Cash-flow Banking explained simply

after grasping the concept that I'm about to show you you will look at things much differently everything from how you save your money how you spend it how you plan for retirement how you invest etc now let me start by sharing a little of my background I have nearly 10 years of experience in the insurance and financial services industry I sold insurance products such as annuities and various investment products such as mutual funds and after doing the research especially on the mutual funds I've learned that these are not performing for the American people and they've never truly worked for the American people I want to explain this more but I'm going to do so underneath two basic headings heading number one will be the history of the stock market and the economy and number two the opportunity that exists within creating your own banking system now let's begin with the history of the stock market and the economy I've received the following data from a good friend of mine Chase Chandler and he's also a specialist within this personal banking concept but the history of the stock market can be divided into three main eras of time and I'm going to show you the data from the dow jones index the first era is from 1901 to 1979 during this era the Dow Jones index experienced a true rate of return of 3.7% the second era is from 1980 to 1999 and the true rate of return during this era is fourteen point zero one percent the last era is from the year 2000 until 2011 within this era the true rate of return was less than 1% the second era from 1980 until 1999 was the highest because that's when everybody started entering the stock market you see in 1980 Congress first started the 401k plan the IRA was instituted a little before this born out of the ERISA Act of 1978 and the IRA became available to everybody in 1980 so during the second market era we have the majority of working Americans pouring most of the retirement savings into the stock market through IRAs 401ks 403b s etc now the reason this is significant is because in 1950 less than 2% of all working Americans owned a common stock less than 2% so when you look at the large influx of money into the market it is no wonder as to why it started to go up this is also the reason why many baby boomers still believe in the market even though this third era performed rather poorly they still remember the second era and believe that's what the market will eventually go back to now when most financial experts talk about the stock market and they are sitting down with their clients to plan for the future they say that you may be able to get an average of 12% over the next 30 years so they come up with the plan and say if you contribute so many dollars a month and dollar-cost average into your 401k you will have say 1.5 million dollars by the time you're 65 the problem that we're seeing today is that there are many people who have reached the age that they had planned on retiring at and their finances are only around say 300,000 instead what's going on here well what's going on is that they are looking at the average rate of return for those mutual funds and not the true rate of return that I mentioned earlier allow me to be blunt on this the average rate of return is a lie it's not real many advisors do not know this but let me show you what I mean if you have $100,000 and you have a 50% increase in year one how much money do you have one hundred and fifty thousand dollars right well if you have a 50 percent decrease in year two how much do you have then if you were to say $100,000 I would encourage you to take this more slowly you actually have seventy five thousand dollars if you remember the original 100,000 we started with it increased by 50 percent in year one and we had 150 thousand in year two this one hundred fifty thousand decreased by 50 percent and we then had 75 thousand dollars now if we were to look at what our Aradia return is on this money we would have experienced a 0% average rate of return but wait we lost $25,000 or 25% over two years this is exactly why the average rate of return is nonsense the number that you will want to look at is the true rate of return also known as the compound annual growth rate or the kegger if we look at the past two years in our example and apply our kegger for a true rate of return we learn that we had a negative 12.5% kegger each year which is equivalent to a negative 25 percent now grasping this concept is absolutely critical this is the exact reason why the baby boomers are waking up today and looking at their retirement accounts and wondering where is all my money this is where it gets interesting even though the stock market has earned an approximate average rate of return of seven and a half percent or so since its inception the true rate of return from 1901 to 2011 was only five point zero six percent and when you consider in taxes and fees this number quickly gets reduced to three percent now we are at the heart of the problem a three percent return is much different than a 7.5 percent return now from what any investor can examine from the market we all know how it moves it moves up down sideways etc if you can see this visually and compare it to an exponential yield curve you learn an important principle that you must grasp for cash flow banking and it's this the biggest inhibitor of building long-term wealth is interrupting compound interest let me say that again because if you fail to grasp this the entire concept will not make sense the biggest inhibitor of building long term wealth is interrupting compound interest if you can grasp this in other concepts that I will be putting forth you will know more than 99% of all insurance agents and financial advisers ok let's look at the last of the three arrows now as we do it's important to note that all markets strive towards equilibrium that's just what they do it's their job our markets right now are vastly overvalued they are trying to seek a large correction but our monetary policy will not let them in 2008 they really tried to correct but due to quantitative easing we are not letting them we