How You Define Retirement May Mean You Will Actually be Able to Retire…

Most people have a specific amount of money they dream of having at retirement.  I hear $1 million all the time — that this would be enough by most people’s standards.  I also hear that winning the lottery would do it, although this seldom happens.   Sometimes I hear people plan on inheriting a large sum of money.  But none of these ideas are very realistic in terms of what retirement is really all about.

So what does it mean to retire, especially to you? Does it mean you stop working at the set age of 65? Does it mean sitting back with $1 million, or does it mean getting old and falling apart?

Let me offer you my definition of retirement: 

“To have enough passive income that when I wake up in the morning, I can elect to work or not.” 

This definition has some real meat you can sink your teeth into and some attractiveness to it because it is not a monetary figure or a specific age. Let’s face it, some people will not be able to quit working at 65, and some people will not accumulate $1 million, but that doesn’t mean they can’t have a good retirement.  Some people want to work until the day they die, if they’re able, and that’s not necessarily because they have to. Some people want to quit work altogether and travel the world. And some want to retire somewhere in between these two.  What I try to help my clients see is that setting up methods of creating income out of existing money and resources that they cannot outlive and does not require their active work to generate is what they really ought to be concentrating on, not trying to save a certain figure by a certain age.

What passive income means is different for every person.  What amount of passive income would you like so that you could decide to work or not? Not everyone needs a million dollars to feel like they can retire.

To think of being prepared for retirement as only saving a set amount of money, such as $1 million can be very depressing, especially when it’s pretty hard, almost impossible to save that million. It’s much easier to learn how to generate passive income that does not count on your activity for its creation.

Here’s an example of creating a retirement using passive income:  One of my clients used active income that he generated during his working years to buy a simple do-it-yourself car wash, you know the kind where you drive your car into the bay, put quarters in, and spray down your car with a hose and soap. Taking the profits from that first car wash, he then went on to purchase two more. These car wash locations provide an average of over $12,000 monthly passive income for him, and that’s after what he spends to maintain them. He doesn’t work at any of these car wash locations, he isn’t washing any of the cars himself, but he’s making money off them. Of course, the amount of money he makes varies at different times of the year, and he has taxes to pay and bookkeeping and other maintenance costs to pay but he recently told me that if sold the three locations, he would have about $400,000 in cash. He would have to pay taxes on this amount, but it would provide him a serious chunk of change he could then also live on, if he no longer wished to continue maintaining the three sites.

Trying to come up with $1 million by a set age is pretty hard, whereas creating $12,000 a month from a business activity that basically runs itself is a lot easier. After all, $12,000 a month is $144,000 a year.  If you divide $1,000,000 into $144,000 earnings you’ll find you would be making a 14.4 percent rate of return on your money.  So wouldn’t you conclude that investing in three car washes with a total value of   $400,000 would be easier than trying and save $1,000,000 from your day-to day-work?

Now’s the time to think about defining retirement for yourself. It isn’t about a set amount of money, or a specific age. It’s about determining how you can create enough passive income so you will have the freedom to do the things you want to do once your active working years are over. Perhaps you do want to continue working as you get older. Perhaps you want to travel, or spend more time with your kids and grandkids. Perhaps you want to do philanthropic work, or finish your college education. Maybe you want to write the next great American novel, or try to get a book of poetry published. Perhaps you want to sit and do nothing all day. Having the freedom to choose what  your path will be in retirement has nothing to do with set figures and ages. It has everything to do with how well you can set up a predictable income that you cannot outlive.  Defining retirement for yourself now, when you can explore more options than just working like a dog and trying to squirrel away money might mean the difference between working until death, or free time and fun times.  There are so many options for creating passive income that I would love to share with you. Contact me today: peter@moneymastery.com.

Whatever retirement might mean to you, see it clearly, define it in writing and refer to it often so you can track precisely when you will have enough passive income to quit active day-to-day work.  Share with me your successes and I will publish on our Website. 

