Destroying Debt and Being Your Own Bank with Mark Willis, Ep 103

Welcome to the Journey to Multifamily Millions podcast, where we discuss money matters with experts! 

Join us as I talk to Mark Willis, a certified financial planner and bestselling author from Lake Growth Financial Services in Chicago, Illinois.

Mark shares strategies for achieving financial independence, including using whole life insurance and the 'Debt Snowbank Method'. He shares his journey from student debt to financial freedom, emphasizing smart investing and critiquing traditional savings methods.

If you're looking to improve your money management, pay off debt efficiently, and build a secure financial future, this episode is essential!

Tune in for Mark's expert advice on making better financial decisions starting today.

Episode Topics

[01:09] Meet our guest, Mark Willis
[04:56] The Debt Snowbank Method Explained
[08:27] Real-Life Applications and Benefits
[16:23] Addressing Common Concerns and Misconceptions
[25:46] The Importance of Liquidity
[34:31] Vetting Financial Advisors
[40:15] What is one red flag every investor should look out for?
[40:29] What is a myth about the real estate business?
[41:47] Connecting to Mark 

Notable Quotes

• "Constraints drive innovation." — Mark Willis
• "There's not always a six-figure job waiting for you on the other side." — Tim Little
• "You finance everything you buy. Whether you use debt or your savings, you're financing it." — Mark Willis
• "Americans are not very good savers writ large. Some people are obviously very good. Others not so much." — Tim Little
• "If I own the company by which I took the policy loan from, I'm in control of repaying that loan on the pace and terms that I wish." — Mark Willis
• "There is a rate of return on liquidity that I think some people should at least keep in mind." — Mark Willis

👉Connect with  Mark Willis

• LinkedIn: Mark Willis
• Website: Lake Growth
• Email: hello@lakegrowth.com 
• Telephone: 1-800-962-9141

👉 Connect with Tim

• Linkedin: Tim Little
• Instagram: @tim_at_zana
• Email: tim@zanainvestments.com
• Visit www.ZANAinvestments.com for more info on Tim and how you can passively invest in multifamily real estate
• Get your Passive Investor's Cheat Sheet FREE

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Transcript

[00:00:00] Mark Willis: I know that my 401k is going to be taxed even more if I wait to get taxed on it in the future. So in that one conversation, he freed up a little over 30 grand a year that he's dropping into a policy now. That's an example of the second kind of person who might be listening. You might be dropping money into a 401k or something like it that you actually don't agree with. That doesn't really align with your interests. If that's true, you may be able to reposition some of that money into something I could put together for you.

[00:01:02] Tim Little: Hello everyone and welcome to the journey to multifamily millions. I'm your host founder and CEO of ZANA Investments, Tim Little. And on today's show we have with us Mark Willis. Mark is a certified financial planner, a three time number one bestselling author and the owner of Lake Growth Financial Services, a financial firm in Chicago, Illinois. I'm really passionate about financial literacy, so I'm excited to have you on here, Mark. Welcome to the show.

[00:01:27] Mark Willis: Hey, thanks for having me.

[00:01:28] Tim Little: It's great to have you on. Like I said, so before we get into how Americans are looking financially and what we can do better, please tell us how you got started in this business and how you got to where you are today.

[00:01:41] Mark Willis: Yeah, it's a, it's a journey through difficulty. I think most people would say that their best insights come from, scarcity or I'll say constraint. Anyway, my wife taught me the phrase constraints drive innovation. I'm sure she may have heard it from someone else, but when you are constrained with resources, sometimes it drives you to find new creative solutions that are outside of the, Also, average strategies that I think are falling flat, economically speaking anyway. I was just reading that, 56 percent of American workers feel behind in terms of where they feel like they should be, and between 2000 and 2019, we've had two stock market crashes, of over 50%. And the market continues to be just as volatile, even now. When I got started in this business, it was just after the 2008 crash and I had just graduated from graduate school thinking, Oh, look at me. I've got my big fancy master's degree and nobody was hiring. My first job was in a property management company helping rehab this really old Chicago building. And my first day on the job, they handed me a shop vac, told me to crawl underneath this broken elevator and just suck out whatever you could find. it was like maybe a foot and a half of black water, just to give you some idea. so it was not an ego boosting kind of moment, let's just say that. To go from master's degree to underneath. In the muck, underneath it all. And honestly, I'm really glad for that experience. And for that time with them for a year and a half or so with them, because it really taught me what I'm truly here for, which is to get in there and serve. And so since then, my wife and I have stumbled across some financial strategies that helped us clear out, not just get rid of our student loan debt, but actually, become our own source of financing and take back control of our financial future with strategies that have helped us invest in real estate and a lot more. Okay.

