E160: Success Key: 4 Stages for Your Effective Infinite Banking Commitment

Nate: In this episode, we discuss the four different stages of infinite banking commitment that each person will find themselves in and also discuss the pros and cons to each stage. She’s Holly and she helps people find financial freedom.

Holly: He’s Nate, he makes sense out of money. This is Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Nate: All right, welcome back everyone. It’s great to have you on the show. I’m really grateful for your support as I know Holly is too and we enjoy doing this, don’t we Holly? We enjoy being here.

Holly: We do.

Nate: It’s fun and I’ve actually wanted to do this episode or have this discussion for a long time. It’s been in the back pocket. I really wanted what we’re going to talk about today to be an actual lesson of sorts where I was going to take a deep dive into a hypothetical human being with their own personal economy, because the question we get asked all the time, Holly, is I want to get started but at what level do I want to get started at? Or how do I get started? How much money do I want to put in? I don’t know if I’m the only one who gets that question but I assume you do as well quite often, right Holly?

Holly: Exactly. How much money do I have to get started with? What is it going to cost me to get started? Those are the first two questions most people want to know.

Nate: Exactly. And I’ve always felt that everybody can benefit from the concept of infinite banking. Everybody should become their own banker at some scale and that’s really where the confusion I think settles in. And really what I’m trying to do here with this episode is give language to I think what people feel, which is I think everyone understands there’s different stages of commitment to IBC. And so that’s part of where the question of I’m looking for your recommendation, what stage of commitment should I really be going into at this time? So really the main goal of this is going to be based on this discussion that everybody in the country I believe can benefit from the concept of infinite banking and everyone should practice it at some scale. The question at hand from almost everyone, the question is at what scale should I start at? And maybe even more so, what scale am I comfortable starting at knowing that we can grow in the future?

Holly: And I think you have to answer those for yourself first, Nate. A lot of times I don’t want to give an individual the you need to start with this amount of money, I want them to understand what are they comfortable with doing and what can they afford right now at this stage in life? Where they’re at later on in life will differ very much so on how they utilize their policies. But like we say, you have to get started somewhere. And I think the breakdown of having different stages also evolves how you start utilizing the policies or if you don’t.

Nate: I think you’re right. So I mean I really do think that everyone’s going to fit somewhere within these four and I invented these four stages and I gave them quick little terms, not that the terms really matter, but the idea behind them is what’s going to matter. I think first off, what we ought to recognize is that objectively speaking, which I like to set that stage, objectively speaking, which means that you can prove over and over with practically no exception, everybody should practice IBC at some level. What starts to get potentially a little bit hazy is when you start getting to the more aggressive and advanced levels of IBC, I would say at those points there’s a couple things. Some people may not be the right fit for some of the advanced stages and certainly some people are not going to be comfortable with some of the advanced stages as far as the big change of life that they’re going to commit to.

So we understand that going in. But I think if you’re listening to this podcast, if you’ve been listening for any period of time, understand that infinite banking is a concept that you cannot get around. That’s the cool thing about it. Concepts are essentially universal, they always work. What I have found though is that different stages of IBC commitment work better for certain people than for other people. And so maybe figuring out where you’re going to be at is going to be helpful. That’s why we also mentioned we tried to come up with some pros and cons to each stage so that people can help weigh well of course me being the IBC Kool-Aid drinker, and you too Holly, we are biased to some degree to the advanced stage. We think that’s really fun to do the last couple of stages.

Holly: Those stages, yes.

Nate: It’s going to be really fun. I think everyone should do those. But what I’m saying is I also come in with humility, understanding that not everybody is going to be excited to commit to that level of infinite banking, which is perfectly fine with me. What I think is that some people assume that to practice IBC, they have to do those deep advanced stages to receive benefit and so they think it’s an all or nothing approach. What I’m here to say is actually it’s not. While of course it’s more exciting to work with people in the advanced stages as an agent, as an advisor, it’s more fun to have conversations on those stages, but I would also say it makes sense for everybody no matter where you’re at, it’s going to make sense to come to infinite banking at some level, and that’s an objective opinion.

