Building a System of Policies in Canada

But often because of a lack of education or a lack of long term thinking, a lack of foresight, which Nelson says we got to think long. Rule number one is you got to think long range. Nelson's Vanelson's four Golden rule five golden rules. And rule number one is you got.

To think long range.

And if we don't recognize and understand that that's possible and see how it can happen. Well, if you don't have, you know, as a policy matures over time, the, the base policy grows and that sort of thing, you know, you might be able to increase it to a point where it can accept, it can accept some of that potential it can build.

So we're going to talk a little bit about, you know, setting a bit of a foundation under the plan of your, your, your policy, your system.

Yeah.

And the importance of the thinking that goes into that. I, I want to, I want to pivot here and we're going to switch to talk about setting a solid foundation because it, it ties into coaching and you know, I share a little story I think to, to set the stage for this. So you know, recently was on a call with an individual and you know, great, great call, wonderful guy, you know, really good, good learner, really switched on and catching onto things, of course, likes a lot of numbers, you know, creates a lot of spreadsheets and things of that nature. And you know, this person, you know, was presented with a, with a, with a policy example which you know, will probably be fine. But the reality is it, it has a, a foundation of a policy. We call it the base policy. It's the, it's the, the component that underpins everything that you're going to build on it. Right. And, and then this policy had a design and we, we see things like this or we hear about things like this, you know, quite frequently, actually.

Put in a certain amount of money on top of that. And the problem is, is that the, the, the lever potential was a little, was too high where if the individual actually put in the capital that he was said he was going to be able to do, there was going to be several limits created on the back end. A number of those limits were going to be number one, he's going to tap out how much potential he could put into the policy lifetime, which is going to create a restriction on its future. That was going to be one issue. Number two, if, and I'll use my, I'll use this, you know, my water jug as an example. So here I've got this little jug of water and just Imagine that. So this container, we can all agree if we're watch container can only fit so much liquid in it. Once you get up to the limit, it's all going to spill out over top. There'll be no more room for more liquid. That's right. Well, imagine you have a container that's a policy and it'll, the tax exempt rules allow you to put up this much capital into the, into the policy, the limit and something changes and you go, and you're going to go and reduce or adjust the size of it. You're going to pull some of that death benefit. So this limit is usually based on the death benefit of the policy. You're going to go and take some of this death benefit, a chunk of it right here and you're going to chop it off the policy and you're.

Going to move it over.

Whether it's a term conversion or you're.

Going to, you know, you're going to.

Cancel it some at some future point there's going to be an event where this drops down here. Now what you've done is you've reduced the size of the total container. Well, if you've put too much liquid in the container, what happens to all that extra stuff?

It's going to spill over in the form of tax going to spill over.

And because we are no longer we have a tax exempt status and then we reduce the size of the tax exempt status, all that extra stuff has to get pushed back out to the policy owner and it creates a taxable event, potentially an extremely damaging one, which is definitely not the intent of anyone doing this but often because of a lack of education or a lack of long term thinking, lack of foresight, which Nelson says we got to think long. Rule number one is you got to think long range. Nelson's v Nelson's four Golden Rule five Golden rules and rule number one is.

You got to think long range.

And if we don't recognize and understand that that's possible and see how it can happen. Well, if you don't have, you know, as a policy matures over time, the base policy grows and that sort of thing, you know, you might be able to increase it to a point where it can accept, it can accept some of that pot, it can build up over time where it can, it can lower the impact or reduce the, the blow or maybe even eliminate the blow. Yeah but the only way that can happen is if the foundation at the, at the base of this machine that you're building is strong enough to hold it. Which means it needs to be big.

Enough to support it.

And you know, here's the best analogy. And this comes from one thing Nelson even said to us.

Jason, you remember we were at a.

Think tank event in Birmingham, Alabama. This is, I don't know, maybe like 2015 or something. We were down there, okay. And, and we were sitting, we were at the back of the room over by the sound, by the sound stage. And the camera guys. Yeah. And someone was up on stage and they were doing an example. There was a bunch of math and spreadsheets up on the screens. And you know, we're around a bunch of financial professionals.

It was all great.

We're all good natured people having fun. But, you know, it was a good example. The person was really actively trying to teach something of value. But Nelson came over and he just like tugged at the, tugged at the shirt and we were sitting there talking and he's like, y' all see that we're all trying to put extra floors on the, on the skyscraper. It's like you got much of a skyscraper if you don't have a strong foundation. Nope, you wouldn't build a skyscraper if you have that with a weak foundation.

Right.

And so when you're thinking about, you know, 20, 30, 40 years of having a policy in place before the day that you kick the bucket, you want to build something really solid so that there's something substantial underneath it that can hold all the stuff that you're going to do as you go throughout time. And, and that prevents, you know, potentially really damaging things from happening. If we are under educated or we just don't see, and we don't know, we don't see our blind spots. Right. So that's part of what a coach can help you do. If they understand what those blind spots are, they're going to help you understand what those are in advance so that you can be prepared for them. And yeah, I mean, it's just so, so important. And here's another thing that happens that I, I kind of speak this a little bit more. You have a page 85 of Nelson's book, page 85. Point number two. He says if you knew at passive income time, you would be getting back every single dollar you put into a system potentially tax free, would you ever object to putting any more money into it? It's a rhetorical question. Obviously no one would object to that. Well, every becoming your own banker style program that we put together allows people to do that.

Would you agree, Jay?

All day long.

Now, if you didn't want to End or interrupt your ability to put money into a premium.

Because that's, because that's what it does.

