Many people, I find, are looking for a better place to put their money. However, as they learned through their Universal Life policy, there wasn’t as much reward as there was risk.

Cashing out a Universal Life policy is an option, however, there can be tax implications, and there may be better options.

Most likely, you were sold a Universal Life insurance policy because of the potential benefits; tax-free growth, tax-free retirement, guarantees, and death benefit.

However, what most people don’t know about is this…High Cash Value Whole Life insurance offers you the many of the same benefits without the risk.

The problem with Universal Life insurance is the costs. The costs go up every year, regardless. This means your fees are always increasing, and if you don’t get enough growth out of the policy, your fees will eat up all of your cash value.

This is what many people are beginning to see happen inside their Universal Life policies. No growth with higher fees, meaning you have to pay more premium to maintain the policy.

Whole life fees do not change. You policy is guaranteed to grow, however, because it is whole life insurance and not term insurance (Universal Life policies use term insurance) you will have the policy for the rest of your life if you treat it correctly.

The best part is this: all that cash value you have built up inside your Universal Life policy can be transferred directly over to your whole life insurance policy, with no fees or taxes.

This money will immediately start growing and giving you benefits. The years you have spent building will not go to waste.

Also, your cash value will be immediately available for you to borrow against.

In a Whole Life insurance policy, you will see a steady growth with added tax and death benefits. Yet you won’t have to worry about your policy failing you as you get older. In fact, it will get better with time, offering you more insurance.

If you are looking to reduce the risk and hold onto the money inside your Universal Life policy, Whole Life insurance may provide you with a better all around solution.

Contact us if you want more information or help exchanging your Universal Life policy.

Aside from the obvious problems with the banking system today (look at what happened in Cyprus), people are looking for a better place to keep their cash savings.

Problems with Most Cash Savings Options

When looking at what to do with cash savings, we may go through a few options in our head. We need something liquid–in case we need the money immediately for an emergency, investment, or a business opportunity–and we also need to get our money working for us, getting a rate of return, because every day our money sits still is lost opportunity.

So, we look at a few options. We can look into CD’s-but we have no liquidity and lock our money up. We can look at buying bonds, which have more liquidity than CD’s, however rates are so low that it isn’t worth the long term risk for such meager profits.

Ok. I Hear You. But What Other Options Do I Have?

I’m really surprised most people are so extremely undereducated about permanent whole life insurance. I know you have probably heard a lot of things about why whole life insurance is bad, but hear me out and see if there is something you may not have known.

What do you want from your cash savings? Well, you want a place where you are going to be able to use your money if you need it, no matter what you want it for. You want a place where your money is going to grow, but you don’t have any risk at all of losing any of your money. Also, you want to earn a competitive interest rate. Well, right now permanent life insurance policies from a variety of insurance companies are earning around 5 percent, and that’s tax-free growth.

On top of this, the money inside your policy is buying you death benefit–so if you were to die, or when you die, the death benefit will transfer with no taxes to your heirs. Also, you can get some tax write offs for using money inside your life insurance policy for business or investment use. You can’t lose money, there are growth minimums, and guarantees associated with these policies.

Did I mention it’s buying you a death benefit. I know I did, but to reiterate, you could have your money sitting in a life insurance policy, and it may be producing enough insurance for you to get rid of your term insurance. As an added bonus.

Probably changes your perspective a little bit on whole life insurance. Still a bit leery? That’s not a bad thing, but maybe it’s time to do some more self education on what we call cash value life insurance. It has some major advantages, but not everything’s perfect.

Understand, these whole life policies aren’t just your run of the mill policies you buy from your insurance guy down the street. These have to be properly structured for cash value to be effective as a cash savings. We’ll take a look next at a few disadvantages, then we can go over why supposed radio and TV “gurus” are against whole life insurance.

The Disadvantages

On the downside, you can’t just throw in a lump sum like into a bank savings account. It does take a little bit of planning ahead to maximize the efficiency of these policies. Also, you aren’t going to have 100% of your money available to you in the first year, it takes some time to build up the cash values. However, I have found that a majority of people see the benefits of having a death benefit in exchange for the long term tax-free growth and guaranteed minimums.

But David Told Me Not To Buy Whole Life

There are a lot of people out there saying that life insurance is a bad investment. But, they are also telling you that the market is a good investment, and if you have your money sitting in a bank account then most likely you have some concerns about the market moving forward. They have told us all to buy term and invest the difference, but look how well that strategy has worked out for our retiring generation.

But, in reiteration. Whole life insurance, structured properly, is more like a high interest savings account. The money is accessible to put into investments, and then to put back into the whole life. This way, when you’re investments are producing, use your money. When they aren’t, your money is safe, secure, earning interest, and buying you a death benefit.

So, What Should I Do With My Cash Savings?

Permanent life insurance may be the best thing you never knew about. It doesn’t fit everyone, but I have found that many people wish they had heard these concepts years ago.

Watch our video about Whole Life Insurance as an investment, or get free PDF copies of our top recommended Cash Value Life Insurance books

It might be only a matter of time before we see things like Cyprus happen in other countries.

Of course they always say this could never happen in the United States, but the truth is we’ve got a serious debt crisis too.

In Case You Haven’t Heard…

If you woke up on Monday morning and had money in the Cyprus banking system, you found out that the banks were closed. You also found out that when they open there could be as much as a 10% tax put on your savings account.

If you had $100,000 saved, it would cost you $10,000 – this just by the mere fact that you had saved money in the Cyprus banking system.

That’s insane! And a perfect example of an overreaching government that has let spending run out of control.

What This Means To Us In America

Cyprus might seem like an extreme example, but we are certainly not moving away from that direction. For years I’ve heard all sorts of rumors as to what might happen here in the U.S. to satisfy the demand for our out of control spending. I’ve heard rumors of the government taking over 401k plans, adding an excise tax on retirement plans, and now the idea of taxing accounts at the bank – all in the name of getting out of debt.

The reality is we aren’t reducing spending. Instead, we seem to be looking for ways to tax more and more. Who knows, at this pace it could be our banks shutting down one day  and all of us getting hit with a brand new tax. Surprise!

The Case For Mutual Life Insurance Companies

If there were ever a case to be made for storing your large sums of money into Cash Value Whole Life insurance this is the one.

Mutual whole life insurance companies are not ran by nor guaranteed by the government. This is a group of like-minded individuals who own the polices and the cash value of the life insurance company – all for the mutual benefit of each other.

Given the choice between having my money in the potential control and confiscation of the government and held in a private mutual life insurance company owned by me and the other policy holders, I’ll take the latter any day of the week.

The reality is we are losing more and more of the one thing we need, control. We seem to always have less, and the government seems to always have more.

I personally don’t want to wake up one day to a new bank tax like we’ve seen in Cyprus, and I’m sure you don’t either. So whether it’s a mutual life insurance company, an offshore account, or anything thing else you can think of, it’s a strong hint we need to put ourselves in a little more control.

The idea of premium financing or premium funding is simple – typically a third party will loan the consumer funds to cover the premium for insurance they want to buy.  These loans are most easily compared to a variable rate loan with a set term.

You may be having some of the same thoughts I did when I first heard about this idea…”why the heck would anyone do this?!”

Before I get into an example let me point out that this strategy is one that is typically used by high net worth individuals that don’t want to liquidate current assets but still understand the need for coverage. They may also be dealing with large estates, businesses, or taxes.

So here’s a quick example: 

Meet Phil and Jill.  They’ve been married for 30 years, Phil is 60 and and Jill is 54 and their net worth is $50 million.  They look into getting a $5 million dollar life insurance policy only to find out that that the annual premium would come in around $223,000.  That’s a good chunk of change each year.

Enter Premium Financing.  Instead of paying $223,000 each year for the next 30 years until the policy is paid up they could borrow $1.7 million at 4.5% from a premium finance company.  This lump sum of money would allow them to pay for the life insurance in full today, known as a single premium insurance policy, have $6.7 million in coverage,  and pay $76,500 in interest each year to the premium finance company that lent them the money.

When Phil passes on, he will leave $6.7 million to his wife Jill. Jill can use $1.7 million to pay off the loan to the premium financing company and she will be left with the same $5 million death benefit. The benefit? They paid a fraction of the cost. They saved $146,500 a year in insurance premium… not bad.

 What to Look For

As with any financial strategy it’s vital that you work with a reputable company and representative.  As you do your due diligence make sure you find out the terms and conditions of the loan.  Often times the loan will have to be refinanced or renewed before the death of the insured – make sure you know if and when this will happen and what effect it could have on the overal outcome.  Ideally you would want a loan with a term that stretches well beyond your life expectancy.

Take interest rates into consideration.  Most premium finance loans are variable, which could be a good thing while rates are low, but if rates are expected to go up dramatically it could pose a problem to the strategy.

A good rule of thumb is to run from anyone who claims that premium financing is a way to obtain “free” insurance.

Is It For You?

Premium financing is a option for high net worth individuals that, for estate planning or business purposes, need substantial life insurance coverage.  The decision for most is whether or not they want to use current cash flow or liquidate assets to pay for the premiums.  If current cash flow and assets are better used elsewhere then premium financing could be a viable option.

Bring on your comments….what did you first think when you learned about premium financing?

Photo credit: flickr - SAN_DRINO

Quick note: with the sheer number of apps available it was impossible for me to cover everything – if you are in love with an app that isn’t listed please share it in the comments.

So here we go, the top 5 must have finance apps.

MoneyMobile

From the guys at Money Desktop comes this killer personal finance tracker app. If you haven’t heard, Money Desktop is revolutionizing online banking. For the most part they provide online banking solutions to banks and credit unions but they have a free personal finance app that allows you to manage all your accounts and create and manage budgets with their patent pending “bubble budgets”

Debt HD Free

This app has some handy features to help you pay off your debts in the most efficient way possible. It even helps you plan and see the results of using the snowball method to pay down your debts.

If you don’t have a Mint account, go get one. Now. This app automatically tracks everything on your phone: your bank accounts, credit cards, loans, spending, etc. It’s incredibly intuitive and it’s all in one place so you can easily see the big financial picture.

ShopSavvy

ShopSavvy will help you do just that, find the best deals on almost anything you’re shopping for. It’s simple, pull out your smartphone, scan the barcode of the item you want and let ShopSavvy tell you where to find the item for the cheapest price.

Along with local results you’ll get online results from places like overstock.com and buy.com so you can guarantee you’re getting the savviest deal.

Pageonce – Money & Bills

Simplicity rules with this finance app. Easily keep track of all your utility bills, cell phone bills, credit card bills, etc. Not to mention having all your accounts in one, easy to navigate location. Pageonce is definitely worth a look.

Shoeboxed

This is a handy little app that allows you to easily digitalize your receipts for effortless organization. This may be a good alternative for those of you that aren’t jumping to share all your bank account information with apps like Mint, etc. Instead of piling up receipts all month on your kitchen counter, use Shoeboxed to de-clutter.

So there you have it, 5 must have personal finance apps. I’m sure you can think of a few others that deserve to be on this list so let’s hear all about em.

I personally don’t have a 401k, and don’t really like them. There are a lot of 401k alternatives that to me make more sense. That being said, I want to show you how and why it might make sense to do what I call, the 401k early withdrawal technique… and yes, I just made that up.

There is nothing excessively tricky or special here, just a few gems most people are not aware of – including financial advisors. There are a few occasions where it might not only make sense to withdraw your 401k early (before age 59 1/2), but you can also avoid the penalty (typically 10%), normally associated with doing so.

401k Early Withdrawal Options

First and foremost, 401k plans typically have a wide variety of limitations, and each plan has its own rules. So first and foremost, if you want to withdraw money there are usually two barriers to doing so. And I don’t just mean without being penalized, I mean you cannot withdraw any 401k money period.

You have to fall into one of these two categories:

1. Your 401k provider will allow a transfer of 401k funds (few plans allow this).

2. You no longer work for the company that controls your 401k.

And the first is a rare category.

If you do fall into one of these categories, or plan to, here are your options for a 401k withdrawal.

401k Early Withdrawal – No Penalty - While few people have ever heard of this little gem, IRS Rule 72t allows you to take money out of your retirement account early, without penalty, before 59 1/2. The rule is withdrawals need to be systematic, or consistent. There are calculators you can use to determine how much you could withdraw from your 401k.

401k Full withdrawal – With Penalty – While taking a full withdrawal is not always the ideal situation, it can often make sense, and it’s all based on income. Here are two scenarios to think about.

1. If you have low income over the course of a year, you could take a 401k withdrawal, and the penalty plus the low tax bracket would be the similar to your working years. Meaning, if you drop from a 25% tax bracket to a 15% tax bracket and do a 401k withdrawal, then the penalty (10%) plus the tax bracket would equal the same tax bracket you were in before.

2. If you are young and have 401k money, you may save yourself taxes by withdrawing today and converting it to something tax free like a Roth IRA, a high cash value life insurance policy, or something like the Infinite Banking Strategy. The same math applies here. If you are in a 15% bracket today, but will be in a 33% bracket in retirement (or possibly more), then taking the penalty today on a 401k early withdrawal would ultimately save you down the road.

Now these are delicate… you’ll want to consult with a tax advisor, but just because that money is currently locked up, doesn’t mean you are without options.

Photo Credit: Flickr – Tax Credit

Now I don’t have anything against real estate agents by any means, they provide a great service to those who want to use them. The problem, however, is the fact that you are almost obligated to have one. And in case you don’t know, the typical fee to the seller’s agent and the buyer’s agent (combined) is typically around 6%. Thats a lot of money!

