In today’s ever changing economic environment, there are a few questions that remain the same. How do you save for your retirement and achieve your financial goals along the way? There are so many things that are out of our control: interest rates, the stock market, government spending. Not to mention inflation.
But what isn’t changing are our financial goals. We still want to get married. We still want a new car. We still want to go out to eat when we want to go out to eat. How do we achieve all of these financial goals when there is so much out of our control?
Well, conventional wisdom would tell us to just take on more risk. More risk equals more return. But that is not always the case as we’re experiencing right now. The answer may be in saving. Saving, not investing.
And you may be wondering what’s the difference? Well, investments inherently have risk savings, do not. The tool we use to help our clients achieve their goals without taking on tons of risk is especially designed whole life insurance policy designed for cash accumulation for several reasons, and one being you’re able to access that money to achieve your financial goals without taking on the risk of the market and everything else that’s out there.
Because your money is safe inside that insurance policy. You could also access that money to reinvest in the market after the market went down. That puts you in control instead of you being at the mercy of people that you don’t even know.
You see, most savings vehicles that are presented to us have risk, whether it’s a retirement plan at work or a brokerage account or other mutual funds. They all include risk, but not everyone wants to take on that risk, and not everyone wants to be at the mercy of everything that’s going on in the world to achieve their financial goals. Not to mention, once you access that money, you have tax consequences possible penalties, and you don’t know how much you’re actually going to be earning on that money. And also think of it this way. Once you access that money, it’s no longer earning interest for you.
We believe there’s more opportunity in avoiding the losses than trying to pick the winners. And we’re not only talking about market losses, we’re talking about the losses of interest paid to others or taxes paid to the government. They’re all losses that reduce the value of our money.
There are so many financial tools available to us between IRAs, 401ks, brokerage accounts, loans, mortgages. The list goes on and on. The question remains, are these tools moving us towards our financial goals or keeping us further away from our financial goals? This question needs to be answered frequently. It’s not a one size fits all or one decision fits your entire life type situation.
Think of it this way. The products, the 401k, the IRA, the mortgage, are the tools. The strategy is what the tool is doing for you. How are you using that tool? Very often when we’re meeting with clients and prospects, we ask the question, Is this strategy bringing you closer to or further away from your goals?
And a lot of times the people will look at us and say, “What do you mean?” The choices we’re making with the financial tool, we don’t even think about it. We just do it because it sounds good or everybody else is doing it. That’s not good enough. If you have stated goals and stated objectives that you’re trying to meet.
Let’s take the 401k for an example. Most employers, if they offer a 401k, also offer automatic enrollment. By not making a decision. You’re making the decision to enroll in this 401k plan. How is this moving you towards your financial goals and is it going to help you achieve your short term and long term financial goals?
In most cases, it will help you achieve retirement or help supplement it at least. But what about your other financial goals, like sending your kids to college or buying a new house or going on a vacation? All of these goals need to be addressed and the 401k is not the tool that will help you get there. But when people use this automatic enrollment and are only saving in their 401k, what happens is their money is not accessible when they want to achieve these other financial goals. And if you access that money before age 59 and a half, if you’re able to, you’re going to pay a penalty and that money is going to be fully taxable as income.
The other option may be to take a 401k loan, but that has other rules associated with it, like the five year repayment schedule and the fact that your money can’t grow while you have it withdrawn through that loan feature.
In addition to that, you’re now paying taxes twice on the same money. You might be asking, how could that be? Very simply, when you pay back a 401k loan, you pay it back with after tax dollars. So you already paid tax on that money. Then you put it towards your 401k loan and now when you go to retire and you take the money out of the 401k, you’re going to pay tax again. You’re literally paying tax twice on the same dollar. Is that your goal and objective?
What you want to do when you’re doing financial planning is making sure your plan is flexible enough to achieve each and every single one of your financial goals, even if they change. Instead of putting money in different buckets for retirement, for paying for college, for paying for your vacation, for putting a down payment on your house. You want your money to be flexible so you’re able to achieve all of these goals throughout your life and you’re not stuck with tax consequences for each one.
