cash value

Is Whole Life Insurance Too Good To Be True? The Truth About The Infinite Banking Concept

If you’ve been reading our blog posts for a while, you will know that we often talk about using specially designed whole life insurance policies to help our clients accomplish their goals. Sometimes, people come to us and say, “Hey guys! This seems like it’s too good to be true. What’s the catch and why aren’t more people doing this?”. If you’re interested in having those questions answered, stick around to the end of this blog post.

People come to us because they are generally frustrated that they’re making a good income and they are doing everything by the book according to the so-called financial experts. They are maximizing their retirement accounts. They are paying down their mortgage and they are saving for their two children for college. But they just don’t seem to be getting ahead. They feel frustrated because they don’t have access to money when there’s a financial or medical emergency, or they don’t have access to money when there’s an opportunity that they’d like to take advantage of. Because of that frustration, they seek assistance from financial advisers who could help them.

We met with a client who was a surgeon. He and his wife were very frustrated because they wanted to take their children to Disneyland. It was only going to cost $13,000. They make $800,000 a year and they were frustrated because they didn’t have access to their money. Why? It’s because they were maxing out their retirement accounts. They were saving money for their children’s college education. They were paying down their mortgage. So they didn’t have access to any of the money that they made.

Clearly it’s not the income that was holding the family back. It was how they were using their money. That’s why we always preach, “It’s not how much money you make. It’s how much money you keep that really matters”. One of the first things we do when we meet with clients is take a look at their personal economic model. We look for inefficiencies. Places where they are giving up control of their money unknowingly and unnecessarily. Unknowingly, meaning they’re not aware that they’re giving up control of that money. Unnecessarily in a sense that, they could actually change it. Although not necessarily that they could change it as quick as a snap of a finger. That’s one of the first things we look at and that’s really why we focus on regaining control of your money  so that you could get rid of those frustrations and you could accomplish what you want with your good income.

Regaining control of your money means putting you in a position where you could access your money when you need it. When we talk about plugging those leaky holes in your financial bucket, it’s literally identifying the five major areas where you are giving up control of your money. Those areas are taxes, how you fund your retirement, how you pay for your children’s college, how you pay for your real estate mortgages and how you make major capital purchases. We do a deep dive as to how you’re using your money in these five areas to show you exactly where you’re giving up control of your money.

Where am I giving up control of my cash flow?

It all becomes so simple. Whoever controls your cash flow controls your life. We find it very important to identify the exact places where our clients are giving up control of that cash. So they could regain control of their financial life. Keep this in mind, anywhere you place your money, besides under your mattress, is a financial tool. They are all financial products. But the products we use to help our clients accomplish their goals are specially designed whole life insurance policies, specifically designed to accumulate as much cash value as possible and as quickly as possible.

The reason why we do this is to help our clients accomplish short term, intermediate, and long-term financial goals;
Short Term Goals –  maybe it’s paying off debt or planning to go on a vacation.
Intermediate Goals – could look like saving for a wedding or a down payment on a house or sending your kids to college.
Long Term Goals –  would be planning for a retirement, supplementing your retirement, or using the cash value on a tax favored basis to supplement your retirement income, as well as leaving a legacy for your family.

When we’re recommending a financial product to our clients, we have a few things in mind.

Number one, they need to have access to that money, complete liquidity to use and control so that they can use it for whatever they need, whenever they need it, no questions asked.

Second, we want them to be safe. Safe from market losses and their money protected from Wall Street and creditors, if they are subject to a lawsuit or bankruptcy. Finally, safety from the government so that if the government increases or changes taxes, their money is protected.

The next thing we want is continuous compounding so that they could access their money, but still earn interest. As if their money is in two places at once. And think of this. What’s the rate of return? Getting $1 to do two jobs.

Finally, we want a reasonable rate of return. Let’s say somewhere around three to four percent.

If we can get all of those things with one product, then that really helps us to accomplish our client’s goal of having access to their money, but more importantly, making their money more efficient.

