Business & Personal Finance Articles

Stop Giving Up Control of your Cash flow

January 12, 2023

In every household and business the main key to finances is cash flow. The difference between feeling financially free and financially stuck all comes down to that one thing, cash flow. But here’s the problem. How do you manage your cash flow to amplify the feeling of financial freedom?

We have cash flow and then we make decisions to save our money. But we save it in places that literally stops the flow of money. We put it in retirement accounts, we put it in home equity. We pay off debts sooner. We put money in 529 plans. We pay cash for major capital purchases. All of these things stop the flow of money. More importantly, it stops the flow of money towards us and starts the flow of money away from us.

Now, it’s not enough just to have cash flow. We have cash flowing in every month from either income or our business. But how do we use that money once it’s in our control to move us forward financially so we could achieve our financial goals without giving up control of that money? And again, keeping in mind that we want the money to flow, but it should be preferably flowing towards us, not away from us.

The next question becomes, “how do I use my money to achieve my financial goals, like sending my kids to college or expanding my business, or buying a new car without stopping the flow of money?” Well, it’s real simple when you look at the choices, you have to save your money.

Are those choices stopping the flow of money or are they allowing your money to continuously flow towards you? Whenever we’re looking at a financial situation we’re looking at those decisions from an aspect of control. Is this decision going to leave me in more control of my money or less control of my money?

There’s an old adage in the accounting industry and it goes like this:

“Follow the flow of money.”

Wherever money stops. That’s where you have an opportunity to make that money flow towards you.

You see, conventional wisdom teaches us to give our money away. It’s by design. Pay off your mortgage as soon as possible. Get rid of all this debt. But what these decisions are doing is leaving us out of control of our cash flow and we’re unable to get our hands on money when we really need it.

We’ve been trained to do things with our money that we would never do with the things that our money buys. We would never buy a loaf of bread and put it away for 40 years and not eat it. Yet, that’s what we’re trained to do with our money when we put it in a retirement account. Same thing with home equity. We would never buy something and forget about it for 30 years, but that’s what we do when we put extra money on our mortgage. We’re literally saying, Hey, I’m going to put this money in the house. It’s not going to earn any interest. The dollars I take out in the future are going to have less buying power than the dollars I put in. We would never do that with the things that money buys, but that’s what we’re doing with our money.

Now, we’re not saying you shouldn’t save for retirement or you should be in debt with your mortgage. But what we’re saying is you should save your money in a place where you have complete liquidity use and control so you can access that money to achieve your goals along the way. Without asking permission and without subjecting yourself to penalties and fees.

This is not a new revelation. We are following the rules of nature. In nature, things have to flow. Water has to flow. You would never want to drink stagnant water. And it’s the same thing with our money. We need to keep our money flowing and preferably flowing towards us. The problem we see too often is that money is flowing. It’s just not flowing towards you. It’s flowing away from you.

If you’d like to get started with our process using specially designed whole life insurance policies to regain control of your money and finally experience more of that financial freedom we’re all looking for. Be sure to visit our website at Tier1Capital.com.

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

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

Taking More Control of Your Cash Flow

January 5, 2023

With the New Year often comes a refresh and what better way to start off the New Year than refreshing your finances so that you have more cash flow to do the things that you want to do, especially in these times of rising inflation and interest rates.

Let’s face it, none of us wake up in the morning and say, “Hey, how can I mess up my finances today?” But the fact of the matter is, a lot of the things that conventional wisdom teaches us about finances and how to use our money can leave us out of control. And it could take years for us to feel the effects of that.

Simple things like maxing out your 401k, putting as much as possible on your mortgage, paying off that mortgage as quickly as possible, paying off your student loans, paying off your high interest credit card debt when not done properly, could leave you feeling pinched down the line when you are trying to achieve other, bigger financial goals.

Now, keep in mind, every one of those strategies, paying down your mortgage quicker, maximizing your retirement plan, paying off your debt in and of themselves, they are all what we want to do. They are all the things that we should be striving for.

However, it’s not what you buy, it’s how you pay for it. And the way or the manner in which you’re addressing these issues could be costing you hundreds of thousands, if not millions of dollars over your lifetime.

