EPISODE 42
[INTRODUCTION]
[0:00:03.2] TB: Welcome to Up In Your Business with Kerry McCoy. Be sure to stay tuned till the end of the show to hear how you can get a copy of this program and other helpful documents.
Now, it's time for Kerry McCoy to get all up in your business.
[INTERVIEW]
[0:00:19.1] KC: Thank you Tim, I’m Kerry McCoy and like Tim said, it’s time for me to get up in your business. For the next hour, my guest Rebecca Rice, A nationally recognized financial planner, author, entrepreneur and orator and I will be getting up in the business of wealth building.
Rebecca will share her unique approach to saving money, tell us what the rich already know and get us started on creating your own financial security. Through our storytelling today, you will hear how we maneuvered the path of independence and leadership in pursuit of our dreams.
My business experience began over 40 years ago when I founded Arkansas Flag and Banner, during the last four decades, Arkansas flag and banner has grown and morphed from door to door sales to telemarketing, to mail, order and catalog sales and now relies heavily on the internet.
Each change in sales strategy required a change in the company thinking and procedures. My confidence, leadership knowledge and my company grew. My initial $400 investment now produces nearly four million in annual sales.
Each week on this show, you’ll hear candid conversations between me and my guests about real world experiences on a variety of business and topics that I hope you’ll find interesting.
Running a business or organization is like so many things. It takes persistence, perseverance and patience. I worked a part time job for nine years before Arkansas Flag and Banner grew enough to support just me. It’s now grown and expanded so much that to operate efficiently, we require, are you ready for the list? A purchasing, manufacturing, graphic, shipping, technology, accounting, marketing, sales and customer service department, plus a retail store.
25 people make their living from working at Arkansas Flag and Banner. I hope you’ll take advantage of this unique opportunity to ask questions or share your experience by calling or emailing me and my guest on today’s show.
Before we start, I want to introduce you to the people of the table, we have Tim Bowen, our technician who will be taking your calls and pushing the buttons. Say hello Tim.
[0:02:10.1] TB: Hello Tim.
[0:02:11.2] KM: My guest today is the remarkable Rebecca Rice. Founder and managing partner of Rebecca Rice and Associates. She is an innovative, thought leader on how to build a business, invest in real estate, pay off debt, gain retirement income, plan for college and produce generational wealth.
Her life changing career began when at the age of 37, she suddenly became a single mom with three children. Without any source of income, Rebecca faced food scarcity and yes, homelessness. She says about herself, I know what it’s like to be without. I made it my goal to never let that happen again and she hasn’t.
In keeping with her passion for financial security, she worked hard, got her certified financial planner designation and learned all she could about building wealth until at last, she advanced to the point where she started her own financial planning business. Rebecca Rice and Associates.
Today, she has uniquely designed and written over 3,000 living benefit policies for clients in every US state and many abroad. To share her knowledge and methodology, she has written an easy to understand book titled Multiply Your Wealth. In addition, she is a much sought after speaker as she shares her best practices in her cutting edge ideas.
It is an honor to welcome to the table a lady with grit and intelligence, Rebecca Rice.
[0:03:42.5] RR: Thank you Kerry.
[0:03:43.1] KM: She didn’t make one facial change through that whole thing. I think you just flew in last night from a speaking engagement didn’t you?
[0:03:53.6] RR: No, I actually flew in from Trying To Get Smarter.
[0:03:55.9] KM: It was an education? What is it called? Continuing Your Education.
[0:04:00.4] RR: Yeah, absolutely.
[0:04:02.3] KM: Well, thank you for coming on our show, when I opened your book and read you were a single mother, hungry and homeless, my mouth dropped. You are the epitome of strife builds character. Do you mind sharing with our listeners your journey?
[0:04:15.5] RR: Sure. Long time ago I found myself with a husband who left myself and my three children, he had sold our home under the oospecies of moving us to another town and put us in a small rental house and left eight days later.
The only money I had was $800 that was in my jewelry box that he didn’t know about, otherwise, everything was gone. From there, I had a choice, I could go on welfare and food stamps and to feed the kids or I could go to work. I was a stay at home mom before, I made the choice to go to work, I worked four jobs, absolutely was too busy to be scared, I just knew I had to work and take care of the kids. The kids were seven, eight and 12 at the time.
They had lost their dad but they’d also lost their mom because I was always home with them and now I was gone too. Through all of that, I was so blessed with working one of my part time jobs was for an insurance agent and helping him organize his office. He saw some potential in me. He said, go get your licenses, you can work in the office, you can have a portion of the commission and I slowly could divest myself of all of the other jobs that I had and found something that I was passionate about that I never ever thought when I was going to college that I would ever do. The rest is history.
[0:05:37.1] KM: Did you stay working for him for very long?
[0:05:39.1] RR: A year.
[0:05:40.3] KM: Then you moved to?
[0:05:42.2] RR: Well, I figured out that I didn’t have a contract of my own that I was working for him and I thought that I could take care of myself if I was doing everything for me instead of for someone else. I had already done that for 21 years in a marriage so I went down to Little Rock, I was in calling at the time, drove to little rock, asked for my own contract, started working the next day for prudential.
[0:06:07.4] KM: As for your own contract, is what an agent does when they go to work at an insurance company?
[0:06:11.7] RR: That’s right.
[0:06:12.8] KM: That way you make your own straight commissions?
[0:06:15.6] RR: Plus renewals and maybe a pension or whatever the benefits are that they have.
[0:06:20.1] KM: How long did it take you to get your license and to get educated to become an insurance agent?
[0:06:25.0] RR: I don’t even think I’m educated now.
[0:06:28.2] KM: I don’t’ believe that.
[0:06:30.3] RR: 28 years later.
[0:06:32.3] KM: Well, it’s everchanging I’m sure.
[0:06:33.4] RR: It is.
[0:06:35.0] KM: When you originally began to work in the field of financial planning, you kind of became disenchanted with the traditional investment models, you saw a flaw, how long did it take you to see that flaw and can you tell us what that flaw was?
