Today we’re going to talk about rate of return and why rate of return isn’t the end-all-be-all of any financial plan.
If you’ve ever sat down with a financial advisor, watched an ad for a financial advisor, or turned on the finance section of the news, you know that they talk about rate of return a lot. But in our opinion, the risk that’s required to obtain that high rate of return is spoken about enough.
When it comes to risk, are you willing to leave your money at risk in the jungle every single day for the rest of your life in order to earn a high rate of return? Keep in mind that the rate of return isn’t guaranteed and nowhere is it written that you have to lose 50-70% in the market in order to get a high rate of return.
The second thing that isn’t spoken about nearly enough is taxes and what impact our taxes and the current tax laws have on your savings and investments. Whether it’s a qualified government plan like an IRA Simples, SEP, 401k, or 403b or a non-qualified investment account where taxes are paid on growth annually, your money is exposed to taxes. And, as you know, it’s impossible to accumulate wealth in a taxable environment. You may look rich on paper, but the after-tax rate of return is not the same as the pre-tax rate of return that’s often advertised.
So, keep in mind, whenever you’re looking at a mutual fund prospectus, they’re publishing the pre-tax rate of return. We’ve said it before: It’s not how much money you make, it’s how much money you keep. And along those lines, how much are you keeping after fees? There are money management fees, broker advisor fees, and any number of other fees whittling away at your money.
So when you’re thinking about investing and going for a high rate of return, don’t forget to consider the effect of market losses, taxes, and fees. Do not ignore the elephant in the room. What happens if you need to access that money? What’s the rate of return on your money going to be after you access it to buy a new car, put a down payment on your home, pay for a wedding, or send your children to college. The answer is zero. After you drain that tank, after you take the money out of that account, not only are you paying taxes on that money, but you’re also losing any interest. You’ll never see the interest you don’t earn on an account.
These are all factors that need to be considered when designing your financial roadmap and your financial game plan. If you’d like to learn more about our process and how a reasonable rate of return can often get you to your financial goals with less risk, less taxes, and, obviously, less fees, be sure to check out our website at Tier1Capital.com to schedule your free strategy session. Or if you’d like to learn more, be sure to check out our free web course, The Four Steps to Financial Freedom, to learn exactly how our process works and how it could work for you.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
So you’re thinking about getting an Infinite Banking Concept Policy and you’re wondering, “Should I include a disability waiver of premium or not?” If that sounds like you, stick around to the end of this blog post because today we’re going to cover top to bottom why a disability waiver of premium may make sense for your situation.
A lot of times when agents are designing an IBC policy, they’re solely focused on the rate of return. So they don’t end up including any riders that have a cost to them, like the disability waiver of premium.
But keep in mind for sure, having disability waiver of premium will reduce the rate of return. And depending on the company you’re using, they may only charge the rider on the base policy, so the cost is going to be negligible. And again, depending on your situation, it may be well worth having that extra protection in case something happens to you. For example, you get sick or injured and cannot work, therefore you have no money coming in. And then the question becomes, how are you going to pay for the policy?
So, let’s take a step backward. What exactly is the disability waiver of premium rider and what does it do and why would you want it? Well, the disability waiver of premium rider is a rider on the policy that has a small cost that ensures your premium gets paid even if you’re not paying it yourself. So if you become disabled and unable to work, the insurance company is going to cover the cost of your premiums. And depending on the company you go with, they may cover the costs of the premiums for the base policy and any riders included on that policy.
So we think if that’s the situation, it may very well be an advantage for you to include that rider primarily if you’re the main breadwinner in your family or you’re a dual-income family and you’re depending on your income for lifestyle and savings.
So think about it, right now you’re designing your IBC policy and you have certain goals in mind of how you want to use that policy. Why would those goals change if you become disabled? Just because you’re not working doesn’t mean that your financial goals are going to change. Keep this in mind: you can always take the rider off of the policy. However, if your policy isn’t issued with the disability waiver of premium, you can’t go back and add it on later. So, it’s something you should really put some thought and consideration into, especially if you’re a younger person, let’s say, under age 50.
So now let’s take a look at what happens if you get disabled, you’re unable to work, and you did not have the disability waiver of premium rider on your policy. So, if you don’t have the rider, the first thing you have to ask yourself is: is there enough cash in your policy to keep the policy going if you can’t make the premium payments? Another question you have to ask is: how are you going to make those premium payments? And the third question would be, again, if you’re disabled and you didn’t have the rider, how is the policy going to continue and how are you going to use and/or access the money in your policy going forward if there are no premiums going in?
