Episode 5: Gold Collar Investor Banking. Different Angle on Life Insurance – You DEFINITELY want to listen to this!
Tune in for some excellent insights!
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- 01:42 – Pancham introduces Christian and Rod to listeners
- 02:39 – How did Christian get interested in financial planning?
- 03:36 – Rod shares how he ended up working with Christian
- 04:22 – Can you generate good returns on your emergency/retirement funds without any additional risk?
- 05:45 – Why investing your money in life insurance is safer than keeping your money in the bank
- 08:18 – Learn why investing your money in life insurance can earn you handsome returns
- 12:26 – How are life insurance policies structured?
- 13:19 – How is a life insurance policy different from a bank?
- 15:56 – Is a life insurance policy completely liquid? What is the best way to draw funds against a life insurance policy?
- 21:46 – Why did Christian and Rod finance their new business by drawing funds against their life insurance policy?
- 25:00 – Pancham recaps the benefits of investing in a life insurance policy
- 26:35 – How much does it cost to buy a life insurance policy?
- 28:02 – When do you break even? What kinds of return can you generate over the long term?
- 31:20 – Is a life insurance policy completely self-sustaining once you put in your full contribution?
- 32:20 – How much money should you set aside as your life insurance premium every year?
- 35:43 – Should you purchase a life insurance policy?
– Taking the Leap
- 36:46 – When was the first time you invested outside of the Wall Street?
- 39:40 – What fears had to overcome when you made your first investment property?
- 40:54 – Can you share one investment that did not go as expected?
- 42:33 – What is one piece of advice that you should give to people thinking of investing in the Main Street?
3 Key Points:
- Can buying a life insurance policy prove to be a good strategy?
- Structure and cost of life insurance policies
- How you can earn higher returns in a life insurance policy because of compounding and do double dipping.
Get in Touch:
Welcome to the Gold Collar Investor podcast with your host, Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.
Here’s your host, Pancham Gupta.
Pancham: Albert Einstein once said that compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t, pays it. It is true. The power of compound interest as compared to simple interest can be easily seen by simple calculations. However, the magic of compound interest only works if and only the following two conditions are met. Condition number one – money stays in the underlying vehicle for a long time. And condition number two, is that the underlying way called keeps accruing consistently without affecting the principal. It would be icing on the cake if that entire growth is tax free. That is you don’t have to pay taxes on that. It would also be nice if the money that accumulates is creditor protected that is if you get sued, no one can come after it. What if I told you that there is a vehicle which I call Gold Collar Investor banking that exists, which will help you achieve all of the above and with some additional benefits. Many wealthy people I know use this as part of the wealth building strategy. Today, my guest, Christian and Rod are here to talk about just that. Christian and Rod have been teaching financial principles and working with clients across a broad spectrum, including wealth accumulation, retirement distribution planning, as well as innovative advanced planning strategies for high income and high net worth individuals and businesses, Christian and Rod, welcome to the show.
Christian and Rod: Thanks, Pancham. Thanks so much for having us. We are excited to be with you.
Pancham: I am super excited about the show today on what we are going to discuss. And hopefully, we can add a ton of value for our listeners. So are you guys ready to fire up my listeners break out of Wall Street Investments?
Christian and Rod: Absolutely. We’re going to do this.
Pancham: Awesome. So before we get started, can you tell us briefly how you both got started out in this business?
Christian: So let me. Maybe I’ll just get started. This is Christian. I got started in the financial services industry kind of right of…As I was going to college. I got interested in some of the concepts and things specifically because I had one of these kind of life changing experiences where my dad passed away really young. My mom was now single mom with a bunch of kids and needing to learn how to do a lot of things that she hadn’t known how to do. I was really lucky in the sense that they had done a good job of planning my dad, my parents together done a good job planning, but she was still in a tough spot having to learn a lot of these financial things that she just wasn’t necessarily prepared for. So I got into the industry almost as a way to learn and help my mom. And then I just kind of grew a passion for it. So it was about 12-13 years ago, I started my financial planning firm, and we’ve kind of grown steadily since then.
Pancham: Great. And how about you, Rod?
Rod: Right. Yeah. So my background is I got an MBA with the goal of having my own business and one of the opportunities that come along. I was working already in the infield when I when I met Christian, and he had already been working in the field for several years. This was about 9-10 years ago, and he recruited me onto a team. He was kind of building a team and so we started working together and have just kept going. So we’ve been together for, you know, nine or 10 years and just continued to build and grow and help a lot of people across the country.
Pancham: Great. So let’s dive into the topic for today. And talk about this vehicle, which I call Gold Collar Investor banking. What is this way to? Can you enlighten my audience?
