Wed, Feb 21, 2024

Peer Pressure

Nelson Nash writes, “If you will get a young man together with his peers at a coffee break or some such gathering and have one of them suggest that they discuss financial matters, I can predict what they will talk about—getting a higher rate of return on the portion they are saving.”

If we had the opportunity to address this group, we would discuss with them the flow of money through their lives. We would show them Mr. Nash’s study of the average American family and how $.35 to $.40 of every after-tax, take-home dollar is being transferred back to the banking system in the form of interest on items being financed. This is money that is lost forever and along with it the interest earning power of that money—forever! We would also calculate the VOLUME of dollars being paid in interest to further illustrate the point. It quickly becomes obvious that eliminating interest payments to outside financial institutions become a much better strategy than moving your savings around in an effort to capture a higher rate of return. Let’s do some quick math:

Savings = $100,000; Interest earned = $5,000; Rate of Return = 5% ($5,000/$100,000)—TAXABLE

Household Income = $100,000; Interest Paid = $35k-$40k

Reducing interest paid by $5,000 would yield 12.5% to 14.3% ($5,000/$40,000 or $35,000)—NOT TAXED

These are the opportunities that come with taking control of the banking functions in your life and becoming more efficient with the flow of money through your life.

Mr. Nash writes, “Once a pattern in life is learned in a culture, it is nigh unto impossible to change. His paradigm is fixed. The PEER PRESSURE and conventional wisdom is overwhelming. When he builds a banking system through life insurance, makes loans to himself to buy automobiles, etc. . .—and pays back to the policy (or policies) the same payment he would have made to the banking institution—then he makes what the banking system would have made off of him. And it is all done on a tax deferred basis! The interest he pays never leaves his account and control. If this is done consistently throughout life it will make a tremendous difference in his financial picture.”

Some of you reading this might be saying something like, “I don’t have this problem because I pay cash for everything.” When you pay cash for things, you are giving up the interest that those dollars could have earned over the course of your life--forever (see comment above). You are still financing the purchase, but you are financing it with future interest that you have lost—forever. This could amount to larger losses and larger wealth transfers over the course of a life than traditional financing. Your dollar today is the most valuable dollar you will ever have. Why would you just give it away?

Think for a moment about what you are currently financing and how you are financing it? There is a better way! Now think of all the financial gurus on TV and on the radio. Can you hear what they are saying? Listen closely and it will sound something like this, "Give all your money to banking institutions so that you can get out of debt and then put your savings at increasing amounts of risk so that you can earn a higher rate of return, which will create larger tax liabilities in the future." The PEER PRESSURE, media, and conventional wisdom that keep you from doing something different is overwhelming! As of this writing, you still have a choice to do something different.

The readers are more than welcome to disagree with what is being written. We promise not to chastise or belittle you. What an unbecoming behavior and I encourage you to turn your ear from all those who engage in this behavior. We at 1st Consultants practice what we preach and are more than happy to share with you our banking systems and how we utilize them. Call for an appointment.

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