“The human species, according to the best theory I can form of it, is composed of two distinct races, the men who borrow, and the men who lend.”
When most people think about investing or growing their money, their thoughts turn automatically to the stock market. Money is dropped into the machine and a bet is placed that more money can be extracted later. That strategy may work out alright or, depending on timing, it may be disastrous. Speculating on the stock market is not, however, the only way to put money to work!
“Private lending” may or may not be a familiar term, but it is the oldest, most proven form of producing interest or income from assets. Private lending is simply lending money in exchange for interest (or occasionally, a share of profits).
There are many types of private lending. Some common examples would include lending capital to help a borrower:
Purchase real estate which will then be developed, rehabbed, rented and/or refinanced.
Start or expand a business venture, perhaps with a partner or fund.
Refinance credit cards or other higher-interest debt.
Fund personal projects—from kitchen remodels to weddings—perhaps through a “peer lending” platform.
Notice that, in each case, you are playing the role of thebank. Banks provide loans for mortgages, businesses and personal projects in exchange for interest. In private lending, you assume that role and gain the associated benefits—and risks. It’s a way of cutting out the middleman, which is the bank!
People and corporations seek funds from private lenders for many reasons. Sometimes, traditional bank financing is not available for a certain type of project. A person or company may not qualify for bank financing, yet may have adequate cash flow or income to repay the loan. And there are other advantages to private funds, such as privacy, speed, or the ability to scale a project.
Have you ever considered becoming a private lender? Perhaps you have loaned money to a friend or family member, either formally—with a contract—or informally—on a handshake. (Of course, there are advantages to NOT loaning money to friends and family!)
If you have money to lend, there are many opportunities, though all are not equal. Some strategies are flawed and risky. Done right, properly structured private lending can be a safe and powerful strategy for growing assets or generating steady income.
If you wish you had started earlier building your future retirement income, this is especially for you. Here are seven reasons you may want to “be the banker” and consider smart private lending opportunities!
Reason #1: Historically proven.
Lending has been a reliable way of generating profits and cash flow for centuries. We have records of private lending agreements as early as 3,000 B.C., showing people loaning to others for defined time periods in exchange for “interest” paid in wheat, livestock, shekels of silver, or other commodities. Interest rates of 20% – 40% were common in ancient times, though extraordinarily high rates became known as “usury” and were discouraged or outlawed.
Of course, lending is a primary strategy of banks. Banks do not speculate in the stock market… they lend money!
In the Great Depression in the late 1920’s and 1930’s, the stock market crash gave investors a new reason to seek a different way to invest. At the time, the U.S. was just over 100 years old and had experienced several crashes and panics, as they were often called. However, the 22 years preceding the Wall Street crash of 1929 saw an impressive, if deceptive, bull run.
Investors such as John Powell soon learned that what goes up may go down… way down. After severe losses, Powell swore off the stock market, deciding that speculation was not for him. After all, Powell was a farmer by trade. He was used to planting crops and getting a fairly predictable result!
Powell began lending money to those who needed capital. He helped people purchase or temporarily finance properties. For the next three decades, Powell was a private lender with steady profits. He never invested in stocks again, yet he grew a tidy sum of money for his family.
Reason #2: Earn predictable income.
When you invest in the stock market, you are placing a bet that the price will go up. Of course, this is not always the case! Nobody thought that Enron would collapse or that the stock market would lose roughly half of its value in the DotCom bust and the Financial Crisis.
When you loan money as a private lender, you have a contract that specifies how much you’ll be paid and when. There is little guesswork. Properly constructed with protections, collateral and the right borrower, this delivers predictable returns. Interest is paid monthly, annually, or as otherwise specified in the agreement.
Is there risk? There is almost always risk when money leaves your pocket, although there are ways to effectively manage risk. A private lending deal should be properly vetted and constructed to guard against losses. For instance, collateral minimizes risks for private lenders and helps ensure timely payments. And as in all ventures, there should be complete transparency and no manipulation by government or corporations.
Reason #3: Receive excellent cash flow.
In addition to passing the test of time, the strategy of lending has created some of the most profitable businesses in the world. (Unfortunately, many people tend to be borrowers, not lenders!) Private lending gives you the ability to “be the bank” and get paid well.
It is normally difficult to create meaningful gains or income with banking products, bonds or any financial instrument offering guarantees. However, properly constructed private lending offers an exception to this rule. Even in this low-interest environment, you can earn many times what your bank is paying… without the roller coaster ride of the stock market.
