Episode 72: How to Grow Your Net Worth While Strengthening Your Financial Foundation 

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Are you confident that your financial foundation is solid enough to weather any market storms that your risk-on assets might endure, or do you feel like a black swan event leaves you feeling uncertain of your financial future?

In the volatile financial landscape we live in, achieving a balance between growth and stability is important to most, but achieved by few. This episode addresses the importance of striking this delicate balance to ensure your financial foundation remains resilient and is strengthened over time regardless of the fluctuations your risk-on assets may be experiencing. By implementing strategies discussed in the episode, you can navigate uncertain times with confidence, knowing your wealth-building efforts lead to continued asset growth while adding additional layers of protection to grow your worst case financial scenario. 

While most investors are on a constant journey to enhance their investment portfolios for higher returns, there is always a desire to minimize the associated risk in the process. This episode explores how you might leverage participating whole life insurance as a tool for building a solid financial foundation, without restricting you from reaching your wealth accumulation growth goals in tandem. 

Stick with us as we lead aspiring entrepreneurs and incorporated business owners like yourself to transform long-term dreams into tangible financial goals. By emphasizing the importance of setting and achieving smaller milestones, we will provide a roadmap for turning these aspirations into your financial reality. This approach not only fosters business success but also facilitates personal wealth accumulation, ensuring a brighter financial future for all Canadian Wealth Secret Seekers.

You’ll learn:

• How to ensure that you are not only increasing your overall net worth, but also raising the floor on your foundational “base case” for your financial future; 
• Why setting specific goals for yourself both for your “base case” financial goals as well as your stretch goals will be necessary to properly identify when you have reached a particular milestone and when you might reallocate assets to safer financial instruments like participating whole life insurance; and,
• Where you might begin your planning journey to contrast your “risk-on” assets and your conservative, foundational wealth protection assets. 
• Understand the significance of tailoring financial solutions to individual circumstances, enabling listeners to prioritize personalized approaches that align with their unique goals and needs.

Resources:

• Create Your Own Canadian Pension Plan So Good That Ontario Teachers’ Pension Plan (OTPP) Members Will Be Jealous!
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Looking for a new mortgage, renewal, refinance, or HELOC? Reach out to Jon to share some options.
• Follow/Connect with Kyle Pearce on LinkedIn for daily posts and conversations about business, finance, and investment.

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting corporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

By hopping on a discovery call with Kyle, he will review your specific personal and corporate financial situation in order to determine if there are some quick wins available for you to minimize taxes personally or corporately, provide ideas for how you can increase your personal cash flow, and ensure that the net worth of your estate continues to grow in tandem.

Let’s Connect For A Discovery Call!

For those interested in having a review of your financial wealth plan, learning more about potential joint venture (JV) opportunities, or a mortgage review, book a free discovery call now.

Watch Now!

Detailed Episode Summary 

Building Wealth and Financial Foundations

Kyle, Pearce, and Jon Orr discussed the importance of having a solid financial foundation to build wealth. They emphasized the need to balance risk and conservatism, and to continuously add to one’s net worth while also safeguarding it. They also highlighted the importance of having a plan for investment dollars to ensure they strengthen the foundation and increase the baseline. Kyle used an example from his personal life to illustrate the importance of having a second opinion and verifying the advice given by financial advisors.

Building a Solid Financial Foundation Strategy

Kyle and Jon discussed the importance of establishing a solid financial foundation. Kyle emphasized that one’s foundation should not be solely based on market fluctuations or current assets, but rather on personal goals and comfort levels. Jon agreed, sharing his own strategy of creating a solid foundation through a pension plan, which provides a stable base for further wealth-building. They both stressed the importance of understanding one’s goals and a plan to achieve them, rather than relying on market fluctuations or hopes.

Strengthening Investment Foundation With Profits

Jon and Kyle discussed strategies to enhance their investment foundation. Jon proposed a new approach of strengthening the foundation by reinvesting profits from risky assets into it, rather than solely investing in more assets. Kyle agreed and added that they also use whole life insurance as a foundation, which provides a stable base for their investment portfolio. They emphasized the importance of having a solid foundation, like a strong house, to weather any storms in the market.

Whole Life Insurance for Financial Foundation

Kyle and Jon discussed the importance of building a strong financial foundation, using whole life insurance as a tool. They highlighted the benefits of this approach, such as the policy’s rising cash value, the ability to borrow against it, and the death benefit it provides. They also compared it to other investment options, pointing out the potential risks and uncertainties, and emphasized the importance of setting goals and understanding one’s financial situation to make informed decisions.