Several years ago, we met with a family who had the goals of having a great retirement with a brand new mountain home, and they also wanted to send their children to college. After looking at their financial situation, it became apparent that what they were doing wasn’t exactly in line with what they wanted to achieve, and it certainly wasn’t the most efficient method.
But with some simple shifts in their cash flow, we were able to help them save for retirement, fully fund their children’s private college educations and build their mountain home so they didn’t have to wait until retirement. They were able to achieve that goal 12 years sooner than they anticipated.
But here’s the best part. By helping them to obtain the mountain home 12 years sooner or not having to wait till retirement in order to build it, the husband had an opportunity to work with his father every weekend to build that mountain home. He and his dad literally hammered every single nail into that cabin.
Unfortunately, several years later, the father died. He had cancer and died at a very young age. The husband came to me and said, “Hey, I want to thank you for everything you did to help us to build that mountain home.” And I said, “Well, you know, you put the money away.” He goes, “No, you don’t get it. I will never be able to get that time back. And if I waited until I retired in order to build that cabin, I never would have had that opportunity. So thank you for showing us how to get to our goal much, much sooner.”
You see, these are the things that money can’t buy. And this is why it’s so important to have the flexibility within your financial plan to achieve your goals all along the way.
Because life doesn’t wait and it’s not about saving for retirement or saving for college. It’s about those moments in your everyday life that you can never get back.
This couple didn’t change their outflows by one penny, but they were able to build the home 12 years sooner than when they were on track or when they thought they could do it. All because we looked at things through a lens that showed them free up their cash flow and do it in a way where they can achieve all of their goals and objectives.
If you’d like to see exactly how we put this process to work for our clients, check out our website. We have a free webinar, The Four Steps to Financial Freedom, where we do a deep dive on how we put this process to work.
We’ve all heard that you should pay yourself first. But how do you do that? I don’t know about you, but every time my income goes up, it seems as if my spending goes up right along with it without even thinking about it. Today, we’re going to talk about how to put your savings on subscription mode so you don’t have to make a conscious decision every single month.
As a young professional, for me at least, it’s hard to think about goals like sending my children to college or saving for retirement when I don’t necessarily see those things in my near future. But that doesn’t mean I shouldn’t be saving for goals no matter what they are, down the line regardless of not having them defined.
The idea that as your income rises, your expenses also rise. That was what Nelson Nash, my mentor, used to refer to as Parkinson’s Law, expenses rise to meet income.
If we could give you an equation on how much you should be saving each and every single month, you should be saving 20% of your income. But how do you do that? Is it best in your retirement account or a savings account? Or especially designed whole life insurance policy designed for cash accumulation?
For me, it’s the whole life policy. When I graduated from college, I got my first whole life policy and it met my income needs at that time. And as the years went on, I added more and more policies to accommodate more and more of my income. So now I’m sitting right about 20%. But the best part about this solution is I don’t have to make the decision of how much I’m saving every month. It comes automatically out of my bank account. So all I have to do is budget for it.
Not to mention, I’ve borrowed against the cash value to buy a car, to pay off student loans, and many, many other things that will be coming up or have come up in the past that I’ll be borrowing against the policy to pay back and to make the purchase that I want to make.
You see, just because I don’t have financial goals defined at this time, I know that down the line and throughout my life I’m going to have major capital purchases. And I also know that if I leave that money accessible, easily accessible in my checking or savings account where I could access it with a click of a button, I’m going to do that.
So by putting the money in the whole life policy, I still have access to it. But I’m not leaving it so easily accessible in my checking or savings account that just because it’s there, I’m spending it each and every single month.
But the real key here is the fact that although I’m using the money, borrowing against the cash value, I’m also being responsible by putting the money back.
People always say, “Do I need to pay that policy alone back?” In short, no, you don’t. But by paying it back, you’re saving yourself loan interest. And when another purchase comes up in the future, you have access to that money again, with just a signature.
And that’s really the key. The need for cash or to access capital for the rest of my life is never going away. In fact, it’s going to get larger and larger as time goes by. Cars are going to be more expensive. Vacations are going to be more expensive. And then you have this thing called retirement.
The best part about saving in this way is that I don’t have to make a decision every single month to put money away. It’s automatically deducted towards the premium. And as the policy matures, over time, that policy grows more and more each and every single year, to the point where when I put a dollar of premium in now the cash value increase is higher than what I put in.
