230: Become Your Own Banker to Control Your Finances

Michele 00:00

Hello, my name is Michele, and you're listening to Profit is a Choice. Joining me on the podcast today is Mark Willis. He's the owner of Lake Growth Financial Services, which is a financial firm in Chicago, Illinois. Mark is going to lead us down this journey of really understanding our financials better. And you know that I love that.

Today we're going to be looking at how to be the bank for our company, what it means to take back the ownership and the money and the lending. Instead of being a slave to the banks or to somebody else holding a note over our head or having so much debt that we don't know how to get out from under it. And Mark is going to share stories, he's going to give us some methodologies and mindset changes so that we too can be in full control of our finances.

Every day, empowered entrepreneurs are taking ownership of their company financial health, and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design, industry, educator, and speaker, I coach women in the interior design industry to increase their profits regain ownership of their bottom line, and to have fun again in their business. Welcome, to Profit is a Choice. Hey, Mark, welcome to the podcast.

Mark Willis 01:34

Michele, so glad to be on. Thanks for having me on.

Michele 01:36

Oh, it's a pleasure. In our pre-conversation, I said to you, you had me at financials. The minute somebody sends me any kind of "I think we could be a good fit for the podcast", I guess everybody listening knows what the keyword is to get my attention. Money and financials are going to make my antennae go up and go "alright, I'm ready to dig in and look to see". Mark, before we even get started talking about the topic and the ideas that we want to put forth today, share with our listeners if you can a little bit about you. We're all listening about how you got to where you are because rarely is the offering that we have today is the one we started with or the business we started with. I'd love to just share some of your journey with our listeners. Before we jump in.

Mark Willis 02:26

Sure. Yes, thank you. Well, you're exactly right. Things didn't start the way they are today for me or my family or business today. I work today with real estate investors, business owners of all kinds, and even some NFL Super Bowl champions. But most people I work with are just looking at having a bit more certainty or control over their finances, their cash flow, and their business. I'd say maybe 65-70% of our business are either business owners or real estate investors or both. And the rest would make up your W-2 day job types. We love them all. You know, it's like children, you can't pick a favorite client. But I am especially drawn to the ethos of the entrepreneur because I am one myself and I think they are going to save the world. In many ways, the entrepreneur can save the world if he or she knows what they're doing. That's been what I do today, I work in an advisory role.

I'm a certified financial planner and work with clients all around the country to help them meet their financial objectives for their family or their business without taking a bunch of unnecessary risks. And in particular, one of the strategies we specialize in is helping them become their own source of financing, which we might want to talk further about. But to my journey. I started out not knowing really what the backside of a penny looked like because I was in so much debt. I couldn't rub two pennies together. We graduated in 2008, my wife and I with $120,000 of student loan debt. And worse than that we had no plan to pay it off. We just didn't have a plan and never paid attention to money.

We graduated in 2008, a great year to be looking for work, by the way. It was funny because the student loan companies actually wanted to be repaid, that kind of shocked me. And it got me focused on this thing called money for the first time in my young adult life. But as I tumbled down that rabbit hole, I began to realize there were some major problems with my training and my teaching that I had been given around money. One, in particular, was how to pay off debt and how to make major purchases. I started my debt payoff plan just throwing money at the problem. Just throw money at it. Hope it goes away. pump as much money into all this debt that I had as possible. And about halfway through my project to paying off all that debt, I realized that I was throwing away the best dollars of my life because I was as young as I'd ever be, just like all of us, today is the youngest we will ever be ever again. And I was throwing money into this hole called my debt. And I'd never seen that dollar grow for me ever again. It was now going into someone else's retirement plan, it was going towards someone else's vacation, or dream job or whatever they were trying to do, it's no longer in my wealth system, it's now in theirs.

