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Welcome to the Infinite Mindset Podcast,
the show where we explore the power of
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the infinite banking concept and how to
take control of your financial future.
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I'm your host Andy, along with
Scott and frequent guest Jared.
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We're here to help you think
bigger, build smarter, and
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create freedom on your own terms.
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Let's get started.
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Welcome everyone to another episode
of the Infinite Mindset Podcast.
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Myself, Jared, and Scott, this is
the Christmas episode, so hopefully
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you are at home with family and
friends, having a good time.
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You're with a good crew celebrating.
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And with that, I'll hand
it off to you, Scott.
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Where are you at right now
on getting your license and
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getting appointed with the NNI?
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I got, got my fingerprints done.
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Those were submitted to Wisconsin.
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So I'm just playing the
waiting game on, getting the
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license in hand from Wisconsin.
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I think they get like 90 days to
process that though It's holiday.
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So we'll see how long that takes.
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But that's the last step
everything's applied for.
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Fingerprints are in.
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after we get done with this, I'm gonna
reach out to the guy that's gonna be
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my mentor, see if I can start the NNI
stuff, or at least the process of it,
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without that license physically in
hand, or if they need that to start.
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So reach out to him and
otherwise they're just waiting
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on Wisconsin to do their thing.
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Okay, cool.
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All right, with that,
we'll jump right into it.
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So we're gonna be
talking about cash value.
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Where is my money, really
is what we're getting at.
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And so first off, it's good to kind
of look at a few definitions so people
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understand what we're talking about.
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And so looking at what is cash
value is actually very simple.
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It's the present value of
your future death benefit.
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And so some people kind of maybe listen
to that and like, what do you mean?
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And so another way to look at it,
it's what would the company give
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you right now if you were to let
them out off the hook and not have
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to pay your, your death benefit?
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And so that term though is actually
called the cash surrender value.
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And you'll see that when you look at your
contract and it's constantly growing.
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As the policy gets older and older,
because you think about it, you're
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getting closer and closer to the
end of your, to your mortality.
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You're gonna be getting closer
to your graduation date.
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So if the company can give you less
money now so they don't have to
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pay that death benefit, that's how
they can get outta the contract.
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Now, they don't actually wanna do that.
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It's just kind of conceptually the
way that we wanna look at this.
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another way to look at it,
sometimes it helps people this way.
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It's the present.
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It represents the equity that
you've built up in the asset.
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In this case, the asset
is your whole life policy.
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And it's similar in the way that
you would build up equity in a home
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if you were paying down a mortgage.
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But for me, conceptually, the
way I like to look at this, when
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you're paying down your mortgage,
you're paying down the debt.
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But when you're actually paying premium
and you're growing your cash value,
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you're actually building an asset.
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So it's a little bit different than
the home, but that's kind of how I
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like to look at that structurally.
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Anything else you guys want to add there?
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Really, really important point there
that you're paying down debt when you're
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paying the mortgage, but you're building
the asset as you're growing this like.
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Perfect, perfect description of that.
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depending on if you're in
the US or Canada, we're just
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gonna focus on the US though.
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You have something called
the policy endowing.
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And what that simply means
is that the death benefit is
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gonna equal the cash value.
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And so in the US typically
that's around age 1 21.
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Now it used to be age 100, but we're
getting, we're living longer and longer.
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And it could still vary a little bit by
company and the different products, but
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that's typically what we're looking at.
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So when you think about this,
if you can get the death benefit
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higher, right, eventually your
cash value has to equal it.
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So ultimately, that's gonna bring
your cash value higher as you go
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along the way, And so when I think
about this and how that cash value
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is getting to the death benefit, I
think about it in two different ways.
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There are two things that are
driving that cash value higher.
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One is time, And the other is your
death benefit actually increasing.
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So what I mean by time is if
the cash value has to equal
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the death benefit at 1 21.
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The time that you have in this policy,
the higher the cash value has to be.
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'cause ultimately it's gonna
equal that death benefit at 1 21.
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And the other side of it is
increasing the death benefit.
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So if I start off at one point, then
I can get that death benefit higher.
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Well, I know that at 1 21, that cash value
still has to equal the death benefit.
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So by default that cash value
has to keep growing to get there.
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we'll, we're gonna dive
into it a little bit more.
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We're just looking at definitions.
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But if you conceptually can think
about this, it's gonna make the rest
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of the conversation, we're gonna
have that much easier to track.
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Jared, I like this.
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You brought this up
before when you said it.
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Cash value is not the same as cash.
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It's a value.
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It's not actually cash, right?
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we'll look at this a little bit more,
but that's important to really understand
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'cause we're gonna talk about what
you're leveraging and what you're doing.
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But if you can look at it as a
value and not actually a pile
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of money, it's gonna be a little
bit easier for you guys to grasp.
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Yeah, and when I first saw, when
I first saw the word endow, I was
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still kind of tied up on the modified
endowment contract, and I a hard time.
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Differentiating the two of those.
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Right.
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But they are two different thing, right?
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The modified endowment contract is totally
different than a policy that does endow
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or the cash value reaching the same
amount or value as your death benefit.
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I, when I, when I saw a picture of
a, a sideways triangle, it's not
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linear, but the, the cash value grows
to reach where the death benefit
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is over the life of the contract.
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I, I think this gets so foreign because.
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used to, A lot of folks are just very
comfortable with term insurance, right?
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This is a whole life policy.
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This is all the way until your
graduation date, so that that
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cash value is constantly rising.
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I said, it's not linear, but it's
constantly rising over the life
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or the time as you described.
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So that's great.
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I, I wanna jump in there too 'cause I
don't wanna get too far down the road
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to the me, but I think it's really good
to talk about it 'cause we're here.
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So you have an endowment and then you
have a modified endowment contract.
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Yes.
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all policies are gonna endow at some
point, and these policies are gonna endow
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when they're supposed to, according to the
IRS for the tax benefits, which is 1 21.
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When you have a modified endowment,
it just means that the cash value is
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going to equal the de benefit at some
point prior to that age, and when
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That's right.
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you lose the tax benefits.
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So that's
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That's right.
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at there.
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Yep.
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Well said.
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according to the IRS.
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I just remember getting confused by
that when I first read that word.
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Not, not from us talking about it
recently, but when I'm learning about
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this and what these policies look
like or how they're structured, I, I
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got so confused and tied up on that.
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So that, just wanted to highlight
that, that there's a learning point.
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No, I've heard that
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Yep.
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That that definitely makes sense.
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So I wanna come back to the two
things that I talked about, the
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time and the death benefits.
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So we'll do the deeper dive now
into the cash value actually build.
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So when I'm talking about time, the way
I look at this is actually the interest
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or the guaranteed part of the policy.
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And then when we talk about
increasing the death benefit,
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we're talking about premium.
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That could either be premium you're
paying out of your pocket, or it
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could be premium that's coming back
as a PUA or something like that.
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So I actually ran an illustration.
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This was pretty cool, and I wanted
to isolate just the interest.
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So I did a 100% base policy.
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And of taking the dividends to buy
PUAs, I used it just as cash going back.
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So it was only the interest
that was growing the policy
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and it performed as expected.
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I did a paid up at 95, so at age
95, all the premium was paid in the
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death benefit never changed, right?
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'cause I'm not buying more death benefit
with the dividends to do the PUA.
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It was just there and at 95 the
interest kept go growing and at 1
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21, the cash value exactly equaled
what that death benefit would be.
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But something that was
kind of cool looking at.
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Is even with this boring vanilla
policy that wasn't paying dividends,
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or excuse me, it was paying
dividends, but the dividends were
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not being used to, to purchase PUAs.
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amount of extra cash still
going to the owner was actually
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still fairly significant.
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So these policies, even the boring
ones with enough time actually do get
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pretty efficient and will generate a
decent amount of cash flow coming in.
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Right?
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So the other side of this is the premium,
and this is where the majority of the
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growth in your cash value comes from.
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And it's either gonna
come outta your pocket.
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So this is what you're used to.
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Whether you're doing a monthly,
quarterly, semi-annual, or annual
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payment, this is the premium that's
coming outta your pocket that's
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gonna, keep the policy in force.
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And depending on how it's structured,
it may buy some additional PUA as well.
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And then the other side of this,
and this is also premium, it's
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your dividends that are coming in.
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And typically the way we recommend
it and the way that the NNI
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recommends it is for those dividends
to buy pua or paid up additions.
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And you can look at these as little
micro policies that mimic the initial
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construct of the other policy.
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They're fully paid up
policies in the short term.
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And so what happens though is you do this,
is all these things are buying more and
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more death benefit, whether it's your
premium or these pua coming in, whether
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you're paying the PUA or whether the
dividend is being redirected towards it.
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It's growing the cash value, and so by
default, your cash value has to just
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constantly get bigger to so that when it
endows at 1 21, it's going to equal that.
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And so,
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I have a question.
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Jump
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had a question, like a legit question,
like a learning moment for myself.
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PUA buys.
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PUA gets added and your death benefit
rises as you redirect your dividends
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towards your, it doesn't, the only
way that it affects cash value
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is that the death benefit rises.
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And as time goes on, the, the, the
other part of this equation takes
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place and you get, you have more
access to your, your present, value
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of your future death benefit is.
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Is what's rising.
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So it's, it's rising together essentially.
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But the, I guess the big question is
the PUA buys more death benefit is
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the, is the starting point for that.
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Exactly.
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That's, that's exactly
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Okay.
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It's, it's usually
viewed as like a one pay.
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when you do a, a paid up at 95,
you're gonna, if you're 45 years
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old, you're paying for that insurance
over the course of the next 50 years.
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Whereas when you add a PUA, you're
adding it right now, it's a one
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pay policy that mimics exactly the
same policy that's already there.
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depending on the company, you're
gonna get a high percentage.
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Of cash value, let's just say 90% for
the sake of a number, where you're gonna
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get about 90 cents for every dollar
that's going to increase your cash value.
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that varies between company
and product and whatnot.
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But you, you have increased your death
benefit and also increased your cash value
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because you've increased the, the current
value of your future death benefit.
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And something to jump on here, this is
actually really important to talk about.
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The PUA increases your cash
value significantly in the short
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term, but not in the long term.
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That's right.
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over the long term is what
will increase that cash value.
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So that's why we do these
ratios and we look at people's
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age and their life expectancy.
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And so the higher the PUA in a policy,
the earlier cash value, but eventually if
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you have a policy that's heavier in base
in the long term, you'll have more cash
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00:10:07,520 --> 00:10:09,170
value in that policy over, over time.
231
00:10:11,503 --> 00:10:11,723
Yep.
232
00:10:11,863 --> 00:10:12,283
All set.
233
00:10:12,555 --> 00:10:12,775
So
234
00:10:14,058 --> 00:10:14,628
Did that answer your
235
00:10:14,725 --> 00:10:15,295
Makes sense?
236
00:10:16,555 --> 00:10:16,795
Yep.
237
00:10:17,275 --> 00:10:17,455
Yep.
238
00:10:17,630 --> 00:10:18,410
That's a great question.
239
00:10:18,490 --> 00:10:18,910
agreed.
240
00:10:19,067 --> 00:10:21,857
for anybody out there and if they
wanna look at their illustrations so
241
00:10:21,857 --> 00:10:25,427
they can put their eyes on this and
see what their own contract is doing.
242
00:10:25,772 --> 00:10:28,862
You'll see premium coming out of
your pocket, which is the contract
243
00:10:28,862 --> 00:10:32,542
premium, and the premium outlay one
is just gonna be your, your annual.
244
00:10:32,542 --> 00:10:35,272
The other one is gonna be what you've
done over the term of the entire contract.
245
00:10:35,392 --> 00:10:38,662
And then on the left side, you're gonna
see your guaranteed or interest side.
246
00:10:38,662 --> 00:10:40,462
And I kind of have this
as my time portion.
247
00:10:40,462 --> 00:10:43,672
Just even if you don't do anything else
with PUAs over time, this thing has to
248
00:10:43,672 --> 00:10:46,552
grow to what your current death benefit
is if you don't grow the death benefit.
249
00:10:46,642 --> 00:10:48,082
And then on the right side.
250
00:10:48,832 --> 00:10:52,252
Excuse me, you're gonna see your
non-guaranteed or your dividends and if
251
00:10:52,252 --> 00:10:56,242
directed properly to buy PUA, that's gonna
be what really grows that policy as well.
