Consumers’ World

Mastering Your Money With The Infinite Banking Concept

Money is the master of our lives, or at least, that’s what it feels like when you’re looking into an abyss of debt, loans, and financial responsibilities. When it comes to getting and staying in control of our financial situations, it might seem overwhelming when you have no idea where to start or even what to look for in creating a better, more rewarding strategy of using, saving, and creating money.

In this blog, we’ll talk about how you’re using your money, how banks use it to make more (for themselves), and how you can replicate their model of money flow to make sure you’re generating wealth for as long as you live. We’ll talk about the infinite banking concept, how it works, and how you can apply it in your own, everyday transactions and money strategies.

Ready to get started? Let’s dive in.

What Does Becoming Financially Free Require?

It Takes Less Than You Might Think

When we think of what it means to be or start becoming financially free, we often imagine luxurious cars, lavish holidays, and an endless flow of cold, hard cash. However, financial freedom looks different depending on who you ask.

For some, it means having the security to enjoy their hobbies and passions without sacrificing their quality of life. For others, freedom simply means learning how to control your finances before they control you through impulsive spending and crushing debt.

The one common fact about financial freedom, no matter who you ask, is that it’s possible to unlock it – and the infinite banking concept is the key.

First Things First…

You Need to Understand It’s Not About What You Buy or Don’t Buy

When you think of saving, you might think of the things that you buy. Instead, you should be thinking of how you’re paying for the things that you buy. In most cases, you’re either paying or losing interest.

Take financing a business for example. When you finance a business, you’ll incur interest that’s paid to the financial institution or lender you’re working with. When you pay in cash, you’ll never see the money that you don’t earn. You’ll essentially keep the interest.

With that in mind, it’s important to understand that the secret to how to control your finances is to control your cash flow. You need to find the most effective, efficient way to earn compound interest on a regular, continuous basis, without halting the purchases that you want or need to make.

Now that you have a basic overview of what you need to know about interest and payments, let’s talk about how banks make money.

How Do Banks Make Money?

They Do It by Using Yours

Becoming financially free means thinking like a bank. No, not loaning out money and hoping you’ll get paid back. We mean keeping your money flowing every single day. To understand the infinite banking concept, you need to understand how a bank makes money in the first place.

The very first step to making money as a bank is starting your bank. This is done by applying for a charter and finding people who want to start depositing money. A new bank might charge higher interest than their competitors at first. Then, this new bank needs to find people who need money.

Starting The Flow and Keeping It Going Forever

Using Depositors and Borrowers in A Perfect Balance

Once they’ve identified a network of depositors and borrowers, the real work begins. They offer sky-high interest rates on savings accounts to tempt you and others like you to start saving your money with them. However, they won’t be losing out by offering you these “high” interest rates. Once they have your money, they’ll start lending it to qualified borrowers.

These borrowers will then be responsible for paying their money back at an interest rate much higher than what you’re getting, which means that Mr. Bank can pay you your interest and pocket the difference. Easy, right?

As you can see, when you’re a bank, “your” money never stays in one place for very long. It’s lent out and stays flowing so that it can grow forever.

How To Apply the Infinite Banking Concept in Your Own Life

Without Spending Years Learning How to Do It

It might seem strange to compare making money as a bank to becoming financially free as a parent, working professional, and/or recent graduate. While you won’t be able to lend out billions of dollars and reap the reward of high interest repayments, you can apply the principle of keeping your money flowing with the right life insurance, savings vehicles, and processes. By owning this banking process, you’ll be able to learn not only how to control your finances, but also how to use them to keep your wealth growing your entire life.

What Does Tier 1 Capital Do?

We Help People Just Like You

Tier 1 Capital provides our valued clients with the permanent life insurance they need to accumulate cash indefinitely. We connect you to a savings vehicle or pool of cash that you own and control.

We provide our clients with a range of financial strategies that cut down the risk and ramp up the accessibility of their money while keeping them in complete control. Our mission is to empower our clients with the strategies and insight they need to take conscious action regarding their finances and their overall financial future. We are committed to keeping you informed, educated, and up-to-date with the best financial practices and services in the industry.

We have worked with families and small business owners of all walks of life, and now, we want to work with you. Reach out to our team now here at Tier 1 Capital  and book a free strategy call today if you’d like to learn more. We’ll walk you through everything you need to know as part of a complimentary strategy session with one of our certified and professional team members.

