Episode 56: How To Build Your Wealth While…Financing a Vehicle

Listen Now!

Ever wondered how you can turn the process of buying a car into a strategic financial move that aligns seamlessly with your short term financial safety goals and your long-term wealth building goals? In this episode, we’re diving into the powerful concept of utilizing participating whole life insurance to revolutionize the way you approach financing major purchases like your dream car.

Picture this: financing your car purchase while simultaneously boosting your overall financial well-being. In this episode, we explore the untapped potential of financial tools that allow you to get double the value from every dollar spent. Discover a groundbreaking approach to aligning your desire for a new car with your broader financial goals.

What you’ll learn:

  • Learn the art of aligning large purchases, such as buying a car, with your overarching financial goals for a more harmonized and purposeful financial journey.
  • Uncover the financial tools that will empower you to make every dollar work twice as hard, providing unparalleled benefits for both short-term and long-term financial success.
  • Explore the alternative path to car financing by leveraging the untapped potential of your own life insurance policies, offering flexibility and control that traditional loans can’t match.

Ready to transform your approach to car financing and elevate your financial strategy? Tune in now to discover the game-changing insights on leveraging infinite banking techniques for a brighter financial future. Don’t miss out – press play and unlock the secrets to financing your dream car while securing your financial goals!

Resources:

Opportunities, Services, and Consulting:

Take Your Next Step In Your Wealth Building Journey

Get in touch with Kyle so he can help you determine your next step in your financial freedom journey through his Canadian Wealth Planning System.

Interested in Joint Venture Opportunities?

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

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

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

Watch Now!

00:00:00:03 – 00:00:32:22
Kyle Pearce
Ever wondered how you can turn the process of buying a car into a strategic financial move that aligns seamlessly with your short term financial or safety goals and your long term wealth building goals? Well, in this episode, we’re diving into the powerful concept of utilizing participating whole life insurance to revolutionize the way you approach financing some of your safety net in the short term, while also assisting in making major purchases like maybe even that dream car.

00:00:32:24 – 00:00:59:11
Jon Orr
Picture this financing your car purchase while simultaneously boosting your overall financial well-being. So stick around. In this episode will explore the untapped potential of financial tools that allow you to get the double value for every dollar you spend. Discover groundbreaking approaches to aligning your desire for a new car with your broader financial goals.

00:00:59:13 – 00:01:25:21
Kyle Pearce
In this episode specifically, we’re going to learn the art of aligning large purchases such as buying a car. But really it can be any large purchase with your overarching financial goals for a more harmonized and purposeful financial journey. Uncover the financial tools that will empower you to make every dollar work twice as hard, providing unparalleled benefits for both short term and long term financial success.

00:01:25:23 – 00:01:40:14
Kyle Pearce
And explore the alternative path to car financing by leveraging the untapped potential of your own life insurance policies, offering flexibility and control that traditional loans just can’t match.

00:01:40:16 – 00:01:54:21
Jon Orr
Ready to transform that approach? Let’s go.

00:01:54:23 – 00:02:11:14
Kyle Pearce
Welcome to the Invest in Teacher podcast with Kyle Pierce and John Moore, where we help high net income individuals grow their wealth into a legacy that lasts generations through hidden investment and tax secrets. Your financial advisors won’t believe our true.

00:02:11:15 – 00:02:19:22
Jon Orr
Get ready to be taught as we share our successes and failures encountered during our real life lessons. Learning how to build generational wealth from the ground up.

00:02:19:24 – 00:02:44:20
Kyle Pearce
Welcome investment students to yet another episode of the Invest in Teacher podcast. And as you heard on the intro, we’re going to dig a little deeper. I know recently we shared an episode about building an emergency fund, and the whole purpose of that episode was because a lot of folks like you and I, John, kind of heavily ignored this idea of an emergency fund for quite some time.

00:02:44:22 – 00:03:01:14
Kyle Pearce
And now I don’t know if it’s our kids are getting a little older or if it’s just that we’re getting a little older, but ultimately we’re kind of backtracking and we’ve been kind of creating a bit of a safety net for ourselves. I don’t know if it’s just seeking that feeling of certainty. We have these other assets that are growing.

00:03:01:19 – 00:03:39:14
Kyle Pearce
We wanted to make sure that we had a safety net in place, but at the same time we didn’t want to kind of have that itch of seeing money sitting there doing nothing. So we talked about supercharging your emergency fund. And in this episode we’re going to look at how you could potentially take an approach like that and you can leverage it to build and work towards other purchasing decisions, other big financial decisions while still not having to sacrifice the additional bonus that optimizing that wealth, optimizing that we created through that specific episode.

00:03:39:14 – 00:04:00:24
Kyle Pearce
So if you haven’t listened to that episode yet, go back and check out how to supercharge your emergency fund. And we also found a way to kind of supercharge our investments at the same time. Whereas today we’re going to look at a slightly different angle using the same theory in order to take care of some of the lifestyle choices that we make.

00:04:00:24 – 00:04:23:10
Kyle Pearce
And today we’re going to focus on vehicles. But as we mentioned in the intro, it’s not just vehicles. There can really be any sort of purchase, any sort of expense and how we can use the flexibility of this strategy in order to help us feel more safe in the short term, but then also get some massive benefits in the long term as well.

00:04:23:14 – 00:04:44:13
Jon Orr
That’s what I love about we talked about last time and specifically what we’re talking about this time is that we are really thinking about how do I build my wealth and do these other things at the same time. That’s really the key for us. For the last few episodes, but also what you’re saying, what we’ve been doing lately in terms of our financial planning for ourselves and the clients that we’re working with.

