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560: A Cash Management System That Will Make You Millions
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This week’s episode of Wealth Formula Podcast is a little different.
What you’re about to hear is actually a webinar I recently did with Chris Miles on a topic I’ve discussed on and off over the years called Wealth Formula Banking.
Why play this on the podcast? Because I genuinely think more people need to understand the concept.
It may or may not ultimately be right for you, but I think it’s worth taking the time to understand it so you at least know it exists and can decide for yourself.
For years, I ignored it completely because the phrase “be your own bank” honestly didn’t trigger any interest in me. It sounded gimmicky.
But eventually I sat down and actually learned how it worked, and once I understood the mechanics behind it, I realized this is one of those foundational financial concepts that every serious investor should at least understand.
Because if this does fit into your financial life, the earlier you implement it, the more powerful it becomes. And that’s really the key here: time, compounding, and velocity of money. Those things matter enormously.
One of the most common things I hear from people who finally understand and implement this concept is, “I wish I had known about this 20 years earlier.”
In fact, Chris tells a story during the webinar about an older investor who basically said that if he had simply optimized how his cash flowed over the course of his investing lifetime—while doing everything else the same—he likely would have made millions more dollars.
And that’s really what this entire discussion is about.
Most people think almost exclusively about what they invest in. Very few people think about where they invest from, and that distinction turns out to matter a lot.
Because once you understand how banks, institutions, and wealthy families actually use capital, you begin to realize there may be ways to amplify the efficiency of the investments you are already making.
That’s what fascinated me about this concept years ago.
In this webinar, we go deep into how the velocity of money works, why policy design matters enormously, how banks and wealthy families think differently about capital, and how this strategy can allow your money to continue compounding while simultaneously being deployed into investments.
Whether you ultimately decide this is right for you or not, I think understanding the framework itself is valuable. Because if this is something that belongs in your financial life, waiting 10 or 20 years to learn about it can become a very expensive mistake.
Reach out to Chris at [email protected] to learn more.
Transcript
Disclaimer: This transcript was generated by AI and may not be 100% accurate. If you notice any errors or corrections, please email us at [email protected].
My dad just passed away last December. Uh, he didn’t have any life insurance. He didn’t have his plan set up. Um, he was a strict money, you know, money-pinching saver, right? Um, saved everything, spent nothing, debt-free 100%, saved in his 401. He’s got the match, everything. And yet even then, uh, even when he was in his 60s, I had to tell him when I was a financial advisor, I said, “Dad, you can’t retire.
If you did, you have to die in five or six years ’cause your money will run out.”
Welcome, everybody. This is Buck Joffrey with The Wealth Formula podcast coming to you from Encino, California. Today, we’re gonna do something a little bit different. You know, a week or two ago, I had a, um,
I had a webinar with a fellow by the name of Chris Miles
on a topic, uh, and this topic is related to a cash flow management system, uh, that I think is really important for people to, uh, understand.
Now, why play this on the podcast? Well, because frankly, I think generally more people need to take the time to understand the concept. Now, it may or may not be right for you, and that’s fine, but I think it’s worth taking time to understand it so you at least know it exists and can decide for yourself.
Because frankly, I myself ignored it, uh, completely, um, for years and years. And the reason was the phraseology that is associated with this is often be your own bank, right? Be your own bank. And whenever I heard that, it didn’t trigger anything in me. It just didn’t trigger me to say, “Wow, I wanna be my own bank.”
It sounded gimmicky, right? But eventually I did, in, in part because of Chris Miles. I sat down, uh, and actually learned what this was, how it worked, and once I understood the mechanics behind it, I was like, “Okay, I get it.” Now this is real. This is one of those foundational concepts that every serious cash flow investor really needs to, uh, understand, because if this does fit into your financial life, if it is something that’s appealing, simple truth is the earlier you implement it, the more powerful it becomes, and that’s really the key here because it has to do with time, compounding, velocity of money, those things.
Those things that matter enormously. And one of the things I, you know, I, I always hear from people who finally understand and implement this concept is, “You know, I wish I had, I’d known this about this, or thought about this, or implemented this 20 years ago.” And Chris actually tells a story in, in the webinar about how, you know, he has a guy in his 70s who’s basically been doing real estate, really successful, but he’s just like if he had used this as his cash management system, he thinks he would’ve made a few million dollars extra just, you know, not by making different investments, but the way he moved his money around.
And that’s really what this discussion is about. Most people think, uh, almost exclusively about, you know, what they invest in, but they don’t really think about, well, if I invest in a, in a different way, if I use a different, um, you know, if a different type of system where I move money around from Will that make a difference?
As it turns out, it makes a, a big difference because once you understand how banks, institutions, wealthy families actually use capital, you begin to realize that there may be ways to amplify the efficiency of the investments you’re already making, and that’s what fascinated me about this concept years ago.
So in this webinar that you’re going to, uh, listen to, uh, you’re gonna hear a lot about the basics of velocity of money, uh, why policy design matters, how banks and wealthy families think differently about capital, and how this strategy can ultimately, and this is the big one, uh, allow your money to continue compounding while simultaneously being deployed in an entirely different investment.
Now, again, whether you decide ultimately is right for you or not, it’s fine. I don’t think, uh, you know… I just think that it’s really understa- it’s a really important thing to understand. The framework is really valuable to understand, and if it makes sense, you wanna do it sooner rather than later. Listen in to this webinar with Chris Miles.
Hey, everyone. If you haven’t done so, make sure you sign up for Investor Club. Investor Club is Wealth Formula’s private investment community. All you need to do is to go to wealthformula.com and sign up for free. And if you are an accredited investor, you’ll get an opportunity to quickly do some paperwork and meet one-on-one with me and get onboarded.
And once you do that, you get access to all sorts of potential private deal flow that you can only see if you’re part of the club. So join now. Join Investor Club at wealthformula.com.
You make a lot of money but are still worried about retirement. Maybe you didn’t start earning until your 30s, and now you’re trying to catch up.
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Thanks everybody for joining. This is a, you know, this is a strategy that, like, you know, we haven’t talked as much about lately, but I, I, I feel like it’s something that is there that people really ought to be thinking about in terms of how to manage your money.
So when we talk about wealth formula banking, we’re, we’re not really talking about necessarily, like, an investment per se. And it does require putting your money somewhere, but I like to think of it more as a cash flow system, a cash management system, and you’ll see why in some cases this is, uh, this is referred to as being your own bank.
Um, it’s one… You know, I used to hear that phrase all the time. I had no idea what that meant. This is what it meant. So what it, what it means is using your money the way banks use their money, the way the Rockefellers use their money, the way Warren Buffett uses his money to optimize whatever it is that you decide to invest in.
And it may not even just be investments. Some people use this as an optimal way to, you know, buy a car, things like that. That’s– It’s been written about significantly over the years about how this can really just, in the big picture, make you or save you a lot of money. And I said that it’s been a long time since I really, uh, uh, talked about this because, like, i-in my back of my head, I feel like everybody already knows it, but they don’t, and it’s been, uh…
it’s something that you ought to know about. The guy who explained this to me for the– really for the first time so I understood it was Chris Miles, and Chris is, uh, Chris is gonna go through that explanation with you and help you understand it. And, um, and hopefully it’ll make a lot of sense, and it’s something that I think a lot of people, um, may decide to utilize for themselves.
With that being said, uh, let me just introduce you to, uh, Chris Miles.
Hey, Buck. I appreciate it. Uh, I’m gonna go ahead and share my screen, guys. Um, I don’t know how many of you guys may have met me before or not, ’cause, uh, I’ve been, I’ve been around the block a little bit. Um, but just so you know, I’m often known as the anti financial advisor because I used to be a financial advisor over 20 years ago, and then I, uh, I realized after a while that it wasn’t working, that the typical slave and save mentality of putting your money away in mutual funds forever doesn’t work.
