Economy

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.

What Happens if I don’t Qualify for a Policy?

So you wanted to get started with the infinite banking concept and you went through the underwriting process and lo and behold, you didn’t qualify for the insurance. What next?

Not everyone who applies for a life insurance policy will qualify. There are two pieces of underwriting that you go through to get an insurance policy. First piece is financial, where they’ll look at your income and other assets to determine if you qualify financially.

The second piece is medical, where they’ll look at your overall health, maybe do a blood test, medical history, order your medical records to determine what the risk is of insuring your life, what is the risk of dying on time or prematurely from an actuary standpoint?

So you didn’t qualify medically or maybe even financial. So what does that mean? Well, it means that the insurance company won’t issue a policy on you, but that doesn’t mean you can’t get a policy on somebody else. Maybe your wife, your business partner, one of your children, and utilize the cash value in those policies. You see, all you really want to do is be the owner of the policy so that you can control the cash value and use the cash value through the loan feature to buy whatever you want, whenever you want. No questions asked.

You see, with a life insurance policy, there are two key players, the insured, whose medical information is used for the policy, and the owner, the person who has all of the benefits, the death benefit, but they’re also responsible for paying for the policy. But as the owner, you’re able to take policy loans out against that cash value, even though you’re not the insured.

 

So what that means is you can still implement the infinite banking concept. It just means that you’re not the insured. No big deal. You still own and control the policy and could again use it for whatever you want.

So what qualifications need to be met to ensure someone else and at the time of underwriting, that’s real simple. We need what is called insurable interest. Basically, you need to be able to suffer a loss from the insurance company’s perspective once that insured dies.

Think of it this way. I can’t insure my neighbor’s home because I don’t have an interest in that home. And similarly, I can’t insure some strangers life because I don’t have an interest in that person’s life. But I can insure my spouse, I can insure my business partners, I can insure my children or anybody else that I literally have an insurable interest in.

Other examples may be a roommate, someone that you split monthly expenses with or a cosigner on a loan. Another person you may want to consider insuring may be one of your parents. You’d have insurable interest and once they die, which statistically would be before you as their child, you would receive the death benefit. And keep in mind, life insurance, death benefits are always received income tax free.

If you are still interested in implementing this process with a specialty designed whole life insurance policy designed for cash accumulation, be sure to check out our website at Tier1Capital.com to schedule your free strategy session today.

Also, check out our free web course to see how we put this process to work for our clients. 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 Can I Borrow from My Policy?

Have you heard about life insurance policy loans and wondering what they are and how they work? A policy loan is a collateralized loan against the equity or cash surrender value in your life insurance policy. And this is a key distinction, because several times I’ve spoken to people who were misinformed, on exactly what a policy loan is.

They were told that a loan against your policy is a loan against the death benefit, that is technically not correct.

 

Although policy loans will decrease your death benefit dollar for dollar if you’re to die with a policy loan balance, it’s technically collateralized against the policy cash value. And this is a big difference because you don’t have access to that full death benefit while you’re alive, but you do have access to the amount of cash value that has collateralized and built up in your policy throughout your policy years.

Now, it doesn’t matter which insurance company you’re working with as long as you have a cash value building life insurance policy like a whole life universal or variable universal life policy, you have access to the policy loans via the policy loan provision included in those contracts.

So the next issue with policy loans is when or how soon can you take a loan or borrow against the equity of your policy? And the answer is it depends. It depends on the company. Some companies allow for loans after ten days or within the first 30 days. Other companies discourage policy loans in the first year.

It’s important to address these questions before placing your policy in force, because the last thing you want to do is plan on using that policy value during the first year and not have access to it to accomplish your short term goals.

The next question is how much cash are you able to get your hands on and that again, depends on the policy. If you have a policy designed for cash accumulation, typically it has some type of rider and the rider allows you to build up that cash value quicker so you have access to it sooner.

You can expect about 85 to 95% of the contribution that’s going towards the rider to be accessible immediately. However, if you have a regular or whole life insurance policy or other permanent life insurance policy, there’s likely some cash value in it, especially if you’ve had it for several years. And typically you could get your hands on about 90% of that cash value via the policy loan.

So you’ve decided that you’re ready to take a policy loan. How do you go about accessing that money? Well, it’s real simple. You’re giving an order to the insurance company with either a form, a phone call or going online and requesting that policy loan. They’ll either send you a check or put the money right into your bank account.