And I know I don’t throw those around lightly. If people know me, I don’t like to speak in black and white terms, I don’t like to speak in objectivity because very few things are completely objective in life. But I do know everyone is going to be in the world of banking at some level and it’s wise to have capital and cash on hand, that capital or cash has to be built up somewhere and we cannot find an objectively better place than what we’re doing right now. So that’s what I’m trying to say. At some level, everyone should do this and what we’re going to dive into is the four different stages that you can do it at.

Holly: As we’re discussing each stage, whether you’re a beginner or you haven’t even started or whether you’ve had a policy for a while, really the question is where do you identify and what stage are you at in this? And I want to say the reason it’s a lot more funner or exciting at the more advanced stages is because there is more of a need for an advisor, a coach to help you get through that versus you just being in it and doing it by yourself. It doesn’t work most of the time if you jump in with both feet and try and swim and you never learned to dog paddle.

Nate: Some people who are really actually in the first two stages, they think that they are actually in their heads doing the later stages. And so they think that they should be talking to us and doing some really cool things with IBC. And I like that this is going to give me some verbiage to describe some things to people. That was essentially the whole point was that while I would love to help you get rolling at some of the more advanced ideas of IBC, your commitment level so far is in the early stages of IBC.

Holly: Yeah.

Nate: So in other words, they’re paying lower premiums, or as far as compared to their income, they’re not really contributing a very high level per se of IBC commitment. But they think that they want the benefits of the higher level commitment and start to do some of the things that they’re going to do with the higher level commitment, and that’s actually where it gets wrong. So the only way to get more out of the system is to progress from one stage to the next.

Holly: Our stage one really is what Nate has termed the saver stage. It is those of us who are actually putting money into a savings account, we’re actually putting some money aside and storing it in a bank. And in our viewpoint, if you’re going to be putting it into a bank, you might as well be putting it into a policy because it’s going to do two things for you, it’s going to give you cash value now and in the future and it’s going to grow tax free. But the second thing too is it’s going to give you a death benefit and I feel like it gives you access to use that money versus just putting it in a bank. And if you take it out, it’s gone, Nate.

Nate: Yeah, and this is what I would call the objective stage. So in the saver stage of infinite banking commitment, this is somebody who already has some money saved up in some safe place, which most people would agree is reasonable. And you listen to almost anybody, they say you should have an emergency fund or something of the sort, you should have some money safe.

Holly: Or reserve.

Nate: Some reserve fund, emergency fund, opportunity fund, whatever it is, people understand that they should have some cash on hand, liquid money in order to do things of life, and as a buffer for all the trauma that can happen financially to people. So this is what I would call the objective stage that for most people, if you commit to this stage of infinite banking, you’re actually not changing anything about your life. The only thing you’re changing is which tool you’re using to save some money into. So this is normally the lowest level low hanging fruit, this is everybody should do this. Nobody should have 30,000, $40,000 in an emergency fund or more sitting in cash in a bank account, they really ought to just start rolling that money into a policy. And that’s why I say it’s objective, it’s going to make you more money. There will not be a con to doing it, there truly won’t be.

And if some people say, “Well Nate, you won’t have 100% of the money,” that’s not even a con, you have more than you need. And you would start at such a low level of actual premium if you had 40 grand, maybe you’re going to move in 10 grand a year that the difference in capital is going to be unnoticeable in exchange for the hundreds of thousands of dollars over a lifetime that’s going to be created. So it’s essentially what I would call the objective stage. But some prominent things about this is essentially all people like this are going to do is they just like infinite banking to be a safe place to store a little bit of money. So this would encompass the people, as I brought up, who already have just a little bit of money going into savings and they already have an emerging fund built up and they’re just going to slowly in a small scale build up a policy with those monies, and it’s not going to be that aggressive.

