Where Do You Find the Money to Start Infinite Banking?

No treasure hunt will be required. You are already allocating 100% of your financial resources to everything you've prioritized as being important. So it's time to dump your financial junk drawer onto the counter, sort through it all, and reprioritize. You must become acutely aware of all the money you have coming in, where it's all going, and where it's flowing to. Individuals who didn't have a positive cash flow before find ways to create it by eliminating waste or reprioritizing where their money flows to. The actual interest volume that is flowing out of your life is significantly more than what the interest rate is. It's called banker's math. It's how they define amortization, and they make you think that's the only way to do it. It's not.

Hey, it's Richard Canfield here. We've got a great new series that we're launching on Wealth on Main Street. I'm excited for this. One of our incredible advisors, Mike Smella, is going to be walking through our book Cash Follows the Leader. He's going to be going chapter by chapter, sharing all of his notes, his incredible observations, and the critical takeaways, the things that really stood out for him along the way. Now he brings a breadth of experience and life experience on running different businesses, of course, and embracing this concept of becoming your own banker in his own life, plus how he is now teaching that concept to other people. So you're going to get a lot of practical, real-world breakdowns from this book. You're going to get a lot out of it. So let's jump right in.

Cash Follows the Leader. We are starting Chapter 3. In Chapter 2, we learned how we build the policy based off of the foundation, which is the base policy, additional paid-up addition insurance, which are like floors to your house. And we learned how there were two main components, one being the death benefit and one being the cash value. And as the death benefit grows from the base and the paid-up additions, so does the cash value. And by the end of the contract, age 121, the cash value has to equal the death benefit. So the more that we can increase both of them, the more that we have liquidity and access to a greater pool warehouse of wealth. And hopefully with what we've learned so far in this book, we see that this is a great opportunity. And yes, this makes sense. And yes, the vehicle that we leverage is incredibly efficient and is really everything stacked in our favor, which is a wonderful thing as each of us individually or as business owners. So in chapter 3, it's like, all right, we understand all this. Now, where do we find the money? How do we find the money to get started? So that's what Jason and Richard talk about in Chapter 3. No treasure hunt will be required. You are already allocating 100% of your financial resources to everything you've prioritized as being important. The money exists to get started. However, locating the money requires a reallocation of your priorities. Think about periods throughout your life when you had extra money, like a bonus, a gift, unexpected windfall. What happens to all that money? Your expenses likely increase to gobble it up. You're not alone, and it's not your fault. It happens to all of us. What does this phenomenon tell us as your advisors? That we need to help you through a period of introspection, a real assessment of your priorities financially, including pinpointing where all the money you work hard to earn is currently flowing to. I want you to picture that junk drawer that you have in your home right now. You know the one I'm talking about. We all have a junk drawer. So it's time to dump your financial junk drawer onto the counter, sort through it all, and reprioritize. And that is what we as, as Ascendant Financial coaches are here to help you do. Prior to getting started with implementing the Infinite Banking Concept, you must become acutely aware of all the money you have coming in, where it's all going, and where it's flowing to. Disposable income is first in line to prioritize premium deposits. If you do not have any disposable income, it's likely because you haven't prioritized it. And when you gain complete clarity on where all your money is flowing to, and then you reprioritize, you'll