Cash Flow Out As An Act Of Savings – Episode 309

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[00:01] Welcome to the Prosperity Podcast. On this episode of the Prosperity Podcast, we’re going to be talking about cash flow out. And previously, we’ve mentioned cash flow in, but now we got to get to the world of what happens when you have all of this money, right? Absolutely. And even if you don’t have all of this money, it’s important to remember that cash flow out is the beginning of savings. And people will want to do this their entire life, literally. Somebody just starting work out of college or even out of high school, when they start earning income, they will want to start to save. And they will want to be saving well into their 70s, 80s, and possibly even 90s, because we’re going to be living

[00:51] to our one’s 10s and one’s 20s so easily these days. So very true. So I’m going to ask you a couple general questions because, oftentimes people say, oh, you should save X amount of dollars, I would rather go off of percentages or ballpark. So what’s a percentage that you say people should save every single month? Well, ideally, it should be 20%. And the 10 to 20% range, of course, is parroted by everybody. I’m going to go on that high side. And we have clients that save words of 30 and 40% of their income. And of course, we all know families where they save one person’s entire income, which may or may not be 50% of the family’s income. But the ability to get committed to a percentage, I totally agree, is a much

[01:38] easier way to look at it. But here’s the thing. If you’re not saving now, start at 5%, start at 1%, start at $1. What matters is that you’re getting into a habit and that you’re making that habit stick. And I’ve told the story numerous times of my daughter when she got her second job and said, Mom, do I have to save 10%? Because just out of school, that’s a more normal starting amount. Do I have to save 10% of this income too? The answer, of course, is yes. And it is so awesome to see the freedom and the flexibility that my children in their early 20s have because they have savings, liquid dollars that they have saved. And I’m always so saddened when I hear of a person that’s just starting work,

[02:26] and they’re being thrown into a 401k, and they have no liquidity, no emergency opportunity money, nothing to tide them over if they need to take a break from their job or find a different job or move cross country for an opportunity or anything. And so cash flow out is the act of savings. And it’s something that America has forgotten how to do. If you talk to depression era people, they were fabulous at it, and we need to get back there. Yes, we do. That was the era where they would put their money in a tin can and dig a hole in the yard sometimes. You know what I mean? Absolutely. And sometimes if that’s the best way to save as a verb, then do it. It’s more important that you save the money. Right now, if you don’t know where to put it,

[03:12] then put it in a tin can. Put it in a savings account at a bank or a credit union. Now, of course, we do know that our favorite way to save is an automated way. And it’s interesting. I was just thinking about this over the last day or two. I think this is what happens when you go away on vacation a little bit. You get some real clarity about your work. And it is that automating savings, making it happen every single month or every single year, every single quarter, some type of automated way is the most critical thing in the world. And one of the easiest ways, the most simplest, no brainer ways to automate your savings program is to buy a whole life insurance policy and pay the premium every single month or quarter or year

[04:03] or whatever system you want to set it up on. And if you as a family will do that, you will get your savings in an automated way and you’ll get results because of it. Absolutely. That is so true. And I think another thing about savings, when you can make the money a little bit harder to get something that’s not within reach, that way your impulse buys might not attack and pull that away. Is that right? Yes, absolutely. And so the life insurance, because you have to call up the company to request the loan, you have the ability to do that with thought rather than just do it with a credit card. And so it enables you to think more carefully about the use of the money and also to use it for the true emergencies and opportunities that cash value of life

[05:02] insurance is designed for. And there are definitely a lot of agents out there that talk about using cashflow of life insurance for vacations and paying your annual taxes and that kind of thing. And that’s fine. That’s certainly one way to do it. But I think the first job of the cash value should be your emergency fund. And there’s so many people sitting with 10, 20, 30, 40, $50,000 languishing in banks and tin cans and under mattresses and whatnot that really could have that money be so much more efficient and effective for them if it was sitting in a life insurance policy. And yet the life insurance policy is the toughest to start. And so people will want to figure out a way to get it started. And oftentimes it’s just biting the bullet and making it happen. And that is

[05:51] something that’s so important and so critical. And if anybody’s out there just feeling like, ah, I’m not sure, I’m scared, I don’t know, understand that whole life insurance is one of those rare products where we get to use that guaranteed word that we brought up earlier. And the fact that it automates your savings plus the fact that it has guarantees should be for you a very simple answer as to the safety, the certainty, the absolute going to be there capability of that product. Even though all of the talking heads and most of the stuff that you read on the internet is going to tell you how bad the product is. Yeah, I think it’s because a lot of people don’t understand what it is. Or oftentimes it’s an

[06:40] industry that is just fighting against an industry that’s better. So, you know, we’re thinking about emergency fund and we think of life insurance and how that works. Let’s dive quickly into how much should people have in that emergency fund? And then we can tackle the life insurance and the cash flow piece. Sure. So the emergency fund amount is very, very personal. And of course, everybody starts with a three to six months. Great. Get there first. Three to six months of expenses. Then of course, the next phase is three to six months of income. Different number. And for an entrepreneur or somebody that’s in sales or anybody that has an environment where they have fluctuating income or fluctuating expenses or anything like that,