Building a Strong Financial Foundation for Business Success

Kyle stressed the importance of creating a strong financial foundation for business owners, highlighting that it can provide stability and confidence during uncertain times. He underscored the significance of setting and achieving smaller goals to reach a long-term dream outcome. Jon agreed with Kyle’s points, adding that a solid strategy is crucial to know how to allocate and utilize assets to achieve these goals. Both agreed that this approach enables entrepreneurs to focus more on growing their businesses and helping others, rather than worrying about their personal finances.

Transcript:

00:00:00:17 – 00:00:48:20
Kyle Pearce
Hey, they’re Canadian wealth secret seekers. We’ve got a question for you. Is the foundation of your investment fund secure? What we’re talking about is the foundation of your wealth, your net worth. How much of your net worth do you feel is sort of permanent, almost set in stone, turned into cement. Today, we’re going to be talking about safeguarding your net worth and trying to gain some clarity around both your own plans of why we’re doing this work that we’re doing and how you can sleep better at night over time as you continue to build your net worth, grow those assets and ultimately build a thicker and thicker foundation so that you can get the time,

00:00:48:20 – 00:01:05:24
Kyle Pearce
freedom and ultimately financial freedom that you’ve been looking for. Let’s do it.

00:01:06:01 – 00:01:11:24
Kyle Pearce
Welcome to the Canadian Wealth Secrets Podcast with Kyle Pearce and Jon Orr.

00:01:12:04 – 00:01:25:08
Jon Orr
We are recovering high school mathematics teachers and education consultants whose entrepreneurial spirit led us to begin multiple businesses, real estate investing, digital courses and coaching and consulting after the bell rang at dismissal time.

00:01:25:12 – 00:01:37:11
Kyle Pearce
Fast forward a decade later where we’ve grown our portfolios and our time freedom to the point where we can now help other entrepreneurs, business owners and investors to grow their wealth into a legacy that.

00:01:37:11 – 00:01:37:23
Jon Orr
Lasts.

00:01:38:02 – 00:02:22:18
Kyle Pearce
Generations through hidden investment and tax secrets. Your financial advisors won’t believe our true John. I am excited for us to dig in to today’s episode because we’re going to be talking about this idea of risk versus not reward, but risk versus being conservative being well thought through, well-planned, and ultimately ensuring that as we continue to grow our assets, that we’re also thinking about the foundation that we’ve built or maybe ignored along the way so that we can essentially create almost a permanency of some of that net worth.

00:02:22:20 – 00:02:42:15
Jon Orr
Yeah, I think when you’re on your wealth building journey, I think sometimes we take for granted that permanency, that baseline, you know, the way your net worth is currently and we continually want to add to your net worth. Right. So you’re always thinking about what is the next thing, what is the next asset that I can add to this baseline that brings my net worth?

00:02:42:16 – 00:02:58:00
Jon Orr
And I think we were like that in a way where we had our day jobs, we had our kind of baseline in there, we had our pensions locked in to go, Hey, this is we know that when I go to retire, I’m going to have this level of income and in it felt very permanent when you thought of it like that.

00:02:58:02 – 00:03:12:20
Jon Orr
And we were adding we were just going to go, okay, well, there it is. That’s our baseline. And let’s add to that. Like, are we satisfied with that being the lowest we could be? We could make that higher when we had our pension and it was kind of like creating a baseline. We were continually adding to that baseline.

00:03:12:20 – 00:03:31:04
Jon Orr
But when we kept adding and adding and adding, I think part of us started to kind of wonder, this is I think this is a natural progression of building wealth, is to going to go back and go, what does our baseline really look like and what’s permanent? Am I adding too much risk to my portfolio? How much risk should I be adding?

00:03:31:06 – 00:03:52:14
Jon Orr
That’s partly why we started to kind of modify our next moves for investing, and we want to share that here with you right now is to go thinking about how have I safeguarded my baseline or my net worth and what is my next move with my investment dollars. So when I have investment dollars, come up, what should I be doing with those?

00:03:52:14 – 00:04:17:00
Jon Orr
Should I be automatically looking for the next investment? Because I think we did that for a long time. Or should I be able to or should I take those investment dollars and go, Wait a minute, do I have a plan for those investment dollars that not only allows me to build my wealth, but at the same time strengthens my foundation, strengthens my baseline so that it does not decrease or I have to use.

00:04:17:05 – 00:04:38:16
Jon Orr
And if you think about a foundation, I’d have to use one of those jackhammers to crack it just because it’s so solid. How do we do both? And that’s what we want to talk about here is if I’ve got investment dollars, all of a sudden pop up, can I safeguard or make that foundation so much stronger at the same time as adding to my net worth, like bringing that baseline up for sure.

