Business Strategies

The Value of Life Insurance: How Much Can I Insure

Have you ever wondered how much life insurance, is too much life insurance? Well, here’s a secret. A life insurance company won’t insure you for more than you’re worth.

Now there are a few ways you’re able to calculate the value of a human life. These are methods that the insurance companies use to determine how much life insurance you’re actually able to get on a life for each different purpose. 

One method is called income replacement. The insurance company takes your current income and projects how many years you should be working to determine how much life insurance death benefit you can have on your life.

For example, if you’re in your twenties or thirties, or even your forties, the insurance company might determine that you could apply and receive a policy in the amount of 30 times your current income.

Contrastingly if you’re later in your life, the insurance company may determine that you only qualify for, let’s say, five years of your income. And that’s simply because we’re using a calculation to determine how much income you’re going to be losing if you were to die prematurely.

This is why it’s important to find the balance between when you’re making a decent income and when you are still young. That way you could get the maximum amount of death benefit on your life.

Another thing that the insurance company will take into consideration is the amount of debt that you have. It could be that you qualify for 30 times your income, plus 100% of your outside debt: mortgages, business equipment, car loans, or student loans. They’ll allow you to insure that separately over and above your income.

Another thing the insurance company can take into consideration is your net worth. They’ll take your assets, subtract your liabilities, and determine what is your net worth. Based upon that, they may allow you to insure 100% of your net worth. So that pretty much encompasses the personal uses. 

However, there’s also a business side. If you are a key employee of a business or an owner of the business, there’s a separate calculation that would be determined for additional death benefit coverage on your life. 

So if you’re a business owner, you can ensure the value of your business interest. For example, let’s say you own a business that’s worth $500,000 and you’re a 50% shareholder or 50% owner of that business. Your business interest is 250,000, and you could purchase up to $250,000 of life insurance coverage to insure the value of your business interest.

Another business use for life insurance is a key employee policy. With that, the insurance company is able to calculate the value of that key employee as it relates to the business, and you’ll be able to purchase a life insurance death benefit for that key employee. You’re able to have both a business policy where you’re insuring your equity in the business, and if you’re a key employee, you could have a separate policy or separate interest for the key person.

Life insurance companies are in the business of insuring risk. The thing they will not do is provide insurance for more than what the risk is.

You see, adverse selection is a distortion of market value. And simply what it means is you’re insured for more than you’re worth. Just like you couldn’t purchase a $500,000 piece of property and be insured for $10 million. The same thing applies to life insurance. You can’t take somebody who’s earning $20,000 per year and get a $50 million life insurance policy on them. The insurance company knows that there’s adverse selection in that situation.

That’s why it’s important to know all of these nuances or have your insurance agent know all of these nuances so that they’re able to advocate for you to get the most death benefit possible if that’s what you’re looking for.

If you’d like to get started with the life insurance policy, be sure 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.

The Benefits of Owning Multiple Life Insurance Policies

We’re often asked how to implement multiple policies using these specially designed life insurance policies designed for cash accumulation. When we talk about being in control of your cash, being in control of your money, or being in control of your life. One of the main tools we use is the infinite banking concept. 

The infinite banking concept allows you to take back the financing function in your life. Take it away from creditors, banks, and other outside entities and control that family banking function within your family or your business. The most important step of this process is to start where you are. However, as time goes on and situations change, it’s important to adapt your banking system to meet your current situation. 

Let’s say you had money in your left pocket. Now, in that left pocket, everybody can and will try to get in there. The government, banks, large corporations, credit companies, and Wall Street. Everybody wants access to that pocket.

Now what we teach people how to do is to take some money out of that left pocket and put it back in your right pocket. Now, it’s still in your pants. But here’s the key. The only ones who could get access to the right pocket are you, your family, and your business. Now, if you knew that there was a pocket designed that way, how much of your money would you want to put into that pocket? 

These life insurance policies, specially designed for cash accumulation, are a great place to warehouse your wealth. Now, after you build that warehouse for wealth and have inventory or cash, you’re able to access that money to finance the major capital purchases that you make. 

