Category: Tutorial Transcriptions

Borrowing Calculator Tutorial 9m 43s Transcript

So let’s look at something a little different here, and let’s go to the borrowing strategy, here if we take the borrowing strategy and let’s look out over 30 years, no present value dollars, let’s put in 10,000 dollar a year. Okay, so what we see over this time is $300,000   so let’s start with understanding the shoe box for just a minute and if we have this shoe box and we’re putting in10,000 ayear into it for 30 years at the end of the time frame we’re going to be at $300,000, but let’s say at this time we’re buying cars, so let’s go to loan one and put in loan amount of $30,000 and first year (4th year) and we’ll buy 6 cars. And we’re going to repay these loans over 4 years so over a 4 year timeframe and let’s say that the bank’s rate is 8 percent on the cars, so that’s not going to affect our account any. Our $300,000 is separate we also have this illustration where we’re going out and we’re buying cars from the bank.


But we see this and Dave Ramsey or somebody along those lines comes along and says “look, you’ve got this cash sitting here,  why are you financing your cars with your banker?” So the suggestion is let’s change that and use our account. We can just take the money out of this account. Change to ‘Account cash’ and let’s put a payback rate put minus 100 so this is what people are taught to do and they feel like they’re getting ahead. And what happens is we went from $300,000 in our shoebox after our advice of paying cash down to $120,000 in our shoebox. Alright so Kim’s gonna keep track here of where we are when we started this. We started with $300,000 in our shoebox, we’ve got $120,000 after Dave’s advice but let’s think about this. We don’t need a life insurance policy to understand or do banking. We can do this with our shoebox.


The first thing we need to understand is be an honest banker, We need to at least  payback what we’ve taken out.  So if we do that, change that to 0 up there on the payback rate, now we’re back to our $300,000. So we’ve partially gotten there but the reality of this is, we’re still not being an honest banker. Now let’s think about it in these terms for just a minute, do you think as highly of your family as you do your banker and the reason I ask it that way is, if you were willing to pay your banker for the same automobile you were wiling to pay him principle plus 8% in interest but yet you’re not doing that for your own family? Now I know you value your family more highly than your banker but your actions aren’t really showing that. If we’re going to be an honest banker we need to payback at the market rate, you can even pay more than that, but at least the market rate and we see when we do that, we see that now our account has gone up to $337,000, why? Because that interest that would have gone to our banker is going to us,  where it should. We’re starting to play the game of the banker.


We talked about that early on about how banks make money. And we’re not quite there yet but we’re starting to make some head way if we have this account here and we’re using it to finance our automobiles, would we really want to just settle for a 0% account? What if we could earn interest with the bank. Still be an honest banker and pay them back so let’s see what that does for us. So if we change our earning rate to 2.1 that was our CD rate that we saw with our bank we see it jump but reality is we’d have to pay taxes on that so let’s put on our tax bracket of 35%  That moves us up to $410,000,  definitely an increase. To start to understand banking, start to apply it to our finances we can start to move some of the interest and on top of that the earnings on that interest over to our side of the ledger. We’ve gone from $300,000 from the  initial way we were saving money and buying cars down as low as $120,000 with paying cash  but up now  $410,000 taking advantage of CD rates of the bank and being an honest banker and paying back our market rate. Now we’ve been talking along earlier.


We saw what returns are with life insurance policy and how great it was. Many times we separate that out from out overall investment yet it’s all part of our saving and investing and there’s something that comes along with that life insurance policy and it’s a loan provision the insurance company because that is a fully collateralized loan another words,  “that cash is mine”,  I can put that up as collateral with the life insurance company and they  will loan me money against it now I can take it out as cash but I lose some of the other benefits, but by borrowing against it the IRS let’s me put it back in the policy and I get to take advantage of long term growth that occurs. Let’s do that and let’s say the policy had a loan rate of 6% so go ahead and put 6 there load in the PLI values rate of return so bring in actual rate of return from the life insurance policy that we looked at earlier, so this is annual growth rate loss in front and all that,  change from ‘Account cash’ to ‘Account loan’ what we see is now we’ve made jump up to $517,000 however do we have to pay income tax on the growth on this life insurance policy? And the answer is “No”. So we get to do this without the annual tax so moves us up to $692,000 so our life insurance policy already had a great rate of return and now we’re able to tack on some gravy thru using it as our source for funding, and reducing our dependence on financial institutions for loans and we get to apply interest back to ourselves. So we’re a long way from what Dave’s talking about, a long way from our shoebox yet it’s something we already have in place and something we haven’t been able to take advantage of.


