Retirement Planning

How Long Do I Pay Premiums for with My Policy?

Traditional whole life insurance policies are paid for your whole life, whether that’s age 85, 100 or 121. But sometimes people want to stop paying the premiums at one point and they’re wondering what options they have to maintain some of the benefits of the policy without surrendering.

When a whole life insurance policy is issued, the insurance company is making you two promises. Number one is to pay the death benefit when the insured dies anywhere along the line, as long as that policy is in-force. And the second promise is that at the age of maturity, usually age 100 or 121, there’ll be a cash value equal to the face amount or death benefit of the policy available for the policy owner.

So in order for the insurance company to fulfill that second promise, they have to allow cash to build up. And it’s that cash that builds up that helps them to fulfill the second promise and more importantly, provide some other additional benefits that you can get by accessing that money.

Now, the cash surrender value isn’t just some number that’s pulled out of the air. Actuaries work with the insurance company to determine what the cash surrender value needs to be at minimum, every single year, throughout the contracts life.

Think of the cash surrender value as literally what the life insurance company is willing to pay you to walk away from the death benefit and all the other benefits.

Because of the whole life insurance policy design. These policies get better and better every single year.

In the beginning, there’s not a lot of cash accumulation because there’s a lot of costs that come with getting these policies issued. But as the policy matures, the cash value is going to grow more and more every single year. By building up that cash value within the policy, it gives the policyholders some options and they’re called non-forfeiture options.

Traditionally, there are three non-forfeiture options in most life insurance policies.

First is cash surrender. Again, what the insurance company is willing to pay you to walk away from the policy.

Second is extended term. And what does that mean? Basically, if you take the original face amount of the policy, the extended term would take that original death benefit for the face amount and extend it for as long as the cash value will buy that amount of term insurance.

For example, if you had a $125,000 death benefit, you might have, let’s say, in the ninth year, an extended term value for nine years and seven months. What that means is you don’t have to make another payment on the policy. And for the next nine years and seven months, you’ll have a $125,000 death benefit without having to make another payment.

And the third option is what’s referred to as a reduced paid-up. If we use the example of a $125,000 original policy death benefit, the reduced paid-up anywhere along the way might be $73,250. And what that means is you stop paying the premiums. The policy is paid up, but it’s not 125,000. It’s 70-some thousand. And as that policy grows and matures and more and more cash value builds up, that reduced paid-up amount will increase.

What these options allow the policyholder to do is to walk away from the commitment of paying that premium. And in the case of extended term or reduced paid-up, they’re able to maintain parts of that coverage for an extended period of time. The point is there are options and they will vary between policy to policy.

If you’d like to get started with learning more about the options or start a 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 today to get started.

if you’re ready to get started or if you’d like to learn more about how our process works, 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.

Using My Life Insurance to get Financially Ahead

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.

How To Set Your Financial New Year’s Resolutions

With the new year comes New Year’s resolutions. What are you doing for your finances this year that’s going to leave you in a better position on December 31st than you are right now? And before you answer that question, if you say you’re going to do the same thing you did last year, why would you expect different results? Today, we’re going to talk about how to set your New Year’s resolution to leave yourself in a better position financially.

When it comes to finances, it’s important to keep it simple and consistent. What could you do this year to leave you in a better position than you are currently? Is it something as simple as making a budget and sticking to it? Or have you been saving but know you need to be saving more? Or have you been saving enough but not saving in a place where your money is accessible to achieve your short-term, intermediate, and long-term financial goals? Now is a great time to take a look at what you have been doing, what has been working, and what hasn’t been working so you could reach all of your financial goals without feeling strapped for cash.

This takes us to the beginning, which is basically understanding what your goals and objectives are. One of the biggest financial mistakes we see people make is really simple – their strategies are not aligned with their goals. So maybe your goal is to expand your business this year. What are you going to do to help achieve that goal? Or maybe you’re getting ready to send your children off to college? How are you going to achieve that goal without pinching your current and future lifestyle? It’s important to take a look at these things because missteps could have effects for years and years and years all the way into your retirement.

We always tell folks,

Every splash and every move you make financially has a ripple effect. It may not be apparent today, but at some point the piper has to be paid.