You see, we all make purchases. It’s part of being alive. The question becomes how are you going to finance those purchases? Are you going to pay in cash? Are you going to go to the bank? Are you going to use a credit card? Or are you going to use a life insurance policy loan that you have complete liquidity use and control over to make those major capital purchases?

And keep this in mind. If you pay cash, you’re no longer in control of your cash. If you finance, you are no longer in control of the process, the bank or the credit company is. But, when you borrow against the cash value of your life insurance policy, you’re in control. Your money is continuing to earn uninterrupted compounding interest. You are in control of how and when you pay back that loan. It’s sort of like having your cake and getting to eat it, too.

When it comes to implementing the infinite banking concept, we talk about becoming your own banker. And the policy is kind of like a bank branch. How many bank branches do you want to build within your system? 

You may not be able to handle all of the financing in your personal and business life with just one policy. That’s why we recommend multiple policies. You don’t have to buy them all at once. You buy them over time.

Another caveat is that you may want to start buying policies on other people, other people in your family, or your business. And the reason why you want to do this is to diversify. You see, everyone is going to die, but not everyone is going to die at the same time. And when you have a life insurance policy on a certain insured, a death benefit is paid at the time of their death.

What this allows you to do, if and when somebody dies first, you’re able to recapture the capitalization cost of that policy. Not only do you recapture the capitalization cost, but you also get an explosion of value, meaning a much larger death benefit comparable to the premiums you put into the policy.

In comparison to other types of insurance, you buy car insurance, but you don’t know if you’re going to have a claim. You buy homeowner’s insurance and you don’t know if you’re going to have a claim. You buy an umbrella policy and you don’t know if you’re going to have a claim.  Comparing that to life insurance, we know you’re going to have a claim. That’s why the system works.

Now, implementing this process in your life, your family, or your business is a great way to create generational wealth, wealth that will pass on and the legacy will be sure to pass on for many, many, many years to come.

If you’re ready to regain control of the finance function in your life and ensure generational wealth for generations to come. Be sure to schedule your free strategy session or check out our 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. We’ll see you in the next one.

Taking Advantage of Opportunities through Your Whole Life Insurance Policy

You hear us talk all the time about using life insurance cash values to finance the things of life. Recently, we had a client who used her life insurance policy values in order to finance a home purchase.

Whole life insurance policies have something contractually guaranteed called a policy loan provision. And if you’ve been following our strategy for any amount of time, you know that we often recommend that our clients borrow against the equity or the cash value of their life insurance policies to take care of the things of life, whether it’s an emergency or an opportunity.

Recently, this client called us and said, “Hey, we have an opportunity to purchase some real estate. It’s an insider deal, but I need to close in 21 days. I don’t believe I can go and borrow from a bank and close within 21 days.” Because it was an inside deal, a sale from a family member, they didn’t necessarily need the inspection report because they knew the history of the property. Consequently, the client asked, how much do we have in the policies and how much can we borrow? 

Well, fortunately, there was enough equity in the policies that they could borrow against the cash value and make the closing within the 21-day period.

You see, this is a huge benefit and future of whole life insurance policies. You have a contractual guarantee to access the policy loans via the loan provision. And what this means is that it’s an unstructured loan from the insurance company to the policy owner. The policy owner is able to set up their own loan repayment terms.

The insurance company does charge an interest rate that goes to the insurance company, The client gets to decide how much and how often they make loan repayments to that policy loan.

And you see, having access to money when you need it is a huge benefit. And it’s a benefit that you get with cash value life insurance. Most financial frustrations come from not having access to money when you really want or need something. And the fact of the matter is when you have access to cash, opportunities tend to find you.

Here was a great opportunity for one of our clients to buy a piece of real estate that they loved and cherished. Keep it in the family. But more importantly, it was a great deal because they borrowed against the cash value, there were less in closing costs, they didn’t have to pay any bank fees, and consequently, that will all increase their overall rate of return. Not to mention the fact that they have complete control over the loan terms.

You see, with this process, you are in control of the process rather than being controlled by the process. And that’s not a small distinction. Now, the key to utilizing this process is to be an honest banker. If you were to go the traditional route and pay the bank X amount of money for X amount of years, whatever the amortization schedule stated, you want to do the same thing with your policy.

