CHAPTER 11

Financing Business and Professional Purchases

 

 

 

So far in these pages we’ve focused on personal uses for Bank On Yourself—as a way of financing your cars, paying off debt, paying for college, providing for retirement, and so on.

Soon after I found out about B.O.Y., I realized it could be used not just for personal finances but for business finances, too. As a business owner myself, I’ve used this method to finance our business vehicles, as well as to self-finance business equipment that in the past we had been leasing.

If you are a business owner, entrepreneur, or professional, how much do you currently spend leasing or financing vehicles, equipment, office space, or buildings? For some businesses, this can amount to literally hundreds of thousands of dollars or more that they will never see again.

What if, simply by becoming your own
financing source for major business
expenses, you could create a bigger stream
of income in retirement? You could
potentially recapture hundreds of
thousands of dollars—or more—that you
would otherwise never see again.

Now imagine what it would be like to recapture all of those dollars. What would you do with those funds? Expand your business? Add equipment or technology that puts you so far ahead of your competition they may never be able to catch up? Hire that chief operating officer, manager, or executive assistant so you can cut back on your hours and have more time to enjoy your life and family? And what if, simply by becoming your own financing source for major business expenses, you could create a bigger stream of income at retirement?

All of this—and much more—is possible, when you use Bank On Yourself. Let’s meet some of the folks who are doing it.

Turning a Love of Horses into a Business

Our journey takes us first to the Arizona desert, home to Susan and Kevin Rowan; perhaps you’ll remember them from chapter 9 as the parents of the fourteen- and eighteen-year-old girls who are funding their own B.O.Y. plans. The family lives in what’s called a Santa Fe territorial-style house, with the Superstition Mountains providing a dramatic backdrop to the view from their home.

Susan, whom her husband describes as “a short, good-looking girl that likes horses,” has a challenging job: for twenty-five years, she has served as a mentor and liaison with teachers of kindergarten through grade twelve who work with learning-disabled youngsters.

Kevin, in his mid-fifties, could be a poster boy for what we think an airline pilot should look like: tall and handsome, commanding, yet with a lighthearted sense of humor. Susan would want me to add that he’s an Irishman, with a shock of red hair. When the pair first met, he was a crop duster; after they became a couple, her salary paid for him to accumulate the flying hours he needed to get his Air Transport Rating. Today he’s a captain for a major airline. For anyone who cherishes the outdoors, his upbringing sounds nearly ideal.

Kevin:

I grew up in the Owens Valley of California. My father worked at a couple of fish hatcheries—extremely interesting places—and for the Department of Fish and Game. We did a lot of arrowhead hunting and a lot of fishing. You could pretty much do any kind of outdoor activity you wanted without having to go get a landowner’s permission.

Financially we never hurt for anything. My parents were pretty careful with their money, and they didn’t really trust credit that much. Anything that you wanted, you better have the money to buy it. You didn’t go in and leverage yourself to the hilt and buy something that you really may not have needed.

Susan’s upbringing was very different.

I was a child of a military father, so I was one of what they call “military brats.” We moved every three years of my life. The last tour was in Germany, and I graduated from a high school over there. It just enriched me and allowed me to be free-spirited.

Then we settled in Yakima, Washington, and I got involved in the rodeo as one of the princesses for the Toppenish Pow Wow Rodeo there. We would go tour for parades. And we’d come in for the grand entrance at rodeos.

My parents taught us that we needed to save. Once you saw something you wanted to buy, well, let’s research it and make sure that that’s really something that you wanted. You needed to work toward your goals, and you needed to earn the money.

Kevin:

My parents taught me the principles of using credit wisely, which was pretty much not using it if you don’t need to. But it was lost on me. My friends and I became children of the ’60s.

Jump ahead a few years. Susan and Kevin, now married, were both becoming concerned about what retirement would be like for them. Susan, now just three years away from retiring from her teaching job, had some expansive goals in mind.

Susan:

About six years ago, I started thinking about the retirement income I’d have, but I didn’t feel it was going to be enough to allow us to have two homes—maybe a home in the desert and a home up in the mountains—and also be able to travel freely.