[00:03:24] Tim Little: Yeah, that's awesome. And I think a lot of people can relate to some of the things that you talked about, right? getting that degree, whether it be, your bachelor's or your master's, especially your master's and thinking, I made it. and then finally, there's not always like a six figure job waiting for you on the other side. like you might've thought, when you were borrowing a degree. To get, say, a master's degree and I can certainly relate to that. I came out of my master's program with about 130. Total and debt. That's pretty scary. Some of that was,little leftover debt from bachelors, but I'd say only 10 to 15, 000. And I think that's probably a big part of why the 56 percent that you mentioned of people that feel behind is because it's so hard to start saving and investing when you have this dark cloud of school debt. So maybe that's a good place to start. I can talk about how I got rid of my school debt and it's partly thanks to real estate. Partly, I got a decent job, right? right out of the bat and I started paying my loans down. because I was living below my means,I didn't go out and get a fancy car and a fancy house. As soon as I got that first decent paying job, I started paying about 1500 a month towards my school loans so that I could whittle them down quickly because I had no expectation of loan forgiveness or anything like that on the horizon. But just as a CFP is a certified financial planner. What is your first piece of advice when someone comes in and they're like, Listen, I feel behind. I feel overwhelmed. And I have this enormous school debt, but they have a decent job. 

[00:05:11] Mark Willis: this is difficult because, what they want to do, and what I think everyone teaches you to do, is just to throw everything you can at the debt and live within your means. To pour all of your money into the debt problem, into the hole that you've created for yourself. And that was my instinct, too, and I'd listen to the likes of Dave Ramsey and others to do the same. But I'm here to say, that's the wrong way. it's the exact opposite. And Now, other people say,start saving first, saving or investing first, maybe instead of paying off your debt, maybe go get some real estate or some, a brokerage account or something. I'm also here to say that may be incorrect. Now, depending on how savvy you want to be, maybe you can do some cool moves there, but there's even better ways to be more than just debt free, but be better than debt free. And then actually we trademarked the strategy. It's called the debt snowbank method, for being debt free. And that's what we ended up doing with our lives and our financial future is better because of it. I can get into what those details are. If you feel like there'd be a good use of time for folks.

[00:06:11] Tim Little: Yeah. And it's interesting that you say that, one is not the perfect solution. Neither is the other. And I feel like I probably did a combination of the two, because I am not a huge Dave Ramsey fan personally, but, I understand that he does have advice that helps some people in some situations. What I did is, like I said, I was trying to pay as much off as possible, but I think the point that you were alluding to is you shouldn't not invest, Early on in that process. And like you said, it can feel like, get rid of debt, get rid of debt. That's like the driving factor. But when you've read things like rich dad, poor dad, that little thing in the back of your head is also saying, Hey, pay yourself first. and by that, invest, not pay yourself, but invest. And Luckily, I think because I've had both perspectives, I was doing both at the same time. and I did get started in real estate,a few years into that, but I really knocked it out. Thanks in part to luck, because the house that I had bought in Washington, DC. appreciated in value so much because I bought in a rougher neighborhood. There was a little bit of gentrification, but the property value went up significantly and I wound up moving and I made about 85, 000, after the sale of that house. Now I could have used that 85, 000 to put a down payment on my next house. But instead, I wrote a check for 83 and some change to completely pay off the balance of my school loans, which, remember, we're at 130 before, but because I had been so aggressive, I was able to knock that down. Now, one could argue whether I should have used that money for a down payment. But we also have to take into account at the time,interest rates, mortgage rates were like 3. 5%. so that's pretty cheap money for a house. And I have the advantage of a VA home loan, which I could put zero down and I basically Did so I there's things out there that people can take advantage of but I do really quickly want to at least understand what the snowbank the debt snowbank method is and see how it compares to some of the things that I and others have done.

