Getting In Over Your Head With Debt

The best way to avoid getting into major debt is to live within your means and develop your budget. However, you can also utilize a life insurance policy to limit the amount of bank and credit card debt you use.

Many of you expressed interest when I talked about the myth of the big paycheck and falling into the big credit trap. Most of your inquiries have been about the best way to avoid getting in over your head with debt.

The best way to avoid getting in over your head in debt is to live within a budget. That budget must include a savings component. The savings component will use a whole life insurance policy. This is where you’ll put away money to create a fund. You put your money into a whole life insurance policy, because it builds a cash value relatively quickly. You also earn a lot more interest on your money rather than if you just put it into a bank account. Over time that cash value grows and will become your own personal bank. This is called the Infinite Banking Concept. Whenever you wish to make a large purchase, instead of borrowing the money, or using a credit card, you borrow the money from your whole life insurance policy. The same way you would pay back a lender, you pay back the life insurance policy with interest.

Let’s say you were going to buy a car. You could pay cash for the car, but then you no longer have that money working for you. At the end of four years, you have a four-year-old car, and the dealer has your money. You could borrow the money from a lender, at the end of four years, you have a four-year-old car, and the lender has your money, plus the interest you paid. A better solution is you borrow the money from your whole life insurance policy, and pay the money back over four years. At the end of four years, you have a four-year-old car, you have the money you paid for the car and the interest you would have paid a bank, and it's all in your whole life insurance policy. This is the same concept that banks use, except in this case you are the borrower and the lender.

Imagine getting back all of the money that you and your spouse pay for large purchases over your lifetime. Think of all the cars, the appliances, home renovations, any big purchase all going back into your life insurance policy and earning compound interest. Over time it's a huge amount of money. You’re going to spend the money anyway, you’re going to pay the money back anyway. You might as well pay it to yourself.

If you have questions, send an email to David@TheAlemianFile.com. In the meantime, check out and “like” The Alemian File Facebook page. You want to visit my website at CapitalCrestFinancialGroup.com.

Absolutely, make sure you come back here next week to Physician’s Money Digest for another edition of The Alemian File.