And that got me angry. Because I realized I had created this hole for myself and my young family. 120 grand is not a small amount for you know, mid-20 something. But worse was, when I calculated what that 120 grand would grow to had I not had the debt, but could have saved that money instead, it was massive, you know, nearing seven figures over your lifetime. And that really got the fire under my pants to get up and try something better, better than debt free. That became my mantra, I want to be better than debt free. And so, as a financial planner, now, I help people become better than debt free. I have since paid off my debts. But more than that, I bought them back by becoming my own banker, paying the student loan snakes off, and actually collecting that money from myself to get a profit off the debt that I once paid to somebody else.

Michele 06:26

I love it. You know, I think about one of the things Mike Michalowicz says we've both talked a little bit about Profit First earlier, but one of the things he says and I've heard other people say it, so I don't think it can only be attributed to him, is that we have to fall in love with saving more than we fall in love with spending. And I do feel for you and for the young people that have student loans. I know there are a lot of our listeners that have student loans because a fair number of the people l coach have student loans. They're into their 30s and 40s, and some are even in their 50s still paying off student loans. It feels like such a weight. It is such a burden to carry, and you feel like you can't make the next big life decision because this is weighing you down. I love that, getting angry. Because that's what spurs us on to make a change is frustration, anger, and irritation, because if we are happy with the way something's going, why would we change it? But if we don't understand like you said, the concept of how it works. I'm sure you probably did the math Mark, but $120,000 by the time you paid it back, how much were you going to have to pay back? If it was extended?

Mark Willis

07:44

Oh, yes, it was almost doubled the price to spread it out like that.

Michele 07:48

If not more, right? And so, I think sometimes when we're taking out these loans, whether it's credit card loans, or that type of loan, unless we have a plan to pay it back, and we have a plan for it to create some return on investment, not just to consumption. Not just I'm just consuming and building debt, which is one type of debt, but even going into debt to build something that has a return on investment. That's a different type of debt. And they have to have a plan and a strategy, each to be dealt with. Let me ask you this, what did you go to school for? Did you go to school for financials and to be a financial planner?

Mark Willis

08:27

Oh no, I jokingly say I went to school for seminary, I got an undergrad in ministry and then a graduate degree as a Master of Divinity, which means you could be a preacher, Minister, or pastor or something. I never saw myself in that role in that traditional kind of role behind the pulpit type deal. And I jokingly say, my favorite book of the Bible is the book of Numbers. Because I was always very much a numbers geek. But money was not on my radar. Actually, it was there's a lot of shame around money. But the key was, for me, in a master's context to lead a congregation, there was not a real course on balancing a budget. Or, even more important, managing the relationships of the leaders of a community or a nonprofit or in this case, maybe a business. How do you talk about money to somebody who has a very different mindset, or worldview? How do you negotiate a balance sheet with a team of your peers or colleagues or shareholders of a business? It was just surprising to me that I had gone through all this education and had no real theology of money. But even more than that, a practice of money that I could feel sane with and just run in my normal bills as a young adult.

Michele 09:53

Oh gosh, you're so true. I remember when my husband and I got married. Because you work in this industry, your seminary degree has served you well, I can promise you if you're working with husband or wife teams on how they're going to handle their money. Because it is from what I understand one of the number one reasons for divorce, even above infidelity, is money management issues. It's huge. And when my husband and I got married, we came from very different money backgrounds, and in my home, you paid for everything in cash. I mean, I'm in my 50s, so we didn't have all the ATMs and the credit cards. All that wasn't there and used the same way. So, I grew up in a very cash-friendly home, as did he. In my home, though, my dad was very analytical. Everything was budgeted and written down. And, you know, I can remember it was almost like doing little T accounts sitting at the kitchen table. So, I understood money really deeply. And I would fight for two hours to get down to the penny when that bank statement came in, and I had to balance my bank accounts. My husband, on the other hand, his mother worked at the bank. So, when his bank statement came in, he would go his rule was I'll go a week without spending any money. And I'll call my mom, and she'll tell me how much is in the account. That was how he balanced.

