One of the keys to Indestructible Wealth that you may have never considered: making money in two places at the same time. Sounds too good to be true, right? The key to this is going to surprise you. Don’t miss this episode featuring Rachel Marshall from The Money Advantage.
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How To Make Money In Two (or more) Places At Once. Featuring Rachel Marshall From The Money Advantage
I have a very special guest, Rachel Marshall. Thank you so much for joining us, Rachel. It’s a pleasure to have you on the show.
Jack, thanks so much. It’s my pleasure to join you. Thank you so much for inviting me.
I’m excited to dive into this concept because, in my opinion, this is the foundation of the entire wealth-building plan that I train and teach adamantly to all of my readers that they need to be building indestructible wealth. To have indestructible wealth, if they’re missing this piece of the entire process, I don’t think that they can say no matter how much wealth they build that they truly have indestructible wealth. I’m excited to dive in. Talk to us a little bit about your journey. How did you get into infinite banking? We’ll then take it from there.
I am going to come back to that indestructible word because I love your mantra, and this is something that we always say. If you have any life event that can come in and make you poor or steal the wealth that you’ve built, it’s not wealth at all. I love how like-minded we are in this idea that you don’t just want to create a lot of money, but you want a lot of control, cashflow, and protection in your life.
Let me rewind a little bit. Like you and your readers as well, I came across Robert Kiyosaki back in the eighth grade. I read Rich Dad Poor Dad and came up with the idea that I wanted to be in business and investments, things that produce cashflow for me. Fast forward, my husband and I are dating. We’re talking about, “Let’s start a business someday. What in the world is that going to look like? We don’t have any idea.”
Fast forward a little more, we got married and ended up going to school together. We had kids a little bit later, and I quit my job working after college. We were in a position where we are down an income, my income. We have the baby. I became a stay-at-home mom. We said, “It is the perfect time to start a business.” Financially, we had been in a position where we’d been pretty good savers for a long time and we had first saved in bank accounts. We were getting barely anything in our bank accounts.
Most people are saying, “Where else would you save?”
That’s the place to put your cash. We started getting almost scarcity-minded and thinking, “What happens if the dollar collapses?” Mind you, this is 2008. We’re going into a timeframe where we’re saying, “The world is going through a major upheaval. How can we be safe and protected?” We started putting our cash into gold and silver, which at the time seemed like a good long-term store of value but the problem was we got to a position where we said, “We’re probably putting about half of our income into gold and silver.”
We’re then at a position where we are starting a business. We’re down that income. We need the cash. Gold and silver are cut in half of the value that we purchased them at. We hadn’t intended on using this cash. The challenge that we came up against very quickly was around the 2012 timeframe, as we were getting our business off the ground. We realized we need liquidity.
You couldn’t sell your gold and silver because it was half the value of what you purchased them at. You don’t want to take a 50% loss and it’s not that easy to convert it to cash.
It’s not. You would think this is real money. It is real money but a long-term store of value, which is why we had it in the first place. We did have to sell the loss. It was painful. We took the loss because we needed cash to start the business. The lesson we learned super quickly was we have to as business owners and investors have access to cash. That’s what liquidity means. How quickly can you turn this into cash? With gold and silver, sure you can sell through various vendors where you can sell to somebody who has a local market for buying and selling gold and silver but you’re usually going to take a loss. There’s also going to be a premium that you take a loss on when you sell it. It was painful for us.We have to, as business owners and investors, have access to cash. That's what liquidity means. Click To Tweet
What we discovered in that timeframe is we said, “We should have been thinking differently about where to store this cash.” We wanted to have savings and money that we could rely on if we had an emergency, investment opportunity or a business that we wanted to start but we needed a better place. That led us to look at high cash value life insurance, which you’re probably familiar with the term infinite banking, this ability to use a whole life insurance policy as savings or a place to store your savings.
We looked at that and said, “We should have been funding whole life insurance all along and then investing in other things.” We learned the lesson through the mistake. That’s what led us into the business. We got a life insurance policy and then we said, “We need to be able to help more people understand the value of using this tremendously powerful tool. That’s what led us into the business of helping people keep and control more of their money.
When most people think of storing money are going to think of their bank account. What do you think is happening in society? These policies have been around for 100, 150 to 200 years.
Usually about 170 of most of them.
If you pulled 100 people, probably 1 out of 100 would understand the concept that there is an alternative way to store cash and get 20 times higher interest rates than what you would get in a normal bank or maybe more than 20 times. I don’t even know how you even do the math when you’re getting 0.01% in your normal bank account. I got $0.56, which was awesome. I don’t know if $100,000 or something that’s in the bank. What’s happening? Why is there so little awareness?
