Personal Finance

Imagine having a pool of cash that you own and control that’s large enough that neither you nor your family ever has to use traditional banking systems ever again. Now there may be an interest that needs to be paid on those loans, but imagine having death benefit to recoup the interest lost over those years of financing through this family banking system. That is power.

So here’s a recent example. We have a client who set up a policy several years ago and had absolutely no intention of borrowing against the cash value. The policies were purchased to fund a buy-sell agreement and to create an exit strategy for the principles in this business.

At the time of purchase, I had mentioned “Hey, this money is accessible if you need it.” But think of this. The interest rates that they were able to get from a bank were about two, two, and a quarter percent on a business loan.

Well, fast forward to last week. He had just purchased two trucks and had called and said, “Hey, what’s the interest rate to finance if I borrowed against my life insurance?” We told them it was 5.35%. His response was, “Sign me up.”

Whoa, what changed? He goes, “Well, it’s real simple. We borrowed to buy these trucks on our credit line. I got the interest statement. It was nine and a half percent.”

So think of this, he was going to pay 4% more interest on the same amount of money. That was an increase in interest payments of 75%. The interest rate is one thing, but a more important thing is that he was able to call up and say, sign me up. And that’s literally all it took. We sent him a form. He’s going to sign it, send it back, and submit it to the insurance company, and they’re guaranteed to send him the money because he has access to the money. This is the importance of having liquidity, use, and control of your money and regaining control of that finance function in your life. 

When he draws on his credit line, every couple of years he has to provide financial statements and literally reapply for the privilege of getting that loan. And what happens if he doesn’t qualify? No loan! And what if he has a balance? Well, if he has a balance, the balance comes due. The point is that the bank is always in control, but when you’re borrowing against your insurance, you’re always in control. 

So let’s transition over to how this could apply to your family banking system. By creating these policies, they become pools of cash, money that you have full liquidity, use, and control of that you’re able to use while you are alive. So you are able to take loans for yourself. Maybe you’re going on vacation, sending your children to college, getting out of credit card debt, or putting a down payment on the house, the options are limitless.

Imagine that you have a pool of cash large enough that you’re able to take control of the finance function for your family members as well. So imagine your children want to buy a house, want to start a family, want to start a business, want to buy a car, want to get married. They come to the family bank for financing because heck, since we are dealing with life insurance, one day hypothetically, this death benefit is going to be passed along to them anyway. So they’re borrowing from the family’s money that’s going to be passed on to the family, and they’re still entitled to a death benefit.

A death benefit that’s tax-free, that’s passed outside of probate, and that’s guaranteed that will allow you to recapture those costs, those finance costs, those insurance costs in the long run, and allow you to create generational wealth for generations to come.

This really underscores the importance of being in control of your money. If somebody else is controlling your money, they’re controlling your life.

If you’d like to learn more about how to put a family banking system in place for you and your family and your business, hop on our calendar by clicking the ‘Schedule your Free Strategy Session’ button. We’d be happy to chat with you about your specific situation.

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

Do you realize that we finance every single purchase that we make, whether we pay cash or borrow? Conventional wisdom has taught us that debt is bad and should be avoided at all costs. So what’s the difference between financing and debt?

Let’s start off with defining what debt actually is. Debt is making a purchase any other way than out of monthly cash flow, which means you have to finance. Now, what people don’t realize is if they borrow from a bank, they understand that they’re financing with the bank. What they don’t realize is that if they’re paying cash, it is actually a form of finance. It’s called self-finance. So you’re either going to pay interest to a bank or give up interest by paying cash. There’s no other way around that.

This concept is called opportunity cost, the cost of the interest that your money could have earned had you not spent it. One of the basic things that I’ve seen is that most people don’t realize that most or all of their debt is incurred to pay or fund current lifestyle expenses. They’re paying for their current lifestyle by either borrowing from a bank or a credit company, or liquidating assets. This is more true than ever with sky-high interest rates as well as inflation. The costs of goods and services are sky-high right now, and our income oftentimes isn’t keeping up.

So let’s look at some data. In Q4 The New York Fed came out with their household credit report. Household credit is up $16.8 trillion, which is up 2.2% from Q3 of 2022. Credit card debt topped $986 billion in Q4, which was up 6.6% from Q3 of 2022, which was the highest quarterly growth rate ever recorded. Now, in Q2 of 2023, credit card debt soared over $1 trillion for the first time in history. So, yes, debt is up. So the proof is in the pudding. Most people right now are supporting their current lifestyle. They’re not reducing it because the costs of goods and services are going up. They’re maintaining it using their credit cards.

So again, let’s take a look at what debt is, right?

When you’re in debt that means you’re obligating your future earnings to pay for something you bought today. Now, if you don’t have the assets to back up the cost of the purchase, you’re in debt. What we’re talking about is collateral. Does your debt have a piece of collateral to support that debt should something go wrong?