Rod: Yes. So the particular vehicle that we’re talking about is a place where we can set aside funds that we’re saving up, maybe it’s for purposes of retirement, or maybe it’s more money in a good place for an emergency fund or maybe it’s even for future investing. Maybe we can get into some details on that. But we just want to have a place where we can set the money aside, where we can get a predictable returns, much better than when we get in the bank. We can grow that money on a tax free basis. And it’s liquid, we can access that we can use it whenever we need to access it. And then it also has some additional benefits as well. It almost sounds too good to be true already. Right?
Pancham: Right, Right. So is it right to say that this is an opportunity Fund, which is also safe and secure?
Rod: Absolutely. Yeah. In fact, there are many who believe that this is much more secure than even just keeping your money in the bank, which kind of sounds silly, right? We feel like when we put our money in our bank accounts, that it’s secure, and I believe it is. But when hard times come, there are those beliefs. And I’m among them that this actually is even a little more safe than what you would end up with a bank.
Pancham: This is so interesting. That you said. Right? That this is even more secure than keeping money in the bank. I’m sure you have intrigued some of my listeners. Why is that? Like? Can you explain a little bit more?
Rod: Yeah, let’s actually just talk about what it is because I think that’s going to help us get to the answer. So what we’re talking about here is whole life insurance which I’m sure nobody anticipated that that that was going to be the answer. Right?
Pancham: Right. You know, like you just probably turned off a few of my listeners by mentioning the word, “life insurance”.
Pancham: I would like to mention that life insurance is just a vehicle and don’t look at it as life insurance. So listeners, please keep an open mind and think of this as a bank account, as an opportunity fund. And listen to what Rod has to say about that.
Rod: Yeah, and I think it’s not unusual. I think most people when they think about life insurance, they do think about taking care of my family or my business partner or something if something happens to me, right if I pass away. But because of the nature of the way cash value life insurance works, it just creates so many opportunities for us to just do better than we can in other places, in certain ways. Okay, so now getting back to this whole point about crazy statement I made about it, potentially that being better, you know, safer than keeping your money in the bank. The life insurance companies are so heavily capitalized and especially when you compare that to banks, I make a deposit into my bank account, and it doesn’t just sit there. Right? The bank’s going to go out and loan that out, not just once, but with Federal Reserve banking, they’re going to loan that out multiple times. Right? Right. So they become highly leveraged. And so when hard times come, like we saw in the 2008 – 2009 situation, banks can get into trouble. Right? So then even, you know, deposit holders, you know, we have the FDIC, we have other things that kind of to back that up, but there are limitations.
Rod: And again, depending on how deep you go into it, there can be potential issues there. When I look at the core company of these insurance companies, they’re just so highly capitalized. And by law, they have to be I mean, you think about, you know, a 40 or 50 year old getting into life insurance policy like this, just by their nature, these companies have to do long term planning, because chances are they’re going to be in that policy for 30-40-50 years. They just live on a different plane in terms of the way that they manage their funds compared to a bank.
Pancham: So let’s talk about these companies. What are these companies? There’s so many of life insurance companies out there. Are there specific kind of companies you’re talking about and which you’re saying are safer than some of these banks?
Christian: Yeah. So I’ll chime in on this one. Generally speaking, when we’re talking about this concept, we want to use the most long standing steady companies that exist. So we’re generally using good like we talked about reason, whole life insurance, and maybe to be more specific. We use what we call dividend paying all life insurance from mutual life insurance companies.
Rod: They have an incredible track record of financial stability. And I say they, that’s true almost across the board. There’s probably some that are but we’re using the highest rated, longest standing mutual companies that just again, have this incredible track record, and what makes it unique is that they’re not beholding to stock holders. Rather, when I purchased a policy from a mutual company, I become an actual owner in that company proportionate to the policy that I have. Right? And so again, what’s happening then, is when the company experiences profits like they have for the past hundred and 65 years, they then pass those profits back to the policyholder in the form of dividends. And so by doing that, it makes it kind of a unique thing that we don’t have to worry about stockholders. We can take a longer term approach.
Christian: And many of those companies have tended to be the longest standing, strongest, most highly profitable, not just insurance companies, but companies on the planet. And so from that standpoint, going back to what Ron said, for every dollar that they owe out to the policyholders, they have that plus that in reserve. So it’s really unique in the world that we live in where leverage is such a big part of how every company does business is life insurance companies. These mutual life insurance companies specifically tend to be very conservative and steady so that they can deliver a consistent return which ultimately inside of the strategy is what we want. Because this is our opportunity fund. Right? We need it to be safe so that when we want to take advantage of opportunities, that money’s been in there. That it’s growing. That it’s, you know, we’re getting all the benefits that we talked about. So it gives you some insights on to the actual insurance companies. And maybe one more thing is they’ve been around for 150 plus years. So just an incredible track record of solvency and success over a significant amount of time.