But then the next question becomes, how do you pay that loan back? And do you have to? You see, life insurance policy loans are unstructured loans, which means there’s no coupon booklet or payment schedule that goes along with the loan. It’s completely up to you as to when or whether you pay the loan back.

And the reason is the entity, the insurance company that is making the loan is also the entity that is guaranteeing the collateral, the equity in your policy. The insurance company is literally verifying to themselves whether or not you have equity in your policy. As the equity appears or when you have equity, the insurance company can release that money to you through the loan provision. Since it is a loan, a separate loan from the insurance company against your cash value, the policy loan will accrue interest.

And what that means is basically on your policy anniversary, the insurance company will send you a bill for interest if you have a loan outstanding. It’s typically anywhere between 4 and 6%, maybe a little more, maybe a little less, and it can fluctuate.

But every year you’ll get that policy loan interest bill and you have the option to pay it. And as long as there’s enough cash value within the policy, you don’t have to pay it and it will accrue onto your loan balance. But we do recommend that you at least repay the loan interest so your loan balance doesn’t continue to grow year after year.

And this is important, you understand, because the loans are unstructured, the decision to pay back the interest or to pay back the principal is completely yours. The interest is charged, but the decision to pay it is yours. And that’s why we utilize policy loans to help our clients regain control of their money.

Now, you may be wondering why would you want to pay that policy loan back? And the answer again is control. As soon as you pay that policy loan back, you’re releasing equity within that policy. So you’re able to access that money again in the future.

This is very different than when you’re repaying your loan to, let’s say, a credit card or other loan, because once you give that payment to that other entity, you no longer have any access or control or you’re giving up opportunity costs on each one of those dollars.

You see with policy loans if you take a policy loan, this becomes your loan balance. Your equity is reduced dollar for dollar by the loan balance. Every payment you make on the loan reduces the outstanding loan balance and increases your equity. And that’s the key. Now you control that money because you’re the owner of the policy. You could ask for another loan, and another loan, and another loan, as long as there’s equity you can borrow.

Now, at this point, you may be wondering, what do people use policy loans for? And there’s a variety of reasons. We have people who are buying real estate, investing in their business, doing other investments in the marketplace, earn an external rate of return as well as their internal rate of return within the policy.

We have other people who are trying to get out of debt and they’re building their savings in the policy and also getting out of debt simultaneously. And what this allows to happen is they’re able to get out of debt often faster and still build their savings within the policy so they don’t have to put themselves in that situation going forward.

Another reason why people would borrow against their life insurance cash value is to create a volatility buffer against their retirement portfolio. We’ve done a previous video that explains how a volatility buffer works, but real simply, instead of taking money out of your retirement portfolio in the year that the market is down, you would forgo taking money out of that account, borrow money against your life insurance to supplement your income and give your portfolio an opportunity to regenerate or regrow itself.

Another great use of policy loans could be sending your children to college and funding the tuition through the policy loans. Did you know that accessing money from your life insurance policy and building that equity within your policy is completely off the FAFSA calculation in most cases?

Another reason why people would take a policy loan would be to buy a car or to remodel their home. And finally, for a medical or financial emergency, you see the key in life is having access to capital. And one of the things about life insurance, cash values is that money is liquid and you can use it and you control it. We call it liquidity use and control or “the luck factor.”

If you’re ready to get started with a whole life insurance policy designed for cash accumulation or could use some more guidance on using your existing life insurance policy, be sure to visit our website at Tier1Capital.com.

Feel free to schedule your free strategy session or if you’d like to learn more about how our process works, check out our free webinar, 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.

 

Pay Yourself First

Nowadays there is so much competition to get in our checkbooks every single month. Between subscriptions, utilities, credit card bills, student loans, rent or a mortgage the competition is fierce. Not to mention the increasing rate of inflation that could be detrimental to our cash flow each and every single month.

Today, let’s look at why it’s more important than ever to pay yourself first.

The Golden Rule in personal finance is to pay yourself first, but the question becomes, how do you do that? There’s never been more competition. It’s never been easier to give away control of your cash flow.

With as many subscription options as we have today, whether it’s a large corporation, a small company, a financial institution like an investment firm, a bank or an insurance company, or the government, they all are experts at getting into our checking account and getting into making sure that we’re paying them first rather than paying ourselves first.

