Category: Advisor Resources

Borrowing Against Whole Life Insurance at a Bank

This post originally appeared as an article on Kim Butler’s Partners for Prosperity website at www.partners4prosperity.com/collateral

We thought this to be valuable information to also share with the Truth Concepts community. 

 

We get many questions on using life insurance policies with cash value as collateral for bank loans.

First, you can ONLY borrow against a policy with cash value, such as whole life insurance. You cannot use this strategy at all with a term insurance policy.

Often, local (as opposed to large/national) banks and credit unions will lend against the cash value of life insurance. So you may want to start with your local banker.

Additionally, the banks listed below have been referred to us as providing this service nationally. Please contact them directly for more information.

Loan-to-value limits are usually 80 or 90%. (You could borrow up to $80k to $90k with $100k of cash value as collateral.) Bank rates are often lower than the interest rates for policy loans, with current rates as low as prime.

Brittnay Wittnebel
Kensington Financial Associates
2875 NE 191st Street, Suite 603
Personal AND “Direct to Business” loans
OK to use multiple policies for collateral
Kensingtonfa.com
Aventura, FL 33180
(305) 466-0577  ext. 102
(608) 346-3205

Kensington Informational Flyer

Brandon Miller
State Bank

Lines of credit from $20k
Georgia
Brandon.miller@statebt.com
404.290.0050 (cell)
404.239.8664 (office)

State Bank information flyer

Matthew Hale
Heritage Bank

Greater Atlanta Area
matthew.hale@heritagebank.com
404.933.5144 (cell)

Patricia Davino
Valley National Bank

1455 Valley Road
Wayne, NJ 07470
PDavino@valleynationalbank.com
(862) 261-3065 (direct)
(973) 934-5886 (cell)

Kathy Smith
AVP, Portfolio Manager
3490 Piedmont Road NE, Suite 700
Atlanta, GA 30305
404.814.8006 | f: 404.393.9925
kathy.smith@lionbank.com

For more information about how to use your life insurance to benefit you now, see Kim D. H. Butler’s book, Live Your Life InsuranceKim and Jack Burns’ new book,  Busting the Life Insurance Lies.

 

 

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Is Whole Life Insurance a Bad Investment? (Book Excerpt)

In December, we announced the launch of Kim’s latest book, Busting the Life Insurance Lies, co-authored with Jack Burns and James Ranson. Below are two excerpts from the book, one from Part One.

First, we include the conversation that sets up the first several lies and shows how each lie is related to real-world myths and concerns as seen through the eyes of a family. Next, we jump straight to Lie #1, “Life Insurance is a Bad Investment.” This is the first of 38 lies and half-truths “busted” in the book.

A Family Conversation Around the Dinner Table

Kara found herself sitting a few places away from her father. “Dad,” she called across two cousins, “I was asking Mom about life insurance just now, but we got interrupted. How does yours work?”

“Oh no, not insurance!” groaned one of the cousins in between them before Bill Harding could answer his youngest daughter. “As if we didn’t have enough to spend money on already!”

“Right?” put in the other cousin. “And you gotta pay so much to it, it’s a wonder you’ve got any left to live on. I know a guy who only eats ramen because he’s got such high premiums to pay. Imagine having to live on ramen because of insurance! It’s ridiculous.”

Noticing both cousins shoveling down stuffing and mashed potatoes as if facing a three-month famine, Kara doubted either of them could actually imagine living on ramen. She very carefully did not say this out loud. Instead, she looked past them to her dad again. “Dad?”

“Well, K, we have a policy called a whole life insurance policy. It’s–”

“Say, don’t those policies have terrible returns?” This came from Kara’s brother-in-law, Chad, sitting across the table from her. “I hear the way to go is to invest, make a bundle for yourself, and then bam, you’re set for life. You don’t need insurance when you’ve got money invested!”

“You sure about that, honey?” asked his wife, Kara’s second-oldest sister Jeanne. “I thought the safest place for money is in a bank. That’s got to be way better than an insurance policy, anyway.”

“Make more money investing, but yeah, sure, both are better than insurance,” Chad said around a mouthful of turkey. “All the insurance companies are the same: out to take your money. Why do you think they get such big commissions?” There was general nodding in response to this declaration. Kara noticed her father didn’t join in.

