#236 – Banking on Yourself: Mastering Wealth Building Strategies with Mark Willis, CFP

Anna Sergunina: 00:00:00

Welcome to the Money Boss Parent Podcast. I'm Anna Sergunina your host. Today we're diving into the fascinating concept of banking on yourself with esteemed guest Mark Willis. As a Certified Financial Planner and the leading authority on this strategy mark is here to shed light on how it works, and why it's getting traction, I am intrigued. We'll explore the vehicle that is at the heart of this approach, which is a whole life insurance policy, and uncover its unique benefits and applications, such as saving for retirement, buying your next car, saving your kids education, and much more. So get ready to unlock the secrets of building wealth while taking control of your financial future. It's time to bank on yourself with Mark Willis.

Anna Sergunina: 00:00:49

Hello, money bosses. Welcome back to the show. I am excited to connect with you today. And my guest on the show today is Mark Willis. And we are exploring an interesting concept in your personal finances, which I know that you may have heard from time to time, or may have not. But it is centered around how you can bank on yourself. And yes, I said banking on yourself. And so I'll have Mark, give us all the ins and outs of this idea. Because let's face it, interest rates are as high as they have been in a long time. And we're still yet to see whether they are going to be changing in either direction. So this banking on yourself idea really is intriguing to me. And I want to explore it more. So first of all, Mark, welcome to the show. I'm excited to have you here.

Mark Willis: 00:01:39

Thanks, Anna. Great to be here.

Anna Sergunina: 00:01:41

Yeah, so let's dive in. I know on your website, you have a quote that says, What if you could create wealth in a safe and predictable way and become your own source of financing? So I'm kinda like, introducing these ideas. So let's talk about that. And at the same time, tell us a little bit about yourself. How did you become interested in this topic?

Mark Willis: 00:02:04

Yeah, my own personal journey I was I've had the privilege now as a certified financial planner to work with business owners, and real estate investors, even some NFL Super Bowl champions. But most people I work with just want more certainty and agency over their own financial decisions. They want more control and peace of mind. And they felt like when they meet with me, they say they feel like that they're just sort of a tennis ball floating down the gutter of life, that they're just sort of being handed one financial tool after another, whether it's a credit card, or a 401k. They're just being handed accounts, and they're supposed to know what to do with them. We're sort of, I guess, assumed a pilot's license without really ever going through any flying training with this money stuff. And that's, that was my own story. I got out of college, and I had six figures of student loan debt. And worse than that, it was 2008. So nobody was hiring. And even worse than that, I didn't have a plan on how how I was going to pay off all this just immense amount of debt. So I don't want to see that happen for anybody else. And thankfully, somebody pulled me aside and got and slapped me upside the head and showed me some strategies that changed my financial future. In fact, it changed my family's tree, financially speaking, and now it's like one blind beggar given to another, I want to share this as many ways as I can with folks to help them see that it is possible to build wealth in ways that are safe and predictable, and most importantly, to become your own source of financing. Because I believe that being your own banker is more important than racing after a higher rate of return in the stock market.

Anna Sergunina: 00:03:47

Hmm. Okay. I mean, there's lots of questions. Okay. So the first one, I think, let's maybe start with identifying or defining what does that mean to bank on yourself? Like, how would you go? Like, what if you don't have a deep pocket per se right to pull from so like, how does that magically appear?

Mark Willis: 00:04:07

That's a great question. Because, you know, banking is something that we're all sort of involved in. In fact, there's a book out by David Graeber. It's called debt the first 5000 years. And it really, I think, speaks to the truth that banking is just sort of core to the human experience. In other words, we're gonna be in the banking business, we just, honestly most of us are sitting on the wrong side of the bankers desk. And when we're sitting on the wrong side of the bankers desk, somebody else is pulling the puppet strings of our life. They're pulling interest out of our pockets. You know, the average American spends a third of their income servicing or participating in the debt instruments that they've accumulated, whether it's mortgages, car loans, student loans, credit cards, medical debt, that's a third of it. Time is money. And then that's a third of your day just servicing debt, being a slave to the bank. And that's why banks have the biggest lobbies in town. That's why they have the biggest buildings in town. That's why they're the most profitable business in human history. And folks, when they hear me say, Hey, you should be your own banker, they think, Oh, well, that's great. Mark. Yeah, if only I had $100 million in an FDIC charter. Yeah, great. Not exactly a helpful piece of advice, Mark? Well, what if you could be your own source of financing? What if you could be your own bank, or what if you could bank on yourself and recapture the interest slowly, maybe at first, but effectively be like the banks that you see, without having to go through all the hoops and jump through all the hoops and be the fat cats, you know, that that start these mega banks down the street, but you can functionally INSOURCE not outsource but in source the banking function in your own life. It doesn't take a lot of money. My my wife and I, we started just a couple 100 bucks a month. And we started building up a reserve, a cash reserve that we used like a bank for ourself, to help us pay off all that student loan debt that we've accumulated. And since then have gone on to use it for other things as well.

