- How rich people think about money.
(bell chimes) In this educational episode
I'm going to address how money works.
And sometimes people don't realize
that what makes the world go round
is actually paying interest in order to make more interest,
it's what I call safe, positive leverage.
But leverage without liquidity is stupidity,
you'll understand why next.
(upbeat music)
So I'm Doug Andrew,
I've been a financial strategist
and retirement planning specialist now
for nearly five decades.
And during that period, I've helped 1,000s of people
understand the marvels of wealth accumulation.
The first is compound interest,
to be able to have your money
earn compounding rates of return,
which a lot of people think they understand but they don't,
and I tell 'em "A dollar doubling 20 periods
will be worth how much?"
And they say, "Oh, I don't know, 60, 100 bucks, or..."
"No, a million bucks, 1,048,000."
A dollar doubles to two to four,
okay, to eight to 16 to 32 to 64.
A dollar doubling 20 times will be worth 1,048,000,
but if it doubles even more than that, 40 or 50 times,
it's unbelievable because of-
This is why Albert Einstein called compound interest
the eighth wonder of the world,
but actually it was Rothschild who said,
"No, the eighth wonder of the world is
compound interest tax free."
See, a dollar doubling 20 times to a million
is worth a million if it's tax free,
some people say, "Well, if it's tax deferred
it's worth a million."
Yeah, but if you have to pay tax now on that million
that you're pulling out of, let's, say an IRA or 401k,
you're only gonna net maybe 650 to 700,000.
I want to have my money grow totally tax free.
If it's taxed as earned,
which is the way most Americans save,
a dollar doubles to $2 and you pay tax,
in a 33% bracket you only have $1,67 left,
that doubles and then you pay tax on that,
you'll only have $27,000 or 2.7% of what you coulda had.
And that's the way most Americans save in banks,
credit unions, mutual funds, tax is earned.
So better than a tax deferred account, like an IRA or 401k,
I prefer totally tax free.
So the first two marvels of wealth accumulation
is compounding, tax free,
but the third is safe, positive leverage.
Now, this is what makes the world go round
and this is what makes money work,
so let me explain it this way.
It's the ability to own and control assets
with very little or none of your money
tied up at risk in that asset.
So how does money work?
Well, if you understand, like in the Bible,
in the New Testament, Matthew 25 or Luke 19,
the parable of the talents or the parable of the pounds.
This is where, you know, the master gave unto one,
a servant, you know, five talents
and another two and another one,
and went away on a trip and came back and said,
"Well, how did you do?"
And the one with five doubled it to 10,
the one with two doubled to four,
but the one with one did what? Buried it.
And he says, here's your dollar
and the harshest words in scripture were spoken.
I mean, not even this harshest words
were spoken to the woman taking in an adultery,
"Thou wicked and slothful servant,
you should've taken that one talent
and put it in the bank with usury, and put it to work."
Well, what a lot of people don't understand,
if you put your money even in a bank or a credit union
or an insurance company, they're paying you interest.
Why are they doing that?
Are they just a benevolent institution?
Why would they pay you interest,
it's not sitting in a vault.
They're paying you interest
because they know they can make more interest,
but they are multimillion
and billion and trillion dollar institutions,
because so many times people quip...
Well, there's two kinds of people in the world,
those that pay interest and those that earn interest,
and I go, "No, no, there's a third kind of person.
The ones who understand when it's wise to pay interest
to make more interest, like banks, credit unions,
insurance companies and alike."
they very gladly pay interest,
a bank will very gladly pay you 1% interest.
On every million dollars of OPM,
other people's money, they pay 1%,
that's only 10,000 a year they pay.
Why do they do that?
Because they loan that out over and over and over again
because they loan it out,
and the people who borrow it
and they pay off the contractor of their house, or whatever,
and then they deposit that money back into the bank.
A bank will loan out and get back that money
17 times a year, that's called the velocity of money.
But let's just say on one, one of those transactions
they're loaning it out at five,
how much more is 5% than 1% that they're paying you?
Don't say four, it's five times, it's 500% more.
They're paying 10,000 in interest and they're making 50,000,
50,000 is five times or 500% more than 10,000,
it's a 500% rate of return.
A lot of business owners understand this,
they would gladly pay an employee or a contractor 10,000
that made them an extra 50,000,
they would buy a widget machine for 10 grand
that made them an extra 50 grand,
that's a 500% return on equipment cost
or employment cost, in the previous example.
Well, see, this is what wealthy people do,
this is how money works.
And so what I've done for years is
teach people how to become their own banker.
And so by doing that, first of all,
I have done that on any of my assets,
on any of my real estate.