Should interest rates go up further, this is actually good for private lenders. Interest rates would naturally rise for private lenders as well as institutional lenders. There is always a demand for lending both inside and outside of mainstream channels. When it becomes more expensive for banks to lend and borrowers have a harder time accessing capital, demand for private lending increases.
Today, investors who want more income from their existing assets can earn a healthy return by becoming private lenders. And when the return is contractually agreed upon (as we recommend), you will know exactly what growth or cash flow to expect.
Reason #4: Diversify your investments.
Not only does private lending help diversify a stock-heavy portfolio; it can also help diversify different types of real estate investments. You may want to lend on different types of properties. You might want shorter-term and longer-term contracts. You can diversify by lending money in different locations and types of neighborhoods.
Of course, it is handy to do business locally. But you might live in an area where it is difficult to earn a decent return. And even if your neighborhood is ideal, you never want to put all of your eggs in one basket!
Reason #5: Secure your cash with collateral.
If you are lending on real estate, your investment should be fully secured by the individual property itself. A first deed of trust is the gold standard, although there are different ways that private lending deals can be structured. (Be sure you’re not last in a long line to be paid!)
You’ll want an appraiser to verify that the property is worth more—hopefully a good deal more—than the amount you are lending. The lower the loan-to-value percentage, the more security you have for your investment.
Of course, not all private lending opportunities are secured by a real asset. In the case of peer lending, the borrower’s income and good credit are your “security.” Credit scores, income and other factors can be helpful predictors of risk, especially alongside collateral.
Reason #6: Use a self-directed IRA to defer taxes.
One advantage of a properly structured private lending agreement is that it can be done inside of a self-directed IRA. With an IRA, you get the benefit of a tax deferral. Gains are deferred until withdrawn from the IRA (typically in retirement).
If new money is placed in an IRA, you will receive a tax benefit in the form of a deferral. IRA contributions are deducted from your current taxable income and become taxable upon withdrawal from the IRA.
Private lending can also be done outside of an IRA environment; it is your choice.
Reason #7: Maintain Roth conversion flexibility.
With a properly constructed private lending deal, you can convert all or a portion into a Roth IRA to avoid paying taxes on future gains or interest income. You’ll have the flexibility to do so a bit at a time, which can help you avoid higher tax brackets.
The beauty of this strategy is that you can gradually move your nest egg into an environment where future income and gains will never be taxed. (Never!) This is our favorite strategy to create passive,tax-free income in retirement (or whenever you want it!)
What’s the catch!? (Not sure you need an image here or if this is too “square” but if you want one, it’s kinda cute. You could also crop off the top 2 pigs to make it wider if you wanted.)
You’ve no doubt heard the term, “buyer beware!” The same could be said about lenders. If you have cash, private lending deals may be plentiful. However, some are better than others. Some aren’t “deals” at all–especially not for novice private lenders!
With private lending, you assume the risks as well as the benefits of lending. That is why we have carefully vetted what we believe is the BEST private lending opportunity. We are working with a developer with a long track record of paying private lenders like clockwork. All capital is fully collateralized and the investment qualifies as an exempt security, which gives private lenders additional protections. Interest rates are competitive and vary according to the length of time. It is not necessary to be an accredited investor (although you can be!)
To learn more about this private lending opportunity to create profits and cash flow, here’s a short video that illustrates how private lending has helped our clients grow both their assets and income.*** No pressure… we’ll just give you the information you need to make an informed decision, then get your questions answered!
“Wars are not paid for in wartime; the bill comes later.”
While this remains true in many ways, chances are, your portfolio and your wallet have already paid a price since the military invasion of Ukraine.
However, the Russian-Ukraine conflict is only one piece of the war on your wallet. Today, we want to call attention to the various battlegrounds threatening your dollars and investments in 2022.
There’s never been a more important time to pay attention to what’s happening with your money and take a proactive stance. That’s why—after examining the war on your wallet—I’ll suggest some action steps to help you defend your dollars.
The Ukraine-Russia Conflict
As we discuss the impact of the Russian/Ukrainian conflict on your dollars, we want to begin with an acknowledgment. War is brutal. Those of us who experience the damage in dollars alone are the lucky ones. May peace come quickly, in Ukraine and elsewhere.
That said, the impact of geopolitical events on stock portfolios has been severe. If you have money in the S & P 500, you saw nearly a 13 percent drop from early January highs to recent lows. The Nasdaq fell a whopping 21 percent from early January highs to March 14.