[00:08:27] Mark Willis: I want you to imagine a net zero timeline where you're stuck to zero. If you would imagine maybe a horizontal line across your whiteboard, if I could draw one in your mind for a moment. if you have nothing saved and you needed to get a car or a college degree, you'd fall down. under zero net worth, right? You'd owe money to somebody. And then you'd have to climb your way back up every month like a little staircase crawling and scratching your way back up to net zero only to tumble back down again when you take the next loan whether it's for the next car or the next college degree or the next bigger McMansion or whatever. So that's one strategy and many Americans live their whole life on the debt staircase. On the other side of the ledger, above that net zero line in your mind, is the saver's staircase. And once again, we're climbing up the staircase and delaying gratification, whatever it might be, buying that car a few years later, whatever it is we're trying to purchase. But here's the problem with paying cash for things. As soon as I withdraw money out of my savings account, or money market account, or 401k, or whatever I'm pulling the money from, it no longer is earning any interest for me. It's gone forever. Also gone, and this is a big deal. Also gone is whatever that savings could have continued to grow had I not bought the car or the college degree and just left the money to invest instead. So the real answer is you finance everything you buy. Whether you use debt or your savings, you're financing it. In fact, When you pay cash for things, you're financing it from your future self. You're taking out of his or her pocket. Let's say for a 50 grand car today might be 200 grand, not in your pocket in the future. You see what I mean by this idea of opportunity cost.

[00:10:16] Tim Little: Yeah, and that's exactly what I was going to say. You didn't say it at first, but what you're really getting at is the opportunity cost that money that you had maybe in a high yield savings account or whatever it was. Yeah, you could be investing that or you could be gaining it. somewhat minimal interest of a high yield savings account. But if you use that cash to buy something, sure, you don't have debt, but you're also losing that opportunity to invest it and gain the interest there.

[00:10:44] Mark Willis: So I was forcibly paying down my student loans and I was in my mid to early mid twenties at the time. And at some point I look up all my student loans. toil and sweating, and working three jobs in the midst of a great recession, overpaying on my very low interest student loan debt, by the way. and, I said, what am I doing here? I'm putting the most valuable dollars I'll ever have in my life into a hole. And all I'm going to have to show for my money is a bunch of thank you payments. Thank you for your payment. Thank you for your, it'll be a bunch of receipts from Sally Mae and Nelnet and the rest of the bozos that I owed money to. And then a strategy came across my desk. It was a mentor of mine that came by and visited us from college. and he showed us a strategy called bank on yourself, which uses a little known variation of dividend paying whole life insurance of all things. And so as I stumbled across this strategy, it compelled me to look into it as a way to pay off my student loans. So just for those that have never heard of this before, it's a, using a dividend paying whole life insurance policy. Those things grow on a guaranteed basis. It's not just the death benefit you get access to when you pass away. There's also a living benefit called cash value. It's like equity in your home. You can use it like a line of credit to yourself, borrowing against that liquid asset to spend on anything. And, that would include investing in real estate, but for me and my 29 year old self at the time, I used it to pay off a lot of my student loans. And what's interesting about this strategy, Tim, is when I accessed the policy loan feature on this policy, it continued to grow. My asset, my cash value continued to compound and grow, even on the capital I borrowed like there was no loan. So to me, this is better than being debt free

[00:12:27] Tim Little: yeah. And I think that's the key. The key advantage there is that, if you have 200, 000 in there, you borrow 100, 000 to, pay off your loans or for a different investment, you're still gaining interest on that 200, 000, that you had in there. Now talk about, how do you go about, is your base basically taking a loan from yourself? Correct. So you just have to pay it back.

[00:12:57] Mark Willis: yet. In essence, you're taking it from yourself, but in reality, it's a life insurance company loan, then they've used your cash value as collateral. So it's just like getting a heel lock on your house. I jokingly call it the me lock because you're getting it from you. you're something me, you're, it's your, myself line of credit, you might say. but yes, you're borrowing against your cash value coming from the insurance company, of which you are a co owner. So this is a couple of things to unpack there. There are lots of different kinds of insurance companies out there, Tim. They are publicly traded and there are mutually owned and publicly traded companies that don't offer this feature. you must get it from a mutually owned company. One that's owned by the likes of you and me, the policy holders. If that's true, then it's like. Me and you are going into business to start a mortgage company together. Let's say that you and I started a mortgage company together and we're selling mortgages. And I come to you and I say, Hey man, I really need a mortgage. And my wife and I want to buy a house. First of all, would I go to any other bank if I needed a mortgage? Of course not. I'm coming to the family. I'm coming to our business, right? To get the mortgage. And so hopefully you approve of me for the mortgage. But Tim, here's another important question. Would you require me to repay that loan to the company? to the business that you and I own together.

[00:14:14] Tim Little: Yes.

[00:14:14] Mark Willis: Yeah, I hope you would.I know that we just met, but hopefully even if we trusted each other like old buddies, you'd still want me to pay back that mortgage. Now, here's my last question. Who benefits financially when I repay that mortgage to the company that you and I own together? 

[00:14:28] Tim Little: both of us.