So the question remains, how do we pay ourself first? The answer is simple. It’s to get $1 to do multiple jobs. If you were able to get $1 that you were using to repay a credit card with, to do multiple duties so that it’s also able to continuously compound interest and be working for you at the same exact time, that’s the secret.

Think of this question. What’s the rate of return? I’m getting $1 to do several jobs. The answer is that it’s almost infinite, and that’s the key. Making sure your money is much more efficient than just doing one job. That takes us back to the original question.

How do you pay yourself first? Well, first and foremost, you have to prioritize savings. And it’s really simple, but it’s also very hard. So think of this. I’ll never forget when my son got his first real job after college and after he got his paycheck. He was figuring he was going to make about $2,000. When he got his first check, it was closer to $1100. I’ll never forget what he said to me. He said, “Dad, who in the world is FICA?” And I said to him, “Welcome to the real world, son.”

So again, how do we pay ourselves first when we’re only going to end up with 50 or 55% of what we think we’re going to get in the first place? Well, it’s real simple. You’ve got to make sure that you’re understanding how much you get and also prioritize, and say, “Okay, whatever I get, 10% is going into my savings, could be 5%, could be 3%”, whatever you choose. You just need to start somewhere.

So when it comes to compounding interest, there are two factors and only two. Time and money. We can never get the time we lose back. So it’s important to start saving now, and make a habit out of saving. Save month after month, week after week, and never drain that tank so that you can experience the eighth wonder of the world: compound interest.

When we talk about not draining down the tank, what does that mean? Well, typically what happens is people save with great intentions, and then all of a sudden a disaster hits them. They have a financial or a medical emergency, so they wipe out their savings. Another example is that they’re saving money, and they need a down payment to buy a house. So what do they do? They drain down their savings and use it to pay for that emergency or they use it for that down payment on the house. Well, what happened is you drained down the tank and you stopped compounding interest on that money.

So again, the key is getting $1 to do two things. Have it in a place where you can utilize it to do whatever you need, whether it’s a financial or a medical emergency, a down payment on a house, paying cash for a car, things like that. But also, still make that money continue to grow and earn uninterrupted compounding of interest. Because if you drain that tank and deplete all of your savings, you lose all the opportunity that that money could have earned you. You’ll never see the interest that you don’t earn on that savings. But more importantly than the opportunity, you just lost all the time it took you to build that money up. Now you’ll never get that time back either.

So when you look at a compound interest curve, and in the beginning years you don’t see much growth, keep this in mind. Compound interest is when you are earning interest on the interest. That interest continues to compound and grow every single year. If you continually drain down that tank, knock yourself back down to zero, and start all over again, you’ll never experience the real growth on your money, which takes place in the later years.

It’s so important to never get off that compound interest curve, because by the time you realize the detrimental effects this is going to have on your finances and your ability to achieve your financial goals, it’s going to be too late.

This is where we always say the future you needs to have a sit down discussion with the present you about how you’re using your money, because the present you could really be shortchanging the future you out of a comfortable retirement.

So here’s the key. Pay yourself first and never stop. Pay yourself as a matter of course and never drain that tank. One of the ways we help our clients achieve this goal of paying themselves first is with a specially designed whole life insurance policy designed for cash accumulation. So, they’re able to meet their short term goals of paying off their credit card debt or paying off their student loans, as well as their long term goals, such as paying for a wedding, sending their kids to college, or saving for their retirement.

If you’d like to get started with this specially designed whole life insurance policy for cash accumulation, to help meet your short term and long term financial goals, so that you can save and pay yourself first and never drain that tank. Be sure to visit our website at Tier1Capital.com.

Feel free to schedule your free strategy session today or check out exactly how we put this process to work for our clients in our free 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.

Is the Death Benefit Better for the Beneficiary?

We often talk about the living benefits of life insurance, but we’re skipping out on a huge benefit,
and that’s the death benefit that comes with every single life insurance policy. So let’s start at a very high level. What is a life insurance policy?

Quite frankly, it’s a unilateral contract between the insurance company and the owner of the policy. So what’s a unilateral contract? Well, think of it this way. There are two parties to this contract. There’s the policy owner and there’s the insurance company. The policy owner has one job and one job only, and that is to pay the premiums on time. When the policy owner fulfills that obligation, the insurance company has all of the rest of the obligations.

That is, pay a death claim when the insured dies, make sure that all the other ancillary benefits, whether that be cash value, whether that be disability waiver of premium terminal illness or chronic illness, any benefits that are extra to the policy the insurance company is guaranteed and obligated to deliver.