252
00:10:56,482 --> 00:10:59,452
And then a little bit, I just wanna
talk about this on the left side,
253
00:10:59,452 --> 00:11:02,002
there you will, or not, the left
side on the premium, you'll see the
254
00:11:02,002 --> 00:11:03,682
contract premium, the premium outlay.
255
00:11:03,892 --> 00:11:07,672
Depending on how that's structured, you
will have base and PUA mixed in there.
256
00:11:07,877 --> 00:11:11,117
So just to clarify, part of it will buy
the base, which will be that interest
257
00:11:11,117 --> 00:11:13,937
part, and then you'll have those little
PUAs like Jared mentioned before, which
258
00:11:13,937 --> 00:11:16,997
are those little micro policies that just
keep jumping and building it as well.
259
00:11:17,267 --> 00:11:20,147
But ultimately, all of these
things interacting together is
260
00:11:20,147 --> 00:11:21,957
what's gonna, grow that cash value.
261
00:11:23,550 --> 00:11:26,040
Yeah, I really like how you broke
that down between the interest
262
00:11:26,040 --> 00:11:28,890
on the guaranteed side and the
dividend on the non-guaranteed side.
263
00:11:28,890 --> 00:11:32,280
That really hits the easy button and
takes a lot of the confusion out of these.
264
00:11:33,025 --> 00:11:35,875
I don't typically put numbers on
an illustration in front of someone
265
00:11:35,875 --> 00:11:39,325
until they're right about ready
to, to finally pull that trigger.
266
00:11:39,355 --> 00:11:41,155
'cause the, the nu there's
just so many numbers.
267
00:11:41,155 --> 00:11:41,845
It's confusing.
268
00:11:41,845 --> 00:11:42,565
What am I looking at?
269
00:11:42,565 --> 00:11:43,825
Where, what does all this mean?
270
00:11:44,135 --> 00:11:45,965
So to that just really
hits the easy button.
271
00:11:45,965 --> 00:11:47,195
I like, I like how you described that.
272
00:11:48,012 --> 00:11:48,162
Yeah.
273
00:11:48,162 --> 00:11:50,502
And, and the truth is too, we can
make these numbers dance, right?
274
00:11:50,502 --> 00:11:52,932
I wanna make sure that conceptually
people understand what's going on.
275
00:11:52,932 --> 00:11:55,692
I do want people to understand what's
going on with the numbers, but if you're
276
00:11:55,692 --> 00:11:57,072
a good agent, you know what's going on.
277
00:11:57,252 --> 00:11:59,502
You could, you could manipulate things.
278
00:11:59,502 --> 00:12:00,222
I'll just put it that way.
279
00:12:00,222 --> 00:12:00,792
And that's not our
280
00:12:00,845 --> 00:12:01,145
Sure.
281
00:12:01,152 --> 00:12:03,357
wanna make sure people actually understand
the construct and what's going on here.
282
00:12:03,610 --> 00:12:04,210
Exactly.
283
00:12:04,215 --> 00:12:04,665
Exactly.
284
00:12:05,532 --> 00:12:08,562
Okay, so hopefully you guys have a
good understanding of the fundamentals.
285
00:12:08,562 --> 00:12:09,792
If you don't come back, reach out.
286
00:12:09,792 --> 00:12:12,912
We're happy to clear any of this up,
but I wanna move on to loans because
287
00:12:12,912 --> 00:12:15,792
my goodness, if you go out there on the
internet and look at this stuff, people
288
00:12:15,792 --> 00:12:19,182
think, oh my goodness, if I finance
my car through my policy and take
289
00:12:19,182 --> 00:12:21,432
loans, I'm gonna get rich buying cars.
290
00:12:21,672 --> 00:12:23,832
No, this is absolutely not true.
291
00:12:23,832 --> 00:12:24,792
It's very simple.
292
00:12:25,092 --> 00:12:28,962
There's so much noise here, but, and
I call magic, it's not magic, it's
293
00:12:28,962 --> 00:12:30,432
just the way that these policies work.
294
00:12:30,807 --> 00:12:34,527
The benefit here is because it's cash
value and you're not borrowing your
295
00:12:34,527 --> 00:12:38,337
actual cash, is that when you have
a loan out, that cash value is still
296
00:12:38,337 --> 00:12:40,167
growing uninterrupted in the background?
297
00:12:40,687 --> 00:12:43,537
the only thing that will maybe affect
it a little bit, and we've talked about
298
00:12:43,537 --> 00:12:47,077
this before we did one of the webinars,
is direct versus non-direct recognition.
299
00:12:47,407 --> 00:12:50,587
If you have a direct recognition
company, they will lower your
300
00:12:50,587 --> 00:12:53,317
dividends slightly depending on
how much of a loan you have out.
301
00:12:53,467 --> 00:12:56,107
If you have a non-direct recognition
company, it will not affect
302
00:12:56,107 --> 00:12:58,267
the dividend at all, and you
can do a quick search on that.
303
00:12:58,267 --> 00:12:59,497
That will clear it up pretty quickly.
304
00:13:00,292 --> 00:13:03,682
But ultimately the key is being an
honest banker is paying back the loan,
305
00:13:03,682 --> 00:13:06,742
like Nelson talks about, at least at
the rate that you'd pay back the bank,
306
00:13:06,742 --> 00:13:10,402
preferably higher, but paying back the
loan does one thing and one thing only.
307
00:13:10,402 --> 00:13:14,122
It replenishes the cash value so that
you have access to it again, and it
308
00:13:14,122 --> 00:13:17,212
also will ultimately lower the amount
of interest you're paying to the
309
00:13:17,212 --> 00:13:21,532
insurance company, the longer it's out,
and so that hopefully clears that up.
310
00:13:21,742 --> 00:13:24,202
Taking loans, I want to say
this again, will not grow your
311
00:13:24,202 --> 00:13:25,492
cash value or make you rich.
312
00:13:25,492 --> 00:13:26,342
It does not work that way.
313
00:13:28,175 --> 00:13:31,625
If you go back to your previous point
about building the asset, not paying
314
00:13:31,625 --> 00:13:36,005
the debt that ties in exactly with
what you're talking about here, right?
315
00:13:36,095 --> 00:13:36,485
So.
316
00:13:37,760 --> 00:13:40,010
you're paying back your asset.
317
00:13:40,160 --> 00:13:42,140
You're replenishing your asset.
318
00:13:42,560 --> 00:13:45,980
A lot of folks see the loan and they
think debt just 'cause that's kind
319
00:13:45,980 --> 00:13:47,060
of the way we've been programmed.
320
00:13:47,060 --> 00:13:50,840
We take out car loans, we take out,
whatever loan you're gonna take
321
00:13:50,840 --> 00:13:54,580
for the, all of that fills in to
the, the idea that it's a debt.
322
00:13:55,030 --> 00:13:57,940
Whereas if you're playing honest
Banker and you're paying yourself
323
00:13:57,940 --> 00:14:01,870
back in the same way that you
would've paid back that debt, gonna
324
00:14:01,870 --> 00:14:03,700
replenish the asset that you've built.
325
00:14:06,472 --> 00:14:06,832
I love it.
326
00:14:06,832 --> 00:14:08,272
That's a really good
way to say that, Scott.
327
00:14:08,272 --> 00:14:08,937
Anything you wanna jump in with?
328
00:14:11,182 --> 00:14:13,732
Are we gonna talk about like the
interest rates on a cash value
329
00:14:13,732 --> 00:14:17,242
loan and what, what and why, or
330
00:14:17,337 --> 00:14:18,237
I, I didn't have it, but
331
00:14:18,267 --> 00:14:18,487
is
332
00:14:18,537 --> 00:14:18,987
to jump in,
333
00:14:19,072 --> 00:14:19,282
it.
334
00:14:19,317 --> 00:14:19,977
to jump in here.
335
00:14:20,007 --> 00:14:20,067
Yeah.
336
00:14:21,197 --> 00:14:23,957
I know one of the questions I get
asked, well, you gotta pay interest on
337
00:14:23,957 --> 00:14:26,187
this, and, I'm like, well, two things.
338
00:14:26,187 --> 00:14:27,357
One, it's simple interest.
339
00:14:27,357 --> 00:14:30,687
You know, it's, you, you can
pay back principle first.
340
00:14:30,717 --> 00:14:32,727
it's simple interest
calculated by the day.
341
00:14:33,207 --> 00:14:36,807
the other part of it is, is this
money, the way the insurance
342
00:14:36,807 --> 00:14:38,877
company works is they have to.
343
00:14:39,462 --> 00:14:42,702
Essentially put that money out there
for loan to make the money, to get
344
00:14:42,702 --> 00:14:47,392
you the dividend to, so if they're
not doing it elsewhere, they're,
345
00:14:47,442 --> 00:14:49,812
If they're not doing it for you,
they have to do it elsewhere.
346
00:14:50,052 --> 00:14:53,862
So in order for these policies to work,
there's, there's that, and the way I look
347
00:14:53,862 --> 00:14:55,842
at it is it's like an administrative fee.
348
00:14:56,202 --> 00:14:58,302
You know, it's like I'm part
owner of a business, I'm paying
349
00:14:58,302 --> 00:15:00,582
a business for management.
350
00:15:00,672 --> 00:15:04,342
If I'm not doing it, then, if they
loan a block of money out there to a
351
00:15:04,342 --> 00:15:07,682
bank or something like that, the bank
is paying the administrative fee, but
352
00:15:07,682 --> 00:15:09,392
somebody has to pay it for this whole.
353
00:15:10,067 --> 00:15:16,847
To work the, I think the magic for me
is, it's, I, I, I know it's not my money,
354
00:15:17,267 --> 00:15:21,507
but I view it as such like you guys are
saying, and then you pay it back faster.
355
00:15:21,757 --> 00:15:25,027
Nelson recommends, pay it back
at least how you're gonna pay it
356
00:15:25,027 --> 00:15:27,037
bank back or pay it back faster.
357
00:15:27,637 --> 00:15:30,947
And that drives that, some people
see oh, you have an 8% interest rate.
358
00:15:30,947 --> 00:15:31,967
Well, I can get a car loan.
359
00:15:32,147 --> 00:15:34,247
I was like this when I started,
I had this conversation with.
360
00:15:34,997 --> 00:15:38,147
the guy that's gonna be my
mentor, why would I go take out a
361
00:15:38,147 --> 00:15:40,957
loan, if I can get 2% at a bank?
362
00:15:40,957 --> 00:15:43,337
And he's like, well, he started doing it.
363
00:15:43,427 --> 00:15:46,907
And it's like, okay, if you
calculated out the interest I paid.
364
00:15:47,412 --> 00:15:50,832
Versus pulling it from my savings or
putting it through a policy sequencing.
365
00:15:50,882 --> 00:15:55,502
it's like I'm, as I'm building this
system and seeing how it all functions,
366
00:15:56,312 --> 00:15:59,762
I don't know really how to put it into
words other than it makes complete sense
367
00:15:59,762 --> 00:16:01,682
because it's a different type of interest.
368
00:16:02,222 --> 00:16:03,692
You pay it down faster.
369
00:16:03,902 --> 00:16:07,652
There's actually less interest charges,
less finance charge, like the total cost
370
00:16:07,652 --> 00:16:12,002
of financing at the end is significantly
lower than going through a traditional
371
00:16:12,002 --> 00:16:14,462
method just because of the way it's done.
372
00:16:15,152 --> 00:16:15,632
So.
373
00:16:16,105 --> 00:16:17,965
You bring up a really,
really good point there.
374
00:16:17,995 --> 00:16:21,425
'cause, a lot of folks get,
get wrapped around the axle
375
00:16:21,425 --> 00:16:22,445
on the interest rate, right?
376
00:16:22,445 --> 00:16:24,035
They're like, what is the deal?
377
00:16:24,035 --> 00:16:25,085
Six to 8%.
378
00:16:25,085 --> 00:16:27,995
I can totally beat that in
the marketplace, and yet.
379
00:16:28,685 --> 00:16:32,985
Us as someone that understands, a
lot of the concepts that Nelson has
380
00:16:32,985 --> 00:16:38,205
taught, we, we get that you're already
saving that 34.5% by creating this
381
00:16:38,205 --> 00:16:40,365
system and by becoming your own banker.
382
00:16:40,545 --> 00:16:44,355
And so if you're, if you're already
saving that 34.5%, whether it's
383
00:16:44,355 --> 00:16:46,370
costing you 2% or you're saving 2%.
384
00:16:47,265 --> 00:16:49,965
That's pennies on what
you've already saved, right?