This could also be the stage of someone who wants to diversify, which I don’t love the word, but they’re like, “Oh, I’ve already got all this money in stocks and bonds and real estate and I just want a safe place. I’m just going to put some money in, a little bit here and there. It’s a whole life insurance policy. It’s safe, it’s tax free, it’s going to be nice.” The hallmark of this stage is that people in this stage rarely ever use their policies. They will rarely ever use it. They’re just saving a little money into it, money that would’ve been saved someplace anyway. They’re not even really changing their investment paradigm or their patterns, they’re still maxing out 401ks and IRAs and doing this and doing that and they’re investing in other places and they’re not using policies to do it, this is just a little, “I’m moving some savings in, diversifying.” By the way, I’m making fun of it.

But what I’m saying is it’s just the beginner stage of IBC. I’m getting a little policy going. People in this stage should not think that if they did some policy loans and maneuvered some money that they were going to create some awesome IBC system. You have committed to just the lowest level stage you can commit to, a stage that everyone in the country should be committing to to become their own banker, just moving their already liquid money into a place that’s going to give them more money in return.

Holly: This is like you got your feet wet and that’s all you want to do. You don’t want to go in the deep end or that you just want to stay in the shallow end, get your feet a little wet. It is essential because everybody, like we said, should be doing this. We’re doing banking whether you’re in IBC or not, this is a place to actually do banking and control your money. So that’s what we’re saying in this stage is that it is the low hanging fruit, but it’s the process of you getting started. And if that’s where you stay the whole time, that is okay. It’s what you’re comfortable with and if that’s where you’re comfortable, then that’s where you stay.

Nate: Yeah, exactly. My biggest issue is when you have clients who are doing this but yet think that because they’re in this little stage that they are doing IBC, and then you ask them what all they’re doing with money and they got a lot of money over here, they’re putting a lot of money over here, they’re putting a lot of money over here and they got this little tiny IBC policy and they’re trying to ask you questions about what they should be doing to maximize their policy. And I think guys, in the saver stage, don’t think that you’re going to make a life-changing thing. My recommendation to you will be to move to other stages. But not everyone’s ready for that because it’s going to create higher amounts of premiums as you go down the stage. That’s actually, by the way, the difference in all of these stages. When we say the four stages of IBC commitment, it’s actually essentially going to be how much of your cash flow is going into premium and then is going to go out and work for you. So in the saver stage, it is the smallest amount.

Holly: Yeah. And I think, Nate, too in this stage when people think they’re doing something else and they want to maximize it, it’s maximized. You can’t do much more with what you actually have until you increase premium. And so that’s one of the cons is you have to be okay if you want to move to another stage to increase your premium. If you’re not willing to do that, then you’re going to stay at the stage you’re at because you can’t maximize it anymore than what it’s been designed to do.

Nate: Awesome point. Your ability to maximize infinite banking in the various stages that you’re in is completely dependent on the stage you’re in. So when people say, “I want to maximize IBC,” most of the time the only way to maximize it is actually to grow into the next stage. That’s how you would end up maximizing because infinite banking is not a policy. Infinite banking is a process that uses policies. It would be the same thing if you were to own a business and you had a little community bank and you can do various little things with one location and one little bank. You can do a few little things. But if you really wanted to start growing the business, you would oftentimes try to figure out a way to add another location and to expand the business. And that’s why businesses do this. The same type of thing is with IBC.

There can be little things you could do in the saver stage to start getting more out of it, but there would not be anything that crazy. It’d be pretty easy to max out this stage. And so if you are only willing to commit to this stage then as we brought up, the con to this… The pro is that you’re going to be making more money than you were before you started the stage. And there’s no question about that, it’s not even arguable. The cons though would be mainly that you’re not going to be able to accomplish much in this stage regarding infinite banking. In this stage, as we mentioned, you rarely ever use it and the discussions that you and I are going to have as an advisor to a client relationship are going to be relatively bland because unless you’re willing to get into some more advanced stages, there’s only so much we can do.

