Debt Management

Stop Giving Up Control of your Cash flow

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

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

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.

 

How Can My Business Increase its Cash Flow?

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?

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.

What are Opportunity Costs?

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.

How can I Protect Myself from Inflation?

If you are making any type of purchase these days, you’re without a doubt experiencing firsthand the effects of inflation. Today, we’re going to talk about inflation in our economy and the impact of inflation and the national debt on our country.

Currently, the national debt in the United States is about to exceed $31 trillion. You see, it really doesn’t matter how we got here. That’s water under the bridge. The question becomes, what does $31 trillion in debt mean for you and me?

Having $31 trillion in debt really limits the options that our government has to combat things like inflation. You see, prior to 2022, the Federal Reserve, our central bank here in the United States, was artificially holding interest rates down to try and stimulate the economy. Well, what that causes or creates is inflation.

You see, by printing more money to stimulate the economy, all they really did was flood the economy with more money, chasing the same amount of goods and services. And when there’s more money chasing the same amount of goods and services, you’re pushing prices up, which causes inflation. So in order to combat inflation, the Federal Reserve, with the help of our government, is looking at increasing incrementally interest rates over time.

Here’s the problem, with $31 trillion in debt and inflation at around 8%, you have to raise interest rates at least to the level of inflation, about 8%. Now, here’s the problem. Our choices as a country of addressing this inflation crisis are really limited. And here’s why. At 8% interest on $31 trillion of debt, you’re looking at over $2.4 trillion of interest alone. Well, what does that mean? Think of it this way. $2.4 trillion of interest represents about 40% of all the revenue our government brings in. And that is a huge problem.

Well, let’s take a look at what that could mean for you and me. Let’s start with the question what is the government’s source of revenue or income? Well, it’s really easy. It’s our taxes. What would it mean for our country if 40% of our taxes was going just to interest on debt alone? Now, although these are huge numbers, it kind of relates to what happens in a household when there’s too much debt. A lot of times it’s hard and it becomes suffocating. And I’m sure we’ve all experienced that.

So you may be wondering how does that impact you and me? And the question is, what does the government normally use the revenue to do? Well, it’s to support government funded programs, things like Medicare, Medicaid, Social Security and other government funded benefits.

The next question is who’s going to elect the officials that are going to say, “Hey, yeah, no, cut back government spending. We don’t need those programs for our citizens anymore.” You see, our government only has two ways that it could address a crisis. It could address it legislatively by increasing taxes, having more money that they can use to solve the crisis. The second way is to print money or do it administratively through the Federal Reserve.

Here’s the problem. We’ve printed money and printed money and printed money. That’s always been the answer because you see, to raise taxes, people see that and feel that immediately. But printing money creates inflation, which we don’t necessarily see at least immediately. We see it ultimately in the form of inflation. And that’s where we are right now.

This is why we call inflation the stealth tax. It’s because it’s real sneaky and it sneaks up on us and all of a sudden our dollar has less purchasing power. Well, it doesn’t necessarily make sense to print more money when you’re trying to combat inflation, because that would just cause more inflation.

So that leaves us with one thing, and it’s raising taxes to solve this problem. So the question really comes down to this how do you protect yourself, your family, your business and your money from the devastating effects of both inflation and the potential for taxes to go up in our country?

If you’re interested in learning how to protect yourself, your family, you business, and your money, make sure to contact us for your free strategy session at Tier1Capital.com.

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

How Can My Business Easily Increase Cash Flow?

If you’re a business owner, then you know that your success or failure all comes down to one thing: cashflow. Are you wondering how you could increase your cash flow without making more sales or reducing your overhead?

We meet with business owners every single day. Those conversations revolve around three areas.

First, how to operate their business more efficiently by using the cash flow that they have.

Two, how to reinvest in their business, to grow their business so that they can have a better future.

Or three, how can they utilize their business, and the cash flow from their business, to enhance their personal lifestyle and meet their family obligations?

Let’s face it, if you got into business on your own, you did it to become financially free. But whether you’re trying to expand your business, maintain your business or increase your lifestyle, it all comes down to one common denominator, and that is how you’re using your cash flow. You see, we discovered over 20 years ago that it’s not what you buy, it’s how you pay for it. It’s how you use your cash flow that determines the success of controlling your cash flow.

