Derick Van Ness | Systematizing Your Savings — The Key To Continued Financial Growth

Adam LeanPodcast

On this week’s episode of P is for Profit, we speak with special guest Derick Van Ness. Derick is a wealth strategist and the Founder of Big Life Financial. They focus on removing the mystery and misinformation surrounding money and financial strategy so that business owners can live their biggest lives. This is done by helping business owners create financial systems to optimize the growth and the protection of their money.

“I’ve been a marketing consultant and a business consultant and different things, and I found that most people find that not having money is probably the biggest obstacle to them being who they want to be and living the life that they want to live. I’m really passionate about that for myself, so I decided to dive into and figure out what are the foundational models, what are the things that people can do? How do we wipe out most of the stuff that’s holding people back in the simplest way possible? We’ve developed and learned a couple of models that really remove that for people,” says Derick.

We chat about the most common things that are holding people back from living their biggest lives, as well as:

  • Systematizing your savings
  • The downsides of investing in stocks and bonds
  • Cash flow banking
  • Common financial mistakes made by business owners
  • And more

Listen now…

Mentioned in this episode:

Transcript

Adam Lean: In this episode, we’re going to talk about how to remove the mystery and misinformation surrounding money and financial strategy. We’re going to talk to a financial and tax expert about how to create a financial peace of mind. This is P is for Profit.

Adam: Welcome to P is for Profit. My name is Adam Lean and I along with the rest of the team at The CFO Project are passionate about helping business owners improve the profitability of their business. My guest today is Derick Van Ness. He’s a wealth strategist and founder of Big Life Financial. They focus on removing the mystery and misinformation surrounding money and financial strategy so business owners can live their biggest life. Wow. I’m excited to dive in. Derick, welcome to the show. 

Derick Van Ness: Happy to be here, Adam. Thanks for having me. 

Adam: So I mean this is a lot, removing the mystery and misinformation surrounding money and financial strategy. So before we dive in, tell us a little bit about who you are and why you do this and how you got into this.

How Derick Became a Wealth Strategist

Derick: You know, it’s kind of a roundabout story. But I think the short answer is, I’m like a life optimizer, right? I try to get as much as I can out of life. And I’ve done a lot of different things. And what I found is along the way, being an entrepreneur, at one point, I was flipping houses. And, you know, and I’ve been a marketing consultant and a business consultant and different things is, I found that most people find that not having money is probably the biggest obstacle in them being who they want to be in living the life that they want to live. And I’m really passionate about that for myself. 

And so I decided to dive into and figure out what are the foundational models, what are the things that people can do? Kind of the 80, 20 rule, right? How do we wipe out most of the stuff that’s holding people back in the simplest way possible? And we’ve developed and learned a couple of models that really remove that for people. So, long story short, I was looking for it for myself, got really passionate about it, started working with a ton of business owners as a consultant, and just realize that this is probably the biggest thing I can do to help business owners live the life they’re meant to live. 

Business owners are a special group of people. They started a business because they had a vision, they’ve been able to see it through. I love people who are going after their dreams. And so to be able to support those people and kind of get the money out of the way so they can do what they’re here to do is something I’m really passionate about. So I kind of ended up there that way.

Adam: Excellent. So let’s talk about it. You said 80,20 rule sort of, so what is holding people back? What’s that 80%?

Creating a Simple Strategy for Managing Wealth

Derick: You know, so this is gonna sound kind of crazy and maybe people can relate with it with all the stuff that’s going on with a pandemic is, there’s a lot of information flying around and people don’t know what to believe. And I hate to say it but there’s a lot of people who benefit from confusion, right? When people don’t know what to do, they have to sort of blindly rely on experts. 

And so what we’re trying to help people do is instead of believing and buying into the idea that money and finances need to be super complex and they need to be super, you know, multiple strategies and all this stuff working together, how do we cut through that? How do we create a simple strategy that helps people to be at their best? And what we, what I’ve come up with is the key things are this, if you’re a business owner, you’re going to make the bulk of your money in your business. 

So be good at that first. If you’re not good at your business, you don’t even have money to save or invest or grow or built or retirement or anything. So if you’re going to get one thing, right, be really excellent at your business, invest in yourself and your business, learning your craft, becoming excellent, figuring out your customer, all of that. And a lot of the stuff you guys talked about on the show, right? 

Second thing is you need systems, simple systems to support you. And I think the biggest mistake a lot of people make is they’re trying to jump from ABC to XYZ. They’re trying to be really sophisticated investors, or they’re taking big risks, or they’re getting into things they know nothing about with all their money. And sometimes when I ask clients, you know, on a scale of one to 10, how important do you think it is to understand where you’re storing your life savings? 

And most people say, Well, I think that’s probably a 10. And then depending on what they’re doing, I ask them, well, how much on a scale of one to 10 do you understand where you are storing your money? And a lot of them it’s closer to a 1, 2, 3, 4. The biggest, and I’m not fully against this, but the biggest perpetrator is a lot of people are putting money into stocks and bonds and these kinds of things, and they have no idea why or where the money’s going. And they just are kind of doing it because they’ve been told that’s what they’re supposed to do. 

