Personal Finance

Saving and Eliminating Debt by Leveraging Your Current Cash Flow

I would argue that the number one source of financial stress comes from not having access to money when you really need it. The perfect example of this comes when you end up in too much debt than you could afford. It ties up your monthly cashflow and leaves you in a position where you just are trying to get out. But often people neglect to save and secure their own financial future before getting out of debt.

Total household debt is up to $16.9 trillion for Q4 of 2022, and of that, nearly $1 trillion is credit card debt. Credit card debt had grown by 6.6% in Q4 over Q3. That’s the largest quarterly increase ever recorded.

It’s clear that Americans are being squeezed from every angle. Inflation is up. Interest rates are up and savings is down. It’s getting harder and harder to make ends meet. So it’s no wonder that people are charging on their credit cards. But when you charge on your credit card, what are you actually doing? You’re obligating your future income to pay off that credit card debt and with the interest rate so high, some credit cards are 25 to 30% APR these days. It could be a very heavy interest expense, but it’s what people need to do to get by. However, once you’re in credit card debt and you’re trying to get out, the natural reaction is to put all of your monthly cashflow, all of your extra money towards that debt because it’s draining you.

What people neglect to take into account is that even if you got all that credit card debt paid off, you’re still just at the zero line. You’re no more financially secure than you were when you were buried in debt.

You went from a position of having very little cash flow and no access to money, and now you’re out of debt, but you’re still in a very precarious situation financially.

This is why we think it’s important to both pay off your credit card debt, but also save for your future, to accumulate a pile of money that you own and have full liquidity use and control over to protect you and your family.

58% of Americans have less than $5,000 in savings and 42% of them have less than $1,000 in savings. Most families out there have a very difficult time absorbing a $400 medical bill. And let’s face it, how easy is it to rack up $400 in medical bills today?

Parkinson’s law says that expenses rise to meet income. So if you’re not diligent on saving your raises, guess what’s going to happen? Your expenses will rise to meet your income.

Another way to look at this is with the student loan debt. A lot of people stopped paying their student loans during the pandemic because of the forbearance. Didn’t they in essence, give themselves the raise? What’s going to happen when those payments resume and their cash flow is going to be pinched for the amount that they’re going to have to repay back to the student loans?

You know, we talk about this all the time, but really, there’s no such thing as a free lunch. Our capital also has a cost, and sometimes we don’t recognize that. In essence, what’s happening is we’re taking care of our current lifestyle wants and completely ignoring our future lifestyle needs.

One of the ways we help our clients is by using specially designed whole life insurance policies designed for cash accumulation so that they’re able to build a pool of cash that they’re able to leverage to pay off their credit card debt and achieve their other financial goals without interrupting the compound interest curve.

If you’re interested in learning more about how to manage your debt and your savings, check out our website at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about how exactly we will put this process to work for our clients, check out our Four Steps to Financial Freedom Webinar right on our homepage.

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

Are You Saving Enough to Reach Your Retirement Goal?

It’s pretty safe to say we all have one goal in common, and that is to eventually retire. Today, it’s harder than ever to save for your retirement. Americans are being squeezed from so many different directions. Income is down, inflation is up, the savings rate is down. How are we going to be able to save as well as live and survive to get to retirement?

One day you’re going to want to turn your income off, stop working and start taking distributions from your accumulated funds. We call this Position A. Having enough money saved up and accumulated to support your current standard of living, adjusted for inflation, so that you don’t run out of money before you run out of life.

So how do you know if you’re on track to meet this goal? How do you know if what you’re saving in your company 401k plan, 403b plan, IRA, or other investments is actually going to get you to your Position A.

Well, there are four questions that everyone needs answered in order to know whether or not you’re on track. First and foremost, what rate of return do you need on your savings and investments to get you to Position A? Second, how long do you need to work in order for you to get to Position A? Third, how much more do you need to save in order to get to Position A? And number four, how much will you have to reduce your current lifestyle in retirement in order to not outlive your money?

Knowing the answers to these four questions is vital to make sure you’re on track to meet your Position A. Another thing to note about these four questions is that the answers are going to be noted in future dollars, meaning adjusted for inflation. Currently, inflation’s between 6 and 7%, so the government says, and we want to make sure that you have enough so that your dollars could buy the same amount in the future as they’re buying today.

The point is, this is not a simple calculation.

