Banking On Yourself | Manage Your Money The Grandma Way | Amanda Neely

Great to be here. Thank you for having me.

Yeah, and it's a great question. So I think the best way to answer that is to tell a little bit of my story. I started working with actually a former guest on your show, his name is Mark Willis, and a little around 6 years ago. And he was the first one introduced me to this concept. And I've never paid Mark a dime. My money has never gone to him. But instead, I have shifted some of my financial strategy, some of where I was putting my money, into this Bank on Yourself program. And I've been using it. I paid off my student debt. I got through a really rough time in my business. We got out of business debt as well. And it's really helped transform how I think about money, what I'm doing with my money, and put me in a much better place financially. And that's why I decided to make this my second business after my first one I sold it.

Yes, exactly. My background, I was actually, I came out of college working for a non-profit was my first job. I was ready to change the world. I decided after a couple years of doing that that entrepreneurship was really how I wanted to change the world. And my husband and I opened up our first business. It was a coffee shop. So my background very much in, you know, social change and coffee. And then decided that really liked helping people figure out what's happening with their money can also help transform them and transform the world. So it's kind of a continuation of my dream there.

There has been lots of formal training, both like this on state levels and with certain companies that we work with. And then with the Bank on Yourself division, I've gone through lots of training with them as well.

Yeah, so people that are my generation, when we think about our grandma, that would have been the Greatest Generation typically, is who our grandmas were. And our grandmas came of age during the Great Depression, and they had to figure out financial tools, how they were going to manage their money in that atmosphere, which happens to be very similar to the atmosphere I came of age in during and after the Great Recession. And I think there's been a lot of really cool things that grandma did that have stood the test of time. They've actually been around for hundreds, if not thousands of years, that can really be applicable now, not just the latest and greatest supposedly greatest products out there.

Right. Yeah, it's funny when you say traditional approach, what most people think of is 401ks, IRAs. But those haven't been around very long, you know, the early 1980s is when the first 401ks were started. So the real traditional products are things like whole life insurance and annuities. But actually, in grandma's day, about half of Americans had whole life insurance. And the difference there is that your money is not going to an investment firm or a bank. It's going to a life insurance company. What they do with that money is very different, and how it makes your money then do very different things depending on who you're giving it to to help grow it for you.

That's a great question. So there are multiple different factors. Because there are a lot of people that still have whole life insurance. I've heard that it's still the most popular type of insurance, even though you might think term insurance for your life insurance is more popular. Congressmen and presidents have had this particular kind of whole life insurance. So I think it's more popular than people realize. But because it's a private contract between you and the insurance company, it's not available in public records. But then the other factor, which I think is really important, is that the commission that I take as a life insurance agent, especially for how we design them to do the Bank on Yourself type whole life insurance policies, the commission is 50 to 70 percent less than the commission for even just a typical life insurance agent. And even that is way less than the one and a half percent that you might pay for assets under management to an investment firm. So most people going into the financial advisor field aren't going where they're gonna make the most money.

Yeah, what I would say is that this allows you to still do those other things in a safer, more predictable way. So there are people that first put their savings into a whole life insurance policy. Then when they see a really great opportunity in the stock market, they can actually access a portion of what they've set aside in their life insurance policy and go buy those stocks. And then when they're ready to sell those stocks, they can sell them and put the money back into the life insurance policy. And meanwhile, their money that's within the life insurance policy still continues to grow as if they didn't touch it, because they're with a mutual-based life insurance company. That's what's called non-direct recognition. So they're not directly recognizing your cash value; they're giving you those funds from the general fund instead. So that's one fun thing. You can still get the big returns, but you have this foundation of nice, consistent, reliable growth within your whole life policy too.

There is some concern with that. That's a whole can of worms that we could talk about. Probably the biggest concern is what the insurance company does with the money. About 70 to 80 percent of their funds are in investment-grade corporate bonds. And if people know this market at all, we know that corporate bonds and bonds in general have really low interest rates right now because the interest rates are low for everything. So there's the risk that if interest rates stayed low, there wouldn't be a big return within these kinds of policies. One thing that I am comforted by is that bonds are typically held for 30 years. So my life insurance company most likely has bonds that are about 30 years old, maybe 20 years old, and interest rates were a lot higher then. So I'm still getting the benefit of that. And as the current bonds mature, hopefully interest rates will rise, and they'll be buying new bonds, and I'll get those rising interest rates. And they just have massive amounts in their general fund, so that helps to offset whatever. And they also have a business model that they've perfected over hundreds of years too, that helps a lot to offset any of those things.

Yeah, each company issues an annual report that is available typically on their website. And you can see it broken down. If you wanted more information than what they even break down there, I bet you could get it if you ask for it, especially if you are a policyholder, because the kinds of companies that we use for Bank on Yourself are mutually owned. As a policyholder, you're an owner of the company. You better be able to find out those kinds of things if you want.