[0:06:48.8] RR: Well I worked in the industry for about 10 years and the thing that I wasn’t satisfied with is that I couldn’t be really good at one thing because there are so many things that as an adviser, you supposedly have to be an expert at, you have to be an expert at disability insurance, protecting your ability to earn an income.
You have to be an expert in life insurance, covering the state planning needs, you know, money for a state cost if you have those. Protection, in case you die too soon for your family. All of those things that involve life insurance. You have to be an expert in long term care on to protect your assets if you have to go into nursing homes so they all don’t get spent, just providing nursing home care.
You have to be an expert in investment advising, managing money accounts, 401(k)’s, everything. About 10 years after I was in the business, I decided, I only wanted to be an expert in one thing. Then the decision process was made and I absolutely love life insurance. I’m in love with life insurance. I don’t just love it, I’m in love with it.
I gave away my security licenses and I turned them back in to the securities and exchange commission which took a lot of work to get and they’re not easy.
[0:08:05.5] KM: Yeah, why wouldn’t you just want to keep those?
[0:08:08.3] RR: If I’m not going to use them –
[0:08:09.9] KM: And you have to probably keep renewing them.
[0:08:12.1] RR: Well, there’s continuing ad, there’s compliance issues, there’s all sorts of things that are involved in that and so I turned them in. Plus, that’s a temptation. You know, if someone walks in and says hey, I have 20 million dollars, would you manage it for me? I might change my own rules. It was a protection for me too, to continue to strive with what I really wanted to be best at.
[0:08:35.6] KM: You felt like all the policies that you had were investing in the stock market and into mutual funds and that was really risky, everyone of those things that you just talked about I believe, a lot of them are tied to mutual funds.
[0:08:50.2] RR: They are, universal life, variable life, index universal life, they’re all tied to the market.
[0:08:56.9] KM: It’s volatile.
[0:08:58.2] RR: Well, not only volatility which can destroy your rights of return okay? But risk, the definition of risk itself is the ability to lose 100% of your money. Well, if you're saving and investing, why are you letting things that by definition you could lose 100% of your money.
[0:09:16.9] KM: If you lose it and they always say, well it comes back but if you happen to lose it right at the moment that you need it, that you’ve reached the end of your life and you're ready to go on your retirement and your money has been cut in half because the market has dropped, you know, you don’t have time to rebuild it back.
[0:09:32.3] RR: Ask those 64 year olds in 2008 who are probably still working, I know a lot of them that have not retired yet because the market crashed, 2008. There we are, they lost half or more of their retirement funds and they had no choice but to continue to work.
[0:09:53.9] KM: You have a great plan that I read in your book. Tim, I think this is a great place for us to take a break. But you’re listening to Up In Your Business with Kerry McCoy. When we come back, financial planner, author and entrepreneur, Rebecca Rice is going to explain her unique approach to saving money, hear how she shelters her clients with volatile stock markets and learn how we can start building our own financial security. We’ll be right back.
You’re listening to Up In Your Business with Kerry McCoy. I’m speaking today with financial planner, author and entrepreneur Rebecca Rice. Founder and managing partner of Rebecca Rice and Associate. Rebecca, you saw a flaw in the traditional investing which are stocks, bonds, CD’s, real estates and mutual fund or a mutual fund just combination of all the aforementioned investments.
You decided that you wanted to just go into selling whole life insurance and your paradigm shift in investing came one night when you were reading Nelson Nash’s book, Be Your Own Banker. Can you tell us about that night? You said you stayed up all night and read it and thought you had just found the key to life.
[0:11:20.6] RR: The answer, yeah. You know, women by design are more conservative than men typically, in the way that they handle money and invest. I know you’re a wild child.
[0:11:34.5] KM: Except me.
[0:11:37.2] RR: I read Nelson Nash’s book and I thought, this is it, this has got to be it. I went to visit him, I spent four days visiting him.
[0:11:43.9] KM: Where does he live?
[0:11:45.4] RR: Birmingham Alabama. He’s 87 years old now, he doesn’t do any public speaking anymore, he used to do about 60, 70 speaking engagements a year, two years, 18 months ago, he stopped doing that but his mind is sharper than mine ever can be. Spent four days with him, came back and I had a decision to make and the decision was, what am I going to do with the rest of my life?
I know this. I understand that and it helped so many peel in a non-risk, non-volatile way. It’s kind of like the tortoise and the hare, you know, that old story? Aesop’s fable? Who always won?
[0:12:22.7] KM: The tortoise.
[0:12:24.1] RR: Okay. Slow and steady, right?
[0:12:28.1] KM: Right.
[0:12:29.6] RR: Steady, known compounding money rather than volatility, like the hare, okay?
[0:12:39.2] KM: How old were you when you first found out about this?
[0:12:42.3] RR: My gosh.
[0:12:43.0] KM: 48? When are you too old to do this?
[0:12:45.9] RR: Well the insurance company says you’re too old at age 85, they won’t sell you a life insurance policy after age 85.
[0:12:51.9] KM: But if you wanted to get into whole life that we’re going to explain here in a minute. Is there a point that you say you’re too late to jump in?
[0:12:58.8] RR: You know, it also depends on the unique person that you are.
[0:13:01.7] KM: Okay.
[0:13:02.7] RR: It depends on gender, health. Because a life insurance is underwritten based on your health, your gender, your income, your age, all of those things come in to making a design, personally designed policy for you.
[0:13:18.2] KM: It’s harder to get a policy because you have to jump through a few more hoops, you can just go buy mutual fund with all this risks, stocks and bonds and CD’s and real estate and all this risks in your mutual fund. You can just go buy one of those this afternoon.
But if you want to buy a whole life insurance policy, you’ve got to take –
[0:13:36.3] RR: An exam?
[0:13:37.4] KM: An exam.
[0:13:38.0] RR: Right, medical exam, paid for by the insurance companies. The insurance companies are going to access some of your medical records.
[0:13:45.5] KM: But you think it’s so worth it?
