“The Real Key to Creating Wealth”

Fortune Magazine published an article back in September of 1993 by Shawn Tully with this title:  The Real Key to Creating Wealth. In the article, he spoke about something called Economic Value Added (EVA), which turned the corporate world upside down.  Before EVA, corporations weren’t taking into consideration the cost of using their own money to finance purchases, operations, or expansions.  Once EVA became common knowledge it became easier to differentiate which companies were profitable and which weren’t, making investors’ ability to pick and choose where to invest more reliable.  EVA also helped CEOs and CFOs to better manage their companies.

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EVA, according to Shawn Tully, is the real key to creating wealth.  Respectable CEOs and CFOs in the corporate world now accept EVA as common knowledge. This common knowledge can greatly enhance your ability to create wealth in your own life as well.

So, what is EVA? And how can it help you to create wealth?

In simple terms, EVA is “the measure of the profitability of projects undertaken.”  Specifically EVA defines those profits realized after the cost of capital has been overcome or recovered.

Before Shawn Tully, the cost of capital was only considered when a corporation used borrowed funds. When a company used its own capital, it was assumed to have no cost. Tully clearly recognized that using internal capital carries an opportunity cost—one that can reduce or even eliminate profitability.

For example:

• A $10,000 loan over a 4-year period which has an interest rate of 5% compounding annually will end up costing you $1,280.47 in interest
• However, using your own $10,000, but losing the 4% rate of return you could have earned on that $10,000 over those same 4 years, would have forced you to lose $1,698.59 of interest

This means, if you kept earning 4% on your $10,000 and used someone else’s $10,000, paying them 5%, you will keep $418.12 of interest which you would have lost by using your own capital.

As $418.12 is 4.181% of $10,000, this 4.181% becomes an economic value added in your favor.

But here’s the problem:  Where do you find a place to keep your money where it can continually grow at a guaranteed pace and not be subject to decreasing returns, penalties or fees when it is leveraged?  The three places you can keep money that provide guarantees are:

1. Bank accounts backed by the FDIC, up to $250,000
2. S. Treasuries which are backed by the federal government, and
3. Certain life insurance contracts
   1. Guaranteed Annuity contracts, and
   2. Guaranteed whole life insurance contracts

Of all the places you can store your money that offer guarantees against loss, only whole life insurance contracts provide the unique combination of security, liquidity, and stable, long-term growth. Unlike other financial tools, high cash value whole life insurance allows you to access your money without the risk of decreasing returns, penalties, or hidden fees—making it an ideal vehicle for those looking to build lasting wealth and take control of the cost of capital in their lives.

It’s important to understand that not all whole life insurance contracts are created equal. The design of the policy plays a crucial role in determining its long-term value. For instance, I recently reviewed a policy illustration where the policyholder was paying 21.242% more in premiums than the guaranteed cash value after 40 years. Even more concerning, the death benefit was only 111% higher than the total premiums paid over that time.

By contrast, a policy designed here at McFie Insurance for the same individual—with identical starting premium payments—guaranteed a cash value that was 30.527% higher than the total premiums paid by year 40. The death benefit in our design was also 154.412% greater than the premiums paid. This difference shows the importance of working with professionals who understand how to properly structure whole life insurance for maximum efficiency and long-term wealth-building potential.

Call 702-660-7000 today and find out how you can stop losing money and start creating EVA in your life.  Having helped hundreds of others discover the real key to creating wealth, we are here to help you too.

Tomas P. McFie DC PhD

Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.