I actually got into real estate investing and was able to retire the first time when I was 28 years old, uh, by just doing passive hands-off investments, much like many of you guys have been doing or looking into with Buck. And, uh, and of course, you know, the recession hit a little while later. I went broke during that period of time, learned a lot of good lessons and came back again, and was able to retire the second time when I was 39 years old in, at the end of 2016.
And so, uh, so know that although we’re talking about this strategy here, I’m coming from a, you know, not just a business owner perspective, but also an investor perspective. Uh, this is something that I’ve learned over the years, really over the last 20 years, and so I’m excited to kinda share my viewpoint, my take on it, not from the traditional way you may or may not have heard of something like this, but more from an actual investor perspective of how you really make it work So, all right.
So we’re gonna talk about this wealth formula bankit, ’cause obviously, you know, Buck has talked about this for many years now, uh, ever since, you know, really him and I started partnering up almost, what was it? 2017, wasn’t it? So we’re going on almost 10 years, aren’t we?
Yeah, maybe before that even. Yeah.
Yeah. It’s been a while. So, uh, so really, I wanna talk about today how to get your money to pay you twice. Now imagine this, like if you could all of a sudden have money flowing in even when the stock market’s tanked. Two, you can get your investments working harder where you can actually be able to relax with your family, have your money working harder for you so- so you don’t have to work so hard for it, and no longer have to hope that your financial plan will work, but you actually know it will.
You can do this without needing a lot of time, don’t need millions of dollars, and you can actually do this without becoming a massive financial expert. And so today, I wanna cover three basic things. There’s one, how can you grow your cash faster, risk-free? I know that sounds in opposition to each other, ’cause everybody tells you high risk creates high returns.
That’s not true. That’s what, uh, most financial advisors and financial companies want you to believe so they can take none of the risk while they are the investors, and then you just go ahead and put your money with them and take all the risk instead. So how can you grow that money risk-free? How can you actually use it to increase your ROI better than a 401and have it liquid in a way that you can actually make money in two places at the same time?
Now, here’s the thing I’ve learned is that most investors, they, they learn… They end up leaving money on the table, right? With every deal. Um, but not in the ways that you might think is normally the case. You know, some of the things we have going on right now, we have inflation. Inflation’s been kicking butt, and we just had the numbers come out this last week where it’s actually getting hotter once again, not just because of gas prices, even before that, but we got the Feds printing money like it’s Willy Wonka chocolate bars right now.
Like, there’s so much money being printed. M2 money supply is at all-time high, that they’re driving up inflation, which could also drive up more interest rates, and that is worse in the sense that if your income is trying to go up, you’re now fighting inflation. We got national debt. We just talked about they had a $2 trillion surplus last year, right?
So we’re, we’re… I mean, now it’s just going skyrocketing at this point, and how are they gonna pay for it? Well, one easy place they can go to is your IRAs and your 401s, and that’s something that’s a place that many people thought could be a good place to keep it, but it could actually be one of the worst places to store your money right now.
You know, because let’s be honest, uh, we’re in one of the lowest tax bra- brackets right now, and yet we might actually see those taxes going up in the future. Most likely we will. Ironically, they tell you to defer your tax to later when we probably will have the highest tax rates. Um, they tell you to diversify your money, right?
Because that’s how you’re gonna keep your money safe. Hey, let’s look at the S&P 500. You know, right now, the S&P, just the top seven stocks are about a third- Of the overall index. The top 10 stocks are about 40%. So are you really diversified even if you have your S&P 500 ETF? No, not at all. In fact, you’re less diversified than you’ve ever been, uh, in the history of having the S&P 500 because of what’s going on with the AI bubble and everything else.
So you’re not diversified. We also have Vanguard. Just so you know, Vanguard, when they predict the stock market, they expect it to do better… Well, they, they, they want it to do better. They, they always overestimate what they want because they don’t want you pulling money out of Vanguard. Well, guess what?
The next 10 years, they predict a 2.8 to 4.8% average return over the next 10 years The problem is this. If you expect in the next 10 years you wanna have some sort of financial freedom or to start being able to pull off some income, you’re not gonna do a great job if you’re making less than a CD with higher risk.
That’s just not gonna work. It doesn’t help that we’re at all-time highs. In the last 30 years, the average has only been at 8.38% of the S&P 500. We’ve been taught it’s, like, between 10 and 12%. The reality is, even at best… And I’ve been tracking this for 20 years on a, at least a monthly, if not quarterly, basis, and I’ll tell you, like, this is one of the best times we’ve ever had.
We’ve had a 17-year bull market with one little blip in 2022 that you can barely see where the… right near where the arrow is, and that’s it. We’ve had the longest bull run in history which will be in your lifetime. Pretty much what I’m saying is don’t expect it to get much better than it’s gonna get, right?
Um, and this is the problem, is that you have this dilemma, because with inflation and with everything that’s going on, you have this cash and you’re like, “Okay, either I can have it be an asset or a liability, because I can let it sit on the sidelines. But if I let it sit on the sidelines and, and put it in a bank account earning point nothing percent, and then I get taxed on point nothing percent, that’s not gonna help me out.
I’m gonna lose to inflation. But if I try to get it out to invest, well, now I’ve lost my control, because what if I lock it up for months or years on end on these deals, and I’m just locking it up in a place ’cause I gotta get it to do something? But I might put it, put it in places I shouldn’t be putting it in.”
And that’s the dilemma we see people having is like, “Well, I can’t just let it do nothing, but I also don’t wanna have it just, you know, I don’t wanna gamble it away either.” Well, there’s a way to kind of do both here, and we’ll talk about that in a second. Uh, one thing you have to understand, too, ’cause I’ll have a lot of people, a lot of our clients are actually going away from the 401mainly because of this.
I mean, one, we got excessively high fees. Even if they don’t have sales fees, those 12b-1 fees, those admin fees, those fees are coming out. They’re usually between 1 and 2% a year, and that can literally cost you hundreds of thousands of dollars. Even worse, there’s below average returns. Um, I actually went looking into the Fidelity’s target date funds.
Have you ever seen those target date, like 2035 or 2055, 2060, where you can pick the fund, the, the time you’re supposed to retire and just say, “Great, I throw it in there”? In fact, uh, right now they say about 86% of millennials just automatically pick those target date funds. But I went and I tracked. I said, “Let’s look at the 10-year performance of these target date funds with Fidelity.”
And guess what I found out? They underperform the stock market by 2.1%. That does not include the minimum .75% fees that have to come out. That doesn’t include the other fees that come out too, just right there. So that means you’re underperforming the market by 3%. Uh, not to mention we got no control because they could change the rules whenever they want, 59 and a half rules, you have to obey that.
You have the 72 and a half rule, but of course, that could change at any time too. It already did back in 2020, and we have all these limited access. It’s like, it’s like trying to get a… You buy a car, you go through all this work of buying a car as a teenager, but your parents keep the car keys. That’s what it’s like partnering up with the government here, right?
And, uh, and here’s the reality. I, I showed somebody just recently, I said, “Hey, even if you got 100% match,” right? Which is the example on the left. You know, say you contribute 10,000 into your own S&P 500 fund, do it on your own, you earn 8%. Or if you take out that really the 2.85% from Fidelity because of the f- the underperforming stock and the excessive fees, I even put it at five and a quarter to be a little optimistic.
Even with that 100% match, look at the total number. Even then, with that 100% match, after 40 years, you’ve got less than if you just invested on your own And this is why we’re seeing people over and over, they keep putting money in these 401Ks and not… And say, “Well, I get the free money. You know, I get the match.
It should be fine.” But when they start to realize, “Wait a minute, that match doesn’t do jack squat for me. It really only gives me an extra 2 or 3% compounded a year,” then they start to question, like, “Wait a minute, well, why am I doing this 401K? Why am I locking my money up in something I have zero control over that the government can decide what they wanna do with?