 

Qualified Plans: The Hidden Truth

These are not tax savings plans but
rather tax deferred savings plans. The government did not say that you don’t have to pay taxes…

 

For many people, the term 401k is synonymous with retirement preparation, and sometimes represents the full extent of
their preparedness. Such accounts are often included as part of a benefits package provided by employers, and chances
are if you have one, most of your retirement savings are being deposited into this account. Given that it can play such a
prominent role in our financial picture, it is imperative that you fully understand exactly how these plans work.

So what do Qualified Plans do exactly?

Most people will be familiar with the fact that they defer taxes, which is true. But this term “defer” can often lead to a
misunderstanding about what is actually happening. Some people fall victim to the misconception that “deferred” taxes are
taxes they are “saving” because the taxes do not have to be paid; which is not true. These are not tax savings plans but
rather tax deferred savings plans. The government did not say that you don’t have to pay taxes on the dollars in your
Qualified Plan; they said that you don’t have to pay the taxes now.

If not now, then when?

Well, later obviously. The key difference between now and later though is relative to your tax
bracket. What bracket you are in now, and what bracket you will be in when you decide to take the money out of the
account. If you defer the tax and you are in a higher bracket later than you are in today your share of the account will be
less. If you are in a lower bracket when you take the money than when you put it in you will get more. The IRS is not
going to ask you what tax bracket you were in the day you made the contribution to your account. Their only concern is
going to be what tax bracket are you in at the time of withdrawal. Because this is true you will need to make an informed
decision about which option is best for you.

The Check Story

“Let’s assume that you call me one day and want to borrow $10,000. I hand you the check, but before you take it you are
going to ask me two questions. The first is how much interest am I going to charge you, and the second is when do you
have to pay it back?

Suppose I said to you, I am doing fine right now and do not need the money, but there will come a day when I need it, and
when I know how much I need we can figure out how much interest I need to charge you to get how much I need.”
Would you cash that check? Probably not, but you are standing in line to do exactly that with the federal government in
your qualified plan. They did not say that you don’t owe the tax; they said you can pay us later. At what rate? Now that is
a good question.

Understand that Qualified Plans do two things:

1. They defer the tax, AND
2. They defer the tax calculation

Ultimately, the impact these plans can have on your finances either positively or negatively, depends on a number of
factors. The first and most fundamental of these is your understanding of the rules of the game, and secondarily the
strategy you use to play the game.

Tic-Tac-Toe

You may not remember the first time you played tic-tac-toe, but you can probably guess who won. It was likely the person
who showed you how to play the game. The game has only a few simple rules, one is the X, the other O, three in a row
wins. As we first learned this game as children, we lost routinely until we learned the strategy of the game. If you have
dollars in a Qualified Plan, you are already playing the game. As an advisor, my job is is helping clients employ a winning
strategy by better understanding the rules of the game.

Opportunity Cost vs. Rate of Return

 

“That car that we pay $20,000 for, is really costing us about $150,000.”

 

For the past 35 years, I’ve learned that there are only five ways that you could accumulate wealth in America. Number one, you can be born into it. Number two, you could marry into it. Number three, you can purchase a business and have your employees create wealth for you. Number four, you can purchase real estate and have your tenants create wealth for you. Or number five, you can focus on saving more of your money.

Notice, nowhere in there did we say you need to earn a higher rate of return on your money to become wealthy. You see, traditional financial planning focuses on rate of return. Oftentimes people go from one advisor to the next advisor, all with the promise of a rate of return that’s better than the last. We believe that there’s more opportunity in making your money more efficient than there is in picking the winners.

For every dollar that goes through our hands, we could only make two choices with it. We can either save it or spend it. Saved dollars will grow over time, spent dollars are gone forever. Now the potential future value of spent dollars is called opportunity cost. We will never see the money that we don’t earn after we spend our money, but let’s take a look at an example to see just what an impact opportunity costs can have on our money.