The fact of the matter is we’re trying to hit a moving target and in essence, we’re trying to plan for certainty during uncertain times. However, as with any goal, in order to know how to get there, you need to first know where you’re going, and then you can make a plan on how to achieve that goal of getting to your Position A and retiring so that you’re not going to run out of money before you run out of life.

 

If you’d like to know the answers to the four questions as it relates to your specific financial position, check out our website at Tier1Capital.com and hop on our calendar for a free strategy session. We’ll be able to answer them in about 15 minutes.

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

Escaping from Credit Card Debt

Credit cards could be a great financial tool if used properly. They give you instant access to capital and if you pay them off before the credit card due date, you don’t have to pay any interest. Unfortunately, some people get into a situation where they’re carrying a small or large amount of credit card debt that could really weigh down their ability to succeed financially.

Additionally, participating in a tax qualified retirement plan like a 401k or an IRA is a good idea as well. However, what happens when you combine having credit card debt with your participation in a tax qualified retirement plan?

Sometimes people come to us and say, Where do I get started? Do I pay off my credit card debt? Or my student loans? Or do I start saving first? And to that question, we answer, “What if you could do both?”

Credit card interest rates could go anywhere from 18 to 30% these days with an interest that high carrying any credit card balance could become stifling because of the amount of interest being charged each and every single month.

When you combine high interest rate credit card balances with your participation in a retirement plan such as a 401k, that creates a double whammy where you’re saving money in an area that you can’t access. And along the way, you’re paying a hefty interest rate just to get out of debt.

A lot of times people who are carrying a credit card balance and contributing to their retirement plan can feel stuck and suffocated financially because they have no access to cash flow. Hundreds of dollars every month are going towards credit card interest, and hundreds of dollars a month are going towards an area where they don’t have access to that money.

So where does that leave them as far as their short term financial goals? The strategy of where you’re saving your money and the strategy of how you’re using your money need to be coordinated to give you the best results.

Typically, if someone comes into our office and says, “Hey, I’m carrying this heavy credit card balance and I’m contributing to my retirement plan every paycheck”, the advice we might give them is to pause on the retirement until we could get a hold and a handle on this credit card debt, because, like I said, that interest rate can be stifling on your ability to save for your future.

And a lot of times when we see people in that situation, we’ll ask them, how long have they been doing this? And they’ll look and say, “Well, we’ve been doing this for a long time. It seems like forever.”

Well, that situation keeps perpetuating itself. Because what happens is sometimes you start getting that credit card balance paid down, but then you run into a financial or a medical emergency, and that means you’ve got to put more money on a credit card because you don’t have access to any of your money. Why? Because all of your savings is in your retirement account. Again, try to coordinate, where you’re saving your money and how you’re using your money, can give you tremendous results on the back end.

Every situation is different. A heavy credit card balance for some people may be a few thousand dollars. In some extreme cases we’ve seen people with over $100,000 of consumer debt that they’re carrying each and every single month.

But with great debt and great cash flow comes a great opportunity. With some simple shifts, you may be able to get out from underneath that credit card debt by building your own pool of cash that you have access to to start chipping away at the debts one by one.

The ultimate goal is to put you in control of all of that cash flow that you were using to get out of debt or to pay on your credit card. Imagine the impact it would have if you had control of every single dollar that you’re currently putting toward your credit card debt.

Imagine what goals you’d be able to accomplish, like putting a down payment on the house, starting a new business, paying for your car, or simply retiring one day.

This is a simple concept. If you step back, literally what we’re doing is converting liabilities into assets. Any time you can convert a liability into an asset, you win.

The mechanism of this strategy is redirecting excess debt payments from the credit card company and putting it in a specially designed whole life insurance policy designed for cash accumulation so that you could build a pool of cash that you have access to that you own and control.

As you build up that pool of cash, you’re able to borrow against the cash value within the policy and start knocking away at the credit card debt so that you slowly begin to earn more and more control of your cash flow. As you pay off those credit card debt, you redirect those payments to your policy loan so that you’re building your policy with your premiums as well as the loan repayments, and you’re able to pay off debts quicker and quicker down the line.

There are two huge advantages to this. Usually you’re paying a much lower interest rate to the insurance company. Currently, those rates are about five, five and a half, maybe 6% on the high side versus paying 18 to 25 or 30% on a credit card. So clearly you win there.