Here’s a simple example. Most business owners don’t like debt. They think debt is bad and hate having that weight on their plate. So they’ll accelerate their debt payments and get that debt off their balance sheet as quickly as possible. But what they don’t realize is that by giving up that cash flow every single month to that outside entity, it’s leaving you in less control and less financially stable position.

Think of it this way if you had one extra dollar at the end of the month, that dollar represents profit that you earned during that month. Now you have this dollar that you own and control or your business owns and controls. You make the decision because you don’t like debt, to take that dollar and throw it on one of your loan balances before you pay down that debt.

You owned and controlled a dollar, after you paid down that debt, the bank owns and controls that dollar. It’s your dollar and you willingly gave it to somebody else under the premise that it was advancing your financial position.

So here’s the kicker. By making that financial move, your net worth did not change at all. All that you did was transfer control of that $1 from you to an outside entity. So the question is, did it really move forward or did it just feel good?

So let’s go back to our original question.

How can you increase cash flow without having to increase revenue or without having to reduce expenses?

Well, it’s really simple. You make your money more efficient by making sure every dollar you use is leading you to financial freedom instead of advancing those other guys, the credit cards, the banks and the outside financiers, we take a step back and look through this lens of control. And we say, “Will this move leave you in more control of your money or will it give away control to an outside entity?” And when you look at it from this frame, the decisions are so much more clear.

The first step in increasing your cash flow as a business owner often comes down to a simple move, like refinancing your debt and extending the amortization schedule. What that’s going to do is free up cash flow every single month. Yes, it will pay down your debt at a slower pace, but you’ll have cash flow to save and build a pool of cash that you own and control and have access to while still earning continuous compound interest on that money, even when you access it to do things like grow your business or finance your lifestyle.

When we sit down with business owners, we’ll have a general discussion about how they’re actually utilizing their cash flow, how they’re using their money. And we think how they’re using their money is much, much more important than where their money actually resides. And the reason is, is because that generally creates patterns of profits or cyclical cash flow versus times where there’s no cash flow.

Once we have a good understanding of how the business owner is using their money, it’s easy to make some simple shifts that make their money more efficient and have it working for them to leave them in a stronger financial position from a cash flow perspective for their business and their family.

Just by making their money more efficient, by understanding how they’re using their money and making small adjustments to how they’re actually using their money. They don’t have to increase sales, which usually cost money, or reduce expenses which usually reduces services. We could increase their cash flow without increasing sales and without reducing expenses, and that’s the value that we can bring to any business.

If you’d like us to take a look at your business’s cash flow, feel free to visit our website at Tier1Capital.com to schedule your free strategy session today. We’d be happy to take a look.

Also, if you’d like to see exactly how we use this process for families and businesses, check out our free webinar, The Four Steps to Financial Freedom, found right on our website.

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

Can My Policy Handle All of My Expenses?

When people find out how powerful, specially designed whole life insurance policies designed for cash accumulation are, oftentimes they want to put in as much money as possible on a monthly basis. Today we’re going to answer the question of how much premium is too much premium?

Just the other day we got a phone call from a client and they said, “Hey, I would really like to run all of my lifestyle expenses and all my major capital purchases through this policy. Is that possible and what would the benefits of that be?” In order to answer that question. We need to first step back and take a look at how things are done normally without the infinite banking concept or without a specially designed whole life insurance policy.

So every week or every month, money flows into your life. Money flows into your household or to your business. It could be your income from work, your income from your business. It could be passive income from real estate or other investments. It could even be an inheritance. Money comes into your life, and from there you pay your expenses. So think about it. Once the money gets into your account, into your checking account. There’s only four things you can do with it.

Number one, you could spend it.

Number two, you could save it.

Number three, you could invest it.

Or number four, you can defer it into the future through a qualified retirement plan. Things like IRA’s, 401K’s, 403B’s are examples of qualified retirement plans. And with those, you defer the taxes into the future.

Another word for defer is postpone, so that money comes into the account tax free. But when you take it out, it gets taxed.

The key here is you’re not necessarily saving taxes. All you’re doing is postponing the tax into the future when hopefully you’ll be in a lower tax bracket. But that begs the question, is that really what you want? Do you really want to be in a lower tax bracket in the future? And if you are, wouldn’t that indicate that you weren’t really successful at saving money?

