Episode 46: Do You Have Your Financial Plan Backwards?

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The Canadian Wealth Secrets Team is back with another podcast episode where we delve into the critical aspects of building a solid financial plan that serves as the foundation for successful investing. Many people find themselves hesitant to start their investment journey, feeling like the financial successes of others are unattainable. This episode provides valuable insights and practical advice to dispel such doubts by helping you to take care of the necessary “stepping stones” needed to have success investing.

The episode emphasizes that merely having the goal of “investing” is not enough. It’s essential to establish a comprehensive financial plan first instead of falling for the trap that many eager to invest individuals get stuck in and then struggle to make an initial move. We’ll highlight the significance of starting with a detailed household budget to first help prevent financial pitfalls like Parkinson’s Law or “lifestyle creep,” while helping you decide how you might start appropriately allocating your investment “seed funds” wisely.

We also emphasize the importance of safeguarding your financial plan through methods that won’t be restrictive to your investment aspirations. In particular, we’ll guide you to ensure that a balance is achieved between securing their financial future, while still propelling you to reach your lofty and audacious investment goals.

Stick around as we provide actionable strategies that will allow you to break free from financial inertia and get back on track towards your financial and time freedom journey!

What you’ll learn:

• Why it might seem like trying to “do” what others have done isn’t possible for you;
• How starting with a goal of “investing” isn’t enough;
• Why many who are eager to begin investing seem to get stuck and struggle to get started;
• Why starting with your household budget with your fixed and variable expenses is an essential first step to avoid Parkinson’s Law or “lifestyle creep”;
• How you might go about ensuring your financial plan is protected in a way that doesn’t feel limiting to your lofty investment goals; 
• Why you should reflect on whether you are being guided by the right team of individuals to help me accomplish my financial and time freedom goals; and,
• How you can get “unstuck” from the rut you are in and back on track towards true happiness.

Resources:

• More on Parkinson’s Law and Financial Creep 
• Dig into our Ultimate Investment Book List
• The Real Group Windsor Real Estate Team
• Canadian Wealth Secrets Ontario Mortgages
• Canadian Wealth Secrets Wealth Planning
• Download our Wealth Building Blueprint

Opportunities, Services, and Consulting:

For those interested in being considered for potential Joint Venture (JV) opportunities, reach out to us here.

Contact Matt if you’re Buying or Selling Real Estate in Windsor or Essex County!

Reach out to Jon if you’re looking for an Ontario Mortgage, Ontario Mortgage Refinance or a HELOC in Ontario.

Get in touch with Kyle to begin your journey through his Canadian Wealth Planning System.

Check out the work Jon and Kyle do assisting mathematics educators and district leaders.

Watch Now!

00:00:00:11 – 00:00:26:06
Kyle Pearce
More than half of Canadians have some type of life insurance. I think it’s around 60%. That’s still low, in my opinion, but it’s better than maybe some might predict. But I’m talking about some other protections in place. So some people have that life insurance. But I’m going to argue that there’s other pieces that we need to take care of before we even deal with our fixed expenses and our variable expenses.

00:00:26:10 – 00:00:48:21
Kyle Pearce
So I want to say that again, because if my fixed expenses, which is my car payments, my house payments, my insurance on my car, my insurance on my house, my utilities, which are not so fixed, they are varied, but they are things I have to do. If those expenses are too great, that I can’t take care of this protection aspect, then maybe I got to rethink where I’m at.

00:00:48:22 – 00:01:08:17
Kyle Pearce
Maybe the house, I’m in the car, I’m driving the membership I have for whatever it is that I like to do and how I like to spend my time.

00:01:08:19 – 00:01:15:23
Kyle Pearce
Welcome to the Canadian Wealth Secrets podcast with Kyle Pearce, Matt Biggley and Jon Orr.

00:01:16:00 – 00:01:23:24
Jon Orr
Get ready to be taught as we share successes and failures encountered during our real life lessons. Learning how to build generational wealth from the ground up.

00:01:24:01 – 00:01:29:04
Matt Biggley
Welcome investor students to another episode of the Canadian Wealth Secrets Podcast.

00:01:29:06 – 00:01:57:19
Kyle Pearce
Well, my friends, we are digging into another episode here, and as you noticed in the title, is your financial plan Backwards? And we’re going to have to take a deep dive here because lately what we’re finding is we’ve been on many calls with many invested students who have been listening and reaching out to us. And it’s been great to not only get to know those who are listening, but also to start recognizing some of the patterns that we’re seeing out there.

00:01:57:19 – 00:02:31:06
Kyle Pearce
And one thing that we’re noticing, at least from the listeners of this show, is we have a lot of people out there who are really interested in getting into investing, and some have already done so. Some have already begun their journey of investing, which, hey, kudos to them. That’s fantastic. But what we’re finding along the way is that there’s actually a few stepping stones that are either missing, may be wobbly, may be off to the side, making you kind of do a wide sidestep to get to the next stone.

00:02:31:08 – 00:02:34:24
Kyle Pearce
And in this episode, we’re going to chat a little bit about that.

00:02:35:04 – 00:03:02:13
Jon Orr
Yeah. So you mean we’ve been chatting a lot on this podcast about how income and real estate investor but I guess what I’m hearing from you is that a lot of these people are reaching out and they’re like, You know what? I would love to help you become a real estate investor. And partnering with us on our JVs is or maybe help getting started, but there’s actually some things you’ve got to take care of first so that you’re really in a great shape and great position to be that real estate investor.

00:03:02:13 – 00:03:07:16
Jon Orr
Because I think those conversations right now are like, You’re not there just yet, even though you thought you were.

00:03:07:17 – 00:03:26:07
Matt Biggley
Yeah, and I think we want to hit the proverbial homerun. We’ve listened to too many podcast, read too many books, talked about this over beers, and got really, really excited about it. But I love this topic because this is really about fundamentals, about foundations. This is about understanding that not every swing you take is going to be a homerun, is going to be some singles out there.