So in essence, saving is on subscription mode. Think of all the companies that are in our checkbook each and every single month, from Netflix, to our utilities, to our rent, everything is automatically deducted from our checking account. So why wouldn’t you pay yourself first right from your checking account? And the ease of this process makes it so more accommodating to fit our lives.
If you’d like to learn more about how to put your savings on subscription mode, visit our website at Tier1Capital.com to schedule your free strategy session today. We’d be happy to talk more about your specific situation and how we could help you meet your needs.
Do you realize that every single purchase we make is financed? Whether we financed traditionally or pay cash, we’re either paying interest or giving it up. How do we make our money as efficient as possible and put the debt cycle to work for us?
You’ve heard me say it before and I’ll be sure to say it again.
Whoever controls your cash flow, controls your life.
Well, the first step is to understand where your money is flowing to or, more importantly, what’s the beginning of the debt cycle. So here’s an example. Let’s say you’re a business owner. Probably when you started your business, you did not have a lot of cash or access to a lot of capital. So you want to be in this business and what do you do? You go and borrow some money. Well, the next step is you take that money and you use it to capitalize your business. You’re actually deploying that money to grow your business.
The third step is now that the money is deployed, you utilize it to generate a profit. And now with those profits, you go to the fourth step and you use those profits to pay back the loan. Here’s the problem, because all of your cash flow was going towards the loan. Now, when that loans paid off and you want to expand your business, now you’ve got to go back and borrow again. And this process continues. And that’s why we call it the debt cycle.
Because the beginning and the end are the same. It’s so hard to get out of this debt cycle. It becomes a perpetual cycle that happens with business owners because they never take the time to capitalize their own assets so they could finally break the cycle. There’s only one way out.
What if there was a way to take a portion of the money that’s going towards debt to build your own asset and capitalize your own asset so you could finally break that cycle without impacting your cash flow. Would you want to know about that process?
Well, the fact of the matter is the process does exist and it’s been around for over 200 years. Conventional wisdom teaches us that debt is bad. And so it’s often that we see business owners trying to repay their debt as soon as possible. But what happens when you do that is you’re giving up control of all of your cash flow to the bank. And then when it’s time to expand your business again in the future, you’re forced to go back and borrow because you didn’t take the extra step of building your own asset instead of building the banks.
We’re going to share with you a practical example. Several years ago, we met with a business owner who had started a business about 15 years prior, and they had no money. So they borrowed everything to capitalize their business. But as time went by, they became more and more successful and they paid off that 20 year loan in about ten years.
The problem was they were taking all of their cashflow to pay that debt off as quickly as possible. So when it came time to expand their business, they didn’t have any access to additional capital. So they had to borrow again. And my question to them was very simple. When you went back to the bank to open up your second store, whose money did they give you? And all we heard was silence in the boardroom.
Eventually, the president of the company said, “Oh my gosh, they gave us our own money back.” And the CFO said, “Yeah, and they charged us interest and fees in order to get our own money.” That is clearly the debt cycle and we can break you from that just by becoming aware of where your money is flowing and how to set up a pool of money that you own and control so that you could access that money to expand your business.
Now that you’re aware of the debt cycle, the next step is to learn how to put this process to work for you and interrupt it, so that you could be in more control of your cash flow and make your cash flow even more efficient. You’re building that asset for yourself so you’re less dependent on banks and credit companies.
If you’d like to learn more about exactly how we use this process, check out our free webinar, The Four Steps to Financial Freedom right on our home page.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
But what happens when you need to access cash for a major capital expenditure? Whether it’s a major capital purchase, a medical or financial emergency, the bottom line is when you follow conventional wisdom, your money is inaccessible when you need it most.
Conventional wisdom teaches us that we shouldn’t be working for our money, but we should be putting our money to work for us. Whether it’s real estate, a brokerage account or a retirement account, all of these places are leaving our money inaccessible, even though they’re “working for us.”