If you were well-diversified in global equities, you may have done even worse. China’s Shanghai Index and all of the European stock indexes all fell further than the S&P 500. Russian stocks collapsed into dust, suffering more than 95 percent losses before the market was closed for 3 weeks.
While some of the losses above preceded the invasion (the result of other factors covered in this article) the deepest cuts appear to be directly influenced by the conflict.
Growth Stock Implosion
Even before the invasion of Ukraine, growth stocks such as Tesla took a beating. As money fled the technology sector in anticipation of rising interest rates, Tesla plummeted from $1200 to about $766—a stomach-turning 36 percent drop. Other companies such as Meta/Facebook, Paypal, Moderna and Etsy fell even further, reported Kiplinger.
Outside of the S&P 500, mid-cap and small-cap growth and momentum stocks have been obliterated. Many tech, solar, and other innovative growth companies have lost 70 to 80% of their value since 2021 highs. Still buying the dip? Choose wisely!
China’s Threats to Stability
China has become an economic superpower, with the largest economy in the world. Chances are, your portfolio may have shares of BABA, NIO, or other popular Chinese companies. However, many investors are not fully aware of the incredible risks of investing in China—or the impact that a volatile
China could have on the REST of your portfolio.
For starters, there is the threat of stocks being de-listed. Last year, when Didi (known as “China’s Uber”) declared its intention to de-list shortly after its IPO, Chinese stocks trading in the U.S. plunged by over $1 trillion, reported Bloomberg. Will more Chinese companies be delisted? Bloomberg thinks so, declaring in a March 15 headline, “the U.S. is moving closer to de-listing Chinese firms.”
The alignment of China and Russia and a potential invasion of Taiwan is another looming crisis. As the New York Post covered recently, China and Russia have formed a new alliance to challenge the West. Putin needs China’s cash, investments, and market for commodities and weapons. And while many countries have imposed bans on Russian oil, China continues to be a major customer.
Just weeks before the invasion of Ukraine, Vladimir Putin and Xi Jinping made their mutual loyalty official. After meeting just prior to the Beijing Olympics, a new pact was unveiled declaring a “new era” in the global order. The 5,000 work agreement vowed, “Friendship between the two States has no limits,” and “There are no ‘forbidden’ areas of cooperation.” The economic implications of this challenge to the power and influence of U.S. and NATO could be significant.
The Next Too-Big to Fail Whale?
In 2001, the collapse of Enron “shook Wall Street to its core,” reported one financial journalist. A year later, the bankruptcy of WorldCom echoed the tragedy. And who can forget the impact of the 2008 collapse of Lehman Brothers? It was, perhaps, the biggest catalyst for the destabilization of the entire financial system.
The next “too big to fail” giant, Evergrande, may be made in China. The second-largest real estate company in China and the world’s most indebted real estate developer, it has been teetering on collapse for months. The company’s struggle to repay creditors has already caused dramatic sell-offs in the global markets, and with indications pointing to Evergrande being a ticking time bomb.
Ratings agency Fitch had said that default “appears probable” while Moody’s had said, “Evergrande is out of cash and out of time.” On March 22, Evergrande investors learned that more than 2 billion in cash had been seized, cash that had been used as pledge securities. No doubt, as in 2008, investors of Evergrande and beyond will be left holding the bag wondering, “What happened?”
Rising Inflation and Commodity Prices
While inflation sometimes leads to inflated stock prices, the rise in commodity, especially oil prices, are taking a toll on many publicly-traded companies. While energy companies may benefit, skyrocketing oil prices means it’s far more expensive to transport goods to customers. Operating farm equipment and most fertilizers just got more expensive, which will only push food prices higher. Many other commodities such from lumber and industrial metals are also skyrocketing. Corporations must either hike prices or shave profits.
Many American families are feeling the impact of inflation. According to an analysis by Advisor Perspectives, consumers lost 1/10th of their buying power from January 2021 to January 2022. The calculation took into account “real” disposable income (including inflation). This could have devastating impact on both families and the economy.
Rising Interest Rates
Rising interest rates means that both consumer debt and corporate debt is becoming more expensive. In February of 2022, the Institute of International Finance reported that total global debt had risen to a new high of $303 trillion. And although the U.S. and other Western nations have spent like there was no tomorrow, over 80 percent of last year’s new debt burden came from emerging markets, where total debt now approaches $100 trillion, reported Reuters.
