Why Life Insurance Is a Savings Account That Shows Up Like a Bill – Episode 248

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[00:01] Welcome to the Prosperity Podcast. Welcome back to another episode of the Prosperity Podcast. Today we’re going to be talking about life insurance, but we’re going to be talking about framing the way you see life insurance a little differently. It’s to the point where when I heard this, a light bulb went off and said, oh, for sure Kim, this is a conversation we have to have. So we’re going to bring on Kim and she’s going to share the way to look at life insurance from a new perspective. Well as you said, Spencer, this was a comment that was made at a recent event that my husband and I were at. So Todd Langford and I do what are called truth trainings for financial advisors. And of course, anybody’s ever welcome if they want to come for three days of some

[00:55] seriously intense number crunching. So we are sitting in a room with about 30 people and talking about life insurance and mortgages and retirement plans and everything else from a heavily numerical standpoint. And somebody says, well, life insurance is just like a savings account with a bill attached and you always pay your bills. And that was such an accurate statement. Did I quote that right? Yeah, that is. The way I wrote it down was life insurance is a savings account that shows up like a bill shows up like a bill. Yeah, that’s awesome. And you know, when I think about my own life over the last 25 years, that is absolutely how the life insurance cash value that we have was created, not because of anything special I did other than just opening up a policy and paying

[01:53] the bill. And sometimes the bill was just the premium. Sometimes the bill was both the premium and the pay to petition. And yet it got paid. And of course, our listeners know that I like to think about the life insurance as the emergency slash opportunity fund. And of course, that’s just a fancy word for a savings account. And so it is so helpful to view the life insurance as not only the savings account slash emergency slash opportunity fund, but the true asset that it is. And the statement is accurate. We do pay our bills. And how sad it is that typically we pay all of our other bills before we make an effort to save money. And those families that are seriously committed to saving money. And we’ve all heard this first.

[02:45] Well, pay yourself first is what the saying is. And yet most often that doesn’t happen because what a family does is they pay their mortgage bill and their cell phone bill and all their other bills. And then they try to, quote, save what is left over. And if instead they will set themselves up with a life insurance bill, then that bill will get paid first. And I know that our family would not have the size of the emergency opportunity fund that it does. If we had just tried to save money in a savings account that didn’t have a bill attached to it. I totally agree. You know, one of the things to think about is typical in a person’s life, when they get a raise, they adjust their spending habits and they adjust

[03:38] their lifestyle. So if you happen to be doing well at your job and now all of a sudden you’ve changed companies or you’ve moved up and you’re making 20% more. Unfortunately, what most people do is they spend 20% more. They get a bigger mortgage or they buy more things. Well, by making this look like a bill, you can adjust and it’s benefiting you because it’s putting you in the driver’s seat and it’s having you use your life insurance and having this as a bill that’s going to continue to work to your advantage. So I completely agree with what you’re saying. It’s interesting. You know, if every single person that got a raise saved and I’m talking after taxes, 50% of that raise, then they would get ahead

[04:35] financially so fast. And you’ll notice I’m not saying 100% of the raise. You should improve your lifestyle. You should go on a maybe a little nicer vacation or get a little nicer car or whatever is important to you with your money. But at the same time, since you weren’t used to having this money, if you would save a big portion of it, then that money would build an asset which could then provide for more flexibility, more freedom, more control down the road, which would be even better than a lot of the material things that we so often want to spend our money on. And again, it’s both. Todd and I talk about this all the time. We like to live in a house of both. Like how, let’s brainstorm. How can we have both rather than it being an either or decision?