Statistics Will Most Likely Determine How Well You Play the Financial Game…

If someone didn’t track the numbers LeBron James posts every week, do you think he would be making millions of dollars playing basketball? Of course not.  Isn’t it true that every player gets paid according to how well they average at these numbers?

Take a look at some of these stats:

It’s fun to watch elite athletes doing amazing things we can only dream of!  Wouldn’t it be equally fun to watch your own amazing numbers in terms of your financial abilities? Those who are doing great things with their finances are seeing some amazing opportunities present themselves, just like these star athletes, things like seeing their savings grow exponentially due to compounding interest, eliminating all debt including their mortgage in a short amount of time, and having the cash flow to invest in real estate that can make them more money. The truth of the matter is, just like professional athletes who are paid based on their numbers, you will “get paid” by how well you do the following:

  • Save money each month, and not go into further debt.
  • Pay off debts each month.
  • Manage emergencies that arise.
  • Provide fun activities for your family that you don’t put on a credit card.
  • Prepare for retirement.
  • Lower your taxes.

To take the sports analogy a little further, let’s suppose the following:

If you don’t track how you’re doing in these areas, you will fail financially and be “kicked off the team” so to speak.

If you don’t track your money and end up not performing well in your own personal financial game, you may be substituted out, or traded.  In a marriage, this is called a divorce and it is expensive!

Just as in sports, if you get mad and throw a fit, you can be charged with a penalty during play. In your financial life, this is called getting into arguments with your spouse or partner over money and it causes real harm to relationships.

If you run off the court while your financial game is being played, you end up out of bounds with your money. This is called debt in the game of life and it means you end up turning your money over to others to make them more money while you go broke.

If you don’t have the right equipment, you can slip and fall, even get injured and have to sit out of the game. In your own personal financial life, this is called not being prepared for retirement or having to go into long-term care without having any way of paying for it.

So many similarities exist with regard to playing sports and playing your financial games.  It’s always best to get a coach and and learn how to practice playing properly with their help than it is to go it alone.

For more information about a financial coach (as opposed to financial advisor) visit www.moneymastery.com. Or contact me:  peter@moneymastery.com for a no cost discussion.

What Will You Do about Money If You Live to Be 100?

Experts think that any of us living today, who reaches age 65, healthy and vibrant, will easily make it to age 100.  Whoa! That will change things financially, to say the least.  In the “old days,” between 1960 and 1980, people who reached retirement age lived just four to eight years past retirement to about 69 for men, and 72 for women. It wasn’t too big of a stretch to have between five and 10 years of retirement income saved . But consider working 35 years, then retiring for 35 years instead of just 5 to 10.  I read an article in 1983 that said by the year 2000, many people would be retired as long as they worked. At the time I balked at that idea — NO WAY! I thought. But the fact is, those numbers are a reality now and that longer retirement period is presenting some very challenging problems we all need to think about:

  1. How will you afford to live 35 years into retirement? 
  2. Will you need to work more years than you had originally planned, until age 75, for instance? What if you can’t because of poor health?
  3. Will you have to reduce your living costs drastically to make ends meet?
  4. What about inflation? If the inflation rate keeps averaging 5 percent screen-shot-2016-09-16-at-2-31-17-pmper year as it has been doing, living on a fixed income for 35 years is not going to work very well.
  5. People may be living longer, but especially in the United States, where the standard American diet is so poor, you won’t be living to
    a ripe old age in good health. What if you’re one in four people who will require long-term care? This is expensive at between $2,500 and $6,000 per month.
  6. Social Security will be bankrupt in 2034, according to the Social Security Administration’s annual report, so what do you do if you can’t count on even that income in retirement?
  7. If you are one of the many retired persons who is divorced, what will you do to live on just one retirement income instead of two?