Now we’re starting to move into maximizing the life insurance policy however when we look at this loan over here on the right side our column we haven’t come anywhere near using up the abilities of this life insurance policy. The beauty of the life insurance policy is as we pay it back it’s automatically available for us to borrow again -something completely different than what happens at the bank, payback doesn’t automatically entitle us to borrowing more money.  Again so as soon as this gets paid back, we can borrow again, we may choose to pay this back at even a higher rate we can do that, and we can see what kind of impact that has long term when we start to take those types of strategies and apply them or put those into play.


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Tutorial Life Insurance Values

Hello and welcome to a tutorial on a new Truth Concepts tool called Life Insurance Values.  Todd Langford will show how you can use the Life Insurance Values tool to cut down the time you spend copying and pasting information into the Truth Concepts calculators and drastically show the whole truth about life insurance.  Go ahead Todd.

The new tool is called Life Insurance Values and right here under the Tools menu at the bottom we see Life Insurance Values.  And this is a place that we can load 6 permanent life insurance policy illustrations and 4 term life insurance illustrations and all that information gets saved into the data file.  The idea behind it is that we can then pull information from this calculator into the other calculators while we’re working with a client so we don’t have to spend time copying and pasting information.  We can just put it in here save it open it up with the client and pull from these numbers in to a particular calculator as a particular calculator becomes appropriate.

So here I put in some information:  We need to have a start age, we need to have a description that will help us later when we need to figure out what we put in here and then also we need at least the premium values, the net cash value, and net death benefit.  We have the ability to put in some additional information withdrawals, loans, repayments, all of that could be done whatever you’ve done in the illustration you just copy that information and put it in here.  Now this tool also calculates a couple of additional columns automatically.  One of them is the Total IRR on Cash value and this is a running total many of you have seen this as an optional column you can include in  your illustrations where you could have the illustrations software calculate that for you.  Here, we’ve done it for you. 

 And what it does it’s got a running total of the Internal Rate of Return based on the cash value and we also have one based on the death benefit and what you’ll see in the two of them is on the death benefit we start with a 7000% in the start of this particular illustration and the IRR drops over time.  The opposite is true of the cash value it starts very low and increases over time, we start with negative 100% because we have zero cash value in the first year but the IRR appreciates and increases over time. 

We have a third column here between the two of them it’s called Annual Rate of Return on Cash Value and what it does is calculate the ROR on the cash value for every year without carrying the baggage from previous years.  Whereas the IRR calculation even when you get down here in the 10th year it also has all the previous negative years that are weighing it down.  The annual RoR on Cash value looks at each year separately, we have a positive annual return on cash value here in the 4th year of  .93%.  Where’d that come from what it means is if we started with the previous year’s cash value of 23902, we add 14200 to it, in order to end up with the 38,455 we have at the end of the year, it means that those dollars earned .93% in that particular year, so every year is treated individually. 

This calculation is actually used in a little while in another calculator which we’ll show in a while when we actually import it. 

For the purpose of learning I have a calculation here where I have not put in the net death benefit I put everything else but just as a review so you can see how to put these figures in.  If I pull up an illustration that I printed to adobe just to show you.  First thing I’m going to do is change the zoom on the screen to 75% to have an entire page on my screen. If I were to just click when it turns into an I bar and drag down it will highlight the entire illustration but I can’t use these numbers to paste into the software.  So what I do is go to the column which I’m looking for which in this case is a net death benefit column curser is an I bar I’m going to hold down the alt key and you’ll see a rectangle form in the middle of the I bar that’s one of the press my mouse down highlight just that one column right click somewhere in the blue area select copy then I can go back to the Life Insurance Values tool click on the death benefit right click and paste values.  I would encourage you to put every year in here.  If you put them all in here you’ll have whatever length of years you’ll need with that particular client in that calculator. 

Back to my pdf with illustration, scroll to next page, hold down alt key hold down the mouse and highlight net death benefit column, right click and copy paste values next 40 years.  I’ve got a this one named L95 $25,000 premium for 25 years.  I can close this screen and it saves the data file it doesn’t lose the information like with some of the other calculators.  So I can save it under a particular client name this information will also be stored in there.  As a way to shorten the process with the client we could Preload all the information in here, even though there’s no calculators it will shorten the timeframe.    And it will save all the data in the file with it. 

