Become your own banker.
In this episode, I'm going to address the question, "Where should I keep my working
capital for my business?"
Now, get ready.
You're going to be blown away where you can have money that is extremely liquid earning
great rates of return and it's tax-free and how you can leverage and use it as working
capital in your business.
So, I'm Doug Andrew and I've been a financial strategist for more than 4 and a half decades.
I help people optimize their financial assets and minimize unnecessary taxes.
But I also have many mastermind groups that I facilitate for entrepreneurs and business
owners.
When I teach this concept of how to manage working capital for their business, how to
become their own banker, they are blown away.
So, as I proceed here, you are going to learn that whenever you have money that is earmarked
for working capital to use in your business, to but inventory or seize the opportunity
or whatever.
Because if you're a business owner, you know that many times, you have to put a lot of
wood in the fire, so to speak before you finally get some BTUs of heat back.
And I have learned this for 4 and a half decades.
I've had to shell out a lot of money waiting.
Sometimes 6 months, 9 months, a year to start getting return back on that.
And so, as I began to receive it back, I knew where to put that capital.
And so, you want to make sure your working capital passes what I call the laser test.
Laser is an acronym that I use that stands for liquid assets safely earning returns.
So, the first letter [???] of those words spells LASER.
And I'm going to show you where I put my working capital where it's liquid.
I can access it with an electronic funds transfer or phonecall.
It's safe.
I don't lose the money due to market volatility or the institution where it's at.
I earn predictable rates of return on it while I'm using it and also while it is sitting
there waiting for me to tap into it.
It's also totally tax-free.
And so, I like to put my money in vehicles that pass what is called the laser test.
You're going to see how powerful this is and how you can be making tons of money on your
money while you're using it in your business simultaneously.
So, in order of importance...
First liquidity, what comes after liquidity?
Safety.
Now, when we talk about safety, it's not only safety of the institution but also safety
of your principal.
So, whenever I put money aside like working capital for business, I wanted to pass the
safety test on a scale of 1 to 10 around an 8 or a 9 or even a 10 if I can.
I do not like losing my money.
So, I want to use institutions that are rated double A and triple A by various rating agencies
like Fitch and Standard and Poors and so forth.
But more important than that is safety of principal.
See, I want to set aside whether it's 10,000 or 100,000 or a million dollars or 10 million
in my business working capital account.
And I want to participate when the economy is doing well when the market is up.
But I do now want to lose due to market volatility when we have these dips or crashes in the
market.
And so, this is why I use this strategy called indexing in order to protect my principal.
When you use indexing, you're going to learn that when the market goes up, you get to participate
on the upside.
But when the market goes down, you do not lose because your money is not invested or
at risk in the market.
Your returns are linked to the market.
And this is critical to have safety of principal with your working capital for your business.
And you're going to see from some stories I share with you that when the economy is
going down, you need access to money during recession sometimes just to make ends meet.
The last thing you want is to think that you have a million-dollar next egg or a cushion
and it's only worth 600,000 because the market is down.
So, you want to protect your principal.
Safety of principal.
Not lose due to the market volatility.
And so, that's number 2.
So, I've owned many, many businesses in my life.
And I've helped with my spouse create several business ventures.
And whenever we do that, we keep our working capital in a vehicle which I call the Laser
Fund in a few and wondering what is that.
At the end of this episode, I'm going to give you a link where you can claim your free copy
of my most recent bestselling book called The Laser Fund, okay?
Now, the key elements of a prudent investment especially money that you earmarked for working
capital for a business, you want to have liquidity and safety.
But next is rate of return.
But it's 3rd down the list.
So, you will learn if you read and study my book that you want to earn a rate of return
that is at least equal to the rate of inflation.
But hopefully, grater.
Because if your working capital account is in some bank or credit union paying you a
measly 1% it's like you're rowing upstream at the rate of 1 mile and hour and the current
of inflation is coming down at 3 or 4.
You're going backwards.
Okay?
That's not smart.
You want to have your money in a vehicle that is earning predictably a rate of return that
is grater than inflation.
Now, to be honest with you, you're going to learn by studying this book that I've always
earned a rate of return at least 5.5% greater than the inflation rate at the time.
If inflation is at 5, I was earning more than 10.
If it was 10, I was earning more than 15.
If it's 15, I was earning more than 20.
People go, "How do you do that?"
It's actually pretty simple.
It's surprising how many financial advisors don't know how to do this.
I simply link my returns to the things that inflate.
I don't like inflation any more than you do.
But it doesn't hurt me.
It helps me because my money is linked to the things that are going up in price.
And so it helps me, it doesn't hinder me.
And so, when you earn a rate of return, generally speaking, if inflation is 3, 4, 5 percent;
you've got to be earning 7 to 10 percent.
And I've been earning 7 to 10 percent predictably for more than 45 years on my laser fund.
You're going to see how and why.