Even worse, you put your money in the bank earning 0.0, and you’re not even keeping up with inflation. You want to put your money to work for you, your family, and your business. The problem is, when you follow conventional wisdom, your money is inaccessible and you’re literally paying somebody to oversee that money. They’re making profits off of that money, and you’re taking all the risk. And, when you need the money the most, you can’t get it.
When you follow conventional wisdom strategies, you may make money or you may lose money, but there are two things for certain: you will pay fees and you will pay taxes.
By following conventional wisdom, we’re parking our money in these accounts and it’s inaccessible when we need it the most. The money stops flowing. But how do we allow ourselves to still earn interest on our money and still earn continuous compounding of that interest and make the purchases that all of us need to make throughout our lives?
That’s why we develop the process that keeps your money flowing and more importantly, keeps your money flowing towards you so that you could be in a financial situation where you could make the purchases and still earn interest on your money.
We use specially designed whole life insurance policies designed for cash accumulation to help put our clients back in control of their cash flow. So whether it’s earning interest on your money or paying off debt or making major capital purchases, your money is always working for you.
If you don’t have a policy yet and you’re looking to get started with our process, check out our website at Tier1Capital.com today. Feel free to schedule your free strategy session or if you’d like to learn more about how this process works, check out our free webinar, The Four Steps to Financial Freedom, right on our homepage.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
A lot of times when we’re designing a whole life policy designed for cash accumulations, people will get hung up on the break even point, the time where the cash value is greater than the premiums paid.
But today, we’re going to talk about how you could use your policy before that break even point so you could get financially ahead, even before you break even.
You’ve heard us say it before and you’ll hear us say it again.
It’s not all about the internal rate of return of your policy. It’s how you can put this policy to work for you to achieve your financial goals.
And putting the policy to work for you is critical in helping you to achieve financial independence. And the reason why is really simple.
Every time you take a loan from the insurance company, you are creating financial freedom in your life. Those loans are unstructured. What does that mean? It means you don’t get a coupon booklet, you don’t get a monthly invoice. You actually are in charge of structuring the loan repayment process, and that is complete control.
So what are some ways you can put this policy to work for you before the break even point within those first ten policy years? Well, initially, any small debts that you have, whether it’s credit cards or the you know, the last remaining year or two on a car payment, you can borrow against your cash value, pay off that loan. And instead of having that payment going away from you, you now have that money, that payment, flowing back towards you, into your policy.
You’re going to make the same payment you were making to Ford Motor Credit, back to your policy. The only difference is this you don’t own Ford Motor Credit, you own your policy. So when you make the monthly payment back to the policy, you can use that money again somewhere down the line.
That’s right. You’re going to be rebuilding that cash value by repaying your loan and you’re going to be building that cash value from within by paying that monthly or annual premium.
So now you have two payments per month working for you. You have the loan repayment, which you can access again through the loan feature, and you have your premium which is building and growing your cash value.
You see every single purchase we make and this life is financed, whether we finance traditional through a bank and pay interest to them, or we pay cash and give up the earning potential or growth potential on that money. This is simple finance 101. We’re either going to pay up, by financing, or give up, by paying cash. There are no exceptions.
So the question becomes, how do we put this law of nature to work for us? And the answer is with a specially designed, whole life insurance policy designed for cash accumulation. Why? Because we have guaranteed access to that money, and it doesn’t interrupt the continuous compound of interest within that policy. As long as you place it with the right company.
So keep this in mind. Even though you’re using the money to pay off some debt or to make a purchase, your money is still earning interest for you. Uninterrupted compound interest is working for you.
A lot of times we meet with people who didn’t buy life insurance policies for cash accumulation. They weren’t designed for the infinite banking process, but they have a policy that might be ten, 12, 15, 20 years old, even, and they have a lot of cash in there and they can access that cash through the loan feature. They never considered it because they were never told that they can do it.
The point is they have access to money that they can get on their terms and they can utilize that money to make the rest of their money more efficient and make their cash flow more efficient, where they can borrow against their policy, pay off an outside debt, and have that monthly payment now coming back to them by redirecting the payment back to their policy.
Now, if you have a whole life insurance policy, you have a policy loan provision and if you’ve had that policy for a long time, chances are there are some cash value built up within that policy. Not as much as it would have been with a specially designed life insurance policy designed for cash accumulation. But because of the second promise that insurance company makes to have the cash value equal to the death benefit at the age of maturity, there has to be cash accumulation within that policy. And this is key to this whole process.