385
00:16:50,175 --> 00:16:53,975
So as someone sitting in our
little room here, we understand
386
00:16:53,975 --> 00:16:55,355
that, but not everybody gets that.
387
00:16:55,445 --> 00:16:58,625
So it's really, really important
question that you just asked because
388
00:16:58,895 --> 00:17:00,185
you, you hit the nail on the head.
389
00:17:00,395 --> 00:17:04,415
This does not always get
understood or grasped or otherwise.
390
00:17:04,715 --> 00:17:08,735
And I think to build on, the
concept that your mentor said is,
391
00:17:09,335 --> 00:17:10,835
you're in the position of power.
392
00:17:11,150 --> 00:17:16,160
By having this asset, if you chose to
go take advantage of that bank loan or
393
00:17:16,160 --> 00:17:18,015
the, the car dealer loan, that's 2%.
394
00:17:19,470 --> 00:17:21,600
You saved, maybe you saved a
couple of percentage points.
395
00:17:21,600 --> 00:17:25,750
Maybe you were that, that maybe that's
a, a valued cost to you to be able to
396
00:17:25,750 --> 00:17:29,500
go through their financing, but you
also have built the asset that you
397
00:17:29,500 --> 00:17:33,040
have the ability to do that by your
choice, by your power if you want.
398
00:17:33,220 --> 00:17:36,940
You are not required with only
one option to go down to the car
399
00:17:36,940 --> 00:17:40,630
dealership and get lucky that they
have the right financing setup because
400
00:17:40,630 --> 00:17:42,010
you don't have any other options.
401
00:17:42,310 --> 00:17:43,570
You're in the position of power.
402
00:17:43,840 --> 00:17:45,610
So you can go either way on that.
403
00:17:45,750 --> 00:17:49,290
But it really comes down to when
it's your capital control it.
404
00:17:50,957 --> 00:17:51,227
Yeah.
405
00:17:51,757 --> 00:17:54,492
I think the other thing to point
out is I just relate it to.
406
00:17:55,287 --> 00:17:56,247
Vehicle purchases.
407
00:17:56,247 --> 00:17:58,647
'cause that's what I, that's
how I was looking at it before.
408
00:17:59,007 --> 00:18:04,197
Now I'm at the point where I'm
looking at, I take a policy loan for
409
00:18:04,197 --> 00:18:07,797
cash value to create more money than
it's ever gonna cost me to borrow.
410
00:18:07,797 --> 00:18:11,597
And so I'm not looking at it from
a purchasing point as more of
411
00:18:11,597 --> 00:18:13,097
an investing standpoint, which
412
00:18:13,440 --> 00:18:14,220
really.
413
00:18:14,815 --> 00:18:17,755
that takes that another two
steps farther down the road.
414
00:18:18,265 --> 00:18:18,715
You know?
415
00:18:18,765 --> 00:18:20,855
now it really doesn't matter
'cause you're generating way
416
00:18:20,855 --> 00:18:22,085
more than it'll ever cost you.
417
00:18:22,822 --> 00:18:27,502
and while you still have the opportunity
to borrow from your cash value, literally
418
00:18:27,502 --> 00:18:31,472
two weeks after the check clears, you can
use these cash values right off the start.
419
00:18:31,472 --> 00:18:35,372
It's not gonna have equaled what you've
really put into it for a couple of years.
420
00:18:35,372 --> 00:18:37,742
So there's also that business
setup startup, right?
421
00:18:37,742 --> 00:18:39,462
you've gotta understand what you're doing.
422
00:18:39,462 --> 00:18:43,062
A lot of folks get really wrapped also
around this idea that I just started.
423
00:18:43,062 --> 00:18:43,542
It should be.
424
00:18:44,207 --> 00:18:46,447
This high producing asset
right now, it's whoa, whoa.
425
00:18:46,447 --> 00:18:46,837
Hold on.
426
00:18:46,927 --> 00:18:48,997
Well, you just started give it some time.
427
00:18:49,117 --> 00:18:52,987
You gotta think long term and get beyond
the first year or two to realize what
428
00:18:52,987 --> 00:18:54,577
you've really built in terms of an asset.
429
00:18:56,239 --> 00:19:00,439
Yeah, like you guys, said, it comes
down to control and options and
430
00:19:00,439 --> 00:19:03,469
the fact that it is still growing
in the background, even if you're
431
00:19:03,469 --> 00:19:04,939
leveraging it, which is huge.
432
00:19:04,969 --> 00:19:07,429
And so if you can get that,
you really do understand it.
433
00:19:07,849 --> 00:19:11,509
and with that, I'll dovetail into why
the companys even let you do this, right?
434
00:19:11,509 --> 00:19:13,819
So why is this advantageous for them?
435
00:19:14,164 --> 00:19:15,514
So I did a little bit of research here.
436
00:19:15,514 --> 00:19:17,224
I thought it was pretty cool, and
it's kind of interesting every
437
00:19:17,224 --> 00:19:19,324
time I do this and I look back,
I always find a little nugget.
438
00:19:19,324 --> 00:19:22,354
And so the newer one that I found here,
I didn't realize this was back in May of
439
00:19:22,354 --> 00:19:24,814
1777, so we're going back a long ways.
440
00:19:25,234 --> 00:19:28,924
There was an early American life insurance
company and they actually voted to loan
441
00:19:28,924 --> 00:19:32,644
5,000 pounds to the Continental Congress
for the revolution in support of that.
442
00:19:32,944 --> 00:19:35,844
So that was the first, there may
be something out there, before
443
00:19:35,844 --> 00:19:36,934
that but I didn't find it.
444
00:19:36,934 --> 00:19:40,294
This is what I found was the first example
of a loan from an insurance company.
445
00:19:41,089 --> 00:19:44,759
then this kind of set up the, the
framework going forward for us as
446
00:19:44,759 --> 00:19:46,079
owners to actually access that.
447
00:19:46,319 --> 00:19:48,869
So by the early 1800s it started
becoming more mainstream.
448
00:19:48,869 --> 00:19:52,049
And this is what we really care
about as owners and the companies.
449
00:19:52,049 --> 00:19:53,999
They weren't doing this out of
the goodness of their heart.
450
00:19:53,999 --> 00:19:57,899
What was happening was people were getting
going through tough times, or they had an
451
00:19:57,899 --> 00:20:01,499
opportunity and they had the cash value
there, but they had no way to get to it.
452
00:20:01,499 --> 00:20:03,929
So they were surrendering
policies to get to it because
453
00:20:03,929 --> 00:20:05,129
they had to do something else.
454
00:20:05,309 --> 00:20:07,979
And for a life insurance company, you're
looking at this, this is a bad deal.
455
00:20:07,979 --> 00:20:09,119
We're losing customers.
456
00:20:09,869 --> 00:20:12,089
So to come up with the way, well,
how do we keep the customers but
457
00:20:12,089 --> 00:20:13,559
let them access the cash value?
458
00:20:13,829 --> 00:20:16,664
And they realize this is the most
secure loan that is out there because.
459
00:20:17,489 --> 00:20:19,589
either gonna get, we already
have the money, right, that
460
00:20:19,589 --> 00:20:20,729
you guys have paid in premium.
461
00:20:20,729 --> 00:20:23,159
We're gonna limit the amount
that you can take in loan based
462
00:20:23,159 --> 00:20:24,269
on how much cash value you have.
463
00:20:24,569 --> 00:20:26,759
Or if you pass away, there's gonna
be a death benefit that comes.
464
00:20:26,759 --> 00:20:28,789
And we'll just subtract what you
have out and then collect, you'll
465
00:20:28,789 --> 00:20:30,679
get the difference, but we'll
collect what we need to there.
466
00:20:30,979 --> 00:20:34,099
So it was really a way to
keep these policies in force.
467
00:20:34,384 --> 00:20:37,024
Then the government came
in and in 1905 you had the
468
00:20:37,024 --> 00:20:38,854
Armstrong Investigation reforms.
469
00:20:38,914 --> 00:20:42,004
And what they said is, no, not only
should most companies be doing this,
470
00:20:42,004 --> 00:20:44,884
we're gonna contractually make it so
that all companies do this so that
471
00:20:44,884 --> 00:20:46,564
people have access to their cash value.
472
00:20:46,714 --> 00:20:48,874
And that actually ended up being huge
when you had the depression and a
473
00:20:48,874 --> 00:20:51,694
bunch of other stuff that came in the
thirties and the other stuff after that.
474
00:20:51,934 --> 00:20:54,514
But basically, to sum it up, it's
beneficial for the life insurance
475
00:20:54,514 --> 00:20:57,664
companies, but it gives us, as
the owner an incredible tool
476
00:20:57,664 --> 00:20:58,804
to finance the needs of life.
477
00:21:00,155 --> 00:21:02,801
Cool history there, I had no
idea that it went that far back.
478
00:21:03,071 --> 00:21:06,041
9 17 77. That's, that's impressive.
479
00:21:06,088 --> 00:21:06,628
one I found.
480
00:21:06,748 --> 00:21:07,048
Yeah.
481
00:21:07,316 --> 00:21:07,326
Yeah.
482
00:21:07,348 --> 00:21:09,838
like doing this stuff 'cause you find some
neat stuff that when you're, when you're
483
00:21:09,979 --> 00:21:10,484
That's pretty cool.
484
00:21:10,558 --> 00:21:10,708
it.
485
00:21:10,798 --> 00:21:11,068
Yeah.
486
00:21:12,528 --> 00:21:13,098
so with
487
00:21:13,239 --> 00:21:17,039
It kinda, it kind of adds the, it kind
of adds a, you said, that other little
488
00:21:17,039 --> 00:21:20,859
nugget, when we talk, these companies have
been around for, some of 'em a hundred
489
00:21:20,859 --> 00:21:23,529
plus years paying dividends, and then
you see something like this and it's
490
00:21:23,529 --> 00:21:29,719
like, oh geez, 1777, is when it, what you
found could be the earliest start of it.
491
00:21:29,779 --> 00:21:30,169
So.
492
00:21:30,401 --> 00:21:30,821
That's right.
493
00:21:30,838 --> 00:21:31,198
in America.
494
00:21:31,198 --> 00:21:33,238
I don't know, other areas, other
countries that had going on.
495
00:21:33,238 --> 00:21:34,948
But I only care about here
'cause that's what we're writing
496
00:21:34,948 --> 00:21:35,848
and that's what we're doing.
497
00:21:37,108 --> 00:21:37,998
So, yeah.
498
00:21:37,998 --> 00:21:39,318
America Anyway, so.
499
00:21:40,983 --> 00:21:42,603
With this, and we're
talking about a lot and.
500
00:21:43,143 --> 00:21:45,633
When you're taking this loan,
there's a lot of confusion here.
501
00:21:45,633 --> 00:21:46,623
People get very hung up.
502
00:21:46,713 --> 00:21:48,513
What money are you actually borrowing?
503
00:21:48,513 --> 00:21:51,943
And that's why we were stressing,
stressing cash and cash value early on.
504
00:21:51,943 --> 00:21:55,213
So you are borrowing money
from the insurance company.
505
00:21:55,213 --> 00:21:58,963
You were not borrowing the actual money
in your individual insurance policy.
506
00:21:59,323 --> 00:22:01,873
And so Scott, you brought this up
before and that's what got us down
507
00:22:01,873 --> 00:22:03,223
the whole loan conversation, right?
508
00:22:03,223 --> 00:22:05,863
But the company must invest the money
that they're taking in somewhere
509
00:22:05,863 --> 00:22:08,353
and they have to meet basically,
about two main obligations.
510
00:22:08,583 --> 00:22:11,283
They have the death benefit
payouts and the other expenses that
511
00:22:11,283 --> 00:22:12,633
come with operating the company.
512
00:22:12,813 --> 00:22:13,773
And you can break that down.
513
00:22:13,773 --> 00:22:16,263
I don't wanna go into all little stuff
that could be, but it's everything else.
514
00:22:16,263 --> 00:22:17,973
And both are, significant, but.
515
00:22:18,838 --> 00:22:21,548
One option the company has, and we
talked about the Armstrong Acts,
516
00:22:21,568 --> 00:22:23,698
and the rest of it is to loan
the money out to policy owners.
517
00:22:23,698 --> 00:22:26,998
But not only can they do that
contractually, you're first in line.
518
00:22:26,998 --> 00:22:29,638
So if you want to get to that
money or that cash value,
519
00:22:29,638 --> 00:22:30,688
you're first in line to get it.
