A lot of people just want to retire and have financial freedom. But how can you do that if you’re in debt? In this episode, Chris Miles and I talk about how he retired TWICE, how to get your Max ROI infinite banking to pay you twice, and how you can get your money to work for YOU! We also discuss the 7 secrets to free up your cash, how to create an anti-financial plan, achieving financial independence, and how to “double-dip” on your investment returns. Chris is the Founder of Money Ripples. He is also a cash flow expert, author, podcast host, and a leading authority on teaching entrepreneurs how to get their money to work for them.
If you are ready to learn how to create passive income right now, gain financial independence, and infinite banking, and the real reason financial advisors suck, tune in now to this episode of The Real Estate Rundown and find out what Chris has to say about it all!
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Chris Miles: Speed Up Your Journey Towards Financial Freedom
In this episode, I’m going to be interviewing Chris Miles. He has impressed me because he can tell you how he has retired twice. Here is a guy that doesn’t get it because he had to do it twice. He is also going to share with us how he did it and why you might want to look at what he calls infinite banking. I know you’ve heard about infinite banking, but you haven’t heard it like this. You’re going to want to read this as we discuss seven ways to free up cashflow, achieving financial independence and this thing called an anti-financial plan.
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We are here with Chris Miles and we are going to be talking about how my friend Chris was able to retire twice, create cashflow and live the life that he wants. Chris, welcome to the show. I’m glad to have you.
It’s a pleasure to be here, Shannon.
Most people only want to retire once, but you had to do it twice. Why? It’s easy. You just quit going to work.
If I become financially independent twice, it means I screwed up once. I had to do it a second time to make up for it.
You’ve been to the school of success followed by a semester in the school of hard knocks, but then your lessons went back to class. Take us through a little bit of your journey there. How do you retire, lose it, build it again and then retire again? What was that process in your life?
I started out being the traditional mainstream financial advisor doing that kind of stuff. For four years, I was teaching people how to do all the crap you hear about like, “Save everything. Spend nothing. Save it forever. Put it away in the stock market and hopefully, someday you have something.” I realized that after a while, nobody was financially free including myself, but not even the financial advisors were financially free teaching that advice. Eventually, in 2005 and 2006, I had a friend that was in real estate. He was partnering with his dad doing small deals, but they had doubled their income from their active income at their work. I thought, “That’s amazing and hard to deny.” I like evidence and know that things work.
I started to learn from them a little bit. I quit being a financial advisor in March of 2006. I bowed I would never teach about money again. My old plan was to do mortgages and be a mortgage broker because, in 2006, anybody could be a mortgage broker. I teach ballroom dancing on the side. A little-known fact, I was one of the nation’s top amateur ballroom dancers years ago. I was going down that path and starting to get mentored by these guys. I didn’t have a huge lifestyle. I only had to hit $3,500 a month to be financially independent, so I did. By that summer of 2006, I was able to become financially independent.
I was 28 years old and thinking, “What am I going to be when I grow up?” After a little bit, in 2007, I partnered up with some guys and we decided to teach people how to get out of the rat race like we did. We were doing our thing there. It was funny because I remember one of those partners said, “Chris, we want you to focus here and cut off your passive streams of income,” which I should have looked at as like, “That’s a major BS thing right there because why if we are trying to teach people how to get out of the rat race would I cut off my multiple streams of passive income?” I did that to be a team player. On top of that, we were focused on just real estate investors in this new business venture we did.
Money is like air. You don’t think about it until it’s gone.
What they wanted you to do was burn your boat.
They said like, “This is our mission and passion.” It was one guy’s mission and passion. He wanted all on board, “Burn the boats. Everybody full steam ahead towards his vision.” I had a similar vision because I wanted to teach people too, but mistake number one is I cut off those streams of income. That was a big mistake. Mistake number two is I got overconfident by 2007 because I was in my late twenties and thinking, “Everything I touch turns to gold. It’s cool getting cashflow but think of how much we’re making on appreciation in the market? I should start buying bigger houses to bank on the appreciation. Forget the cash. I don’t care if it’s negative cashflow. Let’s go for appreciation.” Between that and everything else, I was not paying attention to my money. Soon, I was in the place where things started turning around with the recession by the end of 2007 and 2008. I found myself about $16,000 in the hole each month. I was quickly burning through my savings and running up credit card debt to try to stay afloat. I went from a millionaire to an upside-down millionaire in about a year or two.