You want to be in control of your money. You want to create financial independence. You have enough cash flow to do it. But it seems like you’re never getting ahead. It’s sort of like you’re driving down an icy road, slam on the brakes. But what happens? You’re going faster because of the relationship between the tire and the ice. And it’s the same thing with our finances. If we’re not careful, we could be doing things that we want to accomplish on a short term basis. But we’re missing completely the big picture.

You see, we’ll never see the interest we don’t earn, the opportunity cost on the money that we’re freely giving away, to these finance companies. By making some simple shifts and making your cash flow more efficient so that you’re in more control of that cash flow, and you have it working for you instead of other entities like the banks, Wall Street, and the government, could make all the difference throughout your entire lifetime and your financial journey.

We found there are two different ways that you can be in control of your money and your cash flow.

The first way is the strategies or the choices you’re making to actually save your money. Where you save your money makes all the difference in the world. You want to save your money in a place where you have complete liquidity, use and control of that money.

Putting all of your savings in a qualified retirement plan like a 401k or a 403b, puts your money literally out of reach when you need it most. So there’s no liquidity, there’s no use, and there’s certainly no control on your side for doing that. So where you decide to save your money is a very big factor on you being in control or not being in control.

You see, we believe that there’s more opportunities in making your money more efficient and avoiding the losses than there is in picking the winners. With the retirement plan, for example, a lot of people put all of their savings into these qualified plans.

But what about the short term financial goals? How are you going to fund those if all of your money is tied up in the retirement plan?

What we see happen a lot of times is people having to dip into their retirement plan. That money is fully taxable. And if you’re under age 59 and a half, you also get hit with a 10% penalty. So with this example, even if you’re earning a huge rate of return on that money, after the taxes and the penalty are you even breaking even? That’s why we preach that it’s so important to make your money more efficient and to use and save your money as efficiently as possible so you don’t have to experience that.

That brings us to the second area where you may be giving up control of your money, and that’s how you’re financing major capital purchases. You see whether you finance or a loan or credit card or you’re paying cash, every purchase we make is financed. And the question becomes, how do you use that financing as efficiently as possible? So you come out ahead instead of behind.

What if there was a way so you could be in control of the lump sum and still finance the purchase? The way we do this for our clients and for ourselves is using a specially designed, whole life insurance policy designed for cash accumulation.

And the reason is simple we have complete liquidity use and control of the money. We control the financing function as far as how much we’re paying back towards the policy loans and we are able to earn uninterrupted compounding interest on the money even after we access the policy loan.

So the specially designed life insurance policies accomplish two areas where we’re giving up control of our money.

Number one, where we’re saving our money because now we’re going to be saving it in a place where we have complete liquidity use and control of the money. And number two, we’re going to use that cash value to make the purchases that we need to make, whether it’s paying for our children’s college, going on vacation, buying a car or starting a business.

If you’re interested in learning about how to put a specially designed, whole life insurance policy designed for cash accumulation to work for you and your financial goals, be sure to visit our website at Tier1Capital.com and feel free to schedule your free strategy session today. We’d be happy to chat with you.

If you’d like to learn more about how we put this process to work for our clients, check out our free webinar that does a deep dive on our concept: 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 To Set Your Financial New Year’s Resolutions

January 2, 2023

With the new year comes New Year’s resolutions. What are you doing for your finances this year that’s going to leave you in a better position on December 31st than you are right now? And before you answer that question, if you say you’re going to do the same thing you did last year, why would you expect different results? Today, we’re going to talk about how to set your New Year’s resolution to leave yourself in a better position financially.

When it comes to finances, it’s important to keep it simple and consistent. What could you do this year to leave you in a better position than you are currently? Is it something as simple as making a budget and sticking to it? Or have you been saving but know you need to be saving more? Or have you been saving enough but not saving in a place where your money is accessible to achieve your short-term, intermediate, and long-term financial goals? Now is a great time to take a look at what you have been doing, what has been working, and what hasn’t been working so you could reach all of your financial goals without feeling strapped for cash.