“What do you think, Dad?” she pressed on, silencing one of the cousins with a glare when he attempted to interject again. “Well, K, I think this dinner table’s a terrible place to tell you what I think. It’d take me till dessert just to respond to what everyone’s just brought up, let alone tell you what your mom and I use and why. Why don’t we do this: tomorrow morning, after the kids go out sledding, let’s you and me and your mother and Stephen refill our coffee and talk about it then…. I’ll bring the cinnamon rolls.”

Lie #1: Whole life insurance is a bad investment

Probably the first and loudest lie we hear is that whole life is a lousy investment opportunity. People say this one all kinds of different ways:

  • The rate of return is poor, I can do better investing elsewhere.
  • If I buy life insurance I’ll lose out because I can’t invest elsewhere.
  • I have to die to get any value out of life insurance, so I’ll invest elsewhere.

When people hear statements like these, they tend to jump ship and pursue other investments…without actually checking to see if any of them are true or not. And they end up missing out on all the huge advantages that come with whole life.

First of all, we don’t feel like whole life should be called an investment in the first place, because it really isn’t one. It doesn’t actually invest in any market, it isn’t dependent on stock market swings, it doesn’t require a broker or financial advisor to manage it, it has much better liquidity and accessibility, it’s much more likely to pay dividends, it provides a death benefit, its fee structure is very different, its growth is tax-deferred as long as it stays in the policy…the list of differences goes on.

A whole life policy is not an investment, but it IS an asset of the highest quality. It’s a place to store liquid cash that also provides immediate protection benefits. It’s permanent life insurance, AND it’s the best long-term savings vehicle we know of. Not only does calling it a bad investment belie its relatively strong rate of eventual return, calling it an investment at all creates confusion around what whole life is, why you’d use it, and how to compare it to its alternatives.

Now about that return: if the rate of return is bad…compared to what? Once a whole life policy gets some cash value built up, its annual rate of return (AROR) actually rises higher than most liquid vehicles’ rates ever will (savings accounts and money markets). The growth of cash value inside whole life policies settles at about 3.5-5% (depending on age, health, and other factors) as of this writing in 2016. (You can ask your advisor to calculate your policy’s exact rate–it changes each year depending on dividends.)

Now, 3.5-5% may not impress you, but understand that cash value is a liquid, tax-advantaged asset that can never drop in value, like so many other investments. Taking the midrange of 4%, it is actually better than anything you’d get with typical liquid accounts like money market accounts (currently 0.2%) and treasury bills (currently1.7%). And it’s much better than a bank savings account’s return–as of this writing, bank interest rates are sitting just above zero. So with time, the return on whole life becomes stronger than many other options. (For a visual calculator comparing life insurance to an “alternate” account, see Appendix G.)

Plus, don’t overlook the death benefit! This is an immense “return” that a whole life policy gives immediately and permanently as soon as you pay the first premium. Too often, self-proclaimed financial experts, gurus and bloggers neglect to include the death benefit at all when comparing whole life with other assets. Of course, this skews build over time.

There’s nothing wrong with a diverse investment portfolio–we’re not saying insurance and investing are mutually exclusive or that you should do only one at the expense of the other. If you have the resources to do both, by all means do both. In fact, a whole life policy can actually help you invest. Some advisers recommend whole life as a highly effective diversification strategy that can strengthen overall returns and safety while making distributions from market-based retirement accounts more efficient. (After all, you don’t want to have to liquidate stocks when they’re down, do you?)

You can also use your cash value as collateral for another investment, or you can lean on it as a safety net if you run into any investment issues. For instance, real estate investors have a high need for liquidity for repairs, vacancies, and down payments on new properties. Whole life is a fantastic place to grow and keep cash that can be easily borrowed against.

This is why whole life insurance is an “and” asset, meaning you can have cash value for emergencies or opportunities and use it to invest in other things. Compare that to a 401(k) or 403(b) retirement plan as an example. We call those “or” assets, because you can either invest in them, or you can keep your cash liquid. With these products, you’re essentially putting your money in a box and throwing away the key. Try to get anything out of a 401(k) or IRA before age 59½, and you’ll likely pay significant penalties. This is why, if you only have the funds for insurance or investing, we’d recommend starting with insurance. You’ll want to build your savings and emergency fund first so that you don’t end up liquidating investments for car repairs or medical bills.