You went from $3,500 a month to $16,000 in gross expenses. Your cashflow didn’t increase that much and then it all stopped turning.
It was worse than that because I had all these new business expenses of this new business venture. Between that and my personal expenses, I started increasing my lifestyle too a little bit. As a result, my total expenses between business and personal were about $22,000 a month. I was only bringing in, most of it was now active income, about $5,000 or $6,000 a month. That was the big issue. I didn’t know I was in that bad of a hole. I had to finally look at the truth and start tracking my money, which is one of those first secrets of freeing up cash. I stopped doing that because money was so prevalent. It was like air. You don’t think about it until the air is gone. That’s what happened. I put myself in this rough place where now all of a sudden, I was in the hole for over $1 million.
I have no idea what you ended up on. Nobody else on the planet was. When you were 28, I was 32 and we were doing the same thing and went through the same growing pains. I had my dad chirping in my ear, “It’s not going to be forever, son. You need to put some of those away,” like Jiminy Cricket on your shoulder. For those people who are younger, go ahead and google Jiminy Cricket. Chris and I are okay with that, but we did that. We were doing unanchored retail space. “We can make this work and that worked, so why not do this?” The next thing you know, not only we’re out over our skis. We’re no longer skiing. We’re in mid-air and there’s no more velocity. All of a sudden, we’re headed for the ground.
2008 was a hard bounce and I found myself in a very similar position. You had all the things that you knew that you weren’t paying attention to. We’re now staring at you, going, “I told you so.” I don’t know how that felt for you, but for me, that felt horrible because I knew better. “I knew I shouldn’t have done this. I knew it but I did it and here I was.” Where did you go from there? I know what I did. I finally put the shovel down. I could dig in and I started building a ladder. How did you get out of that to get to the place where you retired a second time?
You’re not kidding. There are all kinds of mind games that were happening to me. In fact, the hardest part was not the financial part. It was the mind crap, all the mind trash you’re going through. I was supposed to be the guy that had it all figured out, teaching people how to get out of the rat race and I was back in it. There are all these like, “Am I out of integrity? How can I keep teaching this if I’m not living at myself?” To get out of it, I got back in integrity. I said, “I can’t teach this. I’m going to stop to teach people how to get out of the rat race, but I’m going to teach them what I’m doing and I’ve been learning, which is getting resourceful like how to find the money.”
Financial Freedom: You don’t have to cut your lifestyle down to find the money.
I had no savings left and no credit. My credit was getting hashed by 2008 and 2009. That wasn’t an option. I couldn’t get money. Nobody wanted to lend me money. Nobody in their right mind would and I don’t blame them. I had to figure out how to create money out of seemingly nothing. I started switching and I was like, “Okay.” I had to get creative because I was settling debts and doing different things. I was finding more efficient ways to pay off certain debts while leaving the other ones alone to get the biggest rate of return on my money. I had to get scrappy. I had now more multiple streams of active income I was trying to create to make sure we could stay afloat. There were some months I didn’t take a check. It was rough.
I started teaching people what I did, which is getting resourceful and how to find money because the funny thing is people would come to me and they said, “Chris, I would love to hire you as a consultant, but honestly, I can’t find the cash.” I wouldn’t say this at that time, but the thing I’m thinking in the back of my mind is, “Your situation is way better than mine. I bet you could find the money easily. Your situation is easier than mine is.” I said, “If I can help you find the cash, would you pay me?” They were like, “Of course.” I said, “Here’s what we’re going to do. I help people find the money.” Soon, I started to create a system around. It took about a year to get in the groove of it, but soon, I was able to create this whole cashflow system with it.
