Business & Personal Finance Articles

Generational Turnover in a Family Business

March 23, 2023

Are you in business with your parents or parent and you’re wondering how you could buy them out when the time comes. That’s a huge issue for the younger generations, like millennials, as their parents approach the retirement age.

In America, it’s not uncommon to be in business with your family members, but what happens when the older generation is ready to phase out into retirement and the younger generation has to step into those shoes? How do you transition from the younger generation being employees to being in control of the business and transitioning the older generation out?

That is the age old question. But also keep in mind there are several issues that need to be addressed. One issue is, what happens if the founding or the older generation dies. That can be a huge financial impact to the business. Literally, all of the knowledge, connections and information goes to the grave with that person.

As is with any issue involving family, it’s not always cut and dry. First, we have the issue of death or retirement or disability of the founding member. But what happens if this founding member simply wants to cut back his hours or retire? How does the younger generation buy them out and compensate them throughout their retirement so they could afford to retire, while also affording to maintain the business and their income?

But keep in mind, the older generation needs to be compensated for all the value they created over their lifetime. Think of it this way, if they weren’t transitioning the business to the younger generation, they would have the opportunity to sell the business off to someone else at fair market value. Why should it be any different because we’re transitioning to a family member.

Now, surely there will be a family discount, but the older generation can hang around and can also be contributing to the growth or the sustainability of the business. And obviously all of that knowledge and those connections aren’t just going away.

So the key all comes down to this with proper legal planning and proper financial planning, you can ensure a smooth transition from one generation to the next. But with these steps become, an additional set of issues. You see, you don’t want to just have an agreement with no funding behind it, and you don’t want to just have funding with no agreement behind it. Having these together gives us a whole separate issue, though, of where are you going to find the money to fund this solution?

And that’s where we can help. We are specially trained to show you how to maximize the efficiency of your money so that you can get $1 to possibly do two or three or four different duties and in the process, make your money more efficient. Quite literally, what we’re able to do is to find money within your current cash flow without having to reduce expenses or without having to increase sales or revenue in order to fund this new plan.

It all comes through the lens of making your money more efficient and leaving you in more control of your cash flow so that you’re able to allocate some of that money to accomplishing your goals of buying your parents out of the business, while still being able to operate the business and grow the business all at the same time.

You see, what we found is that some simple shifts in how you’re using your money could make all the difference down the road. We recently worked with a business owner who owns a manufacturing company locally. He wanted to start planning his business exit strategy for about ten or 12 years down the line, and it was determined that the business was worth about two and a half million dollars.

So we started from ground zero, meaning that they had no money saved to fund his exit strategy. Now, also part of the backdrop to this case is his son was involved in the business and his daughter was a schoolteacher and not involved in the business. And he wanted to make sure that if he passed away, she would be compensated in some way, shape or form for his interest in the business. What we needed to do was to determine how much money he needed to put away in order to get that full value of his business. Two and a half million dollars. And it was determined that he needed to put away about $200,000 per year.

So now the question became, where are they going to get the money? He looked at me straight in the eyes and said, “Tim, if I could save $200,000, you better believe I’d have been doing that for a long time. I just can’t understand where we’re going to get the money”. And my response to him was, “What if you already have the money within your current flow? You’re just using your money inefficiently. If I can find the money, would you fund the plan?” He goes, “Sign me up“. And that’s exactly what we did.

We did a deep dive into their financials. We looked at where they were putting their money, how they were using their money, how they were making purchases. And lo and behold, we didn’t find $200,000, we found $240,000 of annual recurring revenue that they could use to fund his exit strategy. And in one fell swoop, we redirected money from an inefficient strategy to a very efficient strategy that was going to fund his exit strategy. But in the process, he got much, much more cash flow relief.

If you’d like to learn more about these strategies and how we could customize a plan to put them to work for your business, be sure to 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 put this process

to work for our clients, check out our free web course. The Four Steps to Financial Freedom.

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

Is My Business Marketable Enough to Retire?

