Money. Wealth. Life Insurance.: How the Wealthy Use Life Insurance as a Tax-Free Personal Bank to Supercharge Their Savings by Jake Thompson

Author:Jake Thompson [Thompson, Jake]
Language: eng
Format: epub
Published: 2014-01-14T18:30:00+00:00

CHAPTER 7 A MORE EFFICIENT SAVINGS STRATEGY

Cash valu e life insurance solves a lot of problems that we’ve already discussed, but in this chapter I wanted to discuss a few other areas where it can save you, and earn you, additional money.

Throughout your life you’ll likely save hundreds of thousands of dollars to buy all kinds of necessary and unnecessary items. Cars, homes, medical expenses, education, weddings, to name a few.

It’s clear that borrowing on high interest credit cards and loans is an expensive way to pay for those items, so I won’t go into any more detail than that. I’m going to assume you save and pay cash.

In addition to large purchases, you’re hopefully keeping emergency savings liquid, safe, and accessible. What most people haven’t thought about , however, are the thousands of dollars that have been lost (or not earned) by saving for these items in the conventional way.

When you pay cash for something, you have to save for it first. And where do you save it? Somewhere you know you can get it when you need it. For most people, this is some form of savings or checking account.

There are two problems here. The first is in regards to how you save it, and the second, how you spend it. As you set money aside for these large purchases and emergencies, you’re putting thousands of dollars to very little use in low interest, taxable accounts. If you’re earning 1% inside a savings account, but could be earning 5% in a life insurance policy, you’re missing out on 4% interest every year. We call this opportunity cost, and it means thousands of dollars lost in your lifetime.

In addition to low interest and growth, you are also required to pay taxes on what little you have earned. This reduces your savings efficiency even further.

Now this doesn’t apply just to large pu rchases. You may keep cash for emergency savings. You might be an investor or business owner that sits on large amounts of cash, waiting to use it.

When you plug cash value life insurance into the equation, your savings dollars earn more, and your tax burden is reduced. It’s a much more efficient way to save.

Now the second problem is this. When you pay cash for a car, you typically don’t plan to put that money back into your savings on any schedule. You simply plan for your next purchase, and save what’s necessary. This emphasizes the real value you are placing on your dollars… very little.

Jake Thompson

Let me explain… When you borrow money from a bank, do you expect them to charge you interest? Of course. When you lend someone money, do you expect them to pay you interest? Of course. Yet when you use your own money, you place no such value there. Why?

This is exactly why I recommend taking loans against the insurance policy. It ensures that you are accountable to the money you use. It ensures you never liquidate your account to make a purchase with no intention of keeping that money growing.

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