptions, and even subscriptions for dog toys these days. Everyone’s trying to get into our wallets and to add on top of that, the credit card debt that we’ve already accumulated and the thousands of dollars that many of us have in student loans. The competition is fierce to get in our wallets. It’s not an easy thing to regain control of your cash flow and that’s why we spend so much time focusing on that on our blog. 

The key is to spend less money than you make. If you’re doing that, then you’re in a position to create some financial security for yourself. But it’s been said in America that people buy things they don’t need with money they don’t have to impress people they don’t know, who in the end don’t care. The bottom line is that once you’ve determined a baseline of how much money you can save, then we can get you to the 20%. The key is eliminating inefficiencies in your current cash flow, and that’s where we can help you.

Speaking of inefficiencies in your current planning, we’ve identified five areas where people are giving up control of their money unknowingly and unnecessarily. Those five areas are: 

    1. Taxes
    2. Mortgages
    3. How they’re funding their retirement 
    4. How they’re paying for their children’s education
    5. How they’re making major capital purchases. 

Speaking of major capital purchases, if you’ve been putting yours on credit cards and you’re looking for the best way to pay off that credit card debt and start saving, check out our latest blog post on how to pay off your credit card in the most efficient manner, how to get on track for saving faster.

Here’s the secret, start saving now and start saving on a consistent basis. No matter how little, put some money away every single paycheck so that you can start your compound interest curve now and never let it stop. When you’re looking for a savings vehicle, you want a vehicle that is going to give you full liquidity, use, and control of your money so that you could have access when you want for what you want without incurring any penalties. 

When you’re ready to get started saving, schedule your free strategy session and we’ll be happy to guide you through this journey. 

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

Money Management Tips: How to Reach Financial Freedom

Have you ever felt like you’re doing everything right? You’re paying off your debt as quickly as possible, you have a short mortgage term, you’re maxing out your retirement plans, you’re paying cash whenever possible, and you’re investing in the stock market as much as you can afford to, but you’re still not seeming to get ahead. You still can’t reach that feeling of financial freedom like you’ve finally made it? If that sounds like you, continue reading because we’re going to diagnose exactly why that may be the case and recommend some simple shifts you can make to reach financial freedom.

30 years ago, I was in my late twenties. I was doing everything the so-called financial experts were suggesting you do. I maxed out my retirement account. I was paying down my debt, I was paying cash whenever possible, and because I was doing all those things, I never had any access to money. I had to borrow money from my parents to pay my mortgage. Why? Because I was freely giving up control of my money to the financial experts, and to the financial institutions.

Whoever controls your cash flow controls your life.

That’s why we preach: it’s not what you buy, it’s how you pay for it that really matters. Our process has four easy steps: Step one is to identify where you’re giving up control of your money. Step two, the hardest step- you have to STOP doing it. Step three is saving some of that money, and Step Four is where the magic happens- Where you’re borrowing from your own pool of money and paying interest back to yourself, and when you’re doing that, your money never leaves your control.

You’ve essentially cut out the middleman and you’re able to earn continuous compound interest on your money. As you’re repaying yourself, you’re building a pool of cash, so you’re able to access that again in the future. When you’re doing all of these things, paying down your debt, taking short mortgages, maximizing your retirement, investing whenever you can, paying cash whenever you can- you’re literally giving control of your money to them. And who are they? Well, they’re the financial insiders. They’re the greedy 1%, if you want to call it that. They depend on our participation for them to make profits. They create the situation and they make the rules. They profit from our outcomes and so these institutions have rules and those rules are for them to make profits.

So what are the rules? Simple.

    1. They want to get our money.
    2. They would love to get our money on a systematic basis, every month.
    3. They want to keep our money as long as possible.
    4. When it’s time to give us back our money, they want to make sure that they pay it back to us over as long a period as possible.

So how do they get us to follow these rules? Well, they position it as if it’s in our best interest. But in whose best interest is it to hand over all of your money every month to them instead of paying yourself first? It doesn’t sound like it’s serving you, it sounds like it’s serving them, and I would agree. So when you play the game by their rules, you could win according to their rules, but in the end, you lose.

So if you’d like to learn more about how you could apply our process to your situation and how you could finally regain control of your cash flow and regain control of your life, please schedule your free strategy session today.