I’m going to open up a funding calculator so we can see how it pulls in.  Change the current age to 25 and projected age I’m just going to put age 70.  Now I want to pull in my life values so I’m just going to click on stored life insurance data it’s going to give me a list of everything I have currently loaded in the Permanent Life Insurance Value tool.  The one we were just working with is that L95 $25,000 premium for 25 years, I can we have the option of Interpolate these values, by clicking the interpolate right here  I can change that right here from 1Million to 2 Million let’s say and the software will automatically change everything to the new and you can do that on death benefit, based on premium we could change the premium scenario and say like on this one we put $25,000 in on premium it would basically double everything that was there. 

The last thing we can do from an interpolation standpoint is based on in cash value I could put in a year that I want to hit a certain cash value so let’s say here in the 20th year I want to have a million dollars cash value and figure out what it would take to grow that cash value and adjust everything to have a million dollars of cash value in the 20th year. 

For this let’s just use the illustration as is and turn the interpolation off, pull in the illustration it will ask me if I want to replace the information that I already have, as a safety feature to make sure you don’t lose any data.  What year do I want the first year, typically that’s going to be the age of the start of the PLI illustration, but you may want to pull in say from age 50 and see what it’s going to be from there, you have the ability to do that, it’s going to pull in the information anything I had in there it pulled into the funding calculator.  I’m also going to pull in some term insurance into this calculator, again I could interpolate these numbers if I wanted to, I’m just going to use the 30 year level pre loaded into the Life Insurance Values.  It’s going to ask me again “Do I want to override the term that I have in the funding calculator” I don’t have any in there so yes I do.  I’m going to start at age 35 I can tell it over here to include the term insurance.  You can change the age to cancel term to cut it off at the point in time when the term insurance would be cancelled.  So you can see how easy it is just to pull that in, you can do this with any of the calculators that have any life insurance values.    

One of the things I mentioned earlier is that Annual Rate of Return column that we have on the Life Insurance Values worksheet.  What I want to do here is pull up one of the calculators that uses that directly.  That’s the borrowing Strategy Calculator.   I’ll show you how it works and why it’s important.  In this particular calculator, if I go to let’s say 35 years and I want this to illustrate a life insurance policy then I can put the information in by doing this I can put in 50000 premium even though our life insurance illustration is 25 I can put in 50. On the present value I’m not going to put in anything that would assume some existing cash value on the policy.   I’m going to load the PLI ROR’s, that rate of return we were talking about and we can pull in that ROR column and yes I want to overwrite the values I have here, I want to start at age 35, it pulled in that one column, it didn’t pull in any of the other columns, it pulled in my rate of return so then if I want to run an $50,000 illustration this end of year account balance. 

 And if I were to run a $50,000 this ROR column would match what I have.  Because it’s going to follow that permanent life insurance curve.  Here we have the information in (on left) here we have the results (right) and now we have a picture of what the life insurance illustration should actually look like.  With this new tool you can load the data in directly out of the pdf, some illustration software let’s you export to an excel sheet copy the columns and put them into the life insurance values tool and pull them into any calculator you want right in front of the client without a huge hassle.

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Borrowing Strategy Calculator Tutorial

This Todd Langford  going  over the Truth Concepts calculator called the borrowing strategy.


What we are going to be showing today is the power of having the client pay themselves, just like they would the bank.  We’ll use a car loan as an example that is borrowed against the savings account and take a look at that versus marketplace loans like you’d receive from a bank and help the client understand the best place to borrow money.

Let’s look at this out over a 30 year time frame, so in illustration period I’ll put in 30.  We won’t be concerned about any existing dollars in the account let’s look at starting from now this individual’s going to save $20,000 a year and in this savings account they can earn 2.5% and that’s going to be taxable earnings we put a tax bracket in here of 30%.  What we can see is if he continues this savings at earnings and tax rate he’s going to end up at the end of 30 years with about $793,999.

 At this point let’s go ahead and add a loan to this.  I’m going to click on Loan/WD 1 and the amount, let’s say a car purchase so $30,000 we’ll purchase it in 3 years so not right away, we’ll purchase one vehicle and we’ll pay this back over 4 years.  Right now it’s showing us the loan but no loan interest because we haven’t put in the interest information. 

