EP 626 - Learn How You Can Be Your Own Bank With Mark Willis, CFP

This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for pennies on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same.

Now here's your host, CEO of We.

Close notes, Scott Carson. Hey everyone, you are listening to the Note Closer show with Scott Carson. My name is Mark Willis, certified financial planner and bank on yourself professional. Today on the Note Closers show, you're going to hear about how to become your own source of financing.

Good morning, good afternoon, good evening everybody. Welcome to this episode of the Note Closers show. As always, Scott Carson. Excited to be here with you today. And we've got a very special guest on the show today. He is a two time, not just a one time, but a two time number one bestselling author, is the owner of Lake Growth Financial Services out of Chicago, the Windy City. He's got a huge passion for not only helping investors, but a lot of real estate investors. And people find financial freedom and really do amazing things not only with their investments, but also with retirement. I think you're really gonna love what he's gonna share today. So we're honored to have our buddy Mark Willis join us on here. He's a man on a mission. He likes to help you think differently about your money, your economy and your future. So Mark, welcome to the nutclose. Sure, bud.

Oh man, Scott, thank you so much for having me.

Glad to have you, man. So you've had Some hindsight. Is 20 20. I think we can look back at what everything happened 12 years ago, what's going on in today. So why don't we talk about how you kind of got into that aspect of really having a passion and a mission for helping people struggle along the way.

Well, it was just the other day I was speaking with someone on a phone call. We had a quick 15 minute phone call just to kind of get to know each other, see if any of our services at our financial firm would be a good fit. And he was sharing. He's frontline worker and one of the nation's heroes right now. And he was laid off amidst everything else. You'd think that someone in that space would be hard earned to keep. And one story after the next. We've had good times and bad times. A lot of people say this is a K shaped recovery. Some people going clear up and to the right, other people dropping down, losing their jobs, getting furloughed Getting hours reduced. And this is not unlike what I and my wife went through a number of years ago. Like you said, In 2008, we graduated right in the middle of the Great Recession, or as I call it now, the less Great Recession of 2008. And we had no job, we had no plan to pay off the six figures of student loan debt that we had. And really we had no attention on our finances. So there's a lot that has changed in 2020. I think we're all ready for 2021. Come, Lord Jesus. That's what I'm saying. 2021 is the year.

Praise Jesus. Come on.

But in the meantime, we've got a lot that we're working through. We are eyeballs deep in a massive recession, a pandemic, possible national conflicts, and of course, our election is coming up and the stock market is at all time highs now. Go figure that, right? So what hasn't changed, I think is important for your listeners, everyone to realize there are some things in the financial universe that just have not changed. And one of the more important and I'd say fundamental parts of our financial life that hasn't changed is the idea and the function of banking. Banking is banking has been for as long as we've had human civilization. There's a great book by David Graeber Scott. The book's title is the first 5,000 years. And I think the title of the book says it all. We are in the banker's world. We're all just living in it. It's the banker's world. And if we can understand the function of banking in our lives, it won't matter what your mutual funds are in this year. It won't matter really almost anything else to your financial life. It's the smallest hinge that can swing the biggest door in your note business, in your personal life and your financial future as well. So that's what we specialize, that's what we work on with our clients, is helping them take back control of the banking function in their life so that they can sleep with sanity once again.

So let's talk in that a little bit. What do you mean by the banking? I mean, I believe everybody's in the dead game. You're just on the wrong side of the payment streams for the most part. Right?

Yeah.

People got going out with their student loans, their car, their mortgage, their IOU to Bubba down the street, whatever it might be we got going out. And that's why I love becoming the bank and having money coming back. And so let's Talk a little about that. What you kind of hit it to.

Yeah, well said. I'd say that similar statement that I like to tell folks is we are all in the banking business. We're just sitting on the wrong side of the banker's desk. What if you wake up one day and you owned the bank? What would be different about your life if you owned a local bank branch down the street? The kind that you know about, the kind that you may have some debt, too. Most of the people I work with are business owners who are just trying to run their business profitably during this difficult time that we're all going through. If all of a sudden we owned two businesses, not just one, not just our day job, not just our note business, not just our side fund, not just our investment portfolio, but we also owned a bank. Just imagine that for a minute. What would be different about your financial life if you were your own banker? Let that sink in for a moment. The power there is. Well, it's hard to even quantify. Everything about your financial environment would change if you had a ready line of credit to yourself. Unless you want to deny your own loan to yourself. I mean, go at it if you really want to do that. I guess repo your own car too, if you really want to. But if you were the banker, imagine what that would do. What could that offer you if you had an asset on your balance sheet that could give you six figures or seven figures of capital in good times. In bad times, you'd have a competitive edge against everyone else in your marketplace. Everyone is looking and begging. The government. I've had numerous zoom calls with folks where they got a PPP loan or an Eidl loan earlier this year, and now they're concerned that they've got to jump through the government's hoops to keep enough people employed or to pay that loan off with interest over the next few years. And yes, it was like getting rained on money to us business owners. And then we all started getting rioted and looted and many businesses had to border. We live here in Chicagoland. I saw it. Plywood on the windows and everything. But if you could become your own source of financing when banks aren't lending, what kind of power, what kind of competitive edge would that yield for you? And how much more could you take advantage of this situation in appropriate ways and even protect yourself from whatever comes next, whatever 2021 brings us, God forbid.