We believe that there is more opportunity in helping our clients avoid the losses than trying to pick the winners. Using this specially designed whole life insurance policies allows us to accomplish all of the things mentioned above and so much more. Because they are able to take advantage of opportunities when the stock market is down or when a business opportunity comes up. They are able to pay off their debts or buy a car. They’re able to use that money, however they want to use it without interrupting the compounding of interest. This is such a powerful tool.

Now that we’ve listed all of the benefits that you can get from owning cash value life insurance. Let’s talk about what it won’t do. It will not give you the highest rate of return in the shortest period of time. For a lot of people, that’s a deal killer. But that’s okay because you see, we’re worried about helping our clients who want to regain control of their money, who are sick of being frustrated from not having the cash to accomplish their short term intermediate and long term goals. The cash value life insurance gives them the opportunity to do those things we mentioned earlier.

We believe that there’s more opportunities in avoiding the losses and making your money more efficient and working for you consistently with no risk of loss than there is in picking the winners. That’s why we use this product so passionately.

Why aren’t more people doing this?

Well, it’s real simple. This is the way people used to save back in the seventies. But unfortunately the wall street model took over. IRA’s and 401k’s became popular or started in the seventies. The Wall Street model has pretty much taken over for the past 40 years. But prior to that, this is the way people used to save. But keep in mind, cash value life insurance has been around for over 200 years.

Ray Kroc used cash value life insurance to keep his business going when he was trying to figure out how to make money from McDonald’s. Sam Walton bought so much life insurance for many of his employees that he ended up paying a fine. Walt Disney borrowed against his life insurance when no bank would loan him money to start the theme park in Florida. Keep this in mind, banks are the largest purchasers of cash value life insurance. They take profits from their customers.They recommend the customer to put money in places where their money is tied up and then they take those profits. Put some of those profits in cash value life insurance.That’s very ironic.

So when the question is posed, “Why aren’t more people using this product?”. The answer is quite simple. Advisors today are not trained on how to use this product to its full potential. But for our company, we have been using this for several years with all of our clients, as well as personally. We use it to purchase cars, to invest in our business and send kids to college. All of the things that we’re talking about to our clients, we’ve done personally, and we’ve been doing it for several years. That’s the difference between us and most advisors. They are not trained on how to use this product and how to make it as efficient as possible for their clients.

If you are tired of feeling frustrated and stuck that your cash is pinched, or you feel like you’re doing everything right, but still can’t seem to get ahead and would like to learn about how you could put a whole life insurance policy, specifically designed for cash accumulation, to work for you and your family. Feel free to schedule a free strategy session or check out our web course where we go into great detail about how this process works. Remember, it’s not how much money you make, it’s how much money you keep that really matters.

Protect Your Dollars Against Inflation With Life Insurance

 

 
 

Currently we’re at 20.7 trillion of money in circulation. In 2025, it’s projected to be 33.5 trillion, and in 2029, it’s projected to be $53.9 trillion. Doesn’t that create inflation? What does that mean to us? Well, isn’t inflation really having an effect on the purchasing power of our money? Isn’t that literally a way that the government found to pay their bills by taking money from us, stealing our purchasing power?

Did you know that 40% of all US treasuries have been printed between the year, January, 2020 and today, not only that, but 78% of all the money that our government has ever printed has been printed between January 20, 20 and today. Do you have any idea what effect inflation is going to have on you, your family and your business? When it comes to responding to crisis, whether it’s wildfires, hurricanes, pandemics, or war, our government only has two ways that they’re able to respond. They could respond legislatively by increasing taxes, or they could respond administratively by printing more money. That’s it. They only have two tools in their toolbox when it comes to responding to crisis.

