So many people are feeling the cash flow crunch right now, and all the standard
advice tells you to sacrifice more, save harder, tighten your belt even further.
But what if I told you the real solution isn't about cutting back?
It's about taking control of the money you're already spending.
Well, I've absolutely packed this episode with practical strategies
to free up cash flow without sacrificing your quality of life.
We will talk about why liquidity gives you power, that status quo
investment tools like 401Ks never will.
And we'll go over how to capture future income growth so that even if you got
a 0% rate of return on your money, you'll end up millions of dollars
of ahead of the typical investor.
This is Stacked Life, the podcast that teaches you everything you need
to know about The Infinite Banking Concept, whole life insurance, and
the strategies that make it all work.
And I'm John Perrings, an authorized Infinite Banking practitioner.
I've implemented IBC for hundreds of clients and educated thousands
more via my top rated podcast and financial resources at StackedLife.com.
This is a bonus episode, wrapping up a four part series on the top challenges
people are facing to get ahead today.
So far, we've covered staying ahead of rising prices, financial instability
and debt, employment and job market concerns, and the challenges when
dealing with status quo financial planning advice that isn't delivering
the outcomes people want or need.
We addressed some of these challenges from a principles based standpoint
in those individual episodes, but now I want to get practical.
What are some tangible things we can do today, if we're feeling a cashflow crunch?
How do we actually save more, create growth in our financial life
and really start to pull ahead?
As we get into this, let's get to the root of the issue first.
And the root of the issue is that people really lack control over
their money and their cash flow.
Traditional planning, prioritizes sending money away to other people's financial
systems, which are the banks, Wall Street, and government controlled plans.
It leaves people cash, poor and vulnerable.
Not only when life throws a curve ball, which we know happens from time to time,
but also when opportunities come up.
In the last episode, we talked about the number one rule of investing,
which is "buy low, sell high." Yet most people, because of the way that
their plans work, they're just plying money into the market over and over
again, regardless of the timing.
And they never really have the liquidity they need when
it's actually time to buy low.
And a lot of people talk about Warren Buffet as the model of investing.
And Warren Buffet talked about this.
He's famously said that the best time to buy is when there's blood in the streets.
Meaning, there's a massive sell off and prices are very low.
But no one is really set up to take advantage of opportunities like that.
When they come along.
They're so hyperfocused on whatever the next investment is that they
can put their money into, they end up putting themselves in a position
where they're highly illiquid.
And so they can't take advantage of opportunities that come along.
And when I'm talking about opportunities, I'm talking about
real opportunities that show up.
Real opportunities are often once in a lifetime opportunities, and
most people cannot grab those when those opportunities come.
I can speak for myself on this.
When I hit a crossroads in my career, I had the savings built up because I
had actually already implemented The Infinite Banking Concept in my own
life, before getting into this business.
I'd saved up a significant amount of cash.
And it allowed me to completely change careers from tech into actually
doing what I do now, which is helping people implement IBC for clients and
helping teach clients how this works.
When I shifted gears from tech into financial services completely,
you know, changing gears in my career, starting my own business.
For a long time I was a W2 employee, and when you switch over into the world
where you are kind of, you know, sink or swim, it's a pretty big change.
And, you know, one of the ways I was able to make it, I, I would like to think I
would've been able to make it no matter what, but there were some significant
challenges in, in that gear change.
Getting into this business and really learning how to justify an income from it.
You know, my cash value life insurance really helped me through
that period where, you know.
It, it was not automatic that income was coming in, and now here I am in a
career that I love more than anything else I've ever done professionally.
I love my clients.
It's, it's extremely rewarding.
I'm doing financially better than I ever had, meaning I make more
money than I ever did in a W2 job.
And I have this really rewarding personal life, you know, with my family
and my relationships, and I'm doing exactly what I wanna be doing, and
here's why I'm bringing this up, this big improvement in a huge part of my
life, which is my professional life,
how could I ever assign a rate of return to something that changed my
entire life for the better forever?
You know, not everything is always about the dollars and the percentages, right?
But even when it is, the real opportunities that come along are
the opportunities that present themselves because you are who you are.
You know what you know, you live where you live and you know the
people that you know, they're usually very individual, and it's not always
something you can necessarily predict.
