90: Why Whole Life Insurance is the Ultimate Cash Asset

090 Why Whole Life Insurance is the Ultimate Cash Asset

[00:00:00] Hello, everyone. I'm John Montoya, and I'm John Perrings. We're authorized Infinite Banking Practitioners and hosts of the Strategic Whole Life Podcast.

John Montoya: Hello everyone. Welcome to episode 90, IBC as the ultimate cash asset. In this episode, we're going to talk about cash as both insurance and an asset, a comparison of the best places for money to reside, economic value added, and why people don't think of whole life as a place for cash. Now, the idea for this episode comes from a client of mine in South Carolina who noted to me via email We all know the masses don't use IBC as their cash emergency liquid opportunity fund.

It's eye opening to see just how much opportunity exists for people and how many are totally sleeping on IBC as a better option. We couldn't agree more, so thank you, Brent, for this idea, and we're going to explore it here in this episode. The first thing that. I'd like to do is study the [00:01:00] history of the word cash and the word cash has its origins from the middle French word.

And I'm going to butcher this because I never studied French, but cashier which means to make a false note. This evolved into the old Italian word meaning money box or chest. And eventually into the English word. Cash as we know it today. Now, I find it interesting to learn that the French referred to cash as a false note, but if you know anything about the history of John Law and the Mississippi company he founded and the subsequent hyperinflation that ensued, collapsing the French economy in the 1700s, you know that false note It makes plenty of sense in this regard.

However, it's Casse, meaning money box, that I find more applicable in today's discussion. We have typically kept things of value in a money box. This idea is old and the idea of paper money is that It should have purchasing power should maintain its [00:02:00] purchasing power, at least in the short to midterm.

Today we might refer to our cafe as an emergency or rainy day fund. Nonetheless, it's where we keep short to midterm money. Think of it as three to nine months worth of expenses. Now the average person. thinks the best place for their cash box is their safe, or maybe they keep it in a traditional fractional reserve bank or a money market account with a brokerage account.

But the best place for cash, we argue, is where it derives the most economic value. And none of these places mentioned other than a whole life policy, places a typical household um would normally park their cash. None of it maintains All the extra benefit that you would with a whole life policy.

And I do want to make something clear. An emergency fund is cash set aside for the purpose of providing yourself with a safety net, yourself or your family with a safety net. It's not to be confused with a checking or debit account [00:03:00] used to cover monthly expenses. When it comes to an emergency account, every disciplined household maintains one.

Although we might not frame an emergency account as an insurance account, that's exactly what it is, a savings account in case something happens. It's insurance to provide peace of mind. So you and your family won't have to rely on anyone or any entity. So think of it this way. Our cash fund is ultimately our way of insuring or self insuring that if anything happens.

We have basically set aside a store of value to ride out those bumps in life. We tend not to think of it that way, self insuring, but that's what savings is. Essentially what we're doing is self insuring by keeping a reserve of highly liquid assets or cash. I think it's absolutely terrific that we set money aside.

If your emergency fund just sits idle, I encourage you to get out of the static mindset that you're in when it comes to your [00:04:00] cash and instead adopt a growth mindset. That's what this show is all about. It's to unleash economic value. And if you have cash just lying around, you're completely missing out on one of the greatest principles in finance.

 To continue on I do want to mention that when it comes to whole life insurance, that there is far more to, to what's Involved with whole life, what you get out of it, then what you initially may see, just looking at the surface of things, the saying the, you can't see the forest through the trees.

That's exactly right. When it comes to whole life, most people, when they even consider a whole life policy, they're thinking about a death benefit and they completely miss out on the living benefits. And truth be told, they're missing out on the cost of their capital completely. Doesn't even register.

And we're going to touch on that in a little bit. But [00:05:00] the reason why we have the show is to help educate you about whole life and becoming your own banker. And if you don't quite grasp yet what IBC is about, we highly encourage you to listen to more episodes or even reach out to us, let us help you bridge that gap, but at a minimum, I want to argue that you should have at least one whole life policy to transition your emergency fund, money that just sits there doing nothing.

Into a whole life policy and doing so is going to take you from a static mindset where that money is doing nothing and you don't even think about it. It's just, there's a rainy day fund and you're going to start to. Unlock that growth mindset that we really want you to have and become so beneficial. Especially as you get going further.

Remember this, your emergency account is otherwise doing nothing for you.

John Perrings: I think these are all amazing points. And I think the one to really drive home is the emergency fund. I [00:06:00] think too few people out there actually have any type of an emergency fund. Even some people that practice IBC, we, in episode 80, we, Eight, we talked about maximizing, maxing out loans and one of the very common problems is people, pay their premium, build up a little bit of cash value and immediately borrow all of it out of there.