Now, you can’t just demand a life insurance policy. You must first qualify. And there are two main ways that the insurance company is going to qualify you. The first is medical underwriting. They’re going to look at the insured’s health and determine that they’re healthy enough that the insurance company will take on their risk. The second piece is financial underwriting. And basically what this means is that you can’t over insure someone. The insurance company is not going to give you as much death benefit as you want and they’re not going to give you more death benefit than that person is worth. Just like when you’re insuring a car, you can’t get more money for the car if it gets totaled than the car is worth.

So there are three ways that an individual can qualify for more or a larger legacy or larger death benefit. First is based upon their income, and usually it’s a multiple of their income that they can insure themselves for. Second would be based upon their net worth. If they have a $2 million net worth, then theoretically the insurance company would be willing to issue $2 million of death benefit, and the third would be based upon business needs, whether it’s insuring your business interest or insuring your business debt.

Now that we’ve talked about how to qualify for a life insurance death benefit, let’s talk about why you would want life insurance death benefit to insure your legacy versus buildings, your business, or an investment account for that matter.

The answer is real simple: liquidity, use and control. We talk about it all the time and it’s more important via the death benefit than ever. You see, when the insured dies, it triggers something in the contract and the insurance company is now obligated to pay the death benefit, whatever it may be in that contract.

So keep this in mind. We’ve seen so many times where people pass away and their children have moved out of town and they leave their home to their child who lives four states over. The kid doesn’t want the house. The kid moved to Ohio or Maryland or Massachusetts for a reason. He didn’t want to be here. And because of that, the first thing they’re going to do is sell the house. Well, if the house is worth $200,000 right away, they have to pay a 7% real estate sales tax, plus a transfer tax, plus a probate tax. They thought they were leaving their kid $200,000. It’s only going to be about 150,000 after everything is said and done.

Now, let’s look at if the parent dies with an investment account. Same thing. There’s management fees, there’s liquidation fees. And again, there’s taxes and probate, probably end up with maybe $160,000.

So now let’s look at an investment account. Same thing. They’ve got to pay somebody to manage the money. They got to pay somebody to liquidate the money. They got to pay taxes on it. And it’s going to go through probate.

When all said and done, they’re going to end up with way less than $200,000. Now, if you really want to get sick to your stomach, let’s have the parent die and leave the child a retirement account. Same management fees, same liquidation fees, same probate fees. But now they got to pay income tax on top of it. And that income tax is in the kids tax bracket, not the parent’s tax bracket. So when all is said and done, they’re left with pennies on the dollar.

Well, how does this contrast with a life insurance contract? Well, first of all, it’s a contract between the insurance company and the policy owner. So it doesn’t need to go through probate. There’s no income tax. In most states there’s no state inheritance tax. It’s simply a claim form to the insurance company. And whatever the death benefit states is how much the beneficiary is going to get. So you know exactly how much money you’re passing on to your heirs and you get to determine where that money is going at your death. You’re completely eliminating the middleman. There’s no management fees, there’s no taxes. There’s no probate fees.

Like so many other times, when you’re dealing with an insurance company, you’re giving a direct order. You’re not asking permission. You’re saying, hey, when I die, I want my money to go to this person. And so that person fills out a claim form and they get a check from the insurance company.

Oftentimes when you’re dealing with a life insurance claim, the first money that the beneficiaries are able to get their hands on are from the insurance contracts, not from the bank account, not from the investment account, certainly not from the real estate. This money is going directly to that beneficiary as soon as possible.

And keep in mind, one thing about life insurance, it is the only financial vehicle, the only asset that you will own that guarantees that what you want to have happen will happen, even if you’re not here to see it happen.

So what does that look like? Well, let’s say you’re alive now and you’re young and you have a child and you want them to go to a good college. So you’re saving for retirement. But let’s say you die in five years. How is your child going to afford college now that they don’t have the savings that you’ve been accumulating for them? So one way to do that is to take out an insurance policy to make sure your child has the money to go to a good college, even if you’re not there to see it happen.

Another reason why you’d want to buy life insurance for the death benefit is for income continuation. If you’re a breadwinner or a dual household income, wouldn’t you want to make sure your spouse could maintain their current standard of living even if you’re not there working with them?