Now if you’ve read some of my stuff, you know I’ll go to great lengths to save money, like what I did to go on a free cruise compliments of my credit cards, or how I get free movie tickets, or a million other things I do. I don’t always consider myself extremely financially smart, but I do consider myself very financially creative. So as I was reading a recent post over at MyPersonalFinanceJourney.com (great blog by the way, you should check it out) about using a Realtor, I thought I’d share how I plan to sell my home without using a real estate agent.

How I Do The Agents Job

We moved into our home almost 2 years ago, and I remember very well wondering, “what am I paying this agent for?” I mean, we were even driving separate cars! Now technically I don’t pay her, it comes out of the seller’s pocket, which makes the decision of selling your home with or without an agent an even bigger decision.

She, our agent, was really nice, and great at what she does, but there just isn’t much she can do that I can’t. Now to be fair, it’s probably mostly my fault because I am very proactive, and like to deeply engage myself in order to feel good about the decision I ultimately make.

But the reality is this, I did the research, I found the areas we wanted to live, and I found the exact homes we wanted to look at. The only thing she was able to really help me with was opening the door to show the home.

(There is a caveat here. I already lived in the area we were looking to purchase a home. I would have needed a lot more help had we been moving into a city I had never before lived. I’m certain there are extenuating circumstances where a buyer’s agent can be very helpful and necessary.)

Now I know this is post is supposed to be about selling your home. I’m getting there…

You see, before even using a buyer’s agent I tried to simply contact the seller’s agent and hopefully save a little bit of money. Here’s what I discovered:

1. Some wouldn’t even talk to me. They would only talk to an agent.
2. Going directly to the seller’s agent didn’t mean commissions were saved, the seller’s agent just saw it as increased commissions because they wouldn’t have to split it with anyone else.

I ultimately was left with no choice but to work with an agent just to get through the door… for me this seems ridiculous. So if I can’t seem to buy a home without an agent, I do plan to sell one without one.

How I Plan to Sell My Home Without An Agent

About a year ago I was helping a neighbor move that had just sold his home. As we were talking, he mentioned he didn’t use an agent. This sparked my interest and I asked him a few more questions.

I soon found out he not only didn’t use an agent, but of the multiple times they’ve moved, he has NEVER used an agent.

That got me even more interested. I asked him to go in depth…

Here’s what he does. Instead of using an agent, he uses a Fee only listing service that, for around $200, will list your home on the MLS. Since my biggest concern would be exposure, this seemed like a great option.

After he gets it listed, he and his wife take the calls, show the home, and sign the purchase agreement. He still offers the buyer’s agent their half of the commission, and he keeps the rest. On a $300,000 home, thats about $9,000 more he gets to keep on the sale of his home. Not bad!

This has saved them thousands of dollars over the years as you can imagine. Money I, too, plan on saving.

Now this means you’ll have to do a little bit more leg work. You’ll have to show the home, take the calls, and you may even have to buy a sign (deal breaker?), but you’ll save a lot of money.

What do you think? Do you see yourself using a seller’s agent, or do you think you could do it on your own?

 Photo Credit: Flickr – Daniel Leininger

I’m sure we have all been impacted by job loss at some point or another, especially in the last few years.  While it isn’t exciting to lose a job, it’s just as much a part of the economy as graduating or getting a raise. A blow to the stomach yes (or slap on the cheek), but certainly a part of life.

In my career as someone that helps people with their finances, I’ve had multiple clients directly impacted by job loss, and from those experiences, I’d like to offer up a few of the positives that can come out of losing a job.

Personal and Career Growth

You’ve heard the stories. Everyday people find opportunity in despair. One of those individuals is Pat Flynn. If you don’t know Pat Flynn, he runs a very successful website called smartpassiveincome.com.

In short, Pat lost his job in 2008, started his own business, and became extremely successful. An interview with Pat tells his story of how losing his job was the greatest thing that could have happened to him. And he’s not alone. Thousands of businesses were born in difficult circumstances.

While starting a business isn’t the only option, you may find that your next career opportunity far exceeds your previous one. You may find better pay, better position, or better environment. A few positives to look for.

An Opportunity For More Control

One very attractive employee benefit most employers offer is the 401k plan (most obvious statement of this whole post). 401k plans have a wide range of limitations which vary from plan to plan, but there is one commonality among almost all of these plans… You cannot move money away from your provider.

In essence, you are forced to lock that money up inside that 401k plan.

When you lose your job however, the game changes. You unlock these ridiculous chains, and allow yourself to make some key financial decisions with this money. You are placed back in control.

Here are a few of the options you have:

IRA Rollover - an IRA Rollover allows you to keep the same tax deferred status of your 401k, but allows you to control where those funds go. Options like annuities, real estate, gold, silver, and other investment options become available in this scenario.

IRS Rule 72t (Early Systematic Withdrawal) - Rule 72t is a little gem that not a lot of people know about. It allows you to actually take out money from your retirement account before you turn 59 1/2.

The stipulation here is the withdrawals have to be systematic, and follow certain criteria. You can use this calculator to see what you could withdraw in your situation.

Full withdrawal - Most of you are probably familiar with the 10% penalty on early (before age 59 1/2) withdrawals from government qualified accounts (401k, IRA, etc). While its not an ideal situation to pay that penalty, extended unemployment can create a unique scenario where it can make sense.

In a scenario where you have low income over the course of a year, for example, withdrawing your money might be no different than taking that money as income later. Meaning, if I drop from a 28% tax bracket to a 15% tax bracket, then the penalty plus the tax bracket doesn’t feel any different than the brackets you would have otherwise been in.

Now keep in mind, withdrawing money is a delicate process. I would certainly recommend only doing this in close connection with your CPA.

In Summary

Job loss is not ideal, but it’s not the end of the world. Instead of being blind sided and depressed, I recommend stepping into your new situation, and face it head on. You might find a lot of positives you may not have otherwise found.

Photo Credit: Flickr: Khalilshah

I’m sure when you hear terms like “becoming your own bank”, you think about handling big bundles of money, or staring at four monitors while trading your stocks, but in fact it is quite the opposite. The concept of becoming your own bank, is to educate yourself on everything financial, which will not only save you money in the future, but also in the present.

Most people spend “extra” money, or more money than they need to, usually on things like:

1. Overpaying on your taxes – This is one of the most common occurrences. The tax code is so hard to understand that many people interpret it incorrectly, causing them to pay too much money in taxes!

2. Earning less interest – Without educating yourself on where to put your money, you may be holding your money in an account that produces barely any interest.

Most peoples’ financial strategies lack a key element, and that is control. Empowerment is the first step to financial freedom. To become educated is to become empowered. BecomingYourOwnBank.com could possibly be the difference between getting that tax refund, or getting…well…nothing!

Even simple tools like an Annuity Calculator for Structured Settlement Payments can help you determine what deal is the best for you financially. An Annuity Calculator for Structured Settlement Payments can help you manage a settlement and determine how you are going to spend your lump sum payment.

Many people have structured settlements and contemplate what option is best, whether they should take a lump sum or if they should take structured payments for a pre-determined amount of time. While everyone’s financial conditions are different, it is important to make sure that your settlement adjusts with inflation.

Becoming your own bank means one thing: controlling your financial freedom. If I told you that there was one place that you could go to right now, where all of this information on how to save money, and get back money is readily available…you would jump for a chance to get it, right? What if I told you that it was FREE!? BecomingYourOwnBank.com has put a lot of time into creating the “Infinite Banking Tool Kit”, which has all kinds of useful information, including everything from learning how to stop overpaying on your taxes, to making sure you’re making the most interest on your money.

Did you know that banks actually use your money in your bank accounts to make more money!? That’s right! Banks use your account balance to make market trades, and that gives them the ability to make money off of your money. By making sure that you get the highest interest rates possible, you can get your fair share of the profits!

Becoming financially secure carries many benefits, including the ability to live life stress free and with the freedom to do as you please. People that have structured settlements should definitely consider selling their annuity for a lump sum cash payment, because it will give them the money that they would need to either pay off past debt, or to make investments in their future. If you want to secure your financial future, and have cash on hand, (instead of only on paper), visit Einstein Structured Settlements and cash in on your annuity with the help of an expert factoring company in the settlement industry.

It’s that wonderful time of year, tax season! As we approach the beginning of March I thought it’d be a good idea to fill you in on some of the best ways to use the tax refund you’ll hopefully be receiving soon.

The average refund in 2012 was $2,803….not bad – maybe you plan on getting more or less but regardless, wouldn’t it be nice to do something really constructive with that money?

I’m sure some of you have already stopped reading because you plan on living large with your refund – maybe blowing it on a weekend getaway, or an all day shopping spree. That’s cool, enjoy yourself! For those of you that want to try something different here are few suggestions.

Get Your Refund Faster

Don’t procrastinate!  I probably sound like your high school chemistry teacher, but seriously, don’t wait to file your taxes.  Get it done early and make sure you get that money in your account as fast as possible with direct deposit.   Great, now you’ve got money in hand and you’re ready to put it to work, let’s see what we can do.

1. Peer to Peer Lending

There are a few very high quality and trusted sites that focus on peer to peer lending.  The idea is that borrowers can get access to money at decent rates and investors can earn a decent return on their money.  One of the main peer to peer sites, Prosper.com, claims earnings between 7 and 10 percent for investors – with loan amounts ranging from $2,500 to $25,000.  Not a bad idea for the few thousand dollars you’ll receive as a tax refund.  I’d be interested to hear some reader experiences with P2P lending.

2. Start or Add To Your Emergency Fund

In a recent post, Josh pointed out that close to half (43.9%) of households are “liquid asset poor.”  This means that almost half of American households  lack the savings to cover basic expenses for three months if unemployment, a medical emergency or other crisis leads to a loss of stable income.  Adding to or starting an emergency fund would be a great way to use this year’s tax refund.

3. Pay Down High Interest Debt

Maybe you’ve got a balance on credit card with a 15% interest rate.  Do your future self a quick favor and knock down as much of that high interest debt as you can.  Using your tax refund to pay down debt is another solid idea.  Here’s what I would do: pay off the high interest debt but keep making the payments I was making to myself.  Why make the corner bank rich with interest when you can fill up your own person bank instead!

These are just a few things you could do with your tax refund – the possibilities are endless.  What have you done in the past or plan to do this year with your tax refund?….and dont’ worry this is a no judging zone, so even if you decide to spend it on the newest, biggest flatscreen TV we won’t fault you for it

What is striking to me is that net worth is still on the decline. In 2006 we hit our peak, 96,000 dollars was the median net worth. Now, that number has declined to 70,000 dollars in 2010.

The most striking problem that I saw was the liquid asset poor families. This is considered, by the Asset and Opportunity scorecard, to be an individual or family who could not support themselves for 3 months if they lost their job today.

I think about how this ties into the Infinite Banking Concept and everything we are trying to teach here at BecomingYourOwnBank.com. How are we supposed to become financially stable and independent from banks if we can’t even save 5k.

This just further proves the dire circumstances we are in today. Not only do we need to be getting out of debt, but we need to be self financing and end our reliance on bank credit. With American’s, according to Nelson Nash, paying 34 percent of their money to financing costs, the answer to me seems quite obvious. Start self financing and you will easily end the crisis for a majority of Americans.

To me, it comes with the first step, following your dollars. I wish that they would have asked how many of these people keep a budget and write down the money they spend. My guess is a majority of these people do not.

16 percent of American’s fall under this asset poor category and are making less than $18,000 a year. That is pretty bad, if you have children or you are a single parent.

However, 64 percent of those considered asset poor are single or married couples with no children. So, the real problem in our country is not poverty. The real problem is a spending frenzy of “gotta have it.” And I’m not talking about Coldstone here.

To me, the majority of American’s could be saving more money, period. We do not lack the ability to be saving, what we lack is the desire to save. We are too easily persuaded by advertisers and those around us. We feel like it is our born right to have the best things in life. It’s unfortunate to me.

I had a friend who wanted a car. She budgeted out on paper how much she could afford. She figured out that with the money she was making she could afford a 350 dollar payment. I’m not going to even get into why buying a car based on payment is bad here, so what did she do?

Well, I went out with her to look at cars, I helped her find a decent car that would have been around a 175 dollar payment a month, and then she would have extra money as a cushion to save some money and maybe have a little bit of fun on the side as well.

She didn’t make a decision right then, she waited. A few days later, I saw her driving around in her nice new shiny red car that she bought. Payment a month…$350.

Why do we do this to ourselves? I just don’t understand our mentality. Her justifications went as follows.

“I had to have it. It’s really nice. It fits me much better than the cheaper car.” (Of course it does)

“It will hold its value much better.”

“I am probably going to have kids and a family soon so this will be a good car for a family.” (She was single at the time)

And her list went on.

Let’s do some quick savings calculations. You make 8.3 percent of your income every month if you are on salary or a 40 hour a week employee making an hourly wage. This means that, if you live paycheck to paycheck, you will spend 8.3 percent of your income a month on expenses. So, if you save 5 percent of your money a year, will you have enough at the end of that year to even cover 1 months expenses? No.

So, 2 things come into play. What do you think they are? It’s pretty simple. Frankly, you need to save more AND spend less money. It’s the only way.

Am I the only one with a goal of saving 20% of my income? I think this should be the universal goal. If you fall a bit short of 20% you are a heck of a lot better off than if you fall short of 5%.

In order to save 20% of your income, then you need to be saving roughly 1.7 percent of your income a month. This means that, after taxes, you should only spend 6.6 percent of your paycheck every month, and put the rest in a savings vehicle of some sort.

