Episode 23: How to Build Wealth with Life Insurance

Acquania Escarne 0:00

As a millennial myself, I am determined to find financial independence and retire early for my family. And I've used life insurance as a strategy to help me build tax free income. Is that a strategy that you've been familiar with for quite some time? Or did you too learn about it recently?

Felicia Gopaul 0:18

So I had been in the industry for probably about 10 years when I, my husband moved me from California out to New Jersey, and I found a new firm to be affiliated with and they were doing some stuff that I had never seen before. So I had always been trained or heard the whole concept of what you need to do was buy term and invest the difference. And so a lot of my clients that I have helped over the years had bought term insurance. But these guys were doing a lot with permanent life insurance and they were doing some sophisticated stuff with with permanent insurance that I had absolutely never seen before. And they were using it in really smart and intelligent ways, and they were doing it for their million dollar clients. And I just got fascinated with, "Oh, you could do that? Oh, you could do that too? Oh my goodness, you could do that?!" And that's how I got excited about life about life insurance.

Acquania Escarne 1:22

You are listening to the Purpose of Money Podcast. A podcast where we talk about ways to build wealth and create more freedom in your life today. I am your host Acquania Escarne.

Hey guys, welcome back to the Purpose of Money podcast. I'm so excited to have Felicia Gopaul, a wealth building strategist on the podcast with me today. We are two women who are passionate about life insurance and how you can use it to build wealth for your family. So today's conversation is going to talk about why you need life insurance, how you can use it to build wealth, and others strategies that you can utilize life insurance for to help you find financial independence and retire early for your family. Felicia Gopal, thanks for being on the show. Welcome.

Felicia Gopaul 2:12

Thank you so much for having me. I can't wait to dig into this. To have another woman who is excited about this topic is really fun for me.

Acquania Escarne 2:20

Exactly. So just a little background, I virtually met Felicia. We were both panelists for the Black Fin Girl Magic Financial Boss Summit. We were both the panelists who talked about life insurance. But I thought it was interesting that we have different perspectives in which we discuss the topics and how we share this information with the public. And so we connected after the summit to bring you this wealth building strategy in one podcast, maybe more to give you some ideas on how you can apply that knowledge today. I am so glad to have you Felicia because I have been searching for other women in this space. As you may know, life insurance has a lot of males, older males, white males who are in the industry and doing quite well for themselves. And then the other thing I liked about you is you're utilizing a strategy that not a lot of people of color know or apply when it comes to building wealth. So I'm so glad we can dive into that today. But before we get started, can you please tell our listeners a little bit more about yourself?

Felicia Gopaul 3:30

Yeah, my name is Felicia Gopal. I am the founder of Financial Control Mastery, and the creator of the Financial Freedom Fundamentals course. I work with primarily with women to help them build their wealth and utilize life insurance in or as one of the tools that I use to help them.

Acquania Escarne 3:52

I love it. And how long have you been in business?

Felicia Gopaul 3:55

Oh, I've been in business and I've been doing this for quite some time. For 25 years, I really was a comprehensive financial planner. So I understood how life insurance could be used. But it wasn't until a little bit later that I really learned how to use it well.

Acquania Escarne 4:12

Excellent. As a millennial myself, I am determined to retire early for my family. And I've used life insurance as a strategy to help me build tax free income. Is that a strategy that you've been familiar with for quite some time? Or did you to learn about it recently?

Felicia Gopaul 4:30

So I had been in the industry for probably about 10 years when I, my husband moved me from California out to New Jersey, and I found a new firm to be affiliated with and they were doing some stuff that I had never seen before. So I had always been trained or heard the whole concept of what you need to do was buy term and invest the difference. And so a lot of my clients that I have helped over the years had bought term insurance. But these guys were doing a lot with permanent life insurance, and they were doing some sophisticated stuff with permanent insurance that I had absolutely never seen before. And they were using it and really smart and intelligent ways. And they were doing it for their million dollar clients. And I just got fascinated with, "Oh, you could do that? Oh, you could do that? Oh, my goodness, you could do that?!" And that's how I got excited about life, about life insurance. They were opening my eyes to all sorts of things that I had just never seen before.

