Insight & Analysis

Effects of Inflation on Whole Life Policies and Premiums

With inflation being a hot topic these days, a natural question may be, are my life insurance policy and my life insurance premiums inflation-proof? And how exactly are they impacted by inflation?

Based on the data inflation is officially a problem that we’re going to have to deal with. And based on experience, we all know the impacts of inflation. In December 2021, inflation stood at three-quarters of 1%. It wasn’t even calculated at 1%. In August of 2022, inflation was over 9%. And in December of 2022, it was down to 4.6%. Still a far cry from 75 basis points.

Now they call inflation the stealth tax because we don’t see it as a tax. It’s nowhere in our tax returns. It’s nowhere on our payroll checks. However, it impacts each and every single one of us, some more than others. We know we’re dealing with inflation, every time we go to the grocery store, every time we fill up our gas tanks, every time we get our utility bill, we are experiencing the damaging effects of inflation.

Now, pivoting to life insurance, how exactly does inflation impact the death benefit and the premiums? Well, keep this in mind. Inflation impacts everything. The question that needs to be answered is, is inflation impacting us positively or negatively? Because the news is not all bad.

Take your premiums, for example. With a whole life insurance policy, your premiums are locked in for your whole life. Whether your policy is a ten-pay policy paid up at 65 or a paid-up at age 121. Those premiums are contractually guaranteed to never increase. So the longer you can extend that premium payment period. You’re also paying those premiums with dollars that have been affected by inflation. So when you get to the tail end, let’s say age 121, the value of those premiums has been greatly affected by inflation. 

A candy bar back in the sixties cost, what, $0.10? Today, you’re lucky if you could get a Snickers for $1.50. Think about that in terms of your premium. Your premiums are going to stay the same. But if you waited all that time, it’s going to feel like a nickel. And that’s the point. Inflation is going to affect your life insurance premiums positively because the dollars are going to have less purchasing power, the longer you extend your premium payment periods.

Now, going on a little tangent, the same applies to your mortgage. This is why it’s important to consider taking out a 30-year mortgage instead of a 15-year mortgage because you have a lower payment to begin with. And by the end of that term, that payment is going to feel like nickels. 

Inflation is also impacting your death benefit. So if you start out with a death benefit, let’s say, to pay for a funeral. The longer you extend that payment period or the longer you live, the value of that death benefit is going to buy less of a funeral. You may not be able to pay for the band or the dinner. Maybe just the burial.

When I first started in financial services back in the mid-eighties, we were selling burial policies for $5,000, meaning you could have paid for a funeral for a little bit less than $5,000 and had some money left over. Today, you can’t touch a burial for anything less than $15,000.

So the point is inflation is always going to be there. It’s always going to be affecting us, sometimes positively, sometimes negatively. But the point is we’re going to have to deal with it. 

The only way to combat inflation on a long-term basis is with proper planning. If you’re ready to start planning for your future, whether it be premium planning or death benefit planning, be sure to schedule your free strategy session today.

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

The Benefits of Owning Multiple Life Insurance Policies

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

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

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

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

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

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

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

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

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

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

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

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

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

If you’re ready to regain control of the finance function in your life and ensure generational wealth for generations to come. Be sure to schedule your free strategy session or check out our web course, The Four Steps to Financial Freedom.

And remember, it’s not how much money you make, it’s how much money you keep that really matters. We’ll see you in the next one.

Compound Interest vs Simple Interest: The Key Differences

Sometimes money concepts could feel complex, especially compound interest versus simple interest, and how they impact your life insurance policies. Interest is a very complex topic, the further you dig into it, the more complex it gets.

Every once in a while, we’ll hear that life insurance policy loans are calculated on a simple interest basis, and that’s not exactly the case. Let’s take a step back and look into the difference between compounded interest and simple interest.

Compound interest is where you calculate interest on your principal balance, plus the interest. Simple interest is interest that is calculated only on the principal balance. 

