The Most Efficient Debt Elimination Strategy Out There

5-ish Minute Private Family Banking Podcast.
 
The Most Efficient Debt Elimination Strategy Out There
 
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 discuss Private Family Banking as a debt elimination strategy. This is part 1 on this topic and I give a conceptual overview of the strategy. Later, I'll talk about how it works in practice.
 
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Transcript

SPEAKER_00 0:20

Hey everyone, Mike here, back with another episode of the five-ish minute private family banking podcast. In one of the first episodes, I asked a question that I'll ask again here, just as a refresher. If your dollar could be liquid, could be safe from market volatility, could be growing uninterrupted, if it could be protected from creditors and legal judgments, if it could be inflation resistant, if it could be controlled by you, and if it could be free from fees and penalties. And if your dollar could be used for a number of different things like college savings, major medical, major life purchases, pool of capital for investments, uh guaranteed wealth transfer, and more. And if that dollar could be used more than once, would you like to learn more about it? The first few episodes I focused on why high net worth people, uh families like to store uh sometimes large amounts of money inside of uh whole life insurance policies. And for the last several episodes, I've been talking about uh a lot of those benefits that I've just mentioned and highlighting how each applies within private family banking. If you haven't listened to any of those, I'd encourage you to go back and check them out. It'll give you a better understanding of what I'm talking about when I talk about uh a private family banking policy. We're now gonna shift gears and we're gonna begin to talk about some of the ways that you can use a private family banking policy. And we're gonna start with debt elimination. This is step one for us when we talk about a three-step process. If you have consumer debt, um, you know, commercial uh loans, whatever, um, debt elimination is the first step. Now, there's probably a thousand different strategies out there to help people eliminate debt. The avalanche method, the snowball method, you've got debt consolidation loans, and more. Hopefully, by the time I'm done covering this topic, you'll see why private family banking is actually the most efficient strategy to use when you're trying to eliminate your debt. Today I'm just going to cover how it works, and then next time I'll give you an example of how it works in practice. The first step in using your life insurance policy to pay off debt, you know, the policy that was built and optimized to accomplish your goals, it's the same first step that we'll need to take to accomplish any of the strategies that we talk about. And that is to build your pool of capital. This is done simply by paying your life insurance premiums. Because we have optimized your policy for banking, your cash value will grow significantly faster than it would in a traditional whole life insurance policy. We'll have any debts that you have that you have and we'll list them in order of balance from the smallest to the largest. You'll continue to make your monthly payments on those debts. However, at the end of the first year, what you'll do is you'll take out a policy loan from the insurance company. The size of the loan is dependent on the amount of cash value that you have built up, which is largely impacted by the size of your premium payments. You're going to use this loan to throw chunks of money at your debt. Wait, so on borrowing to pay off debt, you ask? The question you really probably need to ask yourself is who owns the debt? See, in your previous situation, the debt is owned by someone else. You owe someone else the money. In this situation, we're transferring the ownership of your debt to you. We're giving you more control. And we're capturing for you the interest that until now you were paying to someone else. Now, as each debt is paid off, you'll take the balance of the or take the payment that you were making on that debt and will use it to pay off the policy loan that you just used in order to pay off the outside debt. It seems like you're just shifting money around at first, but really what you're doing when you pay off the policy loan is you're freeing up your cash value to be used again. So at the end of the second year, the policy loan that you can take out is larger for two reasons. One, your cash value has grown through continued premium payments and through the dividends from the insurance company. And also, you've freed up some of the previously used cash by paying down the policy loan. So, what you do then is you take out another policy loan at the end of the second year and you throw it at your outside debts. Any debts that are paid off have their normal payments shifted back over to paying back the policy loan again. You'll continue to do this until all of your debts are paid off, at which point all of the payments that you have been making on the outside will now be transferred and will go back to paying off the policy loan until it's gone. Perhaps it doesn't make sense conceptually why this would work without seeing it in practice, but rest assured, next time I'll show you the power of doing this and why I say that this is the most efficient way to pay off debt. But I'll have to leave it here for now because I'm already over time. Please like and subscribe, share this with a friend, and I'll see you next time. Until then, out