Employ the 3 miracles of wealth accumulation. In this episode, I'm going to address the question,
"How to become an ultra-high net worth individual.
So, I'm Doug Andrew and I've been a financial strategist and retirement planning specialist
for more than 4 and a half decades. And I've helped many, many people accumulate
wealth. But I've also been blessed to meet many multi-millionaires and billionaires.
And so, I've had the opportunity in private to ask them how they accumulated that wealth. There are 3
basic marvels or miracles of wealth accumulation that I have discovered. And I've also used these
to help many people become wealthy. Even ultra, mega-wealthy. The billionaire class.
They used these 3 marvels or miracles in one way or another. Now, I'm going to also use a metaphor
in this episode. And as you go through and learn if this clicks and you want someone else to watch
this, be sure and share, click like. Subscribe to this channel because I post an in-depth topic
every single day that answers a financial question on this channel. So, the 3 marvels or miracles of
wealth accumulation when I first disclose them, some people go, "Oh, yeah. I understand that."
We'll see. Are you ready? The first miracle or marvel of wealth accumulation is
compound interest. Now, you wouldn't believe how many times I say that in a room full of CPAs
or Tax Attorneys. And they roll their eyes and go, "We thought this was advance continuing education?"
I go, "So, how many of you think you've got a pretty good handle on compound interest?" -"Yes,
we do." I go, "Okay." Now, it was Albert Einstein that said, "Compound interest is
the 8th wonder of the world." So, this is what I do. I pass out an 8 and a half by 11
sheet of copy paper. This is a 26-pound copy paper. Now, I don't know if you know what
that means. It means that it'll hold 26 pounds of weight before it rips. 26-pound copy paper is the
typical and it's five one-thousandths of an inch thick. And so, I pass out a sheet to everybody
and I tell them to fold it in half like that. And then fold it in half again. And then I say,
"Now, imagine if you fold this over 48 more times in half..." Now, you can't physically do that
because of the folds. And they pretty much know that.
But imagine if you could fold it over 48 more times. A total of 50 times. I want you to take
out your pen and write down on this sheet of paper about how thick this would be if you fold it over
48 more times. A total of 50 times in some form of measurement. Millimeters, centimeters,
inches, yards, miles. And so, they all write it down. Now, I've done this with rooms full of 80
financial professionals. And then I go around the room and say "Hold up your answer."
The most common answers are 3 quarters of an inch, 6 inches, 2 inches. Some people say a mile and
they get laughed at of the room. Now, I understand compound interest. I didn't have a calculator.
But I said, "Oh, it's at least 26,000 miles." And I get laughed at of the room. Then I go, "Okay,
I thought you had good handle on compound interest? What is this doing everytime you fold
it in half?" it's doubling. Yeah. Double, double, double. On the sheet of paper, I hand them the
math is on the inside. Do you know that a sheet of copy paper five one-thousandths of an inch thick,
if it's folded over 20 times, it's already a 1,048,000 time thicker? It is almost a mile high.
"WHAT!?"
If you fold it over 42 times (Double, double, double, double), the stack of paper would be
from here to the moon. If you fold it over 8 more times, 50 times, it would be 93 million miles high
from here to the sun. If you could've fold it over one more time, 51 times, it would be from
here to the sun and back. It's double, double, double, double. They are shocked. Because they
were thinking 3 quarters of an inch when it's from here to the sun. That's compound interest.
Now, it was Rothschild who said, "No. The 8th wonder of the world is compound interest
tax-free." Not tax as earned. Do you know most Americans save their money in taxed as
earned investments? It's the worst way to save and the most common way people save money. So,
I want to illustrate this for you because I've shared with you so far,
2 of the 3 miracles --compound interest and tax-free accumulation. So, let's go over here to
the screen and I'll show you a dollar doubling 20 times. Now, linear growth would just be a dollar,
dollar, dollar. It's like taking 20 steps. But if you double the number of steps, that's exponential
growth. So, here we go. A dollar doubling to 2 to 4 to 8 to 16 to 32. After 20 doubling,
would be worth $1,048,000. That's one way to stack up a million from one dollar. Just double it
20 times. Now, it's a million dollars if it's tax-free. But most Americans save their money in
banks, credit unions, regular mutual funds. Some people use tax-deferred IRAs. So, they may say,
"Well, I have a million. Tax-deferred." Well, it's not all your money. A third of that belongs to
the government. Only about 650,000 of that is your money. I prefer totally tax-free. So, a million is
only if it's tax-free. And that's my preferred way of saving. Let's say you have to pay tax as you
go at the bank or the credit union every year on your earnings. And let's say you're in a 25% tax
bracket. So, dollar doubles to $2. You have to pay tax of 25 cents on that dollar. So, you only have
a buck seventy-five left. That buck seventy-five doubles to 3.50 and you pay tax on that. Guess
how much you'll have instead of a million. Only $72,000. Only 7.2% of what you could've had.
This is how most Americans save. But do you know that most Americans are in a higher bracket than
25% at the end of the day? Between federal and state tax, many of them pay 33%. In California
over 40%. In a 33% bracket, instead of having a million, you'll only have $27,000 instead of a
million. 2.7% of what you could've had. So, that's why Rothschild said, "No. It's not just compound
interest." Because this is compound. It's compound interest tax-free. There's a big difference
between a million and 27,000. This is only 2.7% of what you could've had. But this is why I
prefer tax-free accumulation. That is the second marvel or miracle. Now, what's the third one?