Today we’re going to look at buying your first car. You graduate college and you get your first job. Now you want to buy a car. Let’s say it’s a $20,000 car. That $20,000 could have earned 5%. We’re going to look at this over the next 40 years. Well, focusing on opportunity costs, we think the car cost is $20,000. Nothing could be further from the truth. The fact of the matter is that car costs us $20,000 plus what we could have earned on our money for 40 years, that’s an additional $127,168. That car that we pay $20,000 for is really costing us about $150,000. That is opportunity cost.

Keep in mind. This is only looking at the cost of one car. The average person is going to purchase 12 cars over their lifetime. The point is, it’s not what you buy, it’s how you pay for it. Making your money as efficient as possible and losing as little opportunity cost as possible is what will make you financially free. There’s no certainty in trying to risk your way to financial independence.

 

 

How do I pay off my debt?

 

“Our mission as a company is to show people how to regain control of their money.”

 

The problem with getting in the debt cycle is that once you take on that first debt, it becomes difficult to save your income. In the case of an emergency, you’re forced to take on more debt and tie up even more of your income and make it even harder to save. In his bestselling book “Rich dad, poor dad,” Robert Kiyosaki’s foundational principle is to pay yourself first. But if you’re working that hard to pay off your debt, how in the world are you going to be able to pay yourself first? 

So here are some of the problems with consumer debt. First, it places an obligation on your future earnings. You lose the capital to purchases and the financing costs forever. As in, you’re giving up opportunity costs. When you make these purchases, you become a debtor to the creditor. Most importantly, you’re losing control. 

Our mission as a company is to show people how to regain control of their money. With this simple concept, showing them how to regain control of the financing function in their lives. We could make significant progress in showing you how to regain control of not only your money, but your financial future. 

If there’s only one thing you take out of this video, please let it be that “ It’s not what you buy, It’s how you pay for it that really matters.”  Because let’s face it,  every purchase we make is financed. You could either be a debtor, a saver, or wealth creator. Let’s go over the differences. 

This is what a debtor looks like. They have no money. So when they have to buy something, they have to finance it. They have no choice. They dig a hole and then they fill it up and then they dig another hole and they fill that up too. But notice, they never get above the financial line of zero. So what a lot of people do, is they save money in order to spend. They save, save, save, and then when it’s time to buy something, wipe out their savings in order to make the purchase. They keep doing this again and again. Over time they don’t stay above the financial line of zero. 

Then there’s the wealth creator. This is what we help our clients to become. They save as a matter of course. Then, when it’s time to make a purchase, they borrow against their money. They use other people’s money to make their money more efficient, but notice they never interrupt the compounding of interest on their money. Their money is always working for them and they are no longer working for money. That’s the power of becoming a wealth creator and that’s the power of controlling the finance function in your life. 

 

How do I protect my money from inflation?

“As long as you keep your money in the whole life insurance policy, your money’s going to grow on a tax deferred basis.”

 

 

Inflation is a rise in prices of goods and services. Inflation reduces the purchasing power of our dollars. The problem is, the longer we hold onto our money, the less it can buy for us. Here’s an example. If you were to go into your backyard and dig a hole and bury $1,000 and leave it there for 10 years and after 10 years you go back and dig it up, what will you have? Well, it’ll be something that looks like a thousand dollars, but at 3% inflation over those 10 years, that $1,000 will actually only have the purchasing power of $744. The problem is not only will you have lost $256 of purchasing power, but you will have lost 10 years of time that you can never recapture. The government is destroying the purchasing power of our dollars every time they print money. Do you think our government will need more money in the future? If our government needs more money, there’s only two ways they can get that money. Number one is taxes. Number two is they can print more money.

There are six ways that whole life insurance can help protect your money against the effects of inflation. The first way is buying dollars for future delivery for pennies. Which means the premium you’re paying is pennies compared to the dollars you’re buying in a death benefit. What better way to protect your net worth than to buy discounted dollars for future delivery?

The second way is that your premium stays the same, but because of inflation over time, it’ll feel like less. For example, if you have a thousand-dollar premium at 3% inflation and 10 years, it’s only going to feel like $744. In this instance, you have inflation working for you rather than against you.

The third way that whole life insurance can help protect your money against the effects of inflation is what we refer to as multiple duty dollars. A lot of times clients will ask us, “Hey, I want to start saving, but I have to pay down my debt first.” We actually show them how to start saving today and how to pay their debt off quicker. How we do that is through whole life insurance. We take $1 that was just going to perform debt reduction and use it to reduce debt, to create an asset, to create a death benefit, to create a disability benefit, to create a long-term care benefit and provide retirement supplement. We took $1, that was previously doing one job, and got it to perform the job of 6 multiple duty dollars.