They could tax me more, they could tap into it, they could do whatever they want, ’cause I’m not the owner, I’m just the beneficiary of this thing. What do I do instead?” And this is where we come to this, you know, wealth formula banking we’re talking about here. Uh, by the way, just so you know, more statistics from Fidelity.
53 million account holders between 403s, 401Ks, and IRAs. Only 1.1 million have a million plus. But a Transamerica poll found out with these same people, 35% say it’ll take a miracle to be able to retire because you only pull out 3% a year, which is the new recommendation. The 4% rule was debunked years ago.
3% a year on a million bucks is 30,000 a year. You’re basically living below the poverty line, and that doesn’t work. That’s what happened with this guy, uh, Dan. I actually had him on my podcast recently. Um, he actually just passed away this last year. Uh, but Dan here, he actually had a million dollars, and his financial advisor says, “Great, now you can live on 30,000 a year.”
The cool thing is doing some of the strategies that even Buck talks about with investing, um, he actually got up to over 130,000 a year with that same money by not keeping it in the 401K and doing other things with it or even self-directing it into more of these things. So my whole thing is stop playing the game, stop getting caught up in this because trapping your money in 401Ks, doing those 529 college savings plans where, again, no control, then you could possibly lose four years of savings and go down to two or three years if there’s a market crash, which we’re overdue for.
But here’s what the wealthy are doing differently right now, and this is what you need to b- really pay attention to. Um, I like what Bear Bryant says, uh, for those of you guys who are Alabama fans, you know, Roll Tide, right? Um, offense sells tickets, but defense wins championships. Um, I also like to quote Wolverine.
You know, he says, “Is it, uh, offense the best defense,” right? Whatever it is, you gotta have both. You gotta have a good offense, but you also have to have a good defense to be able to keep your money going. Right now, Buffett is storing cash a lot. He’s now got 30% of his money sitting in cash, almost $400 billion sitting in cash right now.
Uh, what’s interesting is he already sold off Bank of America stock ’cause he’s not trusting in that as much anymore. Um, oh, he also sold off Apple, and a few years ago, he actually sold off his S&P 500 index, which is what every financial advisor or every financial pundit will tell you to do right now. He already sold out of those things.
Here’s the Buffett indicator. This talks about what the actual economy’s doing compared to the stock prices. It’s now at an all-time high. It’s now 203% above where it should be, meaning the market’s overdue again for a crash, and not just a crash, but a big one. Oh, and there’s that Vanguard S- SP 500 you already sold out of, right?
So the wealthy are selling while the amateurs are buying right now. Now, the last 12 recessions have happened. Guess what? All three causes. You know, eight of them were from lock evaluations, like with tech booms, uh, we had real estate booms, things like that. Uh, right now we got an AI boom. Uh, widespread military conflicts, like wars, world wars, and so forth.
And one of them, if you go back to the 1980s, hawkish Fed policies where the Feds started raising interest rates like crazy and trying to tighten money. Guess what? All three are happening right now in 2026. All the more reason why you gotta play a good defense to go with your offense. And so I look at it like this.
Here’s… If you were to describe your perfect savings vehicle that you had, wouldn’t it look something like this? There’s one, it’s liquid. You can use it for whatever, whenever you want. But no one else can get to it, just you. Also, ideally, wouldn’t the returns beat inflation? Wouldn’t you want higher returns?
And wouldn’t it be cool if that tax s- that savings account was tax-free? And on top of that, if it’s not just tax-free, beating inflation, but those returns, still you’re safe from bank failures and market crashes. You’re actually safer than being in the bank. And even better, your family can inherit more than it’s worth tax-free.
Well, I refer to this as kinda like the Swiss Army, the Swiss Army knife, right? This is where wealth formula banking comes in, because that’s exactly what it is. It’s tax-free, high yield savings account that you can actually keep your money in. But this is not the typical traditional whole life, ’cause we were talking about using whole life insurance, but not the traditional stuff that you hear about.
And it’s not even the traditional infinite banking Nelson Nash thing we’re talking about when we’re talking about with, with wealth formula banking. This is better. This is much, much better. So here’s the difference. Many people will start to use savings accounts. They keep it liquid. It’s stagnant.
There’s no creditor protection. So if somebody sues you and wins or if there’s a creditor after you, they can garnish the money out of your savings account, just like they can put a lien on your, your own property. They can do those sort of things. You already know you’re getting paid point nothing percent.
There’s not really good leverage if you wanna make good money off that money. You just have to pull it out and invest it somewhere else, and it’s taxed every year. I mean, think about it. You make point nothing percent, and you get taxed on point nothing percent. With wealth formula banking, right now it’s paying 6% a year tax-free.
It’s 100% protected from lawsuits and creditors in most states. That means if somebody sues you and wins, this is one of the only places you can put your money and they cannot touch it. I was actually on a, on a, uh, a big real estate show recently, and the guy’s saying, “Hey, I’ve had all these infinite banking guys on, and I just don’t buy it.
I, I don’t see the whole purpose of it.” And, uh, and he was… We were talking about this whole making money in two places at once thing. He’s like, “Yeah, I’ve heard that before.” And then I just happened to mention, “Oh, by the way, it’s 100% protected from lawsuits and creditors.” He’s like, “Why didn’t anybody tell me that?”
He’s like, “That reason alone, especially with me, where I have high income and a lot of assets, I wanna protect it, ’cause I could literally store millions of dollars in here. You’re saying I wouldn’t, I wouldn’t lose it?” I’m saying, “Yeah, that’s exactly it.” That’s one of the coolest things, that is able to have your money protected.
You know, as I’ll show you here later, it actually counts when you want it to count, but it doesn’t count as an asset when you don’t want it to count as an asset, like in that case of being sued By the way, banks love it when you have it, and you can actually maximize your ROI by getting your money pay you two places at once.
I’m not the first person to do this. This is not, like, something I created. This has been going on for generations. Uh, if you ever heard of a guy named Walt Disney, he literally, uh, when he was trying to build Disneyland, nobody believed you could build a theme park without alcohol, right? And have a family-friendly type of theme park.
Uh, he s- he had that vision to do it. Turned down by literally hundreds of banks. Finally, a new and upcoming network called ABC, you guys probably know of it ’cause now they’re combined, um, ABC said, “Hey, we’ll come in if, Walt, you come in with your own cash first.” What did Walt do? He sold off his second, his, his little vacation property, and he leveraged his life insurance savings account, not the death benefit, but the cash savings account in there, he leveraged that as collateral so ABC would come in with the rest of the money, and now the rest is history.
Now you stand in line for an hour and a half or two hours and you smile about it. So, uh, that’s the kind of cool thing you can actually do with this. J.C. Penney, during the Great Depression, actually paid his employees’ wages when they were tight on cash. It’s not just guys from the old times, guys. Jim Harbaugh, any of you guys that are football fans, was with the, with Michigan back in the day.
Now he’s with the, with the Chargers. In 2016, Michigan actually loaned Harbaugh $2 million bonus, but they gave it to him as a loan, because if you get paid a bonus, as you guys well know, uh, that income is gonna be taxable. So he asked to be loaned $2 million a year, plus 4 million upfront, to go put into his life insurance policy Now, he was able to get it from them at a 0% interest rate.
Um, this is kind of the same thing that Buffett did recently with buying an oil company. He actually got what’s called float from an insurance company, where he was able to borrow from the insurance company and use that to buy, um, uh, the petroleum company. I’m trying… Um, Occidental. That’s who it was.
Occidental Petroleum he bought. He bought a huge amount of shares using insurance, right? Using the money from the insurance company. He did the same thing. He just had Michigan loan him money so he could get tax-free, growing his plan tax-free, and it could come out tax-free. He just has to pay them at some point, um, either before he dies or, of course, you know, if he ever left, which he eventually did.