March 20, 2023

As a business owner, it’s not uncommon to have a majority of your net worth tied up in your business. How do you retire when all of your assets are tied up in the business? What’s your legacy going to look like if your only asset is your business? What happens if your children don’t want any part of the business? This is a situation we see all too often. There are some simple steps you could take to make sure you’re able to retire and not depend on the equity within your business.

Do you realize that over 80% of all businesses are first generation businesses? Meaning that the founder of the business started the business and is still operating and working in the business? Also, less than 30% of all businesses make it to the second generation. So there is a great probability that for whatever reason, your children will not take over the business.

Let’s face it, kids these days have minds of their own. But what does that mean for your retirement? How do you retire if all of your assets are tied up in the business?

There’s an old saying that the benefit of a closely held business is just that, that it’s closely held. And you don’t have to consult a lot of owners or a lot of people when you’re making a decision. The bad part or the downside of a closely held business is that it’s closely held and you’re responsible for everything. So, there has to be a delicate balance between making enough money to operate the business, making enough money to grow the business and making enough money to make sure that you’re independent of the business so that you could leave on your terms.

The fact of the matter is, a lot of small businesses aren’t marketable, and the main reason for this is because the owner is the breadwinner of the business. If the owner was coming with the business, it would be worth a lot more than the business without the owner who’s been running it for however long. So what ends up happening with these small businesses is they’re forced to liquidate any inventory they have and any equipment that they have at fire sale close out rates and walk away, close the doors of the business for a fraction of the price that they would have got had they been able to sell the business as a whole.

So the danger is that you pour all of your profits back into the business by doing so, you’re literally locking up that money inside your business and setting yourself up where you may never be able to get the value of the money you actually put in, let alone a profit.

When you first start your business, it’s important to reinvest the profits so you’re able to grow and expand. But as your business matures, it’s even more important to diversify so that you have liquidity use and control of an asset and also have your business to provide income for you and your family.

How do you continue to operate and grow your business while at the same time making sure that your future, or your exit strategy, is independent on having to sell the business?

We recently came across a situation with one of our long time clients who was a business owner for 37 years and he had an offer to sell his business. But because he had over two times the value of the business in other assets, he didn’t have to take the first offer that came along and he was able to wait for the best offer to present itself.

As with any financial planning, taking steps early on to secure your financial future is best. And it’s never too late to start planning. By taking these steps to secure your financial future, you’re setting yourself up for success in retirement and also securing your legacy for your family. You’re not dependent on the sale of the business for your livelihood. Instead, you have a pool of cash that you have access to along the way, and the business to help support your income for you and your family.

This individual took the best offer that was on his terms. By selling his business and getting the best price possible, it was just sort of like frosting on the cake. You see, he wasn’t dependent on the sale of his business for retirement and said he had money set aside, that he had full liquidity use and control that he spent years accumulating so that he wouldn’t have to be dependent on the sale of that business in order to retire.

With cash comes control. And that’s the lens which we look through to make sure that our clients are making the best decisions possible and setting themselves up for growth today and also security in the future.

If you’d like to get started with a plan to secure your financial future for you and your family and your business, be sure to visit our website at Tier1Capital.com. Feel free to schedule a free strategy session. We’d love to chat with you.

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

How can You Properly Invest in a Down Market?

March 16, 2023

Capital investments are vital for any business to keep it growing and operating smoothly. But with interest rates on the rise, the cost of financing could feel quite daunting. How do you continue to grow and expand your business without being bogged down by the costs of new equipment and capital investments?

When you’re making a capital investment in your business. Any way you look at it. You are going to pay a finance cost. And what I mean by that is, if you finance, you’re going to pay interest to the bank or the credit company for the privilege of using their money. But if you pay cash, you are giving up interest that you could have earned on your money. So the question becomes, how can you make that capital investment in your business and still maintain control of your cash?

We always say it’s not what you buy, it’s how you pay for it that really matters. And how could you make your cash flow and your capital as efficient as possible within your business?

When you look at things through the lens of maintaining control of as much cash flow as possible, being as efficient as possible with your cash, now that decisions become much, much more clear. Now what happens is, instead of financing through conventional methods directly with a bank or a credit company, or instead of paying cash, if you maintain a pool of money that you own and control, and you borrow against that money. You fit the amortization schedule to meet your cash flow needs, ultimately it puts you in more and more control of your money while also making that capital investment.