The fourth way whole life insurance can protect against inflation is dividends. Although dividends aren’t guaranteed, dividends typically increase as the policy matures. That’s an addition to the guaranteed growth within the policy. As interest rates rise in the market, the dividends in the policy typically increase. All other safe money products, as interest rates rise, the value of the product decreases because of the inverse relationship between interest rates and price.

The fifth way that whole life insurance can protect your money against inflation is through collateralization.  The loan feature, your loan against a life insurance policy, is actually a collateralized loan against your cash value. So literally your money could be in two places at once because you’re borrowing against your cash value and getting a separate loan from the insurance company. Our clients have found that this can help them to take advantage of tremendous opportunities that are created when the market crashes because they can borrow against their cash value. When the market is down, they can buy into the market and then sell when the market rises. They can then put the money back into their policy and then use the money the profits gained from that transaction to supplement their income or to buy another policy. Our clients have found this to be a tremendous tool to show them how to take advantage of downturns in the market rather than become victims of market volatility.

The sixth way that whole life insurance can help protect against inflation is taxes. As long as you keep your money in the whole life insurance policy, your money’s going to grow on a tax deferred basis. Additionally, you’re able to access your cash on a tax-favored basis. This is a huge advantage over other financial products.

In summary, life insurance can help protect your money against inflation by reducing or eliminating taxation. It also makes your money more efficient, think multiple duty dollars. Thus putting you in a position to take advantage of market volatility, rather than becoming a victim of market volatility.

 

 

How do I get the ultimate return on my investment?

 

“We’re going to show you why it’s not what you buy, but it’s how you pay for it and how using leverage can actually get you a higher rate of return on your money.”

 

 

Have you ever wondered how you can get the most out of your real estate investment? Today we will be using an example about how to leverage your money for real estate investing but know that this concept can be applied to any type of investment. So, keep that in mind as we go through todays example.

We’re going to show you how using the cash value in your life insurance can maximize the rate of return on your real estate investment. We have clients who invest in real estate who ask us, “ Why should we put money in a life insurance policy and earn a measly 4% when we can put money in a real estate deal and earn an infinite rate of return?”

We’re going to look at a real estate example, and we’re going to show you three different ways of acquiring the property; paying cash, financing with a traditional mortgage, and leveraging your life insurance cash value. We’re also going to show you how leveraging can actually get you the ultimate rate of return on your investment.

Here we have a $250,000 property and we are choosing to pay cash. After closing costs, we have $255,000 of our own money in the deal. We have no costs for financing and after taxes, insurance, and maintenance, we ended up with a gross rental income of $2,500 per month. We’re going to sell the property in 60 months and we’re going to assume that the value of the property appreciates at 2% per year over that ownership period. When we sell the property, five years later, the value of the property is $276,270. After we calculate everything that we received, we ended up with 13.08% as a rate of return on the real estate investment.

Now you may be wondering if the property is only appreciating at 2%, how did we get a 13.08% rate of return? Again, we have to evaluate the fact that we received $2,500 per month for 60 months. When you calculate that income versus the money we had in the deal, that’s how we can calculate a 13.08% rate of return. That’s a pretty good rate of return, but it can be so much better if we apply the laws of leverage to the purchase of the property.

Now, most people think that because we’re saving so much of interest by not financing, by not using a traditional mortgage, that this rate of return is as good as it gets. We’re going to show you why it’s not what you buy, but it’s how you pay for it and how using leverage can actually get you a higher rate of return on your money.

Next, let’s look at the classic 80/20 finance. We’re going to finance 80% of the purchase price, put 20% down and pay closing costs out of pocket. It’s the same deal. It’s the same building, same purchase price, and the same closing costs. The only thing we’re changing is the fact that we’re using other people’s money.We’re going to borrow 80%, $200,000 at 5% for 20 years. That means we have a mortgage that we didn’t have by paying cash and the mortgage is $1,320 per month. So how are we going to pay for that mortgage? We’re going to pay for it from the rental income, the $2,500 per month.