Yeah, well, I actually consider myself better than debt-free. So I took out, I'll just use the student loans as an example. I took out a loan from my whole life policy and I paid off the student loans. But because my cash that I'd built up there is still growing as if I didn't touch it, it's actually earning a better rate of return than the interest that I'm paying on that loan back to the insurance company. So I'm positive on those funds. And I think that's better than just being debt-free. There's so many people, you know, they're debt-free, but they don't have any wealth growing for them. Once you pay back the student loan company, you never see that money again. They're not going to give you a new loan just because. Whereas this is a dynamic fund that's continuing to grow and continuing to see benefits from for the rest of my life.

Yeah, anything that you want to do with the funds, you can do. You could go buy a car, you could pay for your kids' college, you could buy a home, invest in your business. It's your money. You just tell the insurance company, here's how much I want, here's my signature so you know it's me, and they send you the funds. And you can do whatever you want with it from there.

Yeah, we actually do that kind of analysis with people all the time, where I say, let's look at maybe you use one of those popular methods for paying off your debt, like the snowball method or the avalanche method. And we can help run those numbers, show you what that could look like. And then let's compare what we're starting to call the snow bank method, where instead of just putting that extra money toward your debt, you put it into a Bank on Yourself policy first, and then you pay it off when the balance is equal. And then let's see, maybe it takes you longer to pay off your debt, but what does that mean for your retirement in 30, 40 years, or 10 years, or however long retirement is for you? What's the difference? And kind of not just comparing how quickly and how much interest do you pay, but also what can those funds grow to?

Awesome.

Yeah, I mean, it's kind of human nature that we want what we want and we want it now. So we go and we buy what we really can't afford, and that puts us in a situation where we have to go into debt. In my case, I think this is true for a lot of people as well. I subscribed to Suze Orman. I thought she was the end-all be-all of finances as I came out of college. I bought one of her books, like I'm gonna follow all that she says. And it was really only because I allowed myself to be open to other ideas that this idea of banking on myself, becoming my own source of financing, really hit me and allowed me to be open to it. If I had probably heard of it without having an open mind, I would have said, well, Suze thinks whole life is horrible, I'm not gonna even listen to that. But unfortunately, a lot of people, they listen to Suze or they listen to Dave, and if anyone says anything contradictory to them, they just ignore it. So, you know, I'm sure there are other gurus out there, those are the two most popular that I've come across. And so I think in some ways, a lot of people are just listening to what everybody else does and what everyone else says, rather than taking the time to find the truth for themselves.

Absolutely, that's a really awesome concern. You're asking the right question there with taxes. And some people call this strategy the rich man's Roth, or I would say rich woman's Roth. Unfortunately, Roth is Mr. Roth, he was a congressman that passed the Roth IRA in 1996 or '97. So it's kind of weird to call this the rich person's Roth. But it works very much the same way. You pay the taxes in advance on the money that you put in. And then if you do everything correctly, follow all the rules and guidelines, you can access the funds and use them tax-free throughout your lifetime.

Yeah, there's some really interesting strategies for business owners and entrepreneurs. In fact, I wish I would have known about this strategy before I started my first business. It would have been a lot better. But I mean, a lot of the reason that businesses fail is because the owners run out of money. And this getting your personal finances in order, having a savings, having that nice solid foundation that a whole life insurance policy can give you, can really set you up then to do some really awesome things in your business. And there's some cool ways within your business to make sure, like let's say you're taking on an investor and that investor is gonna give you maybe it's a loan, and they want to make sure that their loan is paid back. You can actually use your life insurance as leverage, where if you pass away, they're gonna get paid back. Or if you have a partner, you know, if you pass away, your partner might not want to work with your significant other who would inherit your shares. Life insurance can be a cool way to have your partner receive a benefit when you pass away to then buy the shares in the company. There's all kinds of cool things you can do there.

Yeah, so I was actually really excited when I first heard about your podcast with Bootstrapping, because that's exactly what we did to grow our first business. And we wrote our first business plan in 2008. We sat on it for a year, and then in 2009 we actually started pursuing it. Not a great time to be starting a business, but we didn't know any better, so we just figured it out. And we exactly, you know, sold coffee, did events, and invited people, and really liked to get the money we needed to buy all the equipment and do all the startup. And it took us till 2011 to actually start. Maybe one of our mistakes was not pursuing bigger funding from bigger sources. We didn't really have assets that we could leverage to get a loan from the bank. We didn't have a home that we could use as collateral, and we still had tons of student debt ourselves too. So it's not like we had a rich uncle or anything like that either. And so kind of the failure there is maybe we just decided to scrape by the skin of our teeth and make it happen. But it was a strength. I know Daymond John talks about that a lot, you know, start broke and you're gonna start in a lot better place than someone that starts with a lot of money. But then after we got started, we stayed in that broke mentality, and we continued to act like bootstrappers, and I think to our detriment for a while. And to start thinking, spending more on marketing, you know, maybe hire more quickly, stuff like that. I think there's a fine balance from how you start broke but don't act like you're broke the whole time. So we ended up selling the business after six and a half years in operation. And it's a really great nonprofit that's now running it. And actually they're having to restart it because the building that kicked us out, but they're doing a great job of restarting. And in some ways, by selling, they're taking the mission and what we were trying to accomplish to the next level because they have a 30-year history. They're not in that broke mindset. And I'm really excited about the future of that brand and what's going to happen with it going forward.