Well, you obviously have a lot of opportunities there if you've got that income coming in. The banks being able to pay out 0.01% on a certificate of disappointment. You know what I mean? Yeah, you can use that. Give me credit three times. You can use it. But then they're getting 4% on a mortgage or they're getting 8% maybe on a used car loan. 19, 18% on credit cards. That arbitrage of doing it. So let's talk about, let's dive into this. What's the vehicle you're talking about for people out there? Because I know my audience and definitely sounds, they understand the power of banking. But let's talk more about. What are you exactly talking about for those that are listening? Yeah.

Well, we all know that banks don't lend out their own money. That's where they get infinite Return. They're going to give that.01% on that certificate of disappointment and then they're going to loan that same money out to the guy behind me in line who needs a loan at 10%. Now how much of the bank's own money did they have in the deal there?

Zilch.

Zilch. Yeah. So we call that Infinite return around here. Now I am a certified financial planner. And when you go through that process to get that designation, Scott, they ask you to really dive deep and broad. It's the biggest, baddest certification you could go through. And I'll say it took me and my wife because really it was both of us about three years to go through that designation. And for me it was so fun. But I kept track of about 450 different places we could put our money as I was going through that study. 450. Now everywhere you keep your money will make it act different. And that's just a brain dead, obvious statement. But I think it needs to be said. Where I keep my cash makes it act differently. It's like a fish in water. The environment matters. If you put a fish in the wrong environment, it's going to die. You leave it out in the desert, it's not going to last too long. If you put it in the right environment, nice salty ocean, it's going to survive, it's going to thrive, it's going to reproduce. And we want our money to reproduce. So part of what I like to start conversations with, with many of our clients is hey, what do you want your money to do for you? I don't have any preconceived notions of what your characteristics are. Like if you could be pope of money for a day, Scott, or anyone listening, wave that magic wand, you know? Yeah. What sort of characteristics would you want your money to have. That's sort of where we like to start. I'll give you one or two, but I'd love to get your thoughts on this, too. If you could design the perfect financial vehicle, what attributes, what characteristics, what environment would you want it to have? For me, I wanted easy access to the cash. If I've got it in a certificate of disappointment. See, I've already got it two times. There. Did you see that? Trademark Scott Carson. The first thing I need is liquid access to my cash. We're in the middle of a pandemic and I know that if I've got a fever, I need lots of liquids to lower my temperature and to keep me healthy. And similarly, if our money is sick, we need liquid funds, liquidity to get access to that cash quickly to help us. It's like the oxygen of our businesses. To be able to access liquid cash is many times the difference between success and bankruptcy, unfortunately for too many businesses. So that'd be one. I'd also want a good competitive rate of return. I'd want some tax advantages on my cash. What about yourself, Scott? Is this striking up any ideas for you? What do you want your money to do for you?

You know, liquid is always. You want to have access to it. You want to be at some place that I don't want to say safe, because nothing is safe. People talk about, oh, and the bank is safe because the fdic, well, do you know the bank can take up to 99 years to give you your FDIC money back to you? And people don't realize it. And then you're only, was it protected up to what, a hundred grand? Specific ex banker and me pulling that out of my ass. I haven't talked about that in years. But it is. People don't realize that, that you have to have it. You also want it to be, I think, independent of rumors. We all know that rumors that companies can affect stock prices, ups and downs and things like that. We talked about that. You don't have penalties if you got to pull the money back out and stuff like that. So. And then you also want the opportunity to you be able to direct it however you want it to go to. How's that money? Good if you need to use it. And then also obviously ROI is an important aspect along with rot return on time.

Yeah. Well, that's really a great list. I love that. So protected from rumors. Can you say some more about that? Are you talking about like market quarterly reports and that sort of thing?

Well, if you're invested in something. And we'll give you example. Like Netflix has taken a big hit this week. Their stock prices dropped based on one show they had posted on there. Okay, I haven't watched it, but we know a lot of people been like, oh, cancel Netflix, cancel Netflix. Do you see something independent of Netflix rumor? Or like, oh, suddenly you've got Tyson Chicken has an outbreak and a bad birds and they're doing a recall. It's gonna affect stock price, Stuff like.

