An Investment Strategy to Create Passive Income: Infinite Banking
The Infinite Banking Strategy
Earning money in two places at once sounds too good to be true, but if structured correctly, that's exactly what you can do with something called Infinite Banking.
We talk about this alternative investment strategy with Chris Miles, of Money Ripples. Chris is a leading authority teaching entrepreneurs and professionals how to get their money working for them today.
We explain what the Infinite Banking method is, why Chris started down this path and how he’s able to create flexibility in people’s lives to give them financial freedom.
Key Takeaways:
How unconventional approaches such as infinite banking and real estate can vastly improve financial independence.
How to use your policy as a financial Swiss Army knife —protecting assets from creditors, boosting cash flow from real estate, and creating a work-optional life
Infinite banking concept and its role in higher return investments
Links:
Time Stamps
00:14 Meet Chris Miles: The Anti-Financial Advisor
01:03 Chris's Journey from Financial Advisor to Real Estate Investor
02:32 Discovering Alternative Investments
06:30 The Concept of Infinite Banking
07:50 How Infinite Banking Works
16:21 Setting Up and Utilizing Policies
18:32 Building a Financial Safety Net
19:05 Strategic Use of Life Insurance Policies
19:33 Diversification and Investment Strategies
20:11 Funding and Managing Life Insurance Policies
20:40 Client Success Stories and Practical Examples
23:09 Maximizing Policy Benefits in Retirement
26:58 Alternative Investment Opportunities
35:13 The Importance of Multiple Income Streams
36:28 Conclusion and Final Thoughts
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Introduction to the Podcast
Welcome to me financial the podcast designed to inspire your financial life. Hello everyone. And welcome to the podcast. I'm Michelle Moses, your host.
Meet Chris Miles: The Anti-Financial AdvisorAnd today we are going to be talking to Chris miles of the cashflow expert and the anti financial advisor. Honestly, Chris, I kind of had you on just before.
because that's in your title. I thought it might be fun to talk about that. Uh, and we are going to be talking about investing in real estate and creating cap passive cashflow in one way that you can do that. Uh, Chris is a leading authority, teaching entrepreneurs and professionals how to get their money working for them today.
He's an author podcast host of the money money ripples podcast has been featured in us news, CNN money. Entrepreneurs on fire, bigger pockets and has a proven reputation with his company, Money Ripples, getting his clients fast financial results. Thank you for being on. [00:01:00] Yeah. It's been a pleasure to be here.
Yeah. So, well, let's get started.
Chris's Journey from Financial Advisor to Real Estate InvestorCan we, um, what you want to talk about, like how you got started in this or, and what your passion is? Yeah, I got started on this because I used to be a financial advisor, like the, and more like the mainstream financial advisor, right? Like the typical person that's the salesman in the suit, just trying to sell you a bunch of mutual funds and things like that.
Um, but after doing that for four years, I remember my dad said, Hey, why don't, why don't we have you come talk to me? You know, why don't you become my financial advisor? And so I sat down with him and looked at his portfolio and it's the first time I've ever seen his money because he was the guard. He was the guy who was very guarded of his money.
He'd always say things like, we can't afford this. We think I am made of money. Money doesn't grow on trees. You know, you know, those kinds of things growing up. And so for him to open up was a shocker and, and I knew he was cheap and I knew he was a saver. He was the kind of guy that Dave Ramsey would look up to, right?
Like he was the guy that I think Dave Ramsey learned from. And, uh, and so I sat down and I looked at all of his finances, saw that he paid off [00:02:00] his house early, totally debt free. He'd stuffed his money in his company's 401k for decades. Only to find out, I said, dad, here's the deal. You're 61 years old. If you wanna retire today, you better hope you die in five years, because that's how much money you have before you run out.
And of course he's gonna say, well, that's not what I wanted to hear, Chris. What's the answer? Right? And as and as a financial advisor, not knowing anything outside of my, my realm. Even after four years, I said, I don't know. You did everything right. And it bugged me. Like it really bothered me.
The Turning Point: Realizing the Flaws in Traditional Financial AdviceAnd I remember it was, it was actually a guy that I hired to be in my financial firm that went and left to go do real estate investing.
He actually kind of woke me up to it. He said, Chris, how many of your clients are really, truly financially free where they don't worry about running out of money in the retirement? I said, well, they all worry about that. You know, that's, that's just the thing, you know, in retirement is how do you let your money, you know, stretch out as long as possible.
He said, okay, Chris, well, how about this? How many of you guys, this financial advisors are financially free, not off the commission's earning, but actually [00:03:00] doing these investments, you've been recommending like by just investing in these mutual funds. And as I really thought about it, and this isn't, this is to that end of 2005, when I was talking to him, I said, you know what?