00:04:44:13 – 00:05:02:22
Jon Orr
So I always want to ask that question. It’s like, if I want to do that, how can I do that and build my wealth at the same times? So it’s like, how do I invest in real estate? How do I do that and build some other ways for wealth planning at the same time, how do I pay for my child’s university or post-secondary schooling?

00:05:03:03 – 00:05:25:23
Jon Orr
How can I do that and still build my wealth at the same time? Like you said, there’s a lot of different large purchases that we can make or even some small purchases we can make, but also set ourselves up for future financial success. Future financial generational wealth is what we’re trying to talk about. So that’s that underlying question is how do I build wealth but also do all these other things we still have to do in our life.

00:05:26:00 – 00:05:46:09
Kyle Pearce
I love it. And something that I want to also make sure that we sort of continue to draw a line in the sand and differentiate what we talk about here versus what you might hear in some other shows. You’ll notice that while we’ve used the term infinite banking in some previous episodes, we are not very aggressive, infinite bankers by any means.

00:05:46:13 – 00:06:08:19
Kyle Pearce
We use a very similar tool, a tool that they leverage in infinite banking. But our approach here is much more holistic, right? We’re looking at the whole picture, and by no means are we suggesting that using this particular strategy we’re going to talk about today is perfect for everyone. Nor is it the only thing that we should be doing, right?

00:06:08:19 – 00:06:29:19
Kyle Pearce
So if somebody is listening in and you’re just I’ve heard some podcasts that talk about infinite banking, for example, and they’ve got people they’re just talking about how it’s almost like they’re like scared of investing in anything other than whole life policies. And I feel like that’s sort of a really, really, really super, ultra conservative approach, which is not that smart.

00:06:29:19 – 00:06:50:04
Kyle Pearce
It’s better than nothing, right? It’s better than not doing anything. But ultimately, you should be looking at, Hey, I want to work towards wealth building. Part of that’s going to involve different alternative assets, right? So some of them are going to be straight Main Street. Maybe you have a tax free savings account or RSP. We’re not saying not to do those things.

00:06:50:04 – 00:07:19:19
Kyle Pearce
Those are not what we’re going to be talking about today. But what we’re going to do is we’re going to kind of build on some of the things that we can do to get some bonus out of some of these expenses that might arise in our everyday life. And we also want to make sure that everything we share here are ideas that should always the decisions that you make when you decide to start something, how it happens later should always be adjusted based on the scenario.

00:07:19:19 – 00:07:45:12
Kyle Pearce
So, for example, some infinite bankers might say, Hey, if you set up a participating whole like policy, the purpose is to create your own banking system and all of these things and hey, that’s great, the flexibility. And then I would say the confidence that you build when you have access to capital like that, that’s still growing at a reasonable over time, compounding at about 4 to 5% over the life of a policy.

00:07:45:14 – 00:08:07:24
Kyle Pearce
But that’s fantastic. I’ll take that any day over putting money into gases or putting them into CDs or any of those fixed sort of interest bearing assets. However, on the other hand, you want to take the financing terms that make the most sense to you at the time, right? So that something like an infinite banker may kind of push back against this.

00:08:07:24 – 00:08:22:18
Kyle Pearce
And, you know, you never like get the banks out of your life is what some would say. Even Nelson Nash in his book say that there snakes, you know, or the dragons or whatever he calls them, that we want to get them out of our life and we want to get them out of our life as quickly and fast as possible.

00:08:22:18 – 00:08:51:07
Kyle Pearce
Hey, if you want to go that route, rock and roll on this podcast, we’re going to be talking about how we can use that tool, participating whole life to help us grow our investments, our savings, our safety, as well as. And one of the big pieces here is our actual wealth for full family wealth, meaning not just money, but also just how we live our lives and how good we feel with our families and our friends.

00:08:51:09 – 00:09:10:05
Kyle Pearce
But then also to be able to eventually develop some sort of legacy that we can leave behind. And there’s a lot of responsibility that goes along with that. So just want to make sure we’re clear before we dive in that this you’re not going to hear us talking about how we’re going to set this thing up. And this is the only way to do it.

00:09:10:05 – 00:09:27:00
Kyle Pearce
Guess what? We’re going to give you a scenario where we’re going to say, Hey, if the bank offers you this, here’s what you’re going to do at that time in order to make sure that you still benefit on both ends and you walk away wealthier at the end than you did had you not use this particular tool.

00:09:27:02 – 00:09:47:18
Jon Orr
Yeah. So let’s dive into some of those scenarios to think about how do I buy a car If I’m in market for a car, I know I need to eventually purchase a vehicle we all have that is one of our largest expenses that we have to make. Let’s say that I’m personally looking at buying this car and for our family, maybe it’s a family car, maybe it’s this.

00:09:47:18 – 00:09:52:22
Jon Orr
Maybe it’s like, you know what? I just want the sports car that I’ve always wanted. We’re not car people.

00:09:52:24 – 00:10:01:23
Kyle Pearce
Yeah. This is what makes this episode hard for us, right? Because we’re like, how would people buy a really expensive or what we consider to be a really expensive car because we know.

00:10:02:00 – 00:10:14:13
Jon Orr
We’re going to pick that break even though actually, Kyle, my last two cars were brand new cars, but they’re more functional choices than, say, buying a car, car kind of car. I guess that’s that’s kind of a funny way to say it, but.

