Cash Value Liquidity In Canada

Can you have your financial cake and eat it too? How exactly are you able to save money and have the liquidity that you need to go about doing the rest of the things you need to do in your life? Well, I'm here with my friend Roman today and we are going to talk about liquidity, capital liquidity, and how important is liquidity and what are the vehicles that we use in our financial life that are illiquid versus the ones that are liquid. So we're going to talk a little bit about that today and thank you for joining us. We're Roman, I'm glad here to be with you. Tell me why this is an important topic for you.

Yeah, thank you so much, Richard. So, you know, liquidity is something that is the most fascinating thing for me when it comes to money. Right. So when you think about, you know, saving your money, accumulating your money, preserving your money, planning for the long run, you know, I don't want to set aside money to a place where my money is in a prison where, where I have to think in advance to actually take it in case of emergency or in case of something happened to my car, something happened to my furnace, or maybe if there is an opportunity I have to take advantage on. I don't like that. I like something that my money is ready, my money is sitting in a place where I have access to it immediately. Maybe not immediately, but very quickly if I want to. And actually, when I was researching for better strategies, this is exactly how I actually came across the infinite banking concept where I was searching for some strategies and I was absolutely blown away with the idea that you can absolutely have your assets liquid and at the same time they're working for you non stop every single day 24 7.

Yeah, I love that. And I think that is one of the most important, critical features of implementing the process of becoming your own banker. And so that's what it is, it's a process. Now we, in order to utilize this, we typically have people get started by implementing the strategy with a specific vehicle. Now that vehicle is dividend paying, participating whole life insurance. It's designed in such a way where it's optimized to accumulate cash values. Coincidentally, the way that that works is exactly opposite how most people think. It's by rapidly growing the increasing tax free death benefit that forces the accumulation of cash value. So it's kind of funny how that works. But in this scenario, as you build up a capital reservoir of available cash value, you can access that cash value by way of a policy loan at Any time you want, with no questions asked. And that loan will be issued to the policy owner. Typically they have it land in their bank account within about seven to 10 business days, sometimes even shorter than that. We've seen them land in as early as three business days, which is fantastic. So the liquidity piece is exactly there. Now here's the beautiful thing. When you take that policy loan, you're accessing the money from the life company that you co own. So you're a co owner in the company, you participate in their profitability. Now you access that policy loan, they put it in your bank account. Your money came from the insurance company's general fund. Your capital, which is the cash value, is still in there and it continues to rise daily. Every day that you take air into your lungs, as long as you're breathing, that policy is going, you know, moving forward, it's getting better and better and better. Now in the other situation where you're not breathing Roman, that's not good. We hope that that's not you. By the way, if you're having a tough time breathing like call 91 1, that would be the right thing to do right now. Stop this video, call 911. But otherwise, if you're breathing fine, that's good. If you have one of these policies, you have cash that's still accumulating. And so the day that you walk off planet earth, there's going to be a big fat tax free payout that's going to be able to go to your family, the beneficiaries, the people you've chosen. Meanwhile, your ability to use capital as it accumulates daily, rises and rises and rises and your usage of it is always available to you throughout that entire timeframe. So now imagine, let's contrast that with another type of vehicle. So in Canada, a common vehicle most Canadians are familiar with and a lot of Canadians have their money trapped into is the RSP Registered Retirement Savings Plan. Now that is not on its own a bad program. However, it has rules and restrictions and a lot of people that we talk to, Roman, on a regular basis, you said the word earlier, you said the word prison. A lot of people feel like it's a prison for their money, a money prison because. Because they don't want to reach in and grab it or use that capital because there's penalties and early tax, withholding, tax they got to pay right away. And so there's all these concerns and for a lot of people, they're just not familiar what the impact is if they go to make that decision. And so that money is now effectively locked away. And hopefully it's growing, hopefully it's accumulating. But if you also need to go and get a family vacation that you want some memories, if you also need to go and repair the transmission on your car, you need new winter tires, you need to replace the car because you know it got, you know, it's past its expiry date. Well, you can't access that capital because it's trapped now in that monetary prison. Now, in the life insurance situation we talked about, that is not the case. You've got that capital liquidity. So now you need to go make a financial decision to acquire a capital asset, something that you need immediately to work with, such as, you know, you need a car to get you from A to B. Well, you're either going to pay money to a third party lender to access their pile of capital, or you're going to give up the money that your own pile of capital can do. In our situation, your money continues to grow in a policy. You can access the policy, loan, pay for the vehicle, and now all you do is you make a car payment back to your own pile of money so that you can use it again and repurpose it later. It's really not that complicated, but, man, it is so, so liberating. Roman.

