Valuable Finance Insights from Tier 1 Capital

Learn about financial strategies to enhance business and personal cash flow. Get tips that will help counteract the effects of inflation. Discover unconventional wisdom related to life insurance, infinite banking, wealth building, and much more—here in the Tier 1 Capital blog.

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The Magic of Compounding Interest

Unless you’ve been living under a rock, it’s clear that inflation is running rampant. In fact, it’s at a 40 year high. Spoiler alert, it’s not Putin’s fault.

They call inflation the stealth tax. It’s not written in our tax code, but it affects each and every single one of us. Some more than others. So if you want to combat inflation, there’s one secret. It’s called compound interest. Albert Einstein, once called compound interest the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.

We have a perfect example on illustrating the magic that is compound interest and we’re going to lay that out with a magic penny. This penny doesn’t exist, but if it did, it would double every single day for 31 days.

So we start off with a penny. Day two, it’s two pennies. At the end of seven days, it’s worth $0.64. At the end of 14 days, we have $81.92. After 21 days, we have a whopping $10,485.76. And as we continue to grow, day 28, we have $1,342,177.28. Just three days later, we’re looking at a whopping $10,737,418.

Now that, my friends, is the power of compound interest.

What’s the problem? Why aren’t we all multimillionaires? Is the problem market fluctuation? Is the problem taxes? Is the problem fees? Or is the problem a combination of all of these and something else?

Absolutely something else. The biggest culprit to compound interest is draining the tank. You see, when it comes to compound interest, there are two factors to consider time and money. Time is something we can never get back. So each and every time we drain that tank down to zero, we stop the compounding of interest. We’re no longer earning money on our money. We start back at the zero line and we have to make up all that time that we lost originally.

So let’s carry on with this magic penny example. What would happen if we drained the tank after 22 days? Hey, we may have enough money in there to buy a car. And are we going to go to the bank and finance to buy that car?  Heck, now we have the cash. We’re going to lose money to interest paying the bank back? No, we’re going to drain our tank. Pay cash. Cash is king. But let’s take a look at what happens when we do that.

On day 22, we have $20,971.52, enough to buy a brand new car. Now, instead of having $10.7 million, we got to start over and go back to day one. But we only have nine days left for compounding.

You had the potential to earn, hypothetically $10.7 million, but because you made that one decision on day 22, your tank is only worth $2.56. That is why we never drain the tank. And that is the power of compound interest.

So this is where we talk about the seen and the unseen. We see the interest that we’re going to pay on a car loan, and that is not acceptable. Because let’s face it, debt is bad. We spare ourselves of the embarrassment and the pain of paying interest on a car loan, and we drain down our tank and we utilize our savings.

But what we don’t see and what we’ll never see is the interest we could have earned had that money been compounding. You know that we always say you’ll never see the interest that you don’t earn. And this example really underscores how much you don’t see, and more importantly, the value of continuous compounding of interest.

If you want to combat the effects of inflation and that eroding effect on your money. We do have control over is our own personal economic system and what our money is doing for us. And part of being in control of your cash flow is earning continuous compounding on your money, especially when it comes to combating inflation and making sure your money is as efficient as possible, which is something we talk about all the time. Small minor adjustments on how you’re using your money can have tremendous impact on the bottom line.

If you’d like to get started with your compound interest curve so you’re able to use your money and never drain that tank, 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.

Are You Utilizing Your Cash Flow Properly?

 

In America, family businesses and small businesses are the backbone of our economy. 50% of all employees in America work in a small business. But small businesses don’t come with small challenges. Today, we’re going to talk about the cashflow implications of having a small business.

According to a recent study, 69% of business owners either lose sleep or have trouble sleeping because of their financial cash flow issues. And that was in 2019, before the pandemic.

Lack of sleep causes stress, and stress has been linked to chronic disease, stroke, heart attack, diabetes, depression, not to mention the stress that’s put on relationships by cashflow being pinched.

On top of this, small business owners are facing the twin challenges of high inflation and high interest rates. In essence, you’re paying more for your employees, you’re paying more for your supplies, and you’re paying more for your money. This is further pinching your cash flow and putting you at a very strong disadvantage.

