If banks, marketers, and others have a plan for your money, you might as well have one. But what do you truly want your money to do for you? In this episode, Mark Willis, a Certified Financial Planner, joins Jim Pfeifer to share his insights on how you can benefit from your money if you can be your own bank! He explains how life insurance can shine with TGIF, which stands for Tax Advantages, Guarantees, Insurance, and Financing. Mark also explains how you can pivot from fear about life insurance because of familiarity bias. Listen to this conversation to learn more!
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Be Your Own Bank With Mark Willis
I’m excited to have Mark Willis with us. He is a man on a mission to help you think differently about your money, your economy, and your future. He is a Certified Financial Planner, a bestselling author, the Owner of Lake Growth Financial Services, a financial firm in Chicago, and cohost of Not Your Average Financial Podcast™.
Over the years, he has helped hundreds of his clients take back control of their financial future, and build their businesses with proven tax-efficient financial solutions, unknown to most financial gurus. The stuff I love is finding out the stuff that no one is doing but they should be doing. Mark, welcome to the show.
I love being on. My mom always said I was outstanding in the field. I didn’t realize that that was out in the left field, so I’m glad to be on the show.
You’re in the right spot. That’s fantastic. The first question I always ask is I’d like to hear about your financial journey. How did you get to where you are to be a Certified Financial Planner, have a podcast and be helping people with these unknown to most financial solutions?
I certainly didn’t get handed a silver spoon as a child. I got handed a paper bag. I put my coins, allowance and lemonade stand money in there. At about age five, I had accumulated enough to go open a checking account. My mom wanted me to do that. My job as a little kiddo was to take my paper bag full of money and wadded up dollar bills.
I walked into this strange place called a bank and hand over my entire life savings to an absolute stranger with a little name tag on his vest. I watched him walk away with all my money. I was supposed to trust him and my mom that that was a good idea. She was trying to do the right thing to teach her kiddo about money and how that works.
Fast forward, a few more years, I’m graduating from college in the middle of the Great Recession with three private school degrees between my wife and me, and over six figures of student loan debt with no plan to pay it off. I was realizing that all of a sudden, banks are not the generous benefactors that I once thought they were. They wanted to pull blood out of the stone so to speak. They were happy to do it in the midst of the Great Recession when we had no jobs and prospects.
One thing I can say that was a benefit there was it got me focused on my financial life. I started educating myself on finances. I got so nerdy in this area that I worked for a CPA and overheard some pretty wild conversations in the middle of the Great Recession as she was calling her clients. I also got interested so much that I went through and got my certified financial planner designation and started a financial firm for clients all across the country.
I’ve had the great privilege of working with folks who are business owners, real estate investors and NFL Super Bowl champions. Honestly, Jim, most people I work with are people who want to have more control over their life. They want to take back control of what’s been taken from them, whether it’s through banks or Wall Street. I’m not your average financial planner. I love serving clients and helping them move upstream financially.
We are not your average financial community, so we might have a match here. I want to jump right into it. You bank on yourself. Infinite banking and whole life insurance, there are a million different words for it. If you google ‘whole life insurance,’ you’re never coming back from that. Can you explain to us what are we talking about here? What is whole life insurance or Bank On Yourself? What is the big deal?
I will classify this first and say as a certified financial planner, everybody starts with their needs first. I would much rather go with Tiger Woods’ golf swing to Tiger Woods’ golf clubs. Most people focus on the clubs, and we’re going to talk about the clubs in this episode. You’ve got to get the swing first. What is the swing? The swing is understanding what you truly want your money to do for you.
Many people would rather give you their best financial plan. Everybody in the world has a plan for your money. You might as well have a plan for your money. Banks, marketers, and Wall Street certainly have a plan for your money, be happy to take a fee off your money, and plan to retire before you could. You must have a plan. Part of having that plan is knowing what you want.
To be very honest with you, very few people know what they truly want. It’s a great thought exercise to sit down with a pen. You could do this in five minutes. It’s free. Write down a list, not of nouns but of adjectives. Not of labels for money but of characteristics and attributes. What am I talking about? What are some nouns for money? 401(k) is a noun. Savings accounts, real estate, syndication deals, annuities, whole life insurance, mutual funds, and diagnostic trusts are all different labels for your money.
