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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Retirement Planning: How to Avoid Paying Higher Taxes

What would be the safest way to make your money last longer in retirement? Wouldn’t it be to reduce or eliminate your tax obligation? Stick around to the end of this blog and we’ll show you how to use a specially designed life insurance policy to reduce or eliminate your tax obligation and keep the government’s hands out of your retirement.

When people come to me with their yet-to-be-taxed retirement accounts: 401K’s or IRAs, they’re literally shocked as to how much taxes they’re on track to pay in retirement. The reason they’re shocked is that that’s not what they were told. They were told that they were going to be in a lower tax bracket in retirement. So let’s take a look at exactly what happens when you’re making contributions to your IRA, 401K, 403B, or your other qualified retirement accounts.

Basically, you’re putting a piece of your income into these accounts and you’re deferring the tax into the future. As your account grows and the interest accumulates, eventually you’ll have a large pile of money to use for your retirement. But what happens is, as that money is growing, so is your tax obligation. Here’s the key to utilizing specially designed life insurance to help supplement your retirement. We know what taxes we have the potential to avoid. We just don’t know what the rates are. 

There are six potential taxes you could avoid by using these specially designed whole life insurance policies. That includes:

    • Federal income tax
    • State income tax
    • Social security offset tax
    • There’ll be no increase in your Medicare premium
    • In most states, you’re going to avoid probate and state inheritance tax. 

So what would it look like and how would we proceed to move money from forever taxable in a qualified retirement account to never taxable in a specially designed whole life insurance policy? Basically, after age 59 and a half (so you could avoid the 10% penalty for withdrawals prior to age 59 and a half), we would start taking distributions to fund the annual premium on your life insurance policy. 

The key questions you need to ask yourself are basically, do you think taxes are going up in the future? Do you think that with everything that’s going on in our country, and keep in mind we’re $30 trillion in debt, do you trust the government to do what’s in your best interest or what’s in their best interest? And if you think taxes have the potential to go up really high, here’s the question, do you want to pay those taxes? And I bet there’s not a lot of people that asked you that question. But the key is you have a choice. What choice will you make to make sure that your money lasts longer in retirement?

If you’d like help designing a specially designed whole life insurance policy for cash accumulation to help your retirement go further and keep the government off your payroll. Be sure to visit our website at tier1capital.com to get started today. Feel free to schedule your free strategy session. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

What is a MEC and When To Avoid It

Have you ever heard of a modified endowment contract or a MEC?

Well, stick around to the end of the blog, because today we’re going to do a deep dive into the nitty-gritty of MEC contracts.

Basically, a modified endowment contract or a MEC is a life insurance policy that gets stripped of its tax advantages because it doesn’t pass the seven-pay test. The seven-pay test is a test used by the IRS to determine whether or not your policy will become a modified endowment. And the seven-pay test is really simple. It compares the amount of premium needed for you to pay up the policy in the first seven years. If the premium you actually put into the policy exceeds that, then your policy is determined to be a modified endowment contract. Once a MEC, always a MEC. If you put one penny more than is allowed by that seven-page test, your policy will always be a MEC and it will always be stripped of its tax advantages. So what are the tax implications of having a modified endowment contract or a MEC?

 

Basically, once the policy goes from being a life insurance contract and crosses that imaginary MEC line, it goes from being a life insurance contract to being treated as a non-qualified annuity. As with any non-qualified investment, a MEC, any distribution taken from a MEC will be considered ordinary interest or a return of the interest earned. That goes for any distribution, whether it’s a dividend distribution or a policy loan, which generally aren’t taxable. But if your policy is a MEC, the distribution can be taxable.

Additionally, just like a non-qualified annuity, any distributions or policy loans or surrenders prior to age 59 and a half are subject to that 10% penalty. Despite losing some of the tax advantages of life insurance when you have a MEC, there are some situations where it makes sense to go for the MEC. Particularly, if you don’t plan on accessing the cash value prior to age 59 and a half. Or a lot of times it makes sense if you have assets that you need to shelter from the expected family contribution, FAFSA calculation. 

So when wouldn’t you want your contract to be a modified endowment contract? You wouldn’t want your policy to be a modified endowment contract if your plan is to access the living benefits of the policy, whether it’s to make major capital purchases, educate your children, or supplement your retirement. If you have enough time to do the planning and you plan on accessing the living benefits of a life insurance policy, you would want to avoid a MEC at all costs.

It’s easy with the way we designed the life insurance contracts for cash accumulation to avoid that MEC. But sometimes people have a large lump sum of money that they want to put in immediately, and we have to split that up over several years so that the policy doesn’t become a MEC and we could take advantage of the tax advantages and the tax shelter offered by a life insurance policy.

But one of the things that I’ve found is the MEC issue is much to do about really, not a lot. The key is this number one, the MEC status could be avoided with proper planning and design, and that’s where we can help you. Secondly, keep this in mind. Whether your policy is a MEC or it’s not a MEC, you still enjoy the tax-free death benefits that are given to life insurance policies. And because of that, it still creates a nice little tax advantage.

