6. How Money Works Banks, Credit Unions, Insurance Companies = Historically Low Rates of Return Traditional Financial Institutions Your Money Global Economy CDs and savings accounts are generally FDIC insured up to $250,000. Cash value life insurance offers life insurance components in addition to the investment component.
7. The Power Of Compound Interest “ Compound interest is the most powerful force in the universe.” Albert Einstein, as quoted in Dow 40,000 by David Elias (1999) Rates of return are nominal rates, compounded monthly. Contributions are assumed to be made at the beginning of the month. The chart above is not indicative of any particular investment or savings vehicle. It does not take into consideration taxes or other applicable deductions, which would lower performance. This example uses constant rates of return. Actual investments will fluctuate in value. $200 Monthly Savings for 35 Years (Age 30 - 65) “ U.S. consumer bankruptcy filings in the first half of 2010 reached the highest level since 2005.” Reuters.com July 2, 2010 $1.3 Million 12% interest 3% interest $148,680 6% interest $286,370
8. The Rule of 72 This simple calculation gives you the approximate number of years it will take to double your investment. 3% 12% 6% Based on the Rule of 72, a one-time contribution of $10,000 doubles six more times at 12% than at 3%. The table serves as a demonstration of how the Rule of 72 works and is only an approximation of accumulations. It is not intended to represent any specific investment, which will fluctuate in value. How many doubling periods do you have in your life? ? $20,000 $10,000 $10,000 $10,000 $20,000 $20,000 $40,000 $40,000 $80,000 $80,000 $160,000 $320,000 $640,000 $1,280,000 $2,560,000 $160,000 $40,000 0 6 12 18 24 30 36 42 48 Number of Years 3% 6% 12%
9. Buy Term and Invest the Difference Invest the Difference $175 monthly savings invested at 10% for 30 years = $398,882 at age 65. John $150,000 $300,000 Mary $150,000 $300,000 Children $0 $25,000 Total Protection $300,000 $625,000 Monthly Premium $298 $123 Death Benefit Before Primerica Changed to Primerica’s Term Monthly premium is an average of whole life policies from three major North American life insurance companies for male, age 35, standard risk and female, age 33, standard risk. Cash value life insurance can be universal life, whole life, etc., and may contain benefits in addition to a death benefit, such as dividends, interest, or cash value available for a loan or upon surrender of the policy. Whole life usually has a level premium for the life of the policy. 2. Primerica monthly premium for age 35, non-tobacco use for 35 year Custom Advantage policy (C535) and spouse age 33, non-tobacco use for 35 year Custom Advantage rider (C5SR), both with rates guaranteed for 20 years, plus a child rider of $25,000 each on two children, underwritten by Primerica Life Insurance Company, Executive Offices, Duluth, GA. Term insurance provides a death benefit only and its premiums increase at certain ages. The accumulation figure reflects continued investment at the same rate over 30 years at a 10% nominal rate of return compounded monthly and does not take into consideration taxes or other factors, which would lower results. This example uses a constant rate of return, unlike actual investments, which will fluctuate in value. This is hypothetical and does not represent an actual investment. More than double the coverage for $175 LESS per month! “ For most people, the right type of life insurance can be summed up in a single word: term.” www.SmartMoney.com, September 1, 2010 “ Term insurance is a better investment than whole life, as it offers more coverage for your premium …” CNNMoney.com, January 8, 2009 Difference = $175/month!
