Title: “The Power of Verbs Over Nouns: A Fresh Approach to Money Management”
Episode: 224:
“I love verbs more than nouns when it comes to money. I don’t care what you call my money.”
For today’s episode, we have Mark Willis. He is a certified financial planner and a real estate investor who works with people from 50 states and around the world to help them build real wealth outside of Wall Street.
In this episode, he talks about the more efficient way to manage your money and how to build wealth in ways that you can control and understand. Listen and enjoy the show!
Key Takeaways:
[00:44] Introducing Mark Willis
[05:45] Bank on Yourself
[07:47] Building up contractual wealth
[09:56] What is banking?
[11:55] T.G.I.F.
[15:38] Averages mean nothing
[20:57] Disgust in marketing
[23:51] Integrating the Bank on Yourself system into Profit First approach
[33:26] Connect with Mark Willis
Quotes:
[08:08] “Owning a property is the same as owning a policy in that they are both founded on the civilization technology known as the contract.”
[09:52] “It is the most profitable enterprise in all of human history is banking.”
[21:30] “It’s impossible to convince someone of something when their salary is dependent on them not being convinced.”
Connect with Mark:
Website: https://kickstartwithmark.com/
Tired of living deal to deal?
If you are a real estate investor or business owner who is tired of living deal to deal and want to double your profits, head over here to book your no-obligation discovery call with me. Either myself or someone from my team will hop on a short call with you to get clear on your business goals, remove any obstacles holding you back, and map out a game plan to help you finally start keeping more of the money you work so hard to make. – David
Transcript:
Speaker 1 (00:00):
So I like verbs more than nouns when it comes to money. So I don’t care what you call my money, call it a wet sponge, call it a 401k. I don’t care what you call my money, as long as it does what I want it to do for me, as long as it has the right characteristics, so the right attributes.
Speaker 2 (00:17):
If you’re a real estate investor who’s sick and tired of living deal to deal, then welcome home. Hear from everyday real estate investors just like you, and discover how they’ve completely transformed their business by taking a profit First approach. This is the profit first for REI podcast, where we believe revenue is vanity. Profit is sanity. It’s time to start making profit a habit in your business. So here’s your host, David Richter.
Speaker 3 (00:44):
We have a very special guest today is Mark Willis and he goes into how to use Profit First and what you could do instead of using bank accounts for every single account. And I do endorse this methodology and I highly encourage you to listen because this is where if you’ve already implemented Profit First, you could get some advanced tips and it’s a very great episode where you might be able to be more efficient with your money and bank on yourself. So I wanted to give you this episode as a special treat because I don’t want you to just go out there and be like, okay, I’ve set up the system, now what do I do? Or the tax money’s just sitting there. How can I make sure that I do something better? This will give you some very pointed tips. Thank you for listening and enjoy the episode. Hey everyone, this is David Richter, profit First RI podcast. I have Mark Willis here today. Really excited because he’s going to give a little bit of a different sprint on profit first because a lot of us use bank accounts and that’s what we teach a lot when people first get started. But this might open your eyes a little bit on an even better, more efficient way for you use the Profit First system. So Mark, thanks for jumping on today.
Speaker 1 (01:53):
David, great to be here. Thanks so much for having me.
Speaker 3 (01:55):
Yeah, well, why don’t you just give people a little bit of your background, where you come from, what you’re doing now, and then we’ll dive right into it. I think this is a very interesting topic and I think a lot of people will be very interested to hear about not using bank accounts for all your accounts.