520
00:22:30,688 --> 00:22:31,678
So you have access to it.
521
00:22:32,008 --> 00:22:36,103
All the cash value does is it serves
as collateral that guarantees the loan.
522
00:22:36,103 --> 00:22:38,128
And we hit on that already
on how that works out.
523
00:22:38,338 --> 00:22:40,798
But this is actually huge for
us, and this is a huge bonus.
524
00:22:40,828 --> 00:22:44,368
This is what allows that cash value
to actually grow in an uninterrupted.
525
00:22:44,448 --> 00:22:46,608
Because you're not actually
borrowing the cash value.
526
00:22:46,638 --> 00:22:49,368
That's just the collateral that's
out there, so you're never actually
527
00:22:49,368 --> 00:22:52,278
interrupting it unless you're talking
maybe direct, non-direct recognition.
528
00:22:52,278 --> 00:22:53,328
But that's just a minute point.
529
00:22:53,508 --> 00:22:55,428
Either way, even both of
those are still growing.
530
00:22:56,598 --> 00:22:59,778
and then, so to sum it up, this is
one of the ones, and you'll hear a lot
531
00:22:59,778 --> 00:23:03,108
of people talk about, well, when you
graduate, and when we say graduate, mean
532
00:23:03,348 --> 00:23:07,128
when you pass away, your beneficiary
only gets the death benefit and the
533
00:23:07,128 --> 00:23:09,318
company keeps the cash or the cash value.
534
00:23:09,558 --> 00:23:12,498
And so I crack up and really it's a
lack of understanding and the critics
535
00:23:12,498 --> 00:23:14,598
don't even understand what they're
saying when they're talking about this.
536
00:23:14,598 --> 00:23:14,733
And so.
537
00:23:15,558 --> 00:23:19,008
The best way that I've found, I've
found to illustrate this to people that
538
00:23:19,008 --> 00:23:22,428
maybe don't understand is to compare
it to something that you know, so this
539
00:23:22,428 --> 00:23:26,688
would be the equivalent of saying that
you paid off your mortgage, right?
540
00:23:26,898 --> 00:23:30,258
You sold your home, and then after
you got all the cash from that,
541
00:23:30,258 --> 00:23:32,868
you went back to the bank and say,
oh, hey, by the way, remember all
542
00:23:32,868 --> 00:23:34,518
those mortgage payments I I made?
543
00:23:34,668 --> 00:23:36,603
I wanna get all that principal
back that I paid you as well.
544
00:23:37,428 --> 00:23:39,438
so it doesn't, it just doesn't make sense.
545
00:23:39,438 --> 00:23:42,228
I think when people hear that kind of
light bulb goes off, hopefully it is.
546
00:23:42,228 --> 00:23:43,998
If not, we'll come up
with another analogy.
547
00:23:44,398 --> 00:23:48,298
but the other thing to look at here is
also when that death benefit does get paid
548
00:23:48,298 --> 00:23:52,468
out, it's gonna be many, many multiples
of whatever your out of pocket payments
549
00:23:52,468 --> 00:23:56,128
were all, or that premium that went out,
especially if it's designed properly.
550
00:23:56,128 --> 00:23:59,098
So your beneficiaries are gonna be way
better off than if you just have that.
551
00:23:59,323 --> 00:24:00,103
Somewhere else.
552
00:24:00,293 --> 00:24:03,603
and the whole time, we can get to
this, and this is kind of what we were
553
00:24:03,603 --> 00:24:06,063
talking about earlier, that cash value,
if you're doing the right things with
554
00:24:06,063 --> 00:24:08,403
it, not only are they getting that
death benefit, but hopefully they're
555
00:24:08,403 --> 00:24:11,523
getting all the other things in life
that you built in finance, hopefully
556
00:24:11,523 --> 00:24:14,583
investments in other business entities
that you were able to do because of that
557
00:24:14,583 --> 00:24:16,083
cash value that you had along the way.
558
00:24:17,133 --> 00:24:18,028
Anything else you guys want to add?
559
00:24:19,526 --> 00:24:19,746
Yep.
560
00:24:19,981 --> 00:24:20,426
Well said.
561
00:24:21,086 --> 00:24:24,236
even if the, even if your house isn't paid
off and you just think about that same
562
00:24:24,236 --> 00:24:28,616
exam example, maybe you've got a $500,000
home that's got 250,000 in equity.
563
00:24:29,111 --> 00:24:32,351
When you sell that home for
500,000, you don't get the
564
00:24:32,351 --> 00:24:34,691
500,000 and the two 50 in equity.
565
00:24:35,111 --> 00:24:36,221
that's just not how that works.
566
00:24:36,431 --> 00:24:38,441
You get the equity
you've built up into it.
567
00:24:38,711 --> 00:24:42,591
So maybe you had had a HELOC, maybe
you had borrowed against that equity.
568
00:24:43,011 --> 00:24:45,081
Well, they're gonna take
that equity back from you.
569
00:24:45,541 --> 00:24:48,991
From the sale price whenever you
sell that home, I know we, we were
570
00:24:48,991 --> 00:24:52,021
really careful at the beginning to
differentiate between an asset and a
571
00:24:52,021 --> 00:24:55,001
debt, but that, that example is spot on.
572
00:24:55,001 --> 00:24:58,941
It, it is perfect to help understand,
you're, you're leveraging an asset to
573
00:24:58,941 --> 00:25:03,261
borrow against, and if you are leveraged
against that asset when you graduate,
574
00:25:03,621 --> 00:25:06,081
well, they're gonna take what you
owe back and then pay the rest of the
575
00:25:06,081 --> 00:25:07,521
death benefit to your beneficiaries.
576
00:25:08,333 --> 00:25:09,443
It's a great way to sum that up.
577
00:25:12,053 --> 00:25:13,943
Scott, anything else you wanna
add before we finish it up?
578
00:25:14,618 --> 00:25:14,738
I,
579
00:25:15,394 --> 00:25:15,934
That's it.
580
00:25:16,238 --> 00:25:16,823
okay, cool.
581
00:25:16,913 --> 00:25:18,143
Well, thanks everybody for listening.
582
00:25:18,143 --> 00:25:18,893
Merry Christmas.
583
00:25:18,893 --> 00:25:21,833
Hopefully you're, like I said, you're
with family, friends, or good crew and
584
00:25:21,833 --> 00:25:22,823
we'll catch you on the next episode.
585
00:25:23,871 --> 00:25:24,641
Merry Christmas y'all, see ya..
586
00:25:25,824 --> 00:25:26,454
Merry Christmas.
587
00:25:30,807 --> 00:25:32,607
Thanks for tuning into
the infinite mindset.
588
00:25:33,087 --> 00:25:36,177
If you found today's conversation
valuable, share it with someone who's
589
00:25:36,177 --> 00:25:39,687
ready to think differently about
finances, and don't forget to subscribe.
590
00:25:40,047 --> 00:25:42,807
Your journey to financial freedom
starts with the right mindset.
00:00:03,090 --> 00:00:07,470
Welcome to the Infinite Mindset Podcast,
the show where we explore the power of
2
00:00:07,470 --> 00:00:11,370
the infinite banking concept and how to
take control of your financial future.
3
00:00:11,940 --> 00:00:15,240
I'm your host Andy, along with
Scott and frequent guest Jared.
4
00:00:15,810 --> 00:00:19,200
We're here to help you think
bigger, build smarter, and
5
00:00:19,200 --> 00:00:21,090
create freedom on your own terms.
6
00:00:21,270 --> 00:00:22,170
Let's get started.
7
00:00:25,500 --> 00:00:28,855
Welcome everyone to another episode
of the Infinite Mindset Podcast.
8
00:00:28,855 --> 00:00:32,635
Myself, Jared, and Scott, this is
the Christmas episode, so hopefully
9
00:00:32,635 --> 00:00:34,855
you are at home with family and
friends, having a good time.
10
00:00:34,855 --> 00:00:36,355
You're with a good crew celebrating.
11
00:00:36,715 --> 00:00:38,245
And with that, I'll hand
it off to you, Scott.
12
00:00:38,245 --> 00:00:40,135
Where are you at right now
on getting your license and
13
00:00:40,135 --> 00:00:40,900
getting appointed with the NNI?
14
00:00:42,901 --> 00:00:44,481
I got, got my fingerprints done.
15
00:00:44,481 --> 00:00:46,311
Those were submitted to Wisconsin.
16
00:00:46,311 --> 00:00:49,161
So I'm just playing the
waiting game on, getting the
17
00:00:49,161 --> 00:00:50,601
license in hand from Wisconsin.
18
00:00:50,601 --> 00:00:53,841
I think they get like 90 days to
process that though It's holiday.
19
00:00:54,021 --> 00:00:55,281
So we'll see how long that takes.
20
00:00:55,281 --> 00:00:58,281
But that's the last step
everything's applied for.
21
00:00:58,281 --> 00:00:59,241
Fingerprints are in.
22
00:00:59,731 --> 00:01:02,701
after we get done with this, I'm gonna
reach out to the guy that's gonna be
23
00:01:02,701 --> 00:01:07,931
my mentor, see if I can start the NNI
stuff, or at least the process of it,
24
00:01:08,301 --> 00:01:12,711
without that license physically in
hand, or if they need that to start.
25
00:01:12,711 --> 00:01:16,401
So reach out to him and
otherwise they're just waiting
26
00:01:16,401 --> 00:01:17,931
on Wisconsin to do their thing.
27
00:01:17,970 --> 00:01:18,720
Okay, cool.
28
00:01:19,560 --> 00:01:20,970
All right, with that,
we'll jump right into it.
29
00:01:20,970 --> 00:01:22,740
So we're gonna be
talking about cash value.
30
00:01:22,845 --> 00:01:25,020
Where is my money, really
is what we're getting at.
31
00:01:25,050 --> 00:01:28,110
And so first off, it's good to kind
of look at a few definitions so people
32
00:01:28,110 --> 00:01:29,340
understand what we're talking about.
33
00:01:29,340 --> 00:01:33,060
And so looking at what is cash
value is actually very simple.
34
00:01:33,375 --> 00:01:36,570
It's the present value of
your future death benefit.
35
00:01:36,930 --> 00:01:39,360
And so some people kind of maybe listen
to that and like, what do you mean?
36
00:01:39,360 --> 00:01:42,120
And so another way to look at it,
it's what would the company give
37
00:01:42,120 --> 00:01:45,510
you right now if you were to let
them out off the hook and not have
38
00:01:45,510 --> 00:01:47,070
to pay your, your death benefit?
39
00:01:47,130 --> 00:01:50,280
And so that term though is actually
called the cash surrender value.
40
00:01:50,280 --> 00:01:53,700
And you'll see that when you look at your
contract and it's constantly growing.
41
00:01:54,005 --> 00:01:56,600
As the policy gets older and older,
because you think about it, you're
42
00:01:56,600 --> 00:01:59,240
getting closer and closer to the
end of your, to your mortality.
43
00:01:59,420 --> 00:02:01,640
You're gonna be getting closer
to your graduation date.
44
00:02:01,850 --> 00:02:04,730
So if the company can give you less
money now so they don't have to
45
00:02:04,730 --> 00:02:07,520
pay that death benefit, that's how
they can get outta the contract.
46
00:02:07,520 --> 00:02:08,570
Now, they don't actually wanna do that.
47
00:02:08,570 --> 00:02:10,700
It's just kind of conceptually the
way that we wanna look at this.
48
00:02:11,530 --> 00:02:13,630
another way to look at it,
sometimes it helps people this way.
49
00:02:13,960 --> 00:02:14,830
It's the present.
50
00:02:14,830 --> 00:02:17,260
It represents the equity that
you've built up in the asset.
51
00:02:17,260 --> 00:02:19,510
In this case, the asset
is your whole life policy.
52
00:02:19,630 --> 00:02:22,390
And it's similar in the way that
you would build up equity in a home
53
00:02:22,390 --> 00:02:23,590
if you were paying down a mortgage.
54
00:02:23,590 --> 00:02:26,680
But for me, conceptually, the
way I like to look at this, when
55
00:02:26,680 --> 00:02:29,920
you're paying down your mortgage,
you're paying down the debt.
56
00:02:30,100 --> 00:02:33,190
But when you're actually paying premium
and you're growing your cash value,
57
00:02:33,190 --> 00:02:34,300
you're actually building an asset.
58
00:02:34,300 --> 00:02:36,340
So it's a little bit different than
the home, but that's kind of how I
59
00:02:36,340 --> 00:02:37,600
like to look at that structurally.