The old way of looking at retirement planning may not work for you anymore. Trying to save using a basic 401(k) is passe. It’s time to get creative and look at real estate, life insurance, annuities, and leasable resources as other options for creating a predictable retirement you can’t outlive. I suggest you read the book MONEY, What Financial Experts Will Never Tell You Full of case stories and practical, holistic approaches to financial planning and retirement that are easy to apply, this book is a BookCovermust-read. Get it in time for Christmas and give it to your kids as well. They will for sure be living longer than you, in most cases, and will have to be ready for a long retirement period. Why not prepare them for that now?  Get going, as time will keep marching forward. Will you be pleasantly surprised when you reach retirement age, or will you be horrified and shocked at what you have done to yourself financially by not taking things seriously today?

What is a 60-20-20 Savings Plan?

Money Mastery teaches its clients the  importance of spending money properly and savings is just another way that you “spend” that must be done properly. I like to point out to my clients that there is no such thing as savings. What does this mean exactly?  Well, ask yourself this question:  You save money for what?  The minute you answer the “FOR WHAT,” part you have spent your money.  It is still in the bank so you call it savings, but isn’t it already tagged, ear-marked, set aside for spending on something? Yes, so that’s why there is no such thing as savings.  So as Money Mastery Principle 3 states: Savings Is Actually “Delayed Spending.”

So what kind of things do we need surplus money for in order to take care of this “delayed spending?”

  1. Emergencies
  2. Emotional spending
  3. Retirement

Emergency Savings

We all have emergencies; they come along once in a while and surprise shutterstock_224050600each of us.  For example, suppose your car transmission breaks, or your hot-water heater leaks, or you have an illness that keeps you from work for a month.  All these are common things that happen all the time.  Look at your associates and see how much this is happening all around you. It’s only a matter of time before some kind of an emergency hits you.

Emotional Needs

And what about impulse purchasing? Just like an emergency, this is bound to happen to you at some point, so why not be prepared for it just like you would an emergency? So many people end up in far more debt than they need to because they do not set aside money that is used purely for the purpose of fun. If you never spend money for the sheer emotional satisfaction of getting something you really want to buy, then responsibly managing your finances becomes a drudgery. It’s like a diet that never allows you to indulge in a cookie or some ice cream once in a while — you will end up feeling too restricted and therefore not stay on the diet. The same is true for emotional spending. We all need to purchase things for shutterstock_44998930 (800x600)ourselves or loved ones on impulse at times, so it’s best to simply be prepared for this when it happens by having money set aside expressly for this purpose. If you don’t, you will spend money earmarked for debt payments or to pay other bills and this causes big trouble down the line.

Retirement

Of course everyone knows they need to be saving the most money to spend later in life when they have quit working or can no longer work due to health problems. The problem is so many people do not really know how to do this.

The Beauty of the 60-20-20 Savings Plan

The 60-20-20 plan calls for all surplus money to go into these three areas for future spending:

  • 60% for long-term retirement
  • 20% for fun activities that build relationships and ensure you stay on track financially
  •  20% for emergencies.

When a person has money set aside for fun, retirement, and emergencies and an emergency hits then “what is the emergency?”  There isn’t one. And what about when an impulse purchase takes you over momentarily? No problem — you already have money set aside for this specific fun thing so you can spend guilt-free !

How much should you spend into these future accounts?  You should be saving at least 10 percent of your gross income every month for retirement. As for emotional savings, put enough away so that you have money to look forward to a wonderful activity or splurge purchase at least four times a year. In my experience, if you are not having fun very often, life becomes a real drag. As for emergencies, I suggest you review your income and if it is steady and you’ve had no interruptions in pay for the last three years, then save three months of income and be sure it’s liquid, meaning you have it someplace you can get at easily without penalty.  However, if you are self-employed or commission-only, you will need at least six months of income in reserve just to manage properly.

Dream with me for a moment. Let’s suppose you had no consumer debt, with six months of income in the bank. You would not have to be worried at all.  Take this challenge and calculate how much money it will take to get six months income reserved with no consumer debt, then estimate  how many months it will take you to reach this goal. If you want some really easy tools for doing this, I suggest you go here for a low-cost online tool that will help you calculate this quickly and easily.

Where should you keep this money?  This is a big question in terms of retirement money, and I have lots of opinions about that, some of which you can review by reading the following blog posts.  

