A question that you may have, if you’re thinking about implementing the infinite banking concept, is why on earth would I be paying interest to access my own money?

One of the core principles of implementing the Infinite Banking concept, using a specially designed whole life insurance policy designed for cash accumulation, is utilizing policy loans, leveraging the life insurance company’s money to make major capital purchases, whether that be a car, a wedding, or an investment where you can earn an external rate of return.

You see one of the things we sort of take for granted, or I think more appropriately we ignore, is the fact that we finance everything we buy. What do we mean by that? If you want to make a purchase, everybody thinks there are only two ways to do so. You could finance borrowing money from a bank or a credit company, and therefore paying interest to the bank or the credit company for the privilege of using their money.

The second way you can make that purchase is to pay cash. And what most people fail to take into consideration is the opportunity cost of using their cash. In other words, they know that if they take a loan, they’re going to pay 5 or 6 or 10% interest. But what they don’t take into consideration is the fact that if they use their cash, they could have earned interest on their cash. And guess what? That’s called opportunity cost.

Any way you look at it, you are paying or financing that purchase. You’re either going to finance through a bank or self-finance by paying cash. We have a saying here at Tier 1 Capital, you’ll never see the interest that you don’t earn on the money you used to pay cash to make a purchase.

With traditional banking, we typically park our money down at the local bank. However, we’re not earning any interest on that money, are we? The bank is though. They’re able to loan out that money at whatever rate of return they deem necessary. As many as 9 or 10 times for each dollar deposited.

So what does that mean? If you finance and have a bank account at the same bank, Which money are they actually lending you? And how are you being compensated for it? People deal with banks every day, and they accept that as normal.

And then we present them with the idea of, “Hey, why don’t you cut the banker out?” Set up your own pool of money that you will always earn interest on using the cash value of a life insurance policy. But you see, they have these preconceived notions of what life insurance is. And a red flag goes up and they’re like, No way. Life insurance is bad. Bank, good.

And then they come back and say, “Why in the world would I ever pay interest to get my own money from a life insurance company?” Well, here’s why, it ain’t your money. Your money is still in the policy earning interest on an uninterrupted basis.

The insurance company is putting a lien against your money and giving you a separate loan from their general account. That’s why you’re paying interest. You’re paying interest to get the insurance company’s money. You’re using other people’s money to make your money more efficient. 

At the end of the day, if you’re accessing money, whether you’re financing or paying cash, there’s a cost to accessing money.

If you’d like to make your money more efficient by utilizing a specially designed whole life insurance policy designed for cash accumulation, schedule your free strategy session today. We’d be happy to talk about your specific situation and how this concept fits.

And remember, it’s not how much money you make, it’s how much money you keep that really matters.