The question becomes how do you make your cash flow more efficient so that there’s less stress within your entire business and your family? And the amazing thing is most business owners don’t even realize this, but they have the cash flow available. It’s just not being utilized properly, or they may be just looking at things the wrong way.

If you’d like a second perspective and see where we could help make your cash flow more efficient so that you’re able to relieve this financial stress. 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.

Saving and Eliminating Debt by Leveraging Your Current Cash Flow

I would argue that the number one source of financial stress comes from not having access to money when you really need it. The perfect example of this comes when you end up in too much debt than you could afford. It ties up your monthly cashflow and leaves you in a position where you just are trying to get out. But often people neglect to save and secure their own financial future before getting out of debt.

Total household debt is up to $16.9 trillion for Q4 of 2022, and of that, nearly $1 trillion is credit card debt. Credit card debt had grown by 6.6% in Q4 over Q3. That’s the largest quarterly increase ever recorded.

It’s clear that Americans are being squeezed from every angle. Inflation is up. Interest rates are up and savings is down. It’s getting harder and harder to make ends meet. So it’s no wonder that people are charging on their credit cards. But when you charge on your credit card, what are you actually doing? You’re obligating your future income to pay off that credit card debt and with the interest rate so high, some credit cards are 25 to 30% APR these days. It could be a very heavy interest expense, but it’s what people need to do to get by. However, once you’re in credit card debt and you’re trying to get out, the natural reaction is to put all of your monthly cashflow, all of your extra money towards that debt because it’s draining you.

What people neglect to take into account is that even if you got all that credit card debt paid off, you’re still just at the zero line. You’re no more financially secure than you were when you were buried in debt.

You went from a position of having very little cash flow and no access to money, and now you’re out of debt, but you’re still in a very precarious situation financially.

This is why we think it’s important to both pay off your credit card debt, but also save for your future, to accumulate a pile of money that you own and have full liquidity use and control over to protect you and your family.

58% of Americans have less than $5,000 in savings and 42% of them have less than $1,000 in savings. Most families out there have a very difficult time absorbing a $400 medical bill. And let’s face it, how easy is it to rack up $400 in medical bills today?

Parkinson’s law says that expenses rise to meet income. So if you’re not diligent on saving your raises, guess what’s going to happen? Your expenses will rise to meet your income.

Another way to look at this is with the student loan debt. A lot of people stopped paying their student loans during the pandemic because of the forbearance. Didn’t they in essence, give themselves the raise? What’s going to happen when those payments resume and their cash flow is going to be pinched for the amount that they’re going to have to repay back to the student loans?

You know, we talk about this all the time, but really, there’s no such thing as a free lunch. Our capital also has a cost, and sometimes we don’t recognize that. In essence, what’s happening is we’re taking care of our current lifestyle wants and completely ignoring our future lifestyle needs.

One of the ways we help our clients is by using specially designed whole life insurance policies designed for cash accumulation so that they’re able to build a pool of cash that they’re able to leverage to pay off their credit card debt and achieve their other financial goals without interrupting the compound interest curve.

If you’re interested in learning more about how to manage your debt and your savings, check out our website at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about how exactly we will put this process to work for our clients, check out our Four Steps to Financial Freedom Webinar right on our homepage.

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

The Hidden Cost of Paying Cash

When it comes to accessing other people’s money, it’s clear that capital has a cost. For example, when we have a credit card debt, we know that we’re paying a lot of interest towards that debt. Same thing with student loans or mortgages or any other debt.

However, a lot of people fail to remember that our capital also has a cost. And we call that opportunity cost. The cost of not investing that money and spending that money instead has a cost. And that is what people fail to recognize.

It’s easy to forget that our capital actually has value when we have it in the bank earning next to nothing. However, if that money was invested, what could that money be earning for us? What if we took advantage of an opportunity in business or an investment or anything else? We would be earning an external rate of return on that money that we couldn’t earn within the banking system.

And you see, the important point here is having access to capital. When you have access to capital, opportunities will seek you out.

I’d argue that all financial stress actually comes from not having access to money when we really need it. So that’s why a lot of people save in the bank. We have access to that money, there’s no penalties, we may not be earning any interest, but at least we could get our hands on it if we need it.