Another reason to buy life insurance is if you’re a business owner, and we see this so often, where a business owner will insure his business interests or the value of his business interest
so that his spouse doesn’t have to run a business they’re not familiar with. They can utilize the cash to create the lifestyle that the business created when the husband was operating the business.

So it all comes down to, once again, having full liquidity, use and control of your money even after your death.

If you’d like to get started with a life insurance policy to protect your family or your business, visit our website at Tier1Capital.com to get started today.

Feel free to schedule a free strategy session and get right on our calendar.

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

Ready to Expand Your Financial Knowledge Circle?

You hear us talk about wealth transfers and how you’re giving up control of your money all the time. But what does that actually mean? Where do we find this money and how? Where is there money hiding in plain sight in your financial life?

Let’s face it, we’re all trying to make the best financial decisions possible. When we wake up in the morning, we don’t say, “Hey, how could I screw up my finances today? “No, we say, “How can I move myself forward financially? How do I get from point A over here to point B, Financial security?”

Everything we do, we think, is moving us forward. But here’s the question. If what you thought to be true turned out not to be true, when would you want to know? Wouldn’t the answer be as soon as possible, so you could start on the correct path to financial freedom? A path where you have complete liquidity use and control of your money so that you don’t have to ask permission to access your money to make purchases in your life.

Let’s face it, every purchase we make is financed, whether we go to a bank for a loan or we pay cash. But what if there’s a better way, a way that leaves you in control of more of your money for a longer period of time?

All the decisions we make are based on the knowledge and the information that we have at that time. We call this the circle of knowledge. This circle represents all of the information that exists in the universe today. It’s everything that’s known by everyone in the universe. Your slice may just be a small slice of everything.

Then, there’s another slice of that circle of knowledge, and it represents everything that we know exists, but we just don’t know anything about it. It’s things like brain surgery or nuclear physics.

What we often forget is that there’s a whole universe of knowledge out there and not one person could know everything in the entire universe. It’s simply impossible. What we’re able to do is leverage the knowledge of other people, that’s the easiest way to expand your slice of knowledge.

So here’s the problem. All of the rest of the information, the rest of that circle is information that we don’t even know exists. It’s stuff that we don’t even know that we don’t know. And this is the information that can be holding us back from making huge strides personally and financially.

So how does this relate to the money we’re giving up control of unknowingly and unnecessarily? Think of it like this. The information that we don’t know exists is stuff that is literally sitting in our blind spot. Now, when you’re driving down the road and you look in the rearview mirror and you see nothing, and then you look in the side view mirror and you see nothing. And then you peek your head around and you see a 4,000-pound truck traveling down in the lane that you wanted to turn into.

That’s your blind spot. And this could be your blind spot financially as well. The information that we don’t know exists is stuff that is literally sitting in our blind spot. That car didn’t just appear out of nowhere. It was there the whole time, we just didn’t see it until we changed our perspective.

So if the decisions we’re making are based on the information that we have, the information we know and believe to be true, the best way to make better decisions could be as simple as expanding your circle of knowledge, making your slice a little bit bigger, and creating new beliefs that could actually move you forward financially instead of what the conventional wisdom is telling us to do.

It’s very simple. There are only three ways we can expand our knowledge. The first is the experiences we receive by the places we go. The second is the knowledge we gain by reading books. And the third is the transfer of knowledge from one person to the next.

That’s where we come in. We could help you because the key here is the things that might be in your blind spot are literally in the slice of the circle that we know, and we know that we know it. If you meet with us and we share our piece of the circle of what we know, it could help expand your circle of knowledge so you can make the best financial decisions for you.

There are five major areas of wealth transfer that we could help identify where you’re giving up control of your money unknowingly and unnecessarily, with 100% certainty. Those five areas are…

  1. Taxes
  2. Retirement
  3. Real Estate
  4. Capital Purchases
  5. Education

After we identify these areas where you’re giving up control of your money. It’s really simple. This is money that’s literally hiding in plain sight. It’s in your cash flow. You think it’s moving you forward, but it’s actually holding you back. Once we go through this process, you’re able to utilize that money to move you forward.

If you’d like to get started with a custom plan on how to move yourself financially forward, visit our website at Tier1Capital.com to get started today.

You could schedule a free strategy session if you’re ready to speak with us or we have a free webinar where we do a deep dive on our Four Steps to Financial Freedom.

Feel free to click that button and register for our webinar today.