Speaker 1 (02:09):
Yeah, I followed the typical financial plan that the radio hosts had for all of us. The folks with last names rhyming with Shamsi and Borman, so if you follow their advice, you’ll kind of know where I was at the moment of becoming a young adult trying to figure this thing out. I feel like I walked into a movie about money 45 minutes into the plot and I had no clue what was going on or why I’m supposed to get this 401k or why I’ve got all this student loan debt all of a sudden, or why I got the free T-shirt to sign up for that credit card last week. That was sort of the awareness I had with Money. Now we work with folks as a certified financial planner, myself and my colleague advisors. We work with folks in all 50 states and really around the world to help people build real wealth outside of Wall Street. And we’re looking to help people who want to build their wealth in ways that they can control and understand. We specialize in helping real estate investors, whether they’re just dabbling in the topic or that they’ve got a hundred doors in their portfolio, whether they’re looking at wholesaling or syndicating or landlording or anything in between. We seem to have some strategies that work pretty well with just about all the particular investors that we work with, which is a great honor and privilege for us to get to work with those folks.
Speaker 3 (03:24):
How did you go from the Dave Ramsey type, that type of advice to where you got to today? What was that journey like?
Speaker 1 (03:33):
Wow. Well, I’ll give you the short version if you want to double click and go deeper, we certainly can. Let’s just say I left college with six figures of student loan debt and I had no plan to pay it off, man. So I just was grasping at straws because we were in the middle of the great recession at that time. And so we started diving into the debt snowball method to pay off all our debts. And I listened religiously to different radio programs, that sort of thing, Dave Ramsey being one of them. And at one point a mentor of mine came to visit us. He was a professor from the college that I’d built up all that debt at. Maybe he felt sorry for me, I don’t know. And he looked at me in the eye and as I was frantically trying to pay off all my debts, every dollar going towards the debt payoff and eating rice and beans, and on the weekends man, we’d go crazy and eat beans and rice.
(04:22):
I mean it was like living lean for many years there, my wife and I. And so he looked at me in the eye and he said, mark, is it possible Dave Ramsey could be wrong about something? And he just sort of let that question hang out in the air for a while and I had to candidly tell him I had no clue. I mean, I assumed that whatever Dave said was true. So I had to go back and do my due diligence and look into a strategy that he had brought up to me called Bank on Yourself, which ultimately changed my life and the life of my family tree and now thousands of our clients around the country as well.
Speaker 3 (04:57):
Wow. Well, okay, so it sounds like someone asked you a hard question and that was the breakthrough moment. It sounds like for you of turning that all around.
Speaker 1 (05:08):
You could hear the cracking sound of my closed mind beginning to finally open.
Speaker 3 (05:12):
That’s a great visual there. Okay, so I guess that’s where a lot of people, if you’re listening to this now, you might need to open your mind if that’s all you’ve had in your past, is that type of advice. I’m very interested where you went from because I know what bank on yourself has founded on. So from going from the Dave Ramsey advice to the bank on yourself, can you tell briefly the concept of bank on yourself? And I know that briefly is like, I don’t know if it can be brief. So go into it for the people to get an understanding of it
Speaker 1 (05:45):
In three words, you bank on yourself.
Speaker 3 (05:47):
Oh, there you go. That was easy.
Speaker 1 (05:49):
That’s it. Yeah, if you want a little bit more, I can give you a little bit more. Let’s go a little deeper, a little
Speaker 3 (05:55):
Deeper there. That’s really the 30,000 foot
Speaker 1 (05:58):
Fee. Yeah, that’s super 50,000 foot, yeah, right foot. So either you’re going to bank on yourself or someone else is going to bank on you. Either your money has to live somewhere, it’s going to either live at your bank or someone else’s bank. Now I’m not intending to set my clients up with FDIC insured, typical chapter level banks that you familiarize yourself with in your area. This is the banking function. So I like verbs more than nouns when it comes to money. So I don’t care what you call my money, call it a wet sponge, call it a 401k. I don’t care what you call my money, as long as it does what I want it to do for me, as long as it has the right characteristics or the right attributes, that’s where I’m after. And that’s what a lot of our clients look for too.
(06:43):
We’re all told get the 401k, get the credit card, get the student loans, get the house, buy the real estate property, whatever else. But the key for me is functionality. Is it doing what I want it to do or am I having to run around a chicken with my head cut off to try to keep up with what my money demands of me? No, I want other, I want my money working harder for me than me working for the money. So what is it? Bank on yourself uses a modernized form of all things in the financial universe, David. It uses a modernized form of dividend paying whole life insurance, which doesn’t sound like a place to save money for most folks. They think life insurance and they think, oh, that’s the money. I’ll leave my family someday when I graduate. But this is a different kind of life insurance.