Federal taxes are projected to be $3.8 trillion for 2021. In 2020, 61% of us households paid no federal income tax and that number is expected to increase in 2021. Now in 2025 tax revenue is projected to be $6.3 trillion and in 2029, 8 years from today, tax revenue is projected to be $10.5 trillion. So we absolutely know that the government is planning on increasing taxes. Now here’s the question. When the government increased taxes, are they going to tax the people who don’t pay any taxes? Or are they going to tax the people who are used to paying taxes? Let’s face it. They can’t get blood out of a rock and when they go to increase the taxes by 270% over the next eight years, are you willing to pay those taxes? Are you prepared? What are you doing to protect yourself, to make sure you’re not paying more taxes than you need to? The point is we live in America and we have choices. Are you choosing a strategy that protects you from taxes? Or are you choosing a strategy that is going to subject you to increasing taxes?

So now we’re going to take a look at what happens when our government responds administratively by printing more money. Did you know that in the year, 2000, the amount of money in circulation measured by the M2 money supply was $4.8 trillion? In 2021, it’s projected to be $20.7 trillion. Now think about this: In the year 2000, it was 4.8 trillion, in 2021 it’s 20.7 trillion. The amount of money in circulation grew by over 430%. Well, our population in the year, 2000 was 300 million people. Today it’s 330 million. So the amount of people in our country grew by 10%, but the amount of money that they put in circulation grew by 430%.

The bigger problem is currently we’re at 20.7 trillion of money in circulation. In four years, in 2025, it’s projected to be 33.5 trillion, and in 2029, it’s projected to be $53.9 trillion. That’s a big number, but when the government prints more money, what does that create? Doesn’t that create inflation? What does that mean to us? Well, isn’t inflation really having an effect on the purchasing power of our money? Isn’t that literally a way that the government found to pay their bills by taking money from us, stealing our purchasing power?

How do you protect yourself against the effect of increased taxes and increased inflation? The stealth tax?

Well, that’s easy first and foremost, you want to protect your money. So you’re never subjected to losses. Secondly, you want to have access to your money so that you could take advantage of any errors, mistakes, or blunders that are made by the government, wall street and the banks. Lastly, you want to do both with reduced or eliminated taxes. What I just described are the benefits of cash value, life insurance.

If you’re looking to learn more about how cash value life insurance could help protect you, your family and your business against the eroding effects of taxes and inflation, schedule your free strategy session today!

Why My Clients Choose to Work With Me

If you have had any previous experience with a financial advisor, chances are the conversation revolved around how much money you have, where it’s located, we can do a better job. It would seem that most investment firms share the same singular focus of trying to find better products that earn a higher rate of return which often take more risk. For all of the fancy analytics and mathematical acrobatics available today, nobody has yet figured out how to predict the future. Earning higher returns is certainly not a bad thing, and something we can help you with as well, however we believe we should help our clients avoid money they could be losing unnecessarily before considering options that require more risk. Return is not the only thing to consider when evaluating the efficiency of your own personal economic model. There are three types of money:

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The money used to secure your financial future must somehow come from these three areas. Accumulated money represents the dollars you currently have invested and are currently saving. You could focus your attention on these dollars in order to find better investments that potentially pay higher rates of return.

Lifestyle money represents the dollars you are spending to maintain your current standard of living: where you live, what you eat, where you vacation etc. For many people, this is where the conversation ends. While everyone wants to solve their financial problems reducing their current standard of living is not a popular option.

What if there were a way to address the issue without having to incur more risk or impact your present lifestyle? I’m glad you asked!

Transferred money represents the dollars you may be transferring away unknowingly, and unnecessarily. Such as:

  •  How you pay for your house,
  •  What you pay in taxes
  •  How you fund your retirement accounts
  •  Non-deductible interest
  •  How you pay for major capital purchases like cars, education, weddings, and other large expenses.

There are really only two ways a financial advisor can be of help to you:

  1. By finding better products that pay higher rates of return requiring more risk
  2. By helping you be more efficient by avoiding unnecessarily losses

I believe that there is more opportunity to serve my clients by helping them first avoid the losses, before trying to pick the winners. My focus with clients begins with eliminating the involuntary and unnecessary wealth transfers. Consider this. There are two ways to fill up a bucket that has holes in it. One way is to pour more in, and the other is to first plug the holes, then the bucket will fill up even if the flow is just a trickle. Which strategy more closely resembles the way you are currently approaching financial management?