What I’m more interested in when I sit down and speak with clients over the phone or Zoom is what you truly want your money doing for you. What action items? What characteristics, verbs and adjectives? It is what I love to focus on. We talk about passive income, competitive yield that beats inflation and privacy. Whenever someone goes snooping around your net worth, are they going to find all of your money or could we keep some of it somehow private? We want collateralization, tax-free buildup, and tax-free access to cash. I’m giving you a random sampling here. Would you add anything to that list? Anything else you want your money doing for you?
I’m not very good at grammar so I don’t know if these are nouns or verbs but for me, it’s all about getting financially free which gives me time freedom. Everything I do, I’m focused on time freedom. Whatever tools or golf clubs or whoever’s swing you want to give me, as long as I am moving in the direction of having choices, that’s what I want. I want optionality.
I agree with you. Energy, time, attention and money are the four currencies we all have access to. It’s the TEAM framework that we talk quite a bit about, Time, Energy, Attention, and Money. Money is part of the deal, but Time freedom is a good one. That’s certainly why passive real estate can be a great answer here.
Can you talk about energy and attention? I like your TEAM concept. I get the Time and Money, but what’s Energy and Attention?
Let’s think about it. If you have a full day ahead of you and you’re lazily laying on the couch, what is getting your attention? Realize there’s a reason why we use the phrase, “To pay attention to.” We’re paying attention. It’s a currency like money and time is a currency. You can spend time with your family or on the conveyor belt at the day job. Your attention is a currency.
Your energy, certainly, I can spend myself on a workout. When you incorporate the TEAM framework, you’re maximizing all the leverage points of your life, not just the financial assets but your attention. People will pay good money to get your attention. That’s what Super Bowl ads are all about. It is to pave to get your attention. Wall Street and marketers certainly love to get your attention.
This is why it’s so cool that you’ve built this community of left field investors so you can share in the attention economy together. What are we learning together? What did I find over here? What deal could I come to the community with to get feedback? That’s what I mean by the attention asset in your overall framework.
That’s a great way to look at it. To me, as you were explaining it, they’re all things you spend. You spend your Time, Energy, Attention, and Money. We go back to you need to have a plan. You want to get all that under your control and that’s what you’re saying.
Money can help with the purposes of the other three. When I have enough money, I have the time freedom or I can invest in my health to build up my energy. There are lots of ways you can use the four assets together in tandem with each other. It’s almost like nitro and glycerin. They can work well together to make each other stronger. That’s where I like to start. It’s oftentimes true that the same answers come up. When I ask somebody, “What do you want your money doing for you,” they give me similar answers. They go through a pretty long list if we do that thought exercise.
[bctt tweet=”When I have enough money, I have the time and freedom, or I can invest in my health to build up my energy.” via=”no”]
Somewhere around the 10th or 11th characteristic, they start to hesitate. They look at me like, “Mark, if I create a financial product that’s doing everything I said, let’s say it’s got guaranteed growth, a competitive rate of return, liquid access to the money that I can use for investments or other opportunities, I have a tax-free yield in retirement and privacy against creditors, lawsuits or other predators on my net worth and I want to be able to collateralize it and use it for loans,” pretty quickly, clients begin to think, “This may or may not be legal what we’re talking about here.”
Strangely enough, I felt the same. I was following the to-do list that the world hands you. I get the 401(k), savings account, that checking account mom gave me when I was five years old, student loans, credit cards, house and all that stuff. I never stopped to say, “What is it I truly want my money doing for me?” When I started making that list and going through the CFP training, I was compelled by this one asset that’s been around for hundreds of years that checked all of my boxes. That was dividend-paying whole life insurance.
We’ve come full circle, back down the ladder of mindset, down to boring old whole life insurance. Most people, if they haven’t unsubscribed from your show yet and I apologize if they did, but if you’re still with us, hold tight because this is not your grandpa’s whole life insurance. This is an asset that has been around for hundreds of years. It’s a dividend-paying mutually owned whole life insurance policy modernized for maximum cash accumulation and offers non-direct recognition policy loans, which allow us to do some pretty incredible things.