What do rising interest rates mean to you? While you may get a little extra interest on your bank savings, rising interest rates historically go hand-in-hand with stock market crashes and corrections.
In recent years, corporate debt has skyrocketed as companies have become addicted to nearly “free money” borrowed at next-to-nothing rates. But now the Fed is in a no-win situation: either raise rates at the risk of a stock market crash, or allow runaway inflation to destroy the dollar.
But wait—there’s more!
I didn’t even TOUCH on many of the obvious risks.
The supply chain crisis still plagues many industries and semi-conductor chips are only a part of it.
An extra 200,000 businesses or business branches closed permanently in the first year of the pandemic, estimated the Federal Reserve. Many remaining businesses struggle with labor shortages.
Could rising interest rates could trigger the next housing market crash? When the same dollars only purchase a fraction of the same home, prices will inevitably drop.
And in spite of significant recent drops, the stock market is still not priced to buy, say many analysts. Valuation measurements such as the “Buffett Indicator” (U.S. publicly traded companies divided by GDP) show U.S. equities are still historically overvalued.
Then there’s the next Covid variant which could soon lead public health officials to recommend more economy-destroying lockdowns or other mandates. (It’s already here—Omicron BA.2, the sequel.)
The way OUT of this mess!
The last 2 years have been stressful and unpredictable—to say the least! And while I’d like to assure you that it’s smooth sailing from here, I’m not going to lie to you. If your portfolio and nerves are battered, it’s time to bullet-proof them.
First, if most of your money is in the stock market, consider diversifying asset classes NOW.
All we ever hear about from the talking heads on Wall Street is about “stocks and bonds.” That’s not because stocks and bonds are necessarily the BEST vehicles for your money—it’s because that’s what Wall Street is selling!
But a diversified portfolio isn’t simply different kinds of stocks. You could be invested in Microsoft, Tesla, Etsy, and Ally Bank—very different companies. But when bad news headlines hit, they can ALL drop like a rock.
Does that mean Microsoft’s business changed from a month ago? Is Tesla’s technology is suddenly less valuable? Did Etsy or Ally’s business models change? Of course not! The only “changes” were headlines and investor sentiment.
Historically, real estate, private lending and dividend-paying life insurance provide excellent hedges for stocks. (Gold, silver and Bitcoin can provide a hedge against inflation—but they have their own volatility, too.)
Second, demand a guarantee for your money.
What!? You can put your money into something predictable—besides a savings account or CD paying anemic interest rates?
“Errors of human judgment can infect even the smartest people, thanks to overconfidence, lack of attention to details, and excessive trust in the judgments of others.” —Robert J. Shiller, Professor of Economics, Yale University
Yikes! It’s not so bad if your “error of judgment” means you picked the wrong brand of toothpaste or even the wrong resort hotel. But it’s mighty serious, indeed, if your error of judgment leaves you struggling to get by in retirement—particularly if your health (or the health of someone close to you) means you can’t go back to work.
According to AARP, those errors of judgment have left the majority of baby boomers believing they’ll be forced to postpone retirement. And half have little confidence they’ll ever be able to retire.
“But I’ve done all the right things!”
If you’ve been doing “all the right things” financially but are disappointed that you don’t have nearly enough in your retirement fund, do you think continuing along the same path will suddenly start bringing you a different outcome?
And how much is enough, anyhow? Is having $500,000 socked away going to do the trick? Even if you only need $3,000 per month to augment your Social Security check, $500,000 will be gone in about 14 years! Then what do you do? Sit home and watch reruns of I Love Lucy?
The sad truth is that most families don’t have anywhere near $500,000 in retirement savings. In fact, the Federal Reserve Survey of Consumer Finances reveals that the typical household nearing retirement—people ages 55 to 64—has only $111,000. If a couple uses their $111,000 to purchase an annuity, those assets will provide at most only $500 per month!
That’s not even enough to buy groceries these days, not to mention paying for health care, heating, transportation, insurance, and all the other expenses of daily life. And the purchasing power of that $500 will decline over time, due to inflation.
But even more frightening is the fact that this paltry $500 per month is likely to be the only source of income they’ll have to supplement Social Security because that’s all most people have.
The U.S. Senate Committee on Health, Education, Labor, and Pensions tells us just how bad the situation is: “After a lifetime of hard work, many seniors will find themselves forced to choose between putting food on the table and buying their medication.”
