The Hidden Price of Playing It Safe – Episode 687

Transcript provided by the show’s production team.

[00:00] Spencer Shaw: Prosperity Thinkers, welcome to the podcast. We’re gonna be talking about the hidden price of playing it safe. Now, in a previous episode, we were talking about opportunities. This is a perfect piggyback episode because those two can be related depending on who you are. Attention engineers that are listening to the podcast, drive a little bit slower, take all the words in, listen to it like 14 times, and you’ll be okay. Okay, Kim take it away. What’s the hidden price of playing it safe? Kim Butler: Oh, that is so funny. Well, it is interesting because I am in people’s financial lives, the safety net, right? I deal with life insurance that lets people play it safe because they know that their family is okay if they die. Obviously my team helps with disability insurance,

[01:00] guaranteed income for life as it relates to retirement, those types of things. In fact, every now and then I tease about rebranding, and if we do, we’re gonna call ourselves the Guaranteed Girls. And of course, David on my team, who is not a girl, laughs and says yeah. I can go along with that.” Of course, I just rebranded about five years ago with the very purposeful brand of Prosperity Thinkers, because that’s what I want people to do, is to think, to turn their brains on. So as it relates to playing it safe, when you have the protections in place, it makes it so much easier to know when to play it safe for you, and it’s definitely different for different people, and when it’s okay to get that foot onto the gas, right, off the brake and onto the gas and really

[02:00] move. And so if you are one of those people that really likes to analyze things, you’re one of those people that really likes to do mind maps and Excel spreadsheets and map things out in a way or plan things out, like my least favorite verb ever then I get that, and maybe it’s your most favorite verb, right? Plan. At the same time, it’s so important and so easy, if you know what you’re doing, to acknowledge that there is a sufficient time to do that planning, that analysis, et cetera, and then there is another time that the trigger must be pulled, even if that is in saying, “No, we’re not going to pull that trigger. We’re not going to take that step. We’re not gonna do that thing.” And to me, it really often comes back to cash and that position of liquidity, that opportunity fund that we talk about so

[03:00] much. And people today, and it’s largely the fault of the financial services industry They just don’t even think in terms of an opportunity fund, and it’s because no financial advisor is asking you about it. Financial advisors are not interested in your emergency fund, your cash position, your opportunity fund. And then furthermore, if you have one, right? Like you have a money market, you’re ready to go you’ve got your opportunity money, you can make the down payment on the real estate deal or the franchise you’re gonna buy or whatever it is, it’s being taxed every single year. And people don’t realize the negative impact of that taxation every single year on the growth of that fund. And in a way, that’s a good thing because we really shouldn’t be overtly focused on the growth of the fund, right? What matters more is the money that we’ve put in there because it’s not designed to sit there and grow. It’s not going to be there forever. It’s not to be an investment.

[04:00] It’s to be cash. It’s to be liquidity. It’s to be opportunity money, which means it has to be available to take advantage of opportunities. And we all know situations where sometimes you have one day, seven days, you know, a very short period of time to take advantage of an opportunity. And so the storing of that position of cash and that liquidity in a life insurance policy is so valuable because you can still get at it immediately. You can borrow against it and go do your down payment or your whatever it is that you want from an investment standpoint, and its growth is not taxed, and it earns a decent enough rate of return that it will at least keep pace or even beat inflation along the way. So think about this. Your typical person gets their first job, you know, age 22, 25, something like that. They’re basically gonna have an opportunity fund for 80 years, right? 20 to 100, give or take, taxed

[05:00] every single year. Spencer Shaw: It’s rough Kim Butler: Yeah. And there’s such an easy solution to help that not be the case. So I’m not sure if I exactly answered your question, but I really want people to be aware that whole life insurance is the most efficient place to store the opportunity funds, and we should view them in as positive a light as possible, not as a drag on our overall financial statement. Spencer Shaw: Yeah, absolutely. You know, as, as you’re talking about, there’s work, there’s action that has to happen in order to put the emergency and opportunity fund together. There’s work, there’s action that has to happen to, well, even before you start an emergency opportunity, to get your mind, your thinking in the right place. So one of the questions that I have, I’ve got a jumping off point, which is this, and I wanna see if you agree or disagree and then go

[06:00] down this rabbit trail. So it says: People overestimate the risk of action and underestimate the risk of inaction. Do you find that true? Kim Butler: I think so. It’s so… I mean, that’s such a big concept. It’s so hard to boil that down to the simple and very black and white statement that you’ve made, because I think it really depends on the person, and there are so many people that look back on their lives and realize how many times they missed it by not taking action. And then there’s others that, quite frankly, are taking action too often, and they’re almost sabotaging themselves because of that. You, that, you know, yeah, I flip that statement and it could be equally accurate. So that’s a toughie Spencer Shaw: So I’m gonna, I’m gonna rephrase it this way and you’re– I’m gonna pull from the Kim library the bank of memories. Do you

[07:00] have an experience in the past, and I’m gonna speak in terms of life insurance, that you’ve seen someone that wanted to go forward and have the emergency opportunity fund and go and move forward with that, and a medical event occurred and they no longer could qualify? So that’s want and action. Have you seen that? Kim Butler: Yeah. Thankfully, it has not happened a lot in my 30 years of helping people with life insurance, but there have been a couple circumstances where the medical event absolutely disabled their ability to buy the life insurance, and so we had to turn our focus elsewhere, and whether it was on a spouse or children, which clearly was not as effective as it could’ve been. Sometimes those medical events, after a period of years, can be revisited. So, you know, if you’re in your 40s, 50s,

[08:00] 60s even and you’ve got your health solid again, please don’t think you’re uninsurable for life. I mean, sometimes yes, you are, but a lot of those medical events can be solved. But I’m aware right now of a business owner that passed on who was very healthy, and his family is really in financial straits and difficulty because there was not life insurance there, and his company’s trying to still pay the family. It’s just messy. GoFundMe accounts had to be set up. I mean, it’s really sad. Now, that’s not what you brought up. You brought up somebody has a medical event and they can’t qualify, meaning they can’t purchase life insurance. But I think the other side is equally true as well. And again, I’m very grateful that we don’t have a lot of this in our client base, but it is, it does happen. I asked actually Claude the other day, I think there’s something like, now I can’t remember the number I wanna say 6,000 some people that die every

[09:00] day between the ages of 40 and 60. And so we just need to be conscious of that. And life insurance is to be utilized your whole life, even term insurance. It’s there to help you your entire life. And so it’s absolutely something that young people will want to take a look at, delve in, put in place because of the peace of mind and the opportunities that it drives. Peace of mind it provides for them and their family, opportunities that it drives for them while they’re living. The product is called life insurance. It’s not called death insurance. And we want to be in a position to utilize it during our lives Spencer Shaw: Yes. So true. I knew you would have a personal story, so thanks for sharing that. For, you know, all of us, I think there’s times when we do play it safe. Depend-depends on what’s happening. You know, it could be a health scare, it could be something going on with our work, it

[10:00] could be whatever else it is. And then there’s times when we are overconfident and reckless, and having a good conversation, coming in and listening to conversation like this it cuts out the two extremes and gets us a little bit more balanced. So Kim, very grateful for you. Thank you for sharing your wisdom on the podcast today. For all you listeners, if you’re looking for your specific questions answered we do take questions and share those on the podcast. Hello@prosperitythinkers.com.