Not only should you start saving BEFORE you invest, but you may also want to put some protection in place, especially if you have a spouse or any dependents. This is another way that whole life is an “and” asset…you’ll be protecting your income while you’re saving for the future!

Finally, if you’ve been wary of life insurance because you’ve heard that you have to die before you get any value, hopefully you now understand this is not true. While many investment products (even good ones) are designed so that you DON’T have access to your money, whole life is just the opposite. It’s a financial foundation that is designed to be used…your whole life.

If there’s one thing we’d like you to take away from this book, it’s that life insurance is a tool for improving your life, not just covering for your death. No financial vehicle is as useful as whole life for emergencies, opportunities, investments, for providing your own financing, permanent protection for your earning capability, or for your peace of mind.

We hope you enjoyed this excerpt from Busting the Life Insurance Lies! Kim uses books in her practice to leverage her time and educate clients, often in combination with Truth Concepts (especially the Whole Truth videos in regards to life insurance returns or comparing mortgages, as she explains in our last post.) 

Busting the Life Insurance Lies is available on Amazon in paperback and also in a Kindle ebook version. (Audio book to come.)

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The 7 Figure Success Secret of Top Producers

“Success leaves clues.”
~ Tony Robbins

Question: What do —

  • Patrick Donohoe, founder of Paradigm Life, one of the largest U.S. financial services firms that focus on whole life insurance,
  • Michael Isom, a seven-figure wealth advisor and co-author of What Would the Rockefellers Do? 
  • Garrett Gunderson, New York Times best-selling financial author and Wealth Factory founder, and
  • Kim Butler, top-producing advisor, author (and Todd Langford’s wife and lovely assistant)

— all have in common?

Answer: Besides their success, they have each attended MANY trainings with Todd Langford, perhaps more than any other advisors we could name.

They devoted themselves to learning how to master the use of Truth Concepts software and understand the financial truths it reveals. Then, they started teaching others what they had learned, through presentations, videos, webinars, and books.

We caught up with these folks this week to ask why they have attended so many trainings, and what did they get out of them?

Learning from Mentors and Colleagues

Patrick Donohoe makes room in his busy schedule for Truth Training, a three-day event led by Todd Langford with Kim Butler (Todd’s wife, also a top producer whom Donohoe names as a mentor) at least once a year. When asked why he’s attended about a dozen trainings in less than 10 years, Patrick says he “keeps going because there’s so much information it’s impossible to absorb all at once.”

Each time he attends, his business is in a slightly different place and he has new questions. He walks away with something different, depending on what problems he’s trying to solve for his clients at that given time, also who else is in the room at Truth Training and the questions they bring to the table.

A couple years ago, Donohoe began hosting Truth Trainings in the Paradigm Life office, partially for his own convenience, but also to encourage the local advisors who work with his firm to attend as well. “There’s a value to learning together. There’s a bigger presence, a tremendous value that comes from sharing insights, questions, and collaborating with others,” observed Donohoe. “Everyone looks at the world differently, so I can learn from other perspectives and opinions.”

Donohoe also observed of the financial industry, “There are a lot of advisors out there selling that aren’t knowledgeable,” he lamented, voicing his desire for the industry to retain it’s integrity. He believes that being able to use Truth Concepts has shaped his ability to educate others, which is why he advocates other advisors gain skills in using the software and sharing the stories and concepts they illustrate, as well.

“You can do anything with the calculators: prove, disprove, plan, compare, etc.,” says Patrick. Becoming proficient with the calculators “gives you confidence that what you are doing is superior… sure, you’re selling, but you’ve got to have confidence that what you’re teaching and recommending works.”

Passing on the Financial Education

In particular, Patrick uses the calculators to “demystify the sales rhetoric of traditional qualified plans, mutual funds and the stock market.” He also finds it’s just as important to “reinforce the benefits of whole life insurance objectively, rather than just talking about it.” Particularly when recommending strategies that are outside the mainstream, he believes that clients need numerical proof to give themselves confidence to try something new and stick with it.

While Donohoe occasionally still uses Truth Concepts in individual client consultations, he also leverages his time by recording videos and webinars that are used extensively in Paradigm Life’s client education process as well as in their marketing.