It’s unfortunate that people have been almost blindsided by this misunderstanding of what life insurance is about. We hear the term life insurance. We think, “That’s for me to have a death benefit paid to my beneficiaries when I die.” That’s where our knowledge stops. Unfortunately, there’s a lot of misinformation about whole life insurance that causes people to say, “That’s a bad investment. I don’t want to give up liquidity in the early years on my cash. I’ve heard that it’s expensive.”
That’s where the information stops. We have these things that prevent us from digging deeper and figuring out if this is something that we want to use for ourselves. Life insurance has been around for a long time. Most of the companies that we use have been around for 170 years if you go back to before the Great Depression. They have consistently paid dividends. They’ve paid interest over that long span of time.
You look at most life insurance companies stay standing. The failure rate of a life insurance company is very low, even compared to a bank. When you hear that you can get better returns in a whole life insurance policy when it’s designed correctly, you have safety where you’re not going to lose money and you have access to your cash value, that’s attractive. That was why we started using life insurance. It was almost this bulletproof place to put the cash which we got much better safety, liquidity and growth. The unfortunate thing is most people have no idea that it can be such a powerful tool and yet if you go back before the 401(k) and when people were using the tools that they have now, life insurance was the place where people saved their money.
You also had a health scare years ago. That even further cemented your belief down to your very core. It is so important for people to have. What happened?
Thank you for asking about that, Jack. I stood you up for a phone call that we had during that time when I was in the hospital.
That was one time when I would say all excuses are not equal. That was fine.
We had the whole life insurance. What was interesting is my husband and I have gone through an evolution in our understanding of life insurance even. If we back up to college, we had about a $50,000 policy that was a term policy on him. We said, “That’s enough life insurance. That’s pretty much all we need and that’ll be enough to bury him. I’m not planning on working so I don’t need life insurance on me. I’m not a breadwinner.” That was our limited knowledge at that time. After we found out that we needed more liquidity, we said, “How much cash can we put into our whole life that we can support with our income?”
We did as much whole life insurance as we could at that time. That was years ago. We had another evolution and said, “It’s not just about how much cash value we can grow and how much savings we can put into life insurance. We also need as much death benefit as we can get.” The reasoning behind that was to say, “If something did happen to me or Lucas, how would we have as much death benefit as possible to be able to pay for our family to continue?” We put it in place as if it probably will never happen, especially when you’re young, healthy and everything looks great.
I was pregnant with my second daughter. I ended up in the hospital about ten days before I was due. We ended up finding out that she had concerns and we had to induce right away. That still wasn’t that big of a deal. We proceeded with the induction. Only afterward, my placenta would not detach, which led me into surgery, which caused me to hemorrhage. I went into a very severe condition that my blood was clotting throughout my body and losing the clotting factor it needed to be able to stop the bleeding.
My husband is getting reports after I’m in surgery that first, they can’t stop the bleeding. Second, they stop the bleeding but I’m in a worse situation. I’m unconscious for 45 minutes in ICU following the surgery. I had no idea. I was blissfully unaware at the time that I was very near death. There was about a 50% chance that I wouldn’t make it. If I did, I’d probably have long-term damage to my brain, kidneys and part tissue damage.
The crazy thing with that is Lucas is in the hospital room with our new baby daughter. I’m in surgery and he’s getting these reports that I may not make it. He is having to deal with that mortality, realizing that life is not certain and thinking, “I’m so glad that if Rachel doesn’t make it, we have the life insurance that would at least be that safety net to catch me and the kids so that I could figure out how in the world to navigate this situation that we never expected in our wildest dreams could happen to us.”
Thankfully, I’m here. My daughter is here. We all survived the story but I never was more convicted that I needed a death benefit, not just the cash value that I’m able to access, use, boost investment returns, do all these amazing things in my investment life and speed up time and money freedom. I was never more convicted that I also need as much death benefit as possible because that one event could have come in and stolen everything financially, emotionally and relationally from our family had we not had the life insurance in place.
I realized it wasn’t even just about the life insurance. It was also having the right estate plan in place. It was about also solidifying what you want your estate plan to do to carry on the death benefit in your family and what you want that to pay for so that your family can continue on the legacy that you’re building with your life. That’s why I’m writing a book about that as well. It’s so important to make sure that you’re thinking about the unknown and being in a place of indestructibility.
I get chills hearing that story again. That was a very tough situation. It’s so crazy to think that somebody’s so young, energetic, full of life like you and healthy, that that could potentially happen. A 50/50 chance is crazy to think about. A lot of us think that nothing will ever happen to us. That’s not how it works.