It's paying a premium that allows that to happen. That means you need to have a sustainable method where you can pay a premium. It doesn't mean you have to pay it every year. You can build a sustainable system where it's not required. But all of a sudden you sell.

A rental property or you have an.

You know, you have an influx of capital.

Oh, boy.

Wouldn't you want to run it through the system where if I put, you know, files, hey, I'm allowed to put 100 grand amongst 10 different policies and premium, let's say base premium. And I haven't been paying it for, for, for a number of years. And now I want to put some in where you can always pay the base premium. You're always allowed to.

Yeah.

So if you have this influx of capital you need, you, I want to pay the premium this year. And you, you fill up 10 policies, let's just say it adds up to 100 grand of overall premium. And the moment you did that, you got like 150 or 200 grand back in growth instantaneously. Who on earth wouldn't want to make that transaction happen? But you have to have a foundation big enough to allow you to give, to give you the option for that decision to even be available.

One, you have to view your, you know, your policy or your system of policies as a place to construct your warehouse of wealth. And you can always add to that warehouse of wealth. It's not, it's not a, hey, I'm going to fill up my warehouse of wealth, stop, and then start filling up someone else's. So I stop, I stopped depositing premium into my system, and then I'm going to allow all my cash to flow away from me into someone else's.

I'm just going to go put it back in my bank. You've created. What have those guys done for you lately?

You've created all this financial energy in your system, and then you want to take the future financial energy and flow it through someone else's. What did you build yours for to begin with? To stunt its growth. At some point, you should always be looking to fill your own warehouse of wealth with more capital. That's what makes the whole thing work. And so it's. But that all begins with, even before having the tool. It all begins with the way that you think. And if you look at premium as an expense and you don't rethink your thinking and look at Premium as a method of growing your warehouse of wealth and creating more room inside that warehouse for future deposits, then you may be missing the point.

Yep.

And what did Nelson say? He said you got to build the system to accommodate.

Was it page 26, Jason?

Build a system big enough to accommodate the needs of others? I believe is how it goes.

Yeah. He talks about, you know, would you have much of a grocery store business if you were the only customer who shopped there? Well, the answer is no. You must build the business so that your needs are taken care of. But you're also taking care of the needs of others. And the needs of others extend to, as it relates to your own family banking system and how you go about that. But it also extends to future generations and how they're going to be non reliant on commercial banks for anything other than the convenience of whatever the medium of exchange happens to be at that time. But money, money is just that, it's just a medium of exchange. The banking process goes on no matter what. And so the more you control it, the better off you are now and the better off the next generation will be. And if they maintain control and expand that control, the better off the generation after that will be and so on. But it's so important to rethink your thinking.

And it's not a one time event.

It'S not, oh well, I, I decided I'm going to embrace this journey. I've rethinked my thinking. I'm all done. It's something that continues for the rest of your lifetime.

And the moment you say you're all done, you've basically just embraced the arrival syndrome.

Well, you're a sharp example of what happens on that backward bicycle. It's much easier to fall back into your old way of thinking. And if you do that, then why would you expect a different result than what you were getting in your old way of thinking? You've got to continually be building your own warehouse of wealth. Your money must reside somewhere are some of the ridiculously simple fundamental truths. What better place to have it reside than here? And it can't be achieved overnight. We know that it's meant to be done incrementally, gradually over a period of time. But it's not just the construction of the system that's meant to be done incrementally and gradually over a period of time. This is meant to be a process. And it's a process that has no done by date. It just keeps going. But you've got to be resistant to slipping back into your old way of thinking. Because the moment you do that, you'll slip back into your old way of being and all those old financial habits start to reemerge. And then once your thinking is gone backward now you're looking at your system, and you're looking at it as a product. I've got a product. I've got this policy. I've got this system of policies, whereas you've got to be looking at it as from this very place, I get to take control of a process. And that process is something that is necessary for the rest of my lifetime and every generation that comes after me.

This just reminded me of something to Jason, a quote from Buckminster Fuller here. This is a picture I took from a, from a gentleman who, who first. I first learned this quote from him. If you want to teach people a new way of thinking, don't bother trying to teach them. Instead, give them a tool the use of which will lead to new ways of thinking.

Very good.

That's. That's really what Nelson's book is, and that's where our podcast is. That's what the resources that we're providing are. That's what this community group that we have here going is. These are tools that allow us to help modify, reengage and update our thinking and embrace new, new pathways of thinking.

So, yeah, and, you know, the one.

Final thought I want to have too here is just again, thinking about the foundation of a policy. You know, how you can go and buy like, little, little, little additives that you can put fuel in your car.

You're supposed to clean the engine or.

Optimize your fuel economy, and, and that sort of thing give you a little bit more boost. And I don't know how well they work, but, I mean, they claim to, they've got good marketing, so they claim to work. I'm not a car guy. Okay, for fully confessed, but, you know, I, I think about the flexible PUA.

Premium that people can do into a.

Policy, and I think that's like one of those additives that's like one of those things that's supposed to help you, you know, help make the car go a little faster. It's like adding a little bit of turbo boost. But you know, that additive runs through that tank of fuel and then it's done. And then you have to go put new fuel in. Right. You always have to keep. You can't. The car can't move without the regular fuel. That's the foundation. The regular fuel. Fuel is the base premium.

You always have to have that in.

There to get that keep that engine going. Okay. Yes. You can maybe do some things to tweak and optimize and to make, you know, get a little bit more, you know, rev out of the engine, get a little bit more speed. But a lot of those things are temporary, and then they have to go back in the shop. Right. Whereas the car will always operate if it's got just the regular fuel. And so that's another kind of way of thinking about the importance of the foundation and the base policy.