Yeah, so there's not a specific age. Actually, my one-year-old already has a Bank on Yourself type policy. Obviously he's not paying for it, someone else is. But also, when you're in your 20s, finished college, they're gonna be looking at what, and if you're paying for it yourself, they're gonna be looking at how much income are you making, can you afford to be putting this money into the policy? I think just like a Roth IRA, if you're not earning any money, you can't put money into a Roth IRA. It's gonna work very similarly. But as soon as you have an income, as soon as you have money that you want to be saving for your financial future, whether it's short term or long term, absolutely you could start a policy.

Yeah, we have a couple different ways that we can go about it. Say you knew what death benefit you wanted, we could say here's how much premium you'd have to pay. Let's say you knew when I turn 60 I'm gonna have this much income from it, we could say well this is how much you need to put in. Or we can start with here's how much I can save on a regular basis, and then we can build it from there. And we custom tailor every single one of these policies to the individual or to the couple, depending on what their goals are, what their situation is.

Yeah, it's a little over a year ago that we had our first episode come out. But I've been a content creator since 2009 when we started actively pursuing that first business. Did a blog, a video blog, I've had another podcast. But this one for the year, what is the name of it? It's going really well. It's called Grandma's Wealth Wisdom, and we have a lot of fun with it. Where I am sort of an information hoarder, I love to hoard information, and this is really the way that I grow by helping share that information with others. So it's kind of my maturing and how I become a better person. So in that way, it's really helping me a lot. But I've also gotten really great responses from the people that are listening, that are learning so much and being connected to information that they're like, I can't believe I've never heard this before.

Yeah, so we don't get paid for the podcast. We don't do any advertising or anything like that. We actually get paid for success. So when we find strategies for people that they love and that they want to implement, whether it's Bank on Yourself or whether it's something different, we make money when we have that match happen and they say I want to do this, I love it. Kind of like affiliate marketing. We don't recommend products that we don't use and love ourselves. But at the same time, we don't actually collect money from the individual. They pay the same amount that they would pay otherwise, and then we just get a portion of that sale because of our contract with the companies. So it's more like a lead generation or marketing tool. And again, it's helping me grow as a human being too.

I definitely believe in content marketing in some way, shape, or form. What I would recommend is whatever way you consume information. So if you love YouTube and that's where you go instead of Google to search for the answer, or if you listen to tons of podcasts, or if you like reading blogs, create the content in a way that you are also consuming it. And you'll create better content and you'll reach people who you really connect with. But if you're not creating content, it's hard to then connect with people. So think through who you want to connect with, how you naturally consume content yourself, and then create content in that way.

There's a lot, right? So I think the biggest thing that people are doing is just doing what they've been told by the HR person at work or their peer from college, their college roommate, whatever that person is doing or told them to do. They just do blindly without thinking through, is this really the best thing for me? Does it match with my values? Does it match with my goals? And if you take the time to do that, and do that with somebody who's gonna help you think through that, not just try to sell you a product, it can totally transform the future, as well as how you feel about your money right here and now.

Yeah, maybe so. Sometimes when people hear the words Bank on Yourself, especially if they're like me, they may be a millennial and I want to live in a connected world where everyone is benefiting each other and I'm connected with them. You know, does banking on myself seem too independent, self-reliant kind of thing? But actually, because we're using mutual companies, and if you look at the history of life insurance, it's some of the most connected ways you can operate with your money. Life insurance was started because two people came together and said, I'll take care of your family when you pass away if you'll take care of my family when I pass away. And people started becoming bigger and bigger groups. I want to be connected in that kind of way with other people, as long as I benefit too. And to be part of that kind of story, rather than patting the wallets of people that got us into the financial crisis in 2008 in the first place, and they're probably going to get us into the next one. I mean, that really aligns with my values and how I want to operate in the world with my money. And if that's all you get out of this conversation today, is thinking a little differently about how you're connected with others, I think that would be the most important thing.

Yeah, so our website is grandmaswealthwisdom.com. And you can check out the podcast there. Or even better, there's a Request a Meeting button you can click, and schedule a phone call with me. I love talking to people on the phone, getting to know you, hearing what your values are, answering any questions that you have. So you can schedule a 15-minute phone call there, and we can see how I can help.

Thank you. It's a pleasure.