And what we use for our clients is showing them how to use specially designed whole life insurance policies designed for cash accumulation to help finance the purchases within their business. And the reason why we use the specially designed whole life insurance policies is because the clients have complete liquidity use and control over their capital, every step along the way.

With these policies, there’s a loan provision so they have access to the capital on their terms. They could sign a form. It doesn’t hit their credit score and they get to determine the payback schedule of that policy loan. So they’re able to take money from the insurance company and invest it in their business with no questions asked.

So if the lens you’re looking through to make your decision on how to make this purchase is to be in control. You get the purchase, you’re in control of the terms and conditions, and your money is always earning uninterrupted compound interest. That is the same lens that we utilize to help our clients make their money much, much more efficient.

If you’re a business owner and you’re looking to get started with the whole life insurance policy designed for cash accumulation to take your business to the next level, visit our website at Tier1Capital.com and feel free to schedule your free strategy session today. We’d be happy to chat with you.

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

What is a Limited Pay Policy?

March 13, 2023

As a young person, the thought of paying life insurance premiums until age 100 or 121 can seem a bit daunting. I mean, who makes commitments for that long, really? But here’s the secret. There are limited pay policies, policies that are paid for X amount of years. These policies can be a great saving solution for young people.

A limited pay policy could make sense in a lot of situations, but it especially makes sense when you’re dealing with these specially designed whole life insurance policies designed for cash accumulation.

By its nature, a specially designed policy for cash accumulation puts extra money into the policy, and a limited pay policy has extra premium because you’re shrinking down the amount of years in which you’re paying the premium from age 100, let’s say, to age 65 or for a 20 year period or a ten year period.

The lower the amount of years of funding, the higher the premium. But again, if you’re designing a policy for cash accumulation, a limited pay policy makes sense because it puts you in a position where, let’s say a life paid up at age 65, there are no more premiums due after age 65. Now you’re collecting checks instead of paying premiums.

But let’s take a step back. We’re saying a higher premium. And what we mean by that specifically is, it’s a higher premium for the set amount of death benefit, which isn’t necessarily a problem when you’re designing these policies for cash accumulation. You’re focusing on the cash accumulation versus the death benefit. And many people, when they’re young, they don’t have a great need for death benefit. So it’s really not a deal breaker.

But the key is you’ll have the death benefit at your life expectancy when you’ll need the death benefit the most. And consequently, if you have a limited pay policy, again, let’s say a life paid up at age 65, by the time you’re 85, there will have been 20 years where you didn’t have to pay any premiums. But you had a completely paid up death benefit that’s actually growing every year because there’s no cost of insurance dragging the return or the growth of the policy.

In my case, I started limited pay policies years ago and it was a simple way to get started with saving. I put away a 500 or $1,000 a year into these policies, and in ten or 20 years they’re going to be paid up completely and the cash value and the death benefit are going to continue to grow and accumulate interest and dividends throughout my entire life, even after the premiums aren’t being paid anymore.

But keep in mind, there is a trade off with a limited pay policy. And what the trade off is, is that’s less money that you could stuff into the policy for any given death benefit. And what that means is your cash value will be slightly lower in the earlier years, but then you have to weigh the cost of having less cash value in the early years versus the benefit of having no premiums in the later years.

But let’s take another step backwards and think about compounding interest. Compound interest curves require two factors time and money. We all know we could never get time back, and it’s important to consistently put money in to these policies to accumulate the best compound interest curve possible. But with a limited pay policy, you’re limited on how much money you’re able to put in.

So again, in my situation, what I do is I have a term policy that guarantees convertibility of that death benefit, and I could create more whole life policies throughout my life as my budget allows. So as I pay up policies I have the cash flow to now convert a piece of my term policy into a new whole life policy and start the cycle all over again.

But the key is I’ll be building capital that I could access everywhere along the way to take care of the things of life, whether it’s buying a car, whether it’s going on vacation or moving across the country. Not to mention for business opportunities.