And you may be wondering why. Well, there’s a few reasons.

The first is loan interest. The quicker you pay off that loan balance, the less interest that’s going to be transferred to the insurance company as lost opportunity cost. The second reason you want to pay that loan back as quickly as possible is because you want to be able to be in a position to take advantage of the next opportunity. If you’ve borrowed out all of the equity against your policy, you have less equity available for the next opportunity. It’s a concept called inventory turnover. When you’re in control of your cash, you want to turn it over as quickly as possible. Meaning borrow it, pay it back, borrow it, pay it back. The more you turn it over, the greater the profits. And again, when you have access to capital, opportunities will find you.

With a mutually owned life insurance company, you’re entitled to non-guaranteed dividends. Meaning the profits of the life insurance company that come from, let’s say, policy loan interest, could be credited towards your policy in the form of non-guaranteed dividends but keep this in mind.

Once the dividend is declared by the insurance company, it is guaranteed. And once it’s paid to you, it could never reduce in value. The only non-guaranteed dividends are the ones that haven’t been declared yet.

So let’s take a look at what happened here.

We had a client who had an opportunity to make a great investment, and they had equity or cash value in their life insurance policy that they could access at their discretion. But they needed to close within a very short window, 21 days. Therefore, they borrowed against the cash value of their policy, reduced their closing costs, made the closing, made the investment, and now they’re in the process of paying back that loan. You see, liquidity use and control should not be something that’s taken for granted.

If you’d like to get started with building a cash-value life insurance policy designed for cash accumulation, schedule your free strategy session today. If you’d like to learn more about exactly how this process works, check out our webinar called “The Four Steps to Financial Freedom” which goes into detail about this exact process.

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

Should I Own a Whole Life Policy Individually or Through My Business?

When setting up a life insurance policy designed for cash accumulation, a question that often comes up is, “Should I have my person own the policy or should I have my business on the policy?”

Today we’re going to talk about the pros and cons of each.

Before we get started, let’s address the elephant in the room. Should your premiums be paid with before tax dollars or after tax dollars? Basically, the question of, “Can I run the premiums through my business and take a tax deduction for it?” The answer is a big NO.

You cannot get a tax deduction for paying life insurance and understand why. Life insurance is not an expense. It’s an asset. You can’t expense an asset. And, if you do, you’re paying tax on the harvest instead of the seed.

You see, the premiums are the seed, the small amount that you’re paying today, and the harvest is the life insurance death benefit. And the last thing we want to do is expose several thousands or hundreds of thousands or millions of dollars to taxes in the long run.

You see, one of the great advantages of owning life insurance is you could put in pennies, the premium, and get back dollars, the death benefit. That’s called leverage. And why would you want to counteract that leverage by having the dollars taxed? It doesn’t make sense.

Now that we got that out of the way, the question becomes, should you have the person on the policy or should you have the business on the policy?

The short answer is, either is fine and each situation is different. But, keep this in mind, whether or not your business should own the policy really comes down to what type of business entity are you? Are you a sole proprietorship? Are you an LLC, a partnership, a sub S corporation, or a C Corporation? The answer to that question, what type of business entity do you own, will dictate who should own the policy.

Now, in most cases, having the individual own the policy can accomplish what you want to accomplish when you’re capitalizing a whole life insurance policy for cash accumulation to help capitalize your business. But then again, there’s the question of what’s the purpose of the insurance? Is it for a stock redemption? Where the business is going to redeem a deceased shareholder’s equity in their business, or is it a cross purchase, or is it for key person reasons? There’s a variety of reasons why a business would want to get or own life insurance on one of its employees. 

However, in most cases where the business owner wants to take loans from the policy and infuse that cash into their business using the policy loan provision. Even if the individual owns it, you could just add one extra step and it allows that individual to own and control that cash value rather than the entity.