For example, a car loan has the collateral of the car. A mortgage has the collateral of the property. You’re not in debt If you borrow $10,000 and you have $10,000 in assets. If you borrow $10,000 and you don’t have $10,000 now you’re in debt. And if you’re liquidating your assets because you don’t want to be in debt, eventually, you deplete all of your assets and now you’re stuck with only one choice, which is to finance. Trying not to get into debt, only to get into debt doesn’t make sense. It’s a slippery slope. 

One way to combat this is with a specially designed whole life insurance policy designed for cash accumulation. With these policies, we’re able to help our clients build a pool of cash that they own control and have access to with no questions asked. That way they’re able to collateralize against that cash value access money from the insurance company and go off and purchase their major capital purchases, whether it be cars, weddings, vacations, other investments, real estate property, or starting your own business. The possibilities are endless.

The key is the insurance company will not loan you more money than what you have in equity in your policy. So you’re never in debt. You’re financing your choosing to use somebody else’s money to make your money more efficient. That’s the moral of the story. How can you make your money more efficient by using other people’s money? And that’s what we teach our clients. We teach them the difference between debt and finance, and we teach them how to choose the right path for them.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation, be sure to schedule your free strategy session.

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

One of my most frequently asked questions is how many policies should I have and whether is there a benefit to having one big policy versus several smaller policies. When deciding what the best policy for you is, you may be wondering how much premium is too much premium and what is the benefit of having multiple policies working for you.

And the answer is, it depends. It depends on how much income you have, how many assets you want to use or deploy into policies, and whether you have business interests. Do you have a family? How many children do you have? All of these factors weigh into making the proper recommendations for you.

You see, the bottom line is this going into this, it’s all about you. It should never be about the adviser. Unfortunately, we have seen several times where the adviser put their interest in front of the client.

When thinking about how much premium to use, I always ask the client what’s a comfortable number for you. How much can you afford to save on a monthly or annual basis? Using our growth process, we’re able to find the money, money that you’re giving up control of unknowingly and unnecessarily.

But the question still comes back to you, how much of that money do you want to use to get started with this process on your path towards financial freedom? We could never answer that for you because it’s not our money. And you see, that’s one of the keys to having a process where we could actually find additional money for you.

Recently, we worked with a client who said that they could afford to put away about $1,000 per month, and that was great. We set up their initial plan using the $1,000 per month. But in the course of working with our process, we found an additional $1800 per month that was already in their cash flow. It was just being utilized inefficiently.

My response to them was, “Hey, here’s another $1800. What do you want to do with it? Do you want to put it in your lifestyle or do you want to continue to save and add to your program?” Their response was, “Well, it was already in our cash flow. We basically don’t need it for lifestyle. Let’s save it.” The bottom line was we let them know that at any time they could cut that $1800 in half if they wanted to, because of the way we had structured the plan.

So the question remains, how many policies are too many policies? Do I really need more policies? And for me, I have multiple policies because when I got my first policy, I was 22 years old, fresh out of college. I couldn’t afford much premium. However, as I built my income year over year, I was able to put away more and more of my money because my goal is to save 20% of my income. And for me, my policies are a way to do that in a structured way where I don’t have to think about putting money away because it’s automatically deducted from my bank account.

And basically, I was in the same situation. I started off with small policies. And then as time went by, I built larger and larger policies. And I’m saving over 25% of my income. But the bottom line is you have to find a place that’s comfortable for you. And that’s where we could help you,

It’s not enough to say how much can you comfortably afford. The question is really how much can you comfortably afford in good times as well as bad? Another thing to consider is these policies are actuarially designed to get better and better over time.

For example, in the first policy year, you could expect about 50% of that premium deposit to be available in cash value. However, in the fifth year, I could expect, dollar for dollar, once I put that premium in, I’ll have a dollar of cash value that I could leverage against.

Allowing that laddering effect could allow me to have an efficient policy and then build on build on my policies with another policy and allow that one to get efficient as I go along in life.

But see, the bigger question is this: it’s not so much how many policies should you have. It’s really what kind of policy should you have. Should you have extended pay or compressed pay? And that’s where we can help as well.

So here you are, you want to get started with the infinite banking concept so that you can control the financing function in your life, but you’re not sure how many policies you should have or where you should start. Therefore, we created a process that’s client-focused so that we could help you get clarity as to how much you should be starting with and how many policies you should have.

If you’d like to get started with this process, schedule your free strategy session with us today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.

Are you getting started with the infinite banking concept and you’ve heard that you should be building a system of policies?

When it comes to starting your banking system, the most important piece of advice that I give people is to start where you are. Start with whatever budget feels comfortable for your situation at the time.

Ideally, you want to build this banking system, and a system of banking has multiple branches or multiple policies that are accumulated over time. But it doesn’t happen overnight. The key is to start at a place that’s comfortable for you financially and more importantly, is something that you can utilize. Because the more you use it, the better it’s going to get.

As Nelson Nash said, any time that you can control the financing function in your life, you win by default because everybody else is being controlled by the system. If you’re in control of the system, you win by default.