Pancham: Right. So if I were to rephrase what you Christian and Rod, you said that the Gold Collar Investor banking is nothing but a whole life insurance policy being used as a vehicle that is issued by a mutual company. And these mutual companies have been in existence for 150 years or so and have survived the Great Depression, 2008 crisis and everything in the middle. Is that right?
Christian: Absolutely. Yep, that’s exactly it. I think that’s well stated. Now, one thing that I just want to hit on those, just because we want to create a little bit of clarity here, these policies that we use are not built, while you’re out average policy that you would get if I went down to the New York Life on the corner, right? Like, we’re doing something that is unique. And really what we’re trying to do and is we’re kind of, for lack of a better word, we’re super charging them based on the way that we actually put money in. And so the way that that works is just that we’re starting to delineate between using the policy for death benefit and cash, and instead of funding it to create a death benefit, even though that happens, and that’s another incredibly powerful tool and resource for us. But what we’re really doing is we’re super charging the cash and allowing it, do the policy to focus on growing it all, you know, five to 6% costs for your return while being safe and secure and totally liquid.
Pancham: Right, right. So, a lot of my listeners may not even have heard of whole life insurance at all, and some may have heard about it from different life insurance agents over the years. However, we are not among listeners. We’re not talking about life insurance in a traditional life insurance way even for the whole life insurance. Even though the vehicle here is the same, which is the whole life policy, but how they are structuring it and how we are using it is completely different. While structuring it, they make sure that the policy is set up for growth by max funding the policy and minimizing the insurance cost. And for using it like Christian just mentioned that you’re going to use that as an opportunity Fund and the funds grow inside of the policy tax-free. Can you guys explain a little bit more on this thing? Like, how is this different from a regular bank account? Let’s say I have a regular bank account and Chase versus this policy where the money is sitting. How are these two things different?
Rod: Yeah. So let’s talk specifically about the way that the policy grows. So there are two things that drive growth inside of the account. Number one, there’s a guaranteed interest rate. And then there’s a dividend that’s paid as well. And first of all, so the guaranteed interest right now is that 4%. And I don’t know any banks that are paying 4% on the savings account, or even a, you know, a CD right now. And yet, you know, again, the non-long term nature and the way that these companies manage their funds, they can offer a 4% guarantee. And then on top of that, they’re also offering a dividend, which right now between the different companies will put the total between the guarantee and the dividend around six to six and a half percent. And again on the dividend, the companies have been so consistent in paying a dividend. That, you know, again, like you said, going back to the Great Depression and even before then we can go back to the Civil War. And so companies that were that were paying a dividend and how it missed a year since it really is a consistent place where we can grow those funds. And again, from just a security of having it in a place where I know it’s going to be there, we capture that as well.
Pancham: Right? So in the regular bank account, you don’t get any of these benefits, right? You don’t get tax free growth. If there is any growth in the first place, you know, at max, as of now, people are getting probably 2% on their savings account on which they have to pay taxes and its compound. It’s a simple interest, not even a compound interest. Any other differences are just pretty much sums it up. Well, so you might have we might have mentioned this too, but I would say a couple other things that are interesting and important.
Christian: One of them is the creditor protection piece because of the fact that we’re teaching this as an opportunity fund for people to, to go out and invest this money, it ends up being something that’s even more critical that we’re being smart with our money. And we’re taking care of it right? When we take additional risks, there’s always just an opportunity, but we want to make sure that we’re mitigating risk. The one of the value propositions is that it’s always going to be, we can always build it in a way that ends up being creditor-protected.
Pancham: Oh, yeah, creditor protection is a huge benefit as compared to the bank account. Now that you guys have explained the difference between this and the bank account. How can I really use the money once it’s inside of the policy versus, you know, in the bank account where I can just go write a check and pay for a car that I might buy? How’s that done?