 

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How GameStop changed the way we think about the stock market.

 

 

“What if you could develop a strategy that would prevent you from ever losing money ever again, and because your money was safe, you were in a position to take advantage of any manipulations or volatility in the market.”

 

Have you ever felt that the market is being manipulated by wall street, the government and banks? Do you think it’s being manipulated for our benefit or for their benefits? Did you ever give thought to the fact that not one American CEO or senior executive did any jail time for the 2007, 2008 financial crisis that almost took down the entire financial system? That’s when they went begging to their buddies in Washington to get a bailout and you and I ended up paying for the bailout. How about this? We can’t benefit from insider trading, but they can. Congress set themselves up where they’re completely exempt from insider trading, but yet Martha Stewart went to jail for insider trading. 

We have to stop playing the game by their rules because the system is rigged against us. We need to play by a different set of rules to set ourselves up for financial success. We have the opportunity to take advantage of the markets rather than being a victim to the markets. Here’s another example of how the game is rigged against us. For years and years, hedge fund managers were able to short stocks and take advantage of the market. However, in the early months of 2021, when the general public began to manipulate the stock for Game Stop, the popular trading app Robinhood, took the stock off their platform so that no one else could take advantage. No one else could benefit from the market manipulation. 

Again, it’s another example of “we could manipulate the market”, meaning the insiders, but once the public gets a hold of it, “Oh no. Now what’s wrong.” Now the regulators are talking about stepping in to make sure that this could never happen again. Do you think the regulation is going to be for our benefit or for their benefit? 

Why play a game that’s set up for them to benefit and for you to lose? What if you could develop a strategy that would prevent you from ever losing money ever again, and because your money was safe, you were in a position to take advantage of any manipulations or volatility in the market. Furthermore, even better than that, what if you can do so with total elimination or reduced taxation on your money! Wouldn’t that be vital information to have? If that type of planning was available, when would you want to get started? 

 

Becoming the beneficiary of your own life insurance policy: How to use the living benefits

 

“You see, instead of becoming a victim of market volatility, owning cash value life insurance allows you to access that money so that you could actually profit from market volatility.”

 

There are two main types of life insurance. The first is term insurance, which has one benefit and one benefit only, the death benefit. Then there’s cash value life insurance, which has a death benefit, but also has several other living benefits. By taking advantage of these living benefits, we’re able to overcome the five financial challenges that we all face. 

It has often been said that there are two certainties in life, death and taxes. So let me ask you a few questions. Number one, do you think taxes are going to be higher in the future? Number two, do you think that with all that’s going on in our country, and keep in mind that we’re nearly $28 trillion in debt, do you think there’s a potential for taxes to go up much higher in the future? Now here’s the most important question. Do you want to pay those taxes? You see, after you pay tax on your earned income, the choice of whether or not you pay taxes in the future on that money is completely voluntary. 

Which choice have you been making? And with that in mind, wouldn’t it make sense to build a pile of money that the government could never access ever again, as long as you live? You see, the living benefits of life insurance allow you to have that money grow on a tax deferred basis, and you could access it on a tax-favored basis via the loan provision. Finally, that money passes to a named beneficiary on an income tax free basis. Do you know of any other financial tool, financial product that could be that tax efficient and provide liquidity use and control of your money? 

The next challenge we all face is lower benefits in the future, you know, higher premiums, higher deductibles, and more out of pocket expenses. But, doesn’t that mean a lower standard of living for you and your family? Are you okay with that? Because I’m not. If there was a way to replace those expenses, when would you want to know about it? Before or after the benefits are lost? By using the living benefits of life insurance, you’ll have access to money to supplement your income when those benefits are lost, and still have death benefit to pass onto your family. 