This takes us to the beginning, which is basically understanding what your goals and objectives are. One of the biggest financial mistakes we see people make is really simple – their strategies are not aligned with their goals. So maybe your goal is to expand your business this year. What are you going to do to help achieve that goal? Or maybe you’re getting ready to send your children off to college? How are you going to achieve that goal without pinching your current and future lifestyle? It’s important to take a look at these things because missteps could have effects for years and years and years all the way into your retirement.

We always tell folks,

Every splash and every move you make financially has a ripple effect. It may not be apparent today, but at some point the piper has to be paid.

A great example of this is getting out of credit card or student debt. What’s the best way to accomplish this goal? We’ve covered this in several videos, but one piece of advice I could give you is to make sure you’re saving along the way. What if there was a way to begin saving while paying off your debt simultaneously? Would you want to know about that technique? And this goes back to what we had said in a previous video, how can you put your savings or pay yourself first on subscription mode? One way we’re able to help our clients and ourselves is by using a specially designed whole life insurance policy designed for cash accumulation to help meet all of these goals when it comes to paying off debt. By putting your savings on subscription mode and building up a pool of cash that you have access to in this whole life policy, you’re then able to access that cash to pay off high-interest credit card debt or student debt and then repay yourself and rebuild that cash value within your policy so that you don’t have to jeopardize your savings to pay off debt.

Another example is to utilize this tool to expand your business. But like we always say, it’s not what you buy, it’s how you pay for it. So whether it’s paying off a credit card, paying off some other debt, expanding your business, or taking advantage of an opportunity, either way, you’re buying something. If you’re using the right process to make that purchase, you will always be building wealth everywhere along the way. So you’re not taking that money out of circulation. You’re just utilizing it or repurposing it or deploying it somewhere else so it can get you another rate of return.

A lot of times when people are thinking about financial goals, they’ll think of long-term goals like a down payment for a house, retirement, or sending their future children to college. But it doesn’t have to be that complicated. Looking at what goals you have for this calendar year is a great feat.

So to summarize.

1. Make your goals, but make sure that your strategies are in alignment with your goals.
2. It’s not what you buy, it’s how you pay for it. Make sure that how you’re using your money is going to be moving you forward not only for your short-term goals but your intermediate and long-term goals.
3. Pay yourself first. Put your savings on subscription mode.

One of the biggest mistakes that you could avoid is wasting opportunity cost. Something that we always say is you’ll never see the interest you don’t earn. Every time you drain your savings and drain that tank, you’re losing so much opportunity cost and you’ll never realize exactly what effect that’s having over your lifetime. We call that the cash trap. When you buy something and pay for it with cash, you think you’re winning because you’re not paying interest. Unfortunately, you’re also giving up interest and people don’t realize that that’s the opportunity cost. Every purchase you make has a cost. You’re either going to pay interest if you finance or you’re going to give up interest if you pay cash. It’s pay up or give up. That’s why we say it’s not what you buy, it’s how you pay for it that matters.

If you’d like to get started with your financial resolution for the New Year and put your savings on subscription mode, we’d be happy to help you meet your goals. Feel free to schedule your free strategy session right here on our website. Or if you’d like to learn exactly how we put this process to work for our clients, be sure to 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.

Can I Insure My Nonworking Spouse?

January 2, 2023

You’ve heard us speak about the qualifications for life insurance several times. Both medical underwriting and financial underwriting. And you may be wondering how much insurance could I get on my nonworking spouse, whether they’re a stay at home parent or just a homemaker?

Traditional financial underwriting for life insurance looks at the insureds income to determine how much earning potential they have over their life. So what happens when they’re not earning any income? How much insurance could they qualify then?

Keep in mind that life insurance company underwriters are keenly aware that although a spouse may not be working and earning an income, they are still working and they are still contributing to the overall well-being of the household. They have formulas that will help you to determine how much insurance you can get for your nonworking spouse.

The general rule is there can’t be more death benefit on the nonworking spouse than the working spouse. Now, keep in mind that life insurance company underwriters are aware that sometimes the working spouse can’t get life insurance because of a health issue.

So in that case, let’s say they only have 100,000 or a very low amount of coverage. How do they determine how much insurance the nonworking spouse can get?