[07:30] you absolutely want to have a larger number. So maybe it’s six months to a year or something that enables you to have that larger dollar figure to give you the certainty and the peace of mind that having that liquidity creates. Because if you are in an environment where dollars are changeable, in other words, income is not static, having the peace of mind to say no to a deal, having the peace of mind to say yes to an opportunity is so valuable. So we said emergency money first, but as you hear it quickly morphs into opportunity. Now, how big do you want your opportunity fund to be? That’s a great question. I would say that’s like one of those million dollar questions when you can get someone to go through that and then they sit there and go,

[08:20] wait, yeah, I guess I should have more savings. Well, to me, your opportunity fund, we pretty much want it unlimited. Of course, everybody, of course, has their limits, but we want it as big as possible because we want our opportunities to be as big as possible. So we have a situation where you just want to keep building and building and building. The way to do that is that cash flow out of automated savings that is happening on a consistent basis whereby you are putting money, continuing to build that opportunity fund literally for the rest of your life. So one thing that’s interesting about the conversation with you versus when I read other books or podcasts, oftentimes I hear people, they get lost in the details. They start talking

[09:16] about, oh, if you skip your morning latte, you’re going to have this many dollars, or if you penalize yourself and drive a beat up car forever. And I hear that and it requires so much discipline and it’s taking away a lot of freedom and fun that people just don’t want to do it. But when you set it up this way in an automated way, then you’re paying yourself first and you still get to enjoy the other things. Right. And that’s what’s so valuable about the life insurance structure is you are doing the automation, you’re doing the paying yourself first and I mean, it is a classic and asset. It’s not an or asset. Am I going to decide to put money in my 401k or am I going to decide to keep liquid dollars available for an opportunity? It’s an and asset where you

[10:12] get the emergency and the opportunity and you actually get to take advantage of the opportunity. Absolutely. So when we as we start to wrap up this cash flow out, if you’re sitting across from the table from our listeners, what are some other pieces of advice that you could give them that will help them out financially? Well, the cash flow out savings first is where it absolutely starts. Everything starts there. Next, of course, is to get to the next step, which is to create cash flow in. And I think that the first investment that people should be looking at is an environment where you’re creating cash flow in and you’re getting into that practice. And then of course, you want to look at the growth environment, which is going to be

[10:57] maybe 10 years down the road for other people. They’re ready right away, which is great. And one of the wonderful things about our practice is we help people at all stages of the game and at all levels of the game. It doesn’t matter to me if you’re right out of school and just starting to save money or you have millions and are ready to invest, we can help you. And so it’s a real joy to have been in the industry long enough to see what works and to absolutely positively know what to do with somebody’s finances. And I’m so grateful to have had all the training and all of the experience to be able to look at somebody’s situation and tell them specifically what they should do. Yeah, that is so true.

[11:39] Now, I would say that one of the things our listeners can do is if depending on the type of consumer you are, meaning if you like to listen to podcasts, which you do, you’re here. Maybe you like to read books, listen to audiobooks. There are several different platforms where you can learn additional information. What would be a great book that you would suggest or audiobook, Kim? Well, I have my favorite, of course, which is our Live Your Life Insurance book. That’s always a good start. Another starting one is The Richest Man in Babylon. Those are two favorites. For people that are investing or interested in investing in real estate, Jim Small has a book out that’s called The 10% Rule, I think. I’m going to

[12:24] have to double check on that title. Also, we have a new book coming out that, Spencer, you have been helping us with the audio version of Busting the Real Estate Investing Lies. That will be a valuable one for people. And then, again, depending on your level of knowledge, if you don’t have some information and education around the oil and gas space, and especially the tax benefits that you can get from that, I encourage you to reach out to me. Now, this is only going to be for accredited investors, but for those that are accredited, the oil and gas space has some amazing tax benefits that I’ve got quite a bit of recent study and knowledge around and would be happy to share. Wonderful. So I’ll echo. I will say that live your life insurance is an absolute must. That’s

[13:12] a good foundation. And then for people that are looking for that cash flow in, cash flow out, Busting Real Estate Investment Lies is great because it’s an easy way to get a cash flow product. And honestly, one of the other things that any of you listeners can do is just send an email that, hello at partnersforprosperity.com. I’ll make sure to get links to those audiobooks inside the show notes. So it’s just one click away to be able to download and get going on reading or listening or whatever that may be. How’s that sound? That would be super fabulous. Thank you. No problem. Well, thank you listeners for spending additional time with us today. And we will get you another episode on how you can be more prosperous.

[14:00] Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partnersforprosperity.com. If you liked this episode, make sure you subscribe and leave a review.