Financial Flow vs Stagnation – Episode 541 

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, we’re going to be talking about financial flow versus stagnation. This is one of the principles of prosperity. And personally, I think it’s one that’s often overlooked until it’s managed in a retrospective perspective. Does that work? Is that the correct language? What do you think, Kim? It does work, absolutely, because sometimes we do have to look backwards to get some progress. Like we’ve been talking about in previous podcasts, the value of measuring backwards. So flow is principle number four, I believe, and it is usually designed to talk about cash flow. And what’s so interesting is when people hear the word cash flow, they tend to think of money coming in.

[00:54] What we don’t realize is that money going out is equally important. Now, there’s obvious expenses that money goes out for. But putting money through something, so out from us, through something else, is a very important element of cash flow. And whether you’re doing something typical, like putting money to your plan, notice I use the word to there or putting money through investment real estate. Again, notice the verbs or putting money through life insurance or putting money through a business, outgoing cash flow is just as important. Now, the complete opposite of that is stagnation, where dollars are sitting. So, again, retirement plans are an example. There is massive, massive wealth that is sitting in retirement accounts right

[01:57] now. Now, you could say, oh, mine’s not setting, you know, I’m trading it. Yes, but it’s still under an umbrella called an IRA or 401k or a pension or a profit sharing plan or whatever your type of retirement plan is called. And those dollars are stagnant. They’re not being put to use. Cash flow money going out and money coming back indicates that that money is being put to use and money is meant to be put to use. It’s not meant to just stack up and accumulate and be fun net worth numbers on our balance sheet. It’s cash flow that lets us travel, lets us give, lets us earn, lets us create. And money moving is a part of a lively worldwide economy, and it’s also part of a lively personal economy.

[02:55] And it’s paramount that we figure out how to make money move throughout our system. And cash flow is the beginning of that. So let’s uncover, let’s pull out the microscope and look at some of the clients that you’ve worked with where they have money to actually have movement. And all of us do, but using larger numbers is just more helpful for the situations. And so where is it that you’ve been able to say, hey, we need to get more movement here? And I would imagine it’s going from the typical and shifting away from typical. So let’s uncover and let’s get into the weeds on that. Absolutely. So what it’s going from is the typical that’s correctly stated to the traditional. And the traditional is most often investment, real estate, businesses and

[03:56] the whole life insurance product that we know and love and speak about on this podcast so much. So I can think of an example. There’s a gentleman named Ron that’s just recently shown up in our practice, 40 years old, very common, really has deferred as much income as possible into a retirement plan, doesn’t have a lot of other dollars to work with, but that cash flow that he’s been setting aside, I think the maximum these years, 21, 22,000, you know, pretty common thing for people to do is to max out their retirement plan when they really don’t know what else to do, has a mortgage, you know, he had been prepaying a little bit on that, but he’d listened to our podcast and stopped and has some cash sitting around, you know, of course has a few

[04:42] after-tax accounts as well, stocks, bonds, mutual funds, that kind of thing. He had no life insurance. And what that means is basically he has built a couple story house, think all of the taxable accounts and then the retirement account on top without a foundation. And we know that homes without foundations do not do well long term. So we took some of his cash flow and redirected it to building his foundation, which is his whole life insurance policy on himself, on his spouse, on his children that shored up that home. So now it has a foundation and a strong first floor and a strong second floor. Now he can start to build again. So this is fast forwarding a little bit, but he can start to look at

[05:34] investment real estate and or businesses with the opportunity to let the cash flow that’s going through the life insurance filter on up into those investment real estate pieces and potentially businesses whereby those will generate cash flow to then come back down, run through the life insurance again, increasing the foundation and then going on back up again. So if you think about it, if you have a two or three story house, that is a certain level of foundation. But if you wanted to build a 10 story building, that’s a different kind of foundation. So it’s always important that we’re using our cash flow to continue to build our foundation stronger and stronger and stronger so that we can go higher and higher and higher with that building that we

[06:24] typically call our personal net worth. Notice in this entire story about Ron, it’s been cash flow creates money movement because now instead of putting money to something like his retirement account, he’s putting money through it like life insurance and investment real estate. So that then is creating the movement, which is principle number six. And by the way, that then also gets us a multiplier effect, which is principle number seven. So pretty straightforward and employee, decent income, saving decent dollars, nothing extravagant, completely overhauling his finances in the course of two to three years to setting him up to generate a much, much bigger impact with a lot more control, a lot