Well, it’s real simple. They have formulas. And again, the formulas vary from company to company. But keep in mind, you can get as much insurance as you both qualify for across the board.

Whether you’re insuring your non income earning spouse for a cash value policy so you could utilize that policy. Or for the death benefit to cover the expenses that you’re going to incur if they were to die prematurely. Check out our website at Tier1Capital.com to schedule your free strategy session today. We’d be happy to guide you through this process.

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

Should I Insure My Child?

December 29, 2022

There are several reasons why you would want to insure your child. Maybe you can’t get insurance on yourself and you’d like to lock in their future insurability. Maybe you’re cosigning their student loans. But regardless of the reasons, there are rules when it comes to ensuring your child.

The first reason why we see parents wanting to ensure their child is because they want to implement the infinite banking concept, but they weren’t able to obtain insurance on themselves. And so they’re going to own the policy and the cash value with the child as the insured, which is typically very possible.

Another reason why you would want to insure your child is to lock in or guarantee their future insurability. And in many cases, getting a policy when they’re young can help them throughout life as they mature and they take on their own family. Securing a death benefit at a very young age at a very low price could be very advantageous for them down the road.

Additionally, you could add a rider onto your whole life policy that guarantees your child the ability to purchase additional insurance, maybe $50,000 or $100,000, without showing any evidence of medical insurability every few years somewhere down the road.

Another reason why life insurance may be appropriate to insure your child is if you’re cosigning their student loans. This way, if your child dies before those loans are paid off, you have a death benefit to immediately pay off the balances. A lot of times people say, Jeez, I don’t want to insure my child. I just don’t even want to think about it. We’ll think about this. The hardest thing in life is to have to pay a bill that you made to educate your child, on an installment plan.

Now that we’ve gone over the reasons why it would make sense to insure a child, let’s dig into what are the rules when it comes to placing insurance on that child.

Now, the amount of insurance that the child is going to qualify for will vary depending on which company you go with. They all have their specific rules on how much insurance the child will qualify for, but for minor children, it’s typically a factor of how much insurance is on both parents. If mom has $100,000 on her life and dad has $100,000 on his life, that gives us $200,000 of insurance. The child would typically qualify for either $100,000 all the way up to over $200,000 of insurance. Based on the amount of insurance the parents have. And again, based on the company that you utilize.

The second scenario we see a lot is when the parents are trying to insure a child who is no longer a minor. So age 18 and up, when you’re dealing with an adult child, it’s going to be factored off of their income or their income potential.

The other day, we’re dealing with a client who wanted to ensure their adult aged child, who was actually a sophomore in college, and the insurance company came back and said, Well, how much does this kid earn? And unfortunately, he didn’t have a lot of earnings, but we were able to provide them with his major field of study. The insurance company actually projected his lifetime earning potential and issued a policy based upon his future potential income.

Now, if you’re insuring your student for the amount of their student loans, the insurance company would ask, what is the loan balance or what amount of loan do we expect by graduation? And you will qualify for that amount of insurance to cover the loan balance. The key is there are different rules and you have different choices depending on how much insurance you want, how much insurance you need, or how much insurance you can afford.

If you’d like to get started with the underwriting process and insuring your child, whether a minor or adult child, check out our website at Tier1Capital.com to schedule your free strategy session today.

Also, if you’d like to learn more about our exact process and how we put it 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.

How Can My Business Increase its Cash Flow?

December 26, 2022

Whether you have a service business, distribution business or manufacturing business, your problem remains the same. It’s all about cash flow.

We all know that cash flow is the lifeblood of any business. When cash flow is good, it could feel like your business is doing great. On the other hand, when cash flow is bad, it could feel like your business is falling apart. Cash flow is bad when you have more outgo than inflow. So how do you manage the challenge of daily cash flow?

As a business owner, you know how important it is to use money and credit efficiently so that you can avoid cash flow problems and more importantly, avoid having to make hard choices.

Do you realize that over 74% of businesses either have chronic or cyclical cash flow problems? And this all comes from using cash flow to your detriment. This forces them to either reduce their overhead or increase revenue, increase sales in order to address the cash flow problem. In essence, it puts them in a situation where they have to choose between their business or their family. No business owner should have to make that choice.