But that's the 3rd key element of a prudent investment for a working capital account or
any savings account for that matter.
Now, working capital for business, I want to make sure it passes that LASER test.
And so, not only do I want liquidity and safety.
But I want liquidity and safety.
But I want to earn predictable rates of return and I want them to be tax-free.
So, when we talk about this, money that I earmarked for business, to be able to have
in my fingertips with an electronic funds transfer or a phone call.
And have safety of principal.
That's why I use the laser fund and indexing.
I'm able to participate with good rates of return where I make money when the market
goes up and not lose when it goes down.
But hello?
The reason why I use the laser fund is because it's totally tax-free.
It has been grandfathered in the internal revenue code for over a century under section
72(e), 7702, and 101(A).
Those 3 sections say that money inside of max-funded insurance contract will accumulate
totally tax-free.
When I access money the smart way, it's totally tax-free.
And when I ultimately die, it blossoms.
It increases in value and transfers income tax-free.
Hello?
That is the best place I could have my serious cash not only for retirement, college funding
for my kids but for working capital for business.
And I'm going to share with you an actual story of one of our clients who uses his portfolio
of laser funds to buy and sell huge real estate properties apartment complexes.
So, I'd like to end this episode by sharing a true story of one of my clients, a very
good friend, in fact.
Most of my clients become good friends of how he kept his working capital for his business
very liquid, safe, earning predictable rates of return in my favorite vehicle called the
Laser Fund.
And I'll show you how you can claim your free copy of this book in just a moment.
So, what he does is he buys distressed properties.
These are usually multi-unit residential apartment complexes.
And he goes out and he finds properties that need to be fixed up.
But the current owner doesn't have the capital or the desire to invest a million bucks or
whatever in fixing up the property.
And he doesn't want to be a landlord.
He likes to sort of buy it.
Fix it up and flip it, so to speak.
But these are large apartment complexes.
And some of them are worth millions of dollars.
So, where does he keep his working capital to do this?
In the Laser Fund, a maximum-funded insurance contract where the money is extremely liquid
safe earning predictable rates of return until he uses it.
But when he goes to access money, he borrows his money out of his laser fund instead of
withdrawing it.
So, let me use an example.
If he finds a piece of real estate and he needs to get a million bucks out of his laser
fund to tie up the property with an earnest money he may call me and say, "Doug.
Hey, I need a million dollars out of my laser fund.
Will you fax or email me that one-page form.
Now, I now exactly what he's talking about.
He does this many, many times.
So, I send him the one-page form and he puts his name at the top and he puts his policy
number because it's an insurance contract.
And this is where he has a million or more dollars this liquid and safe.
And he answers the question on the form: "Would you like to withdraw a million dollars out
of your insurance policy?
Or would you like to borrow a million dollars?"
Guess which one he checks?
Borrow.
Why?
If he withdraws his million, if it's in there earning 6, 7, 8, 9, 10 percent in some years
like 2017, he was earning 16% and even 25% on another laser fund.
He would lose that opportunity to make 16 or 25 percent.
Why would he do that?
Because the insurance company will loan him a million dollars at 5%.
Now, he could actually borrow the money at 2.5% and they'll continue to credit 2.5%.
And that's called a zero wash loan.
That's not what I would recommend.
He borrows money at a little higher rate at 5% and they will continue to credit him on
the million that he left there.
He simply used it as collateral and they keep crediting him whatever the indexed rate is.
So, in 2017, he borrowed a million bucks.
They charge him 5% that year.
What's 5% on a million? 50 grand.
He didn't have to write out a check.
It's automatically deducted from the interest he earned that year.
How much did he earn?
In one, 16%.
In another, 25%.
That's $250,000 he earned tax-free.
So, if you understand what I just said, he borrowed a million dollars, they charge him
50,000.
They credited 250(thousand).
250,000 minus 50(thousand), he netted 200,000 or 20% tax-free on his money while at the
same time he used that million in his business to tie up an apartment complex fixed it up
and turn it over and make 100% there too.
Hello?
This is how you use a laser fund as working capital for business because if you understand
how money works, you can continue to earn interest on your money while you're using
it in your business.
Are you getting it?
This is called safe positive leverage.
So, folks, if you want to learn more about how to do this and how the laser fund works,
I would recommend you study this book.
I don't want you missing out.
This is actually 2 books in one.
This side is for the left-brain thinkers.
It contains about 200 pages of charts and graphs and explanations --14 chapters.
If you learn more by stories, you just flip it over and you read this book.
This has 12 chapters, 100 pages with 62 actual client stories like the one I just shared
with you.
If you like to use your whole brain, your right brain and your left brain, read both
books.
But here's how you can claim your free copy.
I'll pay for the book.
You simply go to laserfund.com and contribute a nominal amount towards the shipping and
handling.
I'll cover the rest of that cost and I'll pay for the book and get your free copy and
begin to learn.
There's options in there to listen and learn, watch, and learn.
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