I realize that was a huge mouthful. We simplify that and call it a Bank On Yourself type of whole life insurance. There are a few things that make this asset shine for me. I’m great with acronyms so I’ll boil it down to four TGIF. T is Tax advantages. It can be put into the policy after tax. You can access the money anytime you want. You could be 35, 55 or 75 years old. If it’s designed properly, you can get the whole thing out tax-free. Both principal and through a loan, you can get the gains out income tax-free. That’s a tremendous benefit. I’d be done talking about it and we could talk about that because it’s like a mega Roth IRA that has no income phase-outs or contribution limits. That’s T, Tax advantages. There’s a lot more there but we’ll move right along.
G is Guarantees. Whole life insurance is guaranteed to give you a higher cash value this year than you had last year. That’s a contractual guarantee. There’s nothing else I’m familiar with that has that kind of a competitive guarantee. It surely beats my savings accounts so other money market accounts, CDs, savings and bonds. It’s never going to beat the best year of the stock market but it builds on itself every single year. It’s true compounding.
Most people think they’re compounding their wealth when they’re bouncing up and down and changing the value of their net worth. Change is different from compounding. Here’s what I mean and a quick example. Let’s say you had $10,000 and you invested it into a stock. Let’s say that stock went from $10,000 to $20,000. You doubled your money. That’s a 100% rate of return. You’re like, “That’s cool. I’m sticking with that stock.” Let’s say in year two, we lose half of the value of that stock. $20,000 comes back down to $10,000. You have a negative 50% year. You went up 100% and went down 50%. Are you any wealthier as a result? You started with $10,000 and ended with $10,000.
[bctt tweet=”Bouncing up and down and changing the value of their net worth is different from compounding.” via=”no”]
You’re not but your standard financial advisor would say that you have a 25% return.
That’s very insightful. That is what average rates of return get us. That’s why we’re not so average around here. I don’t believe in averages. I don’t want to be average. I want to be awesome. Average rates of return are meaningless but compound linear growth and compound growth give us that beautiful ever increasing, compounding asset. It’s like that beautiful J curve that we financial advisors love to draw for folks. That’s the second one, guarantees. 2021’s gain is locked in so we don’t lose 2021’s gain if we stumble in 2022 because the policy grows guaranteed.
I stand for Insurance. We’re automatically going to leave our family more than we could ever save for them in the contract because it’s an asset known as life insurance. If I put $1 in my savings account and I pass away, my family gets $1. If I put $1 into life insurance and pass away, depending on your age, it might be $3, $5 or $10. That’s an incredible gift. It’s an income tax-free legacy I make right away. I don’t need a big fancy trust or a lot of paperwork to do it.
F is Financing. As a CFP, I’ve got to say it clearly as I can. Your need for financing is very likely greater than your need for insurance. Most people don’t come to me looking for a mega-giant life insurance policy. They’re looking for ways to make major purchases because they’ve got investments to get into, kids to send to college, retirement to prepare for and their financial goals. They want the freedom, transcendence and independence that you talk about on your show and more.
Financing is the biggest hurdle that most people have in their financial life. The problem is most people are having to beg somebody else for that financing operation. Banks have only been around in their modern form for the last couple hundred years. That’s not so long in the grand scheme of things. There’s a book out there called Debt: The First 5,000 Years by David Graeber. What a title.
Debt and banking had been around for as long as we’ve been keeping records but modern banks are relatively new. What if you could take back the banking function and bring that back in-house? That’s what Bank On Yourself type policies let us do. I’ll wrap this little montage up as quickly as I can with a simple example. Let’s say that you’ve packed a bunch of money into one of these policies. You’ve got $100,000 in one of these policies. It’s got a cash value of $100,000.
Let’s say it’s got a death benefit of $1 million to round that off there. Let’s say you want to borrow against the policy. You’re allowed to do that. There’s a contract that says you can borrow as much out of that cash value as you have, usually 90% or so. Let’s say you put $80,000 into an investment opportunity. The nice thing about this tool and what is game-changing for me is that when you borrow against the life insurance policy, it will continue to grow compounding on the full $100,000, even on the $80,000 you borrowed as if there was no loan.
