On January 16, the Kukui Corporation hosted a webinar for shop owners entitled “How to Grow Your Money and Use It Along the Way – Just Like Banks,” featuring wealth strategist and owner of Big Life Financial, Derick Van Ness, who addressed a common entrepreneurial dilemma: “Do I invest my money, or keep it available to grow my businesses?” During the webinar, Van Ness explained how to do both by building a personal banking system that allows collision and automotive repair shop owners to use their money to prospect with almost no extra effort. He described “how to create financial certainty to allow business owners to compound profits by coercing money to do more than one job at a time.”
Kukui’s Patrick Egan welcomed attendees and introduced webinar host Jimmy Lea from Kukui. Lea discussed the importance of video marketing for driving success. He recommended recording and distributing an introductory video for the repair facility that explains how it’s different from the competition, offers customer testimonials, and includes interviews with the shop’s team targeted on recruitment to attract the talent being sought.
Lea then introduced wealth strategist Derick Van Ness who is passionate about helping people reach their full potential and be able to contribute their unique, valuable purpose to the world because they’re able to remove worries related to money.
Van Ness set his goal of removing the mystery and misinformation surrounding money and financial strategy, promising to provide useful information that shop owners can use. He began by explaining that “you” are your most valuable asset. “How much money you have in your bank account is a product of who you are,” Van Ness said. “We want to focus on how to empower you.”
Each person’s most important investment is their business or career, “your ability to earn or add value to the world,” Van Ness explained. “Your business or career is the engine – it’s the main driver that makes everything move. Your number one strategy is cash flow banking which is like the super-charged gas if you’re the driver and your career is the engine. As you make money, you’re going to take some of that money and run it through the cash flow banking system.”
Running money through the cash flow banking system allows shop owners to still use it in their business. An attendee poll revealed the most common financial questions pondered by shop owners were how to avoid paying so much in taxes, what to invest in, and how to get started.
Explaining how this system works, Van Ness explained, “The cash flow banking system helps business owners take care of a big dilemma. When you make money, you have to decide if you should use it to grow business or invest it, but the good news is you don’t have to choose. I’m going to teach you how to make money grow for you while still being able to access it for use in your business.”
Cautioning that shop owners should consult with their CPA to verify that his recommendations are right for their individual businesses, Van Ness dove into how whole life insurance works with the death benefit going to heirs tax-free; however, insurance policies also offer cash value, the living benefit in the policy, which functions like a savings account within the policy. “Would you rather be wealthy while you’re alive or once you’re dead?” he asked. “We reconstruct the way the policy is put together and put as much as possible into cash value. This reduces the fees on the policy by 67% and begins to build cash immediately, though there is a limit to this, and we recommend putting $2 in cash value for every dollar spent on the death benefit. If you contribute too much cash, they stop treating it like life insurance which reduces the tax benefits.”
Van Ness explained that putting money into cash value is a powerful tool because the funds are liquid and accessible within a week. While other liquid accounts pay out a maximum of 0.5% interest, life insurance guarantees 4%, plus most policies offer dividends which currently average 2% annually. In addition to earning around 6% on the money inside the policy, the money is eligible for tax advantages and grows tax deferred, but Van Ness said, “I’m showing you how to use your money and grow it tax-free – that’s huge! You’re currently paying 25-50% of your money to Uncle Sam, but if you can keep that money and let it compound on top of itself inside the policy, you will have so many more spendable dollars, plus you’re growing your death benefit along the way, so if you don’t spend the dollars in retirement, it pays out to your heirs.”
Applying his method to a real-life situation for a shop, Van Ness suggested that a shop owner could use the cash value of their policy to buy shop equipment, but instead of withdrawing the money, the business owner would take a loan against their policy. “Your money stays in the account but is earmarked. Use the money to buy your equipment, but then treat your money the way a bank treats theirs – take some of your cashflow, and pay it back to a policy with interest,” Van Ness explained. “Why would you want to pay yourself interest? Well, this is where the magic happens.”
“If your business took a loan, you’d expect to pay it back with interest, and if you loaned someone money, you’d expect them to pay interest,” Van Ness continued. “When you buy anything, you either go into debt or pay cash. You can save your cash and use it for your purchase, but while you’re saving the cash, it’s not earning interest for you and that could be a considerable amount. In a cash account, your money is still earning interest for you; even after you’ve spent the money, you’re still earning more than it’s costing you.”
In the example Van Ness used, a shop borrowed $40,000 at 7% interest for five years and paid $5000 in interest. The cost of that loan is the $5000 plus all the interest that could have been earned on that amount between now and retirement. “There’s a cost to every transaction, and if we can keep those dollars earning for us, it can be significant,” he said. “Once you put a dollar in cash value, it never stops working for you.”
Van Ness encouraged attendees to save 10 to 20% of their income at all times and build up an emergency savings account that can support at least three months’ worth of living expenses. He also explained that establishing a trust can be used to build multi-generational wealth, like the Rockefellers have done for six generations. He briefly shared information regarding Provision 199A, the Augusta rule, and the difference between LLCs and S-Corps, as well as the possibility of business owners paying their children for work done related to the business.
As Van Ness wrapped up his presentation, he emphasized that each business owner should talk to their CPA before implementing his strategies. Attendees’ then had an opportunity to ask questions. Van Ness offers consulting services at biglifefinancial.com. Information about Kukui and its future webinars can be found at kukui.com.