Unlock the secrets to financial freedom in this episode as Chris Seveney delves into passive income strategies with Russ Morgan from Wealth Without Wall Street. Discover the secrets to achieving financial freedom as Russ shares insights on enhancing savings, increasing cash flow, and creating passive income streams outside the traditional Wall Street investments. Learn about the concept of infinite banking, the importance of the investor DNA, and how to leverage unique financial tools to build a secure and prosperous future. Tune in to uncover strategies that can transform your approach to wealth-building and financial independence.

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Unlocking Financial Freedom: Passive Income Strategies With Russ Morgan

I have a special guest, Russ Morgan, with Wealth Without Wall Street. A little bit about them. Wealth Without Wall Street is an online community that seeks to reeducate business owners and families and how money truly works. Their goal is to teach people how to enhance savings, increase cashflow and create passive income, all without the help of Wall Street. Thanks for being on. How are you?

Chris, thank you very much for having me. It’s always a good time to be with you.

Russ and I have probably known each other for years. I met them at a conference and through a colleague. One of the things I enjoy about having Russ on the show is talking about what they do and how they can assist other people out there. The reason I got interested is that people look at it as they get older and realize that most people are invested in Wall Street, typically through their 401(k) or some retirement plan. You realize as you start getting older, that’s not going to get you where you need it to be or where you want it to be. You have to start looking at alternatives. Russ and his partner, Joey, created fabulous programs and educational content and wrote a book. I’ll let you talk a little bit more about that, Russ.

Challenges With Traditional 401Ks

Thank you very much. You’re right. The 401(k) is oftentimes a huge debate point for people when they see our brand because we stand out there, we say, “Unfortunately, your baby’s ugly,” which is hard to hear. It’s hard when many of us who held jobs within the WT workspace, where we built income or built wealth inside of these 401(k) plans, for someone to say that a 401(k) is the worst tool to be used if you’re trying to become financially free.

Our brand stands on that and it’s specifically because we believe financial freedom, in particular, is when you have more passive income than you have monthly expenses. Every single thing that we look at and what we’re doing with money has to go through that lens. If you’re not getting closer to financial freedom, if you’re not building a passive income stream, if you’re not reducing the monthly expense with what you’re doing with the money, then you’re inherently getting further away from what you say you want.

I think people want to be financially free, not that they can sit around on a beach necessarily, but they can pursue the things that they’re passionate about, pursue their purpose. At least, that’s what the thousands of people who join our community tell us. They want to be able to do more of what they want to instead of the things that they have to do.

People want to be financially free not so that they can sit on a beach necessarily, but that they can pursue their purpose and the things they are passionate about. Share on X

I think we’ve heard that too oftentimes, even with us entrepreneurs, people who’ve created businesses. I think Michael Gerber coined it whenever he was talking in The E-Myth about how that person who was a great technician opened up their business but had to become the manager and become the entrepreneur and got bogged down with all the things they were doing.

They started to hate having to do all those things. Joey’s and mine’s goal is to help people, not anybody but a million people. That’s our goal. Help a million people who want to become financially free, get there faster. We wrote a book called Wealth Without Wall Street, Three Steps to Freedom Through Passive Income, and I would love to chat about it.

What’s interesting that you mentioned is the definition of financial freedom because a lot of people will think about it, “I want to sit on a beach and not have to do anything.” That’s not the case. For example, I went and started my own business several years ago. I have a team and I run a company. I still work, but I view myself as financially free because I can do what I want. I still invest outside of Wall Street and in alternatives, but it allows people to do what they want.

If I wanted to go golfing this morning or I wanted to take my son somewhere, I could do that. I think that’s where a lot of people get mixed up sometimes in that definition of freedom that you say. Tell us a little bit more about Wealth Without Wall Street. You mentioned that 401(k) is the enemy of the state, but tell us a little bit more about the group and what it is that you do.

I want to touch on it quickly. I feel like I’m one of the presidential candidates in a debate. I know that you’ll ask me this question. I’m going back to the other question. You mentioned something that we put in the book and that was around the concept of an ideal day. I think too often, we picture what financial freedom would look and Imagine the day or week that we’ve spent in the past and say, “That would be amazing. If I could go back to that location go back to that situation, I would enjoy that forever.”