It's really kind of like the age old saying that luck is when
preparation meets opportunity.
And the preparation piece, when we're talking about The Infinite
Banking Concept, the preparation is capitalizing, being able to roll with
the punches, so to speak, but also being able to actually do something
about a real opportunity when it arises.
Here's another perfect example.
One of my colleagues and friends recently bought his dream ski cabin
in Aspen right off the lift, right off the slopes, ski-in-ski-out situation.
And it's been his lifelong dream to have a cabin like this.
And the only reason he was able to buy it is because he didn't have to spend
the time trying to secure financing like the other people had to do.
He had cash and he just paid as a cash buyer all from his whole life insurance.
He had the cash within five business days, bought the place while everyone else was
scrambling, going through underwriting, and trying to get approved for financing.
He beat everybody else out because he was liquid.
But it's also about rolling with the punches.
You know, everyone puts the cart before the horse looking for all
these exciting things like rates of returns and cool new investments
and the next big thing and financial hacks and all these other things.
Then when one thing goes wrong, they either don't have the liquidity to
roll with the punches, so to speak, and it blows the whole thing up anyway.
Or even worse, sometimes they've over leveraged themselves and they don't
have the control over the payback terms, and now it really blows everything up.
So where does this leave us?
The number one improvement we can make to our financial lives is to really
try to wrangle back control over it.
And that's where the Infinite Banking and whole life insurance comes in.
Whole life insurance is the cash asset that gives us liquidity
and control over our capital.
The Infinite Banking Concept is the process that we use to strategically
accumulate and deploy that capital.
One of the number one questions I get asked is, how much premium should I pay?
And a lot of times people are trying to find the money they need from
their existing cash flow to start the process of strategically capitalizing
a whole life insurance policy.
So for the rest of this episode, I'm going to share with you some practical
ways to free up existing cash flow so that you can pay life premiums, either
without coming out of pocket at all, or to supplement other cash flow to pay higher
premiums and build even more cash value.
Before I do that, if The Infinite Banking Concept is something that's
been on your mind, but you've just been looking for the right time to start
implementing it, maybe this episode is all you needed to get started.
If that's the case, you can schedule a free 30 minute consultation
with me right at StackedLife.com.
On this call, you'll get all your questions answered, and learn
whether or not IBC is right for you.
And if so, what's the next best step you can take?
Alright, first, let's talk about retirement plans, 401Ks, IRAs, et cetera.
With these plans, you're really subjecting your money to a lot
of rules in order to get to it.
Now we've been talking a lot about liquidity and these are not technically
totally illiquid accounts, but the penalties are so high to access them.
They might as well be for all intents and purposes.
It gets back to the idea that if anything goes wrong, the whole plan blows up
anyway because that money is really supposed to be earmarked for the future.
And if you have to raid those accounts, then that blows the plan up for what it
was supposed to do for you in the future.
I'll speak from experience here.
When I first started working in the late nineties, the DotCom bust came
around pretty quickly early on in my career, and I had to raid my 401k to
get the money that I needed to live on.
You know, again, my, my background is in tech.
I worked at tech startups for years.
And those are usually the first companies to start feeling pressure when money
dries up during a market correction.
A lot of the employees at startups or some of the first people to get laid off.
So I've experienced all these things.
I know exactly what it means to have to dive into those accounts in
order to get the cash that you need.
And once you do that, you lose all the growth on that money forever.
I talk to a lot of people every day, and most of the time their
main savings vehicle is their 401k.
They might have a little bit of money sprinkled in some other investments or
in a savings account or whatever, but the main thing that they have is their 401k.
And a lot of times they're not saving a whole lot over the 401k contribution.
So let's take a look at that 401k from a cashflow perspective, what
is that 401k actually doing for you today to help keep you liquid and
maintain control over your capital?
What does that 401k or IRA doing for you right now?
And a lot of people say it's a forced savings, which it, it kind of is.
But again, you have this forced savings, so to speak, and when you really need it,
you have to go raid that forced savings and spend it in order to pay the bills.
The other thing people say is they get a tax deduction.
And so let's just address that really quickly while we're on the topic of 401Ks.
What you get with a standard 401k or IRA is not a tax
deduction, it's a tax deferral.