Anna Sergunina: 00:06:18

So let's break down I want to kind of touch on on different topics that I think might be relevant. But let's continue on that because I want to understand and help you kind of break this down for our listeners, like, what are the sort of the steps and what does that mean? I think we all follow, like, you can sit on the other side of the table and be the banker. But like, Where would that source of capital come from? So maybe we can start with a simple example of if you're buying a car? Or are you are you giving an example that you think would be the most relevant? Yeah,

Mark Willis: 00:06:49

yeah, hey, money has to live somewhere. Plain and simple. Your money has to live somewhere. And when you earn $1, it goes somewhere and either goes to spending, or it's discretionary income, and you can save it, or invest it, or pay off debts or pay toward taxes. And there's really not many other options, right? So if you are able to save that discretionary dollar, where's it gonna go? Well, the next rule in my little Jenga set here is your money goes somewhere, and where you put it makes it act differently. Okay, so if I put a fish in a doghouse, it's not going to do very well. The Environment Matters. If I put a fish inside a beautiful aquarium that's temperature controlled and well fed, it's not just going to enjoy itself, it might thrive, it might multiply. And so you want to put your money in places where it will enjoy itself and multiply. So where you put your money makes it act differently. That's a key insight. And I know it sounds so pedantic, it sounds so simple, but where you put your money makes it act differently. So most people go through their whole life and never really think about what am I truly want my money doing for me? Like, what are my personal desires? What's my wish list? What's my functions, what's the characteristics or attributes that I want my money to have? So that it does what I want it to do, rather than me always doing what I'm supposed to do for the money, I want to my money working for me and not me working for my money. So it's a great idea at some point to just sit down and make a little list for yourself. What are the what are the functions? What are the verbs, I don't care as much about nouns, call your money, whatever you want, call it a 401k, call it a hedge fund, call it a wet sponge, I don't care what you call your money, as long as it does what you want it to do for you. And so what is it? What are some things that you'd want your money doing for you? Well, for a lot of our clients, and for myself, too, we wanted liquid access to the money. We wanted it to be available to us for any reason, you know, without any red tape or restrictions, no prohibited transactions. We wanted it to be available with a competitive rate of return. We wanted it to be available with no taxes due on the money. I want it to be safe and protected against creditors and people who might try to sue us. I wanted it to be private and against outside of the risk of people trying to sue us or if we wanted to use it for like a kid's college. I didn't want it to be counted against us for financial aid for college. I want it to be available for any purpose, both my business and my personal life. Like I wanted to be able to go on a vacation with the money, but also use it for real estate investing. So this was my own sort of list, right? And the list went longer and longer and I just kind of started making my little wish list. And at some point I kind of started feeling like Wow, is this thing even legal what I'm describing here, but I just wanted to I wanted to Blue Sky think what do I want my money doing for me? And I feel like too few people ever take the moment to say well is the 401k really doing what I want it to do? Or is it just Am I just putting money into the 401k? Because someone told me to once.

Anna Sergunina: 00:10:08

A lot of times, that's probably the case. And I'm sure you've probably had clients, and I've had half clients, I've had plenty of those where they do get to a phase of their life when it's time to draw from that 401k. And unfortunately, because not, you know, the thought of saving. They got right they did that part, the older working career, but when they do get to the distribution phase, and a lot of their wealth is sitting in that 401k. So there's very little that you can do. Yeah, the diversification of income, as well. So yes, right.

