Change Your Financial Future Now! (Ep. 331)

"Find a way to get the warehouse of wealth started as soon as possible. It cannot be done overnight. The earlier one starts the policy, the longer it is in force and the more efficient it gets. If anybody out there is saying, well, I don't know if I can start this right now, Mary Jo. I don't know if I have enough money. When is the perfect time to start? The perfect time to start is now. What do you mean you don't have any money? Nelson started at the worst possible time and he figured out where he was going to get money. Why can't you figure out where you're going to get money? Oh, because you don't know the concept. That's why you schedule an appointment with John or I. We can help you figure out where to find the money, where to comfortably get started, how to correctly think about this pool of money and how money needs to flow through there. Once in a while, I will say you don't have the money to get started. But then we're going back to Parkinson's law saying, what are we doing with money? Where is that money going? How are we spending it?"

Hello, hello, hello, and welcome back to the podcast. Thank you very much for being here. All right. Today, we are into chapter three of Building Your Warehouse of Wealth. And we're going to talk about how money flows today. And this is a good one. It's called Spending Habits of Americans. And like this chapter is a repeat, basically, of the beginning chapter of BYOB. A couple of the beginning chapters of BYOB. And he's just expanding on those chapters. Here is the thing. If you had a hard time understanding Becoming Your Own Banker, this really is a good explanation of what Nelson was saying in those beginning chapters. So if you don't have the book, go get it.

Okay. So let's look what he's talking about here. The flow of water is necessary for us to live. Now, prior to this, he's talking about, hey, water flows around the world. It goes up into the atmosphere. It comes down as rain. It goes back and it just keeps flowing. Moisture turns into water and it just keeps flowing. And he said, the flow of water is necessary for us to live. Similarly, there is only one pool of money in the world. The fact that the pool is being managed by various banks, insurance companies, corporations, and individuals in various currency denominations and countries is incidental. The money in your wallet or purse is part of the banking system. When you go to buy something, money must flow. From you to the seller in a relatively short period of time. Otherwise, nothing happens. If money didn't flow, it would be worthless.

And so we really need to just stop and think about the flow of money. And you guys hear me talk about it all the time, especially if you're a client and you meet with me and you're like, hey, Mary Jo, what do I use this money for? And I'm like, well, I don't know. It's one pool of money. So does it matter if you use savings? Does it matter if you use cash value? Does it matter if you use cash? How is that going to affect that pool? Out of what piece of the pool do we want to take money? And so I talk about a pool of money all the time. What I don't talk about often is how it has to flow to make things work.

And so if we just look at the economy as a whole, this is what Nelson is saying. If we look at the economy as a whole, money has to go through a system or it doesn't work. So when we look at fractional reserve banking, if I put a dollar into the bank and the bank goes and lends out $9, money is flowy. I'm maybe going to put a dollar in the bank and then they're going to come to you and they're going to lend you $9 to buy cows. That $9 goes to the sale barn. From the sale barn, it goes back into the banking system. Maybe it goes to a couple of different, you know, it goes to the electric company. It goes to employees, wherever. And then it goes, eventually it ends up back into the banking system to make another $9 on every dollar that was put in. And so that is what he is trying to say. It all flows through and then it comes right back through the system. I think of a dollar just moving from me to a vendor to I'm going to have this book printed, right? I'm going to pay them. They're going to put it in the bank. They might give some to employees. Money has to flow.

And this is why the government wants to lower interest rates. Why they don't want people saving money. Because if you put money into your bank account and it just sits there as savings, it's not working. It's not doing anything. It's not stimulating the economy. People aren't spending money. That's not what they want. They want people to spend money. They don't want people to be savers because it can't create more dollars, fractional reserve banking. But it means that we now have people that don't have jobs, right? That's why they say, oh, nobody is spending any money. This business went out of business. Well, because people are saving now. They're scared to spend money. So they want to keep everything at peace so that money flows. Because money has to flow in order to get things done, not even to make more money. And money has to flow to pay employees. That's why we want to have successful businesses.

So Nelson goes on to say, without the concept of warehousing your money, we would all be on a barter system. Yeah, that's true. Someone is going to perform the warehouse of wealth function. How much of this function do you control as it relates to your needs in your life? How much of our monetary system do we control? We don't hardly control any of it because we don't think we should control it. We think we can just give money to the bank and it's totally okay. Let them control it.

Then he goes on to say, and if you've read BYOB, you guys have seen this. He goes on to say, I build scenarios around the all-American family because I don't want people to think you have to be rich to create a banking system that can handle all your needs for finance. I sort of want to pause here and make you guys think about that. You don't need to be rich to create a banking system. It's crazy how many people will go online and I'll post something online, a video, and they'll be like, oh, you have to have a lot of money to do this. No, you don't have to have a lot of money. Nelson is talking about the all-American family and the all-American family can do this. You don't have to have a bazillion dollars in order to do this, but we all need to start somewhere.

