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.
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.
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.
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.
If you haven’t noticed, the world we live in is becoming more and more polarized. There are so many conflicting opinions out there. Are we about to go into a recession or not? And what about interest rates? Are they going to keep going up or are they going to decrease again?
Will there be continued volatility in the market or will stability return to the market? Not to mention the ultimate question, are taxes going up or down? How do we put ourselves in control of what we can control and start saving for the future, for a sure thing, regardless of what’s happening.
Because of the polarization, because of the uncertainty that comes with this polarization, one thing is certain. We still have goals. We still have milestones. And the longer we wait to address them, the more time we lose. And the fact of the matter is this the only thing we cannot afford to lose is time.
So the question remains, what moves should you be making right now to put yourself in a better financial position tomorrow? What are you going to look back and say, “Hey, I’m glad I made that financial decision. I’m glad I didn’t stay paralyzed and I’m glad I took that next step”.
The lens we look through is control. How do you remain in as much control as you can? Control of your assets, control of your cash flow, control of when you meet your goals. And when you’re in control, you’re better positioned to take advantage of anything that the economy, the government, and the world throws at you.
Again, putting yourself in a position where you could actually take advantage of all the bad news that’s out there. You could actually be in a position where you can look at that as an opportunity rather than being victimized by whatever happens outside.
You see, we believe there’s more opportunities in avoiding the losses than picking the winners. And not only that, but have you ever heard this, buy low and sell high? What better time to have full liquidity use and control of an asset than when the world is in economic turmoil? And by being prepared, you put yourself in a position where not only can you take advantage of opportunities, but you can protect yourself from whatever happens out there.
Here’s a question we ask all of our clients. Does having money that safe, liquid, and accessible when you want, no questions asked, does that take away any options in the future?
All of these things take your cash flow on a monthly basis and to put it out of our control. We’re transferring money from our control, our checkbook, every single month to outside creditors where we no longer have access to that money, especially without permission or a penalty.
So the answer, in our eyes, is very simple. When you view things through the lens of you being in control of your money, that makes your decisions so much easier. Because when you look and you analyze at the outcomes of each of these strategies and you see that you’re not in control of your money, don’t do it. Search, and find, areas or strategies that will continue to keep you in control of your money so that you can pivot in any direction that’s advantageous to you.
A perfect example of how someone isn’t looking at things through the lens of control is when they get hung up on interest rates. For example, when you go to the bank for a mortgage, what’s the first thing they offer? Hey, if you get a 15 year mortgage, you’ll have a lower interest rate than if you got this 30 year mortgage. But, what happens if you take that 15 year mortgage?
Well, you’re giving up a larger chunk of your monthly cash flow. And what’s the ripple effect of that? Well, if you’re putting more money toward your mortgage, you’re locking more money up in your home equity, but you’re also not able to save as much to reach your other financial goals.
You see, the money in your home equity isn’t necessary liquid, and it’s especially not liquid if you lose your job or become disabled, there’s no bank that’s going to give you a mortgage or access to that money If you don’t have a job.
So when you step back from that decision to take a 15 year mortgage because the interest rate is lower versus a 30 year mortgage, now you’re chewing up more of your cash flow. And the ripple effect is now you can’t save as much money, but more importantly, now you have less accessible money. So, if an emergency comes around or an opportunity comes around, you can’t solve the problem created by the emergency or take advantage of the opportunity that came to you. So the key is having accessible money that positions you to take advantage of all of these situations.
Let’s face it, life always happens. And when life throws a curveball at you, don’t you want to be able to hit that ball out of the park instead of being hit in the face? I for one, I have to tell you, I hate getting hit in the face. It’s not pretty.
If you’re ready to hit that curve ball out of the park, be sure to visit our website at Tier1Capital.com. Check out our free webinar for exactly how we put this process to work for our clients.
As we always say, it’s not how much money you make. It’s how much money you keep that really matters.
Have you heard that Apple recently launched a new high-yield savings account? This type of account is a great way to earn higher interest on your savings because let’s face it, we all need a savings account to have liquid cash readily available exactly when we need it.
Hi, I’m Olivia Kirk and I’m Tim York. We’re from Tier 1 Capital, and we’re here to show you how to regain control of your money. For the best advice on controlling your cash flow, be sure to subscribe to our channel. And don’t forget to hit that bell to be notified when we upload new videos twice every single week.