Mark Willis: 00:10:47

And most, most retirement researchers are now concluding that the best withdrawal rate on a 401 k is less than what we originally expected. Back in the 90s. It was coined the 4% rule. You've probably familiar with this. More recently, retirement researchers like David Blanchett and Wade, Dr. Wade, foul, and many others are saying that no, we need maybe closer to 2.8% withdrawal rates. What does that mean? Well, if you had a million dollars in your 401k, the best research says you can't take more than about 28 grand a year out of that 401k. Lost right for your class. Yeah, for you not to run out of money. That's a 90% success rate 90% success rate on 28 grand a year off your million dollars. That's the millionaire lifestyle, Anna, to live on 28 grand a year. And oh, by the way, that's a taxable 28 grand is that it is so right after tax, we're looking at maybe a little less than two grand a month in income. That just doesn't seem efficient. So what else can we do? Right? What was what was it for me? What did I do to take care of retirement needs to take care of all that student loan debt I had built up, and to build some sort of solution for my clients. Well, for me, bank on yourself was what I discovered. And you know, I gotta say, as a certified financial planner, it shocked me that this was even an option. It wasn't on my radar. But of all things, it's a modernized form of dividend paying whole life insurance. That you can use something as old fashioned and stodgy as whole life insurance of all things, to create what is like a bank for yourself. So I'll explain this very quickly. And then I'll hush I want to get your feedback on this. Yes, when you design the policy properly, it grows guaranteed every single year, you have tax free access to the money if it's designed properly. And it's been that way for over 100 years, you still have life insurance, so you can pass away and leave your family more than you've ever saved for them. And then finally, you can borrow against the policy. And the policy acts like a bank, except you're the banker. So you can borrow from that cash value that's in the policy, and you're in control of repaying that loan to yourself, you can skip a few payments, you can pay extra, you can pay nothing at all for a while. And it allowed me and my wife to pay off all of our student loans. It allowed us to invest in real estate and allowed us to buy our cars, it'll pay our kids college someday. This is what we've been able to do with something as old fashioned as whole life. But if if it's designed properly, the policy can even continue to grow on the capital you borrowed. So that's it in a nutshell bank on yourself dividend paying whole life insurance.

Anna Sergunina: 00:13:41

I'd love for you to, to maybe talk a little bit about how it works. And so that because when somebody's thinking life insurance, I think we all understand that, you know, the basic Okay, I have, I don't know, $100,000, I may get it for more, or maybe I have a term policy, or maybe somebody does have a whole life policy. But how do you sort of turn that to be the bank? Right? allows you to do all these things you're describing.

Mark Willis: 00:14:08

Great point. So most people when they hear the words life insurance are thinking to themselves, Oh, yeah, that's the money. I'm gonna leave my family when I graduate someday. So in this case, term insurance cannot function like a bank. It's just purely there's nothing to borrow against. You only have a death benefit, and you're merely renting that death benefit for a temporary period of time. And there's nothing wrong with term insurance. I mean, many of our clients have it, I think it's a good purpose. There's a good purpose for it. But if we're going to use our policy, like a cash flow management system, then there needs to be something that we can access on the side of the grass on this side of heaven. And cash value life insurance, strangely enough, has a living benefit to not just a death benefit, but a living benefit. And that living benefit It is called cash value. And the cash value is what you can use, you know, for all the things I mentioned, you know, buying your cars, investing in real estate, that sort of thing. And so it must be a cash value designed life insurance contract. Why life insurance? Why are we talking about life insurance? The reason is, only life insurance has a line of credit against it, that you can use, and that's contractually guaranteed to be available to you. You know, I could borrow against my home equity. Heck, I could borrow against my 401k Kacha. But who holds the puppet strings in both of those scenarios? Not you. You that's a great answer. Yeah. Yeah. In only in the life insurance, do you have a contract that says you have the first right to your own money, and there's no questions as to what you're going to use the money for. You can use it for going to Vegas, or you can use it to pay off debt, or you can use it for your kids college, there's no prohibited transactions. None of that is true with home equity lines of credit, or when Kay loans margin loans on brokerage accounts, that sort of thing.

Anna Sergunina: 00:16:09

Oh, let's talk a little bit about that. Because in the example we had earlier, where the you've been saving in the 401k all your life, and now you turn around, and maybe you thought you could get X amount of dollars, and you could but now you have to pay taxes, what's the tax benefits of a whole life policy? Or how do you how do you sort of maximize that?