The Wealth Architect

Best-selling author Garrett Gunderson, author of Killing Sacred Cows and co-author of What Would the Rockefellers Do? calls himself the “Chief Wealth Architect” of Wealth Factory, which provides comprehensive financial education for entrepreneurs. He shared with us the difference that Todd’s trainings made for him:

“I have never considered myself a software or tech person, yet after attending Todd’s courses over and over people thought I was a tech whiz. The reality is that I attended over and over because he is an amazing instructor of finance, analyzing strategies, verifying what is truth and discovering what is fiction.”

Known for his own desire and ability to educate others about how money works, Gunderson adds, “I became a better teacher because of Todd. I made more money, had more confidence, and learned more every single time I was there.”

We saw a lot of Garrett for awhile… it seemed no matter where in the country we were training, there he’d be! “I think I attended 10 courses in two years,” he admits. Was it worth it? Apparently so… Garrett calls the trainings a “Game changer.”

The Top Producer Habit

Owner of Optic Financial and co-author of What Would the Rockefellers Do? with Gunderson, it was no surprise that Michael Isom attended the inaugural Summit for Prosperity Economics Advisors, as he had been attending trainings with Kim and Todd for the previous 15 years.

Kim and Todd have both been mentors of mine in this industry since 2000,” Michael shares. After all these years — and since establishing a highly successful financial practice — why does Michael continue to attend Truth Training? He says it helps him “stay at the top of my game in communicating the truth about all things financial,” adding, “There is nothing out there at this same level.”

“I use Truth Concepts and the calculators with EVERY client I assist. I want to provide the truth about all things financial to my clients. Truth Concepts is the most complete source for that — period.”

Yes, the trainings take an investment of time and money, but Michael is clear that it is more than worth it. “When I do this, I ensure that I will consistently generate over 1m + a year in revenue as a result. No joke either, the last 3 years (I’ve earned) $ 1 million+ as a result of the regularity of my Truth Training attendance.”

Sharpening the Saw

But it’s not all about the numbers. One reason that advisors attend again and again is for the personal benefit they receive… the camaraderie with other advisors, the chance to grow as they learn.

Stephen Covey coined “Sharpening the Saw” in the quintessential success manual, The Seven Habits and Highly Effective People. As the Steven Covey website explains, it means “preserving and enhancing the greatest asset you have–you. It means having a balanced program for self-renewal in the four areas of your life: physical, social/emotional, mental, and spiritual. As you renew yourself in each of the four areas, you create growth and change in your life.”

Isom shares one reason he goes to Truth Trainings is to “Be inspired and inspire at the same time.” He adds, “My personal courage and confidence is increased dramatically as a result of TC.”

And although Truth Training is part of our business, those are the same benefits that make us look forward to each training… we love to sharpen our own saws, and the advisors who come and the conversations we have (during the training and also during the meals we share) help us do that!

A Skeptic Converted

When Kim started attending Todd’s trainings back in the 90’s (long before they dated or married), she was a “typical” financial planner and a skeptic about some of the concepts presented. Was whole life really a better option than “buying term and investing the difference”? Was a 30-year mortgage really more beneficial than a 15-year mortgage? Kim wasn’t convinced.

“It took me 4 or 5 trainings before I bought into it myself,” Kim shares. She attended several times in the first two years, oftentimes being “the only woman in the room,” although it’s never bothered Kim to be a pioneer!

Then, convinced of the value, she started sending assistants as well as going back for additional training at least every other year. “It was actually one of my assistants that used calculators to pull apart the mortgage discussion to show me how it was right, because I had always believed a 15-year mortgage was better.”

Since Todd’s new software (Truth Concepts) was released in 2008, Kim estimates she has attended 30+ trainings. “I am so grateful for that time, because even MORE, I have confidence and knowledge and increased ability to share with my clients the whole truth about whatever their financial question is… because I know those calculators inside and out.”

Kim claims she is “not a calculator person!” and admits that although she rarely uses them in client meetings these days, she says, “You don’t have to use them in front of clients, what matters is that you know and have confidence in what the software demonstrates.”

Kim uses a few of the Whole Truth videos to save herself time, such as the funding calculator (“The Truth About Whole Life Insurance Returns”) to prove the IRR of whole life, which she emails to clients to watch between meetings.