These policies are great for entrepreneurial type people. You have full liquidity use and control of that money to take advantage of business opportunities that come about. So you could earn an internal rate of return within the policy and also an external rate of return by starting your own business and putting that capital to work for you without interrupting the compound interest curve, which is key.

Nelson Nash, the author of the bestselling book Becoming Your Own Banker, put it so eloquently, “When you have access to money, opportunities will find you.”

If you’re considering a specially designed whole life insurance policy designed for cash accumulation, whether the traditional design or a limited pay policy to meet your needs, visit our website at Tier1Capital.com to get started with your free strategy session today.

You can hop right on our calendar, or if you’d like to learn more about how we put this process to work for our clients, check out our free webinar, The Four Steps to Financial Freedom. It’s 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 Saving Dilemma

March 9, 2023

We’ve all heard that you should pay yourself first and save for your future. But not everyone does it. Are you saving for your future? Is it 10% of your income? Is it 15? Is it 20? Are you saving anything? And if you are, are you saving in a place where you have access to that money?

Today, we’re going to talk about how to strategically save for the future so that you’re able to meet your long term goals of retirement and your short term and intermediate goals as well.

So a universal financial goal that most people have is to someday retire. But what about your other goals? How do you achieve those as well as your retirement? We call that the savings dilemma. Should you save only for long term goals or should you save for short term goals or should you save for both? And the problem is, once you make a decision whether it’s short term, intermediate or long term, you’re literally eliminating the other choices.

In other words, if you’re saving for long term goals like retirement in a conventional, traditional retirement plan, that means that money is not accessible or available to you for the short term needs that you’re going to have from the time you start saving until the time you go to retire. We call that saving in buckets, but that’s not necessarily the best strategy because you can’t access that money without penalty before age 59 and a half.

But what happens when you want to get married or put a down payment on your house or send your children to private school? Where is that money going to come from?

Now, a lot of times people say, “Oh, well, by the time those events occur, I’ll be making more money”. Well, maybe you will, maybe you won’t. And in all probability you will. But that still doesn’t negate the fact that saving in buckets is a very inefficient way of saving. When we’re looking at savings vehicles for our clients, we’re looking at somewhere where they’ll have complete liquidity use and control of their money without penalty is everywhere along the way.

You see, you may be making more money in the future, but what you can’t recapture is the lost opportunity cost for those years when you’re building up your income. When it comes to compound interest, there are only two variables in that equation and that’s time and money.

With time, we could never make it up. So it’s important to start saving as soon as possible and never jump off that compound interest curve because you could never make up that lost time.

It’s often said the more time you have, the less money you need to put away. The less time you have, the more money you need to put away.

The key is if you’re saving everywhere along the way and you have access to that money and you’re never jumping off the compound interest curve, well now you’re in a position where your money is always working for you, but you’re also in a position where you could access that and use it for the things of life, those things that come up, whether they’re emergencies or opportunities.

The most frustrating thing in life is to have an opportunity come your way and you’re not in a position financially to take advantage of it. Why? Because you don’t have access to your money. You see, we believe that there’s more opportunity in protecting yourself against the losses than trying to pick the winners. Our goal is to help you make your money as efficient as possible so that you’re able to achieve your financial goals regardless of what’s going on in the market or the bigger economic environment.

And when we say losses, we’re not only talking about market losses, we’re talking about the lost opportunity of paying taxes, the lost opportunity of paying fees, the lost opportunity of paying interest to an entity that you don’t own or control, and the lost opportunity of having to access your money and jumping off the compound interest curve.

One of the ways we help our clients to become more financially efficient is by using specially designed whole life insurance policies designed for cash accumulation so that they’re able to access their money that they build up for major capital purchases or to take advantage of opportunities or to expand their business.

By utilizing the loan provision within these policies, they’re able to earn continuous compound interest within their policy and still access the cash value to make these major purchases or take advantage of opportunities. So you have the potential to earn an internal rate of return within the policy uninterrupted, as well as the opportunity to take advantage of financial opportunities that come up.

Another benefit of this process is that you’re always paying yourself first. You start where you are with what you can afford, whether it’s 5% of your income or 20% of your income, and you continue to save as a matter of course and your money continues to grow and compound within the policy and all the while you have access to it via the loan provision.

