Protect, Save, Grow: Flipping the Financial Order of Operations
Protect, Save, Grow: Flipping the Financial Order of Operations
The goal of Remnant Finance is to help likeminded members of our community secede from the forces of economic enslavement- namely large financial institutions, corporations, and the government, who work in tandem to separate you from your capital. Those forces perform this job exceedingly well. If you think that I am being hyperbolic, try this: the next time you are in a conversation at work about finances, bring up that you have or are considering storing your capital in a whole life insurance contract. Watch as your co-workers (or relatives, or strangers, etc) leap to defend the unholy trinity of wealth confiscation. They will extol the virtues of government-qualified plans, of bringing to the table all of the capital yet retaining all of the risk, of relying on a money manager whose incentives are most certainly not aligned with their own. The hundreds of billions of dollars spent on financial advertising each year are a testament to the success of the propaganda campaign to convince us that our money is best left in the hands of experts.
The assets under management (AUM) model has yielded phenomenal profit for those who preach it and thrive off its bounty. We in the IBC community understand and appreciate the economic value of certainty, so its no surprise that the wagons are circled in support of a model that ensures payment regardless of performance. What is surprising is who does the circling, as mentioned above. I am not against being paid for value provided, I am a staunch capitalist to the full degree which I can comprehend what capital actually is. What I cannot resonate with is knowing that someone paid me for a service that I failed to perform. If I were a plumber, and you paid me to fix your shower, then I left with your kitchen sink now leaking as well as the shower, it’s hard to imagine walking away with payment in hand. I could not respond to your complaints with ‘that’s just how it goes sometimes, the plumbing always fixes itself eventually.’ Yet that is the sentiment we have been conditioned to accept in ‘the market’ when it comes to the prudent stewardship of our capital.
If we can so easily find a crack in the foundation of conventional financial thinking, perhaps we can apply our skeptical lens to examine another fundamental of their strategy. Through that lens, we reconsider economic priorities and flip the established order of economic operations on its head. The typical conversation with a certified financial planner (CFP) can be summed up as follows. “Hand your money over to me and let me grow it with a selection of products which will hopefully grow and be there for you when you need it. Then we will save a portion of your money in another bank product, where you retain access for use in emergencies. Finally, let’s talk about protecting your loved ones via term insurance, so that if you pass before we can accumulate this large pile of cash I am projecting, they are compensated for their loss. Once you have accumulated enough, we can drop the insurance and self-insure.” (see our video on the average rate of return fallacy to understand what is wrong with those projected returns).
Grow, then save, and finally, protect. That is the speculative model that relies on statement wealth and postpones liquidity, access, and control to a future date. Nowhere in this discussion are contractual guarantees considered, since the product suite has none. This model downplays or ignores the persistent eroding factors that will feverishly attempt to eat away at your principal. Those parasitic eroding factors include taxes, fees, portfolio turnover, inflation, liability from lawsuits, disability, technological advancements, planned obsolescence, and the ever-changing yet never-ending statutory assault by an insolvent and reprobate Congressional leviathan.
Statement wealth: unrealized net worth balance that exists only on statements, accessible only by selling positions and lacking any guarantees or certainty;
Contract wealth: real, accessible capital that is backed by contractual guarantees
How confident are you in you in statement wealth to survive these eroding factors over decades? There is said to be a lawsuit filed every 42 seconds in America. If your wife were to injure someone in a car accident tomorrow, how many of your growth assets are exposed to garnishment in a liability claim? Assuming the market and government performed as projected, and your statement wealth survived to that point intact, would you be able to withstand a seven-figure settlement without having to liquidate those assets? If (when) Congress decides that their share of your estate is not sufficient, ie they raise taxes, will your correspondingly diminished share be adequate when your advisor planned around current tax rates? It takes decades to grow your statement wealth, but only seconds to lose it if the right protections are not in place.
This is why we start with the protection component, and work our way to the growth component from a position of strength. First face head on the exceptional forces working against you, then proceed knowing your castle is secure. Have you been building your house out of straw? Using an IBC policy as the foundation of your economic pyramid, you are plugging many holes in the dam that could otherwise topple your growth strategy. We address the liability, disability, and property and casualty exposure in our exploratory calls to shore up those weak spots and ensure that the chaotic randomness which life will most certainly throw at you cannot topple your foundation. This is the moat around the castle, and given the persistence and strength of the forces which insatiably desire your capital, it is the critical starting point in building out a sound economic strategy.
By starting with IBC for our protection, we are inherently saving in the most efficient financial vehicle that we can access. This article is not about the mechanics of a whole life contract which undoubtedly validate that claim, but rest assured that the contractual rights contained in your policy yield unparalleled strength in your savings component. This is the castle itself, which is effectively insulated from the eroding factors cited above.
Once we have our principal savings component in place and protected by our economic moat, we can then venture out into the realm of risk and reward without exposing our castle. The growth component in the castle analogy are the exploration and conquests we undertake to expand our kingdom. These battles for expansion take the form of whatever you were already doing in risky frontiers- real estate, equities, business ventures, etc. We are by no means saying not to invest or take risks, only to do so in a manner that leaves your principal intact such that any potential failures do not translate to partial or total loss of your foundation and do not diminish your family’s ability to survive financially, even if you don’t.
We strive to help our members flip the financial order of operations on its head so they can keep their priorities in the correct sequence. You can relieve the pressure on your other assets to perform all the work in your later years by having a deep reserve of liquid, accessible capital from which to draw when the eroding factors are hitting the hardest. Do you have a strategy in place to ensure your family is taken care of regardless of how the market performs? If so, how confident are you in that strategy to meet all contingencies? If not, hop on a call with us here to review and to stress-test your current strategy. Remember, you only get one shot at this. When you decide to hang up your sword, will your castle be intact?