Here’s How to Plan a Great Retirement

Over the Long Haul the Stock Market Always Goes Up, Right?

Successful Retirement Means You Will Need 8 to 10 Times Your Annual Income

How to Check to See How Good Your Retirement Plan Will Be

Kids’ Snacks and Your Retirement

The Coming Healthcare Crisis for Retirees and What You can Do to Protect Your Retirement Against It

Why You Will Pay More in Taxes at Retirement with a 401(k)

Stop Saving Money Into a 401(k)

Retirement can be funded in so many better ways other than just dumping it into a 401(k) that are so much safer and more predictable that I urge you to contact me for a no-cost conversation: peter@moneymastery.com. These include real estate, life insurance, annuities, and so forth.  As for emergency and emotional savings, I would keep these funds in the form of cash at home in a safe place, in a safety deposit box, or in a savings account that has a debit card attached to it so you can take care of emergencies when they happen.

How to determine if it truly is an emergency?  If it is totally unexpected, it is probably an emergency.  If the need is urgent, like that it needs to be solved today or at the latest in two to three days, it is probably an emergency.  If you cannot move forward without getting the problem resolved, it is definitely an emergency.  Don’t be afraid of using this emergency money, for this is why you have it.  Just know that 80 percent of all people will have an emergency during this year.  For your peace of mind, you must plan for this happening and relax and know you don’t have to worry.  Go to www.moneymastery.com for more help.   

Why It’s Good to be Rich

I love the article by Jonathan Clements that appeared in the Wall Street Journal in 2005 called “Why It’s Good to be Rich” because it underscores the power of having surplus money, something you must experience to truly understand. A person in debt will never understand the idea that a little bit of surplus money can multiply quickly in your  hand.

Clements article outlines 25 financial benefits that people with fat wallets are able to enjoy and the ways in which those benefits create additional wealth. Here are some of those benefits:

  • You can pay off your credit-card balances each month, avoiding high interest costs.
  • You will always have enough money to take advantage of tax-favored accounts like Roth IRAs.
  • Your fat investment portfolio helps you feel rich so you don’t need to prove your wealth by purchasing new cars and designer clothing on credit.
  • Your accounts are big enough that you won’t get hit with annoying bank fees, annual IRA fees, and account-maintenance fees like those with smaller balances must pay.
  • Your high FICO score and superb credit history ensure that you can always get a loan and qualify for no-fee credit cards.
  • You can drop term life insurance because you’ll have so much money that your spouse and kids won’t need insurance; you can invest the premiums in cash-producing ventures instead.
  • You won’t have to buy long-term care insurance, saving thousands of dollars in premiums for something you may not even need; if you do end up going to a nursing home, you can pay your own care facility or home-healthcare costs instead.
  • You can sleep better at night because you don’t have to worry about how you’re going to pay the bills or whether your investments will see you through retirement.
  • Your financial prudence provides a good example for your children, so they grow up to be financially independent and less likely to need bailing out from you.
  • You won’t ever be forced to sell your home and move into an apartment after you retire, or worse, in with your kids.
  • You can avoid playing silly financial games such as buying lottery tickets in hope of “getting rich quick.”
  • You always have the cash on hand to seize lucrative financial opportunities whenever they present themselves.
  • You have enough money to travel the world or engage in philanthropic ventures that will provide you priceless experiences you would nave have been able to have otherwise.

More Leverage Ideas to Help Your Money Make More for You

In my last post, 5 Ways to Make More Money You Probably Never Thought About, I noted how wealthy people use their money and resources to make more money for them, rather than squandering them or sitting on them. In this post I wanted to give you some additional ways in which you can get your existing money and financial resources to do more than one thing at a time for you.