Maybe none. Cause there's been guys working here since the late 1970s. and still they can't retire either. He said, well, there's your problem.
Discovering Alternative InvestmentsAnd, and that kind of got me down a different path, a path that I know you talk about in the show too, where I started looking at alternative investments. Cause I wanted to see, I'm one of those people.
I like to see that there's proof in the pudding, right? Like I want to know that something actually works. And, uh, and that's where I started finding guys that were like in the real estate space in their twenties and thirties, financially independent, financially free doing that kind of thing. And so I started following that path and it got to the point where I couldn't.
I couldn't justify being just the mainstream financial advisor anymore, where I didn't really have any options outside of just mutual funds and annuities. Right? I wanted something better. Well, and part of it is the education that you're given when you go into those jobs, too, right? I mean, it's It's just like tunnel vision.
It's kind of [00:04:00] like, I feel like, and I'm not going to say the name of the company, but they, uh, are really insurance salesmen. And then they get out into other financial planning places and they're like, Oh, I just sold insurance when they were taught, Oh no, I'm a financial advisor and this is what I do. And yeah.
And, um, and yeah. And then I think that alternative investments are just so much more exciting. And my clients think they're so much more exciting. Absolutely. Well, and that's why you have your RIA, right? Because I mean, even when I was looking at it, I was like, well, can I offer this instead? No, you can't do that.
Yeah. The client says you can't do it. Right. Yeah. It was so hard just, you know, having like, you know, the series six and 63, you know, and those kinds of things. So, I mean, long story short, I, I just, I had to choose between them. I said, you know what, I'm out. I'm going to, I'm going to just be a mortgage broker because in 2005, And 2006, anybody can be a mortgage broker.
And, uh, I was teaching people how to trade stocks and options. You did it too. Yeah. I did that too. Yeah. Yeah. So you remember those days it was easy. Anybody with a heartbeat could get along. Right. Um, it was great. But, uh, but yeah, like I did that, I was teaching [00:05:00] people how to trade stocks and options and I just really was.
You know, and I taught ballroom dancing on the side. So you're just trying different things. That was kind of my life. Yeah. Okay. While I was learning. Yeah. And growing. Okay. And so now what is, what is like the process of what you're trying to do with people? The same thing I did, because later that year I was actually able to become financially independent myself when I was 28.
And uh, and so that's, it kind of pulled me out of retirement in 2007, you know, because people always want to know, well, how'd you do it? How'd you, quote, unquote, retire so young. And it was actually by me doing the opposite of what I was teaching people to do myself. Right. Um, and so that's why I've been doing, I've been helping people do that.
Like, how do you actually create a plan? You know, we're not investment advisors by any way, shape or form, you know, we're not telling people like, here's where you should invest. Um, but we are strategists and connectors. So we help align people and say, here's some things you can do with that. Here's, here's some people we've vetted people that we've used for years ourselves.
You can use them to, you know, whether you're investing in. You know, buying turnkey rentals, whether you're doing syndications by [00:06:00] investing in oil and gas or apartments or self storage or whatever it might be, or lending funds or things like that. Try to really kind of matchmake a little bit more and help them create a game plan to getting to the point where they are work optional.
They have enough passive income to stop working if they want to, but they don't have to. Okay. So it's trying to use their money to create passive income so that then they can just have, you know, whatever they can retire if they want or do whatever they want. They're not tied to a job really. Okay. Okay.
And I think it's interesting too.
Infinite Banking ExplainedUm, and I, I not only picked you because you have the anti financial advisor, uh, thing on your profile or on your website, but, uh, also you do this with infinite banking, right? And is that part of one of the tools that you use? Yeah, it's so funny because even though I was insurance licensed and even though I was security licensed, knew nothing about infinite banking as a financial advisor.
Right. And then I hear about this from all these real estate investors. But I'll tell you, the way they were doing it was so funny. [00:07:00] slow and expensive. And they're always telling you like you buy your house with it or buy a car with it. But they never, they never really taught me about how to use it with like alternative investments, like real estate investing.
That's something I had to discover on my own later on. And Oh my goodness. Like when you, when you can really figure out how to design the right policy to then utilize that cash to then invest in two places at the same time, you know, essentially by, you know, use that, that money. To then go and use that to buy properties or buy whatever assets you have, specifically cash flowing assets, ideally, to then have that cash flow going back in to pay down that line of credit.
And, and the amount of compounding interest you make compared to the simple interest you pay on the loan, you start to realize you can actually make a higher rate of return on your investments by doing that way, versus just using a simple checking your savings account. It kind of becomes a no brainer, doesn't it?