The point is that safety of principle and accessibility to your money has a cost. One of the biggest mistakes that we see people make, whether it’s on a business basis or a personal basis, is not recognizing the value of their own capital. They completely ignore the value that their own capital or accessing their own capital has to them as an investment.

We talk about this all the time, continuous compound interest. You not only lose that money, but you also lose the potential that money could have earned you if you had left it invested. That’s called opportunity cost and it’s amazing how seemingly smart and great financial people completely ignore opportunity cost.

But it makes sense. I mean, conventional wisdom tells us that debt is bad and that cash is king. What you expect from them? However, conventional wisdom may not have our best interest in mind.

Another thing that we found is that people obsess over what they see. In other words, I’m not going to pay 8% to a bank in order to borrow money to buy a car. I’ll pay cash and pay nothing. Again, they obsess over what they see. The 8% they’re paying, but they completely ignore what they don’t see, what their cash could have earned them had they not paid cash for the vehicle? We accept as normal what the system has conditioned us and taught us to accept as normal whether or not it’s true.

Here’s a perfect example. Let’s assume you have $25,000 sitting in a bank account, a savings account, earning 4% interest. Now, I know they don’t exist today, but just go with this example. You want to buy a car, You need to buy a car. And the car coincidentally cost $25,000. So you say to yourself, I don’t want to cash in this account because I don’t want to lose that interest rate. I’ll call the bank.

So you call the bank and you find out that the car loan will cost 6% interest. So now you’re thinking, okay, if I pay 6% interest, that’s 2% more than the value that I could earn in my savings account at 4%. I’m not going to pay 6% interest. I’ll cash out my savings account and give up the 4%.

But the banker says, Oh, no, no, no, no. It’s actually going to cost you less to finance at 6% and your account will grow by more earning only 4%. Do you believe him?

Now, think about that. You mean to tell me I’m going to earn more money at 4% versus paying 6%? That doesn’t make sense. But the numbers are true.

The $25,000 in your bank account earning 4% is compounding the interest is being accrued on a growing balance. So at the end of five years, because that’s how long typically a car loan is, your account balance is going to be $30,524 and some pennies.

Now, conversely, if you finance the vehicle, borrow $25,000 at 6% interest for five years, the payment is $483.32. And if you add up all the payments for 60 months, it’s going to equal $28,999 and change. That’s what you’re going to pay. And you could have earned 30,524 and that’s what you would have had had you not paid cash.

It’s a bit of a paradigm shift. But the point of the matter is that your assets have value, whether you’re taking advantage and earning interest on them or not. It’s important to put your money somewhere where it’s safe. You have full liquidity use and control of your money, so you’re able to take advantage of continuous compound interest on your money.

But again, it’s really simple to obsess over what you see, paying 6%, and completely ignoring what we don’t see, the interest that we would have earned had we not paid cash. And we always say, you’ll never see the interest you don’t earn.

If you’d like to learn more about our process and how we put it to work for our clients so you’re able to make better financial decisions, visit our website at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about exactly how we use this process to help our clients, check out our free webinar, The Four Steps to Financial Freedom found right on our home page.

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

Are You Saving Enough to Reach Your Retirement Goal?

It’s pretty safe to say we all have one goal in common, and that is to eventually retire. Today, it’s harder than ever to save for your retirement. Americans are being squeezed from so many different directions. Income is down, inflation is up, the savings rate is down. How are we going to be able to save as well as live and survive to get to retirement?

One day you’re going to want to turn your income off, stop working and start taking distributions from your accumulated funds. We call this Position A. Having enough money saved up and accumulated to support your current standard of living, adjusted for inflation, so that you don’t run out of money before you run out of life.

So how do you know if you’re on track to meet this goal? How do you know if what you’re saving in your company 401k plan, 403b plan, IRA, or other investments is actually going to get you to your Position A.

Well, there are four questions that everyone needs answered in order to know whether or not you’re on track. First and foremost, what rate of return do you need on your savings and investments to get you to Position A? Second, how long do you need to work in order for you to get to Position A? Third, how much more do you need to save in order to get to Position A? And number four, how much will you have to reduce your current lifestyle in retirement in order to not outlive your money?