The next thing I’m going to do is go to the Loan/WD Payback rate and this is independent of whatever the rates are thats are being charged.  This is the rate that will determine the payment we pay back with.  What I’m going to start with is 8%.  If I do that, it’s going to show me a $9,000 payment on an annual basis that I would pay this loan back.  The Market Loan Rate this will be whatever the going rate is, let’s say for example that right now on car loans the bank is charging 8% and I would use 8%.  The Alternate Loan Rate, this might be a special that is going on like right now General Motors 2.9% rate.  If I put 2.9 in here, it will calculate the payment based on a 2.9% loan charge, and that’s going to be $8,253. 

What we see here is future account value stayed the same because the source of the loan was the Market.  We didn’t touch this account at all, we used the bank or whatever funding source that was available.  What if we were to take advantage of this loan rate like we talked about with General Motors?  If I change this source to the alternate loan it will use the 2.9 rate, since we chose a payback rate of 8%, the calculator will assume that 2.9% went to General Motors in this case, and any excess on that payment is going to go into this savings account and we see it in the Extra Payment Lost or Found column.  So we $1,006 each year for these four years.  The difference is rather than having $793,999 like we would have without this loan strategy, instead what we will have is $800,156.  What happened under this scenario we used a cheaper loan source, but paid it back based on the market rate and we got to reap the benefits of that difference in the payments, we were able to take advantage of the opportunity for a cheaper loan.

We would have another option here.  What if rather than using the 2.9% with General Motors, we chose to fund this ourselves, use this 2.5% asset here.   Whatever the earnings are, in this case the 2.5% if I take money out of here to fund it for myself I give up the ability to earn that 2.5%.  The result is exactly the same as if I had borrowed money at 2.5%.  So let’s see what happens.  If I change my source to Account Cash and rather than $1,009 in additional payment going in each year, we have $1,227 going in each year and the difference is we boosted this future value by about $1,500.  We end up with $801,506.  That’s where the difference is with this particular calculator.  As we create loans, start to finance things using our own assets, and finding the cheapest source for money, as long as we follow through the banking concept of paying our self back and paying ourselves the market rate or more, we’re going to be able to reap the benefit of those cheaper rates. 

We might decide maybe we want some discipline we could pay it back at 12% if I do that then it’s going to put additional dollars in here, it’s going to be $806,520.  This added another $5,000 over this timeframe just because we committed ot making payments at a higher rate.  You’ll notice we didn’t use any info over here in this box the Account Loan Rate.  The reason is with a savings account it does not have the ability to borrow money if we were ot use this account more like a life insurance policy then these items would come into play, Life Insurance policies have loan provision that come with it, and if we have a direct recognition company, then we might have a difference in what the earnings rate was overall on the life insurance on the borrowed side versus the non borrowed side.  So, this would give us the ability to adjust the earnings rate on the borrowed versus the non borrowed. 

Another option here would be to apply this excess payment we have directly to the loan first before going to the savings to see what type of impact that would have.  So I can do that by clicking Apply extra payment to the Loan.  What we see is not a big difference between the two.  Depending on the amount of the loan that will impact whether it’s going to be beneficial to apply the excess payment to the loan or not, and we can use this calculator to determine which is going to be best.

Another option that we have is we chose to do one loan.  Typically if we do a car loan we might do one of those every 4 years, therefore we can change the number of the loans and extend that out.  We could do this over the timeframe total of 6 cars.  It’ll put 6 total loans in here and we can see what type of impact that will have to our bottom line.  If we put 6 loans in here we end up in this case with $857,606 rather than $794,000.  We also have the opportunity to inflate these cars.  We can do 5 additional loans as many times as we want to in the space of whatever our illustration time is.

So what this calculator does in summary is illustrate the principles of banking both borrowing and paying back with varying interest rates, strategies, and money sources.  It enables us to show the client  different scenarios all summarized into one or one simple scenario.  This is a powerful calculator for showing how we can gain control over our own debt and the missing component when people are talking about getting control over their debt, is the part about paying it back. 

At our 2 day truth trainings we spend another hour or more on this calculator showing additional strategies, examples, and ways to use it.  So join us at Truth for one of those trainings, we look forward to seeing you there.

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Truth Concepts Tutorial Automobile Purchase

To open the automobile purchase calculator double click on the TC icon.  This gives you a menu bar which you can move to another screen if using multiple screens or place it where is most convenient.   You can also resize calculators as you open them to view them comfortably.  To do so, click on the calculator and move cursor to bottom pull down and drag to make the box a larger size.   Select Automobile Calculator. 