We’re going to evaluate this over the same 60-month period. We’re going to sell the property again in five years at 2% annual appreciation. We only have $55,000 of our own money in the deal. We’re also going to get the tax deduction because a portion of the mortgage is interest. So now we have less monthly income, $1180 versus $2,500, but we also have less of our money in the deal. When we sell the property, the fact that we have a mortgage doesn’t change the selling price of the building, it’s still $276,270. The only thing that changes is, when we sell the building, we have to pay off the mortgage. Our net cash out is lower. It’s $109,380.

Now you may be thinking with a lower cash out and a lower monthly income, it’s really surprising that the rate of return is actually higher when you finance, right? But you need to consider that we only have $55,000 in this deal. Our real estate investing clients, they understand leverage, and they would never pay cash for a building. If they have $255,000, they can buy five buildings instead of one by not paying cash. They understand leverage and that is the beauty of using other people’s money. Would you rather earn 34.37% on one property or on five?

Let’s take a look at the final scenario where we finance 80%, but we borrow against our life insurance policy for that 20% down payment. The only expense we have out of pocket is the closing cost of $5,000. We have the same property, $250,000 with the same closing costs of $5,000. But this time we’re going to mortgage the $200,000, just like in the last example. We have a 5% loan for 20 years and we have the same mortgage payment. The difference is we’re going to take $50,000 against our life insurance policy. We’re also going to finance that at 5% for 20 years. Our total mortgage payment is actually going to be a little higher and our monthly cashflow is going to be a little lower.

When we sell the property for $276,270, after five years, our net cash out is $67,633 because we have to pay off the bank mortgage and the loan we took against our life insurance. But remember, we only had $5,000 of our own money in the deal. Looking at it, this is the ultimate leverage. When we calculate all the income that we received, plus the appreciation of the property, we end up with a rate of return of 245.87%. Now, you might be thinking that that’s a great rate of return and it surely is. But actually, this scenario is so much better because what we didn’t tell you is the fact that when we borrowed against our life insurance, our money was still continuing to earn uninterrupted compounding of interest at the rate of 4%. Additionally, we have a death benefit. So, we have so much more than we’re actually showing here, that we couldn’t and didn’t calculate into the rate of return.

This is why it’s not what you buy, but it’s how you pay for it that really matters. Leveraging can really increase your rate of return. We really illustrated that with these examples today, you know, conventional wisdom would have you believe that the less you pay the banks and finance companies and fees and interest charges, the greater rate of return you can earn. Today’s example really underscores the importance of having as little of your cash tied up in the deal as possible and how leveraging other people’s money can maximize the rate of return that you could earn on your money. Not to mention you still have control over all that money that isn’t tied up in the deal.

 

How do banks operate?- Implementing the infinite banking concept

Have you ever found yourself wondering how banks make money? Do you want to learn how to regain control of your money? In this video we break down the process behind running a bank, and then we break down how you can keep your money flowing! While this process isn’t easy, we are here to guide you through the process. The four rules we have learned to live by are as following. 1. Always think long-term. 2. Don’t be afraid to capitalize. 3. Don’t steal the peas. 4. Don’t deal with bank if you don’t have to.

Make no mistake, although we park our money at banks, they don’t let it sit there.”

 

Are you thinking about implementing the infinite banking concept to regain control of your money? Well, it’s important to know how commercial banks operate and make money so you could duplicate their process using the infinite banking concept. The first thing banks need to do is, file for a charter. Once the charter is approved, then they have to capitalize the bank. But, understand banks don’t lend you their money. The next step is for them to go and solicit deposits. They usually charge higher interest rates than the neighboring banks in the community, but that’s only step one. Then, step two is to identify borrowers. You see, in order for a bank to make money, they need to have depositors and borrowers.

The third step is for the bank to solicit depositors and how do they do that? They generally do that by enticing you, by offering a higher interest rate on savings accounts and CDs to get you to deposit money with them. Most people are depositors and borrowers from the bank and understand banks can’t make money if they only have depositors and they can’t lend money if they only have borrowers, so they need both depositors and borrowers.