But he was able to earn interest off their money while they charged him no interest. Now, my story, like I mentioned, I was able to retire the first time in 20- 2006. Um, while I was learning about this real estate stuff, I started hearing about Nelson Nash and some of these things. And, um, now remember, I was a financial advisor.
I’d never heard of this strategy before. When, uh, when I was presented to it by all these real estate investors saying it was the best thing ever, I remember meeting with the insurance agent they recommended. Now granted, I had a life insurance license, but I didn’t know how these things were designed. I went to him, I saw the numbers, I said, “You know, this looks really expensive.
I, I don’t know if I like this. Um, is there ways we can make this better? Is there lev- different leverage we can pull to make, to make it get a better ROI? Um, because I know you can do that with other types of insurances.” And the insurance agent told me, “No, you can’t.” I said, “All right. Well, I guess if that’s the case, I’ll just buy it as is, because apparently this is the best thing since sliced bread.”
Well, uh, two years later, 2008, the recession’s hit. I’m going broke. I can’t keep affording paying my premiums. I called the insurance company saying, “Hey, is there anything I can do here?” They said, “No. There’s no cash in your policy. It’s not gonna float itself, and so you’re gonna have to… If you can’t pay the premiums, you’re gonna lose it.”
So guys, I had paid tens of thousands of dollars into my plan only to watch it disappear. Months later, I was talking with a different friend who also bought a policy from the same guy, found out that the insurance agent lied to me, that there were levers you could pull to make these better. Because here’s the thing, you might hear Dave Ramsey or Suze Orman, people like that ripping on this strategy, but they’re not all the same.
You gotta understand that these are not designed the same way. In fact, most will never design it the way that we wanna design it here, and the way that Buck likes it designed.
Hey, Chris? Yeah. Just, sorry to interrupt you, but just as an aside, that happened to me too before I got, before I met you.
Yeah.
Yeah. Like, I, I, I, I didn’t, I mean, I didn’t know and I didn’t have, like, my license or any, so I didn’t understand anything. Exact same thing, and then, um, once I met you, realized there was all of these other options in terms of, like, stripping out and maximizing cash value. So just, just thought I’d point that out.
I just was like, that happened to me too, so.
Yeah. No, no, you’re a smart guy too. I mean, obviously you’ve been trained, like, better than most of us and… No, that’s the, that’s the problem is, like, it’s just, it’s not available. In fact, even insurance companies won’t teach you to do it the way that I started to find out I could have actually done it.
I, so I had to do my own research. I had to look around. I ran my own numbers, ’cause I did have my insurance license still. Ran my own numbers and found out I could have beat all of his numbers. I could have had cash in there from day one, not go three years in and have no cash in it. And, uh, and I confronted the guy.
I went to him. I went to his office, which was the same office I was working in, but we, we went to a conference room, and for two hours I debated this guy, chewing him out. And finally after two hours, he said, “Chris, I designed it that way because I couldn’t afford to cut my commissions.” And I said, “There, now you’re finally being honest with me.
And by the way, screw you ’cause I just referred friends, family, and clients to you over the years and found out that you were doing it wrong.” And that’s kinda where since then I’ve really been on a mission to do it better, right? To really find, like, how can I get… Like, milk every bit of ROI I can get out of these things, lower the costs so that my ROI improves.
And really, now it’s been almost 20 years, have found the right system to do that, and that’s what we’re doing here. Let me show you an example. This is very similar to, like, what I had, although this is a recent person. This is actually a woman that, um, uh, interestingly enough, uh, Buck, she’s a neurosurgeon.
Um, this was brought to me by, um, by an insurance agent who says, “Hey, I know you work with this in- particular insurance company. Will you take a look and see if it’s, if it’s any good?” ‘Cause, uh, he’s like, “I’m, I’m sure it’s not, but I want, I wanna see what’s possible here.” Now, it’s kinda gonna, it’s gonna be hard to see maybe on your screen.
I have the vanilla whole life on the, on the side, the one that she got set up with, and then the wealth form of banking on the right side. And so I looked at it, I said, “Well, yeah, look at that.” Like, she’s paying 60,000 a year. She already paid her first year’s premium, is what’s on the, shown on the left.
The highlighted part on the right shows how much cash is in that savings account, which shows you those first two years she paid in 60,000, zero cash in the savings account. It’s all going to pay for her insurance costs for the death benefit. Year two, she pays in another 60,000. Still zero. Year three, she pays in 60,000.
Now it’s $180,000. She’s got 30 grand in there. It takes her 13 years to have just as much as she finally paid in. Where mine on the right, I said, “This is the same one.” I’m like, “By the way, just so you know, she’s a year older.” So even though insurance costs go up slightly when you get older, I was like, “Look at this.”
Instead of having zero that first year, she’s got over $50,000 year one, and by year five, she’s got more than what she paid in, almost by year four. Now, if you can’t see this, here’s, here’s what it looks like, right? No cash for year three, only 30,000 cash after that. Now, also, by year 25, that other one, that vanilla example, 2.38 of k- million of cash that’s in there by year 25.
On mine, same company. It’s not about the company, guys. Although the companies help, it’s about how the agent designs it. 50,000 that first year, 168,000, not 30,000, in the third year. All this means, guys, it’s not that the ROI increased. It’s not that we increased the dividend. The dividend was still paying 6% a year.
But instead, it’s because we reduced the cost by, in this case, by almost $140,000 in just those three first, first three years. And that’s why you had over 3 million of cash by year 25. That means it’s literally saving her about, uh, roughly, you know, 600,000-plus, um, just by tweaking those numbers. Needless to say, she was pretty pissed off, and the, the guy that designed it for her obviously just did it the traditional way.
It wasn’t like he did anything wrong. I want to be very clear. It’s not like he was unethical. He didn’t know how to do it any other way, because one, insurance agents don’t wanna teach it, ’cause they’re gonna cut their commissions back, but two, the insurance companies don’t teach it either. This is something that we had to learn, um, and figure out on our own, right?
Um, that’s not even the best example. I had a c- a dentist, uh, a, a dentist and his wife, they actually said, “Hey, can you review our plans?” And they even used a guy that was a quote, unquote, “infinite banker.” So it wasn’t just like the vanilla one. This guy actually got them cash from day one. And, uh, and I said, “You know, I’m sure it’s probably good.
You’ve had them for six or seven years. Uh, you probably should just keep them as is. But sure, I’ll double-check and look at the numbers.” What we found out, guys, in a … I have, like, the QR code if you ever wanna watch the interview. In 20 years, by even though we started a brand-new policy with new fees up front, in 20 years they would have $2.25 million more than what they had in their current plan, paying nothing more into it.
Paying the same amount, but have a $2.25 million more, and they would still have $4 million more death benefit, too. Just insane. Um, needless to say, I’m glad that they pushed me on looking at it, ’cause I was gonna just say, “You know, you’re f- guys are fine.” And so the biggest thing here is, is that it’s not just about the ROI of the, of the com- what the company’s paying you.
It’s about how do we reduce those costs as low as it can go while still keeping it tax-free. That’s what it should be. You should be getting the max ROI, not your agent on this. Now, it’s not for everyone. Here’s three types of people that should not do this. One, if you’re probably over the age of 70, this is gonna be, it’s gonna be expensive, right?
You could do it, but it’s not gonna be a very good rate of return. Um, so if you’re over the age of 70, this may not work for you. Or if you’re in poor health. If you’ve had recent heart attacks, you’ve had tumors or something like that, some kind of cancer, um, something of that nature. Uh, by the way, even if you’re a smoker, um, I actually showed a guy where as a smoker his ROI was still pretty decent.
Uh, better than what most agents give non-smokers he was able to get, and that was just this last week. Um, but again, if you’re in poor health, this may not work. So for example, there was a guy that, uh, Bucket introduced me to almost 10 years ago, um, that was a dentist, but he was about 400 pounds. You know, he was overweight.