[0:13:46.8] RR: I own 53 policies.
[0:13:49.2] KM: You own 53 policies?
[0:13:51.5] RR: Yes ma’am.
[0:13:53.3] KM: Okay, we got to get into this. In your book, Multiply Your Wealth, you outlined 14 excellent reasons why everyone should own a living benefits policy which is a whole life policy. Let’s talk about each one of those reasons and the first one is compounding interest. All right.
[0:14:13.1] RR: Compound interest is the eighth wonder of the world according to Albert Einstein.
[0:14:15.4] KM: I love that.
[0:14:16.5] RR: You know, he’s a pretty smart man isn’t he?
[0:14:17.9] KM: Yeah.
[0:14:18.1] RR: Okay. What do we mean by compounding interest? Well, the interest that you grow first year. Okay? Let’s say you have $10,000 and you earn 5%. That means that you have now at the end of the year, $10,500 right?
[0:14:31.9] KM: Yes.
[0:14:33.3] RR: Okay, but if you just leave that money in there and let it grow at another 5% the next year. What do you have?
[0:14:39.0] KM: $10,500 plus another $550.
[0:14:43.6] RR: There you go. Okay? It starts compounding on itself. That’s compound interest. Now, it doesn’t look real sexy at first, it’s kind of slow, it looks slow alright? Let me give you another example. If I would put a penny in an account for you and I would double that penny every day for 31 days, how much money would you have at the end of 31 days?
[0:15:06.8] KM: 31 cents.
[0:15:08.6] RR: No, because listen to what I said. I’m going to start with a penny and I’m going to double that penny every day.
[0:15:14.8] KM: Yeah, I don’t even know, that’s algebra. How much would I have?
[0:15:20.1] RR: $10,737,000.
[0:15:22.3] KM: That is not true.
[0:15:23.7] RR: It is true. Come to the office, come visit me, I’ll show you.
[0:15:29.7] KM: One penny doubled every day. Okay. Let’s do math.
[0:15:35.8] RR: One penny turns to two, times to four, times to eight, times to 16, turns to 30. Do you see what I’m saying? 32. 64. 128. Alright.
[0:15:43.4] KM: That’s compounding.
[0:15:44.2] RR: That’s compounding. But the first three and a half weeks, there’s just – I mean, you’re up to maybe $40,000 compounded. Well that’s not a whole lot of money, okay? It’s those last five or six days where the compounding in this example goes nuts. So, slow and steady like the hare right? Like the tortoise, right? Okay.
[0:16:08.7] KM: It’s safe? There’s no risk?
[0:16:12.0] RR: In a life insurance policy, you have two different components that give you a rate of return. You have a guaranteed by contract, contract law, okay? Anybody listening to the show, if you have a mortgage, you have a contract, nobody can change the interest that they’re charging you for that because it’s contract. Signed, sealed and delivered, you’ve heard of that right?
[0:16:32.6] KM: Right.
[0:16:33.5] RR: Okay. A life insurance policy is a contract, it sits under contract law, nothing changes, you can’t change it. They have a 4% guarantee inside the policy. That’s one component. The second component is because of the type of life insurance companies that we use which are mutual life insurance companies, mutual life insurance companies, we get to participate as policy owners.
All of my 53 policies I own, they get to participate in the profits of the life insurance company itself in the form of a dividend. Now, most dividends that you think of in investing are taxable, right?
[0:17:09.7] KM: Yes.
[0:17:10.8] RR: This is tax free as long as you use it correctly.
[0:17:13.0] KM: Which is reinvested in your policy?
[0:17:14.8] RR: That’s right. Two components, right now, policies are earning about five and a half percent tax free and a 30% tax bracket?
[0:17:25.0] KM: Yeah, what is that?
[0:17:25.1] RR: That’s equivalent to making about 7% taxable.
[0:17:28.6] KM: it’s safe? That’s what the stock market is making?
[0:17:30.9] RR: There you go.
[0:17:32.0] KM: Okay, let’s move to number two. Safety and security.
[0:17:35.6] RR: Well the safety is, the guarantees inside the policy okay? We’ve just talked about those alright? The security comes from the type of insurance companies that you choose.
[0:17:44.4] KM: Which are the mutual –
[0:17:46.2] RR: Mutual life insurance companies. They are over 200 years old, that predates the civil war. Their financial institutions that are fortune 100 companies that have proven over 160 to 70 to 200 years that they know what they’re doing financially in this company, they’ve weathered every financial storm that the Americas could throw at them.
[0:18:08.1] KM: It’s because of their lending practices that they’re solid?
[0:18:11.0] RR: Absolutely. And because, they don’t have to satisfy stock holders.
[0:18:16.3] KM: They don’t?
[0:18:16.6] RR: No, they don’t have stock holders.
[0:18:18.2] KM: And they can’t loan more money than they have like a bank can loan money that it doesn’t have so a bank can become insolvent pretty quick. I read in your book that I didn’t know this that a mutual insurance company has to keep 90%.
[0:18:32.1] RR: Of their money in reserves okay?
[0:18:33.8] KM: Yes, which a bank doesn’t have to do.
[0:18:36.1] RR: No, the bank works under a fractional reserve system okay? They can take for every $10, they can loan that $10 out nine times. They have to hold some back but very little. Then they can keep turning that money.
[0:18:51.0] KM: In an insurance company can only loan out 10% because they have to keep 90% solvent.
[0:18:57.3] RR: That’s right.
[0:18:58.4] KM: That is pretty nice.
[0:19:00.0] RR: Another thing is anything that’s guaranteed inside an insurance policy has to be in guaranteed funds inside the insurance company itself.
[0:19:07.4] KM: They have to keep the –
[0:19:09.2] RR: Yes, they have to. If they are one dollar off when they get audited then they’re declared insolvent from $1.
[0:19:15.1] KM: Well there’s no room for human error.
[0:19:17.7] RR: But they don’t make very many mistakes.
[0:19:18.5] KM: You never have the risk of them folding and losing your insurance policy which has happened in term life before right?