On average, we fund $34,000 a year in people’s lives without having to create passive income. That’s just funding money sometimes in their businesses. They’re leaking money there, in their personal life, or whatever it might be finding that cash and then now getting that to go to work for them or at least to build up some savings and create some security while everybody is trying to pull out of this recession. That’s what started to help pull me out because as I was helping other people figure out the same thing I was figuring out, we all elevated each other together. That was the key.
You mentioned that there are seven secrets to freeing up cash. Three of them right are the three top ones.
I mentioned one of them was tracking your money. This time, I had all these people doing. These are the seven common ways that people fund on average $34,000 a year. Tracking money was a big one because a lot of business owners, especially if you’re a business owner, you don’t want to track money. You’re too busy trying to make money. You’re like, “I don’t have time to look at it.” What’s happening is it’s like trying to carry buckets and the water is leaking out along the way and you’re getting frustrated. You would go back and keep hauling more not knowing what’s going on. I would be like, “Let’s look for ways here. Where are we spending money that’s not productive and generating income for you and your business? What’s going on in your personal life?”
Anytime somebody said they’re too busy to track money, I always found at least $500 a month that was being lost. They didn’t have to cut their lifestyle down. That was my key thing. I didn’t want people to live on rice and beans. That’s why on my website, the book is called Beyond Rice & Beans because it’s a slap in Dave Ramsey saying, “I don’t want you guys to live cheap and living on rice and beans and suffering,” but how do you be a better steward of your money? That was a big one. It’s tracking your income and expenses and being proactive like, “We can cut expenses, but what can we also do to increase income? Can we create more value in your job or business?”
Business is way easier to do that but I’ve had W-2 employees where I told them, “Go to your boss and ask them, ‘What can I do? How can I create value for you and the company that would merit me a raise?'” It’s amazing how few people ever do that. I had one guy who was making about $15 an hour at his job and he started asking that question. They said, “Do this and this,” so he did it. When it came review time, they were like, “You did everything we asked. Here is your raise.” Eventually, after about a year and a half, he went from $15 an hour up to $28 an hour in his job. He almost doubled his income. That’s the kind of stuff you can do. Number one is tracking your money. That’s one and a half to increase your income is always a nice thing, too.
Find the money so that you don’t have to live on rice and beans.
The seven were probably ten because those were several things all wrapped into one. It was great. What’s another one?
Another one is debt. That’s an interesting thing because the Dave Ramseys of the world are telling you that debt is evil. The truth is that’s not dumb as long as you’re not dumb with it. I tell people debt can be divine if you use it right. I created a formula called the Cash Flow Index. What this formula is you take the balance of the loan, divide it by the minimum monthly payment and it gives this index number. For example, to put this in real life. Let’s say that you’ve got a $20,000 car loan that you’re paying $1,000 a month on. You’ve got a $20,000 credit card that you’re paying $400 a month on. Let’s say that credit card is at 18%. If you’re Dave Ramsey, you’re going to say, “Pay off which one?” You’re going to say credit card every time.
The truth is, especially when you’re in a tight cashflow situation or even if you’re trying to get your money moving faster, it’s about velocity. I would look at it and say, “Which one is going to have the highest payment?” When crap hits the fan, whether it’s an unexpected expense going on in your life or your income drops suddenly, I bet you’re probably grateful that you only have to pay $400 a month versus $1,000 a month. I tell people, “As a tiebreaker, go for the interest rate and pay the highest interest rate, but ignore it completely. Look at what’s going to free up the most cashflow with the least money out of pocket?”
In this case, if you had an extra $20,000 and you can only pick one, go for the car loan because that has freed up $1,000 a month that now you can use that money to go create more passive income with. You could still use it to pay off the credit card if you wanted to, but the cool thing is you’re not required to have to make that payment. That’s what I learned in that hard time is it didn’t matter what the interest rates were. It was like, “What’s leaking out of my life right now? How much money am I losing?” That’s a big one right there.