An example of simple interest would be a $10,000 deposit into a CD and it’s earning 4% interest. If it was calculated on a simple interest basis, you would receive $400 per year for the duration of the CD. Looking at this, we’d have a $10,000 balance, and the interest would only be calculated on that balance. Within those three years, we would only earn 1200 dollars worth of interest.

Now, when you compound interest, you’re earning interest on your principal, plus the interest that you earned. At the end of that three-year period, you actually earn an additional $48 and change because you’ve been earning interest on your interest.

But let’s translate it into how it affects our policy loans and paying back those policy loans, and how interest is calculated over the policy year.

Most life insurance companies calculate the loan interest due in advance. Basically what that means is you will be charged interest at the time of the loan if your policy anniversary date was today and you took a $10,000 loan and the interest rate for borrowing was 5%, your loan balance would be $10,500 because they charge you the interest in advance.

Another caveat with life insurance policy loans is, that as you make loan repayments, those repayments go towards reducing the principal of the loan, not towards the interest being charged on the loan. That’s why in many cases at the end of your policy year, you’ll get a bill for loan interest that may be due whether or not you’ve been paying on that loan all throughout the policy year.

Now you do have the option as to whether or not you want to repay that loan interest. If you don’t, it will accrue onto the loan balance and become part of that principal after your next policy anniversary. If we step back, this makes sense, you are actually in control of the repayment process. The insurance company charges the interest. The decision as to when and how you pay that interest is completely up to you.

Let’s look at an example of what this would look like.

Let’s say you borrowed $1,170 against your policy cash value via the loan provision, and you wanted to pay it back at the rate of $100.16 over 12 months. Assuming 5% interest is charged. A simple way to figure out the loan repayment is to use an amortization calculator.

With this, we’re able to see that we paid back $1,201.92, which is $31.92 of interest over that year. This could be calculated simply through the amortization calculator. However, the insurance company views things through a different lens. You’re working off of an amortization schedule based on $100.16 payable each month. But the insurance company looks at it from the perspective of saying, okay, we’re going to charge you 5% interest on the principal, $1,170, and you’re going to be paying this loan back at the rate of $100.16.

When you make your last payment. The insurance company will refund you any unused interest, meaning when you pay it back, you might pay it back in 11 months and 22 days and they will refund you the eight days of unused interest.

If you’d like to learn exactly how to put your life insurance policy to work for you, your business, or your family, 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. We’ll see you in the next one.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stabilizing Your Portfolio Using Whole Life Insurance

If you have an investment portfolio, chances are you’ve heard of a 60/40 split. 60% equities with 40% bonds and you’ll be safe. However, do you realize that the 60/40 split recently had the worst year ever because of the inverse relationship between interest rates and bond prices?

With the rising interest rates in the market, prior to last year, bond investments had a run like no other. For 40 years, bond interest rates came down, which means the prices went up. It didn’t matter. When you got in on the bond train, you made money. Those days are over. The reason this happened is because interest rates, again, steadily came down. That’s probably not going to happen for a long time. 

We all know that interest rates are on the rise. They’ve been on the rise for a while. And they’re going to continue to go up until inflation gets under control. With a small interest rate increase last year, the 60/40 portfolio split had its worst year ever. That’s not even taking into account the rise in interest rates since January 1st of this year.

Now, the point of the 60/40 split in the portfolio is to have some riskier investments and bonds to balance it out with some more stability. However, what happened last year was we had volatility in the riskier investments, as well as volatility due to the interest rate rises in the bond market.

So this bears the question, if bonds aren’t stable anymore, and we’re adding them to the portfolio for stability, what do we use to replace the bonds to add stability and keep our money safe?

Most investment managers talk about diversified portfolios, but how do we diversify our portfolio in a way that introduces stability to our portfolio? One way may be with a specially designed whole life insurance policy designed for cash accumulation and you may be wondering, what does whole life insurance have to do with investments?