The bottom line is, banks make sure that money is always flowing. The same laws apply in nature. Water has to flow or else it stagnates, and you can’t drink it. Water has to flow through the body or else you die. Blood has to flow through the body, or you die. The same laws apply to money. It needs to continuously flow. Just think of all the ways that we make our money stagnate. We put money in retirement accounts, and we don’t touch it for 30 or 40 years. We pay off our house early and we have this huge amount of our wealth tied up in real estate that we really can’t access without getting permission.

Make no mistake, although we park our money at banks, they don’t let it sit there. They follow the same laws as nature, and they keep that money flowing. They keep that money flowing by using a basic business concept called, inventory turnover. Every business owner knows that, the faster they turn over their inventory, the more profits they make. It’s the same thing for a banking model. The only difference is their inventory is depositors’ money. So, let’s take a look at a real-life practical example of how banks make money. In 2016, Bank of America had $860 billion worth of deposits. Based upon that, they paid $1.9 billion to the depositors. Wow, that’s a lot of money to pay the depositor, but it’s nothing compared to what they earned in interest from borrowers. They earned $44.8 billion from things like mortgages, home equity, loans, fees, business and personal loans. That’s over $42 billion more than they paid out in interest to depositors. Bank of America had no skin in the game. They loaned borrowers, depositors’ money. The only risk they had was to pay the depositors $1.9 billion. By keeping money flowing, they were able to generate $44.8 billion in revenue.That’s why it’s important to keep money flowing, and that’s why it’s important to own the banking process.

Now that we know the benefits of owning the banking function in your life, let’s get started and look at the rules. My mentor Nelson Nash had four basic rules. Number one, think long-term. Number two, don’t be afraid to capitalize. Number three, don’t steal the piece. What did he mean by that? Basically, what he meant was if the insurance company is charging you interest, pay yourself more than that amount of interest. Your money is worth more than Bank of America’s or anybody else’s. The fourth rule was, don’t deal with banks if you don’t have to.

Now that we understand how banks operate and the basic rules for the infinite banking concept, let’s take a look at how we help our clients regain control of their money using the infinite banking concept. The first step is to identify where they’re actually giving up control of their money. We look at places like their mortgages, taxes, how they’re funding retirement plans, how they plan on funding college tuition for their children, and how they’re funding major capital purchases. Step two is really easy. They just agree to stop doing those things where they’re giving up control of their money so that they can go to step three. Which is to capitalize their policy, capitalize their bank. This leads them to step four, where they’re actually borrowing against their own cash value and paying interest back to an entity that they own and control so that they can control the process and make the profits.

How to choose an insurance company for the Infinite Banking Concept.

In this video we break down the important things to consider when choosing an insurance company for the infinite banking concept.

1.) Choose the right agent

2.) The process is much more important than the product

3.) Make sure the company you choose is a mutual insurance company

4.) The company should have a proven track record of paying dividends and sharing profits with policy holders

There are hundreds of thousands of insurance agents out there, but only about 200 are licensed IBC practitioners with the Nelson Nash Institute. “

 

Are you thinking about getting an IBC policy but aren’t sure where to begin? The number one criterion when choosing the right insurance company for the infinite banking concept is to choose the right agent. There are hundreds of thousands of insurance agents out there, but only about 200 are licensed IBC practitioners with the Nelson Nash Institute.

As a licensed practitioner, we’re not only trained to set up and structure a policy, but most importantly, to guide you on how to use your policy throughout your life. It’s important to find someone who’s not only knowledgeable but who’s also implementing this in their own financial life. The last thing you want is someone who’s pitching you a policy but doesn’t believe in the concept enough to put their own skin in the game. Ultimately, your success or failure in any given methodology is going to come down to your execution.

The process is much more important than the product. The next criterion is to make sure you’re dealing with a mutual insurance company. Mutual insurance companies were formed for the benefit of the policy holders. All profits that the insurance company makes are funneled back to the policy holder in the form of tax-free dividends. In contrast, a stock owned insurance company funnels their profits back to their shareholders because they’re the owners of the company.

So, a stock owned insurance company is there for the benefit of the owners of the company, the shareholders. It’s similar to a bank. A bank is there for the benefit of the owners of the bank, the shareholders of the bank. You see, if you want to become your own banker, it’s important not only to control the process of the banking, but also to benefit from the profits of the banking, which can only happen with a mutual insurance company.

