The Power of Recycling Your Money Part 2
In my last article, I wrote about the concept of recycling and how it can apply to money.
If you missed that one, I recommend you go and read it here.
I introduced the concept of how this can be done using a specific kind of life insurance called High-Early-Cash-Value-Dividend-Paying-Whole-Life-Insurance (which I call a Sacred Account for short because I don’t like repeating that mouthful every time I talk about this).
Well in this article, I’m going to teach you how it all works and why I have 6 of these life insurance policies that I use to recycle and reuse my money.
First, let me give you some background on myself.
I am a reformed Dave Ramsey guy. If you don’t know Dave Ramsey, he is one of the top financial educators in the world and he is set against the idea of using any form of life insurance that you would save money into.
I was an instructor that taught his classes, a student of his teachings myself, and I even went into business with him as an Endorsed Local Provider/SmartVestor Pro where I would help his radio listeners implement his financial and investing philosophies. I did that for a number of years and represented him in 8 different territories. One of the qualification I had to meet was that I would never offer any form of life insurance that acted as a saving or investing vehicle. So needless to say, it’s a bit ironic that I now own 6 of these life insurance policies and avidly use them in the way I am describing.
You see, I didn’t know there was more than one way to design a life insurance policy. In fact, only about 1% of life insurance policies on the planet are designed in the way I am describing.
Let me give you a crash course on what I mean.
So first, whole life insurance is a type of life insurance you pay into that buys a permanent death benefit so that when you pass away, no matter what, you leave a tax free legacy behind. But it also has a cash value, which is a tax free savings vehicle that is ultra protected, and is guaranteed against loss and guaranteed to grow. You can actually choose how much of your contributions will go to the death benefit and how much of your contributions go into the cash value.
The death benefit on these specific life insurance policies actually pays you profits which are called dividends. Why? Because the companies who offer these policies make you a shareholder in the insurance company when you own a policy. So the more death benefit you own, the more “shares” you have. And the more “shares” you have, the more profits you get paid because you have more ownership in the insurance company itself. Now, these are insurance companies that pre-date Wall Street, modern day banking, and the IRS itself. The ones I use are 100–200 years old, have never lost money, have paid profits to their policy owners for 100+ years in a row and have survived every economic boom and bust since the Civil War in some cases. My point is that as far as companies I want to be an owner in, these are at the top of my list.
When I put money into a life insurance policy, I like to put 10–40% towards my death benefit. This gives me a good amount of ownership in the company and gives me a good amount of profits/dividends each year.
This means the other 60–90% of my contribution goes into the cash value, which is the savings side of my life insurance policy. The money in my cash value is the safest money I have and it’s because I get the following benefits on money in my cash value:
Guaranteed growth
Guaranteed against loss
Tax-free
Protected from creditors
Protected from lawsuits & judgments
No market volatility
No Wall Street asset management fees
The insurance company is not borrowing against my money to make money on it the way the banks do
The profits I earn from owning the death benefit get reinvested back into my cash value to accelerate my growth and to protect my profits the same way my cash value is protected.
Make sense so far?
I get income from owning death benefit with these insurers. I have an ultra-protected savings account by having money in cash value.
Over the long haul, every dollar I put in my Sacred Account will earn 3–5% per year, tax-free and have these protections I’ve mentioned.
Now for the recycling part.
Because I am an owner in the insurance company, I can borrow the insurance company’s money and use my cash value and death benefit as collateral. That allows me to borrow out the equivalent of what I have in my cash value, but to do it as a loan from the life insurance company instead of withdrawing my actual cash value funds.
This means my cash value is actually still there growing, while I use the funds I’ve borrowed from the insurance company instead. This gives me uninterrupted compounding interest.
Plus, loans are not taxable. If my cash value were growing the way I’ve mentioned and I have a gain from that growth, if I were to withdraw my own money the IRS would want to tax my gain. But if I take a loan against my asset and borrow from an insurance company that I am a shareholder in instead, that’s not a taxable gain because it’s a loan not a withdrawal.
This means every dollar I put in my life insurance policy with earn tax-free and uninterrupted compounding interest for the rest of my life.
I simply borrow against it, it still grows, I use the borrowed funds for whatever I please, and then when I’m done, I simply repay my loan to the insurance company and I have all of my original money, plus the growth on it while I used the loaned funds, available to borrow against again.
This is how you recycle money.
Your other option is what you do now. You get money and then you spend it. And it’s gone forever and you can’t reuse it again.
With this method, you get money just like you do now, and then you put it into your Sacred Account, and you can borrow, repay, reuse, and borrow, repay, reuse…as many times as you want. You are recapturing and recycling every dollar you do this with.
I have bought vehicles this way, grown my company this way, invested in real estate and other assets this way, and even funded donations to my church and charities I care about with this method. And the entire time my original money just keeps growing and I repay myself and reuse the money again next time.
Imagine if each year, you didn’t have to start from $0 anymore? You still had the growth and value of all of the money that is in your Sacred Account, plus whatever you were going to earn this year?
Now, I don’t expect you to read a single article and decide to start doing this, but hopefully this planted a seed in your mind like it did mine. And if it did, you have a lot more education and training in front of you before you’re ready to start doing this. Because in my last article, I mentioned there are 2 things you need to change to be able to recycle your money:
The way you think about money
Where you put your money
This is simply the first step in changing the way you think about money to make you aware that there is more out there than what we’re told.
Yours in Purpose, Wealth & Freedom,
Jerry Fetta
Founder & CEO of Wealth DynamX
My mission in life is to help good people build more wealth who will in turn use that wealth to make the world a better place. Concepts like the one I am teaching about today are tools and educating meant to help accomplish that aim. So if you’re a good person who wants to create a wealthier life and help make the world a better place and you’d like more information on how my company can help you achieve that, email Contact@WealthDynamX.com.
If you’re a follower of mine and have not read my book The Blueprint to Financial Freedom yet, that is the place to start. This book covers the specifics for each level in the various chapters and you can grab the book for FREE as my gift.
Click here to get a copy!
The Blueprint to Financial Freedom by Jerry Fetta
Jerry Fetta is the CEO and Founder of Wealth DynamX. He has achieved financial independence by the age of 31, built a multi-7-figure financial education and coach firm, was named an Inc 5000 Top 100 fastest growing financial firm in the U.S. and is a nationally recognized financial expert featured in Forbes, Yahoo Finance, Fox, Chicago Weekly News, New York Finance, interviewed on hundreds of podcasts with world renowned experts, earning endorsements and affiliations throughout his career with names like Kevin O’Leary, Grant Cardone, Dave Ramsey, and Pamela Yellen.
Jerry’s mission in life is to help create millions of financially educated and solvent families achieving greater financial freedom and sharing the truth about money with those around them.
Learn more at www.WealthDynamX.com
(DISCLAIMER: The information in this content should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs. Wealth DynamX can and does not provide advice unless/until engaged by you.)