You could access that cash through a collateralized loan. So your money is still in your policy. You get a separate loan from the insurance company. The insurance company puts a lean against the cash value. And now you can utilize this money that you get through the loan to pay off outside debts or to make purchases. It’s almost as if your money is in two places at once because, quite literally, it is. It’s always in your policy working and you can access that equity through a loan feature.
Now we’ve seen our clients use their policy loans for all sorts of things because, quite frankly, there’s no limits. There’s no qualifications for obtaining these loans as long as there’s cash value in the policy, you have access to the loan. You can make major capital purchases like a wedding, cars, vacation. You could pay off debt, you could send your kids to college using these policies.
The only limitations are in your imagination on how you want to put this policy to work for you.
There are many examples of famous people who have access to cash value in their life insurance to start their now famous business. One great example is Walt Disney. No bank would loan him money to buy swampland in Central Florida, but he had a vision. He also had a sizable life insurance policy that he was able to borrow against the cash value to start purchasing land in central Florida. And we all know how that ended up. He created the happiest place on earth, Disney World.
If you’d like to get started with a specially designed, whole life insurance policy designed for cash accumulation and some ideas on how to put the policy to work for you, even before it breaks even. Check out our website at Tier1Capital.com to get started with a free strategy session today.
Or if you’d like to learn more about how we put this process to work for our clients, check out our 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.
Have you considered getting a life insurance policy but you’re turned off by the idea of an insurance physical? When it comes to life insurance underwriting, there are two main components that the insurance company looks at.
The first is financial. They’ll either look at a loan, your net worth, or your income to determine how much death benefit you qualify for. Just as you cannot over insure a building for more than it’s worth, you can’t ensure a human being for more than they are worth.
The second component of life insurance underwriting is the medical component. This is where the insurance company will assess your risk from a medical standpoint. They’ll do a deep dive on your medical history and review questionnaires and often order medical records or an insurance physical.
However, with these new advancements in technology, a lot of companies are using algorithmic underwriting where you don’t necessarily need an insurance physical. Especially if you’re young and healthy. We’ve managed to foster a few relationships with insurance companies who offer an express or algorithmic underwriting process, which means that the insured doesn’t necessarily need an insurance physical if they meet the qualifications of these program.
How the process works is we fill out medical questions, send it to the insurance company. The underwriter determines whether or not they need an exam, and if they don’t need an exam, the policy is issued within a day or two. If they need an exam, then they go through the process. But the key is you might have that option where you don’t need an insurance physical.
One caveat to this process is sometimes the insurance company will still order medical records, which can take more time and still allow them to go through the express program without an insurance physical. The key is to save you time and headaches of having to schedule an insurance physical. Most companies allow this to happen between the ages of 18 and 60 and for up to $1 million of coverage.
So if you’re looking to get started with a life insurance policy, whether it’s term whole life or a specially designed whole life insurance policy designed for cash accumulation, this may be the solution for you without an insurance physical.
When people find out how powerful, specially designed whole life insurance policies designed for cash accumulation are, oftentimes they want to put in as much money as possible on a monthly basis. Today we’re going to answer the question of how much premium is too much premium?
Just the other day we got a phone call from a client and they said, “Hey, I would really like to run all of my lifestyle expenses and all my major capital purchases through this policy. Is that possible and what would the benefits of that be?” In order to answer that question. We need to first step back and take a look at how things are done normally without the infinite banking concept or without a specially designed whole life insurance policy.
So every week or every month, money flows into your life. Money flows into your household or to your business. It could be your income from work, your income from your business. It could be passive income from real estate or other investments. It could even be an inheritance. Money comes into your life, and from there you pay your expenses. So think about it. Once the money gets into your account, into your checking account. There’s only four things you can do with it.
Number one, you could spend it.
Number two, you could save it.
Number three, you could invest it.
Or number four, you can defer it into the future through a qualified retirement plan. Things like IRA’s, 401K’s, 403B’s are examples of qualified retirement plans. And with those, you defer the taxes into the future.