Rod: Yeah, I’ll take that one, Pancham. And so there are different ways we can access it. So it’s completely liquid. We could take it as a withdrawal. Well, we actually suggest people do and kind of, again, getting back to this, this concept of an opportunity funds, these cash value life insurance that whole life policies have what we call a loan provision. And so I’ve built some money inside of my cash value. Kind of like in your example, I want to go buy a car, or maybe I want to go invest in real estate or some other kind of cash flow investment. I can actually take a loan against my cash value, and use those funds to go and do my investing. And what’s really cool about the way that this works is that the money that comes to me that I’m using to invest or to buy the car isn’t coming directly out of my account. It’s actually coming to me from the general account of the insurance company. What that means is that all of my account value all of that is still there and continuing to grow and earn that that compounding interest over time. So I take the loan, I go invest, I take the cash flow off of the investment and I funnel that back into my Opportunity Fund. Technically speaking, I am paying off the loan. Right? And I do that to build that back up my opportunity funding, I can go out and do it again. So we work with a lot of investors who use this as their primary Opportunity Fund, to go out and, and do their investing. And, and it’s just an amazing way to enhance that. But not only that, like you said, you could use it to, to, you know, buy a car to invest in a business, you know, we do that. Essentially, you get to decide rather, there’s no there are no limitations on what you could use those funds.
Pancham: Okay, so let me recap this, in my own words, the way you are going to use this money out of the life insurance policies but taking loan against it, and that you will have to pay interest on that loan, take that money and you go buy a car with that money. Just like you would take the money out of the bank account. And a lot of people think of this thing as, “Oh, why would I pay interest on my money? My own money where I don’t have to do that in the bank account”. And I just want to clarify that money in the bank account. If you have to go out and take $50,000 out and buy a car from that money, you are going to lose interest on that $50,000. And now you’re broken the first principle of the compound interest. For the compound interest to really work, the money has to be in the account forever, or the underlying way. But if you take that money out of that bank account and you go buy a car with that, you’re losing that interest and you’ve broken the cycle of compound interest. On the other hand, if you were to take loan to buy that car, instead of paying cash, you will be paying someone as the interest for that loan. So regardless of what you do, either you lose interest when you pay cash or you pay interest to someone when you take loan. As opposed to with this insurance policy, the amazing part is that you take loan against it, and pay the insurance company interest, but your money inside of the policy keeps growing at a compound interest. So the interest you are paying to the insurance company is going to be offset by the compound interest inside the policy. Is that right?
Christian: I think you nailed it. So what would you described the function is what we often refer to as last opportunity costs. And like you said, it’s the idea that when we go out and we purchase, we make purchases, then that money could have been invested, could have been earning interest otherwise and wasn’t able to know what this strategy does is that it, it creates a continuous interest rate curve for us to run on. So we never have to go off of that. And that’s really an incredible and powerful backer. And so what ends up happening is just that when we start to look at the last opportunity cost that we could have had, have we done something different? It becomes, especially over time this incredible and significant number that we’ve been able to, to leave back into our world that otherwise would have lost or would have gone out. Is that making sense?
Pancham: Right, right. That makes perfect sense to me.
Rod: And one of the thing maybe just to clarify is that the different are the interests that we’re paying on the loan and interest that we’re earning? Right, is a wash, right? But what happens is over time, as we’re paying interest, we end up paying simple interest on the loan, while our cash value continues to grow in a compounding way. So over time, the difference that that arbitrage that we create becomes very significant. So that even though technically speaking from the interest rate standpoint, it’s a watch from an actual interest earned versus actual interest paid point of view is very different, we’re going to earn a lot more interest than when we actually end up paying.
Christian: Really what we’re doing is we’re using math to our advantage. Right? Like, when you look at kind of what it is, this is just a numbers game. It’s understanding a vehicle that allows us to create a better math equation that provides more value to us than we otherwise would get. And like Rod said, that arbitrage over time ends up being something that’s really significant and can create that advantage.
Pancham: Right, right. The power of compound interest is only seen over time and for that the money has to sit there, the compound interest that you’re going to on inside of the policy is going too far overshadow the simple interest that you will pay against the loan.
Christian: Exactly, exactly.
Pancham: Now, let’s talk about an example that illustrates the awesome power of this loan provision. If you were to use it for investing in cash flowing, business or real estate and on about eight to 10%. It’s kind of like using the same dollar in two different places.
Christian: I can maybe touch on it by just giving kind of a quick example from our own world rather than I like he mentioned it then working and a partnership for almost 10 years now. Just recently, we decided to use the concept, they use the strategy to buy a business. And so what that looks like, it’s going back to the math that we talked about, but from just a pure logistics standpoint, we have the money that we’ve been building up from the policy. We use that money, we purchase the business and now we can ultimately just put the policy put that money back in there as we earn a return on the actual business itself. Now, when we get into those kind of numbers, but at some level, the strategy becomes even more powerful, dependent upon the actual returns that we have. And yet, regardless of whether you can go out and get a 20% return on a great real estate deal or business, or whether you can go out and get a 6% or 8% return, like, at some level it can fit for anybody. Like I say, the most recent way that Rod I have used it is in purchasing a baseball [inaudible] five months ago.