The value of this process is really startling because what happens is wherever you start, whether it’s saving 2% of your income, 5%, 10% over time, you get to a point where you’re saving a significant amount of your income and it doesn’t feel like it’s reducing your lifestyle. Why? Because you have access to all the money that you were able to save in those previous years.

So your savings percentage increases as well as your total net worth. As you build up the cash value within the policy, you have access to that cash to pay off credit cards, student loans, put a down payment on the house. This policy can go with you through all stages of your life. At the end, you have access to it to supplement your retirement income and ultimately to pass down as a death benefit to your loved ones or a charity of your choice.

If you’d like to get started with this specially designed whole life insurance policy designed for cash accumulation to help meet your savings and financial goals, be sure to 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 put this process to work for our clients, check out our webinar, The Four Steps to Financial Freedom.

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

Access Your Money on Demand

March 6, 2023

As business owners, we all know how important it is to have access to cash when you really need it. Are you thinking about taking a policy loan from your life insurance policy to help grow and expand your business?

Access to capital is the lifeblood of any business. Your business cannot continue to operate, and it certainly cannot grow without access to capital. But many times because cash flow is cyclical, we run into situations where our cash flow is not flowing in as quickly or on a timely basis as we need it. And there are the opportunities that you have that you may not even be considering where you can borrow against the cash value of your life insurance to keep your business going or to help your business to continue to grow.

Traditional means of financing require that you ask for permission by applying and ultimately qualifying on the bank’s terms to obtain access to their capital. But the reason life insurance loans are more preferred is because you are not applying and qualifying. You are literally giving an order.

The loan provision that exists in your policy is a contractual obligation, the insurance company has to honor your request for the loan. You’re not asking permission. You are literally giving an order. And that is not a small distinction. That’s why our business owner clients love borrowing against their life insurance. They are not qualifying. It doesn’t matter what their credit score is, It doesn’t matter how much money they have in the bank. It doesn’t matter what their cash flow is. The insurance company, when you call them up, they say, “Yes, sir. Where do you want us to send the money?”

So with these life insurance policy loans, they’re unstructured loans. So it’s suggested that you pay at least the interest back every year, because if you don’t, it will tack on to the balance of your loan. But other than that, you’re not required to make payments back to this policy loan. You get to determine the terms of these loans.

And that, again, is a key distinction. You’re in control of the whole process. You determine if or when you pay back the loan if or when you pay the interest. What that means is you can literally fit the payment back to the insurance company, into your cash flow. You can do it on your terms, whatever makes it best for you.

We’ve had a lot of clients who start paying back their policy loans and then they stop because cash flow got bad. They literally stop paying back their loans until a time in the future when their situation or the economic environment changed.

So you may be wondering, how does this the logistically work with the life insurance policy, the individual and the business entity? And the way we help our clients structure this is by first obtaining a policy loan to the individual as the policy owner. And then the individual is able to loan their business the money and the business repays the individual.

One of the key things that jumps out to a lot of our clients is the fact that they are completely in control of this entire process from the beginning till the end, and that is the power of utilizing the cash value in your life insurance to loan money to your business.

It’s our mission to help as many business owners as possible to make the best financial decisions possible. And a simple way to do that is to be in control of your financial process. So how could we help you make your money more efficient and put you in the most control of your cash flow?

Whether you have existing insurance policy is or you’re looking to get some put in place to achieve these financial goals or other financial goals like business succession, business continuation, deferred compensation, or other business financial goals, check out our website at Tier1Capital.com. We’d be happy to help you get started with our process.

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

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

Preventing Lost Opportunity Cost

March 2, 2023

What are you doing that’s holding you back financially? When it comes to finances, no one wakes up in the morning and says, “Hey, how could I mess up my financial future today?” No. We all wake up and say, “Hey, how can I move myself financially forward?”

When it comes to finances, there are so many tricks and strategies that all claim to move forward. But the question is how do you make your money more efficient and how do you maintain liquidity use and control of your money?