 

A great example of this is getting out of credit card or student debt. What’s the best way to accomplish this goal? We’ve covered this in several videos, but one piece of advice I could give you is to make sure you’re saving along the way. What if there was a way to begin saving while paying off your debt simultaneously? Would you want to know about that technique? And this goes back to what we had said in a previous video, how can you put your savings or pay yourself first on subscription mode? One way we’re able to help our clients and ourselves is by using a specially designed whole life insurance policy designed for cash accumulation to help meet all of these goals when it comes to paying off debt. By putting your savings on subscription mode and building up a pool of cash that you have access to in this whole life policy, you’re then able to access that cash to pay off high-interest credit card debt or student debt and then repay yourself and rebuild that cash value within your policy so that you don’t have to jeopardize your savings to pay off debt.

Another example is to utilize this tool to expand your business. But like we always say, it’s not what you buy, it’s how you pay for it. So whether it’s paying off a credit card, paying off some other debt, expanding your business, or taking advantage of an opportunity, either way, you’re buying something. If you’re using the right process to make that purchase, you will always be building wealth everywhere along the way. So you’re not taking that money out of circulation. You’re just utilizing it or repurposing it or deploying it somewhere else so it can get you another rate of return.

A lot of times when people are thinking about financial goals, they’ll think of long-term goals like a down payment for a house, retirement, or sending their future children to college. But it doesn’t have to be that complicated. Looking at what goals you have for this calendar year is a great feat.

So to summarize.

    1. Make your goals, but make sure that your strategies are in alignment with your goals.
    2. It’s not what you buy, it’s how you pay for it. Make sure that how you’re using your money is going to be moving you forward not only for your short-term goals but your intermediate and long-term goals.
    3. Pay yourself first. Put your savings on subscription mode.

One of the biggest mistakes that you could avoid is wasting opportunity cost. Something that we always say is you’ll never see the interest you don’t earn. Every time you drain your savings and drain that tank, you’re losing so much opportunity cost and you’ll never realize exactly what effect that’s having over your lifetime. We call that the cash trap. When you buy something and pay for it with cash, you think you’re winning because you’re not paying interest. Unfortunately, you’re also giving up interest and people don’t realize that that’s the opportunity cost. Every purchase you make has a cost. You’re either going to pay interest if you finance or you’re going to give up interest if you pay cash. It’s pay up or give up. That’s why we say it’s not what you buy, it’s how you pay for it that matters.

If you’d like to get started with your financial resolution for the New Year and put your savings on subscription mode, we’d be happy to help you meet your goals. Feel free to schedule your free strategy session right here on our website. Or if you’d like to learn exactly how we put this process to work for our clients, be sure to 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.

 

When is My Policy Most Beneficial?

A lot of times when people come to us, they have short term financial goals that they’d like to accomplish using a specially designed whole life insurance policy designed for cash accumulation. But the real magic tends to happen as these policies mature.

There are certainly a lot of reasons why you could use a specially designed whole life insurance policy, designed for cash accumulation on a short term basis to achieve your short term financial goals, like getting out of debt, sheltering money for your children’s college education, or just regaining control of your cash flow.

As with any whole life insurance policy, a policy specially designed for cash accumulation, the insurance company is making two promises. The first promise is that should you die while you own the policy and you’re the insured, the insurance company will pay your beneficiary the death benefit.

The second promise is simple at the age of maturity, which is typically age 121, the insurance company is going to have cash set aside equal to the face amount of the policy. So what does that mean? Well, year after year, the insurance company has to build up the cash value in that whole life policy. So they could make that second promise. By making that second promise, by having the money available at the age of maturity, the policy gets better and better and better with each passing year. The longer you have the policy, the better it gets.

You see, these policies are actually designed to build cash value over time, and that’s not counting any paid-up additions riders or dividends on that policy. When we design a whole life policy for cash accumulation, we add on paid-up additions riders which are going to increase the cash value availability in the early years of the contract. And we’re placing these policies with mutually owned life insurance companies.

When you purchase a policy with a mutual insurance company, you are literally the owner of the company as it relates to the profits or the profitability of your policy. And what does that mean? That means any profits the insurance company makes on your policy will be returned to the owner, you. And they do so in the form of tax deferred dividends.