Rod: And the cool thing about the loan provision is it’s different than anything you’ve ever seen in terms of like going to the bank and getting a loan or whatever. So because the cash value that the inside the policy is there acting as collateral. Insurance company doesn’t dictate terms on how you pay that back. You actually get to decide on your own how you’re going to pay that back. And so depending on you know, the nature of what you’re using the loan for, then you turn around and you pay that. Now we always want to make sure we’re at least paying the interest rate so we can keep that simple versus compounding dynamic going. And yet, what we suggest is that whatever it is, you’re using the loan for let that dictate how you pay it back. In other words, if we’re investing in real estate that gives us a consistent income, then we would just take that income and funnel it right back into the policy and let that replenish that Opportunity Fund. In this case with investing in a business, you know, month to month may differ in terms of the cash flow, you know, in profits and things like that, and certainly not be consistent. But again, that’s the beauty of this strategy and the way that the loans work inside of these policies is that totally flexible in terms of how you pay it back.
Pancham: I like that you know. I like defining my own terms rather than having bank define the terms for me. So before we move forward, let me recap on what we discussed till now. Gold Collar investor banking is nothing but a whole life insurance policy, which is Max funded for cash growth and minimizes the insurance cost. Some of the benefits are being able to leverage the power of compound interest in the real world tax free growth. It’s as safe and secure as it can be ability to have your money work for you in two different places, like you discuss for your business. It’s creditor-protected. That means that if you get sued, and the judgment comes against you, they cannot go after this money. And you know, every state law is different. So you really have to see what state you’re in. But usually that’s the case. Does this summarize the Gold Collar Investor banking on everything we’ve discussed so far? I think.
Christian: I think you nailed it, punch him. You probably did better than us on that. So, well done. Well done.
Pancham: All right, great. So, you know, I’m sure a lot of listeners are listening. There has to be a catch. Right? There has to be a catch. So how much does it really cost? For a typical person, let’s say, a person who is 35 to 40 years old? How much would it cost to create and open this bank account? And when does it start to pay off? You know, when? When do I break even, so to speak?
Christian: Okay, they’re excellent questions. And I’m glad you asked it, because I’d rather people understand this on the front end. So when we put money in the very first year, that’s where the majority of cost exists in life insurance. Now, in a traditional policy, like, let’s say that I put $10,000 of cash into the policy. Traditionally, I would have very little if any cash out. What we’re going to do though, like I talked about before, we’re going to minimize cost. And so when I put money in, I’m usually going to have, if I put that same $10,000 in, I’m going to have probably somewhere between $7,500- $8,000. Right? So there’s been a cost, right? I just paid a 20 to 25% of my first year contribution as a cost to do this. And that’s really what ends up happening is that that’s where the cost lies. So I it’s a pain point. I just like to be very straight with it. Right. So the question we have to ask ourselves is, can we get enough value over a longer timeframe to make sense of taking the hit up from it? And that’s really what for most people determines whether they say, “Hey, I’m going to move with it”. If you have a long term view, from a planning standpoint, from an investing standpoint, it’s incredible. But if it’s a situation where I’m putting money in and I’m going to need every dollar that I’m putting, it’s just not it doesn’t always make sense. So that’s the first way that I quantify costs the other way would be just in the difference between the actual return that the insurance company is giving me in what I expect to get personally. So if you remember before, I talked about how we expect to get about a five and a half percent net return. In other words, that’s the return that comes to us over the, let’s just call it over a 20 year period in the policy. Right? Okay, that’s obviously not linear. Because if I just if we talked about how most of the cost happens in the first year, then it’s going to take time for us to get to that point. Right? Generally, the breakeven point happens at about your five. That’s an average time frame. Sometimes it can be year four and for sometimes it’ll be in year six, depending on like age and help. But generally, we’re going to be right about year five. And what you said is that what you call the breakeven point would be, I’ll just describe what that means. It’s the point where we have more cash value in the policy than what we’ve put in. Now, it is important to know that I can be utilizing that money immediately. In other words, right after I put money into the, into the account, I can then go and start using the stuff that’s there. Right. So I talked about, I put $10,000 in let’s say that I have eight thousand dollars cash, I have the ability to use that $8,000 and start investing right away. But the breakeven point will usually happen in year five. Is that making sense? Again, without having the visualization, it might be a little bit hard, but hopefully kind of catching that.