00:10:14:13 – 00:10:32:19
Kyle Pearce
Yeah, well, in your family is like mine, right? You have three daughters. They’re a little older than my kids, but like, I’m the type of person that my car, the inside of, it’s a disaster. And it’s almost like every time I clean it, I’m like, I feel like I wasted time because it’s like by the next weekend it’s completely destroyed.

00:10:33:00 – 00:10:54:02
Kyle Pearce
I come out, I hate shopping. I see a new scratch on the car, all of these things. And I just don’t care enough about them, so I don’t let that bother me. But that also impacts like my purchasing decisions. I actually don’t want to, quote unquote, as some people call it, invest in the lifestyle choice of a nice car because it doesn’t actually make me happy.

00:10:54:04 – 00:11:14:04
Kyle Pearce
And therefore I would much rather put funds into other things. Remember the Gold bar scenario I talked about on one of the podcast? I’m just hugging gold bars. But ultimately here we’re going to take a scenario, John, and we’re going to like build one out and one thing that we have to also say is we’re building out this scenario based on a lot of hypotheticals here, right?

00:11:14:05 – 00:11:36:21
Kyle Pearce
Like, we’re just trying to give you another scenario. So in the last episode where we’re super charged an emergency fund here, we’re going to kind of like use a little bit of the same premise as to where this policy may have started from. I’ll be honest and say I don’t have necessarily a PA whole life policy set up with the intent of it being used to purchase vehicles with.

00:11:37:01 – 00:12:02:06
Kyle Pearce
But that’s also because I buy cars like you do, John, that I can usually pay off fairly quickly within a year, 18 months. I’m not concerned about the interest or the arbitrage. However, I have whole life policies for other purposes, right? And I could leverage them and use this strategy. Right. So I just want to make sure everyone’s clear here that we’re not saying like everyone should go run out and do this.

00:12:02:11 – 00:12:28:20
Kyle Pearce
It might resonate with you where you go. Well, I do typically buy a car every X number of years. Maybe this is a strategy that I want to do where I can still get what I want, which is a reasonably nice car, but also benefit my wealth in the longer run as well. So get that dollar kind of doubling right where you get to like get it to get the car and it’s not like a dollar that never returns back to you ever again.

00:12:28:22 – 00:12:53:11
Kyle Pearce
And this would just ultimately give you maybe maybe a little bit of an opportunity to kind of go, you know what, I’m going to start this journey in order to reach this particular goal, which resonates with you because some of you aren’t. That last episode, maybe investing in the S&P 500 didn’t resonate with you and that’s fine. Maybe buying a car does, and that might be motivation to get you started on a journey like this.

00:12:53:13 – 00:13:17:16
Jon Orr
Yeah, and I think the $2 the two uses of every dollar I think is for a lot of us, I think a huge motivator to go like because if you don’t utilize any of these strategies or this particular tool today, then when you go to buy your next car, let’s say you just bought a car and it’s five years from now, it’s like I was going to kind of run through a scenario, but like, maybe I should start thinking about that now and setting yourself up for that financial future, but also available to buy the car.

00:13:17:16 – 00:13:31:14
Jon Orr
Because if you don’t, five years from now is going to come and you’re going to be like, I got a person in this car going to trade in the car, I got a new car or whatever that time is, it’s like, Well, now I have a few choices to make. How do we traditionally buy cars? What are some of our methods?

00:13:31:14 – 00:13:53:04
Jon Orr
It’s either I have the cash sitting here. Okay, awesome. I have the cash sitting here. But that’s not a lot of us. So it’s like, Well, do I go and use my home equity line of credit to buy the car and I can control how to pay that back? That could be an option for you. Or it’s like, Hey, I’m going to get a loan from the bank, I’m going to get a loan from the bank and I’m going to go and I’m going to buy that car, whereas I don’t get flexibility usually.

00:13:53:04 – 00:14:09:15
Jon Orr
And when that loan gets paid for how much to pay off, there’s lots of flexibility there. Usually a set time or I’m going to get the loan from the dealer itself. And then that same thing is true where I’m paying back their set amount on their rate. I don’t have a lot of flexibility here, so those are my choices.

00:14:09:15 – 00:14:29:10
Jon Orr
But ultimately, all of those choices that when you take that dollar and use it to buy the car and use it to pay off the interest of that car, that dollar is using it in that one way, it pays off the interest or it pays for the car itself. Whereas the strategy we’re talking about on cash is going to run through a scenario here on that.

00:14:29:10 – 00:14:43:11
Jon Orr
It’s that same dollar is being used twice, and that’s the real key here. If you want to build wealth and buy a car, then these are the strategies you want to think about, whether they make sense for you. If you’re just looking to buy a car and you don’t need to build your wealth, you’re probably not the person.

00:14:43:11 – 00:14:47:12
Jon Orr
Listen to this podcast right now. You’re here because you want to do both.

00:14:47:14 – 00:15:20:01
Kyle Pearce
Yeah, And I would say to the other pieces, I know there’s a lot of listeners there too, like, listen, I’m not really concerned about a car payment because they are high enough income earners that it’s like, this is a non-factor. However, why I think those friends might want to listen here is because some of the strategies we’re going to be unpacking, especially those in future episodes that really apply to business owners with corporations, are going to leverage a similar tool and you’ll have sort of like a head start on that learning.