Right. Well, why don't we go back and, can you go back and explain, uh, Infinite Banking to the listeners and, I mean, just kind of give a basic overview of it. [00:08:00] Yeah, I see it as just a simple tax free supercharged savings account, right? It's a savings account that is tax free. You, you've of course had your death benefit with life insurance, but that's not the big thing we focus on.
Although it's a great perk for it. And that's the ultimate purpose of it. But the thing that's nice is that you have this tax free savings account inside of it. That is liquid. It's, it's like, it's kind of like having a Roth IRA, but you can access it without the whole 59 and a half rule, you know, or we're in about 10 percent penalties and things like that.
So you're able to have that money grow there, be safe. It's outside of the stock market. Um, but here's the real magic that I discovered later on is that when you, one of the mistakes we hear people say all the time, and I know it might drive you nuts too, is they'll say you borrow your own money, right?
You pay yourself back, which is so not true. Like you actually, because that money is guaranteed, the insurance companies and even some banks are willing to lend you money based on that money in there. So that money is collateral. You can get a line of credit against it. That line of credit can be paid back however, [00:09:00] whenever you want.
The deadline for paying it back is your death, but there's no like monthly payment. So it's kind of like having a home equity line of credit, but you don't have a monthly payment. And the nice thing is too, is that it actually pays you interest where a home doesn't pay you interest. So basically what you're doing is taking so infinite banking you guys is where you're taking a whole life policy and you're putting cash into it.
And the way that I have done it is with companies where you, so let's say you, you know, you pay your base premium and And then you've also dumped, um, some cash in at 20, 000 a year, let's say, or 30, 000. You can do more. It just depends on how much your death benefit is. And then once you get it built up, then the idea is that you borrow the money from it.
And I know you just said you hated that, that term, but that is the technical term for it. And you borrow the money for it from it to do solar panels or to invest in real estate or do whatever you want to do. And the ones that I use, um, is when you have the money [00:10:00] in the policy and when you borrow it, then you're still making interest on that money as if it is not borrowed.
So let's say you've got 50, 000 in a policy, you borrow 25. Inside of the policy, it is still making interest as if there's 50, 000 in there and your policy is still intact, your death benefit is still intact, you know, all of this, um, and, but it is accruing interest, but if, and it's hard to describe on this podcast, but the more that you borrow from it and the more you pay back, actually, the more that you do actually make inside the policy.
Uh, and, um, I would just say it's kind of, you're not, you know, You're still paying a little bit of interest, but the more that you kind of churn it, I guess you could say, uh, the more that your, um, policy dollars do go up. So would you agree with my assessment of this infinite banking? Yeah. Like I said, like it wasn't about like borrowing, like borrowing for the policy is true, right?
You really borrow for the insurance company when you do that. But. the policy is collateral. Right. So are you [00:11:00] saying you go to a bank and so you have the whole life policy and then you're going to a bank and borrowing like a line of credit against it? You could. Um, lately though, the, the interest rate has been a little bit too high.
So it's cheaper than insurance companies right now. At least most of them, some of them charge pretty high too, but most usually you borrow from the insurance company and you pay them the interest. Right. Um, the thing that's nice though, is that, you know, you're getting paid interest all along the way. So for example, say you have a hundred thousand dollars of cash in there.
You want to borrow 50, 000. The problem is I see a lot of people that critique it will say, well, why would I pay interest to borrow my own money? And the answer is you're not borrowing your money. Your money is sitting in that account. The 100, 000 is still in there. Even though you get 50, 000 from the insurance company, you're borrowing from them, paying them interest.
But you're earning full interest on that a hundred thousand that's compounding tax free, right? And so like you said, like, you know, different interest rates, people say, wait a minute, but the interest rate might be higher than when I'm getting paid. Sometimes it is, sometimes it isn't. [00:12:00] Well, that doesn't matter because one thing I teach a lot of my clients is, For example, say you have a mortgage that's 4 percent interest rate, you could try to pay off that mortgage in 30 years, right?
Just by paying it off in cash outright. Cash out all your assets, pay it off. You'll never have to worry about paying the interest on that mortgage. But the thing that blows people's minds is, What if you took that money you could have used to pay off that mortgage today, but instead kept in a CD, right?
Just a crappy CD. Say you earn 2%. You will still beat the 4 percent mortgage because it compounds faster than the simple interest you pay on that mortgage. And that was the thing that finally clicked for me was I realized that there's two different types of interest happening. There's compounding interest, which of course has that curve that you always see goes up over time, the exponential curve.