Government-Controlled Plans Are Not the Answer
The real problem is that 401(k) and 403(b) plans, IRAs, Roths, SEP-IRAs, and so forth, are all government-devised and government-controlled plans that in the long run don’t benefit you as much as they benefit the investment advisors who sell you the plans.
For example, tax-deferral—the holy grail of retirement planning—is not the magic bullet you may have been told it is. First, tax deferral is not the same as tax-free.
Second, just about every financial expert—and virtually everyone we meet—believes tax rates are going up. So waiting to pay your taxes until the rates go up makes about as much sense as waiting to buy a new mattress until they raise the price. Plus, if you’re successful in growing your nest egg, you’ll only be paying higher taxes on a bigger number!
Third is the issue of how you grow your money. Thanks to the multi-billion dollar lobbying efforts of Wall Street, the government makes it very difficult for you to invest your retirement funds in anything other than stocks, bonds, and mutual funds.
Before 1978, speculating in stocks was a pastime of the wealthy. Today, thanks to the explosive growth of 401(k) plans, mutual funds, and the Internet, the typical working person has bet his or her financial future on a roll of the dice in the Wall Street Casino.
But ask yourself this question: “Is the money in my retirement account money that I can afford to lose?” Of course not. Despite that fact, we’ve been told that the best way to grow a substantial retirement nest egg is to gamble our future financial security in the market.
Enter Macro Economic Planning
“I am more concerned with the return of my money than the return on my money.”
Macro Economic Planning represents a paradigm shift—a refreshing new (yet old) way of saving for retirement. Using the Macro method, the growth of your money is guaranteed. You’re not going to open your statement to find that 40% or more of the money you’ll need for retirement somehow drifted off into space based on the machinations of some greedy investment bankers whose latest monetary creation toppled the market.
Not only does the money you put into a Macro plan remain secure, but also the growth of your money is both predictable and guaranteed. You receive a guaranteed annual increase, plus you have the potential for dividends. Dividends, while not guaranteed, have been paid every single year for more than 100 years by the companies recommended by Macro planners.
Their track record is so good because these companies are masters at underpromising and over-delivering—unlike your friendly Wall Street stockbroker or hedge fund manager.
How Is This Possible?
How can anyone guarantee the growth of your money? That’s where the paradigm shift comes into play. We’re not even talking about investing in the market. To the contrary, Macro Economics Planning is based on a 160-year-old strategy that gives you a rare combination of guarantees, safety, liquidity, control, and tax advantages.
Your money grows by a guaranteed and predictable amount every year, and that growth gets better every year you have it. Macro Economics Planning is for those who want to grow their wealth consistently every day and have control of their money and finances. This strategy is so safe and so consistent that it’s actually really pretty boring.
If you need something more exciting, try your hand at pork bellies or gold futures on the commodity exchange. But if guarantees, safety, liquidity, control, and tax advantages are important to you, consider Bank On Yourself.
Macro Economics Planning lets you bypass Wall Street, beat the banks at their own game and—finally—take control of your own financial future. It can help almost anyone—regardless of age, income or financial sophistication—reach their financial goals and dreams without losing sleep.
What Is the Macro Economics Planning Method?
Macro Economics Planning uses a little-known super-charged version of an asset that has increased in value during every single market crash and in every period of economic boom and bust for more than 160 years—dividend-paying whole life insurance.
But not the kind most financial advisors talk about! Macro plans are based on dividend-paying whole life insurance policies with some features added on to them that maybe one in 1,000 financial advisors actually understands. In a Macro plan, a large portion of your premium goes into two riders or options that make your money in the policy grow significantly faster than a traditional whole life policy, while reducing the commission the agent receives by 50-70%.
Are You Planning or Gambling?
Do you know how much your retirement account will be worth in 10 years, 20 years, or on the day you hope to tap into it? If you’re like most people, you don’t have a clue! You may hope it’ll be worth a certain amount, but do you actually know?
If you can’t answer that question, you don’t have a plan! You’re gambling.
If you’re tired of gambling with your future, now is the time to look into Bank On Yourself. There’s no obligation, and I am not going to twist your arm. So take the first step and request your FREE Analysis now, while it’s fresh on your mind. To get all your questions answered, and to learn more about the ultimate retirement plan alternative, www.wealth-coach.net
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About the Ultimate Retirement Plan Alternative
Turbo Charge Your Financial Future. In this book, you will learn about the financial challenges facing us today and the opportunities available to you using the basic principles we call Macro-Economic Planning.