00:15:20:01 – 00:15:49:21
Kyle Pearce
So this is good learning around the tool and how it works, because a lot of people look at participating whole life or any permanent whole life or any permanent insurance products as sort of a black box. And because they’re like a black box, you can listen to some folks like Dave Ramsey out there who hates them, and he’s clearly shown in his videos when he explains how they work, that he actually doesn’t have a clear understanding of how they can be structured and how they can be used and leveraged.

00:15:49:21 – 00:16:20:02
Kyle Pearce
And I wonder, Dave Ramsey doesn’t believe there’s any good data out there which suggests that maybe that’s why he doesn’t like this strategy at all. So that’s real estate. Investors right away are not Dave Ramsey followers, right? Because you are building your wealth based on a leverage strategy. So we’re applying that here. So our real estate friends love PA whole life because of the advantages it builds and the fact that inside the policy it grows tax free, which is fantastic.

00:16:20:02 – 00:16:36:12
Kyle Pearce
So we’re going to look at a scenario here. Those are on YouTube. I didn’t make it pretty this time, so you don’t have to go there. We’re not going to dig straight into the weeds here, but we are going to talk about some of the summaries and some of the details. And it’s more or less for John and I to kind of structure the conversation and make sure we’re on the same page here.

00:16:36:12 – 00:16:53:23
Kyle Pearce
But what I went and did is I was thinking to myself, I’m like, first of all, it’s crazy. I heard someone recently we were at a hockey tournament. They told me how much their car payment was. I’m not going to repeat it, but it was a lot. And I was like, Holy smokes, these car payments, first of all, they’re stretching them out over 96 months now.

00:16:54:04 – 00:17:14:01
Kyle Pearce
And there are a lot you’re hearing leases are 800 bucks a month now. So car payments are often over a thousand bucks, sometimes all kinds of craziness. So again, makes my heart flutter a little bit because I’m just not a believer in cars and I don’t like throwing money away. But here we are. So we’re going to look at this strategy.

00:17:14:04 – 00:17:45:00
Kyle Pearce
And basically what we’re going to do is we’re going to use the power of a participating whole life insurance policy, keeping in mind that insurance is designed for the death benefit. However, with permanent life products like participating whole life, as we said in the past, they have living benefits and the living benefit is that it gains value. The present value of this particular policy will continue to grow over time at a fairly predictable rate.

00:17:45:00 – 00:18:04:23
Kyle Pearce
Right? We say fairly because each and every year, just like a company’s dividends when Bell Canada releases their dividends, you don’t know exactly what it’s going to be, but they try to keep it as consistent as possible because that’s what makes it a blue chip stock. The same is true with insurance policies, so they can’t guarantee what the dividend is going to be like.

00:18:04:23 – 00:18:23:24
Kyle Pearce
But these companies have paid dividends since they began these policies. And for yeah, like sun life is like over 100 years they’ve been doing this work. Equitable Life is a newer company, but they’ve been doing this for decades upon decades and again, much longer than many of your blue chip stocks that are putting out dividends each and every year.

00:18:23:24 – 00:18:45:16
Kyle Pearce
So with that in mind, it’s a rock solid. And again, we talk about it as like a foundation. And you’ll notice in the intro we were talking about the safety that it provides in the short term. So again, I’m kind of approaching this. I’m going, okay, in my head, I don’t think I would personally set up a participating whole life insurance policy specifically just to purchase vehicles in the future.

00:18:45:22 – 00:19:09:22
Kyle Pearce
I don’t feel for me that would make sense. However, I would consider taking my emergency fund like we talked about last time, building a policy around my emergency fund that I want to have access to. So it’s growing over time. And then as it grows to a point where there’s too much money in it, where I might want to leverage it for bigger purchases like a vehicle.

00:19:09:22 – 00:19:44:13
Kyle Pearce
So this policy here today, we switched it up. We didn’t want to keep it the same as last time. So we’re gonna change how we’re approaching this policy. This particular individual is 41 and it rounds to your closest birthday. So I’m wondering who that might be. Oh, it’s me that I ran this on. So 41 years old currently, and we’re going to put in and I’m planning in my mind right now, and I can change this, I can fund this for the rest of life, as we found in the last in the last example with the emergency fund for this one, I’m going to plan to fund this thing for 15 years.

00:19:44:15 – 00:20:08:12
Kyle Pearce
And at the 15 year mark, we’re just going to let the dividends pay the base premium for this policy and just let it ride. However, you know what I would do if I had extra money sitting around in year 16, I’d probably be continuing to fund it because that’s a nice bump to the cash value. And then I would potentially use it for whatever purposes I want.

00:20:08:12 – 00:20:24:15
Kyle Pearce
But here we’re going to assume we’re going to go 15 years and we’re just not going to even consider any of those things. Okay. So we’re going to put 90 $600 in per year. And some people might be like, Where’d you get that number from? And like, where am I going to find that money from? Well, guess what?

00:20:24:15 – 00:20:40:24
Kyle Pearce
If you plan on buying a car, especially a new car, we’ll call it middle ground car. A nicer car. Well, you better figure out where you’re going to get that money from, because guess what? That’s 800 bucks a month and that’s just a lease payment for a new truck or SUV. So you better find it.

00:20:41:04 – 00:21:02:08
Jon Orr
Yeah, exactly. But I also want to just throw this caveat in here that when Kyle, you just said we’re going to fund this for 15 years and remember that we’re here to not just fund the purchase of a car, we’re doing two things at once, right? We’re trying to build our wealth, but also utilize building our wealth to fund a car purchase.