A second benefit is that as you’re paying back the policy loan, you get to use that money again to pay off another credit card and therefore have more cash flow redirected back to the policy that you are in control. And slowly but surely, you’ll have all of your debt payments coming into your policy and you own and control the policy. Therefore, again, converting liabilities into assets.

The most important step is the first one. If you’d like to get started and learn more about how we could put this process to work for your specific situation. Visit our website at Tier1Capital.com. Feel free to schedule your free strategy session today. We’d love to talk to you.

Or if you’d like to learn more about 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. It’s how much money you keep that really matters.

Redirect Your Cash Flow Back to You

A lot of people don’t have the time or the motivation to do a deep dive into their finances. And other times people say to us, “Hey guys, I’m not giving up control of my money in any of these five areas of wealth transfer. How do I get started with saving for my short term, intermediate and ultimately retirement savings goals with this concept?”

We talk about the five areas of wealth transfer where we look to find where people are giving up control of their money unknowingly and unnecessarily. Those five areas are: taxes, how you’re funding your real estate, how you’re funding your retirement, how you’re paying for your children’s college education, and then how you make major capital purchases.

But what if you’re not giving away control of your money in any of those five areas of wealth transfer? Does that mean that your cash flow is already as efficient as possible?

But that may not necessarily be the case.

The fact of the matter is, most of your income is flowing through your system, through your checking account, and going to pay for lifestyle or to be reinvested or to help you grow your business.

 

In many situations, we’ll review how people are using their money and we’ll look at those five areas of wealth transfer and we’ll be able to identify areas that they’re giving up control of their money unknowingly and unnecessarily, and show them how that if they just stop doing that, their circle of wealth will grow. And, if they redirect that same cash flow back to an entity that they own and control, they’ll be able to build a pool of cash that they could access, no questions asked, without having to get permission, in order to expand their business or their personal lifestyle.

In that type of situation, it’s easy for us to identify the leaky holes in your personal economic model or in your bucket, if you will. We’re able to plug those holes and fill up the bucket with money. But if you don’t have any holes in your bucket and instead your bucket doesn’t have a bottom, it’s important to build that foundation and start with what you can afford to put away at this point and then slowly build up that bucket. Keeping that money as efficient as possible so that you’re able to achieve your short term, intermediate and long term financial goals no matter what they may be.

What we have found is that everybody has financial milestones or goals that they need or want to accomplish, and in that case, starting where you are puts you in a better position to make your money more efficient prospectively as you’re going forward, because the more efficient your money could be, the better chance you have of reaching those milestones and more, more importantly, achieving your goals.

A financial goal could be something like paying off your credit cards, your student loans, saving for a down payment on a house, financing a new car, or eventually one day retiring. No matter what your financial goal is, it’s important to start somewhere so that you’re able to build before it’s too late.

You see, with the compound interest curve, there are only two factors to consider, time and consistently putting away money. The sooner you start that compound interest curve, the better your results are going to ultimately be. This goes back to a point earlier, when we say pay yourself first. Again, the whole concept is to make your money more efficient, paying yourself first, make sure that you’re saving or you’re going to be on track to meet those milestones.

The process we use uses a specially designed whole life insurance policies designed for cash accumulation to help our clients achieve their financial goals. With this product, we’re able to design a policy to meet the cash flow needs of each individual client, and every situation is different.

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation to help meet your financial goals, be sure to visit our website at Tier1Capital.com to get started today. Feel free to schedule your free strategy session or if you’d like to learn more about exactly how our process works and how to put it to work for your family and your situation, 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.

Is My Business Marketable Enough to Retire?

As a business owner, it’s not uncommon to have a majority of your net worth tied up in your business. How do you retire when all of your assets are tied up in the business? What’s your legacy going to look like if your only asset is your business? What happens if your children don’t want any part of the business? This is a situation we see all too often. There are some simple steps you could take to make sure you’re able to retire and not depend on the equity within your business.

Do you realize that over 80% of all businesses are first generation businesses? Meaning that the founder of the business started the business and is still operating and working in the business? Also, less than 30% of all businesses make it to the second generation. So there is a great probability that for whatever reason, your children will not take over the business.

Let’s face it, kids these days have minds of their own. But what does that mean for your retirement? How do you retire if all of your assets are tied up in the business?