Most business owners don’t realize that they have a choice to increase cash flow without increasing revenue and without having to reduce overhead. This is exactly why we’ve developed a process that focuses on how you’re using your money and how to make that cash flow more efficient so that you don’t have to choose between your family and your business. There are no hard choices.

A lot of times when people think about finances, they focus on the product or where their money is parked. But it’s not what you buy that really matters. It’s how you pay for it and how you’re using your cash flow.You see, what you buy is the equivalent of a golf club, but how you pay for it is the equivalent of the golf swing. And we think that you can improve your finances by focusing on how you’re using your money, just as you can improve your golf game by focusing more on how you swing the club and less on the actual club.

Our process focuses on the five major areas of wealth transfer that we all experience to help make your money more efficient. Those five areas include taxes, mortgages, how you’re funding your retirement, how you’re paying for your children’s college education, and how you’re making major capital purchases.

By focusing on these five areas, we’re able to show our clients how to regain control of their money so that they’re giving away less and less of their cash flow. And they’re able to save more and more to accomplish their financial goals. Focusing on these five areas translates into more cash flow for your business, which can be utilized to get you through times when revenue isn’t coming in as quickly as possible or times when overhead is a little higher than usual.

If you’re a business owner and looking to regain control of your finances and your cash flow so you’re able to achieve more of your financial goals, be sure to visit our website at Tier1Capital.com. Feel free to schedule your free strategy session today or if you’d like to learn more about how our process works 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.

When is My Policy Most Beneficial?

December 22, 2022

A lot of times when people come to us, they have short term financial goals that they’d like to accomplish using a specially designed whole life insurance policy designed for cash accumulation. But the real magic tends to happen as these policies mature.

There are certainly a lot of reasons why you could use a specially designed whole life insurance policy, designed for cash accumulation on a short term basis to achieve your short term financial goals, like getting out of debt, sheltering money for your children’s college education, or just regaining control of your cash flow.

As with any whole life insurance policy, a policy specially designed for cash accumulation, the insurance company is making two promises. The first promise is that should you die while you own the policy and you’re the insured, the insurance company will pay your beneficiary the death benefit.

The second promise is simple at the age of maturity, which is typically age 121, the insurance company is going to have cash set aside equal to the face amount of the policy. So what does that mean? Well, year after year, the insurance company has to build up the cash value in that whole life policy. So they could make that second promise. By making that second promise, by having the money available at the age of maturity, the policy gets better and better and better with each passing year. The longer you have the policy, the better it gets.

You see, these policies are actually designed to build cash value over time, and that’s not counting any paid-up additions riders or dividends on that policy. When we design a whole life policy for cash accumulation, we add on paid-up additions riders which are going to increase the cash value availability in the early years of the contract. And we’re placing these policies with mutually owned life insurance companies.

When you purchase a policy with a mutual insurance company, you are literally the owner of the company as it relates to the profits or the profitability of your policy. And what does that mean? That means any profits the insurance company makes on your policy will be returned to the owner, you. And they do so in the form of tax deferred dividends.

You see, in life insurance a dividend is literally a return of overpaid premium. When you use those dividends to buy paid-up additions or paid-up additional life insurance, those dividends accrue on a tax favored basis. By designing the policies with the paid-up additions rider and with a mutually owned life insurance company, you’re able to turbo charge the access to cash in your policy. And as your cash value grows, your access to cash is going to increase and you’re going to be able to access more and more to achieve bigger and bigger financial goals for you, your business and your family.

So in the short term, you can get out of debt quicker. You can save for your children’s college or use it to make major capital purchases. But as time goes by, you get greater access to cash, greater annual increases in cash, and greater death benefits.

Nelson Nash’s number one rule was to think long term. He was trained as a forester. He thinks 70 years in advance and like Nelson would say, I may not be here and neither may you, but somebody is going to be there and they’re going to reap the benefits of our good decisions today. But the long term benefits of using a specially designed life insurance policy could never be counteracted. You see, these policies could allow you tax free access to cash value to accomplish your financial goals, tax deferred growth within the policy, and a tax free death benefit to your family when you die.