So now he's going into the annual pattern of spending. This graph, if you guys have seen BYOB, you have seen this graph in BYOB. And he talks about how much money is going to housing, transportation, living, savings. He did a bunch of studying. Nelson took a long time, did a lot of research, did a bunch of studying about where the all-American family is spending their money. And then he followed that up years later and saw that it didn't hardly change. 25% of our income is spent on transportation. 30% is spent on housing. And 45% is spent on living. So think about that. We have a dollar, okay? 25 cents of that dollar is going to transportation. 30% is going to housing. 30 cents is going to housing. And 45 cents is spent on living. Clothes, groceries, charitable giving, boat payments, insurance, vacations, that sort of thing.

And he says, many of these items are financed by credit cards or bank notes. The balance is financed by paying cash for them and thus giving up interest that could have been earned otherwise. The all-American family is saving less than 5% of disposable income. But in this example that I'm going to use going forward, Nelson's going to be generous and say that the all-American family is saving 10% and only spending 40% on living instead of 45. I rarely, rarely come across somebody that is saving 10% of their income. It happens, but it is not often. The majority of the people I talk to aren't even saving 3% of their income. So this to me is beyond generous. And Nelson says, just remember the real situation is at least twice as bad as what is depicted.

So the problem is that all of these items are financed by other banking organizations. The automobile financing package for this hypothetical person is $10,550 for 48 months with an interest rate of 8.5% with payments of $260.05 per month. As I was reading this, I don't remember. I didn't look to see when this book was written. 2012. Okay. I know that he's using the same example of what he was using in his book. And that was written in, I think, 2000. And so what I find interesting is that Nelson financed this car for 48 months. Today, 25 years later, we have a six-year car lease payment. Right? We can go six years to finance a vehicle. I think I heard the other day, seven maybe. I should probably keep up on that. But I think maybe we can do seven now. And now we want to do 50-year mortgages? Is that what Trump was talking about? I don't know. I don't care because either one of them are dumb. I would never do a six-year car note because your car is probably not going to be worth what you owe for it at the end of six years. Anywho, I digress.

Nelson is talking about a four-year car payment here at $260.05 a month. He says, 95% of cars that are traded in are not paid for. I did do a small Google search before I recorded this and it said that 40% of vehicles are not paid for when they're traded in. But people are not doing a four-year note. And so if you're going to trade a vehicle at year four, I'm guessing that Nelson's going to be pretty correct here to say 95% of those vehicles are not going to be paid for. He goes on to say, this means at the end of 30 months, if the car is traded, 21% of every dollar is interest. 21% of every dollar you paid is interest. That means that the interest portion of every dollar spent is perpetual. It never seems to dawn on you that the volume of interest is the real issue, not the annual percentage rate.

And I think that that was more telling when interest rates were 2%, 3%, 4% than today as I'm recording this with 7%, 8% interest rates. Because when we had 2% interest rates, we said, we can't afford not to buy that thing. What are you talking about? I'm going to go buy that because a payment is so cheap, I can't afford not to buy it. So instead of just having a car payment, we also had, oh, well, I can now afford the boat payment. Oh, well, we can afford the camper payment. Oh, we can afford another tractor. We can afford another combine. We can afford another drill. We can afford all of those things because interest rates are so low. But because you bought multiple things at low interest rates, your volume of interest you're paying is still the same. It's not as much as 8%, but there's still a volume of interest. What did we pay over the lifetime of that thing in interest that we could have had? That's money diverted away from us.

So this is what Nelson says. He said, when you go to the doctor's office and you get a shot, it is not the rate at which the medicine is injected into you. It is the volume of the vaccine, right? Too little and it won't do any good. Too much and it will kill you. So we have to look at if we're paying too little interest, maybe it's not as bad. Too much, it could kill us financially. And so what is the volume of interest that we have paid over our lifetime to institutions, to lenders, to banks so that we can have access to money? Do we need to lose that 2% to the banking system, cause inflation, be captive to them?

Mortgage rates have decreased to ridiculous levels and induce people into buying houses that they cannot afford. Hmm. I think I've said that before as well. The net effect of this action has turned the banking function over to the bankers and they have painted the American citizens into the worst corner of all time. The banking function should be controlled at the you and me level. It can be done through building your warehouse of wealth.

