How do you make your dollars work harder? The secret is learning how to multiply your money. An effective way to multiply money is to get your dollars to do multiple jobs. First, let’s define what a “job” is.
Any time a dollar buys a product, purchases an asset, pays an insurance premium, reduces tax, increases cash flow, leverages itself, improves protection, recaptures opportunity cost, improves liquidity, recovers control, enables tax benefits, builds confidence, gains movement or lowers restrictions, that dollar is doing a job. The problem is that too many people aren’t utilizing their money as efficiently as they could be. They’re breaking up their dollars across accounts that can only do one or two jobs per asset.
What people often don’t know, or realize, is that there are assets and strategies you can have that allow your assets to do well over that. You could potentially employ assets and strategies that accomplish up to seven or eight jobs.
Why Your Assets Are Lazy Assets
If you’re still unsure what a lazy asset is, consider the typical financial advice you see. You’re told to break your money up into several accounts: one for college savings, one for retirement, and one for emergencies (and rarely does typical advice include an account for opportunities, an “opportunity fund“). While saving is better than no saving, and the accounts might offer some tax benefits, those benefits are often tax deferrals. And unfortunately, tax deferrals feel great now, yet all but guarantee you’ll pay more later (and when you’re on a fixed income, too).
So how do you get your dollars to educate your kids AND provide for your financial freedom? You get your money to multi-task by learning how to multiply your money. Like a Smartphone, money can do more than one thing. Yet it has to be moving to multiply efficiently. If you lock your money away in a bunch of separate accounts, it can only do one or two jobs (accumulate and defer taxes). So in order to see the most benefit and multiply your money, you have to USE it and create a cash-flowing system.
How to Multiply Your Money
1. Investment Real Estate
Rental properties are excellent vehicles for accelerating Prosperity. When you purchase investment real estate, you put your money to work! Here are some likely jobs your dollars will be doing:
- Purchasing and improving the property value
- Making mortgage payments, which increases equity
- Earning appreciation (not guaranteed, yet historically reliable over time
- Qualifying landlord for depreciation (a tax advantage which offsets cash flow)
- Achieving leverage (the nearly unlimited ability to multiply dollars by controlling a larger asset with a smaller down payment)
- Enabling disposition (the ability to sell or give property away in a tax-favored way, such as in a Charitable Remainder Trust)
- Creating cash flow (which can be increased over time)
- Building financial confidence through gaining experience as a real estate investor
Now, how about educating those kids? If you build up assets in a 529 plan, when you send the kid and the money off to school, the asset is gone. That money now causes lost opportunity cost for your retirement or financial freedom. For example, if you send $100,000 to the school at age 50, this equals $324,340 lost from your asset base by the time you are 80, assuming you could have earned 4% with that money. If you have investments performing at net 12%, the lost opportunity cost of that $100k is a whopping $2,995,992.
By using real estate, you can access that $100k by borrowing against the property (meaning that the underlying asset keeps growing). The cost of borrowing (interest plus principal payback) can be carried by the tenants. It can also improve your tax position. Then, as the loan is repaid (again, by the tenants), you can use this borrowing strategy for the next child. After you pay all college costs, you can enjoy the cash flow from the property once more.
Notice it was the product (investment real estate) plus the strategies (leveraging) that enabled the dollar to educate kids AND provide financial freedom.
2. Whole Life Insurance
When you have a properly structured whole life insurance policy with a dividend-paying mutual company, your options are vast. Below are examples of how you can multiply your money with whole life insurance.
- Premium payments act as savings deposits
- Build cash value with certainty
- A waiver of premium provides stability
- Guaranteed death benefit
- Leverageable cash value account(such as borrowing against your cash value from your insurance company, perhaps… for that rental property down payment?)
- Increase of death benefit over time
- Paid-up additions improve your savings and death benefit
- Favorable tax position (policy loans provide tax-free access, death benefit is tax-free to heirs)
- Earn interest and dividends on your cash value account
Additionally, money can “move” through the policy, and leveraging your policy gives you endless options for further cash flow.
Can You Multiply Your Money with Whole Life Insurance?
Absolutely. Similarly to real estate, you can borrow against (we don’t recommend “taking out”) the cash value of life insurance to pay for school while the underlying asset keeps right on growing and earning interest and dividends uninterrupted.
The cost of borrowing (interest plus principal) will need to be paid back by either you or your child, however, borrowing costs go on only for a period of time, say four years of college plus ten years of payback, whereas opportunity costs go on for your lifetime. So while there will still be some debt, your cash value won’t diminish in value. In fact, it will continue to grow and earn interest even when leveraged. This means that as you pay back the loan, that cash value becomes available to use again, like a line of credit. This means you’ll have an ever-increasing pool of money to use for retirement income and annuities, vacation, that new car, and so much more.
We Can Help You Learn How to Multiply Your Money
Getting your hard-earned dollars to do as many jobs as possible is more important than chasing a higher rate of return. We all want our money to be efficient and effective. To accomplish this, your measuring stick should be how many jobs your dollar is doing—not what rate of return it is earning.
If you want to learn more about multiplying your money, sign up for our complimentary Prosperity Action Pack. You’ll get access to some of our best education, right to your inbox. You’ll learn how to optimize your savings, create strategies where your money is working hard, how to lower your opportunity cost, and so much more.
And if you feel like you’re ready, we can help you buy a whole life insurance policy. We’re here to help! You can contact us here or email firstname.lastname@example.org to get started today.