That, you know, somebody sneezes the wrong way, why should that have any impact on your financial future? If someone sneezes the wrong way on Wall street or China or wherever, or someone gives the wrong report or someone publishes a wrong tweet or whatever, why should that impact your financial future? I totally get that. Yeah, that's awesome. And then I'd also add to that the rumors of your own business, right? What if you go through someone sues you for wrongdoing or slander or something like that. If you're a business owner, odds are you're going to get sued at some point. I hate to say it, but let's protect it from creditors and bankruptcies and lawsuits and frivolous lawsuits. I'd say that'd be another little key piece to that. But boy, that's a great list. So I put together a list of 20 or 30 different characteristics I wanted my own money to have and you mentioned it. Competitive rate of return, some sort of safety as much as we can have. Safety in the financial universe, some sort of liquidity, no penalty to borrow or access that cash, no limit on directing those monies. If I want to fix up my own kitchen or send my kid to college or invest in slot machines, I guess I want the right to be able to do that. Why should say the government tell me I can't fix up my own kitchen with my cash like a self directed IRA can't allow us to do so. Before putting labels on our money, it's always really important to think, what do I want my money to do for me before we put labels on it? Because we have so much bias, so much background, so many financial gurus on the radio telling us we should stay away from this or keep clear of that. I just wanted to get to the bottom of the function first principles. Thinking is all about what are the functions behind the labels? I don't care what it's called, I care what it does. For me, that's the truth. So for me it was eye opening moment when I realized that there's been a financial asset in this country available for over 200 years that does everything we've been describing. It grows on a guaranteed basis every single year outside of the stock market, aside from Netflix rumors and who sneezed on what chicken or whatever else. Right. I'm going to use that too. That's great. It's liquid and accessible to me anytime I wish. It's taxed like a Roth IRA in that it's tax free for the rest of my life. On the harvest. Both principal and gains can be accessed totally tax free. I can use it and direct it for my investments, my real estate, my, my kids, college or going to Disney World. It's my cash. I can do anything I want with this asset. And it does a nice competitive, albeit moderate rate of return that's decent enough for me to keep up with and even beat inflation and allows me to do everything else in my investment life that I want to use it for. This vehicle surprised me when I found out it was dividend paying whole life insurance of all things. Now this is not the kind of dividend paying whole life that our grandpas probably had in their portfolio and Dave Ramsey loves to hate on. It's the whole life insurance that's been modernized for massive cash accumulation. 8, 40 times as much cash as the old stuff used to have. And the way we do that these days, as I came to find out in my research that the insurance agent or the financial professional building this has to take a pretty massive pay cut to design the policy correctly. Obviously it's going to cut the death benefit down as small as we can make it, while pouring as much wealth as we can into the cash value side of the policy. So many people are not aware that there's kind of two types of life insurance. There's rented term insurance, you're renting it for a certain period of time. And then there's owned life insurance, where you own it for life and it's an asset on your balance sheet. And there is a death benefit, yes, but the cash value is like a living benefit. And the more you build up wealth in that cash value, the more you can use it as a line of credit. And back to our point about banking, you can use it like a line of credit to yourself. It's like having a bank on yourself. So any feedback, thoughts, questions on that?

You have the two. Obviously there's a difference in price. We know that term is always the cheapest because the stuff in this like you are, you've got a term, a 10, 20, 30, 40 year term, and the price is based only obviously on your health conditions at time that you get it approved. Any type of insurance, you got to usually qualify some sort of fashion out there, correct?

That's right, yeah. If you're going to be the insured, you'll have to do a medical exam. Now, you don't have to be the insured to get a policy. I have a gentleman who came to me, he was so pumped up about the idea of becoming his own source of financing, but he had just had open heart surgery. So that basically took him off the list to getting life insurance. Think like an insurance company, they're not going to bring you on if you just had open heart. So what he's done, your risk might.

Be a little higher there, you know what I mean?

Just a bit, yeah. He actually brought up a concept that a lot of our clients have since done, which is he's grandpa of the family, kind of patriarch. He now owns 12 policies. How did he do that? Well, he's got a wife, adult children, grandkids, and he's the owner of all the policies in the family today. He's using it. He sends in his paperwork and loan requests and accessing the cash for his investments as real estate. Probably once a quarter he'll send in some paperwork to get those monies out in about three to five days. But should he pass away all that money, all the cash value in those policies then goes to his wife and then when she graduates, it goes to the kids. It becomes a three generation financial portfolio. We just created a personal family bank. Not literally an FDIC bank, of course, but this is a portfolio of wealth that's now generating dividends for the rest of three generations. That's incredible. And you're right, the premium that goes into a whole life policy will always be more than a temporary term insurance policy. Let me kind of talk about that quickly. Term insurance, you pay for it for 10 years, 20 years. Great news, you lived. The bad news is you just gave them over 30 years, you gave them 30,000 bucks, let's say, and you have nothing to show for it. With a whole life policy, you've got over 30 years. You've got three times as much as you put in there in liquid cash. And then you also have a giant death benefit, income tax free. So I'd wonder which of those is more expensive, the one you get nothing at the end of 30 years or the one you have a giant pile of tax free. Well, now I love term insurance too. I think they're both fine. They both do Things again, what do we want our money to do for us? I'll say this last thing, too. Are we more likely to die just because we have a whole life policy? No. You know, insurance company knows there's a reason why term insurance is so much cheaper. It's because nobody dies with term insurance in force. According to a recent study, 99% of term insurance just gets canceled or expires. Nobody gets that claim paid out. So you're right, there is a reason and a time for renting an apartment, just like there is a reason and a time for term insurance. What we're describing today is becoming your own source of financing, and you got to own it to be able to borrow against it.

Let's dive into the functionality of the whole stuff because you're basically putting in, you're buying a policy. Let's just say the grandfather you talked about, he puts a $50,000 policy down on there. Let's talk about some of the functionality of that. Because you said, okay, in what you said 30 years, it's three times the amount of what you've paid into it. Is that what you said?

Yeah, yeah. In his example. Yeah, yeah. That's rough estimates. I can give you some exact specific examples of a guy who's 45, he was putting in 32 grand a year. All right, that was his decision. Now who in the world, in the right mind, Dave Ramsey and all the rest of them, be screaming, you know, 32,000 into a whole life policy. Why don't you just put that in the market, or worse, in a savings account, and after 10 years, he's got 400 grand of cash value and a $2.1 million asset to the family.