If you’d like help designing a life insurance policy for cash accumulation or a modified endowment contract, be sure to visit our website at tier1capital.com to schedule your free strategy session today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

5 Factors to Consider When Choosing An Insurance Company

When it comes to the Infinite Banking Concept, there’s one major key to consider before you get started. Is your company a direct recognition company or a non-direct recognition company? Today, we’re going to take a deep dive into this.

A lot of times people are looking to get started with IBC and a huge mistake they can make is choosing a company that uses direct recognition. You may be wondering, what does direct recognition even mean?

Basically, the insurance company recognizes the fact that you have a loan against your policy and they credit you a lower dividend on the loaned balance. That’s analogous to having money in a CD with a bank that’s paying you, let’s say, 2% interest and at the same time borrowing from that same bank for a car loan. Let’s say they’re charging you five and a half percent interest. Then the banker says, well, you know because you have a car loan with our bank, we’re going to give you a lower interest rate on the CD. Would you want to do business with that bank? Here’s the point. If the purpose of getting an insurance policy is to borrow against the cash value, why in the world would you want to be penalized for doing what you want to do with your policy? 

At the end of the day, the insurance company has to invest that money somewhere and they’re limited as to where they’re able to invest. They could invest in commercial real estate, bonds, or policy loans. And most of the investments are in bonds and commercial real estate. But at the end of the day, policy loans are one of the best places for insurance companies to earn interest.

The reason why policy loans are the best investment for insurance companies is that the entity that is making the loan – the insurance company – is also the entity that is guaranteeing the collateral – the cash value in your policy. They don’t have to pay somebody to do an appraisal or to do an audit. They know it. That’s their job. They’ve already done the administration. So it’s a no-cost or low-cost way for the insurance company to pick up a guaranteed rate of return. When it comes to direct recognition, they’re really just increasing their already guaranteed rate of return because you’re paying interest on that loan. So by lowering your dividend, it’s just increasing their gains. We always preach to our clients – regain control of your money. Are you regaining control of your money if the insurance company is penalizing you for borrowing against your policy? 

So we’ve created a cheat sheet for choosing the best company to work with for an infinite banking concept policy. We have five criteria that we’ve used when choosing an insurance company. 

      1. First, it’s got to be a mutual company. Why? Because mutual companies share the profits of the company with you, the policyholder. In essence, you’re the owner of the company as it relates to your policy. 
      2. Second, the company has got to have been around for over a hundred years. 
      3. Third, it’s got to have been able to have paid dividends for over 100 consecutive years. 
      4. Fourth, it should be non-direct recognition, meaning that they’re not going to penalize you if you borrow against your policy. 
      5. And fifth, the company should be licensed to do business in the state of New York. Why is that important? Because New York has the highest level of regulatory protection for the policyholder. And in insurance law, if you want to do business in New York, you have to follow New York law in the other 49 states. 

If you look at these five criteria, you’ll be able to choose an insurance company that will best benefit you for the infinite banking concept. If you’re shopping around and looking for the best company to use for the infinite banking concept, check out our website at tier1capital.com to schedule your free strategy session today. 

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

Turn Your Liabilities Into Assets

So you’ve been looking into the infinite thinking concept and you’re wondering when is the best time to get started? Well, age is an important factor and today we’re going to do a deep dive on what the best age to start a policy is.

First and foremost, why is the infinite banking concept a great thing? Well, the reason is we use a specially designed whole life insurance policy to get and keep you on the compound interest curve. We start that compound interest curve for you and your family and never let you fall off. You have complete liquidity, use, and control of your money along the way. Also to accomplish your short-term, long-term, and intermediate financial goals. The infinite banking concept is literally a method of making purchases. We always say:

“It’s not what you buy, it’s how you pay for it that really makes the difference.” 

With this concept, you’re literally able to turn liabilities into assets and leave you and your family, or your business, in a more secure financial position than when you started.

As we noted, the infinite banking concept is a method of making a purchase. So let’s look at the other ways that you could make a purchase.

    1. You could finance, in which case you’re giving up control of your money to the bank for the privilege of using their money.
    2. You could pay cash, in which case you’re draining down the tank and no longer earning interest on the money you used for the purchase.
    3. You could lease, which is even worse than financing because you don’t even own the product that you purchased.
    4. Or you can use the infinite banking concept, in which case you’re borrowing against your own money, continuing to earn uninterrupted compound interest, and being in control of the terms and conditions of the loan.

So let’s get back to the question of when is the best time to get started with a policy for infinite banking? The answer is as soon as possible. A lot of times younger people will come to us and they’ll get hung up on the fact that we use whole life insurance for this concept because they are either single or they are a young family and don’t have children yet. What happens is they don’t move forward and that could be a huge mistake.

When’s the best time to start saving? Really, that’s the question. The answer again is as soon as possible. The trick is to always pay yourself first. A lot of times people get in the habit of paying for a million subscriptions or paying a lot for a car payment or their rent, and they forget the importance of starting that compound interest curve as soon as possible. With the compound interest curve, it needs time and it needs money. These policies allow us to save as a matter of course and still have access to that money to achieve our financial goals. You don’t have to start by putting a lot of money into a policy. You could start out at $50 a month or $100 a month. The key is to get started.