If there’s going to be higher taxes and lower benefits, will that be enough to fix all the problems that are about to happen in our country? So how will our government respond? Won’t they print more money? When they print more money, doesn’t that cause inflation? You see, inflation is the third financial challenge that we all face. So what’s your strategy to overcome the effects of inflation? More importantly, when you’re retired, how are you going to overcome inflation? The living benefits of a life insurance policy provides multiple duty dollars. What that means is, the money can be accessed to overcome a long-term care event, a chronic illness event. We know that it can be utilized to supplement your income for anything. Finally, it can do all of the above on a tax-favored basis. 

That’s multiple duty dollars, and that’s how the living benefits of cash value life insurance can help you overcome the effects of inflation. So if there’s higher taxes, lower benefits, and the government prints more money, won’t that cause more and more volatility in the markets? Higher volatility in the markets is the fourth financial challenge that we’re all going to face. If there’s higher volatility in the markets and you make a mistake, can you lose some money? If there’s higher volatility in the markets and you make four or five mistakes, can you lose it all? 

Wouldn’t you benefit from a strategy that allows you to lock in your money when the markets are high so that when the markets go down, you’re in a position to access that money because your money wasn’t correlated to the market and you can profit from all the mistakes, errors, and blunders that are made in the market. You see, instead of becoming a victim of market volatility, owning cash value life insurance allows you to access that money so that you could actually profit from market volatility. 

The next challenge we all face is the challenge of outliving our income. If we retire at age 65 and only live till age 72, would we have much trouble planning for that retirement? But what if we retire at 65 and live all the way till 95, but run out of money at age 72, what would the rest of our retirement look like? And by the way, isn’t 72 the new 52? Aren’t 72 year olds doing what 52 year olds used to do? Do you have a strategy in place that could provide you with an income that you can outlive? By taking advantage of the living benefits of life insurance, you could provide supplemental income when all your other streams have dried up. 

Do you realize that most people view these five issues, higher taxes, lower benefits, higher inflation, greater volatility in the market and longevity, outliving money, as challenges. Here’s what owning cash value life insurance can do for you. What if you never had to worry about these issues ever again for the rest of your life? What if any time any of these issues occurred, you’d be in a perfect position to take advantage of it. Wouldn’t that be a great benefit to have? 

Do you know of any other financial products that can provide these benefits with certainty? Can a CD savings account, money market, IRA, stocks, or bonds provide you with these benefits? You see, the living benefits of life insurance can help us overcome these five challenges, and in essence become the beneficiary of our own life insurance policy. But then we still have the death benefit that goes to our family. So if I can show you how to be in complete control of your money until you take your last breath, but instead of leaving that money to a nursing home hospital or the government, you can leave that money to your family for generations to come. Wouldn’t you want to know about it?

 

 

 

How do policy loans work?

“Think of this, what if you can guarantee that you will never lose any money ever again, would that be a good benefit to have?”

 

Anytime you have cash value in your life insurance policy, you have a contractual right that allows you to borrow against that cash value. Anytime you want. For whatever reason. Two reasons that we think make a lot of sense to borrow against your cash value are number one, to make a major capital purchase. Major capital purchases are things that you can’t pay in full using your regular monthly cashflow. And the second reason is to take advantage of an investment opportunity. 

Let’s take a look at the mechanics of how a policy loan can work for a major capital purchase. As you pay your insurance premiums, three things increase your cash value, your death benefit and your access to capital. When you take a policy loan against your policy, you’re not taking money from your policy. It’s a collateralized loan, very similar to how you access equity in your home. You’re not taking money from your home. You’re putting a lien against your home and the same way you’re not taking money from your policy. You’re putting a lien against the cash value in your policy. As you make policy loan payments, you’re making the payments directly to the insurance company to decrease that lien on your cash value. This is going to free up cash that you can access again in the future. 

