Dave Ramsey’s Buy Term Insurance, Invest The Difference, Timeshares Suck Vs. Permanent Life Insurance To ENSURE your Wealth and Timeshares are GREAT – September 30, 2023
First and foremost, most of us in the financial world appreciate Dave Ramsey for bringing Financial education to the forefront. For people like myself, it’s not until I speak with other people that I realize how complex my financial situation is.
Dave Ramsey SIMPLIFIES financial education for people who are in debt, who should even have access to debt. However, if you’re financially educated, Dave Ramsey is extremely hard to listen to.
First and foremost I should remind the reader that FIAT money is the main reason consumer debt as we know it today even exists. Debt if Banks were controlled by the free market, would be EXTREMELY hesitant lending money to consumers.
In this modern era, there’s a fiat money and fractional reserve banking, which allows PRIVATE banks to buy things and INFLATE currency without doing any hard work. So banks and other financial institutions will often lend money to people knowing this people can’t pay it back, with the INTENTION of leveraging the debt they lent.
For example, I’m a bank, and I lend money to someone who plans on using the money for consumer spending purposes; as the lender, I may not even care about the borrower paying back the money; what I’m concerned with is that the borrower makes the MINIMUM payments every month, so that on my bank balance sheet, I can use the borrower as LEVERAGE to get access to more money LEGALLY.
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If I lend you money, you’re an ASSET on my balance sheet that I can then use as leverage to gain access to more capital. If you’re saying to yourself this sounds ridiculous, you’d be right, the derivatives financials market is loco, but it helps to expand the money supply and provide money in areas of the economy that otherwise wouldn’t exist.
Now, after banks and financial institutions diversify their portfolios with different types of lenders, this is why a lot of banks can afford to lose money on consumer debt while having a lot more credit-worthy borrowers on their books.
Where this becomes problematic with Dave Ramsey’s Buy Term and Invest the Difference strategy is that first and foremost, TERM insurance is RENTING insurance, meaning that it’s only an asset on your balance sheet if you die during the term insurance policy; you can’t estate plan with term insurance and you can’t borrow against your term insurance, thereby making term insurance a payment you’re responsible for that enriches the insurance company.
If the insurance company doesn’t have to pay out a claim during the term insurance policy, you basically WASTED your money. If we’re talking about mutual funds, a few things you have to know about mutual funds are mutual fund FEES, taxes, and market risk.
Even if you get 15% return from your mutual funds compounded, that money would be TIED up, whereas if the same money were in a PERMANENT insurance product like Indexed Universal Life Insurance, it would be protected from loss because INDEXED universal life insurance is NOT actually in the market, similar to Segregated Funds(another insurance product that mirrors the markets) indexed universal life insurance has your money with the INSURANCE company and the insurance company buys options on your behalf which if successful allows you to enjoy the rising market.
But unlike mutual funds, you can BORROW against your permanent life insurance policy, which people don’t seem to comprehend how huge this is. Why wouldn’t you pay extra money for INSURANCE and have the ability to BORROW against your insurance policy?
Who in their right mind wouldn’t want to be able to get money back from their insurance policy? If I buy term insurance, ALL THE MONEY I spent on the insurance policy is GONE, whereas, with participating insurance policies, you’re participating in the profitability of the insurance company, which even includes borrowing money from YOUR insurance policy.
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With By term invest the difference, you’re taking ALL THE RISK, and the only benefit is getting taxed when you withdraw YOUR money from the mutual fund and losing all the money you spent on term insurance and being told one day that you’re no longer insurable.
When you have Whole Life or Universal Life Insurance, you don’t have to worry about your insurance EXPIRING; term insurance is a TERM. Now, another thing I noticed with Dave Ramsey is that he frequently bashes timeshares; timeshares to me, are a lot like consumer debt; I don’t think the average person should have a timeshare because, in my humble opinion, timeshares are better suited for upper-middle class and rich people.
I love my timeshare, but I OWN my timeshare; I don’t have any monthly payments, a recent timeshare I signed up for required me to pay for 10 years, the price was rather cheap, but I love it because I like to travel in style on the cheap, but when I hear other people using timeshares, I’m hearing they have monthly payments, which from my point of view sounds utterly ridiculous, even I can’t travel all the time, because I have to sometimes watch my expenses, why would someone already in consumer debt, own a timeshare?
So for those types of people, I can see why Dave Ramsey is good for them; where I take issue with Dave Ramsey is that Permanent Insurance and Timeshares are EXCELLENT products; they’re just not for everyone.
I know the game: when you’re on vacation, you might get approached by an aggressive salesperson, and before you know it, you signed up for a timeshare for $10,000-$30,000. I get it, trust me, but that doesn’t make the timeshare a bad product; what it comes down to is that these salesmen make their living selling these timeshares, and often they’re not correctly matching the timeshare with the right client.
The same is true with Life insurance; one of the problems with permanent life insurance is that most people DO NOT like paying the higher premiums, whereas people like myself are fine with paying the higher premiums because of the value we get in return.
Now, if you’re not financially educated it’s hard for you to see value in say a dividend-paying participating whole life insurance policy, whereas for someone like me, I’m trying to buy as many as I legally can.
When most people hear about dividend-paying whole life insurance, they’re imagining all the dividends, whereas I’m imagining the ACCESS to capital while I’m alive and the death benefits for my family when I’m dead.
If you’re a buy term invest the difference person, you think borrowing money from an insurance policy is stupid (why borrow money from myself?), but I’m looking at buy term and buy mutual funds as a really silly way to insure and invest.
With that said, I wouldn’t BASH people for doing it, because maybe that appeals to them, but my thinking has always been regarding money, get yourself financially educated, because if you’re not then Dave Ramsey is indeed one of the best options online.
To those of you calling up Dave Ramsey to try and shift minds in a different direction, you’re an idiot to do that, because even doing what I’m doing is complicated; if you know how to use permanent insurance to your advantage, you’re the rare 10% of the population.
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Everyone knows most banks put their money in insurance companies; why? Because insurance companies are not permitted to PRINT money, and even banks know that they have to abide by insurance liquidity rules in the event of an economic COLLAPSE.
What I’m referring to is if there’s an economic collapse, your payout from an insurance company will be based on keeping the insurance company solvent, and if you owe premiums, you’d better make sure you keep paying those premiums.
Whereas banks, which a lot of mutual funds are at risk too, are reliant on their fractional reserve system, which is another way of saying bank deposits are NOT secure and banks can’t determine when customers will want their money back.
This again is something most people don’t understand about PERMANENT life insurance. Within the insurance terms, the insurance company will let you know that their solvency is most important, which is why as an example, if you run out of money, a whole Life insurance policy can allow you to defer payments or borrow against your insurance policy is a feature most people fail to comprehend.
Promises to PAY equate to an insurance company’s LIQUIDITY; once you comprehend certain financial principles, you’ll better understand the insurance industry, which, by the way, didn’t have problems during the great depression, whereas BANKS and the STOCK MARKET did. The Stock Market and banks make up most mutual fund portfolios. Even if you’re invested in some energy company, most of the time, those energy companies are in debt to the banks, so their insolvency is the bank’s insolvency is the stock market’s insolvency.
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If you’re in the insurance sector, the only thing you have to worry about are the people who stop making their insurance premiums. Most of the customers of insurance companies are business people, which is why insurance is often called the financial backbone of the Western world, which is why for some of us permanent life insurance is the best financial product in the marketplace.
Interesting times ahead!