  1. Apply savings to debt. Rather than “parking” money in passbook savings that will make very little interest, why not deposit that money in a HELOC (home equity line of credit)? This puts the saved interest expense in your pocket (which is usually always going to be more than what you’d earn in passbook savings) while still keeping that money available for those emergency and emotional spending events that are sure to happen.
  2. Turn a non-producing (or low-producing) asset into a high-producing asset. Money that you have deposited into a 401(k) or IRA, for example, is sitting their earning a modest amount of interest, or it may even be losing money, so it’s probably not wise to put all your long-term savings into such “stagnant” programs. Investing some of your money into real estate or equipment that can be leased out is a better way to get your assets to produce more money for you.
  3. Spread out your investments. Consider various investment options based on how they are taxed, risk risk level, capital appreciation, and so forth.
  4. Increase your return on investment. While it’s important for people with large debt loads and little savings to be quite conservative early on with their savings habits, as you get spending and debt more under control you will see a little cash accumulate. When this occurs it is foolish to leave the money in a low-return program such as a CD. Consider, instead, what savings should be converted to higher yielding investment plans.
  5. Examine ways you can make your current investments more valuable. Like I mentioned in my last post, can you convert real estate space into rental income Do you need to study the market and trade investments in more lucrative fields? Can you use the equity in your current real estate to purchase additional properties to begin a “rolling” real estate investment?

More ideas in coming posts. Hope these are some you will take into real consideration as they could be resources you already have that you are not using to their full potential.

5 Ways to Make More Money You’ve Probably Never Thought About

Wealthy people are those who have learned how to get their money and resources to do more than one thing for them at a time — they know how to put their assets to work for them to make more.

It has been said that if given $1 million, the average person would misuse that money in less than 10 years and end up with the same sum of money they started with. But a financially principled person knows the power of the “multiplier effect,” and rather than squandering or sitting on their resources has learned to put them in motion to continually make more.

Here are 6 ways to put money and resources in motion to make more money:

  1. Turning a profit again and again from a single notion. How many times have you  had an idea pop in your head that you thought was an absolute stroke of genius? Have you ever considered that some of these ideas could be set in motion to create additional wealth? One of my clients I’ll call Mindy did. As a dental hygienist she spent countless hours pouring molds of people’s teeth. As she poured the molds she thought it would be a fun idea to use plaster to make molds of a baby’s hands and feet. From that idea she designed a keepsake product for parents to make molds of their children’s hands and feet, the first such product of its kind. In the beginning Mindy sold over 40 of these kits a month. In time, retailers like Walmart and Shopko began signing distribution agreements with her to sell her kits in their stores. Sales took off and Mindy was asked to appear on QVC where she sold over $100,000 of product in less than 8 minutes. Mindy no longer works as a dental hygienist and the “little idea” has begun turning a profit for her in a way she could never have imagined. This one idea, which she had in one single moment, is now produshutterstock_250088392cing untold wealth for her over and over again.
  2. Making money from existing property:  Chargingsomeone to live or work within a space is an obvious way that people can make a profit from an existing asset. Finishing a basement of an office building and then renting it out can be a great way to do this. If you don’t have the money to finish the basement space of an office or home, you could find a tenant who is willing to improve the space all while getting credit off the rent for the money they spend on making improvements. The right tenants will like this arrangement because they don’t have to pay rent while they are using the space and making improvements on it, and you as the landlord will love it when you get a finished rental space out of it that you can then charge full rent on.
  3. Getting your talent to reward you again and again.  We all have skills we use on a daily basis, but when was the last time you examined all your talents to determine which of them could be used to turn a profit for you? If you have writing skills, for example, you could use these as a ghostwriter or other professional writer and then receive royalties on that writing for years afterward. It only took you a few months or even a year or so to write the book, for instance, but if you structure contracts correctly, you could be receiving a profit from that one-time effort for years to come.
  4. Leasing:  Turning need into a continual source of profit. One Money Mastery client wanted to get into the White-Chairswedding business by leasing wedding decor. When she ran across a sale on Amazon for 25 white bistro chairs at a really good price, she bought the chairs and began adding to her collection over the next several months. After a year, she had 250 chairs that she stored in a shed in her back yard and began renting out for garden wedding receptions. She average four weddings the first summer, recouping half of her investment.  After two summer wedding seasons, she had replaced the cost of purchasing the chairs and now turns a continual profit every summer of at least $4,000 between the months of June and September. There is very little cost for her to store and maintain the chairs, so she keeps most of the profit. Buying equipment once and leasing it over and over again is a very lucrative way to put money and/or resources in motion to create more.
  5. Buying trust deeds to generate additional wealth. If you have a chunk of money you can work with but don’t know what to do with it, other than not wanting to risk it in the stock market, why not consider buying trust deeds on bankrupt properties from banks? One of my clients I’ll call Guy did this for approximately 18 cents on the dollar. At one point he became interested in a defaulted triplex with a price tag of $140,000. Its actual appraised value was $$190,000 but Guy offered the bank $50,000 to take it off their hands. At first the bank balked at his offer, but knew it wouldn’t be cost effective to try to maintain the property until it could be sold closer to their asking price. The bank did not want to be hassled with trying to find tenants and keeping up the grounds so it sold the property to Guy. He then found suitable renters and began renting each unit for $850 per month, generating over $30,000 in one  year. Using this profit, he made improvements on the property and turned around and sold it for $225,000. He then used his profit margin on this property to buy additional defaulted trust deeds to continue to the process.

