The Wife and I have always wanted a pool. We even consider building one at our old house (now a rental property), however, it would have been tight on the property (side note: boy am I glad we didn’t as it would be one more thing to break with a renter there). When we moved to our current home in August of 2019 the conversations began again with The Wife even getting quotes in January of 2020. The quotes were significantly higher than I had thought they were going to be, so I pushed the project back on her asking for a year or two to get settled into the new house…and then COVID hit. At that point, it was March of 2020, and we were spending a lot of time at the house with no end in sight. We interviewed a few companies and finally decided to move forward with building a pool and patio in June of 2020.

My original plan to actually pay for the $80k+ project was to liquidate and use some mutual funds The Wife’s parents had saved for her and finance the remaining majority of the project using either a 401(k) loan, a life insurance loan or an unsecured loan.

Then as fate would have it I was offered a good amount for the predecessor to this site (and other sites I owned). I was excited to liquidate that business (and it really was a side hustle turned business) as I took on a new role in an NYC law firm which was consuming a bit more time than I expected.

I was particularly proud that we were going to do this huge construction job with zero debt…man plans and God laughs. After we completed the project (i.e. a working pool with a very nice patio to go around it), it was time to do the landscaping.

I was shocked to find out how much it was to install a new sprinkler system ($5k), some top soil/seed (~$4,500) and to fix the fencing that was destroyed in the construction. I needed to come up with another $15,000.

Using my Whole Life Insurance to Consolidate Consumer Debt and Finish up my Pool Project

I have multiple whole life policies from two major mutual companies, MassMutual and Guardian. I look at my whole life policies as an asset class in my financial plan. I could take a loan against them directly from each company but the interest rate was higher than I wanted to pay, and Guardian is non-direct recognition company which means my dividend would get hit if I were to borrow directly from them. I remembered that in the past I was introduced to a company that would offer low interest loans using your cash surrender value as collateral. Why do they offer low interest loans? Because if I miss a payment, the entire loan is collateralized by my cash surrender value and they can be made whole. It is actually a pretty brilliant business.

Specifically, I used Kensington Financial to obtain an interest only loan – and I would absolutely recommend them. Everything was smooth sailing and very easy. The only minor complaint I have with them is that their back end loan processing website feels like it was built a decade ago. I can’t imagine it would cost all that much for them to upgrade it.

The Numbers Behind Using My Whole Life Cash Value

So I had about $10k worth or work left, and I didn’t want to diminish my outside liquidity, so using Kensington I pulled $20k – $10k will be used to hopefully finish up this project, and $10k will be used to pay down other debt in anticipation of my mortgage refinance this month.

I am then going to redeploy my previous savings amounts (below) into paying down this debt as soon as possible :

  • $150/week into my Dividend Investment Portfolio
  • $75/week to my Primary Residence Mortgage as extra principal
  • $5/week to my Emergency Fund (I had finally got this where I wanted to get it, so was just keeping a flow to it).
  • $25/week to my Vacation Fund
  • $75/week to my house fund

So I was saving/investing about $330/wk or $1,320/mo into various non-retirement accounts. I have stopped all of that I put in an automatic payment of $1,000/mo towards this debt. In addition, once the mortgage refinance hits next month I should have an extra $400 or so month to kill off the debt even sooner. I am looking to have this all paid off within 14 to 18 months. If interest rates turn on me I can always use cash to pay it off, but in today’s environment, I don’t believe that is going to be a problem.

Buying Term and Investing the Difference

Americans have a dismal savings rate

Source: St. Louise Federal Reserve

I mean look at that it took the freaking pandemic to get us about 5- 10%. I assume this even includes qualified, retirement accounts. This has been reconfirmed in my anecdotal evidence has back office support for the past 14 years in the financial services industry. I can safely say that almost no one invests the difference! Sure, you may be the exception but you probably aren’t. Hell, I like to believe I am a great saver, but I honestly don’t believe I would have another $40k (my current CSV) plus growth sitting on my net worth statement if I didn’t purchase my whole life policies. I get a bill to pay it, and bills get paid.

I am well aware that the Internal Rate of Return sucks in the first 5, 10 years, but if you are playing the long game it is just another asset class that provides bond like returns with some very interesting other attributes (death benefit, tax free compounding and an ability to be stripped for income tax free). I am not a zealot and I don’t think all eggs should be in any single basket (privately owned business, equities, bonds, cash, real estate, etc.). Most of my net worth is still in the public markets and likely will continue to be.

I look forward to enjoying the pool this summer!

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