I told you I would explain how to bank on yourself, yet have taken quite a bit of time to do so. I have been busy. Well, here it finally is.



The way you start the bank on yourself is by purchasing a permanent life insurance policy. This policy can be either a universal or whole life policy. You have to be careful when choosing which company to buy from or how the policy is designed. Each company does it differently and some aren't good contracts. You want a company that looks at loans in an indirect fashion. This means they will grow the account value without recognizing any outstanding loans.

When it comes to life insurance, the government has placed a maximum you are allowed to pay for it. When you exceed this maximum, the policy ceases being life insurance and becomes a Modified Endowment Contract (MEC), which loses all of its tax advantages. The trick in banking on yourself is buying a policy that reaches these limits. The way your money grows in the policy depends on how the money is invested. Whole life policies are invested in the company you purchase from and grow through dividends. Universal life policies grow by stock or interest rate prices. I tend to like whole life policies best, because they don't have the big insurance costs and fees typically associated with Universal Life.

When you get the policy, you get the option of choosing your payments. You can make one big payment up front or stretch your payments out over a period of time. The cash value, which you will use as your bank, grows over time and as the account grows. When you receive dividends or make additional payments, you buy small amounts of paid-up insurance, which is basically a one time payment policy, that increases your account value. Since you are only allowed to pay so much for the insurance, you have to be careful. Universal life insurance policies are based upon having term insurance mixed with permanent. This allows the person to change their premiums and pay more one month and maybe less the next. You can also make a whole life policy with mixed term insurance as well. You can convert that term into permanent with additional payments and this too gives you flexibility of universal life.

As your account grows, you get to borrow the money from your life insurance policy. Use the money to make any and all big purchases. You will pay the account back as you would a bank with interest. Since the account doesn't recognize the loan, the account will grow in value as if you hadn't taken out a loan. This will compound the value of your account quicker than by borrowing from a bank or your retirement account.

Since insurance companies don't care whether you pay your loan or not (it comes out of your death benefit at death) you have to have some self-motivation and pay it back. If you can afford it, pay back more than you would normally so your account grows even faster. This also allows you to have capital to borrow from for a future purchase.

Now that you did this your whole life, you are ready to retire. You now have the ultimate tax free retirement account. Instead of taking loans out and paying them back, you can start taking an income stream from your policy until the day you die and then have a leftover death benefit for your successors!

How to Bank on Yourself and why

I have read books, researched online, and have watched numerous videos explaining this concept and have found that the information given to consumers leaves a lot to be told. No one wants to talk about specific products and no one wants to explain really how the products achieve this goal. I am going to try to put it in a nutshell how it works.

People have been banking on themselves and even banking on their assets for years and years. No one called it this though. A few years ago, everyone was banking on their homes. They were taking out home equity loans that counted towards the value of their home, assuming home values would decrease and that by borrowing the money from the equity, the home value would continue to increase. They would then be able to get what they wanted, pay back any and all loans, and if they desired to sell the home, would be well off. This concept of borrowing from equity in an asset that you thought was going to grow isn’t a bad idea; it’s just bad that it was in an asset that has volatility.  

The whole bank on yourself concept is based upon purchasing a permanent life insurance policy. The difference between life insurance and a home is, there are guarantees and no depreciation (when structured correctly). As you pay the policy off, you gain equity, which you can therefore borrow from. Unlike a bank loan, you get to choose when and how you pay it back. You may choose to never pay it back and when you die (which we all will do), the loan and any interest is taken out of the death benefit.

The benefits to borrowing from the life insurance policy are the way your money grows in the policy. Each company recognizes loans differently, which is why it is very important to choose a company that uses a non-direct recognition of loans. This means that when the company pays interest or dividends, they look at the actual cash value (total equity) not total cash value minus loans outstanding. By doing this, your money in the account gets to grow even when you have it out on loan. An example of how this works and why it is so powerful is this: If you invest $100 at 5% interest, that money will double to $200 in 14.4 years. If you borrow $100 at 5% interest and pay it off in 14.4 years, you will have only paid $140.48. By having the non-direct recognized account value to $100 and at the same time borrowing that money, you have a net growth of $59.52. That is incredibly powerful.

How do we set these up? Check out the next blog = )

I was sitting in church on Sunday and heard 2 great speakers discuss the concept of financial wellness. It being the new year, this topic is brought up quite frequently in churches. It is difficult for people to follow spiritual callings and participate in their church when they have difficulty paying their bills. It is quite interesting to me how it seems that everything temporal in this life ties directly to those spiritual. It is typically in the times of financial turmoil that people start to turn to faith and have to start looking towards something greater than themselves.

The greatest challenge any instructor/teacher/coach/professor/etc has is to instill their wisdom in others and to see them making choices based upon that learning. It can be even more difficult when the student has preconceived notions about a topic or a closed mind. It is even more difficult for a student to change, especially when it is about a habit that is a part of their daily routine.

As I have been thinking about how to create a good financial program that changes lives, I thought about my own preconceived notions and even my own change in my health lifestyle.