And it creates a lot of uncertainty for a lot of them. So we kind of skip some of that and I say first thing you got to do before you invest is you got to learn how to save, right? So be good at your business, systematize savings, because if you can’t save, you never really get enough money together to invest. And then when you do invest, put your money into things you know about, things you care about, and things you control. A lot of times, that’s your business first. And then beyond that, if you’re going to put money in another place, put it where it has guarantees because the big thing that kills a lot of people is they take unnecessary risk. 

And so volatility, ups and downs of the market ups and downs of businesses they don’t understand the downs hurt so bad. When you lose $10,000 in investment or $100,000 in an investment, you don’t just lose that 10 or $100,000, you lose what it could turn into over the next 10, 20, 30 years. So people don’t realize they’re like, Oh, I lost 50 grand in an investment at age 30. Like, you didn’t just lose 50 grand, you lost what that 50 grand could become over the next 30 to 40 years. And those numbers get real big if you’re putting them into something that grows. Does that make sense? 

Adam: Yeah. Yeah.

Derick: So, yeah, that’s kind of it. Be really good at your business, systematize your savings once you have money saved up, put it into things you know about, care about and control. And we teach a system called cash flow banking, where we help people to grow their money and then use that as a baseline strategy.

Adam: So before we get into the cash flow banking and where people should invest and how they should invest, why not stocks and bonds? Like what is the big, I mean, I understand conceptually that you’re saying that most people don’t understand stocks and bonds. Well, one could argue that that’s what their financial advisors for, is to understand it for them. They just know that, you know, to put, to invest their money in risky or riskier investments known as the stock market. So I guess why not the stock market?

Why Not the Stock Market?

Derick: Yeah, great question. The real, the short answer of it is people haven’t been getting great returns in the stock market. When you look at them, historically, the market goes up and the market goes down. But if you really look at it from 97 to about 2011, people made almost zero money in the market, depending on exactly what index, but if you’re looking at the Dow Jones Industrial Average, they would have broken even in that period of time. And then if you put in fees, factoring fees, which are part of everything, right? 

So that’s not a stock market thing, that’s just the thing in general, people would have lost money. Even at 1% a year not compounded they’d be 10, 11% down. And then you have them, the money grew from there, and then now we’re seeing another downturn. The problem is it creates unpredictable results for people. Now, if somebody just wants to bring enough, they just want to work at a job and they get a match from their 401k, maybe that can work for them. I think there are better systems, but that can be okay. The problem is as a business owner, most the time when you’re putting your money in there, you’re losing control of it. 

A lot of people are doing that through qualified plans, 401Ks, IRAs, things that you put the money in there but when you go to pull it out, there’ll be a penalty. So that deters most people. If we look at what you could do with that same money inside of your business, it can make a massive difference. So let’s say you put money, you put $100,000, or let’s say $10,000 into the stock market and you earn 10% this year. Most people would say 10 percent’s a pretty decent rate of return, and they would take that all day long. The problem is that’s, you go from 10,000 to 11,000. 

So you made $1,000. What if you took that $10,000 and you reinvested it in your business, in marketing, in growth, in a contractor or a part-time employee? Do you think you could earn more than $1,000 profit in that, right? Predictably? And for most businesses, the answer is absolutely. So I would say go there first. And then when you go outside of your business, I prefer things and only because there are other options on the table where you can get a guaranteed rate of return. 

And if you can get a guarantee, you don’t have those losses I was talking about earlier so you don’t take such a big step back when things don’t go your way, right? And that, over time, makes a really big difference. Because if we could pull the 2001 and the 2009 in the current drop out of the stock market, it’d be a home run. It’s just that that’s part of the process. And it really cripples a lot of people, especially when you’re near retirement. If the market drops right before or right after retirement, it can really cripple your ability to have income through the rest of your life.

Adam: So if the stock market is not guaranteed, what is a guarantee?

Derick: So through what we teach with cash flow banking, we teach people how to store money in a special type of account where they get a guaranteed 4% on their money, plus an upside with dividends. And we teach it through a life insurance policy that’s properly structured. So a lot of people have ideas about what life insurance is, right? And they think, Oh, well, it’s really expensive. And if I don’t have kids or I don’t want to leave money behind, why would I have that? 

If we even take the death benefit piece off the table and we just look at this as a place to store your cash, you can get a much higher rate of return with guarantees, tax advantages. And when you add all that up over time, the consistency of never having a down far outweighs any of the upside you might get in the good years in the market. When we look at it long term, and there’s some videos online that we have that show this kind of stuff, you have to earn pretty close to double-digit returns in the market to end up with the same amount of net spendable dollars. In other words, dollars that you get to keep after taxes and fees and everything else. 

So we find that that return, even if it’s just a break-even with the stock market is great, but you have the peace of mind along the way of never having to worry about what’s going on with the market so you can be really good at your business. Because I do think a lot of people get distracted by all the stuff that’s going on out there instead of just being able to focus on where they really make their money and what they’re really passionate about, which is their business. That makes sense?

Adam: Yeah. So let’s sort of dive into that cash flow banking concept. So break it down for us. What is that, what are the different parts? What does that mean?