Mark Willis: 00:16:31

Yeah, life insurance has enjoyed tax advantages since before we even had an income tax in this country, which was in 1913, if you can believe it. So life insurance predates the IRS by over a century. Wow. I did not know that. Yeah, my mind is blown, right? Yeah, that that says a lot. And it was grandfathered into the IRS tax code and still enjoys a number of tax advantages. One, you put the money in after tax much like a Roth IRA. Unlike a Roth IRA, there's no income phase out rules. And you can put in any amount you want. There's no contribution limits to life insurance like there is with Roth IRAs. In fact, folks that are really nerdy can look this up, just search for the words, rich person's Roth on the internet, you'll see what I'm talking about here. Alright, so once it's in the life insurance contracted, grows without taxes due every year, you know, CDs and savings accounts, money market accounts, brokerage accounts, a lot of these, they tax you each year, but life insurance is not taxed every year. And then the money when you pull the money out in retirement is income tax free. And it also doesn't count against you for provisional income when you're going for social security income or applying for Medicare premiums. Meaning you can be pulling six feet and many of our clients do this, they pull out six figures a year of tax free income out of their life insurance policy, and it doesn't count against their Medicare premiums are their social security income, most folks don't even realize that they can get their social security income taxed. If they're pulling too much money out of their IRAs, or 401. Ks, this is altogether different when you're pulling money out of your life insurance policy.

Anna Sergunina: 00:18:16

How so let's talk about numbers, maybe for someone to kind of grasp the idea because it's there's limits right to how much life insurance you can qualify for I'm sure life insurance company does not have an unlimited amount. But how does one think about like if, if if I have a goal of saving for retirement, we have a child who we need to save for college expenses, and just some some, you know, normal stuff going on vacations buying a home buying cars, like how do we calculate how much insurance should we have? And can that be available to us?

Mark Willis: 00:18:53

Yeah, that's, that's, that's a great question. I want to be really quick to to say, Hey, this is a great tool. Obviously, I'm talking a lot about the benefits. But you don't want to just jump into getting one of these things. There's so many things to consider. Before you sign up. You want to do your due diligence. And you don't want to just work with anyone who has a life insurance license. Because there are plenty of people who would love to sell you a big juicy life insurance policy and make a big commission on you. Be aware, you know, buyer beware. Let's just say it that way. There will save save it to the end. But there's several ways that can help you arrange for making sure that you get the right policy that's not going to be riddled with Commission's or buying too much insurance. You don't want to do that either. But no to answer your question. You're right. There's, I always tell folks, your need for financing is always greater than your need for life insurance. What do I focus on? What do you mean by that? Well, you know, if you were to pass away, you would not need to buy any more cars. You wouldn't need to go on any more vacations you wouldn't need to necessarily pay off a lot of your consumer debts, usually those are paid off with your estate. You know, there's just a lot less expense when you pass away is obviously you're leaving a hole for your family, and we want to have some insurance there to cover them. But your need for financing is greater than your need for insurance. So the way we design these policies, I cut down how much insurance you're buying. Why? Because it's the insurance part that causes life insurance to grow more slowly. If it folks listen to Dave Ramsey, or Suze Orman, a lot of these guys hate on they, they downplay what life insurance, they think it's a big ripoff. And, you know, candidly, I agree with them with most whole life that I've seen, or worse Indexed Universal Life or other types of insurance, if you have the wrong kind of insurance or you design it improperly, it will be very expensive, and it will grow very slowly or both. If on the other hand, we can cut down the amount of insurance that you're putting on the contract, then a lot more of your money, your dollars will go into the cash value part of your policy, and it'll grow a lot more efficiently. And so if I can trim down how much is insurance on this contract, we can build up a lot more cash value day one, and you can use it from day one, or the things that we've been talking about your kids college, or paying off your student loans like I did, or any number of other things you might want to do. So again, your need for financing is much greater than your need for life insurance most of the time. And if we can cut down the death benefit, how much? Well, typically we take about a 70% cut on the death benefit, and also cuts the Commission's by about 70%. By the way, if we can do that cut that it allows you to flood your policy with a lot more money, and gives you a lot more use of the policy from day one.

Anna Sergunina: 00:21:54

Explain please to our listeners when they're making a payment, right? Because I think we follow like, Okay, I have $100,000, for example of life insurance policy, and my premium is X on a term policy, all of that premium goes to pay for that amount of insurance. And that's it. And that's what you're really paying for with the whole life policy. And in my simple terms, how explain to clients is that in the payment that you're making, because just like you explained, there's the component of insurance, but there's also like this investment bucket, right? That we're trying to grow because that is what we're going to be tapping into for financing needs in the future. So part of that payment that we're making consists of the insurance component. That's the, because that's an insurance policy. And then also part of it is like an investment bucket. So just go in a little bit more details on that, please.