There are lots of ways to make your money and resources work for you if you will just take the time to think about what you’ve got and how it could be put to work for you. For more information on this powerful concept, contact me, peter@moneymastery.com.

A Quick Overview of Financial Basics and How to Apply them in the Right Order

Many people get caught in the trap of wanting to do things out of order when it comes to finances. They are tempted to invest their way out of debt, for example, rather than getting out of debt first, then investing the interest money they save by being out of debt to make more.  Knowing the rules of the financial games you are playing suggest that you must do “first things first.”

Here’s an idea of how to apply financial principles, step-by-step, and in the right order:

The Basics

  • Consider getting an education or learning a skilled trade.
  • Secure vocational income.
  • Avoid getting into debt; if you are in debt, get out of it.

Cover Risks

  • Buy basic life and disability insurance (don’t wait to buy life insurance until you are older, do it now while it is still affordable and can be used to fund retirement later in life).
  • Build emergency and emotional savings.
  • Purchase a house.
  • Minimize taxes

Invest Surplus Money

  • Consider investing in guaranteed investments such as CDs or Money Market accounts.
  • Consider investing in low-risk options such as mutual funds.
  • Consider investing in real estate.
  • Consider investing in individual stocks.

As you play each of these financial games in the order that is best for you, you will naturally be led to an understanding of the rules governing the next game. Each step you take will build confidence until you understand how to play even the most risky financial games and have the economic wherewithal to afford to play them.

Because every financial game we play comes with a certain amount of risk, knowing the rules means understanding what thos risks are. Some financial decisions are less risky than others; nevertheless, each one can be a gample. Don’t put vital money in jeopardy due to high-risk investments you cannot afford to lose (and this includes bailing out adult children with sacred retirement money you will not have the time or energy to recoup should those children never pay you back).

Be wise and always do “first things first” when it comes to finances.

Organizing Your Finances Enables the Creation of Additional Wealth

It is so important to know the 10 financial principles that can change your life is so many wonderful ways. That’s why I have been spending time covering each of the Money Mastery Principles, which build upon each other and all work together in harmony. As you apply each principle on top of the next, you will get in better and better control financially. That’s what today’s post will cover, Principle 8, and the importance of organizing all the principles to work together.

Organizing Your Finances Enables the Creation of Additional Wealth. Disorganization breeds procrastination which leads to lost opportunities. Organizing your finances means knowing where important documents are, having an estate plan for your loved ones, and knowing how to protect your assets from over-taxation, litigation, and theft.  


It can be hard to know where to store important documents, but we must try.  When I see someone who is not organized, it makes me sad for them.  They have no idea how expensive it is to them by not being organized.  I know from personal experience, when I try to get organized, as soon as I get started I realize how long it will take and sometimes feel defeated before I get anything done.