Think about this, if you have an IBC policy properly designed with the waiver of premium rider and you become disabled, and hey, maybe your financial goals have changed, maybe your new financial goal is to maintain your lifestyle and your financial security, which is a great goal. This properly designed policy will allow you to do it. You’ll have complete liquidity use and control of that cash value with no questions asked, which is very important at this time of your life, because let’s face it, you have no proof of income. Traditional means of accessing money from a bank or credit card are now going to be difficult because you have no source of income and the premiums are being covered by the insurance company. Imagine the peace of mind that comes with that.
So keep in mind having the rider on a policy protects not only your income, but also think about it, the policy has a death benefit and the reason you’re setting it up is to be in control of your finances and to be in control of your money. Why should those goals change if you become disabled and you have actually less money coming in? And as we mentioned earlier, the cost of the rider is generally negligible. It’s a very small amount. And more importantly, insurance is a transfer of risk to begin with. So you’re transferring the death benefit risk. But more importantly, now you could transfer the disability risk all for a negligible cost. So it may be beneficial to you to include that rider in the policy design, especially if the cost is very small.
Although, IBC policies are designed for maximum cash accumulation, so you maintain full liquidity use and control of your money throughout your financial journey at the end of the day. We do use a life insurance policy to accomplish that.
If you’d like to talk about whether the disability waiver of premium makes sense for your situation, be sure to check out our website at Tier1Capital.com to get started today. If you’d like to learn more about our process, click on our website to watch our free web course the Four Steps to Financial Freedom.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Do you have an IBC policy or are you thinking about getting one? If that sounds like you stick around to the end of this blog post because today we’re going to go over the four essential rules that need to be followed for any IBC policy to be put to work for you.
Rule Number One: Think Long-Term.
In Nelson Nash’s book, Becoming Your Own Banker. He explicitly says you have to think long-term. Remember, he was trained as a forester, so he thinks 70 years in advance. And like Nelson would say, “I will not be here. And probably neither will you. But somebody will and they will pay the price of you, not thinking long term.”
So what does this look like when it comes to designing your IBC policy? Well, it can look like maybe putting 10% of your premium towards the base policy and 90% towards the PUA, the paid-up additions, and the cash value part of that policy. And what that does is it directly violates rule number one. Think long-term.
So with this design, you’re getting a lot of cash value upfront, which could be great for your short-term needs. Maybe you want to make an investment as soon as you place the policy.
But what about the long term? How is this policy going to serve you and how is it going to serve you best? And it’s usually not with a 10/90 split.
Keep this in mind. When Nelson Nash discovered the infinite banking concept, there was no such thing as a paid-up additions rider. Because he was a long-term thinker he realized that he had to get the premiums, the base premiums of his life insurance to equal his mortgage. And then he knew at some point the cash value build-up would be four times his mortgage, allowing him to weather any financial storm created by inflation or manipulations in the financial markets.
Rule Number Two: Don’t Be Afraid to Capitalize.
And what Nelson meant by that was don’t be afraid to put in as much money as possible for as long as possible. Again, the temptation might be to do the 10% base, 90% paid-up adds. And that might work for some people who want to use their policies more aggressively early on. But what we found is, again, people are long-term in thinking and the best or the most efficient way of funding a policy or capitalizing your policy is 40% base, 60% paid-up additions.
Let’s take a step back here. When we say don’t be afraid to capitalize, we also don’t mean overextend yourself. If you’re looking for ways to make your cash flow more efficient, and to fund your policy more, we could help. Visit our website at tier1capital.com to schedule your free strategy session.
Rule Number Three: Don’t Steal The Peas.
If you’ve read the book Becoming Your Own Banker, I’m sure you remember the example of the grocery store owner and the temptation of them stealing the peas, going out the back door with their groceries, and not paying for them. So what he meant by that was if you are going to set up an IBC policy and you are going to borrow against your policy, make sure you put the money back, because if not, you are no better than the grocery store owner who goes, who bypasses the cashier and goes out the back door with his groceries. You’re stealing the peas and you cannot and will not or should not do that.
Rule Number Four: Don’t Deal With Banks More Than You Have To, Especially For Access To Cash Or Borrowing.
What did Nelson mean by that? He fully understood fractional reserve lending. He knew that if you pulled yourself away from the fractional reserve lending system and went to infinite banking, which is 100% reserve lending, he knew that you would no longer be contributing to inflation in America, and more importantly, you would be in control of the financing function in your life.
So let’s recap the four rules.
Number one, think long term.
Number two, don’t be afraid to capitalize.
Number three, never steal the peas.
And number four is, don’t deal with the banks more than you have to.
In January of 2019. I got a phone call from Nelson Nash and we chit-chatted for a little bit and Nelson said to me, he said, “Tim, I need to rethink my four rules. I think I need to add another rule.”
