“Expenses rise to equal income.” –C. Northcote Parkinson.
I heard Nelson put it this way, “expenses rise to exceed income.”
It holds true for many, that all our income is already being used up for the “necessities” in life and we can’t find any spare money at the end of the month.
Is this true for you?
Finding money for an IBC policy is a problem I help people work through when they’re ready to start an IBC policy. Let me take you through my process.
First things first, what are your goals for the future?
The single most helpful thing I can do in helping you find the money to start a plan is going over your goals financially. I like to break it down with the near-term goals that you want to achieve in 1-3 years, and then talk about what your dreams are to achieve financially throughout life. My reason for doing this is to see if your actions financially today are helping you move closer to your goals.
I want to share a short example here of what I mean.
Recently we began working with a young man who has a job at a John Deere dealership. He shared an interest in coming back to the family farm and ranch operation in a short time from now, 4-5 years, and a wanting to do more than just be paid hourly. So, he will need to take full or part ownership of an operation, rent land or potentially find something small he could purchase to start out.
The employer offers a qualified plan which he currently is contributing too. We informed him of the penalties and restrictions to use this money after it is contributed to his plan. Both parties believed that having access to the money he is currently directing to this qualified plan could play an important part to help him start at the family farm and ranch.
This is one instance where we found money could be redirected to align with a client’s future goals.
Just walking through this with potential clients, and providing knowledge and education is the best way we can help you. Once informed, you’re better equipped to decide where you want to direct your money.
What to do with the debt?
What kind and how much do you have?
Is it good debt or bad debt?
- Good debt puts more money in your pocket, it’s cash flow positive.
- Bad debt is debt that takes money out of your pocket because it is not producing any cash flow, it’s cash flow negative.
Every person has their own unique financial situation so I won’t make any blanket statements here. It is very possible though if you are making extra payments or more than the required payment, that it would make sense to redirect this money to a policy.
You are in a superior position having liquidity and debt, compared to the person who is debt-free and broke. At some point in the future, if you still have debt, and after you have built up adequate liquidity, you can take the outside debt and bring it into your policy. This gives you full control of the banking function at this point and gives you options for eliminating the policy loan.
How do you direct your cashflows right now?
What are you currently doing with your income before you pay off debts or recurring expenses?
Do you have seasons where your cash flow is much higher or is it consistent?
Anytime your money is sitting in a checking or savings account at a bank, it’s not working for you and you’re falling behind. Money can be flowed through a policy and in a matter of 30 days or less be available to you. This keeps your money at work and growing for you, while still affording you the liquidity you need, in the form of a policy loan. When you receive more income, you can easily repay the policy loan, often times online through your client portal.
This all goes without saying that you still have to be making more than you’re spending in your business. At the end of the day, that is the most important factor.
How bad do you want to become your own banker?
“There has got to be some honest introspection at this point and a commitment to get out of financial prison must be a burning passion” –Nelson Nash.
Only you can make the commitment to taking control of the banking function in your life. Will it require some sacrifice on your part to get started, yes for some it will, but if you want something bad enough you can make it happen.
This is the most important and profitable thing any individual or business can do in their financial life, and “if you know what’s happening, you’ll know what to do” –Nelson Nash.
I’ll leave you with this final piece to ponder.
Is it more important for you to chase that 8, 12, or 20 percent rate of return by giving up control of your money, or to control all the interest that is currently leaving your life?
Look at the volume of each, and you will find your answer!