And then there's simple interest, which we see on loans. Simple interest is just like your mortgage where as you pay down the loan balance, less and less discharge interest and you pay more and more to principal. So like you said, depending on how you pay it back, That's where the real [00:13:00] magic happens because the amount of interest you get charged is less than the interest they pay you on that money.
And that's how you can net positive, even if the loan rate's higher than what they're paying you in return, you could still beat the interest rate. Right. And so when I talk to people about using that with real estate, for example, I showed an example where I just used my own policy to buy like a, like a 1 million, apartment building, quarter million dollar down payment.
If I kept that money and just took that cashflow that I liquidated on my savings account, because now there's no more money in that savings account. It's now to be replenished by the cashflow. And from that investment over nine years, I'll make a whopping 1200 bucks in interest, especially after I have taxes taken out.
but doing that same thing with my policy. I, despite the fact I pay interest in insurance company, I still net about 126, 000 in nine years doing that same exact thing. Same strategy, just paying, instead of paying the cashflow back to my savings account, I pay it back towards that line of credit from the insurance company.
And once, once like I talked to a lot of real estate investors, once they get [00:14:00] that, they're like, Holy cow, this is a no brainer. Why wouldn't I do it? And that's exactly the point, right? Is that once you understand how it works and how it really does allow you to make money in two places at the same time because you're earning interest faster than what you're paying on the loan.
So you make money inside the policy while you're also still making your cashflow from your investment. It's not an either or category where it used to be like with the policy I bought my initial policy. I bought, there was no paid up additions. They told you, you couldn't do it. They said, no, no, you pay all base premium.
So they would give me a higher death benefit policy with a high base premium, no paid up addition. So I didn't have any cash going in there. I actually lost it during the recession because I didn't have any cash in it to keep it going. Paid up additions, you guys are the ways that you get the cash in there.
And the paid up additions are when you put extra cash up over your, Premium that you actually pay the base premium that you pay just like on a term policy. Uh, those kind of those called those are called paid up additions and you actually are purchasing more insurance that cannot be taken away from you and you are allowed to put more [00:15:00] cash inside of the policy.
Um, we're not allowed to say like a bank account, but like a, you know, just like a savings account or something like that. You would, um, put cash in, um, it is then increasing your death benefit with something that can't be taken away. So sorry to interrupt you. I just wanted to clarify that for them.
Exactly what I was going to say is like, it's just paying extra in there to build up that cash policy, right? The cash that you can use. Yeah. And, uh, I'll tell you that's, that's another thing too, that investors like too, is that many of them, as they start to grow their portfolios more and more, the biggest fear is how, how do I avoid losing the, the, the assets that I have?
Well, in most states, as you know, the money that's inside life insurance policy is a hundred percent protected from losses creditors. Right. Even if somebody sues you and wins, they can put a lien, they put a lien on your house, put a lien on your savings account. I've watched it happen. Yeah. Um, you could do all those kinds of things, but they cannot take the money out of your policy in most states.
Right. So you have that protection. Plus, you know, on top of that, you know, you've got the ability to be free, you know, be free from the banks, [00:16:00] which I don't know, like I've had more and more, um, more friends in the real estate space say, I'm just not trusting the banks right now. There's something fishy going on, especially after Signature Bank went under and everything else.
Where can I put my money? That's safe as safe as a bank. And I said, well, yeah, life insurance is pretty, yeah, they have to have a lot of reserves. Yeah, they have to have a lot of reserves and they do have a pretty good record.
Setting Up and Utilizing Infinite Banking Policies
And so do you find that it takes a lot of time to get the policies up and going?
Because. And, you know, because you do have to have the time of applying for the policy and then being able to get the cash in there that is enough to purchase real estate and to have a down payment for it. It depends. I mean, setting up a policy is the easy part, right? I mean, sometimes they can be done in a matter of days, could be a few weeks.
If they're healthy, yeah. Worst case, it might take a couple months. Yeah, there are, there are some of those exceptions where if they've got bad health or health issues, but I mean, I just had a friend, uh, last week, he finally did a policy. He waited a few years, but he's type two diabetic, but, um, [00:17:00] thankfully he changed his diet and everything.
He lost a bunch of weight. Um, for the most part, his markers were pretty good. He got, He actually did the, um, uh, what's it called? The, uh, paramed exam, you know, where the examiner's coming out to his house to test his blood and urine. He did that. And just a few days later, they approved him. See everybody, this can be like a health kick too.
If you want to, want to apply for some life insurance, you can get your life back together, your health back together. It's really true. So, so yeah, it can, I mean, that part's the easy part. Yeah. But does it take the time? Yeah. To get the cash in there. Yeah. Yeah. Yeah. Cause once you get the cash in, usually you have to wait at least 30 days, um, for some companies, others that make you wait longer, we try to try to stay away from the companies that make you wait a year or two.