[05:29] And obviously sometimes you can’t have both. Okay, fine. And yet if each person just saved 50% of their raises, how far in advance they would get. And if those raises are saved in a life insurance policy, and again, you could consider it even monthly or annually, it really wouldn’t matter. We’ll talk about that here in a minute. Then you’ve got a place where those dollars are just far enough out of reach that maybe you won’t spend them on the big screen TV or whatever doodad, as Robert Kiyosaki says, you might buy with the money and you’ll instead treat that money with a little bit more seriousness and purchase experiences with it or save it for a bigger opportunity or what have you. Now, from your experience, how long does it typically take for it to

[06:29] click for someone, for them to say, oh, wow, I get this. I’ve been putting money into this policy and now I get it. It’s a savings account and I see the benefits. How long does that typically take for a person? It’s usually two to three years. And the reason is because the first year of the life insurance is the worst year. You put in, let’s say $10,000. It’s probably going to be worth maybe five or 6,000. And that’s just not exciting for anybody. And so we have to understand that that first premium and paid up addition are going to buy that death benefit, which of course right now is not exciting at all. They’re going to pay the commission for the agent and they’re going to pay for the administrative costs of the company.

[07:13] And then the second year often is somewhat the same. You might write a check for 10 grand and now maybe your cash value increases by seven or $8,000. And then it’s the third year typically where you’re going to write a check for 10 grand and actually see an increase in cash value for that $10,000. And so typically that timeframe is what it takes. Now, I absolutely have had clients. They’ll kind of forget. And so we’re on the phone 10, 15 years later and some things come up and they’re actually going to need cash. They have an opportunity and they’ll borrow against it. And then they’ll say, you know what, I finally get this now. So I’d like to say it’s always two to three years, but sometimes a little

[08:01] bit longer than that. You know, it’s kind of funny that you mention it that way because there really is that aha moment that happens in life. And I agree by that two to three years. And so for our listeners, if you’re considering setting this up, just walking into the game and knowing, Hey, I have to have discipline for a couple of years and you have some expectations. It helps you get through it. It’s similar to the business world because there’s a thing in the business world where we’ll use apps and app will take off and get a massive amount of downloads. And then what happens is the dreaded, what they call the trough of sorrow. That’s when the business will flatline or decline. And if a business owner understands that you’re going through the trough of

[08:55] sorrow, they can easily push through it. And then you level up, you start to have some serious rewards and some gains, would you equate the same almost for the, uh, this type, this type of savings account? Absolutely. It’s a really good analogy because you truly are starting your own little miniature business when you start a life insurance policy and it takes time to get it going and it is, it’s absolutely frustrating. I happily tell people that because I certainly don’t want them to abandon it at the end of the first or second year and life insurance is something that once bought, you should literally hold onto the rest of your life. The product that we typically talk about is called whole life

[09:39] insurance for that very reason. And I want to circle back to my comment about the savings account and the bill and whether you pay it monthly or annually, because I think it’s an important one that people don’t understand a lot. And that is that if you pay it monthly, you’re going to have a certain amount of cash value at the end of the year. If you pay it annually, you’re going to have the exact same amount of cash value at the end of the year. The difference is if you pay it monthly, you’re literally borrowing the annual premium from the life insurance company throughout the course of that year. And so it absolutely costs a little bit more to pay it monthly. Usually the cost is around six or 7%, which is up there.

[10:28] I’ve seen some companies more like nine or 10% and yet for some of us, it’s actually better to have that monthly bill because it becomes automated and we just roll right on through it month after month after month. We don’t have to think about it once a year. Oh my gosh, is this really where I want to put the money? Oh my gosh, do I really have the money, et cetera? And so a lot of times it is actually better to pay for the life insurance monthly. Now, from a pure financial standpoint, it’s better to pay for it annually because we get the lower cost. But I think until you truly have bought into it, like you said, when that mind shift has finally occurred, which happens sometimes more with your

[11:10] second, third and fourth policies a lot quicker than sometimes the monthly amount where it’s just automated and we don’t really think about it is the better way to go. That is so true. And again, as you mentioned, you can automate this. It’s not like 10 or 15 years ago where you had to sit down at the kitchen table and write out a check and put a stamp on your, on your mail and send it in. All of this can be done in a way that is going to be automatically withdrawn and it’s very easy to set up. And if you have the discipline, then you’re going to be able to get through that two to three year period. And then I promise you’ll feel so grateful that you did. I truly am the life insurance cash value that we have.