Acquania Escarne 5:34

So just to get those listeners who know nothing about life insurance up to speed, I'm going to give you a quick intro into the two main types of life insurance that exist. So Felicia did mention Term Life Insurance, which I like to call similar to a renters policy. You have a certain amount of time or term that you're buying policy for, and a policy could be for one year, five years, ten years, fifteen, twenty, or thirty years, and then we also have those that renew annually. And those are a set fixed payment for the amount of the time you have the policy. But if you don't die within the term, you've paid the life insurance company money that you won't see again. But you also now don't have insurance when the term is up, you either have to get more life insurance or you can make the decision not to if you feel you are what some people call self insured, you have enough assets, you just don't really think you have a need to have life insurance any longer, which is another subject, I can definitely go into deeper. And then the second option is permanent or whole life insurance, which I like to equate to buying a home. It's something that you keep for your whole life. You pay the premium for the term set. Sometimes that is for the rest of your life. In some strategies, you have a time period in which you paid towards the policy in your working years, but maybe not in retirement. But whatever the terms are, that covers you from the day that you get the policy until the day you die, no matter how long you have it as long as you've paid the premiums, according to the agreement. So those are the two types. There's different subcategories of insurance and names that I'll throw out there like variable life insurance, indexed Universal Life Insurance. Those are all different types of permanent life insurance, but the most common one that families purchases term, and there's a reason for that sometimes term is more affordable. And it does cover most people in the period that they need it. Their working years when they have young children or there's a large expenses and assets that they want to cover if something happens to them. But as Felicia mentioned, there's this common theory that you should buy term insurance and invest the rest. But I've also noticed in my career and working with clients, most people don't do that. They end up spending the rest. So we have found different ways in which you can use permanent insurance to make more money for yourself in your future, more money for your family. So before we dive into that, I wanted to just ask you, Felicia, your opinion about why do you think people of color do not know about the wealth building strategies that we've discussed and how you can use life insurance to build wealth?

Felicia Gopaul 8:33

Well, I think, honestly, they don't often run into advisors like yourself. So I've been in this industry for 25 years, and you've been in the industry for how long you've been in the industry. How many times have you met people who who talk about this stuff like you and I do?

Acquania Escarne 8:47

It's rare. That's why we took advantage of the opportunity.

Felicia Gopaul 8:50

Exactly. I mean, that's the thing. It's rare. There's a number of people who are financial advisors, there's a lot of people who are in the industry, but knowing how to use this tool properly is, is very rare. And so I think one of the reasons that they don't is they don't know people like us. And so the and the other thing that they do is even when they come across it and they hear a concept or they read a book like David McKnight, the Power of Zero, or What Would the Rockefellers Do?, which is a book that you recommend that I went out and got after after the summit, so thank you for that. But even if they've read those books, they get excited about the concept. And so they go out and talk to their financial advisor or their person, and their person isn't familiar with it. So they can sell them the product, but they don't know how to properly fund it. They don't know how they don't know really, how it fits into their overall picture, other than the client said, "Hey, I think I want one of those" and they said, "Hey, I can sell it to you," and so they sell it to them. So I think that's the other thing is people don't understand the product. They don't understand how it could be used. And they don't understand how if it's not properly funded and structures, how it could blow up in their face.

Acquania Escarne 10:15

Exactly. And I think that's important to know is working with someone who's familiar with the strategy of using life insurance to build wealth and how to properly educate you about it so that you're making the right financial decisions, and you're funding it in a way that makes it successful and profitable for you.

Hey, guys, I hope you're enjoying this podcast episode. I just wanted to take a break and share a story about an amazing woman who has created freedom and wealth in her life. I promise I'd share these kinds of stories on the podcast, and this week, I'm highlighting Teri Ijeoma of Trade and Travel. Teri has an amazing story about how she went from being an Assistant Principal making $40,000 a year to a swing trader making $100,000 a day in quarantine. Teri started out investing just a little bit of her money and had a goal to make $300 a day. She just wanted to replace her income so she could travel more and work less. Well let's just say she mastered investing in the stock market and is now teaching others how to trade too. Check out my website ThePurposeofMoney.com/Invest to learn more about how Teri accomplished financial freedom through investing. Remember, check out ThePurposeofMoney.com/Invest to learn more about Terry Ijeoma and her course Trade and Travel.

I love David McKnigh's book,The Power of Zero, because it outlines ways to create tax free income for yourself.

Felicia Gopaul 11:57

Yeah.

