Financial Strategies # 3 - Is Paying Cash or Cash Value KING?

You either pay interest to someone or you give up interest you could have been earning with the money being spent. This means every dollar is either working for you or working for someone else, but it is working. Interest never stops working.

How can we design a system where our money is multi-tasking for us. Instead of performing only one action, buying something, we want our money to be able to buy something while at the same time increasing our wealth. This is possible and it is a common strategy of the wealthy.

There is really only one type of financial vehicle that makes it possible to multi-task our money exponentially though; and it is a specifically designed, dividend paying, whole life insurance policy with a Mutual company. See diagram to the top right.

The diagram below depicts an example of what most people are doing right now when they purchase stuff. They borrow money from a bank or financial institution then pay that money back with interest.

The reality is that even though the interest rate is 7.87% with a monthly payment of $608.80, they are paying a total of 16.888% more than the original price of the car of $25,000 over the four year period because (interest) $4,222 / (Principal) $25,000 = (interest volume) 0.16888. . So who is benefiting in this scenario? Who is the interest working for? In which direction is your hard earned money flowing, towards you or away from you? I think away from you.

Some people are smarter and they save up the money in a savings account first, and then they pay cash for the item, saving themselves a lot of interest. So after paying money for insurance, retirement, education, rent or mortgage, emergency fund, taxes, food and living expenses what is left goes into the savings account. Quite often if you pay cash for certain items you get a bigger discount on top of the interest savings though, so it is worth the wait.

Let's look more closely at this scenario. First, you had to wait to save up your extra money before you could purchase your item but you know you will be saving yourself 16.888% plus what ever interest you were able to accumulate while the money was in the savings account, plus receive a possible lower charge for paying cash at signing. So this is a better strategy than financing the purchase. We are not taking inflation into account.

Secondly, once you withdraw the money from the savings account it is no longer earning you interest. It has gone out of your life forever, never to be seen or heard of again. That money purchased one item for you and that is it. It was uni-tasked.

This scenario though is the reason why many people believe CASH is KING, because it saves a lot of interest charges over a lifetime.

But now you have to spend another period of time saving up money for the next item you wish to purchase.

This is where the fun starts. This is where you must understand the beauty of multi-tasking your money. This is how you build wealth over your lifetime while purchasing your every day items. This is why CASH VALUE is KING.

Let us look at some of what our premiums are creating when we pay for a dividend paying, whole life insurance policy with a mutual company that has some added riders attached as well.

1. Obviously it is a life insurance policy so provides a death benefit that grows tax advantaged.

2. We start building our own personal banking system which provides 60% cash value immediately for our tax free borrowing needs.

3. It allows us to recapture the principal and interest payments that would otherwise be flowing into someone elses bank or financial institution. This is big. I'll go into more depth below.

4. Here is the kicker that makes Cash Value King. Remember when you borrow from a savings account, or any other type of financial investment you collapse that account. The money is gone and you are no longer receiving any benefit from that money You have to sell the gold to access the cash. You have to sell your stock to access the cash. You have to pay penalties and are under many restrictions when you borrow from a retirement account. Not so with this whole life insurance policy. The policy is contractually growing. And part of the contract of life insurance policies is that the cash value portion of the policy must be lent. It will either be lent to someone else, or it can be lent to you. In fact, as owner of the policy you actually have first dibs on the cash value. This means your money is growing even while you are borrowing it. And not only is it growing, it is growing tax deferred and earning tax free dividends at the same time.You are borrowing the value of the cash, not the actual cash.

This is what is meant by giving up earning interest in the original statement of this hub.

I am focusing on Cash Value being King in this hub so you will have to read my other hubs in this series to learn about all the other benefits of owning this specially designed life insurance policy. Sorry, but I am trying to focus on one benefit per hub to make it easier reading for everyone.

Let's look further into #3 - What is the significance of allowing us to recapture the principal and interest payments that would otherwise be flowing into someone elses bank or financial institution.

This is such a major benefit to owning cash value life insurance but most life insurance agents and therefore the public do not understand how to use it to their benefit. Or the reduction in commissions to the agent by adding the necessary riders to make this policy into more of a living benefit and a banking system with life insurance as the icing on the cake, makes it not as worthwhile to sell. But it is much better for the client.

Now listen up and wrap your mind around this right now. If you borrowed the $25,000 (like in the above example) from your own bank (the cash value from your specially designed whole life insurance policy) and paid yourself back with interest what have you just done?

You have multi-tasked your money at the highest level. You have reversed the flow of your money back to you instead of away from you. You have used your lifetime purchases to fund not just your future but the future of your loved ones after you pass away.

As we pay ourselves back the money we have borrowed, (at a higher interest rate than what the bank was going to charge us) we are able to buy even more paid up additions which substantially increase the death benefit, which increase the dividends we earn, which in turn increases the amount of cash value available to us for our lifetime banking needs.

Plus, we have recaptured all the principal and interest charges that would have been lost forever otherwise, in someone else's bank.

How can you determine the most efficient way to fund

College,

Vehicles,

Retirement,

Real Estate,

Vacations,

and more, without going broke?

Have you spent more money on just buying cars than you have on savings for retirement?

Where do you save your money? In someone else's bank or in your own bank?

Why earn money and not learn the best way to utilize the banking of it?

You cannot look at whole life insurance as just a bad investment or just an expensive life insurance policy. It is sooooo much more than that. Keep reading all my hubs in this series to understand how you can take advantage of this incredible financial vehicle. Granted, the design of the policy must be of a certain type to create all these benefits. Most policies are not designed for optimum banking efficiency and many agents don't bother learning what's best for the client.

If you don't quite understand the impact this method can have on your wealth building during your lifetime then give me a call so we can talk further and I can show you what owning your own banking system in the form of a specially designed whole life insurance policy can do for you personally, for your situation. I give free consultations so check out my personal offer today

Check out a ten minute video on my blog with educational information about life insurance.

My next HUB in this Financial Strategies Series is Speculation or Prediction for Retirement. Read it here

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