Mark Willis: 00:22:48

Sure. Yeah. And, you know, the quick way I'll describe this is, imagine a sailboat. The policy itself is like a sailboat, there are three components to the way we design these policies. And I won't bore your listeners with too much engineering here. But let's just say we take, you know, two boats one would be a giant battleship, you know, all of it is heavy, slow growth, you know, slow moving. Let's say you're putting 1000 bucks a month into a policy that's designed the old fashioned way 100% of your money or 1000 bucks a month would go toward the base contract. That's like a battleship a giant barge, that's not going to move very fast. Contrast that with a much smaller sleek efficient sailboat where maybe only 300 to 400 bucks a month of your 1000 is going into the hole of the sailboat another 10 to 20 bucks a month would go into a term writer which all the term writer does is lift up your death benefit kind of like a mast lifts up the the death benefit on or the sail on your sailboat. So the term rider lifts up your death benefit for a very inexpensive sum and then the rest of it 500 bucks a month or so is going into the paid up editions writer which is the most efficient part of your policy especially early on. If you can design the policy much more like a sailboat that way you still have a couple 100 bucks a month to keep you out of the water that's the base face amount of the life insurance policy and then the vast majority of your money is going into the paid up editions writer which is flexible like a sailboat is is gonna sail that can go up and down. You can raise it and lower right if you need to. And that policy is going to be flooded with cash value just like the sale will be flooded with wind to help move your boat forward and help you get down the down your journey as fast as possible.

Anna Sergunina: 00:24:44

What about taxes? Because that's I think the first question that may come to mind like I get the strategy how it gives me both the life insurance and it keeps growing it and then also it's my an investment bucket like but when I take money out like let's say I need to buy a car This year?

Mark Willis: 00:25:02

Well, let me let me kind of answer your question. With an example. Let's say you wanted to buy a $50,000 car. And let's say you did this and you had a choice, you could just pay cash for the car, you know, you could just do that do what Dave Ramsey says, Why, why use this policy? Well, when you pay cash for a car, you withdraw it from your bank account and pay cash for the car, you no longer have that money, right? It's gone. All you have is the old car. And you've lost all that that money could have earned for you had you left it in your savings account, not bought the car. So your your true cost of buying a car with cash out of your savings account is tremendous. It's huge. Over your lifetime, maybe that's 100 200 grand last. Now let's use the policy. When you borrow from these policies, if they are bank on yourself designed, they will continue to grow and compound as if you never touch the money. So let's do the math there. If I was to borrow against my policy, 50 grand, it would come not from my policy, but it would come from the insurance company I have a contract with. So within about four or five days, they'd send you a check in the mail or direct deposit into it right into your bank account. And your policy would continue to grow even on the 50 Grand you'd borrowed against to buy your car. Now they do charge a little loan interest. Maybe that over four years would be about 1.92% APR. So your annual percentage rate would be about 3800 bucks over four years. That's about 2% APR, not too bad, right? To borrow money at that kind of price. Meanwhile, your policy might be growing at approximately 5%. Let's say four to six is pretty typical, but an internal return of let's say 5% a year. So over four years, your 50 grand would grow to 62,000 bucks. So what am I doing, I'm given a lot of math on a podcast and I apologize, let's kind of break it real down real simple. Folks earned 12,000 bucks in their policy, they spent 3800 bucks to borrow the money. That's still an arbitrage of 8000 some odd dollars, right? Almost 9000 bucks. That's more than $0, which is what you'd have in your savings account. Right? And that's after just four years, you know, imagine 20 years later how much compound growth you'd have on your 50 grand? To me, I can't imagine buying a car any other way. Now, you brought up taxes, none of that was a taxable event. There's nowhere on my tax return that I have to report that I did any of this. It's completely private between you and the insurance company. For a lot of folks, this sounds like financial peace and privacy.

Anna Sergunina: 00:27:45

What happens if you because you because this this transaction or this way of accessing the capital right from that bank, your own bank, in the sign this policy? What happens if you don't pay it? Like this is a borrowing? And it's like you actually have to play back? Well, what if you don't pay it back? Yeah,

Mark Willis: 00:28:03

well, so how can this thing go wrong? Well, besides, it may be being engineered improperly, which we can talk about later, or it being designed with the wrong company, which we can also talk about, if you simply just walk away from the loan, the policy will accumulate interest. And when you finally pass away decades from now, the loan would be wiped clean by the death benefit. So in the event that you might pass away, the family, your family would get your total death benefit minus the loan balance, whatever that loan balance was. And then they get the rest of that net death benefit income tax free paid to them. So and that gets your new car if you'd bought the car or whatever you bought with that.