I said, “Nelson, what? What would that rule be?”
And he said, “Real simple. I’m going to graduate from this world one day and I’m going to leave my family a significant amount of death benefit. And if they don’t have large enough holes in their policies, they’re not going to have a place to store that money. I think we need a fifth rule.”
Rule Number Five: Make Sure That You Have Enough Holes in Your Policies to Accommodate a Windfall.
So that could be in the form of a policy loan against your policy or having term insurance that you’re able to convert into new policies when that windfall happens.
If you’re looking to regain control of your cash flow and put these four plus rules to work for you and your situation, we’d be happy to help. Visit our website at tier1capital.com to get started today. You could schedule your free strategy session or check out our free web course where we go through a deep dive on how we put our process to work for you.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
We’ve often said it’s important for you to be in control of the banking function in your life. Why is that important? Well, let’s take a look at the cast of characters in the play that we call banking.
First, there’s a depositor. Nothing can happen without a depositor.
Next is the borrower. The borrower pays for everything.
And in the middle is the banker. The banker matches up depositors and borrowers and collects a fee in order to do it.
But keep in mind that the banker in the middle controls everything. And that’s why it’s crucial for you to be in control of the banking function in your life. The process of banking.
So let’s take a look at what it looks like when you’re not in control of the banking function in your life. There are two times you’re giving up control of that cash flow.
The first is when you’re paying cash for purchases, and the second is when you’re financing through a bank or credit company.
So let’s take a look at that first option of paying cash for a purchase.
The first step is to save. Capitalize that bank account so you have enough money to afford the item you want to buy.
Step number two is to “Drain the Tank”. And once you drain that tank and make that purchase, you have given up control of all of that money. And you’ll never see the interest you don’t earn.
Like Nelson Nash used to say: “You’ve abdicated your responsibility as a steward of that money.”
The second way you could give up control of your money is by making purchases and using the bank to finance those purchases.
With this method, you’re borrowing from the bank and paying them a fee for the privilege of using their money. And actually, it’s not their money. It’s the depositor’s money. Remember, they’re linking everyone up. With this option, you’re literally obligating a portion of your income to the bank. And as Nelson said, you’ve abdicated your responsibility as a steward of that future cash flow. So what’s the solution? How do you control the banking function in your life? Well, let’s talk about that.
If the recipe for being in the banking business is to have depositors and borrowers, then think of it, on a daily basis, what are you, your family, and your business? Aren’t you depositors and borrowers? So if the recipe is depositors and borrowers, you can literally be a bank. But how do you do it? That’s the process that you need to control, and that’s where we could help you.
So here’s what normal borrowing looks like. You deposit money in the bank and the bank matches you up with the borrower. The borrower takes the money and pays the bank back in increments. The bank collects a fee for that and then pays a tiny little bit to you, the depositor. Now, this is where the magic of banking happens after you make that first payment back to the bank. They’re able to turn that over and lend it out again. And when you make your second month’s payment, they lend that out again. And this is the velocity of banking.
You see the basis of any business – whether it’s a car dealership, whether it’s a McDonald’s franchise, or whether it’s banking – the cornerstone of that business is turning over its inventory. It doesn’t matter if your inventory is used or new automobiles, McDonald’s hamburgers, or money. It just so happens that in banking, their inventory is depositors’ money. So the quicker they could turn that over, the faster they’re able to earn more profit.
Let’s see what it looks like when you’re in control of the banking function. You see, you’re the depositor, you’re the bank, and you are the borrower. So let’s assume that your business wants to buy a vehicle and the vehicle is going to cost $20,000. You go to your reserve of money, a specially designed life insurance policy, and you loan it to the bank (you). And then you turn around and loan that money to your business. Now your business makes a payment back to the bank (you), and the bank (you) pays the depositor (you) a portion of that interest. The excess interest in between is the profit of the bank.
But the key to the infinite banking process is that you are still earning interest on your deposit because you collateralize a loan against your life insurance policy. Rule number one: Never Drain the Tank.
So again, this is where the magic of banking happens for you this time. Because you are the bank, you get to constantly loan money out to you and then recapitalize that bank. So you get to benefit from the velocity of banking. Keep in mind the profits of banking and the principle of velocity banking is going to happen with or without you being in control. The question is, do you want to be in control and earn the profits or do you want to abdicate that control to the bank and let them make the profits?
If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation so you can put this process to work for you and your family. Be sure to visit our website at tier1capital.com. Feel free to schedule your free strategy session or check out our free web course to learn in detail how we take people through this process.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
Are you dreaming of the day when you finally get to ring the “debt-free bell”? If that sounds like you, stick around to the end of this blog because we are going to do a deep dive on whether it’s better to be debt-free or to own your own debt.