Kevin:

I’ve got 401(k)s with the airlines, and Susan had an IRA and a few other plans. We took full advantage of those. But we felt we needed to do something different. You know the old saying that the definition of insanity is doing the same thing over and over and over again and expecting a different result.

So we decided we needed a different result. There’s a newsletter I subscribe to, which is a resource I highly respect and trust and look to for recommendations of ways to make money and grow wealth, as well as what things to stay away from. And it was around then that they had a nice write-up on the B.O.Y. program, and they recommended we check into it. And so I did.

“The definition of insanity is doing the
same thing over and over again and
expecting a different result. We decided we
needed a different result than we were
getting with our 401(k)s and IRAs.”

Even with the recommendation, plus reading a report about Bank On Yourself, Kevin still wasn’t completely convinced.

I thought, “This is interesting and I’m going to have to try to think of some holes to punch into it.” So I’m looking at it from various directions and trying to play devil’s advocate. I was trying to find some holes in the theories and the operational effects that I saw in there, and I just really couldn’t. I couldn’t find a hole. So that’s when I decided I’d get a referral to an advisor who could help me set it up right.

He was put in touch with a B.O.Y. Advisor in his area and “we’ve been at it ever since,” he said.

Meanwhile, his wife had already been traveling in a parallel direction. Susan:

I started thinking that I need to have another business after retirement. I grew up around horses and riding horses. Then, after I had my children, I hadn’t had horses for a while and I decided I wanted them back in my life. Horseback riding is a great stress reliever for me. That’s when I decided to go and get educated on breeding horses, and how to inseminate mares. I began raising brood mares and babies.

Now I’ve been building this up as a business for four years. I’m working full time in the schools, and, oh my goodness, I’m also the number-one person who cleans up the manure and feeds the horses. It’s probably another twenty-five-plus hours a week.

So I’m an ambitious individual who is striving to establish a secondary business for after I retire, and that’s raising and breeding quarter horses for the western riding competitions called reining. It’s like western dressage.

Kevin:

Here in Arizona, there is an incredible amount of cash flow going into an operation like that, for the start-up and to maintain it. And we grow none of our feed here. We have to buy it all.

To many, one of the most surprising parts of B.O.Y. is how new-comers to the approach can be helped to find the seed money to fund their plans. Perhaps even more surprising is how this can be done while at the same time getting rid of some of the family debt.

Susan:

Our Bank On Yourself Advisor helped us figure this out. He’s played such a crucial role in all of this. First educating us and then he’s there to counsel and advise us. He looked at the value of our house. We did some refinancing and used the cash to get rid of debt, including about $25,000 of credit card debt and payments we were making on two trucks.

Once we got that debt in check, he told us, “Okay, do you think you could now afford this much to go into Bank On Yourself?” So he was really good leading us into that.

It freed up cash flow so we could then pour money into Bank On Yourself. We started a plan for each of us, and between the two we’re putting in $4,000 a month.

We knew that we were still going to have to pump money into the horse business. It costs about $30,000 a year. We draw from our Bank On Yourself policy when we have to. Like when I wanted to upgrade and buy better broodmares, I thought, “Okay, that’s a good investment.”

The Rowans discussed how they expect the business to be not just self-supporting by the time Susan retires from teaching but to throw off extra retirement income that will allow them to travel and have that second home Susan mentioned. Her husband then talked about the aspects of Bank On Yourself that most strongly appeal to him.

Kevin:

To be able to pay yourself back that interest instead of paying it to somebody else—that was probably the hook for me. And just to have the ability to have that money available, so that when you need it, you can get it without having to go down to your banker and make a case for it or go to your credit card company or whatever.

“The hook for me was paying yourself back
instead of someone else. And to have that
money available, so you can get it without
having to go down to your banker or put it
on a credit card.”

It seemed to me like it was a very good opportunity to do something for yourself and still do the things that you wanted to accomplish to begin with, instead of having that noose around your neck for the interest and the principal that needs to be paid back.

It’s difficult for people to conceptualize an insurance policy where you can put more money in than you need to fund the death benefit. To most people insurance is just a necessary evil. B.O.Y. is outside the box, certainly, but you need to be willing to look beyond the most obvious vehicles for wealth building.

The Rowans now understand that a B.O.Y. life insurance plan can be more than “a necessary evil” and can become a positive factor in one’s life and financial planning for the future.