Anna Sergunina: 00:28:53

If it happened all at the same time, that's right.

Mark Willis: 00:28:55

Yeah. No, that'd be pretty mad if they if I bought a new car and died the next day, like man, where's my where's my you know, what a rip off? Given all that you get? That's why the insurance company is willing to offer all of this to us. Because they know, one day they're getting paid back. You know, when when I borrow from my policy, there's no credit check. There's no asking question like, What are you going to do with the money? They don't care. They don't even have a required repayment plan, because they know they're being paid back someday, when I graduate when I pass away. Now I personally try to repay my loans over a reasonable period of time. Why is that? If I don't have to do it, why should I want it? Well, because I want to be able to use that money again for the next car, or to invest in the next real estate deal, or whatever else I might want to use the money for.

Anna Sergunina: 00:29:47

And this is you mentioned in the beginning, this is how you paid off your student loans right because you have you started out with having

Mark Willis: 00:29:54

a lot of student loan debt. Yeah, six figures of student loan debt and yeah, no play. And while I was following the Dave Ramsey's Dave Ramsey snowball method, but someone woke me up to this idea of opportunity cost and Annette and as you know, with your advice to clients that can be traumatic, right, when you realize, you'll never see that dollar work for you ever again, when you spend the dollar, whether it's on an ice cream cone, or to pay off your student loans, that's $1, you'll never see again, or all of its little friends that it would have grown to over your lifetime. You know, the, the $1 you have when you're 25 years old, might be $14 by the time you retire. But you won't have the $14 if you spend it today. And that was a that was like, it was mind melting to me, you know. So I wanted every dollar I had my pocket and my 20s at that time to go into something that would always compound for me forever. And that's what I found the bank on yourself strategy. And what made it to me so compelling.

Anna Sergunina: 00:30:56

So how, okay, we talked about things like buying, you know, consumable goods, cars, homes, things like that, going on vacation, even saving for retirement. What else can you do with with this policy? Like what other applications are there?

Mark Willis: 00:31:11

Oh, it's infinite. It's truly infinite. Like we have clients that are using this for ATM investments, for mobile home park investments, real estate strategies, you know, flipping houses? What if you could use this policy for rental properties? What if you could use it for alternative investments like crypto or other things, when you borrow against the policy, it continues to compound and grow. Meanwhile, you have it out there in the world invested in smart things that you might be able to recommend your clients Anna. So whatever you do, be smart about how you're allocating this but treat it like a cash flow management system. That's the way most of our clients do. We've had folks use it to pay their property taxes on their houses, or pay their income tax bill. Hmm. Think about that for a minute. Yeah,

Anna Sergunina: 00:32:00

as a matter of fact, before we got on this recording, I was reading some stuff. And recently, most recently, IRS has raised the interest on the that they're charging on late payments. So it's like 8%. Now. Wow. So you can think about that

Mark Willis: 00:32:20

they've become the bank, haven't they? For many millions of Americans, why not do the same? So it's just using, it's beginning to think like a banker. And that does change almost everything about how I understand money. So what wouldn't be included under that umbrella term? You know, when would I not use my own bank? In essence, not literally a bank, I have to keep saying that. But you know, it's like a bank. And I use it functionally like a bank. It's I don't have a debit card associated with the policy, or credit card. But thank God, but you can think of this like your own line of credit to yourself.

Anna Sergunina: 00:33:01

And the money just transfers to your account whenever you need it. Just I think you mentioned that. That's right.

