Build Your Banking System Before You Buy Your Next Vehicle (Ep. 256)

If you are going to have a fleet of vehicles, why would you not do this? Why would you not say, hey, you know what? We don't need the most brand new vehicles right now. Let's just try to capitalize a system for four or five years and then let's add to it. Does this matter if it's taxes? I pay my taxes through my policy.

And so could I do that year one? Absolutely not. It took me time to capitalize that system. And then I got to a point where I could be borrowing cash value to pay taxes and then I can pay myself back quarterly.

So it doesn't just have to be trucks. A lot of times we get stuck on that too, that we forget to use our imagination. Hello, hello and welcome back to the podcast.

Thank you very much for joining us. We are going to go through equipment financing. This is a long chapter.

It's a lot of stuff. We're going to keep it short and sweet to not make it so complicated. A lot of what Nelson talks about in here is capitalizing the policy repetitive.

But I just want to start out by saying, if you go to page 54, that is where he's going to start showing us how to buy a truck. He has already talked about putting $40,000 in a policy for four years. And he's done that in previous chapters.

And so now he's implementing it here. Should you do this? Good gravy, no. And you can't do it.

You cannot pay premium for four years and be done paying premium. Like the policies that we write, the shortest year is 10. You can't pay premium for less than 10 years.

I know that he says he's using dividends to continue to pay base premium. He would not recommend that. He talks about that in this chapter.

So this is just to illustrate how you would capitalize a system and finance those vehicles. So Nelson tried to basically say, hey, this is how you should be thinking and be creative about it. And we take everything in his book literal, which causes some problems.

Yes. Okay. So this is an illustration of how this can work.

All right. Trista loves this chapter. So it's all Trista.

I do love this chapter. Because like I'm just a numbers gal. Remember, she has an Excel spreadsheet.

She probably does a pie graph of what they spend money on. I'm not gonna share too much about my nerdy Excel sheets. I'm just kidding.

Then what are we gonna pick on? I do love them. I think they're great. Very informative.

Everyone should do it. You need an Excel spreadsheet. I'm your girl.

I do love this chapter. Because like I'm just a numbers gal. Remember, she has an Excel spreadsheet.

She probably does a pie graph of what they spend money on. I'm not gonna share too much about my nerdy Excel sheets. I'm just kidding.

Then what are we gonna pick on? I do love them. I think they're great. Very informative.

Everyone should do it. You need an Excel spreadsheet. I'm your girl.

But I just want to start out by saying, if you go to page 54, that is where he's going to start showing us how to buy a truck. He has already talked about putting $40,000 in a policy for four years. And he's done that in previous chapters.

And so now he's implementing it here. Should you do this? Good gravy, no. And you can't do it.

You cannot pay premium for four years and be done paying premium. Like the policies that we write, the shortest year is 10. You can't pay premium for less than 10 years.

I know that he says he's using dividends to continue to pay base premium. He would not recommend that. He talks about that in this chapter.

So this is just to illustrate how you would capitalize a system and finance those vehicles. So Nelson tried to basically say, hey, this is how you should be thinking and be creative about it. And we take everything in his book literal, which causes some problems.

Yes. Okay. So this is an illustration of how this can work.

And I'm just going to go through some highlighted things before I kind of get into the Sparknotes version of what my takeaway is from this chapter. So the first thing that I have highlighted is, he outrracks all possible borrowers and access to a pool of money that must be lent to make the life insurance plan work. And then he goes on to say, look at how you're building equity in your equipment.

Because essentially, he is paying off these logging trucks through the bank. And his accountant is excited that he's building equity in his equipment. And then he goes on to say that's true, but he's building equity in the wrong place.

He should be building equity in the banking business that finances his trucks. Everyone should be in two businesses. The one in which you make your living, and the other should be the banking business that finances whatever you do for a living.

Of the two businesses, banking is the most important. Businesses come and go, but banking is eternal. So essentially, what he's saying is, if you have equity in your trucks, you're limited in your options of what you can do with that.

If you have equity in your banking system, how many options do you have available to you? It's not just limited to your truck. You could be making a hard money loan to someone else. You could be putting money down on real estate.

You could be paying for marketing your business. You could be using it for taxes. It really is an exercise of imagination because you're not limited.

Whereas if you have equity in one place, typically you are limited. And someone is making the rules around how you're able to use that equity. And a lot of people don't think about that.

It's like if I have equity in my home, well, I have to have the qualifying income to maybe get a HELOC or a cash out refinance. And then I'm still not able to use 100% of my equity, right? Whereas if I have the equity in the right place under my ownership and control, I could use it to my discretion. Okay.

So basically, he goes about financing the logging truck, which is, is it $40,000 or $52,000? Let me see. I think if it was my favorite chapter, I would know that. $52,600.

Yeah, $52,600. Okay.

So he says, pay close attention to this point. It is vital that he must set up a loan repayment plan that equals or exceeds what he would have had to pay the finance company that he was using in the past. So if you go to page 54... And he's talking about paying extra interest as well.

Extra interest just means more premium. That's it. Yes.

More premium. That's all that means. And Nelson talks about this and we can get that out of the way right now.

The extra interest that he's paying in this chapter is what's making these policies grow. Yes. It's not magic.

This is where people think, if I take a loan, I make money. You only make money if you pay the extra interest into a policy or a new policy to increase cash value. So in this chapter, anything extra is not actually going into one policy either.

People think, oh, it's just one policy. And Nelson says right here, remember, all he could do is add additional policies to his banking system as early as possible to enhance his ability to finance his entire inventory. So when people read this, they think that this is all one policy. It can't be one policy because of the MEC. So we have to do a system of policies.

So a lot of people like to jump to these numbers and jump to this chapter. Just like a lot of people like to go to the numbers in my book and they like to skip the first half of the book. The first half of the book is the important piece.

So right. And so you have to understand if you skipped over the MEC chapter, you're going to think this is one policy, but you can't skip over all of those things. So anyway, none of the figures that you're going to see are set in concrete.

They will vary with interest rates and how you treat the system. Your behavior is managing the system is the most important factor in the entire equation. We haven't heard that before.

Okay. I don't think I have anything else on that chapter. If we miss something, I'm sure you guys will let us know, but you know where to reach us.

So Mary Jo at Without the Bank or Trista at Without the Bank, but read that chapter and don't make it that complicated. And there's not much to go over in it because a lot of what he was saying is repetitive to everything we've already gone over in previous podcasts, in previous chapters. We don't need to be reminded of it. So let us know how we can help schedule your appointment and we'd be happy to have a meeting with you. Have a fantastic day and we'll see you in the next podcast.