Another word for defer is postpone, so that money comes into the account tax free. But when you take it out, it gets taxed.
The key here is you’re not necessarily saving taxes. All you’re doing is postponing the tax into the future when hopefully you’ll be in a lower tax bracket. But that begs the question, is that really what you want? Do you really want to be in a lower tax bracket in the future? And if you are, wouldn’t that indicate that you weren’t really successful at saving money?
So now that we’ve identified the four things that could happen to your money once it comes into your life, let’s just focus on, the spending aspect. Once what money comes into your checking account and you spend it on your lifestyle, necessary expenses, your mortgage, your rent, that money is lost and gone forever. And what we mean by that is you no longer have the opportunity to earn interest on that money.
So money comes into your life and you use it for lifestyle. You make any type of expenditures, regular bills, etc. Once you do that, the money’s gone, never to return. So what can you do to change that? To make it advantageous to basically pay your bills?
Well, it’s like this. When the money comes in, take a portion. Not all of it. Take a portion of it and put it aside in a specially designed life insurance policy and then you could access that cash value through the loan feature to pay for major capital expenditures like paying for a car, a vacation, or maybe your children’s college education.
The key here is you got to make payments back. But once that policy is built up and capitalized, maybe you’ll be in a position where you can save more money and start a second policy or a third policy. And then as those policies build up, then you’ll be able to access more and more of the cash value through the loan feature and utilize that to offset some of your lifestyle expenses. So this process allows you to both make your regular purchases and save so you’re never draining that tank and you are able to earn uninterrupted compound interest on your money. Because once you drain that tank, you’ll never see the interest you don’t earn on that money.
So now you always have a portion of that money working for you rather than for someone else. A way this could practically be implemented in your life may be paying off credit card debt. Maybe you have a credit card debt and you’re paying as much as you can every month and you’re putting hundreds or thousands of dollars towards this credit card debt, trying to knock it out.
What if instead, you took that excess payment, put it towards the policy, and built up cash value to then repay the credit card debt with a policy loan? Then as you repay the policy loan, you’re rebuilding your own capital instead of Visa’s or MasterCard’s.
So let’s back up to the question we started with. How much premium is too much premium? And it’s all about your cash flow. The last thing you want to do is overextend yourself with a monthly premium payment and not be able to sustain this policy.
Once you start a policy, you never want to get rid of it because the longer you have it, the better it gets. Most of the big benefits are on the back end. Nelson Nash used to tell me, “Tim, this is not a get rich quick type of strategy. This is a long term.”
He used to say, “Remember, I was trained as a forester. Foresters think 70 years in advance.” I may not be here, but somebody will. And if we set this up properly, somebody can benefit dramatically from that planning that you’re doing today. But the key is you’ll also be able to have access, liquidity, use and control of that money and continue to earn dividends and uninterrupted compounding of your money.
So the answer is, it will depend on your specific situation, your cash flow coming in, and your monthly expenditures that aren’t really changing things like your utilities, your food bill, your mortgage. You don’t want to run everything through the policy, but you have the ability to run some major capital purchases through the policy.
If you’d like to get started and learn how to put this practice to work for you and your specific situation, we’d be happy to talk to you. Hop on our calendar at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about how we put this process to work for our clients, check out our Web course the Four Steps to Financial Freedom.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
So you’re ready to request a policy loan and you’re wondering exactly what’s going to happen. You may be wondering how do you request a policy loan and what does that look like? It depends on the company. And some companies allow you to request a policy loan via a phone call, a physical form, or a web form.
Now, a key distinction between a policy loan and a regular conventional loan is that you’re not asking permission to access this money within your policy. You’re giving an order to the insurance company. You’re saying, “Hey, I have cash value in my life insurance policy, I have equity. I’d like to take a loan against that equity, send me a check.” And they’re saying, “Oh, I’m checking this money. You have it. Here you go. Take the loan and we’ll talk to you later.”
A policy loan will not reduce or go against your credit score. And whether or not you make a payment or you’re late on a payment on a policy loan won’t affect your credit score. Again, you’re giving an order versus asking permission. This is a big deal when it comes to, let’s say, losing your job or becoming disabled, because when you’re applying for a loan conventionally in these circumstances, you’re asking permission.