are in the midst of the largest monetary experiment in history and it has never worked so the markets are extremely overvalued and by printing more money we're going to continue to see inflation at work asset prices will go higher than the reported consumer price index and it's going to be harder and harder to grow wealth especially if you have a mutual fund earning a true rate of return of 3% while inflation is at 5 or 6% now I want to talk to you about some banking principles at this point these principles are important to grasp because we will need to understand how they work in order to implement them within our own conceptual banking system the first banking principle is leverage and when you think of leverage I don't want you to think about debt I want you to think about using someone else's money to build your wealth we see banks do this all the time as they lend out the money of their depositors money that isn't theirs to various borrowers the bank will pay out a small amount of interest to the depositor and collect a larger amount of interest from the borrower this is the principle of leverage the second banking principle is velocity and with velocity the question that I want to ask is how fast are you moving your money because the faster you can move your money the greater you will be able to grow your wealth banks implement this through the number of bank loans they lend out if they can take the money that they are receiving from their depositors and even their borrowers and loan it out just as fast they will receive a higher and higher return on their money as it is working for them in many places at once the third banking principle is cash flow and with cash flow I want you to think about a payment system when banks have many borrowers they have many streams of payments coming into them and the more cash flow that they have the more loans they can lend out to increase their cash flow at an even greater amount okay so now that you have a grasp on these banking principles keep them in mind as we will need to apply them to our personal banking system a little later now I want to dive into how the cash flow banking system works in doing so there's an example that I want to use as an intro that will help illustrate how powerful this system really is again I heard this from my good friend Chase Chandler when it comes to cash flow banking this example compares the legacies of two men Cornelius Vanderbilt and M shell Rothschild let's start with Vanderbilt he was basically the Bill Gates of his time he built much of the transportation system in the United States and he was a very wealthy individual he died in 1877 and he left his family with 104 million dollars now it's interesting but in 1972 they had their first family reunion and he had 120 descendants who were alive of these descendants there was not one single millionaire left now compare this to Rothschild he passed away in 1812 and he made his money in the banking industry when he passed away he left behind a family banking system with three rules and in describing these rules it's important to note that this was a conceptual family banking system and not an actual chartered bank so the first rule for this family bank was that if you needed money you would take out a loan and pay it back with interest the second rule is that the knowledge gained for any business venture had to be shared with the other members of the family so you had to write down and share your wisdom of what you had learned with both your immediate and extended family members the third rule was that the entire family had to meet once a year in order to reestablish their family values and their principles okay time for a question from Rothschilds descendants how many millionaires do you think are left from his dynasty today answer all of them now I hesitate to esteem that as I do not want to create a type of greedy person who only thinks about money but I strongly feel that implementing these principles can help you and your family create a powerful dynasty of stewards and we create an immense resilience against the economic bubbles that exist all around us so as we examine the sale illustration it's easy to see that most financial understanding today is done like the Vanderbilt family and not like the Rothschilds okay let's now take some time and examine our conceptual banking system as with any system there are rules that need to be applied in order for it to flourish when you take a loan out just like the Rothschilds did you have to pay it back with interest this will cause the money in the banking system to increase as well as a compound interest that it's earning now remember I cannot say this enough we are not talking about becoming an actual institutional bank you simply want to incorporate these banking principles into your family bank and essentially imitate the Rothschilds this concept is 90% education and 10% product now as your bank becomes capitalized we need to remember that this is simply a holding tank for our money I cannot stress this enough it's where your dollars live when they're not working for you somewhere else and as your money is housed in this holding tank it's your goal to find cash flow assets as investment opportunities where your money can earn better returns there are many ways to do this in some like real estate so let's say that you capitalize your bank and you eventually decide to purchase a vacation condo and as a side note many people who are younger may be thinking that it would take a really long time to build up enough capital in your bank in order to buy a vacation condo on a winter ski resort or a nice lake for a summer rental and while I would agree with this I would respond to it in two different ways first of all the real estate bubble 2.0 is here and when the next crisis hits and credit contracts as it did in 2008 there will be many affordable deals available to scooped up and you would be surprised how affordable some vacation properties will be secondly what if you started a family bank with your siblings your parents your aunts or uncles if you would treat this as a family bank and even a family