He says, now add up all the interest that this All-American family is paying out and you will find that 34 and a half cents of every disposable dollar paid out in interest for the average All-American male. This proposition never changes. And so Nelson said, hey, over all these years, I have looked and I have followed and it doesn't matter where the interest rates lie. The All-American family is still at 34 and a half cents of every dollar is going to interest. That's crazy. We complained about it at 8%. We didn't complain about it at 2%, but the same volume of interest is leaving our houses because we can't afford not to buy it. And he's not wrong. The banks have put us in a corner.

Even today, as I listen to social media and I'm listening to mortgage officers on social media saying that they're calling notes. People are not able to afford their homes. Well, why can't they afford their home if their home is at 3% interest or 4% interest? Because the price of everything else went up. So we think, well, we went and bought all this stuff at 2% interest. How can we not afford it? Well, we could afford it at the time when groceries were lower, when gas was probably lower. We could afford it when we purchased it. But what we're not thinking about is the price of everything else going up. The volume of interest is killing us. The fact that we were buying things just because we could is killing us.

Nelson said, this means that we have a $3.45 to one ratio of interest paid out as compared to savings. So we're giving somebody else $3.45 while we're putting a dollar into savings. Think about that. We're going to give the bank $3. Just round the numbers. We're going to give the bank $3, but we're going to put a dollar into savings. And then this young man, together with his peers at the office, are going to go on coffee break or some such gathering. And one of them is going to suggest that they discuss financial matters. I can predict what they will talk about, getting a high rate of return on the portion they are saving. Meanwhile, every participant in the conversation is doing the above. What a tragedy. But this is how they have learned to conduct their financial affairs, all because of the way they think. The banking industry has taught them well. So have the schools. So have the colleges, right? So has society. So has a car dealership.

Think about that. When I read this the first time, years and years and years and years ago, I thought, isn't that the truth? We're giving $3 to a financial institution, $3.45 in interest. We're saying we don't have any money to save. We can't save anything because we have all of these payments, right? But on the dollar we save, we're going to try to get the highest rate of return. We're going to put that $1 at risk and we are going to try to get the highest rate of return on that dollar in the stock market, in our retirement account. So instead of looking at the big picture, at our pool of money, and saying, where is this money going? How are we utilizing this money? Instead of doing that and thinking about how we can utilize our money correctly, how we can bring some of that money back into our banking system. Instead, we think, how can we put the tiniest amount of money into a savings account and get the best rate of return? That would be like saying, I don't know how I'm going to pay my bills next month, so I'm going to go to the casino and see if I can win some money. What? If you really think about it, the logic is just crazy. Why are we doing that? Why, why, why? Why are we not saying, hey, let me give the banking institutions less so I can put more money into my savings and not have to chase a high rate of return and not have to put my money at risk? Love it. Love it.

Okay. This typical person is spending 34 and a half cents out of every dollar he spends on interest alone. And this pattern really doesn't change all that much during his entire lifetime. It should be pretty obvious that his need for finance during his lifetime is greater than his need for death benefit. It should be pretty obvious. Yeah. I think it's getting more and more obvious as we read this chapter, right?

Nelson says, then why don't we solve for the need for finance through the magnificent life insurance policy? The reason that very few folks see the possibility is because of the way they think. They pay pennies in premiums and thus have access to pennies in cash value. And conclude, life insurance is just a penny-ante product. Nonsense. Change the way you think. Put in large premiums. In due course, you have access to a large pool of cash value that is accessible for major purchases in life through policy loans. Please remember that it's all borrowed money.

You put in peanuts and you're gonna get peanuts out. The way we have been taught to think about life insurance is the problem. So many people think, oh, it's expensive. And they don't know what they're talking about, right? They're just hearing what somebody else has said, but they've never actually studied it. And so if we put more money in, which then leads to higher compounding, higher dividends, we have more access to money. If we put peanuts in, we're gonna get peanuts out. Nelson used to say, don't buy life insurance like you're going to Walmart. That's not how you should be buying life insurance.

He says, it's all borrowed money. You must pay it back. When you buy life insurance from this type of a company, you own the contract, not the company. Do you want to steal from your warehouse of wealth and destroy it? I hope not. If you are halfway smart, you should pay the policy loan back at a higher interest rate than what the company is charging you. The extra money is just additional capital to expand the system and gets paid into the paid-up additions rider.

So a lot of people have questions on that tiny little thing that I just read. And he gives us the answer right there. But I love the fact of where he says, do you want to steal from your warehouse of wealth and destroy it? I hope not. So many people forget that they own this life insurance policy, which means they own part of the insurance company. Nelson is referring to them as their bank. So if you own part of the company and you want to not pay that company back, why are you trying to screw your own company? That doesn't even make sense to me. Why would you try to do one over on them so your company can file bankruptcy? I think that if that's your thought process, some people need to go back to BYOB and read the chapter where Nelson talks about the bankers destroying the bank. I think it was a bank in Texas, right? Because they didn't pay back their loans. They took money and they didn't pay it back. Why would you do that? If you had a store, would you steal things from your own store and not pay your store for them and then wonder why you went bankrupt? Doesn't make sense at all.