There are many “financial gurus” out there advising people on getting out of debt and, certainly, for a segment of the population, that is an ideal goal. Many people are buried in debt and they need to get out of it. We are not arguing that point, but there’s another segment of the population who makes a really good income and has some debt. And, unfortunately, this advice is being pushed on them as well. And those people are literally living a life of hell getting out of debt or trying to be debt-free.
And the problem with this advice is that by putting all of your free cash flow towards your debts, you’re not able to save. And a lot of times the advice is for you to save in a qualified retirement account where you can’t access that money. So, what happens is you get out of debt, but you still have no access to cash. And so what happens? You have to go back into debt.
The solution to this is to start saving in a place where you have complete liquidity, use, and control of your money. That way you no longer have to depend on banks and credit cards when you need to go make your next major capital purchase, invest in your business, or take advantage of an opportunity that comes up.
And here’s the issue: if you’re building your own cash that you can borrow against and utilize to pay off some other debt or to make purchases, now you are actually owning your debt. And looking at what Nelson Nash said, that’s what banks do. A bank for us. When we borrow money from a bank, it’s a liability to us. It’s an asset to the bank. If you’re the banker, you now own an asset. And sure, you have the debt. But now you can control the terms and conditions. You can control when and if those payments are made. You are in control. And that’s the point.
Here’s the perfect example. Let’s say you have $5,000 in your bank account today and you also have a balance on your credit card of $5,000. And tomorrow you decide, “Hey, I need to get out of debt. I’m going to take this $5,000 and I’m going to apply it towards my credit card.” Today, you have a net worth of zero. And tomorrow, after you pay off that credit card, you have a net worth of zero. But what’s the difference? Today, you own and control that $5,000 in your bank account. As soon as you give it to the credit card company, you no longer have liquidity use or control over that money. And your net worth hasn’t changed at all. You’ve abdicated your responsibility as a steward of that $5,000.
You see, when the money is in your control, you have the opportunity to invest it, earn money on it, and do basically whatever you want with it. But as soon as you hand it over to the credit card company, you’re giving them that control and the opportunity that comes with it.
That’s why we recommend borrowing against your own money and using that to pay off the credit card. And now that you own that debt, you could redirect the payment. You were sending Visa, MasterCard, or Citibank back to your policy. Now you own the debt. It’s an asset to you and you’re earning interest on that money.
We always say “Never Drain the Tank”. Always allow that money to continuously compound interest. And that’s what we do with specially designed whole life insurance policies designed for cash accumulation. We’re allowed to own our debt and repay ourselves, so we never stop that compounding.
If you’d like to learn more about how to get started with a whole life insurance policy designed for cash accumulation, be sure to visit our website at tier1capital.com to schedule your free strategy session today. Or if you’re interested in learning more about how we use this process, check out our free web course. It’s about an hour and it goes into a deep dive of how we do this.
And remember, it’s not how much money you made. It’s how much money you keep that really matters.
Are you looking to get started with the infinite banking concept? But you’re wondering what the best type of policy is, whether it’s universal life, index universal life, variable universal life, or whole life insurance? Well, if that sounds like you, stick around to the end of this blog because today we’re going to do a deep dive on what the best type of policy is for you and your situation.
The infinite banking concept uses life insurance as a vehicle to implement the process. But let’s take a step back and think about what exactly is insurance fundamentally.
Life insurance or any insurance, for that matter, is technically a transfer of risk from you to the insurance company. And the cost of doing that is a premium that the insurance company charges.
Now, let’s take a look at the various types of cash value life insurance and the characteristics of each.
Fundamentally, life insurance, or any insurance for that matter, whether it’s homeowners or car insurance, is a transfer of risk from you to the insurance company. Basically, you’re saying, “I have this risk. I don’t choose to accept it. I need to transfer it.” The insurance company raises its hand and says, “Hey, we’ll charge you a premium for that risk.” And they’re working with the law of large numbers. They’re working on thousands of people who are in the same situation that you’re in.
But now let’s look specifically at life insurance. Let’s say you have a $100,000 risk that you don’t want to accept. You transfer it to the insurance company. With a whole life policy, it’s all bundled together. It’s a neat little package, and it’s guaranteed to have more cash value next year than it did this year. That’s because the insurance company is making two promises:
When you reach the age of maturity, let’s say age 121, they’ll have the face amount of the policy available for you in cash should you want it.
Now, let’s take a look at some other types of policies. There’s universal life, there’s indexed universal life, and there’s variable universal life.
But the chassis is universal life. And what that basically means is: the technical term for universal life is flexible premium adjustable life. If you want to have the flexibility of making various or not making payments, you can do that. Here’s the problem: that variability creates some additional unwanted risk that most insureds don’t understand. Quite frankly, most insurance agents don’t understand it. Now, there are three variables that the insurance company needs to consider as it relates to a life insurance policy.