00:04:38:16 – 00:04:56:01
Kyle Pearce
And this really comes in. What makes this so hard is that as I think in general, humans, we all want someone to give us the answer, right? Like everyone’s just like, just do this and everything’s going to be okay. And for some financial advisors, that is sort of how they operate, right? So they go, Listen, just trust me.

00:04:56:01 – 00:05:20:16
Kyle Pearce
You trust me, right? And the client typically, Yeah, of course. That’s why I’m here. And they say, Do this, do this, do this. Everything’s going to be okay and awesome. That’s fantastic. And if you’re able to do that, that’s great. I’m actually thinking of an example of someone close to me in our family, my wife and I. And for years they ask me almost annually to look at what their advisor’s doing.

00:05:20:16 – 00:05:40:20
Kyle Pearce
So it’s like they’re going to an advisor and they trust the person. But then they’re like, I still need the second opinion. So there’s something that sitting right with this individual in my life, right? This person is saying like, I’m not sure the person saying it’s a good plan. And then I’m reiterating, you know what? Based on what they’ve got going on here, I like it.

00:05:40:23 – 00:06:01:01
Kyle Pearce
But my concern for her is always, you don’t like it. There’s something here you don’t like. So it’s like we got to get to the bottom of it. We’ve got to get to the root of it. Because the reality is, is that I would argue that she has a really thick foundation, but I don’t think she recognizes that and she doesn’t feel that she has a thick foundation.

00:06:01:01 – 00:06:29:10
Kyle Pearce
And for other people, I would argue that they might not need as thick of a foundation because they’re just fine and they’re happy and they are willing to kind of go with what they’ve got, maybe go with the flow. And this is what makes things so challenging, is that you really need to identify who you are and what will make you feel comfortable so that you can get to a place where you feel confident in the foundation that you’ve been building.

00:06:29:12 – 00:06:51:19
Kyle Pearce
Because we’re going to argue today that your foundation isn’t all of your net worth. It isn’t. It’s not all of the assets out there, because, for example, if I’m an index fund investor or maybe it’s a mutual fund investor or whatever you’ve got going on in the markets, those numbers go up and down each and every year. And ultimately that from one year to the next can change.

00:06:52:00 – 00:07:14:21
Kyle Pearce
And therefore we wouldn’t argue that that is your foundation. Some would say, well, it’s solid enough and that’s okay. But I would argue that for us we look at how do we kind of mix between growing our foundation, like thickening the cement that we’re going to use as this baseline and being able to, again, get some upside results with the rest.

00:07:14:22 – 00:07:43:23
Kyle Pearce
Right. So that’s us. But that’s because we know who we are. The real challenge will be for you as a listener to kind of go, Who am I? What am I doing right now? And what do I feel comfortable in doing? And you might not recognize who you are yet, and that’s okay. But for a lot of people who have maybe put money into mutual funds, for example, the question I would ask you is if that’s a solid goal for you, the question would then become is like, why aren’t you contributing more?

00:07:44:03 – 00:08:05:04
Kyle Pearce
Or if you already are contributing a significant amount of every, say, paycheck or every dollar that you’re in, in your business, If you’re already doing that, then awesome, then that might mean that. Yeah, like your comfortable with that foundation that you’re crafting or creating for yourself. The real goal, though, I would say, is do I know what this is going to get me?

00:08:05:07 – 00:08:23:08
Kyle Pearce
Do I know what this is going to help me achieve in the future? And if that’s a question mark for you, right. Like if you don’t even have like, say, a range, you’re like, well, if I keep doing this that by age, blank, whatever that number is for you. Because remember, you might be a person who wants to slow down at 55.

00:08:23:13 – 00:09:03:04
Kyle Pearce
You might not want to slow down until you’re 70. These are all variables that you have to think about. And if you’re not sure what that goal, what that’s going to help you to achieve, you might either be contributing too much, you might be contributing not enough. And right now you’re kind of stuck in this hope and pray mentality, whereas today we’re going to at least share what we’re doing for ourselves in order to kind of give us the upside results that we want, but then also sort of help us to answer some of the questions that we call this foundation, this baseline, where we want to essentially create a thicker and thicker base so

00:09:03:04 – 00:09:29:19
Kyle Pearce
that even in the worst result, in the worst scenario, where something doesn’t go well for some of the other investments we have that we know how far will fall, right, like the will fall and we’ll hit this really thick foundation. And if we did, that will be okay with it, right? That will be like, you know what? We are okay with where we are, even though it might be a very, very low probability chance of ever happening.