Um, but yeah, I mean, 30 days later, you can be using that money, but I'll tell you this, I've been teaching a little bit different lately. Um, ever since 2022, um, I liked whenever I hear things in the, in the economy, right. When people start saying you should do this, I will do the opposite. So somebody says you should buy more [00:18:00] stocks.
That's when I never buy stocks. They say, if everybody says you should buy real estate, that's the time not to buy real estate. They say everybody buy a Bitcoin. That's the time not to buy a Bitcoin. Right. Um, and same thing, like in 2022, everybody was saying you should not hold cash. And as a result, I said in the spring of 22, I said, I should be holding cash because if nobody holds cash, then the person that has cash is going to rule the world.
Yeah. Cash is king. There's a reason that there's that saying. Yeah. And so people of course say, well, where can I store cash where it's not going to make 0.
Building Emergency Savings with Life Insurance0%. I can protect it life insurance. And so I started building that more and I started teaching my clients. I said, you know what, honestly, even if you're set up a new policy, the first few years, don't use it.
Like actually just build up the cash in there to diversify your emergency savings account. Cause You know, like my wife and I, we said, we want to keep 300, 000 that we don't touch that doesn't get invested. It's just there for emergencies. Well, do the math. Our credit union pays us 0. 1 percent on 300, [00:19:00] 000.
That means we make 300 a year, but after I pay taxes, I really walk away with 200 a year of interest. But if I earmark a quarter million in my policy where I'm making over 5 percent tax free, that's already right there making 12, 500. So keep 50, 000 in the bank because I can get to it quickly where the policy might take me a week or so to get to that money.
Well, then I could still have bank money there, diversify more into my policy, keep that money there. That's growing a much better interest and it's tax free. I'll make more money that way. And so I didn't have people cash there and then invest the rest. Right. And I get that.
Diversifying Investments and Life Insurance PoliciesI think that the diversification is great is to have some money into in a life insurance policy.
And then also in, you know, other things. Um, but my My question more about the time getting it in is that they don't allow you to put, I mean, I guess it depends on the death benefit, but you normally are going to put, you know, 20, 000 to 50, 000 a year into these policies to get the cash, get the cash balance up.
And then after, you know, five or six [00:20:00] years, you usually kind of taper off and stop. Um, and so is that kind of what you do or how long are you trying to put all the money in and year one so that you can then use it? Yeah, I definitely don't recommend front loading very often, um, where you put a big lump sum of cash in the beginning.
Cause I mean, there are people out there, especially in the real estate space that recommend that, but honestly that just charges you more. And that's what I think with the premium just costs more. And so what you're trying to do is keep the premium, the base premium down. We're steady. Yeah. Yeah. Yeah. Okay.
All right. Yeah, exactly.
Strategies for Funding Life Insurance Policies
So like, instead of dumping on a hundred, 200 grand, we might say, let's keep it at 25 grand a year. It does take more time to build, but you know, let me give you an example. Cause this happened recently where I had a client that they were looking at doing both investing and they want to do this.
And they're saying, well, should I run all of my money, this quarter million dollars through my policy? And I said, no, definitely not. Cause that first year is the hardest year. That's the most expensive year that just pays, pays the insurance agent more. Don't do that. I said, instead. [00:21:00] let's have you do maybe it's just like 25, 000 a year, right?
Um, and so I said, do 25, 000 a year, but here's the cool thing. You still have 225, 000 you can invest. If that 225, 000 makes even just 10 percent return, that's 22, 500 bucks. So now you pretty much have your policy paid for just by the returns of the investment. And they can, of course pay the 25 regardless, but now they've got that extra cash.
They might end up sending up a second policy the next year. So instead of just, you know, all or nothing one place to the other, it's no, let's do both. We can still get the policy, still build that up, but let's just invest the cash day one, get that money, start kicking off some returns, building more cashflow.
It allows you to put away more and create that kind of what I refer to as an income avalanche, right? Where you can, Start taking more money and reinvesting it. So then it's not just 22, 500 that year, you might be able to bump up over 000 in the next few years and so on. Right, right. Okay.
Using Passive Income to Fund Policies
And I think that it's important to point out with some of these policies that having this [00:22:00] passive income in order to pay the policy, I like that your idea of doing that because that is where I think some people get really hung up on it.
Is they like the idea of it, but then when you are just working a job or, you know, and you don't think that you have that passive income, it really just as becomes an expense of, you know, a thousand to 3, 000 a year that you're paying to just keep this policy in place. And, um, that is where I see people just like, Oh my God, how long are we going to do this?