00:03:26:07 – 00:03:59:14
Matt Biggley
And I was read this article by John Maxwell, who’s a well-known leadership writer, and he was talking about how many people ask him, how can I do what you did? And it was whole point was, you can’t do what I’ve done because you’d have to live the life I lived in. So it’s the same for us. We’ve got these disparate and interesting experiences and backgrounds that we’ve come into this with, and it’s this chemistry between the three of us that makes this partnership powerful and you can’t just step into the world investing beat in real estate or in some other type of investing without bringing that lived experience and that expertise.

00:03:59:14 – 00:04:15:03
Matt Biggley
And we’ve all got a unique expertise. But I think part of this challenge for people is finding the right investment to plug that expertise into. And of course, we talk a lot about real estate on this podcast, but we’ve got some other really cool vehicles that we’re going to discuss in more depth today, too.

00:04:15:05 – 00:04:33:17
Kyle Pearce
I love it. I love it. And it’s interesting because you’re so right there, Matt. It’s impossible to live exactly the same life as someone else because the experiences are completely different. However, we can learn from them. Sometimes people try to mimic them, but if you don’t know the whole story, sometimes that doesn’t lead you down the right path, right?

00:04:33:17 – 00:05:03:10
Kyle Pearce
It kind of takes you on this general direction, but maybe doesn’t end up getting you to the same place. And I want to just go on the record and say that me personally, I’m going to let you guys speak for yourselves. But in math instruction, I always say this because I want people to understand that it’s not like we come into this world and we sort of just know all the answers when we’re sharing things with the audience, be it in our math education, space or in our investor space like we’re doing here on Canadian Wealth Secrets.

00:05:03:12 – 00:05:30:21
Kyle Pearce
We are sharing from our own experiences. And many of the times it’s because we’ve made the same mistakes. So I’m going to go on record and say that I had my wealth building journey, my financial plan backwards. For many, many years, and I’m going to argue that I was kind of lucky, to be honest in some ways, because there were a couple of those paver stones along this path that I skipped over.

00:05:31:02 – 00:05:51:21
Kyle Pearce
But now what I find myself doing and I’ve been encouraging you guys as well alongside me in this journey to kind of go back and actually fix it. So if you picture of your real estate investor, right, and you build this house and then you look down in the basement, you’re sort of like, we probably shouldn’t have skipped some of those big cinder block bricks in the foundation.

00:05:51:24 – 00:06:12:18
Kyle Pearce
We probably should make sure that is stronger. And that’s ultimately what we want to talk about here today. I was so fixated and I find the people I’m chatting with most often are fixated on the home run. As Matt said, they’re fixated on the end result, which is what will happen if I’m successful in my wealth building journey.

00:06:12:20 – 00:06:32:23
Kyle Pearce
And the reality is, is that there are really important pieces that need to be put in place to maximize your chances that when you swing at that pitch, that you are going to in fact reach the seats instead of get somebody to catch it at the wall or somebody catch that ground ball and run it to first base and get you out before you even get moving.

00:06:33:03 – 00:06:52:14
Jon Orr
All right. You said you had your financial plan backwards, so I’m going to tell you my financial history as well. I want you to tell me if I’m also backwards. All right. So, for example, when I was early in my career, you’ve got money and you’re coming in. It’s the first time you’ve got money coming in. You’re not thinking about anything.

00:06:52:14 – 00:07:08:04
Jon Orr
I wasn’t thinking about anything other than, hey, I got income for the first time. Then I started to go. The best thing I can do is I should buy my house. I’m going to buy my house. My house is going to be a great asset for me. And then I got my money. I’m going to put some away for my pension.

00:07:08:04 – 00:07:25:18
Jon Orr
So I start to sock away some for my pension. And that also is in the mix up to trying to figure out how do I create my budget. I got my personal expenses is we’ve got kids coming along, we’ve got to take care of them and we’ve got activities to pay for. We’ve got all of groceries, we got our budget to manage.

00:07:25:19 – 00:07:52:11
Jon Orr
Those are life expenses. And it wasn’t until later, right? It wasn’t until later where and I’m going to argue it wasn’t until probably late thirties, forties, where you’re getting a little bit more comfortable into your budget and you’ve got a little bit more money every year. You got maybe got a pay raise throughout that time where all of a sudden your budget still maintain and your lifestyle expenses probably are still roughly around every year.

00:07:52:11 – 00:08:07:11
Jon Orr
They change a little bit, but then it’s like, well, I got some extra money. It’s like, wait a minute, I feel like pretty comfortable these days. And then it’s now starting to think about where do I put this money? I’ve got extra money here, where do I put that? Now I’m going to start to go. Do I put that in the stock market?

00:08:07:11 – 00:08:23:15
Jon Orr
Am I going to grow that? Do I get into real estate investing? That’s where my journey went. So I went from earning income, making sure my lifestyle expenses were taken care of to thinking about investments later on in my life. So tell me more. Is that backwards or is that forwards?

00:08:23:17 – 00:08:42:06
Kyle Pearce
Yeah, actually I would say that yours actually varies from I think a lot of people, probably not those listening here though, as we mention, because for a lot of people what ends up happening over time when you take your money, the part that was interesting, you had mentioned your house, so that was important to you and that’s important to a lot of people.

00:08:42:06 – 00:09:02:17
Kyle Pearce
It seems to be less important to more people these days, and that might be due to inflation. It might be due to low paying jobs, like all of those things. But I’m going to guess that quite a few people listening to this, if you’re thinking if you’re investor minded, you’re probably thinking about, hey, owning a home, right? And having that as an asset that will grow in time.

00:09:02:19 – 00:09:20:16
Kyle Pearce
But ultimately, you had mentioned that you sort of then took care of all of your life expenses. Now, I’m curious, though, I want to go to Matt and I want to get your perspective. When you were coming along and you’ve got to kind of think back in the journey, did it look like John’s experience? Did it look different?

00:09:20:19 – 00:09:40:11
Kyle Pearce
Where was your head at when you were? Hey, you began at the time you were teaching, your wife was teaching. You know, you’re slowly kind of climbing that ladder in the education world where you getting a little more pay each year until you get to the top of the grid, as they call it. What was your sort of approach to your financial plan?