So now that we’ve identified the four things that could happen to your money once it comes into your life, let’s just focus on, the spending aspect. Once what money comes into your checking account and you spend it on your lifestyle, necessary expenses, your mortgage, your rent, that money is lost and gone forever. And what we mean by that is you no longer have the opportunity to earn interest on that money.

So money comes into your life and you use it for lifestyle. You make any type of expenditures, regular bills, etc. Once you do that, the money’s gone, never to return. So what can you do to change that? To make it advantageous to basically pay your bills?

Well, it’s like this. When the money comes in, take a portion. Not all of it. Take a portion of it and put it aside in a specially designed life insurance policy and then you could access that cash value through the loan feature to pay for major capital expenditures like paying for a car, a vacation, or maybe your children’s college education.

The key here is you got to make payments back. But once that policy is built up and capitalized, maybe you’ll be in a position where you can save more money and start a second policy or a third policy. And then as those policies build up, then you’ll be able to access more and more of the cash value through the loan feature and utilize that to offset some of your lifestyle expenses. So this process allows you to both make your regular purchases and save so you’re never draining that tank and you are able to earn uninterrupted compound interest on your money. Because once you drain that tank, you’ll never see the interest you don’t earn on that money.

So now you always have a portion of that money working for you rather than for someone else. A way this could practically be implemented in your life may be paying off credit card debt. Maybe you have a credit card debt and you’re paying as much as you can every month and you’re putting hundreds or thousands of dollars towards this credit card debt, trying to knock it out.

What if instead, you took that excess payment, put it towards the policy, and built up cash value to then repay the credit card debt with a policy loan? Then as you repay the policy loan, you’re rebuilding your own capital instead of Visa’s or MasterCard’s.

So let’s back up to the question we started with. How much premium is too much premium? And it’s all about your cash flow. The last thing you want to do is overextend yourself with a monthly premium payment and not be able to sustain this policy.

Once you start a policy, you never want to get rid of it because the longer you have it, the better it gets. Most of the big benefits are on the back end. Nelson Nash used to tell me, “Tim, this is not a get rich quick type of strategy. This is a long term.”

He used to say, “Remember, I was trained as a forester. Foresters think 70 years in advance.” I may not be here, but somebody will. And if we set this up properly, somebody can benefit dramatically from that planning that you’re doing today. But the key is you’ll also be able to have access, liquidity, use and control of that money and continue to earn dividends and uninterrupted compounding of your money.

So the answer is, it will depend on your specific situation, your cash flow coming in, and your monthly expenditures that aren’t really changing things like your utilities, your food bill, your mortgage. You don’t want to run everything through the policy, but you have the ability to run some major capital purchases through the policy.

If you’d like to get started and learn how to put this practice to work for you and your specific situation, we’d be happy to talk to you. Hop on our calendar at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about how we put this process to work for our clients, check out our 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.

Don’t Ask Permission to Access Your Money

So you’re ready to request a policy loan and you’re wondering exactly what’s going to happen. You may be wondering how do you request a policy loan and what does that look like? It depends on the company. And some companies allow you to request a policy loan via a phone call, a physical form, or a web form.

Now, a key distinction between a policy loan and a regular conventional loan is that you’re not asking permission to access this money within your policy. You’re giving an order to the insurance company. You’re saying, “Hey, I have cash value in my life insurance policy, I have equity. I’d like to take a loan against that equity, send me a check.” And they’re saying, “Oh, I’m checking this money. You have it. Here you go. Take the loan and we’ll talk to you later.”

A policy loan will not reduce or go against your credit score. And whether or not you make a payment or you’re late on a payment on a policy loan won’t affect your credit score. Again, you’re giving an order versus asking permission. This is a big deal when it comes to, let’s say, losing your job or becoming disabled, because when you’re applying for a loan conventionally in these circumstances, you’re asking permission.

You’re going to the bank or the credit company and you’re saying, “Hey, this is what I have. Can I have some money?” And they’re going to say, “How are you going to repay it? Can you prove that you can repay this money? And if not, they’re not going to allow you access to their capital.” But with a policy loan, that’s irrelevant.