I don’t want that to be a scare tactic. In all stretches of the imagination, what I think is important for someone to hear is that your life matters. It is extremely valuable to your family and to the impact that you’re leaving. If you want to create the biggest legacy that you can, then make sure that you plug all those leaks and possibilities of something coming in and destroying the wealth that you’re building. It’s important to think about how life insurance fits in, not only to speed up time and money freedom but also to pass on that legacy.
I’ve heard you talk about this a lot in your reports. You talk about this concept. How do you make money in two different places at the same time? That’s very intriguing. How could that happen? Tell us about that.
Sometimes it almost seems like something preposterous. We think, “I can use my money to pay. I can put a pool in the backyard or go on vacation. I can buy a dog for the kids or we can do this extra fun thing.” We don’t think about being able to do two things at the same time. We have this either-or mindset with money. Sometimes that comes from scarcity thinking that money is finite but sometimes it’s the reality that money is a limited resource in many ways and we can usually only use it for one thing.
What if you could use it for more than one thing at the same time? What if we could stack the use of that money and say, “It’s able to be used to pay for college, buy a home, pay a death benefit, buy a rental property, buy another rental property and invest in another business.” What’s interesting is that there’s usually an opportunity cost and you have to have the trade-off. However, when you use whole life insurance, you killed 2 birds with 1 stone. You get your money to work in two places at the same time.
I like to call this the asset. If you will entertain me for a moment, I will tell you that normally, people think I can put my money into savings or investments. If I start having the saving or investment conversation, most people will say, “I want to invest because I get better returns in my investments. I don’t want to bother with saving because I don’t get any return there and it seems like I’m putting my money to rest and out of commission. It’s like soldiers that are sleeping in my Army. It seems like it’s doing nothing for me.”
The necessary evil, if you will, is to say, “Let me go invest this money. Even though there’s a possible risk of losing that money, I don’t want to set it on the sidelines.” However, it’s not about saying, “I can save or invest.” You can do both at the same time, and here’s how. When you put money into a cash-value life insurance policy, and we can talk about all the specifications later or you can get the guide and find out more details that way if you’re interested in finding out more.
They have to be properly structured in what you’re talking about doing.
I’ll share a very brief overview. It needs to be with a mutual company because that’s how you get paid dividends. It needs to be a specially designed whole life insurance policy, not any other kind of policy, universal, variable universal or term life insurance. This is a whole life insurance policy with high cash value and dividend-paying with a mutual company.
This is a life insurance policy that has a death benefit that will pay out to your kids, grandkids, wife or whomever you name as a beneficiary when you pass away. Also, it builds cash value inside the policy. The cash value is important because this is like your savings account, for lack of a better word. This is comparable to cash savings. This is not an investment. This is where your money is safe. It’s not going to drop in value. It’s liquid because you can access it and it’s growing better than bank rates.
We have this money growing in our cash value. What is interesting is that while it’s growing in my savings tool of life insurance, I can also use that money somewhere else. What do I mean by that? Here I’m putting my money into the life insurance policy and it’s growing in the life insurance policy. I could sit it on the shelf, keep paying my premiums and not do anything with that policy. It’s still going to perform well for me. I’m still going to have this cash value growing and the death benefit. I can certainly have it as this set-it-and-forget-it asset.
I would recommend driving that asset around and using it as much as possible. Here’s how you can use it. There are two ways. One, you can withdraw your cash value. We don’t recommend that because it’s not going to be as advantageous for you but if you borrow against it, you are able to borrow against your cash value and put dollars to work in another asset. Here’s how it works.
I’ve got my cash value growing here with dividends and interest. I’m going to take a policy loan. This loan is cool because it is guaranteed contractually to be available to you as a policy owner so you do not have to qualify or tell them, “Here’s what I’m going to use the money for. Here’s how I know I’m going to be able to pay you back. Here’s my creditworthiness.” You don’t need any of that. No paperwork except for, “This is how much cash value I have. Here’s how much I want. Please send me a check.” They say, “Yes, sir. Yes, ma’am. I will send you the check.” You then get your check.
My experience was I’d made a phone call and had the money in about 4 or 5 business days in a wire.
That’s about right. They’re usually going to deposit that straight into your bank account or they’ll send you a check depending on how you set it up. 4 or 5 days is about exactly what we’re seeing with our experience and clients as well. They’re contractually guaranteed to give you the money. Are they giving you your money? This is the big question. If they gave you your cash, we’d be reducing the cash value over here and putting the money to work over here in an investment but the cool thing is they’re not doing that.