Consider this statistic, only 1 out of 7 families has a simple will.  It is a well known fact we will all die.  No one has gotten out of this life alive.  Why don’t we get organized before we die so we don’t leave a financial mess for our family members? It’s largely because of this feeling of being overwhelmed with difficult decisions about what to do with certain things, and we give up before we have even begun.

In my 45 years of experience, I have helped many people get organized and it has made a world of difference to them to get that nagging feeling of not knowing what will happen to their money or belongings when they die off their mind and come to a place of peace, hope and prosperity. I have done this by first having them get their spending and debt under control. Once
these things are working well together, people find they are acquiring a little bit of a surplus and before long, they have money and assets they need to manage and organize so that Uncle Sam, inflation, and mismanagement doesn’t eat away everything they have worked so hard to put together.

So that’s when we get the wills and living trusts put together and name a guardian for their children.  I have watched while a family was mourning the loss of their father, they knew that he had provided enough money to pay for their college, and take care of Mom and all because he had stopped being frozen by what he perceived would be hard to do, and got organized, before it was too late.

Without planning, if you have minor children and both you andEstateOrganization your spouse pass away at the same time, your resident state will take over and direct all the affairs of the children.  And your assets and money will follow the guardians that the court appoints, during the court proceedings.  Along with foster parents chosen for you, all debts become due and payable upon death.  Add all the court costs and attorney’s fees and your family will pay out an additional $30,00 or more to get things settled.

Do the smart thing. For about $495 and 60 minutes you can avoid all this expense and give yourself peace of mind by setting up a living trust and funding it, then distribute copies to all family members who are involved for their records.  Go to www.easylegalplanning.com and get your financial affairs organized.  Then review documents once a year and make necessary changes.  Contact me with questions (801) 244-5756, or peter@moneymastery.com.

 

 

Have Your Cake (Life Insurance Money) and Eat It Too!

If you purchased a specific “High Early Cash Value” kind of whole life policy from Mass Mutual, for example, all your premiums will be saved as cash values inside the policy.  For example, if you were to deposit a premium of $12,000 a year into this life insurance policy, you can have well over $60,000 by the end of year five.  This will certainly be more than what you deposited.  Building cash value such as this is like having your cake and getting to eat it, too!

In addition, you can borrow from you own cash values to pay off debts and then pay back to your policy the same payment you made to the creditor, thus recapturing all principal and interest payments.  These payments made to yourself are like eating your own cake without your serving ever Screen shot 2016-06-01 at 4.07.57 PMdiminishing…  Let’s examine the details.

Do you know how much interest you will pay out to creditors over your lifetime?  The average amount of interest that my clients pay is $194,000 over the many years of owning a home, buying cars and paying on some credit cards.  If you were to pay this $194,000 to yourself through your life insurance policy and get a 3 percent gain each year on all these payments, you would have accumulated $1 million of cash values over the life of the policy.

For this discussion, I am not talking about the death benefit, or the tax-free status on the growth, just the amount saved within the life insurance policy itself.  Pretty impressive, huh? Let’s say you never use your death benefit, but just use the cash value while living to pay off debts and then pay yourself back the principal and interest expenses.  You will have created over $1 million in the life insurance policy that can be used for retirement income, or starting a 8259new business, or paying children’s college tuition, or investing in rental income properties, or myriad other wonderful opportunities.

What might be the catch, you may be thinking… or is there one?  There is no catch. The only requirement is to act NOW and start saving money into a life insurance policy.  The money is safe as it can possibly be (much safer than your 401(k) money you keep squirreling away each month that is subject to serious market drama), and this is especially true for such companies as Mass Mutual, that has an A+ rating for financial strength.  They are over 150 years old and have helped millions of people with their financial needs through two World Wars and the Great Depression.

How can I get started saving money?  Please refer to my recent post in this blog called, 6 Tips for Finding Money You are Wasting.  From these “money-finding” activities alone, you should be able to save at least 5 percent of your annual income each and every month.  

Contact me for details of how to create a properly structured whole life policy that builds cash values. If you need help with saving money, I stand ready to help you with that too.  Here is my email:  www.peter@moneymastery.com.