Another question we often get is, is there any tax benefits to the business owning the policy versus the individual owning the policy? And to that, the answer is no. You see, there are no tax benefits that go to the business, if the business owns the policy. If the business does own the policy and the business is the beneficiary of the policy, that means the death benefit is paid to the business and that goes tax free from the insurance company to the business. But now you got an issue where the death benefit, the dollars, are tied up in the business. There’s only two ways you can get the money out of the business. One is to expense it, meaning pay expenses. And the second is to salary it, to pay somebody’s salary. Either way, they’re taxable events.

And the bigger question often becomes, who should be paying that premium? And to that, we see that often the business account has more cash flow running through it. And as long as the individual is owner of that entity, the business is able to make those premium payments and expense it to the individual.

So basically what that would look like is the business entity is going to pay the insurance company and then the business entity is going to bonus out that premium amount to the individual so it gets taxed. So, ultimately, the business paid the premium and was able to deduct it as salary to the executive or the owner. That’s all kosher from a tax perspective. The individual paid the premium but he didn’t have to write the check, he just paid the tax on the premium.

Now, let’s not forget about the tax benefits of whole life insurance policies in general. Although there are no added benefits for the business by the business owning the policy. There certainly are benefits associated for tax reasons with whole life insurance policy designed for cash accumulation.

First of all, we have tax deferred growth within the policy. After we pay tax on that premium, we’re able to grow that asset in a tax deferred environment. We also have tax favored access to policy loans on a guaranteed basis. We have tax favored benefits in retirement with access to the cash value, and then we have a tax free death benefit paid out to our named beneficiary outside of probate.

On top of all of that, you have additional tax benefits if you’re using the cash value to supplement your retirement income. If it’s done properly, you can avoid state income tax, federal income tax, Social Security offset tax, no increase in your Medicare premium. The death benefits pass outside of probate and in most states pass outside of state inheritance or estate taxes. And the death benefit, again passes tax free to the beneficiary.

If you’d like to learn more on exactly how to use a whole life insurance policy designed for cash accumulation for your individual or business situation, schedule your free strategy session today and download our free business owners guide.

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

3 Steps to Avoid the Great Resignation within Your Family Business

As a small business owner, you could feel limited in the ways you’re able to attract, retain and reward your key people. Let’s dive into how to use a whole life insurance policy to accomplish just that for your key people, so you’re able to keep them in the game. 

As a small business owner, there’s no way to do it alone. It’s so important that you have a team of key people around you to help build your business. During the Great Resignation, over 48 million employees voluntarily left the workforce. Some left the workforce before they even secured another job. According to Gallup, 48% of all employees, that’s basically half of your employees, is either actively looking or searching for opportunities.

Let’s ask this question. What impact would it have if you lost any of your key people? The cost of replacing a key employee could be as much as 200% of that employee’s salary. Recently, one of our clients had their plant manager retire. It took three people to replace that one individual. In a small business that could be very close knit and the key employees could end up taking on several roles to move that business forward. They’ll do what it takes. 

This all leads us to why it’s so important to incentivize your employees to make them want to stay. How can you incentivize your key people to stay without giving away equity in your business?  Let’s face it, you want to keep the family business in the family. 

There are ways to make your employees feel valued and to take care of them for their future. Because it is a family business, we do care about their well-being as well. So how does the process work? How do you get started with holding these key conversations with your employees?

Well, the first step is to actually have the conversation. We’ll meet with the owner and we’ll meet with the employee separately. We want to find out the key value for the employer. And we also want to find out what is important to the employee. Because let’s face it, if your objective is to incentivize your key person to stay. If the benefit isn’t perceived as valuable to him or her, they’re not staying. 

As a business owner, it’s really important to keep your key people incentivized to stay and help you to grow your business. But the reality is 48%, one out of two of your employees, is looking for another opportunity.

The second step is to design a plan that meets both the employer’s objectives and budget, as well as meets the needs and desires of that key employee. 

The third step is our secret sauce. We’ll meet with you and your financial team to find areas of great potential, where you may be giving up control of your money unknowingly and unnecessarily. This is where we literally find money that’s hidden in plain sight. It’s money that’s baked into your cash flow cake, but you think it’s moving you forward and it actually really isn’t. That’s the money we can use to fund the incentive plan to keep your key employee. 