No matter what software system you use, learn it well. Learn it thoroughly. Become confident in using your financial software, and pay special attention to mastering the stories — the narrative — that make the numbers meaningful to your clients.

And whatever you do, don’t struggle in isolation or frustration! Gather together with other like-minded advisors to learn, grow, and to encourage and be encouraged. Together, we make a bigger difference!

It’s never been easier. This February, it’s never been more convenient or more affordable to attend Truth Training, because February 15-17, 2017 we’re offering Truth Training via LiveStream! Patrick, Michael, Kim and Todd will all be there live, and we’d love to have you join us virtually.

Want to attend a Truth Training live? We recommend it as the BEST way to learn and gain confidence using Truth Concepts. Get the details, see the dates, and register here. We’d love to have you, whether it’s your first Truth Training or your tenth!

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Busting the Life Insurance Lies

We’re Launching a New Book… and It’s Our Gift!

My wife, Kim Butler, and our friend, Jack Burns, have joined forces to write what just may be the definitive book about whole life insurance: Busting the Life Insurance Lies: 38 Myths and Misconceptions that Sabotage Your Wealth.

This book is written for every American who’s gotten conflicting advice on life insurance from their insurance advisor, financial planner, and the financial “gurus” on TV and radio:

“Is life insurance a bad investment? Shouldn’t I just make a bundle and invest it instead? Don’t I lose all my cash value when I die? What about my spouse or my kids—do they need life insurance?”

These are the questions that confuse people and even prevent them from establishing a firm financial foundation. Unfortunately, myths, misunderstandings, and outright lies cause uncertainty around what life insurance is, how it works, who needs it and when, and—most importantly—the great benefits it can bring to your life. This book clears up all that confusion.

Busting the Life Insurance Lies is also written as a resource for advisors. It contains an extensive 50-page appendix with policy illustrations, with nearly 20 policy illustrations, as well as a transcribed Truth Concepts presentation demonstrating the Internal rate of Return of a whole life policy, using the Funding calculator.

Here’s the book trailer:

And now, to help us launch the book…

Download YOUR copy and enter a DRAWING for an Amazon Gift Card and (for those who don’t already have it) – ONE YEAR of Truth Concepts software!

The official book launch is today and tomorrow, December 21 and 22, 2016.

During that time, you can download the book on Kindle for FREE.

(You can also purchase the paperback, if you prefer.)

Comment below (or on our Facebook page) “Got it!”

We will draw a random winner to receive an Amazon gift care AND… (for new users), a Year of Truth Concepts!

Why This Book Was Written

It’s possible that there has never been a financial product that has been so misunderstood as whole life insurance.

You can find debates on the internet with hundreds of comments that will take you hours to read.

“Financial gurus” dismiss it, or even argue against it. (Especially critics not certified to give financial advice.)

Most investors ignore it, not comprehending the value of savings, liquidity, stability, and leverage.

On the other hand, some insurance agents and advisors believe it is the sole solution to every financial problem (even when it’s not).

So what’s the TRUTH about life insurance?

In the foreword to my wife Kim Butler’s revised and updated Live Your Life Insurance (her best-selling little book that reveals how to get the most from a whole life policy by putting it to use before you die), I wrote:

“It has surprised many people–including myself–that the mathematical calculations reveal that one much-maligned, often-misunderstood financial product is actually superior in many ways to other financial products, when all factors are considered… That product is participating (dividend-paying) mutual whole life insurance.”

In Busting the Life Insurance Lies, my wife Kim and our friend, Jack Burns of JB Life go into great detail to dispel the myths and clear up the mystery of (especially) whole life insurance.

Some of the 38 lies and half-truths they “bust” in this book include:

Lie #1: Whole life insurance is a bad investment.

Lie #7: You’d do better to be self-insured by building up your own net worth.

Lie #8: Life insurance is just for burial costs.

Lie #9: Only people with dependents need life insurance.

Lie #10: Never buy life insurance for a child.

Lie #15: “Buy term and invest the difference” works.

Lie #17: The insurance company keeps your whole life cash value when you die.

Lie #19: If you can’t pay your premiums, you’re in serious trouble.

Lie #20: If you borrow against your policy, you’re borrowing your own money.

Lie #22: You can only count on the guaranteed column (not dividends).

Lie #28: A whole life policy means you don’t need any other investments.