Whole life insurance is a terrible “investment.” And that, in fact, is true because typical investments inherently have risk. But with a whole life insurance policy, it’s actuarially designed to get better and better, year over year. The fact of the matter is that whole life insurance is uniquely positioned to take advantage of increasing interest rates -which will work out in your favor.

You see when interest rates rise, the insurance company doesn’t have to sell the bond. They’re going to hold the bond to maturity. They can utilize the bonds that are maturing to reinvest into higher interest-rate bonds, or they can utilize those bonds to pay expenses. So it’s an old money, new money type phenomenon.

But the point is, because the insurance company has that option, they don’t have to sell the bonds before maturity, and therefore, realize a loss. In essence, what you’re doing is you’re giving the interest rate risk to the insurance company (instead of taking on the risk yourself -as in typical stock investments) which is uniquely positioned to accept that risk because they don’t have to sell the bonds.

Here’s the long and the short of it.

In rising interest rate environments, the insurance company is able to take on that bond interest rate risk and come out better on the other side. You’re able to transfer that risk to the insurance company. 

But what happens in low-interest rate environments?

Well, whole life insurance policies designed for cash accumulation are a great way to warehouse your wealth due to their many benefits. We have tax-deferred growth within the policy. We have an actuarially designed policy that’s guaranteed to get better and better every year. We have dividends that, once they’re credited, can never go away. We also have tax-free access to the policy cash values via the policy loan provisions. And then at the death of the insured, we have the opportunity to recapture all of the costs associated with the death benefit costs, as well as any loan interest that you paid throughout your life. You have the opportunity to recapture that and keep it within your family at the insured’s death. 

You give the insurance company the interest rate risk. You give the insurance company the portfolio risk, And you give the insurance company the opportunity cost risk. They’re accepting all the risk because they’re uniquely positioned to accept that. And it adds stability to your portfolio, plus, you get a death benefit.

If you’d like to learn more about this positioning, schedule your FREE strategy session with us.

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

Cracking the Code to Properly Save for College

Have you ever wondered how people afford sending their children to college? Sometimes the first child is manageable, the second is tight. And by the third or fourth child, it’s downright impossible. Today, we’re going to talk about how to set yourself up financially to send your children to college and afford that college tuition. 

The cost of college education has been rising at a rate that is significantly higher than the rate of inflation. Basically, that means that what it’s going to cost you to send your children to college is growing much faster than the income that you’re earning. But here’s the deal. If your income grows fast, that factors against you when you’re filling out the FAFSA, the Free Application for Federal Student Aid.

We call inflation the stealth tax because we don’t see it on our tax returns, but it affects each and every single one of us. When it comes to the cost of college, not every family is going to pay the same amount of tuition for the exact same school. You see, it’s calculated based on four factors: parent’s income, parent’s assets, children’s income and children’s assets. So when it comes time to send your children to college, you want to make sure you keep those numbers looking as low as possible.

But the question becomes, how exactly do you do that? How do you set your family up in a position so that you’re paying the lowest legal amount you have to your to send your children to college so that you could get out ahead in the long run?

What you’re trying to do is maximize the amount of federal aid that you receive. And if you do that in so doing, you’re making your money more efficient. What we’re trying to do here is show you how to send your children to college with minimal impact on your ability to save for your future and with minimal impact on your current lifestyle.

But here’s the issue. Traditional methods of paying for college and saving for college are going to leave you pinched. Here’s a secret, 529 savings accounts count against you when it comes to federal aid application. So by doing the right thing and saving for your children to go to college because that’s a major capital expenditure, you’re actually decreasing the amount of aid that your family’s going to qualify for because you did the right thing to save for college. 

If it seems like you’re damned if you do and damned if you don’t. I got news for you. That’s the way they set it up. You see, everything that served you well financially up until the point your children are applying for federal aid, will work against you going forward after the application for federal student aid. 