This may sound confusing, but here is the point. If you are spending 6.6% of your income a month, and you save 20% a month, then every year you save 3 months worth of expenses in your savings.

This means, with no debt, you would be out of the “liquid asset poor” category in 1 year.

Now, what if you have debt. Then try to get as close to 20% of your income going towards debt payments. Pay off debt as fast as you possibly can. Then, when you get out of debt, don’t make the key mistake of thinking you have all this money to spend, start putting away the money you were putting towards debt, to your future.

Now, take that money you have been saving, and start using it to finance your cars, kids education, weddings, boats, whatever it is you buy, and pay that interest back to yourself.

Now even more of that money you are spending is going back into your savings, because interest you used to pay to the bank is going into your pocket.

And maybe you are at 10%, or 15% when you start financing your own cars and putting more money into your pocket. It’s a process, but eventually your goal should be to save 20% of your dollars.

You should see now that by getting ahead in life, and maybe roughing it for 4-6 years, will get you so far ahead in the long run that you won’t have to worry so much about the life crises that will inevitably arise.

Lack of planning only brings with it fear. And you won’t get anywhere operating on fear of the future.

I didn’t want to go off on a whole thing here, but these statistics are just sad…for the most part. To me, there are definitely people out there who need help–especially, in my mind, single parents who are struggling. I feel like there are genuine people out there who are in need.

However, I feel a majority of American’s have the skills and the income stream to make themselves millionaires. However, they trade away their future potential because they want something now. They don’t take the time to realize and implement the strategies that will create a much more lucrative future for themselves. Take the time today to take action, do something that will start you down the path to financial freedom in the future.

Now that may seem like a lame answer, but have you taken the time to search Google to find discounts before?

Well, I didn’t either, until today. I was trying to buy a generic prescription and my pharmacy didn’t have it. The brand name prescription was 130 dollars.

So, I was like, “no way.”

I called Walgreens, it was 95 dollars at Walgreens for the generic. Well, that’s a bit better than 130 dollars but still not great. I was getting a little irritated so I Googled my prescription with “coupon” at the end of it. The site http://www.goodrx.com/ came up and I clicked on it.

Some coupon came up on my screen with a bunch of RX numbers, etc. I thought, “this is going to be fake for sure.” But, I figured the worst that could happen is I look like an idiot for 2 minutes in front of a Pharmacist at Walgreens, so probably not the dumbest thing I’ll do all day.

However, I went to get my prescription, gave my computer printed coupon to her, and she said to me, “wow,” as if amazed herself, “it worked. Your price is 35 dollars.”

And my thought was, “wow,” as well.

So, if you want a discount on something, I guess all you have to do is Google it. I saved 65% by doing that one thing. Saved me 60 dollars. Not too bad.

“My Thoughts on Universal Life and Variable Life

“Universal life was invented in the early 1980s by E.F. Hutton, a stock brokerage firm that, in my opinion, knew nothing about life insurance. Remember the television commercial, ‘When E.F. Hutton speaks, everyone listens.’ Have you heard him say anything lately? They don’t exist anymore! UL was nothing more than ‘one-year term insurance with a side fund of an interest-bearing account.’ It was an attempt to ‘un-bundle’ the savings element and the life insurance element of a whole life policy–something that can’t be done, if one understands the concept of whole life insurance.

“This happened during a time of high interest rates and it ‘looked good’ in the early years of the policy. When I first saw the policy I ran some illustrations and they kept ‘falling apart’ when the insured attained age 65 to 70. The cost of one-year term became prohibitive at the advanced ages and ‘ate up the cash fund’ from that point forward. Therefore, I never sold one of them when I was in the business–and I surely wouldn’t buy one!

“Next came Executive Life out in California. They made a ‘big splash’ in the business and ultimately went broke. I understand that policy owners actually lost money with their policies.

“Does the name, Michael Milken, mean anything to you? He did prison time as a result of his financial shenanigans. Would you guess where he was selling all of those ‘junk bonds?’ If you replied, ‘Executive Life,’ then go to the head of the class! Would you like your financial future in the hands of people like that?

“Lastly, there came Variable Life, invented by Equitable Life Assurance Society. It was nothing more than one-year term insurance with a side fund of a mutual fund. There are more mutual funds than there are stocks. No mutual fund is any better than it’s manager. The great preponderance of mutual fund managers had never seen a down-turn in the market until the recent one.

…

“I was with Equitable Life when Variable Life came on the scene. I never sold one of those policies–and I would never buy one. I do not recommend its use for the Infinite Banking Concept.

“The tragedy of our times is that the life companies never spent any time on understanding Dividend-paying Whole Life Insurance and teaching the buying pubic its characteristics.”

Nelson Nash, Becoming Your Own Banker

Photo credit MIKECNY

For those of you that have sufficiently stalked me it will come as no surprise that I’m somewhat of a baseball nut.

Well, maybe nut isn’t the proper term, but I like baseball a lot -so much so that I take time out of my day for 4 months out of the year to coach a high school baseball team.  Even though I might look young enough to be one of players (often confusing umpires and opposing coaches) I’m in my 7th year of coaching and I recently experienced something I’ve never had to deal with.

Don’t worry I’m going to somehow connect this post about baseball with money, I’m going to have to with  title like muscles, tendons, joints and money – I wouldn’t want to upset anyone.

Throw, Throw, Then Throw Some More

So keep in mind that for the past six years I have been extremely hard on one of my extremities in particular – namely, my right arm.  Let me throw some numbers at you….

6 – The number of teams I’ve coached

16-20 – The number of players on a team

20-30 – The number of pitches I throw to each player during an average practice

50 – The number of feet each pitch is thrown (a normal pitching mound is 60 ft. 6 inches from home plate but I like to short that distance during batting practice to take the stress off of my arm)

So after some quick math….here are some more numbers….

300-400 – The number of pitches thrown each weekday during the season

24,000-32,000 – The number of pitches thrown during an entire season

144,000-192,000 – The number of pitches thrown during the past 6 seasons

Okay enough numbers.  All I wanted to to was prove the point that I’ve thrown a baseball (which only weighs 5 ounces by the way) a little bit more than the average person.  Okay real quick one more number…..192,000 pitches multiplied by 50 feet each means a total of 9,600,000 feet, or a little over 1,818 miles, or like driving from Boise, ID to Houston, Texas.  Okay I’m done now

Obviously all this throwing has put my shoulder through the ringer and like I said at the top I’m now experiencing something I’ve never had the pleasure of experiencing….injury.

After thousands and thousands of pitches my shoulder is starting to beg for mercy.  To be a little more specific the rotator cuff muscles and  tendons that run along the shoulder are being pinched  between the two bones that make up the ball and socket joint of the shoulder (humerus and acromion)  when my arm is lifted.  Not extremely painful but easily aggravated.  The problem is everyday movement sets in motion a vicious cycle.

The Cycle of Pain

As the muscles and tendons are pinched, or impinged, between my bones they become inflamed.  If they are aggravated or used too soon the inflammation flares back up and the cycle continues.  Have you ever tried going through a normal week without lifting your hands above your head?  I have.  It’s really hard.  In fact it’s pretty much impossible, so you can see how I’m now in this cycle of inflammation and attempted recovery.  Quite frustrating to say the least.

So let’s talk a little bit about money (nice smooth transition huh?)  There are cycles we fall into when it comes to how we manage our money, some are good (consistently saving, living with our means, etc.) and some are bad (not sticking to a budget, continuously racking up debt, etc).  Luckily, breaking free of  bad money cycles isn’t as hard as keeping your hands below our head for weeks on end.

Bad Money Cycles

With the amount of debt in American it’s easy to say that the most common bad money cycle is debt.  It’s so easy to fall into and so hard to climb out of it’s no wonder that the average family is plagued with a little over $15,000 in credit card debt.

We want instant gratification and it’s so easy to buy now and pay later that the thought of interest rates rarely crosses the mind.  On a credit card with a 15% interest rate, minimum payments won’t do you much good, and depending on the amount of debt you may never be able to fully pay it off with minimum payments.

Another bad money cycle is the lack of saving.  We work, we earn, we spend.  Savings is often an afterthought and usually after it’s too late.  The savings rate in America is hovering around 5%.  That means the guy or gal that makes 100k per year is only stashing away around 5,000 bucks each year.  Simple math will tell you that unless that money is earning some astronomical return each year there is no way it will be enough to last during retirement.  We have to create a cycle or habit to save more money, it’s as simple as that.  Regardless of where you put it (I would recommend something safe, predictable, accessible and tax advantaged like high cash value life insurance) create a cycle of saving as much money as you possibly can – your 65-year-old self will thank you for it later.

Good Money Cycles

I didn’t want to end on a bad note so I wanted to point out some of the good things going on out there.  Hopefully since the recent downturn you have become more frugal, whether it’s coupons, groupons or garage sales slashing the price on the things we need or want to buy can make a big difference.

Along with not overspending on the things you need make sure you budget till you’re blue in the face.  You should know where every last dime is going and be able track how you’re doing compared to past months and years.

As for me I’m working on getting back into a good cycle with my shoulder – I wrote this whole post within lifting my arms above my head once!

Tell me about the cycles that you’re in (good or bad) and how they’ve affected your financial life – or if you just want to talk baseball I’m okay with that too.

I really wanted to dig a little deeper into our current financial system, some of the flaws, and danger signs, we should be looking out for today in order to spot the potential problems for tomorrow.

Also, I wanted to better understand the banking system that the Federal Reserve uses to control the monetary system.

According to Mark, there are two fundamental flaws in our current banking system. These flaws, if they remain unchecked and unchanged, may end up being the key causes for the future decline of America.

Fundamental Flaw 1: Fiat Money

He tells us, “Our most fundamental flaw is that the banking system uses fiat, or paper money rather than gold, rather than silver, rather than copper or some other tangible item.”

This fiat money, because it is put into our financial system unevenly, creates what we call the business cycle.

Simply put, business cycle is this: in a market economy there are boom and bust cycles. The Federal Reserve is making an attempt to control these boom and bust cycles by increasing or decreasing the money supply accordingly. In a word, they are trying to control the economy, and limit extreme changes.

However, how does this end up affecting our economy overall?

Well, the problem arises when banks issue too much money that isn’t backed by gold. It puts the economy into a boom. Mark continues…

“That boom is unsustainable because that money is printed out of thin air, essentially, because there are no resources backing it. And, as a result, entrepreneurs undertake projects because they are getting cheap sources of funds. But there are no resources being set aside by consumers in savings to make these projects sustainable. So, once these projects start to come online, and start producing, the booming economy gets unwound, and we find ourselves in a bust, or a crisis.”

Let’s look at this from a healthy economic perspective. In a healthy economy what happens? When people have excess dollars, they save those dollars up, storing them in a bank. What happens next? The bank takes those dollars and lends them out. Because there is an abundance of dollars to be loaned out, there is more incentive to entrepreneurs to borrow money and start new businesses. This is a healthy cycle.

But what we learn here is the basic flaw that happens in our current economic structure. Money is produced from thin air, giving the appearance of economic growth and cheap money. So, entrepreneurs and those looking to borrow money for purchases, get the idea that the economy is growing.

However, the fact is the economy is not growing, the Federal Reserve is merely creating the illusion that this is so, the entrepreneur borrows the money, starts his business venture, and all this only then to realize that people do not have any excess income to spend, and the business dies.

This is where having a gold backed currency shines. There isn’t a way for governments to fake economic production.

“Because that (fiat) money comes in unevenly, it tends to create the business cycle. So, you have your booms and your busts and resources destroyed in the process. The whole…foundation for our banking system is fundamentally flawed… Instead of trying to understand what causes the business cycle, (the government) instead applys policy measures to try to limit the ups and downs in the economy.”

This is flaw number one. On its own, this appears to be an egregious flaw in our monetary system, one that can have very severe consequences. However, partnered with what Mark considers the second fundamental flaw, our predictions for the future may get worse…much worse.

Fundamental Flaw 2: Fractional Reserve

“The other fundamental flaw is that our banking system runs on a fractional reserve basis. Our money can be multiplied by ten, or twenty, or thirty.”

He continues, “A lot of people live their life with the impression in their mind that when they deposit money in their banking account that somehow your money is sitting in a little pile on a shelf inside the vault with their name on it. Once you realize the banks aren’t just holding that money, they are giving your money to other people, and by law they only have to hold a very small percentage of your deposits on reserve.”

Well, let’s take a step back and let me show just how the banking system creates this money out of thin air.

Let’s say you go to the bank and you deposit 100 dollars. The life of that 100 dollars is what we are interested in. Well, the bank itself is required to keep 10 dollars, or 10 percent, of that money on reserve. This is where fractional reserve gets its name, because only a fraction of the dollars that you deposit are required to stay on reserve.

But, this is where it takes a turn for the worst. We’ll take this from me down the line, so I’ll just use the names A, B, C, and so forth for the people involved in this little sketch.

You deposit 100 dollars into your bank. They keep 10 dollars and loan 90 dollars to A.

A deposits 90 dollars into his bank. They keep 9 dollars, and loan 81 dollars to B.

B deposits 81 dollars into his bank. They keep 8 dollars, and loan 73 dollars to C.

C deposits 73 dollars into his bank. They keep 7 dollars, and loan 66 dollars to D.

D deposits 66 dollars into his bank. They keep 6 dollars, and loan 60 dollars to E.

E deposits 60 dollars into his bank. They keep 6 dollars, and loan 54 dollars to F.

And you can see how this goes on and on. This is why the multiplier used is 10, meaning that for every 100 dollars you deposit into your bank, you can expect that to become 1000 dollars of debt loaned out.