But the people that actually use the cash value to put on solar panels, buy a car, you know, they, they're doing different things with it. Yeah. But then because they don't always have the time for the passive income. So I like your, um, your idea about only using the money to create passive income so that you can then pay the, um, life insurance with it.
Am I missing anything? Any parts of it? Yeah. So definitely safer way to go in my opinion, right? Like it's, I think that's the number one thing. And like you said, I never want [00:23:00] people to feel like it's an expense because you know, once you get past those first few years, usually by year three or four, it's paying for itself.
Right. So it's already earning more than what you're putting into it. And when I get people to that point, like I just had a couple there in their sixties, they said, Hey, I know we're supposed to be paying this for the next, you know, for a total of seven or eight years, but honestly, I'm not so sure. I don't, I can't afford to keep paying a hundred thousand a year between the two of us.
I said, well, you're not honestly, you're at the point where the policy is already paying for itself. You could just borrow from the cash to pay the premium forever, you know, or even just make it paid up at some point, you know, and just let that let it grow without you paying a single premium for the rest of your life, which is way better than they were thinking, trying to get a 10 year term policy.
In their sixties. Oh gosh, no. Which is a death benefit that's probably gonna run out anyways. Yeah. So it's just wasting money, throwing money away when they already have a policy that's already paying for itself. Yeah. So once I got them to see that, then they kind of shifted their perspective a bit. Yeah.
Maximizing Policy Benefits in RetirementSo once you have enough cash in the [00:24:00] policy, you guys, it starts to make dividends. And so then you can use those dividends to just pay the premium. And a lot of people will do that, you know, when they go into retirement, they're like, okay, I am turning this thing off and the way that I sell it too. Um, and I don't know, when you took the.
The infinite banking training, I was like 20 years ago. I can't even believe I'm saying that. But they would talk about how, um, you know, when you go into retirement, um, talking about you're gonna be spending all of your, um, different assets down. So you could spend, you know, all of your IRAs and 4 0 1 Ks, you could then.
You know, downsize maybe. And then the life insurance is just there growing for another 10 or 15 years into your retirement. And then you could either borrow from it and then you could even do withdrawals if you want, and then you don't even have to pay it back. Um, if you're at the end of your life and it's something that you don't care to pass on to your heirs and you know, it's.
You just want to spend it down. But if you do want to pass it on to your heirs, um, um, or have it like as a long term care fund, I mean, there's just so [00:25:00] many different options that you can do with it that, um, I, you know, I did a life insurance podcast before having you on and I was really touting, I mean, all the different things that you can do with it.
I just think that these policies get such a bad rap and I think they get a bad rap because. People are out there only selling life insurance and saying you need to put every single dime into them. And that's just not, I mean, obviously if anybody's ever telling you that you should put all your money in annuity or life insurance or all in real estate, you know, that none, that's never the right answer is to put all your eggs in one basket.
So. That's right. Yeah. Yeah. That's exactly it. And that's true. I like it. I like that you brought up that point because I often, you know, I, I mean, I tell people, of course that can become like your supplemental retirement down the road, but the truth is that we're so busy You know, taking your money and making it work for you, even if it's in an IRA, right?
Self directing it into doing some other types of investments. You know, the whole goal is it really, it's just gravy. You know, the money that's in the policy, the money that could be taken out tax free is all just gravy on [00:26:00] top of all the other money you're doing. And it reminded me of one of my, one of my insurance clients where he, uh, you know, he's, he's, he's 30, right?
So he basically wanted to create a retirement plan by the year 2030. He needed about 5, 000 a month. And so he's been buying up properties just a little bit at a time. And he's only putting in like, he's only saving like 15, year, something like that, you know, between the money he's earning from his properties and the money he's been saving.
He's been putting that to his policy and, and I'm looking at the trajectory. I'm like, well, he's not going to get to 5, 000 a month. And then he drops the bomb on me. He says, and then in 2030, I'm going to pull out 800 a month for my policy, because you don't have to wait till you're 59 and a half, even though he's in his thirties.
He can start pulling money from that while he had about 4, 200 a month coming from his real estate, he's at 5, 000 a month by 2030, you know. Well, and then who knows what else he's going to create. Yeah, he could create something else and then not pull it from the policy later on. It could just be like a stopgap for whenever he figures things out.
Alternative Investment OpportunitiesOkay, so what are some of the things [00:27:00] that you advise people to invest in for this passive income? Can you give me like examples? Yeah. So I mentioned like, like what he was doing turnkey real estate. And what that is is where you have a property manager. They, you have somebody helps you find the property.
