Debt Management

How To Live Financially Free

Have you met with a financial adviser who turned you away because you didn’t meet their account minimum? Well, today’s your lucky day, because today we’re going to take you through exactly how to go from having nothing or not enough to being abundant and living financially free.

So the first question you should ask yourself is: why don’t you meet their account minimum?

And it’s probably because you’re following conventional wisdom, but that’s the good news – you probably also have money that’s hiding in plain sight. Our process seeks to put you back in control of your money. We do a deep dive into your finances and find money that you’re giving up control of unknowingly and unnecessarily. 

Unknowingly means that you don’t know you’re doing it. You don’t wake up and say, “Hey, I’m going to make a bad financial decision today.” No one does. 

Unnecessarily means that you don’t have to continue down that path. Making some simple shifts within your finances could put you back in control of your money and leave you in a better financial position going forward.

We have been trained to find, on average, $24,000 per year of money that’s hiding in plain sight. That’s money that you can use to move forward financially. Our process looks at five major areas of wealth transfer where money is leaving your control each and every single month. Those areas include:

By looking at these five areas, we’re able to identify money that’s leaving your control. Then we can redirect that money back into an account that you own and control and have full liquidity use of that money in order to achieve your financial goals.

And you see, we don’t have an account minimum. We would never insult somebody by telling them that they’re not good enough. Everyone thinks they’re doing the best that they can with what they have, but what if there was a way to make your money more efficient. What if instead of just paying down debt or paying cash for purchases, you were actually accumulating wealth for you and your family? Wouldn’t you want to know about that? This is where financial advisors get stigmatized as only being there for the wealthy.

But if you’re serious about moving yourself forward financially, we are here to help. If you’d like to get started with our process, visit our website at tier1capital.com to schedule your free strategy session today.

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

Who’s in Control of Your Money?

Are you a millennial saving for retirement in your employer-sponsored retirement plan? Did you know that the average age millennials started saving for retirement was actually between ages 22 and 23? Why? Simple, automatic enrollment. 95% of those enrolled don’t opt out. If you’re wondering if there are better ways to save for your financial goals and retirement, stick around to the end of this blog. 

When it comes to saving for retirement, use your employer-sponsored plan to contribute up to the level that the employer matches. But over and above that, you may want to consider alternatives that put you in control of your money so that you could access that money somewhere along the line. In case there’s a financial emergency, a medical emergency, or an opportunity that you want to take advantage of. 

Now keep in mind that these strategies may be different from the ones that your parents, your grandparents, your mentors, or even your friends are using. 

But they seek to keep you in control of your money because whoever controls your cash flow controls your life. And we have seen too many times people trying to put as much money as possible into their government-sponsored or employer-sponsored retirement plan. And you see, it’s not about having the biggest statement or the largest value on your statement. It’s about being in control of your money. And yes, you might have a large statement or a large balance in your retirement account. But who really controls it? Is that all your money or is part of it controlled by the government? 

And you see, that’s the key. Putting you in control of your money. Have you considered what the taxes are going to be in the future when you go to access that money, or if you have to access it before the government says you’re allowed to? What the penalties are going to be on that money? And you see then this brings us back to the basic question: Do you think taxes are going up in the future? 

Do you think taxes have the potential to go up a lot in the future? Is it better to defer a small amount of tax into the future when it could potentially be a large tax? Or is it better to pay a small amount of tax on your income now and let it grow on a tax-deferred basis so you never have to pay taxes on it again?

So you’re going to always want to contribute up to that employer match. But anything over that, you have a choice. Where is the best place for you to save that money? And that’s where we can help you. We can help you assess where the best place to put the money would be to fit your circumstance. You’re going to want to keep full liquidity use and control of any excess money that you’re saving. You’re going to want to save it in the place that it’s allowed to grow on a tax-deferred basis, and that allows you access to anything you need, no questions asked. So you could use it to renovate your home, go on vacation, send your kids to college, take advantage of opportunities, or anything else you could think of. 

