4 Questions You Should Know the Answers To

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When we’re young, retirement seems such a long way off that we seldom feel any urgency to plan for it.  I know few people, however, who don’t arrive at their golden years wishing they’d started sooner, planned better, and saved more!

Do you know how to determine where you will be financially at retirement, if you continue on your present course of action?  Do you know what would need to change, and by how much, for you to make the corrections that would bring about the outcome you desire?

Whatever your age, knowing the answers to these four questions can save you a lot of grief when you finally reach that stage in life when you have more years to look back on than forward to.  So ask yourself:

  1. What rate of return will I need to earn, every year from now until retirement, to be able to maintain my standard of living without running out of money before my life expectancy?
  2. How much do I need to be putting away every year between now and retirement, to be able to live like I am living now (or like I want to live)  without outlasting my money.
  3. In my current plan, how many years past my desired retirement age will I have to keep working in order to accumulate enough assets to sustain my desired lifestyle through my life expectancy without running out of money?
  4. At the rate I’m currently saving/investing, what is the maximum I could spend each year during my retirement years and still have my money last all the way to my life expectancy.

At Brite Hope Solutions, we offer a complementary service to help you answer those questions. Our powerful tool, “Retirement, Ready or Not,” can help you get on track to making sure that what you want to happen in those golden years will happen.

Is My Cash Really Free?

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Do you know how much your hard-earned cash in savings or other accumulated assets is worth to you?  That may sound like a rather simplistic statement.  But if we’re honest, we’ll have to admit, when we get ready to make a major purchase such as an automobile, home, wedding or college education, we recoil at the idea of using the bank’s money because of the interest we have to pay.  We’d say that money is expensive to use, and we’d be right.

Those of us who are cash-payers think nothing of taking our own money, however, and plopping it down to save the interest we’d have to pay if we financed that purchase.  Most likely, we even feel a mite proud of such a noble accomplishment in our financial journey, and, indeed, we should be.   The discipline it takes to postpone gratification until we can afford the purchase is worthy of approval.

The concern I want to raise is this:  we treat our own cash as if it is free, as if it doesn’t cost us anything to use it.  Is that true?

One question begs to be answered:  Is our cash really free?  What if the cash we used to make our purchase would have earned us more had we kept it and put it to work than we’d have paid for the use  of someone else’s money?   You see, our money is not free, because, when we pay cash for major purchases, we give up whatever we could have earned had we left our money to compound interest without interruption for the rest of our lives.

There is a fundamental difference between amortized interest and compounded interest.  There is a huge discrepancy between the interest I pay on the decreasing balance of an amortized loan and the interest I earn on the increasing balance of a  compounding account.  If I can leave my money to work for me without interruption, without having to spend down my reserves, I will earn more than enough to pay for the use of someone else’s money and pocket the very significant difference.

What if there is a way to make those major purchases without spending down your own reserves.  What if, instead of spending your reserves, you could use them as collateral?  Then your money could continue to earn and grow.  We call this concept the Private Reserve Strategy and would love to show you how it works.  Contact us for more information.

 

Private Reserve Strategy

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Let me introduce you to the  Private Reserve Strategy.  The idea is to accumulate a pool of money (Private Reserve Account) that can be collateralized, rather than spent down, when making major life purchases such as automobiles, college education, vacations, etc.

That keeps me, then, from having to empty or diminish my reserves each time I make a major purchase, thus allowing the power of compounding interest to continue uninterrupted over my lifetime.  That’s bigger than most of us realize!

By collateralization, we mean using our Private Reserve Account as collateral for a loan, in the same way we would use our home, business, or other asset.   In effect, we would  be allowing the lender to place a temporary lien on the portion of our account necessary to secure the loan until it is repaid.  Once the lien is removed, our collateral capacity returns to it’s full amount, to be used as security again and again in other situations.

I can hear it now.   “But why would I want to pay interest to borrow against my own money?”   Simply because the difference between Amortized Interest and Compound Interest is huge! Especially if we allow the compounding process to continue without interruption.

Let me illustrate:

Let’s say I have accumulated $20,000 in an interest-bearing account earning 4% (for illustration purposes) and am able to leave it untouched for 30 years.  Within five years, I have earned $4,420 in interest.  At the end of 30 years, I would have amassed $46,270 in interest and accumulated a tidy sum of $66,270.

If, however, during that thirty year period, I decide to remove $20,000 cash to purchase a vehicle and pay it back into my account over the next four years, I would disrupt the 30-year compounding cycle, and forfeit at least $9,419 in interest that I could have earned over the 30 years.  If I disrupt the compounding cycle again at some point in that time frame, my lost opportunity costs would mount to $17,470!

You see, our money is not really free as we’ve always been taught to believe.  There is a cost to it.  It’s call OPPORTUNITY COST!