We all need to navigate the headwinds that we all face, whether we’re business owners and we’re trying to navigate the headwinds that we face on a daily basis to move our company forward, or we’re a family and we’re trying to move ourselves forward financially. We all face the same headwinds. There’s the need for access to money, but if we don’t have money or more importantly, if we have money saved and then we need to access that money for an emergency or to take advantage of an opportunity, we’re going to drain down the tank. We’re going to use that money. And again, we’re never going to see the interest that we don’t earn on that money.

Then there are things like, let’s say you’re saving, there’s going to be taxes on your savings and investments. There’s going to be losses perhaps on your investment. There’s certainly going to be fees on those investments. All of those things are headwinds that we face on a daily basis. And then if we pay a tax, we pay a fee or we experience a loss, then there’s the lost opportunity cost. What we could have earned on that money had we not paid those fees or hit those headwinds or had those losses.

This is why we constantly talk about making your money more efficient. How do we work with what you have to get you as far as possible financially, whether in your family or your business?

Let’s say you have a plane that could fly 100 miles per hour, but you’re flying into a 345 mile per hour headwind. If your plane could only move 100 miles per hour, but you’re flying into that headwind, you’re going nowhere, and certainly nowhere fast. In fact, you’re not going nowhere, you’re literally going backwards.

So the facts are the facts. Your plane could only move 100 miles per hour and we have no control over the wind. But what if, instead of having a headwind, we adjusted the direction we were going and used it as a tailwind to propel us forward?

And that’s literally the type of planning we can help you with or the type of planning we designed for our clients on a daily basis.

We know that the winds are a given. The headwinds that we face are there. How can we work with those headwinds to make sure that we’re taking advantage of them so that now we’re using that wind to propel us forward rather than to prevent us from moving forward?

If you’re ready to make your cash and your cash flow more efficient and take advantage of the winds, please be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.

Or if you’d like to learn more about how we put this process to work for our clients, check out our Four Steps to Financial Freedom Webinar right on our website.

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

Increasing your Business’ Cash Flow Efficiency

February 27, 2023

As a young business owner, it could be simple to fall into the trap of reinvesting all of your profits back into your business to help that business grow and expand and hopefully grow your income as you go. But today, we’re going to talk about how do we save outside of the business on a systematic basis to achieve your other short term and long term financial goals?

When you first start off as a business owner, there’s not a lot of cash flow that you could take out of the business. You’re just putting all that money into the business to help grow and expand and set a footprint in your space. But once that business is established, there’s some extra cash flow there that may make sense not to put directly back into your business, because, let’s face it, life exists outside of your business. You may have a family, children that you want to send to college, a wedding that you want to pay for, or a home that you need a down payment for. How do you grow your business and still achieve these financial goals?

It’s often been said that the problem with a closely held business is that it’s closely held. And what does that mean? Basically, you make all the decisions, and generally most business owners will make the decision to reinvest all of their earnings back into the business. Not necessarily a bad thing, but here’s what happens. That money is stuck in the business. And if you have other goals outside of the business that you need or want to accomplish, it puts you in a position where you have to choose between your business or your family. And no business owner should have to make that choice.

So the question is how do you make your cash and your cash flow more efficient so your money could be in two places at once. And the way we help our clients to achieve this is by using a specially designed whole life insurance policy designed for cash accumulation. So you have full liquidity use and control of your money to do things like expand your business. But also send your children to college or finance a new car. There is no “or” in this situation, it’s an “and.” How do you do this and that? Not to mention, you could use this tool as a long term solution to achieve your goal of eventually retiring.

So by making your money more efficient, it’s literally like your money’s in two places at once, because quite frankly, it is. And that presents a situation or an opportunity where you have $1 performing two, three or four tasks. It’s multi duty dollars and it really works for a small business owner.

What do we mean by multi duty dollars? Well, you’re paying the premium for the life insurance, but you also have access to that money to expand your business or achieve your other goals. But that policy also produces a death benefit for your business or your family. And there’s other riders that could be included.

Those other riders include a disability waiver of premium rider in case you get sick or injured and can’t pay the premium or a terminal illness or chronic illness benefit rider which allows you to tap into the death benefit on a tax free basis to pay for a long term care event or a chronic illness.

