“You’ve got to do fewer things more effectively.”
– Adam Urbanski, business and marketing coach
In part one of “Shortcuts to Prosperity,” we examined 12 financial hacks organized under the first four of our Principles of Prosperity™. We continue now with the remaining three principles and 13 additional ways to hack your money and take a shortcut to wealth.
Prosperity Principle: Keep CONTROL of Your Money!
No one will care about your money as much as you do, so don’t hand over the control of all of your dollars to someone else.
- Automate your savings.
One of the easiest ways to lose control of your money is to spend it! Don’t let your dollars just sit around in your checking account, burning a proverbial hole in your pocket. Schedule automatic withdrawals to transfer money into a savings account, a whole life policy, or an investment.
But the mistake that most people make is that they move their money to places where they have no control! So mind these next hacks…
- Reconsider that 401(k) contribution.
Many people “automate saving” through their 401(k). If your employer matches your contributions, we recommend contributing only to the match level.
401(k)s have many rules, leaving your dollars under the control of the government and your employer. Want your money to start a business or take a year-long sabbatical? You’ll pay a price to withdraw for a “non-approved” reason. Then there are the future taxes, and the extremely limited investment choices.
Bottom line: 401(k)s are fraught with financial landmines, and you’re better off investing elsewhere beyond the match.
- Do the Roth.
You have no control over future tax rates, which are highly likely to rise. So don’t subject your investments to future unknown taxes! Choose a Roth (401(k) instead of a traditional 401(k) if you want to take advantage of the employer match.
Also consider converting your traditional IRA monies into a Roth IRA, perhaps a bit at a time, to avoid future taxation. (See #17, 18, and 22 for tips on how to best this.)
- Quit the Wall Street casino.
We’re conditioned to believe that the stock market is the best long-term investment, convinced by the endless ads and “financial education” campaigns sponsored by the trillion dollar financial industry. But you have zero control of the money dollars on the stock market roller coaster.
Not even Warren Buffet can predict or control the market, as evidenced by his enormous losses in the last stock market crash. And there are other options (including one that Buffet and Gates are now using….)
- Self-direct your IRA.
Many people already have money in qualified retirement funds such as 401(k)s, 403(b)s, and IRAs. And you’ve got to choose from their menu of investments… primarily mutual funds. What do you do now… especially if it’s a bad time to take a big tax hit? You can do a self-directed IRA and have access to a much wider range of investment choices.
- Use a life settlement to grow assets more predictably.
One of our favorite investments that can be used in a self-directed IRA is life settlement funds. Comprised of life insurance policies (which can be bought and sold just like other assets) from seniors that no longer wanted or needed their life insurance policies, these assets rely on actuarial math, not market speculation.
Warren Buffet (through Berkshire Hathaway) and Bill Gates (reportedly through his personal assets) have invested hundreds of millions in life settlement funds.
(See “Life Settlement Investments: Pros, Cons and Facts” or contact us to inquire about life settlement investments.)
Prosperity Principle: MOVE Your Money
Typical financial planning focuses on accumulation, but you want your money moving like a river, not sitting stagnant like pond water. Keep your money in motion with these hacks, and you’ll have MORE of your dollars working for you!
- Put lazy assets to work.
Look and see where you have money just sitting. Lazy assets may include:
- money accumulating in savings accounts and CDs beyond what is needed for emergency purposes.
- paid-off properties. Especially with rates at historic lows, you’re much better off putting money to work in investments than pre-paying mortgages.
- large cash value accounts that are never leveraged.
Now, use that money to…
- Expand your investments.
If you have ample savings in the bank and/or a whole life insurance policy, or a lot of stagnant home equity, consider how you can “move it and use it” to increase your asset base and/or your cash flow. For instance, you could put lazy cash into a cash-flowing bridge loan, and use the income from that to invest elsewhere. Or leverage your life insurance cash value and put it to use.
In this ultimate real estate profit hack (a real-life case study), a client used his whole life policy to purchase an excellent commercial property with strong cash flow and generate stratospheric triple digit returns!
- Embrace “good debt.”
Many financial educators focus on being “debt free” as the all-important financial goal. While this may provide peace of mind (which is important), mathematically speaking, it’s not usually the best advice.
If companies refused to take on debt, the great majority of them would stunt their growth. It’s the same with your personal economy. Business loans can help grow revenues, mortgages allow us to build equity in large assets with a small down payment, and investing in ourselves pays excellent dividends.
- The Roth conversion tax hack.
A brilliant move to make! Normally when you move money from a traditional IRA into a Roth IRA, you’ll pay income taxes on whatever amount you move. But using a certain life settlement fund, (see hack #18) you can hack your taxes, owe less to the IRS, and at the same time, put your dollars in an investment that won’t roller coaster ride like the stock market!
For more details, read about it in “Escaping the Tax Deferral Trap, Part 2” and inquire about “Roth Conversion Life Settlements” at hello@prosperitythinkers.com.
Prosperity Principle: MULTIPLY Your Money!
To make your money multiply, you want it doing multiple jobs. You want your dollars to multi-task like a smartphone or a Swiss army knife!