The next criterion you want to look for when choosing an insurance company? Does it have a proven track record of paying dividends and sharing profits with policy owners? The companies we choose for our clients have been paying dividends for more than 120 consecutive years. That’s World Wars, depressions, recessions, gas crisis’s, you name it. They’ve been through it all.

In conclusion, these are the criteria we use when choosing an insurance company for the infinite banking concept, but again, the most important thing is choosing the right agent for you. You want somebody who’s going to take the time to understand your situation and then set up a plan that will help you to maximize your benefits from the plan according to your situation.

 

Why use whole life insurance for the infinite banking concept?

If someone can get your money, is it really yours? In today’s video we compiled a list of six reasons why you should use whole life insurance for the infinite banking concept.
1. Control
2. Safety
3. Guaranteed growth
4. Collateral opportunities
5. Tax deferred growth
6. Asset protection

Life insurance is actually designed to have more cash tomorrow than it does today. “

 

 

Have you ever wondered why people use whole life insurance for the infinite banking concept? The first reason is, control. Let’s face it, you can’t regain control unless you’re actually in control. Life insurance is a unilateral contract. What does that mean? Well one party, the insurance company, has a binding obligation. They have to guarantee the cash value, the death benefit, and any other benefits. The other party, the policy owner, has very few promises, which is basically to pay the premium. Once the policy is approved and put into effect, the insurance company is working for you. That is control.

Number two is safety, life insurance companies reserve 95 cents of every dollar that’s deposited and in contrast, banks only reserved 2 cents for every dollar that’s deposited. Based on that, where do you think your money is safer? During the great depression, over 9,000 banks in this country failed. In contrast, less than one half of 1% of all life insurance company assets were impaired. That’s a big deal because people who owned life insurance contracts during that time were not only able to access their cash value to weather the storm, but they were also able to access it to take advantage of opportunities that arose during that time.

One of the best examples of this is JC penny, the American retailer. He had over 1400 stores before the great depression and he actually borrowed against his life insurance to keep his business open and weather that storm. This takes us to our third reason. Guaranteed growth. Life insurance is actually designed to have more cash tomorrow than it does today. There’s no chance for market loss because your growth is guaranteed. Your money is allowed to continuously compound. This takes us to our fourth reason. Collateral opportunities. What does that mean? Collateralization is important because it allows you to access your money without interrupting compounding. It’s like your money could be in two places at one time.

Collateralization means that your money is always in your policy and if you want to access it, the insurance company gives you a separate loan and puts a lien against your money, your cash value. When the loan is paid off, the lien is released, and your money is exactly where it would have been had you not borrowed. In essence, your money has been able to achieve continuously uninterrupted compounding.

Number five is, tax deferred growth. Money grows in your policy on a tax deferred basis. Keep in mind that doesn’t mean that it grows tax free, but you can access it on a tax favored basis. The point is you can’t accumulate wealth in a taxable environment. Let me give you an example. If you start off with a dollar and that dollar doubles every year for 20 consecutive years, meaning that you earn 100% interest each and every year for 20 consecutive years, at the end of 20 years, your dollar would’ve grown to $1,048,576 however, you didn’t pay tax on that money. If you had to pay tax in a 25% tax bracket, how much do you think you would be left with after tax?

Well, 25% of 1 million is 250,000 so I think we’d be left with about $750,000.
The reality is you would end up with $72,571, but what happened to the rest of the money? Well, it was never there. Your money was never allowed to double. You were never allowed to earn 100% interest because you had to pay taxes each and every year along the way. That’s why you end up with less money in a taxable environment.

Number six is, asset protection. Life insurance is protected from creditors, predators, and legislators. Life insurance is regulated by the 50 States. Each state has different levels of asset protection. Check with your state to see how much protection you have on your policies, but let’s face it, if somebody can get your money, is it really yours?

Let’s recap the six reasons why we use whole life for infinite banking. Number one, control; two, safety; three, guaranteed growth; four, collateral opportunities; Five, tax deferred growth and six, is asset protection. My mentor, Nelson Nash, author of the bestselling book Becoming Your Own Banker, said it best. Wealth has to reside somewhere. What better place than a whole life insurance policy? A free contract between free people!

How to navigate the current economic downturn.