A lot of people have a hard time getting their brains around this one. I'll say it this way. Safe
positive leverage. What's that? Again, if this is intriguing you already, share this with a friend.
Subscribe to this channel. And at the end of this episode, stay with me and I want to gift you
a copy of my most recent bestselling book where this is all explained. But what is safe positive
leverage? It is the ability to own and control assets with very little or none of your money
tied up or at risk in that asset. Did you hear that? Okay? In other words, it's owning and
controlling assets where your money is not tied up or at risk in that asset. If I own real estate,
I get to participate with the growth on the real estate. But the actual equity in the real estate,
I keep separated. In a position of liquidity safety and earning predictable rates of return.
Because that real estate could drop in value. And I'm earning compound interest over here
tax-free while the real estate does whatever it does. If the market is growing, I don't have my
money in the market. I link my returns to whatever the market does. But my money is not at risk
in the market. I leverage. Now, a lot of times, you'll have advisors like Dave Ramsey that'll say,
"Oh, no. I leveraged and I got into trouble. I way over-borrowed." And so, he pounds on get out of
debt, get out of debt. And don't ever leverage. Well, that's because he did not have liquidity.
See, leverage without liquidity is stupidity. It is what makes the world go round. This is
the parable of the talents in Mathew 25. This is the parable of the pounds, Luke 19. This is where
I can control assets and own them with very little or non of my money tied up at risk in that asset.
In other words, if Donald Trump going to be buying a skyscraper, what's the first thing he does?
Does he talk to his money manager and say, "Hey, bring the checkbook and write out a check for that
skyscraper." No. He says, "Hey, what's the least amount of money that we can tie up in order to
gain ownership and control of that building? And then let's refinance it as often as possible and
keep the money separated from the building. Because the building is going to go up in
value regardless of how much money is tied up in a property. But by having the money separated, he
can use it for other purposes than when it's tied up in the property, okay? This is safe positive
leverage. But you want to have liquidity. When people leverage with no liquidity,
then all of a sudden, when a recession hits, they don't have any liquid money because it's
all tied up in the properties. That's not what I am talking about. You want to have full liquidity.
So, that is the third marvel or miracle of wealth accumulation. So, how does this all come together?
So, how this all come together? if you study the lives of very successful people like Walth Disney,
JC Penny, Ray Kroc, the originator of McDonald's, the hamburger restaurants. They all used life
insurance to accumulate their money and keep it safe and liquid. And this is where they
leveraged money to be able to save Disney Land when it was in trouble. And Ray Kroc did it with
McDonald's. JC Penny did it to save his department stores. They used life insurance policies to keep
their money liquid safe earning compound interest totally tax-free. And then they leverage that. I
have many multi-millionaire clients who will keep millions of dollars inside of their max-funded
index universal life insurance policies. I call them Laser Funds. L-A-S-E-R, liquid assets safely
earning returns. Because they're tax-free. They compound. Now, it's not pie in the sky rates of
return. But I have a client in 2017, he buys apartment complexes that are sort of worn down
and he buys them and he fixes them up and then he flips them. And so, he bought a 30-million-dollar
property that year. He needed a million dollars to tie up the property on his earnest money. So,
he borrowed a million out of his life insurance policy with me. And the insurance company charges
him 5% because he could've withdrawn the million. Instead, he borrowed it. Why?
Because the insurance company kept crediting him 25% that year. It was an incredible year in the
market and he links his returns to what the market does but he doesn't lose if the market goes down.
That's called indexing. He made $250,000 on his million while he was using it in his business.
Because the insurance company loans you a million. There's no loan application. You just
fill out the form and say, "I want to change the nomenclature. I want to borrow a million
using my policy as collateral." Fine. They gave them a million bucks. Charged him 5% or 50,000.
He made 250,000. He netted 20% return tax-free on his million. He made 200,000 on his million in his
insurance policy while he was using that million as leverage to fix up a rental property and sell
it and double his money over there. Hello? This is what savvy smart people do. That's why I use
a max-funded indexed universal life insurance contract because it has these incredible marvels.
You accumulate your money tax-free compounding. You can access money tax-free. But you can use
it for safe positive leverage to become your own banker. To be able to have your own family bank is
what I call it. Would you like to learn more? This is what has motivated me to write 12 books so far.
My most recent bestselling book is called the Laser Fund. Because I affectionately call a
maximum funded indexed universal life insurance contract structured correctly to do what I am
talking about, the Laser Fund. Liquid assets safely earning returns. This is how to diversify
and create the foundation for a tax-free retirement, a tax-free emergency fund. All kinds
of other goals. College funding for your kids, grandkids. It's like a financial swiss army knife.
But it envelopes all of those miracles and marvels in one. So, go to laserfund.com or click below.
And you contribute a nominal amount towards the shipping and handling and I'll pay for the book
and fire it out to you. But also look at the other options to listen and learn and watch and learn.
My 2 sons and I, they're co-authors with me on this book recorded an 18-hour masterclass.
And everybody who has gone through that 18-hour master class
takes their finances to a whole new level when they learn these principles. So, here's
to your brighter future. Make sure and claim your free copy of this 300-page book.