When I asked how their lives might have been different if they’d discovered B.O.Y. ten or twenty years earlier, Susan replied, “I’d already have the mountain place and be doing the traveling, and probably working part time.” Kevin’s take: “I’d probably not be working.”

Turning the Flow of Capital from Cash Out to Cash In

Thirty-something Kris Campbell, like Susan Rowan, grew up as “a military brat” and moved to a different town or different continent every few years. In college she was a voice major learning to sing opera, but after graduation she landed a job as a studio photographer. Eventually that led her into business on her own, doing a unique brand of professional event photography.

Kris Campbell:

What we do is we go on-site to events, set up a full portrait studio, and print out studio-quality photographs on the spot. We do a lot of proms, graduations, and holiday parties, and we work with corporations on many events.

We also do standard photography so we can go out and take pictures at a convention or other large event and then burn the images to a DVD for the client.

The next thing she said I had to ask her to repeat, because I was sure I hadn’t heard her correctly.

We also print full, four-color photographs onto chocolate.

“So the people eat their pictures?” I asked.

They do! We can print your image in full color onto chocolate lollipops and chocolate CDs. We can even provide them live at events. So we can take your picture and then give you a lollipop with your face on it about five minutes later.

Kris first heard about Bank On Yourself the same way as several other people quoted in these pages.

I was listening to talk radio and heard that you could redirect the money you’re paying to finance companies and the like back to your own pocket. I thought, “I’m paying a lot of money to finance my company.” Because of my business, I have a lot of credit cards, and I have a line of credit, and we finance equipment. We finance a lot of things.

I was carrying about $100,000 in debt. So I thought it would be nice if the money was coming back to me rather than going to all those finance companies.

When I asked if she had ever calculated how much she was paying out in interest every month, Kris answered, “I tried not to.”

Kris started her first B.O.Y. policy with a $21,600 annual premium. The policy was backdated six months—a perfectly legal way for someone to get two years’ worth of premiums into their plan in the first six months. This provides a great way to supercharge the cash value in the plan very quickly—so more equity is available, and it’s available sooner. In Kris’s case, though, for cash-flow reasons she pays her ongoing premiums monthly.

Kris’s policy was backdated six months—a
perfectly legal way to get two years’ worth
of premiums into her plan in the first six
months, so there’s more money available
for her to use sooner.

Once she was established with a B.O.Y. policy and in position to take her first loan, she retired a high-interest family obligation.

I used it to pay off my brother and sister-in-law. They had initially loaned me $1,500, at 15 percent interest. I hadn’t been paying them anything, because it was an investment for them. It was just sitting there building up interest, and the balance had grown to over $4,000. So I decided to pay it all off.

Aided by a software program, her advisor helped Kris look at different combinations of interest rate and number of months for paying back the loan she took from her Bank On Yourself plan for the $4,000. Most people are happy to let their advisor handle the math and offer alternatives, and Kris did, too. At first. But then, she says, “I ended up getting that software program” so she could juggle the parameters and make loan payback decisions on her own.

My biggest surprise came when Kris started explaining how she was almost immediately able to become her own financing source for an expensive device her personal corporation had been leasing.

My company owed $35,000 on the lease for the piece of equipment that creates the photos on chocolate, and my lease payments were $1,026 a month. I took $35,000 out of my house with what they call a cash-out refinance, and I loaned that money to my company.

Her company paid off the equipment lease, Kris explained, so it owned the equipment outright.

And now my company is paying me the $1,026 a month, to pay me back the money I loaned it. I’m now using that money to help fund my Bank On Yourself plan.

So Kris had taken the $35,000 from the refinance and loaned it to her company, and the company had paid off the lease. Every month her company makes a payment to her on the $35,000 loan, and she turns around and puts that money into her policy. She had quickly become her own financing source for a major purchase she had been running through an outside lending institution, while freeing up money to fund her B.O.Y. plan.

I thought that was very creative and resourceful.

Redirecting the finance charges and principal she was paying the leasing company into her own pocket was just a starting point for Kris. She also spends about $20,000 every year on photographic equipment for the business and has now set a goal of financing all that through her policy, too.

