Why Our Advisor Emma Herman Canceled Her 401k – Episode 583

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. Today we have our special new guest, Emma Herman. Emma has been with the Prosperity team for a while. And something that’s unique is this is her debut appearance on the podcast. So we’re going to get to know Emma, what she sees as far as prosperity in the community, some financial tips, some background, and a bunch of other things. So Emma, can you hear me loud and clear? I can. Thank you so much for that introduction. So happy to be here. Well, we are thrilled to have you. So let’s first start and let’s set the stage for our audience. When they call in or maybe are going to modify a policy or just figure out things,

[00:52] they may actually be talking with you because you’re taking over a lot of that. So help us understand who you are first and why you decided that this was a home base for you. Absolutely. Well, the story is a little personal and hails back to my now fiance, actually, Robbie Butler, who happens to be Kim Butler’s son. He and I went to college together and he and I started talking about personal finance a couple of years into our friendship. We were really good friends first. And he had mentioned here and there that he had a life insurance policy. And I always kind of chuckled because we were 18, 19, 20. Why in the world did he have life insurance? And it wasn’t until after we graduated that we became closer, started dating,

[01:44] and he sort of opened up his financial world to me. And he shared that he was actually borrowing against his life insurance policy or leveraging it for real estate. And I was fascinated by that and sort of did a deep dive about Kim, about prosperity thinkers, listened to virtually every podcast episode, which took days of my life. And I remember him looking at me and wondering, why are you doing this? You could just get a policy and talk to someone smarter than you. And that’s when I realized I had an interest in the area and I opened up my own policy, started doing the same as him, leveraging it for real estate. And the rest is a little bit history. The only caveat to that is, meanwhile, I had been maxing out my 401k

[02:38] and I had a W-2 job thinking that was the path to prosperity at the time. I actually read the book Simple Path to Wealth, which now I do not recommend. And I regret even saying the words. Maybe we can edit that out. I read a book that was so heavy on investing, mostly indexes, but a slow and steady investing as though that was the path to prosperity. So I was seeking for a long time. And then once I did my deep dive on Kim, on prosperity thinkers, I realized there was another way. I actually canceled my 401k, which is kind of crazy. Not sure we would advise totally canceling now, but it was the right thing at the moment. Put all of it into my whole life insurance policy. And again, a little extreme, but realized that there was a different way

[03:30] and now feel very secure in my financial decisions and very excited to be on this journey with Kim and the team, helping people realize there is another way. Yeah, absolutely. I think, one, we won’t remove the book. And here’s the reason why is because there is a process to it. It’s a lot of people. Well, they may start their financial discipline through Dave Ramsey stuff and while Dave Ramsey stuff is really good for someone that is trying to maybe get a little bit of traction or pay off some debt, that is not the path to wealth or prosperity even. But if it gets you started, then go do it. And you mentioned something when you’re in your 20s, you’re anxiously engaged in doing stuff. You said that you got a policy yourself and then you started using it.

[04:29] So let’s fast forward to the using it and the leveraging and borrowing against it because that’s going to be a part of your story. So why is it that you were so determined to put it into action right away? I feel as though life insurance has a secret sauce to it or should say whole life insurance has a secret sauce. And compared to what is always the question that Todd Langford uses. And so if I’m going to be using my dollars and ideally recycling them through real estate is my avenue of doing that. I want to be doing it with money that I know is growing separately. So the beauty of real estate is you can leverage a property or a house because it’s always going to be appreciating or growing in value,

[05:19] separate from any loan you have against it, frankly. And so if I can do the same with my whole life insurance policy, why wouldn’t I? While I borrow against the policy to do different things could be for buying a car. The world is your oyster in terms of your loan against your policy. But the cash value is going to be growing virtually unaffected by that loan. So why not put your money to work in more ways than one? OK, so let’s go into touch about your real estate. Are you doing residential real estate commercial? Are you doing flips? Are you doing rentals, rehab? What does that look like? So far for me, it’s been single family residential in St. Louis and I have a small portfolio that I’m hoping to keep growing.

[06:09] And Robbie has some multifamily in St. Louis. We’re hoping to get into syndications. So that’s kind of our next step. But I’ve enjoyed the learning process of single family, and it’s required some renovations. I wouldn’t call them a full flip, but it definitely took some dollars to get stabilized. But they’re all stabilized now and cash flowing pretty well. They range. But I’m excited about those investments and to be able to do more. OK, so let’s kind of take the partnership above the real estate and the partnership of your whole life insurance policies. And are you looking at each property you put into your portfolio is like, hey, this should be another property, another policy that I’m going to create.