It's true that you don't have to pay the tax on the money that you
contribute, but you're also losing access to that money that wasn't taxed.
So the financial institutions get to hold onto that money and you're
gonna pay the taxes on it later.
So if you don't like paying tax on that money, now you like that tax deferral.
How much are you going to like paying on that tax later?
Especially when you want that money, maybe for retirement income.
And this is the conventional financial planning thing where people tell you, you
get a tax deduction, but you don't get a tax deduction, you get a tax deferral.
Meanwhile, your money is locked up in 401k jail and you can't touch it for 20, 30,
maybe even 40 years, unless you pay the tax and you pay that nice 10% penalty.
This money is really doing absolutely nothing for you today.
So where else could you put that money where you might get the same
tax treatment or even better, maybe more more like a Roth IRA, where the
after tax money goes in, it grows tax deferred, but you can get to it tax free.
And the answer of course is whole life insurance.
You're here listening to this probably because you're interested
in The Infinite Banking Concept.
So we're talking about whole life insurance today.
If we want to get control and we're struggling with cash flow, why not
redirect that cash flow from places where it removes control from our financial
life and put it into a place where it increases control over our financial life?
Not only does it increase control, but it also protects our family.
If anything were to happen to us prematurely, like a death or a disability.
Whole life insurance is kind of like a Swiss Army knife of financial products.
Why not redirect that money, even if it's just temporarily
while things are feeling tight,
redirect some of that money into a place where you can control
it and you can get to it.
There are ways to design the policy where you can redirect that 401k money
into the PUA portion of a policy.
As I'm putting the final touches on this video, I realized I wasn't speaking
very clearly right here, and I just wanted to make sure it's very clear.
You cannot redirect money from a 401k into whole life insurance.
What I was trying to say here is you could redirect the cash flow that was
meant to go into your 401k and instead send it to whole life insurance.
And when you do that, that money's basically a hundred percent liquid
and you can get to it if you have an emergency and you can get to
it if you have an opportunity.
And because you can get to it when you have that opportunity.
Couldn't you conceivably use that cash value via the policy loan provision
to buy other investments that you actually have control over and get
the growth that you would've gotten in the 401k anyway, if not even better.
One of the ideas here is you could contribute to your
401k only up to the match.
You know, if you get a company match where they actually match the amount
you're putting into the 401k, you could take a look at what that maximum match
is and you can contribute just up to that so you can get that so-called
"free money." Then anything over and above that match, redirect that into
your whole life insurance policy, especially into the PUA piece of it.
Or if you're like me, I don't want any of my money out of my control.
So I forego the match altogether because I know that I can deploy my capital in a
much more efficient manner, where match is really not that big of a deal to me.
By the way, you can go to my website, StackedLife.com, and in the video
section, look for the video about the truth on your 401k, where I really
do a deep dive into the numbers.
And you can see that that match really doesn't do as much as you think it does.
So here's another thing you could consider, which has more
to do with the timing on when you contribute to your 401k.
You could look at implementing something that we like to call a 401k delay.
And if you're looking at capitalizing and creating a pool of capital, but
you really believe that a 401k is something that you want in your financial
life, you could look at just delaying when those contributions happen.
And the principle behind this is that with a 401k.
We know we can invest in a 401k today, tomorrow, 10 years
from now, 20 years from now.
You know, obviously depending on how old you are, but you can pretty
much always contribute to a 401k.
What we don't know is whether or not you can always qualify for life insurance
because it's based on your life.
You have to qualify with your age, health, and wealth.
And since we unfortunately never get any younger, the best time to buy
life insurance if you're in the market for it is while you're still young.
So why not qualify for a whole life insurance policy and lock that in at
the very best time, which is today?
And instead of your contributions going to your 401k, for a period of
time, maybe three to seven years, we redirect those cash flows to paying
the premium of your new whole life insurance policy or even an existing one.
Two things will happen during this delay period.
Number one, the policy will have become more mature and if desired, you could
drop the PUA portion of that and just make the base premium payments, which at
that point are typically more efficient than the PUA payments, believe it or not.
Now you can take that cash flow and now you can start
contributing to your 401k again.
The other thing that happens is your income tends to increase as time goes on.