60
00:02:37,690 --> 00:02:38,625
Anything else you guys want to add there?
61
00:02:39,668 --> 00:02:42,758
Really, really important point there
that you're paying down debt when you're
62
00:02:42,758 --> 00:02:45,373
paying the mortgage, but you're building
the asset as you're growing this like.
63
00:02:46,438 --> 00:02:47,908
Perfect, perfect description of that.
64
00:02:49,245 --> 00:02:50,895
depending on if you're in
the US or Canada, we're just
65
00:02:50,895 --> 00:02:52,185
gonna focus on the US though.
66
00:02:52,185 --> 00:02:54,615
You have something called
the policy endowing.
67
00:02:54,645 --> 00:02:57,015
And what that simply means
is that the death benefit is
68
00:02:57,015 --> 00:02:58,425
gonna equal the cash value.
69
00:02:58,605 --> 00:03:01,725
And so in the US typically
that's around age 1 21.
70
00:03:01,725 --> 00:03:05,085
Now it used to be age 100, but we're
getting, we're living longer and longer.
71
00:03:05,265 --> 00:03:08,085
And it could still vary a little bit by
company and the different products, but
72
00:03:08,085 --> 00:03:09,435
that's typically what we're looking at.
73
00:03:09,825 --> 00:03:13,035
So when you think about this,
if you can get the death benefit
74
00:03:13,035 --> 00:03:16,245
higher, right, eventually your
cash value has to equal it.
75
00:03:16,245 --> 00:03:18,765
So ultimately, that's gonna bring
your cash value higher as you go
76
00:03:18,765 --> 00:03:22,395
along the way, And so when I think
about this and how that cash value
77
00:03:22,395 --> 00:03:24,885
is getting to the death benefit, I
think about it in two different ways.
78
00:03:24,885 --> 00:03:27,555
There are two things that are
driving that cash value higher.
79
00:03:27,795 --> 00:03:31,555
One is time, And the other is your
death benefit actually increasing.
80
00:03:31,555 --> 00:03:34,495
So what I mean by time is if
the cash value has to equal
81
00:03:34,495 --> 00:03:35,640
the death benefit at 1 21.
82
00:03:35,965 --> 00:03:39,925
The time that you have in this policy,
the higher the cash value has to be.
83
00:03:39,955 --> 00:03:42,385
'cause ultimately it's gonna
equal that death benefit at 1 21.
84
00:03:42,565 --> 00:03:45,025
And the other side of it is
increasing the death benefit.
85
00:03:45,025 --> 00:03:48,955
So if I start off at one point, then
I can get that death benefit higher.
86
00:03:49,135 --> 00:03:52,435
Well, I know that at 1 21, that cash value
still has to equal the death benefit.
87
00:03:52,435 --> 00:03:55,255
So by default that cash value
has to keep growing to get there.
88
00:03:55,685 --> 00:03:57,185
we'll, we're gonna dive
into it a little bit more.
89
00:03:57,185 --> 00:03:58,235
We're just looking at definitions.
90
00:03:58,235 --> 00:04:00,845
But if you conceptually can think
about this, it's gonna make the rest
91
00:04:00,845 --> 00:04:03,125
of the conversation, we're gonna
have that much easier to track.
92
00:04:03,810 --> 00:04:04,590
Jared, I like this.
93
00:04:04,590 --> 00:04:06,480
You brought this up
before when you said it.
94
00:04:06,780 --> 00:04:08,670
Cash value is not the same as cash.
95
00:04:08,700 --> 00:04:09,420
It's a value.
96
00:04:09,425 --> 00:04:11,310
It's not actually cash, right?
97
00:04:11,520 --> 00:04:14,220
we'll look at this a little bit more,
but that's important to really understand
98
00:04:14,220 --> 00:04:16,260
'cause we're gonna talk about what
you're leveraging and what you're doing.
99
00:04:16,260 --> 00:04:18,330
But if you can look at it as a
value and not actually a pile
100
00:04:18,330 --> 00:04:20,820
of money, it's gonna be a little
bit easier for you guys to grasp.
101
00:04:21,868 --> 00:04:26,068
Yeah, and when I first saw, when
I first saw the word endow, I was
102
00:04:26,068 --> 00:04:30,838
still kind of tied up on the modified
endowment contract, and I a hard time.
103
00:04:31,258 --> 00:04:32,668
Differentiating the two of those.
104
00:04:32,668 --> 00:04:32,938
Right.
105
00:04:33,178 --> 00:04:34,768
But they are two different thing, right?
106
00:04:34,918 --> 00:04:39,488
The modified endowment contract is totally
different than a policy that does endow
107
00:04:39,538 --> 00:04:44,038
or the cash value reaching the same
amount or value as your death benefit.
108
00:04:44,338 --> 00:04:48,608
I, when I, when I saw a picture of
a, a sideways triangle, it's not
109
00:04:48,608 --> 00:04:52,538
linear, but the, the cash value grows
to reach where the death benefit
110
00:04:52,538 --> 00:04:54,428
is over the life of the contract.
111
00:04:54,758 --> 00:04:56,798
I, I think this gets so foreign because.
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00:04:57,583 --> 00:05:00,613
used to, A lot of folks are just very
comfortable with term insurance, right?
113
00:05:01,093 --> 00:05:02,263
This is a whole life policy.
114
00:05:02,263 --> 00:05:05,483
This is all the way until your
graduation date, so that that
115
00:05:05,483 --> 00:05:07,523
cash value is constantly rising.
116
00:05:07,803 --> 00:05:10,413
I said, it's not linear, but it's
constantly rising over the life
117
00:05:10,443 --> 00:05:11,883
or the time as you described.
118
00:05:12,765 --> 00:05:13,245
So that's great.
119
00:05:13,335 --> 00:05:15,885
I, I wanna jump in there too 'cause I
don't wanna get too far down the road
120
00:05:15,885 --> 00:05:18,135
to the me, but I think it's really good
to talk about it 'cause we're here.
121
00:05:18,135 --> 00:05:20,895
So you have an endowment and then you
have a modified endowment contract.
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00:05:21,328 --> 00:05:21,548
Yes.
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00:05:21,735 --> 00:05:25,395
all policies are gonna endow at some
point, and these policies are gonna endow
124
00:05:25,395 --> 00:05:29,385
when they're supposed to, according to the
IRS for the tax benefits, which is 1 21.
125
00:05:29,715 --> 00:05:32,805
When you have a modified endowment,
it just means that the cash value is
126
00:05:32,805 --> 00:05:36,525
going to equal the de benefit at some
point prior to that age, and when
127
00:05:36,583 --> 00:05:36,973
That's right.
128
00:05:37,095 --> 00:05:38,415
you lose the tax benefits.
129
00:05:38,475 --> 00:05:38,835
So that's
130
00:05:38,863 --> 00:05:39,283
That's right.
131
00:05:39,375 --> 00:05:39,615
at there.
132
00:05:39,853 --> 00:05:40,093
Yep.
133
00:05:40,213 --> 00:05:40,663
Well said.
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00:05:40,905 --> 00:05:41,835
according to the IRS.
135
00:05:43,018 --> 00:05:45,628
I just remember getting confused by
that when I first read that word.
136
00:05:45,688 --> 00:05:48,658
Not, not from us talking about it
recently, but when I'm learning about
137
00:05:48,658 --> 00:05:52,048
this and what these policies look
like or how they're structured, I, I
138
00:05:52,048 --> 00:05:53,668
got so confused and tied up on that.
139
00:05:53,668 --> 00:05:55,948
So that, just wanted to highlight
that, that there's a learning point.
140
00:05:56,415 --> 00:05:56,925
No, I've heard that
141
00:05:57,073 --> 00:05:57,293
Yep.
142
00:05:57,495 --> 00:05:58,575
That that definitely makes sense.
143
00:05:58,575 --> 00:06:01,215
So I wanna come back to the two
things that I talked about, the
144
00:06:01,215 --> 00:06:02,325
time and the death benefits.
145
00:06:02,325 --> 00:06:05,175
So we'll do the deeper dive now
into the cash value actually build.
146
00:06:05,175 --> 00:06:08,985
So when I'm talking about time, the way
I look at this is actually the interest
147
00:06:08,985 --> 00:06:10,845
or the guaranteed part of the policy.
148
00:06:10,905 --> 00:06:13,215
And then when we talk about
increasing the death benefit,
149
00:06:13,215 --> 00:06:14,175
we're talking about premium.
150
00:06:14,175 --> 00:06:16,815
That could either be premium you're
paying out of your pocket, or it
151
00:06:16,815 --> 00:06:19,725
could be premium that's coming back
as a PUA or something like that.
152
00:06:19,965 --> 00:06:21,405
So I actually ran an illustration.
153
00:06:21,405 --> 00:06:23,775
This was pretty cool, and I wanted
to isolate just the interest.
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00:06:23,775 --> 00:06:25,665
So I did a 100% base policy.
155
00:06:25,710 --> 00:06:30,600
And of taking the dividends to buy
PUAs, I used it just as cash going back.
156
00:06:30,600 --> 00:06:32,760
So it was only the interest
that was growing the policy
157
00:06:32,970 --> 00:06:34,290
and it performed as expected.
158
00:06:34,290 --> 00:06:38,910
I did a paid up at 95, so at age
95, all the premium was paid in the
159
00:06:38,910 --> 00:06:40,350
death benefit never changed, right?
160
00:06:40,350 --> 00:06:43,620
'cause I'm not buying more death benefit
with the dividends to do the PUA.
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00:06:43,620 --> 00:06:47,985
It was just there and at 95 the
interest kept go growing and at 1
162
00:06:47,985 --> 00:06:51,180
21, the cash value exactly equaled
what that death benefit would be.
163
00:06:51,360 --> 00:06:53,130
But something that was
kind of cool looking at.
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00:06:53,445 --> 00:06:56,565
Is even with this boring vanilla
policy that wasn't paying dividends,
165
00:06:56,625 --> 00:06:58,545
or excuse me, it was paying
dividends, but the dividends were
166
00:06:58,545 --> 00:07:01,185
not being used to, to purchase PUAs.
167
00:07:01,965 --> 00:07:04,335
amount of extra cash still
going to the owner was actually
168
00:07:04,335 --> 00:07:05,595
still fairly significant.
169
00:07:05,595 --> 00:07:08,865
So these policies, even the boring
ones with enough time actually do get
170
00:07:08,865 --> 00:07:11,625
pretty efficient and will generate a
decent amount of cash flow coming in.
171
00:07:13,005 --> 00:07:13,245
Right?
172
00:07:13,245 --> 00:07:16,455
So the other side of this is the premium,
and this is where the majority of the
173
00:07:16,455 --> 00:07:18,255
growth in your cash value comes from.
174
00:07:18,585 --> 00:07:20,175
And it's either gonna
come outta your pocket.
175
00:07:20,175 --> 00:07:21,105
So this is what you're used to.
176
00:07:21,105 --> 00:07:24,165
Whether you're doing a monthly,
quarterly, semi-annual, or annual
177
00:07:24,165 --> 00:07:27,135
payment, this is the premium that's
coming outta your pocket that's
178
00:07:27,135 --> 00:07:28,915
gonna, keep the policy in force.
179
00:07:28,915 --> 00:07:31,915
And depending on how it's structured,
it may buy some additional PUA as well.
180
00:07:33,130 --> 00:07:36,100
And then the other side of this,
and this is also premium, it's
181
00:07:36,100 --> 00:07:37,480
your dividends that are coming in.
182
00:07:37,540 --> 00:07:39,970
And typically the way we recommend
it and the way that the NNI
183
00:07:39,970 --> 00:07:43,960
recommends it is for those dividends
to buy pua or paid up additions.
184
00:07:43,960 --> 00:07:47,410
And you can look at these as little
micro policies that mimic the initial
185
00:07:47,410 --> 00:07:48,610
construct of the other policy.
186
00:07:48,610 --> 00:07:51,010
They're fully paid up
policies in the short term.
187
00:07:51,460 --> 00:07:54,520
And so what happens though is you do this,
is all these things are buying more and
188
00:07:54,520 --> 00:07:57,670
more death benefit, whether it's your
premium or these pua coming in, whether
189
00:07:57,670 --> 00:08:00,850
you're paying the PUA or whether the
dividend is being redirected towards it.
190
00:08:01,340 --> 00:08:05,120
It's growing the cash value, and so by
default, your cash value has to just
191
00:08:05,120 --> 00:08:09,950
constantly get bigger to so that when it
endows at 1 21, it's going to equal that.