00:09:29:24 – 00:09:51:17
Jon Orr
Yeah. And if you listen to some of our previous episodes, you know that we did an episode on recreating our pension. We had pensions in the Ontario teachers pension plan as past teachers, and we’ve always been after that being one of our kind of gold standard baselines. And we did an episode on how to beat that, actually what tools are involved to kind of recreate that pension plan but also beat it.

00:09:51:19 – 00:10:17:15
Jon Orr
And that’s still our baseline level to say if we want to create that solid plan that says that that that level of income for us is like where we would fall to if we had to fall and how do we create that? So it is rock solid if I don’t have, let’s say, that pension plan to fall back on, because I think a lot of people, like you said, color are kind of putting them in index funds or mutual funds and it’s floating on top of this that it could go up.

00:10:17:15 – 00:10:41:03
Jon Orr
It could go down based off where the market goes. And we always kind of say like as long as you’re doing it over time, this is what people say, right? That as long as you’re doing over time, that baseline will rise, your net worth will rise. And I think what we wanted to do for ourselves is we didn’t want to trust that floating foundation will rise, but we just like we wanted to make it more rock solid than that.

00:10:41:03 – 00:10:58:12
Jon Orr
We wanted to kind of say that we needed more stability. We wanted to safeguard it, because if we could go, Hey, that part is taken care of, we don’t have to think about it anymore, then it frees us up to build that wealth on top of it. And I think that’s what we did and what we’re working towards.

00:10:58:12 – 00:11:12:09
Jon Orr
It’s like we’ve set up a plan in place to go. We don’t have to think about this anymore. And then I think when were our plans for started was what I was saying before too, is we had that baseline or we do have that baseline and was like, Let’s go grab an asset and let’s just buy that rental property.

00:11:12:09 – 00:11:36:15
Jon Orr
Let’s go put some money into this index fund, let’s buy one Bitcoin over here. And we were buying different assets and we were saying that was bringing my net worth up, but it wasn’t actually increasing that foundation because these assets typically were a little bit more risky, even more if I’m buying my index fund, it’s like, well, there’s still I don’t think that actually strengthens my cement of my foundation.

00:11:36:15 – 00:11:54:12
Jon Orr
It’s there, that rental property, is it really strengthening my foundation? It’s there, but I think we can do better. And that’s what we started to do is like we started to go, look, we can strengthen this up. This asset is sitting on top of it. Yes, it adds to my net worth. But we’re the foundation could be a little bit stronger.

00:11:54:12 – 00:12:24:17
Jon Orr
So what we’re doing now is we’re going, hey, let’s now look to see if we can strengthen that foundation up. And then when that foundation is strengthened, anything that all of a sudden spills over of that foundation, those risky assets or those risk assets, when they start producing, they start hitting some of the goals we’ve set. We can skim some of that off the top, take it, put it down on the foundation, bring that foundation up, and then use that foundation to go, let me go buy another asset.

00:12:24:21 – 00:12:54:16
Jon Orr
And then when that asset starts to produce results, hit the goals we’ve set for that asset, skim it off the top that assets still there. Go down, take those, put it down here, build that foundation up. So we’re using this cycle idea, this kind of repeated investing back in the foundation which continually rises this foundation. And I think where a lot of real estate investors and business owners do, instead of kind of bringing it back to the foundation, they go, what?

00:12:54:18 – 00:13:02:04
Jon Orr
Let’s say I hit my goal for a rental property, I’ll skim that off. So that goal might be refinanced. We took our equity out. It’s like, now I have this. Okay, let.

00:13:02:04 – 00:13:03:03
Kyle Pearce
Me now what do I do with it?

00:13:03:03 – 00:13:21:03
Jon Orr
Right? So it’s like I got this chunk of money, I’ve got my equity. Do I do I go a lot of for us, our goals at the beginning, we’re like, let’s go buy another asset with it. But now we’re saying, let’s actually do two things at once. Let’s take that, let’s add to the foundation. And then that’s use that foundation to go buy the asset.

00:13:21:03 – 00:13:31:20
Jon Orr
And that allows us to strengthen both things up instead of just repeatedly buying more assets with our equity, which is a good strategy. It just doesn’t add to our foundation. At the same time.

00:13:32:01 – 00:13:59:09
Kyle Pearce
I love it. I love it. Yeah. And you sort of nailed it. We try not to leave out our stock investors from these discussions, so it’s not exactly something that we put too much of our capital into personally. However, we do have a waterfall method that we use in our business, so it’s something that with profit we have a percentage that goes here, a percentage that goes there, and we look to continue to grow our index funds and so forth just to be exposed in that world.