[0:19:27.4] RR: Well, it’s happened even with mutual companies, it has happened okay? But, in order to protect safety and security that we’re talking about right now? All insurance companies pay in to a fund so they self-protect their clients. They all pay into a fund that if for some reason an insurance company does get into trouble, that fund is right there to access not for the insurance company, for the policy owners to make sure that they remain whole.
[0:19:57.5] KM: A mutual fund insurance company could never not pay you your death benefits, is that what you're saying?
[0:20:05.7] RR: That’s right. We also have a department insurance commission in every state.
[0:20:10.5] KM: Right.
[0:20:11.0] RR: That insurance commissioner’s job, if an insurance company gets in trouble okay? The sole job of our insurance commissioner who lives down one house and across the street from me.
[0:20:22.7] KM: He’s watching what you do.
[0:20:24.2] RR: He probably is but his sole job is to protect the policy owners not the insurance company. That’s crucial. Look at all the people you have on your side as an owner of a policy that protects, keeps your money safe, keeps your money secure.
[0:20:42.6] KM: I really loved the next two. Control of your money, you asked for it, you get it.
[0:20:48.5] RR: That’s true, that’s the loan provision. There’s two ways to access money in your life insurance policy, okay? We’re talking the cash values. One is you can withdraw the money just like you would go to your savings account at the bank and withdraw funds.
[0:21:03.4] KM: Tell our listeners what cash value means?
[0:21:05.6] RR: Okay, your premium’s made up of two components in a specially designed life insurance.
[0:21:10.6] KM: Which all of yours are?
[0:21:11.8] RR: All of mine are, yes. The premium is designed of two components, the base premium. Now, the base premium we have to have, we have to have some death benefit in the policy to protect the tax free status of the policy okay?
The majority of the premium is going to go to something called paid up additions rider. It’s the cash portion, it’s the secret sauce if you want to think of it that way that makes these life insurance policies such assets okay? Because most of the premium goes to cash, the cash then earns a guarantee 4% plus dividend on all of their cash.
The cost of the policy is the base premium but we drive that cost down right up next to the line where it would throw off and be taxable. We scoot that cost as down as far as we can go.
[0:22:03.8] KM: To premium cost?
[0:22:05.1] RR: The premium cost, yeah.
[0:22:07.2] KM: Then we make a big cash value part and we give money to the cash value part and we build our cash value as a savings account so that we can take a loan against it.
[0:22:16.5] RR: Right, so withdraw. If you withdraw the money, well withdrawing means it doesn’t work for you anymore right?
[0:22:21.6] KM: Right.
[0:22:22.4] RR: No more compound interest.
[0:22:23.2] KM: Because together, they’re being compounded or do you just get compounding on the cash value part?
[0:22:28.5] RR: You get compounding. No, because your death benefit has to compound with your cash value in order to keep everything tax free.
[0:22:34.2] KM: Okay.
[0:22:34.6] RR: Okay, your death benefit has to increase when your cash value increases okay? But when you withdraw, that means you take it out right? Well you can’t put it back in.
[0:22:44.8] KM: I thought you can pay it back, that’s withdrawing.
[0:22:48.4] RR: If you borrow, if you use the loan provision of your life insurance policy, then, your cash actually stays in your policy, compounding, Albert Einstein, uninterrupted compounding.
[0:23:04.4] KM: I see.
[0:23:06.0] RR: When you borrow the insurance company’s general funds, that’s a different pool of money, not your cash.
[0:23:14.5] KM: You're borrowing against your cash, you’re using your cash value as equity and you’re borrowing money from the company.
[0:23:22.0] RR: Yes.
[0:23:22.4] KM: You’re not taking your money out of your own cash value?
[0:23:25.5] RR: No ma’am, if you did, what would happen? It would stop compounding right?
[0:23:28.8] KM: It would stop compounding.
[0:23:29.5] RR: You’re using compound interest, uninterrupted, then we use leverage, we leverage our collateral, our cash value against a loan with the insurance company. Now, the insurance company can’t turn you down for a loan, if you’ve got the cash value in your account, they give you the loan.
[0:23:46.5] KM: They’re required to.
[0:23:48.4] RR: And, you have preservation of capital.
[0:23:50.5] KM: Yeah.
[0:23:51.5] RR: Alright? Then we look at the environment where you’re putting your money, a tax free account that can remain tax free as long as you use it properly.
[0:24:00.3] KM: Okay.
[0:24:01.0] RR: That’s my job, is to make sure that you’re following the rules right? That you have total control over the money. If you have cash value in that account, you have access to it, you control the account.
[0:24:14.2] KM: Through a loan if you want to borrow it, you can take it out but then you lose your compounding. In this policy, you get a death benefit which is going to be generational wealth, you’re populating a savings account that’s called a cash value and you can borrow against your savings account, no questions asked, any time you want to without taking money out of your bank so you’re compounding at the same time.
Your compounding could be more than the interest on your loan or at least, even, so you’re not actually losing interest money.
[0:24:43.9] RR: That’s right.
[0:24:44.0] KM: I love this. Alright, let’s go to the next one. Privacy, this is absolutely my favorite one, this is a contract between you and the company.
[0:24:52.7] RR: Right. So, when you go to the bank down the street here and you ask for a loan and you have to go through all of that loan, proving who you are and that you make so much money and all that stuff that everybody hates when they go ask for a loan right?
You get approved and the bank writes you a check for the loan, does everybody know what’s going on there?
[0:25:15.1] KM: Everybody knows and they’ve put a lean on everything you own.
[0:25:18.0] RR: Yeah, alright. In a life insurance contract, there are in most states, okay? State by state, every transaction is between you and the insurance company. It’s not reported to the IRS and it’s also protected against lawsuits, leans, bankruptcy and the IRS.
[0:25:39.9] KM: That’s my favorite part. The privacy and that you don’t have to beg to a banker and tell him your life story, I just find that embarrassing although I’ve done it like 20 times.
[0:25:49.8] RR: All you do is make a phone call.