He says the only thing that limits how much you can borrow from your cash value is how much cash value you have, right? So when Nelson got in trouble, he said, the only thing that I could borrow was what I had in there. So now, I want to increase my premiums so I can put more money in my policy and I can borrow more money to get rid of the snakes and dragons because he was paying 23% interest. He goes into a story prior to this. I'm not going to go over a story again. If you put more money in, it would create significant cash values from which I would be able to borrow and pay off the snakes and dragons. So Nelson was putting money in his policy into the paid-up additions rider and then he was borrowing against it and using it to pay down the snakes and dragons.

He said, when I described this to my peers, they said, oh, that sounds good. You have a good idea, but you owe a lot of money. As soon as you pay off your loans, you should put that idea to work. Nelson said, nope, that is the way the world thinks and they have never been right about anything. He said, find a way to get the warehouse of wealth started as soon as possible. It cannot be done overnight. It must be done incrementally. The earlier one starts the policy, the longer it is in force and the more efficient it gets.

Well, if anybody out there is saying, well, I don't know if I can start this right now, Mary Jo. I don't know if I have enough money. When is the perfect time to start? Well, the perfect time to start is now. What do you mean you don't have any money? Nelson started at the worst possible time and he figured out where he was going to get money. So why can't you figure out where you're going to get money? Oh, because you don't know the concept. That's why you schedule an appointment with John or I so that we can help you figure out where to find the money, where to comfortably get started, how to correctly think about this pool of money and how money needs to flow through there. Once in a while, I will say, you don't have the money to get started. But if you don't have the money to get started, then we're going back to Parkinson's law saying, what are we doing with money? Where is that money going? How are we spending it?

I have talked to a lot of people recently that have large amounts of credit card debt. $15,000, $20,000, $30,000, $40,000, $50,000 of credit card debt. I am not going to start a policy for you if you have that amount of credit card debt. Unless you came into a whole bunch of money and you can pay that all off right now, right? I am not going to start a policy for you. So instead of making an appointment for me to tell you that, which I'm still happy to talk to you, but instead of doing that, how about you go out and try to get rid of the credit card debt? A debt counseling, go on to TikTok, go on to YouTube, on to Instagram. I heard there's even some videos on Facebook. You guys, there's a lot of people out there that used to be debt counselors or worked for credit card companies that are telling you how to get some of that written off, how to get that restructured, how to maybe balance transfer that to a 0% card so that you're not, you're paying more than interest and you're making some progress on that. There are a lot of things out there to help you get rid of that and then once you get rid of that, then come back.

Now the reason that I won't do it, even though Nelson was in the same situation at 23% interest, is because typically if there is a lot of credit card debt, it's overspending. It's foolish spending. Maybe we got ourself in trouble. I don't know what the situation. But I want to see that you can manage that, get that paid off and then we can have some freed up money. Because the goal is not to borrow from cash value to pay off that credit card and then you never pay cash value back. Because remember, it's a loan and you're stealing from your own company. So if you are in that situation, do some of that due diligence ahead of time. It might take a year or two before we can get you in a situation where it does make sense to have all of that paid off and then to start something. Do it a lot, a lot of people come back and we do start something. But overall, that is not the majority of people out there with that much credit card debt.

You can get started. It's a matter of getting started. Because the longer you have this thing, the better it gets. We can sit and we can make excuses all day long about why we can't get started or we can set up the appointment and figure out how do we get started. Let's have the conversation with John or Mary Jo and see how to get started. Anyway, that's a dead horse I can beat forever.

I feel like so many people read the book and then they're terrified we're going to sell them something and be super pushy so they don't schedule that appointment when in fact that is absolutely not how we work over here. Because y'all, I hate salespeople and I really hate slimy, pushy salespeople. So you are not ever, ever going to encounter me to do that. If we ever get my husband on a podcast someday, maybe we can talk about how mean Mary Jo is to salespeople. Sort of a little game to me. Because if you try to be one bit pushy, I'm out. Your girl's gone.

Okay, you guys grab your books, add this one to your bundle, let us know how we can help you. Email maryjo@withoutthebank.com. Happy to visit with you. Excited to talk to you. You guys have a fantastic rest of your day.

Thanks for listening to the Farming Without the Bank podcast. We hope today's episode has inspired you to take control of your finances in new ways. Don't forget to check out our website, farmingwithoutthebank.com, and engage with us on our Facebook page, Farming Without the Bank. Join us next week as we smash more financial myths and empower you to accomplish your financial goals.