00:21:02:08 – 00:21:20:13
Jon Orr
So when you’re thinking like, oh my gosh, I’m going to be paying $800 a month for the next 15 years to buy one car. No, don’t think of it like that. Remember that we’re doing two things at once. We’re building our wealth while we’re going to create this machine that allows us to buy a car and do those two things at once.

00:21:20:16 – 00:21:35:12
Kyle Pearce
I love it. And I would say in the very immediate short term, like I said, it’s like for me it’d be like emergency fund money, I’m going to funnel it into here. Maybe you have an emergency fund already and you go, Oh, well, all right, I’m going to funnel it over here and just place it over there. And it’s not money out of my pocket.

00:21:35:12 – 00:21:54:18
Kyle Pearce
I’m just going to do that for the next few years until I’m ready to buy my car. So very, very important, as John had mentioned. So over time, as you found out last time, the first few years, they start slow, intentionally. They frontload a lot of the hassle, the expenses and so forth, because these insurance companies, they’re investing in longer term assets.

00:21:54:18 – 00:22:17:04
Kyle Pearce
So it’s a big issue for them. If you bail on your policy in year two, right, they’re going like you bail in year two, you’re going to suffer the consequence because they’re like, this is a permanent policy, like it’s supposed to be here until you die. That’s supposed to be like why you’re doing it. So if you change your mind in the first 12, 18, even 36 months, it’s not going to be a good move, right?

00:22:17:04 – 00:22:41:07
Kyle Pearce
However, by year five, typically the way we structure policies, you’d be at about a break even point. If you did decide you’re like, You know what, I’ve changed my mind. I want to take all my chips and run home. You could do that again. I still feel like that’s like five years of waste that you did this. So this is a longer strategy, like John saying, we’re building this thing, but we want to think about some of these future purchases that we might need to make in life.

00:22:41:07 – 00:23:03:04
Kyle Pearce
I say need because some people need a brand new car that costs a lot of money and other people like us, we just kind of deal with what we got. But as I go here, you can see we’re funding this thing out. So it’s 90 $600 per year and I’m going to say that buy in year seven, you decide at that point your total cash value is about $72,000.

00:23:03:06 – 00:23:18:23
Kyle Pearce
All right. Now, this is based on current dividend rates, so that can be a little higher. It might be a little lower, but it’s not going to go backwards. That’s one thing we know for certain. Okay. So that’s one thing. We know it’s not going to go down where you start losing more money each year. It can’t happen.

00:23:19:00 – 00:23:38:24
Kyle Pearce
So this is a really nice, reliable tool in that way. And I’m going to just go up, go ahead and I’m going to buy this car and I’m going to buy it in cash for $60,000. Now, what I’ve done in the past, when I go and buy a car cash, I often do that. I come in and I usually try to negotiate the car, assuming there’s financing.

00:23:39:01 – 00:24:00:21
Kyle Pearce
And then I’ll throw in the last item, which is, Hey, if I come in with cash, how does that change things? And in some cases they might say, actually, you know what, if you finance the cost of the car is actually lower because we’re going to get some interest and I’ll do a quick calculation and vice versa. So you might want to have that discussion before you say, hey, I’m going to put the money on the table, but assume you did.

00:24:00:21 – 00:24:20:18
Kyle Pearce
You bought it for $60,000. What we’re going to do in this particular case is we’re going to look at this $60,000 and we’re actually going to go ahead and we’re going to be aggressive in this first scenario. Okay. We’re going to be aggressive and we’re going to say, okay, we’re still funding our policy each year. That’s 800 bucks a month.

00:24:20:22 – 00:24:44:05
Jon Orr
Well, let’s be clear just for, say, any of our new listeners, if you’re a new listener, this is where the two uses of every dollar comes into play. Kyle Right. Is that the $60,000 is in? I’ve gone to my policy and pulled it from the policy and put the 60,000, which means like when you said I had $72,000 there, it’s not like I subtracted the 60 from the 72.

00:24:44:06 – 00:25:10:11
Jon Orr
There’s still $72,000 in my cash value. The policy, we actually don’t touch it. It will grow year to year to year, unaffected, compounding every single year. You’re not touching that money. That’s the key here. If you were comparing this to another way to save for this car. Right. If you were saving to buy this car outright or you’re putting money away, you might be putting in a savings account when you actually go to take that money.

00:25:10:11 – 00:25:27:17
Jon Orr
Oh, it’s gone. It doesn’t get that compounding effect anymore. You’ve reduced the actual principal value of that account and that now can only grow at the whatever’s left that doesn’t. It’s not happening here. Same thing if you put this money over in a stock in the S&P and let that grow when you pull it out, it doesn’t grow at that same principle.

00:25:27:17 – 00:25:42:09
Jon Orr
You’ve taken the money out, it’s gone. It’s now going in the car. Whereas right now we’re actually getting a third party loan or a policy loan, which is a key move here to make the machine work in your favor to get the two uses of every dollar.

00:25:42:11 – 00:26:08:17
Kyle Pearce
I love it. I love it. And it’s so important to make that distinction because again, I sometimes assume people know this, but as you’re saying, that is so key because now it’s like your policy cash value. It’s going to continue compounding. Like you said, I’m going to borrow against that cash value. Just collateral. Yeah, exactly. Just like when you get a loan, you’re borrowing against the value of the car, right?