And he said, “Chris, listen, I’m 55. I know my health is not great. Um, this may not work for me, uh, but could I do this policy on my wife instead?” I said, “Well, tell me. Tell me about her.” He’s like, “Well, she’s 52, great health, works out at the gym every day. Um, and of course she’s a woman. Women live longer, so that means a cheaper insurance cost right there.”
By the way, women get higher ROI than the men do, even if you have the same age and health rating. And so I said, “Well, obviously sounds like she’s a great candidate.” And so he started paying $105,000 a year contributing to that account, um, in her name. So he owned it and controlled it, but he put it in her name instead, and was able to use her good health to be able to get a better ROI than just putting it on himself.
Uh, matter of fact, I have one guy, he’s a, a famous YouTuber. He actually is doing a policy on him, his wife, and his three kids. But he’s contributing about 20,000 a year to each kid, um, taking advantage of some of their health as well. His wife’s health is actually, she’s the best ROI of all of them. So figure out how to mix and match to make it to get the biggest, you know, squeeze every little bit of juice we can out of these things to make it a better return and give you access to that cash, right?
So there’s a lot of ways to do that.
Yeah, and I think, Chris, a good, it’s probably good to just point out that, yeah, there is an add- there is that, uh, there is an initial cost out of the gate, and what you’re paying, A, is permanent life insurance, insurance that’s gonna be in there for your, for life, for your family for sure.
And B, the way that, uh, I think Nelson Nash described it is if you were starting a business that was going to make you money, these are sort of the startup costs involved. And- Mm-hmm … so you have, you, there’s a, there’s a, there’s a price to set up this infrastructure and, you know, just like any business or any kind of thing where you have an opportunity to make money off of it, you have to lay the foundation.
And so, you know, y- you could look at that initial one and say, “Well, yeah, that cost 10 grand.” Well, if it cost a total of 10 grand from the beginning but you got the money back, you got essentially from there a free death benefit and you had a way to amplify all your returns going- into the future- Yeah … I think that’s probably a better way to look at it.
Now, um- Agreed … I don’t know if you have any comments on that, but that’s, that’s- I do … kind of the way I wrap my head around it, ’cause people kind of get stuck on sometimes, “Well, I’m paying for it.” Well, yeah, you are paying for it. You’re paying for, for one thing, if you buy, if you, if you consider term insurance, is term, it’s not a bad thing to have.
You should, everybody should have s- cheap term. But the term is if you don’t die on time, it’s just nothing but sunk costs. And over the course, a period of time, you’re gonna pay a lot more in term insurance, and you’re never gonna see it back. Whereas in this situation, you’re setting it up so you essentially recover the cost of insurance and w- and then way beyond that with how it amplifies your returns.
So just thought I’d step in to reframe a little bit.
Yeah. No, that’s a great point, ’cause, uh, I, I, I compare it to being in traffic, which, you know, obviously you’re in California, you know all about traffic out there. But, you know, like sometimes I’ve noticed, like I’m in a lane, I can see there’s a lane going faster than me.
Sometimes I have to h- tap on the brake a little bit, give myself some space, go slower so that I can get into that lane and go faster, right? But it oftentimes means I might have to foot the brakes a little bit so then I can make that shift to go faster. Same thing here. Some people are like, “Well, I could just have a savings account and invest with it.”
You could. Yeah, there’s nothing wrong with that. Um, we’re just trying to figure out how can we milk out more money, ’cause if I can get paid more, ’cause I do get paid higher dividends using my policy than keeping it in the bank account, and there’s better protection that’s tax-free, yeah, I’m willing to take that little, you know, two-year hit, you know, to get a little bit of those net costs to then get a net gain that’s gonna be more than a savings account, even a high-yield savings account, even within the next five or 10 years, you know?
And I get control of that money too. I can use it to make money in two places at once, which, you know, I’m about to show. So yeah, very important point for sure. I- if it’s not enough a point there, I mean, I have several clients that are investors and business owners that have no family. They’re in their 20s, and they’re like, “I have no, no reason to have life insurance, but I’m getting this because it gives me so much more than what I could get just having a, a bank savings or something like that, or only investing in one place at one time.”
So, uh, obviously, like, you know, here’s the thing too. Like I said, it’s a Swiss Army knife. Here’s the ways you can use it, and this is what really makes it more flexible, right? Uh, because- Th- this is where a lot of people stop using their 401Ks, they stop using their 529 plans, because this becomes a thing you can use for multiple purposes all at once.
Uh, cash flowing investments… Oops, I put that there twice. Um, I’ll get back to that one at the end, because there’s some cool things of how you make an- get your money pay you twice we keep talking about here. Uh, the first one I use it for is my emergency fund, as well as business reserves. You know, if I gotta have my money sitting on the sidelines, I don’t wanna lose to inflation, I don’t want to have it just sitting there making nothing.
You know, my credit union pays .05% right now, now the rates have come down a bit. Uh, even my high yield savings account dropped to, like, 3.2%. That, and th- I get taxed on that money. I don’t wanna, like, make a net 2% where I can make 6% tax-free. And even somebody might argue and say, “Well, Chris, with those net costs, is it really that much?”
No, you might say it’s net 5 to 5.5% tax-free after those costs, but still, that’s way better than 2% after I get, I pay taxes, you know? So I keep the vast majority of my m- my emergency fund there. So for example, my wife, she wants 400,000 sitting in cash that we never touch. Never invest, don’t use for business, don’t use for investing, it’s just sitting on the sidelines.
What I told her, I was like, “Well, 400,000 earning even 0.1% is 400 bucks a year that I get taxed on.” I said, “Well, what if we earmark 300,000 that’s in my policy that I don’t touch? I just let it sit there, earning 6% a year tax-free. That’s $18,000 a year, and I still have money between, split between the bank, the local bank that I can get to today, as well as my high yield savings account that I’m making 3% on.
I could split between those. Sure, I’ll still make, you know, a few hundred bucks over there, but I’m making 18,000 versus 400, you know? Just, uh, and then I get taxed on it.” So just for me to be able to make more money, using this as a place for cash reserves alone makes it worthwhile for me, where I’ll put the vast majority.
By the way, you can get to this money in roughly about a week, that can transfer from your, your life insurance to your bank savings account. Um, kids’ savings. I mentioned 529 plans. More and more people are hating their 529 plans ’cause they’re just not performing well. They don’t even perform as well as the stock market, and they could still lose money with the stock market.
And the thing is, what if your kid gets a full-ride scholarship? What if your kid decides to not go to college? What if they do some sort of vocational training? Maybe they go into the, you know, start to become, like, into HVAC or something, or become an entrepreneur. They don’t need the 529 plan. You try to tap into your college savings plan, you’re gonna get penalized and slapped for touching your own money.
Where if it’s in here, you can use it for your kids however, whenever you want. In fact, even if you put it in their name, uh, where they’re the insured, you can control and own it. When they turn 18, it’s not like automatically turns over, becomes theirs. You have to give permission for them to be able to get access to that money if you ever want them to.
So you own and control that money. It’s in your name as the owner, but they’re just the insured. But down the road you might say, “Hey, with my kid, maybe I do wanna turn this over to them. Maybe it does wanna help pay for their education. Maybe it’s gonna help them start up in life. Maybe I’m gonna wait till they’re 25 or 30 when they’ve actually got some brain cells and synapses formed together instead of being brainless like they are in their teens and early 20s.
Maybe I turn over the money then when they can actually use it more responsibly.” You know, so you can do all kinds of things with this to be able to use it for however, whenever you want. Um, extra retirement income, this is the one that most people talk about, which is the fact that you can pull out tax-free income.
This literally has the same tax rules as a Roth IRA. It grows tax-free with… You put in after-tax dollars, grows tax-free, comes out tax-free. But you do not have to wait till you’re 59 and a half to access it. You could literally be pulling this money out before 59 and a half for any reason at all, but again, you’d be able to pull that money out and there’s no penalties.