And here’s the point again. You have choices, and keeping those options open allows you to access that money prior to retirement so that now your money is working in two places at once. 

So if you’re enrolled in your employer-sponsored plan and contributing over the match and you’re looking for some alternatives of where you could save, that would leave you in control of your money so that you could access it when you need it for what you need. Be sure to visit our website and 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.

Do You Have Money Hiding In Plain Sight?

Today we’re going to share with you ideas and strategies that transcend finances. It will be information that can impact your life on a much bigger and deeper level than just financially. Implementing these strategies can give you back control of your money, your cash flow, and your life. No longer will you be dependent on and therefore obligated to the banks for credit and access to cash. No longer will your financial success be tied to the vagaries and whims of the Wall Street rollercoaster. So if you want to get back control over your life and experience the liberating feeling of independence and freedom that come with it, stick around to the end of this blog to find out.

Today we’re going to talk about the concept of money that is hiding in plain sight. And you may be wondering: “How could money be hiding in plain sight? Every day I wake up, I make the best financial decisions for myself. I pay off my debt as soon as possible. I have a 15-year mortgage and I’m paying extra on it. I’m paying off my credit cards as fast as I can. I’m maxing out my 401K’s. I’m paying cash for purchases when I can. I’m saving for my children’s college education.”

But what if we were to tell you that the things you’re doing could actually end up holding you back financially in the long run? When would you want to have that conversation? 

So, let’s start with a simple example of having $500 extra at the end of the month and making the decision to put $500 on your credit card. Why? Because debt is bad. And the first question you need to ask yourself is that by putting that extra $500 on the credit card, does that increase or decrease your net worth? The answer is neither. You see, before you put the money on the credit card, you owned and controlled $500 and you had the outstanding balance on the credit card. Now you have a lower outstanding balance by $500, but no cash. It hasn’t impacted your net worth by one penny. But the key is now who controls that $500? And the answer is, it’s not you. That’s just one example of where you could be giving up control of your money unknowingly and unnecessarily. 

We found that there are five major areas of wealth transfer: taxes, how you fund your retirement, your mortgage, how you’re saving for your children’s college education, and how you’re making major capital purchases like weddings, vacations, or buying a new car. And, you see, this money is actually hiding in plain sight. And what we have found is that the average family has about $24,000 year over year that is hiding in plain sight. Again, it’s money you think is moving you forward. It’s actually holding you back. And because of that, we’re able to identify that money and return it to you so that you can be in control of that money.

Let’s face it. No one wakes up in the morning and says, “Hey, how can I mess up my finances today?” We’re making decisions that we think are right for us because that’s what conventional wisdom told us, or that’s what our parents told us, or that’s what our grandparents told us. But we’re here to tell you that there may be a better way that leaves you with more control of your finances so that you’re less dependent on these institutions going forward. And you see, that’s the key to putting you back in control of your money. Once you start chasing returns or looking at interest rates, you’ve taken your eye off the ball. And that’s where we could find the money that’s hiding in plain sight.

Now, finding the money is only step one. And if you find the money and you just increase your lifestyle or you increase your spending, that’s not going to move you forward either. The second part of the equation is to start saving that money and to start saving it in a place where you own and control it so that you’re able to make better financial decisions going forward and be less dependent on these institutions in the long run.

And you see, we have found that a specially designed life insurance policy will give you access to your money when you need it, no questions asked. So that’s the first issue of control. The second issue is that by accessing that money and using the loan provision now, your money will continue to earn uninterrupted compounding interest. And now that’s the second level of control that returns back to you. And again, what could be more empowering or more liberating than setting up an account that only you could access and you can use for whatever you want, whenever you want. That, to us, is control.