00:13:59:15 – 00:14:25:02
Kyle Pearce
But again, that’s kind of floating up here for us. We don’t look at that as foundational. However, a lot of people might argue that index funds are foundational. They’re much more foundational than, say, stock picking, right? We have some episodes. A while back, we had a stock player or spectator episode where if you’re putting money into individual stocks, you are now in argue much higher risk scenario because who knows what can happen.

00:14:25:02 – 00:14:46:04
Kyle Pearce
Of course you can pick more conservative dividends, blue chip type stocks, but when we start picking, we’re making bets on different companies, right, versus, say, grabbing an index fund. So an index fund, some people might look at that as their foundation. And hey, more power to you if that is you for us, because we do so much in real estate.

00:14:46:04 – 00:15:13:03
Kyle Pearce
Something that we’ve been doing a lot of is thinking about as these assets grow, the equity that we’re building inside these assets, we could repurpose some of that equity. And like you said there, John, like we could take that out and buy the next asset. The problem that we run into, though, I find when we refinance with the intent to put it back into a property is you have a bit of a burn a hole in your pockets syndrome going on there.

00:15:13:05 – 00:15:36:09
Kyle Pearce
Right. Meaning the timing is never perfect, right? It takes time to refine and it takes time to get the money out. Once you get the money out, the clock is ticking, right? The juice is running on that money. Now, this is money that I borrowed. And there’s this added, at least for us, this added mental pressure that we need to like go and do something with it to make it worth the while, Right.

00:15:36:09 – 00:16:01:06
Kyle Pearce
Because it’s costing us money. So for us, what we tend to do is we go, Well, listen, instead of say, selling a property, experiencing a capital gain, a lot of people rotate their capital and sell a property. And now if there’s a capital gain, you’re going to pay on 50% of the capital gain, you’re going to pay about 26% in total on the capital gain based on our capital gains tax rules.

00:16:01:08 – 00:16:25:12
Kyle Pearce
And instead of doing that, we say, well, why don’t we keep that property? It’s profitable, it’s doing well, we can pull money out of it instead of it going immediately into the next property. What we’ve done for our foundation now that we don’t have this solid pension like we did back when we were in the education sector, we are taking that and we’re sort of recreating that world.

00:16:25:12 – 00:16:45:15
Kyle Pearce
So that cement for us is permanent life insurance, right? So we use whole life insurance as this like nice foundation. Now, for some of you out there, if you’re starting if you’re just starting this investment journey, that foundation might be a whole lot thinner. Right? It might just be term insurance just to protect your family. It might be something like that.

00:16:45:17 – 00:17:10:05
Kyle Pearce
But as you start to invest and as you start to increase your net worth, you want to start thinking about how do I solidify this so that I am in a much better spot regardless of what happens in the world, right? If a 2008 happens again and the housing market like it did in the U.S., if it were to crash for a period of time, it’s like what does my foundation look like underneath the surface?

00:17:10:07 – 00:17:40:22
Kyle Pearce
And I almost imagine it thinking about when I’m first starting investing. I bought my first rental property. I had a thin foundation, but it was okay. I was young. Both my wife and I had decent incomes. We had equity in our own primary residence. I had a thin foundation of, say, term insurance. If there was ever an issue and we invested in our first property, ultimately that property began to build, equity started to raise our net worth.

00:17:40:24 – 00:18:02:23
Kyle Pearce
But eventually you start to look and you say, Am I happy with the foundation underneath? Meaning if I was to add another property to the portfolio, if I was to add another, we’ll call it big chunk of capital into the stock market or in any other asset class. What’s going on in the foundation here? Are we good? Are there any cracks in the foundation?

00:18:03:02 – 00:18:22:22
Kyle Pearce
What happens if X, y or Z is going on up here? Because we can’t really know for certain what is around the corner. So that’s where you start thinking to yourself and go, How do I make this stronger if I’m going to build up on this thing? Just like if I took a one story home, I have a foundation.

00:18:23:02 – 00:18:40:11
Kyle Pearce
If I’m going to go to a two story home, I need to now go back to the foundation. I need to go check those footings and go, okay, are we good here? Can this support the weight of this next piece, even though everyone’s like a second story would be amazing for my life, right? It’s going to help my family.

00:18:40:11 – 00:19:13:20
Kyle Pearce
It’s going to give us so much more space. It’s going to give us everything we wanted in this home. But I would argue that that would be the worst decision ever if we build up and then that foundation can’t actually support the addition of that second story. So for us, we start to actually lay more cement down by actually taking out additional whole life insurance, additional permanent life insurance, which is not only going to give us accessible cash value as an opportunity fund to purchase more.