You’re going to the bank or the credit company and you’re saying, “Hey, this is what I have. Can I have some money?” And they’re going to say, “How are you going to repay it? Can you prove that you can repay this money? And if not, they’re not going to allow you access to their capital.” But with a policy loan, that’s irrelevant.
You see, the key here is that the entity, the life insurance company that is giving you the loan is also the entity that’s guaranteeing the collateral. They’re actually figuring out how much equity you have in your policy and loaning to you against that equity. It’s called a collateralized loan. Not only is it a collateralized loan, but it’s also an unstructured repayment schedule. And what that means to you as the policy owner is there’s no payment schedule set up for you.
A lot of times clients will come to us and say, “Hey, I have X amount of money to put towards my policy loan per month. How long is it going to take?” Or, “Hey, I want to pay off this policy loan in two years or five years. How much do I have to pay to accomplish that goal?” And you see, this is key because being unstructured or having an unstructured loan repayment allows you to pay back the loan within your cash flow. You’re not pinching your cash flow to fit into the amortization schedule or the terms and conditions that a bank or a credit company gave you. You’re literally fitting the monthly payment into your cash flow to accommodate your life, not somebody else’s.
There’s a delicate balance between paying your policy loan back too slowly and paying your policy loan back too quickly. When you pay back too slowly, you run the risk of the interest accruing and not covering the interest expense. And what happens is if you don’t pay it at the end of your policy year, it gets tacked on to the balance.
However, when you pay yourself back too quickly for your own cash flow, you do have the option of just taking another policy loan so you feel less pinched going forward. But the key is now you’re in control and you make the decision as to how soon or how long it takes you to pay back the loan. You also make the decision if you want to take another loan. The key benefit of repaying your policy loan is freeing up that cash to be available for you and your financial goals in the future.
Another thing that happens when you take a policy loan is uninterrupted compounding of interest. Now, this only occurs with certain types of companies. They have to be mutually owned by the policy holders, and they need to recognize non-direct recognition so that dividends aren’t affected by a policy loan balance. But the key is your money is continuing to grow at the same pace that it would have had you not borrowed. So the only cost is the interest cost.
Basically what this means in plain English is that your policy will continue to grow the exact same way with the policy loan as if there was no policy loan at all. So your money could in essence be in two places at one time because you never drained the tank. The money is still within your life insurance policy, but you have a separate loan where you have access to that money to accomplish your financial goals, whether it be taking advantage of an opportunity, paying off your debt, or sending your kids to college.
And that’s the key. With a collateralized loan, your equity stays in the policy. The insurance company puts a lean against your equity, and they give you a separate loan from their general account. And as you pay that loan down the equity increases, it’s really that simple. Because a policy loan is a collateralized loan and your money continues to grow uninterrupted compounding, you’ve literally tapped into what’s known as multi duty dollars. It’s as if your money is in two places at once because quite frankly, it is. Your money still growing in the policy as it would have had you not borrowed and you were able to obtain a loan to do whatever you want, whether it’s to make an investment or to pay a bill or to pay off an emergency. Talk about efficiency.
When you take a policy loan, you’re taking a collateralized loan against the cash value. But think about this. You still have all the benefits of your life insurance policy. Now, the death benefit is reduced dollar for dollar, but you still have that death benefit. You may have other riders like a terminal illness, a critical illness, or a disability waiver of premium. Plus, you’re able to use that loan for whatever you want. Maybe it’s growing your business, maybe it’s taking advantage of a market opportunity or investing in real estate or anything else that you may see as an opportunity out there.
So this is what we mean when we’re talking about multi duty dollars. Your money is in the policy. It gets all the benefits of the policy, the death benefit, any additional riders. And you’ve used it to either make an investment, take advantage of an opportunity, or to clean up an emergency.
When you’re thinking about taking a policy loan or you’ve taken a policy loan, keep these issues in mind.
Number one, you’re giving an order, not asking permission.
Number two, unstructured loan repayments, which means you can pay it back within your cash flow and on your timetable.
Number three, uninterrupted compounding. Your money continues to grow as if you never tapped into it.