We did something very interesting. We accessed the asset, our life insurance, and put it into another asset, the real estate deal or the syndication deal. Our money is having a double yield there. Our policy is growing. Hopefully, our real estate deal is doing its thing. Cashflow is there and tax advantages. You get to repay that loan to the policy that you control at any pace you wish.
There was a lot there. That’s fantastic. One thing I want to stress is designed properly. That was one of the words you used. I’d like you to expand on that a little bit but I want to add a little bit of color there because the first life insurance policy I ever had was designed improperly. I did not have an agent who knew what he was doing. That agent was me. I sold it to myself but at the time, I did the standard life insurance policy that I was taught to sell to everybody.
That is not this policy. The Bank On Yourself stuff you’re talking about is not that. Let’s be honest here. The commissions to the agents are much less than a standard policy. I don’t think agents are out there trying to rip people off but when you’re sitting there trying to figure out, “What’s the best thing to present to them,” you present what you’re taught to present, which is the standard, which also happens to be the high commission one. Can you talk a little bit about the phrase “designed properly?”
You bring up a great story and it’s not uncommon. I read that there are over 400,000 life insurance agents in the United States. That gobs backed me when I read that. That’s 1 agent for every 800 Americans. This is why you probably know somebody who had their license right out of college. The things that we’ve gone through, people who are reading know more than 99% of life insurance agents on this particular type of whole life insurance.
You’re exactly right. It being designed improperly can be the difference between success and failure here. It’s not unlike an elevator. If you get into a properly designed elevator that was engineered by a professional, who was certified and who knew what he or she was doing, all you have to do is to get in the elevator and push a button and up you go. That’s all that matters. If it’s improperly designed by your cousin Eddie, you’re going to push that button and look out below. It’s a big deal.
Yes, you’re right. Not only the commissions can be a problem. That slows down the growth of the cash value when that happens. Also, you can get into a taxable nightmare if you’ve not properly set this policy up. It could significantly reduce your benefits if you get a direct recognition loan on the contract. It sounds arcane. It doesn’t sound important but if you borrow against a direct recognition life insurance loan, it’s that same example. $100,000 of cash value and borrow out $80,000. If it’s direct recognition, you only get earnings and dividends while the loan is outstanding on the remaining $20,000 that’s still in your policy.
To me, this breaks compound growth. It’s a moot point. The rest of the loans and all the magic that you might hear about on the interwebs about this doesn’t matter if we don’t get uninterrupted compounding when we access the capital. This is 3 or 4 of dozens of different nightmare scenarios that we’ve seen over the years. I’ve seen thousands of different illustrations and policies over the years. I went through the extra hoops and training. It took me another three years beyond my CFP to be a Bank On Yourself professional.
There are a lot of nicknames out there for this strategy. Infinite this and wealth family that. You can probably search for it as well as I could but the only training program that has a certification and authorization to it, a quality control standard, is Bank On Yourself. That’s why I went through that extra hoop and have that certification as well. It’s quality control for anybody who wants to purchase a policy. If you get a Bank On Yourself professional, you know you’re getting a true Bank On Yourself designed policy.
That was going to be my next question and maybe you can answer it. A lot of people already have their advisors so they’re going to say, “I heard on this show this great thing Bank On Yourself or this whole life insurance policy. It will do all this great stuff.” Their advisor will have several possible answers like, “That sounds like a bad idea. I can do that for you.” My question would be, “Why did I have to bring this idea to you? Why didn’t you bring it to me?”
If I have an advisor already, how do I talk to them about this? If I don’t have an advisor and I’m looking for one, other than the Bank On Yourself qualified, how do I make sure that they’re the right person? Maybe I know somebody or thinking of somebody who is not Bank On Yourself but maybe they do know what they’re doing. How do I know if I’m working with the right person?
Nelson Nash started this revolution a long time ago. He was figuring these things out in the late ‘70s and early ‘80s. The tool itself has been around and used by many famous people, including Walt Disney, JCPenney during the Depression and multiple presidents. Banks are some of the biggest purchasers of these. There’s been a long history of social proof here.
When it comes to your agent or financial professional, you’re right. The shortest thing I can say is if they are not Bank On Yourself professionals, it’s going to be very tough for you to educate them and spend that time educating them. Are they going to take your advice if you’re merely their client? I hate to say it that crudely but that’s, unfortunately, the case. If you ask a barber if you should grow out your hair, you can bet what his answer is going to be.