00:19:13:20 – 00:19:45:17
Kyle Pearce
Right. To help us fund the second story of this building. We can use that. It’s also going to support us in the case that we need it, meaning if I need additional capital at any point in the future, I have a bucket that I can resort to. And then also we have this big death benefit that sort of surrounds us, your net worth to kind of take care of, hey, an unexpected or untimely death or down the road when the taxes that we’re creating.

00:19:45:17 – 00:20:03:20
Kyle Pearce
Because remember, when we build our wealth, we are creating a bigger and bigger tax problem for ourselves. And that foundation can actually help us to alleviate that tax burden for our spouse, for our children, for our estate into the future.

00:20:04:01 – 00:20:39:23
Jon Orr
And what I love about this tool for our foundation is there’s really two other aspects that I heavily rely on as foundational. And one of them is the fact that it’s truly rock solid, right? Because that by contract that policy’s cash value is going to increase every day. It’s never going to go below where it currently relies. It will never drop down, which is not true about you say putting your money in your RRSPs and then using those RRSPs in index funds or mutual funds, you know, know if that will say drop year to year, it’s possible that it has or could be.

00:20:40:00 – 00:20:57:06
Jon Orr
But that’s what I love about this, using this as a foundation is that it will not go down. Now, what I also love about it is that we’re getting two uses for that same dollar. Like you said, it’s going in there. It will never go down. It will only rise. And we also get the availability of that same money.

00:20:57:06 – 00:21:12:18
Jon Orr
So sometimes it’s like, well, if I go and put it over in the index fund going than calling that my foundation, then over there it could fluctuate and we take that for granted. Some people just live with it and that’s why you’re like, okay, I will just make sure it’s an index fund over time. I’m not going to touch it.

00:21:12:18 – 00:21:44:06
Jon Orr
It’ll be fine in the end, but in the media it will fluctuate and change your net worth, which can be hard to think about. But you can’t get another use out of that. If you go, Hey, I can’t go to that index fund and go, Can I borrow that and leave it in growth mode over there and go to buy my next asset, like my next rental property where as you can with your whole life policy, you can borrow against it as collateral and now go in, use that to buy your next rental property or your next investment, or if you want, go put it in the index fund after that.

00:21:44:08 – 00:22:06:04
Jon Orr
I love that foundational piece is covered and we continually rise. It rises because every time that asset skims off the top we go and we add to that baseline. It will always go up and it will ever go down. And then that can be like, Hey, we can always sleep better at night because we know that if we had to sell everything, we’re going to get that.

00:22:06:10 – 00:22:26:00
Jon Orr
And that’s going to be we can start to do projections off that because that’s what you started this episode with is go, how much is enough? What should I be doing with these dollars? Am I hitting my goals for my retirement? Am I hit my goals for what I want to like? Take it easy, because if you don’t have those goals set, you don’t know when your foundation is strong enough yet, right?

00:22:26:00 – 00:22:42:20
Jon Orr
So it’s like once you have your goals, let’s bring it back to the foundation. Bring that foundation up. And now when the foundation is hit, your goal, you’re like, Look, if we didn’t have to do anything else, we don’t have to add any more assets. And the foundation is where we want it to be, then that’s true. Financial freedom.

00:22:42:21 – 00:22:54:07
Jon Orr
That’s true. Like, Hey, I can do anything I want with this dollar. I can go spend it on a vacation. I can go buy a car. It doesn’t matter anymore because, you know, your foundation is rock solid for sure.

00:22:54:13 – 00:23:16:02
Kyle Pearce
Even coming back to you had mentioned about this idea of, say, your stock portfolio and you can take a loan against it. Now, mind you, a lot of times the limit say they might say 50% of the value of your stock portfolio you can borrow against. But why don’t so many people do it? Why is it so such a few people that would actually leverage against their portfolio?

00:23:16:02 – 00:23:40:02
Kyle Pearce
Well, it’s the uncertainty because you had highlighted you’re like, hey, when we build this foundation, what we consider the foundation, it can’t go down. So we don’t worry about, say, a margin call. We also have these flexibility if we’re borrowing against the policies from the insurance company, there’s actually no repayment term, meaning you get the flexibility, whether you pay it back or not.

00:23:40:08 – 00:24:02:20
Kyle Pearce
Course, if money is available to you, you’re going to pay that back because it’s just going to grow and compound even more aggressively for your net worth and build that foundation up even further. But when it comes to a stock portfolio, sure, I can go and potentially get a loan against my portfolio. But if the market goes down to a point, they may do a margin call.

