Financial ScenarioYour Current vs. Optimum
Hypothetical Financial Comparison
If you keep on doing what you’re doing at the end of the year:
Land Market Value $1,963,000
Equity $1,135,347
Private Bank $0
Net Worth $545,064
Third Party Loan Balance $570,233
Cumulative Transferred Dollars $30,183
Estate Protection Account $0
In 5 years, this would be your position (assuming no new purchases than what is currently being shown):
Land Market Value $ 2,296,432
Equity $1,695,380
Private Bank $0
Net Worth $1,367,666
Third Party Loan Balance $255,812
Cumulative Transferred Dollars $165,646
Estate Protection Account $0
OR
By eliminating unnecessary wealth transfers and creating your own private bank that you own and control, you could be in this optimum position in 5 years:
Land Market Value $2,296,432
Equity $ 976,660
Private Bank $700,454
Net Worth $1,536,949
Third Party Loan Balance $0
Cumulative Transferred Dollars $24,176
Estate Protection Account $2,935,503
Learn to Create Your Real Optimum Position
Notes about assumptions used:
Land Market Value This ranch was originally purchased in 1992 for around $800,000. Today, the value of your ranch is totally dictated by the annual appreciation of the land and housing markets during your ownership which of course varies and has been determined by many factors. We’re using a 5% average every year. This value is externally driven and totally out of your control. In five years from now, the market value of your ranch is going to be the same regardless of how much equity you have in it.
Equity The equity was derived from having paid $114,468 in annual principle and interest payments over an 18 year period. In the revised option, the annual payments would have been reduced to $88,032 which has already improved your cash flow by more than $26,000 per year. The more “equity” means the more control that the bank has over your money. If you don’t think that’s true then try to get it back from the bank when you need it the most, i.e. after a disability occurs or during a financial crisis, etc. Therefore, it is to your advantage to keep as much equity as possible in an entity that you own and control.
Private Bank Your “private bank” is an entity that you own and control. Notice the reduced equity in your ranch in the revised position in five years is made up for in the amount of liquid cash you now have available in your private bank. This account provides protection, growth and accessibility of your money that was previously locked up, unavailable or controlled by someone else.
Net Worth Your net worth is determined by subtracting the liabilities you still owe to a third party lender from all of the assets that you have purchased for the use, benefit and profitability of your operation. Until the last dollar is paid to any of the lenders that you’ve borrowed from for a particular asset, you have use of those assets but do not have true ownership. The increase in net worth in the revised position five years from now is from the payoff of the existing balances that is still owed to the third party lenders today that would give you full ownership allowing them to become real assets.
Third Party Loan Balance Your third party loan balance is a cumulative total of all of the principle and interest you still owe to third party lenders.
Cumulative Transferred Dollars The cumulative transferred dollars represent the interest expense that you are paying to third party lenders in addition to the money that those dollars could have earned you had they been invested in some financial vehicle that would be increasing your circle of wealth as opposed to eroding it.
Estate Protection Account The estate protection account is a guaranteed sum of money that will be available to pay for the taxes and expenses associated with the transfer of your ranch to the next generation. Having this account available solves the issue of not having the cash available to cover this cost and prevents any or all of your ranch from having to be sold in order for your heirs to be able to satisfy these obligations.
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