Not to mention the fact that if you use the money to grow your business and put it back through the loan feature, when you go to retire, you can use the dividends from the policy to supplement your retirement income and that’ll save you on four taxes. Federal income tax, state income tax, Social Security offset tax as well as not allowing an increase in your Medicare premium. And there’s actually a fifth tax when you die, the death benefit goes to your family in the state of Pennsylvania, outside of state inheritance tax.

Let’s take a look at the loan feature of these policies. Every whole life insurance policy includes this loan feature, but these specially designed policies allow your money to be in two places at once. What do we mean by that?

Well, a policy loan is a collateralized loan against the cash value in your policy. So the money never leaves your policy, but you still have access to it from a separate policy loan given by the insurance company. So you’re able to access cash and still grow uninterrupted compounding of interest on your money.

One of the best features of these policies is that it’s a systematic way to save outside of your business, meaning as you pay your premium and build up your cash value, you have more and more access to cash and your policy becomes more and more efficient as it matures.

So before you know it, you’ll have a pile of cash that you have access to for whatever you want, whether it’s to expand your business or achieve your other financial goals, and you’re able to access it without interrupting the compounding of interest. So you could earn interest within your policy and continue to grow that cash and still make an external rate of return if, for example, you use it to grow and expand your business.

Think of it this way. You have two choices. Choice number one is to reinvest the profits in the business, and the money is illiquid, or choice two is reinvest the money into the whole life policy. The money’s liquid and you can then borrow against that cash to reinvest in your business. So you get to grow your business. But now you have some liquidity.

We look at financial situations through the lens of control. Is this decision going to put you in more control or less control of your cash flow?

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation. Be sure to visit our website at Tier1Capital.com to get started today. Feel free to schedule your free strategy session. We’d be happy to help design a policy for you and give you a free cash flow analysis to see where we can help you make your money more efficient.

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

Saving vs Investing

February 23, 2023

In today’s ever changing economic environment, there are a few questions that remain the same. How do you save for your retirement and achieve your financial goals along the way? There are so many things that are out of our control: interest rates, the stock market, government spending. Not to mention inflation.

But what isn’t changing are our financial goals. We still want to get married. We still want a new car. We still want to go out to eat when we want to go out to eat. How do we achieve all of these financial goals when there is so much out of our control?

Well, conventional wisdom would tell us to just take on more risk. More risk equals more return. But that is not always the case as we’re experiencing right now. The answer may be in saving. Saving, not investing.

And you may be wondering what’s the difference? Well, investments inherently have risk savings, do not. The tool we use to help our clients achieve their goals without taking on tons of risk is especially designed whole life insurance policy designed for cash accumulation for several reasons, and one being you’re able to access that money to achieve your financial goals without taking on the risk of the market and everything else that’s out there.

Because your money is safe inside that insurance policy. You could also access that money to reinvest in the market after the market went down. That puts you in control instead of you being at the mercy of people that you don’t even know.

You see, most savings vehicles that are presented to us have risk, whether it’s a retirement plan at work or a brokerage account or other mutual funds. They all include risk, but not everyone wants to take on that risk, and not everyone wants to be at the mercy of everything that’s going on in the world to achieve their financial goals. Not to mention, once you access that money, you have tax consequences possible penalties, and you don’t know how much you’re actually going to be earning on that money. And also think of it this way. Once you access that money, it’s no longer earning interest for you.

Our process aims to put you in control of your cash flow and to make your money as efficient as possible so you don’t have to take on tons of risk to achieve your financial goals.

We believe there’s more opportunity in avoiding the losses than trying to pick the winners. And we’re not only talking about market losses, we’re talking about the losses of interest paid to others or taxes paid to the government. They’re all losses that reduce the value of our money.

If you’d like to get started with a cash flow analysis to see how we could help make your money more efficient, check out our website at Tier1Capital.com and schedule your free strategy session today.

Or if you’re interested in learning more about how we put this process to work for our clients, check out our webinar, The Four Steps to Financial Freedom.

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

How Can I Reach My Financial Goals?

February 20, 2023

There are so many financial tools available to us between IRAs, 401ks, brokerage accounts, loans, mortgages. The list goes on and on. The question remains, are these tools moving us towards our financial goals or keeping us further away from our financial goals? This question needs to be answered frequently. It’s not a one size fits all or one decision fits your entire life type situation.