business you would be surprised how quickly the funds within this Bank will grow just like the Rothschild family Bank did okay let's keep going now even though you can and should borrow from your banking system for college tuition vehicles and other items the concept works the best with cash flow assets and your goal is to buy an asset with this holding tank of money and try to earn a higher rate of interest on these assets then where you create more wealth is when these loans are paid off and you have an increase in cash flow coming in and the size of your family Bank continues to increase in value and creates a huge snowball effect now I personally like real estate during these interesting economic times and this would work well with both inflation and deflation if you watch our first lesson on the economy with Richard Duncan he points out that one could raise rents during inflation and decrease them during deflation since things when it costs as much during a deflationary period it is a rational and somewhat safe strategy ok so as far as I have studied through our two main reasons to do this and the first one is obvious to build wealth for you and your family secondly and this is a tad more complex this can be seen as a grassroots effort to destroy the inflation problem if you like to further your education on this there is a great resource that you can purchase at banking with life DVD comm it tells us about the two major contributors to inflation today the first one is somewhat obvious and it's the Federal Reserve printing money but the second one is actually a larger problem and not too many people are aware of it it's called fractional reserve lending and it's the process by which banks create money through loans the idea is that they can loan out of the 90% of the money their customers deposit in their banks so if someone puts say $10,000 in a bank they can loan out $9,000 of that money and earn interest on it when their customer goes out and purchases a car say from the person down the street the seller can go and deposit that $9,000 back into the bank and then the bank will go ahead and lend 90 percent of that deposit out which is 80 100 dollars this process will continue and continue until this initial $10,000 deposit creates a staggering $100,000 this is real money and whenever there is an increase in the money supply and more you of currency that chase after a limited number of goods the prices of these goods go up this is inflation okay let's get really specific now if we create this holding tank of money for our family bank there are some characteristics that it has to have first of all it has to be safe the money has to be highly liquid there shouldn't be any penalties to access its money there should be tax advantages guaranteed growth and we should have some sort of confidence to know that even if the stock markets crash again as they did in 2008 that we would not lose any money now where can we find this tool would a mutual fund qualify no a CD or an IRA or what about a 401 K they would not qualify either now the true rate of return that our family bank will earn if it's structured properly is around four and a half percent this money grows differently than any other asset the most efficient vehicle to use in this situation is a specifically designed cash value life insurance policy and this is not just any type of policy it's not a traditional whole life contract and it's not a traditional universal life contract it is most specifically what is called a low commission high cash value whole life insurance policy this is not something that many people have heard about again it's a low commission high cash value plan and I would go so far as to say that 95% of all insurance agents and financial advisers are not aware of these plans or how they work you see the bank's approach the insurance companies in the early 1980s and they said they really like the whole life insurance plan except that the agents made a lot of money and commissions on it and traditionally these Commission's are pretty high but that doesn't negate how valuable these policies are as these were all that were available at that time now you can pass a death benefit amount to your beneficiaries tax-free but the bankers didn't want to pay these large commissions so the life industry came back to them and said that they would reduce the Commission's by about 80 percent and in turn the bankers could only have access to about 80 percent of money in the first year well the bankers love this and while there are many reasons as to why this hasn't taken off in the mainstream today I feel that the most prominent is this people today are not taught to think long term the bankers who approach the life insurance industry on the other hand were capable of thinking long term and they love this because they knew that over a long period of time their money would grow and it would grow safely in many banks Bali or bank-owned life insurance is where they placed their tier 1 capital and tier 1 capital is just one of the gauges that they used to show how safe and healthy their bank is this is true of JP Morgan Chase Bank of America and other major banks all over the world because banks are the largest purchasers of cash value life insurance now I do specialize in structuring and setting up these plans in the 1980's many of the super-rich and many of the banks were using these policies to invest a bunch of cash into and they were taking a loan out against the policy right away in investing in real estate companies so the government knew that if they turn this into a long-term asset it wouldn't pay off as much for the investors because we live in an instant gratification society today when we set up these plans we only have access to about 60% of the capital in the early years so we're giving up some liquidity early on but if we look long term we're looking at a historic five to six percent true rate of return over the next 30 years now remember and this is important in the big picture while these returns are great we are not really too concerned about them remember our primary concern is that this family