This means that, for every 100 dollars you put into the bank, the bank creates 900 dollars basically out of thin air.

And they are making interest off of 900 dollars. Not a bad business to be in.

Creating Money: A Bad Business to Be In

Lately, however, we have seen the market decline. So, in order to stimulate growth in the economy, the Federal Reserve has lowered interest rates artificially. This is their attempt to stimulate the economy by incentivizing people to borrow money. But, Mark tells us how this hasn’t been going as planned for our friends at the Fed.

“The low interest rate policy of the Federal Reserve has backfired, and as a consequence (banks have) turned to this quantitative easing where they just go out and buy a certain quantity of government bonds and a certain quantity of mortgage backed securities from Fannie May and Freddie Mac.”

The banks are too afraid to lend money out because of the crisis. And they have found that it’s easier and much more efficient for them to just buy bonds and mortgage backed securities.

So, as a result of this, what can we expect? Well, if a majority of our fiat dollars are currently tied up in government bonds and mortgage backed securities, and the financial environment changes, then what happens? All of these dollars will get dumped into the market. If this happens, there will be more supply, and with more supply comes lower prices. As a result, the dollar drops, and this drop could be extremely dramatic.

This is a terrifying observation for the future of our economy. If something happens, and all these dollars get dumped back into our fiscal system, we could see some very heavy inflation, even to a point that we haven’t seen before.

In the end, the real problem boils down to human nature. Why is the government trying to control human nature? Why are they attempting to even out the boom and bust cycles that will occur in their natural way? Why are we creating debt out of thin air?

My real question is, why are we even relying on debt in the first place?

This has been a big portion of what Nelson Nash and the Infinite Banking Concept have been trying to teach Americans. Every dollar you put into the banking system is causing more of a problem.

Does this mean you shouldn’t use a bank? No, I’m not saying that. What I am saying is that there are these innate flaws in our banking system, and that we need to find a way to be self-reliant. Not relying on banks for auto, vacation, and business loans is one of the first steps you can take.

However, the main purpose of banks isn’t to provide you with these smaller services, the purpose of the banking system is to rob the American people through inflation and debt.

We have to enact responsibility and change on an individual level in order to have a large-scale change in the long run. This is what the Infinite Banking Concept, to me, is all about—individual change and responsibility.

We cannot rely on governments to take responsibility for our financial system. The unfortunate part is that things have to change. Will we begin changing it now with our own personal decisions, or will we wait for a mass scale disaster to do it for us?

photo credit Trouble(d)

Whether you admit it or not, you love being in control. From personal relationships to personal finances, being in the driver’s seat is ideal. So, why don’t more people do it? Why are so many people being controlled by friends, family, or co-workers as well as their finances?

Taking Control – Finance Style

Let me suggest that the lack of financial control comes from much of what we watch, hear, and read.

To test this theory I went out and did what any average American would do….search Google!  Haha, I know it sounds lame but let’s be honest Google is the official go-to for any question. So, I searched “take control of your finances.”

Among the pages and pages of advice from various blogs and high profile financial institutions the advice was all quite similar, and to be frank it was good advice. Here are a few of the most common suggestions as to how one can take control of their finances:

1. Create a budget – I couldn’t agree more with this one.   Incredibly important no matter how much money you make.  For some awesome budgeting advice check out our friends at I Heart Budgets – they’ve got you covered.

2. Eliminate debt – Another huge step to regaining financial control

3. Seek after lower interest rates – if you do plan on borrowing money make sure you don’t get caught owing insane amounts of interest – In our latest sketch video we revealed that the average American will end up paying close to $600,000 in interest alone over their lifetime.

and last but definitely not least…

4. Save for retirement – this is the area that I think needs the most work.  You might do a pretty good job of controlling our budget, debt and interest rates but all too often retirement and savings dollars are completely out of your control.

Do You Control Your Retirement?

Let me quickly focus on number 4.  Where would you say the majority of people house their retirement savings? The top three answers are 401k, IRA, and Roth IRA.  Okay, now let’s dig deeper….The obvious similarity between these 3 options is the fact that they are all government sponsored retirement plans.

In a nutshell this means that the government ultimately controls them. How?

1. they tell you when and how much of your money you can access

2. they tell you the maximum you can contribute in any given year.

3. they limit the investment options you have.

4. they penalize you if you don’t play by their rules.

Now based on these 4 points I would say that government sponsored plans severely limit your ability to control your retirement.  I would argue that you are actually taking yourself out of control. You are investing your savings in a vehicle that is, in most cases, 100% susceptible to market risk and mostly out of your control.

Wrap Up

Alright, so let’s wrap this up and review.  We all like being in control, especially of our finances.  Being in control of our budget, debt, interest rates, and retirement can mean a much less stressful financial course throughout life.

Make sure you are comfortable with the amount of control you have….after all you DO have a say!  If you are the type of person that needs to lock away your retirement money in order to keep from spending it, then do it.  If you would rather be in control of every aspect of your financial life (like me) then get going and find the vehicles that allow you do so.

So, what kind of person are you?  Is it best for you to watch from the sidelines while someone else makes sure things run smoothly, or do you need to feel that control?

Thanks for reading, I look forward to your thoughts.

Part of the problem is that a lot of people just don’t know how to budget their money, or even how it might benefit them in the long and short term.

The encouraging news is that you don’t have to be a financial advisor to come up with a reasonable spending plan that suits you and your family’s lifestyle. The process is easier than you might think and breaking it down into steps should help clear up the fog even further.

These are the five most basic steps involved in creating your own budget.

1. Come up with your total monthly take home income. – The first step is figure out exactly what you bring in every month in a dollar amount. Don’t confuse this with base pay. Your base pay is what you make before taxes and insurance costs are taken out. The number we want is simply the amount on your paycheck.

So, if you get paid twice a month and your paycheck is $981, than your grand monthly total will be $1962.

If you have other income streams, be sure to include them; though be aware that your total should only include reliable income that you can count on from a month to month basis. If it fluctuates a lot, try and get an average and use that number.

2. Come up with your total monthly necessary, fixed expenses. – Your next task will be to tally the expenses that go out on a monthly basis and that you know for sure you’ll have to pay.

Usually, they would include the following. I’ll include made up numbers for visual aid.

• Rent or Mortgage: $725
• Electricity: $90 (you might need to average this)
• Water: $35
• Internet: $40
• TV: $45
• Phone: $110
• Car Insurance: $80

Now obviously, these will change from person to person, but the principal is the same. The reason things like gas and groceries aren’t included here is because they aren’t “fixed” and you have a lot more control over when and how you buy them. We’ll get to those in the next step.

Add all of them together for a grand total of, $1125.

3. Come up with your total monthly necessary, non-fixed expenses. –You could include a few different things here depending on your situation. Think of this category as things you know you’ll need, but that you don’t necessarily buy the same amount of at the same time. Gas and groceries are the most typical examples. Keep in mind these are monthly figures.

• Groceries: $250
• Gas: $150

Your gas and grocery bills will change a lot, but try your best to get the average amount from the last several months to use for running the numbers.

4. Find your monthly disposable income. – Your disposable income is the money you have left every month that you don’t need for necessary expenses. You can save that money, invest it or spend it on fun and entertainment. Just add your total expenses from steps 2 and 3 and subtract it from your total in step 1.

$1962 – $1525 = $437

So each month, you’ve got an extra $437 to spend on whatever you want. I always find this number to be pleasantly surprising, since allocating your funds can give you a lot more breathing room than just coasting by without knowing what the numbers are.

It would be wise to put back $200 of that $437 in savings. Even after that, you’ve still got $237 to spend. That’s about $60 per week for dining, coffee, movies or whatever else you want to use it for.

5. Be disciplined and stick to the budget. – The hardest part of having a budget is sticking to it and not breaking the cycle. If you’ve allotted $60 per week for fun, don’t exceed that amount. If you want something expensive like a new computer, wait until you’ve put back enough in your savings account and then use that money to purchase it instead of putting it on a credit card.

It’s not easy, but it is a much freer way to live. If you can stay disciplined enough to stick to your budget financial stress and anxiety will definitely decrease.

Consider also that as you work and get opportunities to earn more monthly income that original income number will increase. The more it increases, the more your monthly disposable income will increase.

When that happens, your savings will go up quicker and you’ll have more to set aside for fun and entertainment.

When it’s all said and done, there’s plenty of incentive to at least give it a try.

Kelly Williams is a professional blogger that enjoys providing consumers with personal finance advice. She writes for Instaloan.com, a leading bad credit loan lender specializing in title loans.

Now why do you care right?

Recently I wrote about why you should have a credit card. I got a little bit of backlash because it’s unconventional advice. What I’m suggesting to you is the positive side of being smart with your money, and how you can use a financial tool that  can be the cause of some of the poorest financial situations, to your advantage.

Let me share with you how my credit cards paid me to go on a tropical vacation.

Free Flights for Both of Us

Late last year there was a credit card offer circling around the internet from Southwest Airlines. They were offering 50,000 bonus points to new card holders, and I fit that profile. They were also offering 50,000 bonus points to new business card holders, which profile I fit as well. So I got them… both of them.

Those points alone were enough to get us both there, easy, but I learned about something called a “companion pass” which would essentially let my spouse travel free with me for a full year. Pretty sweet deal huh? I needed 110,000 points to get the pass and I was just short.

That’s when I learned about transferring points. A Marriott Rewards card offered me 50,000 points, 30,000 of which equalled 10,000 Southwest Points. So I got the card, transferred the points, and used the remaining 20,000 to book the hotel room the night before our cruise left the port. Oh ya, and I also got a bonus free night with the card that we used on our Anniversary. Not bad…

When I booked the flights, I only ended up using 25,000 points to get us to Fort Lauderdale, so I still have around 85,000 points I’d like to use before the end of the year. Needless to say we’ll be having another vacation or two.

Booking the Cruise

So I had a great way to get there, but still needed to book the cruise. This was easy as well since Chase had just offered me two cards. One at 50,000 bonus points, and one at 25,000. These equated to a $750 credit to my account, which I used to book the cruise. I waited and found a great deal on one of Royal Caribbean’s largest ships, the Liberty of the Seas, and booked it.

All in all I ended up covering the entire cost of the cruise, which I would normally borrow from my life insurance policy. And the best part of it is, I’ve still got another 2 or 3 flights in points to use for future trips.

Moral of the story- credit cards are just another financial tool. Use them wrong, and you’ll probably be sorry, use them right, and you’ll get a few extra perks you might not have otherwise had.

Federal guidance — On the national level, it is the Federal Trade Commission that is tasked with protecting American consumers. The FTC has long kept a watchful eye on the business community, by pointing out potential problems and identifying scams when encountered. Before the turn of the millennium, the FTC began to rein in the three major credit reporting bureaus — TransUnion, Experian and Equifax — in a bid to help consumers learn what was being collected by them.

Beginning in 2005 following congressional action and President George W. Bush’ signature, the three credit reporting companies were required to make available to consumers on demand their credit information. A website, AnnualCreditReport.com was established and still exists today, one that provides a free copy of each report once annually to consumers. Thanks to FTC backing, you can get your reports for free and pay just a nominal fee to obtain your related credit score.

State assistance — On the state level, your state attorney general’s office handle companies that do business within the state. Each state plus the District of Columbia has one, with some states offering programs to help citizens get out of debt.

You can also check the legitimacy of any program by contacting the attorney general’s office. If you have a problem or want to find out if complaints have been made against a particular credit repair company, your state may be able to help you stay clear of unscrupulous companies. Contact your state if you need to verify a particular business.

Business level — The business community has its own in-house monitoring service. The Better Business Bureau has been in operation for more than a century, collect information about businesses and providing reviews to consumers. Although supported by member dues collected from local businesses, the BBB can prove a good source to discover local companies offering credit services.

Be careful about the BBB ratings that are dispensed to rate companies. Member companies must pay an annual fee and there has been criticism that a higher grade can be achieved by paying more money. Never base the legitimacy of any company, credit repair business or not, on the BBB score alone.

Independent sources — Fortunately, there is a wealth of information about companies that is available online. Some of the better and independent sites for that information includes Consumer Reports, a Consumers Union publication. General CP information is available for free, but you will need to subscribe to have full access to its sites and reports.

Other websites that help consumers include Nolo.com, WatchdogNation.com, the Consumer Rights Coalition and PeopleClaim.com. One or more sites combined may offer you the assistance that you need. Check out Fool.com, Kiplinger and most any newspaper business site for helpful articles.

As with any consumer decision, you should base the direction you plan to take on correct and timely information. When considering a credit repair company, you will want to obtain and call references, ask for a copy of a business license and, if required where you live, see a copy of the company’s state license. Ultimately, the work that you do to improve your credit rests squarely on your capable shoulders, with credit advisors working as partners in your quest for improved credit.

Jenny Sampson is a professional blogger that enjoys providing consumers with personal finance advice. She writes for TitleMax.biz, a leading Title Loan company offering loans for people with bad credit.

• Give you money up front
• You don’t have to wait for the payment every month
• Hassle free process
• Help you enjoy your money’s worth at the moment

The Benefits of Selling

The act of selling your structured settlement plan sound like a very good deal that’s why a lot of people do it. You will be able to get your money into a one-time transaction and spend it to whatever means you want it to. It means no more waiting for companies to give it to you on a monthly basis. It will be readily available for any purpose you desire it for. Another advantage is that it can be used to directly resolve current financial problems. People who are troubled financially can easily seek the help of companies in finding solutions to their problems.

