Debt and Interest Rates: The Fatal Connection

2024 saw interest expenses for the debt owed by the United State Government reach $1 trillion a year becoming an expense which surpassed the total amount of money spent on defense. Put in other words, for every $1 of gross domestic production of the United States, government debt increased by $2. Obviously, this path of indebtedness is unsustainable. If the creditors, who have invested in the United States debt ever demand higher interest rates, the inevitable will happen, the bubble will pop, and growth and profits will suffer.

Average household debt also reached record heights in 2024.

· Mortgage debt reached 12.59 trillion

· Credit card debt reached $1.17 trillion

· Auto loan debt reached $1.64 trillion

· Home Equity Lines of Credit debt reached $7 billion, and

· Debt delinquency rose to $627.9 billion

Putting this average household debt into perspective, means since the day Jesus Christ was born, 2024 years ago, $24,283,935 would have had to be added to the debt every single day, in order to equal the $17.94 trillion which is owed today. Again, if creditors ever demand higher interest rates on the money they have lent, this bubble too will pop, and household net worth will be transferred to the creditors.

The borrower is always subservient to the lender. This is why debt is so cumbersome and dangerous for those who don’t have the collateral to afford debt. Though debt itself is not a dirty four-letter word to be avoided at all costs, unsecured debt and non-performing debt, is a four-letter word to be avoided because it will financially bleed to death the one who carries it.

It is a good sign that the American people elected an administrator who understands debt and how it can be used wisely and how to eliminate unsecured and non-performing debt which has hindered our economic growth and gross domestic production. Hopefully, the congress will work with this administration to keep the national debt from destroying the United States fiscally.

Another good sign is when private American individuals and business owners, take responsibility for their own debt, stopping the transfer of their wealth to their creditors, and turning their unsecured non-performing debt into full secured and performing debt which is producing more money for themselves.

For example, Justin, who owed $10,956 on credit cards @ 24% with a minimum required payment of $328.68 per month would have taken 56 months (4 years and 8 months) to retire his credit card debt, and he would have ended up paying $18,369.93, almost 2x what he actually owed, in credit card debt.

In Justin’s case, he turned to his participating whole life policy, which his parents had started with $100 a month when Justin was just 2 years old. This participating whole life insurance policy had been designed like agents at McFie Insurance are trained to design participating whole life policies, to generate high cash values as fast as the IRS allows without creating a tax liability for the policyowner.

When Justin was 25, he had $33,137 of cash value in his participating whole life policy, even though his parents had stopped paying the premiums on this policy when Justin turned 18.

Instead of paying $328.68 each month to the credit card company and transferring $18,369.93 of money to his creditors, Justin submitted a $10,956 loan request to the life insurance company, which held his participating whole life insurance policy. The insurance company transferred $10,956 into Justin’s checking account within a few business days. This left $23,168 of cash value in his participating whole life insurance policy, that was not leveraged. This policy loan, unlike Justin’s credit card debt was fully secured with the paid-up insurance in Justin’s participating whole life policy. Furthermore, the $10,956 Justin borrowed did not prevent Justin from earning the compounding growth his policy cash values were guaranteed to generate.

Once his credit card was paid off, Justin started paying the life insurance company the $328.68/month his credit cards would have required him to pay. In 3 short years, and having paid only $11,844 (not $18,369.93), his policy loan was fully repaid. But even more importantly, Justin cash value had grown from $23,168 to $39,555, a growth of $16,387. Not only did Justin recover the $10,956 he paid in credit card debt, his policy generated an additional $5,431 ($16,387 - $10,956 = $5,431).

Had Justin only paid the minimum payment required toward his credit card debt over this same three years, $6,652.19 of the $9,978.29 he would have paid would have been profits (interest) for the credit card companies to keep. And he would still have a loan balance of $7,329.25 to pay off. As it is, Justin’s policy will continue to grow, even if Justin never pays another dime into this policy and compounding cash value can be used again and again.

Justin has been able to turn unsecured and nonperforming debt, which always transfers money from the debtor to the creditor, into fully secured, performing debt. This keeps more money in the pocket of the debtor and generates more money for them to control and manage rather than making their creditors richer.

We elect politicians to be the stewards of our national debt, and everyone knows what a terrible job they have done, plunging our country into debt and crippling our domestic production. This has put us, nationally, at the mercy of our creditors, namely the Federal Reserve Bank and foreign countries who have lent us money. Hopefully, with a more competent administration, 2025 will be a turning point for us all and maybe our national debt will be better managed and brought under control. Then America will be free to become more productive and economically sound.

But irrespective of what politicians do, or don’t do, 2025 is the best time to take control of any personally unsecured and non-performing debt so that you don’t keep transferring your wealth to others. Most debt reduction programs call for harsh financial sacrifice and rigid budgeting. But it doesn’t have to be that way. Justin is one of thousands of people who have used participating whole life insurance to stop the transfer of wealth from himself to his creditors. The process is simple, proven and safe. It can be accomplished with a little discipline, a dose of determination and an honest desire to become a better money manager. But the longer one waits the more wealth will be transferred from you to others.

If you, or someone you love or care for, has unsecured and/or non-performing debt, call us at McFie Insurance, 702-660-7000 we can help. There is no need to bleed to death financially. It all comes down to what you really want in life. Freedom or subservience to creditors?