Cash Flow Banking Concept

Derick: Yeah, so it’s difficult to go into all the details gut the really simple way to look at it is it’s like, there’s something called cash value inside of life insurance and it’s similar to like, a savings account. You put money in there and that money is available for you to utilize if you’d like to. And then we teach people to, of course, build up their cash there instead of like your regular bank account, because it’s going to be earning for you. 

Then when you utilize it in your life, let’s say you’re going to buy a car, right? Which is something you would normally do anyway. You use the cash value from the policy. And there’s some nuances to this so I won’t get into all the details, but conceptually, you go and pay cash for the car, using your account as collateral, and then you pay yourself back just like what you would have paid the bank back, plus interest. So what happens is your dollars are either earning inside the savings account, right? 

That 4% plus a dividend, or they’re earning inside the equity of the car as you’re paying yourself back with an interest rate. Let’s say 7% because maybe that’s what you would have paid on a car loan. So for you, the difference is, it’s no different than making a payment to the bank, except that you’re paying that interest back into an account that will continue to grow and compound for you. 

So once you put $1 into the system, it’s either earning inside the savings account, or it’s earning inside of the equity of the vehicle, but that dollar never stops earning for you the rest of your life. Does that make sense? So we use that to fund all of the day to day things that a business owner or person might use because if we look at an example of a car, if you pay $40,000 and you’re paying 7%, over five years, you pay about $5,000 in interest, right? So most people think that getting a loan okay, cost me five grand and interest. 

But like I said earlier, it’s not actually that it cost you the five grand, it’s that it cost you the five grand plus whatever that five grand could earn for you over the rest of your life. If you’re in your early 30s, that turns into 35 to $40,000 by retirement, right? At 5% interest rate. How many cars you’re gonna buy in your lifetime? You know, 10, 20 cars? How many houses are you going to buy? How many times are you going to finance equipment for your business or marketing campaigns or whatever? If we start looking at all of that it really adds up over time. Does that make sense? 

Adam: Yeah. Yeah. 

Derick: So we’re just putting your money in a place where lending it to yourself is almost the lowest risk you can do, right? Because you know, the borrower, you know what, they have the best of intentions. So we keep the risk low. We keep the money working all the time. And I didn’t really get into it, but there’s tax advantages to that as well. 

Adam: What are the tax advantages to that? 

Derick: So the money inside of the account grows tax-deferred, meaning you would pay taxes when you take it out. But if you use the loan provision I was referencing earlier, you won’t end up paying taxes on any of the growth. So essentially, it can end up being tax-free. And there are some nuances to that and as people get further into retirement so forth, we can weigh out what makes sense. But you get to utilize all that money tax-deferred, or in a perfect world, tax-free.

Adam: Interesting. So what is the biggest financial mistake you see business owners making?

Systemize Wealth Building

Derick: There are a couple, but the biggest one is just I think people don’t systematize building wealth. I think they think that at some point, I’m going to sell my business or we’re going to get this big contract or something big is going to come along and the truth is, wealth is built over time. You know, the first couple of years that you make good money, you think, Oh, I should be rich by now, but I’m not. Where’s it all going? 

And it’s because it’s, you know, a lot of money ends up going to taxes and going back into your business and other things. So I think systematizing savings and systematizing how you grow your money is really important, and I just don’t see many business owners do it. I think they think they’re going to get to that someday and they’re just not taking chips off the table every time they win They reinvest and reinvest and that’s great but if you don’t ever take any chips off the table, you never really build up that wealth that takes time to build. So I think systematizing savings and growth of your money.

Adam: Yeah, that makes sense. So my next question was, what is the best advice you can give a business owner and I’m assuming that’s it.

Derick:  Yeah. Focus on your business, systematize your savings. And if you’re not sure what to do with your money, put it in a place where it always goes up. And that’s where we really like the cash flow banking system. 

Adam: Got it. Okay. So Derick, if somebody is interested in learning more about that and just sort of wrapping their head around this banking system and creating a way to control their savings and be able to keep their money and also use it to grow it, where can they find you? Where can they reach out?

Derick: So there’s two ways to do it. The easiest way, I know a lot of people listen to this on their phone as you can send us, you can text us, you can just text the word biglife, BIGLIFE to the phone number 38470. And we’ve got a book that explains this cash flow banking system and many other financial principles in much greater detail. Or you can just find us at biglifefinancial.com. There’s a button there where you can download the book or you can schedule with us, whichever is easiest. But yeah, text big life to 38470 and we’ll be sure to set something up.

Adam: Excellent. Biglife as in one word, no spaces. 

Derick: Correct. Correct. 

Adam: Okay, perfect. So we’ll put that, the text and the website in our show notes. Derick, thank you so much for being here today. 

Derick: Absolutely loved it. Thanks for taking some time, Adam.

Adam: Yes. So again, if you would like to see if Derick and his team can help you with your business, feel free to reach out. And again, I’ll put his info in the show notes. Thank you so much for listening. And remember, the goal of your business should be to make more profit than last year and turn that profit into cash that you get to keep. Thanks for listening.