The Disadvantages of Selling

There is such a great duality in nature and life that’s why every decision surely has a certain advantage and disadvantage. Though you will get a lump sum of money in selling your structured settlement plan, it will be priced lower than what it is intended to be. Buyer companies make it sure that they get big cuts or profits in buying structured settlements. Of course, these corporations are not philanthropic foundations so you would always expect that they are profit oriented. Another disadvantage is that there is a possibility that you won’t be able to handle the money correctly. Trusted data have shown that some people eventually became broke after their structured settlements.

Now that you have known the possible effects of this course of action, it is time to make a decision. Make a logical decision for yourself and don’t simply follow the advice of company representatives. After all, it is your money and future that is involved in this kind of transaction.

My thoughts — You are either paying interest or losing interest. It’s obvious when we talk about financing or paying interest to a bank. However, it becomes less obvious to the person paying cash for his purchases, the easiest example is a car. He doesn’t see that he is losing out on all the interest he could be making on the money he has saved. In giving it up for the purchase of the car, he is robbing himself of his the potential growth that money could be generating for the rest of his lifetime.

“Remember that there is only one pool of money out there in the world. The fact that any number of organizations or individuals are managing a portion of the pool is incidental.”

“Question: Who is the biggest thief in the world? If you answered the Internal Revenue Service you are correct! Most people have this feeling but lack the ability to explain that it is indeed, theft. I explain it this way. Let’s go to a shopping mall or some such place where there are lots of people to witness what I am about to do to you. At this point I pull out a gun and place it against your head and direct you to “give me the contents of your wallet or I will blow your brains out!” I can predict with certainty that those who saw this act will describe it as theft–and call for my punishment. But–if you will allow me to gather that same crowd for about an hour before you show up–and let me talk to them about how we are going to divide the contents of your wallet and distribute among them–now they will call the act “democracy in action!”

“People just don’t play their proper role in the scheme of things. They have abdicated their opportunity/responsibility as it pertains to the banking function in the economy. They are depending on someone else to perform that job–and that character in the play is making most of the money!”

My thoughts — By relying on banks to perform your banking for you (ie. loaning money and being responsible for your money saved), you only put more money in their pocket. In doing this, you pay for someone else to get rich off of your money for doing something you should be doing yourself.

“Every time a person buys a life insurance policy he is starting a business from scratch.”

My thoughts — Each life insurance policy works like its own business. It takes a few years to start making money. The future results are tremendous if you treat your company properly. You cannot steal money from your business, you must treat your business properly and with more respect than you would a corner bank, not less.

“The money problem. Only money left over after paying taxes can be spent. For the average person in the U.S., 34.5% of that sum goes to pay interest alone, to finance car purchases, homes, and various other purchases. This money is gone forever. It is making persons in the banking business wealthy. It can be yours to enrich your life forever–if you get into the banking business.”

“It is axiomatic that any government sponsored program will always accomplish the opposite of the stated intent. Check any of them out over an extended period of time and see for yourself. The most dangerous thing you can do with money is put it into government sponsored schemes.
“When government creates a problem and then turns around and creates and exception to the problem they created aren’t you just a little bit suspicious that you are being manipulated?”

“Your need for finance, during your lifetime, exceeds your need for life insurance protection. If you solve for you need for finance through life insurance cash values, you will end up with so much life insurance, you can’t get it past the underwriters. You will have to insure every person in which you have an insurable interest.”

By the end of this you will see why any of your investments, stocks, real estate, or other investments are going to be much more efficient coming through your Infinite Banking system or whole life insurance policy.

“But, I Can Get a Higher Rate of Return

“When first exposed to the rationale of The Infinite Banking Concept a person will almost always think–and often voice the thought, ‘but I can get a higher rate of return by investing in _________.’ Unfortunately that person has not understood the message! We are not addressing the yield of an investment–we are discussing how you finance anything that you buy. It is always better to finance it through your banking system than out of your pocket.

“To demonstrate this principle, suppose that ‘A’ invests $100,000 for one year and earns 20%:

“Gross yield…………………………..$20,000

“Less taxes (30%)………………………-$6,000

“Net yield…………………………….$14,000

“Suppose ‘B’ builds cash values of $100,000 in his own Infinite Banking Concept (Dividend-paying life insurance) plan, then borrows it from his system for 8% and then makes the same investment as ‘A’ above. The results are like this:

“Gross yield…………………………..$20,000

“Less interest paid to his banking system…-$8,000

“Taxable gain………………………….$12,000

“Less taxes (30%)………………………-$3,600

“Net yield……………………………..$8,400

“BUT, in this case you must remember who the characters are in the play. ‘B’ also owns the policy to which interest is paid and earns the $8,000 on a non-taxed basis. So the total results are like this:

“Net yield from the investment……………$8,400

“Net yield from his banking system……….+$8,000

“Total yield…………………………..$16,400

“This principle applies to any investment that you might make, so there is no way that a person can ‘get a higher rate of return’ by ignoring the banking process! There is a delay in time while getting ‘the banking system’ established, but once this is done, it is a ‘one-time only event.’ Anytime a person stars up a new business there is a delay in the time before profitability commences. When a life insurance policy is created, that is the equivalent of starting a business that never existed before and the same phenomenon is inevitable.”

Nelson Nash, Becoming Your Own Banker

Whole Life Insurance Cash Value can be looked at in two ways – but before we get into that let’s make sure we’re on the same page when it comes to how the cash value got there in the first place.

Originally, whole life insurance was more simple. A policy owner would pay a level premium throughout their life, and were guaranteed to receive a death claim. Since premiums would add up to large amounts of cash over time, insurance companies produced a policy that would offer a cash reserve which built up to the known future claim, or death benefit.

These policies were essentially designed with the guarantee that the whole life insurance cash value would equal the death benefits at maturity (originally near 100 years old, but recently changed to 121). At maturity, the policy holder would simply receive the matured value, the death benefit, or cash value, both now being equal, plus a guaranteed minimum interest rate.

Two Important Characteristics of Cash Value

First, whole life insurance cash value is an asset. It’s something you own. Just like selling any other asset (gold, silver, real estate), you can liquidate the cash value of your whole life insurance policy. In doing so, you cancel your policy, and that equity you have built will be returned to you by the insurance company. Since whole life insurance is a contract between you and the insurance carrier, at any point throughout the life of the policy you have the right and option to walk away, and receive any and all cash value that has been accumulated.

Secondly, it represents the money you can loan against, or the collateral you now have. By contract with the insurance company, whole life insurance cash value can be collateralized at your discretion, up to the amount you have in cash value. Each carrier differs in when and how you can collateralize this cash value, but most allow it early, and for as long as you have the policy. To be able to use whole life insurance as a bank, like the Infinite Banking Concept suggests, you will want to use proper insurance companies to allow for immediate access.

(If you’re unfamiliar with how loans from a life insurance policy work check out our policy loans article.)

Early Cash Value

Among the many variations of whole life insurance is the high early cash value. A policy owner that wants early cash value can structure a policy to have cash value today, in order to be able to maximize returns, as well as have access to money inside the policy.

It may seem like a simple question, but it’s one that gets asked all too often and deserves a clear answer.  How does life insurance work?

With life insurance coming in all different shapes, sizes and structures it’s not an easy question to answer but it also explains why so many people are trying to figure out exactly how does life insurance work.

I’m going to break life insurance down into three categories to keep it really simple. I know there are subsets and variants that break off of each of the categories but hey, let’s not jump the gun here.  In this article we’ll look at term insurance, permanent insurance and universal insurance.

first up…

Term Life Insurance

Term life insurance can be compared to renting a home instead of buying one.  When you buy term life insurance you are renting death benefit – terms vary anywhere form 10 to 30 years and when the term expires you have nothing to show for it.  Just like renting a home, when you stop paying rent you have nothing to show for it.  Because only about 1% of term life policies actually end up paying a death claim the cost is dirt cheap.  Statistically speaking you are 99% likely outlive the term or cancel the policy early.

Term is essentially a cash cow for an insurance company.  Statistically they’ll only have to pay 1% of all polices they have.

If the insured person dies within  the specified term his beneficiaries will receive the death benefit in the form of an income tax free check.  Just like other forms of insurance the death benefit is income tax free but may be subject to estate taxes.

Permanent Life Insurance

Also known as whole life insurance, permanent insurance can be compared to owning the home instead of renting it.  How does permanent life insurance work?  It’s simple, you pay a set premium that is guaranteed to never increase throughout your life and in return the insurance company guarantees they will pay the death benefit when you kick the bucket – no matter how old you are.

Because there are many more permanent policies that actually end up paying a death claim, the cost for whole life is higher than term.  Don’t forget, though, that you “own” the home instead of renting it.  There is a cash value component of whole life that can be compared to equity in a home.  As time goes on your cash value, or equity, increases – it can be accessed by you for whatever reason your little heart desires via policy loans or withdrawals.   Check out our 8 things you didn’t know about life insurance infographic for some other little know tidbits.

Permanent life is pretty simple – it can however be adjusted and customized in many different ways depending on goals and situations.  A quick example: let’s say you’ve paid your whole life premium for 10 years and you have had enough.  You have the option to “freeze” the policy and eliminate your out of pocket premium cost while holding onto the majority of the death benefit and allowing the cash value to grow with interest and dividends.

Long story short, don’t look at whole life as a noose you are putting around your next until you die.  You have options as time goes on and understanding them is key.  When you graduate from this life your beneficiaries receive an income tax free check in the form of a death benefit.

Universal Life Insurance

You are not alone if you’re sitting there scratching your head asking, “how does universal life work?”  Out of all life insurance products available, universal life is by far the most confusing.  I consider myself to be a pretty bright guy and after having talked to many UL experts I still have a slew of questions that need answering.

Here is the gist of it….. Universal life combines an annual renewable term policy with an investment account that is usually tied to an index like the S&P 500.  Annual renewable term simple means that each year you are insured with a term policy that last 1 year.  After that year is up you will be re-qualified for the next year and so on.

In case you weren’t aware the older you get the more expensive term insurance becomes.  So each year your cost of insurance is steadily climbing and will eventually become outrageous.

In the mean time you are contributing extra money to the policy that goes into the investment account.  The investment account rises and falls with whatever index you chose to tie it to.

How often do you complain about your towel being a rip off?

Probably not very often, a towel is a towel is a towel. It tends to do what you expect it to do… unless, of course, its the ShamWow.

For those that don’t know, the ShamWow is one of those “As Seen On TV” products. It’s essentially a shammy, or towel, with tons of uses. It promises “you’ll say ‘Wow’ everytime.”

According to a couple ShamWow reviews, the problem isn’t that it doesn’t absorb or doesn’t work, it’s the fact that it over-promises and under-delivers.

Now you might be wondering what this has to do with Bank on Yourself… I’m getting there.

When products don’t meet expectations, you start to hear words like “scam” “fake” “phony” or the more creative type – like “ScamWow.” A quick google search for “ShamWow” will suggest related searches. The first of which is “ShamWow Scam.”

According to Google, Bank on Yourself produces related searches such as “bank on yourself scam” and “pamela yellen bank on yourself scam.”

Google.com

What is Bank On Yourself

Bank on Yourself was founded in 2002 by Pamela Yellen after learning some of the valuable characteristics of whole life insurance from the Infinite Banking pioneer Nelson Nash. As someone with a marketing background, Pamela decided to capitalize on the opportunity to highlight some of these benefits.

The goal of the Bank On Yourself strategy is to teach you some of the uncommon uses of dividend paying whole life insurance, and how you can adopt some of the ideas that big banks, corporations, and wealthy individuals have used for centuries into your own finances. Great right? After all, this is what we at Becomingyourownbank.com have been sharing for years as well.

Bank on Yourself, however, takes it a step farther than we feel comfortable. They seem to reveal some little-known features of whole life insurance that don’t seem to exist.

The problem here isn’t what Bank on Yourself ultimately promotes (whole life insurance), because we think it has some exciting uses as well. The problem we have found is that potential candidates of the strategy are left thinking it does more than it can.

Why Google Thinks Bank On Yourself Feels Like a Scam

Just like anything else, if it sounds too good to be true it probably is. Sounds corny, I know, but cliches are cliches because they’re true.

Allow me to quote from a Bank On Yourself video, which appears to be a theme throughout the Bankonyourself website, and other Bank on Yourself material:

“When you save your money in a Bank On Yourself plan, you can borrow it to pay cash for a car, or anything else you might want, and the money in your plan will continue growing as if you never touched a dime of it.”

And directly from the Bankonyourself website:

“you continue to receive the exact same annual guaranteed cash value increase PLUS the exact same dividend you would receive if you had never borrowed a penny. This let’s you use your money and still have it working for you.”

I welcome your corrections, but it sounds to me like you can borrow your money, and continue growing it as if you never touched it. Does this feel like a magic towel yet? It does to me.

The truth is this. In an insurance policy, you don’t EVER pay yourself interest. It is ALWAYS paid to the insurance company, while leaving your money untouched and growing. You control the lending situation, but you never pay yourself.

(You can learn more about how this works by checking out our Infinite Banking Tool Kit)

Check out this review on Amazon:

She mentions the 6% loan rate back to the general account of the insurance company but one time. The rest of the time she says “bank on yourself”. You are banking with the insurance company. There are convenience, privacy and “term-less” factors leaning toward using your policy, but with car loans at the same 6%, it’s nearly a wash if you set it up like she says: pay back on the same schedule like it was a car loan, plus a little extra. That insurance interest expense is ignored for 99.99% of the book. If she was licensed, it would be taken from her. Whole life with PUAR and no direct recognition is a great product. She and the others using “yourself” instead of “insurance company general account” are doing it no favors.