There are two excellent “ultimate money hacks” that help your money multi-task and, ultimately, multiply.
- Own real estate.
Owning your home means you’re not throwing away your rent dollars into a black hole each month. But the real magic happens when you own additional property, residential or commercial, that OTHER people rent.
It’s easy to see why real estate investing is one of the oldest and surest ways to build wealth when you consider how owning real estate allows you to:
- purchase an asset while leveraging dollars with a mortgage, also known as “other people’s money;”
- leverage your tenants’ dollars, which pay off your mortgage;
- create cash flow, even with an asset you may not fully own yet;
- enjoy upside appreciation (not guaranteed);
- take advantage of depreciation to save on taxes;
- deduct related travel and other expenses;
- increase the value of asset through improvements to the property;
- obtain tax-free cash through HELOC or refinance;
- sell the asset and cash in on the equity.
- The ultimate financial hack: high cash value whole life
With typical financial environments, your money can only do one or two jobs, such as earn interest and save for retirement or college or medical expenses or an emergency fund. Unfortunately, this makes your money very inefficient, as you tend to have dollars spread around in separate places, but not enough to really work with in any one place.
With a whole life insurance policy, your dollars can multi-task and be used for:
- all-purpose savings (we don’t consider whole life insurance to be an “investment,” but it is an excellent place to build and store cash),
- an emergency fund (sub-hack: raise your car and home insurance deductibles once you’ve got adequate emergency savings to lower premiums),
- an opportunity/investment fund,
- life insurance (protecting your human life value and ability to earn),
- paid-up addition riders (a great life insurance hack which instantly increases death benefit and cash value),
- earning dividends,
- the possibility of living benefits such as disability savings or income riders, long-term care benefits, terminal or critical disease riders,
- tax-free gifts to children and grandchildren,
- legacy gifts to non-profits or any cause you passionately support.
- Leverage your cash.
This is one of the key ways that banks make money. They borrow money at a low interest rate (when you “save” in a bank account, you are lending them your money), and loan it out at a higher interest rate.
This method of financial arbitrage is much more profitable than people imagine. In this example from Truth Concepts, Todd Langford shows how banks can make profits of 67% up to 200%… and how you can use the same profit strategy yourself.
Many Americans are starting to practice the above strategy using their whole life cash value. We recommend whole life for this use because over time, the internal rate of return averages at least a couple of points higher than the rates paid by bank savings accounts. This means your savings can actually outpace inflation.
To learn more about life settlements, high cash value whole life, bridge loans (mentioned in part 1) and prosperity economics concepts, sign up for our complimentary Prosperity Accelerator Pack and receive our game-changing ebook: Financial Planning Has Failed, along with a video and audio about the 7 Principles of Prosperity™.
YOUR Favorite Financial Hacks!?
What are your favorite money hacks that you use to shortcut your way to wealth? Please share below in the comments!
6 thoughts on “Shortcuts to Prosperity: Our Favorite Money Hacks (Part 2)”
I have a question on 401k versus Roth 401k.
I understand that the match is key to the investment in the first place. But in contributing up to the match, is there value in going with the 401k over the Roth 401k option?
I am wondering if contributing to the 401k will reduce taxes, allowing more money to go into a whole life policy to fund other investments. I understand that future tax rates are key to the decision, but could you get to a point where, at retirement, you only withdraw from the 401k up to the max to remain in the lowest tax bracket and then supplement the income with cash from whole life or other vehicles/investments that may be more tax advantaged at that time?
I can’t seem to find a definitive answer on that scenario and thought you might have some insight.
Thanks for your question. Yes, it is true that contributing to a 401(k) and deferring taxes can free up some cash flow now that can be used strategically. However, our concern is that not only will tax rates likely rise, but many Americans will find those taxes harder to pay when they are no longer working and earning an income.
As far as withdrawing less over a longer period of time in retirement in an attempt to keep taxes lower, that could backfire, as the longer your money is in a 401(k) the longer your money will be affected by taxes and fees. (Also potentially risk, though you could do a self-directed IRA to have more control.)
Our recommendation is actually to spend down that money first. We have a special report that goes over this strategy and how sequencing a more efficient disbursement of assets is the way to reduce taxes and retirement. I’ll have Kim email you the special report, it’s called “Permission to Spend”.
Also you might find this video helpful: it demonstrates returns from a 401k: https://www.youtube.com/watch?v=GP2d3BhzWB0
Thank you for that perspective!
You’re welcome, Kevin!
Dear Kate and Kim,
I’ve been taking large policy loans each year to buy Paid-Up Additions to just come underneath each MEC Limit. I pay all policy loan interest every year but its become quite high (approaching $7,000 per year). I’m starting to question whether that was a poor idea from an arbitrage point-of-view (like paying 5% to make 4.5%). What do you think I should do next? I appreciate any help you can offer.
Hi Shaun, you will want to drop back your contributions to premium plus a minimum PUA only (maybe $100 or $120
depending on the company) and then start paying back your policy loans. I’m very sorry you got information
that helped you feel like the strategy would work long term as it will not. It might have been ok for a short period
if you just had timing issues. Reach out via email with more specifics if you need more help.