There’s an old saying that the benefit of a closely held business is just that, that it’s closely held. And you don’t have to consult a lot of owners or a lot of people when you’re making a decision. The bad part or the downside of a closely held business is that it’s closely held and you’re responsible for everything. So, there has to be a delicate balance between making enough money to operate the business, making enough money to grow the business and making enough money to make sure that you’re independent of the business so that you could leave on your terms.

The fact of the matter is, a lot of small businesses aren’t marketable, and the main reason for this is because the owner is the breadwinner of the business. If the owner was coming with the business, it would be worth a lot more than the business without the owner who’s been running it for however long. So what ends up happening with these small businesses is they’re forced to liquidate any inventory they have and any equipment that they have at fire sale close out rates and walk away, close the doors of the business for a fraction of the price that they would have got had they been able to sell the business as a whole.

So the danger is that you pour all of your profits back into the business by doing so, you’re literally locking up that money inside your business and setting yourself up where you may never be able to get the value of the money you actually put in, let alone a profit.

 

When you first start your business, it’s important to reinvest the profits so you’re able to grow and expand. But as your business matures, it’s even more important to diversify so that you have liquidity use and control of an asset and also have your business to provide income for you and your family.

How do you continue to operate and grow your business while at the same time making sure that your future, or your exit strategy, is independent on having to sell the business?

We recently came across a situation with one of our long time clients who was a business owner for 37 years and he had an offer to sell his business. But because he had over two times the value of the business in other assets, he didn’t have to take the first offer that came along and he was able to wait for the best offer to present itself.

As with any financial planning, taking steps early on to secure your financial future is best. And it’s never too late to start planning. By taking these steps to secure your financial future, you’re setting yourself up for success in retirement and also securing your legacy for your family. You’re not dependent on the sale of the business for your livelihood. Instead, you have a pool of cash that you have access to along the way, and the business to help support your income for you and your family.

This individual took the best offer that was on his terms. By selling his business and getting the best price possible, it was just sort of like frosting on the cake. You see, he wasn’t dependent on the sale of his business for retirement and said he had money set aside, that he had full liquidity use and control that he spent years accumulating so that he wouldn’t have to be dependent on the sale of that business in order to retire.

With cash comes control. And that’s the lens which we look through to make sure that our clients are making the best decisions possible and setting themselves up for growth today and also security in the future.

If you’d like to get started with a plan to secure your financial future for you and your family and your business, be sure to visit our website at Tier1Capital.com. Feel free to schedule a free strategy session. We’d love to chat with you.

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

What is a Limited Pay Policy?

As a young person, the thought of paying life insurance premiums until age 100 or 121 can seem a bit daunting. I mean, who makes commitments for that long, really? But here’s the secret. There are limited pay policies, policies that are paid for X amount of years. These policies can be a great saving solution for young people.

A limited pay policy could make sense in a lot of situations, but it especially makes sense when you’re dealing with these specially designed whole life insurance policies designed for cash accumulation.

By its nature, a specially designed policy for cash accumulation puts extra money into the policy, and a limited pay policy has extra premium because you’re shrinking down the amount of years in which you’re paying the premium from age 100, let’s say, to age 65 or for a 20 year period or a ten year period.

The lower the amount of years of funding, the higher the premium. But again, if you’re designing a policy for cash accumulation, a limited pay policy makes sense because it puts you in a position where, let’s say a life paid up at age 65, there are no more premiums due after age 65. Now you’re collecting checks instead of paying premiums.

But let’s take a step back. We’re saying a higher premium. And what we mean by that specifically is, it’s a higher premium for the set amount of death benefit, which isn’t necessarily a problem when you’re designing these policies for cash accumulation. You’re focusing on the cash accumulation versus the death benefit. And many people, when they’re young, they don’t have a great need for death benefit. So it’s really not a deal breaker.

But the key is you’ll have the death benefit at your life expectancy when you’ll need the death benefit the most. And consequently, if you have a limited pay policy, again, let’s say a life paid up at age 65, by the time you’re 85, there will have been 20 years where you didn’t have to pay any premiums. But you had a completely paid up death benefit that’s actually growing every year because there’s no cost of insurance dragging the return or the growth of the policy.

In my case, I started limited pay policies years ago and it was a simple way to get started with saving. I put away a 500 or $1,000 a year into these policies, and in ten or 20 years they’re going to be paid up completely and the cash value and the death benefit are going to continue to grow and accumulate interest and dividends throughout my entire life, even after the premiums aren’t being paid anymore.

