Aside from simply learning how to make money, the next pursuit becomes how do we stop spinning our wheels and actually make money work for us? We all want money to work for us instead of working for money. When money works for us, money is our servant. However, when we work for money, money becomes our master.
“Money makes a good servant, but a poor master.” –Francis Bacon
Don’t Work for Money; Make Money Work for You
Doing a simply google search for “how to make money work for you” pops up some articles with some pretty mundane and sterile advice. Ideas such as “buy and hold” or “invest for the long term”. While those mantras work great for money managers or banks who want your money so they can profit off of it, parking your money in what Robert Kyosaki terms “tertiary assets” is not a way to become rich, or even beat inflation.
One of the best ways to make money work for you is to place your money into cash value life insurance. (This is the point at which most people’s eyes gloss over, don’t let that be you). You see, life insurance is an asset. And not just any asset, life insurance creates passive income, i.e. cash flow.
Now I am not referring to just any type of life insurance, especially not term life. Instead, I am talking about dividend paying whole life insurance, also called participating whole life insurance, from a mutual company.
If you take a properly structured dividend paying whole life insurance policy, and combine it with the infinite banking concept, you have a recipe for financial freedom that will make money work for you until the day you die—and beyond.
Here are the basics to how it works. First, you begin by funding your life insurance policy. The funding process on ordinary whole life can take years. However, with a properly structured participating whole life insurance policy your cash accumulation starts right away.
Once you have a decent amount of money in your policy, i.e. your “bank”, you can use that money for a plethora of purposes, such as paying down debt, purchasing big ticket items (like vehicles), or investing in other income producing cash flow assets.
As you pay down debt, purchase big ticket items, or invest in more assets, you pay back your policy loan, with interest. In other words, you charge yourself interest on the loan you lent to yourself. Sounds weird, right?
You see, under the infinite banking concept you have to begin to think differently. The concept is a paradigm shift in thinking. You now have two jobs, your normal 9-5 and your banking job. The most important job is your job as your own banker. As you learn to think like a banker you will begin to produce income like a banker.
Anyway, please see our article on infinite banking for more on this amazing concept.
So once you have made your money work for you in your life insurance policy, the next step is to choose what you want that money to do for you.
Paying off Debt
One way to make your money work for you is to rid yourself of debt. However, here is the catch. Instead of riding yourself of debt by simply paying off your debt to the bank, you will be borrowing against your whole life policy and using the funds to pay down your debt. THEN you will begin paying your “bank”, i.e. your policy loan, back. But here is the kicker, you pay back your loan at an interest rate that you as the banker charge yourself. That way you are recapturing your interest and putting the power of interest at work for you—instead of against you as so many financially struggling Americans are currently doing.
Buying a Vehicle
You can make money work for you through the purchase of your vehicle. Using a policy loan, you purchase your vehicle outright. But you can’t and won’t stop there. NEXT, you begin to make monthly payments back to your “bank”, i.e. your policy over the next 3-5 years at an interest rate you, as the banker of your money, decide.
Investing in Assets
Another way to make money work for you is to use your policy’s cash value to purchase cash flow assets. In turn, you pay back your policy using the cash flow from your newly acquired asset to replenish your “bank”, i.e. your policy.
Using Real Estate as an Example
Real estate is a great way to make money work for you. First, borrow from your policy and use the money as a down payment on a real estate investment. Second, use the cash flow from your real estate to pay back your policy loan. As you do this, two things will happen.
The first thing that will happen is you will repay your policy, (with interest), and you will grow your cash value (and death benefit) of your policy. Once your refill your policy you can then turn around and borrow from it again to purchase another cash flow asset.
Another thing that will happen is your real estate investment will build equity. As time goes by and the equity in your investment grows, you can then take that equity and purchase another cash flow asset.
So now you have multiple assets making money work for you, your policy and your investment real estate!
Additional Assets that Make Money for You
Create a Business
Creating your own business is a great way to make money work for you. However, be careful here. It is easy to be self employed and think you have created a business. However, a limo driver is never going to be “free” from trying to make money. Rather, it is the business owner that can truly be free and produce an asset that can make money for him or her. Therefore, invest yourself into your business or find a new trade or pursuit and diligently learn the ins and outs. One day you can take all that you have learned and start your own business, rather than punch the clock for a company.
Patents, Trademarks, and Copyrights are examples of intellectual property. A lot of intellectual property can turn into passive income cash flow. The key is to find a need and meet that need via your creation. Have an idea for a good book or can you produce original music? The ongoing revenue stream form your creation will make money for you for years to come.
When you use your dividend paying whole life insurance properly you are essentially making money work for you in your policy and out of your policy. When you take a loan from a policy that is designed for infinite banking, the money in your cash account is still growing and compounding in true compound interest style. That is because the insurer loans you money from the company’s funds and not from your cash account. Instead, your cash value is used as collateral so that if you do not pay back the loan because say you die, the company first repays itself from your cash value before paying out the death benefit.
So as you borrow money against your cash value, the cash value is still growing due to the guaranteed rate and also from dividends. And hopefully you are making money with the money you borrowed for even further gains.
Velocity of Money
The idea behind the velocity of money is that you have to keep your money moving. If you park your money, say in a 401K, Roth IRA, Mutual Fund, your home, etc., your money is not doing anything. Rather, you need to keep your money moving into new assets, taking out debt, recapturing your interest, in a continuous cycle. This is one of the most efficient ways to escape the rat race and gain financial freedom.
Disclaimer: In no way should this be construed as investment advice specific to you. The info provided is general in nature. Do your own research and consult a professional.
We at TermLIfe2G are not financial experts nor do we claim to be. In fact, all we are is a bunch of life insurance agents who have a ton of experience helping folks qualify for life insurance.
That being said however…
Our experiences have lead us to have thousands of conversations with folks about their finances and insurance needs. This is why we like to share some of the things that we’ve learned in speaking with our clients that may help you:
- Earn a little extra money on the side,
- Save a little money here and there, and
- Potentially explore some “low risk” or perhaps “lower risk” investment ideas.