Think of it this way. The products, the 401k, the IRA, the mortgage, are the tools. The strategy is what the tool is doing for you. How are you using that tool? Very often when we’re meeting with clients and prospects, we ask the question, Is this strategy bringing you closer to or further away from your goals?

And a lot of times the people will look at us and say, “What do you mean?” The choices we’re making with the financial tool, we don’t even think about it. We just do it because it sounds good or everybody else is doing it. That’s not good enough. If you have stated goals and stated objectives that you’re trying to meet.

Let’s take the 401k for an example. Most employers, if they offer a 401k, also offer automatic enrollment. By not making a decision. You’re making the decision to enroll in this 401k plan. How is this moving you towards your financial goals and is it going to help you achieve your short term and long term financial goals?

In most cases, it will help you achieve retirement or help supplement it at least. But what about your other financial goals, like sending your kids to college or buying a new house or going on a vacation? All of these goals need to be addressed and the 401k is not the tool that will help you get there. But when people use this automatic enrollment and are only saving in their 401k, what happens is their money is not accessible when they want to achieve these other financial goals. And if you access that money before age 59 and a half, if you’re able to, you’re going to pay a penalty and that money is going to be fully taxable as income.

The other option may be to take a 401k loan, but that has other rules associated with it, like the five year repayment schedule and the fact that your money can’t grow while you have it withdrawn through that loan feature.

In addition to that, you’re now paying taxes twice on the same money. You might be asking, how could that be? Very simply, when you pay back a 401k loan, you pay it back with after tax dollars. So you already paid tax on that money. Then you put it towards your 401k loan and now when you go to retire and you take the money out of the 401k, you’re going to pay tax again. You’re literally paying tax twice on the same dollar. Is that your goal and objective?

What you want to do when you’re doing financial planning is making sure your plan is flexible enough to achieve each and every single one of your financial goals, even if they change. Instead of putting money in different buckets for retirement, for paying for college, for paying for your vacation, for putting a down payment on your house. You want your money to be flexible so you’re able to achieve all of these goals throughout your life and you’re not stuck with tax consequences for each one.

Several years ago, we met with a family who had the goals of having a great retirement with a brand new mountain home, and they also wanted to send their children to college. After looking at their financial situation, it became apparent that what they were doing wasn’t exactly in line with what they wanted to achieve, and it certainly wasn’t the most efficient method.

But with some simple shifts in their cash flow, we were able to help them save for retirement, fully fund their children’s private college educations and build their mountain home so they didn’t have to wait until retirement. They were able to achieve that goal 12 years sooner than they anticipated.

But here’s the best part. By helping them to obtain the mountain home 12 years sooner or not having to wait till retirement in order to build it, the husband had an opportunity to work with his father every weekend to build that mountain home. He and his dad literally hammered every single nail into that cabin.

Unfortunately, several years later, the father died. He had cancer and died at a very young age. The husband came to me and said, “Hey, I want to thank you for everything you did to help us to build that mountain home.” And I said, “Well, you know, you put the money away.” He goes, “No, you don’t get it. I will never be able to get that time back. And if I waited until I retired in order to build that cabin, I never would have had that opportunity. So thank you for showing us how to get to our goal much, much sooner.”

You see, these are the things that money can’t buy. And this is why it’s so important to have the flexibility within your financial plan to achieve your goals all along the way.

Because life doesn’t wait and it’s not about saving for retirement or saving for college. It’s about those moments in your everyday life that you can never get back.

This couple didn’t change their outflows by one penny, but they were able to build the home 12 years sooner than when they were on track or when they thought they could do it. All because we looked at things through a lens that showed them free up their cash flow and do it in a way where they can achieve all of their goals and objectives.

If you’d like to see exactly how we put this process to work for our clients, check out our website. We have a free webinar, The Four Steps to Financial Freedom, where we do a deep dive on how we put this process to work.

Also, if you’re ready to get started with our process or have some specific questions, feel free 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.

Valuable Finance Insights from Tier 1 Capital