It could be anywhere in the country because I know I live on the Western half of the U S. Real estate here is horrible, right? It's bad to buy rentals here. So, uh, and you don't want to have to deal with tenants, the toilets and the trash. So turnkey rentals is, uh, usually turnkey companies will help you find the property.
They'll help get you renters in it. They'll even help you with the financing and everything else. Line it all up so that you're hands off, but you get paid the net proceeds from that. But the property is all 100 percent yours. That's one area that they could do, uh, lending your money. You can actually lend to real estate investors where you get paid a contractual return.
It could be 10, 11, 12 plus percent a year that you're paid by lending your money to investors to use your money to make more money, right? Um, you could do things where you're in an equity type deal. So maybe you're pulling your money with other investors to [00:28:00] buy apartments. It could be buying into like self storage or assisted living, or it could be even do a carwash, you know, like oil and gas type of stuff.
Not the drilling part, which is more speculative, but more like lacing your land to oil companies. And then even getting paid royalties on top of it. Um, even just like, uh, business partnerships. Like I have one that I do raw land investing, where again, I'm hands off. They do all the work. I'm a 70 percent partner.
They're 30%, but already from investing about 350, 000 in the last two years, um, we're already cash flowing about 8, 500 a month. You know, from that, so over a hundred grand a year. So there's just so many different alternative ways that you can make money. That really, when you start to look at the traditional 401k, which underperforms like fidelity, they actually underperformed by about two to 3 percent from the actual market returns.
You know, you sort of look at that stuff and you say, man, that's a joke. Even with the match of a 401k, you can't even make up the difference. Well, and it's even, it's, it's so out of your control. And I think that's why people like [00:29:00] to diversify is it's just, you know, it, it, again, it's, it's completely out of your control and you're just hoping on a wing and a prayer that everything is going okay.
And I, you know, I, I do think that stocks are kind of a nest, like if you've worked a job and you have a 401k or, you know, they're, they are kind of. They have their place. Yeah, they, they, I just call it the base. You know, that's, that's your foundation of what you've got and everybody has that. But then this is the fun stuff that you can kind of jump off of and, um, do some of these alternative investments.
And this is, you know, where it gets fun. Um, but a lot of those investments that you were saying, I do think it's important that people, uh, manage their, you know, cause a lot of them are longterm investments or they could be longterm investments. Yeah. You know, they start off with, Oh, we're only going to be six months to a year, or maybe five to seven years.
But sometimes, you know, even with COVID, you know, okay, now we're into 10 years. Uh, so, you know, it is important to still have a savings or have money coming in or, you know, don't, don't again, put all your eggs in one basket and [00:30:00] then have all your money working for you and then not be able to pay your bills.
So, uh, am I missing anything? I really like this. Uh, this concept, I think it's been really great. You've had a lot of, it sounds like a lot of success with different clients. And did they just call you and then you, um, like review everything that they do? Yeah, we, we even have our website. We have like this passive income calculator that people can put in their numbers and we can pretty accurately determine how much passive income they create in just 12 months.
You know, um, like for example, I mean, I always tell people, you know, getting money out of prison, right. Um, cause people usually lock up money. They could be in IRAs. They could be locking up money there. They could be locking up money in home equity. It'd be lock up money. Even if they have rental properties, they have too much equity in them.
Like I had a guy from California that. He had seriously 700, 000 equity in his rental property in California, cash flowing 200 bucks a month. You do the return on equity calculation. He makes like 0. 3 percent a year. It took me [00:31:00] two years to finally, finally get him, educate him enough to where he felt comfortable.
And it wasn't just the education, it was the emotional attachment to that property. When he finally said, I'm going to sell this property. take all the equity and invest in other properties like in Louisiana is where he went to purchase a lot of his properties. He's now making over a hundred grand a year on that equity versus the 200 bucks a month.
That's over a hundred grand a year. Yeah. Yeah. And he's like, Oh, now I get it. It was like, yeah, we told you that return on equity was horrible. So get your money out of prison. If you can get your money away and liquid, then you can start to see what you can do with it. And that's, and that's pretty much what that calculator does.
Cause A lot of people are like, well, how do you calculate that in your head? I'm like, practice, but or you just use this calculator and I'll spit out a number for you. Okay. All right. And can anybody in any state come and work with you? Oh yeah. Yeah. It's not state specific at all. And sometimes we even get people from internationally, like in Canada or the UK or Australia that will come to us as well.
Okay. And then do they work with you or is there, you have like a team? [00:32:00] We've got a whole team that does it. I, I'll do like some of the educational calls and things like that. But, uh, Okay. We're pretty close knit team, but they'll usually work with somebody else. One on one. All right. Well, wonderful. Um, do you feel like I'm missing anything that's huge?