You can see these were not the same. And so, when we got married, the first thing we looked for was how do we start merging our money, merging our accounts, merging our financial planning and goals. What's important, and what's not? What's of value? And our framework. And we went to our church and said, can somebody help us? I think there was a Ron Blue money management program or something. And they brought in a program and did it because nobody knew how to manage money. And what's been interesting is years later, I've had so many young families come to me, and just high level, sit at the kitchen table, bring their bills, bring everything, let's just lay it on the table. And let's just look at it and see what this might look like, what's important, what's not. And so, what I do find interesting is that many of us in our home recognize the need so acutely, right? Because it's a survival mechanism in our home on how we're going to steward that cash or the money that's coming in. But sometimes we don't think about it in our business the same way. You made a statement a minute ago, and I'd love to just expound upon it for a moment. You said, I believe, that entrepreneurs are the backbone. They're what we have going for us in the future if they know what they're doing. All right, tell me what it looks like for an entrepreneur to know what they're doing.

Mark Willis

12:38

Well, I want you to imagine an airplane. All right let's say your airplane can fly 100 miles an hour. It's a little prop plane, let's say, and it can do 100 miles an hour, without any wind or otherwise. But we all know that airplanes always fly in an environment. Okay, there's never a time when they're in a vacuum. They're always surrounded by the context. And that context might be a 200-mile-an-hour headwind coming right at your face. Now, tell me Michele, you know, you're pretty good with numbers. If your airplane can do 100 miles an hour into the wind. But that wind is pushing on you at 200 miles an hour? Which direction is your little airplane going to fly? Backward? No matter how hard you push, most people's financial lives are all about how do I rev this airplanes engine to get a little bit better rate of return on my 401k or get a little bit better rate of return on my IRA, or push a little more risk into my business to make it go 105 miles an hour. Meanwhile, banks, credit card companies, and taxes are the environment in which our money lives. And no matter how hard you push, your plane cannot fight against the overall prevailing interest rates or tax rates, inflation rates, and more. So, most people think the best thing to do is to land that plane and just save up and pay cash for everything and wait for the wind to die down. And that is better than fighting. You know, I had a guy one time who made a really good income quarter million dollars a year so for him, he was a doctor, but he was spending 80 grand a year just servicing all of his debts. Boat, a couple of houses, a couple of cars, and medical loans from student loans. All that equaled 80 grand a year in interest payments, Michele, interest payments, that's a third of his income just servicing debt. Now he was happy with his 401k getting like 10% last year. But think about that. That's a 10% non-guaranteed pre-tax rate of return in your 401k. Meanwhile, you have a guaranteed negative rate of return of 30% with after-tax contributions to your credit cards and your boats and all that stuff. Now doesn't matter how much he does in his 401k he's his little airplanes flying backward, right? And so, what can you do? What can you do? Yes, go for it.

Michele 15:03

No, well, so what I was going to say is, I think some of that comes down to a conversation around value and tolerance, right? He clearly had a value, I'll put it to you this way. My husband is more willing to take more risks than I am. I'm going to take extremely calculated risks. I'm going to sit down and go behind my poor financial planner, I love him. I'm going to sit down behind him, and I'm going to be calculating, and I'm going to say, it helped me understand this calculation. And where did you get that number from? And how, okay, I know how we plug that in, then I'm going to go with it. And 9.9 times out of 10, I always agree with them, right? Almost always. But I have to understand it. My husband is like "go go, yeah". He's a bit more freeform about it. Our tolerances are very different from risk. But what we also value has shifted over the years, you know, I'm just going to be really honest, until you even as we, whether we're talking business or home, I have been having a personal awareness, I'm going to say, I'm not struggling, but I have this awareness that is creeping in more and more and more. And listen, I'm all about making money just like you are, but certainly making it conscientiously with integrity, doing it the right way.