[00:14:29] Mark Willis: That's right. And it's true also with these life insurance policy loans. If I own the company by which I took the policy loan from, I'm in control of repaying that loan on the pace and terms that I wish, and when I do repay the loan, it becomes a part of the general account that the insurance company then divides up as a form of dividend to all of us policyholders at the end of the year, if the company is profitable. And I like to work with companies that haven't missed a profitable dividend payout in at least a century. So I'm looking at companies that have been very profitable for a long period of time, right through the Great Depression, right through the Great Recession, and right through the COVID pandemic. I want to make sure that they make it through thick and thin, low interest rate worlds and high interest rate worlds. In fact, now that interest rates have, I'd say, normalized or slightly higher or whatever, that's good news for Whole Life Insurance in terms of their profits. Profitability and rate of return. so that's how I ended up paying off all my student loans and it allowed my wife and I to get compound annual growth. Guaranteed by the way, that's a hard word to say as a financial advisor. we got guaranteed compounding annual growth on our policies, even on the capital we had used to spend and get rid of our debts. And then we paid our policy loans back. at the pace we felt comfortable doing. so this is like becoming our own source of financing. This is the debt no bank method. You keep paying your, you keep paying your minimums on all your debts, step one. Step two, throw everything you can comfortably into a bank on yourself designed, and we'll talk about what that word means, a whole life insurance policy. Step three, as your debts slowly come down and as your cash value and your bank on yourself design policy grows, you simply borrow against the policy and wipe out the debt. Step four, final step, repay the loan while the policy continues to grow as if you never touched a dime of it.

[00:16:22] Tim Little: Okay. Yeah. And obviously a lot to unpack there. I think most people are hearing this and that the challenge in their mind would probably be the, And based on what I know of the system is the amount of time it would take to get a sizable chunk into that account, right? And you talk about putting whatever you can comfortably into that and a lot of Americans are like, listen, I can. They either say they can't save or they're just terrible at saving. That's a fact. Americans are not very good savers writ large. Some people are obviously very good. Others not so much. But in general, we're not good savers. And I think a lot of people struggle because they would look at that as savings, not necessarily investing in themselves. So I'm curious, what would you tell people to get them over One that mental hump if they're saying, Hey, listen,I can't save because I'm already stretched on what I have and I don't have a lot of, additional income to put towards what you're talking about, especially to get it to a sizable enough, amount that you could be doing things like buying properties, paying off large college loans, et cetera.

[00:17:43] Mark Willis: There's probably three different types of people listening. So I'll try to speak briefly to all three. and you let me know if there's anyone that I may have forgotten, your audience better than I do. One, the real estate investor or syndicate, limited partner in syndication deals. They likely are dumping chunks of syndication. What if you could dump that money first into a bank on yourself type policy, and then. a month later, you can access the cash value in the policy to invest in whatever syndication deal. I do this, many of our clients do this. The policy continues to compound and grow. So no matter what happens to that syndication deal, you're continuing to get uninterrupted compounding on your money. So there's a source of cash right there for the folks that are looking to invest in syndications. Just simply drop the money into the policy. It's a warehouse for your wealth. I view my policies that I own as, you might say, receptacles for cash in between my real estate deals that I do. So that's the first, important one there. The second one is someone who says they can't save because they're investing everything in real estate. Elsewhere, like in their 401k.maybe you're listening to this and the market is rallying. I don't know exactly what's happening in the market. Cause no one knows the future. but just to keep up with inflation, we've had 35 percent and we've had quite a bit of inflation. We would need a 35 percent rate of return just to get back what we lost in the middle of 2020 and excuse me in 2022. So we had a 20 percent drop in the S& P in 2022. We would need a 35 percent return at the end of 22 just to get back what we lost in 2022. In the down year, just most recently in 2020 2, 4 0 1 Ks over the last five years, however, have budged. According to the Wall Street Journal, the average 401k balance went from 1 0 6. 106,500 bucks to 107,700 bucks over five years. Okay, so you'd need quite a bit more. You'd need 129, 000 in your 401k on average just to break even with inflation over that same period of time. And this is also true with things like CDs and everything, on the cash side of things as well. So I spoke to a guy yesterday who was making 250,000 a year, but he couldn't save anything. He was like, Mark, where does it all go? Turns out he was packing everything he could into his 401k, maxing that out every year. And, I got to asking him questions, just, Hey, what's your understanding of the taxation of this 401k in retirement? He thought about it. Oh, it's probably going to be taxed in retirement. And then I said, what do you think about where taxes are headed in this country over your lifetime? I don't care about the president. I don't care about this administration just over the next 30, 50 years, do you think taxes are going down or up? He didn't have to think very long there. He said, Oh, they're definitely going up, Mark. And I asked him, again, what's your understanding of how this 401k is going to get taxed. And there was this lightbulb, you could hear the lightbulb begin to glow and buzz in his mind, and he realized, Oh man, I'm creating a ticking tax time bomb by dropping all this money into something I don't even agree with. Because I know that my 401k is going to be taxed even more if I wait to get taxed on it in the future. So in that one conversation, he freed up a little over 30 grand a year that he's dropping into a policy now. That's an example of the second kind of person who might be listening. You might be dropping money into a 401k or something like it that you actually don't agree with. That doesn't really align with your interests. If that's true, you may be able to reposition some of that money into something I could put together for you. The third and last question is, Person who might be listening is someone who's truly just unable to save. That would have been me. You might say, when I first stumbled across a bank on yourself, I thought I couldn't save because I was over funding my debts because I'd been told by the Dave Ramsey's of the world to pay off your debt before you do any saving. Maybe this conversation has helped you realize that creating an asset that never stops compounding now, an asset that. You can borrow again to pay off your debts is the more efficient route. In fact, it's going to provide my wife and I with several hundred thousand dollars more in wealth that we would not otherwise have had we waited to start saving, until after we had paid off our debts. Now, there are a few folks out there who literally are like not making any money. And at that point, all I can say is start focusing on increasing your income and decreasing your expenses. And fighting that fight is probably the biggest and hardest job in the financial universe. There's an old economist, his name's Northcote Parkinson, and he says a luxury once enjoyed becomes a necessity or your expenses will always rise to meet your income. Tim, there's only so much I can do except just to cheer folks on to say, Hey, watch out for those luxuries. Don't let them become necessities. 