That makes a ton of sense too because you get paid by the month. Your cash is coming in. They got tomatch and what you’ve got leftover. Another thought if you go one step further on that and you go, “If I don’t make the payments, which one can I afford not to make?” If I don’t make the credit card payment, they’re going to say bad things to me to experience. They’re going to call the Union and tell them all kinds of rotten stuff about me. If I don’t make that car payment, I’m riding my skateboard to work. When you look at it and go, “What is more important in my life?” Another way to put it, “This is the one that I have to protect and pay off first because of a free-and-clear car versus all the little knickknacks and hanging baskets that we bought at the home show are not going to matter because they’re not going to come to get them.”
There are cool things to do with that too like refinancing. I had a guy who is a business owner. He was getting to the point where he was almost paycheck to paycheck. He was like, “I’m hating my work.” That’s the thing you have to understand that although this is a mathematical equation, it’s much more psychological when it comes to finances than mathematical. This guy was like, “I’m now breaking even. I used to be profitable in my business, but now I’m burning out. I don’t think I’ll ever be able to quit.” I remember looking at his whole situation and this was about 2011. This was after things started to come back. Values have dropped, but things were starting to come back slowly.
I remember he was like, “What do I do, Chris?” I looked at it and said, “You get this $500,000 IRA and you’ve also got these other loans and mortgages.” He had a mortgage he was trying to pay off fast. He was doing the typical Dave Ramsey thing. I was like, “What we’re going to do is refinance your mortgage. Not a cashout, just a simple rate-and-term refinance. We’re also going to pay off just these specific ones using this Cash Flow Index. If we do this, we will free up $4,200 a month. Basically, $50,000 a year, but we need to use $100,000 of cash to help.” Back when we lost value in our home, they had to pay it down a little bit to get to refinance. I said, “You can use $100,000 from your IRA and free up $50,000 a year.” He was like, “Chris, how am I going to retire?” I was like, “You don’t understand, like $100,000 to create $50,000 a year is a 50% rate of return. What financial advisor is ever going to even try to promise you something like that?”
Financial Freedom: It doesn’t matter what the interest rates are. What matters is what’s leaking out of your life right now. How much money are you losing?
If you paid it in two years, it’s going to do it again the third year and fifth year. That’s the thing about cashflow. It shows up every month.
I try to do it every single way and found his wife. I’ve noticed the people that are least trained in finances get common sense faster sometimes. His wife was the one that’s like, “You still have $400,000 in your IRA. This makes sense. Let’s do it.” Here’s the cool thing that happened as a result is that he did it. He freed up exactly $4,200 a month that was life. He started to breathe and relax a little bit. In business, what happens when you start to relax and breathe?
It becomes more efficient.
It started to grow. He was a doctor. His patient conversion ratios went up because he wasn’t a burned-out doctor anymore. Now, he was excited and passionate about his work again, so people were saying yes more often. Within a few months after that, he started making an extra $2,000 or $3,000 a month of income all because he did this. That’s psychological. Plus, we found money with taxes. By the end of the year, he found $80,000 from that $100,000.
You alluded to this at the very beginning when you were talking about, “You had $3,500 a month and you had way more than that in cashflow.” That’s the thing that a lot of people don’t understand about IRAs. They’re stock. They grow because you keep feeding them. You’re getting a 6% return on the utility stock you bought, the IBM you bought back when IBM used to do something or back when Kodak would take pictures, but that doesn’t do anything when you start to spend that and you eat it. It’s gone forever. If you have that creating cashflow, which is exactly what you’re talking about, that is the river of life because it keeps coming in and replenishing itself.
That’s the thing that I’ve seen a lot of people have done. They’ve saved up. They’ve got their IRAs jammed full of money and their house paid off, but they have no way to sustain daily life other than to go back after those reserves and eat them. Instead of having someone say, “I have $1 million here and I’m going to spend that $1 million on a building that gives me $100,000 a year. Now, I still have $1 million because I own the building. I have $100,000 a year to spend that I have every year for the next 100 years. I’ve created cashflow instead of $1 million that if I live on it $100,000 a year only lasts me ten years.” That’s where you were talking about common sense not being so common. You followed it up and told me exactly why because you said he was a doctor, but you held that because common sense isn’t that common. I’m going to eat it.