And they don't have any money sitting anywhere else as an emergency fund. So the, when we talk about, things like market volatility, the ups and downs and the risks that you take when. You are going through life and making financial decisions. Most people are. Are only losing because they put themselves in a position where they actually have to sell.

And if you have a way to ride out the downs the downs of the market, the ups of the market, if you have a way to ride out the down cycles of the market with [00:07:00] cash you never have to sell because the value doesn't go away. It just gets transferred. Someone buys the things that you sell. They buy those assets and then now they're, they become the owners of those assets.

John Montoya: What Nelson writes about in his book is that there's a cost of that capital. And if it's just sitting there, then you basically are going to the first principle and this is from his book page 21.

This is what Nelson writes. The very first principle that must be understood is that you finance everything that you buy. You either pay interest to someone else or you give up interest. You could otherwise. Have earned some people call this opportunity costs. And so he goes on to say in the next paragraph, earning more than the cost of capital is about the oldest idea in, in, in enterprise and business.

So the idea here is if you have money just sitting there it's no better than, a couple ounces of gold. It's like a pet rock. It doesn't do anything for you. [00:08:00] And so you, you have to put it to use and. And the question you should be asking yourself is where can I get the best bang for my buck?

Even if it's just sitting there, where can I get and derive the most economic value possible? And that's really where I wanted to explore, the different places where you can Keep cash. And the most common places that people keep cash, as mentioned, it's in a safe under the proverbial mattress where it doesn't earn interest, or maybe you keep it in a bank where the interest is totally marginal and taxable at that.

And then let's not forget this. Once you withdraw it, because you do have an emergency, it's if it is earning any interest, it's no longer compounding. So you have to save up that. Reserve fund all over again. So you're constantly resetting and starting at zero, something that wouldn't happen with a whole life policy, because when you take a policy loan, it doesn't interrupt the underlining [00:09:00] cash value.

The cash value is just the collateral for the loan, but it still continues to earn its guaranteed interest. And as long as the insurance company meets its worst case projected earnings. It's going to pay out a dividend too. So you have all this compounding on money that otherwise is sitting idle. But when a need does arrive, guess what?

You're going to unlock that capital without interrupting the compounding interest, the compounding growth, and. You're going to be way ahead thinking thinking longer term. If you get past the mindset of, 12 months, three years, five years, and you start thinking 10, 20, 30 years, three generations down the line, and what you're doing with practicing IBC, you're taking an emergency ref emergency.

Reserve account. And now you're talking about generational wealth. It's it's over a long period of time. It sounds like a huge [00:10:00] leap, but I'm going to be 48 years old this year, and I, yes closing in on, on, on the big five. Oh, I still got a couple of years, but I like to think that I do get smarter with with age and experience and what's the most common refrain that we get, John, about people wishing that they would have started this, it's go ahead.

Yeah, I know what you're going to say. Say

John Perrings: Yeah, I wish I had started 20 years ago,

John Montoya: Yeah, exactly.

John Perrings: was mentioned in the last episode as well. And hey, I wanted to touch on, I wanted to touch on something that you just said. Number one just to make it crystal clear, when John's talk, when Montoya is talking about, not leaving money.

To just sit there and not do anything. He's not saying use all your money and don't have an emergency fund. He's saying, where is your money doing the most work for you while it is sitting there as an emergency fund? Because you're [00:11:00] when people borrow all their money out of a policy or they don't have an emergency fund, it's usually because they either have a spending problem or they have FOMO because they want to get all their money out there and investing, right?

So the idea of IBC is strategically capitalizing in whole life and then. Having your money, giving your money the ability to do two or more things at the same time. A lot of times the, so the money is going to continue growing in the life insurance policy while it's doing something else. When you access the capital via a policy loan, most people think of that.

Only from the investment side. So they'll borrow money for against their policy from the insurance company. And then they'll invest that money or they'll buy something with it. They'll buy either a liability or they'll buy an asset. Here's the other thing to think about the the reason we're doing that is we go have our [00:12:00] money doing work in the, in this other asset.

And then our money is still growing while. In the life insurance policy, while that money is also working in the investment that you made. The same thing happens when an emergency comes along. So like when things are not good and you're in a position where your investments are not doing what you think they're supposed to be doing.

You now have, if you actually have an emergency fund, you now have the ability to also continue to grow your wealth, not only in the policy, but in all of your investments, because hopefully you didn't, if you have enough of an emergency fund, you didn't have to sell. So most people are only thinking about IBC as a way to make things go up, but they're not thinking of it as a way to make things go, continue to go up, even when everything else is going down.