All the interest that would just be going down the drain is now going into funding a policy for myself, and it’s providing me with life insurance at the same time.

I asked Kris if she realized that she would then also be getting back the full cost of the equipment and supplies she buys each year, in addition to the finance charges she was paying on those costs. She was aware, she assured me. Kris will be able to look at her annual B.O.Y. policy statements and see how she is recapturing both the purchase price and the interest charges over time, along with some extra “profit,” when she pays her policy loans back the Bank On Yourself way.

Not surprisingly, when Kris ran the idea of B.O.Y. by some of her business advisors—who, like most people, are ignorant of the facts about the kind of insurance used for B.O.Y. policies—they tried to discourage her.

I went to a consultant who helps me make decisions in my business, and I told him I had come across this idea about redirecting some of my business debt by using a B.O.Y. policy. He thought I was crazy and told me, “You should never buy that type of life insurance.”

Not surprisingly, when Kris ran the idea of
B.O.Y. by some of her business advisors
(who, like most people, are ignorant of the
facts about B.O.Y.), they tried to
discourage her.

Some people would have dropped the idea right there. Not Kris; it became clear during our interview that she is a woman who has achieved the level of success she has by keeping an open mind and challenging conventional thinking. (How many photographers would even consider investing $35,000 in equipment that prints edible photos?)

Kris went back to her B.O.Y. Advisor and “put her through the mill. I asked her some tough questions and she was able to answer them all. She has been unbelievably patient with me.”

Kris also had been funding a variable universal life policy. After learning about the many advantages of the specially designed type of whole life policy used for B.O.Y., Kris decided her B.O.Y. policy had “better growth potential” and certainly more guarantees. (In fact, the policy Kris had can even lose money and would not be an appropriate type of policy to use for B.O.Y.).

As a result, she decided to “take most of the money I was putting into the other policy each year and put it into my B.O.Y. plan i nstead.”

When I asked Kris what message she hoped readers of this book would take from her story, she didn’t skip a beat before replying.

I would let them know that a lot of people operate their lives like they’re victims of circumstances, but you do have options to take control of your financial destiny. You really owe it to yourself to be open to the possibilities out there and find ones that make sense for you.

Businesses and professionals who spend significant sums leasing or financing vehicles, equipment, inventory, or even office buildings will find that all of these expenditures could potentially be financed the B.O.Y. way. The difference this can make over time can be staggering.

You can use B.O.Y. to self-finance business
vehicles, equipment, inventory, or even
office buildings.

In addition, some business owners may also qualify for tax deductions for interest and depreciation. A knowledgeable tax advisor can provide appropriate guidance. (A referral to a B.O.Y. Authorized Advisor who can do a free, no-obligation B.O.Y. business analysis for you and may also be able to direct you to a CPA in your area familiar with the tax implications of B.O.Y. for business owners and professionals is available at www.BankOnYourselfFreeAnalysis.com.)

Leaving the 9-to-5 Rat Race to Become a Real Estate Entrepreneur

Christy and Greg Gammon, introduced in chapter 7, have used B.O.Y. to turn their lives around.

Greg:

We’re both involved in real estate. Christy is a licensed real estate agent; I’m a real estate investor. We flip properties, to use a colloquial term, but we’ve both been involved in real estate as self-employed individuals for the last couple of years, and we love it. Part of the reason we’ve been able to do that is due to the success of our Bank On Yourself system.

What’s most impressive about what the Gammons are doing is that it provides one more compelling example of leverage. They are taking loans from their policy and using the money not to buy cars or pay off credit cards, but to invest in their business of buying a house, making improvements, and reselling it at a profit—“flipping,” as Greg refers to the practice.

A great many Bank On Yourself clients are multiplying the power of their B.O.Y. policies with this double-duty technique—making the same dollars earn for them in two different ways simultaneously.

Christy:

We’ve been on a journey with B.O.Y., and we’ve been able to borrow a lot out of the policies to help us build our business.

Even though we’ve had some policy loans out, we continue to get the same guaranteed annual cash value increases and we’ve gotten dividends every year so far, too.

The current investment property that we’re working on is about to go on the market, and when it sells, we’re about to experience quite a windfall. We’re going to be able to pay off our debt for the property and make some larger premium payments into the paid-up additions rider of two of our policies. And then we hope that our next investment will be fully funded by our policies.