If you step back from this process, basically what we’re saying is we can provide a benefit to incentivize your key people with having very minimal, or no impact, on your current cash flow. Because we all know that cash flow is the lifeblood to any business. So it’s important that we keep it as steady as possible. 

If you’d like to get started with incentivizing your key employees and building your strategy, 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.

4 Key Questions to Ask Before Signing Up for a Whole Life Insurance Policy

So you’re thinking about getting started with a specially designed whole life insurance policy designed for cash accumulation. Maybe you want to expand your business or protect your family, or you want to get started with the infinite banking concept. Today, let’s dive into the four questions you need to ask before you sign the final policy papers.

Let’s get started with question number one. Do you like the agent? This agent is going to be with you for the life of the policy, and it’s important that you have a good working relationship with this person before you sign the contract. And that’s why it’s important to have a key conversation with your agent to make sure the agent understands exactly what your goals and objectives are. If not, you may end up with a policy that doesn’t meet your needs.

Number two is you need to answer the question within yourself How do you plan on using the policy? And does your policy meet your needs? With most life insurance policies, you’re going to be building cash accumulation, but you want to make sure upfront that you know how your policy is going to perform over time.

For example, with monthly contributions to your policy premium. It’ll take some time for your policy to grow and accumulate a cash value. So with that, it will take a little bit more time before you have enough cash value to loan against that policy cash and go out and achieve your financial goals. That’s why it’s important that the agent understands exactly what your needs and objectives are to make sure that the policy fits your needs.

In most policies that are designed for this cash value accumulation or the infinite banking policy, you could expect about 50% of the premium contributions to be available for policy loan within that first policy year.

Number three is to look at your contract and make sure it’s not a MEC or a modified endowment contract. Modified endowment refers to a contract status that the insurance company must perform on an annual basis. Basically, the insurance company just needs to make sure that it is performing like a life insurance contract versus an investment.

Number four is to confirm you’re with the right type of company. You want to make sure your company is mutually owned, dividend paying and non-direct recognition. Mutually owned means that the policy owners are owners of the company, not stockholders.  Dividend paying is important because the policy owners are the owners of the company, they’re entitled to dividends if the insurance company makes a profit that year. And non-direct recognition, meaning that the policy performs exactly the same way, whether or not a policy loan is taken. 

It’s really important that you have the answer to all three of those questions when choosing a life insurance company, because some mutual companies pay dividends but they are direct recognition, meaning that they’ll give you a lower dividend if you borrow. And the point is this: if you intend on borrowing, you shouldn’t be penalized for borrowing.

If you’re looking to get started with the Infinite Banking Concept check out our latest YouTube video. We do a deep dive on the four questions that you need answered before you place that policy in force. Once you have satisfactory answers to all of these questions, you’re going to be in a great position to move forward with your whole life insurance policy designed for cash accumulation.

If you’d like to learn more about how to get started with the infinite banking concept or getting started with a cash value life insurance policy designed for accumulation, hop on our calendar for a free strategy session.

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

4 Steps to Cash Control

As a business owner, you know that cash flow is the lifeblood to any business. If you don’t have cash flowing through your business, it could feel suffocating.

Whoever controls your cash flow controls your life. And that’s why we focus so much on control at Tier 1 Capital. In fact, it’s our mission to help as many businesses as possible to make the best financial decisions possible. And it all starts and ends with one thing, and that is control.

According to a recent survey by Intuit, 61% of all businesses around the world struggle with cash flow. And 69% of business owners admitted to sleeping less or losing sleep due to cash flow concerns. This is exactly why we’ve put together a four step process to put you back in control of your cash flow.

Step number one, we identify where you’re giving up control of your cash flow unknowingly and unnecessarily. Unknowingly means that you don’t realize you’re doing it and unnecessarily means that working together, we could fix it.

Second step is the hardest step in the process. You got to stop doing what you’ve been doing to give up control of your cash flow. But it’s the hardest step because these are strategies and techniques you’ve been using all of your life, and you may have an emotional attachment to a lot of those strategies.

But keep this in mind, the thinking that got you in this situation is not the same thinking that’s going to get you out. It all starts with a simple paradigm shift.