Notice that your cash value continues to grow even while you have a loan against it. This is where you get to experience the miracle of uninterrupted compounding of interest, even while you’re using your money. It’s as if your money is in two places at once, because it literally is. Let’s face it. One of life’s greatest financial frustrations comes from the lack of access to capital when you need it most. We saw this a lot during the 2020 pandemic. If you’re a business owner and you’ve plowed all of your profits back into your business, you experienced the frustration of not having access to your capital or control of your money when you needed it most. 

Let’s take a look at how policy loans could work to take advantage of investment or business opportunities. One main difference between a bank loan and a policy loan is that there are no restrictions for the purpose of the loan. There’s no income check. There’s no credit check and there’s no inventory check. Policy loans are collateralized against your cash value. Again, you’re not taking money from your policy, you’re placing a lien against your policy. Basically what this means is, if you die with a policy loan on your policy, your death benefit will be decreased dollar for dollar. For the amount of the outstanding loan. Loan payments are made directly to the insurance company to decrease that lien on your policy. But with every payment, your access to capital will increase. 

Notice that the policy continues to grow even while you’re using your money because a policy loan is a contractual guarantee. You’re basically giving an order. You are telling the insurance company to go get you some money versus going to a bank and asking permission as a business owner. Would you rather give an order or have to ask for permission? 

So let’s take a look at exactly how policy loans work. The first step is to build your cash value. After you have some cash value, you have options. One of those options is to tell the insurance company to distribute a loan to you, and they’ll place a lien against your cash value and distribute an interest-only loan. You could use that money to pay for a car, a wedding, an investment, whatever you want, you have the control of that money. Another thing you have control over is the repayment terms. You get to determine how much you pay back towards that loan. You can pay just the interest. You could pay more when your cashflow is flush and less when your cashflow is pinched, you have control. 

We talked about policy loans and how you have use and control of your money, but there are so many additional benefits with cash value life insurance. Think of this, what if you can guarantee that you will never lose any money ever again, would that be a good benefit to have? What if, because you didn’t lose money, you had access to money so that you could take advantage of any stumbles, wonders or errors that the government and the markets make. What if you could earn uninterrupted compounding of interest on your money, even while you’re using it, would that be a good benefit to have? What if we can do all the things we just described and have reduced or eliminated taxes on our savings, would that be a good benefit to have? All of these benefits exist in cash value life insurance. There is no other financial product that offers all of the things that we just described. 

 

 

Making Compound Interest Work For You

 

“It’s really the best of both worlds when you’re a wealth creator.”

 

Albert Einstein once referred to compound interest as the eighth wonder of the world. Here’s the problem. Most people are so focused on not paying interest that their eye is completely taken off the ball. They completely ignore the concept of continually earning interest on their money. But there’s one foundational principle that we need to come to grips with and that is, we finance everything we buy. What does that mean? It means this, you’re either going to finance and pay interest to a bank or somebody else for the privilege of using their money or we’re going to pay cash and therefore give up interest that we could have earned, had we not paid cash. 

That’s the secret. We either pay up or give up. If you’re looking to realize true financial freedom for yourself, keep this in mind. It’s not what you buy, but it’s how you pay for it that really matters. You know, most people think there’s two ways to pay for something. Either finance or pay cash. Well, there’s actually three ways. So let’s take a look at them. If you finance your debtor, you’re working to spend, you have no savings. You earn no interest and you pay interest. Most people recognize or realize that that’s a bad thing. Maybe they were taught by their parents that if you didn’t have enough money to pay cash, you didn’t need the item. Or they saw their parents struggle to get out of debt. Either way, they move to paying cash. So they save, they avoid paying interest, but they earn no interest. And then they pay cash. 

There’s actually a third way, the wealth creator. This is where true financial freedom is really located. You save, you’re using other people’s money to maximize the efficiency of your money. You’re putting leverage to work for you. You save, you continuously earn compound interest. Then, when it’s time to buy something, you collateralize the purchase. Notice the key here in all three areas and all three methods. You still get the purchase. 