(07:28):
This is the kind that you can build wealth within. It’s almost like when you buy a rental property, you build up equity in that property, don’t you? When you rent an apartment, you’re just borrowing the apartment for a month or two, but when you own, you’re building equity. And that’s what I’m interested keenly interested in for my clients, for myself too, is building up contractual wealth. And that’s what life insurance is. In fact, real estate and life insurance have this in common. The value is in the contract without a contract, your rental property is nothing more than whoever has the bigger shotgun. Squatters’ rights is basically all we got. If we don’t have a contract, that’s all we got. So owning a property is the same as owning a policy in that they are both founded on the civilization technology known as the contract and the civilization technology known as the contract is the basis of life insurance as an asset class. Okay, so let me pause for a minute. There’s a little bit more, but why don’t we stop for a minute. Fundamentally, going back to first principles, the contractual wealth you have with your real estate and a life insurance policy are equivalent. Does that anything there not make sense David?
Speaker 3 (08:40):
No, I mean that makes sense obviously where if I like how you said it, if you don’t have a contract, then it’s like whoever has the biggest gun instead of being able to take over the property. So I like that. And it’s the same thing with the insurance, but I want to even back up before that and say, okay, if you’re banking on yourself, what is that banking function? Because when you think about what you said, typically you go into let’s just use a big bank that everyone knows Chase down the street, chase Bank is there you go, you have a deposit slip, you put the money in there and then you have it when you need it. You could do your debit card or whatever, pay off credit card. So it’s like what are you owning on this of the banking function? Because you’ve mentioned that briefly, and I think that’s really important too. I dunno if you want to dive a little bit deeper into what that is specifically. Well,
Speaker 1 (09:29):
There’s a great book on this topic. It’s called Debt The First 5,000 Years by David Grabber, and it really explores the concept of human relationships in the way of debt. We have a banking function that’s says core to human civilization as friendship or marriage. That’s how old banking goes. And it’s the most profitable enterprise in all of human history is banking. So what is banking? Well, it’s not just the checking and savings accounts that you might open up when you’re like six years old. Banking is the concept of debt and collateralization and I know real estate investors listening will understand the power of debt and the power of collateralization, but that’s just a function you can use. Three friends could get together and become a bank in essence for each other. One person borrows from another person and then pays that person back. That’s the banking function at the U and ME level, it doesn’t require a big mega conglomerate, multinational bank corporation with a big marble or glass entryway.
(10:36):
It doesn’t require all that. So what does it require? It just requires the capacity to build up a contingency fund and then loan it out to customers. Okay, so you can do that. I could do that. It doesn’t require the FDIC or some other entity to maneuver all of that. There’s private lenders in the real estate space that are very familiar with this. Okay, so life insurance is very interesting. It didn’t strike me at first as a certified financial planner. It’s not like they tell you about bank on yourself when you’re getting your CFP. You really have to explore and dig deep into this. So what is whole life insurance and how does it relate to real estate and maybe even profit first? Well, when you have a whole life policy, you build up this death benefit certainly is there. But you also have this thing called cash value and it’s kind of like when you buy a house, you have the whole house, but you only own the equity in that house, which is what you’re building up as you pay down that mortgage.
