How Important is Liquidity, Control and Protection of Your Money, TO YOU?

LIQUIDITY

I have heard so many stories lately I have come to realize that liquidity of our money should be a high priority in our financial plan. There are multiple reasons why we should keep our money liquid but first; here are just three of the many real life scenarios to demonstrate my point.

Scenario 1.

A man owned two properties. One in New York City and another in Boston Mass. Obviously they were worth well over $500,000 each. He also had $200,000 in accounts he could access. He felt successful and wealthy and comfortable about his finances. Recently though, he found he had a major health issue that prevented him from working and that cost a lot of money to care for. He thought that the equity in his real estate was a liquid asset, however, when he applied for a loan to help cover his medical costs he was denied one because, being unable to work, he no longer had an income to pay the money back to the bank. So the equity in his home was not really liquid after all.

Scenario 2.

The 2005 Hurricane Katrina disaster caused so many financial issues for so many people including those whose homes were fortunate enough to not be destroyed by the water. One person had their $300,000 home paid off and was living very comfortably and feeling very good about about their finances. His neighbour still had a mortgage but he also had $200,000 in savings set aside. The value of his house was also $300,000. Both had their homes insured and so after the disaster presumed that they would be receiving an insurance settlement of $300,000 which was the value of their home.

The insurance agent went to the first neighbour and told them that the company bases the value of their property on the surrounding area prices. Well, most of the surrounding area homes were under water and so he valued neighbour one’s home at $150,000.   So, right off the bat this family lost $150,000.

Secondly, because they had spent all their extra income paying off their mortgage, they had not saved any money for an emergency fund. When they asked the insurance rep. when would they be able to lay their hands on the $150,000 his reply was that because it was a natural disaster, they had 6 months before they have to pay them the money. This left them without accommodations, without work, without food and without any money to rent somewhere to live.

The second neighbour however, because he had money in an account that gave him easy access, when he was told the same story by the insurance rep., (his home value is now only $150,000 and they would not see any of that money for six months), they were OK, or not so bad off. Because they had some liquid money, they were able to relocate and rent a small place, buy necessities and start up another business to create some income, they were prepared for rebuilding their lives straight away.

Scenario 3.

My friend’s brother’s friend owns two five million dollar homes, one in Manhattan and one on Long Island. They have four million dollars of equity in each home and only owe one million on each mortgage. That means they have eight million in equity and owe two million still in mortgage debt.  Both husband and wife have great jobs.

However, recently the husband became sick and can no longer work. The wife’s income all though very good, is not enough to pay the monthly mortgages. They also cannot sell the properties in this market. So with eight million dollars of equity they are going to lose both their properties. The mortgage companies have absolutely no compassion for anyone. In fact, the more you have paid off, the more likely they are to foreclose on you rather than make a deal. I am not saying that owning real estate is not a good investment. Not at all. What I am saying is if you are relying on your real estate to pull you through hard times, the equity may not be as accessible as you think.

We are taught to believe that our home is an asset, when in reality it is a liability. Unless you are earning an income greater than your total outlay, from your home, your home is not an asset. Paying down the mortgage doesn’t lower your monthly payment, it takes a highly liquid asset — cash — and converts it into a highly illiquid asset — home equity. What about those who are retired and no longer earn an income? They thought because their home was paid off so if they ever needed extra money in their retirement they would be able to borrow against the equity.  However, once you no longer are earning money, you are no longer eligible to borrow money because you can no longer pay the money back to the bank.

One should consider planning to build liquid wealth while paying off debts. You do this by using the Becoming Your wn Banker Concept. Ask me how today. Always make sure you have a huge emergency fund before you start paying back your mortgage with principal only payments.

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CONTROL

Of the following five investment markets, how many of them do you control? Stock Market Bond Market Gold Market Silver Market’ Real Estate Market Answer, None, Zip. Who is in control of your money in these markets?  Who cares, it doesn’t really matter who, because if it is not you, you have a problem. Wealth has to reside somewhere though right, so what characteristics constitute the best type of investment in your eyes? I know what does for me, and it is not really an investment. It is described in Internal Revenue Code 7702.