Now… look with me instead at the possibility of securing a$20,000 loan for that vehicle at 4%, using our reserve account as collateral.  Our monthly payment would be $95.  On a 60 month agreement, we would pay $2,100 in interest.  Even if we amortized that loan over the full 30 years, we would still pay only $14,374 in interest.  I know.  I know!  That sounds like an ungodly amount of interest, and it is…especially at first glance.

But remember, we would have taken this course of action to allow our Private Reserve Account to continue compounding interest without interruption over our lifetime.  So let’s compare the two.

The difference between the $4,200 we could earn in interest in the first five years and the $2,100 we would pay for using someone else’s money during that same time frame  is 2:1!

Now let’s calculate that illustration out over 30 years, where, if uninterrupted, our interest compounded would reach $46,270.  Even if we stretched our loan payments out the full 360 months at a cost of  $14,374 in interest, we would still come out on top to the tune of $31,896,!   Can you see the amazing potential of collateralizing  reserves  rather than spending them down?

There are so many more benefits to the Private Reserve Strategy than we have discussed in this writing, but being able to capitalize on the difference between paying amortized interest and collecting compounding interest is well worth further investigation, don’t you think?

Contact me for more information.

It’s Not About Interest Rate!

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The average consumer thinks that banks make their money on the spread between the interest rate they pay to their depositors and the interest rate they charge their borrowers.  We get so fixated on the rate of return, we don’t see what bankers see — that volume of interest and velocity of interest are the real wealth builders.

The Volume of Interest

Take a look with me at a $200,000 home loan at 6% over 30 years.  By the time the homeowner pays that last payment, he will have given the lender over $231,000 in interest alone!  That’s 115.5% of the $200,000 he originally borrowed, and is an illustration of the “volume” of interest that accumulates with the compounding process over time.

A good portion of that  interest is collected up-front.  So in the first five to seven years of a mortgage, the interest portion of the average house payment, though it gradually shrinks, never drops below 70%.

Refinancing every 5-7 years allows the bank to really capitalize on interest volume, since a re-fi simply resets the amortization schedule.  At that point, house payments are again calculated with the highest ratio of interest to principal–beginning somewhere around 85-90% or more.

You can see that the rate of interest the banker charges is far less significant than the volume he ultimately collects.  Your banker knows that, but most homeowners are still in the dark concerning this phenomenon.

Velocity of Interest

Interest is velocitized when money held on deposit is loaned out over and over again.  Let me illustrate.  Suppose an individual deposits $100,000 for one year, and the bank promises a 3% return.  That $100,000 is now a liability, because the bank will have to pay $3,000 to the depositor at the end of the year.

So the banker finds someone he can loan the money to.  The interest rate is not key here, but say the money is loaned to a seasonal business owner at 6% for three months.  When that loan is paid off, another short-term $100,000 loan is made at 8%.    The third quarter, that same $100,000 is loaned out again for 3 months at 4% .  And, you guessed it, the final quarter of the year finds another businessman anxious to borrow the money at 10% for the three months remaining.

So, at the end of the year, using simple interest rates, the banker has made $28,000 in interest alone, plus closing and other handling fees that could total a couple thousand dollars or more.  With the depositor’s money, the banker has grossed about $30,000, from which he pays his operating expenses, then happily hands $3,000 over to his depositor.

Even if the banker only charged 2% each quarter on each of the $100,000 loans, he would have accumulated $8,000 in interest plus fees and closing costs with an obligation to pay only $3,000 to the original investor.

Can you see why velocity of interest is where the real money is?

Contact me for more information.

Make Your Next Car Pay For Itself

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That’s right!  Believe it or not, it can be done.

Most of us finance our vehicles.  Let’s say you buy a $10,000 car at 5% over the next 4 years.  Your payment will be $230 per month.  Where do you send that money?  That’s right.  Every single month, you send your payment to the lender or banker who capitalized the purchase of your automobile.

At the end of four years, the bank has their $10,000 back plus an additional $1040 in interest that you have paid.

What are you left with?  The depreciation value of the car.  Let’s say that’s $4,000.  Then you begin the process again.  That’s why we generally refer to an automobile as a liability.

If YOU owned your own banking system, once it is capitalized, you can borrow from your own bank.  The $230 payments will go back into your coffers.  At the end of the four years, what do you have in this scenario?

You still have the depreciation value of the car.  But now, because you are the banker, you also have your $10,000 back and you have the $1040 in interest.  So if you add that all up, you have $15,040 in assets directly related to the purchase of that car.

Very intriguing, don’t you think?

Contact Me for more information about the Infinite Banking System, where you can turn liabilities into assets!

Access to Capital is HUGE!

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How available is your money?