It’s really the best of both worlds when you’re a wealth creator. Let’s take a look at what that looks like. Let’s say you finally graduated college and you have your first real job. Everyone at work has new cars and you finally have the income to qualify for a loan. So what do you do? You buy a car, you go to the dealer, you get a loan. 30 days later, you get a coupon booklet. What you did is, you bought a car and now you have payments. So you dug a hole and you filled it up. Five years later, you got a five-year-old car. You don’t have a payment, time to buy another car. You just keep digging a hole and fill it back up. But notice over time, you never get above the financial line of zero. So what’s the alternative? Well, the alternative is to pay cash. Paying cash takes tremendous discipline because in order to pay cash, you have to save first. So you delay the gratification of a new car until you have enough money to pay cash. Then when it’s time to pay cash, you drain down the tank, you spend your savings and then you got to start over. 

Here’s the problem with paying cash. You still have payments because if you want to pay cash for the next car, you have to begin saving the day you bought the car. Then when you have enough money saved for another new car, five years later, then you drain down the tank. Again, notice over time, you don’t get too far above the financial line of zero. In fact, you’re not much better off than the spender. The only difference is, you lost interest along the way. 

The way that we teach our clients is to become the wealth creator. When you’re a wealth creator, you’re saving. Your money is continuously earning compound interest, but then when it’s time to buy something, you collateralize your purchase. What does that mean? You’re using your savings as security against the loan. You’re pledging it as collateral and you still have a payment, but understand, if you finance, you have a payment. If you pay cash, you have a payment. If you’re the wealth creator, your money never stops earning compound interest. That’s the key to true financial freedom. 

It’s like your money is literally in two places at one time because you’re able to make the purchase. You also are still able to earn interest on your savings because you’re never actually touching it. You’re using other people’s money. There are two main variables to compound interest, money and time. Every single time we drain the tank, we’re saying, “don’t worry, I could replenish that cash later.” What we often forget is that, time is a variable that we will never get back. 

Let’s take a look at an example. Let’s say you’re saving $5,000 per year. You’re earning 5% interest on that money. We’re going to look at this over a 30 year period. We’re going to drain the tank down four times by paying cash and we’re going to refill it every five years. So here’s what happens. We go and we buy a car. Now had we not drain down the tank, our money could have continuously earn compound interest for us. And at the end we would have $353,804. But because we decided to pay cash, and we did this four times. And then we finally realized it wasn’t the amount of income that we were earning that was holding us back. It was how we were using our money that was holding us back. We started to continuously earn compound interest on our money. Notice we only have $71,034. That’s a difference of $282,770. Keep in mind, this person figured it out. After 20 years, most people never figure it out. 

Here’s the problem with traditional financial planning. They completely ignore time. They’re so focused on earning a higher rate of return that they completely ignored the two factors of compound interest, time and money. Most people come to us thinking if only I could earn a higher rate of return, I could finally be financially free, but that’s not necessarily the case. 

Let’s say you could earn 7% on your money. If you go through this same pattern of delaying compounding interest, now you’re out $431,000. That’s still a big number but let’s take a look at what happens. If you could earn 3% on your money, that’s a big number. Keep in mind, we made six purchases over a 30 year period of $30,000. That’s $180,000. You’re losing just as much if you caught onto this 20 years down the road in lost opportunity. 

You see, it’s not what you buy, it’s how you pay for it that really matters. What is most important is to never jump off the compound interest curve. The key is to get on the compound interest curve as soon as possible and never jump off. That includes market losses. Although, financial advisors could promise a high rate of return, every time you experience a market loss, you’re jumping off the compound interest curve. We could see here just how detrimental that could be to your financial wealth.

 

 

 

 

How to navigate the current economic downturn.

 

Were you prepared for an economic downturn? Given the current situation, many people were not financially prepared for the effects of Covid-19. Whether you’ve been laid off or are now working from home, most people are struggling financially. You may have a few options when it comes to accessing some of your invested money. You can take money out of your retirement plan, you could sell your shares in the market, you could get a 401K loan, or you can access some of your home equity. This video will go over all of the implications these options have and what you could do to prepare for future economic downturns.