They had just sat down a few days earlier and calculated how much they’d already paid in mortgage interest on the property they were about to sell. That cost alone was between $10,000 and $15,000.

Christy:

That’s $10,000 to $15,000 that we could have been putting back into our policies this whole time. Next time that’s what we’re going to do. We’ll use that additional capital we’ll be recapturing to invest in more properties.

It’s amazing how B.O.Y. starts to really build on itself. That’s what’s been so exciting for us. We started quite humbly with one residential property that we remodeled and sold. But we have bigger plans and dreams and are looking at maybe expanding into multifamily units, perhaps rentals or even some commercial development.

If we’re able to buy our next property purely using our equity in our policies, I cannot wait! That’s truly an example of us arriving. That’s making the policies work at their full potential.

“We hope our next real estate
investment will be fully funded by our
policies. I cannot wait! That’s truly an
example of us arriving.”

We’re not held back. We can have these dreams because it’s already happening. It’s going to be possible.

Greg:

The nice thing that we’re starting to realize is that we’re not beholden to an institution to give us the financial backing that we would need to help our business grow. We’re starting to see the fruits of our labors, if you will, in building our policies.

And now we have a very real opportunity to take this money that we’ve accumulated through the system and use it for our own business purposes immediately.

When we get the windfall from selling this particular property, we’re not paying back a financial institution, and all that interest hasn’t gone out the window. It’s going to continue to build our policies and our business even more.

The success of the Gammons in their real estate adventure is being helped along by another factor. Since they are taking loans from their B.O.Y. policies for a business purpose, the interest portion of their repayments back into the policies may be tax deductible.

These tax deductions may also apply to the interest when you take a loan from your B.O.Y. policy and use the money for a personal investment in stocks, bonds, real estate, a friend’s start-up business, or the like. Getting advice from a knowledgeable tax professional is recommended, whether you’re taking money for your own business or for a personal business-related investment.

Greg:

Bank On Yourself is the tool that has allowed us to bridge the gap from “Okay, it’s possible” to “Man, this has already happened to us.” It’s an amazing realization, when you actually get to the point where you see it happen.

Bank On Yourself can also be used
for a variety of charitable and
philanthropic purposes.

While Christy and Greg can serve as an inspiration to people who share the longing to go into business for themselves, they provide inspiration in another way, as well. They’re an example of one of the best aspects of the human character: the instinct to help others. Bank On Yourself can be used for a variety of charitable and philanthropic purposes, and the Gammons discussed one close to their hearts.

Christy:

So far we’ve done one trip, a short-term mission to Zambia, Africa, but we’ve made a commitment with our church that we would like to go at least every other year.

We’ve also sent money ahead to send about seventy children to school. They were getting meals two to three days a week through a different program, and we had asked the pastor at our church how we could help. He said, “Well, there’s a village where these children have access to some food, but they don’t go to school.”

He looked at our gift and said, “I think this would be perfect to align with that village, and that would enable the kids to go to school.” So that’s our connection with that group, and we plan to be able to go there every other year to visit with them and bless them. Of course, they bless us more than they ever know.

We want to have that personal connection versus just sending a check. Greg has talked with the pastor about economic development projects and helping people in Zambia be visionary about business and self-employment and really empower themselves. We’re just really excited about what that might hold for us as well.

I’m thirty-three and Greg’s forty-two. As we get older, I don’t see us needing a whole lot, and we don’t see retirement as a time when we’re going to be spending more. We’re just going to be serving more.

And what’s going to make that more possible for the Gammons is the money they will accumulate in the B.O.Y. policies for their retirement. What aspects of B.O.Y. do they credit for this?

Greg:

The thing that comes to mind is the flexibility. It can be tailored to fit your financial situation. It works when you follow the process, and I think that’s one of the things that we’ve really had to learn more than anything else—to just be disciplined to follow the process, and do it faithfully.

We’re living the fruits of the labor that we’ve put into the program, and we really have enjoyed going through this process.

There have been so many side benefits from doing this in terms of the lifestyle changes, the feedback from our children. You can’t really put that on paper. It’s just one of those things that when you experience it you think, “Man, this is awesome.”