Mortality. Are more people going to die than expected?
The cost of running the company. Is it going to cost more than we anticipated?
Investment returns. Are we going to earn enough like we anticipated as it relates to this policy?
Now, with a whole life insurance policy, the insurance company assumes all three of those risks. Basically, what they’re saying is: “If more people die sooner than later, we can’t change the deal. If it costs more to run the company due to things like cybersecurity, we can’t change the deal. And if we don’t earn enough interest on our reserves, we can’t change the deal. We own it. You’re off the hook.”
Life insurance policy contracts are unilateral contracts, meaning that the owner of the policy has one responsibility, and that’s to pay the premiums and pay the premiums on time so the policy doesn’t lapse. All of the other risks are completely on the insurance company. They have to deliver on everything else that’s listed in that contract.
Here’s the issue as it relates to universal life, variable universal life, or equity indexed universal life: the insurance company gave itself an escape clause. They allowed themselves to transfer the investment risk back to the insured. The insurer doesn’t know it or realize it, and I guarantee you the agent never explained it to the insured in that way.
But, basically, what it says is: If mortality is greater than expected, if expenses are greater than expected, and if our investment return isn’t what we expected, we reserve the right to change the deal.
How do they do that? How can they do that? Well, it’s real simple. Run an inforce illustration, run a sales projection, and you’ll see that some of these policies start to fall apart in your late sixties or in your seventies. And what does that mean? Basically, it means that the policy expires before you do.
Now, think about it. Life insurance is the fundamental vehicle for infinite banking. And yet some people are recommending a product that won’t be around as long as you may be around. In other words, you have to die to win.
Another thing to consider is if you allow the policy to lapse and there’s a gain on that policy, meaning you don’t want to pay any more premiums because it’s cost prohibitive. What you could end up with is a huge tax bill because there’s so much gain within the policy and all of the gain is taxable as ordinary income.
Here’s the thing with these universal life policies. In your later years, the cost of insurance could get very expensive. And it will. So you’re left with the choice of paying an astronomical amount of premium and then having to pay the premium again at a higher amount the following year, or just allowing the policy to lapse. Now, if you let the policy lapse and you’ve used it for infinite banking purposes, there’s a high probability that you’ll have a taxable gain, and that taxable gain is going to be fully taxable at ordinary income rates.
In Nelson Nash’s bestselling book, Becoming Your Own Banker, on page 39, he clearly expresses his thoughts on universal life. Universal life came into play in the early 1980s. It was created by a company called E.F. Hutton, a stock brokerage firm. And in Nelson’s opinion, they knew nothing about life insurance. For those of you old enough to remember the commercial, you remember when E.F. Hutton spoke. Everybody listened.
Have you heard ‘em lately? They don’t exist.
Universal life is nothing more than one-year term insurance with a side fund. And if you remember, back in the early eighties, interest rates were 15-16%. And those policies didn’t work then. So could you imagine, under today’s interest rate environment, how faulty and how much risk you’re accepting as far as the interest rate is concerned?
Universal life was an attempt to unbundle the savings and the insurance components of life insurance, which, if you understand whole life insurance, it can’t be done. You can’t unbundle the whole life contract. Here’s the thing with the universal life contract, the flexibility you’re getting cannot be duplicated with the whole life policy. However, it can come close and at the end of the day, the risk that the insurance company is pushing back to the owner of the contract is not worth the flexibility.
This takes us to the policy illustration. When you’re choosing insurance companies or you’re choosing insurance policies, generally an agent will show you an illustration or a projection of how the policy might perform. And it is very tempting to look for the highest yielding illustration. But that is such a slippery slope. There are so many variables that the insurance company can manipulate to create that better-looking illustration, and it is not worth the time of day when you look at those illustrations. If you’re judging whether or not you should purchase a policy based on an illustration, stop the process – you’re off the rails.
The issue is how are you going to use that policy? And what Nelson Nash proved to us in his bestselling book, Becoming Your Own Banker, you will have the greatest impact on the performance of that policy. You will have the greatest impact on how that policy serves you.
Some of our clients use these policy loans to get out of debt faster, take advantage of investment opportunities, start their own business, or send their children to college.
The point is: how are you going to utilize this policy to move you toward your financial goals? And what is that worth?
With these policies designed for cash accumulation, you have the opportunity to take advantage of the internal rate of return as well as an external rate of return. So it really comes down to how you are going to move forward using these policies and taking advantage of the continuously compounding interest that happens within your contract. And that’s the importance of the infinite banking concept when you’re trying to regain control of your money.