00:09:40:11 – 00:09:44:20
Kyle Pearce
Or maybe, hey, was there even one where you even thinking about that?

00:09:44:22 – 00:10:00:13
Matt Biggley
Yeah, my wife, when she first got her teaching job, the superintendent called her and said, okay, now you can go out and buy a car. And she tells that story and I think when we first get her teaching jobs, it feels like we’ve found the Holy Grail. It feels like we won the lottery. You think you’re just going to be.

00:10:00:15 – 00:10:05:13
Matt Biggley
I remember growing up as a kid, I thought teachers were incredibly wealthy and that was obviously.

00:10:05:15 – 00:10:09:18
Kyle Pearce
My because they live under the course, right? Don’t they live at the school when you’re a kid?

00:10:09:21 – 00:10:29:04
Matt Biggley
That’s right. I think coming from a family where there was my dad was in retailers, just there was more variance in terms of what employment look like in the case of my old family experience. So I think getting a teaching job, you had felt like you’d won the lottery and then you realize pretty quickly that by the time you take your pension off and your taxes and there’s really just not a ton left at the end of the day.

00:10:29:04 – 00:10:45:17
Matt Biggley
So if you come into this career with student debt and otherwise to hold a claim that if I remember going to an educators financial who’s an organization, it kind of purportedly specializes in teachers and wanted to get excited about saving up for a home and being able to buy that first home. And they’re like, Oh, it’s going to be a long road.

00:10:45:17 – 00:10:58:05
Matt Biggley
And it was pretty depressing to be told that that’s not really what you want to be told at the beginning of your journey. And I think part skill, part luck for me was all the real estate that I’ve done over the years. That has a lot to do with timing and that has a lot to do with luck.

00:10:58:05 – 00:11:21:15
Matt Biggley
But I think the embrace for me was that the thing is the journey. I think this is a big choose your own adventure book to a certain degree. And I think what I would say is I’ve always love expertise. That’s how I ended up talking to educators financial. I loved expertise, the challenge or the tricky part and all of this stuff in this whole entire world is that there are so many self anointed experts.

00:11:21:17 – 00:11:45:10
Matt Biggley
So it’s hard to figure out who the actual experts are. So when you’re looking for investment guidance, anyone you walk into at your local bank is going to claim to be an expert. These folks from these various investment companies claim to be experts. People trying to sell you crappy mutual funds claim to be experts. So I think my big epiphany over time is to have discovered what true expertise is.

00:11:45:12 – 00:11:59:06
Matt Biggley
And even then, everyone’s path looks really, really different. Mine happens to have focused largely on real estate, and that’s because of an affinity towards it, a skillset towards it, a passion towards it, and also the fact that it’s been successful as well.

00:11:59:08 – 00:12:19:00
Kyle Pearce
Yeah, it’s really interesting because something that is, I think our goal here at Canadian Wealth Secrets is when we do meet with our invested students, the real goal for us, we always say at the beginning of the call is we hope and we essentially guarantee that you’re going to walk away with something new or a big idea that you can learn from and apply.

00:12:19:02 – 00:12:36:05
Kyle Pearce
And most often it has nothing to do with any of us. We actually can’t help you with that part of the journey. But when you’re ready, there are things that we can do to help you along the way. When you get to that paver stone, when you’re ready to do, say, a joint venture, reach out to us at something that might make sense.

00:12:36:05 – 00:12:52:08
Kyle Pearce
But in the meantime, here’s what you might want to do. Or if you’re ready to sell a home in Windsor, Essex, mats there already or get a mortgage in Ontario, John’s here to help you. But really, at the end of the day, I think that’s one of the filters that you can use as you reach out for those who are listening.

00:12:52:08 – 00:13:10:23
Kyle Pearce
When you reach out and you’re trying to distinguish between those who are projecting themselves as experts versus those who maybe aren’t, is how often are they willing to let you walk out the door without accepting the thing that they were offering? And it might be that it’s just not the right time for you for that specific thing. So keep that in mind.

00:13:10:23 – 00:13:28:15
Kyle Pearce
But when I roll back and I think about my own sort of financial plan, I did, like many people that were chatting with, are doing right now. But I had one caveat. I had a little bit of luck involved. I’m going to explain that in a second. But I had my earned income coming in just like you, Matt, and just like you, John.

00:13:28:15 – 00:13:48:24
Kyle Pearce
We were very similar paths in our journey, not earning a ton, but it felt like a ton at the time, right? Coming out of university and going like, Wow, I have this quote unquote steady income and Chantell and I saved up because we wanted that house, just like you said there, John. And really, I funneled everything through my fixed and my lifestyle expenses.

00:13:48:24 – 00:14:10:18
Kyle Pearce
Right? So these are you’re like fixed in your variable expenses. And then after that, this is where I lucked out because I’m just inherently cheap that I actually had enough that I could put some extra on my mortgage. My thought at the time was pay off the complete mortgage. I was my goal. I had my pension and then I learned about real estate and I started to change everything.

00:14:10:20 – 00:14:33:22
Kyle Pearce
But here’s the problem with that thinking. And if I wasn’t lucky enough to be cheap or frugal, as some people call it at the time, I wouldn’t have had any money left over. And that’s what we’re finding. A lot of people, they’re in this scenario where their life, where their expenses have sort of balloon to a point where they’re actually spending either all of what they have.

00:14:33:22 – 00:14:55:05
Kyle Pearce
Sometimes it’s even more than what they have and they haven’t actually taken care of the missing pieces that I missed in my journey. And you guys also missed in your journey. And that really came down to this idea of protection for your family unit. Now, some people are going to go like, wait a second, Kyl’s talking about life insurance.

00:14:55:05 – 00:15:16:03
Kyle Pearce
Well, life insurance is one of those things. And in Canada, luckily, Canadians, we have more than half of Canadians have some type of life insurance. I think it’s around 60%. That’s still low, in my opinion, but it’s better than maybe some might predict. But I’m talking about some other protections in place. So some people have that life insurance.