[bctt tweet=”When your agent or financial professional is not a bank-on-yourself professional, it will be very tough for you to educate them.” via=”no”]
In some ways, it’s an uphill battle to educate your advisor. Why should you have to? Can’t you have a team of advisors, a CPA, an estate planning attorney, a real estate agent, a real estate attorney, a Bank On Yourself professional and a property and casualty insurance agent? The list can go on and on but the important thing as a Certified Financial Planner is that I do the right thing for my clients, which is why I went through that extra training and certification to do Bank On Yourself. We do have a list of 29 different characteristics and attributes that you can read, learn about and understand on our podcast. It’s episode 159 if folks want to go find it or I can send it to folks if they want to reach out to me.
I have a couple more questions on this topic. This one might be a two-part question but why are people so afraid of life insurance like whole life insurance? Google it and you’ll see what I mean. That’s one side of it. The other side is I know they’re afraid of it but why isn’t everyone doing this? When I bought my first policy, I was terrified because I read the internet and the internet is bad. Why isn’t everyone doing this? Why are so many people afraid of it?
There’s Dr. Google out there. If you’ve ever seen a little spot on your neck or something, don’t Google that either. Go find someone who knows what they’re talking about and work with them. As far as fear and why isn’t everyone doing this, it is a lot like when I was a kid. A little older, I was helping my dad on the roof doing some roof repairs. At first, I was super scared. Over time, I get more and more used to it. I was so used to it that all we did to keep me up there safe as I climbed up the roof was my dad tied a little garden hose around my waist. We’re up on a two-story building looking over a big drop. Familiarity bias is what we call that.
You want to start to look for things when you buy them. When you buy a red car, you start to find all the red cars around. As a financial professional who deals with and specializes in this in my financial firm, I see it everywhere. I see more people saying, “Mark, how do I get another one of these? How can I do more with whole life insurance in my portfolio?” We’re looking at 5 to 6 figure a year premiums for folks but it doesn’t have to be mega. It can be small too.
You can start with a couple of hundred bucks a month and try it yourself. As far as why people might be so against it online, all I can say is, is it possible that the internet could be wrong about something? They might have biases. Do they truly have your best interest at heart? The commenter on that Reddit forum, does he know what you need for your retirement and financial life? Probably not.
The best thing I can say is to start with the verbs, attributes, characteristics and adjectives and then get into labels. If you want to find people online, good luck to you but many people have oversold whole life insurance, those greedy commission salesmen. I got to say too that there was a reason why the movie was called The Wolf of Wall Street, not The Wolf of Insurance.
There’s quite a bit of greed all around the financial industry. It comes down to not so much whether it is a whole life product, an index fund or a real estate deal. It comes down to what you want. Can you trust the people that you’re working with to do the right thing for you? As a fiduciary, I try to do and must do what’s in my client’s best interest.
I won’t recommend Bank On Yourself just to anybody who walks through our door. We have to do a financial consultation first. Figure out if that person is going to benefit from this and exactly how we should design it. If it’s not Bank On Yourself, we are a full financial firm. We’ll go down the list of several other tools and resources, including real estate that should be incorporated into somebody’s portfolio.
One of the keys is you have to find the right professional to help you. Some of the reasons that whole life gets a bad name are that a lot of the policies are structured improperly or too much for the person. It looks great in year one and then they can’t afford it after that. They blame the tool instead of the tool that’s sold on the policy. It’s very important to find someone who knows what they’re doing. There’s been a lot of change and uncertainty in the economy. Interest rates and inflation is going up. This is good if you’re in certain investments. It’s bad if you’re in other investments. Uncertainty is a problem. Talk to me about how inflation and interest rates rising affects your Bank On Yourself policy and whole life insurance.
We’ve certainly seen mortgage rates rise dramatically in 2021. In many ways, that’s doubled the cost of homeownership for a lot of folks and that’s made it untenable to become a homeowner for many people. I bought an $8 latte. If folks keep reading this in 2023 or 2024, that might sound quaint. We might be talking $20 lattes. Maybe I should go back to Folgers, I don’t know but you’re right. Interest rates and prices are going up.