Protect Your Dollars Against Inflation With Life Insurance

 

 
 

Currently we’re at 20.7 trillion of money in circulation. In 2025, it’s projected to be 33.5 trillion, and in 2029, it’s projected to be $53.9 trillion. Doesn’t that create inflation? What does that mean to us? Well, isn’t inflation really having an effect on the purchasing power of our money? Isn’t that literally a way that the government found to pay their bills by taking money from us, stealing our purchasing power?

Did you know that 40% of all US treasuries have been printed between the year, January, 2020 and today, not only that, but 78% of all the money that our government has ever printed has been printed between January 20, 20 and today. Do you have any idea what effect inflation is going to have on you, your family and your business? When it comes to responding to crisis, whether it’s wildfires, hurricanes, pandemics, or war, our government only has two ways that they’re able to respond. They could respond legislatively by increasing taxes, or they could respond administratively by printing more money. That’s it. They only have two tools in their toolbox when it comes to responding to crisis.

Federal taxes are projected to be $3.8 trillion for 2021. In 2020, 61% of us households paid no federal income tax and that number is expected to increase in 2021. Now in 2025 tax revenue is projected to be $6.3 trillion and in 2029, 8 years from today, tax revenue is projected to be $10.5 trillion. So we absolutely know that the government is planning on increasing taxes. Now here’s the question. When the government increased taxes, are they going to tax the people who don’t pay any taxes? Or are they going to tax the people who are used to paying taxes? Let’s face it. They can’t get blood out of a rock and when they go to increase the taxes by 270% over the next eight years, are you willing to pay those taxes? Are you prepared? What are you doing to protect yourself, to make sure you’re not paying more taxes than you need to? The point is we live in America and we have choices. Are you choosing a strategy that protects you from taxes? Or are you choosing a strategy that is going to subject you to increasing taxes?

So now we’re going to take a look at what happens when our government responds administratively by printing more money. Did you know that in the year, 2000, the amount of money in circulation measured by the M2 money supply was $4.8 trillion? In 2021, it’s projected to be $20.7 trillion. Now think about this: In the year 2000, it was 4.8 trillion, in 2021 it’s 20.7 trillion. The amount of money in circulation grew by over 430%. Well, our population in the year, 2000 was 300 million people. Today it’s 330 million. So the amount of people in our country grew by 10%, but the amount of money that they put in circulation grew by 430%.

The bigger problem is currently we’re at 20.7 trillion of money in circulation. In four years, in 2025, it’s projected to be 33.5 trillion, and in 2029, it’s projected to be $53.9 trillion. That’s a big number, but when the government prints more money, what does that create? Doesn’t that create inflation? What does that mean to us? Well, isn’t inflation really having an effect on the purchasing power of our money? Isn’t that literally a way that the government found to pay their bills by taking money from us, stealing our purchasing power?

How do you protect yourself against the effect of increased taxes and increased inflation? The stealth tax?

Well, that’s easy first and foremost, you want to protect your money. So you’re never subjected to losses. Secondly, you want to have access to your money so that you could take advantage of any errors, mistakes, or blunders that are made by the government, wall street and the banks. Lastly, you want to do both with reduced or eliminated taxes. What I just described are the benefits of cash value, life insurance.

If you’re looking to learn more about how cash value life insurance could help protect you, your family and your business against the eroding effects of taxes and inflation, schedule your free strategy session today!

How Business Owners Can Increase Cash Flow

 

When you first start your business, it’s very important, actually, it’s vital that you reinvest the profits into the business to help the business grow. However, as your business continues to grow more and more, your net worth becomes enmeshed in the business. Consequently, your net worth becomes illiquid and inaccessible. And that has a direct impact on your cash flow.

As business owners, we face many challenges at various times throughout the year: how to increase revenue or increase sales, how to decrease expenses or overhead hiring people. Currently, it’s very difficult to hire people, and more importantly, it’s difficult to get the right people for the right position.  One common thread challenge that all business owners face either consistently or at various times throughout the year is how to increase cash flow.

Today, we’re going to talk about how to increase your cash flow as a business owner and we’re also going to show you how to do it without increasing your sales and without reducing your overhead expenses.

When you first start your business, it’s very important, actually, it’s vital that you reinvest the profits into the business to help the business grow. However, as your business continues to grow more and more, all your net worth becomes enmeshed in the business.