No parent should have to choose between sending their child to their dream school and funding their own retirement. But unfortunately, that’s what it comes down to a lot of times in these college funding situations. Because you know what wasn’t factored into the FAFSA calculation? How much money parents are paying towards their own debt on a monthly basis. And clearly the amount of debt you have is going to impact not only your lifestyle, but your ability to pay for your child to go to college, especially if you plan on doing so without derailing your own retirement. There’s only so much cash flow to go around.

If you have a lot of debt payments, there’s only so much leftover at the end of the month. What happens is a lot of parents are forced to decrease their retirement savings at the time they’re sending their children to college so that they’re able to finance the cost of college tuition.

Here’s the solution.

You really should be looking at ways to make your money more efficient because the more efficient your money becomes, the better prepared you are to take on or tackle this increased expense of sending your child or children to college.

At Tier 1 Capital, we look at things through the lens of control. Are your financial decisions putting you in more control of your cash flow and assets or in less control of your assets? Whoever controls your cash flow controls your life.

No parent wants to stand in the way of their child pursuing their dreams but we see so many times where children have to make a decision between almost bankrupting their parents and pursuing their dreams.

So what are some practical steps you could walk away with and apply?

Number one is to look at where you’re giving up control of your money unknowingly and unnecessary. We call these wealth transfers. The five areas that we focus on are taxes, mortgages, how you’re funding your retirement, how you’re paying for your children’s college, and how you’re making major capital purchases. And let’s face it, isn’t college a major capital purchase?

Number two would be to build in flexibility to your plan. First, you find the inefficiencies, regain control of that cash flow, and then save in an area where you own and control. And the importance of that is the flexibility to send your children to college to pay for vacations, to pay for any expenses that come up, and then eventually also use that money to retire without the restrictions placed on accounts by the government for example.

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

The Inverse Relationship Risk between Bonds and Interest Rates

Everyone knows that interest rates are finally on the rise. But what you may not realize is what’s going on under the covers. What’s happening to the bond market as these interest rates rise? Do you realize that there’s an inverse relationship between interest rates and bond prices? Let’s take a deep dive on what this means for you.

Let’s start at the beginning. What the heck is an inverse relationship, and how is there one between interest rates and bond prices? Well, it’s real simple. When the interest rates rise, the value of the bond or the price of the bond goes down. And when interest rates go down, the value or the price of the bond goes up.

Now, in and of itself, it may not mean a whole heck of a lot to the average investor, because if you’re holding the bond to duration or till the end of the bond period, there’s no problem. If you bought a 4% bond and interest rates went up to 5%, you’ll still collect your 4% at maturity. The problem is when you’re either renewing rates or exchanging bonds, that’s where the problem comes into play.

There are three main risks with this inverse relationship. The first is interest rate risk. Interest rate risk really comes into play if you need to sell your bond before maturity. If you need to sell your bond before maturity and interest rates have risen, the value of your bond may have gone down and consequently you’ll receive less than you were supposed to receive. You will lose money.

Risk typically isn’t associated with bonds, as they are considered a safe investment. But as we see here with this inverse relationship and rising interest rates, it can leave you exposed. This could also be a little bit of an issue because bonds are relatively liquid. If it comes down to it and it’s between selling your actual investments, stocks, real estate or mutual funds, it may make more sense to sell your bond, because it’s the most liquid. But the point is this. You have to recognize the fact that bonds are not risk free.

The second issue that could arise between this inverse relationship of interest rates and bonds is opportunity cost. And basically what that means is you might have better opportunities with higher interest rates, meaning that savings accounts, CDs, annuities or newer bonds might have higher interest rates than the existing bonds that you hold, making the value of your bonds worth a little bit less.

Now, the problem arises in this case, when you want to sell your bonds because they have a low interest rate, you can make more money, more interest somewhere else. So let’s get the bonds out of here. We could get a better opportunity somewhere else. But what happens is, we have to sell those bonds. You can’t redeem the bonds before the maturity date, so you have to sell them on the open market. But with that, they have a lower market value. So you could incur double loss in a sense.