Knowing the answers to these four questions is vital to make sure you’re on track to meet your Position A. Another thing to note about these four questions is that the answers are going to be noted in future dollars, meaning adjusted for inflation. Currently, inflation’s between 6 and 7%, so the government says, and we want to make sure that you have enough so that your dollars could buy the same amount in the future as they’re buying today.

The point is, this is not a simple calculation.

The fact of the matter is we’re trying to hit a moving target and in essence, we’re trying to plan for certainty during uncertain times. However, as with any goal, in order to know how to get there, you need to first know where you’re going, and then you can make a plan on how to achieve that goal of getting to your Position A and retiring so that you’re not going to run out of money before you run out of life.

 

If you’d like to know the answers to the four questions as it relates to your specific financial position, check out our website at Tier1Capital.com and hop on our calendar for a free strategy session. We’ll be able to answer them in about 15 minutes.

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

The Importance of Building a Proper Succession Plan

In life, everything has a cost. There are the things that we see, but there are also the things that we don’t see. And unfortunately, the cost of the things we don’t see could be significantly greater than the cost of the things that we see.

When it comes to business succession planning, a lot of business owners tend to put it off. They don’t want to pay the cost of getting the planning put in place and funding the plan. But what they don’t see is the cost of that inaction.

 

When it comes to family businesses, there are a lot of dynamics involved. You have spouses, you have children that are involved in the business, you have children that aren’t involved in the business, and it could get a little sticky. So how do you smoothly transition and allow the next generation to step in, gain control of the business while you’re still there and ultimately at your death?

One thing we know for sure. Fair is not equal, and equal is not fair. What do we mean by that?

Let’s assume you have two children, one working in the business and one who is not working in the business. If you leave the business 50/50 to each of your children, that’s not fair to the child who’s working in the business. And ultimately, it’s not going to be fair to the child who’s not working in the business.

The child who’s working in the business wants to grow the business. The child who’s not working in the business wants to take income from the business. Those conflicting goals can cause a lot of strain on the relationship of your children, and it could also put a lot of stress on the business.

If I’m the child who’s working in the business and my sibling is getting half of the profits, what motivation do I have to build the business If I’m only getting half of what I deserve, what I’m earning, and what I’m working towards every single day?

Conversely, the child who’s not working in the business wants to take as much income out of the business as possible, stripping the business of its profits and its ability to reinvest and grow the business.

So how do we solve this issue? How do we make sure that the child who’s not in the business gets properly compensated from her parent’s estate and make sure that the child that’s in the business is able to grow and expand and really profit from what their parent has established for them.

And the answer is with properly documented and properly funded businesses succession planning. You see, business succession planning lays out exactly what you want to have happen at your death, disability or retirement to take care of the child that’s in the business as well as should properly fund the buyout of your other child who’s not involved in the business.

But the problem becomes how do you come up with the funding, the liquid cash to buy out the nonparticipating child? That’s where proper planning comes into play. And there are many ways that you could fund or reward the child who is not participating in the business.

Number one, you could pay cash. Keep it liquid. Take it out of the business. Buy out that child. Number two, you could finance. You could go to the bank finance a loan, and pay it back over time if you don’t have the cash. And the third way is to buy life insurance, insuring that first generation owner so that at their death, liquid cash comes out of the life insurance policy and allows us to buy out that other sibling.

By insuring the first generation owner. Nothing happens until that person dies. And the event that creates the problem, the distribution of the business or the value of the business is also the event that triggers the solution, life Insurance.

If you’re interested in learning more about how to put this process to work for your family business, check out our website at Tier1Capital.com and feel free to schedule your free strategy session today.

If you’d like to learn more about how we put this to work for business owners, check out our free guide for business owners.

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

The Importance of having a Business Succession Plan

Did you know that the number one reason why small family businesses fail is because of lack of planning? Only one third, 34%, of all small businesses have a robust, documented succession plan. One of the main reasons that business owners fail to plan is because they’re too busy working in their business and they don’t take the time to work on their business.

You see, when it comes to family businesses, a lot of times they’re already established by the time the second generation gets there. So they assume it’s going to be there forever, but without the proper planning, that may not be the case.

Proper succession planning is the key to pass the family business from one generation on to the next.