If you’d like to get started, with a specially designed whole life insurance policy designed for cash accumulation to accomplish both your short term and your long term financial goals, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today. Also, if you’d like to see exactly how we put this process to work, check out our Four Steps to Financial Freedom webinar.

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

Can I Qualify for Life Insurance Without a Physical?

December 19, 2022

Have you considered getting a life insurance policy but you’re turned off by the idea of an insurance physical? When it comes to life insurance underwriting, there are two main components that the insurance company looks at.

The first is financial. They’ll either look at a loan, your net worth, or your income to determine how much death benefit you qualify for. Just as you cannot over insure a building for more than it’s worth, you can’t ensure a human being for more than they are worth.

The second component of life insurance underwriting is the medical component. This is where the insurance company will assess your risk from a medical standpoint. They’ll do a deep dive on your medical history and review questionnaires and often order medical records or an insurance physical.

However, with these new advancements in technology, a lot of companies are using algorithmic underwriting where you don’t necessarily need an insurance physical. Especially if you’re young and healthy. We’ve managed to foster a few relationships with insurance companies who offer an express or algorithmic underwriting process, which means that the insured doesn’t necessarily need an insurance physical if they meet the qualifications of these program.

How the process works is we fill out medical questions, send it to the insurance company. The underwriter determines whether or not they need an exam, and if they don’t need an exam, the policy is issued within a day or two. If they need an exam, then they go through the process. But the key is you might have that option where you don’t need an insurance physical.

One caveat to this process is sometimes the insurance company will still order medical records, which can take more time and still allow them to go through the express program without an insurance physical. The key is to save you time and headaches of having to schedule an insurance physical. Most companies allow this to happen between the ages of 18 and 60 and for up to $1 million of coverage.

So if you’re looking to get started with a life insurance policy, whether it’s term whole life or a specially designed whole life insurance policy designed for cash accumulation, this may be the solution for you without an insurance physical.

If you’d like to see if you qualify for this program, check out our website and schedule your free strategy session today at Tier1Capital.com. If you’d like to see exactly how our process works to put people in control of their cash flow, check out our webinar, The Four Steps to Financial Freedom, found right on our homepage.

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

Are You Insuring Your Key Employees?

December 15, 2022

Are you a business owner who is insuring your PCs for more than your VPs? You see, there are three main reasons why you would want to insure your key employees.

First and foremost is the fact that they are the people who are adding to the growth and profitability of your business. Let me give you an example. About 25 years ago, I had a business owner client whose building burned to the ground. And it wasn’t till after the fire that he realized that his building, which was worth over $250,000, was only insured for $68,000.

Most business owners would have seen that as a problem. But he along with his key employees, kept the business going and profitable throughout the time it took to rebuild the building.The point was he didn’t have proper insurance on his building, but he was able to grow the business and came out much further ahead than he would have had he lost a key employee. You see those key employees were the people responsible for keeping that business alive, even when he didn’t have enough insurance to rebuild the building.

You see, people don’t do business with you because of your building. They do business with you because of the people you have working and supporting your business and your operations. If something was to happen to one of them, what impact would that have on your business? And are you willing to take on that cost?

The second reason why you would want to insure your key employees is because with life insurance, it’s the only product that allows the problem the death of your key employee, to also trigger the solution, the death benefit and the cash flow that comes with this life insurance. Think about the devastating effects it could have. Losing a key salesperson, for example, on your business. Think about all of the revenue that your key employee brings in for the business and how many people within the business depend on those sales.

You see, in a lot of situations, the key employee is the founder or the owner of the business, somebody who might be older and the next generation is going to need two things, time and money. Time to make up the mistakes that they might make, and money to gloss over those mistakes.

So again, with life insurance, the problem also triggers the solution. When the key employee dies, it also triggers the solution of money that allows you to make mistakes during the time of transition.

The third reason why you would want to insure your key employee is is because life insurance is the only product that allows you to buy dollars at a discount. Think about it this way. If you had a key employee that passed away, you would need money to attract and retain a new key employee to replace them.