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

How to Take Advantage of Compound Interest

Oftentimes people say to us, “Why would I pay interest to an insurance company when I can just pay cash?” Here’s the secret. Every purchase you make, whether you finance or pay cash, is financed. You’re either paying interest to a bank or credit card or losing interest by draining your tank.

Nelson Nash shared with me his four cardinal rules of finance and rule number one was think long term. And as I’ve had a chance to reflect on that, I’ve come to understand and appreciate
exactly what he meant.

Think long term? He was referring to compound interest and more importantly, uninterrupted compound interest. So the key is how can we have uninterrupted compound interest and still take care of all of the things in life that come up; paying for weddings, buying cars, medical emergencies, etc. And how do we continue to earn interest on our money and still take care of all of these issues?

 

Let’s take a look at what compound interest is. Basically, compound interest is when your interest earns interest. Albert Einstein once called compound interest the eighth wonder of the world. It’s very simple. There are only two factors that affect compound interest: time and money. And we can never get time back. That’s why it’s so important to start now and never drain the tank. Never pay cash for major capital purchases because you’ll never see the interest you don’t earn on that money. If we’re growing our savings but then we have to drain down our savings in order to make a purchase or to pay for an emergency, we’ve just violated thinking long term and we interrupted compounding of interest.

This is where borrowing money from an insurance company could actually help you make your money more efficient. How? Because we’re getting a collateralized loan, and that basically means our money never leaves our policy. Our money continues to earn uninterrupted compounding of interest, and we have a separate loan from the insurance company that we pay down. As we pay down that loan, our equity in the policy increases and that’s the secret to using other people’s money and taking advantage of uninterrupted compounding of interest. That leads us to our next point.

What is the difference between compound interest and amortized interest, and why would it make sense to leverage other people’s money at a cost when you have the cash available? Why not just take your cash and make that major capital purchase? Quite simply, compound interest grows on an increasing balance and amortized interest is charged against a declining balance. That’s why you actually earn more interest on a lower interest rate when it’s compounding, then you’ll pay on a higher interest rate for an amortized loan.

If you look at any loan, for example, a mortgage, you’ll see that in those beginning years, a ton of your payment percentage is going towards interest. But as that loan matures, more and more is going towards breaking down that principal balance on your loan. This is why you could earn more interest at 3% over a period of time compounding than you’ll pay amortized over that same period of time at 5% interest being charged. It’s a crazy phenomenon that a lot of people don’t understand. That’s why they’re giving up control of their money to pay cash for major purchases.

I’ll never forget about 25 years ago. I was speaking with the president of a bank and I explained this concept to him, the difference between compounded interest and amortized interest. He says, “Yeah, yeah, yeah, I understand.”, but he didn’t fully understand this whole concept. The difference between compound interest and amortized interest is the basis of the banking industry, yet this CEO of the Bank had no clue.

If you realize the power of compound interest, you would never drain the tank. You would want to maintain as much control over as much money as possible for as long as possible. That’s the key. That’s why you should always borrow against your insurance policy, gladly pay the interest to the insurance company because your money is continuing to earn uninterrupted compound interest for the duration of your ownership of that policy.

If you’d like to get started with the whole life insurance policy designed for cash accumulation,
so you could earn uninterrupted compound interest on your money, or so you never have to drain the tank again, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today. Also, if you’d like to learn exactly how we put this process to use for our clients, check out our free webinar, The Four Steps to Financial Freedom, where we do a deep
dive on exactly how we put this to work.

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

Why ‘Buy Term and Invest the Difference’ Strategy Might Not Be For You

When it comes to life insurance, many financial advisers out there suggest buy term and invest the difference. But that may not be the best strategy. And today we’re going to talk about why.

The main premise behind buy term and invest the difference is that the cost of whole life insurance is high and the cost of term life insurance is low. So if you have that in your budget, you’re able to still afford the death benefit, but you could invest the difference in the prices in the mutual funds and potentially earn a higher rate of return. Also, the premise assumes that you won’t need the life insurance coverage past a certain point.

 

The first issue with the strategy of buy term and invest the difference is real simple. They don’t invest the difference. So the problem is you’re setting up a strategy that you’ll invest the difference and you don’t. Now, maybe you will start out and invest the difference, but something is going to pop up in your life that’s going to prevent you from continuing to invest the difference. I don’t know what those things are, but it could be where you have a medical emergency, you’re buying a new house, or you’re sending your children to private schools. Anyway, the cash flow is pinched and the easiest thing to stop is the investment. So that’s the first issue.