Is it locked up in long-term investments that cannot be accessed without penalty until a certain period has elapsed or until you reach a specific age?

Do you have it invested in Real Estate, where your access to it depends on the banker’s willingness to grant an equity loan or the sale of the property?

Imagine with me that you could put your money into a vehicle that would grow it with guarantees and tax protections, yet still have total control and immediate access if and when you wanted or needed it for any reason whatsoever  — WITHOUT PENALTY!

Only one financial vehicle can provide all that.  It’s the Infinite Banking System and it’s helping thousands of folks just like you take back control of their financial future.

Contact Me. for more information and a free consultation.

You Finance Everything You Buy…

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I can hear many of you insisting, “I don’t finance anything!  I pay cash for everything I buy.  No, sir!  No finance charges for me!” And my hat is off to you.  Congratulations!   You have arrived at a place that many people only dream of.

Perhaps you, like many who are finally debt free, believe that getting to the place where you can finally pay cash for all your purchases is “as good as it gets.”  I want to challenge you to look a little deeper and see that there is a financial position that is even stronger, even more powerful.

You see, you really do finance everything you buy…even when you pay cash.  How is that so?   You will either pay interest to someone else for the use of their money or you will forfeit interest you could have earned had you left your money in an interest-bearing account. That is called “lost opportunity cost.”  For too long, we have ignored the cost of using cash on hand when making financial decisions.

What if there was a way for you to earn on your money, even while you’re using it?  What if there was a way to recapture your money even after you’ve spent it?  That would be even better than paying cash, wouldn’t it?

With the Infinite Banking System, you can control your financial environment, because you  become your own banker/bank owner.  With your own private banking system, you can recapture money you spend and re-use it over and over again to finance your personal and business needs.  You earn both the interest you would have paid or lost had you purchased the item the traditional way, PLUS the dividends and earnings of the “bank.”  It’s a win-win situation!

Want to know more?  Contact Me.

Paralysis by Analysis!

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Sometimes, financial decisions are difficult to make.  After all, we could be putting our family’s future at risk with the choices we make, right?  Many of us, however, allow fear or confusion to keep us from making timely decisions and, as a result, our financial dreams never have a chance to materialize.

In The Tragedy of Hamlet, Prince of Denmark, Prince Hamlet, the main character, is said to have had a mortal flaw.  It was that of  thinking too much.  In Shakespeare’s words, Hamlet’s youth and vital energy were “sicklied o’er with the pale cast of thought.”

Wikipedia defines the terms “analysis paralysis” or paralysis of analysis as “over-analyzing (or over-thinking) a situation so that a decision or action is never taken, in effect, paralyzing the outcome.”

The over-analyzer tends to lose sight of the  benefits that could be gained from a decision, because he/she treats that decision as over-complicated, focusing on too many details and options, which overshadow his main goals in the process.    Consequently, a choice is never made.

Perhaps one of the biggest culprits of paralysis of analysis is the compulsion to find the optimal or “perfect” solution upfront.  These folks fear making any decision which might result in a less-than-perfect-outcome, and cannot seem to entertain the possibility that, on the way to a better solution, problems that might arise can be dealt with and course corrections made.

If you have become “paralyzed” and can’t seem to make a decision, step back.  Take your focus off the minutia and look at the big picture.  Ask yourself these questions, and, if you are satisfied with the answers in relation to the decision you are about to make, go for it!

  1. What are my objectives?
  2. Will this decision allow me to reach them?
  3. What is the risk involved?
  4. What are the guarantees?
  5. Will I have access, liquidity, and control of my money, or are there restrictions that will limit my free use of it?
  6. Will this decision protect me, and those I love, from unnecessary, future tax burdens or add to them?

Never jump into a major financial decision without doing your due diligence.   But be careful of the paralysis of too much analysis!  Many wonderful opportunities have been lost to folks who just couldn’t pull the trigger on a decision.

Learn Secrets that Bankers and Smart Investors Use All the Time

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I have became acquainted with a way to make use of a life insurance policy to structure a private banking/financing system that enables you to recapture your money even after you’ve spent it, to “recycle” your cash flow for future purchases over and over again and grow it at the same time.

Structuring your own personal banking system enables you to turn what would normally be considered liabilities i.e. automobiles, vacations, equipment purchases,etc.,  into assets which not only pay for themselves, but increase your net worth.

Access to capital whenever you want it, for whatever reason — no questions asked — and  tax free use of your money even when you begin making withdrawals for retirement, make this especially attractive to those who have their funds tied up in qualified government programs with so many restrictions and future tax implications.

This is a little known concept, the principles of which are  typically only used by bankers and smart investors.  I’m trying to get the word out to the average consumer that you, too, can take advantage of the financial strategies that bankers have been enjoying for years.

Contact me for more information.