(11:36):
So that equity is the cash value inside the life insurance and the equity or the cash value is what I’m most interested in for as far as the financial planning tools that we use with our clients. So this cash value piece, four things to keep it real simple. T-G-I-F-T-G-I-F-T. Tax advantages like crazy. And it could even be tax-free if we designed it right, it could even be a tax-free access to the money. So lemme say that again. You can have a seven figure number in that policy that life insurance cash value might have 1,000,010 million bucks in it, let’s say. And it’s available without taxes due if we designed it right. So that’s incredible. That’s the T. There’s a number of other major tax advantages, but we’ll keep it brief here today. G stands for guarantees. So this thing grows guaranteed every single year no matter what the stock market or real estate markets are doing. So we’ve had some modest fluctuations in several markets and certainly the interest rates on mortgages are going nuts right now. Policy values just keep going up higher and higher. All of our clients have hit all time record highs and their policies every single year since they’ve started their accounts. And that’s going to keep happening contractually for the rest of their lives. That’s awesome. We could stop at any one of these,
Speaker 3 (12:55):
Right? Yeah.
Speaker 1 (12:56):
Third insurance. So it is life insurance. We’re solving that need for many families by automatically leaving a death benefit more than I’ve saved for my family. If I put a dollar in my savings account and I died tonight, my family would get a dollar a dollar. But don’t spend it all in one
Speaker 3 (13:13):
Place.
Speaker 1 (13:14):
If I put a dollar in my life insurance, it’s going to be depending on my age, it might be $10, $7, $15. That same dollar could be multiplying the gift to my family. That’s the third piece. And then lastly, and I’ll hush F stands for financing. Financing. You can become your own source of financing. So back to that idea of the function of banking. You can borrow against these policies like a bank and as you do that, the policy will continue to grow and compound as if there was no loan. So say that another way. If you had a hundred thousand dollars, let’s say in cash value, and let’s say you borrowed out $80,000 to put as a down payment on a house, your policy would still grow on the full $100,000, even on the capital you borrowed and you’ve got the rental property you just bought performing for you as well.
Speaker 3 (14:10):
Double dipping.
Speaker 1 (14:11):
Double dipping, man, good way to
Speaker 3 (14:12):
Say it. Especially in the real estate world, you can actually buy something that appreciates as well and then as has all the other advantages but you’re using, I really like that. So I would also say too, does this, what you just described there, when you can take it out and it’s not affected for the growth, is that compound interest and is that something that plays into that
Speaker 1 (14:37):
True compound interest has no volatility? Think about it. True compound interest has no volatility. Of course the stock market is not truly compounding, neither are real estate prices. Those can fluctuate. But true compounding is a straight line. It’s a linear, actually it’s a J curve projection that has no down or up or variability. No beta is what they would say. And yes, yes. When you borrow against a life insurance policy, it will continue to compound uninterrupted. And as you pay yourself back, your policy loan back, that money re liquidates or it collateralize so you can use it for the next real estate deal or the next kid’s college or whatever else you want to use it for.
Speaker 3 (15:18):
And that’s where would you say that’s the biggest hiccup for a lot of those other financial people out there that say the compound interest, if you just get 12% annually, they’re not doing something like this. Usually
Speaker 1 (15:30):
Not at all. So
Speaker 3 (15:31):
It’s like that’s where their volatility is. It’s like okay, 12%, but is it really compound interest?
Speaker 1 (15:38):
Average is mean nothing. That’s why our show is called not your average financial podcast. I learned it from Elmo and Sesame Street. There’s no one who’s average, right?
(15:49):
You’re unique. So let me give you an example. I can give you 20, let’s not do 12% man. Let’s do 25% rate of return. You ready? Yeah. Alright, I’m going to do some math. You’re a math guy. I know maybe some people listening aren’t big into math, but let me just help me feedback to me how you’re feeling as we go through this experience. Okay, so let’s say I got 10,000 bucks and let’s say that you take that 10,000 and it’s your money and you go invest that money. Okay, so you’ve invested 10,000 bucks, you feel pretty good, you got 10 grand, right? So far so good. Alright, now let’s say your investment doubles. You do a hundred percent rate of return. How do you feel now?
Speaker 3 (16:26):
I feel great.
Speaker 1 (16:29):
Me too, man. I need to borrow some money. What do you say? So at the end of year one, your $10,000 went up to 20,000 bucks and you’re feeling great. So that’s the end of year one. Now, year two rolls around, you decide to keep the money invested. Unfortunately, you lost 50% of your money in year two. So your $20,000 goes back down to the original $10,000 you started with. How do you feel now?