On the other end of the spectrum, are people in their fifties or sixties or even in their seventies, who say, “Gee, I wish I’d started a policy 20 years ago. I wish I knew about this”. Well, if you’re not done making purchases, you’re not too old to start an infinite banking concept policy. Whether you’re young or whether you’re old, it’s important to get started before your health is compromised. If you find out about this method after your health is compromised and you can’t get insurance, you may be able to purchase insurance on someone else’s life and still use this method and you just won’t be the insured. Keep this in mind. I have a gentleman who was 83 years old when he started his first IBC policy. So you’re probably not too old.

Here’s something to consider, when you purchase a whole life insurance policy, the insurance company is making two promises. The first promise is to pay the death benefit when you die anywhere along the way throughout your whole life. The second promise is to have a cash value equal to the death benefit at the age of maturity, which is usually at age 121. So the difference between a young person purchasing life insurance and an old person purchasing life insurance is the cost of insurance because, with an older person, the insurance company has less time to reach that same death benefit cash value equilibrium. Another way to look at this, though, is the fact that with older people, the insurance company has to put more money away sooner, which means you’ll have more access to cash sooner for an older person versus a younger person. This is very important when it comes to the infinite banking concept because with this concept, typically the insured isn’t looking at the death benefit. They’re looking more so at the cash value. 

Another thing to consider for younger people is the policy design. There are riders that allow us to stuff more cash into the policy sooner to make that policy for a younger person much more efficient than the traditional way of purchasing insurance.

So here’s the point, whether you’re young without a family or old with a family or anywhere in between, the best time to get started with the infinite banking concept is yesterday. If you’re ready to get started with an infinite banking concept policy designed for you to meet your cash flow and your needs, visit our website at tier1capital.com. We have a free web course there which you’re welcome to watch. It goes into a deep dive into how our method works. If you’re ready to get started, feel free to schedule your free strategy session today.

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

Debt Management Tips: Pay Off Your Student Loans

Are you buried in credit card debt or student loans? And you’re looking for the best way to pay them off as soon as possible? If that sounds like you stick around to the end of this blog because today we’re going to go over a few methods of how to get out of debt and put you in a financially secure position along the way.

So there are two main methods of paying off debt. The first one we’re going to talk about is The Avalanche. With The Avalanche, you order your debts in order of highest interest rate to lowest interest rate, and you put all of your excess payments on that highest interest rate loan. A slight issue with this method is that it could cause delayed gratification because a lot of times the loan with the highest interest rate also has the highest balance. So it could feel like you’re not really getting anywhere. This is why we suggest using The Snowball. 

With The Snowball, you order your debts in order of lowest balance to highest balance, and you put all of your excess payments on that lowest balance. Then as your small debts get paid off, you add those payments to the next one down, the next one down, the next one down, until eventually, you’re putting a lot of monthly cash flow towards your highest debt. This one’s great because it feels very gratifying to get all of those debts paid off, even if they’re small amounts.

The problem with The Avalanche and The Snowball is really that you are giving your excess cash to the bank or the credit company. So you go from a situation where you have a lot of debt and little cash flow to a situation where you have no debt and no cash. Either way, you don’t have access to money. 

I can’t tell you how many times we get the question: 

Should I start saving first or should I pay off my debt first?

We always suggest you start saving because the sooner you start saving, the sooner you jump on the compound interest curve. That means your money is going to be working for you 24/7. We always suggest saving in a specially designed life insurance policy. 

Now here’s where The Snowball comes into effect. We borrow against the policy to pay off the smallest debt, and then that payment that we were making on the smallest debt goes back to the policy. You see, if you make that monthly payment directly to the credit company, the credit company owns and controls that cash flow. But when you make that payment back to the insurance policy, you own and control that cash flow, which means you could use it again. Then when there’s enough cash to pay off the second debt, you can take that money, pay off the second debt, and now you have two payments coming back to the policy which you own and control. Eventually, you’ll have all of your debt paid off and all of your debt will be paid off sooner than if you just did the regular snowball. That’s why we call this method The Snowball on Steroids. 

After you use this method, what you’re left with is a policy with a ton of cash value that you don’t need to access money from the banks anymore. You’re able to access it from your own policy without any questions asked. You have complete liquidity, use, and control of that money whenever you want for whatever you want. You increased your net worth and increased your security all with the same dollars you were using to pay off your debt.

Here’s the point – it’s important to get out of debt, but it’s more important to put you and your family in a secure financial position. This Snowball on Steroids method does both simultaneously. If you’d like to get started, watch our free web course on our website where we go through exactly how we put this to work for our clients. If you’re ready to get started, schedule your free strategy session today.

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

Money Management Tips: Save Money on Mortgage Payments

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

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

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

Are you in control or is the bank in control?

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

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

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

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

Whoever controls your cash flow controls your life.

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

How To Fund Your Retirement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Money Management Tips: Regain Control Of Your Money

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

Money Management Tips: How to Reach Financial Freedom

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

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

Whoever controls your cash flow controls your life.

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

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

So what are the rules? Simple.

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

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

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