I got my first policy as soon as I graduated from college, and naturally, I didn’t have a job yet, so my policy was only $200 a month. But that was starting where I was at the time. Over time, however, I’ve built more and more policies into my banking system and leveraged them along the way. As we build up that policy and that policy ages and matures by design, actuarially they become more and more efficient.

During the early years of the policy, let’s say I had access to 50% of the premiums that I was paying. However, over time, and as that policy has matured, I have access to more than $1 for every $1 of premium that I’m paying. You see, life situations change. I started earning an income and then as my income has grown, I’ve been able to purchase more policies because ideally, we want to be saving 20% of our income.

However, as our income changes, that’s a moving target. And so it’s important to build that system to accommodate and save efficiently along the way. Not only do I have access to more and more cash, but now I’m making the rest of my money more efficient because I can utilize that money and leverage the cash value I have to make the rest of my money more efficient.

For example, when I wanted to buy a car, instead of paying cash for the car, I borrowed against the life insurance. I was able to maintain control of my cash, and now I’m making a monthly payment back to the insurance company. And that’s important because now I have two hoses filling up this policy bucket.

I have the premiums growing and accumulating the cash value. Plus, I have the policy loan repayments, reducing the lien on my cash value so that I’m growing my cash value exponentially. Consequently, the next time I want to go buy a car or put a down payment on a house, I’ll have access to more cash value within my policy because I’m playing honest banker.

And here’s another analogy. If you’re doing business with a commercial bank, you are flying into a perpetual headwind, but when you control the financing function in your life, you’re creating a perpetual tailwind.

So naturally, we start off by insuring ourselves and maybe our spouses, but over time, it may make sense to build a banking system to include your extended family and your children so that you have multiple lives insured. And that creates a windfall into the family banking system and allows you to create generational wealth within your family.

If you’d like to get started in creating a tailwind instead of flying into a headwind, schedule your free Strategy Session today. Or if you’d like to see exactly 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 and it’s how much money you keep that really matters.

So you’ve heard of life insurance policy loans, but have you ever wondered exactly how the intricacies of policy loans work?

If you have a whole life insurance policy, there’s a contractual provision built into your contract that allows for policy loans. Policy loans are unique in that they’re unstructured, and you have guaranteed access via this loan provision. We usually recommend policy loans for our clients because they’re unstructured and they make the rest of their money more efficient.

You may be wondering how the heck could taking a policy loan make my other money more efficient. Well, there’s a couple of reasons.

First is the fact that it’s a collateralized loan. What that means is you’re not borrowing money from your policy, you’re borrowing money from the insurance company. They’re putting a lien against your policy, which means your money continues to earn uninterrupted compounding interest. It’s almost as if your money is in two places at once.

If you were going to pay cash for something and instead take a policy loan, now you still control the cash, the money in the policy is still working for you, earning uninterrupted compounding of interest and you’re paying a loan back to the insurance company. As that loan balance comes down, the amount of equity you can borrow against rises. You always have access to more and more money as long as you’re paying back the loan and the premium.

With the challenges we’re looking at going forward; high inflation paired with high interest rates, making the most of your money is important. That efficiency that you can achieve by borrowing against the cash value of your life insurance basically gives you multiple duty dollars.

The next benefit of using a life insurance policy loan is this unstructured repayment schedule, meaning you as the policy owner get to determine the amortization of that loan. You could set it up on a monthly basis for an amount that matches your budget or pays off the loan within a certain time period, or you could contribute lump sums towards that policy loan to knock it down when you have, let’s say, a bonus or a windfall of money, come in or you could pay just the interest. And it’s not required that you pay back the policy loan, although it is recommended.

Let’s say you set up the loan repayment for $400 again, that’s your decision. But three or four months into it, you realize you need more monthly spendable income. You could reduce that loan payment from 400, let’s say, to 300, or 200, or 100, or stop it altogether. Obviously, interest will accrue, and that interest is paid to the insurance company. However, it gives you flexibility within your current cash flow. That’s another key to making the rest of your money more efficient. 

The insurance company is actually able to make this unstructured loan because they’re the entity making the loan as well as guaranteeing the collateral. They’re on both sides of the equation, meaning they have nothing to lose in the game. If you don’t pay that policy loan back they have the cash value. If the insured dies with the policy loan outstanding, they simply reduce the death benefit dollar for dollar because that money was technically already paid out to that policy owner.

Here’s another note on making your money more efficient. What’s the least valuable asset that you control? Wouldn’t it be a death benefit on your life? You’re never going to spend that money. But think of it this way, by using the loan feature and borrowing against that cash value, it’s almost like you’re becoming the beneficiary of your own life insurance policy.

If you’d like to get started with using whole life insurance to leverage cash value and make your money more efficient, feel free to hop on our calendar using the ‘Schedule your Strategy Session’ button, or check out exactly how we put this process to work for our clients with 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.