So Apple recently announced a new high-yield savings account that currently is crediting 4.15% APY. This is very competitive, especially compared to other high-yield savings accounts. And you may be wondering, “What even is a high-yield savings account and how could I leverage it? My bank is paying me point nothing on my savings and they’re charging me fees every once in a while.” Well, a high-yield savings account is a type of savings account that has some restrictions. For example, they may say, “You could only withdraw a certain amount of money or a certain number of transactions each and every single month. But in return, you’ll earn a higher rate of return on your savings.” So, this is a great tool to leverage if you’re saving in a savings account and need access to money within the very short term (you might as well be earning a higher interest if you’re saving anyway).
But how does this compare to a specially designed whole life insurance policy designed for cash accumulation? One key difference between a high-yield savings account and a specially designed life insurance policy, in the beginning, you will definitely have more cash available in the high-yield savings account than you will in the life insurance policy and that is something you must take into consideration when choosing between the two accounts. However, it’s not necessary to choose between the accounts. It can be an “and” situation. For example, I save up for my annual premiums within a high-yield savings account. You see what the whole life insurance policy if I pay on a monthly basis, the insurance company charges me a fee. However, if I save within this high-yield savings account I’m able to earn a little bit of interest as I accumulate the funds and save on the fees when I’m contributing it to the life insurance company.
We always say that every strategy you employ from a financial position has a ripple effect on everything else you’re able to do based on that choice. The decision that Olivia made to save in a high-yield savings account, to pay her annual premiums on her life insurance policy, not only gave her a higher interest rate on her cash, but also, saved on the premium that she paid the insurance company. And another thing to consider is that I have access to the money everywhere along the way. When it’s in the savings account, I’m able to access that money if I need to. And once I contribute it to my policy, I have liquidity, use, and control of that money to use as I see fit.
And keep this in mind, there are many tax benefits of having the money in the life insurance policy that you don’t get with a high-yield savings account. So, even though I’m earning a reasonable rate of return within that high-yield savings account, all of the interest I earn is taxable as income at the end of the tax year. However, once I contribute the money to the policy and pay that premium, and have it secure in my policy, that money is able to earn uninterrupted compound interest on a tax-deferred basis, which is a huge benefit. It’s taking money from forever taxable to never taxable.
Another key consideration to think about, is this interest rate and the high-yield savings account, whether it be an Apple or another high-yield savings account, is not guaranteed. You’ll notice that every month or so these interest rates have been fluctuating -going up or down or whatnot. It’s not locked in for any set amount of time. Once the money is put into the policy. I have contractual guarantees. These policies are actuarially designed to get better and better with time.
Then there’s the issue of safety. Is your money safer in a bank account or is your money safer with the life insurance company? And that brings us to the reserve requirements of financial institutions such as banks versus life insurance companies. I’m sure you’ve heard of fractional reserve lending, but what does it actually mean? You don’t know what fractional reserve lending is? Well, it’s really simple. It means that the bank only has to set aside a fraction of their liabilities to guarantee that you’ll get your money. Fractional reserve lending means that the bank only has to put away pennies to guarantee dollars. You see, they’re basing it on the idea that not everybody is going to want their money at the same time, and that works until it doesn’t. Conversely, an insurance company needs to have over a dollar of assets for every dollar of liability. Meaning if all of the claims were submitted for every single policy that the insurance company has, they would still have extra money left over. So, the issue of safety should be paramount in your decision to put money anywhere, whether it’s in a bank, in an Apple savings account, or in a life insurance policy.
If you’d like to learn more about specially designed whole life insurance policies designed for cash accumulation, check out our website at tier1capital.com to get started today. Thanks so much for being here. And remember, it’s not how much money you make. It’s how much money you keep that really matters.
Americans are quitting their jobs in record numbers, it’s called the Great Resignation. Over the past two and a half years, over 47 million people have voluntarily left the workforce. If you’re a business owner, this could be bad news.
On average, it could cost up to 200% of that employee’s salary to replace them with a new employee. Seeing these statistics can be troubling for a business owner. However, there are some ways to help you take advantage of the great resignation so you could be in a position of control and not a position of victimization.
According to the Society for Human Resource Management, a loss of a key employee can have particularly damaging effects for small businesses. And here’s why.
The first reason is because that key employee may be the only person in your entire area who has the skill set to perform that job. Not only that, but a lot of times in a small business, they’re the only person who has that particular skill set and knowledge. Meaning the business owner may have trained them, but that key employee may have gone on and learned other things by themselves to help progress. They take things to the next level and that’s why it’s so important to retain them.