You see, the key here is that the entity, the life insurance company that is giving you the loan is also the entity that’s guaranteeing the collateral. They’re actually figuring out how much equity you have in your policy and loaning to you against that equity. It’s called a collateralized loan. Not only is it a collateralized loan, but it’s also an unstructured repayment schedule. And what that means to you as the policy owner is there’s no payment schedule set up for you.

A lot of times clients will come to us and say, “Hey, I have X amount of money to put towards my policy loan per month. How long is it going to take?” Or, “Hey, I want to pay off this policy loan in two years or five years. How much do I have to pay to accomplish that goal?” And you see, this is key because being unstructured or having an unstructured loan repayment allows you to pay back the loan within your cash flow. You’re not pinching your cash flow to fit into the amortization schedule or the terms and conditions that a bank or a credit company gave you. You’re literally fitting the monthly payment into your cash flow to accommodate your life, not somebody else’s.

There’s a delicate balance between paying your policy loan back too slowly and paying your policy loan back too quickly. When you pay back too slowly, you run the risk of the interest accruing and not covering the interest expense. And what happens is if you don’t pay it at the end of your policy year, it gets tacked on to the balance.

However, when you pay yourself back too quickly for your own cash flow, you do have the option of just taking another policy loan so you feel less pinched going forward. But the key is now you’re in control and you make the decision as to how soon or how long it takes you to pay back the loan. You also make the decision if you want to take another loan. The key benefit of repaying your policy loan is freeing up that cash to be available for you and your financial goals in the future.

Another thing that happens when you take a policy loan is uninterrupted compounding of interest. Now, this only occurs with certain types of companies. They have to be mutually owned by the policy holders, and they need to recognize non-direct recognition so that dividends aren’t affected by a policy loan balance. But the key is your money is continuing to grow at the same pace that it would have had you not borrowed. So the only cost is the interest cost.

Basically what this means in plain English is that your policy will continue to grow the exact same way with the policy loan as if there was no policy loan at all. So your money could in essence be in two places at one time because you never drained the tank. The money is still within your life insurance policy, but you have a separate loan where you have access to that money to accomplish your financial goals, whether it be taking advantage of an opportunity, paying off your debt, or sending your kids to college.

And that’s the key. With a collateralized loan, your equity stays in the policy. The insurance company puts a lean against your equity, and they give you a separate loan from their general account. And as you pay that loan down the equity increases, it’s really that simple. Because a policy loan is a collateralized loan and your money continues to grow uninterrupted compounding, you’ve literally tapped into what’s known as multi duty dollars. It’s as if your money is in two places at once because quite frankly, it is. Your money still growing in the policy as it would have had you not borrowed and you were able to obtain a loan to do whatever you want, whether it’s to make an investment or to pay a bill or to pay off an emergency. Talk about efficiency.

When you take a policy loan, you’re taking a collateralized loan against the cash value. But think about this. You still have all the benefits of your life insurance policy. Now, the death benefit is reduced dollar for dollar, but you still have that death benefit. You may have other riders like a terminal illness, a critical illness, or a disability waiver of premium. Plus, you’re able to use that loan for whatever you want. Maybe it’s growing your business, maybe it’s taking advantage of a market opportunity or investing in real estate or anything else that you may see as an opportunity out there.

So this is what we mean when we’re talking about multi duty dollars. Your money is in the policy. It gets all the benefits of the policy, the death benefit, any additional riders. And you’ve used it to either make an investment, take advantage of an opportunity, or to clean up an emergency.

When you’re thinking about taking a policy loan or you’ve taken a policy loan, keep these issues in mind.

Number one, you’re giving an order, not asking permission.

Number two, unstructured loan repayments, which means you can pay it back within your cash flow and on your timetable.

Number three, uninterrupted compounding. Your money continues to grow as if you never tapped into it.

Number four, multi duty dollars. You’re getting $1 to do the job of three, four or sometimes $5.

You see, it’s all about maintaining control and efficiency of your cash flow and your money. You want to maintain complete liquidity use and control of your money so that you’re able to continue to grow the money and still accomplish your goals like sending your kids to college or taking advantage of opportunities.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation and put this process to work for you, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.

If you’d like to learn more exactly how we put this process to work for our clients, check out our webinar, The Four Steps to Financial Freedom. Or if you’d like to learn how to put this process to work for college tuition. We have a webinar specifically on that. The Three Keys on How Not to Overpay for College Tuition.

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