You see, in life insurance a dividend is literally a return of overpaid premium. When you use those dividends to buy paid-up additions or paid-up additional life insurance, those dividends accrue on a tax favored basis. By designing the policies with the paid-up additions rider and with a mutually owned life insurance company, you’re able to turbo charge the access to cash in your policy. And as your cash value grows, your access to cash is going to increase and you’re going to be able to access more and more to achieve bigger and bigger financial goals for you, your business and your family.

So in the short term, you can get out of debt quicker. You can save for your children’s college or use it to make major capital purchases. But as time goes by, you get greater access to cash, greater annual increases in cash, and greater death benefits.

Nelson Nash’s number one rule was to think long term. He was trained as a forester. He thinks 70 years in advance and like Nelson would say, I may not be here and neither may you, but somebody is going to be there and they’re going to reap the benefits of our good decisions today. But the long term benefits of using a specially designed life insurance policy could never be counteracted. You see, these policies could allow you tax free access to cash value to accomplish your financial goals, tax deferred growth within the policy, and a tax free death benefit to your family when you die.

If you’d like to get started, with a specially designed whole life insurance policy designed for cash accumulation to accomplish both your short term and your long term financial goals, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today. Also, if you’d like to see exactly how we put this process to work, check out our Four Steps to Financial Freedom webinar.

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

Can My Policy Handle All of My Expenses?

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.

How Do I Become a Wealth Creator?

Have you recently received an inheritance or anticipate receiving one soon? For the past 37 years working in financial services, I’ve seen many people receive inheritances and they generally fall into one of two categories. First, they’re either a spender, or second, a saver.

The first type of person who would receive an inheritance is a spender, and the spenders finances typically look something like this. They start at the zero line, and when it comes time to make any major capital purchase, they’re forced to borrow because they have no savings, they’re at zero.

And so they dig themself a hole in debt and all of their extra cash flow, instead of going towards savings, goes towards repaying that debt and filling in that hole. So when they receive their inheritance, it makes sense that they first, pay off their debt and then would drain down that tank, draining down the rest of that inheritance to make other major capital purchases.

The second type of person who would receive an inheritance is a saver and savers start at the zero line and they save and save and save. But when it comes time to make a major capital purchase, they drain down the tank or reduce their savings back to zero. And then they start saving again for, let’s say, the next automobile or the next major capital purchase.

So if you’re a saver and you receive an inheritance, it would make sense that you would use your inheritance to make major capital purchases and pay cash for everything.

Now, it may seem to you that the saver and the spender are two very different people, but they have something in common, and that whether you’re a debtor or a saver, you spend a lot of time at the zero line and you never get to experience the magic that comes with continuously compounding interest on your money. The other thing that neither the spender nor the saver receive or experience, is being in control of their money. Which brings us to the third type of person who can receive an inheritance. And that’s the wealth creator.

The wealth creator is a very unique individual. They save, as a matter of course, just like the saver. The only difference is, unlike the saver who drains down the tank to make purchases, they continue to earn uninterrupted, compounded interest by borrowing against their savings. And when they borrow against their savings, they’re making their money more efficient.

 

Now, if you’ve recently received an inheritance or anticipate receiving one soon, you may want to look into becoming a wealth creator. Keep this in mind, the saver, spender, and the wealth creator are all making the same exact purchases. And we say this all the time. It’s not what you buy. It’s how you pay for it that really matters. The wealth creator is still able to make that purchase without draining the tank and without giving up control of their money, all the while making their money as efficient as possible. They’re never jumping off that compound interest curve. That is a huge deal.

If you’re using a specially designed whole life insurance policy with a mutually owned life insurance company, you’re automatically building in a legacy for the next generation and being a great steward of your money.

If you want to make your inheritance work for you, your business, and your family and last for generations. Visit our website at Tier1Capital.com to get started.

Feel free to schedule your free strategy session today or check out our free web course, the Four Steps to Financial Freedom to see exactly how we put this process to work for our clients.

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

Pay Yourself First

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Feel free to schedule your free strategy session today or check out exactly how we put this process to work for our clients in our free webinar. The Four Steps to Financial Freedom.