[0:25:51.7] KM: And say, and you’ll get it within a week?
[0:25:54.3] RR: Yes. If you need it in an emergent situation, they’ll ACH it into your account in about 24 hours.
[0:25:59.5] KM: Number five, that’s nice. Number three is control of your money, you ask for it, you get it, 90% of your cash value is what they’ll loan you but number five is freedom to borrow against your cash value at any time and at a fixed interest rate. I’m not sure what the differences between those except for maybe it’s a fixed interest rate and your bank doesn’t do a fixed rate.
[0:26:22.3] RR: Well your bank could.
[0:26:23.8] KM: But they don’t, ever.
[0:26:24.7] RR: Most of the time, especially for business owners, you know it’s –
[0:26:27.6] KM: Year to year.
[0:26:28.6] RR: Yeah. You have a choice. Some companies, most companies have a fixed rate, fixed for the life of the contract, the whole life of the contract.
[0:26:36.8] KM: You mean you’re borrowing your loan? To borrow against your cash value, your savings account has a fixed rate for the life of the contract?
[0:26:45.6] RR: No, has a fixed rate for the life of the contract.
[0:26:48.6] KM: If I write it right now and the interest rate is 4%, it will stay 4% even if it goes to 12% in 10 years?
[0:26:56.3] RR: Yes.
[0:26:56.8] KM: Okay, I better hurry because the rates are low right now.
[0:26:59.2] RR: Now you can choose a variable rate if you want to but that’s going to move with the market right?
[0:27:04.3] KM: It’s probably a cheaper policy.
[0:27:05.9] RR: No, it’s not.
[0:27:07.5] KM: Well why would anybody do that? I guess if the rates were high.
[0:27:10.0] RR: There you go.
[0:27:11.0] KM: Yeah, number six, earn money as you borrow it. We actually kind of talked about this but you earn interest and pay interest at the same time.
[0:27:20.4] RR: Right. Okay, so I don’t have any visuals today to show you.
[0:27:25.7] KM: You’re on the radio.
[0:27:27.5] RR: Yep, you’re going to have to call me to make me prove this to you but you actually can pay more interest on a loan than you are earning on the policy and come out it had.
[0:27:39.0] KM: Because of compounding.
[0:27:40.8] RR: Because you’re compounding and your cash value on that whole amount, okay? But on the loan side of the example, on the loan side you’re getting charged a higher, you may be getting charge the higher loan rate but on a decreasing balance right?
[0:27:59.1] KM: Because as you pay it back the interest is on a smaller portion as you pay it back and as you pay it back, it goes back into your cash value that’s growing in the interest over there has some more money. It has a bigger principle to pay interest on. Did I say that well enough?
[0:28:18.8] RR: So I’m going to change those words just a little bit. Alright, if you took a loan from me and I charge you 5% for the loan, who gets the interest money?
[0:28:29.7] KM: You do.
[0:28:31.0] RR: Okay, I do. When you take a loan from the insurance company remember it’s their money, their general account money they get that interest, right? You don’t get that interest. What is your policy doing? I interrupt the compounding 4% plus the dividend, okay? Now who makes – what makes up that dividend? That’s profits of the insurance company, right? If you are paying them 5% to borrow their money isn’t that going to be included in the profits of the insurance company.
[0:28:59.5] KM: Oh I see what you mean.
[0:29:00.8] RR: And then they’re going to turn around and give you a portion of that back to you, right?
[0:29:04.5] KM: At the end of the year.
[0:29:05.5] RR: Uh-huh.
[0:29:06.1] KM: Yeah, I’m telling you I don’t know why our whole life has gotten a bad rep. I guess it’s because of the universal policies but this one you’ve got. We got one more before we take a break, the emergency fund.
[0:29:15.9] RR: Okay, so most people have an emergency fund. Traditional financial advising said that you should have three to six months of income set back in an emergency fund in case something happens but it’s where it’s the environment of where it’s sitting. So if it sits in a savings account right now what are you earning? 0.25%
[0:29:33.7] KM: Yeah.
[0:29:34.1] RR: And then to add insult to injury, you’ve got to pay taxes on that 0.2%. I mean they might as well just let it to have tax but they are not going to. Alright so your money is not growing, it’s not working for you or you could set aside an emergency fund policy just for that, just for emergencies.
[0:29:53.0] KM: That you don’t borrow against.
[0:29:54.9] RR: Not unless you have to, that’s where the emergency comes in right?
[0:29:57.6] KM: So you have 53 policies because you have one in emergency, one is a college fund, one is invest in real estate, one is for retirement. I can’t even imagine why you’d have 53 policies, you have 53 kids.
[0:30:09.9] RR: Yeah, not. I still have the original three though. No when we started 15 years ago when I first really started using this for myself personally, I started with one policy and you know my income has grown since then, right? And I have more disposable income and so I choose to put that –
[0:30:28.6] KM: To reinvest it.
[0:30:29.8] RR: Yeah into other policies.
[0:30:31.6] KM: I love it. Alright Tim let’s take a break. When we come back we are going to learn more from the remarkable Rebecca Rice and her favorite investment vehicle called Living Benefits and she’ll give us some tips on how we can start building financial security. We still have seven of your favorite reasons to do it left also. You are listening to Up In Your Business. My guest is Rebecca Rice, founder and managing partner of Rebecca Rice and Associates.
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[0:31:08.8] KM: You’re listening to Up In Your Business with Kerry McCoy. I am speaking today with financial planner, author and entrepreneur Rebecca Rice founder and managing partner of Rebecca Rice and Associates. Rebecca’s whole life has had a bad rep but we’ve just heard seven out of your 14 excellent reasons to invest in a custom made whole life policy called Living Benefits and they are to recap:
Compounding interest, safety and security, control of your money, privacy, freedom to borrow with no questions asked, earn money even as you borrow against your cash value through dividends and have an emergency fund. Let’s pick up where we left off with number eight. Okay compounding the return on your business investment. You said you could use it by borrowing money and then buying real estate, buying businesses or other income producing assets and as you make money on those, invest it into your – I’m not sure.