If you’d like to get started with a specially designed, whole life insurance policy designed for the infinite banking concept to help achieve your financial goals. Be sure to visit our website at tier1apital.com to schedule your free strategy session today. Or if you’d like to learn more about how our process works, take a look at our free web course listed right on our homepage.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Have you considered insuring your most valuable asset? And you may be wondering: what is your most valuable asset? It’s your ability to work and earn income! But, what would happen if you woke up tomorrow and were no longer able to work? What would happen to your family? What would happen to your lifestyle? If you haven’t considered this, stick around to the end of this blog because today we’re going to do a deep dive on how to insure your income.
It’s often been said that insuring your greatest asset, your ability to earn income, is the equivalent of insuring the goose that lays the golden eggs. Many employers offer short-term disability insurance as part of their benefits package, but that could last anywhere from 90 days up to two years. So, what happens after that benefit period? If you’re still not able to work and earn income, then what? What happens to your lifestyle? What happens to your family? How do you support the things that you’ve become accustomed to when you’re not able to work any longer?
There are other situations where your employer doesn’t offer those benefits or you’re self-employed and you don’t have that luxury. And those cases, it’s especially important to have set aside 3 to 6 months of income as a safety net or emergency fund in case you’re unable to work.
Disability insurance is sort of like having a safety net as you’re ascending this ladder in life. The higher you climb up these stairs or this ladder, the higher you want that safety net.
With a long-term disability policy, you’re transferring the risk of becoming unable to work to the insurance company. So, basically, you pay a premium every month, and if you become unable to work, the insurance company will continue your income. So, now, you have a steady stream all the way into retirement.
Typically, an insurance company will insure 50 to 60% of your income, which is the equivalent of your net pay after taxes. Disability insurance is a cornerstone of any financial plan. Imagine what would happen if you were no longer able to work into retirement. How would that impact your retirement? How would that impact your family? How would that impact your ability to maintain your lifestyle? These are all questions that a properly designed disability insurance policy will answer for you.
Here’s an example:
A couple of days ago, we were working with a young attorney who makes about $150,000 per year. And he said, “Should I get disability insurance?”
I said, “Well, it’s basically the choice of two jobs. Job A pays you $150,000. But if you get sick or injured and cannot work, you and your family get nothing coming in. Job B will pay you $147,000 per year. But if you get sick or injured and can no longer work, you’ll have $120,000 coming into your family tax-free. Which job would you choose?”
He said, “Oh my God, that’s a no-brainer, Job B.”
If you’re looking to add a safety net to your financial plan by adding long-term disability insuranceto your portfolio be sure to visit our website at tier1capital.com to get started today. We’d be happy to go over the specifics of your situation with you.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
If you’ve been reading our blog for a while, you know that we’re constantly preaching about controlling your cash flow. And you may be wondering, why do I need to control my cash flow and why is that even important? Well, if that sounds like you stick around to the end of this blog because today we’re going to cover why controlling your cash flow is so important and how to regain control of your money.
So, you graduate from college, you get your first real job, and you start saving for retirement in the company 401k, 403b, or other company-type retirement plans. You’re moving yourself forward, or so you think, because you’re saving for retirement. It seems to be the responsible thing to do. Unfortunately, that literally separates us from our money when we need it most, obligates our cash flow towards that retirement, and holds us back. But how does it hold us back?
Let’s say from the time you start working to the time you retire, you’ve accumulated over $1,000,000. Well, think about this. When you started saving in your twenties, a dollar bought you a dollar of goods and services. But when you retire, it’s not the same dollar. That dollar is worth much less, probably closer to $0.69. So now your million dollars doesn’t have $1,000,000 of buying power, it only has $690,000 of buying power. But it gets worse because now when you take money out of that account, you’re taking it out on the million and you’re taxed on the million. So let’s say you’re in a 25% tax bracket. Poof, there goes another $250,000 of the million dollars. Now you’re down to $440,000. And when you do the math, you might have a net rate of return, net of taxes, and purchasing power of about 1.5 to 2%. Now, what you don’t realize is that in order to get a 6 or 7% rate of return in your retirement account, you had to put your money at risk every single day for over 40 years.
So let’s summarize or recap exactly what happened. You made the responsible decision to save for retirement in a government-qualified retirement plan. But what you didn’t realize is:
Your money was exposed to the risk of Wall Street.
Inflation ate away at the buying power of your money.
The government is going to take a big chunk of the money when you take it out in retirement.
So you’ve separated yourself from your money, from your cash flow. And under the idea that you’re going to move yourself forward. But there are so many forces pulling you back that you don’t see that it’s almost impossible to get ahead financially.