I am watching the consumeristic beast that is eating us. Eating us and we're not even aware of it. I can say that sometimes I have watched certain influencers, Tic Tok and Instagram, and you're watching them, and they're like "Oh, here's the new shirt, or here's the new pair of pants, or here's the new toothpaste, or you now need to be using this, and don't tell me you're using that". But it's every day. The other day, I was sitting there, and I was watching one of these influencers, and I thought to myself "How much must you have in your closet? Like, how much are you changing clothes? You can't have that many pairs of tennis shoes". You couldn't even wear them every day and isn't this just ridiculous? Why are we throwing good after good? And then I go back and look at my mom and my dad and my grandmother. They’re holding on to things from the 1920s. And they're like "It's still useful". And we've gone to this crazy. Just consume, consume, consume, consume. Which causes us to have to earn more to pay more to have nothing when it's all done. I mean, it's just this weird mindset. Right? Yeah. And I think that this, sometimes it's not until you see it blown up and kind of into a crazy form that you go "a ha, a ha, that's weird".

Mark Willis

17:56

Well, that's true. And it conforms with what I'm seeing in my conversations with folks when I first meet with them. And in 1940, according to the US Commerce Bureau, Americans, on average saved almost 30% 27% of their income - 27% of their income. Wow. Today, we spend, we pay about 36% of our income to interest and debt payments and servicing debt. We used to have about 5-6% of our money going into debt in 1940. Now we have 36%. We have 10 times as much debt that we're servicing. And our savings rate today, again, this is as of just a month ago, we are saving about 2.8% of our income. That's for our retirement, but it's also for our kid's college, it's for our emergency fund, it's for our medical expenses or a "leaky roof. Is 2.8% of our money going to cover it? Of course not. This is why credit card balances are at their highest. This is why banks are the most profitable business in all of human history.

There's a great book on the topic. It's called Debt: The First 5000 Years by David Graeber. The title is the best part of the book, in my opinion, Debt: The First 5000 Years. That four-letter word, Michele, debt probably has caused more divorces, broken relationships, and suicides. I hate to say that word. The word debt is a negative, but it's also, check this out, it can be the most profound shift in your thinking as a business owner or a family member. When you control the environment where your little airplane is flying. You can go from a headwind to a tailwind and if you've got a 100-mile-an-hour airplane getting pushed by a 200-mile-an-hour tailwind. Well, that is a massive change in direction right there. You can go a lot faster when you have the environment under your control. Now most people think it's impossible to control the banking function, the interest rate function, and the tax function, but I'm here to say it's totally possible, I do it myself. I've used my own tools and accounts to pay off my debt, but actually buying it back. And being my own banker, in essence, gives me the control that I had otherwise outsourced and resend it over to banksters, credit card companies, and finance companies. What if you could become your own source of financing? What if you could control that four-letter word debt and turn it into an asset? It'd be almost like, you've ever done jujitsu or any kind of like martial arts, you've seen these guys, come at their opponent. And maybe you grab that guy's arm, and you can turn their force against them and actually leverage that problem into a solution.

And that's what you can do when you've got the right tools and you've got the right mindset, to not just be debt free, but be better than debt free. What's better than debt free, it's sitting on the right side of the banker's desk. Most people are sitting on the wrong side of the banker's desk. And if you're not sitting on the right side of the banker's desk, you're going to lose the financial game. Because all we can do is fiddle with the dials on our little airplane. But when you're sitting on the right side of the banker's desk, you get to control the environment in which your money lives.

Michele 21:23

Okay, I know we're going to move into that part of the conversation. But I want to ask this first. Kind of going back to my previous comment about what do we value and where do we spend our money and how we used to handle debt back in the day. I mean, the best I remember was, we had layaway. Remember, layaway? And then down at the corner store, you could write up a little tab, you could get up to about $25. And then when you had payday, you'd go in and pay off your $25 tab and you would start it for the next payday. Because that's what that was the credit that people had back then. Right? It was very controlled compared to what we have today. And it also was friend to friend in many cases. And people were absolutely going to pay that back because that was their friend. And they had made that promise and they weren't going to let them down. I see the parallel, back in the day there was not this need for immediate gratification, an immediate consumption. It was a "we have to work to earn it" not "we deserve it because we're 22" or "we deserve it because mom and daddy had it in their house", or "we deserve it because that influencer told us" or "I deserve it because I went to college" or "I worked hard" or "I did ABC and XYZ, so I deserve".