They’re leaving your full cash value intact, collateralizing it and putting a lien against your cash value. It’s the same thing as a secured line of credit, a secured loan or something where you have this collateral backing the loan. It’s going to give you a better interest rate and it means your cash keeps growing the whole time. Dividends and interest on all of your cash keep growing so it does not interrupt the compounding. What happens is the life insurance company gives you their money and you put their money or OPM, Other People’s Money, to work in another asset and get your returns over in the investment too.With a life insurance policy, the life insurance company gives you their money, and you can put their or other people's money to work on another asset and get your returns over in the investment. Click To Tweet
I had a hard time wrapping my brain around that they would loan me the money out against the policy. Why would they do this? It doesn’t make sense. Is it another way to think of it as, “I own my house. I’ve got $100,000 in equity. I pull out a HELOC, Home Equity Line Of Credit?” The bank is collateral with my house. They give me $50,000 in cash so I pay an interest rate on that note. Is that exactly pretty similar?
Very. That is the analogy that we typically use because it’s easy to think about, “I’ve got $200,000 of equity in my house. I’m going to get a HELOC or a home equity loan and borrow $100,000 of that $200,000. Yet, that doesn’t drop my property value. My property value is still intact in the house.”
“My property can continue to appreciate, especially in the state market.” You didn’t interrupt the growth of the actual asset because you still own the asset.
Here is where it’s different though. In a home situation, if you think about where is your money sitting, I would say it’s within the four walls of your house. It’s the easiest way for me to conceptualize where is my actual cash. When I want to access that cash, say I’ve been diligent, I’ve made all my payments on time, I’ve even sent in extra payments and then paying twice a month so that I can pay that down quicker and build my equity faster. Say I only have two payments left and I’m almost fully paid off on my house. The problem is I still have to qualify to get that home equity line of credit or home equity loan. I have to go to the bank and prove to them that I’m creditworthy to get my money.
The problem is I’ve made all these extra payments. I lose my job. This is not a hypothetical situation. We’ve shared on our podcast as well, The Money Advantage, that this happened to a good client friend of ours as well and they were making house payments very diligently and lost their job. The bank said, “Sorry, we’re not going to give you access to your home equity because you’re not going to be able to repay us. We don’t trust that you’re going to be able to do that. You’re not credit-worthy at this time.”
They had to default on other obligations they had. One was to pay for college for a child and the other was to pay for a wedding for the child and then another child. It was a hard situation that they went through. Just because you have home equity doesn’t mean you’re guaranteed to access that capital. The other thing is it’s great for people who have their money in home equity because the value is rising.
What about if the housing market did crash? You can lose the value of that cash that you have to borrow against. In a life insurance policy, you cannot lose value. Whatever your cash value is stated at a given point in time, you can never drop in value. When a dividend and interest is added, that sets a new floor and your cash value cannot drop below that in the future. You’re also guaranteed by that contractual guarantee to policy owners that you can access the capital.
No matter what happens in the market with interest rates and asset prices dropping or rising, it doesn’t matter. Your policy will never drop in value. It’s indestructible.
We could go all over the place with this conversation but I’ll keep it pretty simple. If you look at a policy illustration starting now and you say, “What are my numbers going to look like twenty years from now,” that illustration can only make a projection based on today’s dividend rates and interest rates. It says, “We think that if today’s dividend amount is paid out every single year for the next 20 years, here’s what you’re going to have in cash value at the end of 20 years.”
The challenge is we’re in a low dividend rate environment because dividends are tied to the bond market, which is interest-rate driven. If we look at that, we could say, “We’re in the toilet or basement of what dividends could look like. If you look back twenty years ago, dividends were much higher. Where are they going to go in the future? I don’t know. Where are interest rates and the bond rate going to go? I expect up in the future that it would drive up the dividend rates inside a policy, which would in turn increase the yield and rate of return that you get inside a life insurance policy.
They can’t go any further down. Interest rates are almost zero. It can go to a negative interest rate environment. The chances of that aren’t too good. They could only go up over the next decade and beyond. You’re saying that the performance of a high cash value whole life policy is at a historical low and even then, felt pretty good.
If you look at an illustration or a projection of what it could do for you if you’re starting a brand new policy, it’s possible that you could have even higher cash value rates than what is shown in the policy due to that very fact.
To dive back into a point you made, I don’t know that we drew this out. I can borrow against my policy differently than I borrow against my home value. What happens if I borrow money and I can’t pay it back? Do I default? Do I lose my whole policy and everything I’ve paid in? That’s what would happen to my house. I default on and I’d lose the title and the ownership of the entire asset.