Pancham: Yeah, I can break it down again, in my words, and you know, so taking your example of $10,000, you know, let’s say put 10,000 10,000 10,000 for five years. So that’s, I would have put at the end of five years, $50,000. Right? The first year is the biggest cost year. So let’s say after first year, my cash value was only $8,000. So out of that, you know, $2000 went into the cause. The second year I do the same thing, the cost would be little less and then it would be 8+8=16, plus some of the dividend from the first year. So it would be about 17 times and I’m just making the numbers up. So you get doing that for free. Five years. So the cash value at the end of five years would be, let’s say, $50,000 or more. And beyond that, you know, if you keep on doing this that says 6060 year and seventh year, you have $60,000 and $70,000, total end, but your cash value would be $75,000 or $80,000, by the end of seventh year, and, and if you keep on seeing the track, you know, if you keep on putting the money in it, it can keep on growing, but you can choose to not put the money in after sixth or seventh year, and the amount of compound interest that it will generate from all the cash value that you would have at that point would pay off the premium, the base premium for the policy and you would have to you know, it would just the self-propelled engine at that point. You don’t really have to put any money in after 6th year if you choose to do so, again. You know that stuff, but for usually for most people, it could be 6th or 7th year. Is that right?
Christian: Yeah, that I think that’s a great point. So we can generally do it, we can generally stop in as early as four years. But yeah, I think I mean, anywhere in that range like you. That’s another thing that I think is really important here. I’m glad you brought it up project, because one of the things that kind of can scare people is that they assume that it could be there’s not a lot of flexibility. And in reality, there actually is right. So if I put in the full contribution for four or five years, then it would be totally self-sustaining or it would run and it would continue to gain interest at a five and a half percent approximate clip, regardless of what I did at that point. Now, I could obviously continue to put more money into it, and it’s going to generate the same return, but not putting money into it doesn’t create a situation that doesn’t create a challenge for me, the money will just kind of continue to compound like you said.
Pancham: Right? Right. Right. Okay. So let’s move on to let’s say I’m high paid professional and I’m looking to create one of these policies, how should I go about, you know, how much money or premium I should set aside every year and put it into this policy? Like, how would you suggest that I go about doing that?
Christian: Yeah, that’s a great question. And this is one that’s, that’s obviously a little bit different for each person. But what I do is, I say, Okay, once I’ve got to the point where I realized, okay, this is a more valuable place for me to invest from rather than using like my bank account, right? So if I’ve been in the mindset of I save up money in my bank account, and then I go and invest it, wherever that is, then what we want to do is kind of turn that upside down and say, hey, let’s get it working from day one rather than waiting for it to build up. But what I do is I say,” Okay, let’s come up with a number that you want to, you want to save on a given any given year for your Opportunity Fund”. And obviously that’s got to be….you know, we’ve got to take into consideration income and assets and all those different things we have to understand where the money is going to come from. But ultimately, the answer to your question comes in, it all depends on how much the person wants to have inside of the quote unquote, magic bank account or opportunity fun to utilize for investing. And I think that’s probably the biggest deciding factor as to how much money goes in. Now, there’s some factors that exist on our side that the insurance companies need to understand. But for the most part, it’s pretty rare that somebody wants to put in more money and we just can’t figure out how to make that happen. So that kind of answer that question. Again, a little bit vague, but hopefully getting an idea.
Pancham: Yeah, no, it does answer that question. You know, the way I looked at it when I took the policy out, was, how much money that I want to keep aside every year regardless of what’s happening, and whatever that number is, let’s say that number is $50,000. I would ask like, you know, I would you know, how much policy this $50,000 can buy, where I’m maximizing my cash value, and minimizing my insurance cost. And see whatever that number is comes out to be. And then just go with that. That’s how I…
Christian: Yeah. Right. That’s great. I think that’s a, that’s a perfect formula to work from. And I always tell people, look, let’s be, let’s make sure that we’re doing something that feels comfortable. Right. So sometime people will start off smaller. And that’s great, right? At the end of the day, like, I’m in a pretty unique position that I get to talk to an incredible amount of really great people. And so the last thing I’m ever going to do is try to push somebody into doing something that they are feeling totally comfortable. So I’d rather go conservative, start small if that’s what it takes to get to that comfort level. And then generally what happens is as people in that situation might open up. Maybe they’ll open up a policy initially, they’ll get the account rolling, and they’ll start to get comfortable with how to use it. And then they’ll oftentimes do it again. And so that’s exactly what for some people, it ends up being multiple accounts. And that’s totally, that’s totally okay too.
Pancham: I guess this is a great discussion, Chris. And I would summarize this by saying that this bank account will not only give you protection from creditors, the tax free growth, and the opportunity to double dip and have the compound interest. In addition to all of that, it will also give your life insurance. So that’s how I look at.