So what did it grow at, I think is the annual return on investment. I think people are thinking right now.

Well, again, I got probably, it's in the middle single digit range, somewhere between 3% and 6.5% after tax, somewhere in that ballpark. So think of it like a cash equivalent. In your portfolio, you put in 32,000 times 10. After 10 years, he's got $400,000. So you could probably do the math there. And he's also got a $2.1 million gift to the family. So whatever the ROI is on that.

Okay, so that's the number there. Where do you get the 2.1 value to the family on one policy at 32 grand? So let's talk about that.

Yeah, sure. So again, where you keep your money makes it do different things. If I've got 32 grand a year for 10 years. And I put that into a CD. What was it called again?

Certificate of Disappointment.

Disappointment. I'll have about 320,000 bucks to my name if I pass away. My family gets $320,000 in that CD and that's it. Right? That's the end of the story. If I put $32,000 a year in over 10 years into the stock market, all I have is a big fat question mark. And of course my investment advisor is going to get a fee off that cash if I put it into any investment. There's no guarantee. As nice and as solid as real estate is, or even notes, all of it, nothing is guaranteed. We can get pretty close listening to some of the strategies that Scott talks about, but there's no guarantee on investments.

Well, but there's one thing I don't think you're mentioning, I don't mean to interrupt you on this is that the whole point of if you're not going to put it into something, you've got to take the action opposite. And most people are not action takers. That's why this works so well, because they're getting something really just sitting on their hands and twiddling their thumbs. As long as they keep putting money into it, there's that difference. Ex insurance agent here, back in my early days. So I understand the whole life versus the whole buy term and invest the difference aspect that a lot of people love to get in to sell it. Well, you got to make the term work. You've got to do plan B, invest the difference.

Yeah.

You know what I mean?

Yeah. Most people buy term and go out to eat. I mean, that's kind of the way or buy shit. Yeah, exactly. It's true. Yeah. So you know, with the whole life contract in this guy's example, 45 year old after 10 years, he's got 400 grand. That's better than a savings account. But that's not what really gets me out of bed in the morning. What's really interesting is after the 10th year, I have a picture and I could show the numbers if you want to for YouTube or whatever. But in the 11th year, he takes a loan against his policy for $350,000. He's buying a house. Or maybe he's investing in some notes. Maybe he's investing in something that's going to give him a great yield. Whatever that is, the policy will continue to grow and compound, give him the same exact growth, roi, dividends, as if he had never touched the cash. And this is really one of the biggest, most crucial pieces to the financial puzzle and why this matters and why this gets me so pass is because everywhere else in the financial universe that I can find out of 400 plus financial products. Scott, Anytime I withdraw money out of my savings account, my brokerage account, my 401k, I'm losing the compound growth. I have an opportunity cost to my dollar. Every time I buy that car, send my kid to college, go on vacation, anything, I'm losing the growth I could have earned on that money had I left it invested. Instead, even on the piddling rates of savings accounts and CDs, I'm getting at least something when I don't spend the money. But when I do spend cash, it's gone. And also gone is all that that money might have grown to had I left it invested. So I tell folks we're already in the banking business, all of us, either we're paying interest to a banker, car loans, student loans, mortgage loans, or we're passing up interest we could have earned on our money had we left it saved or invested. So back to this guy. In the 11th year, he decides he's going to take out 350 grand and buy some real estate with it or invest in notes or anything else he'd like to do. And he pays himself back on his own schedule over the next five years. His choice. He's in control of that. It's a loan to the policy that he owns. He's got a policy with a company that's mutually owned and he owns and controls the repayment process. He owns the environment where his money lives. If someone else, like a bank, owns the environment where your money lives, they're going to win, plain and simple.

If you own the environment, basically takes the 350 out he's paying. I'm sure there's an interest rate payment on that loan back to his vehicle, correct?

Yeah. So in effect, I guess I'll even say what he's doing is he's using that 350 as collateral and he's borrowing against his life insurance. And there's a key distinction there, rather than taking it out, because if you take money out of your savings account, brokerage account, it'll stop growing for us. We removed that asset. But kind of like a heloc, we're just using our house as collateral for a heloc, the house still grows whether we borrow against it or not. But with a whole life policy, we're using our cash value as collateral and the policy's cash value continues to grow. So to Give you some real numbers here. As he repays his loan, he does have a loan interest rate. The loan interest rate is 38,000 bucks, and the APR on that rate is 2.1%. So that was his loan interest rate.

Sorry if you lost me, you lost our listeners.

Okay, let's do this.

So borrows $350,000. Where does the 38,000 come from?

So the insurance company is what's giving us our cash here, but we own the company where we have the policy. So it's almost like you and I went into business together and we got a mortgage company set up, and you and I own this mortgage company together, right? And I need a mortgage. So I come to you, Scott, and I say, hey, Scott, I know we own this mortgage company together. I need to be a customer. I need a mortgage. And you say, great. Here, sign here. And oh, by the way, here's your interest rate. And I'll be like, wait a minute, you're going to charge me interest? And you're like, heck, yeah, you're a captive customer, Mark. You're not going to go to Chase bank down the street. You're going to come to our mortgage company. I'm going to charge you some interest and. And I'll be like, oh, wait, I also own this mortgage company. I'm going to profit when I pay my mortgage every month. Same is true when you own co own, in essence, the life insurance company. If it's a mutual life insurance company, you get to profit when the policy loan is outstanding and the insurance company charges us an interest rate. They're not doing this for charity.

