Windfall Alert: What Farmers Miss Every Single Year (Ep. 338)

"Nelson says it in here several times. It's all about the way you think. If you think this is a luxury, it's always going to be second fiddle to everything else you do. If you think of this as a necessity, like gas is to a vehicle, then you will always make sure that this is paid first. This should be in every single person's expenses. You can't expense it. It's not a business expense, but it should be in your books as an expense. There is no questions asked. You need death benefit on you, your spouse, your kids, whoever. You need death benefit."

Hello, hello, hello, and welcome back to the podcast. Thank you very much for being here. All right, we are back with Warehouse of Wealth, Chapter 7. This is a good one. This one is really good and going to clear up a lot of questions about windfalls of money. Nelson talks about that here and there, and a lot of people have questions on it. It even cleared up some things for me. So let's get into it.

Nelson says, sometimes in life, everyone experiences a financial windfall of significant proportions. Nelson sold some land that he calls a frozen asset, which I think is kind of funny because it is a bit frozen to some extent. He sold some land and he had a large loan inside one of his policies, right? And he paid that loan off. And he had bought the policy 18 months before. He borrowed the cash value to pay off some of his bank debt. He was preferred plus on that policy — so the best health rating that you can get. He paid that off.

And he says, the net result of this process is when I paid off the policy loan, the result was the same as buying a new policy that year and backdated the policy 13 years at preferred plus rating. That is an enormous advantage.

So Nelson bought the policy. 13 years later, he has a full loan in this policy. He sells land and he's like, what am I going to do with this money? I can't buy another policy on myself because I'm uninsurable. So I'm going to use this money to pay the loan off. When I paid the loan off, it's like buying insurance and backdating it 13 years, because he now has the full death benefit of that policy, right? Had he died, the death benefit minus the loan is what would have been paid. So now that he paid the loan off, it was like backdating the policy and buying more death benefit at a cheaper rate, or any rate for that matter, because he was uninsurable.

So he is saying, you're going to have a windfall at some point. You're maybe going to have land to sell.

He then goes on to talk about — let's just say that you have a daughter and she, I think in his example here, she's six years old, and he said, in 16 years, she's going to be 22. She will move out of the house. She should be self-sufficient at that point.

And as you guys know — some of you may know, others may not know, here's a little insight. Kids get more expensive as they get older, not cheaper. And so now you've got kids that are gone, but the last four years, she's been quite expensive.

So Nelson is saying, that's a windfall because she's gone. You no longer have to buy her groceries. You no longer have to buy face cleaning supplies, clothes, whatever it was that you were purchasing for her. As soon as you quit doing that for your kids, you have a windfall. Where does that money go? That can go to pay back a loan in your policy if you have a loan.

He said, if you don't have a place to put the windfall money, two things can happen. And both of them are bad. First of all, Parkinson's law. You will spend what you make, right? I talk about Parkinson's law all the time. Necessities — something that's not needed becomes a necessity.

Second, the possibility of you decide to create a place to warehouse this newfound wealth, and you choose the best place, and that is a life insurance policy, and you have got to start that policy at this point in time.

So your kid moves out, you have excess money, Parkinson's law is going to eat it up because we're going to spend what we have, or we're going to take that money and we're going to start a new policy with it. So if you didn't have a policy, this is the time to be starting a policy, right?

If you had a policy that has a loan in it, what was the loan for? Because if that loan was for something that's a cash flowing asset, that should be what's paying back the loan. The newfound money should go to start a new policy if you can.

The real penalty of delaying getting a policy started is a huge difference in cash value when one elects to get income at passive income time. The earlier one starts a life insurance policy and the longer it stays in force, the more efficient it gets. People don't understand that.

I want you guys starting policies when it makes sense to start a policy, and there are some times when people want to start a policy and they have $20,000 of credit card debt, and I don't see that to be a good time to be starting a policy. I would like the $20,000 or more of credit card debt gone, right? But as soon as that's gone, we need to start a policy. We need to put a plan in place to get that paid off so we can start a policy.

I see this happen a lot. I've paid off a combine. I've paid off a tractor. I've paid off some land. Something gets paid off. As soon as that payoff comes, then I get told, nope, I can't use all of that payment amount for a policy, because Mary Jo, it was really tight before and so I made those payments. I always got the payment made and I didn't borrow from operating to do it. We're borrowing from operating to do it — different story. I always got the payment made when I sold grain or when I sold cattle or whatever we're selling, but it was really tight. So I don't want to live that tight. I don't want that money to go — all that money to go into a policy.

So let's say it was a $100,000 payment. Almost everybody will say, oh, maybe I can do 40, maybe 50. You're going to cut it in half? 50, 40 to 50% is all that you're going to move over to a policy. What's going to happen is exactly what Nelson is saying. Parkinson's law. Right?