bank serves as a holding place for our money where we are going to earn a safe and secure return and then use this money to take advantage of cash flow assets and replenish our bank for us and provide us with larger returns elsewhere now I will be providing specific analysis using specific numbers in future lessons but it's important to restate that your money grows on a compound interest basis and it cannot go down over time this is guaranteed and it's important to note that these guarantees have beat market for the last 50 years now it's also important to note if you are interested in moving forward with this concept that there are a few final items that you should be aware of first of all you should only do business with a mutual company I will provide contacts in my rolodex of people who can provide these for you besides myself but let's briefly talk about this importance right now if you do business with a mutual company you end up becoming a part owner of that company you will be given voting rights for annual meetings if you would so choose to attend and you'll receive a share of the profits of the company in the form of dividends now through various economic crises world wars the Great Depression and the crash of 2008 the majority of mutual companies have never missed a year where they haven't paid a dividend they are profitable and they share these profits with their policyholders publicly traded companies or stock companies on the other hand are not often very profitable the reason for this is because they are often forced to take unhealthy risks due to their clients demanding higher returns and this usually ends up with a poor performing portfolio now when you're comparing 3 percent to 6 percent interest within a policy for a mutual company I want to point out that while this is important it's not the most essential point to focus on remember this is just a housing vehicle for a money where we will be looking for deals to earn 20 or 30 percent somewhere else remember this this is simply where our dollars are going to sleep secondly if you do go with the mutual company it's important to talk to a professional who has set these plans up before and has experience with them there are ways to improperly structure the policy from day 1 which will cause problems down the road in regards to cash accumulation try to remember this this is very important number 3 the guarantees given by the mutual companies have beat the market for the last 50 years now it's not my goal to compare the whole life policy to other investment vehicles because if we're truly going to apply the conceptual family banking principles and treat it as a holding place for our money we would be missing the point in comparing it to other vehicles but if we did want to go down that path it still wins and they have guarantees most advisors do not know about this and those who do tend to shy away from it as it results in a large commission cut for them as opposed to mutual funds and other financial vehicles so when you compare this to the market and you take into consideration the compound growth and tax-free nature of the banking system you would have to earn an average return between nine and ten percent in the market to equal your life policy but remember we do not care about average returns we are interested in the compound annual growth rate and there is a huge difference number four it's important to note that you can create this banking system all by yourself but if you really want to see it grow quickly I like the principles that the Rothschild family have adopted in order to make a personal banking system into a family banking system so if you have a few like-minded siblings uncles aunts etc who can adopt the same vision with you it would allow the capital in your bank to grow much more quickly because if you think about it it would be easier for my siblings to compile enough money for a nice vacation rental or an apartment complex together share the profits and allow the rents from our tenants to pay off the loan and increase the cash within our family bank then it would be for me to fund it all by myself remember this is all about applying velocity leverage and cash flow all at once when all three of these are applied your money will begin to snowball at a very fast rate in closing this lesson is all about education and I know that watching this video clip may not be enough to fully grasp the concept remember my purpose in educating others is not profit driven it's missional I want to see the wealth go back to the people and to be taken away from the big banks this is one way to accomplish this so if you are not interested in talking to me about implementing this concept please talk to someone else who understands it if you can't adopt the banking principles and stay disciplined it could change your family's financial future for generations to come I encourage you to question this lesson disagree with it and ask me or other qualified professionals you'd like about it I know from experience that if your advisor doesn't understand it they will negate its validity but it's important to start your education now if you're like me you have to be concerned about the future of our economy right now if there comes a day where the dollar gets to be in serious trouble of collapsing you could always take your money out of your family banking system and invest in tangible assets then as those tangible assets retain their value or increase in value as we wait until a dollar is either stabilized or the currency is restored you will recapitalize your family banking system once again from your cash flow assets and it continue to grow your wealth for yourselves and future generation

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Keywords: cash flo, Banking, Cas flow banking, financial education, financial literacy, learn accounting fast, business, skills, learn accounting, accounting questions, Financial courses, online finance courses, business intelligence for management, Investing for beginners, personal finance education

Id: UVln0hmf62Y

Length: 25min 53sec (1553 seconds)

Published: Sun Aug 24 2014