Going to the beach or taking our kids to go do A, B or C or us going and playing golf or whatever, those typically have great memories and their ideal days, but it’s not an ideal lifestyle. I think there’s a difference. We talk about that in the book, the difference between an ideal lifestyle and an ideal day. Sometimes the things that you enjoy doing once, you might not enjoy doing it every single day.

Imagine playing golf every single day. That would get a little bit old. I’ve been around some professional golfers. They tell me that gets old. They get paid well for it and we wouldn’t get paid for it. I think it would get old. That’s the objective: to figure out what our ideal lifestyle would be so that we could build our processes and system to get closer to being able to spend more time doing that thing.

Now, what does Wealth Without Wall Street do? What does it live for? It is intended to uncover and highlight a lot of the miscommunications or myths that exist in the financial industry. One, because Joey and I come from the financial markets. He worked at a big bank and worked in the mortgage industry. I was a Certified Financial Planner and worked in the financial advisory space.

All of the things that we rail on, we do it knowing that we were a part of that problem early on. We look to see what are the things that people are doing with money that’s not getting them any closer. One of the things we say a lot is that the biggest obstacle to becoming financially free, Chris, is lack of access to cash. I could have as many good deals.

A deal of a lifetime comes around twice a week, but most people don’t see them because they don’t have access to cash. They don’t even know or they’re not even looking and it passes right past their nose. We learned that through a process called Infinite Banking. It was something that I fell headfirst into at a conference, I didn’t know what I was doing. I met the author of the book. He happened to be living in my hometown.

When I got back to Birmingham, Alabama, where I live, I looked him up. I spent ten years being mentored by him, understanding how to unlock my cash and get it to a place where I could control it. The thing that we started doing was realizing that once we had access to cash, then we needed to become a better investor. I think it’s Kiyosaki who says that there are no good or bad investments. It’s good and bad investors.

I didn’t know how to be a good investor. You would think that, Russ. You’re a Certified Financial Planner. If you spend all this time investing in the markets, you should be an excellent investor. I knew how to read charts. I knew how to read the terms alpha, beta, and standard deviation and how to look at and see the tenure of the fund manager on the project, but outside of that, I didn’t know a whole lot.

I specifically didn’t know what to do with money. I had no idea how to buy notes, have investment real estate or own businesses that could be passive income streams. I had to start learning. We interviewed guys like yourself on the podcast and we’ve done 550 or 560 episodes. Through that process, we learned that there are many different ways to build passive income.

Ideal Day Versus Ideal Lifestyle

Not every way was intended for me to do it. We built out this process called the Investor DNA. We talked about that in our book, as well as how God uniquely made each one of us. That we can see the world through that certain lens. We go and analyze the different types of deals that are out there based upon our personality styles, the way that we would, things we’d like, things we wouldn’t like and the key factors that are going to be included.

We took that down and made this passive income matrix, which helps simplify the process for someone who’s getting started, someone who’s been putting money in the 401(k) and never taking a step to invest in anything outside of that, where they wouldn’t be overwhelmed by the number of things, but could narrow down the process to one or two ideas that they could go deep on.

We said, “We’ve got to build a community around the people who are doing this because you’re going to be the weird person in the room when you’re pursuing passive income. You’re going to be the one doing the opposite of what everybody else is doing. This could be uncomfortable for most people. The inconvenient truth is not something that people want to participate in.

They would rather be in the line of people doing exactly the wrong thing as long as they’re with the herd. When you tell somebody, “I don’t put money in a 401(k).” They’ll ask, “What? Why wouldn’t you?” You tell someone that debt freedom is good for you. It’s not my pursuit because debt freedom doesn’t equal financial freedom.

My objective is to have more passive income than monthly expenses. Everything that I do, I do in that lens. People are going to say, “My goodness.” Wait until you tell them that you’re putting money in the whole life insurance, like I do. We’ve been putting large six figures year over year into the whole life insurance and building these cash values and people say, “You must be stupid.”