[00:23:05] Tim Little: okay. So some great stuff there that prompted some questions in my mind. the first one going back to more mechanics, the mechanics of the plan. Can you do a large lump sum to start off?

[00:23:22] Mark Willis: Yes, you can. Yeah, and I'm glad you brought that up. If you can't save something on a monthly basis, it's not required that you put some monthly number in there every month. No, in fact, many of our clients, they'll either drop in a single lump sum, or an ongoing annual contribution of varying amounts. So this is one of the myths of, I think whole life insurance. It's not some stodgy, strict number. You don't have to put the same number in every month. I have a client who's putting in a little over 1500 bucks a month if he wants to, and then he drops in a hundred grand every year as he gets his bonus. Somebody else, they don't put anything in every month and they just drop in money as they have it throughout the year when they sell and flip, they flip real estate. So whenever they flip a property, they just drop that money in and they're putting in six figures a year into their policy. Other people, all they can afford is two or 300 bucks a month. And that's okay too. start where you can,

[00:24:11] Tim Little: And when you talk about the difference again, between paying down all your debts, we'll call it the Dave Ramsey approach at the extreme end. and then the other side where you're putting money towards investments. I think. And I wanted to see if you agree that there's still some numbers that have to be crunched in that as well, right? If you have folks who have excessive credit card debt, which is maybe 20 to 25 percent interest rate, I'm guessing you're going to recommend that they, Pay that down and not carry said balance. But if they have those, school loans or mortgages that are, say sub 5%, then that's a completely different story. You can pay the minimum there and everything else goes into the account.

[00:25:02] Mark Willis: Tim, You're exactly right. I will add this too, though, cause I'm not your average financial planner. So interest rates, mathematically, what you just said is correct. Interest rates would be better because you're even your bank on yourself strategy, like if we did the debt snowbank method, like I've described here earlier, It's going to give you a modest rate of return, middle single digits, that's a tax, after tax return of let's say five, whatever percent, that's great. And I have had folks use their debt snowbank method to pay off their credit cards. However, you're right, if it's 30 percent credit cards, I'm going to ask folks to really plug away at those credit cards and then start their policy to pay off their lower interest rate debt. Here's the exception though. What if you are paying off your credit cards and then you lose your job? Typically the credit cards are going to get rescinded and you're not going to get a lot of lines of credit from the bank because you don't have an income. So if you've plowed all this money into credit cards or paid off a bunch of your high interest HELOCs or something like that, and then you get disabled, lost your job. I had a lady, she did this. she paid off her house mortgage, with the divorce proceedings from her ex husband, and then she got disabled like two, three months later, and then she desperately needed money. But she doesn't have any way to get liquid money now because she doesn't have a job. She's disabled.  What bank is going to lend her anything at that point? So my only exception to your, I think, mathematically correct rule about paying off your high interest at first is what about liquidity? There is a rate of return on liquidity that I think some people should at least keep in mind. And one of the advantages of using these policies, there's disadvantages too. We can get to that too. And there's also some risks in terms of how they're designed and who designs them. So we can talk about that too. But one of the advantages is, while you're paying off your debt, during the snowbank method, you're building up a liquid cash reserve in your policy. Case in point, my wife and I, when we were trying to pay off our student loans, we had a medical event. She had, my wife had broken her foot. So we needed some money for the health deductible. We paused paying off our student loans. Instead, we grabbed money out of our policy to help with the health deductible and help her with her medical needs. If we had been tossing money directly into our student loans, we had to go get a credit card for that, deductible. So it's one more thing to consider. Liquidity does have a true rate of return.