00:15:16:05 – 00:15:41:10
Kyle Pearce
But I’m going to argue that there’s other pieces that we need to take care of before we even deal with our fixed expenses and our variable expenses. So I want to say that again, because if my fixed expenses, which is my car payments, my house payments, my insurance on my car, my insurance on my house, my utilities, which are not so fixed, they are varied, but they are things I have to do.

00:15:41:14 – 00:15:58:18
Kyle Pearce
If those expenses are too great, that I can’t take care of this protection aspect, then maybe I got to rethink where I’m at. Maybe the house, I’m in the car, I’m driving the membership I have for whatever it is that I like to do and how I like to spend my time. So I get.

00:15:58:18 – 00:16:22:02
Jon Orr
What you’re saying here about redesigning to focus on protection before, say, other expenses. And that’s where maybe we were backwards before. But back when I thought about that, when you get that full time job and your job says that you’re going to die, you get three times your salary or two and a half times your salary, right? I remember thinking back then, I’m okay.

00:16:22:03 – 00:16:39:01
Jon Orr
That’s going to be okay for us because that will give my family some time to get there their ducks in a row, give them some payout while they’re trying to restructure what life might look like if I’m gone. So I felt like back then I was protected. So was that what you’re talking about? Did I do that then?

00:16:39:03 – 00:17:05:18
Kyle Pearce
Yeah. So I would argue that no, and neither did I because I didn’t have enough. And really, what you really want to be thinking about is, is the protection. I have enough to actually protect my family, assuming I’m still here. And this is something that I heard recently, that one of my mentors that I’ve been working with as I’m on this investment planning journey, Gord is a fantastic person and he teaches so many lessons in every conversation.

00:17:05:18 – 00:17:20:01
Kyle Pearce
And what he said to me was, if you had and this was the question, he’s like, If you had a money printing machine in your house, if you had a money printing machine, would you insure it? And I’m going to ask both of you this because I don’t think you guys I don’t think I’ve ever asked you this question.

00:17:20:01 – 00:17:29:18
Kyle Pearce
But like Matt, would you insured if you had a money printing machine from breaking from getting the paper jammed from any of that stuff, someone comes in like, fix this great.

00:17:29:18 – 00:17:32:19
Matt Biggley
Analogy, security analogy, 100%, 1,000%.

00:17:32:22 – 00:17:35:04
Kyle Pearce
1,000%. John, would you? Yeah.

00:17:35:04 – 00:17:37:00
Jon Orr
Yeah. You wouldn’t want that thing going away.

00:17:37:04 – 00:18:07:18
Kyle Pearce
When you think about it, the three of us are the greatest money printing machines in our house, right? We insure car. We have to, we ensure house we have to because of the mortgage that we got. Right. And yet I’m sitting here and I was for many years going with my job life insurance plan. Right. Which was two and a half times my salary at the time, which I think was at the time maybe two in total, 100, $120,000.

00:18:07:20 – 00:18:28:23
Kyle Pearce
But yet your family doesn’t get that money printing machine anymore for the rest of time. Right. So it’s like almost in a way, it’s kind of like you’re saying, listen, just go find another one and maybe you believe in that, Hey, go live and do your thing. But here’s the craziest part, is that beyond that, protecting yourself with life insurance is one thing that I didn’t take seriously enough.

00:18:28:23 – 00:18:48:01
Kyle Pearce
We since have done that over these past ten years. Matt and I, we did this with our real estate corp because basically we recognized at some point, hey, if we go if either of us goes, how are we going to take care of the other person’s family? So if I go, Matt’s there and he’s like, how am I going to take care of Chantelle’s family?

00:18:48:01 – 00:19:09:19
Kyle Pearce
We’d have to sell half of the portfolio minimum, maybe more, because you might have to firesale it, right? And just like take what you can get. So you’re like, Oh, we need to take care of that. But I’m talking also about things like emergency funds. So why see it’s backwards is that in my head I was like, Oh, just like you said, John, You’re like, I want to go to the investment state.

00:19:09:19 – 00:19:31:07
Kyle Pearce
You jumped from getting through, paying the mortgage. And now I’ve got this extra money sitting here and yet I’m going to guess that you didn’t actually have a savings of some type in case something were to happen to you. And neither did I. And Matt, I’m going to guess that you probably didn’t either. I had a line of credit is why it occurred.

00:19:31:08 – 00:19:32:14
Matt Biggley
Line of credit. The line.

00:19:32:14 – 00:19:37:06
Jon Orr
Of credit was my safety net in case something happened, I could borrow it at a moment’s notice.

00:19:37:11 – 00:19:56:24
Kyle Pearce
In case something happened. Yeah. And I was thinking that way as well. And then now let’s leapfrog and let’s talk about this a little bit more. So we leapfrog to investing and you can invest in mutual funds. Matt You reference crappy mutual funds or indexes or whatever you choose to invest in, in the market. The market might dip and whatever.

00:19:56:24 – 00:20:25:02
Kyle Pearce
You can’t control that and you can eventually get access to that capital if you need it for an emergency. But we’ve got a lot of people looking at things like real estate. And when you go into the world of real estate, if we don’t have this protection in place to take care of ourselves along these stepping stones towards real estate, when I add a property to my portfolio, I’ve probably, unless I’m buying it in cash, I’m opening the door to more risk.

00:20:25:02 – 00:20:51:13
Kyle Pearce
Right? I’m opening my door to if I go, you can use the logic of, well, they’ll just sell the rental property again, maybe selling, maybe selling with a big tax bill, maybe there’s a panic, maybe there, who knows? But it’s like there’s such easy things that we can do to just smooth this path. And I guess it’s like, only now that I turned 40 have I kind of look back and kind of went, Holy smokes.

00:20:51:13 – 00:21:14:18
Kyle Pearce
I left myself pretty exposed for a really long time. And I think I was, knock on wood, lucky enough to get there. But now that I look at it, I’m like, I could have had much more safety in place had I actually looked at my path and thought about what actually do I need to have in place in order to make sure that I have the smoothest path towards this wealth building journey?

