Paying Yourself The Extra Interest in Canada (Equipment Financing)

There often becomes a natural way where expansion of the system begins to make sense. You pay off a certain debt as an example and you realize you don't need influx of cash flow. You come into a windfall event, a tax refund, a, you know, whatever, a new, a new child is born or grandchild is born. You already know that you want to commit and set aside resources for that. So like certain. And then what happens is you tweak or adjust the priorities of where money was flowing in your life. Like okay, well maybe I'll give up one dinner out a month, you know, with the entire family with you know, maybe with a, a bottle of wine or something that cost me $200 a month for that one item and I'm gonna forego that and recommit that capital towards that, that grandchild policy or something. So we, we start to reallocate things in our brain and then through our actions and then magically in other policies it.

So paying back loans versus buying paid up additions, maybe some use of real life examples other than a car. So unfortunately, you know, we don't have a real life example just to share with you or the group that are listening. But what we're going to do is we're going to talk through that a little bit just because it does take a lot of time and energy and effort to kind of put together like a pretty comprehensive example. And unfortunately there's not like what ends up happening is, well, I don't know, several hours goes into multiple spreadsheets to try to create a very simple example to show something. So but what we'll do is kind of talk through some of the core components. So in Nelson's book, in multiple places, Nelson indicates that the intent of quote unquote, paying yourself interest or a spread of interest or extra interest as it's referred to in different points in the book is, is that it should find its way into premium. Now what that premium is, Nelson doesn't clearly specify that it should be a paid up additions premium or base premium. At the end of the day a premium is a premium and premiums in the, in a well structured whole life policy, the premium is what actually it pays for a death benefit. Death benefit drags cash values along with it over time. So the idea of putting that extra spread or extra interest, whatever you want to refer to it, as towards premium is that it increases the capital base of the policy and therefore it helps accumulate over time more that compounding effect with increased dividend potential and so on and so forth. Now in Nelson's examples in the book, Nelson, because he could be sitting with somebody, knee to knee, having a conversation. The reality is the way that Nelson did it. I mean, this book is the workbook for a 10 seminar. So really, this is 10 hours of sitting down, knee to knee with Nelson in a. In a large format to be able to actually explain the content in this book. So because he can't be there knee to knee with us, we have to infer a lot of things that Nelson was doing. And the reality is, when you've got the illustrations in the book, there's limitations to how many columns. Like Nelson even said, I was watching some of the recent series that were releasing here over on the Bankers Vault channel of our conversation with Nelson. Basically, it's a live session of. Of Nelson. There's a whole playlist there. You can go to learnfrom nelson.com to see that whole playlist. In fact, Roman, maybe you could type that in the chat box. That's learn from nelson.com and in these sessions, Nelson himself is saying, you know, if I. If I had to show people what was going on with the shorthand of the different values, like as an example in the equipment financing section of the book, I'd have to add like four more columns. It just wouldn't fit on the page in order to really properly explain what's going on. And so, you know, you can recognize that there's a lot of complexity there that he's trying to really simplify for us. And so the idea is always to try to get that extra interest into premium where possible. Now, I think this question, and I could, I could be wrong if I'm misinterpreting, if that's the case, Neil, I'm really sorry, but we're just going to kind of go with the flow here, is that when, when a new policy is created, and I'll use myself as an example because I actually did applications today. I did two applications on new policies I'm getting on my own children, which I'm super pumped about. I'm expanding my system. And I had another policy issued very recently, in the last maybe 45 days on my wife. So, you know, I personally am looking to expand my system as every member of our team is always actively trying to be inspired and find a way that we can increase the size of our own program. And the policies I'm setting up on my kids, the premium is about $3,600 a year for each one of them. And there's no extra room there. And so I'M just going to kind of go from memory, but I believe that the, the minimum premium is something in the area of around, I don't know, I'll call it, I'll call it $1500 just to keep them that simple. And so that means the, the flexible premium or the paid up additions premium is 2100. There we go. So, so that's the flexible amount, but I couldn't put a dollar more than that in. So 3600 is that is the maximum that that policy will accept as premium. Now generally speaking, most times when we're putting policies together, we're setting them to whatever the maximum level is. Now sometimes people will have certain events that are happening in their life, maybe reasonably consistent events, maybe they have a bonus or they have something that's going on where they, they might have a little bit of space that's created to accept some of that overage. But for the most part, we're usually keeping them kind of, you know, maxed out to the, to the top level. So if I'm now paying myself a spread of interest on, on a policy loan, let's say that I took from my son's policy and I have an extra hundred dollars a month in interest that I'm paying myself, so $1,200 a year, and I want to now apply that to a paid up additions premium. I can't apply it in that policy because that policy is already tapped out. There's no more room. Okay, well, I could go look at his sister's policy, but that one's already tapped out. There's no room and I already have policies on them. Well, would you believe it? Those policies are already tapped out and there's no room. So because I have my policies at the Mac, that is where you start to look towards how do I add another one into my system? Do I add another policy? Well, do I get a policy for $100 a month? Yeah, it's possible you can do that. Is there merit to that? There would be, but is it necessarily the most reasonable thing? It depends on everything else that's going on in your life. How consistently are you now practiced at paying yourself that hundred dollars a month or that extra amount? So this is where you have to start to get a little bit more into the, into the weeds on your, your day to day budget. Now if I'm becoming very consistent of that, if I, if I've set up a path and plan where I'm now regular and recurringly finding that I'm always setting