It’s super important to know what’s happening with this policy so you can make good decisions too. When you take a loan, we always suggest having a payback schedule in your mind that you are personally committing to. Let’s say I have $100,000 of the cash value in my policy and I want to go invest $75,000 and get into multifamily housing investment. Jack, how many properties would that purchase? Is it three properties?
You need about 25% down. If you take $75,000 times 4, you could get $300,000 worth of single-family homes.
Say that’s what we’re going to do. I’ve got $100,000 of cash, take $75,000 out and leave some inside the policy. I could go almost all the way up to see $98,000 in cash that I want to borrow against but I want to show you something interesting. With the $75,000 that I’m borrowing against my cash, all of my $100,000 keeps growing. $75,000 is what I pull against the policy. I’m not taking it out. I’m taking it against the policy. I’m putting that to work and putting a down payment on three different properties.
Say I plan to grow one of those properties for appreciation and flip that property in three years. I don’t have to repay anything on that portion of the loan. I can wait and pay it all back at once, 3 years from now or 5 years from now. Say I expect two of the properties to cashflow and say $1,000 a month which I’m going to earn in cashflow. I could use that $1,000 to pay back my loan, which then reduces the lien and frees up the full cash value like a line of credit again to be able to use for something else.
When you have an outstanding loan, it will accrue interest. If I had my $75,000 loan and I left it outstanding for 1 year, 2 years or 3 years, that’s going to accrue some interest and it’s going to be added to the balance of the loan. Let’s say three years from now, I haven’t paid anything back or say it’s 5 years from now and it’s maybe an $80,000 lien I have against my cash value. At the same time, the dividends in interest have raised the total value and it’s no longer $100,000. It’s maybe 140,000 that I have inside the policy of cash value. While the growth of the policy is going up on top, my loan is continuing to grow.
If you had a situation where you took a max loan, you never repaid it and the growth of your interest on the loan exceeded your total cash value, you could come to a situation where the policy is no longer stable and the policy would collapse. We don’t recommend being in that position. However, what happens is when you put a policy loan in place, you’ll get a letter from the company saying, “Make sure you make your policy loan repayments. The policy loan interest is due. You don’t have to make your payment but you don’t want to collapse the policy either.” You have multiple options with that. We have many episodes on this as well.
If somebody took a maximum loan and then came into financial trouble and they couldn’t repay the loan and maybe they couldn’t make their premium payments either, we have options as well to look at saying, “Can you pay from policy values? Can you pay by your dividends? Can you surrender a part of the cash value to pay for your loan interest or premium?” There are a lot of options. That’s why it’s flexible because you’re not stuck having to make a fixed loan repayment.
However, worst case scenario, if you’re in a position where you say, “I need to surrender this policy,” what they’re going to do is if the policy paid out, say to your heirs, you’re still going to get the full death benefit minus whatever your cash value outstanding loan is. Otherwise, they’re going to give you back what you’ve paid into the policy less your outstanding loan. It is a redeemable situation. You don’t want to collapse a policy but you do not have to pay back your loans on a fixed schedule.
Surrendering your policy is a huge mistake.
I would say it is. There are multiple reasons for that. The first is that when you first get into a policy, you’re going to have some upfront costs. That’s like capitalizing on any big venture. If you were going to start a real bank out in the world, you would have to put up a huge amount of capital and it would be illiquid for a long period. This is capitalizing something. You’re going to capitalize on a policy as well. Those costs are mostly front-loaded at the beginning of the policy. I love to talk about this because sometimes people get in thinking, “I’m going to build cash value. It’s going to be perfect and amazing.” It’s on day one and then they say, “What? I don’t have access to all of the premiums I put in my policy in the first year. This is a terrible investment.”
That was probably my biggest beef with the whole policy because I didn’t go on into it fully understanding. Also, the policy that I got wasn’t through you, unfortunately. If I could go back in time, but I didn’t know you at the time when I signed up for the policy, I would’ve gone through you. My policy the way it was designed wasn’t awful and you saw it but it didn’t give me enough liquidity coming out of the gate as fast as what was possible in these policies. Here I am. I put so much money in and I could draw some of it out but it wasn’t as much as I could have drawn out.
Let’s talk about that for a second. What happens is when you put the cash in, in the first year, you’re going to pay for most of the upfront costs like the cost of running the home office, the cost of keeping the lights on in the home office and paying for all of the staff that do the medical underwriting that manages the money at the insurance company. They have an entire staff in the insurance company itself that has to be paid for. They pay for people like myself who are educating people on how to use the policies in the form of commission. There are some costs that are coming out upfront.