Now, let’s just take a step back. We’re not saying you shouldn’t be saving for retirement. In fact, you should be saving for retirement. But what we’re suggesting is that you save in a place where you have complete liquidity use and control of that money everywhere along the way so that you could reach your financial goals, not just in retirement, but everywhere along the way, because we have to live along the way. And we want you to do that without being dependent on banks and credit cards for access to money or the government rules to access your money or Wall Street to grow your money efficiently.
When it comes to your monthly cash flow, every decision you make has a ripple effect. So you chose to save for retirement in a qualified plan, but you don’t have access to that money. So what happens when you want to go on vacation, send your kids to private school, do a home improvement, or buy a new car? You’re forced once again to go borrow. And what does that do? It further pinches your cash flow. That’s the ripple effect. And with every ripple you make in your monthly cash flow, it gets harder and harder to save in a place where you have liquidity, use, and control of your money.
So let’s start with answering the question: Why is controlling your cash flow so important? And to answer that, let’s take a look at all of the ways that the government, Wall Street, and banks systematically get their hands in our checkbook every single month. Oftentimes, they’re in there so much so that we’re not saving for ourselves, for our future, for our families. It’s really simple when you think about it. Financial institutions, large corporations, the government – they have rules. And those rules are really simple:
They want to get our money.
They want to get our money on a systematic basis. Think about all the monthly subscriptions, the auto pays, etc. that you have where you freely let people in or institutions into your checking account.
They want to keep our money as long as possible.
When it comes time to give us our money back, pay it back to us over as long a period as possible.
Those four rules are cardinal to their financial success, and that’s what we say: If it’s important enough for them to implement those rules, then it should be that much more important or us to follow those rules to benefit ourselves.
Think about the impact it would have on your life and your family if you were to implement those four rules for yourself instead of having them serve the government, banks, Wall Street, everyone else. They could be serving you and you could finally be in control of your cash flow. And that’s why it doesn’t matter how much money you make. It doesn’t matter if you make over $1,000,000 a year or if you make $50,000 a year. If you’re not in control of your cash flow, you’re not in control of your life. It’s really simple.
The government, financial institutions, Wall Street, and banks, they want to, they need to, separate us from our money. And they do it by convincing us that it’s actually moving us forward. And in the process, they get to control our cash flow, they get to control our money, and ultimately they control our lives. Because one day you wake up and you’ve got retirement deposits, you’ve got car payments, credit card payments, mortgages, home equity loans, you name it. And the next thing you know, your cash flow is pinched and you feel out of control. A lot of times people come to us and they think, “If only I earned more money, I could finally reach all my financial goals. I could finally get some cash flow relief.” But that’s not true unless you start making your money and your cash flow more efficient. The problems are going to continue to compound as your income grows. It’s sort of like you have a bucket filled with holes and in order to fill that bucket with water, you have to first plug the holes. And that’s where we can help you regain control of your money. It’s money that’s literally hiding in plain sight. It’s in your cash flow. You think it’s moving you ahead, and it’s actually holding you back.
If you’re finally ready to regain control of your cash flow and stop being at the mercy of government banks and Wall Street, be sure to visit our website at tier1capital.com. There’s a free web course that goes through our exact process, step by step. Or if you’re ready to get started, click the Schedule a free Strategy Session button to get on our calendar today.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Are you a millennial saving for retirement in your employer-sponsored retirement plan? Did you know that the average age millennials started saving for retirement was actually between ages 22 and 23? Why? Simple, automatic enrollment. 95% of those enrolled don’t opt out. If you’re wondering if there are better ways to save for your financial goals and retirement, stick around to the end of this blog.
When it comes to saving for retirement, use your employer-sponsored plan to contribute up to the level that the employer matches. But over and above that, you may want to consider alternatives that put you in control of your money so that you could access that money somewhere along the line. In case there’s a financial emergency, a medical emergency, or an opportunity that you want to take advantage of.
Now keep in mind that these strategies may be different from the ones that your parents, your grandparents, your mentors, or even your friends are using.
But they seek to keep you in control of your money because whoever controls your cash flow controls your life. And we have seen too many times people trying to put as much money as possible into their government-sponsored or employer-sponsored retirement plan. And you see, it’s not about having the biggest statement or the largest value on your statement. It’s about being in control of your money. And yes, you might have a large statement or a large balance in your retirement account. But who really controls it? Is that all your money or is part of it controlled by the government?
And you see, that’s the key. Putting you in control of your money. Have you considered what the taxes are going to be in the future when you go to access that money, or if you have to access it before the government says you’re allowed to? What the penalties are going to be on that money? And you see then this brings us back to the basic question: Do you think taxes are going up in the future?