know exactly what to do, whether it's starting your first policy, storing more money inside an existing policy or deciding to expand your family banking system by acquiring more policies. Either way, your financial priorities can be changed to create more wealth instead of being consumed by expenses. Money that resides inside your system versus someone else's is money that attracts more high-caliber opportunities, stays within the family. It's got to reside somewhere, gonna reside in somewhere Do you control? Is it going to reside in somewhere that someone else controls? Think about how you currently organize and track your finances. Is it all nice and keep and tidy or thrown into a physical junk drawer? Where do you keep your financial records? Is it a pile of papers or unopened envelopes? Do you have a stack of investment and bank statements where the sheer thought of opening them creates anxiety? Some people that initially cannot recite who and what they owe in debts, and no one has taken the time to help them calculate the interest volume they pay on all their debts. Interest volume is not to be confused with interest rates. A rate is simply a percentage that is measured against an amount owed over a year. Interest volume is the actual amount of dollars that you end up paying above the principal amount borrowed. Every payment that you make is a permanent transfer of money away from you and from every generation that comes after you. You cannot use or earn interest on any of that money ever again. The lost opportunity is permanent. There are no exceptions. Think of when you make your mortgage payment, how much of it goes to principal, how much of it goes to interest. Let's you owe $100,000 and you've got a 5% interest rate and whatever your payment is, let's say your payment's $600. I don't know. And if you look at your mortgage statement, maybe of that $600, $500 goes to interest, $100 goes to principal. Wait a minute. Where does 5% come into play? The actual interest volume that is flowing out of your life is significantly more than what the interest rate is. It's called banker's math. It's how they define amortization. And they make you think that's the only way to do it. It's not. But you need to think about how much of that interest is actually going away from you. And if you're able to put it into a system that you grow and control, all of a sudden your mind shift starts becoming incredibly different. So that's where our team comes in. As expert coaches, we pull up a seat right next to you, and together we thoroughly review and engage in a conversation about your financial priorities and the flow of your money. We can easily spot waste, opportunity, and danger long before our clients can. One critical element we identify for our prospective clients is their true positive cash flow. This will then initiate the process and purchase their first policy. Often a combination of existing assets and net cash flow are combined strategically to kickstart a family or business program. So what is positive cash flow? Simply put, if you spend less than you make, you already have it. In other words, after all your bills and expenses are paid, it's the amount of money left over. Often when we help prospective clients sort through their financial junk drawers and clarify priorities, individuals who didn't have a positive cash flow before find ways to create it eliminating waste or reprioritizing where their money flows to. It's a starting point. For example, recently a client shifted from being an employee to being a contractor in the IT space. His wife and two children already diligently lived on the wife's income. He incorporated, and now the income he generates resides there without impacting their lifestyle. As a business owner and shareholder of the company, he controls his personal income and keeps it near zero. He had already accumulated greater than $250,000 in a registered retirement savings plan. So this was a family that was actually in Canada, what we in the U.S. might be as a 401, and grew quite dissatisfied with it. In consultation with his accountant, he determined it made sense to begin strategically melting down these accounts rather than pay potentially higher taxes when he needed to withdraw them at retirement.