[0:32:14.9] RR: Okay, so it doesn’t matter what investing you’re doing that you could actually as long as you put the money into a life insurance policy first, why would we want to do that? To trigger the uninterrupted compounding the rest of your life right? You could actually borrow it out and go invest in the stock market if you wanted to, okay? Or real estate. One of the things that I do is I go around the country and I’m asked to speak at real estate investor groups.
Showing them how to use their money more efficiently because remember, the money is going to compound. The money doesn’t know what you are using it for. It’s just sitting there compounding right? Okay, so the money is going to do what the money is going to do. That’s a second stream of income. Your first stream of income or investment is the investment itself right? Whether it’s real estate, buying another business, anything you think that can go.
[0:33:09.5] KM: So you’re going to take a loan and with that, you are going to take that with that loan instead of going to the bank and saying “I want to buy a piece of real estate” instead of going to the bank you’re going to go to your cash value and you are going to borrow the money and you are going to invest it.
[0:33:21.5] RR: Right, I have a client right here in Little Rock right now who is starting with me, working with me and his goal is to buy four properties a year for the next five years.
[0:33:31.7] KM: By using his cash value, does he have four policies?
[0:33:34.9] RR: No, he only has one.
[0:33:36.4] KM: He has one policy and so as he buys the property and I guess he makes rental income?
[0:33:45.3] RR: He makes rental income from the properties and so where does the rental income go? It goes to pay back the loan to the insurance company, right?
[0:33:52.3] KM: Back to pay back his cash value.
[0:33:55.8] RR: That’s right, okay which frees up that money again to be collateralized again and again and again and again.
[0:34:02.7] KM: And so by the end of the year he is able to buy another piece of property because he’s been funding it and funding his cash value, paying back the loan that’s just cash value. Alright, number nine, pay down debt faster.
[0:34:16.2] RR: Okay, this is my favorite one. I got to tell you this is my favorite one.
[0:34:20.7] KM: This is your favorite one?
[0:34:22.1] RR: Yes, it is.
[0:34:22.9] KM: I didn’t understand this when I read it.
[0:34:24.8] RR: Okay, so everybody in this room.
[0:34:27.6] KM: Everybody in this room, we’re all ages and all genders all right?
[0:34:30.2] RR: There you go, who doesn’t have debt?
[0:34:33.4] KM: Oh well, yeah, everybody in this room.
[0:34:35.7] RR: Okay.
[0:34:37.1] KM: Oh look he raised his hand, he lives on the street.
[0:34:40.1] RR: Oh, you know in America we are all in financial slavery. We truly are and it doesn’t take much to get there. When you look at the average amount of debt out of a paycheck every month that it’s paid 34% of your check. Statistics show that once you pay taxes, for every dollar you earn 30% goes to taxes whether it’s state tax, federal tax, real estate tax, whatever it is, sales tax 30% goes to taxes. If you’re an average American and like I said it doesn’t take that far to get there.
A mortgage, a car payment, a couple of credit cards and you’re there. You’re there, 34.5 cents of every dollar you make goes to pay off debt.
[0:35:31.4] KM: That’s a third over a year.
[0:35:32.7] RR: What do you have to live on? You have to live on about 35% of your income. That’s putting clothes on the kid’s back, taking them to McDonald’s every once in a while, paying your auto insurance, buying food, maybe every once in a while going on a vacation. That is your living expenses. Where did we lead anything in there to save for retirement, for emergencies, for college? It’s so difficult nowadays. There’s not enough room for it all.
So if I can show you how to find money that you’re unknowingly and needlessly paying out, maybe you are paying too much in taxes and you don’t even know about. Maybe you are paying too much in auto insurance and you don’t realize it. I when 11 and a half years ago when I bought my house here in Little Rock, I figured out that I was paying too much to the home owner insurance company and because of that decision on how to use my money more efficiently, for my granddaughter who was just born then I had a $2.4 million increase in wealth over her lifetime.
[0:36:43.7] KM: Oh my gosh, on a $50.
[0:36:48.1] RR: On one financial decision.
[0:36:50.6] KM: Bought at birth.
[0:36:52.2] RR: That’s it, 2.4 million. I was going to spend the money. I was either going to give it to the home owner insurance company or I was going to make that home owner’s policy more efficient for me, not taking the protections away at all and take that difference and put it for a policy for her when she was a few weeks old and that decision over my granddaughter’s lifetime and I stopped her lifetime at age 85, now she has the potential to live to a 110 to 120, her generation does if you read stuff in the papers and stuff, okay?
$2.4 million decision, now what if I can find three or four of those things for you in your own personal financial plan?
[0:37:31.3] KM: You’re a genius.
[0:37:32.1] RR: No, it’s just understanding efficiencies of money.
[0:37:35.9] KM: And why do you call that piggy backing?
[0:37:38.8] RR: Well because the way that we pay down debt is that once we get rid of one debt, we start rolling that payment on the first debt over to the second debt and then when we get that paid off quicker than you ever thought possible, we just keep rolling the money.
[0:37:57.3] KM: Okay, we got 40. I saw Tim look at the clock. We got 15 minutes, we got a lot to do. Act like your own lender, the interest you pay goes to the mutual life insurance which you are an investor of and it comes back to you in a form of dividend. We’ve already talked about that. You save lost opportunity cost. Don’t pay cash, you lose the opportunity to compound your money. We kind of talked about that. Don’t take the money out of your cash value account, borrow against it. Is that what it means?
[0:38:28.7] RR: Withdrawal, well but if you paid cash, let’s go buy a $30,000 car. Okay, if you paid cash for a $30,000 car, did the car cost you 30,000? Let’s measure it over a 60 month period of time okay? Yeah, did the car cost you $30,000 at the end of 60 months?
[0:38:44.2] KM: Not if you lost the compounding in your –
[0:38:46.6] RR: Exactly. So let’s just say that you took it out of an account earning 2.5%, okay?