If you want to expand beyond that, we’re going to call that the capital builder stage. And typically the hallmark of this stage is when someone is starting to redirect other cash flows into policies because they want to build more capital and want to be able to accomplish more things. It’s pretty obvious. So we call it the capital builder stage because it’s the stage of life where you’re of course doing the saver stage stuff, but you’re adding in other cash flows. The most common way to do this is when you’ll talk to a client and maybe they’re contributing to a 401K or an IRA or something of that sort, and they start to reduce contributions over to those accounts so that they can funnel more into premium and get higher amounts of capital built up in policies that they hope to use one day.

So in this stage, you’ll oftentimes not only have enough money for your emergency fund, but you’ll start to have enough money to do things like finance your vehicles, you’ll start to maybe pay down debt, make down payments on homes, send kids to college. This is going to be a bigger piece of your financial life. Now, you’re not going to do everything through a policy but you have committed to a higher level of premiums at this stage because you’ve redirected some other cash flows than just the saver stage. But you’ll also see that in this stage, most people who are using it, they are more personal items. So keep that in mind. They’re more personal items, things like cars, vacations, houses, just regular helping make down payments or home improvements, kids’ education. The people in this stage like the policies, they’re putting more money into policies, they like the tax free growth, they’re guaranteed growth, they like the liquidity, they’re willing to commit to a higher level. They haven’t started treating it as a business at this point.

Holly: And really in this stage, I say this is that stage of you experiment more personally with it like buying a car or paying for a vacation. And Nate, this is where you start understanding the initial process and the rules of what we call the rules of IBCR. So you actually start understanding the process versus all I’ve done is park money. I say at one point, you’re crawling, now you’re taking baby steps to actually implement the process of what IBC is. And until you start implementing it, that’s why it’s more personal because you take a smaller item or something like a car or a vacation and you see how it actually works before I think you really get to that next advanced stage that we’re going to go into.

Nate: That’s exactly right. So actually in the whole IBC kingdom, this is probably the most common stage for people to be in. As far as the pros and cons of this stage, it’s similar. I mean the pro of this stage is you’re better off in a situation in this stage, it’s better to buy cars from your own bank than to use somebody else’s. Now, some people on this podcast might say, “Well what about when the car loan is cheaper than the policy loan?” Who cares? Go ahead and use the car loan. What I’m saying is you’ve now created a place though where you are making more and more profits on many more transactions in life, still mainly personally. The cons of this stage once again, I mean it was hard to come up with necessarily cons in a lot of these stages, especially these early ones, because there’s very little to it. I mean as far as the con goes, once again it’s probably well you could probably get more out of IBC if you would commit to a different stage.

It’s like stage number one. By the way, everybody, I forgot to mention, my goal is by the time this podcast launches, I would like to actually create a presentation that describes this in more detail. I was going to mention that at the beginning and I forgot. But essentially, I was going to try to lay some numbers down and some hypothetical scenarios of what it would look like to be in each stage. Be on the lookout for that. That’s the capital builder stage. They’re using it, they use it for personal items a lot of the time, it’s a bigger piece of their life. They’re not just using their emergency fund strategy, they’re putting other cash flow into it, maybe from their 401K contributions, maybe their IRA contributions are reduced, maybe money that they used to save up to buy cars they’ve now saved up into policies and they’re using the policy to buy cars or just little things like that.

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Nate: The next stage, Holly, is we’re increasing complexity, we’re also increasing premiums as a proportion of income the further you go on. So the next stage, stage number three, is what we call the entrepreneur stage. Now, a couple of caveats here, Holly, you don’t have to be an entrepreneur to be in this stage. The reason I’m calling it the entrepreneur stage is because the people in this stage are most often a hallmark is that they really are going to treat this like a business. So in this stage, you’re committing to IBC at a high level and you’re going to essentially run it like you would a banking business.