So what's the average interest rate on the loans? If you can say that, yeah.

Over four years, the APR on these loans, if it's properly structured, will be about 2%.

Okay, that makes sense. So that loan where that 38,000 came in, that's structured over how long of a repayment plan?

I picked five years for this guy. But that's important to mention you guys, each of us, all of us are the ones that control the repayment process. You can take it over five years, 10 years. You can wait until you sell your property or get out of your private placement fund and just pay it all off at once. You, heck, you could even just take the loan all the way to your grave and the death benefit back to this guy. That 2.1 million would be reduced by the $350,000 loan and his family would get the difference there. So you could just never pay off the loan as long as the Policy is in force. When you pass away, the family gets the net death benefit, income tax free.

There you go. That's the numbers behind the numbers, ladies and gentlemen, there for you.

Yeah, yeah. So you paid 38 grand. You know, Dave Ramsey would be screaming like, wait a minute, you just paid interest on your own money. And I would say, hold on, wait a minute. There's one more piece to this story that I think deserves some attention. This guy, this example, he was not paying. After the 10th year, he stops putting cash into the policy. It's just growing on its own steam. And from year 11 to year 15, when he's done paying off that loan, the policy by itself grew another 120,000 bucks. Now, he paid 38 grand. It grew 120 grand. We call that. I think you know the word arbitrage. Right? That's a powerful strategy for making our large purchases in our life, our investment deals, our real estate, sending our kids to college, investing in our business, capital expenses. Pick and choose. Right? That's the power of becoming your own source of financing and letting the power of the banking function be taken back in house into the family, rather than outsourcing the function of banking to the bank down the street.

Well, but there's also a couple things here. I want to make a couple points here. Dave Ramsey thinks all debt is bad. And no offense, not all debt is bad. I mean, if that was the case, most people wouldn't own their house. You know what I mean? And the biggest fallacy I see is people paying off their house and having all this equity that now they can't touch without having to go out and qualify from a bank and do. It's untappable, basically. I like to say yes.

Debt, equity.

Yeah, yeah, I don't agree with that. You have to understand that the securities in place, you mentioned those on the front, inside that 2.1. If somebody got in trouble, it's an insurance policy. They can't tap into it. Correct.

The cash value is what we can access as a line of credit or withdrawal. But the 2.1 is there. If we have the ultimate emergency and graduate on our family.

I like that. Graduate to a higher power.

Yeah, that's right.

Or a lower power in some cases.

If we wake up on the wrong side of the grass, our family gets that 2.1.

Yeah, but that's the thing. That's the security interest built into it. If you get sued, which everybody in real estate or entrepreneur at some point is going to get sued, they can't go and tap that correct?

Right. The state by state has bankruptcy protections and creditor protections for life insurance, both death benefit and cash values. Check your state's exempt list for creditor protections. But the general rule is there's major cash value protections. They don't want to disinherit your children just because somebody decided to sue you because they slipped on a banana peel outside your rental. So that's the way it works with most states. But check your list in your state where you live.

Now we have people on here that are new investors, man. 32 grand a year. What are some of the amounts that you see people kind of start off and graduate up to?

Yeah, no attention to those numbers really. It could be as simple as a couple hundred bucks a month or if you don't want to wait 10 years like that guy did, had a lady who's in her late 60s and started a policy with about 211,000 bucks and she dumped that all into the policy with one lump sum and right away she had about $195,000 in cash value that she could use right away. So you might have a bunch of money sitting souring in a CD or like I said earlier, maybe you just have a couple hundred bucks a month you could set aside into one of these. Now again, it's all proportional. Take a zero off those numbers I mentioned earlier or add another zero on the concept of banking starts small or at your pace.

Now with the lady that say at 211 she had 195 available to her to do what she needed to, she needed to borrow against that money. Well, let's say somebody falls on hard times like we've seen a lot of Americans out there and they're unable to pay back. That one 95 for a period of time is if they don't pay back in six months or 12 months, they lose it or it just goes to the death benefit of the variant is deducted.

Yeah. This is the coolest thing in my opinion. Cool is a relative word for me as a nerd, I guess. But the.

But I think we're both numbers nerds, man.

Right on. I can tell. I love it. I'm among my tribe. That's right. So, Scott, the interesting thing here is the loan against the policy is self collateralized. And what do I mean by that? I mean that the life insurance company sees loans to you and me as the safest bet they can make. What are these insurance companies doing? They're protecting their general fund and getting yield to pay out their death benefits and pay out their Dividend claims and all that good stuff. Now, Apple and real estate deals. I had an interview with a commercial banker and he was telling me that he uses life insurance companies as source for capital for large bank loans. You probably know this is true. So life insurance companies are out there getting interest, yield and getting fixed income payments like bonds, but held to maturity. Life insurance loans are some of the safest monies that they can invest. Why? Because that's letting the insurance company off the hook. Instead of paying my family 2 million bucks or whatever, it's going to be 2 million minus the loan that they already advanced to me. And if I should pass and never pay off my loan, my family gets the net death benefit, the insurance company is off the hook, the remaining loan, balance amount and whatever I invested. Let's say I bought a couple of rentals with my policy loan. My family keeps that too, with the outcomes and the rental income and everything. Tax advantages that come with real estate. It's just a place to park our money in between our deals. That's one of the best ways I can describe this concept.