[11:59] Has taken us through very, very slow periods of cashflow problems. Very, very high periods of opportunity where, oh my gosh, where do we put this cash and everything in between? And so it’s something that I absolutely love to help people with. I love to educate people on life insurance. Of course, we have our live your life insurance book that does that as well. But sometimes people just need to see the numbers. And so if you are curious about life insurance, you’re wondering how it’s going to look for you, it truly does not matter how old you are. We can help people clear up into their mid eighties. And sometimes it’s actually best for somebody in their sixties or seventies rather than buying it on themselves to buy it on their adult children.

[12:45] And then of course you get into the whole, well, do we want to buy it on our grandchildren as well? And that’s probably a subject for another day. But if you’re curious about this, please reach out to us at hello at partners, number four, prosperity.com. I’m happy to send you an illustration, which is what the life insurance companies provide for you to take a look at how the numbers look for you. And that will help you put it together with the conceptual things like the books and other formats of learning that we have so that you can see it for yourself. And I’m sure somebody that might be new to this podcast is wondering, well, what kind of growth rate does this life insurance cash value get?

[13:26] And in today’s world, we’re probably at the three and a half to 4% range. And again, this is for a savings account equivalent. This is liquid money. You control it. You can use it for whatever you want, and it can act like equity. In my live your life insurance book, I have an acronym that I use and it’s clue control liquidity, use and equity. That’s what the cash value of life insurance does for you as a family. Again, first for your emergency fund and then second for your opportunity fund. You know, I think that the clue acronym is a great way to summarize this. And, you know, having spent this last week with you in that truth training and understanding it with a financial perspective and also the emotional

[14:24] perspective, it was incredibly insightful to see, okay, I’m going to set this up like a bill and help me to understand that I truly have control over that. And I think that’s where most people really flounder is any types of things, they give up control and seeing it this way, you have full control. Life insurance is not the black box that many people think that it is. It’s simply an asset. And like all assets, the more money you put in it, the more money you have, and it works very, very efficiently. And the truth training that you’re referring to is something that anybody’s welcome to check out. And even if you might not actually come, you might be interested in knowing that it exists. There’s a lot of people that are really interested in their own personal

[15:20] finances these days. And so that website, if you’re curious, is truthconcepts.com. You’re welcome to download the software for free for 10 days. If you’d like, you’re welcome to check out all the blogs that are on the truth concepts website. You’re welcome to look at the tutorials and the videos that are there. We don’t hide anything and what truth concepts actually lets us do as an advisor to our clients is to be completely transparent with whatever the subject is. And I think it’s super cool that as I sit here and talk to our clients on this podcast, I’m giving them access to our software that we use ourselves to prove our theories, whether it’s the clue acronym or the seven principles of prosperity or some of the specific strategies we recommend,

[16:14] like using life insurance as your emergency opportunity fund, we’re able to use that truth concept software to back those concepts up numerically and financially. And that gives us so much more confidence in making the recommendations that we do for our clients. And I think it’s super cool that we’re able to be fully transparent with that software, with the information that comes out of that software and enable our clients, those that want to and that are curious about it and analytical enough to tackle it to check it out themselves. Absolutely agree. So those two resources are truth concepts dot com. And then if you do have questions for Kim, that’s at hello at partners for prosperity dot com.

[17:00] I think today we’ve done a pretty good job at explaining and clarifying some of the misconceptions and some of the perspectives that will help people form a more solid financial understanding and see life insurance as a bill, not as something that’s going to pressure them or put their life in disorder. It’s actually something that’s going to benefit. So thanks for spending time with us today, Kim. Absolutely. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com