My biggest beef with the traditional financial industry that I came from and I was trained in was that being on that side, they’re telling you to do everything that the banks and financial institutions want you to do, but not what’s best for your life. When they tell you to save everything, spend nothing, save it for the long haul and in your inner, fuller long haul, take high risks and create high returns. Banks don’t take high-risk rates and high returns. That’s ridiculous. The definition of risk is chance of loss. When did the 90% chance of losing become a 90% chance of winning? Mathematically, that doesn’t work.
Debt is not dumb as long as you’re not dumb with it.
You have a good point there because the banks teach you to do what they need you to do. They need you to loan money. They need money in their account, so they teach you to be their mule to bring them their money, so they loan you money and make the spread. What is it that you have to have on deposit? Do you have to have 15% or 20% on a deposit of what you loan?
It depends on the bank. I know in the state of Utah, it’s a 6 to 1 ratio. They can loan out six times more than what they have in reserves, but the least amount is ten times.
If they can get one guy that thinks saving $100,000 a year is a good idea, then they can loan $600,000 a year on that one guy. They’re going to double that every year because he has brought them another $100,000. They’re going to create fees on that, all of the monthly and the interest. They’re going to call that and give this guy 1%. It’s slavery.
That’s the thing that people don’t realize. If you watch the behavior of banks, you start to realize that everything you’ve been taught, you’ve been duped. You’re talking about they’re like the leverage. Nationwide, it’s ten times. You paid $100,000 and put it into a savings account or a CD. In normal personal finances, it’s almost the opposite of what’s wise because, in personal finances, they’ll say, “We’ll pay off that loan faster, so you don’t pay all the interest to the bank.” Think about it. If the bank were to do the same thing to you, their debt to them is you put money in a savings account or a CD.
Have you ever heard the bank call you up and say, “Shannon, you’ve been a great client of our bank for the last twenty years, but we hate paying interest and Dave Ramsey told us that was evil? It’s against the Bible. We’re going to pay you back all that savings you put in there.” You’re like, “I want it there. I want it to earn interest.” “We hate being in debt to you. Take it back.” You’ll never hear a bank say that, but that’s what we’re taught to do every day. That’s how stupid we’ve become. We’ve bought into it hook, line and sinker with billions of dollars of marketing and these financial companies saying, “You should do it this way that serves us.”
They’re taking your money. Like you said, $100,000. They can leverage that $600,000 or $1 million debt and make interest on it. People are like, “Why did they sell off my loan?” It’s easy because those of us who have done things with notes, know that we can make some good money and interest upfront, sell it off, and then do it again. We keep cycling money around. We always make the interest. If they wanted you to have the longest-term mortgage, wouldn’t they incentivize you with the lowest interest rate so that you pick it every time? Mostly, they give you the lowest interest on a 10 or 15-year mortgage, not a 30-year. I would tell people like, “If you want to stick it back to the bank, pay extra principal in that mortgage. You’ll get them.” It’s like, “No, you got duped.”
There are always both sides of the coin. In my family, there are some of us that did and some of us that didn’t. Those of us that followed the rules maybe got a little bit duped because we were overzealous, but then there are the other guys on the other side that was overzealous on the access to credit. They went out, got themselves in trouble and splattered all over the road. Now, you’ve got the bank going, “See? Right over there, they did it wrong. That’s why you should do this.” They’re reinforcing it, but they’re also the ones that are being reckless that loaned Johnny, Sam, Billy, Jane or whoever it is in your family that’s reckless with money. They were the ones that loaned them too much money. Instead of making that a financially feasible area, they’re being greedy as well. Those are all great things, but how do you counter that? How do you achieve financial independence when we know that the game is rigged?