No, I love it. It's like you said, you take the 195, go buy a property, or could take it and buy down payments on, let's just say 10 properties. But her policy is still growing, as you said on the back inside the bank. She keeps paying her monthly payment, but she's leveraged and arbitrage. But she sells two of them off in five years, the properties double in value or 10 years of value. So she pays off her loan at that point. But now she used that 195 to buy 10 properties.

That's right.

Arbitrage, that stuff. To help herself fund her stuff. I love it. If you can connect the dots, ladies and gentlemen, if you're listening there, if you're an audible learner versus a visual learner, you might need somebody to walk you through that.

I've got several different webinars and spreadsheets that show these numbers. If you love the visuals, happy to set up a time to chat with folks about that. But man, you're right. It's all about, do you want to control the environment where your money lives? Do you want to be your own source of financing? Or do you want to have someone else do it for you? And there's profits to be made. If you can understand how interest works, you'll collect it, as they say.

And Marcus, so I could put a policy on you, couldn't I, if I wanted to?

If you and I were in business, Together. Yes. If we're strangers, probably not.

Because you'd have to still prove to go through the health check, correct?

Yeah, yeah, yeah. There's a big deal on stranger owned life insurance. You don't want your worst enemy coming after you in your sleep, that sort of thing. But if you're a business partner, if your friends, if your life partners, if your family, I haven't seen pets yet, but that's kind of cool. I guess the idea would be if you've got an insurable interest with somebody, it could be a grandkid, it could be a business partner, it could be your spouse and the business partners like.

Key Man Insurance there for you.

That's it. Yeah. You get the vocab. Word of the day, man. Two, two dollars drinks on Scott here. So that's awesome, awesome stuff, Key Man Insurance. Yeah. You can even have your business own the policy, use it as a access point for assets and collateral for your capital expenditures for your business. And then guess what, that's a big bucket of money that's now a sellable asset. When you do sell your business someday, let's say there's half a million bucks in your policy there for your business now your business is worth at least that much, plus everything else your business has built up over the years, hopefully. And you can use that as a golden parachute to sell your business or leave it in the business when you walk away with your golden ticket, so to speak. For the business, too.

Yeah. And it's a valuable asset to help you leverage. Who doesn't like buying a property that they can make 20, 25% return on investment or do a quick flip that they can make a quick 50 grand in 90 days. I get that, everybody. But the biggest thing is when you hear people bragging about quick hits like that. They're quick hits when we talk with investors and they've flipped the property. Cause that's one thing. Exactly. What have you invested in before is an important thing, you know, and they're like, oh, yeah, I did a fix and flip one time. I was like, Great. I made 30%. Great. How long was it? 90 days. Did you do three more? No, I only did one that year. Well, then your money didn't really make 30%. It made more like 8% annualized, if you looked at. So if you understand it, breaking the numbers down. So that's one of the biggest things, being able to park your money, have it making something entire time, get it out, get it back in, and double down on everything. Right.

You know, that is so True, Scott. I'll say this briefly. I'll also mention what this isn't good for as well. So you're right. When do we want our money growing the fastest? Some people will tell me, Mark, I want it fast right now. But that means to the exclusion of the future. I've got a thousand bucks in my pocket and I double it today, that's 2,000 bucks tomorrow. But if I've got half a million bucks in my policy a few years from now and it doubles to a million, that's even better. I would rather my policy or my money more specifically, become more and more efficient every single year. Imagine if our cars got better gas mileage every single year and there was nothing we could do to stop it. What would that do? How would that impact. How would that change how we bought cars or drove or whatever? Right? And if our money had an ever increasing, more efficient schedule to grow consistently and predictably, even if we use the money, it keeps on growing and there's nothing we can do to stop it. That's a pretty powerful tool. Now, it's not a good fit for people who want quick hits. Like you said, Scott, it's going to be boring you to tears if all we care about is ROI inside the policy. Like I said, 3, 4, 5%, 6%. Maybe once we get back to normal interest rates, maybe it'll be even higher. But my plan is, see this as my parking space for my cash before I go and invest with Scott or anybody else. It's where my money lives. It's like the garage for my cash. And then I always take my car out of my garage to go do stuff, but it's always coming back to the garage once it's all done.

I've been thinking about while you've been talking about this, we talked about this earlier. How many business owners took PPP loans out there and this could have been their own loan to them on the front end if they'd been spart and what people don't realize. I was talking with an economist yesterday about it. Yes, I talked to an economist. Yes.

Wow.

I know. Weird. Yesterday with the PPP loans, a lot of times that can be forgiven if you're using that towards payroll, if you're using that towards those expenses. But if it's forgiven, guess what comes from Uncle Sam? A tax bill for loan forgiveness of at least 30%.

Awesome.