The first year is the worst year for the policy performance because maybe you put in $10,000 in year 1. You’re probably going to have access to maybe $7,500 of that in the 1st year. Here’s what’s going to happen though. It’s like a slingshot. It pulls back in the 1st year and then by about year between 5 and 9. Usually about year 7 but it’s not a guarantee. It’s based on your age, underwriting status, smoking status and life habits. Generally, we see about in year seven that the policy cash value begins to exceed what you’ve paid in premiums.
The easiest way I can illustrate that is here’s your cash value, which is growing. It starts here and continues to grow. This is the premium you’ve paid in. Here’s the cash value you have in year one less than the premium that you paid in that first year. They do this curve. In about year seven, they break even. Your cash value continues to grow beyond the premiums that you pay. You always have more cash value than you’ve ever paid in premiums every single year going forward after that. Your death benefit will always be way more than you’ve ever paid in premiums.
When you think about that in the long-term like I’m investing for something that I want to have around for 25, 30, 40, to 50 years, or even to say I want this policy to pay out to my kids and I want my estate plan to direct that when they get the proceeds of my life insurance paid in trust, those proceeds will purchase as much whole life insurance as possible on that generation. You can continue that forward. You can ladder your life insurance policies and guarantee that if I, in my lifetime, put $1 million into life insurance premium but that pays out $3 million of death benefit and the next generation has $3 million that goes in the life insurance premiums but pays out $10 million in death benefit, you can continue this cycle of building long-term family wealth over generations.You can ladder your life insurance policies and continue this cycle of building long-term family wealth over generations. Click To Tweet
The payout is income tax-free but it’s always more than you paid in premium. If you can think long-term, it’s advantageous for you. The challenge is the person who says, “It’s not worth it to me because in that first year I had that backwards contraction like the slingshot. The cash value was a little less than what I paid in the premium. I can’t deal with that.” They will lose the tremendous benefit that is ahead of them if they can stay the course and see past that first year in 2 years.
We can talk about policy design and all the fancy things but what’s interesting is that in a life insurance policy, you’ve got base premium and paid-up additions if you break it down to the simplest terminology. What happens is most people are familiar with a whole life insurance policy that’s all based on premium, which takes a long time to build cash value and has a great death benefit and dividends but the cash value in the early years is low.
The trade-off is to say, “Let’s get a lot of paid-up additions,” which is a different kind of premium that gives you much less death benefit but gives you a lot of early cash value. If we think about this, the challenge with the super high paid-up edition policy is the 1st year and 2nd years are wonderful but the death benefit is lower, which means you’re going to have lower dividends. If you’re looking out that 20 and 30 years, you’re not going to be having as great of a long-term growth tool.
The key is to figure out how to balance the death benefit with the amount of liquidity or cash value that you have that you can then tap to borrow against to fund the unforeseen expenses that come up, buying your rental properties or all of that.
I couldn’t go through this show without giving proper credit to Nelson Nash, who is the Founder of the concept of infinite banking. He didn’t create it because people have been able to use whole life insurance for a very long time but he popularized the term infinite banking and the infinite banking concept. He started by discovering that he had access to cash inside of his whole life insurance policy which was the last resort for him when he couldn’t access capital any other way.
He realized that he was paying way higher rates to access another financing. He was tapped out of that resource and said, “I can access my money at a lower interest rate. Why in the world is not everyone doing this?” He started educating people on the ability to use their cash value life insurance. He starts with about a 30/70 policy design. This show is not the place to go into the technicalities but that’s a starting point that gives you that perfect balanced point between maximum early cash value and maximum long-term growth.
It’s not a perfect answer for every single situation. We work on a sliding scale from there based on the specific policy design or the specific policy that we’re working with, the person’s needs and their age. Some people need more. Some people need less. There’s a lot that goes into figuring out exactly where that balance point is for you. I would caution someone to not think short-term. The person who says, “I want as much cash value in year one as possible.” If that’s the only thing that they’re thinking of, they will be disappointed because if you design a policy just to accomplish that short-term objective, you’re going to lose out on the tremendous long-term advantage that you could have.
Most entrepreneurs need liquidity for their businesses so badly. I don’t even know what my tax liability’s going to be from year to year. I have no idea, plus or minus a wide range. I need my value intact in my policy. I need the casual value as much as possible to protect myself. I don’t want to go into debt to the IRS. I’ve seen that with my friends. That sets you behind. I want to make sure that I have enough of my policy. Should I forecast it wrong, I can always tap that. I can have my money in a few days and pay off my tax liability with no problems. That’s the thing. Entrepreneurs got to be careful not to try to tap the cash value too high but do it to the maximum of where it makes sense and they’re not cutting themselves off short.