00:26:08:17 – 00:26:38:24
Kyle Pearce
You’re borrowing against that. You’re not just getting a loan. And the reason why car loans often are much higher unless it’s a brand new car and there’s some sort of incentive program going on, usually what’s happening is you’re getting a higher interest rate against a car because cars go down in value, right? So they’re like, listen, if you don’t make your payments, all of a sudden it’s like we’re stuck with this car and it’s not worth as much as we thought it was going to be worth, or nearly as much as it was worth when you bought it.

00:26:38:24 – 00:27:00:15
Kyle Pearce
So that’s why car loans typically have higher interest rates. And it’s the dealers that are working kind of behind the scenes and they’re inflating the price of the vehicle to get 0% down. And we’re going to talk about a scenario there as well. So they’re just playing with numbers to make it look better on your end. But ultimately, at the end of the day, most banks, they don’t want to lend money on a car.

00:27:00:17 – 00:27:07:20
Kyle Pearce
They would much rather lend money on a whole life policy, which because they know it’s so hard, rock solid and are.

00:27:07:20 – 00:27:09:00
Jon Orr
Going to die.

00:27:09:02 – 00:27:30:16
Kyle Pearce
Right. And you are going to die. Unfortunately, again, as I’m sorry to inform some of you listening this might be news, but that is something that you definitely want to be looking out for. So we’ve now, instead of taken a loan against the car, we’ve taken a loan against your insurance policy, which once again has super flexible terms.

00:27:30:16 – 00:28:00:21
Kyle Pearce
Okay. So right now, against your cash value of a life insurance policy, a particular company right now here in Canada is charging 6.5% simple interest. They apply it only at the end of the year. They don’t apply it monthly like a home equity line or like a car loan. So there’s a benefit there. You’re actually not ahead if you’re getting a 6.5% car loan or a 6.5% key lock, even though right now, as we talk about it, most HELOCs are over 8% right now.

00:28:00:21 – 00:28:40:24
Kyle Pearce
So if you borrowed against your house to buy car, you would actually be not ahead borrowing against your cash value of your life insurance policy. Now, I also want to be clear that if we I say if I’m going to say when, more or less when we see rates starting to dip over time. This is my thought. My thought is, along with all of the other economists out there, I’m not an economist, but the thought is and historically what we see is once inflation starts to get stamped out like it is, we’re going to see interest rates start to spike down relatively aggressively because the Fed’s going to overdo it and the Bank of Canada’s

00:28:40:24 – 00:29:06:14
Kyle Pearce
going to overdo it. So eventually you’re going to see your hillock will probably be back at, say, 4% or three and a half percent. In that case, it might make sense to borrow against your house on a home equity line of credit at that time. You make that choice. But right now, this is a great option for folks who might be using a home equity line or a personal line of credit where the rates are very high to buy a vehicle.

00:29:06:16 – 00:29:29:10
Kyle Pearce
So as we see here, we’ve got this car loan at $60,000. We’re going to aggressively I’m going to call this aggressively pay this down by making $800 payments on the policy loan. Okay. Now, some of you are stopping. You’re going, wait a second, Kyle. I thought we were funding the policy $800 a month. And the answer is, yes, we are going to do that.

00:29:29:10 – 00:30:01:12
Kyle Pearce
That was a commitment. We decided in this scenario, we’re going to do that until you’re 15. We can adjust that as we go. We can decide if we want to go longer. We want to go a little less. That’s totally up to you. However, that’s what we had decided at the beginning here. And in this scenario, we thought, you know what, I want the benefit of this policy as it grows, as it comes into its most beneficial years, which is year ten and beyond, where this thing really turns into something powerful.

00:30:01:14 – 00:30:30:08
Kyle Pearce
I’m going to try to knock down this policy loan because I have the cash value available to me and I’m still doing my other investing and I’m still, you know what I mean? Like, we’re not saying it’s an either or here. We’re not saying don’t invest or don’t any of those things. We’re just making our car payments. So we’re making essentially $600 payments right now, half of it going to fund this policy and continue that work so we can build this wealth building tool and be able to reuse it later in life.

00:30:30:10 – 00:30:53:05
Kyle Pearce
And we’re also going to knock down this policy loan. And what you’re going to see is that it’ll take us until about it’s like I set it up this way, John. It’s like until year 15 when the car is fully paid off. Okay? The amount of interest we’ve paid is approximately the same as what it would be if you made car payments through the dealer.

00:30:53:05 – 00:31:13:15
Kyle Pearce
If they were giving you six and a half percent. It’s going to be a little better here because of simple interests. And wait a second, in year 15, we also stop making payments on this policy. So we had decided that when we started this policy, we were going to do this for 15 years and we’re going to put $800 a month in.

00:31:13:17 – 00:31:38:13
Kyle Pearce
And along the journey we bought this car for $60,000 and then we made aggressive payments of $800 to pay that policy loan down. And now at year 16, I’m not putting any more money into this policy and my car is completely mine, free and clear. I bought it for six, so it’s probably worth ten now. Congratulations. But it’s paid off.

00:31:38:15 – 00:32:20:24
Kyle Pearce
And here we are in a normal scenario and I get it like we’ve put 15 years of $800 a month, right? That’s 144,000 into this policy. But that 144,000 will continue to grow over time. And actually, by year 15, the total cash value is showing here as illustrated just short of $200,000 worth of available cash flow. And I’m not going to put any more money into this policy and it will just continue to compound over time so that I could buy another car, if that’s what you want to do in year 17 or 18 or whenever you choose.

00:32:20:24 – 00:32:30:06
Kyle Pearce
And guess what? You could buy an even more expensive car. We’re not going to advocate that you do that, but it’s your money. You get to decide and you get to decide how you want to leverage it.