[0:38:52.8] KM: Okay which is not very much.
[0:38:54.6] RR: No, so at the end of five years the actual cost of the car was $33,390.00. So the lost opportunity cost was $3,390.00 right? Okay the cash can’t work anymore for you, it’s gone right?
[0:39:13.6] KM: So if you take it out as a loan what is your interest?
[0:39:18.7] RR: So the loan, the interest rate right now in the State of Arkansas for most of the insurance companies that I am working for is around 6%.
[0:39:26.2] KM: Five to six which would make you think to pay cash.
[0:39:29.5] RR: Well, maybe so you lost your principle never to be able to compound ever again plus you lost the lost opportunity cost of the interest over that five year period, $3,390.00 right? So that’s a total of $33,390.00, you are going to pay back to the insurance company at 6%, $34,500.00 okay? So it costs you more to pay back to the insurance company the money that you borrowed from them right?
[0:40:02.5] KM: Okay.
[0:40:04.8] RR: But your cash value in the compounding, uninterrupted compounding at the end of five years is worth $38,500.00.
[0:40:11.2] KM: Oh, wow! Who would have thought that? Now can you put the money – if you borrowed the money out of your savings account, your cash valued, can you put it right back?
[0:40:19.8] RR: Yeah.
[0:40:20.1] KM: But you just won’t, too many people won’t.
[0:40:22.7] RR: Right.
[0:40:23.4] KM: So if you took the money out and paid cash and then quickly put it back it would be fine.
[0:40:27.2] RR: Well yes but then you have to measure, well I could quickly put more money into a policy so you can never outrun that. The life insurance policy is always going to be better.
[0:40:36.5] KM: You need a board for that one.
[0:40:38.1] RR: Okay.
[0:40:41.0] KM: I believe you though. You retired tax free, this was very clever. Tell us what that means you retired tax free.
[0:40:46.4] RR: Okay, so 53 policies full of tax free cash value growing. When Bobby and I, my husband and I retire, we’re going to start accessing some of that money and we are going to borrow it out with never an intention of paying it back. So by borrowing the cash out of these policies, the cash comes to us tax free right?
[0:41:10.5] KM: I love that.
[0:41:11.9] RR: Now, when Bobby and I get to go to heaven, when we die then the insurance company is going to take that loan that’s been accruing inside our policy and they are going to take it off the death benefit first because we owe them first. They’re first lien holders right? And then the residual death benefit is going to go to my heirs, my precious children and my grandchildren and then hope greatgrands by then tax free because it is a death benefit and death benefit is tax free.
[0:41:39.0] KM: That is just perfect and that is how you pass on generational wealth.
[0:41:44.0] RR: Absolutely.
[0:41:44.9] KM: So that’s what number 13 is, pass on generational wealth and number 14 is the death benefits are merely a bonus because you have found a really safe secure private place to control your money and the death benefits are just a nice way to pass on your generational wealth.
[0:42:03.6] RR: Yeah, the death benefits are an umbrella that allows everything else to work underneath that umbrella in a tax free venue, totally liquid. You have control over it, all of those things.
[0:42:14.7] KM: We’re not going to probably have the time to take much of a break. I just want to tell everybody you are listening to Up In Your Business with Kerry McCoy. We’re not going to come back but we are talking to Rebecca Rice, a financial planner, author and entrepreneur and she’s going to give us some tips on how to pick the right living benefits polices and agents so we could start building financial security for ourselves today.
Rebecca the living benefits policies, we have been talking about that we have outlined in 14 steps today are custom made to fit your client’s needs and I think that’s what makes your methodology work is because you fit it to the needs of your client. Are they trying to do or generate? Are they trying to pass on their wealth to their heirs? Are they trying to fund retirement? Are they trying to like your client buy real estate, college education?
You know I would want it so that in case Arkansas Flag and Banner got in a tight spot, I could borrow money with no questions asked and loan it to my company. That’s what I saw when I looked at it. So you say in your book Multiply Your Wealth. That is very important we choose an insurance agent that is well-versed in whole life, how do we do that and what should we look for when we’re picking an agent?
[0:43:35.5] RR: Good question, you need to interview them. Ask them if they know about this concept. If you go down the street, you’re not going to find that many insurance agents who know what they are doing or even have heard of this much less understand how to create the most efficient policy that they can for you giving you the most cash value out of the policy for the money that you are putting in there. I would interview them.
I would ask them if they understand about how important the cash values are in the life insurance contract. Ask them who they used. They need to have a mutual life insurance company that they use. A Stock Company is not going to give you the dividends that a mutual life insurance company will okay? So you need to ask them who they work with. I have been doing this for 15 years, believe it or not it’s still cutting edge.
[0:44:28.0] KM: It is to me. I’ve never read anything like this. If I was to advise something for our listeners I would tell them to pick up your easy to read book, Multiply Your Wealth, and you don’t have to read – I mean its go’t your 14 steps easy to read right there. It’s got some workbooks in here if they wanted to do their own workbooks. How do people find this book if they want to?
[0:44:51.9] RR: Well they can come by the office.
[0:44:53.4] KM: They’re free?
[0:44:54.1] RR: They can come by the office. If they want to drop by the office they can have a book.
[0:44:57.6] KM: Where’s the office?
[0:44:58.7] RR: Office is at 17709 Cantrell Road.
[0:45:03.0] KM: In Little Rock, Arkansas.
[0:45:04.3] RR: In Little Rock, Arkansas so if you go down highway 10, if you reach Chenonceau which if you are going out of town it would be in Chenonceau, it’s the street starting in Channel area. So the ranch is on your right and Bank Corp South is on your left. My office building is right behind Bank Corp South.
[0:45:24.6] KM: So you are open from 8:00 to 5:00 Monday through Friday?
[0:45:30.4] RR: Monday through Friday.
[0:45:30.9] KM: And they could probably just put in their Google Maps, Rebecca Rice and Associates in Little Rock, Arkansas and get there.
[0:45:38.8] RR: You can go to Google, I mean to Amazon and my book is on Amazon.