As you can see, we’re not the only one’s who think it’s a little misleading…

(Learn more about how policy loans really work)

Bank On Yourself Authorized Advisors

Pamela has created a network of “Authorized Advisors” that educate people on the use of dividend paying whole life insurance. Quite often, we are contacted by someone that is working with a “Bank On Yourself Authorized Advisor.” Before I explain what my observations are, here is a description of the authorization process according to Pamela Yellen.

• The potential candidate must have at least one year of full-time experience in insurance and financial services and complete a preliminary application. If the candidate passes this first step (which includes meeting several additional requirements set up by NACFA – a training organization in which I have no ownership), they are invited to apply for membership in the NACFA/BOY MasterMind Group
• Those applications are scrutinized according to multiple and proprietary criteria established by NACFA. Since 2009, only 5-10% of preliminary applicants have been accepted into the group
• In order to call themselves Authorized Advisors, the agent must study for and pass an 8-module (currently) training with manuals, videos and tests that all require a 100% score to pass. It takes an average of two full days for advisors to complete the material, and the average advisor has to make 2-3 attempts at each module to pass it
• Authorized Advisors are also expected to attend three hours of ongoing training tele-classes each month.

After talking with potential candidates that have met with these advisors, here are a few of my personal observations.

• Many of these advisors have a limited knowledge of how the product really works, leaving potential candidates thinking they can use their money from the policy, and have it continue to grow as well. This is consistent with what we see in her marketing materials.
• There is an inconsistency between these advisors. There are many highly qualified and respectable agents that work with Bank on Yourself, but many that seem to have a far lower level of proficiency in this concept.

Here’s how I see it. You might want to buy a towel-like product that does a good job absorbing more water than a traditional towel, but you don’t want to buy a piece of material that you think can prevent carpet stains from soda, effortlessly clean your counters, and never be ruined, only to find it’s just a little better than a regular towel… am I wrong? It’s not about the product, it’s often about the expectation.

The Bank on Yourself pitch seems to be over-hyped, and will under-deliver according to the information we’ve gathered.

Here’s another Amazon Review referencing Pamela’s book “Bank On Yourself”:

“I agree with all the reviews that criticize this book for its anecdotal, infomercial tone- the writing is more irritating than informative, and I was annoyed by all the come-ons that insist only the author’s website and stable of very special “Certified Advisors” can construct such an insurance policy for you. If it’s really so old and established, surely a fee-only, non-commissioned insurance broker, lawyer or other third-party professional could help you construct your own plan and not be confounded by the concepts in this book (as the author claims). For $15, I expect that I am paying for solid information I can use, not a drawn-out advertisement.”

Dividend paying whole life insurance has been around for over 200 years. Now granted, its not well understood, and not often sold in your best interest, but it’s not new territory. The Bank On Yourself advisors aren’t the only ones that get it… we think we have a pretty good idea of how it works too

The Truth About Whole Life Insurance

Now let me wrap this up. A properly structured whole life insurance policy has a lot of value. I personally own 3 policies. It is not, however, an unheard of strategy that banks “don’t want you to know about.” It’s a way to keep your money safe, earn competitive growth, and shelter your dollars from taxes. Within that, you have the ability to collateralize your policy, and borrow money from the insurance company at very competitive interest rates. By doing so, you will avoid being subject to interest rate changes by the federal reserve, much like Nelson Nash did in the 80′s (more on that in our interview with Nelson Nash). It provides great protection against future tax changes and interest changes that are inevitable.

(If you want to learn more about how dividend paying whole life insurance works, I recommend checking out our life insurance resource page, and seeing if it is something that fits with what you are looking for.)

This review of Bank on Yourself does a good job at summing up my point:

“Let me start by saying that I’ve been happy with the whole life policy I bought (against ‘expert’ advice) 22 years ago. Compared to the stock market hits I’ve sustained in 2001 and 2008, it’s been a steady, reliable performer, adding to my net worth… So, although I’m not anti-whole life, I also feel it’s not the panacea the author describes. It should be one part of a diverse investment portfolio, the majority of which should still be in traditional stocks/bonds/etc. This book is simplistic, and if you don’t read carefully, it can be misleading in its pitch to sell insurance.”

Your comments are welcome.

Jake

An Internal Revenue Service (IRS) rule that allows for penalty-free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-free early withdrawals, he or she must take at least five “substantially equal periodic payments” (SEPPs). The amount depends on the IRA owner’s life expectancy calculated with various IRS-approved methods.

The IRS Rule 72t is a great way to access money inside qualified plans before age 59 1/2. By accessing this money in “substantially equal periodic payments,” you avoid the 10% penalty normally associated with early withdrawal.

That was fun!  I’m sure you another couple  minutes to spare so head over and read the 5 reasons I don’t invest in mutual funds.

For those that aren’t familiar with exactly what they have, here is what a 401k actually does for you, then look at some 401k alternatives.

1. Defers taxes – Instead of paying taxes today, you can postpone those taxes to a later date.

2. Defers tax calculation – as the money grows, so does the tax along with it. When money is withdrawn, you are taxed on the future value, not the current value.

Back in the early 1980′s, when 401k plans began (more about this in our first Money Time Podcast here), they were designed to reduce taxes in retirement. Since the highest marginal tax bracket was around 90%, and retirement was based on pensions, it was easy to assume a lower tax bracket in the golden years.

So the logic behind the 401k plan is to postpone high income tax today to a lower tax bracket later.

Reality in Retirement

To assist in this discussion, we interviewed multiple CPAs to better understand tax brackets in retirement.

“Most folks expect a lower bracket, and that doesn’t develop the way they anticipate” – Rick Sager CPA

Rick was right in line with the other 5 CPAs we interviewed. It is becoming a rare situation that you actually retire at a lower tax brackets.

If, indeed, you do retire at a higher tax bracket, then technically you have “lost” as far as the game goes. You’ve essentially postponed lower taxes to higher ones. Sounds fun right?

If that’s the case, then we can rule out IRAs, SEPs, and other tax deferred sponsored plans as alternatives, since they essentially do the same thing… postpone taxes. That boils down my alternatives to 2 specific things, but first…

The Other Big Issue

Apart from the tax structure itself, 401k plans do the one thing that really gets under my skin. It takes away your control. The vast majority of 401k plans tie up your money with that 401k provider. You can’t touch, and you can’t use it.

This has essentially left 401k plans subject to high levels of risk by offering mainly stocks and mutual funds as investment options. While that may be appropriate at times, the vast majority of 401k owners are 100% at risk, and I can assure that in the last decade, those risks have not paid off.

Alternatives to Your 401k

So what 401k alternatives or alternatives investments are out there?

Let me name a few:

1. Roth IRA – A Roth IRA provides you the 2 things the 401k does not. It lets you pay the taxes now (in a lower tax bracket), and grow your money tax free. In addition to a better tax situation, it provide you the ability control in deciding where the money is invested. A great alternative to 401k plans that have little investment options outside of the stock market.

2. Permanent Life Insurance - When structured properly, a cash value life insurance policy be a great 401k alternative. Here are a few advantages:

Tax Structure – Similar to the Roth IRA, a permanent life insurance policy is funded with after tax dollars, and grows tax free.

Liquid – Unlike government qualified plans (including the Roth IRA), permanent life insurance is 100% liquid and accessible.

Guarantees – Permanent life insurance has no where to go but up. It provides solid guarantees that ensure growth, and no losses.

Safety – In addition to the other advantages above, these type of policies have been around for centuries. Time has tested and proven their ability to safe, predictable vehicles to grow your money.

All in all, I recommend looking at 401k alternatives above and beyond any company match (free money right?). Having more control over your tax situation and your investment option may prove to be a great financial decision.

Now more than ever you need to look at what you are doing with your money, and find ways to keep it safe and out of the tax loop.

Nick’s long lost cousin collected over $3,000 in pennies! Listen in as we talk about how far we would go to pick up loose change. Let’s just say some will go farther than others…

If there was a strategy out there that actually made sure you never retire, would you care to know what it is?

Maybe you wouldn’t care so much, unless of course you were one of the thousands that follow it, and didn’t know it.

That being said, there is a such a strategy, and it has been a mass failure.

What The Financial Guru’s Don’t Tell You

The financial gurus are full of advice. They may differ on small items, but the overall theme is resounding.

Cash value life insurance is one of the worst financial products available – Dave Ramsey

Whole Life insurance. That’s probably on the top of Ms. Orman here’s top hate list – Suze Orman

Buy term and invest the difference. – Dave Ramsey

Get term insurance. Invest in investments like mutual funds ands stocks. – Suze Orman

It makes you feel good inside that the people on TV and on the radio are telling you what to do. How would you feel if Suze Orman invested less than 4% of her money in mutual funds and stocks? According to an interview with the New York Times she does. In fact, while she tells you to take risk, she hardly takes any at all.

They also don’t tell you that there theory works based on 2 things. Mutual funds produce and whole life insurance doesn’t.

The Mutual Fund Myth Exposed

There’s no reason to rely on theory here. The facts say enough. Ever heard of Dalbar? They are a leading financial services market research firm, and they’ve got all the numbers you can handle. Look at the returns for mutual funds in the last 20 years (which is the best case scenario)

In the last 20 years the returns are less than 2%. Oh… and that doesn’t account for the taxes either. Then add the cost of insurance. How’s this strategy looking so far?

Whole Life Insurance Gets Even Better

So how does the product that tops Suze Orman’s all time hate list compare? A case study by Mass Mutual, a life insurance company, about life insurance returns, shows that over a 28 year period, the returns were between 4.49% to 6.52%.

Now don’t take into account taxes (because its tax free), and don’t add the cost of insurance (because its already included in the returns).

How To Never Retire

So if you want to ensure that you never retire, the best thing you can do is invest in mutual funds, and buy term insurance. The risk, poor returns, fees, and added costs will certainly be enough to keep you handcuffed to a day job for the rest of your life.

Now what do you think? Do you agree or do you think I couldn’t be any more wrong? Make your comments below. And tweet your opinion.

“Whole Life insurance is better than buying term and investing the difference” – Click to Tweet

“Buying term and investing the difference is better than buying whole life insurance” – Click to Tweet

*Photo credit: http://www.flickr.com/photos/76657755@N04/7214600922/sizes/n/in/photostream/

There’s this thing called a mutual fund. I know you’ve heard of it. Most of you probably have money invested in some. I know people that have lost huge amounts of money, have had to completely revise their retirement goals, and continue to pack money into these funds (I used to be one of them). You may be making the biggest mistake of your life, and the worst part is your passive about it. Most of you that invest in mutual funds can’t even accurately tell me any details. You simply look away… like that will help you sleep at night. America doesn’t seem to care that the road their on is treacherous, and could bring them great harm.

A mutual fund is basically a compilation of a lot of stocks and other investments into one fund. Why? So you can “diversify” and “hedge your risk.” Its true that if you throw all your eggs in one basket, you might lose it all, right? Ya, if the place you are investing is like playing Roulette. More on that later.

I believe the mutual fund market is a sham. A place for the savvy to take advantage of those whose lives involve working everyday, coming to a messy home and busy spouse, running to soccer games, and a list of a million other things that don’t allow them to track every move their investment advisor makes. Let me share with you why mutual funds do not work.

First and foremost. How did we fall into this idea that if you can’t pick winners, you just pick a bunch of hopefuls, knowing some will lose money and some will gain money. Not only does it help prevent losses, but it prevents the gains as well! How do you assume that if you have some winners, and some losers, you’ll come out all that far ahead?

Second. Mutual funds have been involved in so many scams its sick. Just read the book “The Pirates of Manhattan.” You wanna talk about corrupt? That book has all you can handle. Its now illegal (even though it still happens), but big fund managers used to buy shares in certain stocks, then throw their fund money into it- causing it to boom, then dump it, making a bunch of money for themselves, and leaving every one else to hang dry. Not only that, but the fees, kickbacks, and money exchanges that go on in that world are unfathomable. Believe me, there are a lot of people making money on mutual funds, but the investor isn’t one of them.

Third. How long does it take to realize it doesn’t work? Mutual funds have averaged less than 2% a year over the last few decades (read this Dalbar study at Investorsinsight.com), and yet I still hear people say they can get 12%. Keyword is “can.” No one ever says they “have”. You might have one good year, but its certain to follow with the bad. Just ask all the people around you that have been devastated in the past few years.

Fourth. The Mutual Fund Millionaire. Have you ever heard of someone that made millions by investing in mutual funds? Of course not. I’ve been in the financial planning world for 5 years now, and not one person I know of has made their millions in mutual funds. Here’s the thing though… Almost every single one of you has seen projections that would promise otherwise. They look something like this:

1% a month is 12% a year. 270 months is 22.5 years.

I pulled this from CalculatorSoup.com. If you save $800 dollars a month and earn 12% a year, you would be a millionaire in 22.5 years. Now $800 a month is not a lot for the average saver, especially those getting a match in there 401k. So how many millionaires do you know?  If all I had to do was save $800 every month to be a millionaire, wouldn’t we all be millionaires? Needless to say I know a lot of people that save $800 a month (easily), and I know few that are millionaires. Riddle me that….

Fifth and final. Roulette. Of course you want to diversify. I would too. The fluctuations in stocks are as much of a gamble as the slot machines in Vegas. If a company goes under, you’ll have nothing to show for it. Businesses die every day, and new ones start. Its the circle of life.