So that’s another big reason. Many people, even traditional advisors, have started to use this as a strategy for people that wanna retire by 50 or 55 so they can bridge the gap between that and their 401s or IRAs And then the last one, cash flowing investments. If you’re gonna be doing things, especially in the alternative investment space, or even in your business.
By the way, business is another way you can make some cool money off of it too. But even if you’re just talking about cash flowing investments, this is where it really sings. Um, this is kind of how I show how it works, right? Is that you have money, you usually put it in your bank account, and you go and you just put, throw it into a, an investment, and then you take the cash flow and it fills up your bank account again.
Remember, like, when you’re draining that savings account, yeah, you go, go invest it, but now it’s only earning money in one place, in that investment. And then you have to wait for that cash flow to come back in to replenish, to slowly build it back up. But what if you could have your money in cash and still have an investment at the same time, earning dividends in two places at once?
That’s where this comes in. Here’s how you do it. There’s two ways to access your money with your life insurance account. One, you can withdraw it. You can just withdraw it, just like any other savings account, you can pull the money out. But once again, once you pull the money out, it’s no longer earning those tax-free interest.
Plus, it’s not having all the creditor protection and everything else. So your other option is you can get a collateralized line of credit against it. Yes, you can even go to a bank. There are certain banks that will give you lines of credit using your life insurance as, as collateral, but you can actually just go to the life insurance company directly.
Here’s the cool thing. It’s a private loan. There’s no credit check. You don’t even have to have a good credit to do it. You can pull out the money for any reason at all And even better, you can pay it back however, whenever you want. The deadline for paying back your loan is your death. And at that point, they just pull out your d- death benefit, whatever you borrowed from them, and then they, they pay the rest of your family tax-free.
Now, why can they do that? Well, because, yes, they are charging you interest on a loan. By the way, there is a lot of lies out there in the infinite banking space, um, even in the real estate space that say, “Oh, you pay yourself back interest.” That’s a lie. That’s a myth. You do not pay yourself back interest.
You actually pay interest to the insurance company, just like you would to a bank. But this is the key thing. You’re also earning interest on the money at the same time. So while you’re paying them simple interest, they’re paying you tax-free compounding interest, roughly about the same rate. So as a result, especially if you’re using this for cash flowing investments or if it’s going to your business and it’s generating income, and you use that income to pay back in to replenish or to pay down your line of credit, just like having a HELOC, but it’s like having a home equity line of credit that pays you interest.
And so as you start to pay it down, less and less gets charged interest. So let me show you what that means.
And just to, you know, I know you’re gonna talk about it again, but this was sort of a aha moment for me when I, um, really tried to understand this, right? And I think people are probably wondering, well, how do I borrow money but still make money on that money?
Well, it’s in the mechanics. As Chris mentioned-
Yeah …
money that’s growing in your account, your, uh, WealthForming Bank account in this case, is growing at a compounding interest rate, right? And when you’re borrowing, you’re not borrowing f- necessarily from your money there. You’re borrowing from the insurance company’s ledger, their money.
And when they charge you interest on that money, they’re not charging you compounding interest. They’re charging you simple interest. So even if it’s the same number, the same, like say it’s 4%, you’re borrowing at 4%, and your, you know, and your money’s growing at, uh, just 4% compounding, you come out way ahead.
Mm-hmm. You know, that’s just kinda how the numbers work, right? Mm-hmm. So this is like, this is like the whole To me, this was the big aha moment. It’s basically like you’re, you’re, you’re, you’re borrowing at a simple interest and you’re having someone pay you at a compounding interest, right? So effectively, that’s the magic right there.
That’s right. That’s exactly it. I mean, that’s… People say like, “Well, Chris, why would I borrow my own money?” And my answer is always, “You don’t. You don’t borrow your own money. You can just withdraw your money. Why would you borrow it? You just withdraw it.” But no, I wanna borrow from the insurance company because I know I can earn more money than what I’m borrowing at.
And it’s not just a spread. Some people say, “Well, if they say they charge you 5%, Chris, and I make 10% on investment, I’m making a net 5%.” I’m like, “No, because you’re also being paid 5 or 6% on your money too,” right? So you’re actually earning more than that, you know. But, uh, again, we’ll show you how this looks right here in this next example.
Uh, say you buy a little, uh, fourplex, right? A million dollars. You gotta put a $250,000 down payment. The cash flow, I mean, if it were a good one, $2,500 a month, right? Definitely won’t find that in California or anywhere in the western half of the US, you know, but yeah, 2,500 a month for twenty– $250,000 down.
So picture this. If you drained your savings account of a quarter million, now that 2,500 a month is gonna go back in to replenish your savings account so then you can reinvest again. Well, let’s compare. What if we use the savings account, draining the account, versus using the strategy with the life insurance where we don’t drain our account, we actually leave it sitting there earning that compounding tax-free interest, but we borrow from the insurance company instead.
What’s the difference? Well, the savings account, if you’re earning 0.1% over nine years, that means you basically pay back 30,000 a year times nine, that’s 270,000. You still only net after taxes 1,200 bucks of interest. Nothing that’s gonna make you happy, right? So yeah, you made your $270,000, but you only made 1,200 bucks in interest.
However, we use the same thing with the life insurance. And by the way, I used myself. So I, I ran the numbers on myself a few years ago when I was 45. I’m now almost 49. Uh, when I was 45 years old, I ran these numbers. Even with net insurance costs coming out and interest that you’re paying back the insurance company, here’s the net gain I got Almost $127,000 of profit after those same nine years.
Same thing, same money, same strategy, but just instead using a different vehicle that pays me better interest. That’s the difference.
This is a, I think this is, I guess, the cut the money shot, right? I mean, really, Chris, it’s like, it’s just a matter of, you know, I mean, Buffett talks about the magic of compounding interest.
This is what we’re talking about. This is what banks do when they lend, and they use arbitrage to, you know, find these opportunities of money left on the table. And basically, this is the kind of stu- this is why we keep talking about this, um, as a system, as a cash flow management system, and a way to optimize, uh, your investments.
So I mean, this is, um, I mean, that, that’s, that’s, uh, I think a, a perfectly, perfectly captures what we’re talking about here.
And you’re right, banks do understand this, uh, because banks will hold anywhere from 15 to 20% or more of their cash in these same kind of plans. They actually store their cash here because the feds can loan them more money because this is considered a tier one asset, which means they can loan out 10 times the amount they have in here.
So they get more leverage than we get. If that’s not even evidence enough, uh, I have another friend who his friends actually, or a family that owns a bank, and he asked him, he’s like, “Oh, so you guys probably use your bank, don’t you?” Like, it’s kind of nice you have your own lit- literal family bank. They say, “Oh, no, we don’t put money in our own bank.
No, we actually put money in our life insurance policies.” So think about it. They own a bank, and they won’t even use their own bank. They still use this strategy instead Uh, that’s where I talk about, like, that double dip, right? Where you can make money in two places at once. You know, as, uh, good old, uh, you know, Christopher Walken says, “He’s got a fever.”
But in this case, the only prescription is more arbitrage, right? How do you make more money with that money? So the k- system is just this. If you’re to simplify it down, it’s like you pay down your loan on the in- insurance, and you reinvest that money again and again. So as you pay back that, in that case, that 2,500 a month, it’s paying down that line of credit.
And just so you know, you could run up that line of credit and pay it down all you want. It’s not like a 401loan, where if you use it once, you have to pay off the entire loan before you can use it again. That’s not the case. This is like an open line of credit, and, like, up to 95% of the cash that’s in there.
So if you have 100,000 in cash, you can access 95,000 for any time, for any reason. If you got a million dollars, you can get up to about 950,000 or so for any time, any reason. And so even if you pay down that loan balance, you’re like, “Hey, I got a half million. Pay down 400,000? Cool, I got… I can do it again.