What that essentially means is in this stage, pretty much every dollar of free cash flow… Now, that term free cash flow means any dollar that you’re not going to spend on just basic lifestyle, regular monthly expenses. Every dollar of free cash flow is going to be contributed to policy premiums first and then everything you’re doing in life, anything above monthly expenses is likely going to be funded from the policies. This is why we call it the entrepreneur stage because most people on this stage are essentially financing practically all of their investments with policies.

Holly: And then I think this is the stage that really you’ve achieved what Nelson has said in his book of you should always be in two businesses, the one you’re doing for your regular job and work and banking. So this is that you are actually training it as a business, you’re actually taking in those loans. And if you’re your own business or you own your own business, you’re using your policies literally to help fund whether it be payroll or what it is, but it literally is an asset that is basically growing. And I think very few people achieve this stage out of fear. I’m going to say it really is fear.

Nate: I think you nailed it, yeah. I think a lot of people think they’re in this stage when they’re really not because they have some fear still. It took me a while myself to even get into this stage, so I don’t think people should feel guilty about it. But you’ll talk to people who have committed to high levels of premium. Not every dollar of free cash flow is being contributed to policies yet. And I think that essentially has to be the case to be in this stage fully where pretty much every dollar of free cash flow is going to be contributed to policies. So you have people who are paying large premiums and who are using those policies to make investments and maybe run their business and they’re doing things like that. And so they’re getting really close to this stage. And I would say there might be a hybrid in between stage two and three where they are doing quite a few things with it, but they still have capital that’s not in their own bank that accumulates in the banking system and then goes out and does stuff.

They are very close to this stage. But you’re right, what keeps them from actually doing this is the fear of premium. The pro of being in this stage is that every dollar of free cash flow that you make is finding its way into policies first. And so every dollar is now able to do more than one job. Every dollar that you possibly can is going into policy premiums, producing cash value and you are leveraging that cash value to go do the things of life. So you don’t have any wasted opportunity cost anymore. You’ve completely gotten rid of it, everything is rocking around the way it should. The con of this stage, or at least in most people’s eyes, is that it takes a high level of commitment, takes a high level of comfortability and people are worried in this stage that their premium levels have gotten too high.

And so you could say that the con of getting to this stage where every dollar free cash flow is being contributed to policies and it’s really run like a business is that to do it, yeah, the commitment level’s pretty high. Your comfort level’s got to be pretty high. You can’t just do this as a side gig and be in this entrepreneur stage. But as we’ve talked about, Holly, if people are in the capital builder stage and they’re saying, “Nate, what can I do to maximize it?” There’s only so much you can do in that stage. You have to start getting closer to the entrepreneur stage which means you have to commit to higher premiums. And I know that word commit might be a little strong, people I think they have a weird relationship with premium. They think it’s more rigid than it is.

They think there’s going to be huge negative consequences if they don’t max out the policy each and every year. They think there’s going to be huge consequences if they miss a year of premium, all of which most of the time should not be concerns when you understand what’s going on. Now, we don’t have time in this show to do that, but we’ve done it many other times, try to alleviate some of these concerns. But I would say in this stage, you are actually getting to the point where it is possible to start being too aggressive. In the entrepreneur stage is when you’re starting to need to rely more and more on your IBC coach, your IBC advisor, someone like me or Holly or whoever you’re working with. In this stage, it’s not uncommon for me to rein people in and actually say, “Hey, you’re at a good level now, I don’t know if you really need to keep running around. I think maybe let’s take it in bits and pieces.”