And so I just wanted to touch on that a [00:13:00] little bit because a lot of people just that they don't want to have, they don't want to have what they think is like this fear based thing where, I'm not going to lose money or I don't want to think about things like, from this bad perspective, which is actually a problem in a lot of cultures just to buy life insurance in general, they don't want to talk about death, but We have to think about how can I continue to make all of my, all my financial life continue to go up, even when everything else is going down.

Not to mention, if you're sitting on cash in addition to your emergency fund and everything else is going down, when there's blood in the streets, that's when you get a good deal. And that's what all the best investors are doing. When, buying things at a discount, buy low, sell high. It's the number one rule of investing, but right now everyone's buying at all time highs.

No one is focusing on sitting on cash, being patient because they don't see the value. And this is exactly what Montoya is getting at. They don't see the value of [00:14:00] sitting on cash because interest rates have been so low, but now we have whole life insurance. Take a look at whole life insurance and all of a sudden that story starts to change.

If you run a tax adjusted rate of return on whole life insurance, I think it'd blow your socks off.

John Montoya: I'll continue and say and this is again, something that Nelson said and wrote in the book. There's no such thing as having too much money in a bank, but he would go on to say, wealth must reside somewhere. And what he was teaching us is that it's better that we create our own banking systems.

And how do you do that? Through a dividend paying whole life. It's a contract, it's not an investment, it's you get to participate in the profit of a financially stable and strong, historically strong industry, the one that is blind to, I'd say 99 [00:15:00] percent of investors even financial planners with whatever degree or hat they carry completely overlook.

What Whole Life actually does they fall into the same trap of looking at it as solely for death benefit. And then they think it's too expensive. And they don't realize that when you have a whole life policy, that because of the way it's structured, the way it's engineered, the way the actuaries put it together, you're guaranteed by contract.

To have more than what you put into it. And think about how many places where you can park money. And we're talking about the ultimate cash asset today, right? Your emergency fund, right? You're guaranteed to have more money than what you put into this contract and you get all these added. economic benefits that no traditional fractional reserve bank will ever give [00:16:00] you for the same dollar.

There really is no comparison. And to get back to what I was saying and what Nelson wrote, the very first principle is that you finance everything that you buy. Doesn't matter if you pay cash for it. So those people that, think that just because you have an emergency account, sitting in cash that, that that's good.

It can get better. We want you to provide yourself and your family with more economic value. How do you do that?

You got to study up, you got to study up and you have to have the discipline to save. And last but not least you do have to be able to medically qualify because something John we've said this over and over on the podcast life insurance is something that you do not buy. You have to qualify for.

You've got some homework to do, but hopefully we're laying some groundwork for some ideas [00:17:00] to get you thinking, to go from that static mindset to a growth mindset and get you moving towards improving your financial lot in life. And that's what these whole life policies will do if you take the time to study and learn.

Everything that you can possibly do with a whole life policy and believe me, it's far more than what the what I'll call the typical advisor would have you believe.

John Perrings: Yeah, and the good news is this podcast used to be called The Fifth Edition because that was the final print edition of Becoming Your Own Banker. And shortly after the sixth edition came out, which is the audio book. So if you don't like to read No problem. You can get the audio book and listen to Becoming Your Own Banker.

And it's really the source material for The Infinite Banking Concept. There's a lot of books out there and a lot of podcasts and YouTube that talk about IBC and there's really only one source where this comes from. [00:18:00] So it's good to, it's good to read that.

John Montoya: And one, one final note I put this down at the very end cash represents freedom. That's why we save, right? It's to have autonomy, freedom of choice, to do whatever we want to do with that cash. With that in mind give your cash the most freedom you possibly can. And if it's just sitting under a mattress and a safe in someone else's bank, not your own family bank.

Unleash it. Do yourself a favor. Do your family a favor. I don't think you'll regret it. I know you won't.

John Perrings: Awesome. Awesome. Well, As usual if this is resonating with you and you'd like to learn more about how this could apply in your life specifically, head over to StrategicWholeLife.Com. You can book a free 30 minute consultation with us right there. Could talk about you and how this could work in your life specifically.

Or if you're the type of person like I [00:19:00] was that likes to just learn as much as they possibly can before talking to anyone we have an online course just for you. It's right there at the top of the banner at StrategicWholeLife.Com. You can sign up for IBC mastery and it's a pretty much a soup to nuts course on everything you need to know about whole life and IBC.

All right. Thanks, John.

John Montoya: Thank you, John. Thank you, everyone. Take care.