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The Borrower

Does this cycle look familiar?


You take out a loan, you slowly pay it back, once it’s paid off or close to being paid off you take out another loan. Unfortunately this is a cycle many American’s find themselves in. They are in a constant cycle of debt owned by banks and other financial institutions. They have payments every single month going to someone else, all of which include a ton of interest! Think about all the interest you pay to a bank throughout your ENTIRE lifetime on loans. Is it $5,000? $50,000 ? $500,000 ? Maybe….$5,000,000 ? Now think long term, how much interest will your entire family pay to a bank or lender in the next 200 years of your family with this cycle? It’s a pretty crazy thought right? What is even crazier is when you factor in the opportunity cost of that interest your family will pay. While this cycle seems hard to get out of, it is possible and there are more efficient ways to management your capital and make purchases.

The Saver

Maybe this looks more familiar to you.


Cash is King right? You save up money and then you deplete your savings to buy something with cash, then you save it back up and then you deplete it again and you live in this cycle of saving and spending. While this method does save you money on interest paid to a lender, you still miss out on the massive opportunity cost of that capital when you spend in cash. Every purchase you make costs you interest whether in the form of interest paid to a lender, OR Interest you could have earned on that capital (opportunity cost). See what the borrower and saver have in common? They both end at 0. I know it feels good going into a car dealership as a strong, superior cash buyer, but what If I told you that is not the most efficient way to purchase a liability? Think about it, if you spend $30,000 cash on a car, that is $30,000 less you have earning you interest for your entire life, and if passed on correctly, for your children’s lives, and their children’s lives etc. (hence endless legacy) Let’s assume just 5% interest, a $30,000 car purchase with cash has a lost opportunity cost of $181,000 over a 40 year period. If this wealth is passed on correctly, that $30,000 cash purchase has a 100 year opportunity cost at 5% of $3,900,000! Doesn’t feel so good making cash purchases now does it ?

The Producer

The third way to spend money is what we call the producer.


This person builds wealth and efficiently spends their capital without losing opportunity cost of their dollars. The producers collateralizes an asset (we recommend high cash value whole life insurance) THEN makes the purchase with a policy loan from the insurance carrier and repays the loan. By spending money this way we are able to keep our dollars growing and compounding even after they’re spent. This works for buying both assets and liabilities. However, we only want to collateralize assets that can not go down in value. If you do this with an asset that drops in value, you could find yourself in trouble with a margin call. That is another reason why we only recommend this strategy with strategically designed life insurance policies; they are contractually guaranteed to grow in value. 

If you use this method to buy assets, your dollars can grow and work for you in 2 places at once. If you use this method to buy a liability you do not lose that massive opportunity cost we saw in the saver method. Think long term, think about how this can be used for your entire lifetime, think how you can pass these strategies and principals down to children and change the entire trajectory of your family. These loans can be used for anything, rental properties, business start ups, other assets, a wedding, a car, college, vacation…anything and you can sleep at peace knowing you did not lose the opportunity cost of your capital.

Why use Life Insurance?

Life Insurance is a "Swiss Army Knife" Style Financial Tool

Life Insurance is a very misunderstood product to the average person, it is even misunderstood to many financial professionals yet it has been around for centuries. It is a tool used by banks, corporations, family office’s, and ultra high net worth families. Although popular among those groups, it is not exclusive to them; anybody can utilize life insurance as a tool if designed properly!

Most people hear “life insurance” and just think life insurance = death benefit. While Life Insurance Contracts do have a death benefit, they can have living benefits too…if designed correctly. This is where the misunderstanding ties in.

There is a massive gap between the average”off the shelf” life insurance policy and a strategically designed life insurance policy designed for living benefits. 

“The Producers” life insurance policy is designed for living benefits, not solely death benefit. One of the living benefits of a life insurance contract is a cash value account. If designed correctly by a specialist, with the right carriers, Cash value is contractually guaranteed to grow, tax free! Another useful benefit of being a policy holder is you have the ability to collateralize your cash value and borrow money from the insurance carrier at any time, with no credit check, no tax returns, no reason for the loan….and the payment schedule is also up to you! This is why the wealthy use this tool, there is flexibility to it and many use cases, sort of like a swiss army knife. 

Now, although contractually guaranteed to grow in value, this is not to say that life insurance is an “Investment” to replace other investments. This is also where a lot of the misinformation lies. Life Insurance should not be compared to an investment account. They are different assets, with different risks, and serve different purposes. Again, Life Insurance cash value is not meant to replace your investments.  Cash Value is intended to be an alternative to a savings account, not an investment account.  Any well allocated portfolio will have high risk assets, low risk assets, and liquidity. Cash Value is intended to be a part of your low risk allocation and liquidity therefore it will not grow at the same rates your high risk assets will grow at. Conversely, it will not fall at the same rates your high risk assets could fall at because it is contractually guaranteed to increase.  Comparing a whole life policy to the S&P 500 is like comparing apples to oranges. A more fair comparison would be to compare whole life to a high yield savings account or a bond portfolio. Positioning a portion of your “savings” here as opposed to a savings account is attractive because not only do you get a death benefit protection since it is life insurance,  your money earns uninterrupted compound interest even when you have an outstanding loan against it. Those loans can be used to fund anything, both assets or liabilities. When used to fund assets, your dollar can work for you in 2 places at once. For Example, if you have $100,000 in Cash Value and you borrow $50,000 to invest in an asset, your cash value account will still grow based on the $1000,000 value and your $50,000 you have invested in the asset will be working for you outside of the policy. If you had that same $100,000 in a savings account and used $50,000 to buy an asset you would have $50,000 working in the savings account & $50,000 working for you in the asset. 

In the “Producer” image above we already discussed why we want to spend money this way but that leaves us with a question of what asset can we collateralize to do this? Real Estate? Stocks & bonds? Gold & Silver? Yes you can get a line of credit secured by these assets and do this HOWEVER there is more risk and less control with those assets.

Real Estate, securities and commodities can go down in value, causing a margin call. These loans or lines you take can require, long applications, credit inquiries, tax returns, potentially higher rates, and could take several weeks to months to be approved.  You also lose the ability to control the payment schedule. The bank could require minimum payments on the loan. These assets could work but they do not offer the same type of guaranteed features, loan requirements, & control that a specially designed whole life insurance policy can offer.