Consequently, your net worth becomes illiquid and inaccessible. And that has a direct impact on your cash flow, which has a direct impact on your ability to continue to grow your business on your ability to take care of your personal obligations, as well as your ability to procure financing, to grow your business, or even just to operate it.

In every business, there are seasons of good cashflow and bad cash flow and for the business owner, the typical diagnosis is something like this: “If only I could make some more sales, if only I could earn some more revenue, then I could finally feel the cashflow relief that I’m looking for.”

You see, typically business owners usually correlate lack of cash flow to one of two things, either too little sales or too much overhead. What we found that the real culprit is how they are using their money. How they use their money is really going to have a huge impact on a consistent basis on their cash flow.

About all the competition we have for our business checkbook. We have vendors, we have consultants, we have taxes. We have insurance. Everyone is trying to get into our checkbook and they’re trying to get in there on a consistent basis. So it’s really important that we make our cash flow as efficient as possible so that we as business owners don’t feel pinched when we need more money.

Exactly. And understand that all of those competing industries or those competing vendors are very good at what they do. And because of that, we’re giving up control of our money unknowingly and unnecessarily. But the good news is that’s where the opportunity exists for you to really increase your cash flow.

Because once we bring the awareness that knowingness, that you’re doing things in a less efficient way, we’ll be able to bring that awareness and make the changes necessary to give you the relief you’re looking for. Here’s a perfect example. A few years ago, a business came to us for some consultation on some business succession planning. Basically they had some partners that were looking to retire and they didn’t have the cashflow to buy them.

After a thorough analysis, we determined that the major culprit in pinching their cash flow was that they were in a race to get out of debt.

And what happens when you’re in a race to pay off your debt is all your disposable, monthly income is leaving your control and going into the control of a bank or a finance company.

Now understand the bank loves that because the bank was taking that money and turning it over. And literally by paying off their debt quicker, this business was making the bank’s position better and their position worse.

So what’s the moral of the story. Well, we’ve said it once and we’ll say it again. It’s not what you buy. It’s how you pay for it. That really matters.

And to underscore that point, let me share with you an analogy that we share with our clients. Let’s say that you want a special drawing to appear in the masters golf tournament in the spring of 2022. And you came to us to improve your chances of winning. Well, we point out to you that there’s really only two approaches. Number one, you can purchase the clubs of anybody who’s ever played on the tour or approach number two would be to have the swing of anybody who’s ever played on the tour. Which strategy do you think would improve your chances of winning?

Well, the obvious answer is to focus on the golf swing, how you’re using your money in our example is so much more important. And whoever has the control of your money controls your life. Sometimes we get hung up on things like loan terms and interest rates, and we take our eye off of what’s really important controlling our cash flow

When you control your cash flow, and that becomes your major focus, all of your decisions become much clearer.

NEVER be at the Mercy of Banks Again | Shuttered Line of Credit – What Happens?

 

…there’s an old saying, “A banker is somebody who will give you an umbrella when it’s sunny and take it away when it’s raining.”

Wells Fargo recently closed credit lines on their customers. Stick around to the end of this video, because we’re going to go over exactly what that could mean for their customers, for the economy, and show you a solution that will make sure that you’re never at the mercy of banks, the government or Wall Street again.

On July 8th, 2021, Wells Fargo announced to its customers that if they had a personal line of credit, they were shutting it down. Basically, if you had this line of credit, you’ve got to notice that in 60 days, Wells Fargo was going to shutter your account. Let’s go over exactly what that means.

Well, when your account is shuttered, it means two things. Number one, any unused portion of your credit line is no longer accessible to you. So you don’t have access to the unused portion. And secondly, they’re going to be getting a payment schedule for the outstanding balance that’s remaining. So how is that going to affect their customers? Well, it’s going to affect their customers in four ways. First and foremost, their access to credit has been limited. Secondly, their future cashflow is limited because now they have a payment schedule. Thirdly, because they had credit and it was shut down, that’s going to have a negative impact on their credit score. And all three of those issues are going to negatively impact their customer’s ability to obtain credit in the future.

So you could see how this simple shift from a line of credit to a term loan could have such a waterfall effect on these customers and not only their present cashflow position, but also their future ability to access capital. In the last week or so, we had the opportunity to speak with some of our clients and a lot of them asked “Is this even legal what Wells Fargo is doing? Are they even allowed to do this?” And the answer is yes, it’s written in the terms of their loan agreement.

