I see many of you struggling to wrap your head around cash value life insurance and figuring out how to fund these accounts long term. In this email I wanted to focus on the fundamentals that I personally have in place before I even have a conversation with any insurance agent. These fundamentals help me come to the table prepared when talking to an insurance agent so I can tell him or her exactly what I want. Often times when talking to an agent the conversation is typically around the design of the policy, pros and cons, etc which is very important. At the same time it would be wise for you the client to come prepared and competent when speaking to an agent. Remember most insurance agents are not financial coaches/consultants or advisors so the agents job is to make sure you are insured and fully understand the product you are purchasing. They are not typically going to provide financial coaching to you to make the best decision. I recommend if you have a financial coach/consultant or advisor to involve them in the process of you funding one of these high cash value policies. So let's begin,
You will hear me say this all the time in my videos if you do not know your numbers do not expect the concept to magically work for you. I have an entire playlist to help you get you all of your financial numbers in line so you understand where you stand. You can access that link here - PreGame Work
What I do for myself is I take my conservative monthly net free cashflow and times it by 12 for the year. I then take the total number and times it by 66%. Whatever the final number is I know I could fund a policy with my eyes closed each year based on that number. It is a conservative way of funding your first policy without the fear of not being able to max fund year to year. I often see people trying to max fund these policies beyond reason and then forget that this is a long term account where the intent is to continue to max fund year to year to really maximize the policy performance long term. One of the biggest things I mention on my channel is to not over leverage yourself with an insurance policy. Pay in what you know you can do according to your numbers. I would not try to fund a policy 75k a year but you only make 110k a year. That is more than 50% of your income. I would rather you increase your income overtime and have the problem of making a lot of money and now know what to do with it then to not have enough money and bills you can't keep up with.
What is the strategy you are going to implement once the policy is funded? If you are not clear on this it can delay you and your goals. It is very easy to run the numbers on using a policy before it is in place because these life insurance policies are very predictable when you look at the guarantees. There are many different ways to use life insurance so narrowing down to one strategy in the beginning will benefit you long term. As opposed to what a lot of people tell me when looking at IBC they'll say "I want to max fund this policy so I can borrow all the money out to pay off my debt, invest in real estate, run my expenses, pay my taxes, and buy Bitcoin!" I'm like 👍 that's great can we run the numbers first and see in which order will we do that.
I hate to be the one to say it but this infinite banking concept is not magic. It will not make you a millionaire overnight, the policy will be negative for the first few years, you are not going to have 100% access to cash in the first year, it takes time for the money to grow. There are a lot of moving parts that I believe takes time to learn and engage with to truly understand before moving forward.
This is a question you need to ask yourself because it will help you determine the end goal for your policy. You need to know the total amount of principle dollars you want to send to your first policy. You can compare it to how much you save per year or what you contribute to retirement accounts and spread it over a period of time.
Once you figure the amount of money you can do in a year then you multiple by your commitment to do that for many years over. Is it 10 years, 20 years, 30 years? How long will it be? 🤔This matters because it will determine how much your internal cost will be. You do not want to commit to a high premium if you do not have the discipline to fund for a long period of time. So get clear and be real with yourself. Ask yourself what is something you have done in your life consistently? Was it a 20 year+ marriage, 15+ year career, you saved 20k a year for 10 years? Do a commitment test on yourself and that will help you come to a conclusion.
Remember, the longer you set the funding the higher the premium would have to be to support the overfunding of your policy. If you fund for a short period of time the cost is less because you do not need a higher death benefit. I would say anything under 10-14 years is short term funding and anything past 21 years and up I would say is long term. In the middle would be 15-20 years.
This is probably the most important key of all is timing. If you know your numbers, you get the strategy down, you know your cashflow let's say you did all of that the final thing is timing. Meaning do you actually have the cash to fund this thing. Just because you did cashflow times 12 and then took 66% you got your numbers down on paper but do you have actually have 66% or whatever the number is accessible and ready to allocate toward this product? Do you have upcoming expenses to worry about, yearly bills you forgot about, the vacation you planned, the house repairs, taxes, so many other variables you need to account for before you dump a lot of cash into policy. I believe if you have patience and time this accordingly, you will set yourself up properly for long term success and also any setbacks that can occur.
For example: I had a client fund a policy around 20k a year. She did it the first year and then come the second year she fell off a little bit. She didn't max fund, now it's not the end of the world, she was able to easily cover the base premium and additional costs to maintain her ability to max fund when she is ready. She knew her numbers but had some setbacks that delayed her. Thankfully, she studied and got herself a flexible policy to continue to fund what she could we jumped on a call and set up a plan to get back on track.
Bottom line, time yourself and be patient. ⏱ I can't stress it enough -- too many people are starting policies without thinking, falling into the hype, and ending up with policies that can't financially maintain.
Sometimes it is the agent's fault not gathering enough info, asking enough questions, or designing a bad policy. Sometimes it is the client just not taking the time to learn and getting a bad case of FOMO (fear of missing out). Please do not be this person let me give you that advance warning.
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I hope this brought value to you - I'm always here if you have questions!
Have a wonderful day and God Bless,