Financial Freedom: Most people are in that accumulation mindset. They’re always taught to build equity, save, get a bigger net worth. But net worth is worthless if it doesn’t generate income.
That’s the thing is that almost you have to do the opposite. Listening to shows like yours is a big way to do it because you’re bringing on people that already are doing the opposite. For example, when I get people like that guy that had the $500,000 in his IRA. He was believing that he had to save, accumulate money, pay off his debt and that was the way to do it, but it doesn’t always work that way. Another example is I had another client down in California. I have a lot of Asian clients. They’ve been raised to be incredible savers. He had this plan and said, “I’ve got my house and I got an investment property in California.”
When he said investment property in California, I was like, “This thing has probably got high equity and no cashflow,” which was true. He had about $600,000 of equity in that duplex he owned, but it was only cashflowing $200 a month. His return on equity was point nothing. He had his home and he was trying to pay off his home. His whole goal was like, “Chris, my goal is in the next six years to accelerate paying down these mortgages so I’m debt-free on my house and my investment property so then I can keep all the $2,000 a month cashflow I’m getting from this property.” I was like, “Here’s the thing. You got $500,000 of equity in your house. Let’s say we only tap into $400,000, but we leave $100,000 in there.”
We get a cash-out refinance, which would only increase his payment by about $1,000 a month because he already had this low or pretty high payment for a low balance. I said, “Refinance, free up some money, and then sell your investment property. We can 1031 into something else.” He was like, “I don’t know.” I was like, “How much are you going to save if you pay off both these mortgages?” “$4,500 a month.” If we get this money unlocked, we’ve got probably $800,000 or $900,000 we could play with. Even if you only made 10%, that’s $80,000 or $90,000 a year. Subtract out the extra payment, we still come out at about $70,000 a year net. I was like, “$70,000 a year, that’s almost $6,000 a month versus waiting six years to free up $4,500 a month.”
I said, “If you reinvest that $70,000 a year and then you keep reinvesting and building that up, you’ll be over $100,000 a year of passive income by the time you hit that sixth year. You have more than double of what you were hoping to create.” He was like, “I don’t know,” because he was so indoctrinated. That’s the thing. I eventually had to work with him a little bit and finagle it and like, “Don’t cash out on your home mortgage. Just do a refinance. You’ll free up about $1,000 a month on your refinance. Do that and sell your other property.” It appreciated at $100,000 by the time he was making the decision. I was like, “Now, you’ve got $500,000 you can play with. Even if you made $4,000 a month, that’s better than $200 a month. You still win and you end up still making over $5,000 a month right now. That’s better than $4,500 in six years.”
That’s the point. There was a guy I know around here that he sold his whole portfolio of product. When he did that, he retired about $120 million in debt. He put in and I’m sitting here going, “You have all of this property and debt.” He goes, “I had all of this cashflow. How I built that empire was I kept trading the cash that I could get and pulling the equity out to build another project. Once I had that project, I got cashflow. $500 a month in cashflow on 50 projects and by continuing to move that money, it creates wealth, cashflow and lifestyle.” We’ve all heard guys like Tony Robbins who teach this kind of stuff, where they go, “Are you looking for cashflow? What are you looking for here? Where are we going?” That’s where we see this where it goes all the time. We can see where the people that have it do well with it because they’ve created it. Those are all good points. How does one achieve that and get there?
It’s getting your money out of prison, is how I call it. It’s like, “How can we unlock the dollars?” It could be equity and properties. With this guy, it could be like, “You’ve got money in savings.” I talked to a guy that has $900,000 sitting in cash savings. He was like, “I was too afraid to put it in the stock market because I don’t like the stock market.” I said, “Good for you because I hate it, too.” That’s coming from a guy who was a former trader in the stock market. I get it, but he was like, “What do we do with that cash?” I was like, “$900,000, even if you make 10%, that’s $90,000 a year of passive income.” The guy is an amazing and great professional in his 30s. He was like, “I don’t want to work forever.” I was like, “Cashflow is your key.”