Yes, it gives a lot of, you know, gives me a peace of mind, you know, knowing that not only I have my money growing every single day, I also have a death benefit. Plus, I can access this money anytime I want, pretty much anytime I want. And it will show up in my account if I want in three to seven business days. And when we talk about, you know, types of assets, we have liquid assets, which is usually money in a savings or checking account in a bank, or it can be some sort of, you know, like coins or maybe collectibles. They're not super liquid, but if it's like cash, like assets, then you can quickly realize them without consequences. As opposed to a fixed asset, which usually is an asset that builds wealth. And for example, like a piece of art, maybe a rental property. It could be RSP like Richard mentioned, where if you need to access money, generally speaking, you can realize it fairly quickly, but you will have to actually sell it at a discount. And you no longer possess this piece of art or this house. You no longer own this asset. So you have to make a decision to cash it out at some point and pay some price for it. Right. And what if you could do both? Have an asset that works for you and don't have a fear to lose it and have access to the equity in this asset and have liquidity. So this is the most fascinating thing for me.

Yeah, I love that. And I'm glad you touched on the real estate example because I think that's really important. So, you know, we, we, we work with, and we talk with a lot of real estate investors. Everyone gets excited about the idea of investing in real estate. But real estate can be very much a frozen asset. Now, market conditions change. Wherever you are geographically, there's something going on in your market right now. And now if you go 100 miles the other direction, there's something totally different happening in that geographic market. And so like, even between where you and I live, Roman, I mean, you're, you're in Manitoba, I'm out in bc. We have some very different real estate markets between our two locations. Would you agree?

Yes.

A lot of differences there. And so, and then if we say, okay, well, there's no maybe, there's Edmonton, Alberta versus Toronto. Again, very different real estate markets happening there at the exact same time. And so geographic has an issue there, but markets do shift and they change. So now let's assume you need access capital from a, from a property and the equity's tied up in the walls of the house. Well, in order to way to realize that is you've got to borrow against the house. Option one. Option two is you got to sell the house. You sell it.

Yes.

Well, now you no longer have the asset as you identified. But here's the other thing. The market condition is going to be what determines how quickly you're able to sell. And then the physical condition of the property, if the property is pretty nice, might sell a little faster. The property's not very nice, or you got tenants in it. I don't know if anyone watching this has ever gone and looked at a property with tenants in it or wanted to buy one or you've been trying to sell one with tenants in it. I can tell you from experience it's not as easy because you got to coordinate showings and often tenants may not keep the property in the condition. That's the pristine way you want a realtor to bring, to bring clients through in. And so those things have an issue on your ability in your timeframe of sale. Now here's the next thing. Even if you get a close sale, a quick sale, usually speaking, if there's someone in the property, they still need, you know, 30 days or so to move. Then there's, you know, the new buyers got Closing costs, they gotta meet with a lawyer, they gotta transfer titles, there's, they gotta apply for a new mortgage. And so, you know, maybe you're 30 days, 60 days, sometimes you can get it happen maybe in like 10 days, but for the most, more often you see a real estate turnover cycle can happen in like 30 to 90 days. And so that is the illiquid component we're talking about. If you needed the money right now, well, now you gotta go and figure out some bridge financing. You gotta jump through a bunch of hoops to try and get the capital immediately. This is why it's so important to address the need of liquidity. We all have a need of liquidity in our life for things that come up. We often don't know when they're gonna come up. You don't know when the transmission is going to go in your car. It just goes. Right. So having that access is so important. And now people usually have a little stockpile of savings built up. But the problem is that saving is very inefficient in that location. And when you go to tap into it, you drain it down to zero. And when you drain it down to zero, well, you got to set payments back in the account, build it up, build it up, build it up so that you can rebuild that savings pile. Well, the same process happens with infinite banking. The only difference is your capital is in an insurance policy. And it's always growing every day, whether you use it or not. When you access money, you simply resave by making a policy, loan repayment, and then boom, you need to use the money again, you've put it back in so you can access it again for a later purpose. It's beautiful.