192
00:08:11,480 --> 00:08:12,200
And so,
193
00:08:12,495 --> 00:08:13,305
I have a question.
194
00:08:13,430 --> 00:08:13,700
Jump
195
00:08:13,785 --> 00:08:17,355
had a question, like a legit question,
like a learning moment for myself.
196
00:08:17,725 --> 00:08:19,330
PUA buys.
197
00:08:21,140 --> 00:08:25,405
PUA gets added and your death benefit
rises as you redirect your dividends
198
00:08:25,405 --> 00:08:29,635
towards your, it doesn't, the only
way that it affects cash value
199
00:08:30,325 --> 00:08:32,275
is that the death benefit rises.
200
00:08:32,275 --> 00:08:37,185
And as time goes on, the, the, the
other part of this equation takes
201
00:08:37,185 --> 00:08:42,505
place and you get, you have more
access to your, your present, value
202
00:08:42,505 --> 00:08:44,455
of your future death benefit is.
203
00:08:45,385 --> 00:08:46,345
Is what's rising.
204
00:08:46,345 --> 00:08:49,045
So it's, it's rising together essentially.
205
00:08:49,255 --> 00:08:53,755
But the, I guess the big question is
the PUA buys more death benefit is
206
00:08:53,755 --> 00:08:55,855
the, is the starting point for that.
207
00:08:56,050 --> 00:08:56,410
Exactly.
208
00:08:56,618 --> 00:08:57,728
That's, that's exactly
209
00:08:57,775 --> 00:08:57,925
Okay.
210
00:08:58,508 --> 00:09:00,738
It's, it's usually
viewed as like a one pay.
211
00:09:00,988 --> 00:09:05,068
when you do a, a paid up at 95,
you're gonna, if you're 45 years
212
00:09:05,068 --> 00:09:08,158
old, you're paying for that insurance
over the course of the next 50 years.
213
00:09:08,398 --> 00:09:12,178
Whereas when you add a PUA, you're
adding it right now, it's a one
214
00:09:12,178 --> 00:09:15,328
pay policy that mimics exactly the
same policy that's already there.
215
00:09:16,258 --> 00:09:19,168
depending on the company, you're
gonna get a high percentage.
216
00:09:19,583 --> 00:09:24,803
Of cash value, let's just say 90% for
the sake of a number, where you're gonna
217
00:09:24,803 --> 00:09:29,093
get about 90 cents for every dollar
that's going to increase your cash value.
218
00:09:30,063 --> 00:09:32,253
that varies between company
and product and whatnot.
219
00:09:32,583 --> 00:09:37,863
But you, you have increased your death
benefit and also increased your cash value
220
00:09:38,133 --> 00:09:42,483
because you've increased the, the current
value of your future death benefit.
221
00:09:43,575 --> 00:09:46,275
And something to jump on here, this is
actually really important to talk about.
222
00:09:46,275 --> 00:09:49,755
The PUA increases your cash
value significantly in the short
223
00:09:49,755 --> 00:09:50,955
term, but not in the long term.
224
00:09:51,343 --> 00:09:51,923
That's right.
225
00:09:52,220 --> 00:09:55,070
over the long term is what
will increase that cash value.
226
00:09:55,070 --> 00:09:57,230
So that's why we do these
ratios and we look at people's
227
00:09:57,230 --> 00:09:58,730
age and their life expectancy.
228
00:09:58,910 --> 00:10:03,650
And so the higher the PUA in a policy,
the earlier cash value, but eventually if
229
00:10:03,650 --> 00:10:07,520
you have a policy that's heavier in base
in the long term, you'll have more cash
230
00:10:07,520 --> 00:10:09,170
value in that policy over, over time.
231
00:10:11,503 --> 00:10:11,723
Yep.
232
00:10:11,863 --> 00:10:12,283
All set.
233
00:10:12,555 --> 00:10:12,775
So
234
00:10:14,058 --> 00:10:14,628
Did that answer your
235
00:10:14,725 --> 00:10:15,295
Makes sense?
236
00:10:16,555 --> 00:10:16,795
Yep.
237
00:10:17,275 --> 00:10:17,455
Yep.
238
00:10:17,630 --> 00:10:18,410
That's a great question.
239
00:10:18,490 --> 00:10:18,910
agreed.
240
00:10:19,067 --> 00:10:21,857
for anybody out there and if they
wanna look at their illustrations so
241
00:10:21,857 --> 00:10:25,427
they can put their eyes on this and
see what their own contract is doing.
242
00:10:25,772 --> 00:10:28,862
You'll see premium coming out of
your pocket, which is the contract
243
00:10:28,862 --> 00:10:32,542
premium, and the premium outlay one
is just gonna be your, your annual.
244
00:10:32,542 --> 00:10:35,272
The other one is gonna be what you've
done over the term of the entire contract.
245
00:10:35,392 --> 00:10:38,662
And then on the left side, you're gonna
see your guaranteed or interest side.
246
00:10:38,662 --> 00:10:40,462
And I kind of have this
as my time portion.
247
00:10:40,462 --> 00:10:43,672
Just even if you don't do anything else
with PUAs over time, this thing has to
248
00:10:43,672 --> 00:10:46,552
grow to what your current death benefit
is if you don't grow the death benefit.
249
00:10:46,642 --> 00:10:48,082
And then on the right side.
250
00:10:48,832 --> 00:10:52,252
Excuse me, you're gonna see your
non-guaranteed or your dividends and if
251
00:10:52,252 --> 00:10:56,242
directed properly to buy PUA, that's gonna
be what really grows that policy as well.
252
00:10:56,482 --> 00:10:59,452
And then a little bit, I just wanna
talk about this on the left side,
253
00:10:59,452 --> 00:11:02,002
there you will, or not, the left
side on the premium, you'll see the
254
00:11:02,002 --> 00:11:03,682
contract premium, the premium outlay.
255
00:11:03,892 --> 00:11:07,672
Depending on how that's structured, you
will have base and PUA mixed in there.
256
00:11:07,877 --> 00:11:11,117
So just to clarify, part of it will buy
the base, which will be that interest
257
00:11:11,117 --> 00:11:13,937
part, and then you'll have those little
PUAs like Jared mentioned before, which
258
00:11:13,937 --> 00:11:16,997
are those little micro policies that just
keep jumping and building it as well.
259
00:11:17,267 --> 00:11:20,147
But ultimately, all of these
things interacting together is
260
00:11:20,147 --> 00:11:21,957
what's gonna, grow that cash value.
261
00:11:23,550 --> 00:11:26,040
Yeah, I really like how you broke
that down between the interest
262
00:11:26,040 --> 00:11:28,890
on the guaranteed side and the
dividend on the non-guaranteed side.
263
00:11:28,890 --> 00:11:32,280
That really hits the easy button and
takes a lot of the confusion out of these.
264
00:11:33,025 --> 00:11:35,875
I don't typically put numbers on
an illustration in front of someone
265
00:11:35,875 --> 00:11:39,325
until they're right about ready
to, to finally pull that trigger.
266
00:11:39,355 --> 00:11:41,155
'cause the, the nu there's
just so many numbers.
267
00:11:41,155 --> 00:11:41,845
It's confusing.
268
00:11:41,845 --> 00:11:42,565
What am I looking at?
269
00:11:42,565 --> 00:11:43,825
Where, what does all this mean?
270
00:11:44,135 --> 00:11:45,965
So to that just really
hits the easy button.
271
00:11:45,965 --> 00:11:47,195
I like, I like how you described that.
272
00:11:48,012 --> 00:11:48,162
Yeah.
273
00:11:48,162 --> 00:11:50,502
And, and the truth is too, we can
make these numbers dance, right?
274
00:11:50,502 --> 00:11:52,932
I wanna make sure that conceptually
people understand what's going on.
275
00:11:52,932 --> 00:11:55,692
I do want people to understand what's
going on with the numbers, but if you're
276
00:11:55,692 --> 00:11:57,072
a good agent, you know what's going on.
277
00:11:57,252 --> 00:11:59,502
You could, you could manipulate things.
278
00:11:59,502 --> 00:12:00,222
I'll just put it that way.
279
00:12:00,222 --> 00:12:00,792
And that's not our
280
00:12:00,845 --> 00:12:01,145
Sure.
281
00:12:01,152 --> 00:12:03,357
wanna make sure people actually understand
the construct and what's going on here.
282
00:12:03,610 --> 00:12:04,210
Exactly.
283
00:12:04,215 --> 00:12:04,665
Exactly.
284
00:12:05,532 --> 00:12:08,562
Okay, so hopefully you guys have a
good understanding of the fundamentals.
285
00:12:08,562 --> 00:12:09,792
If you don't come back, reach out.
286
00:12:09,792 --> 00:12:12,912
We're happy to clear any of this up,
but I wanna move on to loans because
287
00:12:12,912 --> 00:12:15,792
my goodness, if you go out there on the
internet and look at this stuff, people
288
00:12:15,792 --> 00:12:19,182
think, oh my goodness, if I finance
my car through my policy and take
289
00:12:19,182 --> 00:12:21,432
loans, I'm gonna get rich buying cars.
290
00:12:21,672 --> 00:12:23,832
No, this is absolutely not true.
291
00:12:23,832 --> 00:12:24,792
It's very simple.
292
00:12:25,092 --> 00:12:28,962
There's so much noise here, but, and
I call magic, it's not magic, it's
293
00:12:28,962 --> 00:12:30,432
just the way that these policies work.
294
00:12:30,807 --> 00:12:34,527
The benefit here is because it's cash
value and you're not borrowing your
295
00:12:34,527 --> 00:12:38,337
actual cash, is that when you have
a loan out, that cash value is still
296
00:12:38,337 --> 00:12:40,167
growing uninterrupted in the background?
297
00:12:40,687 --> 00:12:43,537
the only thing that will maybe affect
it a little bit, and we've talked about
298
00:12:43,537 --> 00:12:47,077
this before we did one of the webinars,
is direct versus non-direct recognition.
299
00:12:47,407 --> 00:12:50,587
If you have a direct recognition
company, they will lower your
300
00:12:50,587 --> 00:12:53,317
dividends slightly depending on
how much of a loan you have out.
301
00:12:53,467 --> 00:12:56,107
If you have a non-direct recognition
company, it will not affect
302
00:12:56,107 --> 00:12:58,267
the dividend at all, and you
can do a quick search on that.
303
00:12:58,267 --> 00:12:59,497
That will clear it up pretty quickly.
304
00:13:00,292 --> 00:13:03,682
But ultimately the key is being an
honest banker is paying back the loan,
305
00:13:03,682 --> 00:13:06,742
like Nelson talks about, at least at
the rate that you'd pay back the bank,
306
00:13:06,742 --> 00:13:10,402
preferably higher, but paying back the
loan does one thing and one thing only.
307
00:13:10,402 --> 00:13:14,122
It replenishes the cash value so that
you have access to it again, and it
308
00:13:14,122 --> 00:13:17,212
also will ultimately lower the amount
of interest you're paying to the
309
00:13:17,212 --> 00:13:21,532
insurance company, the longer it's out,
and so that hopefully clears that up.
310
00:13:21,742 --> 00:13:24,202
Taking loans, I want to say
this again, will not grow your
311
00:13:24,202 --> 00:13:25,492
cash value or make you rich.
312
00:13:25,492 --> 00:13:26,342
It does not work that way.
313
00:13:28,175 --> 00:13:31,625
If you go back to your previous point
about building the asset, not paying
314
00:13:31,625 --> 00:13:36,005
the debt that ties in exactly with
what you're talking about here, right?
315
00:13:36,095 --> 00:13:36,485
So.
316
00:13:37,760 --> 00:13:40,010
you're paying back your asset.
317
00:13:40,160 --> 00:13:42,140
You're replenishing your asset.
318
00:13:42,560 --> 00:13:45,980
A lot of folks see the loan and they
think debt just 'cause that's kind
319
00:13:45,980 --> 00:13:47,060
of the way we've been programmed.
320
00:13:47,060 --> 00:13:50,840
We take out car loans, we take out,
whatever loan you're gonna take
321
00:13:50,840 --> 00:13:54,580
for the, all of that fills in to
the, the idea that it's a debt.
322
00:13:55,030 --> 00:13:57,940
Whereas if you're playing honest
Banker and you're paying yourself
323
00:13:57,940 --> 00:14:01,870
back in the same way that you
would've paid back that debt, gonna
324
00:14:01,870 --> 00:14:03,700
replenish the asset that you've built.