The second point is that the loss of a key employee also damages the culture and morale of the remaining employees. For example, if Bob was a really good performer and really moving the company along and Sally sees that, she may think the business isn’t going to continue to grow and prosper because Bob had so much to do with the success of the entire business.
The third reason is because there’s a smaller pool of internal employees who can perform the tasks and the duties of the lost key person.
Let’s face it, employee departures cost companies time, money and other resources that many small businesses simply don’t have. With talent scarcity on the horizon, it’s going to be harder than ever for small businesses to retain that key talent within their business.
So that’s why it’s important to plan for the future, to protect those key employees and to reward them for their hard work and what they bring to your business. But there must be a delicate balance between taking care of your key employee and not giving away equity in your business.
So what are the possible solutions?
Well, one may be setting up a special retirement plan for that key employee to make sure that they’re taken care of in the future, something comparable that they might get from a larger company. But within your company’s budget. But again, let’s face it, there’s only so much cash flow to go around. How can you take care of the business, take care of your key employee, and also take care of your cash flow?
That’s where we come in. We’ve developed a process that looks at cash flow and makes it as efficient as possible. You have the same amount of cash coming in every single month. However, it’s not how much money you make, it’s how much money you keep that really matters. It’s not the products you buy with the money. It’s how you make those purchases.
How can you make your cash flow more efficient so you’re able to get $1 to perform multiple jobs? The dollar to protect the business owner, to build the company and also to retain this key employee. Getting $1 to do multiple jobs increases your efficiency. It increases your availability or accessibility to cash and also puts you in a position to weather any storms going forward.
We specialize in helping small businesses find the money to reward their key employees without sacrificing the business owners or the business’s livelihood.
You see, the money is literally hiding in plain sight. We show you how to unlock that cash flow or that cash and put you in control of it instead of a bank, an investment firm or the government.
If you’d like to learn more about this process, check out our website at Tier1Capital.com
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
Unless you’ve been living under a rock, it’s clear that inflation is running rampant. In fact, it’s at a 40 year high. Spoiler alert, it’s not Putin’s fault.
They call inflation the stealth tax. It’s not written in our tax code, but it affects each and every single one of us. Some more than others. So if you want to combat inflation, there’s one secret. It’s called compound interest. Albert Einstein, once called compound interest the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.
We have a perfect example on illustrating the magic that is compound interest and we’re going to lay that out with a magic penny. This penny doesn’t exist, but if it did, it would double every single day for 31 days.
So we start off with a penny. Day two, it’s two pennies. At the end of seven days, it’s worth $0.64. At the end of 14 days, we have $81.92. After 21 days, we have a whopping $10,485.76. And as we continue to grow, day 28, we have $1,342,177.28. Just three days later, we’re looking at a whopping $10,737,418.
What’s the problem? Why aren’t we all multimillionaires? Is the problem market fluctuation? Is the problem taxes? Is the problem fees? Or is the problem a combination of all of these and something else?
Absolutely something else. The biggest culprit to compound interest is draining the tank. You see, when it comes to compound interest, there are two factors to consider time and money. Time is something we can never get back. So each and every time we drain that tank down to zero, we stop the compounding of interest. We’re no longer earning money on our money. We start back at the zero line and we have to make up all that time that we lost originally.
So let’s carry on with this magic penny example. What would happen if we drained the tank after 22 days? Hey, we may have enough money in there to buy a car. And are we going to go to the bank and finance to buy that car?Heck, now we have the cash. We’re going to lose money to interest paying the bank back? No, we’re going to drain our tank. Pay cash. Cash is king. But let’s take a look at what happens when we do that.
On day 22, we have $20,971.52, enough to buy a brand new car. Now, instead of having $10.7 million, we got to start over and go back to day one. But we only have nine days left for compounding.
You had the potential to earn, hypothetically $10.7 million, but because you made that one decision on day 22, your tank is only worth $2.56. That is why we never drain the tank. And that is the power of compound interest.
So this is where we talk about the seen and the unseen. We see the interest that we’re going to pay on a car loan, and that is not acceptable. Because let’s face it, debt is bad. We spare ourselves of the embarrassment and the pain of paying interest on a car loan, and we drain down our tank and we utilize our savings.