[07:21] more liquidity. So I’m using our clue acronym here, use of those dollars and with money that acts like equity, meaning he can leverage it or borrow against it. So clue, C L U E control liquidity use and equity. Okay. So with Ron, a very typical situation we’ll call it, and this is going to happen for a lot of the corporate people out there and corporate listeners. You’ve helped create some movement, some cashflow. You’ve used a word through. What else does that look like once, you know, we’ve got listeners that are from an array, you know, be it entrepreneurs, we’ve got young listeners, we’ve got listeners that are, call it, they’re more preparing for their legacy components. Let’s touch on each three just so that we can say, okay, what is

[08:16] this movement look like with small amounts of money all the way to many zeros at the end? It does crack me up when people ask that it’s very difficult. I think for us to look at a case study, if it isn’t somewhere in our ballpark, but the fact is a 22 year old that could save a hundred a month is not a lot different than a 40 year old that can save a couple thousand a month. And you could even scale that up to a X number year old. Like it really doesn’t even matter. They can save a thousand a week or whatever the number is. So I just quick, another example, we’ve got a business owner that could easily save a hundred grand a year. And so it’s the same situation that foundation needs to be built, then we start to scale up the stories and that enables

[09:07] for so much more peace of mind, so much less frustration because typically in the investment real estate space, you are not dealing with stock market gyrations where your money can get cut in half, which has happened with the retirement plans in a variety of eras over the last 20 or 30 years that I’ve helped people with their finances. And then furthermore, that multiplier effect of $1 really impacting your life insurance, your cash value, which is your emergency opportunity money, your investment, real estate, potentially reducing your taxes, your life insurance, death benefit, enabling you to utilize that investment, real estate or possibly a business. If you get to add that on also, or maybe you already have

[09:59] one, the presence of the death benefit is incredibly important for you to get that multiplier effect. And, you know, it’s interesting. I want to share one more story quickly. We don’t tend to have a lot of clientele in their late sixties and seventies, but I have quite a few in their eighties and they seek financial peace of mind. Like that’s all they’re looking for and simplicity. And so it’s so important at that stage of the game to have been preparing to create a guaranteed income for life. And that’s so much easier done when there is money that you control that’s not tied up in government oriented, qualified plans, like retirement plans. I mean, we can use those dollars, but it is more complex.

[10:49] And it is so important for people in that era to be able to really lock in a lifetime guaranteed income, because they’re probably going to live another 40 years. And so that extra element is very critical, but it’s one that I start to think about when somebody’s in their twenties. So if somebody’s desirous of a peace of mind around their money and knowledge that their money is working as hard as they are a desire to have their money be in their control, not in the financial institutions, not in the governments, not in mine, but in their control, then we’ve coined a term called prosperity economics. We did not make it up. It has existed since literally the beginning of time when people started working with their money.

[11:39] I would say like three, four, five, 600 years ago. And really, if you think about it back then, there were only a few products that people had. They had their homes. They had land. They had businesses. There was life insurance. The stock market is a place to put money. Didn’t even really exist back then. So this is the traditional work. And these seven principles of prosperity that we speak about all the time are based on economic aspects of a human being’s life, dealing with money from when they’re 18 until when they’re a hundred and eighteen. You know, we’ve covered quite a bit of pieces of low and stagnation. You’ve been very intentional in the language. And I think that’s something that we don’t get often when

[12:38] we’re just seeing the highlight reels. We’re getting the shock and awe, but you’re constantly bringing this back to the principles, the pieces that will last forever. And I asked you the question, which was, give me an example for someone younger and someone older and then someone with many zeros. And you didn’t push back, but you didn’t necessarily go into the case study because again, it’s the principles. It’s those pieces that will last. And oftentimes we’ll hear younger advisors and they may have what sound like the good answers, but they, again, haven’t built the foundation. So this was really helpful for any of us to be listening to and seeing, okay, if we don’t have enough movement, here are some of the things that we need to do right

[13:33] now. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.