00:32:30:07 – 00:32:52:09
Jon Orr
Or like you said, it’s your money. It’s sitting there in cash belly every day. It grows to be more than what it was the day before, guaranteed. And you could after that time, it’s you could start, say, withdrawing some of that money. You could, but you could also take a loan and start taking that money out as a policy loan.

00:32:52:11 – 00:33:11:16
Jon Orr
Little bits to fund your lifestyle. And because there’s a death benefit attached to this and because of you plan this. Right. Again, this is something to just think about because it can be used for many different uses. It can be say something that funds the rest of your life a certain amount and the death benefit will wipe out that loan.

00:33:11:18 – 00:33:31:05
Kyle Pearce
I love it. I love it. And I want to be very clear because you said something, use the word withdrawal again, and you’ve used that in previous episodes. And here’s the thing, though, John. You’re right. I can withdraw in year 16. I could take the 208,000 ish or so in year 16. I’ve only put 144 into the policy.

00:33:31:05 – 00:34:01:12
Kyle Pearce
Right. And it’s grown to 208,000. I can say, you know what, this has been fun, but I just for whatever reason, it’s like I’m like Kyle. But instead of gold bars, I want stacks of cash under my mattress. Give it to me. Now, the only negative is just like, if this was a guy. See that you put 144,000 into and let’s say at the end of the GFC term, you’re getting your hundred and 44 plus the earning, which is in this case around $208,000.

00:34:01:14 – 00:34:26:11
Kyle Pearce
Guess what has to happen? The government takes their cut because you have now taken a tax sheltered vehicle which is supposed to be there to support your family, your estate, your legacy through the death benefit. And because we’ve chosen to withdraw it, we are now choosing to pay tax on it. If we borrow against it to fund our lifestyle.

00:34:26:11 – 00:34:51:18
Kyle Pearce
The beauty is, is that I’m not getting taxed on my loan. I am quote unquote, paying this interest on this loan if I choose to never pay it back. Right. So I would want to run the calculation on how much can that be over time until I run out of money. And ultimately I can do that tax free and like you said, when we die, sadly, it’s going to happen.

00:34:51:18 – 00:35:07:19
Kyle Pearce
When we die, that death benefit is going to be significant enough that it will wipe out the cash loan that you’ve had, the policy loan that you had, or it could be a third party loan, because again, you can go to the big bank and say, Hey, listen, I got this life insurance policy. Will you let me borrow against?

00:35:07:19 – 00:35:22:08
Kyle Pearce
Then they’re going to say, I would love to. You’re going to be like, do you need me to get an appraisal like you would for a house are like, No. Do I need to prove to you how I’m going to pay you back? They’re like, No, you’re going to die. It’s fine. We’ll just take the money. Then in their mind, they’re like, This is super safe.

00:35:22:08 – 00:35:39:15
Kyle Pearce
It’s safer to them than a home is because they don’t have to deal with trying to sell a home. They know that they will get their return and it’s actually more predictable to them. So they’re going to openly be willing to do it even if you have no income coming in, because they’ll just take the policy from you.

00:35:39:15 – 00:36:07:24
Kyle Pearce
Right. Eventually, if you take too much or whatever happens and they will just that that’s their collateral and they’re happy with it. So when I look at this and I go, okay, that’s year 16. Let’s fast forward to like year 25. We haven’t used the policy for anything. We haven’t borrowed against it since. You could have borrowed and paid back cars in between if you chose, right, if that’s what you want to do or you didn’t and you just let it sit again, I feel like it hurts my soul when I see such a high cash value sitting here.

00:36:08:05 – 00:36:27:22
Kyle Pearce
And I didn’t go. Maybe I do a first mortgage private lending over here, or maybe I buy this. I put it into a real estate syndication where I’m going to earn 12%. I’m borrowing at 6.5 or less. If I get a third party loan and I do the arbitrage over there, to me, it’s like a sin to just let this money sit here.

00:36:27:22 – 00:36:45:20
Kyle Pearce
But some people choose. They’re like, Well, I like to have GICs and I like to feel good about it. Well, this does a great job at doing that. By your 25, I haven’t put any additional funds in. So the original was 140 444,000. Over the first 15 years. I had bought a car and I had paid it all back.

00:36:45:21 – 00:37:11:08
Kyle Pearce
Right. And I’m now sitting at about 311, 312,000 in cash value. The death benefit is approaching 600,000. So I can leverage 90% of that 311,000 and I can invest it. I could leverage it all in gold. I don’t know how much a helicopter is. Maybe it’s probably more than that, but I can go do whatever I want with it if I choose.

00:37:11:10 – 00:37:30:24
Kyle Pearce
Ultimately, at the end of the day, what would recommend that you do is like if it’s sitting there and there’s a great investment opportunity, that would be something that I would highly consider. And of course I would probably be picking things that cash flow and I would probably take some of that cash flow and start paying back the loan.

00:37:31:03 – 00:37:52:11
Kyle Pearce
And once the loans paid back, then you just have this other investment that’s going like you see how you talked about taking $1 and turning it into $2. We’re doing that again here. So it’s like we got this machine, we bought a car, we use it for an emergency fund and we bought a car with it and then we paid that back and then we decided it’s getting big and now we want to invest over here.