Most people are in that accumulation mindset. They’re always taught to build equity, save and get a bigger net worth, but net worth is worthless if it doesn’t generate income. That’s what most people hope for when they save in their IRAs and their crappy 401(k)s. Even with the match, it’s not even worth it because the return is not big enough. I tell people, “Let’s get your money out of those places. Let’s get it out of prison, get it working for you, and get it into things that are more certain and stable like real estate. Whether it’s commercial, residential, into notes, or even things like land, there are all kinds of options you can get them into that’s safer than the stock market and also gives you better cashflow.”
Cash flow is the river of life because it keeps coming in and it keeps replenishing itself.
I got a question for you and I know my audience is thinking the same thing. They’re thinking, “You came out of 2008 where you had too much debt. You’re telling me to refinance stuff, pull cash out, and do these things. Aren’t you contradicting yourself? Why would you pull this out and create debt when you talked about it was debt that crushed you?”
It wasn’t the debt initially that crushed me. I wasn’t over-leveraged in the beginning. It’s because I took my eye off of cashflow. I wasn’t being a wise steward of my money, tracking my expenses and watching how much was coming in and going out. If you keep that under control and understand they’re like, “I need to be profitable in my life. Not just in business, but in your personal life, you need to be profitable,” that situation wouldn’t happen. People are like, “Yes, but if I borrow money, where do I invest it?” I’m like, “Invest in places where it’s more certain.” When I buy properties, I tell people that boring is sexy. That’s the one thing I learned from the last one.
I’m not trying to aim for the huge things like when I used to think, “If a $100,000 property appreciates by 10%, I’ll make $10,000, but if a $1 million property appreciates by 10%, I’ll make $100,000.” Go for the $1 million property, regardless of what it looks like cashflow-wise. That was my mistake. It had to be profitable, but I wasn’t doing that. If you’re going to use debt and money, you want to make sure you’re getting a much bigger return and more certainty behind it than otherwise. Here’s the thing. People think that they have debt. The truth is most people are already debt-free. The definition of debt is where you have more liabilities and loans than you have assets. In essence, you’re upside down.
For example, let’s say back in the last recession, you had a $300,000 mortgage, but if your house was worth $200,000. A lot of people will say they have $300,000 of debt, but that’s a liability. It’s not debt. They were technically only $100,000 in debt because if they try to sell their house, they would still owe $100,000. The question is if you sell all your assets, would you be debt-free? For many of us, especially with appreciation that has been happening if you are a homeowner, most of us have a positive net worth. Therefore, you are debt-free. If debt were that big of an issue, sell your assets off and then you’re debt-free, but people don’t do that. Even the Dave Ramsey fans don’t want to sell off their assets because there’s that contradiction like, “Debt is evil, but I need to have assets.” They can’t figure it out. The key is cashflow has got to be the focus. If you focus on cashflow and it’s certain and predictable, the debt conversation is not a big worry.
Let’s get to this next thing about double-dipping on your investment returns. How do you get paid twice? That’s what double-dipping is. It’s getting money out of the left pocket and right pocket on the same $100. How do you do that in your investing while you’re getting cashflow and growing your wealth? How does all that happen?
I first learned this in 2006 after I quit being a financial advisor. It blew my mind because the specific vehicle you’re using is whole life insurance. I was anti-whole life. I thought it was the biggest scam ever, but then I kept meeting entrepreneurs and real estate investors that were using it. I will tell you what I learned back then. There were the traditional infinite bankers that you talked about like Nelson Nash, if you’ve heard of his book. That was still a rip off is what I found out. I ended up losing my whole life because when I went through the recession, it had no cash in the policy. I called this max ROI infinite banking, where you get the lowest cost possible whole life insurance to give you the maximum return.
Here’s the concept. Whole life is different than term insurance. Term insurance is death insurance. You pay a premium. You have to die to get it. Whole life has a bigger premium, but they have money that goes to cash that goes in this tax-free and supercharged savings account. Most infinite bankers don’t think like real estate investors and therefore, they set it up like crap. The way to do it is if you can get the lowest cost possible in it. For example, I was showing that same guy that had $900,000. He was like, “What if I put $80,000 a year into this thing?” You can set a maximum on it. The maximum you can do is up to 25% of your stated gross income each year.
