Mystery…No. 5 Volume Is More Important Than Rate

Every major product in the financial services business - every type of mutual fund, annuity, variable insurance product, bank CD, treasury bill, note and bond - proudly trumpets its rates. If 2% is good then 5% is better. If 6% compounded is wonderful then 8% compounded is marvelous.

The rates these products advertise, however, are hypothetical. Rate, like the products it applies to, represents the hypothetical aspect of pure unrelenting risk. The only guarantee of touted rates is that they are volatile and vary widely…in other words, they only guarantee is that there is no guarantee.

The facts are:

• If you contribute to your capital base on a regular basis
• If the financial instrument you chose to protect your capital has a guaranteed rate of return
• If you are using it as a source of borrowed funds for your own purchases
• If you are recapturing the principal, interest and fees you would otherwise be paying to others
• If you are not losing the earning power of your money while you are using it
• Then volume - regardless of rate - becomes more important.

 In other words, if you are managing your money the way banks manage money, volume is more important than rate.

Remember the refrigerator at $1,000.00. If you financed it yourself and paid yourself back at the rate of $100.00 per month plus 12% interest, you would recover the entire $1000.00 dollars in less than a year, capture about $50.00 in interest and have the refrigerator to boot. Does the 12% rate have great value here or does the recovered principal - volume - prove more useful?

Remember what Will Rogers said: “I’m not so much concerned about the return on my money as I am about the return of my money.”

Mystery…No. 6 “Conventional Wisdom” Is an Oxymoron and Tax Deductibility is a Trap

“If you do the same thing everyone else does then you’ll get the same results they do.” - Dr Agon Fly

During the recent bear market, some of the highest paid advisors and investors were able to brag only that their clients lost less than others’ clients lost. “I only lost 35%” is a bragging line. Hardly a single mutual fund showed a gain. 401k investments went down to less than half their original values in some cases. All of these results occurred by following “conventional wisdom,” the thinking that tends to dominate any given topic.[1]

The reality is that current financial thinking, planning, and practices are akin to driving your car by looking out the rear view mirror. You get a great view of where you have been but no perspective on where you are going. You could also say it’s like mapping; it gives you a two dimensional view of what might be in store but cannot tell you about the bridge that just washed out.[2]

Part of that thinking is that you should take advantage of every tax deduction possible no matter what. This is a trap. A client of mine follows this philosophy to the extreme. If there are two choices and one has a tax advantage over the other - even if both were tax advantaged - he always chooses the one with the current advantage.

The results have been demonstrably horrible. His 401k went down almost 80%. His earnings were so low that he lost almost $100,000.00 in the tax deductions that he pursued and his balance sheet is worse now than it was 5 years ago. He is so busy avoiding taxes (legally) that he loses focus on his business and his own best interest.

The Debt Paradigm has created the personal economies of today; low savings rates, loss of the long-term perspective, excessive attention to current tax advantages, follow the crowd investing and saving strategies, high debt, constant refinancing of our home equity and on and on.

It is time to walk away from the madness of the Debt Paradigm and employ solid strategies and practices of the Money for Life Model that promise a solid financial base that the vagaries of the market and the whims of the IRS cannot disturb or destroy.

 Mystery…No. 7 Compound Interest is Magic… Triple Compounding is Astounding

“The most powerful force in the universe is compound interest.” Albert Einstein

Compound interest on money you have saved (not invested) is the secret to financial success. What if you could save your money in a century old financial product where:

It earns compound interest - guaranteed

• You can borrow against it and it still earns guaranteed compound interest even on the borrowed amount
• You can repay the money that you personally borrow and reuse the borrowing power over and over
• Your borrowing costs are minimal or non-existent
• The interest you save by not borrowing from others becomes a secondary source of savings and another compounding factor
• Your money earns tax free dividends even when you have borrowed against the money

There are such products. Cash value life insurance, especially participating whole life insurance, is the cornerstone of the Money for Life Model for managing your personal economy and creating wealth.

Epilogue

There are a couple of thousand insurance and investment companies that do not have reliable cash-value life insurance products in their portfolios.  There are fewer than two dozen companies that participating whole life insurance as one of their primary products.

It’s obvious that the almost one million insurance and financial advisors that can’t sell whole life insurance will not praise it as the most versatile, flexible, and powerful financial product in the marketplace today.

The companies that sell participating whole life insurance policies are the most respected and reliable insurance companies in the world. Here’s a partial list of companies that manufacture and sell participating whole life insurance - in alphabetical order:

• Lafayette Life
• Mass Mutual Life
• Mutual Trust Life
• New York Life
• Northwestern Mutual Life
• Ohio National Life
• One America Life
• The Guardian Life

These companies all understand and support the Money for Life Model in one fashion or another.  They do not specifically endorse the Money for Life Model. However, their products and their practices support the use of participating whole life insurance as a savings vehicle with generous loan provisions, flexible premium options, and technical support for insurance and financial advisors that teach the Money for Life Model to their clients.

If you would like to learn more about participating whole life insurance and the Money for Life Model for creating wealth and managing your personal economy go to www.youBEthebank.com where you can find a link to an insurance and financial advisor that is well versed in the Money for Life Model and the use of participating whole life insurance as the foundation for a successful personal economy.

[1] Dr Agon Fly defines conventional wisdom this way, “Thinking what everyone else thinks and doing what everyone else does because that’s what everyone else thinks and that’s what everyone else does.”

[2] On a recent trip through New Mexico I followed a “scenic” route on the map that led me down a precipitous, 1,000 foot, one lane, unpaved, twisting and snow covered road with no turn-arounds, into the Rio Grande Canyon. I cursed the map, aka “plan”. I didn’t think about my preparedness, which called on every driving skill I’d ever learned and 40 years of focused meditation practice and got me through the ordeal. My wife, Sandy, on the other hand, was frozen and white knuckled during the descent.

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