If you want to combat the effects of inflation and that eroding effect on your money. We do have control over is our own personal economic system and what our money is doing for us. And part of being in control of your cash flow is earning continuous compounding on your money, especially when it comes to combating inflation and making sure your money is as efficient as possible, which is something we talk about all the time. Small minor adjustments on how you’re using your money can have tremendous impact on the bottom line.
In America, family businesses and small businesses are the backbone of our economy. 50% of all employees in America work in a small business. But small businesses don’t come with small challenges. Today, we’re going to talk about the cashflow implications of having a small business.
According to a recent study, 69% of business owners either lose sleep or have trouble sleeping because of their financial cash flow issues. And that was in 2019, before the pandemic.
Lack of sleep causes stress, and stress has been linked to chronic disease, stroke, heart attack, diabetes, depression, not to mention the stress that’s put on relationships by cashflow being pinched.
On top of this, small business owners are facing the twin challenges of high inflation and high interest rates. In essence, you’re paying more for your employees, you’re paying more for your supplies, and you’re paying more for your money. This is further pinching your cash flow and putting you at a very strong disadvantage.
The question becomes how do you make your cash flow more efficient so that there’s less stress within your entire business and your family? And the amazing thing is most business owners don’t even realize this, but they have the cash flow available. It’s just not being utilized properly, or they may be just looking at things the wrong way.
If you’d like a second perspective and see where we could help make your cash flow more efficient so that you’re able to relieve this financial stress. Check out our website at Tier1Capital.com to schedule your free strategy session today.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
As business owners, there is so much that’s uncertain. Are we going to expand our business or is it going to shrink? But what happens when the government needs more money? And how do you react, as a business owner, to protect your most precious asset, your business?
We’re currently over $31 trillion in debt and interest rates have risen and they’re going to continue to rise in the near future. That means more of the revenue that our government takes in through taxes is going to be allocated to paying interest on the debt. That has nothing to do with the government programs, government subsidies and of course, the military protection that the government affords for us.
Now, keep this in mind. The government only has two tools in its toolbox when it comes to producing more money. They could react legislatively by increasing taxes, or by printing more money. If we’re currently $31 trillion in debt and interest rates are rising and part of our issue is that more and more of the government’s revenue is going towards paying the debt. Printing more money is not going to reduce that situation. It’s actually going to make it worse.
Every single time a dollar is printed by the government, it increases inflation. And inflation is known as the stealth tax. Inflation does not discriminate. It affects everybody. Low income, middle income, high income. Everybody is affected by the effects of inflation.
Now more than ever, the buying power of our dollar has significantly decreased recently. So the question remains, how, as a business owner, can you protect yourself from all of these things that are outside of our control?
Now, one of the things we really didn’t drill down on today is the fact that, okay, if the government doesn’t print money, how are they going to address their need for more revenue? And that is to increase taxes. How do you protect your money or your business from an increase in taxes as well as how do you protect your money or your business from the ravaging effects of inflation?
One way you could help protect your cash and your business and the way we help our clients is with a specially designed whole life insurance policy designed for cash accumulation. This could help combat the effect of inflation and taxes on your business and your cash flow. You see these specially designed whole life insurance policies allow you to pay the premiums with after tax dollars. But once the money’s in that policy, it’s able to grow on a tax favored basis.
Then you can borrow against the cash value of that policy and deploy that money in your business, either to pay operational expenses or to expand and take advantage of a huge opportunity that you didn’t want to miss out on.
Either way, it allows your money to be in two places at once. It’s still earning interest in the policy, but now you’ve deployed it in your business to do whatever you need it to do to grow your business.
So you have the opportunity to earn a reasonable rate of return within that policy and earn an external rate of return within your business. That’s called multi duty dollars. That’s getting $1 to do the job of two, three or $4. And by doing that, think of this, what’s the rate of return of getting $1 to do two jobs? Well, it’s almost infinite. And that’s the key. That’s what allows you to offset the ravaging effects of inflation.
Recently, more and more business owners are sitting on cash and sort of paralyzed as to what to do. They know inflation is hitting them, but they also want to protect their money from taxes. So, we’re seeing them wanting to utilize their money in a more efficient and effective way so that they can get the most out of their money and also protect their business.
We always say it’s not what you buy, it’s how you pay for it that really matters. If you’re looking to protect your assets and your business from the effects of taxation and inflation, be sure to visit our website at Tier1Capital.com. We’d love to chat with you. Make sure to schedule your free strategy session today.
If you’d like to see exactly how we put this process to work for our clients, check out our webinar at 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 all know that inflation is running rampant these days and the federal governments national debt is now $31 trillion and counting.