 

I’d like to share an example of a local business that failed to do the planning. The business was in its third generation. The founder of the business never did any succession planning, and when he passed away unexpectedly, all of his ownership passed to his wife, who was not active in the business. He had two sons working diligently in the business, who in fact, were growing the business. And he had a daughter who was not involved in the business at all.

The mom never got around to doing any proper planning as well. And when she died, the boys had to pay over $8 million in federal estate taxes in order to gain ownership of the business. Now, as bad as that sounds, additionally, they had to come up with another $3 million to buy out the sister’s share in the business.

They borrowed $11 million and things were humming along fairly well until the 2008 financial crisis hit, and at that time their business basically evaporated. They had very little sales and certainly no revenue coming in, and ultimately they defaulted on the bank loans. The business ultimately went bankrupt. And not only did the two brothers lose their livelihood, but they had 150 employees who also lost their livelihood.

This perfectly underscores the importance of proper succession planning. A business succession plan is there to lay out exactly what’s going to happen when. Whether the owner dies, becomes disabled, or simply wants to retire. It’s a way to pass the business down from one generation to the next and make sure it’s a smooth transition.

A properly documented business succession plan is known as a business owner’s will. It literally addresses the transfer of the business and the business assets.

If you’re at the point in your business where you’re starting to think about how to exit the business and what’s going to happen and what you want to have happen at your death or disability, and you’d like to start with a business succession plan, be sure to visit our website at tier1capital.com to schedule your free strategy session today. We’d be happy to guide you.

Or if you’d like to learn more about how to smoothly make this transition for your business and your family. Check out our Free Business Owners Guide on our website.

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

Avoid Cash Flow Issues for Your Growing Business

Everybody knows that cash flow is the lifeblood to any business. But many businesses have chronic and cyclical cash flow issues that inhibit their ability to grow. In fact, 80 to 90% of businesses have most of their wealth tied up within their business.

Within a small business, there are two main factors that could cause these chronic and cyclical cash flow issues. Number one is reinvesting all of your profits back into your business. When you do this, you have little to no access to cash because you’re constantly trying to grow and expand your business, which makes sense because that directly impacts your income. And number two is paying off debt as quickly as possible.

A lot of times business owners are in a race to get out of debt, and so they have a ton of money going every single month, to entities outside of their control. But what happens with this is when they need money again they haven’t built any up for themselves, so they’re forced to go back and borrow the next time something comes up.

That’s why we always say it’s not what you buy, it’s how you pay for it that matters. And when you look at purchases through the lens of you being in control of your money and your cash flow, your decision becomes much, much more clear.

You see, what they don’t tell us is that every single purchase we make is financed, whether we pay cash and give up interest or finance and pay interest. You’re either going to pay up or give up. There are no other choices. This is exactly why it’s so important to be strategic with how you’re using your money.

 

You see, when it comes to golfing, it’s easy. There are only two ways you can improve. You could either buy the best clubs and hope that you have the best golf game ever, or you could practice and work on your swing. We work on the swing in the sense that we focus on the process and how you’re using your money instead of where your money is parked. And that is the difference between us and other advisors. Most other advisors are looking to manage your assets, while we are focused on showing you strategies to increase your cash flow by working on how you’re using your money.

And when it comes to business owners, a lot of times, like we said, their assets are tied up in their business, so it can feel difficult for them to get financial advice on how to maximize their assets and grow their business because their financial advisors are simply there to manage the money. Another thing we see with business owners is that they get their financial advice from their accountants. They have a good relationship with their accountants. They’re there every year. Maybe they have their books done by the accountants, but with accountants they’re looking through the lens of, how can I save my client taxes this year?

Let me give you an example. Your accountant approaches you and says, “Hey, you had a really good year last year, but you’re going to owe the IRS $100,000. However, if you take that $100,000 and put it into a retirement account, it’ll reduce your taxes by $40,000.”

Well, that sounds great. You certainly would rather pay 60,000 in taxes instead of 100,000 in taxes. But what they don’t tell you or what you don’t maybe realize is that you have to take the whole hundred thousand invest it in a retirement account. So now you don’t have use or control of that 100,000. Now you got to come up with another 60,000 on top of that in order to pay the IRS. Are you in a much better position or are you in a more illiquid position as a result of that advice?

