Building a Strong Financial Foundation

Scott and Cameron discuss the importance of establishing a strong financial foundation. Discover why foundational savings are crucial for your financial well-being and learn about how life insurance can play an important role in these savings. Scott shares how saving this way allows you to utilize it to not only be prepared during emergencies, but to take advantage of investment opportunities. Also discover how being prepared in this way for financial "black swan" events can set you up for long-term success and enable you to seize lucrative opportunities when they arise.

Transcript

Welcome in y'all to this week's episode of the magnify wealth podcast with your host here, Scott Gannon. So this week, what we're going to be talking about on the magnify wealth podcast is the foundational savings that we all need to have in our lives. When I say this, mean, savings needs to come first. When you build a house, what comes first? Foundation. Absolutely. And when you build a skyscraper, how does that foundation differ than when you build a house? Well, it should be wider. It should be stronger. It should be deeper. So the higher you want to go in your wealth pyramid, the stronger your foundation needs to be. Exactly.

So when we build that strong foundation, we need it to be well protected. We need it to be very low risk because again, we don't want the higher up part of your financial life to come tumbling down someday. Cracks in foundations are never good for what's above it. So when you say low risk, well, we like to say no risk, take the risk right out of it. And that like the foundation part too, there's a lot more to it, but we're going to talk to what we specialize in obviously is that infinite banking concept or saving inside your high cash value life insurance policy so that you can kill. two birds with one stone there with your death benefit as well as your savings. But there's other things too. There's liability insurance, there's proper estate planning, there's a number of things that go into a solid foundation, including emergency funds and obviously the right insurances. And you know what, even though we really specialize in one area, any risk that you have that you can ensure, it's likely the better way to eliminate that risk or the most cost-effective way to eliminate any risk is to insure it if it's possible to insure. 

Canadians these days, know, we save, we save. What's the real problem here? Well, the problem is the average saving rate in Canada the last 10 years is 4.6%. Now all the, just about any financial book you read about building wealth and blah blah blah. is save 10% save 10% save 10%. That is truly isn't getting it done for most of the people that are actually saving or listening to that 40 years ago or 30 years ago or even 20 years ago. The 10% is, a minimum for sure. to be, comfortable when you want to spend your money or your financial freedom days. Yeah, 10 % is not going to get it done. Not in today's environment. 

let's circle back to what we specialize in, which is getting you to save cash in that high cash value life insurance. And what I'm going to do is I'm talk to you a little bit about alternatives. So what is an alternative if you were to not have what we do? Well, you can save it in a bank. But here's the problem savings is not something that you have at risk. It needs to be there when you need it or want it. So we talk all the time about emergencies and opportunities and the only way you're going to be able to really take advantage of opportunities is have money that you can rely that's going to be there. And you can do that with the banks but if you have it in an account that that's possible it's probably being swallowed up by inflation. Inflation. If you're getting an interest rate, it's taxed and fees. Banks charge fees. mean, let's face it. mean, they're in the business of making money and I know just about every second person I talk to complains about the fees of their banks charge. And that little side note, always stay on top of your bank about that every year or two. Threaten to leave. See what they'll do. So there's always ways to save some money. 

All right. Let's get back to our next example. Our next example will be bonds. of course, now we're getting into risk, right? So a lot of people think bonds aren't risky, but if you're trading a bond or if you're buying one and potentially taking note at the wrong time, it absolutely can be changed in value. So bonds are risky. Equities is another option, but that's even riskier. So these really These are non -starters. These are not emergency fund capital. You wouldn't be looking too good if you bought a bond at the start of 2023 and then the end of the year, we're looking to get rid of it. I think it started actually late in 2022 and there was the US had the worst bond bear market and pretty much this was measures. It was like over 200 years. Crazy how much money was lost in bonds. 