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

How to Take Advantage of Compound Interest

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

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

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

 

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

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

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

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

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

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

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

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

Is having a paid-up rider worth it on my Whole Life Insurance Policy? | Tier 1 Capital

Are you thinking about buying a whole life insurance policy and wondering if it makes sense to add a paid-up additions rider? If that sounds like you stick around because we’re going to go over exactly why it may make sense to add that rider to your policy.

First of all, you may be wondering what in the world is a paid-up additions rider.

Quite simply, it’s a rider under the umbrella of a whole-life policy that allows you to put extra cash into the policy. That extra cash buys a paid-up additional life insurance policy. Think of it as a single premium whole-life policy under the umbrella of your whole-life policy.

 

So basically with this rider, you’re able to build up cash value quickly in the policy and no further premiums are going to be due to support that death benefit.

But how would that benefit you as a whole life insurance policy owner?

The first part of answering that question is that we have to step back and look at what a whole life insurance policy looks like without the paid-up additions rider. And in general, most whole-life policies have zero cash value in the first year, zero cash value in the second year, and very little cash value in the third year. So it’s not really efficient on its own without the help of a paid-up additions rider. That’s mainly due to the fact that the insurance company has to pay for setting up those policies.

There are a lot of expenses behind the scenes that need to be supported, and the insurance company takes care of those expenses upfront before building the cash value in those whole life insurance policies.

It’s a lot like building your own business. In the first few years, you’re not going to see any profits because you need to get that machine working efficiently. By design, a whole life insurance policy becomes very efficient after the fourth or fifth year. From that point forward, it literally gets better and better because, by design, the insurance company has to reserve more money to pay for the second promise, which is to have the face amount of the policy in cash at the age of maturity.

So by adding this paid-up additions rider, especially in the early years, we’re able to build up that cash value more quickly within the policy. You may be saying, “Olivia, I don’t even want to loan against my policy. I just want death benefit for my family, for my whole life.”

And I would make the argument that the paid-up additions rider still makes sense, even if you don’t plan on loaning against your policy. And here’s why.

The paid-up additions rider could give the policy a lot of flexibility down the line. You could think of it as prepaying premiums, in a sense, and that your policy has this extra cash. And if you become in a cash flow pinch down the line and can’t pay your premium, or can’t afford that cash flow to pay the premium, you could take a loan or surrender against that paid-up additions rider to fund those premiums. Your policy then remains in effect and at maximum efficiency.

One thing we’ve learned over 37 years in the financial services business is that life happens and things happen beyond our control that prevents us from being on a straight line and doing the things that we said we were going to do 20 years ago or ten years ago or even two years ago. Because of the paid-up additions rider, you’re literally building in flexibility for future premiums.

The last thing you want to do is five years down the line after this policy has been issued, say, “Hey, I don’t have the money to fund this premium and I’ve already paid all these other premiums. I’m just going to surrender the policy.”

After five years there’s not going to be a lot of cash value in that policy, and you’re going to lose all of the premiums paid and all of that death benefit forever.

And here’s the point.

You know, we had mentioned earlier that the policy becomes very efficient after the fourth year. So think of it this way. Right when the policy is becoming more efficient, let’s say you have a cash flow issue and you can’t make the premium. Having had the paid-up additions rider could give you some premium relief.

But think of it this way, if the policy becomes more efficient after the fifth year and it’s going to get better every year after that, it’s sort of like, the worst time to own the policy is in the first four years. You go through that and now just when it starts to get good, you walk away from it. You don’t want to do that. To walk away from a policy in the fifth year or later is analogous to buying a ticket to a movie, buying your popcorn and your soda, sitting through the previews, and just when they say, “Now for our feature attraction,” you get up and walk away. You would never do that and we would never suggest that you do that with a whole life insurance policy.

If you want to get the most out of your whole life insurance policy, you’re definitely going to want to add a paid-up additions rider of some sort. It acts as a bridge, so it takes these inefficient years and makes them more efficient. And after the policy becomes efficient, you could take off that rider and reduce the cost of the premium. But if you want the flexibility of being able to make more choices down the line and ensure the life of your policy, you’re going to want to add this rider.

If you’d like more advice on this, be sure to check out our website at Tier1Capital.com to get started. We have a button for a free strategy session or a web course on exactly how we use this process to make our clients’ cash flow more efficient.