Financial Freedom: Debt is when you have more liabilities and loans than you have assets.
He was like, “What if I did $80,000?” I said, “The cool thing is you’ll have about $65,000 in cash there from day one. Even in the most expensive year, you’ve got cash but here’s the key concept. The cash value that’s there, you can get a line of credit against it through the insurance company.” When you get that line of credit, they’re paying you. This company in particular that I was showing him was 5.75%. The loan rate is 5%. Think of it like a HELOC that pays you money. You have the HELOC. You use it to go buy real estate and you try to get more cashflow to come in. It’s the same exact concept, but instead, we’re using the life insurance company that only charges you 5% while you’re earning 5.75% on all that money in there.
When you borrow it, the money is still there growing tax-free compound interest, but you’re also borrowing it at a lower rate. You’re then investing in your deal, where now you’re making money there in your real estate deal and still making a spread on your arbitrage money like the bank does on the money inside the life insurance. The cool thing is when you get over $100,000, there are banks that you can borrow from at 3.25%. Even though you’re making 5.75%, you’re only paying 3.25% and now you’re completely double-dipping in a massive way.
That brings up some interesting points. Not only are you getting cashflow, but for those that have small businesses, these policies can be an expense to the business. You’re creating tax deductions for your personal growth. I do this with my stuff. When I build a property out, that property buys key man insurance. That key man is my whole life policy. My investors are covered through that whole life policy. I get to use the whole life policy to do things with it that are like this. There are a lot of things you can do here that you’re seeing and that Chris is showing us where cashflow can create things.
It can create opportunities to do other things. It can create a lifestyle that you never thought possible that allows you to quit sooner than you thought, doing the things that the job wants you to continue to do because you’ve set up something about a cashflow lifestyle that gets you to a place where you are now free from that clock-punching mentality where you got to do this and that, even though you may still have some liabilities. Chris, where in the wonderful world of everywhere can people find you to get more information to help drill down into these opportunities that you presented because they’re phenomenal.
I got two easy places. One, you can check out my podcast. You can find The Chris Miles Money Show on iTunes or wherever you listen to podcasts. Two, you can go to my website, MoneyRipples.com.
Chris, I want to thank you for being on the show. Guys, I want to thank you for reading. I hope you got a lot out of this on the show. Don’t forget to like, share, and subscribe to the show on Podchaser, Spotify, iTunes or wherever else you get it and get your automatic updates. You can find us also on Instagram and YouTube. Give us a review. Let us know what you want and how these segments that we do with guys like Chris are helping you grow in your financial decisions and real estate life. Thanks, Chris, for being our guest.
It was such a pleasure. Thanks.
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About Chris Miles:
Chris Miles, the Cash Flow Expert and Anti-Financial Advisor, is a leading authority teaching entrepreneurs and professionals how to get their money working for them TODAY! He’s an author, podcast host of the Chris Miles Money Show, has been featured in US News, CNN Money, EO Fire, and has a proven reputation with his company, Money Ripples, getting his clients fast, life altering financial results. In fact, his personal clients have increased their cash flow by over $200 Million in the last 10 years!
As founder of Money Ripples, host of The Chris Miles Money Show, and co-author of the book Entrepreneur on Fire, Chris Miles is a leading authority on quickly creating wealth by increasing monthly cash flow and creating passive income. He has shown hundreds of thousands internationally how to free up or generate tens of thousands of dollars each year! Chris has been featured in US News, CNN Money, and Bankrate.com and has a reputation for getting his clients fast, proven results. Many of his clients have the option to retire in less than 5-10 years, and Chris himself was able to retire twice by age 39! Chris’s passion is helping entrepreneurs, and high-income employees become financially prosperous by finding and fixing their money leaks and creating passive income.