Number four, multi duty dollars. You’re getting $1 to do the job of three, four or sometimes $5.
You see, it’s all about maintaining control and efficiency of your cash flow and your money. You want to maintain complete liquidity use and control of your money so that you’re able to continue to grow the money and still accomplish your goals like sending your kids to college or taking advantage of opportunities.
If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation and put this process to work for you, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.
Are you looking to start down the path of financial freedom and wondering where you’re going to find the money to start saving?
This circle represents all the money that will pass through your hands throughout your life. Your circle is larger than some and others are larger than yours. But we all have one thing in common, and that is we want our circles to grow.
Every dollar in your circle of wealth is broken up into three categories.
First is accumulated money. That’s the money you have saved and invested. Second is lifestyle money. That’s the home you live in, the car you drive, the schools or the colleges that your children go to. They’re all lifestyle expenses. And finally, there’s transferred money. Transferred money is money you’re giving up control of unknowingly and unnecessarily. Two key words unknowingly means you don’t realize it and unnecessarily means that working together, we can fix it for you.
You see, our focus is on making your money more efficient. How do we regain control of that transferred money and put it to work for you, your business, and your family.
Have you experienced this?
You sit down with a financial advisor and the first thing they say is, show me what you got. So you give them all your statements and a listing of all your accounts and assets. And the next thing they say is, well, you’re earning X. We can show you how to earn X plus something else, but you’ll probably have to take a little more risk to do it. Now you have to make a decision. Do you want to take more risk in order to build your wealth?
Let me ask you this question. Have you ever taken risk and not gotten the reward in the past?
The second scenario you may have experienced with a traditional financial advisor is looking at your lifestyle, cash flow and seeing where you could cut back so you’re able to save more. But let’s face it, if you could be saving more, you probably would be. How many subscriptions can you cut out a month to save more, and will that really help you reach your financial goals?
So if you’ve ever had an experience with a traditional financial advisor, the two bullets they have is move your accumulated money to them because they’re going to manage it better or reduce your lifestyle in order to save more for the future.
But nobody’s talking about this third piece of your circle, and that’s transferred money. And this is where we can help you. This is where we have been uniquely trained to identify exactly where you’re giving up control of your money unknowingly and unnecessarily.
What if there was a way to achieve your financial goals no matter what they are, without reducing your lifestyle or without taking on additional risk? Wouldn’t you want to know about that?
Our unique ability is to point out exactly where you’re giving up control of your money. The question is, will you stop doing it? Because understand, it’s things that you’re doing that you think are moving you forward but in fact, are actually holding you back.
No one wakes up in the morning and says, “Hey, how can I mess up my finances today?” No, we all think we’re making the best decisions that are moving us forward to reach our financial goals. But we’re here to say that there are some areas where you may be giving up control of your money, and there are five areas of wealth transfer that we help identify.
The five areas of wealth transfer are taxes, how you pay for your mortgage, how you pay for your retirement, how you’re sending your children to school, whether it’s college, high school or grade school, and how you’re funding major capital purchases like cars, weddings, or anything else that you can’t pay out of monthly cash flow.
Our process is really simple. It’s four simple steps.
Number two, and this is the hardest step. You have to agree to stop doing it. Now, think of this. What would happen to your circle of wealth if you were giving up control of your money and you stopped doing it? Wouldn’t that have a positive effect and grow your circle of wealth?
Step three is to save the money in a specially designed life insurance policy so that you have access, liquidity, use and control of that money whenever you want, for whatever you want. No questions asked.
And step four is where the magic happens. This is where you borrow from yourself and pay interest back to yourself for things like major capital purchases, sending your children to college, buying vehicles, going on vacation, whatever a major capital purchase would be for you.
If you’re saving and growing your circle of wealth, using your savings to fund your lifestyle, your money never leaves your control. And what effect do you think that would have on your circle of wealth? By using our system, you can regain control of your money to grow your circle of wealth. And if you understand how this works, your money never leaves your control.
When thinking about growing your circle of wealth. We always say it’s not what you buy, it’s how you pay for it that really matters.
If you’d like to get started with a specially designed, whole life insurance policy designed for cash accumulation and see if this makes sense for your situation, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.