Hey, if you're enjoying this book walkthrough of Cash Follows the Leader led by Mike Smella, that's fantastic. If you don't already have a copy, make sure you get one. Go to cash cashfollows.com. That's cashfollows.com. Get a copy right to your inbox. Go ahead and do that right now.

This strategy produced a new funding source for a dividend-paying participating whole life policy that created an instant tax-free death benefit amount that was needed since he had no existing life insurance coverage. This policy will also be utilized in the future as an insured retirement, and it gets better. They had also diligently been setting aside $250 per month for each of their children inside of a registered educational savings plan. Funds where they lacked control and visibility. They had also maxed out their Canada Education Savings Grant and had been accustomed to this payment in their budget for well over a decade. The same cash flow now has been directed into participating whole life insurance policies for their children, providing control and a multi-generational benefit that the whole family can use without any of the restrictions of the retirement plans or the RESP. Then, after exploring their cash flow further, it was determined they were sending weekly accelerated payments onto their mortgage. In one phone call, they covered $360 per week of cash flow they were happily paying to someone else's banking system. Instead of building equity in their home where it was all locked up, they can now build equity in their tax-exempt insurance contracts where they have more control and peace of mind. To top it off, they had creditor insurance with their mortgage lender. They were paying $24 a week for a declining benefit that was unlikely to pay out if or when they needed it. By establishing proper insurance protection that will be there when they need it, they were able to redirect those funds too. So their cash flow was always there, but it that had been allocated based off of what they believed was possible at the time. Now with more education and a clear understanding of how they can work with capital for the rest of their lifetimes, they were able to get their system started without working any harder, changing their cash flow, taking on any risk, and never losing control of their money. This is called working with what you've got, and you would be surprised how practical these discovery sessions are. Here's a quick summary of how this client worked with their coach to reprioritize. $360 plus $24 equals $384 per week over 52 weeks a year is just under $250 times 2 children equals $500 per month. $250 redirected monthly towards a dividend-paying participating whole life policy for each child, and they still have their RESP accounts including the grants intact. $30,000 of voluntary RRSP reallocation per year after the initial withholding taxes of 30% is a net $21,000 of capital to be directed to a new cash value policy each year they choose to make this withdrawal. Being being in the lowest income bracket by controlling how they earn their income made this a sensible option after discussing it with their tax professional. $9,000 is withheld to pay the eventual taxes on income for that calendar year. Overall, 4 policies have been created, one for each member of the family, roughly $47,000 annually of funding potential by adjusting where they reprioritized the flow of money in their life. Additionally, recognizing they wanted to be an honest banker, they committed to depositing at minimum the same amount that used to be sent their old retirement accounts, bringing up their total to $60,550. Each of their children has permanent protection greater than $110,000 to start with guaranteed insurability options and critical illness coverage. The husband, who had no coverage in place prior to being introduced to our team, now has $1 million in life insurance, a combination of whole life with a term rider for extra protection and conversion potential. The wife has $750,000 in coverage, combination of whole life with a term rider they own and control. This is on top of the $2 $200,000 available from her government benefit plan. They had access to cash values to work with them over their entire lifetime, focusing on passive income from age 70 to 95. They can receive a tax-free income to supplement their other retirement sources, as shown in the following chart, which is on page 46. $44,300 per year tax-free income for the wife, $33,300 per year of net tax after drawing it out of his corporation for the husband. The corporation paid all the premiums, collateralized policy, and after issuing a dividend, this is what the shareholder can spend after taxes are paid. If they chose, they could also access approximately $7,000 to $10,000 more per year from each of the plans they own for the lives of their children. These policies would be replenished with the death benefit proceeds from the parents when they passed away, allowing the children the reuse of all of that capital plus more for their own retirement. This represents $92,600 a year in passive income for 26 years, $2,314,000 in tax-free access while they're alive, using their life insurance contracts as collateral. Assuming they pass away at age 96, they leave each of their kids between $500,000 and $600,000 in a tax-free windfall of death benefit proceeds. Each child can repay the $350,000 of outstanding collateral loans on their respective policies. Now the next generation is able to pick up where the parents left off with this wealth. First, the kids use the net death benefit profit proceeds to pay off any policy loans. This replaces the full value their parents used as a passive income. Then from age 70 to 100, each of the kids can now supplement their own retirement income with $25,000 to $35,000 every year income tax-free. It's important to note that the children agreed to take over the premium deposits from the parents. In our example, the parents decided to continue funding until age 70 and then have their daughters take on the responsibility. In this family system, Mom and Dad are able to utilize 2.5 times more to supplement their income than they contributed to the plans on their children. See how the continuation of this multi-generational plan provides value up to the 91st year of setting it. The children contributed from age 38 to age 70 for the oldest daughter and age 34 to age 70 for the youngest daughter. The oldest saved $92,800 over 32 years and the younger sister $104,400 over 36 years respectively. They each utilized more 8.7 times what they contributed out of pocket. A legacy is created for the third generation that their grandparents started almost a century before. The next tax-free death benefit is still a multiple of what each of the children deposited. So we'll stop it there and we'll pick it up with page 49 on the next chapter.

All right, I hope you enjoyed the incredible experience of going through this chapter, this section, this inside of the book Cash Balls Leader with Mike Smella. Make sure you tune in to the next section.