[00:27:23] Tim Little: Yeah. And I guess the last question I asked before I move on to something is you talked about that guy who was putting too much into his 401k. And I was doing something similar as well on the military side with my TSP, I was like, Whoa, I need to slow down, even though. I'm getting up there in years, but I'm also going to have a military pension and that needs to be taken into account. And everybody's situation is different, obviously, but generally speaking, do you find that there is a place for those types of retirement counts when you're looking through the strategy for most of the folks that you're advising?

[00:28:03] Mark Willis: Yeah, up to the limits of the company match, for example. There's nothing else you can really do unless you can negotiate they pay you more. If you believe like I do, like most economists do, like most of my clients do, that taxes are going up in the future, and you're putting money into a taxable account, you're just adding to a taxable burden. Especially if you have a pension, because a pension is, I call it the tax torpedo. It's going to be hitting your bank account whether you like it or not. Now the pensions are beautiful, they're wonderful, I'm a big fan, but That's true with rent money too, by the way. Anytime you take income that can't stop, what if tax rates double? Then your pension just got cut in half, right? Or the tax rate doubles on your pension. That's going to be a big downgrade on your lifestyle. All that I say is look at each person's circumstance, just like you said, Tim. but if you're able to put something up to the match in the company's 401k, usually that's the right move for most folks. Now, some people are able to negotiate with their employer. If it's a small enough business, rather than give me that company match, just pay me a little more,in my salary, and then you can take that money and put it into something that's tax, going to be tax free at the harvest time.

[00:29:09] Tim Little: Yeah. And that makes sense. bottom line, don't turn down free money, right?

[00:29:13] Mark Willis: And I'll tell you, there's actually a perfect amount of money to have in tax deferred vehicles. Tax deferred just means wait until later. Now, as long as we don't lose the standard deduction on our tax forms, you guys probably know there's a standard deduction you can make up to a certain amount of money and not pay any taxes on it, that's a standard deduction. as long as we still have that in the future, and no one knows for sure, so keep voting, but as long as we have a standard deduction, you could take that amount of 401k or IRA and pay no taxes on it. So that's a cool strategy where you put in money tax deferred, And then later in retirement, you can pull it out. No taxes ever paid.

[00:29:50] Tim Little: Yeah. And then, what about Roth, 401ks?

[00:29:54] Mark Willis: Yeah, you can do Roth 401ks too. Those are fine. That's a great way to pack more weight into it after taxing the vehicle. And those would be tax free in retirement. My concerns with Roth 401ks are. you're buying your retirement at the mall with those things most of the time. And you know what it's like to buy something at the mall. You're usually getting something that's undervalued and overpriced. So you're buying typically target date funds. And according to third party research, this is according to Dalbar, which does a report called the quantitative analysis of investor behavior studies, and they do it each year over a 30 year period. This is according to their recent study, the average target date fund investor. So it'd be like anyone who got a 401k in the last 25 years or so, they automatically are in TDFs or target date funds. Now, they're getting about 2. 29 percent over the last 30 years, according to Dalbar's research. Now they're a third party research firm. If you had an all equity index fund, like if you were all in on the S and P 500 and had no bonds, the return is about 5 percent over 30 years. And that's before taxes are due. So hopefully we have that Roth 401k so that it's a true tax free return. But that's 2. 29%. That's not getting me out of bed in the morning. That's not making me want to like, just dump a bunch of money into my Roth 401k. I find my policies, my whole life policies, give me reasonably even better yield than that. over time and it's similarly non taxable in terms of how life insurance is taxed. It's tax free when I access the money and it doesn't even show up on my provisional income when I go to look for Social Security in retirement. Roth 401k's will. What should I do ? And I'll hush after this. When I pull money out of my Roth 401k, Even though it's quote non taxed, it shows up and counts against me when I go to get Social Security. So this is, and also Medicare premiums too. So my life insurance does not, there's nowhere for me to report my income off of my life insurance policy in retirement. So I can get Social Security without taxes due. Most people don't realize this, but your social security will be taxed if you make too much money, even from tax free instruments like Roth IRAs and Roth 401ks. And similarly, your Medicare premiums will be more expensive as well. If you're pulling money from the wrong buckets, which is why it's so important to ask yourself, what's my exit plan, whether it's my 401k or my life insurance policy or my rental policy,rental property.