00:24:02:20 – 00:24:25:12
Kyle Pearce
And that just means they start selling your assets on your behalf to cover it. And that’s why so few people actually use that strategy. So when we think about a stock portfolio as much as so, for example, Jim Chong was on the podcast a few episodes ago and he’s a big real estate investor as well as it’s mostly index investing.

00:24:25:12 – 00:24:50:12
Kyle Pearce
It sounds like from his stock portfolio, he believes in those two things. He’s super unemotional about it and that’s his how he does things. However, if lenders aren’t feeling comfortable lending more than, say, 50, for some people, maybe it’s more percent of that stock portfolio that just tells you it’s just not as solid, it’s not as foundational as other asset classes, real estate.

00:24:50:12 – 00:25:14:18
Kyle Pearce
Typically, you can borrow up to 80% against real estate. That suggests that there’s confidence that that’s fairly foundational for your insurance contracts that you have. The insurance company will allow you to borrow up to 90% of the cash value, no repayment terms. And of course, you can even go to secondary lenders like different banks and so forth, or third party lenders, I should say, like banks.

00:25:14:18 – 00:25:42:24
Kyle Pearce
And they might even do 100% because again, it is a rock solid foundation. So when we look at this and when you think about that in your own context, what this really comes down to is all about who you are and what your goals are. So what is it that you’re after? And I think unless you do that deep thinking, it can be really difficult for you to create a plan that you’re confident in.

00:25:42:24 – 00:26:04:19
Kyle Pearce
And sometimes it causes inaction. So if I don’t know what I’m working towards and I’m just sort of doing the Hope and Pray method, what a lot of people do is they just do either a really small amount and they’re just like, hopefully it’s enough or they don’t do anything at all because they’re just not certain. So for example, I work with a lot of incorporated business owners.

00:26:04:19 – 00:26:33:12
Kyle Pearce
That includes investors, rate investors, as are business owners. If they have an incorporated business, especially real estate investors, where sometimes especially in active businesses, they’ll have retained earnings in that corporation. And because they work so hard in their business, that’s their moneymaking activity, right? So they’re doing all of this work and they’re very successful. They’re then a little bit more hesitant to determine like, what should I do with all of this hard work, right?

00:26:33:13 – 00:26:49:04
Kyle Pearce
If I’m a 34 employee, it’s still hard work. But, you know what you’re getting each and every week. Whereas in a business you’re going like, what if business slows down? What if I need access to this money? I don’t know. Should I put it in a GSE? Should I just put it into an index fund? What should I be doing?

00:26:49:06 – 00:27:13:02
Kyle Pearce
And the reality is for business owners, especially because business can be uncertain, because we don’t know what the future holds, creating that foundation inside the business can be so, so critical and important to not only allowing you to sleep better at night, but to also give you a solid foundation so that you can weather any storm that may lay ahead.

00:27:13:02 – 00:27:40:14
Kyle Pearce
Right. I could have had $1,000,000 in retained earnings in this last year. We don’t know what next year retains. Our earnings is going to look like. We have growth projections. We have these targets that we want to hit. But what should I be doing at minimum inside a corporation? Right. So we were talking on the personal level, on the corporate side, that is even more important because you’ve already taken on a massive amount of risk to be a business owner, right?

00:27:40:14 – 00:28:04:23
Kyle Pearce
Like you don’t have somebody sort of just handing over that pay. If you show up and you make sure you do your job, that you get a T for income every week or every month. Here you are really depending on your business, the market, how things are moving forward. So making sure that you really pay attention to the foundation, but then even more so, what does this look like in the future?

00:28:04:23 – 00:28:38:07
Kyle Pearce
Am I always going to run this business? Is it always going to be as profitable? Will I be stepping back and let somebody else run this business? Am I going to sell this business? So having a big foundation and growing that foundation can be really important not only to shelter from taxation, but to also make you feel more comfortable in confidence so you can focus on growing your business and less on is this the right move for, say, my money to just put it straight into the stock market or straight into, say, a real estate property building?

00:28:38:07 – 00:28:45:01
Kyle Pearce
That foundation, I would argue, is something that all business owners should at least be considering and working through.

00:28:45:03 – 00:29:00:19
Jon Orr
Right. And I think the really important part that you just said that I’m taking away here, right, is first, you’re setting your goals for where you want to be in blank number of years. You can set smaller goals to say, I’m going to hit this in ten years. I mean, hit this in 20, or I can hit this when I retire.