All of these things you book up are weird, but what I’ve learned is that if you want to be uncommon, you want to have uncommon success, you want to have uncommon lifestyles, you need to do what the 1% does and not the 99%. We’re not reinventing the wheel. We’re not doing something that no one else is doing. We’re following what the 1% are doing instead of the 99%.

Infinite Banking

Good things that I want to touch on, one, you mentioned the whole life insurance. Real estate investors, people say whole life or Dave Ramsey. You get him on whole life. One thing, though, I want to jump back on. I want to touch upon it. I want you to talk a little bit about infinite banking. You mentioned the investor DNA. I think that’s critical because I see many people out there who say, “I see this person doing it. I want to do it.”

Just because that person can do it, that doesn’t mean you can. LeBron James can go play basketball, but I’m not going to pursue basketball because I’m five foot nine. It’s not happening. There’s also that same thing when you’re looking at investment strategies. Certain people, for example, invest in defaulted mortgage notes.

If you’re the type of person who is not conflict-oriented, then it’s not a business that you should be in because you’re always dealing with lawyers and having to be a little aggressive. The other thing I wanted to touch upon is you mentioned passive investing. People need to understand what passive means. Passive means not owning four rentals from 300 miles away and trying to manage them.

I think people misconstrued what passive investing means compared to you’re an active investor investing in real estate as an example, but passive investing means somebody else is doing all the work for you. That’s how I define it, anyway. I wanted to make those comments. I’ll jump back a little bit to let people know a little bit more about infinite banking because it is one of those things that the media never talks about because everyone always wants you to put your money in a 401(k).

 

I will touch on the best of investing things. For it to be passive for you means it has to be active for someone else. Just because you’re active in it right now doesn’t mean it’s always active. Maybe you do the work upfront and it becomes passive for you over time. I think being involved and passive doesn’t mean being uninvolved.

I think that even when I invest in mortgage notes with you. It took time for me to form a relationship with you and to understand through our conversations what I invested in. Through that, I need to be able to inspect what I expect. Otherwise, I’m in a different type of Wall Street, if you will. We believe Wall Street is as much a mindset as it is an actual location or investment. It’s the way that we think.

I think your readers know that, but that’s a key thing that people, we’ve become in this easy-button society, and we want things super easy. We turn off the work ethic and assume that we’ll get it for free by this one little easy button, taking this pill, or whatever it may be. It doesn’t work that way. Going to infinite banking, infinite banking is a unique tool, a unique process.

For those who are hearing this for the first time, it comes out of a book called Becoming Your Own Banker. The author was an elder. He died in his mid-80s. He was an economist and used to be a Forrester. He was determined through his personal experience because he started putting money in the life insurance policies. His brother was a life insurance agent early on.

Ultimately, after his consulting days, he ended up getting a life insurance industry business but he was investing in real estate. It came to a time in the early 80s when we think today interest rates are high. That was the low-bottom watermark in the early 80s. Interest rates went from around 8.5% to 23.5% over 18 months.

There, he owed $500,000 at the time on to real estate and his expenses went significantly higher. Now, when you go back 30 or 40 years from now, that’s a lot of money. He was trying to figure out how he was going to get himself out of that scenario. He knew the banks were not the answer. He had to be able to go and access private capital.

He realized that he’d been putting large amounts of money and standards related to his income into life insurance cash values, which operate very similar to equity in a house. This means I make a premium payment on insurance policies, like making a principal payment on a mortgage. I’m building up equity. The difference is you’re building it in a life insurance contract as compared to a home. He could access and borrow against that cash value at interest rates somewhere between 5% and 8%, which were a fraction of what the going rate was.

He said, “The only problem is I don’t have $500,000 of cash value to be able to get rid of the banks.” He only had a portion of that. He thought, “I could solve this problem if I would increase my premiums so that my cash values would increase so that then I could get rid of the banks. Now, I can pay back the institution, which I’m an owner of because the insurance companies that we do business with are owned only by the policyholders.” Then you are participating in the profit.

The idea of infinite banking starts with the idea that we all need cash, that we finance everything we buy and whether we pay cash, we borrow someone else’s money, we’re always dealing with borrowed money. The difference is who controls that function. Who’s the banker in your life? I started implementing this into my life back in 2009.