Speaker 3 (16:55):
Not very good at the end of the
Speaker 1 (16:58):
Well. And isn’t that funny that we started with 10 grand? We started with 10.
Speaker 3 (17:03):
I still feel yuck because I lost on the other a hundred percent.
Speaker 1 (17:07):
You bet. Yeah. You feel like a jerk at the cocktail party. You don’t want to tell people at the barbecue what happened. So what just happened there? We went up and down. We earned nothing for the two years. But if you do the math there, 100 rate of return, minus 50 rate of return divided by two years, that’s an average rate of return of 25%.
Speaker 3 (17:32):
Right?
Speaker 1 (17:33):
And the stock market can advertise that. SEC allows the securities and exchange commission allows investors, money, market holders, even real estate professional syndicator managers, they’re allowed to advertise average rates of return. To me that feels like a crime. What do you think? Yeah,
Speaker 3 (17:54):
If I end with the same amount of money and you tell me that I made 25% every year, it’s like, wait a second, where is that money?
Speaker 1 (18:03):
But most people don’t have, and first of all, the numbers aren’t quite so simple because there’s fluctuations every day, every
Speaker 3 (18:09):
Day,
Speaker 1 (18:10):
And there’s fees coming out of that sucker plus taxes do so for most people they don’t see it. But if you can get the compound annual growth rate or an internal rate of return, you can get a closer picture of what I just described. But the one thing is for sure, do not trust the account statement from your 401k. It’s not telling you the truth. All you can do is do your own due diligence or work with a financial professional who can run it for you because the typical investor, according to third party research, this is according to Dow Barr, so don’t take my word for it. The third parties DALBAR out in Boston. They do research every year on real investors. The actual results of investing in the market over 30 years with a blend of stocks and bonds is 3.5%.
Speaker 3 (19:00):
Wow.
Speaker 1 (19:02):
Not 12, not 10, not even seven, 3.5%. I can be better in a money market account.
Speaker 3 (19:08):
Yeah, no kidding. Not keeping up with today’s inflation, right?
Speaker 1 (19:11):
Yeah. That’s the difference between average and real returns.
Speaker 3 (19:14):
Yeah. Well that’s very eyeopening because, and like you said, that they’re allowed to advertise, like that’s yuck. Now, before we go into using something other than bank accounts for profit first, I know we’ve talked about we use life insurance and I’d like to talk about specific accounts before we even got on here, you were like, Ooh, I like some of these specifically to be set up in this system, some of those different accounts. I wanted to ask though, when you we’re just going to call it out, being a Dave Ramsey fan for so long and thinking that way and living that life, how big of a jump was it to get into whole life where he says it is the literal devil you are, you’re basically like the antichrist if you go down the whole life route and especially if you sell whole life, it’s like good grief. So that’s where I’m like, how did you make that mental shift from that, from one side to the other?
Speaker 1 (20:12):
Well, lemme tell you a story. There’s a guy named Edward Bernas. Edward, he lived about a hundred years ago in the 1920s and he was a major marketer and he was recruited or I guess hired by a hair net company. Now most people would be grossed out if they found a hair in their apple pie or whatever, but it wasn’t always the case. It wasn’t like culturally it wasn’t a big deal. You just found the hair in the apple pine, you moved on with your life. But he helped push the feeling of disgust into our minds when we see hair in our food are revolted at this point. And how many hair nuts do you think he sold as a result of that?
Speaker 3 (20:52):
Lots and lots.
Speaker 1 (20:54):
Millions. So the power of marketing and disgust is a known psychological phenomenon. And I got to say, I got to hand it to Dave Ramsey. He doesn’t have a lot of hair on his head, neither do I. But he has figured out disgust in marketing and that is something I think he’s really been trained on. And he specifically since some of his biggest sponsors are term insurance companies, and so I’m sure he agrees with them, but let’s just call it what it is. He’s a marketer and it would be hard for him. It’s sort of like the Upton Sinclair quote. It’s impossible to convince someone of something when their salary is dependent on them not being convinced.