10. How Life Works Today 1. Young children 2. High debt 3. House mortgage Loss of income would be devastating At Retirement 1. Grown children 2. Lower debt 3. Mortgage paid Retirement income needed
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13. Are you protected from identity theft? The number of identity fraud victims in the United States increased 12% to 11.1 million adults in 2009. Source: 2010 Identity Fraud Survey Report, Javelin Strategy & Research
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15. The Debt Stacking Path* $353 $551 $303 $1,293 $2,720 $551 $303 $1,293 $2,720 $1,293 $1,293 $2,720 $2,720 * The above example is for illustrative purposes only. The Debt Stacking concept assumes that: (1) you make consistent payments on all of your debts, (2) when you pay off the first debt in your plan, you add the payment you were making toward that debt to your existing payment on the next debt in your plan (therefore you make the same total monthly payment each month toward your debts) (3) you continue this process until you have eliminated all of the debts in your plan. In the example above, when the retail card is paid off, the $220 is applied to credit card 2, accelerating its payment to $573. After credit card 2 is paid off, the $573 is applied to car loan for a total payment of $1,124. The process is then continued until all debts are paid off. Note that the total payment per month remains constant. Retail Card 1 Credit Card 2 Car Loan Credit Card 1 Mortgage Total $1,124 $1,427 $2,720 $220 $353 $551 $303 $1,293 $2,720 $573 $2,720 + $220 + $573 + $1,124 + $1,427
16. The Debt Stacking Path* * The hypothetical interest rate is for illustrative purposes only and not indicative of a guaranteed rate of return on any investment. Illustrated rates of return are nominal, compounded monthly. Without Debt Stacking With Debt Stacking March 2019 182 Months Sooner $130,643 Interest Paid $214,433 Monthly Payments $2,720 $83,789 $2,720 Once debts are paid off, invest $2,720 each month until age 67 – the total, given a 10% return, is $2.87 million.* Payoff Date May 2034 Interest Saved $0
17. The Smart Solution Path The above example is for illustrative purposes only. 1. The above monthly payment does not include taxes and insurance. 2. Based on the assumption that the present payment program continues on three open-end credit card accounts with balances of $7,570, $8,830, and $5,500 respectively, each with an APR of 18%, 16% and 14.9% respectively, and combined minimum monthly payments of $876 ($303 and $353 and $220 respectively) and one fixed installment car loan with a balance of $15,764, an APR of 6%, a monthly payment of $551, and an original term of 60 months. 3. The above monthly payment does not include taxes and insurance. The client is responsible for the escrow and the payment of taxes and insurance. The payment reflects an annual percentage rate of 5.86% and a note rate of 5.75%. The loan in this illustration includes points and applicable closing costs, which are financed from the loan proceeds. Your actual closing costs and APR may differ. 4. Assumes no additional debt is incurred. Makes available $1,367 a month 4 Refinanced $215,000 for 25 years at $1,353 per month 3 at age 35 Original Loan APR: 7.50% Original Term: 30 years Original Loan Amount: $184,955 Market Value of Home: $269,000 1st Mortgage $175,000 at $1,293 1 (for 25 more years) Personal Debt $37,664 at $1,427 2 Total monthly payments = $2,720
18. The Smart Solution Path 5. The hypothetical interest rate is for illustrative purposes only and not indicative of a guaranteed rate of return on any investment. Illustrated rates of return are nominal, compounded monthly. 6. This illustration is based on a 25 year mortgage with a biweekly principal and interest payment of $676 plus an additional $148 towards the principal balance with each payment. The monthly payment does not include taxes and insurance. The client is responsible for the escrow and the payment of taxes and insurance. The payment reflects an annual percentage rate of 5.86% and a note rate of 5.75%. The loan includes points and applicable closing costs, which are finances from the loan proceeds. Your actual closing costs and APR may differ. Illustration assumes biweekly payments and the additional principal payments are made on time for 15 years so that all of the principal has been paid. Results of actual debt acceleration programs depend solely on your commitment and adherence to the proposed accelerated payment schedule. Biweekly payments mean payments toward principal and interest and are paid every 14 days. The effect of paying biweekly is to make one extra monthly payment per year. Acceleration Bi-weekly payments plus paying additional principal may result in reducing total time and cost of your mortgage debt. (Reduces a family’s housing debt faster, possibly saves thousands of dollars in interest and may increase borrower cash flow.) $443,900 invested/home and all debt paid off in 15 years Invest $1,071 a month at 10% for 15 years = $443,900 5 Add $296 6 a month toward payment of principal The total, given a 10% return = $3.86 million 5 Take the $443,900 lump sum and invest with the $2,720 now available each month until age 67
19. What You Would Have Earned District Leader $50 $645 $696 $222 $1,613 RVP $110 $1,290 $1,323 $394 $3,117 RVP Override $60 $645 $627 $172 $1,504 The Key: Recruit & Develop People These estimated earnings are based on the following assumptions: Life – Custom Advantage 35 policy for primary insured, totaling $300,000 (C535) at 35-year-old non-tobacco rates and spouse, totaling $300,000 (C535) at 33-year-old non-tobacco rates, plus a child rider of $25,000 each on two children. Loan — $215,000 $.M.A.R.T. Loan ® . Investment – 12 monthly savings of $1,071 and $175 monthly savings from the life insurance example into a mutual fund. Most representatives do not achieve these leadership levels and clients do not always buy every type of Primerica product. In order to become a District Leader and begin earning the level of commissions discussed above, you must become licensed to sell insurance as well as achieve certain sales levels. Reaching the other leadership levels is dependent on the size of the organization you build, the number of sales and override commissions you earn and the efforts of your downlines. RVP Override column reflects what an RVP would earn on sales by a District Leader. Primerica DebtWatchers Loan Insurance Investment Total + + = +
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