 

“I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm.”

 

Today we’re in the midst of the covid-19 pandemic. Because of the pandemic, there are a lot of financial and economic uncertainty in the world and today we’re going to talk about how you could possibly position yourself to take advantage of this financial opportunity and come out better on the other end.

First, we’re going to discuss what you may be experiencing out there in your economic world.If you’re an employee, you may have been laid off or working from home during the pandemic. Either way, these changes cause stress and whether or not you’re still earning income, your bills are still accumulating and if you’re a business owner, your overhead continues. Plus, you have the added stress of knowing that the livelihood of your employees and their families are in your hands. So, at this point, most people, whether you own a business or whether you’re an employee, you’re stressed out trying to think about where you can raise some money to get through this financial crisis,
which brings us to our next point. Where do you have money stored that you could have access to it during this tough financial time?

Let’s face it, most people had money invested in the market and for 11 years that was the place to be and it worked until it didn’t. Well, now the market’s down quite a bit and with your income being reduced, you’re scrambling to get access to capital. Now may not be the best time to be selling your investments in order to pay for your current lifestyle.

Another place you may have access to money is in your retirement plan and for some people this may be your only option. There are a few things to consider if you plan on taking money from your retirement plan. First, if you’re 59 and a half, you’ll have to consider the penalty that will be applied to your distribution. Everyone will have to consider the taxable income from the distribution and most people at this point will have to consider the losses that were hit on their account.

You may not want to be selling at this point, but if that’s the only place you can get access to money, that may be the only option. You also may have options in a 401k, where you can get a 401k loan. But again, there are things you need to consider. Number one, the amount of the loan is limited and number two, the loan has to be repaid usually within a five-year period. In essence what you’re doing is obligating your future income.

This could become a problem, especially if your job is eliminated. Any outstanding loan balance would be taxable fully as income at that point. Also, if you’re under 59 and a half, you’d have to consider the penalty that would be applied. Another place you may have access to your capital is in your home equity, whether you were paying your minimum mortgage payment or paying extra on your mortgage. People have money stored in the equity of their home and they feel that it’s their money. They can get whenever they want, but the reality is the bank will only give you permission if you qualify for being able to repay that loan. The fact of the matter is during these uncertain financial times, the bank may not be readily willing to allow you access to your home equity. I remember a quote from the syndicated radio show host, Paul Harvey, and he said, “it’s times like these that remind us that there have always been times like these.” The point that I got out of it is, the fact that if you were prepared for these times, you wouldn’t have to be scrambling and looking at accessing money from places that may be have restrictions as far as accessing it.

I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm. First and foremost is the importance of having access to liquid cash when these scary financial times occur. The importance of having liquid cash, cash that isn’t tied to the stock market, or money that isn’t tied to the economy tap, cash that isn’t going to leave you with a tax bill. Cash that you could access at any time with no questions asked.

What we’re talking about is cash value, life insurance. Ladies and gentlemen, this isn’t new. This has been around for over 200 years. In fact, JC penny used cash value life insurance. He literally borrowed against his life insurance policies to weather the storm created by the great depression. He had 1400 stores, that’s 1400 stores full of employees that he was responsible for the well being of them and their family. He borrowed against his life insurance to weather the storm. Our point is that if you’re properly positioned, you can utilize and access the cash in your life insurance policy to help you weather Covid-19 and actually take advantage of the opportunities that are going to be created by this pandemic and created by this financial uncertainty.

Keep in mind, life insurance companies are specifically designed for times like these. They’re the most well capitalized businesses in the world. They’ve been through this before. They have a 200-year track record. They know what they’re doing during these scary financial times.

If you have a cash value life insurance and aren’t sure how to use it, please give us a call. We’d be happy to be of service. If you need help designing a policy to help you get through the next financial crisis, give us a call. We could help you design one that helps meet your needs.