Yeah. Thank you for that big whoa in the back there, Uncle Sam. This. You're not paying the. You're not being hit with that debt forgiveness aspect. It's from yourself, you know what I mean? So when people got all excited, you see all these people, they took millions of dollars in PP loans for their payroll or they took whatever they could. I didn't even bother. I was like, you know, we've got a biggest payroll. I was like, no, I'm not worried about that. We will wait on that because we will basically self insure ourselves with our savings and putting stuff away and there are cash flow that coming in. So that's the biggest thing is if you're an entrepreneur, you gotta have some sort of rainy day. You gotta have something leveraged out there. And I don't know if we've got time about that, but you as a cfp, this is a great product and you've worked with a lot of investors out there. What kind of counsel? Because not advice. Everybody can give you advice. Like everybody's got an asshole. Okay? Doesn't mean I'm very good at it. But cfb, you look at what you've done, and I know the class schedule that you've had to go through to understand this in a curriculum you've done. Because I've looked at it as well, you want to have some sort of mixed balance. You don't want to have all your eggs in one basket, right? Mark, let's say an active investor, not somebody who's just sitting on the sidelines, but an active investor. What kind of mixed weight rate would you say that they need to kind of have? If there is such a thing as a balanced portfolio? You know what I mean?

Oh, man, it's a great question. Let me give you kind of my philosophy.

That'd be great.

And every person is gonna have their own adjusted philosophy for their life. And what we do is we have zoom calls or phone calls and we have that conversation. I. Listen before I presume that's like a doctor. You can't make a presumption about people's goals and objectives. So I'll get that.

Coming for a cold. I'm cutting out your eye. Whatever.

Yeah, exactly. Man, I just had an elbow problem here. What are you grabbing your scalpel?

It's your foot. We're cutting off your ankle.

So with that kind of generic disclaimer out of the way, let's think carefully and differently about our money, our economies, our futures. Because you're right. I think there's something to be said for allocation and diversification. I view this product as a both and product. What's to say that if my money is safe, predictable and liquid in this whole life policy, it couldn't also be deployed into real estate notes, mutual funds, anything else, right? No. I have more choice when I have a liquid emergency opportunity fund. And that's exactly how I view these policies. So what's the right balance portfolio? No one knows. Not even us financial planners, not even US CFPs. We're all guessing. That's the truth. And I hate to say it, I hate to be the wizard of Oz Toto, pulling back the curtain a little bit, but no one knows the future of what the market's going to do this week, next week. And when someone tells you, hey, I'm a long term planner, I'm a comprehensive planner, bs. Tell me what the market's going to do this afternoon and tell me what it's going to be in 30 years. Do you even know? No. No one knows. Anyone who says otherwise is trying to fool you and trying to take your fees off your back. So here's an idea. Imagine you're a degenerate teenager like all of us were once.

All of us were.

Yeah, yeah. And you see the factory downtown that hasn't been used in 20 years. The windows are kind of falling apart. You go downtown, you're looking to make some trouble and you pick up a handful of rocks that weighs about three pounds in your hand, right? You got a handful of pebbles in your hand and you throw it as hard as you can at one of those windows. Is anything going to happen, Scott? Is it going to break?

Of course.

Well, wait a minute. If I've got a handful of pebbles, all that energy is dispersed and it won't shatter. At least maybe I'm the weak guy here.

Sorry, I was thinking a big rock. I think of my rock throwing days.

Yeah, yeah, yeah. Well, that's the other side of it. Let's get everything compacted into one three pound rock. If I have it all focused in one rock and I launch it, like with Scott's arm, at that window, it's going to power through there, you know it's going to shatter that window. It's all about focus. If I've got my money in my 529 plans, my 401k, my 403b, my old annuity, my high school buddy sold me, what am I doing? I'm not going to go very far in my financial life. Whereas if I've got my money focused, and some people call this the barbell strategy, where if you've got a lot of cash, safe, predictable, liquid, available, tax free cash for any purpose, right alongside some Speculative investments, you can have some serious plays. You'll lose some money on the speculation, but then you'll make some big deals come through as well. So it's all a matter of philosophy and choice. But as Warren Buffet says, diversification is just insurance against ignorance. So if you understand what you're putting your money into and I think keep on listening to Scott's podcast and the things he teaches on this show because it gives people the insights into making informed decisions on what you can invest in. Then you'll be able to make our choices. Use your predictable, risk free asset. Maybe it's one of these policies, maybe it's their certificate of disappointment that gives you some access to that cash when you're ready to invest.

Very good there. I love it. Three times, baby. Yeah. So with Americans now, a report came out today that the Americans have actually been saving more than they've ever done in years. And there's a lot of money sitting in the bank.

17%.

17, yeah, exactly.

More than in the teens. Yeah.

Which is a rarity variation, but usually been a negative savings ratio for the most part. That's a product as you talking about. It's something that they're not getting anything on it. If it's sitting there getting parked, that could be something to start building your rainy day fund into one of these and working with you. People need to have some sort of reserves. You always get to have something. Cause if something happens, you're laid off at work. We all know that 80, probably more than 90% of people as we've seen are missed paycheck away from being in default or being as stressed out. And that's never been more truthful than what we've seen the last six months. Right, Mark?