Step three: You start to save in an entity where you own and control, meaning that you could access the money on your terms whenever needed, and the money will always continue to be working for you, meaning that it will earn uninterrupted compounding of interest.

Think about it this way. What impact would it have on your peace of mind if you were able to control the financing function in your life? Not banks and not creditors. Wouldn’t that be a huge burden off of your shoulders? We think so.

The fourth step is where the magic happens. We teach you how to borrow against your own capital and pay interest back to an entity that you own and control. Because let’s face it, we finance every single purchase we make, whether we pay cash and give up interest or finance and pay up interest. This solution allows you to regain control of that financing function in your life so that you are the borrower and the lender and you take out any middle man.

Conventional wisdom teaches us that debt is bad and it’s not uncommon for business owners to believe this, to pay off their debt as quickly as possible, to pay cash for major purchases. But what does that do? It gives away opportunity cost. Every time you spend a dollar unnecessarily, you not only lose that dollar, but you lose what that dollar could have potentially earned you for your business. So we work hard for profits and then we give them away because we’re focused on the wrong things.

Let’s face it, we’ve all been conditioned to give away control of our profits. We pay off our debt quickly. We pay cash for purchases. We fund our retirement with qualified retirement plans. And what do these strategies have in common? We have no control over our money, and we have no access to our money. It’s always like we’re chasing our tail to get control of cash.

But the answer is literally hidden in plain sight. Stop giving away control of those profits. What we found is that when you stop giving away control of your profits, that’s where you can start enjoying a better life for yourself and grow your business.

So what is the solution? It’s real simple.

Stop giving away control of your profits. When you do that, you’ll have more cash flow. When you have more cash flow. You can redirect some of that cash flow to start building cash assets. And when the cash assets get large enough, you can borrow against those assets and pay interest back to that entity that you own and control. After that, you just rinse and repeat throughout your entire business lifetime.

Then, when you go to retire, you can access that cash on a tax favored basis to supplement your retirement. The retirement income is just one piece of the pie of how this tool could be deployed in your business. It could also help with business succession, business exit strategies and key person retention.

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

Combating High Inflation and High Interest

Small businesses are currently facing the twin challenges of high interest rates and high inflation. They’re paying more for loans and raw materials while trying to maintain a good quality of life for their employees, all while trying to grow their business.

Things are moving quickly. In November of 2020, inflation was quoted at .75, less than 1%. But let’s take a step back in time what was happening in November of 2020? Well, stimulus checks had been sent out, there was PPP money sent out to business owners. EIDL was on the rise and overall the government was pumping as much money as they can into the economy to keep inflation that low and stop us from feeling the effects of the pandemic.

But let’s take a look at the results of this government interference. In August of 2022, inflation had risen to 9.2%. By the end of December, it was down to 4.6%. But here’s the point. Inflation has increased a lot. We know that every time we go to fill up our gas tank, we know that every time we go to the grocery store, we see inflation on a daily basis. And couple that with the fact that small business owners often have to pay 2 to 3 points more on their business loans.

In February of this year, 2023, the prime interest rate rose from 3.25% percent to 7.75%. This could have a huge impact on small businesses if they’re not flush with cash and they’re forced to finance to run their business or grow their business.

In fact, the last time the prime interest rate was this high was during the Great Recession of 2008. While we have no idea what’s going to happen in the future, we can use history as a guide. During the 2008 recession. 1.8 million businesses closed their doors and 8.7 million people lost their jobs. 

During the last three recessions 91% of business owners were suffering. However, the key is that 9% thrived during those times. Success also leaves clues.

So here’s the question, how can you position your business to take advantage of all the bad news that might happen with a pending recession? Let’s face it, no one knows what’s around the corner. We could guess. We could estimate. We could say what we think. Regardless, you need to be in a position where you can thrive, having the flexibility to pivot to whatever life throws our way. 

We would argue that that comes with being in control of your cash and your cash flow, not dependent on banks not saving in places where you can’t access that money, but rather having a pool of cash that you own and control that you’re able to access for when you’re ready to grow your business, perhaps during the next recession, whenever that may be.