(21:36):
So as a guy who’s selling term insurance and mutual funds on his radio show, it was hard for me personally listening to them do all this to get over that feeling of disgust. But here’s where it really took the turn for me. When I started thinking about verbs more than nouns, when I thought about characteristics, adjectives too, when if I thought, what is it I really want my money doing for me? Does where my money live today? Is it acting according to what I believe and about what I want? At the time we had a 401k, but my thoughts were, hey, I think taxes are probably going up over my lifetime, so why am I putting money into a 401k, which defers that problem into the future? Things like that. I don’t know what the market’s going to do and I want some more certainty in my life, and yet all my money was in things that I had no control over. So moving away from the titles or subjects or nouns and getting more close to what are the functions, that was the breaking point for me.
Speaker 3 (22:40):
Okay. I was going to say I went through that journey as well too.
Speaker 1 (22:44):
Oh, did you?
Speaker 3 (22:45):
Cool. Oh yeah. Going from one side to the other and I’m like, oh man, this is just, it was the cracking. I like how that visual, the cracking of the closed mind, you could hear it so you could hear split open. That was such a great, it is. It was painful at first, but then it was like, oh wait, okay, no, I really like this. That’s why I’m having you on too. I want you to explain now that we’re the feelings that you’ve gotten over and you realize that is a marketing tool to discuss and once you really, you dove in yourself it sounds like, and you said, well no, these are the things I care about. I care about what it does and I care about what the attributes are and does this really help my family and will this help other people? Now you’re helping a lot of other people since this is the profit first RI show what’s equated then to our profit first and how would you set up certain policies or which accounts? Because if people are listening to this, they probably have a basic understanding of profit first and the different bank accounts. So I would just like to see your perspective of which ones are good as policies, which ones are good as like, nah, you should keep that one as a bank account just from your perspective.
Speaker 1 (23:51):
Yeah, no problem. Yeah, I know that there’s several different approaches to this and you can certainly build as many accounts as you want. And I know that there’s sort of the five main ones. Remind me, it’s profit owners, pay taxes, opex, is there another one? Profit hold
Speaker 3 (24:10):
Income, it’s like the income account that’s right now just more of a holding bucket.
Speaker 1 (24:14):
Wonderful. Okay. Yeah, so those are the five core, but of course you could have as many, you could have an inventory account or anything else. Yeah, exactly. So my experience with using Profit first, I’ll call it Light Profit First Light for me, we have used it for years now. We allocate our money according to the target allocation percentages at Lake Growth and we encourage our clients to do the same. In fact, two of our colleagues, Brandon and Amanda Neely are both profit First professionals and trained and certified by Profit First and they integrate the bank on yourself system into their profit First approach. So what does that mean? It means instead of setting up several bank accounts, which have all the problems of traditional banks and banking and finance companies, they’ve set up for themselves, myself and many of our clients as well set up a policy or policies to receive, especially the owners pay the profit account, the taxes, and sometimes many other big projects as well, real estate purchases and so forth.
(25:22):
So you can allocate one policy to all of those accounts in using a budget software or a spreadsheet or a legal pad even. Or you could have several policies. That’s right. You can own multiple policies even if it’s on the same person. You can have multiple policies on that person and each policy might be there’s your tax policy for example, or over there is your profit hold policy or once again, you could merge it all into one policy as well. So there’s two different approaches that you can take. One is dump it all into one policy and then budget allocate, organize the dollars in that policy. We call it giving every dollar a job. And those jobs might be taxes, inventory, real estate, down payment, HVAC repair, whatever. All you might need to allocate your money toward, that’s one option. Or set up a number of policies to solve some of these big problems or the big projects that you want to accomplish.
Speaker 3 (26:21):
Now when we had talked before, you said you really liked the tax account being in there. Is there a specific reason you liked the tax account being a part of the policies versus just a physical bank account? You had mentioned the OPEX or operational expenses sometimes just needs to be a bank account because the money goes in and out so much. So I’m wondering why specifically tax for the policy?