You see, when you’re in control of your money, you’ll have less dependency on banks for access to credit, and you’ll have less exposure to the risks of the Wall Street rollercoaster. If you’d like to get started in finding the money, hiding in plain sight in your finances, be sure to visit our website at tier1capital.com to schedule your free strategy session today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

Debt Management Tips: Pay Off Your Student Loans

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

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

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

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

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

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

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

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

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

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

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

Money Management Tips: Save Money on Mortgage Payments

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

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

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

Are you in control or is the bank in control?

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

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

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

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

Whoever controls your cash flow controls your life.

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

Money Management Tips: Regain Control Of Your Money

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

Money Management Tips: How to Reach Financial Freedom

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

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

Whoever controls your cash flow controls your life.

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

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

So what are the rules? Simple.

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

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

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

Money Management Tips: Regain Control Of Your Cash Flow

If you have been following our blog post, you know that we are constantly talking about the importance of you being in control of your money or regaining control of your money. So why is it so difficult to accomplish despite it being a very simple concept? Today, we are going to talk about the unintended consequences that result from following traditional or conventional wisdom when it comes to your finances and how to regain control of your money by just knowing these things.

Now there are three main institutions that are trying to gain control of our cash flow on a monthly basis: the banks, Wall Street and the government. It is like a game to them in the sense that they set the rules. These rules are:
1. Gain control of as much of our money as possible.
2. Get that money on a systematic basis, meaning they want their hands in our checkbook every single month.
3. Hold on to or control that money for as long as possible.

We are going to take a look at how Wall Street gets us to act in their best interest. By following the rules that benefit them. Firstly, they want to take control of our money. So how do they do that? They will tell you that the only chance you have to beat inflation is to be in equities. They tell you that you have to be in it to win it. They tell you to employ strategies like dollar cost averaging. That’s how they get us to do things on a systematic basis. Also, they tell you that the higher the risk, the higher the reward. So these are things that they tell us to get us, to play the game by their rules so that they could win. Secondly, when the market is down, they tell you that you can’t sell now because you are going to be locked in losses. But when the market is up and you say, “Hey, I wanna sell because I think we made a pretty good profit”. They will say, “Geez, I don’t want you to miss out on this profit”. Plus if you sell now, you have to pay taxes on the gains. So if you don’t sell low, because they don’t want you to lock in losses and you don’t sell high because they don’t want you to pay taxes or miss out on a run, then, when do you sell? Well for Wall Street’s benefit, they never want you to sell.

You see, their job is to get you in the market and keep you in the market at all costs because that is what benefits them, but it doesn’t necessarily benefit you.

 

Now, how do the banks get us to do what’s in their best interest? Let’s take a look at the rules again. Rule number one is they want to get our money. So when it comes to a mortgage, we want to put a downpayment as high as possible. Because with a lower loan or a lower mortgage, you will pay less interest. Rule number two, they want to get our money on a systematic basis. So they will entice us with lower interest rates on shorter term mortgages. For example, a 15 year mortgage will have a lower interest rate than a 30 year mortgage. Rule number three,  they want to keep our money for as long as possible. So with the 15 year mortgage, we’re giving up more of our monthly cash flow to the bank. Even though we’re paying them less interest, we’re still losing control of that monthly cash flow. With the home equity, they tell us that it’s our home equity as if we have control of it and that we are more secure when our house is paid off. But in reality, we don’t have access to that money unless they give us permission to access that home equity. So who’s really benefiting from a shorter mortgage, us or the banks? The answer is clear. The banks are following the three rules and they are in control of our money by positioning it as if we are in control and that it is in our best interest.