325
00:14:06,472 --> 00:14:06,832
I love it.
326
00:14:06,832 --> 00:14:08,272
That's a really good
way to say that, Scott.
327
00:14:08,272 --> 00:14:08,937
Anything you wanna jump in with?
328
00:14:11,182 --> 00:14:13,732
Are we gonna talk about like the
interest rates on a cash value
329
00:14:13,732 --> 00:14:17,242
loan and what, what and why, or
330
00:14:17,337 --> 00:14:18,237
I, I didn't have it, but
331
00:14:18,267 --> 00:14:18,487
is
332
00:14:18,537 --> 00:14:18,987
to jump in,
333
00:14:19,072 --> 00:14:19,282
it.
334
00:14:19,317 --> 00:14:19,977
to jump in here.
335
00:14:20,007 --> 00:14:20,067
Yeah.
336
00:14:21,197 --> 00:14:23,957
I know one of the questions I get
asked, well, you gotta pay interest on
337
00:14:23,957 --> 00:14:26,187
this, and, I'm like, well, two things.
338
00:14:26,187 --> 00:14:27,357
One, it's simple interest.
339
00:14:27,357 --> 00:14:30,687
You know, it's, you, you can
pay back principle first.
340
00:14:30,717 --> 00:14:32,727
it's simple interest
calculated by the day.
341
00:14:33,207 --> 00:14:36,807
the other part of it is, is this
money, the way the insurance
342
00:14:36,807 --> 00:14:38,877
company works is they have to.
343
00:14:39,462 --> 00:14:42,702
Essentially put that money out there
for loan to make the money, to get
344
00:14:42,702 --> 00:14:47,392
you the dividend to, so if they're
not doing it elsewhere, they're,
345
00:14:47,442 --> 00:14:49,812
If they're not doing it for you,
they have to do it elsewhere.
346
00:14:50,052 --> 00:14:53,862
So in order for these policies to work,
there's, there's that, and the way I look
347
00:14:53,862 --> 00:14:55,842
at it is it's like an administrative fee.
348
00:14:56,202 --> 00:14:58,302
You know, it's like I'm part
owner of a business, I'm paying
349
00:14:58,302 --> 00:15:00,582
a business for management.
350
00:15:00,672 --> 00:15:04,342
If I'm not doing it, then, if they
loan a block of money out there to a
351
00:15:04,342 --> 00:15:07,682
bank or something like that, the bank
is paying the administrative fee, but
352
00:15:07,682 --> 00:15:09,392
somebody has to pay it for this whole.
353
00:15:10,067 --> 00:15:16,847
To work the, I think the magic for me
is, it's, I, I, I know it's not my money,
354
00:15:17,267 --> 00:15:21,507
but I view it as such like you guys are
saying, and then you pay it back faster.
355
00:15:21,757 --> 00:15:25,027
Nelson recommends, pay it back
at least how you're gonna pay it
356
00:15:25,027 --> 00:15:27,037
bank back or pay it back faster.
357
00:15:27,637 --> 00:15:30,947
And that drives that, some people
see oh, you have an 8% interest rate.
358
00:15:30,947 --> 00:15:31,967
Well, I can get a car loan.
359
00:15:32,147 --> 00:15:34,247
I was like this when I started,
I had this conversation with.
360
00:15:34,997 --> 00:15:38,147
the guy that's gonna be my
mentor, why would I go take out a
361
00:15:38,147 --> 00:15:40,957
loan, if I can get 2% at a bank?
362
00:15:40,957 --> 00:15:43,337
And he's like, well, he started doing it.
363
00:15:43,427 --> 00:15:46,907
And it's like, okay, if you
calculated out the interest I paid.
364
00:15:47,412 --> 00:15:50,832
Versus pulling it from my savings or
putting it through a policy sequencing.
365
00:15:50,882 --> 00:15:55,502
it's like I'm, as I'm building this
system and seeing how it all functions,
366
00:15:56,312 --> 00:15:59,762
I don't know really how to put it into
words other than it makes complete sense
367
00:15:59,762 --> 00:16:01,682
because it's a different type of interest.
368
00:16:02,222 --> 00:16:03,692
You pay it down faster.
369
00:16:03,902 --> 00:16:07,652
There's actually less interest charges,
less finance charge, like the total cost
370
00:16:07,652 --> 00:16:12,002
of financing at the end is significantly
lower than going through a traditional
371
00:16:12,002 --> 00:16:14,462
method just because of the way it's done.
372
00:16:15,152 --> 00:16:15,632
So.
373
00:16:16,105 --> 00:16:17,965
You bring up a really,
really good point there.
374
00:16:17,995 --> 00:16:21,425
'cause, a lot of folks get,
get wrapped around the axle
375
00:16:21,425 --> 00:16:22,445
on the interest rate, right?
376
00:16:22,445 --> 00:16:24,035
They're like, what is the deal?
377
00:16:24,035 --> 00:16:25,085
Six to 8%.
378
00:16:25,085 --> 00:16:27,995
I can totally beat that in
the marketplace, and yet.
379
00:16:28,685 --> 00:16:32,985
Us as someone that understands, a
lot of the concepts that Nelson has
380
00:16:32,985 --> 00:16:38,205
taught, we, we get that you're already
saving that 34.5% by creating this
381
00:16:38,205 --> 00:16:40,365
system and by becoming your own banker.
382
00:16:40,545 --> 00:16:44,355
And so if you're, if you're already
saving that 34.5%, whether it's
383
00:16:44,355 --> 00:16:46,370
costing you 2% or you're saving 2%.
384
00:16:47,265 --> 00:16:49,965
That's pennies on what
you've already saved, right?
385
00:16:50,175 --> 00:16:53,975
So as someone sitting in our
little room here, we understand
386
00:16:53,975 --> 00:16:55,355
that, but not everybody gets that.
387
00:16:55,445 --> 00:16:58,625
So it's really, really important
question that you just asked because
388
00:16:58,895 --> 00:17:00,185
you, you hit the nail on the head.
389
00:17:00,395 --> 00:17:04,415
This does not always get
understood or grasped or otherwise.
390
00:17:04,715 --> 00:17:08,735
And I think to build on, the
concept that your mentor said is,
391
00:17:09,335 --> 00:17:10,835
you're in the position of power.
392
00:17:11,150 --> 00:17:16,160
By having this asset, if you chose to
go take advantage of that bank loan or
393
00:17:16,160 --> 00:17:18,015
the, the car dealer loan, that's 2%.
394
00:17:19,470 --> 00:17:21,600
You saved, maybe you saved a
couple of percentage points.
395
00:17:21,600 --> 00:17:25,750
Maybe you were that, that maybe that's
a, a valued cost to you to be able to
396
00:17:25,750 --> 00:17:29,500
go through their financing, but you
also have built the asset that you
397
00:17:29,500 --> 00:17:33,040
have the ability to do that by your
choice, by your power if you want.
398
00:17:33,220 --> 00:17:36,940
You are not required with only
one option to go down to the car
399
00:17:36,940 --> 00:17:40,630
dealership and get lucky that they
have the right financing setup because
400
00:17:40,630 --> 00:17:42,010
you don't have any other options.
401
00:17:42,310 --> 00:17:43,570
You're in the position of power.
402
00:17:43,840 --> 00:17:45,610
So you can go either way on that.
403
00:17:45,750 --> 00:17:49,290
But it really comes down to when
it's your capital control it.
404
00:17:50,957 --> 00:17:51,227
Yeah.
405
00:17:51,757 --> 00:17:54,492
I think the other thing to point
out is I just relate it to.
406
00:17:55,287 --> 00:17:56,247
Vehicle purchases.
407
00:17:56,247 --> 00:17:58,647
'cause that's what I, that's
how I was looking at it before.
408
00:17:59,007 --> 00:18:04,197
Now I'm at the point where I'm
looking at, I take a policy loan for
409
00:18:04,197 --> 00:18:07,797
cash value to create more money than
it's ever gonna cost me to borrow.
410
00:18:07,797 --> 00:18:11,597
And so I'm not looking at it from
a purchasing point as more of
411
00:18:11,597 --> 00:18:13,097
an investing standpoint, which
412
00:18:13,440 --> 00:18:14,220
really.
413
00:18:14,815 --> 00:18:17,755
that takes that another two
steps farther down the road.
414
00:18:18,265 --> 00:18:18,715
You know?
415
00:18:18,765 --> 00:18:20,855
now it really doesn't matter
'cause you're generating way
416
00:18:20,855 --> 00:18:22,085
more than it'll ever cost you.
417
00:18:22,822 --> 00:18:27,502
and while you still have the opportunity
to borrow from your cash value, literally
418
00:18:27,502 --> 00:18:31,472
two weeks after the check clears, you can
use these cash values right off the start.
419
00:18:31,472 --> 00:18:35,372
It's not gonna have equaled what you've
really put into it for a couple of years.
420
00:18:35,372 --> 00:18:37,742
So there's also that business
setup startup, right?
421
00:18:37,742 --> 00:18:39,462
you've gotta understand what you're doing.
422
00:18:39,462 --> 00:18:43,062
A lot of folks get really wrapped also
around this idea that I just started.
423
00:18:43,062 --> 00:18:43,542
It should be.
424
00:18:44,207 --> 00:18:46,447
This high producing asset
right now, it's whoa, whoa.
425
00:18:46,447 --> 00:18:46,837
Hold on.
426
00:18:46,927 --> 00:18:48,997
Well, you just started give it some time.
427
00:18:49,117 --> 00:18:52,987
You gotta think long term and get beyond
the first year or two to realize what
428
00:18:52,987 --> 00:18:54,577
you've really built in terms of an asset.
429
00:18:56,239 --> 00:19:00,439
Yeah, like you guys, said, it comes
down to control and options and
430
00:19:00,439 --> 00:19:03,469
the fact that it is still growing
in the background, even if you're
431
00:19:03,469 --> 00:19:04,939
leveraging it, which is huge.
432
00:19:04,969 --> 00:19:07,429
And so if you can get that,
you really do understand it.
433
00:19:07,849 --> 00:19:11,509
and with that, I'll dovetail into why
the companys even let you do this, right?
434
00:19:11,509 --> 00:19:13,819
So why is this advantageous for them?
435
00:19:14,164 --> 00:19:15,514
So I did a little bit of research here.
436
00:19:15,514 --> 00:19:17,224
I thought it was pretty cool, and
it's kind of interesting every
437
00:19:17,224 --> 00:19:19,324
time I do this and I look back,
I always find a little nugget.
438
00:19:19,324 --> 00:19:22,354
And so the newer one that I found here,
I didn't realize this was back in May of
439
00:19:22,354 --> 00:19:24,814
1777, so we're going back a long ways.
440
00:19:25,234 --> 00:19:28,924
There was an early American life insurance
company and they actually voted to loan
441
00:19:28,924 --> 00:19:32,644
5,000 pounds to the Continental Congress
for the revolution in support of that.
442
00:19:32,944 --> 00:19:35,844
So that was the first, there may
be something out there, before
443
00:19:35,844 --> 00:19:36,934
that but I didn't find it.
444
00:19:36,934 --> 00:19:40,294
This is what I found was the first example
of a loan from an insurance company.
445
00:19:41,089 --> 00:19:44,759
then this kind of set up the, the
framework going forward for us as
446
00:19:44,759 --> 00:19:46,079
owners to actually access that.
447
00:19:46,319 --> 00:19:48,869
So by the early 1800s it started
becoming more mainstream.
448
00:19:48,869 --> 00:19:52,049
And this is what we really care
about as owners and the companies.
449
00:19:52,049 --> 00:19:53,999
They weren't doing this out of
the goodness of their heart.
450
00:19:53,999 --> 00:19:57,899
What was happening was people were getting
going through tough times, or they had an
451
00:19:57,899 --> 00:20:01,499
opportunity and they had the cash value
there, but they had no way to get to it.
452
00:20:01,499 --> 00:20:03,929
So they were surrendering
policies to get to it because
453
00:20:03,929 --> 00:20:05,129
they had to do something else.
454
00:20:05,309 --> 00:20:07,979
And for a life insurance company, you're
looking at this, this is a bad deal.
455
00:20:07,979 --> 00:20:09,119
We're losing customers.
456
00:20:09,869 --> 00:20:12,089
So to come up with the way, well,
how do we keep the customers but
457
00:20:12,089 --> 00:20:13,559
let them access the cash value?