But keep in mind, there is a trade off with a limited pay policy. And what the trade off is, is that’s less money that you could stuff into the policy for any given death benefit. And what that means is your cash value will be slightly lower in the earlier years, but then you have to weigh the cost of having less cash value in the early years versus the benefit of having no premiums in the later years.

But let’s take another step backwards and think about compounding interest. Compound interest curves require two factors time and money. We all know we could never get time back, and it’s important to consistently put money in to these policies to accumulate the best compound interest curve possible. But with a limited pay policy, you’re limited on how much money you’re able to put in.

So again, in my situation, what I do is I have a term policy that guarantees convertibility of that death benefit, and I could create more whole life policies throughout my life as my budget allows. So as I pay up policies I have the cash flow to now convert a piece of my term policy into a new whole life policy and start the cycle all over again.

But the key is I’ll be building capital that I could access everywhere along the way to take care of the things of life, whether it’s buying a car, whether it’s going on vacation or moving across the country. Not to mention for business opportunities.

 

These policies are great for entrepreneurial type people. You have full liquidity use and control of that money to take advantage of business opportunities that come about. So you could earn an internal rate of return within the policy and also an external rate of return by starting your own business and putting that capital to work for you without interrupting the compound interest curve, which is key.

Nelson Nash, the author of the bestselling book Becoming Your Own Banker, put it so eloquently, “When you have access to money, opportunities will find you.”

If you’re considering a specially designed whole life insurance policy designed for cash accumulation, whether the traditional design or a limited pay policy to meet your needs, visit our website at Tier1Capital.com to get started with your free strategy session today.

You can hop right on our calendar, 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. It’s right on our homepage.

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

The Saving Dilemma

We’ve all heard that you should pay yourself first and save for your future. But not everyone does it. Are you saving for your future? Is it 10% of your income? Is it 15? Is it 20? Are you saving anything? And if you are, are you saving in a place where you have access to that money?

Today, we’re going to talk about how to strategically save for the future so that you’re able to meet your long term goals of retirement and your short term and intermediate goals as well.

So a universal financial goal that most people have is to someday retire. But what about your other goals? How do you achieve those as well as your retirement? We call that the savings dilemma. Should you save only for long term goals or should you save for short term goals or should you save for both? And the problem is, once you make a decision whether it’s short term, intermediate or long term, you’re literally eliminating the other choices.

In other words, if you’re saving for long term goals like retirement in a conventional, traditional retirement plan, that means that money is not accessible or available to you for the short term needs that you’re going to have from the time you start saving until the time you go to retire. We call that saving in buckets, but that’s not necessarily the best strategy because you can’t access that money without penalty before age 59 and a half.

But what happens when you want to get married or put a down payment on your house or send your children to private school? Where is that money going to come from?

Now, a lot of times people say, “Oh, well, by the time those events occur, I’ll be making more money”. Well, maybe you will, maybe you won’t. And in all probability you will. But that still doesn’t negate the fact that saving in buckets is a very inefficient way of saving. When we’re looking at savings vehicles for our clients, we’re looking at somewhere where they’ll have complete liquidity use and control of their money without penalty is everywhere along the way.

You see, you may be making more money in the future, but what you can’t recapture is the lost opportunity cost for those years when you’re building up your income. When it comes to compound interest, there are only two variables in that equation and that’s time and money.

With time, we could never make it up. So it’s important to start saving as soon as possible and never jump off that compound interest curve because you could never make up that lost time.

It’s often said the more time you have, the less money you need to put away. The less time you have, the more money you need to put away.

 

The key is if you’re saving everywhere along the way and you have access to that money and you’re never jumping off the compound interest curve, well now you’re in a position where your money is always working for you, but you’re also in a position where you could access that and use it for the things of life, those things that come up, whether they’re emergencies or opportunities.

The most frustrating thing in life is to have an opportunity come your way and you’re not in a position financially to take advantage of it. Why? Because you don’t have access to your money. You see, we believe that there’s more opportunity in protecting yourself against the losses than trying to pick the winners. Our goal is to help you make your money as efficient as possible so that you’re able to achieve your financial goals regardless of what’s going on in the market or the bigger economic environment.