I saw firsthand this going through. I’ll give you an example if it’s okay. My wife was a dentist. She opened her dental practice on December 28, 2008. We were sitting there borrowing $750,000 to do the whole build-out and to buy all the equipment. It’s expensive to start a dental practice. We went to Bank of America, the number one dental lender out there.

At the time, we had a large amount of cash sitting in the bank because we had gone through the crash. We had liquidated her father’s account. We had all these stock losses on different accounts. The stocks that he had. He’s sitting there in cash and I’m reading this book called Becoming Your Own Banker that says that the banks take your money and they lend it out to people and they earn the difference in the middle.

He said, “Oftentimes they lend it out to you or someone that you know with your own money, but yet they only give you a percentage of what they’re earning.” This is happening right now. My father was sitting here with large seven figures sitting in a checking account, earning half of 1% maybe and here’s my wife paying 7.95% on this dental loan debt.

I thought, “All we have to do is cut out the middleman in this transaction.” I went to my father-in-law and I said, “What if I could guarantee you a 7.95% return on your money? He said, “Guaranteed?” I said, “Guaranteed, less than a 1% default rate.” By the way, you’ll like the borrower. He asked, “Who is it?” I said, “It’s your daughter.” He said, “What do you mean?”

I said, “All we’re going to do is take the money out of this account. We’re going to pay off Bank of America and, in essence, refinance the debt. She’s going to now pay you that payment that she’s making. That’s $6,000, whatever it was a month. She’s going to make it to you for the next fifteen years instead of Bank of America.” He asked, “We can do that?” I said, “Absolutely, we can do that.” We did it.

She ended up selling her practice ten years later. We had to pay off the rest afterwards. That was the start of becoming your own banker. All we did was take that cash and we bought insurance policies. He insured my wife because if she had died, that would have been a risk to him, so he insured her. He used that cash value to buy an investment property with us. We’ve done all sorts of different deals together. I started doing the same thing.

I started putting my capital into it. I started growing my cash. Now, Joey and I, for the last few years, have been showing our passive income report and it’s gone from $2,400 a month when we first started back in July 2020. We shared $58,000 a month of passive income. All of that is a result of us borrowing against our cash values, investing in assets, taking those cash values and replenishing the loans against those cash values at the insurance company.

Using Life Insurance For Cash Value

One thing that you mentioned, for the readers, is you mentioned it acts a little bit like a house in the sense that if I put $100,000 in a policy and please correct me if I’m wrong, I can borrow $80,000, the insurance policy still shows it at $100,000. The insurance policy is still accruing its own interest or it’s growing based on $100,000 even though I pulled $80,000 out which I’m paying 5% interest on it. More than likely, if you’re going to invest in it, you should be making more than 5% of that investment. I think that’s one of the key features of this, even though you pull the money out. That basis is like your house, if you pull more equity out of your house, your house continues to grow based on its value. Insurance works that same way, correct?

You’re exactly right. That’s the unique part about this, which is that, ultimately, we win by not losing. If we can keep our money, we’ve talked about Dave Ramsey. He hates the Whole Life insurance, but what does he talk about? He gives this analogy of a debt snowball as we start paying off one small debt to a bigger debt support.

What we do within the banking concept is create a cash snowball. We get our cash constantly growing, getting bigger and bigger as it goes, and to your point, instead of withdrawing cash, which immediately ends the interest earnings on the money, the snowball is no longer able to be rolled down the hill. The way that we are doing this is by using the cash value as collateral, allowing our snowball to continue to grow and get bigger.

Now, we’re using the insurance company’s money to invest in different projects. To your point, yes, we’re typically borrowing somewhere around 5%, and we’re making investments in projects. Real estate investors have always understood the concept of leverage. If I borrow at five and I earn 10, my return is not 5%. My return is a 100% return on investment because I only had to give back the 5%. That was their money. I got a 100% return on investment.