Christian: You know, that’s great. I’m glad you brought it. I’m glad that you brought it back to that portion. Because, you know, for all of the just really quick like, I never want to diminish the value of actual life insurance and death benefit, right. My dad passed away when he was just 49. I was, I was 19 years old. My mom was the same It was 40 I like and the thing that kept my family going was the fact that my dad was my family was smart and planning a life insurance instead. I’m just glad that you brought that up. Because again, the actual death benefit ends up being basically an added benefit that I don’t have to pay for in some other way. So maybe for some people, they might be paying for term insurance. And then when they realize that they can get the death benefit in conjunction with it, maybe they can reduce costs and term insurance, because now they have this death benefit that’s coming in a different way. So I totally agree with you. I’m really glad that you brought that up, because that is important.
Pancham: Yeah, great. So I guess we are done with this, but I’m sure we’re going to get a lot of questions. Let’s move on to the next section of our show, which we call taking the leap round. I ask these four questions to every guest on my show. So my first question is, when was the first time you invested outside of the Wall Street?
Rod: You know, I’ll answer that first. For me. Like I mentioned, I got an MBA with the whole goal where I would own my own business and so I had an opportunity to buy a business. It’s a little different than the one that Christian described earlier that we invest in now, because I was actually I was the business. Right? I bought into an opportunity. And that became my, my full time job and, and that was something I had, you know, had looked forward to and dreamed about ever since I had read Rich Dad Poor Dad in college. Right? And cash flow investing was something I kind of got enamored by and, and so that was my opportunity to do that.
Pancham: That’s great that you got to read the Rich Dad Poor Dad book right out of college. I wish I had done that.
Rod: If I changed the course of my life earlier than later, yeah, it is life changing.
Pancham: All right. How about you, Chris?
Christian: So I think my first attempt was probably the worst, most unmitigated disaster. I think I told you about this before but I went out to Southern Utah whereby Zions National Park. So Rod and I are both from Utah and it’s about four hours south of where we’re at. But anyway, I went with a partner I decided to buy a piece of property that we’re going to put up what are called [inaudible] on it. I don’t know if you’ve heard the term glamping? Glamping is the combination of glamour and camping. And so this is like a way to camp but like not really camp, but like do it in style. Anyway, so, so we bought this piece of property and we’re getting ready to put up the [inaudible] on it.
Pancham: What are [inaudible]?
Christian: They’re just like these big, heavy duty tent-like structures. The best thing you could do if you don’t know what a [inaudible] is, is just go Google it and you’ll get the pleasure of seeing what it’s like. Anyway, so, so we’re going to put these words up, but first we needed to make sure we had water there. And so we back the land. We had to use a little bit of faith hoping that the water would be there. And unfortunately it wasn’t. So we dug a massive well and never hit water. And it just was kind of a disaster. So I don’t know if that’s helpful for the audience. But that was my first experience attempting. Now, thankfully, since then I’ve had a lot of really great and positive experiences. And I’ve invested consistently in real estate and business for the last probably 12-13 years with a lot of success. And so I’ve been lucky that way. But that’s kind of a funny story as my first attempt investing outside of Wall Street.
Pancham: That’s funny. So my second question, what fears did you have to overcome when you invested outside of the Wall Street for the very first time?
Christian: For me, it was just the unknown, right? Like, even my dad, my dad was a CPA growing up, but I remember he used to tell me, Christian, you make sure you get a Roth IRA. Like, that was my dad’s advice. And it made sense, right? And that was easy. So it was easy to be like, Oh, you get a job, and I started a Roth IRA. That’s just what people do. And so moving into the alternative space where we’re doing more of it for me, it was really just kind of a fear of the unknown and not you know, getting into stuff that was outside my comfort zone.
Rod: How about you, Rod? Right? Yeah, I think for me, I had a job. I was on a consistent salary, and I had to walk away from that to buy this business and jump in. So you know, in that case, and then again, that’s not that’s not everybody light, like, you know, this business that we’ve invested in now. We have a spot director that runs the day to day and so we’re kind of more take more of an advisory role in that case. So there are different ways to do it. But at least in that case, I was jumping in with both feet and had kind of walking away from some security to do it.
Pancham: I got it. All right. My third question, can you share with us one investment that did not go as expected?