You know, there’s an old saying, a banker is somebody who will give you an umbrella when it’s sunny and take it away when it’s raining. And this action by Wells Fargo only underscores the meaning of that saying. You see Wells Fargo is protecting themselves. They have it written into the loan agreements that they’re allowed to shutter or shut down those lines whenever for whatever reason. And by the way, it’s not only personal lines of credit, it’s home equity lines of credit that they can do this on. They can do it with business lines of credit. And not only Wells Fargo, other banks can do the same banks write documents on those loans. That’s why there’s all these legal documents when you take out a loan. Why? To protect the bank! But this should come as no surprise for Wells Fargo customers. In 2008 and 2009, when they took over Wacovia they did the very same thing.

They shut down credit lines for people, business credit lines. And I had clients call me and say, Hey, I’m in trouble. I’ve got to get a new credit relationship. I just got a letter from Wells Fargo that says I have 60 days to obtain new credit. Well, the ideal situation back then would have been to have control of their own pool of money so that they wouldn’t be affected when the bank decides that the bank wants to protect itself and they shut down your access to capital. So this is all part of what Nelson Nash referred to in his bestselling book, Becoming Your Own Banker. And in there, he has a chapter called the golden rule. And basically the golden rule, according to Nelson Nash was the one who has the gold makes the rules. Well, if you’re in control of your own pool of money and you’re making loans to yourself or to your business, you are truly in control of the process. So the question really becomes, do you want to continue to be controlled by the process and be at the mercy of the banks? Or do you want to be in control of the process? Again, the one who has the gold makes the rules!

Banks are really good at getting us to do what’s in their best interest and they do it under the premise that it’s in our best interest. And they’re so good at doing it, most of the time, we don’t even know what’s happening. And the perfect example of this is a 15 year mortgage with a low interest rate versus a 30 year mortgage with a higher interest rate. Let’s take a look at a solid example of a $250,000 mortgage.

So if our choices are a 30 year mortgage for third, for $250,000, at 4% interest, our payment is about $1,200 per month, a 15 year mortgage for 3.75%. And that’s how they entice us to do what’s in their best interests. They offer us a lower interest rate on a shorter term loan. Our payment will be about $1,800 per month. Now that’s a 50% increase in cashflow that we don’t control. And that’s cashflow that the bank now controls, but again, they have us focused on the interest. So with the 30 year mortgage, we would pay the bank $179,000 in interest with a 15 year mortgage, we’re only going to pay the bank $77,000 in interest. So here’s the issue, if the amount of interest paid is really in the bank’s best interest, why would they cheat themselves out of $102,000 of interest? Well, the answer that is, it’s not the amount of interest that’s paid. It’s how fast the bank gets it back. What the bank literally did by getting us to pay the loan back quicker, they increased their rate of return on the loan, the 30 year loan, they had about a 9.5% rate of return. And on the 15 year loan, they end up with a 13% rate of return. They almost increased their rate of return by 50%.

The thing is that with businesses, when they sell products, inventory turnover gets them more profits. And with the bank, they have a product to it’s loans. So the quicker they’re able to get the loan money back and then turn it over with a new loan, the more interest, the more profits that they’re able to make. Imagine how stressful it would feel if you had a credit line out for tens of thousands of dollars, and only had 60 days to secure new financing, to secure a new banking relationship.

Conversely, imagine having access to your own pool of money, so that when you got this notice, you can borrow against your pool of money, use it to pay off Wells Fargo or anybody else who calls your credit line and buy yourself time to obtain another relationship. In the process, while you’re using that money, you’re still earning uninterrupted compounding interest on the money you used to pay off that loan. Wouldn’t that be a great situation to be in?

If you’re ready to learn more about our process and exactly how it works, check out our free web course at tier1capital.com. It’s one hour and you could register right on our website.

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

How to Increase Your Net Worth

 

Because our money never leaves the policy, our money continuously earns compound interest even while we’re using it. It’s as if our money’s in two places at once, because quite literally it is. We’ve cracked the code on creating wealth by making purchases.

 

Wouldn’t it be great if you could increase your net worth by making everyday purchases? Most people think there are only two ways to make a purchase. You could either pay cash or you could finance. But today we’re going to talk about a third option, an option that allows you to earn continuous compound interest on your money even after you make the purchase.