When we get that, “It makes total sense to me. My job is not to limit how much cash I have access to, which is what Wall Street does. Wall Street gets us to put money in accounts that we can’t touch for 30 or 40 years. They want us to put it in this different Apple belt suit, 401(k)s, IRAs or 529 Plans. All these different things separate us from our cash for long periods while they earn lots of fees off of it. At the same time, now we’re not able to use that cash to start creating the same interest and fees for ourselves.

One of the things you mentioned, I never actually thought of this. Let’s say I had $500,000 of cash value in that policy. I think you mentioned, if I heard it right, I don’t even need to pull that money out. I could use that as collateral, like people use a stock portfolio and go to somebody and say, “I’ll use this as collateral. I’m not pulling the money out, but this is the security instrument to whatever it is you want to invest.” Is that correct as well?

I’ve been doing that for several years now. That’s a little more efficient process. That’s an advanced model. That’s the 3.0 model, but yes. When you can put your cash value up as collateral, that’s the safest instrument out there that I know of because the banks that you’re doing business with are decades old. Maybe some are a hundred years old.

These insurance companies we’re doing business with, some of them are 250 years old. We’re doing business with some of the oldest financial institutions in America. With that in mind, we’re putting our money in the safest position it can be. The risk to the insurance company is that you and I buy an insurance policy and we die tomorrow. Now, that’s not a risk, given the fact that they’re using the law of large numbers.

They know several people are going to die early. The rest are going to have this curve, but as we borrow against our cash value, if we go to them and borrow it, all they’re doing is reducing our death benefit. If you had $1 million death benefit, you took $500,000 of cash out. Now, those numbers wouldn’t be that way, but that’s their death benefit requirement to pay your beneficiaries, which would be $500,000.

They’re okay. They’re managing that liability of the death benefit. I think that when I got my arms around the fact that I was able to use my death benefit while living to control the decision-making in the process. What real estate investors and business owners that we deal with love about this concept, Chris, is that whenever they go, they go into the bank and get a loan and bring their financial statement.

With life insurance, you can use your death benefit while living to control your financial decisions. Leverage it for investment opportunities. Share on X

They have their credit pulled. They’re having to answer the hundred and thousand questions that come along with all of that. They’re set on some payment schedule to repay it. They love it when they call the insurance company and the insurance company asks them two questions. How much do you want and where do you want us to send it? That’s it. There’s no credit check. There’s no structured repayment, meaning I have unscheduled payments.

I can make a loan repayment if I want to. If I don’t, it taxes on the loan. That gives me ultimate flexibility. If I’m a business owner, if I’m using it for investing purposes, maybe a deal I’m doing is not going to cash flow for three months or two years. Then, I don’t have the pressure of having to make that repayment. I can repay it as my deal comes through. That allowed us to do a lot more investing over the years because of that.

Generational Wealth And Tax Considerations

I know a lot of people out there, including myself, have egos but I can tell you pretty much a guarantee is none of us are getting off this planet alive. If you have life insurance, then eventually, that check is going to have to get encashed. It’s my understanding. My father passed away several years ago. Life insurance is not taxed, correct? If I get a check cut, the policy, something happens to me, and my wife would get a check cut to her. That would I believe it’s excluded from any type of probate or anything like that, but also, it’s not taxed.

It is not subject to federal income tax. Depending on how it’s structured and how it’s owned, it could fall within the estate of the owner of the contract, but I think we’re like $11.5 million or something like that individual estate gift limits. For most people, they’re not following in that. To your point, most of the time, the money from the proceeds from the insurance company is not taxed.

It is one of the things that was interesting to me. Another reason why I’m real on the 401(k) is my CPA. Usually, CPAs are heavily pro 401(k)s and IRAs because they love the tax reduction that one year. The year in which you contribute it. I think they go blind to what’s going to happen in the future but one of the things that my CPA has said to me is, “Every single client that I ever had who died with a 401(k), I realized that that is the worst instrument to own when you die.”

I said, “I pretty much know what you’re saying, but tell me why.” He said, “Not only do the people who inherit the 401(k), but they also have to pay federal income tax as they get that money. Oftentimes, if the person who’s been putting money in there, the people that are inherited have been doing a good job, that’s 40% to 45% of it going out.” “If the person who owned 401(k) had a lot of money, then they’re going to pay their 40% or 50% in a state tax.”