What is so special about this IRC 7702? It the tax code that describes the tax advantages we can use to our benefit in a cash value whole life insurance policy with a mutual company. Some of them are as follows:

* This vehicle allows me to stop the transfer of my money out of my financial circle of wealth so it recycles back into it instead. I always say cash is green because it is meant to be recaptured, reused and recycled over and over again.

* I can enjoy some of the profits that are similar to what my local banks make.

* Asset protection. For business owners this is a huge benefit. It is for regular individuals and families also. You can keep your money safe from bankruptcies, judgments and lawsuits. Not all states offer the same rules on this so look up the rules in your own state.

* How about you are in full control of your money. No restrictions on how you use your cash value. No penalties for early or late withdrawal. No threats of damage to credit scores if you miss a payment or two or three or four or more on your loans.

* And one more worth mentioning is you can sleep easy at night knowing you are not just creating safe, guaranteed, wealth for your current immediate family but also for your grandchildren, and their children and so on.
* Real tax advantages. More than you can possibly believe are available.  But they are. And I don’t just mean tax-deferred advantages, I’m talking about TAX FREE.

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PROTECTION

Here is a wonderful true story told by U.S. Supreme Court Justice, Louis D. Brandeis (1916-1939) to help us understand tax choices.
“I live in Alexandria, Virginia.  Near the Court Chambers is a toll bridge across the Potomac. When in a rush, I pay the dollar toll and get home early.  However, I usually drive outside the downtown section of the city and cross the Potomac on a free bridge.
The bridge was placed outside the downtown Washington, D.C. area to serve a useful social service – getting drivers to drive the extra mile and help alleviate congestion during the rush hour.
If I went over the toll bridge and through the barrier without paying a toll, I would be committing tax evasion. If I drive the extra mile and drive outside the city of Washington to the free bridge, I am using a legitimate, logical and suitable method of tax avoidance, and I am performing a useful social service by doing so.
For my tax evasion, I should be punished.  For my tax avoidance, I should be commended.
The tragedy of life today is that so few people know that the free bridge even exists.” Internal Revenue Code 7702 is the free bridge that exists, even today, for protection from some of our tax burden.

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Does this list of characteristics fit in with your idea of how you want your finances to look? Here is what I like……
* I like having control to create my own markets with banking. I can create wealth withOUT investing, withOUT risk.
* I like being in control of  how and when I choose to spend/borrow my money.
* I like being in control of how much interest I pay or charge on loans.
* I like knowing my money will be there when I need it and want to use it.
* I like being in control of the growth of my money and the flow of my money back into my own private circle of wealth.
* I like knowing that money is safe from lawsuits, judgments and bankruptcies.
* I like having guaranteed growth and guaranteed no loss of principal.
* I like owning my own privatized banking system and therefore earning the profits that normally someone else’s bank earns.
* And most of all I like not having to worry whether we are in a bull market or a bear market because it does not affect me. I know my money is in the safest possible place for it to reside, available today, while hardly affected by the market ups and downs. And I can be assured of this safety because of the 200 year track record preceding my use of this financial vehicle.
Check out my offer to you right now and start the paradigm shift of your financial education. You earn it, so take the time to learn more about it.
It is most important that you have an expert show you the best and most efficient way to set up your IRC 7702 so make sure you speak with someone who knows what they are talking about. I have surrounded myself with many mentors and experts in this field and so I have the resources that can make sure you are taken care of properly.
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John Adams, one of our Founding Fathers said….
“All of the perplexities, confusion, and distress in America arises from the downright ignorance of the nature of coin, credit and circulation.”
Allow me to share with you what I have learned and then you can decide for yourself.
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September 18, 2010 · Jennifer · One Comment
Tags: , , , , , , , , , ,  · Posted in: Benefits of Permanent Insurance, Liquidity-CONTROL-Protection

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