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

How multi-duty dollars can fund the growth of your business


Are you a small business owner and looking to grow your business, but wondering how you’re going to retire one day?

If that sounds like you, stick around because today we’re going to talk about how you could continue to fund the growth of your business and still save for the future.

As small business owners, everyone knows that the number one issue is often cash flow. There are constant demands on our cash flow and the question of how do we manage everything?

Think of it this way. There are several types of cash flow to pay attention to.

Cash flow needed to operate your business.

Cash flow needed to reinvest in your business.

Cash flow needed to grow your business.

Cash flow needed to support your family.

With all of these demands on your cash flow. Every single day, it becomes incumbent upon you, the business owner, to make your money and your cash flow as efficient as possible so you can manage all of these demands.

The first step in making any change, is to acknowledge that there may be a better way out there and to be open to hearing about it.

 

Whenever we sit down with a business owner and it comes to the recommendation of doing a cash flow analysis.

They all say unequivocally, “Well, I’m using my cash flow properly,” or their CFO will say, “Well, we’ve already done this. We’re using our cash flow efficiently.” Or their accounting firm will say, “Well, you know, we’ve done the analysis. They’re using their cash flow efficiently.”

I’m here to tell you, you’re probably not using it as efficiently as you possibly can.

What does it mean to make your cash flow efficient?

Well, first of all, we like to get $1 to do the job of many dollars. And we like to make sure that the cash flow is working as hard as possible for you, not for the banks, not for other institutions, but for you, your business, and your family. So getting $1 to do the job of many dollars, we call that multi-duty dollars.

How do we get $1 to do multiple jobs?

The first step is to identify dollars that can be working harder for you. We usually find that in how you’re making major capital purchases and how you’re financing your debt. It’s not what you buy, it’s how you pay for it that really matters. That’s where efficiency can come in.

Recently we worked with a retail operation and they said they were using their money efficiently. The problem was they needed over $300,000 to fund their buy-sell agreement. The question was, where in the world were they going to find $300,000 to do that?

Well, we looked at how they were making major purchases and we looked at how they were handling their debt. Lo and behold, we found over $400,000. They were completely blown away. But again, it’s not what you buy, it’s how you pay for it that matters. So basically, we took the dollars that they were utilizing to pay off their debt and we converted it to create an asset that they can use to fund their buy-sell agreement.

So think about it.

We got $1 that was used for debt and we made it $2 by not only paying off their debt but also creating the asset that they needed to fund their buy-sell agreement. Multi-duty dollars. The same principle of converting liabilities into assets can be utilized for funding your own retirement or major capital purchases for your family, like sending your kids to college, or financing major purchases for your business, like equipment or vehicles for your business. 

Also, you could use it to expand your business so you don’t have to choose.

“Hey, I need to get out of debt as soon as possible. Let me put all my extra cash flow towards this goal.” You can achieve that goal, but also save along the way to achieve your own financial goals and put you in a more secure financial position.

So here’s the point. Over 35 years ago, I began working with a young couple who happen to be business owners, and I said, you know, let’s set up some life insurance that you can utilize along the way. Basically, this will be your exit strategy. You can borrow against the money for whatever you want between now and the time you retire. But then, when you retire, you can live off the growth of that policy. And sure enough, that’s what they did over the years. They borrowed against their policy to grow their business, expand their building, buy equipment and buy cars. They used it to educate their children, but they always borrowed and put it back.

Now, they recently sold their business. They came into a huge windfall and they’re getting all this advice to tie up their money to prevent themselves from having to pay taxes. But, because of all the work that we did, their legacy is intact and consequently, they can use the proceeds from the sale of their business to fund their retirement instead of their life insurance, and all of that money is now going to be utilized for legacy purposes for their children and grandchildren.

The point is we got $1 to do multiple jobs over a 35-year period, and it gave them the flexibility to do the things that they want to do for their children and grandchildren.

If you’re tired of giving away control of your cash flow, and you’re looking for a cash flow analysis. Feel free to hop on our website at Tier1Capital.com to schedule your free strategy session today.

Also, if you’d like to learn more about how our process works for families and business owners, check out our free web course, the Four Steps to Financial Freedom. It’s right on our website.

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