I can run it up again and do more.” And that’s the thing. It’s the cycle and, and the flow of money. Moving your money through, just like a bank does. They’re always moving money. They’re not just letting it sit. That’s what they teach us to do so that we keep money with them. Don’t move it, so then they can move money.
We instead are just doing the same thing banks do, we’re just doing it for ourselves. Um, my personal idea of how I fund these, ’cause everyone will ask, “Well, what’s the best way to fund? Do I throw in a lump sum of money?” Um, that’s not my, my preference at all. If you throw in a lump sum, the larger money you throw in, the bigger the death benefit has to be, which increases the costs.
So I tell people instead, “No, don’t do that. Here’s what I would do instead,” if you’re starting from scratch. If you already have one of these, great. Um, we may wanna take a look at them too and analyze if you have current policies that may or may not be doing a good, doing you justice right now. But I tell people this, because, you know, Buck, you mentioned earlier about that net cost.
Well, the way I’ve been able to overcome that to where I can make sure that my money makes money is for those first one to three years, I’m just using my emergency fund to fund it, just to diversify my savings. Just like people transfer money from a crappy bank account to a high yield savings account, you can do the same thing.
Go from your bank or your high yield savings to this. Use that money instead, ’cause now you still have it available for emergencies, but now those net costs are negligible. So by the time you get to the third or fourth year and there’s a net gain, because now the interest you’re earning in the policy is more than the insurance costs coming out.
Understand that whole life is different than term insurance. Term insurance gets more expensive over time. Whole life is front loaded up front with more costs up front, but then gets cheaper over time. So the nice thing is that there’s kind of this inverse relationship, so as, as the costs start to go down, your i- your compounding interest goes up, and eventually about the third or fourth year, you’re making more than what you’re paying into it.
It’s literally like a tax-free high yield savings account at that point. Great time to start keep using it and building it for investing. So now you’ve got an emergency fund like I have, where I’ve got money earning better than it will in the bank anyways, and I’ve got money to invest too, and so I can really find that balance.
Uh, not that you have to do it this way. Um, again, there’s so much flexibility and creativity here that it’s… the imagination’s the limit, right? Um, but that’s kind of how I’ve seen it work best. Um, I’ll give you an example. I had somebody come to me and they said, “Yeah, this insurance agent told me to throw in a quarter million dollars up front.
Like, just throw it all in and that’s that, and then, then it’s add, you know, about 50,000 a year thereafter.” And I said, “Well, you could do that.” I said, “But let’s, let’s look at it this way. What if you instead, you know, y- like, how much do you have, like, cashflow every year?” He’s like, “Well, I’m putting away about 25,000 a year into, like, savings or 401Ks and whatnot.”
I said, “Let’s do this instead. Let’s set the max at 25,000 a year,” ’cause you can always contribute less, but you can never contribute more. Let’s set it at 25,000 a year. That means that 25,000, that 250 comes out to start your policy. The other 225, invest it. Go invest it in some real estate and do some stuff.
Let’s say you earn a 10% return on that 225. Now you’re earning 22,500 a year. Plus you’re saving 25,000. So what you’re gonna find is that pretty soon the investments earning the 20,000 are basically paying for your policy. So it’s zero net out of pocket. It doesn’t even give you a cost, and that’s the one way you can use it instead of just trying to do this huge dump in, which is what the agent wants, ’cause they’ll make more money when you do that.
I’m not saying you don’t dump in a lot of cash, ’cause you might wanna dump in quarter million, half million or so a year. Um, just so you know the rules on this, you can put in up to 25% of your stated gross annual income. So not what your tax returns says. They only look at tax returns. Unless you make a lot…
If you’re gonna try to put a lot of money in, they might want tax returns to back it up from an accountant. Um, but I had a guy who was a, a real estate syndicator. He said, “Hey, Chris, I wanna put in a quarter million a year.” I said, “All right, cool. Well, how much does your tax return say you make?” He says, “Well, after I write off everything, it’s about 25,000 a year.”
I said, “Well, good thing we’re not doing tax returns. Um, what do you make gross? Like, with everything, all the money coming in, before all the write-offs, everything, what do you make?” “I make a million a year.” I said, “Great. You can put in 250,000 a year, and they won’t even ask for tax returns,” because it was just under the amount that he needed to do to not have to prove anything.
And so he put in a quarter million a year. That was on top of a 60,000 a year policy he already had. Um, so the nice thing… But the cool thing is he’s only required to put in about $60,000 a year, give or take. And so that’s the beautiful thing, is that you have this flexibility to not have to be forced into savings, but you still have this flexibility to use it however you want.
Hey, Chris, um, one of the things that’s nice about this too is it’s not just for people who are making, you know, a million dollars a year, right? You can do, you know, you could do smaller policies, and it really isn’t… It, you know, it’s not detrimental to do that. Like, you’re not losing ground because of that, and that’s really important.
‘Cause I know some people are probably, you know, some people are just starting out or whatever. Maybe they can afford, you know, maybe they’re thinking, “Well, I couldn’t do 60 grand, but maybe I can do 20 grand a year.”
Yeah.
That’s a good foundation. But just, just so that people have an understanding of, uh, of that, ’cause I think that’s, that’s one of the nice features of this, is that, you know, there are certain types of things that really only make sense when you’re at a certain echelon of, you know, the amount of money you’re making.
But one of the key things for this, just like with compounding investments in general, is time, right? One of the things that I find very interesting about… We’ve been doing this, as you said, you know, since at least 2017, before that. But I have, uh, I’ve not met anybody who was not happy they did this, and they become more happy that they did this as time goes by.
And the regret is always, “I wish I’d done more because look at where I’m at now and look what I’ve been able to do,” so.
So I actually talked to a th- 72-year-old dentist recently, and he, uh, he has one of these plans already, but not like how we set it up. It was from somebody else, so it wasn’t as good, but still, he built it up over time.
And, uh, but he had some real estate losses, and it, it had put him in a kind of a tough financial spot. And he told me, he says, “Chris, you know what I realized?” He’s like, “I wish I wouldn’t have gone 100% just all offense.” Kinda going back to Bear Bryant’s quote is that, you know, yes, offense sells tickets, but defense wins championships.
He’s like, “I wish I had a good balance between these two.” He’s like, “Because now I just realized I can pull out money from this tax-free. I wish I had done more here.” He’s like, “I’m glad I did the real estate I did, but I wish I’d done more here to ensure that even if there’s market fluctuations, I always have income coming in And, uh, and you’re right, Buck.
I mean, uh, I tell people usually if, if you have at least 5,000 to 10,000 a year that you can save, this is a good option for you. If you’re paycheck to paycheck though, you’re like, “I don’t even have two nickels to rub together,” well, then great, we just get cheap convertible term insurance. You know, we get cheap term as you can get, and then down the road you can convert it later on.
Uh, I know Buck and I had somebody we worked with where, um, they literally, um, one month they got convertible term ’cause they were kind of warming up to the idea. Literally the next month they said, “All right, let’s convert it” And the great thing is if you have that term in place already, even if health changes, they can’t take that away.
Well, just to point out, Chris, that happened- Yeah … you know, like, um, I don’t know if you remember, but, you know, I, I ended up getting a ton of convertible term back in the day with an anticipation that, like, it’s not that expensive. It’s not more expensive, that much more expensive than regular term that I can never do anything with.
Right.
Sort of capture my health status. And what happened was, you know, that was, I don’t know, early, maybe I was around 40 or something. And, um, but, like, in the last two years, um, you know, I… Two years ago I got atrial fibrillation out of nowhere. Um, you know, I got zapped and it fixed, and I don’t have any problems with it anymore, but forever I’m a guy with a heart problem.
Yeah.
And that… So, uh, this is kind of taking a tangent, folks, but if you’ve been thinking about doing insurance and you’re not even quite ready for it, whatever, at the very least, if you’re thinking about doing these kinds of products, get convertible term. What that means is that it locks in your health status, right?