This is why we always look at things through the lens of control. Sure, there are tax benefits associated with the methods that we use, but when we look at things through the lens of control, is this going to leave you in more control of your cash flow or a less control of your cash flow? Are you going to have access to this money in the near future or are you going to have to wait 15, 20, 30 years to access that money penalty free? Everything becomes much more clear.

It’s our goal to help as many people as possible to make the best financial decisions possible. We do that by looking at things through the lens of how can we help you be in more control of your money? You see, when you’re in control of your money and your cash flow, you’re in a much better position to address your short term, intermediate and long term goals and objectives, whether it’s from a business perspective or on a personal basis. Our mentor, Nelson Nash, used to say when you have access to money, opportunities will find you.

If you’d like to learn more about how to put these strategies to work for you and your business, be sure to visit our website at Tier1Capital.com and schedule your free strategy session today. We’d love to chat with you, or if you’d like to learn about how we put this process to work for business owners, check out our free guide for business owners right on our website.

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

Escaping from Credit Card Debt

Credit cards could be a great financial tool if used properly. They give you instant access to capital and if you pay them off before the credit card due date, you don’t have to pay any interest. Unfortunately, some people get into a situation where they’re carrying a small or large amount of credit card debt that could really weigh down their ability to succeed financially.

Additionally, participating in a tax qualified retirement plan like a 401k or an IRA is a good idea as well. However, what happens when you combine having credit card debt with your participation in a tax qualified retirement plan?

Sometimes people come to us and say, Where do I get started? Do I pay off my credit card debt? Or my student loans? Or do I start saving first? And to that question, we answer, “What if you could do both?”

Credit card interest rates could go anywhere from 18 to 30% these days with an interest that high carrying any credit card balance could become stifling because of the amount of interest being charged each and every single month.

When you combine high interest rate credit card balances with your participation in a retirement plan such as a 401k, that creates a double whammy where you’re saving money in an area that you can’t access. And along the way, you’re paying a hefty interest rate just to get out of debt.

A lot of times people who are carrying a credit card balance and contributing to their retirement plan can feel stuck and suffocated financially because they have no access to cash flow. Hundreds of dollars every month are going towards credit card interest, and hundreds of dollars a month are going towards an area where they don’t have access to that money.

So where does that leave them as far as their short term financial goals? The strategy of where you’re saving your money and the strategy of how you’re using your money need to be coordinated to give you the best results.

Typically, if someone comes into our office and says, “Hey, I’m carrying this heavy credit card balance and I’m contributing to my retirement plan every paycheck”, the advice we might give them is to pause on the retirement until we could get a hold and a handle on this credit card debt, because, like I said, that interest rate can be stifling on your ability to save for your future.

And a lot of times when we see people in that situation, we’ll ask them, how long have they been doing this? And they’ll look and say, “Well, we’ve been doing this for a long time. It seems like forever.”

Well, that situation keeps perpetuating itself. Because what happens is sometimes you start getting that credit card balance paid down, but then you run into a financial or a medical emergency, and that means you’ve got to put more money on a credit card because you don’t have access to any of your money. Why? Because all of your savings is in your retirement account. Again, try to coordinate, where you’re saving your money and how you’re using your money, can give you tremendous results on the back end.

Every situation is different. A heavy credit card balance for some people may be a few thousand dollars. In some extreme cases we’ve seen people with over $100,000 of consumer debt that they’re carrying each and every single month.

But with great debt and great cash flow comes a great opportunity. With some simple shifts, you may be able to get out from underneath that credit card debt by building your own pool of cash that you have access to to start chipping away at the debts one by one.

The ultimate goal is to put you in control of all of that cash flow that you were using to get out of debt or to pay on your credit card. Imagine the impact it would have if you had control of every single dollar that you’re currently putting toward your credit card debt.

Imagine what goals you’d be able to accomplish, like putting a down payment on the house, starting a new business, paying for your car, or simply retiring one day.

This is a simple concept. If you step back, literally what we’re doing is converting liabilities into assets. Any time you can convert a liability into an asset, you win.

The mechanism of this strategy is redirecting excess debt payments from the credit card company and putting it in a specially designed whole life insurance policy designed for cash accumulation so that you could build a pool of cash that you have access to that you own and control.

