You’ve heard us say it before and we’ll say it again: Whoever controls your cash flow controls your life. Today, we’re going to talk about why it’s important to control the banking function in your life.
We’ve often said it’s important for you to be in control of the banking function in your life. Why is that important? Well, let’s take a look at the cast of characters in the play that we call banking.
- First, there’s a depositor. Nothing can happen without a depositor.
- Next is the borrower. The borrower pays for everything.
- And in the middle is the banker. The banker matches up depositors and borrowers and collects a fee in order to do it.
But keep in mind that the banker in the middle controls everything. And that’s why it’s crucial for you to be in control of the banking function in your life. The process of banking.
So let’s take a look at what it looks like when you’re not in control of the banking function in your life. There are two times you’re giving up control of that cash flow.
The first is when you’re paying cash for purchases, and the second is when you’re financing through a bank or credit company.
So let’s take a look at that first option of paying cash for a purchase.
- The first step is to save. Capitalize that bank account so you have enough money to afford the item you want to buy.
- Step number two is to “Drain the Tank”. And once you drain that tank and make that purchase, you have given up control of all of that money. And you’ll never see the interest you don’t earn.
Like Nelson Nash used to say: “You’ve abdicated your responsibility as a steward of that money.”
The second way you could give up control of your money is by making purchases and using the bank to finance those purchases.
With this method, you’re borrowing from the bank and paying them a fee for the privilege of using their money. And actually, it’s not their money. It’s the depositor’s money. Remember, they’re linking everyone up. With this option, you’re literally obligating a portion of your income to the bank. And as Nelson said, you’ve abdicated your responsibility as a steward of that future cash flow. So what’s the solution? How do you control the banking function in your life? Well, let’s talk about that.
If the recipe for being in the banking business is to have depositors and borrowers, then think of it, on a daily basis, what are you, your family, and your business? Aren’t you depositors and borrowers? So if the recipe is depositors and borrowers, you can literally be a bank. But how do you do it? That’s the process that you need to control, and that’s where we could help you.
So here’s what normal borrowing looks like. You deposit money in the bank and the bank matches you up with the borrower. The borrower takes the money and pays the bank back in increments. The bank collects a fee for that and then pays a tiny little bit to you, the depositor. Now, this is where the magic of banking happens after you make that first payment back to the bank. They’re able to turn that over and lend it out again. And when you make your second month’s payment, they lend that out again. And this is the velocity of banking.
You see the basis of any business – whether it’s a car dealership, whether it’s a McDonald’s franchise, or whether it’s banking – the cornerstone of that business is turning over its inventory. It doesn’t matter if your inventory is used or new automobiles, McDonald’s hamburgers, or money. It just so happens that in banking, their inventory is depositors’ money. So the quicker they could turn that over, the faster they’re able to earn more profit.
Let’s see what it looks like when you’re in control of the banking function. You see, you’re the depositor, you’re the bank, and you are the borrower. So let’s assume that your business wants to buy a vehicle and the vehicle is going to cost $20,000. You go to your reserve of money, a specially designed life insurance policy, and you loan it to the bank (you). And then you turn around and loan that money to your business. Now your business makes a payment back to the bank (you), and the bank (you) pays the depositor (you) a portion of that interest. The excess interest in between is the profit of the bank.
But the key to the infinite banking process is that you are still earning interest on your deposit because you collateralize a loan against your life insurance policy. Rule number one: Never Drain the Tank.
So again, this is where the magic of banking happens for you this time. Because you are the bank, you get to constantly loan money out to you and then recapitalize that bank. So you get to benefit from the velocity of banking. Keep in mind the profits of banking and the principle of velocity banking is going to happen with or without you being in control. The question is, do you want to be in control and earn the profits or do you want to abdicate that control to the bank and let them make the profits?
If you’d like to get started with a specially designed whole life insurance policy designed for cash accumulation so you can put this process to work for you and your family. Be sure to visit our website at tier1capital.com. Feel free to schedule your free strategy session or check out our free web course to learn in detail how we take people through this process.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.