Fund a recurring expense

A recurring expense is a cost that comes back: a car every few years, tuition, property taxes, or the annual premium. You save borrowing room in a category for that cost. When the bill arrives, you borrow against the category. While the loan is open, part of the paid-up additions (PUA) payment you already send is pointed at the loan instead. When the loan is paid off, that part goes back to PUA, and the category starts filling again for the next time.

The redirect does not pay the loan for you. Lowering the PUA payment frees the cash. You still send the loan payment to the insurance company, and you record that payment in IBC Tool.

The cycle uses three of the four actions you take at the insurance company. You take the loan, you change how much paid-up additions is billed with your premium, and you make the loan payment.

Steps

Set up the category

1. Open Categories and select Add Category. The screen is New Category.
2. Enter the Category Name, for example Car. Optional: enter a Target Amount, for example the price of the next car. The rule stops filling the category once it reaches that target.
3. Under Policies, make sure each policy that funds the category is highlighted. Growth from a policy you do not highlight will not flow into this category.
4. Select Recurring expense. This is what makes the category repay a loan from your PUA payment later. A normal category does not do that.
5. Under Funding Rule, select % of growth or Fixed amount. Do not select None (manual). You cannot record a loan against a recurring expense category that has no rule, because the loan payment is calculated from the rule.
6. Enter the Percentage or the Amount. See How much goes to the loan. That number is what sets the loan payment later, so it is worth getting it right now.
7. Select Create Category.

For more on how the rules share growth, see Choose a category funding rule.

Fund the category

Before you record a new loan, the category has to hold at least the loan amount. You are borrowing against borrowing room you have already set aside.

1. Open Categories.
2. Select Assign.
3. Enter the loan amount on the category.
4. Select Save.

Auto-distribute can also fund the category, but only as growth arrives. It assigns the share of unassigned growth that the rule sets, and no more. Use it to refill the category over time. Do not rely on it when you need the full loan amount today.

A loan you have already taken does not need this step. The money is already out. See Record a loan you already have.

Record the loan

1. Open Policies & Loans, select Actions, and then select Record Loan. The screen is Record Policy Loan.
2. Choose the Policy. Then choose the recurring expense category as the Budget Category.
3. Enter the Loan Amount and the Date Taken. Optional: enter a Purpose, so you can tell this loan from others on the same policy.
4. Find Return of Capital — Recurring Expense. For a new loan, if the category holds less than the loan amount, the section tells you how much more it needs, and Record Loan stays off. Fund the category first, then come back. The button is off on purpose, so you do not record a loan the category cannot cover.
5. Optional: next to Remind me on the, choose the day of the month you make the loan payment. IBC Tool then reminds you when that day is coming.
6. If you see I’ve already adjusted my PUA for this loan, turn it on only if you have already lowered the PUA payment at the insurance company. See I’ve already adjusted my PUA for this loan.
7. Check I’ve already taken this loan. IBC Tool turns it on when the Date Taken is on or before your latest snapshot that has a loan balance. Turn it off if you have not requested the loan yet, or the Agenda will not remind you to ask for it.
8. Select Record Loan.

With I’ve already taken this loan off, the Agenda shows Request a policy loan. Request the loan in the online portal, or call the insurance company and ask them to make it. Then mark that item done.

Repay the loan

The redirect tells you the amount. It does not move the money.

1. Lower your PUA payment, for each premium period, by the redirect for that period. Do this in the online portal, or call the insurance company and ask them to change it. The Agenda item Adjust … PUA payment gives the new amount the insurance company should collect. See Use the Agenda.
2. Each month, send the insurance company a loan payment equal to the monthly redirect.
3. Record that payment in IBC Tool. See Pay a loan.

Skip a step and the records drift. If you lower the PUA payment and forget to send the loan payment, the insurance company is still charging interest on the old balance. If you send the loan payment and forget to record it, IBC Tool still shows the old balance.

How much goes to the loan

While the loan is open, IBC Tool takes part of your PUA payment and treats it as the loan payment. That part is the redirect. The category’s funding rule sets the size of it.

Example: a fixed amount of $1,200 on an annual policy is a monthly redirect of $100. Your annual PUA payment goes down by $1,200, and you pay $100 on the loan each month. The $1,200 is not the monthly payment.

Record Policy Loan shows the amount for your premium period. On a quarterly or annual policy, it also shows the monthly redirect, for example $1,200/yr ($100/mo). The monthly loan payment is the monthly redirect, $100 in this example. The Agenda item Adjust … PUA payment is a different number. It is the new paid-up additions bill the insurance company should collect.

A percent rule needs a Current PUA Payment on the policy. Without it, there is no PUA payment to take a percent of. Record Policy Loan then shows the category as a recurring expense with no funding rule, and you cannot record the loan. Add the Current PUA Payment on the policy first, then record the loan.

I’ve already adjusted my PUA for this loan

This switch shows when no other loan in the category is open, because this loan is the one that starts the redirect. A second loan does not start a second redirect, so it does not ask again.

Turn the switch on when you have already lowered the PUA payment at the insurance company. The Agenda then does not add an Adjust … PUA payment item for this loan.

Leave it off when you have not changed the payment yet. The Agenda shows the item, with the new amount to give the insurance company.

While the loan is open

• Only one redirect runs at a time in a category. A second loan in the same category does not add a second redirect. It waits behind the first loan, and it picks up the redirect when the first loan is paid off.
• Auto-distribute skips the category. The rule is already going to the loan payment, so it does not also drop new growth into the category.
• If you change the funding rule, the redirect changes with it. Saving can add an Adjust … PUA payment item with the new amount, unless you turn on I’ve already adjusted this with my insurance company. See Use the Agenda.
• To fund a second new loan in the category before the first is paid off, select Assign on the Categories page and assign the money yourself.
• A recurring expense loan cannot take an advance. If you need more money, record a separate loan.

When the loan is paid off

• The redirect stops. If another loan in the category is still open, the redirect moves to that loan. When that loan is on the same policy, your PUA payment at the insurance company does not change yet. When it is on another policy, the Agenda shows an Adjust … PUA payment item for each policy: one raises the payment on this policy, and the other lowers it on the policy of the next loan.
• If no other loan in the category is open, the Agenda shows Adjust … PUA payment again, this time with the amount you pay when this redirect is gone. Raise the payment in the online portal, or call the insurance company and ask them to change it. Then select Mark done.
• If you never marked the first Adjust … PUA payment item done, IBC Tool removes it. The old instruction would tell you to lower a payment you now need to raise. If your payment at the insurance company is already the right amount, no new item shows. If another redirect on the policy changed the amount, a new item shows the new amount.
• Auto-distribute includes the category again. Each time you use it, the rule refills the category for the next cost.

Agenda items in one cycle

The item names your payment period, for example Adjust annual PUA payment.