MOVED TO THE CH 1-6 FILE Paul asked, "So how do I calculate how much to set my monthly payment at?" "It’s based on using that 'Spend and Grow Wealthy' way I mentioned. When you take a policy loan, the insurance company charges you interest, of course— but at a very reasonable rate." "So the amount I pay back every month needs to cover the interest as well— right?" Paul asked. “Yes, but the way it works man not be quite how you picture it. Remember that when you borrow your cash value, the money doesn't actually come directly from your policy.” “You said it comes from the company's general fund, because all the money is pooled together.” “Exactly. And it works the same way in the opposite direction: the principal and interest payments you make on your loan don’t go back directly into your plan, they go into the company's general fund. At the end of the year, the company looks at their income from all sources, and they look at the expenses and death claims they paid out. As long as their results are better than the worst-case scenario they projected, they pay a dividend to all the policy owners in proportion to how big a slice of the total pie each person has.” “Since the company you put me with hasn’t missed paying dividends in a century, I’m not planning to spend much time worrying over whether their going to miss in the next few years.” Jack smiled. He said, “And you don’t have to worry about getting your preset and guaranteed cash value increases each year, either. Those are automatic.” I DON’T SEE HOW THIS IS A GERMANE RESPONSE AT THIS POINT. “So it doesn't matter whether they loan me my money, or loan or invest it somewhere else. I'm going to benefit either way, right?”
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“Right. All that’s important to you is that you’re a lot better off than paying interest to a bank, credit card or finance company and saying goodbye to both your principal and interest. Or paying cash and giving up the interest and income you could have gotten on your money.” He waited for Paul’s nod of understanding before he continued. “And this all happens simply because you're both the consumer and the source of financing. PLEASE RECONSIDER WHETHER IT’S REALLY APPROPRIATE TO REPEAT ALL OF THIS YET AGAIN; AND WHY HERE? – IT INTERRUPTS THE LOGICAL FLOW: Instead of your money going from your pocket into someone else's, it's going from one of your pockets into another one of your pockets that you own and control—your B.O.Y. plan. BUT JUST ABOVE, AND IN YOUR EXPLANATION TO ME, YOU SAID THE PAYMENTS DO NOT GO INTO HIS PLAN BUT INTO THE GENERAL FUND; WHAT AM I MISSING? Both the principal and interest you pay are ending up in your B.O.Y. plan for you to use all over again—for another car, a boat, a home theatre, country club dues or whatever. If you took a loan from a bank or finance company, when you're finished paying it off, the finance company has all your principal and interest, and then they can lend it to you all over again. That's a financial hole you'll never crawl out of. PARAGRAPH ABOUT DEBT UP TO OUR EARS IS MOVED TO END OF THIS JACK/PAUL MEETING” He went on, “Now, about how you calculate what your loan repayments to your plan should be—You could just pay back at the interest rate the company is charging now. That's about six percent. If you do that, your plan will grow nicely, but it won’t grow as fast as it could. So let’s look at it another way. “I think maybe I see where you’re heading. Am I allowed to pay something extra each month? Is that what you’re suggesting I do?” Jack beamed. "Great. Right on target. Yes, you’re allowed to pay more. And, yes, that’s what I’m suggesting. Here's where it gets interesting—I designed your B.O.Y. plan so that if you pay back at a higher rate of interest than you’re being charged, the company will treat that extra amount you're
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paying as additional dollars going into your Paid Up Addition Rider. We've talked about that before.” “I remember about the PUAR. But I still don’t see where you’re going with this.” “The current car loan rate they're charging is about 7½ percent. On a $30,000, four-year loan, that would make your payments $725 a month.” “So if I paid more than that…. How much more were you going to suggest?” “Like $750.” “No sweat. I don't think I'd even notice that extra $25 a month.” “Good. With that extra $25, it’s like paying ten percent interest on the loan, instead of 7½. Remember when I said that the PUAR is like putting your policy on legal steroids—it really turbo-charges the growth of your cash value. Over time, extras like that additional $25 a month will make a huge impact on how much money you have in your plan. Those extras will light that fire under your cash value.” DOES THIS REALLY, REALLY ANSWER QUESTIONS THAT A LOT OF PEOPLE ASK ABOUT. SURE SOUNDS LIKE OVERKILL TO ME. AND IT DEFINITELY INTERRUPTS GETTING TO THE SPEND AND GROW WEALTHY PUNCHLINE. Ten percent is the figure I use to calculate my monthly policy loan repayments and most of my clients', too. I'd already run an amortization table for your car loan at ten percent and come up with a monthly payment of $750, the same amount you came up with. Using the ten percent figure makes it easy to calculate it. It's more than 'market' rate interest, but not enough of a bump up in your payment amount for you to feel it. "So that's what I mean when I talk about the B.O.Y. 'Spend and Grow Wealthy' way that super-charges your road to paradise. Taking loans from your policies and paying yourself back at a little higher than market interest rate,
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with the extra amount going right into your PUAR, in order to grow your cash value in the most efficient way possible.” “You know something,” Paul said. “It really makes you think about money and financing in a whole different way. Our country wouldn't be in the situation we're in—individuals in debt up to our ears, people looking to depend on Social Security and Medicare for money that probably won’t be there—if more people knew that there’s a secure way of investing. And we wouldn't have this retirement crisis either.”
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