Today, we’re going to cover the three things you can do today to protect your family and your business from the effects of inflation down the line.
The first thing you can do to battle the effects of inflation is to go long on your debt, and to go long, particularly, on your mortgages. You may be wondering why that is. Well, it’s real simple. When you go and take a loan from the bank and extend it as long as possible. You’re locking in those payments for that whole term. And what this allows you to do when you pay back your mortgage, the longer you can go on the mortgage, the dollars are worth less and less the longer you can stretch it out. Inflation is affecting those dollars just as it’s affecting your gas bill, your electric bill and your water bill.
In a nutshell, a dollar today is going to be worth less in the future, and 30 years down the line, it’s going to be worth potentially a lot less. So it’s going to feel like you’re paying pennies on the dollar because, quite frankly, you are.
Another reason why you want to go long on your mortgage is because if interest rates go down in the future, you can always refinance to create more cash flow. However, if interest rates go up in the future, you’re locked in at a lower rate and now the bank has the interest rate risk, not you.
Third reason you would want to go long on your mortgage is really simple. If you qualify for the interest tax deduction, you will be paying more interest with a longer mortgage. And the more interest you pay, the higher your tax deduction. So that tax deduction can offset the effects of inflation by giving you back more of the money that you spent.
The second way you could combat the effects of inflation is by deferring taking your Social Security income. Preferably at least until age 70. Now, a lot of people say, I don’t want to wait that long because I’m not sure Social Security’s going to be around. Well, let’s face it, if Social Security truly isn’t going to be around, does it matter whether you take it at 65 or 67 or 70?
So the point is this if you defer taking Social Security, that means you’ll get a larger check every month. And that larger check can allow you to counteract the effects of inflation.
The second reason you want to defer taking Social Security is because it will leave a larger survivor benefit for your spouse.
And finally, the third reason why you would want to take Social Security at a later age is because by getting a larger check, you now get cost of living adjustments on a larger base. That larger base, with the added cost of living adjustments, can help counteract the effects of inflation on your monthly retirement income.
Inflation erodes the buying power away from our dollars, but in retirement, we’re no longer working. So it’s important to make sure those dollars that we have are working as hard as possible for us and that we’re setting ourselves up and the best possible solution in retirement. By deferring, taking Social Security, you’re increasing your benefit amount and helping counteract the effects of inflation on your retirement income.
The third thing you could do to decrease the effects of inflation on your life is by purchasing a specially designed whole life insurance policy designed for cash accumulation. And you may be wondering why is that? And the reason why is simple. Because specially designed whole life insurance policies designed for cash accumulation have the power to make all of your other assets even more efficient.
So one of the ways that a specially designed whole life insurance policy can increase the efficiency of your other assets. Let’s take, for example, your house. Your house is there. You’re living in it. It’s not producing any income for you. So what if you took a reverse mortgage against your house?
The problem with that is most people say, “Hey, we’re leaving the house for our kids.” No problem. The kids might have moved out of the area. They probably don’t want the house, but they do want the money that the house is worth. Having life insurance gives you the permission to spend the equity in your house and you can leave them the money from the life insurance. So that’s one reason.
The second way a specially designed whole life insurance policy can make your money more efficient is by using it as a volatility buffer. Well, what does that mean? In the years that the market is down, you don’t want to take money out of that portfolio and have a down year. So what you do is you take money from the life insurance policy instead of from your portfolio, and that gives your portfolio some time to regenerate it`self, gain back the money that you lost in the year that it was down.
Another way you could use your policy to combat the effects of inflation is by using the dividends to help supplement your retirement income, often on a tax favored basis. And think of this, dividends from a whole life insurance policy should not be subject to federal income tax or State income tax. They won’t subject you to a Social Security offset tax, and they won’t contribute to a higher Medicare premium. And in most states, the death benefits will pass to your children, inheritance and or estate, tax free.
Another point to consider is when you buy a whole life policy, you’re locking in those premium payments. So it’s just like the mortgage, the dollars that you are spending on the premiums today are going to have a lot less buying power in the future. And so it’s not going to be as painful making those payments.
And finally, another way that whole life insurance can counteract or help reduce the effects of inflation. If inflation is higher, that means interest rates are higher. And if interest rates are higher, that means your dividends should be higher. As we mentioned earlier, those higher dividends could help supplement your retirement income on a tax favored basis.
If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation, 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.