When it comes to making major capital purchases, the often most convenient way is to finance the purchase. Think about it – when you go to buy a car, how easy is it to show proof of income and them to give you a loan?

So when we borrow, we have no access to capital. We have to use somebody else’s capital, therefore pay them interest, and in the process, we’re not earning interest, but make no mistake we’re using the collateral of our future income to pay for the purchase. The bank is loaning us money because they know we have the ability to earn income.

Since we’re financing and we’re giving up that monthly cashflow, it hinders our ability to save for the future. And then the next time we need to go buy a car. We’re forced to finance again, because we didn’t have the ability we didn’t have the cash flow to build up a pool of cash to self-finance or pay cash for that car.

So you see how every financial splash we make creates a ripple effect down the road.

Every decision we make financially could either move us towards financial freedom or further away from financial freedom. Often times these debts snowball. So it’ll start with a car loan and then it’ll be paying for the wedding and tuition for our kids and appliances and furniture. These monthly payments slowly grow and grow and grow. Before you know it, we’re out of control of our cashflow.

Think about it from the perspective of a financial institution, what does the financial institution want? What does it need? It needs our money. And the best way to get that is to do it on a systematic basis – on a monthly basis. So the more of our monthly cashflow that the financial institution can control, the more that they can control us, but the more profits that they could make.

The goal of every debtor is to finally be able to go out and pay cash for that car. They’ll save month after month, year after year until they finally have enough money to go out and pay cash for that car. But what happens when they drain their tank down to zero is – they gave up all the potential to earn compound interest on that money.

You see the person who pays cash – does so, so they don’t pay interest. They think they’re getting ahead of the game, but really they’re always going back to zero. They save. They wipe it out. They save again. They still have payments – it’s to a savings account, but at the end of the day, they’re still not earning interest and they’re really not in control of their financial future.

You see, there are only two components when it comes to compound interest and that’s time and money. Every time we drain that tank, we’re losing all that time. And we all know time is an asset that we can never regain.

A lot of times we talk to folks who don’t finance and the reason they don’t finance is because, “I hate paying interest.” they’ll say. My response to them is, “Oh, so you like to lose interest?” And then I get a look like, what are you talking about? And then I explained to them how they’re losing interest by paying cash.

So if financing isn’t the answer and paying cash isn’t the answer – what is the solution to finally achieving financial freedom? And here’s the secret. It’s not what you buy – it’s how you pay for it, that really matters. So you may be wondering how we do this. The answer is we use specially designed whole life insurance policies. Mainly because they have some unique characteristics and that we’re able to collateralize loans against the cash value of the policy. What that means is we’re never taking money from the policy. We’re never draining that tank, but instead we’re placing a lien against that cash value so that we have access to make major capital purchases and basically self-finance.

Because our money never leaves the policy, our money continuously earns compound interest even while we’re using it. It’s as if our money’s in two places at once, because quite literally it is. We’ve cracked the code on creating wealth by making purchases.

There are two main differences between this type of financing and traditional financing. The first is that it’s an unstructured loan repayment schedule. Meaning that you get to determine when and how much you pay back towards this policy loan. And the second key difference is that every time you make a payment, your payment is literally increasing your net worth.

Make no mistake about it – whether you finance through conventional methods, through a bank or a finance company, or with using our process and borrowing against your cash value – every payment you make will increase somebody’s net worth. Using our process, you will increase your net worth.

So every time you make a payment, you increased your future ability to access that capital again. So that over time you’re less and less dependent on the banks and financial institutions – and ultimately can reach freedom this way.

Earlier we mentioned that it’s not, what you buy, it’s how you pay for it. We talked about financing, we talked about paying cash and then we talked about using our process. In this process, we focus on showing you how to regain control of your money. You see, when you focus on controlling your money, all of your decisions become very clear. It’s only when we take our eye off the ball and we focus on interest rates, or we focus on getting a high rate of return on our money that we really start to lose control of our financial future.

If you’re ready to finally regain control of your financial future, please check out our one hour web course. It’s on our website tier1capital.com. We go into great detail about how our process works and how it could work in your life.

Remember, it’s not how much money you make – it’s how much money you keep, that really matters!

Benefits of Life Insurance for Kids

 

Once they reach adulthood, they’ll have access to their policy’s cash value. They could buy their first car. They could help fund college. They could put a down payment on a house.