Mark Willis: 00:33:04

Yeah. So a lot of folks that will what's the catch? Okay. Well, you know, obviously, this is life insurance. So the first few years, you're going to be buying a, there's going to be a cost of insurance. So there's going to, you're gonna be buying a death benefit. So in the first few years, you're going to have less than you paid into the thing, because you're buying that life insurance as a liability to the insurance company, if you croak in the first year. So I don't know, I'll give an example. If you put in, let's say, 10,000 bucks a year, that first year, you might have somewhere around seven to eight grand of cash value. And you might have depending on your age, I don't know $300,000 of death benefit, let's say. So where did that you put in 10, you only had 7000 available where the three grand go? Well, it went to buy that death benefit. So for some people, that's a non starter, because they can they can't think past the first year. And I tell folks don't do this. If you can't get past the first year, you have to be willing to think long range along well, at least a couple of years. Okay. But really, the longer you keep these policies, the more efficient they become. So by year four, you put in another 10 grand and it's growing by 11 grand. By year 10, you put in another 10 grand and it's growing by 18 grand or 20 grand 30 grand a year, 50 grand a year. So the longer you fund this thing, the more efficient it becomes. And I would always encourage people to think how long is too long? Well, at least think as long as your life really it's life insurance. So think at least two generations into the future. And now we're really starting to think like banks do. They think 1000 years into the future is not so long if you think about it. So you know that's that's one of the catches. Another catch is you'll never get double digit rates of return inside your policy. So don't treat it like an investment. That would be another, I guess, consideration. For folks that are looking into this, the last one that I'll Hush. Many people get a policy designed from someone who was not properly trained. And it ends up becoming a taxable issue, or it's riddled with Commission's, or it's issued from a company that doesn't do what I've been describing today. There's a lot of insurance companies out there, there's a heck of a lot of insurance agents out there. And many people will design a policy for you, but it's not designed to do what I've described. And unfortunately, folks, what, what your agent doesn't know hurts you. And that can end up becoming a problem when you end up noticing four years later, seven years later, oh, wow, I don't have what I thought I hadn't. So make sure you're designing this and working with the correct professional. And they can make sure it's set up properly from the start.

Anna Sergunina: 00:35:55

Just a few comments as sounds sounds like if you're thinking about setting up your emergency funds, that wouldn't be maybe necessarily the most. Looking forward, like it wouldn't be the first place to put it, the emergency funds should probably just sit in your savings account high yield savings account. But if if we have more of a midterm to the long term type of a goal, that seems like a good spot to start with. I think also we should point out mark to our listeners. The difference between the term and the whole life? I think some people may not understand what it is.

Mark Willis: 00:36:34

Yeah, great point. Yes, I agree. I think you want to, I still have a regular checking and savings, I keep my major in emergency fund. However, within my policies, and here's why I still have a My I call it the mini emergency fund. Because it does take about a week to get the money out of the policy. So you know, any emergency that I need within a week, I'm going to keep in regular cash. But the big emergencies, let's say I got disabled for two years, I would pull that from my policy, because I'm getting better returns that my savings account would give me and I get continuous compound growth within the policy at the same time. So personally, and this is a personal preference. Each client has their own ideas. I use my policies as my major my big emergency fund. So for the reasons I mentioned, now, you're right, I still want to encourage folks to have diversified investments. As a CFP, I know, you know the importance of that regular cash budgeting, this still comes down to regular, like, you still gotta live within your means you got to still like have a budget and all those fun things. So you still work with with those ideas, you're still living in that world. This is not a magic pill. But if you've designed your your life well, and you can live within your means and you can save then it can be a great tool for helping you manage the ups and the downs in one's life.

Anna Sergunina: 00:38:01

And two, I wanted to clarify like the term insurance is Oh, yes, the big term. And then whole life, it literally is for your whole life. I think there were clever with the name.

Mark Willis: 00:38:13

That's right. Yeah, the marketing department there was just genius weren't certain term, I kind of liken it to renting. It's sort of like renting an apartment for a temporary period of time, the landlord will ultimately raise the rent on you and kick you out. If you live there too long. The term insurance similarly goes up in price, and they'll kick you out if you if you that's why 99% of Term insurance never pays a claim. It serves a purpose. But it's technically it's, it's, it's the most expensive way to buy insurance if you outlive it, right. Whereas whole life insurance there. It's more like owning, you're building up an equity. Again, I I make it sound like one's good and bad. It's they're both really valuable. And they both serve a purpose.