And quite often when we illustrate this out, people's income will have increased
to a point where they can pay some or even all of the insurance premium,
and they can start to contribute to the 401k, possibly even maxing it out.
And so this is a pretty powerful forced saving strategy that gives you a lot
more liquidity and a lot more control.
The second strategy we could look at involves your mortgage.
This is kind of the same thing as your 401k in some ways.
Your, your home is an asset that you own, but it's not necessarily
an asset that you control.
Until you have that mortgage fully paid off, the bank really controls
that asset, and what I see happening is people contribute more than what
their mortgage, payment requires.
They pay down the principle of the loan faster.
Sometimes it's called pre-paying your mortgage in order to not only pay the loan
off faster, but they're also taught that they can save on those interest dollars.
And, and that's true by the way, you do save on the interest of your mortgage
when you make additional payments towards that mortgage, additional principal
payments, but especially for people that purchased a home in like in the last
10 or 15 years when interest rates were really coming down or maybe you even
refinanced into a lower interest rate.
I see a lot of people with, you know, sub three mortgage interest rates.
And you've gotta ask yourself the question is paying down the principle and saving
on, call it 3% interest, is that really the best thing you could be doing with
those extra dollars that you're using to make those additional payments?
The way I describe this is when you're making additional payments, when you
pay extra on your mortgage and using the example, if you have a 3% mortgage, that's
a 3% job that you're giving that dollar.
So the question you have to ask yourself, can I do something
where the job is better than 3%?
So just as an example, if you put that extra dollar into whole life
insurance, instead you'd be giving that dollar a four or maybe 5% job,
depending on your age or health.
And over that same 30 years, assuming a 30 year mortgage, the math proves this
out, doesn't, by the way, it doesn't matter if it's a 15 year mortgage,
if it's over the same time period.
There's just no question that over that same time period, you might be
done paying the mortgage sooner, and you might have saved a little bit of
interest, but you could have been giving that money a 5% job instead of a 3% job.
And assuming the same rates of return,
You'll come out way ahead over that, over that time period,
putting your money into that 5% job.
That's just how the math works, and a lot of people are surprised by that.
Now you will have paid more interest on your mortgage, but the fact that
you're getting a higher return on those extra dollars that you're giving a
better job to you will actually come out ahead and it will create more value
for you over that same period of time.
Now, the rates of course matter on this a little bit, but the idea is that
we want to get some more liquidity.
We want to get some more control.
So maybe it's not whole life insurance that you put your money into.
The idea though is that every time we make an additional payment towards
the principal of our mortgage, that money gets kind locked away,
proverbially in the walls of our house.
If you think about it, you don't really have control over that extra dollar
that you put there because what it does is it builds equity, but it has
absolutely nothing to do with the value of your house or anything like that.
It's just building more equity in your house.
To get to that equity, you first have to get the permission from a
bank or some other type of lender.
So why not take those extra dollars you're putting towards paying down
your mortgage faster and put that into something that will actually create
control, create liquidity, and then allow you to further deploy that capital
to create growth outside of your house.
Now there is another side of this discussion and sometimes
people just really don't want to be beholden to the bank.
They really want to get out from under that loan.
And I would argue that until the house is completely paid off, the
more equity you build in the house,
it puts you in a worse position with the bank.
The banks don't want to hold your real estate, they just
want to get their money back.
So if you have a decent amount of equity built up and then you start
missing payments because you don't have any liquidity, 'cause you
put it all into paying down your mortgage, you might actually be
in a worse position with the bank.
It's an easier decision for them to just fire sale the
house and get their money back.
So it's a little bit counterintuitive, but paying off your house, the more it's paid
off, actually probably the worst position you're in to negotiate with the bank.
So.
What's, what's a better scenario?
Is it better to have the ability to make a payment if you're, if you are
having trouble and might miss one where you have some cash to fall back
on and actually make that payment?
Or is it better to lock all your money away in the walls of the house?
And then if you have trouble making a payment, now you're
subject to the whims of the bank?
I would argue that you'd be in a much better position.
If you're highly liquid and you come across a period of time when you're having
trouble making your mortgage payment, you can fall back on your cash value,
cover yourself to make those mortgage payments, and then you can pay your policy
back and never having lost the growth on that cash value all along the way.