[00:32:23] Tim Little: Yeah. no. And I'm glad you cover some of the tax aspects, cause that's important as well. And, I recommend everyone talk to your tax professional. This is not nothing here is tax advice. but that is an important aspect. the advantage of being able to pull that out tax free. Now, if you're using that money for an investment that may be taxable, that's completely, But no, that's great. So you talked about some of The risks, right there with anything there, there's trade offs. What are some of the risks or disadvantages of this type of plan, especially as it relates to real estate investors?

[00:33:03] Mark Willis: Yeah. there's. No free lunch, except the cheese on the wrong end of a mousetrap, Tim, as with a So the key pieces to this whole life insurance strategy are considerations like time. Are you planning to toss some cash in this thing and do that for some period of time? I would recommend at least seven years. I would encourage folks to keep their policy for their entire life. That's why it's in the name all my life. So I would encourage you to keep it as long as possible. The longer you keep it, the more efficient it becomes. But I would not see this as I get in, get out, get rich quick schemes of any sort. Second, if you're bored with guaranteed predictable returns, you're going to be bored with this strategy. It's going to be a steady, Steady Eddie strategy. I like to couple it with my riskier stuff, the things that get me, double digit rates of return. So I use my policy as my fuel for my business or my real estate or my syndications. The third is typically insurance costs. Now, if they're designed improperly, Again, I'm going to keep going back to that. If they're designed improperly, these policies can lose a lot of tax advantages, they can be riddled with commissions or expenses, and the agent can make off more than you could in terms of how this thing performs. But as long as it's designed the bank on its way, we make sure that there's a quality control standard and we can get into what that means and what's, why this is different than maybe some of the other names that are out there in the marketplace. Transcribed

[00:34:31] Tim Little: Yeah. And this will be the last question before we transition to the turbo round. But because you brought it up, I want to get into that a little bit, which is the, how do you vet? The providers of these types of plans because I've heard many different folks seemingly talking about the same thing, some type of whole life insurance that allows you to borrow against it in order to do investments, etc.

[00:34:54] Mark Willis: A lot of the same characteristics. But how do you know which is reputable? Provider. Some of them came off more like used car salesmen to me than actual, certified financial planners, for example. So how does a novice go about vetting the person that they're going to be setting this up with if they choose to do You've probably been to the grocery store, and if you've ever looked for organic food, you know that there's other knockoff names. There's the USDA Organic Seal of Approval,the organic seal. And then there's all these other words like all natural.

[00:35:29] Tim Little: Yeah.

[00:35:30] Mark Willis: great, but it means nothing, and so similarly, there are very few credentials in this space in the financial universe. That's partly why I got a certified financial planner designation. Took me three, three and a half years to turn the letters after my name. And it takes a certain amount of credibility. I'm held to a higher standard. I have to continually do education and remain in good standing with the CFP board. Most people have heard of the CFP and they have really protected that language. Anyone can call themselves a financial advisor. There's no regulation around that word per se. Now, on the other side of this equation, there's the insurance world. And wouldn't you know, there are a lot of insurance agents in the United States. In fact, I looked it up, there's about 400, 000. Life insurance licensed agents in the United States. That's like one for every 800 Americans. So That's man woman and child So you probably know someone who is life insurance licensed and if they have an internet connection They could have a YouTube channel talking about banking, call it whatever you want cash flow multiplier infinite wealth banking just to name a, a couple of word key phrases, there's lots of nicknames for this out there But there's no protection around the words like becoming your own banker Which was the book that was written that kind of kicked off this revolution by a gentleman named Nelson Nash He was writing books. He was doing workshops. He was teaching the world. He was the evangelist for this strategy. He did this back in the 70s, early 80s. And he's been, he passed away just a few years ago. about 25 years ago, he met up with someone named Pamela Yellen because he was concerned as he was watching insurance agents. Taking his IP, his intellectual property, and then twisting it, designing it with companies that don't really have the right products, or God forbid, putting it into an index universal life contract, which has its own severe sets of limitations around it. or variable life insurance to or even other forms of banking that puts the banker back in control. So he was concerned and he talked to Pamela and together they made a credentialing program and authorization and certification program called the Bank on Yourself Professionals. And I'm one of those out of 200 Bank on Yourself Professionals in the United States and Canada. So if you want to work with me, great, but there are several hundred others out there. As long as you have someone who has the certification. the ongoing education, and have, and are still in good standing with Bank on Yourself, you'll be fine. I counted at least 29 different characteristics of the policy itself that you're going to want to make sure is designed properly. And I did a podcast on this. If you want, I can get you the episode number. I'd have to look it up really quick. But it's on our YouTube channel. If you look up what's the difference between Bank on Yourself and Infinite Banking, you'll see what I'm talking about there. But for most folks that are just wanting what they've read in the book, Or heard on this show is if you've set it up with a bank on yourself professionally, he or she will design it properly and you'll make sure it's going to continue to grow for you. Even when you borrow against it, I had a guy, he had a mutually owned life insurance company, whole life insurance, dividend paying, had paid up additions on it, all the features that I would say would work for you. And 800, 000 in four different policies and his agent. Swore up and down, Tim, that he knew how to design the policies the right way, the way that Nelson Nash would talk about. And yet, it was with a company, I won't say the name on the podcast here, but let's just say that the policy was direct recognition, which just meant when you borrow against it, it stops the compounding. And his agent didn't even know that. I had to literally show it to this gentleman in his own contract. So he had borrowed out basically all 800 grand for some farming equipment. And he was shocked. He was devastated really when he realized he had been duped. Now we had some ways to help save that situation. Now he's in a much better place, but it just goes to the point that not in, not every insurance agent is trained in this. In fact, if you've listened to this whole episode, you probably know more than your insurance guy or gal does about this particular strategy. So just work with the right person. If they've been certified by the bank yourself, you're in good hands.