I don't tie up my own money,
I may borrow money and I borrowed money
at 6% interest, tax deductible,
in a 33% bracket it only costs me four.
On every $1 million of mortgages on real estate
I pay 40,000 a year,
but I'm earning on that million dollars of cash
that I didn't tie up paying cash for the property.
I'm earning in my index universal life insurance contracts,
eight to 10%, I've been actually earning 11 netting 10,
but I've been earning many,
ever since 1980 9.6 netting 8.6, it's rounded down to eight.
How much more is eight than four?
Don't say four, it's 100% more.
Would you pay 40,000 for an employee
that made you an extra 80,000?
Yeah, but there are many, many years,
because of my credit, that I've borrowed money
as low as 3%, tax deductible interest.
In a 33% bracket, on $1 million I borrow at 3%,
it only cost me a net of two or 20,000 a year in interest
and I'm making on the million
in my index universal life, 10, tax free.
How much more is 10 than two?
Five, five times?
It's unbelievable, a lot of people don't understand this,
I've been making five times or 500% rates of return
borrowing at the net cost of two and earning 10, using IUL.
And the banks have been borrowing money
at one and earning five.
They make 500%, I make 500%, we're both happy.
Now if you're sitting there going,
"What? I've never heard of this before."
Well, don't keep your head in the sand,
this is how money works.
And, frankly, when you understand indexed universal life
you will understand how to become your own banker.
This is why many of our clients
who are very savvy business owners,
will use a max funded indexed universal life insurance
for working capital for their business.
And they will borrow a million dollars out of their policy
to tie up a piece of real estate
or for working capital,
and they borrow a million out of their policy.
And they will borrow money at 5%,
they don't have to write out a cheque
for 50,000 on that million for the year,
because it's automatically deducted
from the interest they're earning on their IUL.
In 2017, I had a client who borrowed $1 million
to tie up a piece of property with an earnest money.
They charged him 5% on his IUL policy
to borrow out a million bucks,
but his million stayed in the policy
'cause that was collateral,
and that got credited that year 25%.
So he made a quarter of a million minus 50,000,
he netted 20% tax free, or 200,000 tax free,
on his million in the policy
that was collateralizing the loan he got,
where he went out and made three million
on a piece of real estate.
Is this making any sense?
If you're not gonna study this
you're gonna miss out big time,
But on the average I have made 100% more
than the cost of borrowing the money out of an IUL policy.
But even if you only made 2% higher,
if you can make an extra 2%,
we have many, many clients,
on every million dollars of cash value
in their IUL policies,
even if those IUL policies only averaged 8% rates of return,
which is almost a no-brainer,
they're able to pull out 10% without depleting principle,
even though they're only earning eight,
because they are accessing the money
at a rate of return, okay, tax free
and they're earning 2% more
than the eight that they're earning.
If this is connecting dots in your head,
$1 million can generate a 10% payout,
1,00,000 a year tax-free income,
even though you're only earning eight
because you're pulling it out the smart way
by using safe, positive leverage.
Folks, you are missing out if you don't learn about this.
So this is how wealthy people do things,
this is the smart savvy ones.
If you wanna learn more, I want you to study this book,
I want to gift you a copy.
It's my 11th book,
it's been flying off of our warehouse shelves.
It's called "The LASER Fund",
now LASER is an acronym that stands for
Liquid Asset Safely Earning Returns.
A LASER Fund is a properly structured,
maximum funded indexed universal life
used like I'm talking about here,
but you have to structure it correctly.
And so it's actually two books in one
and you can go to Amazon and pay $20,
and if you do thank you, but I'll gift you a copy free.
It's 300 pages jam packed with information.
200 Pages is this side,
which is all the charts and graphs and explanations,
if you're a left brain learner.
If you're a right brain learner
you flip it over to this side,
this is about 100 pages,
12 chapters with 62 actual client stories.
But this will teach you both right brain, left brain methods
and it will empower you on how to diversify
and create the foundation for tax-free accumulation,
a tax-free retirement, how to become your own banker,
and understand how mega wealthy people build wealth
and continue to not outlive their money.
So go to LASER Fund, L-A-S-E-R fund.com
or click on the link below.
You contribute a nominal amount
towards the shipping and handling,
I'll cover the rest of that cost and I'll pay for the book.
I'll fire out a hard copy to you.
And then while you're in there claiming your free copy,
check out options for audio and video,
if you like to listen and learn and watch and learn, also.
There's also educational webinars
we teach on a regular basis, they're free.
You can even schedule an appointment
with an IUL specialist that I oversee and mentor,
and they'll create some illustrations
at no cost and no obligation,
so you can see how a properly structured IUL
can be established in your particular set of circumstances.
This is really about you and your brighter future.
(upbeat music)