458
00:20:13,829 --> 00:20:16,664
And they realize this is the most
secure loan that is out there because.
459
00:20:17,489 --> 00:20:19,589
either gonna get, we already
have the money, right, that
460
00:20:19,589 --> 00:20:20,729
you guys have paid in premium.
461
00:20:20,729 --> 00:20:23,159
We're gonna limit the amount
that you can take in loan based
462
00:20:23,159 --> 00:20:24,269
on how much cash value you have.
463
00:20:24,569 --> 00:20:26,759
Or if you pass away, there's gonna
be a death benefit that comes.
464
00:20:26,759 --> 00:20:28,789
And we'll just subtract what you
have out and then collect, you'll
465
00:20:28,789 --> 00:20:30,679
get the difference, but we'll
collect what we need to there.
466
00:20:30,979 --> 00:20:34,099
So it was really a way to
keep these policies in force.
467
00:20:34,384 --> 00:20:37,024
Then the government came
in and in 1905 you had the
468
00:20:37,024 --> 00:20:38,854
Armstrong Investigation reforms.
469
00:20:38,914 --> 00:20:42,004
And what they said is, no, not only
should most companies be doing this,
470
00:20:42,004 --> 00:20:44,884
we're gonna contractually make it so
that all companies do this so that
471
00:20:44,884 --> 00:20:46,564
people have access to their cash value.
472
00:20:46,714 --> 00:20:48,874
And that actually ended up being huge
when you had the depression and a
473
00:20:48,874 --> 00:20:51,694
bunch of other stuff that came in the
thirties and the other stuff after that.
474
00:20:51,934 --> 00:20:54,514
But basically, to sum it up, it's
beneficial for the life insurance
475
00:20:54,514 --> 00:20:57,664
companies, but it gives us, as
the owner an incredible tool
476
00:20:57,664 --> 00:20:58,804
to finance the needs of life.
477
00:21:00,155 --> 00:21:02,801
Cool history there, I had no
idea that it went that far back.
478
00:21:03,071 --> 00:21:06,041
9 17 77. That's, that's impressive.
479
00:21:06,088 --> 00:21:06,628
one I found.
480
00:21:06,748 --> 00:21:07,048
Yeah.
481
00:21:07,316 --> 00:21:07,326
Yeah.
482
00:21:07,348 --> 00:21:09,838
like doing this stuff 'cause you find some
neat stuff that when you're, when you're
483
00:21:09,979 --> 00:21:10,484
That's pretty cool.
484
00:21:10,558 --> 00:21:10,708
it.
485
00:21:10,798 --> 00:21:11,068
Yeah.
486
00:21:12,528 --> 00:21:13,098
so with
487
00:21:13,239 --> 00:21:17,039
It kinda, it kind of adds the, it kind
of adds a, you said, that other little
488
00:21:17,039 --> 00:21:20,859
nugget, when we talk, these companies have
been around for, some of 'em a hundred
489
00:21:20,859 --> 00:21:23,529
plus years paying dividends, and then
you see something like this and it's
490
00:21:23,529 --> 00:21:29,719
like, oh geez, 1777, is when it, what you
found could be the earliest start of it.
491
00:21:29,779 --> 00:21:30,169
So.
492
00:21:30,401 --> 00:21:30,821
That's right.
493
00:21:30,838 --> 00:21:31,198
in America.
494
00:21:31,198 --> 00:21:33,238
I don't know, other areas, other
countries that had going on.
495
00:21:33,238 --> 00:21:34,948
But I only care about here
'cause that's what we're writing
496
00:21:34,948 --> 00:21:35,848
and that's what we're doing.
497
00:21:37,108 --> 00:21:37,998
So, yeah.
498
00:21:37,998 --> 00:21:39,318
America Anyway, so.
499
00:21:40,983 --> 00:21:42,603
With this, and we're
talking about a lot and.
500
00:21:43,143 --> 00:21:45,633
When you're taking this loan,
there's a lot of confusion here.
501
00:21:45,633 --> 00:21:46,623
People get very hung up.
502
00:21:46,713 --> 00:21:48,513
What money are you actually borrowing?
503
00:21:48,513 --> 00:21:51,943
And that's why we were stressing,
stressing cash and cash value early on.
504
00:21:51,943 --> 00:21:55,213
So you are borrowing money
from the insurance company.
505
00:21:55,213 --> 00:21:58,963
You were not borrowing the actual money
in your individual insurance policy.
506
00:21:59,323 --> 00:22:01,873
And so Scott, you brought this up
before and that's what got us down
507
00:22:01,873 --> 00:22:03,223
the whole loan conversation, right?
508
00:22:03,223 --> 00:22:05,863
But the company must invest the money
that they're taking in somewhere
509
00:22:05,863 --> 00:22:08,353
and they have to meet basically,
about two main obligations.
510
00:22:08,583 --> 00:22:11,283
They have the death benefit
payouts and the other expenses that
511
00:22:11,283 --> 00:22:12,633
come with operating the company.
512
00:22:12,813 --> 00:22:13,773
And you can break that down.
513
00:22:13,773 --> 00:22:16,263
I don't wanna go into all little stuff
that could be, but it's everything else.
514
00:22:16,263 --> 00:22:17,973
And both are, significant, but.
515
00:22:18,838 --> 00:22:21,548
One option the company has, and we
talked about the Armstrong Acts,
516
00:22:21,568 --> 00:22:23,698
and the rest of it is to loan
the money out to policy owners.
517
00:22:23,698 --> 00:22:26,998
But not only can they do that
contractually, you're first in line.
518
00:22:26,998 --> 00:22:29,638
So if you want to get to that
money or that cash value,
519
00:22:29,638 --> 00:22:30,688
you're first in line to get it.
520
00:22:30,688 --> 00:22:31,678
So you have access to it.
521
00:22:32,008 --> 00:22:36,103
All the cash value does is it serves
as collateral that guarantees the loan.
522
00:22:36,103 --> 00:22:38,128
And we hit on that already
on how that works out.
523
00:22:38,338 --> 00:22:40,798
But this is actually huge for
us, and this is a huge bonus.
524
00:22:40,828 --> 00:22:44,368
This is what allows that cash value
to actually grow in an uninterrupted.
525
00:22:44,448 --> 00:22:46,608
Because you're not actually
borrowing the cash value.
526
00:22:46,638 --> 00:22:49,368
That's just the collateral that's
out there, so you're never actually
527
00:22:49,368 --> 00:22:52,278
interrupting it unless you're talking
maybe direct, non-direct recognition.
528
00:22:52,278 --> 00:22:53,328
But that's just a minute point.
529
00:22:53,508 --> 00:22:55,428
Either way, even both of
those are still growing.
530
00:22:56,598 --> 00:22:59,778
and then, so to sum it up, this is
one of the ones, and you'll hear a lot
531
00:22:59,778 --> 00:23:03,108
of people talk about, well, when you
graduate, and when we say graduate, mean
532
00:23:03,348 --> 00:23:07,128
when you pass away, your beneficiary
only gets the death benefit and the
533
00:23:07,128 --> 00:23:09,318
company keeps the cash or the cash value.
534
00:23:09,558 --> 00:23:12,498
And so I crack up and really it's a
lack of understanding and the critics
535
00:23:12,498 --> 00:23:14,598
don't even understand what they're
saying when they're talking about this.
536
00:23:14,598 --> 00:23:14,733
And so.
537
00:23:15,558 --> 00:23:19,008
The best way that I've found, I've
found to illustrate this to people that
538
00:23:19,008 --> 00:23:22,428
maybe don't understand is to compare
it to something that you know, so this
539
00:23:22,428 --> 00:23:26,688
would be the equivalent of saying that
you paid off your mortgage, right?
540
00:23:26,898 --> 00:23:30,258
You sold your home, and then after
you got all the cash from that,
541
00:23:30,258 --> 00:23:32,868
you went back to the bank and say,
oh, hey, by the way, remember all
542
00:23:32,868 --> 00:23:34,518
those mortgage payments I I made?
543
00:23:34,668 --> 00:23:36,603
I wanna get all that principal
back that I paid you as well.
544
00:23:37,428 --> 00:23:39,438
so it doesn't, it just doesn't make sense.
545
00:23:39,438 --> 00:23:42,228
I think when people hear that kind of
light bulb goes off, hopefully it is.
546
00:23:42,228 --> 00:23:43,998
If not, we'll come up
with another analogy.
547
00:23:44,398 --> 00:23:48,298
but the other thing to look at here is
also when that death benefit does get paid
548
00:23:48,298 --> 00:23:52,468
out, it's gonna be many, many multiples
of whatever your out of pocket payments
549
00:23:52,468 --> 00:23:56,128
were all, or that premium that went out,
especially if it's designed properly.
550
00:23:56,128 --> 00:23:59,098
So your beneficiaries are gonna be way
better off than if you just have that.
551
00:23:59,323 --> 00:24:00,103
Somewhere else.
552
00:24:00,293 --> 00:24:03,603
and the whole time, we can get to
this, and this is kind of what we were
553
00:24:03,603 --> 00:24:06,063
talking about earlier, that cash value,
if you're doing the right things with
554
00:24:06,063 --> 00:24:08,403
it, not only are they getting that
death benefit, but hopefully they're
555
00:24:08,403 --> 00:24:11,523
getting all the other things in life
that you built in finance, hopefully
556
00:24:11,523 --> 00:24:14,583
investments in other business entities
that you were able to do because of that
557
00:24:14,583 --> 00:24:16,083
cash value that you had along the way.
558
00:24:17,133 --> 00:24:18,028
Anything else you guys want to add?
559
00:24:19,526 --> 00:24:19,746
Yep.
560
00:24:19,981 --> 00:24:20,426
Well said.
561
00:24:21,086 --> 00:24:24,236
even if the, even if your house isn't paid
off and you just think about that same
562
00:24:24,236 --> 00:24:28,616
exam example, maybe you've got a $500,000
home that's got 250,000 in equity.
563
00:24:29,111 --> 00:24:32,351
When you sell that home for
500,000, you don't get the
564
00:24:32,351 --> 00:24:34,691
500,000 and the two 50 in equity.
565
00:24:35,111 --> 00:24:36,221
that's just not how that works.
566
00:24:36,431 --> 00:24:38,441
You get the equity
you've built up into it.
567
00:24:38,711 --> 00:24:42,591
So maybe you had had a HELOC, maybe
you had borrowed against that equity.
568
00:24:43,011 --> 00:24:45,081
Well, they're gonna take
that equity back from you.
569
00:24:45,541 --> 00:24:48,991
From the sale price whenever you
sell that home, I know we, we were
570
00:24:48,991 --> 00:24:52,021
really careful at the beginning to
differentiate between an asset and a
571
00:24:52,021 --> 00:24:55,001
debt, but that, that example is spot on.
572
00:24:55,001 --> 00:24:58,941
It, it is perfect to help understand,
you're, you're leveraging an asset to
573
00:24:58,941 --> 00:25:03,261
borrow against, and if you are leveraged
against that asset when you graduate,
574
00:25:03,621 --> 00:25:06,081
well, they're gonna take what you
owe back and then pay the rest of the
575
00:25:06,081 --> 00:25:07,521
death benefit to your beneficiaries.
576
00:25:08,333 --> 00:25:09,443
It's a great way to sum that up.
577
00:25:12,053 --> 00:25:13,943
Scott, anything else you wanna
add before we finish it up?
578
00:25:14,618 --> 00:25:14,738
I,
579
00:25:15,394 --> 00:25:15,934
That's it.
580
00:25:16,238 --> 00:25:16,823
okay, cool.
581
00:25:16,913 --> 00:25:18,143
Well, thanks everybody for listening.
582
00:25:18,143 --> 00:25:18,893
Merry Christmas.
583
00:25:18,893 --> 00:25:21,833
Hopefully you're, like I said, you're
with family, friends, or good crew and
584
00:25:21,833 --> 00:25:22,823
we'll catch you on the next episode.
585
00:25:23,871 --> 00:25:24,641
Merry Christmas y'all, see ya..
586
00:25:25,824 --> 00:25:26,454
Merry Christmas.
587
00:25:30,807 --> 00:25:32,607
Thanks for tuning into
the infinite mindset.
588
00:25:33,087 --> 00:25:36,177
If you found today's conversation
valuable, share it with someone who's
589
00:25:36,177 --> 00:25:39,687
ready to think differently about
finances, and don't forget to subscribe.
590
00:25:40,047 --> 00:25:42,807
Your journey to financial freedom
starts with the right mindset.