Speaker 1 (26:43):
I’m glad you brought that up and I didn’t say it explicitly, but you’re right. I don’t use my policy for opex and here’s why. Any operating expense that would be small enough for me to pay for it out of my pocket or out of my cashflow in my business, I’m just going to pay cash for those smaller expenses. My own heuristic, my own rule of thumb is that anything that takes less than six months for me to save for, I’m just going to use my regular bank account, checking account at the local bank down the street. If it’s going to take me six months or longer to make that purchase, that’s when I’ll use my policy instead of paying cash. Why? What’s the problem with paying cash, let’s say for a car? Well, when I pay cash out of my savings account for a car, I’ll never see that money grow for me ever again.
(27:36):
Yeah, okay. So that money is gone forever. Also gone is whatever that money would have grown to had I not bought the car. So in my policy, if I borrow from my policy, I’m still going to get that compounding feature, that uninterrupted compounding given, and then as I pay myself back preparing for my next car purchase, then I’ll be able to run that money again and again and again recycling that money. So to your point about taxes, this is an annual annoying expense that most people have to pay. Real estate investors love getting those taxes down as low as possible, but most of us still have to pay something to the tax man. So one job of an accountant is to lower your taxes, and I know that you help in many ways as a CFO and more helping people do lots of these strategies. But in addition, what if you could use your policy to pay your tax bill every year?
Speaker 3 (28:32):
Yeah,
Speaker 1 (28:33):
No, that’s that be amazing. What would it feel like to never stop the growth on that tax bill’s money leaving your pocket ever again, recycle that money for as many years as you’re going to pay taxes, which is every single year of our freaking lives. What that was the way to go. Great. I
Speaker 3 (28:48):
Love that because like you said, with the other advantages, the tax advantage, the guarantees, insurance and financing, it’s like, okay, you think of the tax account, if you’ve got the money in there, even if you just held it and just paid it off every year, you still have the death benefit of like, okay, it’s like you still get more benefits than just using a bank account, which it has my mind turning where Mike Macau in the original Profit First book tells you the profit and tax account should be at different banks, so you should be more disciplined and you won’t be as eager to transfer. This is a much better system for your profit and tax account. This is where it’s going to be a little bit harder to touch. You won’t be able to just transfer real quick back and forth, but then this is also something that should be on a larger timescale. It’s not, like you said, it’s not the quick opex or less than six months. So I could also see a reserve account being here,
Speaker 1 (29:43):
Reserve account, and
Speaker 3 (29:44):
Why would you not be growing your reserve account in an environment like that? So now this is great.
Speaker 1 (29:49):
Would you count that also as the profit hold? What do you think about using that? Because a lot of our clients, myself
Speaker 3 (29:54):
Included, yeah, I like profit. It sounds like profit and taxes for sure should be there. And then any other account that you’re like, it’s a longer term account like reserves or whatever should also be there too. No, I love that concept because if you’re going to actually follow the system and do the work to set up Profit first, you might as well have it in the best place for it. That’s right. That’s what I’m hearing from you is like if you have something that’s a longer term goal for that one account, this is definitely a better place than just sitting in a bank account somewhere collecting dust
Speaker 1 (30:29):
And to keep everything nice and anonymous. I’ll just say that the person who founded Profit First, Mike Markowitz, he is aware of, I’ll just say it that way, the bank on Yourself strategy, and he may not have written it into his book, but there are clients, let’s say in his organization, I’ll just leave it at that because they see the power of this. His policies are, they’re not as liquid as your checking account. So what’s the gotchas on all this? I’ll quickly mention that. You can’t get the money out in 10 seconds like you could a checking account, it takes about five to six business days to borrow the money and some people think, well Mark, you’re borrowing the money. Not really, it’s not yours. This is different than a credit card or a line of credit at the bank down the street. When you borrow from this policy, you’re the one in control. You can set up a repayment. I just helped a gentleman just before this call, he borrowed $25,000 from his policy to go and invest in an AI company that’s up and coming. So he’s borrowing from his policy to go invest in this AI company and he said, you know what, mark, it might go to zero, this business that I’m investing in. And he said, I can’t really put a lot toward the loan, so he’s just going to pay a hundred bucks a month. He wants to toward that loan. Now what bank would do that?