That’s an interesting point that you make as well because it’s a fabulous way to think about paying for those big-ticket items. The real reason for that is if I can continue the growth of my cash inside the policy while I take a policy loan to pay my taxes, buy equipment in my business, go buy rental real estate or pay for an unforeseen emergency or an opportunity, I think of it as an emergency opportunity fund. It does both. That’s why I can use it for multiple things. Instead of saving up in my cash account and then taking the money out of my cash account, draining that down and then putting my money over into that big-ticket item, I’m being the bank.
This is what Nelson Nash talked about in his book, Becoming Your Own Banker. He said, “If you can use banking principles to keep your cash and keep control of that capital like in a whole life insurance policy, I keep the cash value intact and borrow against it, this money is continuing to grow for me, which means I can use all of the banking principles.” The bank keeps the cash as long as possible. They give up as little as possible to you. They go earn cashflow, arbitrage and interest with the cash that they’re controlling. They’re in a position of paying you a tiny little interest rate while they can go make a lot more.
Instead of just being the customer, allowing the banking institutions to be very profitable, which they are, we can say, “How can I flip the table and step into their shoes to control the capital, earn interest, use arbitrage by paying something? I’m going to have to pay a policy loan to use my cash but how can I go earn more than that interest rate on the policy loan? How can I be in a position where I’m in control, not just giving up control to the banks?”
We’re going to have to have you back on the show. We certainly need to keep doing a deeper dive into this. Can this be considered a cashflow-producing asset? You’ve talked a lot about how it kicks off interest and dividends.
We could take this anywhere with this particular comment, but I’m going to keep it nice, short and simple. I like to think of my life insurance policy as a garage. I think of it as a holding tank or a place to store my cash. Certainly, it is growing with interest and dividends but I think of that as growing my garage larger. You could take out your interest and dividends.
It could then be a cashflow-producing asset.
It could but what I like to do is keep them inside the policy. You could call it plowing it back in. My expectation is that I want the dividends and interest to grow my policy so that it grows my cash value and death benefit as much as possible. The cool thing is when I have a properly designed policy, it’s not only going to increase the cash value but it’s also going to keep increasing my death benefit over time. I have this powerful compound interest-producing asset that’s going to get better and better with time. I can use that to go invest in other cashflowing assets. If this is my garage, I can put my money in the garage and hold it there until I’m ready to go invest it.
I find the perfect investment. I borrow against the policy. I put my money to work. It’s like driving the car out of the garage. I’m using it for the purpose of making more money. I put it to work in this other investment and then I repay my policy loan. I’m able to take the money out of the garage and drive it to another income-producing asset and back into the garage to repay that policy loan. I’m able to recycle that money over and over into multiple assets. I’m able to use the same money. Maybe it’s paid for one property and that money was repaid through cashflow on the property. I may be purchased multiple properties then and was able to continue to repay my loan. I pay for college for my kids. I pay for a move for my son or daughter and I put them in a house.
I’m able to use the same policy or group of policies. Many times, people will like the concept enough that they want to continue adding on policies and form a family of infinite banking policies. What happens is I’m able to do more in my external investments than if I just put the money in the bank, took it out of the bank, paid cash for the investment and earned the interest and returns only in the cashflowing asset. The way I like to explain this is that if I can use the and asset and infinite banking to get my money working in two places at the same time, that boosts the returns that I’m earning in the cashflowing asset.
It’s like a turbo charge if you will. It’s the extra step that you can put your money into without any extra capital and risk that makes your investments perform that much better. We talk all about this in our guide called the Quick and Easy Infinite Banking Guide for Investors. It talks exactly about how that happens. We use a very simple example of one cashflowing rental real estate property. It showed how the profits were doubled by using the and asset and life insurance first, rather than just putting the money straight into the investment.
That tells me I can supercharge what I’m doing with my cashflowing assets by using this life insurance that most people would overlook, “That’s a boring asset. That’s way too conservative.” “That’s a bad investment,” is what most people would say. Meanwhile, getting all of my other financial assets in my life to perform way better.
If you look at it comparative to say cryptocurrency, you mean it’s the most boring thing on the planet. Cryptocurrency like mine goes up. It was up to 300%. However, it works until it doesn’t. Elon Musk puts out one tweet and the crypto markets crash 20% overnight. What I’m seriously considering is if it drops anymore. I’m going to call up my infinite banker, pull a loan against my whole life policy, use those funds and buy crypto on a massive discount sale.
That’s what people have to be thinking about too. You have this store of value that’s sitting there in your ever-widening bigger garage but you can wait for things to go on sale. The money is continually growing at a safe and steady amount. If something goes massively on sale, tap it, borrow against it, have your money in five days and you can buy awesome high-quality assets that for whatever reason went irrationally on sale.
