Sunday, April 5, 2020

3 Rules To Becoming Financially Independent

If you have read Rich Dad Poor Dad by Robert Kiyosaki, he describes 3 basic financial principles to building wealth.  These rules are so simple to follow and understand that anyone can do them.

Here they are:

  1. Pay yourself first
  2. Know the difference between assets and liabilities
  3. It’s not what you earn, it's what you keep.

These 3 principles apply to life insurance if you have the right type.  

Regarding term insurance, it’s touted by “experts” as the least expensive life insurance option.  This is only true on day 1.  Every day after day 1, the true cost of term rises from there because you have ongoing premiums and according to studies, 99% of term buyers out live the term period.  You are effectively putting more money into a neverending hole never to see again.  

After the fixed term period, in order to maintain the coverage of the policy, the premium rises annually and exponentially.  You've undoubtably seen this if you've reached the end of your term policy (or will when you do!).  Term becomes more cost prohibitive every year and this is the main reason why people end up letting the term policy lapse. 

Problem is the majority of people buy term policies and don’t realize they are buying a liability (they pay premium only to end up with nothing to show for it).  With Infinite Banking designed whole life policies, all 3 principles of Rich Dad Poor Dad are adhered to. 

Wealthy people buy assets!

IBC Whole Life is a forced savings with flexible premium riders that create high early cash values, it’s a growing asset with no market correlation so it grows by a larger amount every year, and the cash values are tax-free every day whether you use it or not (no 10% penalties either like with a 401k/IRA if you are younger than 59.5).  

By the way, with Whole Life policies the premiums are contractually guaranteed to never increase on you.  Not so with term policies as discussed above.

Nothing wrong with term policies if you are on a strict budget and need protection with you family.  By all means, get the coverage!  

That said, if you are buying a term policy and plan to convert to Whole Life later, my recommendation is to be sure:

  1.  you are buying a term policy from a mutual based life insurance conpany (owned by policy holders not shareholders) 
  2. and the term policy is convertible to Whole Life and ideally, an IBC designed Whole Life policy.  Not all mutual companies have IBC friendly Whole Life products.  For example, State Farm is a mutual company but they don't have an IBC friendly Whole Life policy.

I own multiple Whole Life policies on my life and I also have a 10 year convertible term policy with $2 million in death benefit waiting for when I'm ready to start my next IBC designed Whole Life policy.  I refer to this strategy as "IBC Future Planning".  I'll wrote a future post about it so stay tuned.

If you have questions about getting started with Infinite Banking and would like to learn more, please contact me here:

Thank you,

John Montoya

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