Of course, now we come back to specially designed, dividend paying, high cash value life insurance. So what does that do? Well, it is safe, liquid, leverageable, on demand, as we always talk about, it's contractual. and it's tax free when you utilize the lending properly or the borrowing properly. And obviously you need a good coach for that. And that's what we do. We coach you through those opportunities and emergencies. 

So why is now a great time to be a saver? Every seven to 10 years is what happens is what's called Black Swan event. What's a Black Swan event? It's a lingo term or whatever in financial world of catastrophe of some sort. COVID was one, financial crisis of 2008, airplanes flying into buildings in 2001. These are all these events. Now, Black Swan events happen every seven to 10 years. We can go back in history and people made tons of money. if they were ready at the right time for those black swan events. So the people that really made off, like when people were really losing a lot of money in the stock market in 2001 and 2002, or the ones that were sitting on cash and waiting for that black swan event. Or if you were accumulating real estate in the nineties in Canada, that was, you were doing something wrong. If you were thinking that real estate, like it was, you know, there was a lot of people that believe real estate was dead in the nineties, but look at us now. What's another one? Oh, yeah, the financial crisis of 2008. mean, that's the stock market and the real estate market, especially in the US. In fact, I have personal experience with that and I'm happy to share with anybody on a one to one basis. The opportune time to buy was any time between 2009 all the way up to 2012, 13, 14. If you'd have bought then, yeah, you made off quite well. And the is the key is those that made off quite well with the ones that were that had been saving and had cash ready and know, ready, aim, fire for when that event happens. 

Exactly. So, so yeah, the real key is being ready for that event. Now the other course, the other part of this too, is you got to have the guts pull the trigger at that time. Just know, we always encourage everybody that whatever you're investing in, be well researched in it and understand what you're doing. And you'll know when there's an opportunity. So, another example, I'll just go back to a more recent one is just to kind of give some reference to why it's a great time to be saving, is COVID. COVID happened for what? We're into the fifth year. So we're over four years since that happened And we say every seven to 10 years. So when's the next black swan going to be an event going to happen? I mean, frankly, it could be tomorrow. I don't know, but probably two to five years away. Something's going to happen. What is it going to be? I don't know. But, uh, our real estate market starting to get a little, a little, um, um, scary, I guess for some people, because there's a lot of really low mortgage rates that are coming up for renewal in the next couple of years and people just aren't going be ready for it. So you could see a flood. of foreclosures or even just a true buyer's market because there's so much for sale. And during COVID, just think of it this way. If you'd invested in cruise lines in June of 2020, they were down 90%. 

So if you had the guts to say, OK, I think that this is going to go away at some point and threw 10 grand in it. And all I had to do was get back to where it was and you had a hundred grand. Like that's like 900, whatever it is. I don't know what the exact math is on it return, but those are major, uh, windfall events. And as I say, if you, if you're ready and have the cash at the time, that's how you take advantage of black swan events. And the key here is the black swan events. If you're ready, you can build your skyscraper. But to be able to build that skyscraper, now's the time to build a very strong foundation for it. Exactly. Skyscrapers don't get, don't get built in a year anyway. So you want it, you want your, your wealth pyramid to be a skyscraper, then you need to be willing to act and be ready cash wise when those black swan events happen. People talk a lot. A lot of advisors talk about having to be in the market to, to benefit and frankly, I think you're probably better off if you're in the market less, but at the right time. And I'm not suggesting that timing the markets like that's not what I'm talking about. I'm talking about, taking advantage of sales. 

Let's face it. I can go on and on all day with this, you know, load up on steak or something for your freezer. You don't do it when it's at its maximum price. You do it when it's on sale. Same thing. Like you're going to grocery store or go into any department store, right? You know, you're looking for sales, looking for sales. Well, guess what? When assets are for sale or on sale, that's usually a good time to buy. But again, you got to be willing to act fast and, and have the money available to move quickly to be able to maximize that return. 

Awesome. All right. I think we should wrap things up for this week's episode. Thank you guys for coming to the magnify wealth podcast. See you next week. See you later.