I don’t remember who said that you can buy when there’s blood in the street. It was this idea that when there is a blood bath and everyone is fleeing an asset because it’s going on sale and it’s losing money, you’re the one with cash that is positioned to be able to make an educated decision to invest in something that everyone else is leaving. It’s very interesting that the people with cash are always going to win. It’s interesting because most people discount the idea of saying, “I have cash.” They say, “I want to invest straight away.” We use that word in our house. I know it’s not a real word.When everyone is fleeing an asset because it's going on sale and it's losing money, you're the one with cash that is positioned to make an educated decision to invest in something that everyone else is leaving. Click To Tweet
They don’t want cash because it’s being devalued by how much money printing is going on. It’s not earning any interest. They’re not thinking about putting their cash in a different place that does grow, gets dividends, gets interest and that can still be tapped and borrowed against tax-free to buy the stuff when there’s blood in the streets.
We didn’t mention this before but if you look at the growth rate on a life insurance policy and if we say in 30 years, what would it have taken in an after-tax interest rate to earn this cash value based on how much we’re paying in? We’re usually seeing that’s between about a 3% and 5% rate of return and that is tax-free. You would need to be getting probably 4% to 8% on your taxable accounts to compete with that. That’s almost a poor comparison because it makes somebody automatically think, “I should compare this to an investment when life insurance is not an investment.” I’d like to share that because it is helpful to realize you’re earning a lot better than bank rates on cash that’s comparable to what it would be doing in a bank account, sitting for you being accessible, liquid and not dropping in value.
Rachel, how do people get ahold of you if they say, “This makes sense, I want to learn more, book a call or strategize how to get this going?” What do they do?
You can head on over to TheMoneyAdvantage.com. We have everything that you need right there on our homepage. We do a lot more than just infinite banking but that is a big part of what we do because most of our clients want that protection, safety and liquidity so that they can use it to maximize their investing strategy. If you go to TheMoneyAdvantage.com, you can do multiple things right there.
You can get our quick and easy guide that explains more about infinite banking and that’s free. There’s a booklet that you can download along with a quick video course to get your bearings in this idea of what even is infinite banking, how it works and how could it work for me. If you have heard enough already and you’re ready to jump straight into a call with our advisors, you can do that as well. There’s another button right on our homepage and you can jump over to our advisor calendar.
This is a consultation for anyone who is saying, “What I’m doing is working, but it’s not working as well as I need it to work for me. It’s not doing as much as I’d hoped.” If you’re sitting there saying, “I’m saving a lot. I have good savings habits, but they’re not paying off for me the way that I want them to. I want to know that I’m on track. For whatever I want to create in the future, I want to know that I’m doing the best that I can with my money.” You can hop on to our advisor calendar and do that straight through our website at TheMoneyAdvantage.com. We also do have a course if you wanted to deep dive into infinite banking. We have also a podcast, The Money Advantage Podcast, that you can find on the same website. Everything is that one hub right there.
She’s got over 180 episodes. That’s what you produced so far. Congrats on your incredible consistency and success on your show. That’s no easy feat. It’s remarkable.
Everybody, that’s Rachel Marshall with The Money Advantage. Make sure to check out her website, get those resources, book or call and get this going. We’re trying to create indestructible wealth. In my opinion, this is the most important foundational piece of the show. Have a great day.
Thank you, Jack.
That’s a wrap for this episode of the show. Before we part ways, I want to help you take advantage of two incredible tax-saving strategies that could help you save a lot of money. All you have to do is leave me a five-star review if I’ve earned it, and comment on iTunes, Stitcher, or wherever platform. After you’ve done that simple step, email me a screenshot at [email protected], and I’ll send you everything you need to save money on your taxes for years to come.
If you’d like to dive deeper into your wealth-building strategy, check us out at MyIndestructibleWealth.com and follow along on social media. Also, please share this show with anyone who’s looking for guidance on their wealth-building journey. Until next time. Remember, our mission here is to help you make, keep and grow well so that you can enjoy and for years to come.
- Rachel Marshall
- Rich Dad Poor Dad
- The Money Advantage
- Nelson Nash
- Becoming Your Own Banker
- iTunes – Indestructible Wealth with Jack Gibson
- [email protected]
About Rachel Marshall
I help wealth creators build time and money freedom with cash flow strategies, privatized banking, and alternative investments so you never have to worry about running out of money. Through our family office model, we utilize strategies for cash flow, long-term tax reduction, estate and business legal planning, creative whole life insurance strategies (Privatized Banking), and alternative investments.