With whole life insurance, it is unaffected by market volatility. With the markets in 2022, most of the indices are down 25% to 30%. That’s real money for people, especially if you’re already in retirement and relying on that as a stream of income. That’s also going to impact our renters in our real estate deals. It’s going to move people to various sectors of the real estate economy.
When you’re dealing with whole life insurance, it’s guaranteed to grow. Every single one of our clients that have one of these policies is hitting record highs in 2022. Some people would give the right ARM to not lose any more money in the markets. My clients are hitting record highs in 2022 and they’ll do it again in 2023 on a guaranteed basis.
What’s more to that effect? There are dividends paid on whole life insurance. Jim, you’re familiar with this so you might even be able to finish my thought here. As interest rates continue to stay stubbornly high, that’s good news for the insurance companies that invest in mostly bonds and mortgages. Their main business is not to invest in bonds. Their main business is life insurance and actuarial tables. When they don’t need to send that money out as a death benefit every year, they sit on that money and put it to work.
As that pool of money is exposed to higher interest rates like bonds going up in terms of their yield to maturity value, not their par value and as mortgage rates rise and other fixed income goes up, that is going to benefit and increase the profitability of the insurance company. If it’s a mutually owned life insurance company, which is the only kind we recommend for Bank On Yourself, the policy itself will have a larger dividend, which means our policies grow even faster as interest rates rise. Go back to the early ‘80s and you can see dividend rates on whole life insurance in the 12%, 15% and beyond to mirror what was going on in the mortgage world.
That’s what I was hoping you would talk about. Years ago when I was selling some life insurance, we would look at the illustrations, think to ourselves and say, “It seems like interest rates are historical lows.” The illustration is showing the worst case. Interest rates went down even further. We should see hopefully an uptick in dividend payouts, which is a huge benefit to life insurance holders.
I want to emphasize this. I don’t see my whole life policy as an investment. It is nice to get that yield and it sure beats other places I can park my money, especially my cash money, my safe and predictable liquid money. It’s not an investment though so I rarely keep all of my cash value souring inside my policy. I’m regularly looking for opportunities and so are our clients. They can put their money to work in syndication deals, real estate deals, ATMs, storage units and even the stock market if you’ll find a great deal there.
We don’t like to spend our cash value on consumables like sports cars, although you can do that too. The main thing we try to aim our clients toward is how can we achieve financial freedom by getting our money to do as many jobs as possible at the same time. If my policy is growing let’s say a net after the loan of 4% or 5% and then the syndication is what is 8%, 10% or 12%, you’ve increased your yield without any additional market risk due to the guarantees of the life insurance when you use the policy rather than paying cash for your syndication deal.
This is where things get very exciting for me because we’re able to help our clients achieve their goals sooner. Getting back to time, energy, attention and money. Why do we have to deal with Wall Street shenanigans if we can do a more sane way of living and dealing with money, and we can enjoy more time, energy, and attention with our money?
If you’re being your own bank, then when you take the money out and invest it in something, that’s leveraged. You’re using some leverage and then you’re investing it in a real estate syndication that also has leverage. You get double leverage but you’re also being conservative because you’re the bank. If something happens, and I don’t want to get in the weeds here, you can pay the loan off. If things are structured properly, you can save yourself from some of the problems you might get if say you took out a line of credit on your mutual fund or stock holdings where if those go down, you could be in trouble but here you’re a little bit safer.
I don’t look at it as an investment either. We used to call it like a turbocharger on some of your investments. What it does is it gives you more capital that you can use. It’s tax-free and has all those other benefits. Can you talk a little bit more about the possibilities of how you would take some money out, what that looks like and put it somewhere else? You pay it and the interest back. Your velocity of money is what we’re talking about, moving your money and getting multiple returns from $1. I’d like to end with a brief explanation of how that works.
Would you like some specific numbers involved too? Would that help?
Sure, that would be great.
I realize that can be tricky on a show. I also want to quickly tell folks that this is not a good fit for you if you cannot save money. If you’re living beyond your means, you probably need to get that fixed first. With that said, you can start a policy before you’re debt free. I did. I used my policy to pay off much of my student loan debt. I’d been throwing some money at my debt before I learned about Bank On Yourself but as soon as I found out about Bank On Yourself, I stopped throwing money at my debt.