[06:55] Or are you looking at it and saying, OK, I’m going to use the policy to get in and six months, 12 months, 24 months later, I’m pulling that cash out to use it for another. What does a dynamic look like? Yeah, so far it’s just been using dollars from, I should say, our policies, because Robbie does it too, to pay the down payment on those properties. And then the cash flow from the properties part of it in part goes to us. And then the other part goes to paying back the loan. We never recommend, you know, leveraging the policy for the full cost of a mortgage necessarily. But it’s very helpful for down payments. And the quote unquote exit strategy from that loan is the rental income from the property.

[07:42] OK, so I imagine you have friends in your 20s. This is what everyone says. How am I ever going to buy a house? The market’s so crazy. How are you doing this? What did you just inherit a bunch of money? What do you say to people? That’s a great question, because we do have a lot of friends who say that, like at dinner parties. What do you mean you just got another rental? And I think it’s helpful to become familiar with the real estate market in your area. If you’re looking to buy in your area for sure, find things that are in your budget. I know we don’t like the word using the word budget, but finding something affordable that you won’t necessarily live in. But that has good rental comparables in the area.

[08:29] So it takes a little bit of number crunching, but not too much. And I think people would be surprised by what they can qualify for. Talking to a lender, maybe from a friend’s referral who can get you pre-qualified so you know what you’re working with is helpful. And then working below your means. We always talk about your lifestyle expenses and whether you’re buying a house for yourself or as a rental. We want to stay below our quote unquote means. But the more you do it, the more the more opportunity you have. Actually, as you grow your portfolio, lenders start to view you as an investor instead of just a consumer. And if you’ve proven your ability to do it, you can do more, which is the beauty.

[09:16] And it feels like the American dream, frankly. So we’re going down, and this isn’t a real estate episode, but the value in this conversation is that our listeners get to see someone that understood. They had the financial discipline to do a 401k like you did. You had the financial discipline to save your money and live below your means, which are, again, items that we talk about on the podcast all the time. And then all of a sudden, like the light bulb turned on. You’re like, wait, this is an option. And then you went the all in route. You’re like, cancel that 401k. I’m not doing that, which is, hey, that’s cool. I respect that. And now you are growing the portfolio and you’re looking at the policies and you’re saying, OK, not only is this right now, but for the future, here’s what it looks like.

[10:09] So let’s take that real estate stuff. We’ll package that. And now let’s jump over to advisor role. And as a person that is helping individuals set up policies, that means you’re working with people that may have little amounts of dollars or lots amounts of dollars. How are you approaching it? Absolutely. So I feel whole life insurance or insurance in general can be helpful to anyone. So if someone has a little means rate, let’s talk about your goals and objectives and how we can help you meet that. You can choose the minimum amount, maybe the needs based analysis for a life insurance policy in terms of family protection. We have the death benefit side of things, which may mean you just start with convertible term insurance.

[10:59] And if you have a little bit more that you’re able to contribute to your policy, we would strongly recommend a whole life insurance policy so that you can do this. What we’ve been talking about leveraging your policy for other things through the cash value. And then there’s the other side of the equation, which is the human life value. And that is the maximum potential or highest capacity that someone could be insured. And that could be spread out across several different policies or just one. I haven’t seen that yet, but I’m interested to see someone take out their full human life value in one policy. That would be awesome. But you can get the maximum amount and use it for lots of things over the course of the years.

[11:46] Did that answer your question? Yeah, I think so. What I get from that is that you’re able to understand that people are in all kinds of different stages of life. Financial situations, maybe goals, aspirations, meaning someone in their 20s is probably going to be a lot more ambitious than someone in their 50s. It’s like, oh, I again, we’re not going to use the R word retirement, but a lot of people like, oh, I’ve got retirement coming. And you’re like, yo, just calm down a little bit. And they might not cancel their 401k at that stage, but you’re able to look at the landscape. So I find that to be really helpful from you talking with people in the community consume the podcast. What does prosperity thinkers mean to you?

[12:34] Prosperity thinkers to me means infinite potential. It means freedom and control over your finances. And it means peace of mind. I think those things were things I was missing, frankly, and something I was seeking in my earlier years and feel like I found it and cannot wait to continue representing the brand. And really the model of thought, because it’s more than the name, it’s more than what we photos we produce and whatnot online. It’s really a thought movement and it’s very exciting to get behind. That was really well said. I think that’s that’s what we put the stamp of approval on it in the episode. Emma, it was really awesome to get to know you and for our audience to get to know you as well.

[13:33] For any of you loyal listeners that haven’t met Emma yet, you can send an email to the special email address for podcasts, which is hello at ProsperityThinkers.com. And you can even just do an email that says, hi Emma. And then if you are a newer listener and maybe you’re younger and you’ve got that 401k or you’re trying to figure out like where to juggle things and move it around, you have Emma that can give you that insight because she’s in the thick of it right now. So thanks for sharing your thoughts today and spending time with us and we’ll make you a regular appearance here in the future. Sound like a plan? Thanks so much, Spencer. Looking forward to it. All right. Thank you. Bye. Bye.

[14:15] Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.