Deserve. Deserve. That's the mindset that we hear today. And when we hear it in our personal lives, it's going to carry over into our business lives. And I say that because here's what I've seen. They lack their own financial business understanding. They don't even understand their own numbers. They don't know what the money is meant to do. They haven't given the money a job to do, right they haven't parsed it out to pay taxes or to do whatever. They see the money. It's kind of the Profit First dilemma that we see all the money sitting in the bank account, and they just start taking it. What they've done in essence, is they rob the company coffers to live a lavish lifestyle, to go on trips to fix up their house, to do whatever, to pay a medical bill. I don't care what it is. But they took it from the business prior to when it should have been taken. And now the business is running lean, and they're struggling. And it was the entire lifeblood to build their life and they just destroyed the lifeblood.

Mark Willis

23:55

The goose and the golden eggs.

Michele 23:59

And now they're like, they have that "oh, crap" moment, what am I going to do? Right? Then you have those that have also borrowed because they've learned habits. We have learned habits over the last 40-50 years. Just borrow, and use credit cards, you can pay for it later. And by the time we're paying for it, it is consumed and gone and broken or in the trash, or we've given it to Goodwill, and we're still paying for it. Right? And then we pick all that up and we move into our business. And I was sharing with somebody earlier today that whatever mindsets we have or worldviews we have, we don't separate them from our home and our business. Because we don't. We walk from one place to the other. And we do the same things over here. And we have as much consumer debt, I would say, on the personal side as the businesses and that's why you're watching them just like fall and you're watching them. I remember 2008-2009, there were a lot of businesses that closed down. It was a tough time. And if we have not prepared, we will be there again?

Mark Willis

25:03

That's right. The Gloria Steinem quote comes to mind, she says "Rich people plan for four generations, but poor people plan for Saturday night". And I am working with every person that comes across our calendars here, but the people that I can see you're going to make it are the ones that are ready to think long range. And if we're all we care about is "I deserve this" or "I, you know, require that", then a luxury once you enjoy, it becomes a necessity. And then all of a sudden, our expenses will always rise to meet our incomes, no matter how much money we make. This is why millionaires can go broke, billionaires can go broke. Our expenses can always outpace our income if we don't give every dollar a job, which is one of the things I love about what you just said. Thanks, Michele.

Michele 25:49

I'll tell you this, too. I can remember my son, I think it was the youngest son, when he graduated college, he had been working doing internships in his field, for years. By that point, probably for five, six years, he'd been in that field. And he asked his supervisor at that point, he's like, you know, what, what advice would you have for me, as I wrap this up, and I'm looking for my full-time position, he said, the best thing I can tell you is for the first few years live like you're still in college. That's right. He said, don't go out and say, I'm now making the salary. And I'm going to go by all these things. He said, if you can learn to live the way that you've lived very scrappily in college, he said, it will serve you well. And my son was like, he remembered that. And both my boys did that they lived very scrappy the first few years, but it's put them in a position to do other things later, right? And we have to do the same thing in our business, we have to work very scrappy, and then we make a little bit of money, and we blow it. I mean, it's just human nature. Let's jump in then and talk about what it means to be on the right side of the banking desk, like on the right side. We're not going to be bank staff. But how do we handle that? How do we make sure that we control the environment when we're flying airplane? And what does that look like? Not theoretically, but what is it like an action? Mark?