Both of those things. He said that he’d seen scenarios where the beneficiaries got as little as 5% or 10% of the actual account balance because of a federal income tax and a state tax being taken out of a 401(k). I think that’s a real issue and as we are trying to build this thing of what we want and if we want to build generational wealth, we need to build a moat around our safest asset.

Back in the old days, they put this big moat around the castles to protect you from all the outsiders, the people that were coming and trying to rob and steal what you have built. There are so many different things that come at us, from creditors to governments, to market losses, and so on, that we need to build a moat around our safest asset, which is cash. It’s one of the many reasons why we love this tool. We believe it is a tool. It’s not something to be set on the shelf, and it will automatically give us all these benefits. Now, use it and the better we are using it, the more successful we are and the results.

I want to add that neither Russ nor I are a CPA, and we’re not providing legal tax or any type of investment advice. throwing that out there. I’m used to doing it on webinars. I always get a throw that catch-all now out there and stuff. One of the things you mentioned about this because sometimes it can be people who seem to have opinions on everything.

You mentioned that it’s a tool. The more you use it, the better you are at it. As with any investment strategy, you don’t want to have one tool in your toolbox. You want to have multiple tools in your toolbox, but this is an avenue that is very different. It’s unique and intriguing because it allows you to do things and grow wealth differently than you can in most other investments. I want to make that comment.

I agree with that.

Wealth Without Wall Street

As we wrap up this episode, Russ, how can people learn more about Wealth Without Wall Street? Where can they find you where can they get more information about you?

Go to WealthWithoutWallStreet.com/WealthSimplified. We want to make that easy for your readers. We’ve talked about a lot here. We’ve talked about the investor DNA. I know people want to know what their investor DNA is and what this passive income matrix looks like. You can get access to that. If you want to be one of those who read the book and get some of the very strategic steps that we put in there, there’s a link for that.

Also, sometimes people want to get on a call and ask questions about infinite banking, for instance, how do I join your community? Give a free colleague in there. That way, you can talk to one of our coaches. Ninety percent of our coaches, Chris, are our former clients. These are people who were doing what they loved and had a lot of success in it. However, they realized that it wasn’t their exact purpose.

They felt more called to help other people become financially free the same way they had become financially free. We have former CFOs, former pilots, people who were in the medical industry and a pastor. We have many people on our team now, and they are all former clients. You’ll be talking to one of them. A lot of times those conversations revolve around how did they get into this? What were those first steps? I know early on the question is, “What should I do first?” “What’s my right next thing?”

One of your people was a mortgage-backed securities guy who I met at the conference. I’m talking with him and he’s teaching me stuff. I’m sitting thinking, “This is awesome.” You do know more about my business and infinite banking as well. Russ, thanks for having you on this episode. All of this will be in the show notes as well. I recommend taking advantage of that investor’s DNA and understanding and looking into this. Russ and Joey have built a very large membership and group of people with a lot of education in this to try and help you grow your wealth without Wall Street. Russ, thanks for coming on this episode and thank you all for reading.

Thanks for having me.

 

Important Links

• Wealth Without Wall Street
• The E-Myth
• WealthWithoutWallStreet.com/WealthSimplified
• Wealth Without Wall Street, Three Steps to Freedom Through Passive Income
• Becoming Your Own Banker

 

About Russ Morgan

Wealth Without Wall Street’s Founder and Partner, Russ Morgan, is known as “The Idea Guy.” Russ began his professional career as an investment advisor in 2004 after graduating from Auburn University — a slight foray from 10-year-old Russ’ dream of becoming a professional baseball pitcher.

Russ started IBC in 2009, and eventually went on to found Wealth Without Wall Street in 2015. Russ’ mother was an enormous inspiration for him growing up. As a single mother with two young children, she took a rigorous, accelerated track through college while working multiple jobs, all with the goal of bettering her children’s lives.

When he’s not working, you can wave to Russ on a boat at the lake pulling his kids around on a tube. And on Sunday mornings, he’s probably rushing to church with his family … only 10 minutes late.