As you build up that pool of cash, you’re able to borrow against the cash value within the policy and start knocking away at the credit card debt so that you slowly begin to earn more and more control of your cash flow. As you pay off those credit card debt, you redirect those payments to your policy loan so that you’re building your policy with your premiums as well as the loan repayments, and you’re able to pay off debts quicker and quicker down the line.

There are two huge advantages to this. Usually you’re paying a much lower interest rate to the insurance company. Currently, those rates are about five, five and a half, maybe 6% on the high side versus paying 18 to 25 or 30% on a credit card. So clearly you win there.

A second benefit is that as you’re paying back the policy loan, you get to use that money again to pay off another credit card and therefore have more cash flow redirected back to the policy that you are in control. And slowly but surely, you’ll have all of your debt payments coming into your policy and you own and control the policy. Therefore, again, converting liabilities into assets.

The most important step is the first one. If you’d like to get started and learn more about how we could put this process to work for your specific situation. Visit our website at Tier1Capital.com. Feel free to schedule your free strategy session today. We’d love to talk to you.

Or if you’d like to learn more about exactly how we put this process to work for our clients, check out 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.

Redirect Your Cash Flow Back to You

A lot of people don’t have the time or the motivation to do a deep dive into their finances. And other times people say to us, “Hey guys, I’m not giving up control of my money in any of these five areas of wealth transfer. How do I get started with saving for my short term, intermediate and ultimately retirement savings goals with this concept?”

We talk about the five areas of wealth transfer where we look to find where people are giving up control of their money unknowingly and unnecessarily. Those five areas are: taxes, how you’re funding your real estate, how you’re funding your retirement, how you’re paying for your children’s college education, and then how you make major capital purchases.

But what if you’re not giving away control of your money in any of those five areas of wealth transfer? Does that mean that your cash flow is already as efficient as possible?

But that may not necessarily be the case.

The fact of the matter is, most of your income is flowing through your system, through your checking account, and going to pay for lifestyle or to be reinvested or to help you grow your business.

 

In many situations, we’ll review how people are using their money and we’ll look at those five areas of wealth transfer and we’ll be able to identify areas that they’re giving up control of their money unknowingly and unnecessarily, and show them how that if they just stop doing that, their circle of wealth will grow. And, if they redirect that same cash flow back to an entity that they own and control, they’ll be able to build a pool of cash that they could access, no questions asked, without having to get permission, in order to expand their business or their personal lifestyle.

In that type of situation, it’s easy for us to identify the leaky holes in your personal economic model or in your bucket, if you will. We’re able to plug those holes and fill up the bucket with money. But if you don’t have any holes in your bucket and instead your bucket doesn’t have a bottom, it’s important to build that foundation and start with what you can afford to put away at this point and then slowly build up that bucket. Keeping that money as efficient as possible so that you’re able to achieve your short term, intermediate and long term financial goals no matter what they may be.

What we have found is that everybody has financial milestones or goals that they need or want to accomplish, and in that case, starting where you are puts you in a better position to make your money more efficient prospectively as you’re going forward, because the more efficient your money could be, the better chance you have of reaching those milestones and more, more importantly, achieving your goals.

A financial goal could be something like paying off your credit cards, your student loans, saving for a down payment on a house, financing a new car, or eventually one day retiring. No matter what your financial goal is, it’s important to start somewhere so that you’re able to build before it’s too late.

You see, with the compound interest curve, there are only two factors to consider, time and consistently putting away money. The sooner you start that compound interest curve, the better your results are going to ultimately be. This goes back to a point earlier, when we say pay yourself first. Again, the whole concept is to make your money more efficient, paying yourself first, make sure that you’re saving or you’re going to be on track to meet those milestones.

The process we use uses a specially designed whole life insurance policies designed for cash accumulation to help our clients achieve their financial goals. With this product, we’re able to design a policy to meet the cash flow needs of each individual client, and every situation is different.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation to help meet your financial goals, be sure to visit our website at Tier1Capital.com to get started today. Feel free to schedule your free strategy session or if you’d like to learn more about exactly how our process works and how to put it to work for your family and your situation, check out 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.