Christian: Oh man, I think that I already get to. I already did. So I’m just going to leave my answer to the first one that I had
Rod: Okay, all right. How about you, Rod? Yeah, so for me it was it was the business I was running when the when the crash came in 2008 so I bought into a furniture business. So I was wholesaling furniture. And this was in the spring of 2007. And out so over the next year and a half, we, you know, we were successful. It was an existing business, but it hadn’t been actively building furniture for about six months. And so we spent the next year and a half kind of reestablishing accounts with all the different stores that had been purchasing. And so we were feeling pretty good about things in the fall of 2008 when everything crumbled. And the nice thing is, the fortunate thing for us was just that the stores kind of saying to us was, you know, we’re no longer going to be stocking out store. And we’re just going to be selling what we have. So we knew right off the bat that it was going to be, well, who knows how long? Right? Six, eight months, a year before we would start seeing orders again. And so in that, in that sense, we could just cut our losses and move on without dragging it out, like I’m sure a lot of other businesses did. But anyway, that was one that went a little bit of a different direction than I expected.
Pancham: You know, I always say that you do and you learn. So my final question is, what is one piece of advice would you give to people who are thinking of investing in the Main Street that is outside of the Wall Street?
Rod: Yeah, I would say I would say that there are a lot of different ways to do it. So for example, when it comes to real estate, the immediate thing that to think about and the way I started thinking about it was I need to buy individual properties that I own outright. Right? 100% or, or even if I’m getting a loan. Right? That is my…it’s my purchase. And as it turns out, there are a lot of different ways to invest in real estate that doesn’t include just, you know, buying my own property. There’s peer funding, there are syndications, lots of different things out there that are can be great opportunities, but I don’t have to become the landlord or you know, the maintenance guy in order to make it happen. So and then also, you know, I can invest in in smaller chunks, by doing the kind of the more group type of things. And I use that as an example because sometimes we have an idea about something and what it what it entails to invest in that. And yet, if we’ll put a little bit of time and effort into just understanding what those opportunities are, then we’ll we can open it up and understand a little better. And then that so it may turn out that maybe some things that we didn’t feel like were viable opportunities for us. Maybe they are. Right? Maybe just done in the right way. We can make things happen. And so being a little open minded going into it and, and doing a little bit of research, I think can go a long way.
Pancham: Great. How about you, Christian?
Christian: Yeah, I have two, maybe two quick thoughts. The first one, the first things that comes to my mind is this idea. Knowledge is power, right? We’ve all heard that. That it becomes a lot less scary if we’ve put in the time, energy and effort to understand what we’re doing. So I think just being willing to put in that time and effort and gain the knowledge creates so much more creates a more relaxed feeling when we know we’re doing. Confidence. Right? And then the other thing is, is start quick and start small, right, like, so if it’s something that’s new, I would jump in, but maybe jump in with a smaller amount of money so that you can kind of get the hang of it not get too uncomfortable. And then one other thought that comes to my mind is to work inside of a community. One of the things that we’ve been really lucky, fortunate to be a part of some incredible investor community. And the value there is that we can rub shoulders with other like-minded people who are doing the same thing. So maybe one of the best things that your people can do, that the listeners can do, Pancham is keep listening to your show, become engaged and share for their knowledge and gain knowledge from the other people within the community.
Pancham: That makes a lot of sense. Robert Kiyosaki says that you are average of five people that you hang out with and communities a great example.
Pancham: And I think its Robert Kiyosaki. Maybe it was somewhere else. That is where I read it first. All right, thank you for answering all of those questions. How can listeners reach you?
Christian: Yeah, the best place for people to find us is if they just go to Goldcolorinvestorbanking.com. And there is a form on there that they can just fill out, and give us their basic information. And we’ll just arrange a time that we can get together and have an initial conversation and just kind of get to understand their situation and, and then go from there.
Pancham: Thank you, Christian and Rod for your time today. You’ve added a ton of value to my listeners.
Christian: Sounds great. It’s been great to be with you.
Rod: We appreciate it. Thanks for having us.
Pancham: Listeners, if you have questions regarding this or anything related to Gold Collar Investor Banking, please go to goldcolorinvestorbanking.com and fill out a form and someone will reach out to schedule a call. So guys, I will leave you with this. Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it. Thanks for listening. If you want to know the top six reasons on why you should consider diversifying outside of the Wall Street, then you are in the right place. I have written a free report for you. It goes into not just the top six reasons why investing in stocks, 401k’s may not be the sound strategy, but also what are the alternatives? Get your free report today on the goldcollarinvestor.com/download. I repeat the goldcollarinvestor.com/download. Thanks for listening if you have questions email me at firstname.lastname@example.org. That’s p as in email@example.com. This is Pancham. I’m signing off until next time, take care.
Thank you for listening to the Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta visit us at www.thegoldcolorinvestor.com and follow us on Facebook at The Gold Color Investor. The information on this podcast our opinions as always. Please consult your own financial team before investing.