00:21:14:21 – 00:21:41:00
Jon Orr
When I think about my thirties, I think part of me when I think back to that in thinking about trying to get into more investments because we had extra money, it’s almost like you’re saying I should have been more careful with planning for protection emergency fund, but if I had felt like I had to do more of that, I think my mindset back then would be then there’s nothing left for a long time to actually get into the market and then you already hear phrases.

00:21:41:00 – 00:22:02:12
Jon Orr
It’s not timing the market. It’s time in the market. So it’s like, Well, wait a minute, are you telling me that because I have to get my protection in place, because I have to get emergency funds in place, then I’m really pushing timelines back before I even have any sort of extra income to invest in, say, any sort of investments like real estate.

00:22:02:13 – 00:22:16:16
Jon Orr
Think about if I didn’t buy a property five years ago, then I had to wait till now. Is there some way? That’s what I mean. Right now. It’s like, Well, am I being prevented from getting in the market or is there some way I can use that money to kind of get you well in?

00:22:16:16 – 00:22:52:10
Kyle Pearce
Here’s the interesting part. The answer is yes. So if you get that organized, you can. But I think it brings up an even a bigger point. And it kind of comes down to the title of this episode about our planning being backwards, is that if you start with what’s left at the end of your fixed and variable expenses, we’re talking about expenses like entertainment as well and just the things that we do each and every month because we’ve always done them before and we wait until that’s taken care of, then yeah, you’re going to find yourself in this spot you’re talking about there, John So it really begins with coming all the way back and

00:22:52:10 – 00:23:11:01
Kyle Pearce
going. If I do this, this, this and this, if I spend this much on my mortgage, this much on the insurance for that house, this much on the property tax, and then I do the whole budget and I’m not even talking about the variable stuff. Last weekend I had to go to a hockey tournament with my son. That’s an unexpected expense.

00:23:11:01 – 00:23:33:01
Kyle Pearce
There’s going to be those, too. It’s hard to budget those in, but at the end of these, pretty typical, pretty will call it pretty consistent expenses. There’s barely enough for me to invest that maybe I’m living a little bit outside of my means is really, I think what it comes down to and I know that some people might be listening going like, I don’t like the sounds of that.

00:23:33:04 – 00:23:51:21
Kyle Pearce
I thought you guys were going to help us become wealthy, but we are. That’s what we’re going to help you to do by actually thinking that through and going, Huh, If I have a mortgage that is eating up, especially now with higher interest rates, right? So you have higher interest rates. So people are renewing. Some people have home equity lines of credit, right.

00:23:51:21 – 00:24:25:16
Kyle Pearce
Where the home equity line of credit is large and they’re paying around what you’d be paying in a variable interest rate mortgage anyway. So refinancing might not even make sense right now. But they’ve got this high mortgage, this high payment. And really that’s what tightening is with the government. When the Fed says we’re going to raise interest rates, what they are trying to do to you is to get you to go, crap, I can’t buy as much stuff as I used to so that prices come down or they at least stop inflating at that same rate.

00:24:25:16 – 00:24:52:04
Kyle Pearce
So the reason I say that is because a lot of us, I think in the past, I would say in our generation and the upcoming generation, we are living better than pretty much any generation prior. As my parents. My parents did not live as comfortable a lifestyle until much later in their careers, and they were penny pinching and they were saving and they were paying themselves first.

00:24:52:06 – 00:25:13:08
Kyle Pearce
And for the people who aren’t able to do that and they’re not able to set up that safety net. Right. So, I mean, hey, hats off to the people who have some money to invest. And that was me and that was you guys. We didn’t do this protection piece, but we kind of lucked out. Think about how that path changes if something big happened.

00:25:13:08 – 00:25:34:12
Kyle Pearce
Right now, mind you, we’re in teaching. It’s hard to lose your job. I always say you have to do something really, really, really bad in order to, you know, lose that job. But the reality is, if I got sick, if I got hurt, if I died, that would obviously change the financial path for my family. At the time, it was just my wife and I.

00:25:34:12 – 00:26:05:22
Kyle Pearce
But now I have kids and ultimately at the end of the day, if I’m not committed enough to at least get myself at least that layer of protection here, then you have to ask yourself, how committed are you going to be to actually growing your portfolio in a way that’s actually going to be meaningful enough and to help you get to that end goal of true financial and time freedom as we now use that term from Dan Kennedy Time freedom, that is such an important piece of the puzzle.

00:26:06:01 – 00:26:27:03
Matt Biggley
I feel like it’s a little bit of a bleak picture for us. It reminds me of like dieting and exercise. It’s I think savings and investing don’t work for the same reason as dieting and exercise don’t because it’s hard work and people are impatient and people need to see some wins. And so I guess my wonder to you, where’s the fun part of this?

00:26:27:03 – 00:26:31:01
Matt Biggley
Where’s the balance between preparing and actually getting to start getting to.

00:26:31:02 – 00:26:31:23
Jon Orr
Living your life?

00:26:31:23 – 00:26:33:06
Kyle Pearce
Yeah, Yeah, totally.

00:26:33:07 – 00:26:50:10
Matt Biggley
How do we deal with this impatience? Maybe let’s get it to the nuts and bolts. Like what’s the right level of protection? And I’m someone my wife accuses me of loving insurance too much. I love the idea of protection, but I also, I think could pretty risk tolerate it because we’ve done some things that others might consider to be too risky.

00:26:50:10 – 00:27:11:01
Matt Biggley
So let’s get into the fun part here, or at least the action part. So it’s like we were laying out a blueprint for people to say this is the next step in the scaffold to be able to get you to the fun part if you’re not there yet, because we don’t want to be depressed about not being able to live our best lives now because we’re in a just a different place than our parents were.

00:27:11:01 – 00:27:16:20
Matt Biggley
And I don’t think we can go back there and be like, my grandma lived through the Great Depression right into her dying days.

00:27:16:20 – 00:27:41:17
Kyle Pearce
Hey, the new the podcast mantra is to live like we did in the Depression. Yeah. So you could be successful. Yeah. No, definitely. That’s definitely not what we’re after. But I’m happy though, Matt, that you brought up the comparison to health and fitness and losing weight in general because it is something we struggle with and I think one of the biggest or hardest parts is that everybody knows what the end goal, what they want.