The book even tackles “pro” whole-life insurance lies, such as:

Lie #30: When you borrow against a policy, you’re paying interest to yourself.

And it has a section for more advanced or technical myths and half-truths that will most appeal to advisors, agents, and others in the industry, such as:

Lie #31: Universal Life gives policyholders more flexibility and costs less.

Lie #32: Direct recognition is bad, non-direct recognition is good.

Lie #33: You never want to purchase a MEC, or let your policy become one.

Lie #36: You need buy-sell insurance to protect your business.

Lie #38: The gross dividend rate equals what you’ll receive in dividends.

Want to know how Kim and Jack answered all these questions… plus 21 more?

Get the Book!

Download your Kindle copy of Busting the Life Insurance Lies now… and/or you can purchase the paperback on Amazon.com.

Then be sure to comment “Got it!” below in the comments or on our Facebook page so that your name will be in the hat when we draw a contest winner for the gift card (plus a year of TC if you don’t already have it).

Help Kim and Jack tell the truth about life insurance.

Feel free to share this post or the Amazon link; copy and paste this for the Kindle download — www.amazon.com/Busting-Life-Insurance-Lies-Misconceptions-ebook/dp/B01N1JNNS9/  — with others… there’s a lot of misinformation to be busted out there!

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The Value of Asking Questions

 

“Judge a man by his questions rather than his answers.”
~ Voltaire

The Value of Asking QuestionsOne of the things that we cover quite a bit covered quite a bit in our training is the value of asking questions. When we as advisors can ask our clients questions and get them to think about the answer, it will transform our ability to educate our clients and to motivate them to take action.

Silence is Golden

Kim says, “It’s been a tough thing for us to learn, but we have started saying less and less and less, asking more and more, and being quiet. That’s what is going to help you get progress with your clients.”

I’ll hear her do this in the office. She asks her question, she’ll wait till they answer. It’s awkward silence, absolutely. She doesn’t care and the answer will come. And that’s a really important thing.

When I used to work with clients, I’d be too quick to let them off the hook. It’s actually helpful if you don’t. The answers need to come from them, because when they do, it allows them to really understand it. When clients can answer our questions as well as their own, they can really own their financial decisions.

If you think about it, the importance of asking questions is this: even if it’s an “obvious” answer to you, if you preach to your client all the time and they go out into the world and they try to share what you told them and somebody challenges them, how are they going to defend “your” ideas? If they have not owned the ideas themselves, they’re going to backtrack and say, “Yeah, that person doesn’t know what they’re talking about.”

On the other hand, if you asked them questions all the way through and the answers came from them, they can’t dismiss themselves. It’s part of them. So it’s truly important even though it may be something you’ve already laid out, it’s for them to repeat it for themselves and say it.

“Compared to What!?”

A question we have found to be one of the most valuable questions we can ask comes from Daniel Pink’s book, To Sell is Human. It’s the question, “Compared to what?”

Clients so often have this kneejerk reaction to what they’ve heard. “Oh, I heard that Life Insurance had a bad rate of return….”

When you ask, “Compared to what?” it puts them back on the spot. Rather than answering and defending your answer, let them find an answer when they say “Life insurance has a terrible rate of return.”

“Oh compared to what?”

Most of the time they don’t have any idea. They are just repeating what they’ve heard, and the question helps to bring that to their mind.

 

To learn more of the questions we like to ask and the stories we like to tell to go with the numbers…  come attend a three-day live Truth Training, and/or join Truth Concepts Academy to receive 24/7 access to recorded trainings.

What’s your favorite question to ask? Feel free to share below!

 

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The Four-Year Plan

The Growing Cost of College Isn’t Usually This Funny…

student loans

Unfortunately, the four-year “plan” for most college students is to take out a lot of student loans and graduate without a workable strategy for getting OUT of debt (or out of the house!)

This too-true video is hilarious, though it may hit a little too close to home for some…

Feel free to share this page, or click through on the YouTube icon or on this link to watch it on YouTube.

Click below to see the video:

https://www.youtube.com/watch?v=ZIRdST_Dc0M

Use the Truth Concepts Education Cost calculator to help describe the “whole truth” about education costs and opportunity costs for the parents! You’ll find Todd’s presentation on the true cost of a college education live at Truth Training or in a client-friendly recorded version in our Whole Truth About Money video series.

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