00:29:00:21 – 00:29:27:09
Jon Orr
And what is my dream outcome is really what you’re trying to answer. And then where my biggest takeaway right now is how and what is my strategy for my baseline to get me there. I want my baseline to get me there and then then that can help us go, okay, if I continually add in this baseline rises so that it can get me to my dream outcome, what do I then do?

00:29:27:09 – 00:29:44:08
Jon Orr
So this is like part three. What do I then do with my assets that are helping me raise that baseline up? But what do I do with those assets when these mini goals are met for some of the riskier assets? How do I take those profits or I take that money that we are now using to build our wealth?

00:29:44:10 – 00:29:53:22
Jon Orr
How do I utilize that to help me achieve that goal? And I think those three pieces I think are really where my big takeaway is for our wealth planning journey.

00:29:54:03 – 00:30:18:02
Kyle Pearce
I love it. Yeah. My big takeaway I think as well is it took me a very long time to understand who I am as an investor and what it was I was doing it all for. I was doing it out of, I think just safety, but it was a hope and pray mentality. I was like, if I could just take every dollar and put it into assets, it’s like I’ve got my best chance at being okay.

00:30:18:04 – 00:31:02:10
Kyle Pearce
But that was really ineffective. I guess it was effective from the point of view that I took as much as I could and put it into assets, but it wasn’t very smart at the time simply because I was doing something with the hope and pray strategy and it was almost maybe overdoing it at times, right? Whereas now I’m starting to recognize what it is that I’m actually looking to achieve and ultimately, as we slowly add layers of concrete to this foundation, it just gives you more and more confidence to be able to weather any storm, especially, John, you and I, being entrepreneurs, having multiple businesses that all are dynamic and each have their own nuances

00:31:02:12 – 00:31:41:22
Kyle Pearce
that, hey, if a client is lost or if a client is gained, it’s not going to actually impact whether we will hit that baseline goal because we’re taking care of that baseline and it allows us to focus on the things that matter to us, which is helping helping entrepreneurs and business owners and other people who are on their personal wealth building journey so that we could just do the work, help more people in essentially hopefully save them from the hassle, the stress, and maybe even the time and energy that we’ve had to commit to try to figure out what’s going to be the best strategy for us.

00:31:41:24 – 00:32:03:11
Kyle Pearce
And now we at least have our own experiences to offer to others like those who are listening here, to go, Hey, listen, here’s what we did. It doesn’t mean it’s right for you, but let’s help you figure out what is right for you. So if you’re listening to this episode and you’re thinking, Hey, I mean, incorporate a business owner, hey, maybe you’re not.

00:32:03:11 – 00:32:34:08
Kyle Pearce
Maybe you’re on a personal wealth building journey. You’re trying to figure out, how do I create that foundation for myself? Maybe I already have it, maybe I’m already there. And you just need somebody to kind of help you think it through. Hop on a call with us. Head over to Canadian well secrets dot com forward slash discover and we’ll hop on a call we’ll go down the rabbit hole with you try to figure out where are you in and essentially help to mentor you so you can figure out is my foundation as thick as I’d like it to be?

00:32:34:10 – 00:32:57:08
Kyle Pearce
Is it too thick? Maybe it’s too thick and I need to get maybe a little bit more into some more risk on assets. Well, hope you think that through. We’re not going to tell you what you need to do, but we’ll ask you the questions that will hopefully allow you to recognize who are you, what is your journey, and ultimately together help you to take the next step in that journey.

00:32:57:08 – 00:33:07:11
Kyle Pearce
So once again, Canadian wealth secrets dot com forward slash discovery. You can hop on a call with us and we look forward to hear about you and your situation real soon.

00:33:07:13 – 00:33:26:11
Jon Orr
If this was the first time you’ve listened to one of the key, well, secrets podcast, we want to welcome you and we’re really curious what your big takeaway was so you can hit us up on all social media channels at Canadian Well, Secrets. And if you’ve listened before, then we encourage you to leave a rating and review so that you can help others find the show.

00:33:26:13 – 00:33:30:07
Jon Orr
And that reading review will read every single one of them. And it actually makes our day.

00:33:30:13 – 00:33:49:06
Kyle Pearce
All right. Now, Canadian Wealth Secrets Seekers will see you next time.

00:33:49:08 – 00:34:12:24
Jon Orr
Just as a reminder of 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. John is a mortgage agent with Brick’s mortgage license number. m23006803. Carl Pierce is a licensed life and accident and sickness insurance agent and corporate wealth management advisor with the Pan Corp. team, which includes corporate advisors and pan financial.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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