So sometimes I’ll rein people in, some people will say, “No, Nate, don’t rein me in.” And I’m like, “Way to go, guys. You guys are really gung ho.” You can start it at any stage you want to, but in other words, you don’t have to go from one stage to the next. We have people start in this stage. The people who have done a lot of research are really excited. They’re just saying, “Yeah, I want every dollar of free cash flow to be contributed policies right away and I want to do everything in my life from policies,” and that’s awesome. And just not everyone is ready to commit and is comfortable at that stage because it’s going to take changes in how you’re doing things. The first stage and the second stage take very little change if any at all in really how you’re doing things. This third stage will start to really actually change what you’re doing.

Holly: And Nate, I want to say one other con maybe, but it’s not a con, you do have to be disciplined and you have to follow the system and that’s why you need an IBC coach because if you just think, “I’m going to throw all this money in and I’m just going to start loaning it out and investing it,” and you don’t have a system in place, then that is the con because you don’t know what that next step is. I took the loans up, but what am I doing now? And I think that one of the entrepreneurial processes is that every business has a business plan in the same way in the entrepreneurial stage you start having a plan that you get to follow and a guide to lead you down that path so you’re not by yourself.

Nate: Yeah. In this stage, things are well thought out. Yeah, I think that’s a good point. We lay them out on your financial GPS if you’re working with us, these are things where we’re tracking more and more things. You’re using it more often. A lot of times, people in this stage are using policies to make investments and in their business so they’re deducting interest. And there’s some fun things to do in here that you would really want some help to try to establish and make sure you’re dotting the I’s, crossing the T’s in this stage. So this is where you’re running it as a business. Pretty much every dollar that you can muster is going into premiums. Tons of policy loans coming out over the course of the year. I don’t know if I’d say tons, but you’re using it consistently for the various things of life. You’re making large premiums, you’re making large loan repayments, you’re recycling money in and out and in the entrepreneur stage, you’re running it like a business and you’re having a good time.

Holly: And I think people are like, “Well if I’m using every dollar I have cash flow, how do I get to another stage?”

Nate: That’s right. And this is the last stage, it’s a good point. And by the way, I don’t know if we said the cons, the con really would be if you tried to do it all by yourself and you don’t have a coach, you can mess some things up in this stage. So you really do want to have somebody that you trust that you’re working with who’s gone before you in this manner. You don’t really want to do that one alone. The fourth and final stage is the least common stage to be in, it’s the hardest stage to get to. And this is a stage that it does not always make sense for everybody to go to. That’s for sure. This stage is actually reserved for specific circumstances where people’s life will fit into this final stage of IBC commitment. So in other words, not everybody should even go here by the way.

For a lot of people, stage three is your best stage. But if you fit into stage number four, that’s great. This would be like the Nelson Nash practically premium equaling income stage. We call this the lifestyle stage. So in other words, instead of just throwing in all of your free cash flow, which is the money you’re not going to spend a monthly lifestyle expenses and stuff like that, in this stage, people will start to actually pay premiums into policies knowing that we’re going to borrow money out to go do something that’s a recurring normal thing. So this would be people who are paying premiums to pay their annual tax bill on top of the entrepreneur stage. And so they have all of their free cash flow going in and they actually have some additional premium amounts going into policies above their free cash flow.

So maybe they’re pulling loans out every year to do just natural recurring things like paying income tax or property tax or charitable giving or things of that sort. Some people would say, “Well Nate, I’m already paying taxes with their charitable giving and I don’t feel like I’m in that stage.” And that actually is true. You can do those things even in earlier stages, but it’s a hallmark of this stage to where not only are you having all of your free cash flow and making lots of investments from it, but essentially you have a premium that’s higher than your free cash flow overall across all your policies. And so the last point I wanted to make in that front, Holly, was to say in this stage, as I think your brain can take you there, in this stage, it is likely for you to accrue loan balances inside of the policy that you do not intend to repay at least for a period of time.