Do you think taxes have the potential to go up a lot in the future? Is it better to defer a small amount of tax into the future when it could potentially be a large tax? Or is it better to pay a small amount of tax on your income now and let it grow on a tax-deferred basis so you never have to pay taxes on it again?
So you’re going to always want to contribute up to that employer match. But anything over that, you have a choice. Where is the best place for you to save that money? And that’s where we can help you. We can help you assess where the best place to put the money would be to fit your circumstance. You’re going to want to keep full liquidity use and control of any excess money that you’re saving. You’re going to want to save it in the place that it’s allowed to grow on a tax-deferred basis, and that allows you access to anything you need, no questions asked. So you could use it to renovate your home, go on vacation, send your kids to college, take advantage of opportunities, or anything else you could think of.
And here’s the point again. You have choices, and keeping those options open allows you to access that money prior to retirement so that now your money is working in two places at once.
So if you’re enrolled in your employer-sponsored plan and contributing over the match and you’re looking for some alternatives of where you could save, that would leave you in control of your money so that you could access it when you need it for what you need. Be sure to visit our website and schedule your free strategy session today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.
Today we’re going to share with you ideas and strategies that transcend finances. It will be information that can impact your life on a much bigger and deeper level than just financially. Implementing these strategies can give you back control of your money, your cash flow, and your life. No longer will you be dependent on and therefore obligated to the banks for credit and access to cash. No longer will your financial success be tied to the vagaries and whims of the Wall Street rollercoaster. So if you want to get back control over your life and experience the liberating feeling of independence and freedom that come with it, stick around to the end of this blog to find out.
Today we’re going to talk about the concept of money that is hiding in plain sight. And you may be wondering: “How could money be hiding in plain sight? Every day I wake up, I make the best financial decisions for myself. I pay off my debt as soon as possible. I have a 15-year mortgage and I’m paying extra on it. I’m paying off my credit cards as fast as I can. I’m maxing out my 401K’s. I’m paying cash for purchases when I can. I’m saving for my children’s college education.”
But what if we were to tell you that the things you’re doing could actually end up holding you back financially in the long run? When would you want to have that conversation?
So, let’s start with a simple example of having $500 extra at the end of the month and making the decision to put $500 on your credit card. Why? Because debt is bad. And the first question you need to ask yourself is that by putting that extra $500 on the credit card, does that increase or decrease your net worth? The answer is neither. You see, before you put the money on the credit card, you owned and controlled $500 and you had the outstanding balance on the credit card. Now you have a lower outstanding balance by $500, but no cash. It hasn’t impacted your net worth by one penny. But the key is now who controls that $500? And the answer is, it’s not you. That’s just one example of where you could be giving up control of your money unknowingly and unnecessarily.
We found that there are five major areas of wealth transfer: taxes, how you fund your retirement, your mortgage, how you’re saving for your children’s college education, and how you’re making major capital purchases like weddings, vacations, or buying a new car. And, you see, this money is actually hiding in plain sight. And what we have found is that the average family has about $24,000 year over year that is hiding in plain sight. Again, it’s money you think is moving you forward. It’s actually holding you back. And because of that, we’re able to identify that money and return it to you so that you can be in control of that money.
Let’s face it. No one wakes up in the morning and says, “Hey, how can I mess up my finances today?” We’re making decisions that we think are right for us because that’s what conventional wisdom told us, or that’s what our parents told us, or that’s what our grandparents told us. But we’re here to tell you that there may be a better way that leaves you with more control of your finances so that you’re less dependent on these institutions going forward. And you see, that’s the key to putting you back in control of your money. Once you start chasing returns or looking at interest rates, you’ve taken your eye off the ball. And that’s where we could find the money that’s hiding in plain sight.
Now, finding the money is only step one. And if you find the money and you just increase your lifestyle or you increase your spending, that’s not going to move you forward either. The second part of the equation is to start saving that money and to start saving it in a place where you own and control it so that you’re able to make better financial decisions going forward and be less dependent on these institutions in the long run.
And you see, we have found that a specially designed life insurance policy will give you access to your money when you need it, no questions asked. So that’s the first issue of control. The second issue is that by accessing that money and using the loan provision now, your money will continue to earn uninterrupted compounding interest. And now that’s the second level of control that returns back to you. And again, what could be more empowering or more liberating than setting up an account that only you could access and you can use for whatever you want, whenever you want. That, to us, is control.
You see, when you’re in control of your money, you’ll have less dependency on banks for access to credit, and you’ll have less exposure to the risks of the Wall Street rollercoaster. If you’d like to get started in finding the money, hiding in plain sight in your finances, be sure to visit our website at tier1capital.com to schedule your free strategy session today. And remember, it’s not how much money you make, it’s how much money you keep that really matters.