And when we say losses, we’re not only talking about market losses, we’re talking about the lost opportunity of paying taxes, the lost opportunity of paying fees, the lost opportunity of paying interest to an entity that you don’t own or control, and the lost opportunity of having to access your money and jumping off the compound interest curve.

One of the ways we help our clients to become more financially efficient is by using specially designed whole life insurance policies designed for cash accumulation so that they’re able to access their money that they build up for major capital purchases or to take advantage of opportunities or to expand their business.

By utilizing the loan provision within these policies, they’re able to earn continuous compound interest within their policy and still access the cash value to make these major purchases or take advantage of opportunities. So you have the potential to earn an internal rate of return within the policy uninterrupted, as well as the opportunity to take advantage of financial opportunities that come up.

Another benefit of this process is that you’re always paying yourself first. You start where you are with what you can afford, whether it’s 5% of your income or 20% of your income, and you continue to save as a matter of course and your money continues to grow and compound within the policy and all the while you have access to it via the loan provision.

The value of this process is really startling because what happens is wherever you start, whether it’s saving 2% of your income, 5%, 10% over time, you get to a point where you’re saving a significant amount of your income and it doesn’t feel like it’s reducing your lifestyle. Why? Because you have access to all the money that you were able to save in those previous years.

So your savings percentage increases as well as your total net worth. As you build up the cash value within the policy, you have access to that cash to pay off credit cards, student loans, put a down payment on the house. This policy can go with you through all stages of your life. At the end, you have access to it to supplement your retirement income and ultimately to pass down as a death benefit to your loved ones or a charity of your choice.

If you’d like to get started with this specially designed whole life insurance policy designed for cash accumulation to help meet your savings and financial goals, be sure to visit our website at Tier1Capital.com to schedule your free Strategy Session today.

Or if you’d like to learn more about exactly how we put this process to work for our clients, check out our 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.

Preventing Lost Opportunity Cost

What are you doing that’s holding you back financially? When it comes to finances, no one wakes up in the morning and says, “Hey, how could I mess up my financial future today?” No. We all wake up and say, “Hey, how can I move myself financially forward?”

When it comes to finances, there are so many tricks and strategies that all claim to move forward. But the question is how do you make your money more efficient and how do you maintain liquidity use and control of your money?

We all need to navigate the headwinds that we all face, whether we’re business owners and we’re trying to navigate the headwinds that we face on a daily basis to move our company forward, or we’re a family and we’re trying to move ourselves forward financially. We all face the same headwinds. There’s the need for access to money, but if we don’t have money or more importantly, if we have money saved and then we need to access that money for an emergency or to take advantage of an opportunity, we’re going to drain down the tank. We’re going to use that money. And again, we’re never going to see the interest that we don’t earn on that money.

Then there are things like, let’s say you’re saving, there’s going to be taxes on your savings and investments. There’s going to be losses perhaps on your investment. There’s certainly going to be fees on those investments. All of those things are headwinds that we face on a daily basis. And then if we pay a tax, we pay a fee or we experience a loss, then there’s the lost opportunity cost. What we could have earned on that money had we not paid those fees or hit those headwinds or had those losses.

This is why we constantly talk about making your money more efficient. How do we work with what you have to get you as far as possible financially, whether in your family or your business?

Let’s say you have a plane that could fly 100 miles per hour, but you’re flying into a 345 mile per hour headwind. If your plane could only move 100 miles per hour, but you’re flying into that headwind, you’re going nowhere, and certainly nowhere fast. In fact, you’re not going nowhere, you’re literally going backwards.

So the facts are the facts. Your plane could only move 100 miles per hour and we have no control over the wind. But what if, instead of having a headwind, we adjusted the direction we were going and used it as a tailwind to propel us forward?

And that’s literally the type of planning we can help you with or the type of planning we designed for our clients on a daily basis.

We know that the winds are a given. The headwinds that we face are there. How can we work with those headwinds to make sure that we’re taking advantage of them so that now we’re using that wind to propel us forward rather than to prevent us from moving forward?

 

If you’re ready to make your cash and your cash flow more efficient and take advantage of the winds, please be sure to visit our website 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 Four Steps to Financial Freedom Webinar right on our website.