And he goes on to say that when his mother-in-law passed away, they no longer had the $60,000 bill of the nursing home, and lo and behold, stuff started showing up at his house, because even for Nelson, Parkinson's law stepped in. And if we don't truly understand how the policy works and why we should be running it through the policy, Parkinson's law is going to come into play.

I have talked to people about daycare. Daycare is very expensive. As soon as the kids start going to school, why do we not take the money that was going to daycare and move it into a life insurance policy? We all of a sudden say, oh no, now we don't have the money to do that. Why don't we have the money to do that? That doesn't make sense to me. You were paying it. The kids are going to school. We no longer have the daycare expense.

When kids are little it's not that expensive. It's when they get older that's expensive. So then people will say, well, Mary Jo, as they're getting older and they're in all these sports and all this stuff, we're going to need that money. Yes, but you're now giving up — and Nelson is talking about this — you're now giving up how many years before they start doing some kind of sport that you would need that money for. And typically you're going to be what, six years in. Granted, I know kids are doing sports much younger now, but it still shouldn't be that expensive at that point. And daycare is ridiculously expensive.

So why are we not starting the policy and then borrowing from the policy to do the sports later? Makes sense in my head. But we want to live our life and then we want to have the policy, when in fact the policy is a necessity, not a luxury.

And that is something that I am very adamant about at this time, because I am seeing people dying without life insurance. Guess what? You're going to die. You're not getting out alive. I hate to break that news to you. And so it's not a luxury to have a life insurance policy. It is a necessity.

If you are out there farming and you're ranching and you're in the business of farming and ranching, it's a business. Why are you also not in the business of banking? There are certain things that are necessary in life. One is money. It must flow through something and it has to go through a banking system. So you are deciding that you're going to use somebody else's bank always. Never your own. Always somebody else's bank for savings, for checking, for loans — the whole nine yards, you're using somebody else's bank.

So we should be in the business of banking. That is a necessity. We should also be in the business of death benefit. That is a necessity. We are going to die. This is not a luxury item. We should be building that in to the price of our commodity.

How much do we want to pay? I talked to a guy yesterday and I suggested maybe about a $20,000 premium. $15,000, $20,000. And I said, you're doing everything in cash right now. If you're selling hay — this guy was putting up hay and selling hay — how much do you have to mark up your product to the end consumer that they probably wouldn't even notice, for trucking, for per ton cost, whatever that is, that you're marking that up so that you can create your own bank and you have some death benefit, right?

And he's saying, well, no, I can't. I can't afford that. And I said, okay, if you needed a new baler and that was a $20,000 payment a year, would you find the money for that? And of course, he was being a smarty pants and said no. And his wife said, yeah, you would. Absolutely, you would.

She's like, look at where we spend money. Between your cigarettes, your chew, your bourbon, and all the things that I'm spending money on, she's like, I'll let my hair go gray. Hair color is the biggest scam on the planet, says the person that gets her hair colored.

But it is, where are we spending money and what are we doing? How are we going to beat Parkinson's law so that we can get this started? Do we need to, if we're selling cattle, say what do we need to add to our calf prices? How many cents per pound do we need more so we can start our own banking system? If we don't, we have Parkinson's law. That's exactly what this chapter is about.

And Nelson says it in here several times. It's all about the way you think. If you think this is a luxury, it's always going to be second fiddle to everything else you do. If you think of this as a necessity, like gas is to a vehicle, then you will always make sure that this is paid first. This should be in every single person's expenses. You can't expense it. It's not a business expense, but it should be in your books as an expense. There is no questions asked. You need death benefit — death benefit on you, your spouse, your kids, whoever. You need death benefit.

I just found out some people that I talked to a couple of years ago lost their son in an accident and he was 13. It is so important to have death benefit on children. It is not about getting rich on having death benefit on your kids. It is about having the money so that you can mourn.

It was a very interesting conversation. I have had other clients that have lost children. Everybody mourns differently. This particular couple, it's tough. They're in a very tough spot. Their jobs have to do with people's lives, and they're both going to have to retire because mentally they're not going to be able to do the job the same as they did prior to them passing away.

People don't think about that. People do not think about that. They just think, oh, I'm going to get up and go back to work. No, you're not. You absolutely are not.

So, death benefit is a necessity and we look at it like it's a luxury, and we have to beat Parkinson's law. How are we going to start the bank? How are we going to make sure that our family is taken care of? It's really a pretty simple question, but it's a question that we want to just ignore.

So, there you go. That's that chapter.

Let me know if you guys have comments, questions, concerns. maryjo@withoutthebank.com. Grab your books, schedule your appointment, and have your information ready when we have the appointment. You guys are going to get an email of everything that I need for the appointment. That is not a suggestion, that is a necessity. If that is not ready, I will cancel the meeting. I will stop the meeting because I can't help you if your numbers are not ready. So, have that ready for yourself, for your business, for the farm. I want all the numbers.

All right, let me know if there's anything I can do for you. Otherwise, you have a fantastic rest of your day.

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