Alright.
Now let's look at a different type of debt.
Mortgage isn't the only type of debt people make additional payments to.
If you have a bunch of high interest credit card debt, that's something that
people also make additional payments to.
So if you're doing something like a debt snowball, for example, and you've
got high interest debt that you're paying off and you're making additional
payments towards that debt to pay it off faster, that's a valid strategy.
But it may not be the only strategy.
So let's take a look at this credit card debt, and let's say
you've got credit card debt at 20%.
Every time you make additional payments towards paying down that debt,
that's basically like a 20% return.
But the problem with paying off debt and making additional payments over a
long period of time is that you're still negatively affecting your liquidity
and negatively affecting the control you have over your financial life.
It is more efficient to pay debt directly, especially if it's high interest debt.
However, you can also look at using whole life insurance as an intermediate step.
It is slightly less efficient, but it introduces an element of liquidity
and control back into your life,
and it's still a massive, massive improvement over paying 20% debt.
What you could do is instead of making additional payments towards your credit
cards, you could use that cash flow to fund a life insurance policy and
then use the policy loan provision to take a policy loan, let's call it a
5% policy loan, to pay off 20% debt.
That's a massive improvement on what's going on, and by the time you're paying
off all that debt, including your policy loan, you now at the end of all that, you
have a bunch of cash that you're sitting on rather than prioritizing paying all
this debt, and by the time you're done paying off of all the debt, you don't have
anything and you're starting from zero.
I think that's the number one problem with some of these debt payoff strategies.
You don't have anything at the end of it.
A lot of times if one thing goes wrong, you just end up
going back into debt again.
By using whole life insurance as a strategy and using policy loans to pay
off high interest debt, you could stop funneling money into the extra payments on
your credit card, because once that money goes to them, it's up to them whether
they want to keep you as a customer.
I'll use myself as an example.
Again.
I was in college and walked by one of those little sign up tables where they're
happy to sign up college kids with no credit history into a credit card.
And I had this credit card for years, by the way, and I had a
balance on it for a long time.
And then I paid it off and then I'll go back to my DotCom timeframe, because
of all that stuff that I mentioned during the DotCom bust, I racked up a
little bit of a balance on it again, and you know, so anyway, I've been
paying this thing off for years and I finally worked it down to zero balance.
Then something else happened because I prioritized paying off the credit card.
I didn't have any cash to roll with the punches, and I put a balance back
on it again, and I paid it off again.
And then they canceled my card.
And what happened was I prioritized paying off that card and when they
canceled it, it was no longer a place where I could go to access cash because
I didn't have control over that source.
Paying that off actually hurt me cashflow wise because I wanted to pay it off
and stop paying the interest, thinking, okay, I'll pay off the card and I'll
still have that credit just in case I needed, you know, if anything happened.
But then they canceled the card, closed my account as, so I lost that source
of liquidity, which was not good for me at that particular stage in life.
So instead of sending money to the credit card companies where they can
just close your account if they want to, why not send those extra payments that
you don't have to make over and above the minimum payment and send it to whole
life insurance where you have control.
Then we just use policy loans to strategically pay those credit cards down.
I have a whole system and software that I use to help map this out.
If it's ever of interest to you, get ahold of me and we can map out
an entire debt payback strategy using whole life insurance to get
you out of high interest debt.
Here's another place where we can free up some cash flow.
529 plans.
People are putting money into these college savings plans with all these
restrictions on how the money can be used.
What if your kid doesn't go to college?
What if they get a scholarship?
What if they need money for something else be, you know, when they're 18 years old?
Again, that's cashflow that's going away from you and
there's strings attached to it.
Instead, you could fund a whole life insurance policy, and if you need
the money for college, it's there.
If you don't, you still have that capital for whatever you want to spend it on.
You're not subject to other people's rules for all that money that you saved up.
So there's your college savings.
That was a quick one.
Here's another angle.
Let's talk about property taxes.
If you have annual property taxes due, and you're saving money for
those property taxes anyway, you could divert that cash flow from your
property tax savings and use it to pay premium on your life insurance policy.
Then at the end of the year, you use a policy loan to pay your property taxes.