Mark Willis

27:15

Yes, that's a good question. Because we've been talking a lot of mindsets here today. And that's good. You got to start with that. The head, the brains, the mind, the spirit are the most important valuable assets you have on your balance sheet as are your own thoughts and feelings, and mindset. However, we have to bring it down the ladder to actual practical strategy, and financial tools that can help you implement the kind of world you want to create for yourself. And, you know, this is going to sound crazy. All right, I just gotta say it up front, I was digging into my own financial goals. I was, again, ashamed of all the debt I'd accumulated, thinking it was the right move, graduating into a recession, where I had no work, basically doing property management, clean up and just scraping by. You know, just trying to make it work with my wife, and all of us trying to bring all of our income to the table. I was trying to figure all that out. I also said I want to get into finance. And I was working for a CPA firm. I was listening to the CPA; she was making those terrible phone calls. And she was a great CPA, great at what she did. But she was having to make those calls. You know what I'm talking about, "Mr. Client, I'm sorry, I just lost you a third of your life savings or half of your life that I know you're 63 years old. I know you're about to retire. I can't help you retire". Oops, I, that was a terrifying proposition.

I almost left the industry, as I was kind of just diving into learning about finance. And then a friend of mine, a mentor of mine from college. He's a professor of mine, actually, at the seminary, he brought to me the strategy called bank on yourself. And it made so much sense. But at first, I was like, more than skeptical. I almost turned turn to like, how do I help him get out of this scam, he must be in, my professor. Here's what it is. It was a bank-on-yourself type whole life insurance policy of all things. It's a modernized form of dividend-paying whole-life insurance. Now, in my entire financial training, I had always been told to avoid whole life insurance like the plague. And I almost did. I had my eyes furrowed; my eyebrows were down. And I was like, this can't be real. And then he said to me, "Mark, Mark". He looked me right in the eye and said, "Mark, is it possible that Dave Ramsey", who was a radio professional financial infotainer at the time, and I listened to Dave Ramsey every day, "is it possible that Dave Ramsey could be wrong about something"? And my mind just blew open right there. And in the next seven months I dug into, is this even possible for those not familiar, I'll quickly explain what is the bank-on-yourself and what does it have to do with your business?

In principle, I'll boil it down to a TGI F acronym All right, because I love my love me some acronyms. Maybe it's those preaching classes I took all those years ago. TGIF, okay, whole life insurance, it is an asset on your balance sheet. It's not term insurance, it's cash value. Whole life insurance, the "T" stands for tax advantages and even tax-free income in the future. You can use the cash value, okay? The cash value is what you can spend on this side of heaven, the death benefits are there for when you pass away. But the cash value is your money while you're alive. And while that money is in your account, it's available with no taxes due if we designed it properly, you can contribute whatever you want into a policy. In essence, it's like an unlimited Roth IRA in that regard. No limits on what you can put in there. And when it comes out, it's income tax-free. Most people like to hear that it's a tax-free stream of retirement income because most people believe taxes are going up in this country. That's a beautiful thing. Second, the "G" stands for guarantees, it grows on a guaranteed basis, outside of the stock market completely removed from the markets that have shown themselves to be more volatile now than ever before. And on a guaranteed basis, my money and my policy are going to hit a new all-time record high every single year. And there's really nothing we can do to stop it. It just grows contractually by the insurance company's guarantee, I love that. It's really refreshing to say, all right next year, my net worth will be this five years from now my net worth will be this plus this, and so on and so on. Third, it is life insurance. I'm going to leave my family more than I could ever say for them. "I "stands for insurance. That's a nice feature because that's also income tax-free. And then finally, in maybe the most relevant for our conversation for business owners, this is a bill, this gives us the ability to be our own source of financing, that's the "F", financing. You can become your own source of financing by using the cash value like a line of credit to yourself, where you can borrow against that policy. And the policy will continue to earn interest and growth as if you had not borrowed from the money. And to me, that was the wake-up call of my life.

Michele 32:17

Exactly. You borrow from your 401K, you have to pay it back plus interest. Sometimes there are penalties, and you're not having any growth on what you throw out.

Mark Willis