Anna Sergunina: 00:38:58

Yes, totally. Okay, two last questions. And we're gonna be wrapping up because this is this is a great topic. And I know, I'm sure our listeners are enjoying it. What kind of investments we didn't touch on this can we actually have inside this vehicle? Yeah,

Mark Willis: 00:39:15

great question. So whole life insurance is a contract. It's not an IRA. It's not, it's not a brokerage account. So it does not have investments within it. It's purely a contract. It's a contract that you have with an insurance company. It's a lot like a real estate property, right? Like when I own a real estate property. I have a contract with the with the county or the buyer seller and the you know, so there's no investments per se within the life insurance contract. That's partly why it grows guaranteed, by the way. Now the insurance company has a team of actuaries and bond investors. They're doing a great job of managing their general account and doing I mean 50 million dollars a week of bond purchases is not uncommon. They'll do, you know, a lot of fixed income assets and that sort of thing, Anna. But in principle, you're not putting any investment inside your whole life policy. What a lot of folks will do, again, they'll borrow against the policy to invest, but it won't be within their whole life contract.

Anna Sergunina: 00:40:20

This is this is helpful. I just wanted listeners to kind of have an idea of like, stock, like, you know, I haven't, like some kind of investment over here. And I'm looking at this policy. So it's like, I should think of it more like a fixed income or like a bond, correct investment? Because I think you've mentioned something like we can't like double digits isn't the like, we're not buying Nvidia stock and cypress, right?

Mark Willis: 00:40:44

Yeah. Yeah, that's a great point. In fact, a lot of folks have found that replacing the bonds in their portfolio with insurance contracts, reduces the beta, meaning the volatility and increases the overall yield, meaning you get more money in income than say a bond would do, especially in the last few years, as bonds have really been been suffering with higher inflation rates.

Anna Sergunina: 00:41:06

Yeah, so my last question would be cost. And just really more from standpoint of like, in this is what I think is known in the world of insurance, like the younger you are life insurance, the least expensive it is, I suppose it's the same principle for whole life policy. So if you have a younger person, then they probably will pay less versus a person who is older. For the same reasons. Is that true?

Mark Willis: 00:41:35

Yeah, in this case, I'm going to be a slightly contrarian to this, here's what I mean, when you're, when you're buying the death benefit, and that's your focus, then you're exactly correct. And that's, that's the case with 99% of people out there buying life insurance. What you and I have described today, we're almost seeing that death benefit as a bonus or an afterthought. It's certainly crucial, it's going to be there for our families. But the biggest piece is the cash value. So for someone who's 25 years old, and someone who's 55 years old, if you wanted to put the exact same dollars into the policy, the cash value would grow the same. But you would have less or more death benefit. So the younger guy or gal would have a bigger death benefit. And the older person would have a smaller death benefit. But the cash value would grow exactly the same, or approximately the same. All other things equal, because we're whittling down the death benefit cost. So to your point, you could have someone who's 25 or 55, or even 85 years old, getting a policy that's growing approximately the same, the only difference would be how much death benefit were they purchasing. So

Anna Sergunina: 00:42:46

if that if that's the goal. Okay, great. Thank you so much for clarifying that, because that would be great questions? Yes. That would be a question for somebody who's like, oh, well, you know, I don't and this is also an understanding I think with with older clients, it's like, well, I don't need the life insurance anymore, because we're thinking of it is the life insurance piece only. Well, Margaret, very much enjoyed you sharing this interesting idea and concept of how you can actually use this vehicle for banking on yourself and providing an avenue for an alternative way of saving and investing in a growing growing your wealth. How can our listeners connect with you to learn more and just to kind of be in your ecosystem?

Mark Willis: 00:43:26

Well, thank you. It's been a great conversation and you ask wonderful, thoughtful questions. Your folks are better because they're subscribed to your show. So make sure you subscribe to the show. If you haven't already, give her a five star review. What I would say is if you want to meet with me and get to know a little bit more about this strategy, go to kickstart with mark.com. That's kickstart with Mark with a k.com we have a book called The periodic table of financial abundance that's hit several bestseller lists, we've had a great deal of lot of fun putting it together gives you an high level overview of everything you'd need in the financial universe. And that's at the kickstart with Mark webpage. You'll also be able to find my calendar there where you can have a 15 minute phone strategy session to see if the bank on yourself strategy or other strategies would be a good fit. Again, that's kickstartwithmark.com Awesome,

Anna Sergunina: 00:44:16

thank you so much, Mark. And we'll include all of this in the show notes and I very much enjoyed talking to you any last minute thoughts before we close? No,

Mark Willis: 00:44:24

just keep up the great work and show folks what is true about how money truly works and keep up the great work.

Anna Sergunina: 00:44:31

Awesome. I will keep on doing that. Thanks Mark so much.

Mark Willis: 00:44:35

Thank you