Like I missed asking you, you know, I mean, you've asked me some good questions already. I'll just say this. Like I like. You know, what, uh, what you're proposing, what you're proposing, right? I mean, that's, there needs to be more voices like this out there because the, the mass media, I mean, they, they are so bought into just having you do the traditional stuff.
And if like Fidelity, I mean, give you an example. I mean, Fidelity, I looked at their stats, 45 million clients in Fidelity, only 750, 000 have over a million dollars between their 401ks. and their IRAs. And of those, then Transamerica did a study asking them how many of them feel like they could retire. Of those people with over a million dollars, 35 percent said that quote, it will take a miracle for me to retire.
You know, why? Because they're pulling out 3%, you know, they're told to pull out [00:33:00] 3 percent a year on a million bucks. And I don't know that, I don't know that people really want to fully retire anymore. I mean, I think it's more like, I just want to be able to, you know, create the passive income and have the option and I, or I just.
I'll look at it too as, um, you know, not everybody could be buying real estate and if everybody was doing it, then it would be not beneficial to be doing the show. Right. And, uh, you Um, and so I get it, it's kind of like how I sell some of these alternative investments where I give people a discount. Well, the only reason I can give a discount is because this other guy over here is making a commission.
So I, you know, I, I think it's wonderful for the people that find this information and that listen to this podcast and listen to you. Um, but I'm also very grateful for, I guess, the It's the options for other people to be, um, being able to save something because sometimes people aren't able to save anything.
And these IRAs are going to at least give them a tool to know what it [00:34:00] feels like to save some money. But I totally get what you're saying, but I just try to turn it around a little bit because I know not everybody's on the same path and they don't all have the same risk or the time. They don't want to spend the time learning all of this.
And they don't trust people. No, I get it. Yeah. I was there too. Yeah. At one point, like, where's for me, you know, saving 4 0 1 Ks and IRAs and Roth IRAs and things like that were like the thing to do. Mm-Hmm. , you know, and it, it just, it's got to the point where I realized I couldn't keep my mouth shut anymore when I realized that people couldn't do it.
You know, traditional mutual fund options, especially when they're for 401k options are very limited, especially those target date funds. Those are the worst performing investments you can get usually, versus like something that may be more independently managed. Like what you might do. That's a totally different ball game.
Right? So that's the thing is that we just want to open people up to knowing that you're not stuck to falling in the rut that everybody else is falling into. That feels like they're living on a fixed income budget. Right.
The Importance of Multiple Income Streamsand And, and get to the point, like you said, like where you are work optional, [00:35:00] where you, you only work just because you want to do it, not because you need the money.
Yeah. And so few people can say that nowadays. Most people they're like, well, I still want to work, but they realize that if their job would be eliminated today. You'd be in trouble, right? And it's kind of like, uh, I have a client that he works in Hollywood as a set designer and of course, Hollywood shut down in 2020.
It shut down in 2023 because of the writer's strike all the time. It keeps shutting down. And the one thing he's grateful for is that he has passive income coming in. So that doesn't matter if they shut down, he can wait until Hollywood deals with all their drama, no pun intended, but once they get out of the drama, then he can actually.
Pick it right up and not be worried about that. And that to me is like real freedom. Yeah, it is. It's important to have multiple streams of income. I'd first started this and, uh, my financial planning practice. And then the market went down in 2008. I had been in business for like two years and I had an e commerce store.
And if I didn't have that, I would have been on the street. I don't know what I would have done. So. Yeah. You got to have multiple [00:36:00] streams of income. I mean, especially if you've got a job that were, you know, where things could go sideways and you want to have savings. So, and it feels so much better to be financially, uh, independent and okay.
I, I really hate the word I'm getting tired of the words, financial freedom, honestly. Uh, but you know, I, it, it feels just so much better to have that taken care of and to know that if you've lost your job or for me, if the stock market went down, that we, you know, be okay for months and years on end. So, yeah.
Conclusion and Final ThoughtsWell, Chris, it's been really nice talking with you. I, uh, am really intrigued by your business and what you've got going on. And, uh, I am, thank you for taking the time to be on the podcast. Yes. Same here, Michelle. Really had fun. Thank you. Yeah. And everybody I'm going to have, um, Chris's information in the show notes and, um, let me know if you have any comments or questions for him.
And thank you so much for listening. Be sure to share it with your friends and write a review. Thanks guys. I hope you have a great [00:37:00] day.
Disclaimer: The information provided in this podcast is for general informational purposes only and should not be construed as professional financial advice. Always consult with a qualified financial advisor or professional before making any financial decisions. The hosts and guests of this podcast are not responsible for any actions taken based on the information presented.