Do you know how stocks go up  or down in value? Few do. If you said company growth and profits, I’m sorry to be the one tell you that you are wrong. Stock value is based on simple supply and demand. Lots of people buy, stock goes up, lots of people sell, stock goes down. Now who has a formula or software that predicts when people will buy or sell? I’d be interested….

I prefer much more intelligent ways to invest my money. Mutual funds…. no thank you.

Now tell me what you think in the comments below. Am I totally off, or do you agree?

You probably don’t hear that much. Most people dread life insurance, but know they need it. So what’s different about me? I’d say I’m one of lucky one’s who has learned the “inside scoop” about life insurance, and how to use it for your benefit. While most people buy it all the same, boring way, I do it almost the opposite.

Today life insurance is the most important asset I own. I own as much life insurance as I possibly can, and can’t seem to purchase enough. Is it because I am so altruistic, and want to pass on a lot of money to family? Thats part of it, but I’m a little more selfish than that. It serves many purposes, but here are a few of the reasons I use it:

1. Cash Value- I buy high cash value whole life insurance. By doing so, I actually have most of my money available day 1, and I can use it anytime I want. The cash value is safe, and grows very well. I can access this money any time I want to, and I have. I use it just like a bank. I borrow from it and pay it back. I’ve used it for cars, medical expenses, and I’ve even purchased real estate entirely from my cash value.
2. Growth- With over 200 years of history, life insurance is one of the most predictable places to have money, and the growth is very competitive. You can read more about life insurance returns, and safety in our post about life insurance investing. The best part, however, is my ability to take those dollars and put them to better use (like my real estate) any time I want to.
3. Death Benefit- There is not much more comforting than knowing my family will have what they need if I die. Even though I use this tool as a better way to handle our family finances, it also gives me the coverage I need, and it seems to be a bonus.
4. Taxes- I do not like taxes…. who does? Life insurance is tax free and I can use it tax free. The death benefit then passes to my family tax free. It has the most tax advantages of any asset out there. That is exactly why big banks and corporations by it by the billions.

What do I mean? The answer is simple, so let’s take a look inside a 401k, or any corporate matching qualified plan, and see how our rate of return is affected.

Now the first thing we need to understand is that a 401k is going to defer the tax, meaning put the taxes off for later.

If you went to the bank and asked them for 10 year loan, you would ask them for the terms of the loan as well. What if the banker said this to you, “you know what, I really don’t know how much I’m going to need, so how about this. Take the money now, and in 10 years, I’ll let you know how much I need.”

You wouldn’t take that that loan in 1000 years. But isn’t that the same thing the government is offering us in our qualified plan?

That being said there is 1 thing to first remember about our qualified plan, that is taxes.

If I get an overall 10 percent rate of return, how do taxes affect this?

Well if I’m in a 35 percent tax bracket when I retire, but for the first 20 years I was in a 21 percent tax bracket, does that affect my rate of return?

Yes. You have to remember if you pay a fee that you originally wouldn’t have paid, you have given up dollars that you didn’t have to give up. So, this 20 years at a 21 percent tax bracket is going to lower our rate of return to around 9 percent.

Even though this is out of your control, it’s important to understand.

Now here is the real meat of what I wanted to share with you. Every dollar you contribute over your qualified plan match lowers your rate of return.

Does that sound confusing? Untrue? Well let’s take a look at a scenario and figure this out.

So let’s say Joe is calculating his qualified plan rate of return. His investment return is 10 percent (I’m going to use 10 percent throughout this entire post, please understand this is purely to teach the philosopy behind the concepts here and not an actual account). He contributes $5,000, the minimum he has to contribute to get a $2,500 dollar match. His rate of return is 12%. Why? Because his match is increasing his rate of return.

However, let’s say he wants to increase the amount of money he puts into his qualified plan, let’s look at the dollar amount and its corrisponding rate of return.

$7,500 – 11.44 rr

$10,00 – 11.12 rr

$15,000 – 10.77 rr

$20,000 – 10.5 rr

What does this mean? It means that the more money I put in on top of my match, the lower my rate of return is going to be, because I have lowered the effectiveness of my company match. The higher my company match is as a percentage of my dollars, the higher my rate of return will be.

Now there is one other thing to understand, and that’s the difference between a qualified plan and a tax free account.

If I am getting a 10 percent rate of return in my qualified plan, and a 10 percent rate of return in a tax free account – let’s say no match in either to start out — which balance will be higher in the end?

The answer is, they will be the exact same.

This is because what is happening in a qualified plan? The taxes are a portion of the dollars, and that portion is growing right along side with your principle. So all that is happening is your taxes grow at the same rate as your actual dollars.

So the only difference in a qualified plan vs. a tax free account is the match.

If I contribute $5,000 dollars to a tax free account, and $5,000 dollars to a qualified plan with a $2,500 dollar match, in the end I will have around $300,000 dollars more in my qualified plan. However, what if I raise my contributions to $20,000 a year?

My qualified plan beats my tax free plan by $300,000 dollars. No change. The match is all that has an affect here.

So, in order to get the highest rate of return in your qualified plan, what do you need to do? I hope you can answer that question now, and I hope you see now that the real value in a qualified plan is the match, contributing the minimum amount to get the match is going to give you the highest rate of return. And that there still is the potential risk of losing money depending on what the government decides to do with taxes.

Stocks

Crestmont research did some fantastic research about the stock market from 1900-present. The interesting part of this research is that the biggest growth in the stock market was between 1978-1999 where there were only 6 years (of those 21 years) where we didn’t have double digit growth. On top of that, only 2 of those 6 years were losing years.

It’s also interesting when we compare this to history. Did something happen in 1978 to cause such massive growth in the stock market? Well in fact yes there was such an event, the 401k.

With government 401k plans becoming available retirement savings begins to all funnel where? Into the stock market. And when everyone is buying stock that causes the demand to go up, and with that the prices go up.

Now to add to this mess (and talk about bad timing) those who were working in 1978 we like to refer to as “the baby boomers.”

So, what situation does that leave us in today? Well we have the largest generation of retirees pulling money out from the market, leaving us with the dead weight of the largest ponzy scheme in history. And understand they are only starting to retire, so more and more of this money will be pulled out of the markets over the next ten years, with little money being put back into the market to replace it.

It’s no wonder people are looking for alternative investments to the stock market, the volatility has been all over the board for the last ten years, and the future isn’t looking any more predictable.

Mutual Funds

One of our authors Jake Thompson did a fabulous expose called, 5 Reasons NOT to Invest in Mutual Funds where I’ll be taking a majority of this information for this section from.

The mutual fund industry is a fantastic place to be, if you are a mutual fund manager. However, for those investing money in mutual funds this is not the case. There have been so many scams and so much illegal activity behind mutual funds it’s sick.

Mutual funds have averaged less than 2 percent for the last few decades (you can read Dalbar’s study here), so they have been even less reliable than stocks. Sure you minimize your risk, but you minimize your losses, and how long do you want to try to walk up on the down escalator before you just give up?

I’ve never met a mutual fund millionaire, it doesn’t exist.

401k’s

Now the 401k has some additional benefits that make it a better investment, right? Well let’s take a look at some of these benefits and analyze them.

I know it’s hard to walk away from the company match, and that’s a decision you have to make with some careful consideration, but what most people don’t like about the 401k is the loss of liquidity, or that they don’t have access to their money.

The problem that arises are these: What if I have a business opportunity, investment opportunity, or I fall into hard times? In each of these cases, a 401k can be your worst enemy because it will trap your money. Unless you want to pay high fees, you can’t take the money out of your 401k, making it a double edged sword.

The other reason most people get involved in 401k’s is that it defers their taxes until later, but let’s look at a scenario and see if we can get a better idea of the consequence of postponing taxes.

Let’s say I’m a bank, and you need to borrow $10,000. You come to me and ask for a loan and I agree. The first thing you are going to ask me is, “What are the terms.” Now, if I say back to you, “Well, I don’t know. I really don’t know how much money I’m going to need. So here, take the loan, and when you are ready to pay the loan back I’ll let you know the interest rate.”

There is no way you would take that loan in a million years. But isn’t this exactly what you are doing in your 401k? You don’t have any clue what the tax rate is going to be in 1, 5, 10, or 20 years when you take the money out. You take that risk when you put money into a 401k, and I don’t know about you but the way our country is going I don’t expect taxes to go down.

We’ll get to 401k alternatives in a minute. But first let’s look at…

Bonds

When people want safety, and they get sick of all the negative aspects and losses of their stocks and mutual funds, often they turn to bonds. Bonds can be a great place for your dollars to be safe and grow slowly. However, bonds lack liquidity–meaning you can’t access the dollars until the bond matures. But what if there was something just as safe and proven as a bond, that also gave you tax free growth? Well, let’s take a look at our best alternative investment.

Cash Value Alternative

The most secure, predictable, and tax-advantaged alternative investment to the market is cash value, permanent whole life insurance. You may think life insurance is a bad place to store money, or maybe you didn’t realize you could build up cash in a whole life insurance policy, but the truth is most of the people that are against life insurance either don’t understand it, or worse if you save money in life insurance they won’t make money.

However, aside from what the so called “experts” tell you, whole life insurance is the most tax advantaged place to put your money, and it’s the easiest place to access cash while your money grows.

What are the tax advantages of this alternative investment? The money in a cash value life insurance policy will grow tax free, if treated properly it will never be taxed, and when you die the death benefit from the policy (which is always greater than your cash value until you are over 100 years old) will transfer to your beneficiaries with no taxes. So, I will repeat simply, if you don’t close the account you won’t pay another dime in taxes on principle or growth ever.

What about safety? Life insurance is tied to safe investments by the life insurance company (who are some of the safest and smartest investors historically). They guarantee you that you will never lose principle or growth on your money. Like a bond it is safe, but the difference is that life insurance dollars are accessible for you to borrow out and use anytime. And also, what bond has a death benefit attached? None. But using life insurance as an investment puts your risk of death on the shoulders of the life insurance company, adding another layer of safety.

Don’t just take my word for all this, we have some great books that we are willing to offer you free–for a limited time. Sign up below and learn for yourself all the details about cash value whole life insurance that you never knew.

How great would it feel to know you got a deal on something you never thought you could?

That’s an easy answer. It would feel great!

I decided to put this to the test, and get a deal on something I thought would be near impossible.

How Creativity Creates Uncommon Results

I started landscaping my backyard a few months ago, and after hours of putting in sprinklers, garden boxes, rocks, and a lot of other items, it came time to actually make it look good. After two failures when trying to seed, we decided it was getting late in the summer, and just needed to get some sod (I’m no pro).

I decided to make it a challenge. Could I really get a good deal on sod? Other than trying to find scraps on craigslist (which would have taken a few years to get enough to fill my backyard), I couldn’t seem to find a deal.

So here’s what I did. As a landscaper (of my own home anyway), I tried to get an account at one of the sod farms, and get a discount. It would have worked if I had a license and could commit to a bigger purchase than I needed, so that was out.

I failed, but I learned something from that failure. I learned that landscapers can get a good discount. Which was what I need to know to get the results I wanted.

Like fate, I ran into a neighborhood friend who happened to be a landscaper. I asked if he could help me out and he did. All he had to do was make a call. I picked it up, I paid for it, and I got a sweet deal.

Normal Price: $.22 per square foot

Discount Price: $.18 per square foot

Not a huge discount, but still a discount.

How You Can Get Discounts on Almost Everything

A deal can be found on almost everything. Here are some things you can do to explore your options.

• Check online- people get deals all the time and blog about them (like me).
• Ask friends- a lot of people have insights you would be surprised to hear. Ask around, and use social media.
• Ask for deals- just ask for a discount. You’ll find more businesses are willing to offer discounts than you might think.

Now tell me what you think. Does creativity help? What have you done to get uncommon deals?

We live in a culture of I want it now, credit cards, quick loans, social security, and government handouts creating an atmosphere of little planning for the future and makes us feel entitled to whatever we want, giving us a false sense of safety. It seems the mentality is, “everything will work out for me eventually, if I can’t figure it out someone else will for me.”

Margaret Heffernan (no relation to Doug that I know of) says in her recent article on economics,

“It’s worth noting that I know many people in banking and finance who are committed to using their expertise and their institutions to empower and fuel constructive, value-creating businesses. What troubles me is that they are mostly overwhelmed by a culture that just can’t resist the fast buck, market flimflammery, and related manipulation that earns them champagne, big bonuses, and the admiration of their professional peers. ”

However, is it really our fault as a culture? Who created this culture?

“You Have to Be Trusted By People That You Lie To”

I’m seeing all around me, stories of banks getting involved in millions, and billions, of dollars of risky investments–and losing a lot of money. We see large investment banks struggling or even going out of business. And at the base of all this, it seems the mentality, no matter who originated it, isn’t working out too well for anyone.

Whenever there is a bubble, a mentality, an ideology, or any type of overall culture persuasion, you can usually bet the media, usually with money on the mind, has something to do with it.

And this is exactly where I would say the origination of this “culture” comes from.

When large mutual fund companies, banks, and other investing giants have a lot to gain from your dollars staying in their pockets, of course they are going to take a good chunk of your money and put it to use, convincing you to give them more of your money. Or advertising.

This is where huge media corporations make so much money, so why wouldn’t they start a channel or 2 just for financing advice, where they can make a lot of green?

This is where those touting investment advice and the media come together to make this insatiable Goliath.

Why do you think people like Dave Ramsey and Suze Orman stay on the bill?

It’s in everyone’s best interest to keep this easy-money market mentality going, everyone but you the consumer.

What Can David Do?

