Private Family Banking - How to Buy a Car

5-ish Minute Private Family Banking Podcast.

Private Family Banking - How to Buy a Car

Private Family banking is a long-term financial strategy. We teach people how to leverage a high cash value permanent life insurance policy to take control of their household finances.

In this episode, I talk about how Private Family Banking offers safe, consistent growth that is free from market volatility. I also discuss how that money continues to grow uninterrupted even while you use it. To demonstrate this, I show you the benefits of buying a car using Private Family Banking rather than paying cash or borrowing.

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Transcript

SPEAKER_00 0:20

Hey everyone, thanks for joining me for another episode of the five-ish minute private family banking podcast. In the last episode, I gave you an overview of the structure of private family banking policy and reassured you of the liquid nature of the cash value, which becomes your pool of capital inside the policy. The next feature I'm going to cover is what amounts to what I would call the maybe the primary goal of private family banking. And that's the safe uninterrupted growth of the cash value inside the policy. When I talk about the reasons that high net worth individuals keep large sums of money inside of whole life insurance policies, I mentioned that safe, uninterrupted growth of the cash value is one of the primary reasons. Notice that I did not mention high returns. It's easy to find something that gets a higher return somewhere else if that's what you're looking for. But again, with regard to the policy itself, high return isn't necessarily what you're chasing. Instead, what you'll get is uninterrupted growth, something that isn't subject to the volatility of the markets. And think about this as the you know conservative part of your overall portfolio. So there's two primary ways that your cash value grows. First, the consistent payment of premiums. Second, is the annual dividends paid out by the insurance company. Because you're using a life and uh sorry, a mutual life insurance company, uh, dividends are paid out to the policyholders. Typically, they try to target a 4-5% dividend rate. This allows your cash value to grow steadily, uninterrupted, and tax deferred. And this is true whether you have accessed your cash value or not. For example, say you've built up $40,000 in cash value and you want to purchase a used reliable vehicle for your daughter who is graduating high school and heading off to college. Ultimately, your daughter is going to pay for the vehicle, but only has $5,000 saved up from work that she did throughout high school. She could use the $5,000 as a down payment and borrow the rest. Or she could limit her purchase to $5,000 and pay cash. $5,000 won't buy her much of a car. And if she borrows, then the loan takes away her flexibility and liquidates her cash with the down payment. But since you have enough cash value built up inside your private family banking policy, you offer to help with the purchase of the vehicle. You find one for $12,000 and you borrow the money from the life insurance company. Your daughter pays you back on terms that are agreeable to both of you. In other words, you control the length of the loan. You control the amount of the payment. The loan is taken out from the insurance company, not from your cash value. It does reduce the amount of cash value available, but it does not stop the cash value from growing. You will still earn that dividend on the full $40,000 as though you never touched it. Now, what about the loan? You'll pay that back as your daughter pays you back. But in the meantime, your money continues to grow as though you never touched it. So, what are the implications of the loan? The loan is simply used as collateral against the death benefit. So if you were to pass away, say before the loan is paid back, then the death benefit that gets paid out would simply reduced, be reduced by the amount of the loan balance. In the meantime, your daughter has a car that works. She's able to keep the $5,000 that she had saved up, and she's making a payment back to you that you and her both know that she can afford. This is what I mean when I say uninterrupted growth. It grows even as you use it. And when I talk about maintaining control of your money, this is how you do it. If your daughter had taken out a conventional loan for the car, the payment might have been larger than she can afford. And they won't care if life happened and she had difficulty making some of the payments. But because the agreement is between you and her, there is flexibility in the amount of the payment, as well as the ability to pause payments due to extenuating circumstances. Now, this is a small example of how you can use a policy for an expense that everyone can probably relate to. And hopefully it shows how the strategy can be used and why it works. But still doesn't address the objection that I often hear. I can get a higher return somewhere else. Give me some time, but I'll get to that. I want to build the foundation for this strategy before I show you the real power. But once I do get there, I'll show you how that high return you might be able to get somewhere else can actually be improved by taking advantage of this strategy. So please like, subscribe, share this with a friend, and I'll see you next time. Until then, out