Yep. And also, let's talk about the timing. The timing may be not exactly right to either sell the property because it can be either low market where you know you can incur a loss when you sell, or it can be actually you can trigger capital gain tax. Right. If you sell with a good profit, which is great, but at the same time, you would rather hold this property or hold this stock. Otherwise if you didn't have this emergency, but you have to sell because you know there's no other option. So you basically okay with triggering tax and paying tax today, but have some money freed up for your emergency or whatever have you may not be very good timing to exit the market, exit the asset. So something like borrowing against it may be very, very handy. And this is the beauty of infinite banking concept. You always have access to insurance companies money to borrow against your cash values without ever surrendering it.

Yeah. Capital on demand with total control. And here's the other thing that we didn't really touch on, but I think it's important we identify in this and sure, we mentioned in some of our other great content that's available on our channel, but if you, when you take a policy loan, you have capital access on demand. So that's check one, that's really good. But the other key thing is that these loan instruments now with the insurance company, because you're a co owner of the company, they're what's referred to as an unstructured loan. Unstructured meaning that you dictate the repayment terms of the loan. There's no formalized amortization or requirement to make a payment. And so this is where we find is an extreme advantage. But also for people who are not really learning and really sucking in all this knowledge and reading Nelson's book becoming your own banker, they can easily get derailed and not have the same success because they're not practicing the principles that Nelson laid out of being an honest banker. So you, if you access that capital and you don't initiate or create some kind of a repayment term on there because the insurance company is not going to force you to do rests on your shoulders, it's all up to you to make that happen. And so it's so important that you have the right mindset when you go into this process, because it is a process. And that mindset starts with education, like what you're doing right now and continue your journey of education. We have lots of great content and one thing that we would always recommend, and certainly it's a broken record if you've seen any of our videos, of course, is get the book becoming your own banker. And you know what, the book's only 92 pages long. And really out of those pages, you know, there's a glossary and a forward and so there's actually only about 77 pages you even need to read, but they're all filled with absolute gold. Now if you had a book that was bound like this and basically it was, you know, like it was made out of pure gold, I would imagine you'd want to go get your hands on a copy right away. That's my feeling about this book. I know, Roman, you feel the same. Our whole team feels that way. So make sure that you, you know, there's a link in the description to go and get a copy of. We can't encourage it enough because it literally is the gift that keeps on giving. It's kind of like, you know, you go on a family vacation and you get all the memories about all the joy and the experience that you had there. Well, you get to relive those memories inside your brain. It's the gift that keeps on giving, Right. Versus you buy a toy for your kids. You know, you buy a bike for your kid when they're five, and by the time that they're seven, they've outgrown the size of the bike, right? Well, there's still memories there and they got the usage of the bike, but they've legitimately outgrown the bike and you need to replace it. So that's not the same situation. This is something that constantly and continually brings value into your life. And so that's why we would recommend it so highly. Now, any final thoughts on liquidity and the importance of liquid versus an illiquid asset that you want to. Final thoughts, Roman, for everybody?

Yeah. So I would address this question that the viewer may ask himself. Hey, I'm asset rich and cash poor. For example, I have maybe a real estate investment. I have RSPs. I have a lot of things going on. But when it comes to emergency, when it comes to liquidity, I have nothing to show for. So what I do. So what do you think, Richard, we should advise our viewer to do number one? I think we should probably advise to get a hold of Nelson's book, read it and get yourself a good coach who understands infinite banking, who practices infinite banking in his life, and can actually help you start growing your own system where you have a lot of liquidity and you have also potential to grow your wealth at the same time. Do you have anything to add to that, Richard?

Well, I mean, I think the next step would be to go and send yourself on over to our website so you can get access to some of that information. There's an amazing class that you can take right there. You can learn all about how people are implementing this right in Canada. Head on over to watchIBC.com and you're going to be able to get access that immediately. Continue your journey of learning, and you're going to have a ton of more great content that's going to show up on the screen right away. So make sure that you keep engaging and you keep digging in, because the more you understand, the more you see, the more you see that you didn't see.