Our third and final issue with this inverse relationship, and that is portfolio volatility. Bonds tend to be more stable than other investments, such as stocks and maybe even mutual funds. And consequently, they’re an ideal candidate for diversification of portfolios and risk management.

What this means in plain English is when you have a riskier portfolio full of real estate stocks and mutual funds, oftentimes advisors will incorporate bonds into the portfolio to stabilize and make sure you’re not losing all of your money, or all of your money is not at risk. But here’s the problem. During volatile interest rate environments, when the bond interest rates rise, because of the inverse relationship, the value goes down and that introduces risk to an asset that you may have considered to be less risky.

So, ultimately here’s the point. Fluctuation in bond interest rates can have an adverse effect on your overall portfolio performance.

Is Your Cash Flow Prepared for Student Loan Repayment

The most recent word on the street is that student loan repayments are going to begin again in October of 2023. What does that mean if you’ve been spending that money instead of saving it or paying toward your student loans all along? Well, basically, it could mean that you’re going to experience a cash flow pinch. Between inflation, high interest rates and now an extra debt payment it’s all about cash flow. Whoever controls it, controls your life. Let’s talk about how to create some cash flow relief and set yourself up for a better financial tomorrow.

They call inflation the stealth tax because it’s not written in the tax code, but it affects each and every single one of us. Some more than others. And recently, the costs of goods and services has been increasing at a faster pace than our income can keep up with.

According to the Federal Reserve, in the last quarter of 2022, consumer debt increased by $6.1 billion, which was one of the highest recorded quarterly increases. And that’s just in three months. This is proof that the cost of living is increasing faster than our income. If you don’t have the cash flow built in, it makes sense just to obligate your future income and put it on the credit card.

However, with student loans coming due and yet got another bill that we’re going to be responsible for, how are we going to fit this into our cash flow? This is why it’s more important than ever to make your money more efficient. You see, there’s only so much revenue coming in. There’s only so much income coming into your household or coming into your business. It doesn’t make sense to be using your money inefficiently and wasting the control that you had over that money. That’s why our process is more important today than it’s ever been, because we show you how to regain control of your money. 

What that looks like is looking at your cash flow for areas of wealth transfer. Areas you’re giving away control of your cash flow unknowingly, meaning you’re not aware of it and unnecessarily, meaning it can be corrected. And once you’re able to identify those wealth transfers, you could start saving in an area where you own and control, so ultimately, your goal could be to regain the finance function and control of that finance function in your life so that you’re less dependent on banks and credit companies for access to capital in the future.

You see conventional wisdom teaches us to save in areas where we don’t control that cash flow. Let’s take a look at a 401k, for example. Yes, we’re saving for retirement, which is admirable. However, when it comes to making these small milestones along the way, we don’t have access to that money and we certainly don’t have access to it without paying taxes, and a penalty in most cases.

You might be saying, “Hey, I’m using my money very efficiently.” Well, this is where the problem is. If you’re implementing conventional wisdom or traditional financial advice, in all probability, your money is inefficient. When we say inefficient, what we mean is your money is not accessible when you need it for whatever you need it. No questions asked. If your money is inefficient and inaccessible, that can create some huge financial problems.

I would argue that most financial struggles come from not having access to money when you really want or need it. Take, for example, when student loans are coming due. Imagine if you had access to money, instead of feeling pinched, you can have some cash flow relief built into your system. Flexibility is key when it comes to these issues.

If you’d like to learn exactly how we help our clients to become more in control of their cash flow and their assets Check our free web course that lays out exactly how we put this process to work, The Four Steps to Financial Freedom.

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

3 Steps to Avoid the Great Resignation within Your Family Business

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

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

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

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

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

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

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

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

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

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

If you’d like to get started with incentivizing your key employees and building your strategy, schedule your free Strategy Session today. And remember, it’s not how much money you make. It’s how much money you keep that really matters.

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

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

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

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

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

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

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

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

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

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

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

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