If you’d like to learn more about our process, we have a free business owners guide 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 Risks of Certificates of Deposit

You may have been noticing that banks have been offering relatively high interest rates on short term CDs, and that’s because of the inverted yield curve. But what risks are involved and what risks should you consider when looking into purchasing a CD.

Let’s start at the beginning. What the heck is an inverted yield curve and what effect does it have on our economy? Typically banks or investment firms will offer higher interest rates for a longer duration, whether it’s a CD or a bond.

You’re leaving your money with the bank longer, they’re going to have more time to capitalize and invest that money. You should be rewarded adequately for the commitment of leaving your money with the bank for that extended period of time.

However, with an inverted yield curve, short term rates are actually a lot higher than the long term rates. And what does that mean?

Well, it’s basically the bank saying, “Hey, we feel comfortable committing to this higher interest rate for the short period of time based on the economic outlook. However, past this amount of time down into the future, we don’t feel so sure that the interest rates are still going to be this high. We’re not going to offer you as high of a rate of return”.

But what are they actually doing? By advertising these high interest rates for short term products, they’re able to lure in the consumer to tie up their money with the bank while the interest rates are high.

Now, here’s the problem. Let’s say things are good for the next six months, but you have a nine month CD and after six months, the economy tanks. So what’s the Fed going to do? They’re going to lower interest rates. Why? Because they want to get more liquidity back into the economy.

And now here’s the problem. When you get to renew your nine month CD, let’s say the rates are half of what you’re currently getting. So you’re sort of getting tricked to tie up your money for a short period of time so that the bank doesn’t have to be stuck paying a higher interest rate for a longer period of time.

Basically, they’re saying we don’t think the economy is very stable and it’s not stable for a long period of time. We don’t know what’s around the corner and neither do we as consumers. So they’re protecting themselves. But what are you doing to protect yourselves, to make sure that your wealth isn’t dependent on the economy, whether it’s in the market or in a CD?

You see, the system is set up to benefit the banks and the financial institutions at our detriment. We as individuals or small businesses pay the price for all of the security that the financial institutions want to embed in the system for themselves. And think of the massive marketing and indoctrination that’s going on from these financial institutions that’s teaching us to do things the way that benefits them and again, to our detriment.

According to a 2022 study conducted by Northwestern Mutual, only 35% of Americans actually are working with a financial advisor. So if you are one of the 65% of Americans who aren’t and you’re doing it yourself, you could be at a severe detriment when you put all of these factors together.

The easiest way to get someone to do something that’s not in their best interest is to make them believe that it is in their best interest. And a lot of times, unfortunately, that’s what these financial institutions do.

And I’m sure you’re out there saying, “Well, come on, there’s no way. How do they do that?” Well, let me give you an example.

Let’s say you want to buy a house and the interest rate for a 30 year mortgage is six and a half percent. And you sit there and you say, “Boy, that’s a very high interest rate.” And you go to the banker and say, “You know what? Our family has been a customer of this bank for over 25 years. We deserve a better interest rate.”

And they say, “Well, Mr. Smith, here’s what we’re going to do for you. We’re going to give it to you our way. If you take a 15 year mortgage, we’re only going to charge you 6%.” And you sit there and say, “I did it. I negotiated them to a much better interest rate.” No, you did it. You gave them more and more of your monthly cash flow. And that’s what it’s all about.

You see, when you focus on being in control of your money, the decisions that you make with your money become much, much more clear and you are now in greater control of more and more of your money.

They’re able to distract us with interest rates. Is at a high interest rate. Is it a low interest rate? Can I get a better interest rate across the street? Well, that doesn’t really matter. Not too much, at least, because what really matters is how much money you’re giving up control of every single month. Because the more you give up control of your money, the less money you have to save to invest, to reach your goals with as it gets more and more tied up.

If the bank made the same amount of money on every loan, how many choices do you think you would really have? One. So the very fact that the bank offers multiple interest rates and multiple mortgages for various durations indicates that they’re making more on some mortgages and less on others.

Wouldn’t it be great information to find out where they make more money and then stay away from that choice?