There are a couple ways to use this calculator:   put in value of a person’s current assets or leave it blank initially.  Type in net rate of return on savings this is going to fall for most people in the 4 to 5 % range.  Using 5% we’ll do a 40 year projection and if doing a 40 year old that person if buying an auto every 4 years, they’ve probably got another 10 purchases ahead of them.  You can change the buying frequency to set it up for the number of years you want to illustrate.  Here we’ll do the buying a car every 4 years we’ll take an actual purchase price of $40,000 that gives us our first set of numbers.  This makes the assumption that this person buys these cars and downsizes the kind of car he’s buying or the automobile company forgets to raise the price on it. 

In this case, the buyer transfers $400,000 to the car company over that period of time.  We know that this is not true and if we want to take our calculator and interest rate calculator and spend a few minutes to educate the client, they are going to find that the auto purchases average a little above 5%.  So if that holds true in the future then the value of the cars really goes up the cumulative cost goes from $400,000 to over $1,000,000 and we’ve got the actual asset value simply applies a 5% cost to these purchases there’s no way that this cannot happen.  So your true cost of these automobiles is $2,815,000. 

A better way to do this is to add a couple of things we’ve overlooked.  In our state, 8.25% is our sales tax.  The automobile insurance is going to run about $1,800 so in this car buying model, we’ve got 3.4 million dollars of money that we’ve transferred out of our asset pile and to the car and car insurance companies. 

This is a good tool once people have read the book on infinite banking to help them get a handle of their car buying problem.  In the way of an expenditure they lose control of that money and the money they would have earned had it not been transferred.  The number that you have right here also determines based on their situation, their age and purchasing habits how much can be recovered through the infinite banking process. 

I could have started out over here and suppose we’ve got $250,000 and we’re saving $10,000 a year increasing 4% and this shows our value is $4,110,914 so you would think that this person with this kind of savings and money adding into their savings account that they could afford to accumulate and save money and pay cash for their automobiles thereby saving interest. 

Let’s take a look at a four year purchase frequency, $40,000 car plug in our sales tax, insurance, what we have is our $3.4 million of damage done to the account if we pay cash for the cars.  Once the person has read the book this is a good refresher and if not read this is an excellent motivator to get them to read the book because without the infinite banking process they don’t have much of a chance.  They need the art of  acquiring their own debt.  If they are paying cash they create a debt against their existing capital and the paying cash and the borrowing there’s zero difference unless the borrowing rate is less than the savings rate. 

Tutorial by Norman Baker.

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Financial Calculators Tutorial

Financial Calculators Tutorial by Norman Baker:

Here is a short tutorial on the financial calculators in Truth Concepts.  Future Value, Present Value, Payment, Interest Rate and Time Period Calculator.  I can size the calculator by moving my cursor to the edge bottom or side and stretching.  I can make it as big as I want to or reduce to an icon.  I can memorize the short cut keys. 


Rate Calculator:  We’re looking for a future value of $1,000,000 as hypothetical suppose we have a $100,000 of cash to start with we’re going to make a $10,000 payment and we’d like to have $1,000,000 and we’d like to do that in 20 years.  So the calculator solves for interest rate and tells me that 8.27 is the percent I would have to earn in order to have my million dollars. 


Present Value:  I double clicked on the “Present Value” in the Rate Calculator and now I have a Present Value Calculator up.  Our future value is $1,000,000 we’ve got an annual payment of $10,000 and annual rate of 8.27% and we’ve got 20 years it gives us a present value that is less than our $100,000 to start with the reason for that is this decimal point the output has 13 decimal points, by right clicking on output section I get the whole number and paste and that should get the $100,000 present value to the penny. 


Payment Calculator:  Solving for payment, Present value again $100,000 future value is a million annual rate is still in memory, left click right click and paste to give the 8.27% rounded but I have all the decimal points in.  I’m looking for a 20 year period and it tells me in order to have all those other assumptions I’ve got to have an annual payment of $10,000. 


Future Value:  Click and Size again for a new calculator.  Again present value number is $100,000, $10,000 payment, rate is in memory, over 20 year period this gives us our $1,000,000.


Time Period or Number of Years:  Click on Years.  You’ve got your $100,000 you’ve started with, $10,000 annual payment will produce a million dollars with the pasted interest rate in and it tells us that it takes 20 years to accomplish. 


This scenario I could click on file save, give it a name, save it and it will bring those calculators up in that particular format just like we have it on the screen.

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