00:37:52:16 – 00:38:20:07
Kyle Pearce
Now I make this investment and I take any of the profits there and I pay back the policy loans. So now I have this cash value again and I have that investment over here. You can see how compound the idea of compound interest really starts to snowball when you have the right tools in place. And that’s not something that you can get when you just have a bunch of cash sitting in the bank and it’s just sitting there losing value to inflation.

00:38:20:13 – 00:38:27:06
Kyle Pearce
And then I go and buy something and now I’m at zero again and I have to sort of re save again in order to restart this process.

00:38:27:12 – 00:38:55:00
Jon Orr
Totally. Totally. And I think you’ve clearly outlined some great benefits of why this tool makes sense. And I know that the listener right now is thinking if I want to build my wealth and use it to do things with while I’m here to fund things for my lifestyle, I now have this ability to do that. So that’s a really important point of why we want to use this particular tool to do those things.

00:38:55:00 – 00:39:27:03
Jon Orr
We have to buy a car probably anyway. Why not try to align it with some of the goals that we already are aiming towards in our life? So Kyle, as we kind of wrap here and we could go into other scenarios we could look at and another way to think about the car, But I think the big idea there is lots of different ways you can utilize that tool, but thinking about that alignment is really important If you’re already trying to do this strategy, if you’re already trying to build your wealth, let’s try to do it and do these other things at the same time.

00:39:27:06 – 00:39:54:09
Jon Orr
And there’s this tool is there for us to do so if that’s something you also want to learn more about, if you want us to kind of go deeper into a scenario, want us to look at your particular scenario, reach out to us, head on over to in Teacher Dot for access Discovery. You can book a call with us and we can dive into your personal scenario to see what tool makes the most sense for you and then help you achieve your financial goals.

00:39:54:11 – 00:40:12:03
Jon Orr
So Kyle Hey, what we wanted to do in this episode was a few things and I hope that we did them here. We wanted to talk about aligning those large purchases with those financial goals. We hope we did that here. We wanted to talk about financial tools that empower you to make $1 work in two different ways or twice as hard.

00:40:12:03 – 00:40:30:02
Jon Orr
I hope we made that clear here today. We also want to explore alternative financing pathways that allow you to be more flexible than, say, some traditional financial pathways. So we hope we did that here for you for any sort of large purchase you like. So it could be the car. We talked about the emergency fund last time, but it could be, though.

00:40:30:07 – 00:40:44:12
Jon Orr
I’m thinking about financing my daughters heading off to university in a couple of years. It’s like, let’s start planning for that, using the same strategies here so that we’re not only just putting money for school, but we’re building wealth at the same time.

00:40:44:14 – 00:41:10:06
Kyle Pearce
I love it, I love it, and we will definitely continue the dive here in there. We’re not going to just talk about these strategies at all in a row. However, we are going to start looking at various scenarios. The one education is one that’s great. Another one is a really interesting RSP strategy where you can get both because again, we are not saying this is the one thing that you want to be doing with your dollars, that you want to be investing and building wealth with.

00:41:10:08 – 00:41:33:07
Kyle Pearce
You want a variety of strategies. We want to differentiate are strategies. And we essentially just want to make sure that we have the power to do things on our own terms and at the same time, have the opportunity fund available to us so that we can do some other investing along the way while still feeling safe enough, secure enough so that we can sleep at night.

00:41:33:07 – 00:42:03:20
Kyle Pearce
Right? So these are some of the strategies that we’re thinking a lot about. And John, I know that both of us are super excited once we get into some of the corporate and business strategies as to why if someone’s not convinced of why this makes sense in maybe their everyday life in some way, shape or form, if you’re a business owner in a corporate, especially if you have an incorporated business and you have not used participating whole life policies yet, then you are definitely missing out.

00:42:03:20 – 00:42:25:02
Kyle Pearce
So make sure friends reach out to us. We love running scenarios for you. Your scenario is super unique. This particular situation is probably not a good fit for you, right? That’s the reality. It’s a good fit for someone, but maybe not you. So let us help you out with that. Over at Canadian Wealth Secrets dot com forward slash discovery and friends, we will see you in the next episode.

00:42:25:02 – 00:42:42:10
Kyle Pearce
So until then, class dismissed.

00:42:42:12 – 00:42:52:18
Jon Orr
Just a reminder folks, the content you heard here today is for informational purposes only. You should not get through any such information or other material as legal tax, investment, financial or other advice.

00:42:52:20 – 00:43:12:18
Kyle Pearce
John is a mortgage agent with Brick’s mortgage. That’s a licensed m23006803. Kyle is a licensed life and accident and sickness insurance agent and wealth architect with the Pan Corp team, including corporate advisors and pan finance. Jill.

"Education is the passport to the future, for tomorrow belongs to those who prepare for it today.”

—Malcolm X

Grow Your Wealth Building Skills

Many believe that you are either a money person or you are not.

This fixed minset approach to managing money is limiting your ability to accumulate wealth and restricting your financial freedom. Break free from this deficit thinking habit and begin your journey to grow your wealth with us.

REAL ESTATE INVESTING

Learn why investing in real estate is where we began our wealth building journey and why we believe it is the best place to start.

infinite banking

Learn about us and why we began a journey to better manage our money, how to invest and begin to build wealth for our families.

STOCK MARKET INVESTING

Overcome your fear of the stock market by learning about the  markets, implementing proven strategies, and minimizing risk.

We believe that anyone can build generational wealth with the proper understanding, tools and support.

CHANGE YOUR FINANCIAL FUTURE

Canadian Wealth Secrets - Real Estate - Why Real Estate