So here’s the point. We talked about interest rates. We talked about an inverted yield curve. We talked about how financial institutions get us to do things that are in their best interest by making it appear that it’s actually in our best interest. 

The bottom line is this. If you want to get off the hamster wheel, if you want to stop being controlled by the financial institutions and our government, we have a solution for you. Check out our process laid out clearly in our Four Steps to Financial Freedom webinar 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.

Finding Opportunity in a Recession

Finances are cited as a worry for 87% of us. Inflation is up. Savings are down. And the talk of recession has reared its ugly head again. How do we navigate this new economic environment that we’re living in right now?

The point is, consumers are starting to feel the pinch. They’re spending less, they’re going out less, and they’re searching for better deals. Inflation is going up, meaning our buying power of our dollar isn’t going as far. So you could cut back your savings. Sure. But that’s only going to get you so far because let’s face it, incomes and the increase in our salaries oftentimes isn’t keeping up with the increase in the cost of living.

So what’s the impact? Well, once your savings is cut down, once you’ve cut back your budget as much as possible, you’re either going to have to cut back on your lifestyle and feel the pinch there, or to maintain your lifestyle, you’re forced to use credit.

Two years ago, our economy was awash in liquidity, meaning there was so much money coming from the federal government that people had access to money. They were buying houses, they were building houses, they were renovating their house. Well, the liquidity isn’t there anymore and savings is down dramatically. People have accessed their savings. So now if they want to build, if they want to renovate, they need credit. But here’s the problem. Interest rates have gone up dramatically. 

We’re being squeezed from both ends, but we still have goals to reach. We only have this one life to live. How do we make the biggest impact for our family and our community to move ourselves forward? Not to mention our own ultimate goal of retiring someday and living comfortably in our retirement?

How do you position yourself so you don’t feel this pinch? Is there actually a way? Are the rich feeling this pinch as much as the middle class?

Well, the answer is no, because the rich know the importance of having access to cash. Having a pool of cash set aside that they’re able to access without being impacted by the rising inflation rates, without being subjected to the approval of creditors, without being subjected to the lack of liquidity that comes with saving in a retirement plan or stashing money away in your home equity.

You see, one thing we’ve learned over the past 37 years is that access to capital trumps everything. When you don’t have access to money, your life sucks. And that’s where we can help you. 

I would argue that most financial stresses come from not having access to cash for what we really want or really need, because like I said, we still have these goals to reach. Maybe your child going to college, maybe you do want to renovate your house or buy a new car, or maybe your hot water heater went over the last month or two and these things need to be addressed.

So how do you build in flexibility in your plan instead of having buckets marked for your different goals? How do you accommodate all of life’s goals without feeling the pinch?

We always say it’s not what you buy, it’s how you pay for it that really matters. We’re not saying, “Hey, cut back your lifestyle. You don’t need that car. You don’t need that hot water heater.” We’re saying there may be a better way to finance your purchases in life so that you’re in control of that financing function instead of those terms being dictated by credit companies or the bank.

You see, this financial environment has really created opportunities for everybody if they step back and see exactly what’s going on. It’s more incumbent now than ever to be as efficient as possible with your money, with your cash flow, so that you can thrive through these very difficult economic times.

Earlier, we mentioned that recession has reared its ugly head over the past three recessions. 91% of all businesses and 91% of all families were affected negatively by recession. But here’s the key. 9% actually thrive, and they’re the ones that we want to emulate. They are the examples that we want to share with you, because, keep this in mind, success leaves clues, and the people who thrived during the last recessions are the people that can show us how to thrive during the coming recession.

Have you ever heard this? Buy low and sell high? What lower time is there then in the middle of a recession and in the middle of economic turmoil? That’s when it’s most important to have access to cash, to be ready to take advantage of opportunities, whether it’s an investment, a business opportunity, or real estate.

The best time to buy is when everybody else is forced to sell. That’s when the real value appears, and that’s when the opportunities are out there.

In conclusion, if you like to be in a position where you could take advantage of the economic turmoil that’s forthcoming, check out our Four Steps to Financial Freedom Webinar 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.