Acquania Escarne 11:57

It is a book that outlines what we call Call a LIRP, that's a life insurance retirement plan. And part of the book goes into your regular retirement savings. Everyone who works for someone else hopefully has a 401k or something equivalent that they can utilize to save for retirement and take advantage of the matching funds. But then but then McKnight goes into more of Social Security, whether we think it'll exist or not right now, we're hopeful it will exist for us, even though I don't rely on it as a part of my plan. But it could be taxable for a lot of higher income earners or even mid income earners because you really have to be making low income amounts in order for Social Security not to be taxable. So then the book kind of outlines for you, okay, if your 401k contributions were pre tax and will be taxable in retirement, and now you also have your Social Security income that's taxable in retirement, where are you putting money that's protected from Uncle Sam? And that's when the book dives into the nitty gritty good stuff, which is Roth Individual Retirement Accounts, if you qualify to invest in those, and then Life Insurance, which doesn't have the same income requirements as a Roth IRA, and it definitely doesn't have the limits on what you can put in it per year, like the Roth IRA, it actually has much higher limits for funding. And but limits do exist. And that's where I think people don't realize how valuable that is to be able to put away more money towards retirement or whatever you want, and being able to utilize it tax free when you need it. I want to ask you when you're working with clients these days, what is one of the common issues that you find?

Felicia Gopaul 13:51

Oh, well, my my clients are probably very similar to your clients. They're smart, educated professionals and they're a bit of a do it yourselfer? Is that true for you?

Acquania Escarne 14:05

Yeah

Felicia Gopaul 14:06

Yeah, they're a bit of a do it yourselfers. So what happens with do it yourselfers is they find good information on the internet or in a book or on a podcast. And then they try and implement it themselves. And I would say that that is probably the biggest one because as I said before, one of the biggest challenges with this strategy is you need to know how to do it properly. And the books will introduce the concept to you but they're never going to tell you the nitty gritty of it. And you know, and that's partly because both of us are in regulated industries. And we just can't go into the nitty gritty with with in a book. Not to mention, you know, we don't want you to go out and and try and perform surgery when all we've given you is enough information to put a bandaid on on your knee, okay? We don't want you to do that. So, you know, I was reading it, you know, I'm a, you know, I'm a nerd. So I was reading David McKnight reviews on Amazon. And there was a number of people and they're just like, "He's not telling us how to do this." And it's just like, "Yeah, he doesn't want to tell you how to do it. He wants you to come and talk to him." And we want you to come talk to us. I mean, we know that you want to travel. We know you want to retire early. We know that you have children that you want to educate. We know that you want to leave a legacy. We know that all of those things are things that you can do with a properly funded life insurance policy. But we also know that we need to have a conversation with you. So we can tell you the pluses and the minuses of this strategy. And there may be other things too. But to be honest, this is not the solution for everybody. Would you agree?

Acquania Escarne 16:04

Amen, Yes. And people don't understand that. And I'm so glad you brought that up. Because one of the things that I tell my clients is I can tell you what the name of it is and the different companies I work with. But at the end of the day, I still do an individualized financial analysis for every single client. I would be irresponsible to start with the application and not go into can you afford this? Are you doing a long term strategy because this is a 10 plus year investment. I think you really should be thinking about the long term. If you need to access what you're putting in here next year, this is not the strategy for you. So one of the things that I do try to emphasize is it's a great plan. It's not meant for everyone and you do need to be committed to the process because it requires you to fund this life insurance policy for the rest of your life in some cases. Sometimes we can arrange it for shorter terms, much, much shorter terms if you're younger, because the younger you are, you can kind of fund it earlier and then not have to fund it anymore. But even that strategy all depends on the person, because I am always using it as a tool to provide you tax free income in retirement. But how much tax free income it provides you really depends on what you need. And I found in some cases, because of all the other assets that people have built through their 401 K and then their Social Security income, they may need less tax free income then the next person who started saving for retirement late and now they find themselves in a position where they have the income, but they really only have 10 years to do the strategy. So how do we maximize that? So it's about personalizing it to the the customer based on what they need and what their goals are. And I absolutely agree with you that some people don't realize that and they want the blueprint and the mastermind behind it all. But they don't realize that we put a lot of effort into individual plans.

Felicia Gopaul 18:15

Yes, yes, we do.