aside this extra $1200 in an extra interest that I'm paying myself, then it might be a natural next step to go and get a policy for, you know, to be able to accept that capital. Or maybe I want to do that for let's say three, four, five years. And I want to accumulate that value now because I've proven that I'm very consistent at it. Now maybe I might be able to say, okay, well maybe I can get a slightly larger policy that's 2000 or 2500 dollars a month, basically pre funded the first two years. And then as I roll into the third and the fourth year, I've been consistently saving $100 a month so I can continue paying that premium. More additional years and then maybe I'm going to have a windfall event, etc. So how you kind of grow is different for everybody because we all have very, very dynamic and very different financial lives. We have a lot of our clients who are business owners or sales professionals and their income is very inconsistent. You know, it's, it's very up and down and there's some people have seasonal jobs or businesses where I mean, they make big gobs of money, let's say in the summertime. You know, as an example, I have a friend who has a concrete business. He makes his entire year's year and then some, you know, basically in about four to six months out of the year and then he lives off that for six months a year. And so there's people who have those kind of income inconsistencies. And so what works for, you know, Bob Jones may not work over here for Sally Smith. And that's where, you know, the dynamics of us focusing on the core principles are so important. So the, the we always kind of come back to the basics. And if you understand, Nelson would say if you understand what's going on, you'll know what to do. So the recognition that the intent, the desire, the mindset should be focused on how can I apply or how might I apply that extra interest in my life. Then your brain starts to go towards solving those problems and effectively the solution sort of materializes over time. It may not be direct paths immediately, but through conversations with your coach and kind of figure out what's going on for you, you'll start to kind of dial in on what it makes sense. Similar to that, what we find with folks is that there often becomes a natural way where expansion of the system begins to make sense. You pay off a certain debt as an example, and you realize you have a new influx of cash flow, you come into a windfall event, a tax refund, a, you know, whatever, a new, a new child is born or grandchild is born, you already know that you want to commit and set aside resources for that. So like certain. And then what happens is you tweak or adjust the priority of where money was flowing in your life. It's like, okay, well maybe I'll give up one dinner out a month, you know, with the entire family with, you know, maybe with a bottle of wine or something that cost me $200 a month for that one item. And I'm going to forego that and recommit that capital towards that, that grandchild policy or something. So we start to reallocate things in our brain and then through our actions and then magically another policy is born. And it's become somewhat intuitive to people. The more they get focused on Nelson's core message and the more that they read from the book and indicating that the first illustration, illustration one is all about setting the baseline. And then the following illustrations is about showing people how redirecting the flow and the energy, the financial energy that was going to the finance companies for all the payments of this logging business, the logging business was sending $192,000 or payments, financial energy out the door to other, to other institutions basically about getting, getting that back effectively. So the key indication here is that you, what you see is that the total cumulative net outlay column in the accrued financing examples, the cumulative net outlay actually increases. And the reason it's increasing is because Nelson's putting more capital into the policy. That capital really is representative. It's a representation of the extra interest that was previously being directed towards a finance company. And now that capital is coming back towards the policy as a form of premium. Now a lot of times when people are getting a brand new policy and they're in the process of, whenever setting up their own, their own policy, often we're looking at them as though we're always going to be paying premium, we're going to be paying premium as long as we possibly can. Nelson gives many indications of doing that in the book, but the reality is there are certain points in time where you might think of or say, hey, I'm not going to pay the premium this year, or maybe I only want to fund this policy for, let's say as an example, 20 years. And at that point in time, I want the policy to fund itself internally from its resources. Well, if that does happen at that future point in time, you have the ability in general, across the board, most policies, you have the ability to still pay a premium. So at any point in time after you have stopped paying a premium, that you all of a sudden start doing it again. Well, then every number, the cash value numbers, the death benefit numbers, all the numbers get better after that point where new premium is added to the policy. And so really the core is that Nelson's trying to teach us. And he says so on point number two of page 85, that if you knew you were getting back every single dollar you put into a system potentially tax free, would you ever object to putting more money into it? That is really the mindset that we're trying to achieve. And so again, extra interest that you pay yourself, the purpose of that is to find its way into premium. If you can't immediately get it into premium in your system, then build up that resource to the point where it's. It becomes sizable enough that you can now go and get it into premium. And Maybe that'll take 2, 3, 4 years, 5 years depending on it. But if you're consistently getting into the habit, again, this is all about that habit. And the way that we create habits is that we do things on a repetitive nature. The more consistently that you're able to do that and then do it in multiple areas of your life. Well, if all of a sudden, you know, you're paying yourself $100 of interest over here, and then over here at the end of the year, you've got $500 of extra interest from that loan that you paid yourself, and then over here in some other line item, you've got another 50 bucks of interest, and then over here. So like, these things begin to stack and stack and stack, and then eventually you. What you're doing is you're reformulating the habits of how cash runs through your life. The result of that is there's more cash available that's not disappearing out the door, that's being contained within your personal economy to be able to be reallocated towards bringing resources. A lot of times that happens without really working any harder. The thing that changes is how your brain assesses how the money's working for you as it goes through your life. And, you know, the result is really probably saving a little bit more capital.