So all you gotta do then later, if you wanna do something like this, you just flip the switch. But it- once you lose your health status, you’re kind of screwed on any of this stuff. And what you’ll find is, as your wealth grows, insurance becomes more and more and more important, not less. Um, that’s another webinar altogether, but, but, uh- Yeah
sorry to interrupt, but go ahead.
No, that’s a great point, ’cause, um, yeah, I had a woman that, she was in her 30s and had perfect health, and we got her a convertible term. Uh, a year later, the c- uh, husband came back to me. He says, “Hey, I want to do 20,000 a year into a whole life policy.” And I forgot about the term policy that she had set up, so we went to go get her, uh, get the approval, and the insurance company came back and said, “Hey, based on her recent health history, there was things she went to the doctors for, she’s uninsurable.
We will not insure her at all.” And that same day I got the rejection, I was going under her account and saw that she had that convertible term insurance from the previous year. And so that same day, I went back to that same insurance company and I said, “Hey, we wanna convert this term insurance to whole life.
Here’s how much it’s gonna be for the conversion,” you know? And they immediately approved it at the best health rating. So you’re right. I mean, you wanna lock in the health rating, and it, it… Let’s be honest, I mean, uh, no ma- y- I’m a marathoner. Um, I’m not getting any younger. Even if I’m in great health, still this may be the best health I’ll ever experience in my life.
And so I have both. I have the whole life policies and I have the term policies that I know I can convert. But you gotta make sure you get it with the right companies, because it only converts within that company. So some, some people will get their term policies, then we look at the conversion options and it sucks, you know?
Or like Northwestern. Pretty much if you have Northwestern, guarantee you’re, you’re getting ripped off in, in insurance costs right there, you know, hands down. Not to name anybody specifically, but we just did. Um- The funny thing
is they seem to have a monopoly over doctors, Chris, and it’s, it’s crazy to me, is I, when I first finished training, that was the first insurance I bought too, is because like some of the doctors referred it to me, and of course I ended up getting rid of all that stuff.
But it’s funny.
Yeah. Northwestern guys, they’re like in every networking group locally that you hit, and it’s like they’ve… That’s pretty much where every young insurance agent goes to when they start their career is Northwestern, isn’t it? Yeah. So, uh, a few examples of why. I ask people, I start polling people like, “Why do you do it?”
Um, this one guy on the left, he actually owns a turnkey real estate company. He said, “Well, obviously, like, I want to store large amounts of money.” He wanted something better than Chase Bank. He’s like, “I have literally millions with Chase Bank and they treat me like crap.” He’s like, “I’d rather keep my money in insurance and make more.”
He’s like, “And the truth is, over history, very few insurance companies have gone out of business.” Um, by the way, Great Depression, there were 35,000, uh, 35,000 banks in 1929, which went down to 13,000 banks by 1935. Insurance companies, only about 20 went out of business during that same time. Um, they also have better protections than FDIC too.
They have what’s called reinsurance that backs them up too. Um, this other guy, Neil, he actually just wanted that, that credit term protection, right? That was a big thing for him. Uh, this couple, they’re actually dentists. Um, he actually said, he’s like, “You know, I got it when I was 59. I wish I knew about this 20 years earlier.”
Right? That’s the thing I hear all the time is like, “I wish I knew about this earlier.” The truth is you never get younger, you know, and that’s the key. Um, I didn’t even talk about, unless I do… I hardly even talk about the death benefit. You know, we’re talking about everything else, but obviously there’s a generational wealth aspect where you can, again, pass on money tax-free and create almost like what the Rothschilds or the Rockefellers did, which is they actually bought policies on all them and then it all paid into their trust, and then it kept k- recycling.
So, instead of them just inheriting money and becoming trust fund babies, they could actually go into their overall family bank and then from there, um, that they have to borrow from their family bank in order to access the money. They can’t just take money out and blow it. You know, they’re not gonna be like Paris Hilton, right?
They’re not gonna do that. They’re actually gonna be able to use that money and keep recycling it through so that your wealth grows generationally, gets bigger versus shrinking. So, uh, so really just wrapping this up. I mean, like we said, this is like the Swiss Army knife. You can use it for so many things, whether it’s tax-free early retirement, whether you’re using it for kids, you know, for, uh, funding education, whether you’re using it for making money in two places at once, especially if you’re doing real estate investing and things like that.
Um, even, even just collateral. You know, I had a doctor actually use this to get collateral on a building, and he was able to get the interest rate two and a half percent lower than what they had just offered him before when in using that collateral, just like Walt Disney did. He actually was able to get an amazing rate on it and be able to free up the colla- collateral, use it for other things.
I mean, so many ways you can use this. Uh, so many options, even an emergency fund and everything else. So why not just get the most out of your money you can, right? Uh, just finishing this last story. Um, you- if you notice here, um, I actually, I literally just for you guys, I rented a hotel for three hours.
Now, well, really for the night, but, uh, I- the place I was staying at, the Airbnb, has actually got, uh, bad internet, so I decided to come here instead. But I’m actually here because my dad… This is a picture of my dad when I was, um, and myself about 30-plus years ago. Uh, my dad just passed away last December.
Uh, he didn’t have any life insurance. He didn’t have his plan set up. Um, he was the strict money, you know, money-pinching saver, right? Um, saved everything, spent nothing, debt-free 100%, saved in his 401s, got the match, everything, and yet even then, uh, w- when he was in his 60s, I had to tell him when I was a financial advisor, I said, “Dad, you can’t retire.
If you did, you have to die in five or six years, ’cause your money will run out.” He worked until his 70s. He worked until his body couldn’t even handle it anymore. Um, and then of course, just last year when he was 81, he passed away. And um, and I remember him saying before he passed away, he’s like, “Chris, I, I just, I don’t even understand your life.”
He’s like, “I never… I wish I would’ve done the things that you did. I wish I would’ve known about these things, that we could create, you know, financial freedom for myself.” He’s like, “I barely vacationed. I just figured if I just work, work, work, work, work, eventually I’ll save, and then I’ll be able to enjoy my life.”
And he, and at that time, he was bedridden for about four years, uh, due to health and everything else, and so he never got to enjoy that life. Yeah, and that’s the thing, guys, that if I could leave you one thing, it’s that, you know, even if you’re on the right track, you’ll get run over if you just sit there, as Will Rogers says, right?
You can listen to stuff, you can learn about it all day long, but until you take action to do something, it’s… Your, your life is not gonna change. And so don’t just get educated on this, but find a way to act. Um, you can actually just email me, you know. Or, or Buck, would you prefer me to email you? I know-
Oh, either way is fine.
Uh, reach out to Chris directly if you’d like, [email protected]. Uh, otherwise you can obviously reply to any of my emails. I’m happy to connect you with Chris, uh, as well, myself. And uh, everybody have a good evening.
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Welcome back to the show, everyone. Hope you enjoyed it.
If nothing else, uh, hopefully you’ve spent some time actually learning what this is all about, because, you know, a lot of people use this, especially real estate investors, cash flow investors, and you wanna at least understand why, right? There’s plenty of concepts out there, there are plenty of philosophies, there are plenty of, you know, different things you can do.
Your job is to learn about them and ultimately decide what’s right for you. This concept is, uh, right for a lot of people and a lot of… And I, and can honestly say that I don’t know of anybody who’s done this who’s regretted it. So take a look, dig down a little bit deeper, and if you are interested, uh, in talking to Chris Miles, uh, definitely reach out to him or go to wealthformulabanking.com and, uh, you can, uh, click on that as well.
That’s it for me this week on Wealth Formula Podcast. This is Buck Joffrey signing off.
If you wanna learn
more, you can now get free access to our in-depth personal finance course featuring industry leaders like Tom Wheelwright and Ken McElroy. Visit wealthformularoadmap.com.