[00:39:45] Tim Little: Yeah, no, I really appreciate that clarification because there is so much information out there and a lot of it is good and great, but, there's, it's also easy to get confused, right? when you're hearing all these different, but similar terms, associated with this strategy. All right. With that, we do need to move on to the turbo round. So I'm going to ask you three questions that I ask every guest and I just asked for a fast. fast answer to those and honest, right? So let's get into it. What is one red flag every investor should look out for?

[00:40:18] Mark Willis: Someone who is willing to sell you something without willing to show you what they're investing in themself.

[00:40:24] Tim Little: Okay. Transparency like that. All right, next one. What is a myth about this business that you would like to set straight? 

[00:40:32] Mark Willis: Now there's a John F. Kennedy quote, The great enemy of the truth is not often the lie, a deliberate, contrived, or dishonest lie, but the myth. Persistent, persuasive, and unrealistic belief in myths allow the comfort of opinion without the discomfort of thought. So I would say the biggest myth is that you can just follow the herd and it'll all work out.

[00:40:52] Tim Little: Yeah, we've seen how that's gone so far for so many people. All right. And finally, what does success look like to you?

[00:40:59] Mark Willis: Okay. So another quote, sorry for all these, but Will Rogers has a great one on success. He says, even if you're on the right track, you'll get run over if you just sit there. So spin your wheels, that's okay. I'm a believer in analysis, but don't get into paralysis. you gotta apply those wheels to friction on the ground and move that vehicle forward. Make decisions, make mistakes. Be comfortable with losing a little bit of pride or money even if you learn something. So success looks like making a few mistakes and failing forward.

[00:41:28] Tim Little: Yeah, and there's similar principles in stoicism, right? It's not enough just to learn, you must do it. Otherwise, what was the point of all that learning? okay. Mark A., this has been awesome. I know I learned a lot, and I'm sure our listeners did as well. Please tell them how they can get a hold of you, and if there's anything else that you'd like to share with them.

[00:41:47] Mark Willis: Yeah, if you'd like to discover this strategy and learn more about how this could help you either pay off debts like we discussed today or help your kids with college or invest in real estate or syndication deals, if you're sick and tired of wondering and guessing what your financial future is going to look like and you want some more solid certainty, I can help. You can go to kickstartwithmark.com. that's kickstartwithmark.com. Mark with a k.com, and we'll do a 15 minute phone strategy session with either me or one of my colleagues. We're all bank on yourself professionals, so you'd have the right people to talk to day one about this strategy and about real estate and how it fits in like hand and glove. It's, I jokingly say, real estate and banking on yourself is like nitroglycerin. they just. Do really well together. So that's kickstartwithmark.com. And if you want to check me out first, go to not your average financial podcast or wherever you're listening to this show.

[00:42:36] Tim Little: Awesome. we'll have all that information in the show notes. Again, I appreciate you coming on and look forward to continuing to see you do big things on your journey.