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

Increasing your Business’ Cash Flow Efficiency

As a young business owner, it could be simple to fall into the trap of reinvesting all of your profits back into your business to help that business grow and expand and hopefully grow your income as you go. But today, we’re going to talk about how do we save outside of the business on a systematic basis to achieve your other short term and long term financial goals?

When you first start off as a business owner, there’s not a lot of cash flow that you could take out of the business. You’re just putting all that money into the business to help grow and expand and set a footprint in your space. But once that business is established, there’s some extra cash flow there that may make sense not to put directly back into your business, because, let’s face it, life exists outside of your business. You may have a family, children that you want to send to college, a wedding that you want to pay for, or a home that you need a down payment for. How do you grow your business and still achieve these financial goals?

It’s often been said that the problem with a closely held business is that it’s closely held. And what does that mean? Basically, you make all the decisions, and generally most business owners will make the decision to reinvest all of their earnings back into the business. Not necessarily a bad thing, but here’s what happens. That money is stuck in the business. And if you have other goals outside of the business that you need or want to accomplish, it puts you in a position where you have to choose between your business or your family. And no business owner should have to make that choice.

So the question is how do you make your cash and your cash flow more efficient so your money could be in two places at once. And the way we help our clients to achieve this is by using a specially designed whole life insurance policy designed for cash accumulation. So you have full liquidity use and control of your money to do things like expand your business. But also send your children to college or finance a new car. There is no “or” in this situation, it’s an “and.” How do you do this and that? Not to mention, you could use this tool as a long term solution to achieve your goal of eventually retiring.

So by making your money more efficient, it’s literally like your money’s in two places at once, because quite frankly, it is. And that presents a situation or an opportunity where you have $1 performing two, three or four tasks. It’s multi duty dollars and it really works for a small business owner.

 

What do we mean by multi duty dollars? Well, you’re paying the premium for the life insurance, but you also have access to that money to expand your business or achieve your other goals. But that policy also produces a death benefit for your business or your family. And there’s other riders that could be included.

Those other riders include a disability waiver of premium rider in case you get sick or injured and can’t pay the premium or a terminal illness or chronic illness benefit rider which allows you to tap into the death benefit on a tax free basis to pay for a long term care event or a chronic illness.

Not to mention the fact that if you use the money to grow your business and put it back through the loan feature, when you go to retire, you can use the dividends from the policy to supplement your retirement income and that’ll save you on four taxes. Federal income tax, state income tax, Social Security offset tax as well as not allowing an increase in your Medicare premium. And there’s actually a fifth tax when you die, the death benefit goes to your family in the state of Pennsylvania, outside of state inheritance tax.

Let’s take a look at the loan feature of these policies. Every whole life insurance policy includes this loan feature, but these specially designed policies allow your money to be in two places at once. What do we mean by that?

Well, a policy loan is a collateralized loan against the cash value in your policy. So the money never leaves your policy, but you still have access to it from a separate policy loan given by the insurance company. So you’re able to access cash and still grow uninterrupted compounding of interest on your money.

One of the best features of these policies is that it’s a systematic way to save outside of your business, meaning as you pay your premium and build up your cash value, you have more and more access to cash and your policy becomes more and more efficient as it matures.

So before you know it, you’ll have a pile of cash that you have access to for whatever you want, whether it’s to expand your business or achieve your other financial goals, and you’re able to access it without interrupting the compounding of interest. So you could earn interest within your policy and continue to grow that cash and still make an external rate of return if, for example, you use it to grow and expand your business.

Think of it this way. You have two choices. Choice number one is to reinvest the profits in the business, and the money is illiquid, or choice two is reinvest the money into the whole life policy. The money’s liquid and you can then borrow against that cash to reinvest in your business. So you get to grow your business. But now you have some liquidity.

We look at financial situations through the lens of control. Is this decision going to put you in more control or less control of your cash flow?

If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation. Be sure to visit our website at Tier1Capital.com to get started today. Feel free to schedule your free strategy session. We’d be happy to help design a policy for you and give you a free cash flow analysis to see where we can help you make your money more efficient.

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

Saving vs Investing

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.

Our process aims to put you in control of your cash flow and to make your money as efficient as possible so you don’t have to take on tons of risk to achieve your financial goals.

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.

If you’d like to get started with a cash flow analysis to see how we could help make your money more efficient, check out our website at Tier1Capital.com and schedule your free strategy session today.

Or if you’re interested in learning more about how we put this process to work for our clients, check out our 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.