Along with financial fitness we are pushing personal fitness. The whole Nevada Benefits staff has been charged with wearing pedometers that track our daily activity and have been told to change our eating habits. The program demands we Move, Eat, and Live. We have constant low level activity, we eat real food (getting rid of processed food and sugars), and going outside and enjoying life. This program isn't like most health programs. It is changing your lifestyle along with changing what you do. The biggest challenge I am having with is is that it demands I change my entire diet and eating habits. I think everyone has a good understanding of what foods are healthy. There is a part of us that knows how to live a good healthy life as well, yet there is a dichotomy between what we know and what we do. I think the reason we all ignore this knowledge is because we are sidetracked by the things that satisfy us at the moment. We are also so addicted to things we don't know we are addicted to subconsciously. I have found that one of these things for me is sugar. It is in almost everything I eat!

So the biggest question I have for this program is how to affect such a change in people that they want to act and want to change. I want people to realize even the subconscious addictions and learn to overcome them. I am learning that my addiction to sugar runs deeper than I thought. I fill myself up on good food and can't eat another bite, but yet still don't feel satisfied until that sugar treat is in my belly to top it off. It clearly isn't a physical need, but mental. In order to succeed I need to put off the temporary want and keep with the long term goal. Financial fitness requires the same discipline.

What kind of things are like sugar in your financial world? Maybe it's the extra large soda you don't need or the fast food stop when you are just 5 minutes from home. Maybe it's the family member who wants the new toy or your own want for a new toy. We have unlimited wants and desires. It seems like the more money we have the more we're able to spend. So lets try to find that financial addiction and focus on that first. As we eliminate it, we will force ourselves to change our subconscious like never before. The rest of the plan will just seem natural, like I am doing with walking and being more active.

Financial War

This past week I was listening to the radio and heard the saying “financial peace.” I thought it was ironic that they were talking about peace when the callers of the show werein a financial war. All Americans are concerned about the welfare of themselves and their family. I don’t think we ever get a day off from this. Whether you are poor or wealth, you have to deal with financial issues.

I took from Gallup.comthe top5 things people are most concerned with and placed them at the beginning of the site, because I think they are the most common for all of us. I think these are the reasons most people start financial planning and then give up shortly after when life happens.

1.)    Lack of money/low wages. In Economics 101 we learn that humans have unlimited wants and desires. The only problem is that there are limited resources. Thank goodness we have money, otherwise we’d have the tragedy of the commons. This is the main reason everyone gets themselves into financial trouble. When it comes to spending and the future we much rather want the immediate satisfaction. We want the soft drink or cheeseburger now, or that new car now. This causes us to purchase on credit and spend what money we have left over on things that can probably wait or we can use something cheaper that does the same job.

2.)    Healthcare costs. This is the #1 reason we file for bankruptcy- even with insurance! I think this is because we don’t understand our insurance and because we don’t know what healthcare really costs. Know your deductible. When purchasing a health plan, most people purchase a PPO which carries with it a deductible which you have to pay when you have an major medical treatment outside of regular doctor’s visits. The higher the deductible, the lower the cost. Plan for these deductibles. One great way to plan is to purchase an HSA qualified health plan and save the amount of the deductible every year in a Health Savings Account, which has great tax benefits and rolls over every year!

3.)    Debt/Not enough Money. This goes back to #1. Stop going into debt and power pay those debts. Use the snowball method of paying down debt. You can also contact a debt management company that will negotiate with your credit card companies a lower interest rate and require a monthly payment from you every month while they apply the debt snowball for you. Cut the credit cards up as well- you don’t need them anymore.

4.)    Cost of Living/Inflation. On average inflation happens at about 3% each year. I think we all know that doesn’t mean a thing to the average family. We keep seeing fuel and food costs rising much higher than that. The reason the Federal Reserve still says it’s under 3% is because they look at other goods, such as electronics and such, which are becoming cheaper all the time. For homes that typically can’t afford other items, it affects them a whole lot more. Make sure your disability insurance has a cost of living or additional insurance rider on it. Make sure you include it in your retirement planning as well. For those of you that are working, ask for a raise or look for a new career that can pay better when things get tough. You can also clip coupons and look for bargains.

5.)    Unemployment/Job Loss. A lot of people see this as the end of the world. Almost every successful person I have met made their career when they were at wits end at another job or hit rock bottom in their business. There is something about failure or forced change from our routines that inspires greatness. Even if you are satisfied with your job, keep your resume updated regularly. Keep a few months of income set aside to help pay the bills when such an event occurs. Even those retirement accounts won’t do you much good when you lose your income, don’t feel bad about taking from them (just know of the consequences and only when things are dire). Ask family and friends to help out. Go to your community, then go to your church. It is amazing what is available to you as you reach out and network with people. That resume you had left posted on Monster and kept updated may have attracted a head hunter that may bring you the best new career you overlooked while stuck at your current job. The #1 reason people are concerned about losing their job isn’t because they love their job, it’s because they need the income. Make the change now to live below your means.

So this is the financial war. Keep updated on my blogs as I discuss how to fight a good fight and prepare yourself. We’ll discuss insurance ,savings, debt, and retirement planning.

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Also make sure you fill out the financial discovery form under 'Get Motivated' and let us know what you think. The goal is to create a user-friendly program that allows for you to share your information with us so we can create a financial profile and help gear you towards your goals. As humans, we all know what things we should be doing to live a good, productive life, but really don't know where to start or how we can achieve our goals. You will find that as you go through the questions you will have your eyes opened and have a better realization of your own life and probably figure out some steps you need to take.