Instead of the next year, just saving up all over again only to then just spend it.
You can save up again by paying off the loan you created to pay your
property taxes the year before.
Now you've freed up that capital all over again to pay your next property tax bill.
What's happening is your cash value is going to continue growing and
compounding on the total amount.
Meanwhile, you're only borrowing the amount that your
property tax is every year.
So over a period of time, the growth of your policy starts to outpace what
you're using in policy loan interest every year to pay your property taxes.
This can be an easy way to find premium dollars that can be used to better
capitalize your system over and above just saving up and spending every single year.
This last piece that I'm going to go over can be super powerful for anybody.
Let's say there's nothing you can eke out right now.
You're not contributing to a 401k, you're not making additional payments
to your mortgage or your credit card.
You're not contributing to a 529 plan.
You're not paying your property taxes, or I should say you don't have a
property tax bill that you have to pay.
You wanna pay your property taxes.
Let's just say you're really just maxed out in terms of cash flow.
Well, there is one thing that we can count on, and that's typically everyone's
income will increase over time.
So at the very least, most people will at least get a cost of living wage increase.
But even more likely, of course, promotions will happen.
You'll move on to new companies, maybe you'll even start a business and
income will tend to grow over time.
So even if we don't necessarily have anything we can do today to really
start diverting cash flow to a place where you know it can do more for us,
we can actually still plan for tomorrow.
We can start keeping track of our cash flow and more importantly,
start keeping track of the growth of our expenses in the future.
The typical way that people try to address cash flow or a cash flow
crunch, regardless of your income bracket is a lot of times we're taught
to go on a financial diet, so to speak, in the form of a budget where you
sacrifice your quality of life today.
And if you're living paycheck to paycheck right now or struggling to really
save, it's really not a great option.
It really just ends up being kind of a short term thing where you try to
do it and then something comes up and you're not able to do it anymore and
you're just kind of on this cycle and you usually end up giving up and you
end up just being a bad spender anyway.
Your standard of living right now is your standard of living.
So a better way to do this is not to try to change anything today.
If you can change what you're doing today, that's great, but if you can't, what
we want to do is make sure that we're capturing the difference in the future.
What normally happens to people is as their income increases, their expenses
tend to increase at the exact same rate.
And the difference between their income and their expenses never changes.
And what we wanna do is we wanna try to capture the
savings inside that difference.
But if you have no difference right now, meaning you can't save
any money, it's highly likely that that will continue into the future.
And this is why I've introduced the cashflow management system
called Currence into my practice.
And what Currence does is it allows regular people like
you and me to consciously save rather than unconsciously spend.
And what we're able to do by using Currence is slow the increase of our
expenses in the future without making any changes to our lifestyle today.
We don't have to slash our costs today, and we don't have to eliminate the
growth of our expenses, but we just want to slow it down and not let it
grow at the same rate as our income.
By doing this, we can redirect freed up money so that we can start deploying
that money in ways that create more income for us, and then it just builds
and builds and builds from there.
What ends up happening is when people implement Currence in their life, they
find that they're saving like 300 to 600% more than the average American.
And by being able to save more, then we can buy more growth
assets, which creates more income.
And even though the percentage of our spending, is less than what
we originally had, the dollars that they can spend because they have
more income grows significantly.
So their lifestyle actually improves.
Their spending rate might be less, but their spending dollars are more
because they're saving way more and now and they're creating more income.
Everything improves because everything starts from your cash flow.
This is the thing we want to do.
We wanna start looking at processes, not necessarily investments or
products or things like that.
We want to operate with a process in mind and not just chase the next investment.
Once we have the process in place, it doesn't matter as much what the
individual investments are because as Nelson Nash said in his book, Becoming
Your Own Banker, when you have cash opportunities have a way of finding you.
So rather than just searching for that next thing you can just put
money into without thinking about it, if you have money, you'll almost
definitely come across opportunities that you don't even really have to try.
All right.
I hope this really helped you guys.
If you find these principles are resonating with you and you'd like
to learn more about how they might apply in your life, specifically,
schedule a free consultation with me.
I'll take you through a short assessment and we can see how The Infinite Banking
Concept might benefit you, and if so, what the next best step you can take.
See you on the next one.