Acquania Escarne 18:17

Yes, I'm so glad you brought that up. But I do agree that there are benefits to the books being out there because at least the concept is put into your mind. And it sparks a conversation. And then you go to someone to have a conversation further about how to execute it, hopefully someone who knows how to actually implement the plan and the strategy. But as you mentioned before, sometimes that's not the case. So it becomes a little bit tricky, but I'm glad you brought that up.

Felicia Gopaul 18:47

But you know, it reminds me of the conversations that I've had with friends who are doctors, and so they're frustrated sometimes because their clients have gone to Dr. Google to get the answer to their whatever. But Dr. Google doesn't know your situation, doesn't know all the pieces of it. Dr. Google doesn't know all of that. So that's the challenge with with hearing with a book or podcasts or any other vehicle that that introduces them to the concept is it doesn't take into consideration all of the pieces that you and I would take into consideration when we were sitting down with them on a one on one basis. So I think that that's an important factor to kind of keep in mind when you're talking about that. And I like you I like the concept of them being introduced to them. So that means that sometimes I don't have to do quite, I don't have to convince them that this is a good thing because they've already been convinced by this book or whatever that they've already done. And now all I've got to do is help them help them understand how it fits into their particular situation so that they can move forward with the idea. And I think that that's valuable. So that's what I've been doing in my practice is I've been taking this concept that I learned about when these guys were working with really wealthy people, and bringing it down to the people that I'm working with, who are still building their wealth, but really aspired to be in that wealthy category in 10-15 years, when, when they're a little older. Let's put it that way.

Acquania Escarne 20:27

Got it. And I think it's key. And that's why I'm glad we're having this conversation and reaching younger people in the workforce. Because I remember when my husband and I first got married, and we were introduced to this strategy, we didn't have kids. We had a home, we had a condo, but it was one that my husband purchased prior to our marriage so he could afford it on his salary. We didn't have kids, I didn't have very much student loan debt thanks to the scholarships that I acquired in school. So we had income to really get into our financial plan and investing for our future. We saved our first hundred thousand before we had our first kid. So I definitely think this is a strategy that more people need to know at a younger age because it can make the biggest difference in what you're able to do later.

And I'll give my personal story where we utilize the cash value in an insurance policy to purchase a home in the Washington DC area. And anyone who's been in this area will tell you that real estate is not cheap. The average median home in the Virginia area is over $500,000. And if you go into the Maryland area, you might pay $350 to $500,000. And if you go to DC, you could get a nice house, good school district but you might be closer to a million dollars. So these are all numbers that most people would say how in the world am I going to get 10 or 20% down payment to purchase that real estate. And fortunately for us, between the money we'd saved prior to kids, and then the money we saved when we moved abroad and actually were able to save a lot of our income that we used to pay for housing because we rented out our condo, we were able to save money and put even more into the life insurance. And so when we came back to DC and decided that the condo was no longer adequate for our family size, because we expanded a bit. We went out with one child and came back with two.

Felicia Gopaul 22:36

Okay!

Acquania Escarne 22:38

Now we were looking for a single family house. And we didn't have trouble getting our down payment together because I said, babe, we have cash value in this life insurance policy that we can borrow from and not actually have to pay any taxes on it. And we have the savings that we've been accumulating. So we were able to pay our downpayment on our home and still have an emergency fund while we were transitioning from a condo sized family to a single family house. So I definitely feel that that's another benefit is that life insurance is not just for when you die. The cash value can also be utilized for some expenses that you have while you're living and some investments that you make while you're living. And in our case, it was our first home as a family.

Felicia Gopaul 23:30

And it's and you know, it's funny that you should say that because I was just talking to a client yesterday who used it to purchase an investment property, you know? And so they were able to use they were fortunate because they had met a gentleman when they had first graduated from college and they they were making pretty good income because they were engineers, but their, their advisor at the time said you need to buy life insurance, permanent life insurance. You need to put you need to start it at this amount and you need to put it in. And they said, "Sure, yeah. I mean, they were just sure I don't know what else to do." And you're it seems like good advice. So let me just do that. And so they said that over the years, what they really learned is what they had. So they didn't fully know what they had, they had just kind of gone on trust. And luckily, the person that they have worked with was trustworthy. So they had just kind of gone on trust, bought this life insurance, used it for, for down payments, used it to whatever and they're talking about perhaps going back to school and maybe using some of the proceeds, instead of taking out student loans. So again, that's the versatility of these of these policies is if they're properly structured and funded, you can use them for retirement. You can use them for living benefits, you can use them instead of taking out student loans. You can use them for a down payment. There are lots of things that you can do with these policies, you can use them to, perhaps make a charitable donation when you pass. There's lots of things that you could just do with these things. And so, you know, I as I said, I'm excited about these, these products. I think that they have a really are a tool that more and more people need to know about, but they need to under they need to work with people like you and I, who understand them and can tell them how to utilize it fully so that they get the benefit and are able to get to that financial freedom world that they want to live in.