 

Were you prepared for an economic downturn? Given the current situation, many people were not financially prepared for the effects of Covid-19. Whether you’ve been laid off or are now working from home, most people are struggling financially. You may have a few options when it comes to accessing some of your invested money. You can take money out of your retirement plan, you could sell your shares in the market, you could get a 401K loan, or you can access some of your home equity. This video will go over all of the implications these options have and what you could do to prepare for future economic downturns.

 

“I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm.”

 

Today we’re in the midst of the covid-19 pandemic. Because of the pandemic, there are a lot of financial and economic uncertainty in the world and today we’re going to talk about how you could possibly position yourself to take advantage of this financial opportunity and come out better on the other end.

First, we’re going to discuss what you may be experiencing out there in your economic world.If you’re an employee, you may have been laid off or working from home during the pandemic. Either way, these changes cause stress and whether or not you’re still earning income, your bills are still accumulating and if you’re a business owner, your overhead continues. Plus, you have the added stress of knowing that the livelihood of your employees and their families are in your hands. So, at this point, most people, whether you own a business or whether you’re an employee, you’re stressed out trying to think about where you can raise some money to get through this financial crisis,
which brings us to our next point. Where do you have money stored that you could have access to it during this tough financial time?

Let’s face it, most people had money invested in the market and for 11 years that was the place to be and it worked until it didn’t. Well, now the market’s down quite a bit and with your income being reduced, you’re scrambling to get access to capital. Now may not be the best time to be selling your investments in order to pay for your current lifestyle.

Another place you may have access to money is in your retirement plan and for some people this may be your only option. There are a few things to consider if you plan on taking money from your retirement plan. First, if you’re 59 and a half, you’ll have to consider the penalty that will be applied to your distribution. Everyone will have to consider the taxable income from the distribution and most people at this point will have to consider the losses that were hit on their account.

You may not want to be selling at this point, but if that’s the only place you can get access to money, that may be the only option. You also may have options in a 401k, where you can get a 401k loan. But again, there are things you need to consider. Number one, the amount of the loan is limited and number two, the loan has to be repaid usually within a five-year period. In essence what you’re doing is obligating your future income.

This could become a problem, especially if your job is eliminated. Any outstanding loan balance would be taxable fully as income at that point. Also, if you’re under 59 and a half, you’d have to consider the penalty that would be applied. Another place you may have access to your capital is in your home equity, whether you were paying your minimum mortgage payment or paying extra on your mortgage. People have money stored in the equity of their home and they feel that it’s their money. They can get whenever they want, but the reality is the bank will only give you permission if you qualify for being able to repay that loan. The fact of the matter is during these uncertain financial times, the bank may not be readily willing to allow you access to your home equity. I remember a quote from the syndicated radio show host, Paul Harvey, and he said, “it’s times like these that remind us that there have always been times like these.” The point that I got out of it is, the fact that if you were prepared for these times, you wouldn’t have to be scrambling and looking at accessing money from places that may be have restrictions as far as accessing it.

I’ve been in the financial services business since 1985 and this is actually the fifth market correction that I’ve been through and I’ve learned a few things that have helped my clients to weather the storm. First and foremost is the importance of having access to liquid cash when these scary financial times occur. The importance of having liquid cash, cash that isn’t tied to the stock market, or money that isn’t tied to the economy tap, cash that isn’t going to leave you with a tax bill. Cash that you could access at any time with no questions asked.

What we’re talking about is cash value, life insurance. Ladies and gentlemen, this isn’t new. This has been around for over 200 years. In fact, JC penny used cash value life insurance. He literally borrowed against his life insurance policies to weather the storm created by the great depression. He had 1400 stores, that’s 1400 stores full of employees that he was responsible for the well being of them and their family. He borrowed against his life insurance to weather the storm. Our point is that if you’re properly positioned, you can utilize and access the cash in your life insurance policy to help you weather Covid-19 and actually take advantage of the opportunities that are going to be created by this pandemic and created by this financial uncertainty.

Keep in mind, life insurance companies are specifically designed for times like these. They’re the most well capitalized businesses in the world. They’ve been through this before. They have a 200-year track record. They know what they’re doing during these scary financial times.

If you have a cash value life insurance and aren’t sure how to use it, please give us a call. We’d be happy to be of service. If you need help designing a policy to help you get through the next financial crisis, give us a call. We could help you design one that helps meet your needs.