I still paid the minimum but I quickly figured out that I could build up wealth inside my policy and then take and borrow against that policy to wipe out my debt one after the other. The advantage is that I got the asset earnings earlier and sooner. I wasn’t 4 years or 5 years older before I started saving. I started saving now. That got my compounding working now. I still was student loan debt free at the end of that story but I’ve got an asset and I am the banker.
I bought back my debt from Sallie Mae and her cronies. To me, that was better than debt free. That’s what I used my policies for first, along with other things as well to get the business started by some vehicles for the family and doing some other real estate investing and more. I’ll give you an example of how this works and let me know if this is to your question, Jim.
I know of a strategy that can make this simple to boil it all down. After we’ve had several conversations with you over the phone or via Zoom and we determine that this tool is a good fit, we will set up a life insurance policy and go through an application process to get that started. At that point, we go through an underwriting process to see how you’d be approved financially and medically. Once the policy is open, you’re able to put money into it. They call that premium. That premium is what’s used to accumulate the wealth in the policy. That policy begins to build wealth. You can access that money within 30 days of starting the policy.
There was a 35-year-old who felt comfortable putting in. It was a challenge, but it was a good number for him. He could put $1,500 a month into one of these policies. That’s $18,000 a year. At the end of the first year, he already had $11,000 in cash value in his policy and almost $700,000 in death benefit. He put in $18,000 but he had $11,000 available to him. It sounds like that cost him some money. It cost him some money to put that cash value to work. He was buying an asset.
For another person, this might not be right. If you need an instant overnight rate of return, you’re not going to get it with whole life insurance. It’s a slow and steady generational tool that can build wealth for you but also for your kids and grandkids. By year three, he’s already got $40,000 of cash value. His death benefit is over three-quarters of $1 million. He borrows $35,000 the following year from his policy. $35,000 borrows against his policy and then he gets to decide and control how much he pays back to the policy he owns.
Maybe he puts that $35,000 to work in a joint venture real estate deal. Maybe it’s a fix and flip. Whatever he wants to do with the money, it’s his money to do with. He gets to use maybe rent money from the real estate that he purchased. Maybe it’s a cash-out refinance but whatever he does, he’s able to put that money back into the policy. All that goes in after tax so there are no taxes due in that policy. In my numbers and example here, I have him paying his loan off at about $750 a month for the next 5years. He does this not just once, not twice but six different times over his lifetime.
After 35 years of funding his policy, borrowing from the policy and paying it back, he has $1.2 million of cash value and hopefully 6 different real estate deals doing what they’re doing as well. All that to me says that’s a great way to combine the power of Bank On Yourself with real estate opportunities. To use the analogy of nitroglycerin, it’s much better together. Whole life and real estate are great. They work better together because of what we’ve described.
I cannot argue with that at all. That’s a great place to end. The last question I always ask is, what’s a great podcast that you listen to? For the record, you cannot say Not Your Average Financial Podcast™. You’ve got to pick somebody else’s podcast.
There are several colleagues of mine that I can shamelessly plug, good friends and colleagues that are also Bank On Yourself professionals. I’ll sidestep the rule slightly and let you know about Thinking Like a Bank with Sarry Ibrahim, and Wealth Wisdom Financial Podcast with Brandon and Amanda Neely. Both are incredible people. They’re some of the best, smartest, and kindest people I know. They’re doing some incredible work helping us think differently about money.
If readers want to get in touch with you, what’s the best way to do that?
Thank you for the opportunity. If you’d like to build some wealth outside of Wall Street on the left field side of the equation, I’d love to talk. We work with clients all around the country to build real wealth using these policies and other strategies like them. To coordinate with your real estate portfolio, the best website is KickstartWithMark.com. I’d be happy to chat. We can set up a fifteen-minute strategy session to answer your questions.
Thank you very much, Mark. This was a great intro to life insurance and whole life insurance, and how to use it with real estate. We appreciate you being on the show.
Thank you. I appreciate it.