[0:45:43.2] KM: Oh you can order it.
[0:45:44.1] RR: Yeah.
[0:45:44.4] KM: Because we do have listeners who don’t live in Little Rock. This is 100 watt radio station. So they could go to Amazon. Some people might rather do that and just have it delivered to their door. It’s called Multiply Your Wealth: Essential Secrets For Financial Freedom and it’s by Rebecca Rice. So I also want to do this, educate myself about reading Nelson Nash’s ground breaking book which is called Be Your Own Banker. Do you think anybody can read that or do they have to be a financial planner like you?
[0:46:13.4] RR: Oh no, it’s as easy to read as my book is. Common sense.
[0:46:15.7] KM: I’m going to go and get that book. I want to read that. You said the policy needs to be from a mutual life insurance company that’s very important and the agent needs to thoroughly understand the living benefits whole life policy and these concept’s also go by other names that you had in your book called Infinite Banking Concept.
[0:46:36.8] RR: Right.
[0:46:37.3] KM: The bank of you, be your own banker, income for life. When you are talking to your agent that you may have picked, did they need to know these names or could they just use the term living benefits or?
[0:46:53.0] RR: They’re probably going to have their own name for it.
[0:46:55.8] KM: Okay so Living Benefits is your name of your companies and you said they’re all agents, make sure that you do a PUA, Paid Up Additional Writers to jump start the cash value and lower the agent’s commission. PUA’s.
[0:47:13.8] RR: That’s right, that’s the cash portion of the policy.
[0:47:16.5] KM: So you must do that or you are going to be disappointed in your whole life.
[0:47:20.3] RR: Yeah, you’ve missed the secret sauce.
[0:47:21.5] KM: You’ve missed the secret sauce. The secret sauce is the PUA’s, Paid Up Additional writers. Are you all still taking clients?
[0:47:28.2] RR: We are.
[0:47:28.6] KM: Well there you go, nobody needs to go looking for anybody and we’ve already told how everybody can get in touch. I recommend to everybody to read your book, Multiply Your Wealth, are there any myths about whole life that you want to dispel before we leave?
[0:47:44.2] RR: Thank you for asking that question.
[0:47:46.2] KM: You’re welcome.
[0:47:47.1] RR: Yes, you know like you said at the very beginning it’s gotten such a bad rep is because people don’t understand it and I think it’s one of the most important financial tools that you can have as a part of your total financial plan. It’s not the whole answer for everything, okay? But to have it as part of your plan, your plan is going to be enhanced. In retirement income, I can typically increase retirement income by 20%. If we’ve got five to seven years to work with a whole life policy and integrate it into your already current financial plan. I mean that’s how powerful it can be.
[0:48:24.8] KM: In five to seven years you can do what?
[0:48:26.7] RR: I can increase, typically increase someone’s retirement plan by 20% yes.
[0:48:35.2] KM: Alright, Andy Burton, make an appointment for me. I’ve got five to seven years I think, don’t you Tim?
[0:48:42.6] TB: At least.
[0:48:43.5] KM: Yeah, I think so and I can’t turn the microphone off for that. You’re sitting over there snoring. You need to be buying one of these policies right now.
[0:48:52.3] TB: Sure. Sure, I have no investments at all.
[0:48:56.0] KM: You know what I would like to do, we’ve got to go but I wish I could afford to buy one for everybody that works for me.
[0:49:00.6] TB: You know Walmart does that. Well they don’t buy them for their employees but they buy them against their employees.
[0:49:07.0] KM: What’s against your employees?
[0:49:08.1] RR: They do, they buy them as an –
[0:49:10.1] TB: So if the employee dies, Walmart gets money.
[0:49:13.5] KM: Oh my gosh, they’re so crazy. Okay I think I’m buying. I should have done that. Alright, in closing thank you Rebecca. You know I usually give out a cigar but I don’t think you’re a cigar kind of person but you have changed so many people’s lives and you’re helping so many people live the American Dream so I’ll give you a flag that you can sit on your desk.
[0:49:33.1] RR: Thank you so much.
[0:49:34.6] KM: It’s nice that you set that there on your desk and you can set that on your shelf.
[0:49:38.6] RR: You know my dad was a general in the army?
[0:49:42.2] KM: No.
[0:49:43.1] RR: Yes. We have his flag hanging in my office building. So this is special to me, I really mean that. Thank you.
[0:49:50.9] KM: Thank you. Thank you very much. Well who’s my guest next week Tim?
[0:49:54.5] TB: Michelle Joblin from Michelle Joblin Acupuncture.
[0:49:57.9] KM: That’s Joplin from Joplin Acupuncture.
[0:50:01.5] TB: Oh Megan put it, misspelled I guess when we were talking with it.
[0:50:05.1] KM: She’s not a very good speller.
[0:50:07.1] TB: Michelle Joplin, I apologize.
[0:50:09.0] KM: Yes, she’s listening. Michelle Joplin yes, she is passionate about acupuncture and she can change your life, I’m not kidding just like Rebecca Rice, she can change your life. To my listeners, if you’ve got a great entrepreneurial story that you would like to share, I would love to hear from you. Send a brief bio and your contact info to questions@upyourbusiness.org and someone will be in touch and finally to our listeners, thank you for spending time with me.
If you think this program has been about you, you’re right but it’s also been for me. Thank you for letting me fulfill my destiny. My hope today is that you’ve heard or learned something that’s been inspiring or enlightening and that it, whatever it is will help you up your business, your independence or your life. I am Kerry McCoy and I will see you next time on Up In Your Business. Until then, be brave and keep it up.
[END OF INTERVIEW]
[0:51:02.2] TB: You’ve been listening to Up In Your Business with Kerry McCoy. Want to hear today’s program again or want someone else to benefit from it? Jot this down. Within 48 hours the podcast will be available at flagandbanner.com. Click the tab labeled “Radio Show”, there you’ll find today’s segments with links to resources you heard discussed on this program. Kerry’s goal: to help you live the American Dream.
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