00:27:41:17 – 00:28:01:06
Kyle Pearce
So for example, people, when they think about finances and wealth, they’re like, I know what I want. I want a lot of money. And when we talk about goal setting, right, in terms of, well, what is your real goal? What do you want that for? So for someone I want to weigh less or I want to be more fit or I want to live longer, all of those things.

00:28:01:06 – 00:28:22:11
Kyle Pearce
It’s like everybody knows the end goal, but this is exactly it. It’s the hard part. So like you said, it’s the nuts and bolts. We do need quick wins, and I think some of the quickest wins come from having that conversation. And we’ve talked about it before, the long range goal, but then also thinking about what we’re doing now and actually comparing the two.

00:28:22:13 – 00:28:46:14
Kyle Pearce
So what I mean by that is if I was to budget for one month and it’s not about being perfect, it’s not about being exact 100% to the penny or anything like that. But if you were to look at all the things that we spent this last month and you were to put them into two buckets, if you were to like cut up these transactions, put them in a two different buckets and go, this bucket is a bucket that actually aligns with where I want to be down the road.

00:28:46:20 – 00:29:09:18
Kyle Pearce
And this one doesn’t align or it doesn’t support it or it doesn’t help us get there. I wonder what we can learn from that activity. So when you talk about nuts and bolts and think about that and you go, there’s so many things that we kind of just do and we don’t even appreciate them any more. So, for example, something that we used to do quite a lot leading into COVID and then especially during COVID was like Friday night.

00:29:09:18 – 00:29:27:12
Kyle Pearce
We did takeout every Friday night, we did takeout and we brought the ticket home. It almost got to the point where we’re like, This isn’t even exciting. It’s just what we do. And we were paying four times as much. And I was like, I actually think I’d rather just cook some of the burgers that I made because I like those too.

00:29:27:17 – 00:29:50:18
Kyle Pearce
And it was like more of an experience. So that’s just one example. But it’s about freeing up this cash because a lot of the cash is going out the door and we actually aren’t even paying any attention to it. And I also want people to keep in mind, even though a lot of experts would say keep 3 to 6 months of emergency funds, I actually have an idea that I think is better.

00:29:50:20 – 00:30:13:06
Kyle Pearce
It’s better especially for invested minded or investor minded people. And here it is. So my savings plan, because I’m going to be honest, I still don’t have an account full of money. I still don’t like. I can’t bring myself to do it. So what I did instead was I started a participating whole life policy that would be my savings fund.

00:30:13:08 – 00:30:39:08
Kyle Pearce
It takes anybody time to create the savings fund. So I just started putting little by little. And even if it’s going to be not enough to meet, say, the 3 to 6 months of expenses or 3 to 6 months of your salary, which is what some people say, you can go really far down that spectrum. For me, it was just like, Hey, if I could just start doing that, knowing that I’m actually contributing to this savings bucket.

00:30:39:10 – 00:31:00:17
Kyle Pearce
The beauty is being an investor is that when the bucket gets big enough, as the bucket grows, I know I can leverage it and I can use it for my investment goal. So it’s like I get a win win, I get this extra bonus. So I get a layer of protection, which is a life insurance. If I, God help me, I hope I don’t die anytime soon.

00:31:00:17 – 00:31:32:04
Kyle Pearce
But if I do my family, my estate will get a windfall of cash. Great, Fantastic. Under crappy circumstances, unless people really don’t like me. And then, if not, this is going to grow in cash value and essentially create me an additional call it investment seed money bucket that I’m creating. Now, the one trick would be is, hey, you don’t want to completely drain the bucket, leverage the whole thing and then put it into an investment, and now you’re at zero again for your emergency funds.

00:31:32:06 – 00:31:57:19
Kyle Pearce
The ideal would be get it going so that you know, it’s being accumulated. Hopefully nothing bad happens. Right. But at the end, if nothing bad happens, you now have this tax free. It grows tax free, but it also protects my family. And I can also use this as a tool to leverage and put into investments of any type, be it real estate, be it stock index funds.

00:31:57:19 – 00:32:18:03
Kyle Pearce
Maybe you want to do options trading. We’ve had more people come out of the woodwork and asking for tips on that. We can definitely help people with that as well. We love taking conventional wisdom, using the good parts of it. Budgeting is important, doesn’t have to be to a tee, but then thinking about how can we do it better?

00:32:18:09 – 00:32:34:10
Kyle Pearce
Because I don’t like the idea of taking money and shoving it under my mattress. I don’t like the idea. We’ve talked about the gold bars and me hugging gold bars in the basement. I do like that idea, but it’s not a good idea, right? Yeah, A whole life policy for me is a much better idea because I know it’s going to grow.

00:32:34:10 – 00:32:56:15
Kyle Pearce
And over time, on average, the internal rate of return on the cash flow or on the cash value typically is in the low four percents. And I can leverage it at any time up to 90% of that cash value. For me, it’s a complete no brainer versus me putting in a, say, a checking account or just putting it in an envelope in the cupboard at home.

00:32:56:17 – 00:33:15:24
Jon Orr
What I like about this is you’re creating another line of credit where you are the collateral. Your money printing machine is the collateral on that line of credit. So where the line of credit before, if I had a line of credit, I had to use my home as a collateral. Or maybe you had something else that was the collateral towards that line of credit.

00:33:16:01 – 00:33:51:08
Jon Orr
And then the nice thing is you’re creating another line of credit. So most people might use their home as a line of credit or use their home equity line of credit and as their safety net or their investment fund, knowing that their home is going to go up in value. But what you’re doing is you’re creating another one automatically by sucking some of this money away first in there, and you’re creating that savings account slash emergency fund or investment bond or both so that you have more leverage than you would with just your home, because otherwise you’d have to go buy another home to create more leverage, to create another line of credit so that

00:33:51:08 – 00:34:00:15
Jon Orr
you could have more leverage to, say, invest or buy a property at that point. But you’re saying use yourself and make that your own line of credit. That line of credit is just called a whole life policy.