Acquania Escarne 25:39

Absolutely. So I want to ask you a different question. The name of the podcast is called The Purpose of Money. So I ask all of my guests, what is their purpose for money? And what are they trying to use it to achieve?

Felicia Gopaul 25:53

I think the purpose of money is really about helping you live the life that you want to live. It's about, for some people, and certainly for me, it's about leaving a legacy. I've got two children, you know, and part of what I would want the purpose of my money to do is to leave them a legacy where they're set up. I'm not necessarily want them to be set up for life. I'm kind of like Bill Gates in that way. I want to leave them comfortable. I want them to learn how to work. I want them to understand all of those things. So I want them to live a comfortable life. But not necessarily this extravagant life. But I want to teach. I want to use my money to also teach and inform them and help and nurture them as they go out in the world. They I don't want them to have to struggle, you know. So I like the concept of perhaps using life insurance or cash value and life insurance to help them start businesses perhaps or, or any of those sorts of things so they can live a more comfortable life and have a headstart, and they don't have to do all the hard work that many of us had to do in order for us to get our start. I mean, it's what the wealthy have do for their children. And I'm just like, "I want my kids to have those kinds of doors open for them, and opportunities given them that the wealthy is" and i and i don't know that I consider myself that wealthy. But I certainly want to take what I have learned as a financial planner, pass it down to the next generation so that they can live a better life. And so they could teach not only their children, but their children's children. I want this to be a generational wealth building tool that they are able to use not just for their generation, the next generation, the next generation, and I want them to all learn this and that I think, is the purpose of money.

Acquania Escarne 27:57

I love it. I think your answer was amazing. You did a great job.

Felicia Gopaul 28:00

Thank you.

Acquania Escarne 28:01

And I appreciate you sharing that. And I want to emphasize what you're saying that life insurance is versatile. It has a lot of flexible uses. And you gave a great list. I'm going to share more information in the show notes with our listeners. But What Would the Rockefellers Do? is another book I recommended that you read. It goes into how the Rockefeller family utilized life insurance policies to fund a family bank, and then use that family bank to invest in businesses, education, and real estate that family members asked for. And I have been using that concept in my family to structure a similar fund that can allow us more flexibility to empower each other to accomplish our goals, to accomplish our businesses and what it is that we're trying to do and having the financial support to do it. So I am so grateful that our paths crossed in the financial summit for us to come together to bring this information to my audience on a podcast, but I also looking forward to keeping in touch with you and working with you on spreading the word about this concept to more women and more people of color as soon as possible. So before we get off and go about our day, can you please tell my listeners how they can connect with you?

Felicia Gopaul 29:23

Absolutely. So the best way to get ahold of me is by going to my website, which is FinancialControlMastery.com. So you can go there. I also have the same, use the same name for my Facebook page. However, you would find me on pretty much every other medium under my name-just Felicia Gopaul. So you can find that for me for Twitter. You can find that for me for LinkedIn. You can use that same one for Instagram, Felicia Gopaul or Financial Control Mastery. Either one of those ways is a great way to connect with me.

Acquania Escarne 30:01

Yes, and I hope you guys do that if you enjoyed this episode, please leave a review, rate it, and subscribe where you listen to the podcast. We are available on Apple Podcasts and Spotify, as well as on the Podbean app. If you have any follow up questions, feel free to connect with Felicia Gopaul, or me on my website ThePurposeofMoney.com. I hope this information was useful and I want you to share it with friends and family who you think would benefit from hearing this free content. Thank you so much for listening, and I'll see you next time. We have a new episode every other Wednesday.

Thank you for listening to the Purpose of Money podcast. For more resources and information, check out my website thePurposeofMoney.com. And while you're there, please sign up for our newsletter so you have the latest information on new episodes and blog posts. Until next time, keep creating freedom in your life today.

Transcribed by https://otter.ai