The second issue, they never address, is what happens when there’s a significant amount of market losses and your account tumbles by 40, 50, 60%. Are you going to still have the diligence to continue to put the money into that account?

The third issue is what if you need life insurance beyond the guaranteed premium period? Let’s say 20 years. They tell you, you won’t need life insurance after that time period. But what if you do? And what if the reason you need the money or you need the insurance is because you didn’t get the rate of return that they promised. So we’re going to give you the benefit of the doubt that you will invest the difference. But life has a way of happening. And between market losses, between taxes, and having to access your money, will you continue to have the money that you’re thinking you’ll have? And more importantly, will you have the diligence to put the money away?

Keep these financial rules in mind.

    1. Start saving now.
    2. Never stop.
    3. Never drain the tank.

Buy term and invest the difference violates these key principles to any sound financial plan. Exactly how does it violate the principles? Well, at any point, you could stop saving in the mutual funds, whether your cash flow gets pinched or the market’s down so you’re not motivated to continue saving.

Number two is the tendency is when you need money for a car repair or a new car or to send your kids to school, that money is easily accessible, so you just sell the mutual funds and liquidate the account. But here’s the key you’ll never see the interest you don’t earn on that account. Our process uses a specially designed whole life insurance policy designed for cash accumulation to help our clients reach their financial goals. This product is great for goals because it sets them up to save on a consistent basis and allows them complete liquidity, use, and control of their money so they’re able to access their money without stopping compounding. They’re never draining the tank, but they still have access to their money with no questions asked.

Most importantly, you’ll have the flexibility to stop making payments, reduce your payments, and still continue to earn uninterrupted compounding on your money. This method is great because it locks in your insurability and that level premium cost at a younger age than with the by term and invest the difference method.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation so you could reach your financial goals, be sure to visit our Web site at Tier1Capital.com to get started today. Feel free to schedule your free strategy session or check out our free 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.

How Do Banks Make Money?

Have you ever wondered how banks make money? Well, stick around to the end of this blog post because we’re going to go over the velocity of banking and why it’s vital to control the finance function in your life. 

When it comes to banking, there are three main characters to consider: 

  • The Depositors, who save their money at the bank
  • The Borrowers, who need access to money and are willing to pay a premium 
  • The Bank, who connects the two 

So the temptation is to say, okay, the depositor gets 1%, the borrower pays 4% on a loan, and the bank gets to keep the 3% in the middle. That oversimplifies and ignores velocity banking.  Fortunately, there’s a company, Bauer Financial, that does financial reports on banks. Bauer financial reports will show you exactly how velocity banking, or turning the money over, makes huge profits for the bank. 

So, here’s an example of a Bauer financial report from 2016 for Bank of America. Bank of America had $860 billion of deposits for which they paid the depositor $1.9 billion in interest to attract those deposits. Now, the borrowers of Bank of America paid Bank of America $44.8 billion in interest. This came from credit cards, mortgages, home equity lines, fees, and business and personal loans. So, if you look at the ratio of interest paid by the bank, 1.9 billion, versus interest paid by the borrower to the bank, 44.8 billion, that’s a 23.5 to 1 ratio. 

That’s 2,350% more being earned by the bank than is being earned by the depositor. But here’s the kicker. They’re using the depositors’ money to make their money. The bank has zero skin in the game. 

So, this just illustrates how powerful velocity banking is and illustrates perfectly why Nelson Nash’s fourth rule, Never Rely on Banks, Especially For Lending Money is so important. 

Nelson knew the importance of pulling yourself away from the banking system because they control you. And when you control the financing function in your life, now you are in control. And more importantly, you’re no longer controlled by the banks. 

The best way we know how to put this to work for us is with a specially designed, whole life insurance policy designed for cash accumulation, so that you could capitalize your own money and borrow against it and pay yourself back. Not only will you earn the interest in the policy like the depositor in the bank, but if you charge yourself more than what the insurance company is charging you, you also get to keep those profits. And again, you’re in control of the process and you get both sides of the street. 

We always preach about being in control of your cash flow, and if you’re looking to get started with implementing this process in your life, be sure to visit our website at tiercapital.com to get started today. Feel free to schedule your free strategy session to get on our calendar or check out our free web course where we go through a deep dive on 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.