The Donohoe bulletin

Issue 1: The Life Insurance Loan

After more than 10 years advising clients on the Perpetual Wealth Strategy, there’s one thing we continue to hear more than anything else:

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Issue 3: The Most Valuable Benefit of Life Insurance for Children

"Just use the debit card," my daughter Meghan said to my wife. Like every kid, my children weren't born understanding the concept of money. To them, you swipe a card here and you swipe a card there and stuff becomes yours. "Just use the card" was a common phrase on Target runs and trips to the grocery store. Time flies. I have one child in high school, one in middle school, and one in Kindergarten. My kids, even the youngest, are at an age where they now understand what money is. More importantly, they're starting to grasp its value, which is not in the money itself but in what creates it. Things don't show up just from swiping a card. They aren't valued at a dollar amount. They're valued in nights of babysitting jobs, chores around the house, and helping dad at the office. There are many ways to teach children the value of money, but a Wealth Maximization Account is designed with specific characteristics to benefit your children, both now and in the future, and can be an asset for the entire family. The Value of Life Insurance for Children Opening up a Wealth Maximization Account (a whole life policy designed for high cash value) on your children or grandchildren is an incredible way to set them up for a secure financial future. But the life insurance policy itself isn't what changes your child's life, it's the education behind it. Using a whole life insurance policy for children to teach them the value of money is a priceless gift. This gift to a child or grandchild is more than the cash value of an inheritance or trust fund. It's not about giving them money, although you can certainly use it that way if you wish. I use my children's life insurance policies to teach them the difference between wants and needs, the difference between good debt and bad debt, and to help them understand their intrinsic financial value. Do children have an economic value? They absolutely do. Their potential is like a seed, ready to be nurtured and cultivated. To maximize their value as an adult, they have to learn financial responsibility at an early age. One of the most effective ways I've been able to teach sound financial practices is by letting my kids borrow against the cash value of their Wealth Maximization Accounts. It allows me to show them the economic value of their life, as well as the unique way they can use it to make purchases. Family Banking Strategy for Kids A Wealth Maximization Account is unique in that it allows you to borrow against its cash value while still earning guaranteed interest on the full cash value amount of the policy. You, the parent, own and control your child's life insurance policy. You're the "bank" and can allow your child to take a loan from their policy, while the actual interest in the policy itself remains protected. Now, when my kids want things, my wife and I decide if we'll let them borrow from their policies, and it becomes their responsibility to pay it back. We call it our family bank. Our children have the opportunity to make purchases that are of value to them, but they must assume responsibility for paying back the loan. It forces them to weigh the value of their time and commit to a payment schedule. My daughter Meghan has used her policy to buy various types of electronics and a $400 gymnastics mat, amounting to thousands of dollars cumulatively. She had to create a payback plan before she could borrow the money. She felt she could earn enough for the payments by increasing the amount of babysitting she did in the neighborhood. She also researched ways to earn bigger tips by giving better service, such as making little videos of the kids, making sure the house was cleaner than when the parents left, and leaving a handwritten note. This experience has given Meghan an appreciation for where money comes from, what a loan is, and what interest is, all of which will benefit her in the future. Meghan is also learning the value of her time; an enormous lesson when it comes to her lifelong earning potential. The educational aspect of a Wealth Maximization Account is the most valuable benefit of life insurance for children. What If My Child Doesn't Pay Back Their Loan? Failure is part of the process. When it comes to teaching children financial responsibility, failure to repay a loan can actually provide a more powerful learning opportunity. As parents and the policy's owners, we "repossess" what they bought, whether it be a phone, iPad, bike, or toy. It's far

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Issue 4: How to Embrace a Mindset of Financial Freedom

I read an article recently that shocked me. It talked about how medical and technological advances should be increasing the average lifespan of people, yet American life expectancy is actually going down. The causes? Drug abuse, suicide, and an unhealthy lifestyle. Data shows people are unhappy and soothing it with quick fixes that don't provide lasting joy. The mindset many of us currently adhere to leaves us unfulfilled during our working years as well as in retirement. We're stuck because we put limits on our lives based on money and allow it to be the driving factor for our decisions, as well as the excuse for our unhappiness. We've been conditioned to believe our lives should be a linear equation of A+B=C. Here's an example: A. We earn a degree and land a good job with benefits. B. We put 10% of our money away for retirement. C. We retire at 65 funded by savings and social security. If this linear equation was the key to financial freedom, all retirees would be exuding joy, and financial worry would be a long-forgotten emotion. Unfortunately, life is not linear, and according to a recent USA Today article, the anxiety level of retirees is greater than it was when they were working. The Solution: Mindset In Carol Dweck's best-selling book Mindset: The New Psychology of Success, she outlines two mindsets to navigate life: a fixed mindset and a growth mindset. A fixed mindset prevents happiness. A fixed mindset has a lot of rules that must be followed in order for happiness to be experienced. A job title, a bank account balance, the right friends, the right spouse, the right body, the right looks, and so forth. A fixed mindset is always looking for what's wrong or what's missing, focused on reaching the mirage of financial security. A fixed mindset puts limits on what you can achieve, how happy you can be, and how much your life is worth. It's why many of the richest and most successful people struggle with depression, substance abuse, and suicide. They subscribe to a mindset that leaves them feeling unhappy in spite of all they've accumulated. Are you stuck in 1929? Prior to 1929, America was the epitome of a growth mindset. The Industrial Revolution was a time of possibility, innovation, and living the American Dream. The Great Depression ushered in an era of deep-seated fear, of which the impact can still be felt today. People weren't just afraid they wouldn't be able to feed their children or keep a roof over their heads, they were afraid they wouldn't survive. A chasm formed between wanting as much certainty as possible and enjoying the real meaning of life. One of the primary originators of the idea of retirement was The Great Depression. That is when the US Social Security program was conceived. Those who made it through The Great Depression emerged with a money mindset that prioritized financial security over financial freedom, with the ultimate goal of not having to work past a certain age. The "indulgent" experiences of vacations and meaningful family time were deferred until a later date in the future; a sacrifice for the carrot of retirement. Embracing a Growth Mindset Most Americans live better than kings did 100 years ago. Healthcare, communication, transportation, nourishment, access to limitless information, and the vast forms of entertainment couldn't be fathomed by our great grandparents. 2020 is a miracle compared to how the world operated just a few decades ago, and our opportunities for experiences reach nearly as far as our imaginations. When you value your life by experiences instead of money, you'll find you're worth quite a lot more than you thought. This is a growth mindset. However, a growth mindset does not happen overnight. It requires an ongoing purging of conventional wisdom. Financial freedom isn't possible without a growth mindset. If you prioritize work and money, you won't walk away from your retirement party with the ability to enjoy vacations and family time-because you won't know how. You've never allowed fulfillment to be defined by anything other than money, and there will likely never be enough. Keeping Up with The Joneses

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Issue 2: What Life Insurance Brings to a Financial Portfolio

During a client meeting a few months ago, I asked the savvy investor I was meeting with about what initially brought him to Paradigm Life.

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