Yeah. Well, and I hate to point out the fly in the ointment, but where do you think they got all that cash to save? It's the government stimulus checks, it's the PPP money. And thank goodness we've had a lot of our clients come to me this year and say, mark, I just got a PPP loan. I want to put it into a policy or hey, I just got an EIDL loan. I had a guy who had 120 grand come to him. He's putting it into a policy and he'll use that to fund his E Commerce inventory for the next few years and pay his taxes for him. And I'll tell one more little strategy. There was the CARES act this year. If you've been impacted by coronavirus in any way, financial or medical they'll let you have access to 100 grand out of your 401k or IRA with no penalty, and give you three years to pay your taxes on that cash. I haven't seen that done anywhere except the mattress store down the street. You know, three years, same as cash, 10% discount. That's essentially what they're letting us do this year. And we've had a lot of our clients make the choice. Their choice, of course, to take money out of their IRAs, 401ks, where it's a tax deferred time bomb, putting it into an after tax designed whole life policy, which is much more like a Roth ira. And they've got liquid access to that money. They pay off an old debt they had or invest in real estate or mortgage investing, whatever they choose.

Yeah, that's just. You got to talk with your advisor, talk with your accountant, know exactly what the costs are going to be. Because you pull it out of a Roth, you're going to pay a penalty. And that's why it's smart to do it on the front end, to put it into something if you're not affected by corona.

Correct? Yeah, you bet, man. Yeah. Don't do anything that you just heard on a podcast for sure. Go talk to somebody who's competent and a good professional. I'll say. There's a lot of just Googled IT advisors out there who just googled this idea of bank on yourself yesterday after you called them about it, like, hey, Mr. Advisor, I heard Mark Willis talking about bank on yourself on Scott's awesome podcast. I want to do a bank on yourself policy and they'll just Google it right before you show up in their office. Don't work with just anybody. You really want to work with someone who's been doing this and is credentialed by bank on Yourself. Otherwise you could end up with a fee laden, taxable whole life policy, or worse, universal life or variable life insurance. Those type policies just are not designed well for this type of strategy.

And we do a whole other episode on those on a variety of different things at some point. But what's the best way for people to reach out to you? Mark, I'm sure you work with people all across the country, not just up in Illinois, Right? Right.

Oh, yeah. Yep, yep, that's right. Yeah. We love getting around town, we love seeing folks around here, but we do virtual work most of the time. And if you want to check us out first and learn more about us, go to notyouravgfinancialpodcast.com youm can click on request a meeting. If you want to chat with me or any of my advisors, we have a team of people who can help answer your questions, all of whom are, bank on yourself professionals. So that's not your average financial podcast dot com.

Perfect. And we'll have that in the show notes as well for everybody out there. Or it's in the description. Love to watch the video. Mark. This has been a fun time man. I mean it's been educational. I think a lot of people are gonna get a lot out of it. So check out Mark's website there. Check out his podcast. I mean that's a great thing. He's got great nuggets on there. Does a tremendous job of educating. Got some great guests on there. So it's myfinancialpodcast.com everybody. Correct.

It's Nya.

So not your average. Sorry, yes, Nya. Yeah, sorry. Nyafinancialpodcast.com, my apology on there.

We made it nice. And the longest URL we could come up with. That's what Scott.

Well, you gotta use what's available sometimes with the URLs out there, but we'll put a link directly into the show notes. So that's the easiest way for you guys. Listen, go check that either on YouTube with a link or go to our website@wecloseknotes.com and you'll have the links there available for you guys as well. But Mark, quick question for you. You brought this up a little bit. Have you heard of insurance companies are evaluating people differently if they've had Covid. Do you know if there's any of those Things have changed over the last six months.

You know, one thing I have seen is a lot of companies that were struggling financially beforehand are making firm and conservative choices on who they approve for life insurance. Now all the companies I work with have been around for over 100 years and they were paying dividends straight through this year. So straight through 2008, straight through the last pandemic we had in 1918, every one of the companies that I would recommend to clients have not adjusted their underwriting. In fact, a few of them have even raised their dividends this year amidst all the pandemic, which just proves how financially solvent these folks are going to be for the next a hundred years. But yes, there are some companies immediately. I'm thinking of one on the east coast that made some immediate restrictions on who they'd let have a policy. They obviously were in tight financial straits and I'd be very careful working with just any old insurance company, especially for this type of strategy.

Yeah, that's the truth there. So. All right, Mark. Well, hey, man, thank you so much for coming on the Nook show. It's definitely been educational, informative, and I hope all you guys out there pick up the phone, give Mark a phone call, because I think one of the most important assets you can have is a financial professional that can help you guide you can be your kind of look out for you to do that, because I know a lot of people are the Google experts out there. Not just professionals, but also people. I know it all. I googled everything. No, you don't. You need coaches and a good financial coach, somebody who's taken the opportunity to learn and go through the curriculum. Becoming a cfp, that's not an easy distinction to have. So, Mark, thanks for coming on today. We look forward to having you on in the future as well. All right.

You rock, Scott. Keep up the great work.

Thanks, bud. All right, guys, that's going to wrap it up for this episode. Check out Mark's podcast and make a connection with him. Pick up the phone, Give him a phone call, chat. Trust me, if you're sitting at home, you're listening to this, you may have a little bit of time on your hands. So do that, take action, and we'll look forward to seeing you all at the top, everybody. Bye.

Sam.