Finally, the government gets us to play the game by enticing us to invest in retirement plans for our future. They give us a tax deduction on a small amount of money today so that money can grow on a deferred basis and then they have the potential to tax us at a much higher rate in the future.Think about it, you are putting money away today for a small tax deduction, but in the future, the government determines how much of that money you get to keep. Even if you earn a decent rate of return over many years, you don’t know how much of that money is actually going to be available to you to fund your retirement lifestyle. The government gets us to play the game, but they are also consulting with Wall Street and the banks to create the rules. Who else benefits when we participate in retirement plans? Wall Street, because they get to hang onto our money until 59 and a half, or we pay a penalty and tax. Secondly, the bank’s benefits because if we’re maxing out our retirement account contributions, that means our money is tied up. When the time comes that we have to pay for our children’s college education or buy a car or go on vacation, we don’t have access to our money as it is tied up in retirement accounts or home equity. Therefore we have to borrow more money and who benefits when we borrow more money? Obviously it’s the banks.

Now that  we have  looked at how the government, Wall Street and the banks get us to follow their rules so that they can win and can be in control of our money, what’s the alternative that is not following their conventional financial advice?

The alternative is to save in a place where you have full access and control of your money. A place where your money could grow on a continuous compound interest scale and never be interrupted even after you spend the money. We accomplish this by saving in a specially designed whole life insurance policy, where we get to control our money, where we have full liquidity use and control and access to our cash value for whatever we want, whenever we want. So that we will not be forced to go to the banks to borrow and give up control of our monthly cash flow.

If you’re interested in learning more, book your free strategy session today  to know exactly how we can accomplish this. Remember it’s not how much money you make. It’s how much money you keep that really matters.

What to pay first? Insurance Policy Loan Interest, Premiums or Paid Up Additions Rider

Last week, we got a call from a client who got an unexpected $25,000 tax bill. Coincidentally, at this came at the same time as his premium bill, loan interest bill and loan principal bill. He called us and he said, “Guys, do I really need to pay all of this stuff for the policy?”
If you are in a similar position where you have limited cash flow and are wondering what order and priority you have to pay first, stick around to the end of this blog post because  we are going over all of the details.

When you get a premium bill and your cash flow is limited, keep in mind that you should always pay the base premium first. When our client called, we showed him that his premium was about a little over $20,000 per year but his policy was over 16 years old. So his cash value increase was going to be over $32,000 from this 16th year to the 17th year. Once he did the math, he realized that he should definitely pay the base premium because for every dollar he put in the premium, he will get a cash value increase of $1.50.

So it makes sense to pay the base premium. And that’s the number one priority, pay the base premium. Especially as your policy matures. It will may seem to be more challenging to realize, but the more you pay into the policy at that time, the higher rate of return you’re going to get within your policy. So always pay the base policy first.

After you pay the base premium, the next thing you should look at paying is the paid up additions rider, if your policy has one. Especially in the first five years. By paying the paid up additions rider in the first five years, it will give you access to more cash sooner so that you can start using your policy to pay for the things of life. The reason why you want to pay the paid up additions in those first five years is because it takes a little bit of time for the policy to mature on its own. After those first five years are up, you may consider closing out the rider or opening the window so you could put money in at a later date.

The third priority to pay is the policy loan interest. The reason why this is third is because, if you don’t pay the loan interest, the loan interest balance will be added to the loan balance and it will may constrict the amount of cash value that is available in the future to access via the policy loan provision.

The fourth area to be paid should be the actual loan balance. By paying the loan balance and as your loan balance gets paid down, your cash equity increases. That puts you in a position where you will have more access to more money later on to accomplish your goals. With the loan balance, every dollar you put in is accessible via the loan provision. A lot of times, this is tricky for our clients to wrap their heads around with this idea because we are trained that debt is bad. But that’s not necessarily the case with policy debt. We are not taking money from the policy. We are putting a lien against the policy. So your cash value will continue to grow and earn dividends as if there is no loan against it. But by paying it down, if you have the cash flow to do so, you will have more access to cash as you pay back your loan. Also, there is less loan interest built for your next policy loan anniversary.

So let’s summarize the order of priority for paying policies. First base policy premium, second paid up additions rider, third loan interest, and fourth loan principle.

If you have more questions or would like to talk to us, feel free 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.