Again, only life insurance allows the problem, the death of that key employee, to also trigger the solution, an influx of cash into your business, exactly at the time you needed it most, on a tax free basis. Now, here’s the best part. If you’re using a specially designed whole life insurance policy designed for cash accumulation to insure these key employees, you, the owner of the policy, the business owner, has access to the cash value via the policy loan provision on a tax free basis. And you’re still able to earn continuous compound interest on that money all along the way.

So you’re able to access that money, let’s say, to reinvest in your business, maybe make a major capital purchase like new equipment for the business or new cars for your team. Or we had one of our clients access the cash in their policy to buy out a competitor.

You see, there are no restrictions on what you could use that cash value for. So it’s great for business owners who want to be able to access cash and still be responsible and ensure their key employees.

If you’d like to get started putting this strategy to work for you and your business, check out our website at Tier1Capital.com to get started with a free strategy session today.

Also, if you’d like to see how we put this practice to work for businesses and small business owners, check out our Four Steps to Financial Freedom Free 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.

What are Opportunity Costs?

December 12, 2022

As business owners, we make financial decisions every single day. But when speaking with business owners in our office, it’s apparent that many of them fail to consider opportunity cost. What effect is this decision today going to have long term on your business cash flow and ability to grow?

When you’re first starting out in business, it’s all about survival. What can you do to get sales and maintain efficiency so your business doesn’t go under? But as your business matures, it’s important to make adjustments for longevity and efficiency within your business.

We always say it’s not what you buy, it’s how you pay for it. And the key is making the proper decisions with the information that you have to increase your efficiency and therefore stabilize the longevity of your business. One of the keys to efficiency is recognizing the difference between costs and opportunity costs.

Back in the 1800s, there was a French economist named Frederic Bastiat. Frederic Bastiat pointed out the difference between that which is seen and that which is unseen. And what does that mean?

Well, basically what we see when we’re making purchases are the costs. What we don’t see are the opportunity costs. The other things we could have done with that money had we not deployed that capital in the way that we did. And one of our tag lines or one of the things that we always tell people is that you’ll never see the interest you don’t earn by paying cash to make major purchases.

You see, as business owners, we make financial decisions every single day, and a lot of those decisions are based on cash flow. Can I afford this payment? Do I have enough capital to pay cash for this expense? But what’s not considered is, is there a more efficient way to use your money that will leave you in more control and leave you in a better position in the long run?

You see, we finance every single purchase that we make. What do we mean by that?

Well, whether you pay cash or finance, either way, you see the interest that you’re going to be charged. But when you pay cash, you never see the interest that you don’t earn on that money. And what we mean by that is basically, if you invested that money, what kind of rate of return are you giving up by giving up control of that pool of cash?

And once we understand the unseen or the opportunity cost, that helps us to make our decisions much, much more clear. Let me give you an example.

Let’s assume you’re going to invest $50,000 for a major capital purchase to your business. Now, if you finance, the bank tells you that you’re going to pay 8% to borrow their money, but you also have $50,000 of cash laying around in your corporate checking account and you say, hey, if I use this cash, it won’t cost me anything. Big mistake, because it will cost you money. You just don’t see the interest that you’re not earning on that money.

So, if your decision is to pay cash because you’re saving 8% on interest, that you’re not being charged. That, again, is a mistake because you’re not recognizing what the opportunity cost can be for that money that you have sitting in cash.

So you may be wondering how should you be making these purchases if everything all purchased is financed? What is the best way to use your money and make it as efficient as possible for your business and your family?

And that’s where we come in, because we can help you make the proper assessments that take into consideration not only the costs that which is seen, but also the opportunity cost that which is unseen. And again, once you understand the difference between the seen and the unseen or the cost and the opportunity cost, your decisions will become much, much more clear and much more focused.

Our solution uses a specially designed whole life insurance policy designed for cash accumulation. This allows you access to your cash value via the loan provision so you’re able to self-finance and earn uninterrupted compound interest within the policy.

If you’d like to get started with an analysis of your business cash flow and see if this is a solution that makes sense for you, check out our website at Tier1Capital.com. Feel free to schedule your free strategy session, or check out our webinar: The Four Steps to Financial Freedom. It’s free and right on our homepage.

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