 

Are you thinking about buying a life insurance policy on a child or grandchild, but aren’t exactly sure what the benefits of this purchase are? Fundamentally life insurance is a transfer of risk, and in most cases it’s a transfer of risk from the insured to the insurance company for the case of premature death. But let’s face it – when it comes to a healthy child, the risk of premature death is pretty low. That’s why we think the more important thing to look at is locking in their insurability.

The most important reason that we recommend that parents or grandparents purchase insurance for their child or grandchild is to lock in their future insurability. So in other words, when you purchase life insurance on a child, you’re able to “lock in their current health”.  That is so important because if  later in life, they lose their insurability because of a mental or nervous problem, a health issue or an occupational issue, they’re going to be guaranteed by the insurance company, through the policy rider, that they will be able to purchase a stipulated face amount $25,000 up to $125,000, every few years from the ages of 25 through 40. This allows them – as they become adults and maybe have become uninsurable – to take care of the things that are most important to them, their families and their businesses.

So adding that Guaranteed Insurability Rider for just a few dollars a year onto the policy for the child is going to lock in their ability to purchase more insurance throughout their adult life, which is really important.

The next point to consider when thinking about insuring a child is the cost of the premiums. Now the premiums cost much less for a child than it does for an adult because the insurance company has many more years to collect those premiums.

We often hear from people to gee. I wish I purchased insurance when I was younger. What better time to purchase the insurance than when you’re a child? Now, obviously a child doesn’t have that ability, but the parents do. My parents purchased small policies for me that would have the funeral covered in case I died. Well, I use those policies today. I borrow against those policies to purchase my computers and every couple years I pay the money back and then it’s time to buy a new computer.

Well, the other practical purpose of having insurance we talked about earlier was guaranteed my youngest son when he was 18, had a stroke he’s uninsurable, but he has a large policy with options that he can purchase additional insurance in the future. So he can take care of his family and his business.

This brings us to our next point – the savings component of the policy you see with every whole life insurance policy. The insurance company is making two promises. The first is to pay a death benefit whenever the insured dies. The second is that the cash value in the policy will be equal to the face amount at the age of maturity – so the cash value is guaranteed to be there. Because of that aspect of a whole life insurance policy, you’re actually getting multiple duty dollars. Think about it instead of just putting money away in a savings account or a mutual fund or a 529 plan, you’re also getting a death benefit. You’re also getting future insurability and you’re also giving them the ability to choose how they want to use their money. It’s almost like their money is going to be in two places at once. They’ll always have access to cash in the policy and they can use it for whatever they want. And the money’s going to continue to grow uninterrupted on a tax-favored basis.

With the loan provision, they’ll have guaranteed access whenever you’re ready to transfer the policy into the child’s name. Once they reach adulthood, they’ll have access to their policy’s cash value. They could buy their first car. They could help fund college. They could put a down payment on a house. The possibilities are limitless. There’s no stipulations that say what policy loans can be used for. The only stipulation is that it’s guaranteed, that they’ll have access to the cash value via the policy loan, which is a really great thing for a savings vehicle for a child or a grandchild.

So now that we looked at the benefits of owning life insurance on a child or a grandchild, we have to also discuss the rules because insurance companies have special underwriting rules that they abide by when considering offering insurance to a child.

The first rule is that the child can’t have more insurance in place than the parent, unless there’s a good reason such as the parent is uninsurable.

The second rule is that when the child has siblings, then all of the siblings need to be equally insured. In the case of a grandparent purchasing on a grandchild, all of the grandchildren would also need to have equal amounts of life insurance in force.

In conclusion, life insurance is a unique financial tool for children or grandchildren. It could literally protect them from the cradle to the grave. They’ll have access to cash everywhere along the line. They can use the money to supplement their retirement income on a tax favored basis. And then they pass away and the money goes to their children or their grandchildren. It is a unique financial tool that should be considered. It may not be everybody’s choice, but it definitely should be considered and in the conversation.

If you’d like to get started with a policy on your child or grandchild, or would like to learn more about the options, feel free to give us a call, or to schedule your free strategy session today. Please leave us a comment down below, let us know what questions you have about life insurance. And we’ll be sure to answer them in upcoming videos.

Remember, it’s not how much money you make – it’s how much money you keep that really matters.