00:34:00:15 – 00:34:21:03
Matt Biggley
You might wonder about all life insurance is often the same. It’s like it sounds like such a great vehicle and yet it’s one that people either I don’t know if it’s is it ignorance? Is it fear? Is it miseducation? If it’s too good to be true, what’s the jam with this whole life stuff? Kyle, I know you’re really excited about it.

00:34:21:03 – 00:34:27:15
Matt Biggley
You’ve got me excited about learning about it, but why isn’t it more popular?

00:34:27:21 – 00:34:54:21
Kyle Pearce
It definitely has like a horrible, horrible track record in the public eye, especially with some of these finance gurus that are very like pay cash for everything. If you think about, Oh, what’s the guy’s name? Maybe we shouldn’t bring up his name because we don’t want to get sued or anything. But there’s one guy in particular and one lady in particular who are completely against the idea of whole life policies and often times they actually aren’t giving a complete picture.

00:34:55:02 – 00:35:12:21
Kyle Pearce
I don’t think it’s because of understanding, but I think it’s because they’ve dug in on their position and they are very pro buy your house cash, buy your cars, cash, buy everything in cash. So they’re thinking doesn’t align with the thinking of those who would use a whole life policy. And really what it comes down to is a whole life policy.

00:35:13:02 – 00:35:37:10
Kyle Pearce
It is not an investment. I want to say it again, it is not an invest ment. It is a tool that can help protect you and give you a tool that you can use to invest with at the time. So you get to get two things at once and a lot of people get confused. They go, wait a second, is it life insurance or is it an investment with this cash value?

00:35:37:10 – 00:36:01:05
Kyle Pearce
And the reality is, is that it’s a life insurance policy that will pay out a death benefit when the person insured dies. So for me, I’m the money printing machine that I’m insuring. And this thing, as I put money into it each year, it grows in value. It also grows its death benefit in value. Also, the way we design it, it’s not always that way.

00:36:01:05 – 00:36:27:17
Kyle Pearce
If you’re speaking with someone who’s not privy to setting them up this way with a high cash value and all the cash value is, is the present value of your death benefit today. So what I want to say, if we think about this and go, okay, Kyle lives until he’s 95, or there’s your average age expectancy, call it 84, 82, whatever, they run the number and they go actuaries go do a little loop.

00:36:27:17 – 00:36:49:15
Kyle Pearce
They do all the calculated, they go. The chances of Kyle dying when he’s 40 is a fraction of a percent. I’m making that up. I don’t know what the number is. And as they go up, your chances of dying actually increases, as you can imagine, right? You get closer to that average age. And what they’re doing is all they’re doing is they’re saying, listen, chances are you’re not going to die.

00:36:49:16 – 00:37:10:20
Kyle Pearce
And your policy when you do die is going to be worth this much because you’re contributing that much every single year. So I’m going to let you borrow up to 90% of the cash value, which is this. And next year, the cash value is that in the next year, the cash value is that because we’re getting closer to death, which means we’re getting closer to when they’re going to have to pay out the death benefit.

00:37:10:22 – 00:37:44:11
Kyle Pearce
So is it an investment? No, although it does have an internal rate of return. Now, think about this. If I died tomorrow and I opened a policy today, the return on the death benefit I would receive is somewhere in the 20 700% mark. Right. That’s an amazing return. But on debt, I don’t love it because I’m dead. But as you go through life, the death benefit decreases in that return all the way down to if I die when I’m 85 or 90, my average return comes down all the way to.

00:37:44:13 – 00:38:02:07
Kyle Pearce
I don’t know. Do you want to guess what the number is? Because I said a number earlier that the cash portion, 4%, it comes down to around low four percents. So if I make it to average age or later, my death benefit return actually decreases and decreases. So if you’re just about numbers, you want to die like right away.

00:38:02:12 – 00:38:24:07
Kyle Pearce
All right. But if you want to live a little longer, which I do, your death benefit return actually decreases over time and it will eventually get to that sort of landing spot of around 4% because guess what the insurance company is doing with your money. They’re taking it and they’re investing it into safe things that are going to get them more than 4%.

00:38:24:09 – 00:38:43:05
Kyle Pearce
So they’re doing much like what a bank would do when you deposit in it to their checking account, You deposit in their checking account, What do they do? They lend it out as a mortgage like the very next day, right? Or the very same day. In some cases, they’re taking your money and doing something with it and they’re giving you a cut except a traditional banks giving you a fraction of a percent.

00:38:43:07 – 00:39:13:06
Kyle Pearce
Well, whole life policy, the insurance company’s actually giving you a much better cut. But in the early years, they don’t give you as much access to the cash value as they do as the years get longer or bigger and bigger. So for me, I look at it a go, This thing’s super safe. This thing is super protected. I wish I open mine way back when I was younger and I would have continued to open more as more cash flow came into my life so that I could have it as my first stop shop.

00:39:13:06 – 00:39:34:07
Kyle Pearce
It first becomes my savings account, and then as it grows beyond that, it then becomes my seed money for investment that I borrow against. And as I get more money coming in, I would open up additional policies so that I continue to grow this. Some call it like a banking system for yourself. It’s a true money printing machine.

00:39:34:09 – 00:39:56:20
Kyle Pearce
Aside from myself, I’m protecting me as the money printing machine, but it is also printing me money that I can leverage at any time when the time is right and I don’t have to actually apply to borrow against it. It’s in my contract. I have the right to take up to 90% of that cash value and I don’t ever have to pay it back if I choose not to.

00:39:56:22 – 00:40:26:23
Kyle Pearce
We always suggest that you do and that’s your goal. But if you didn’t want to, you don’t have to and eventually you would just get the cash value and they’d say, Sorry, policy’s closed. You haven’t continued to use it or contribute to it. And they call it surrendering the policy. Definitely a last ditch effort piece. You don’t want to do that or plan to do it, but that would be your exit strategy if, let’s say, World War Three begins or your family’s in a really, really, really, really bad spot and you need to start liquidating things.

00:40:27:00 – 00:40:33:17
Kyle Pearce
You can do so. And as long as it’s not in the first couple of years, you’re safe and you’re ready to rock to questions.