Speaker 3 (31:54):
Right,
Speaker 1 (31:55):
Exactly. In fact, he doesn’t have to pay anything on that loan if he doesn’t want to. If you never pay off the loan, it’s just going to be deducted from your death benefit when you pass away. Now, there’s all sorts of reasons and details to not do this strategy, but the biggest among them is just patience. If you don’t have the patience, you got to be patient to do this.
Speaker 3 (32:15):
This is a family tree type thing. It sounds like this
Speaker 1 (32:17):
Is a family tree thing, don’t get in and get out. For sure.
Speaker 3 (32:19):
Yeah, it’s a legacy play, which is great because so many people, I feel like at least the circles I want to run in think about the long term and not just the short term. So I love this, which I think one of the things you said there to end to wrap it up is that so many people, if they get into this and if they do it themselves, it’s first of all, it’s easy to mess up and not structure the policy. But then number two, if you don’t have someone holding you accountable, it is almost like you are in ultimate control of your money. So unless you’ve got someone there helping you, guiding you to, like you said, let’s just do what simple plan, simple playback plan. Even if you don’t have much, we got to put something towards it. It’s like having a good person in your life that really will help you. Even if you make a decision like that, let’s invest in this AI company. That might go to zero, but we still want to keep the policy active. We need to make sure our money’s still there. So I love that too. Okay. How do people reach out to you if they’re interested in this since Profit First and the Bake on Yourself system if they were interested in a call or whatever it might be?
Speaker 1 (33:26):
Sure. Yeah, and you’re exactly right, it does take a guide. It takes an engineer who can design these, right? I’ve met too many people who had their cousin or their uncle doing life insurance. It’s not just your take it off the shelf and buy it kind of strategy or product. You really do need to design these, right? I recommend working with a bank on yourself professional. If that’s me, great. If not, just make sure you’re working with someone who’s been authorized by Bank on yourself. That’s the only certification program I’m familiar with that can do what I’ve just been describing. And if you want to dig a little deeper, you can find our podcast. It’s not your average financial podcast and find episode one sixty five, we call it. The title is Combining Bank on Yourself with Profit First, and we have a whole video on the show notes. You can kind of see all of how we’ve designed this. Very cool in greater detail. That’s episode 1 65 of not your average financial podcast, but if you want to connect with me or one of my colleagues, the easiest way to do that is to go to kickstart with mark.com. That’s Kickstart with Mark with a k.com, and we’ll just do a 15 minute quick phone call, answer questions, get to know you a bit, and see if it’s the right fit.
Speaker 3 (34:36):
Awesome. Well that sounds great. We’ll make sure that’s in the show notes too. But then as well, if you’re out there, I love this stuff, you need to go down this road, but if you’re even feeling like, okay, I haven’t even started the Profit First route, I have no idea where my money’s going. I’m making money, but feeling broke, what the heck is going on here? Reach out to us@simplecfo.com so we can at least get you straight and in order, and then set up the system and we’ll make sure that you have good people like Mark in your life that can help you with the most efficient way to make sure your money’s working for you, not against you in a lot of different aspects, but let’s take that first step then. This was great, mark. Thank you so much for the information you shared here and for being a great guest on the podcast.
Speaker 1 (35:16):
Appreciate it, David. Thanks so much for having me on
Speaker 2 (35:18):
This episode of The Profit First for REI podcast is over, but there are plenty more where that came from. Are you ready to learn how David and his team can help implement the Profit First system in your business? Schedule a discovery call@simplecfo.com right now. We’ll see you next time on the Profit First for REI podcast with David Richter.