There’s a lot of good information in there from Mark. I’ve heard the opening analogy before, but I like how he said it. Would you want Tiger Woods’ swing or clubs? Of course, you take his swing. The problem sometimes we get into with financial planners is that they’re always trying to sell you a set of clubs instead of showing you the right swing and then you can figure out the tool to use. The swing is more of a strategy. I do like that analogy.
TEAM: Time, Energy, Attention, and Money. I like that because those are the things that you spend. What you want to do is figure out how to maximize the time, energy, attention and money that you have because those are things that you’re spending. If you could maximize it and be thoughtful and intentional about what you’re doing, you’ll have much better success.
Talking about the to-do list from financial advisors, he rattled them off like the 401(k) and IRA. All this standard stuff is conventional personal finance. It’s getting away from what we’re doing, which is community personal finance. We’re using our community to help us get to financial freedom rather than the traditional path of going down Wall Street, throwing money in your 401(k) and putting a little bit in an IRA. You need to find an advisor who’s willing to go the alternative community personal finance route, rather than just take out their to-do list, look at you and say, “You’re a potential client. You got to do this and this.” They don’t even know you yet.
I like that Mark is the kind of advisor that is willing to sit down and find out what you need before he throws his golf clubs at you, so to speak. We’re talking about whole life insurance. It is a powerful tool. I know a lot of people in the left field who use it. I want to give a brief example of how I use it for ATMs. ATMs are about 25% cash-on-cash returns. You give them $100,000, they’re going to send you $25,000, roughly back for 7 years.
What I do is instead of taking that $100,000 out of my pocket, I go to my life insurance. I take $100,000 out of my life insurance and throw it in ATM. In the 1st year, they’re paying me $25,000. I’m putting that all back to pay off all the interest and pay down the loan. In year two, I’m doing the same thing. In year three, the same thing. In year four, the same thing.
A few months into year five, that entire policy loan is paid off, including all the interest. For the next three years, they’re essentially sending me $25,000 a year. This is the power of this strategy. I’ve created almost $75,000 out of nothing because I’ve not spent $100,000. It’s back in my policy. While I was using it, my policy was growing as if it wasn’t in there. Once I pay it all back, I just get free money. I don’t even know how to calculate the return of free money. I guess it would be infinite.
That’s a strategy you can use for life insurance. It’s very powerful. I like a lot of the stuff that Mark was talking about. One of the most crucial things that we talked about is you need to find a professional that will do what you want them to do and what you need them to do. We’ve talked about this. How do you find the best syndicators, attorneys, CPAs, financial advisors, life insurance agents and all of that? We find that through our community.
We ask our community, “Whom are you using for your life insurance?” They throw out a name and you use that person. Maybe someone else throws out a different name so you can go talk to two people. That’s the way you get quality advisors helping you along the way. You do not need to do all of this by yourself. We’re using our community to find professionals that can make us better and get us quicker to our financial freedom and whatever that means for you. For me, that means time freedom to do what I want and have options.
I enjoyed listening to Mark. I was glad to have him on. We will be keeping track of the whole life insurance and seeing where it goes. Especially as the economy is changing, hopefully, those dividends will go up. I enjoyed my conversation with Mark. He had some great ideas and topics about life insurance and how to use life insurance. That was interesting to hear. That’s all for this episode. We’ll see you next time in the left field.
- Lake Growth Financial Services
- Not Your Average Financial Podcast™
- Debt: The First 5,000 Years
- Episode 159 – Past Episode on Not Your Average Financial Podcast™
- Thinking Like a Bank
- Wealth Wisdom Financial Podcast
About Mark Willis
Mark Willis is a man on a mission to help you think differently about your money, your economy and your future. After graduating with six figures of student loan debt and discovering a way to turn his debt into real wealth as he watched everybody lose their retirement savings and home equity in 2008, he knew that he needed to find a more predictable way to meet his financial objectives and those of his clients.
Mark is a CERTIFIED FINANCIAL PLANNER™, a THREE TIME #1 Best Selling Author, the Owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois and co-host of the Not Your Average Financial Podcast™. Over the years, he has helped hundreds of his clients take back control of their financial future and build their businesses with proven, tax-efficient financial solutions unknown to most financial gurus. He has become known as “Not Your Average Financial Planner!”
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