00:40:33:17 – 00:40:53:21
Jon Orr
I think to get close to wrapping here. Kyle one is there like a minimum. You always hear that whole life policies are more expensive than term. So it’s like, wait a minute, if I’m trying to restructure my finances to do that first so that I have access to the emergency fund if I need it and I’m creating, how much is the right amount is probably obviously dependent on the person.

00:40:53:21 – 00:41:03:22
Jon Orr
But is there a minimum maximum? I know I’ve always wondered that, and I think that’s probably a whole other episode. And the second one is do you need a special person to do this?

00:41:03:24 – 00:41:27:08
Kyle Pearce
Yeah, definitely. So Great, great questions. Every insurer has their own rules, so for example, some insurers like sunlight, for example, you need to have a minimum death benefit, which means the premium might be a certain amount. Others have much lower death benefit amount. So definitely varies. But you can do policies that are, hey, a hundred bucks a month, things like that where you’re starting small.

00:41:27:08 – 00:41:45:03
Kyle Pearce
I always suggest that people, when they’re experimenting with this idea, a lot of people would be like, I want to learn it. This was me as well. I want to learn it as best I can, and then I want to put as much money as I can into it. But then what that does is it changes your learning time and it extends it because now you want to go down the rabbit hole.

00:41:45:03 – 00:42:00:16
Kyle Pearce
I’m a fact finder, so I’m doing all this learning and money crunching numbers and spreadsheets. What I would recommend is you start with that saving plan idea. You go, Hey, listen, if it’s 50 or 100 bucks a month that you want to start with, that’s what you start with. So you can see it, you can understand it, you can experiment with it.

00:42:00:22 – 00:42:21:08
Kyle Pearce
And that as you start to value that tool as what it’s for, which is, hey, it’s a machine that’s not only going to protect me and my family, but it’s also going to allow me to use it as a tool moving forward. That’s when I would say, okay, let’s put another one in force. That’s actually a little bit larger because now I’m feeling more confident with this work.

00:42:21:08 – 00:42:42:07
Kyle Pearce
So my first policy was pretty small. Now my wife got one and it was much larger and our corporations, those who have businesses, there are so many reasons why businesses must be considering power whole life inside of their corporation. And I say must. It’s very important we use it inside our corporations. And to me it’s like a tool.

00:42:42:07 – 00:43:07:17
Kyle Pearce
I wish I knew more about ten, 20 years ago, and I would be in a completely different place in terms of my protection, but then also in terms of just my access to capital in order to fund more of my deals without having to go back the bank every single time. And yes, John, to your second question, an expert, someone who is actually a licensed life insurance advisor is really important.

00:43:07:17 – 00:43:50:17
Kyle Pearce
That is something I hold my life and my accident and sickness license and I tend to focus most of my time and attention on constructing creative, participating, whole life policies for clients, both in the invested educator or vested teacher world, but also for those in the investor space that we’ve worked with in the past. So great questions and hopefully enough to get people thinking about how they can protect themselves, protect their families, and sort of ensure that patio stone on the path to their investments and their wealth building journey is firmly in place so that they don’t catch themselves in a tough or tricky spot along the journey.

00:43:50:19 – 00:44:15:23
Matt Biggley
This is a good episode, I think. Lots to think about for people and reflect on. I think for me my big takeaway is that protect is an investment. That’s really where you need to start with your investing journey is that layer of protection because that gives you a peace of mind. I know I’ve gotten older 44 now. I think my risk aversion has increased and my desire to protect myself and my family.

00:44:15:23 – 00:44:27:13
Matt Biggley
That was a big part of leaving. Teaching was setting up that protection, and I’m personally looking forward at a delving deeper into these whole policies is a way of expanding that protection investment.

00:44:27:15 – 00:44:46:00
Jon Orr
We’re definitely going to have more info in future episodes about this strategy and about the tool and how we can use that to create leverage and create your personal wealth, your family wealth and your generational wealth. So we want to thank you here for listening to another episode of the Invest the Teacher Podcast. And if you haven’t yet hit the subscribe button, do that now.

00:44:46:02 – 00:44:53:17
Jon Orr
And we would appreciate, especially if you’ve listened to a many episodes, share this podcast with your friends or family and give us a rating and review.

00:44:53:19 – 00:45:28:07
Kyle Pearce
Hey friends, if you want to spend some time and share your situation and determine, Hey, which stones along your path are they firmly in place? Are they sort of like off to the side? Is there any adjusting that you might want to consider? One of the things that we promise those who hop on to a call is that you’re going to learn something and you’re going to have a next step to help you along the journey, whether it’s a tip on how to get yourself a budget that works, whether it’s, hey, getting the right protection in place, or maybe it’s about getting you pointed in the right direction in terms of the help you might

00:45:28:07 – 00:45:56:20
Kyle Pearce
need as in terms of accounting or legal or any of that advice. We do our best and we take pride in trying to help you, our listeners, in moving along down the path in that journey. So head on over to Canadian Wealth Secrets dot com forward slash discovery. I’ll spend some time with you. I’ll ask you some questions and ensure that you are in the right zone, in the right place so that you can move swiftly along that path towards financial and time.

00:45:56:20 – 00:46:01:12
Kyle Pearce
Freedom once again Canadian Wealth Secrets dot com forward slash discovery.

00:46:01:15 – 00:46:14:01
Matt Biggley
All links, resources and transcripts from this episode can be found over on the website that’s invest in teacher dot com forward slash episode 46 again that is investor teacher dot com Forward session Episode 46.

00:46:14:03 – 00:46:53:01
Jon Orr
All right investors students class dismissed. Just as a reminder, the content you heard here today is for informational purposes only, you should not construe any such information or other material as legal tax, investment, financial or other advice. Just also as a reminder, Matt is a licensed realtor in the province of Ontario with Dear Brook Realty. John is a mortgage agent with Brix Mortgage License number m23006803.

00:46:53:01 – 00:46:59:04
Jon Orr
Kyle is a licensed life and accident and sickness insurance agent with corporate advisors in Pan. The financial.

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