I say it’s all about control. If you want to stop major banks from investing our dollars in risky investments, we have to give them less control, if you want to stop the hemorrhaging of retirement dollars down the market drain, we have to give them less control, if we want to stop creating major bubbles and giving Wall Street brokers our dollars to buy their 4th vacation home off the coast of the Mediterranean where you most likely will never even go, we have to give them less control.

We can’t continue to permeate an unhealthy state of mind and expect a healthy state of economics or government to exist. Because, even though the chips are stacked against us, and even though I have painted the picture that the fault is on them, they cannot give us anything we do not accept. So leave it all on the table, and keep your control.
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Is the Infinite Banking Concept a scam?

If it is, you certainly don’t want to be the sucker that got conned, and if it isn’t, you could be passing up what could possibly be a great solution to a lot of financial headaches.

The Truth Behind Infinite Banking

In the early 80′s there was a real estate investor named Nelson Nash. If you remember the early 80′s, interest rates where out the roof, and real estate investors like Nelson Nash were getting hit hard. In our interview with Nelson Nash, he shared with us that the interest he was paying had climbed to 23%. Something that could happen again in the next few years.

Nelson had a few permanent life insurance policies at the time, and realized he could borrow from them at 5%, 6%, and 8%, while everyone else would be stuck paying high interest rates. It not only saved his business, but it changed his life. He had accidentally discovered a diamond in the rough.

Since then, Nelson has wrote a book called Becoming Your Own Banker, and has been invited to speak at high level conferences throughout the world, sharing insights about the far too uncommon strategy called Infinite Banking.

Why Its Not a Scam

The Infinite Banking Strategy is called a scam only by those that know nothing about it. In fact, its  basic concept has been used longer than almost any financial strategy in history.

A few examples are:

• Ray Kroc started McDonald’s with this strategy
• James Cash Penny kept his company J.C. Penny running through the Great Depression with this strategy
• Doris Christopher started The Pampered Chef with this strategy
• Walt Disney started Disney with this strategy

*photo credit: http://www.flickr.com/photos/rosengrant/3545047810/

And the winner is….

I’ll get right to the final results because I know that’s all you really care about anyway.  The USA came in fourth place in overall financial literacy.  We may not get to stand on the medal podium but I would say high fives are in order.  Topping the list was Brazil, followed by Mexico, Australia and then the good old USA.

But before we start slapping hands

I don’t want put a damper on this party but I do want to point out some of the findings.  After all there were a lot of people that worked really hard to put this study together and we don’t want their work to go overlooked.  A series of questions were asked to a boat load of people from each country and the results were compiled in a very clean looking report where each country is ranked for each question.

The question that caught my attention was: “To what extent would you say that teenagers and young adults understand money management basics and are adequately prepared to manage their own money?”  I hate to break it to you but the USA was almost dead last in this category, with a score of 18.5.  Keep in mind this is out of 100 possible points.  To translate: Americans don’t feel that teenagers and young adults are even close to being ready to handle their own money.

He was expected to make a decision right then about how he was going to save for his retirement, how he was going to allocate his contributions and pick between 50+ mutual fund portfolios.  In my opinion that’s a pretty big decision and should be given a little more than 5 minutes worth of thought.  Unfortunately, most simply follow the financial crowd and hope for the best.

Here is something I can’t understand: the average person will spend more time clipping coupons to save money on toothpaste and toilet paper than they will understanding exactly what’s happening in their retirement account(s).   We have been brainwashed into thinking that all we have to do is set it and forget it and when it’s time to retire we’ll be sitting pretty (based on past market performance, of course).

Now don’t get me wrong here, I’m not saying that you should run like crazy from the options mentioned above.  The point I’m getting at is that there has to be some thought put into a decision this big.  There are thousands of different allocation and diversification options inside government sponsored retirement plans, some of which are much safer than others.  The problem is most people don’t take the time to understand exactly where their money is invested.  Aside from that, most don’t take the time to educate themselves on any alternatives that are available.   Maybe access to your money along the way in important to you so a 401k or IRA might not be a good option.  You need to ask the hard questions to those managing your money and if they can’t answer them, find someone who can.

Why a safe retirement investment is so vital

All you have to do is listen to the stories of those who planned on retiring in late 2007 and 2008 and the importance of safety will slap you across the face.  Some lost over half their savings and are now having to live on less or in most cases work far past the point they wanted to.  The most important time in life to have money to live on is when you are not working to make it, so why would you risk not having enough and putting a damper on your golden years?

There has to be a change.  On top of America’s incredibly poor savings rate, we are risking  money we will need to rely on the most. Safe retirement investments are out there, maybe you know of one. Share your experience with your retirement accounts, lets hear about the good, the bad and even the ugly.
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If you are like millions that have been invested in the stock market, hoping that the “buy and hold” strategy will work, this news should make you cringe.  Think about it, you would have been better off investing in those boring old bonds that nobody pays attention to instead of holding on for dear life as the market played with your money.

This is the classic battle of tortoise versus the hare and the tortoise just caught up.  The fact that bonds have edged out stocks goes against what most have been taught and at the same time makes stock investors wonder why they have endured incredible volatility  in exchange for lower returns.

So it begs the question, what is the value of having money in stocks and mutual funds?  It also points out the unfortunate truth that our nation is incredibly under-educated about stock market alternatives.

There are a handful of these banking friendly companies out there, surely you’ve heard of a few of them and you may have never heard of one or two. Let me break down what you should look for when considering a company for infinite banking:

Mutual Company No matter what the company has to be a mutual company. It’s just a fancy way of saying you and all the other policy holders are mutual owners of the company. Meaning you get to share in the growth the company realizes, instead of that growth going into the pockets of share and stock holders.

100+ Year Dividend History Whole life insurance is really old. You should go with a company that is aged to perfection and has paid dividends for at least 100 years straight. What that tells you is that even through the great depression and all the recessions our country has seen the insurance company remained solid and strong.

Its funny to me that some agents refuse to tell you which insurance companies they work with when utilizing the banking concept, as if that information will allow you to do something without them. The fact of the matter is you have to work through an agent to get to  the insurance company and, in my opinion, the agent is 10 times more important than the company. Here is a list of the companies that I have used for Infinite Banking: (in no particular order)

-Lafayette Life
-Mass Mutual
-Mutual Trust
-Guardian
-One America (AUL)

No one of these companies has a magic formula or secret calculation, they are all working with the same data. One may be bigger and more well known than another but all are very highly rated, and have what we’re looking for in an insurance company.

I’ll try not to beat a dead horse but will emphasize again the fact that the insurance company is important but the agent communicating on your behalf with the insurance company is even more important. Go with the company that makes you feel comfortable and offers you the above characteristics and  go with the agent that will do what’s best for you.

This is actually the start of a new category for me, Moola Mind Deals, where I’m going to start sharing the deals I find, where I find them, how I find them, and how much I buy them for. You can click on the category tag under the title if you want to read more Moola Mind Deals.

The following items were found on craigslist. Now as a slight disclaimer, I am always hesitant to buy certain items on craigslist. For example, I would NEVER buy a mattress, that grosses me out. So when it came to getting these baby items, we made sure they were in pristine condition, and we could wash them. So I’m happy to say that all the items we have purchased have been extremely clean, AND we have washed them.

Shermag Glider Rocker

Retail (Diapers.com): 237.99

Craigslist Price: $90

I’ve seen these priced at more and I’ve seen them for less, but this particular brand is a little nicer than some of the other glider rockers out there, and therefore more expensive. We didn’t really like the cheap styles and wanted something a little nicer.

This particular glider rocker took me a few weeks to find, because I like to make sure its near new, and in pristine condition. I don’t like the idea of cloth being used, so it takes me more time than maybe others.

When we got to the house to check this out, the chair was in very good condition, and the home it came from was very nice and clean, which to me is important. We knew it was a great deal, and bought it.

Graco Lovin’ Hug® Infant Swing

Retail (GracoBaby.com): $109.99

Craigslist Price: $30

This was a great find. It took me about a week to find it. The funny thing was that when we went out to see it, we realized we had bought 2  items from her already, and that was over a year ago! She must be a craigslist addict too! Very nice lady, very high quality items, and very clean home, so we bought it.

Graco Quattro Tour Stroller

Retail (Gracobaby.com): $159.99

Craigslist Price: $30

Now this one we found is a little older than a brand new one from Graco, but, in my opinion, it works just as well.

This particular stroller we bought from a guy, on craigslist, that used to install (believe it or not) car seats. He bought this top of the line a while back, but didn’t need it anymore. It, like the other items, is in excellent condition, because it kind of makes my skin crawl to think it would be any less clean.

Defining Paid Up Additions

To be more technical, paid up additions are an immediate purchase of life insurance coverage (death benefit) in full. That paid up insurance then adds cash value equal to the paid up price.

Let me break that down a little bit. Make sure you read the example at the bottom, it will clarify even further.

A purchase of paid up additions is essentially paying for the death benefit, in full, today. Because it is being paid for, in full (hence the name “paid up”), there are no premiums or insurance costs associated. It is fully paid for insurance. This also means that the dollar you used to pay for the insurance are now dollars added to your cash value. Simply put, its money you put into your policy that goes into cash value, and gives you more death benefit.

Paid up additions can be paid for out of pocket, or can be purchased with dividends.

One of the main uses of the paid up additions rider is to add cash value to the policy. This is especially beneficial if you are using life insurance as an investment, and want to accumulate cash value quicker. When you contribute to the paid up additions rider, those dollars ultimately increase cash value and increase death benefit. This can have significant advantages (safe, liquid, tax friendly). Check out our high cash value life insurance resource page for more information on why this can be beneficial, and how to create it.

Flexible vs Non-Flexible

Every insurance company is different. Some have a flexible paid up additions rider, where you can contribute as much or as little as you would like into the rider from year to year. Others are less flexible, and if you do not continue to contribute to the rider at the same levels, you can risk losing the rider and having to reapply for it in the future.

Adding the PUA Rider

To take advantage of the paid up additions rider, it needs to be structured into the policy when you purchase it. Some companies may allow you to add it in the future, but it may be subject to health, age, and other factors.

A Hypothetical Example

A 35 year old purchases a policy with an annual base premium of $4,000 dollars. This premium purchases $200,000 of death benefit.

This individual decides to pay and extra $6,000 into a paid up additions rider in the first year. The paid up additions will give him an immediate cash value of $6,000, and add $30,000 to his death benefit.

He ends up paying $10,000, with $6,000 going to cash value, and a total death benefit of $230,000. If he continues to purchase paid up additions, he will continue to increase his cash value, and his death benefit as time goes on.

Make sure to sign up for our Infinite Banking Tool Kit to get more information on how to use the PUA Rider.

If you follow NBA basketball in any way, you’ll know there are a lot of moving parts. There are hundreds of players, hundreds of contracts, dozens of teams, and a lot of trading. Teams are constantly deciding how to create the best combination of players and talent. Some of these players come at a price, and some come with contracts they have to keep. Your finances are no different.

We can learn a lot from these organizations about how we should run our own finances. If we were half as vigilant about our finances as they were about their teams, we would stand to gain a lot. We too, play by a similar set of rules. Just like the Lakers looks for the best things for their organization, we look for the best things for us. These items (home, car, food, clothing, etc) come at a price, and often come with a  commitment. My home mortgage is expensive, and comes with a 30 year commitment. My phone bill is much cheaper, especially with the tips I use to save on my phone bill, but it comes with a 2 year commitment.

So what do the Lakers do when those commitments are up? They reevaluate their situation, and look to trade. Hence how the Lakers acquired #10 Steve Nash. We should do likewise. When your phone commitment is up, you should look to trade. When your next auto insurance, or life insurance premium is due, you should look to trade. When better mortgages rates enter the game, you should look to trade. Consistently looking for better options in managing the game of finance can make you feel like a winner. And winners get paid.

Will you always trade? No. Kobe’s been with the Lakers for 15 years now, but I can assure you they have made the analysis. You don’t always have to switch phone carriers or insurance companies, but you have to look at what will, overall, be most beneficial for you and your finances.

I will end my thoughts with one final, controversial thought…

Kobe is the greatest player of all time.

Dividend Paying whole life insurance is a whole life insurance policy that has cash value and pays dividends. The term “dividend paying” is more accurately defined as “participating.”

According to Investopedia a participating policy is defined as: ”An insurance contract that pays dividends to the policy holder.”

Unlike a traditional corporation, or other insurance companies, a participating, or dividend paying, policy does not pay profits to stockholders. All profits from the company go to policy holders, and are payed out in the form of a dividend. In other words, as profits are generated from external investments, they are distributed to those participating,  the policy holders.

Although dividends are not guaranteed to policyholders, many life insurance companies that offer these types of policies have paid them consecutively for over a century. Lafayette Life, a company founded in 1905, is one of these. According to their Legacy of Trust pamphlet,

“Lafayette Life has remained strong
despite the impact of two world wars, the
Great Depression, the stock market crash
and the challenges of a changing
marketplace, industry and society.
Nothing has deterred Lafayette Life from
meeting its primary obligation to policy
owners. Additionally, although dividends
are not guaranteed, Lafayette Life has
never failed to pay a policy dividend to a
dividend paying policy.”

This is consistent with most every dividend paying whole life insurance policy.

Advantages of Dividend Paying Whole Life Insurance

• A level premium guaranteed to remain constant, and never increase.
• A guaranteed death benefit
• Tax Free Dividends
• Tax Free Growth
• Liquidity and complete access to cash value
• Guaranteed growth every year, with no loss provisions
• Strong Growth