That is a hallmark of this stage. The con of this stage is that you can go too aggressive, you can make some weird mistakes in this stage. This is 100% a stage that you want someone in your corner, an advisor who can really help you decide whether taking the jump from entrepreneur stage to lifestyle stage makes sense. I think that the people who fit this stage most relevantly are the people who are pretty confident that windfalls are going to come in the future. Nelson Nash talks about this all the time of paying such high premiums that loan balances start to accrue and then plugging those in the future with various windfalls. So this is why I say it fits great to do these types of things, especially when you expect windfalls in the future. Windfalls can come in many different forms. They can come in selling existing assets down the road.

Maybe you’re a real estate professional or investor or you own a business and you are going to sell properties or sell the business sometime in the future, and you know there’s a windfall coming. This could also be you expect your income to go up in the future dramatically as far as your career path is concerned, or this could be an inheritance from your parents as expected. And there’s different things where essentially in this stage, you understand that for a period of time you’re going to be paying more premiums and you’re going to be using some loans in there that you’re not really going to plan to repay. But since you have so much capital going in, you’re not even that worried about it and there’s reasons why. And so if someone wanted to go to this stage, I ask a lot of questions and paint out a really clean picture of what life would look like in the lifestyle stage and then we play it out on paper with some different hypotheticals and we say, “Yes, it makes sense,” or, “No, you should stay in the entrepreneur stage.”

Holly: And I think too in this stage, what people have to understand when we say that you’re accumulating a loan balance that you’re not intending to pay off right now, those are often what we call strategic loan balances.

Nate: That’s right. That’s a good point.

Holly: It’s not a, “I just created this loan just to create it.” Like Nate said, it takes a lot of planning and strategically looking at it, does this make sense? And it’s not just a loan balance to have a loan balance, it’s what we would define as a strategic loan balance specifically for a reason that we believe there is going to be a windfall in the future and how that loan balance will play out. But like Nate said, there are very few that might ever reach this stage or it doesn’t fit for them.

Nate: Yeah.

Holly: And so it’s okay not to have to get to the lifestyle stage. The entrepreneurial stage is really a fun stage where you are actually creating wealth for your family. You don’t have to get to the final stage to create wealth and to make this process work. So every stage is very unique and it’s to each individual, and that’s why Nate and I say you need a strategic coach to coach you through that because that person is working with you on your personal situation. There are no two people and no financial situation that’s alike. And so that is one of the cons to this stage is you might never get to that stage because it will never be a fit for you.

Nate: It’s not like we’re just doing it for fun, we know what we’re doing and we know the end game. We have an agenda built out. So I’ve had people in this stage plenty of times before where for a period of time, their loan balances or maybe they’re borrowing money from policies, paid taxes and charitable giving and their premiums are so high that they’re not even choosing to repay those loans year by year. But we actually have a very specific plan. We are tracking, we know exactly where the loan balance is going, we know when windfalls are going to occur.

Maybe they’re paid to addition rider premiums, they’re going to reduce sometime in the future once policies are sufficiently capitalized and they’re going to use that cash flow to repay any loan that would’ve built up over that time. Or maybe this is a thing where they want a place to store capital above their premiums with random windfalls. So once again, we don’t exactly have enough time to go through the entire idea of what it means to create a strategic loan balance. That would be also something I should probably make a video on that’s not just a podcast discussion.

Holly: Yeah.

Nate: But that’s a hallmark of this stage and not everyone should do this. So for some people, their max stage really is the entrepreneur stage, and that’s perfectly fine. For others who have a high level of IBC comfortability are already rocking and rolling with their commitment and want to take it to the next step, questions are asked and a strategy is built up. And this is definitely the most complex stage and this is the one where you’ll want a coach to guide you through it more so than any of the other stages because this time in this stage, a coach may actually say, “No, I don’t think you should.” Well we’ve been here for a while, Holly, maybe we should recap and shut it down. So in the four stages, saver stage, entry level, your hallmarks or people rarely will use it in this stage, people in this stage may ask me, “What should I be using my policy for?” Nothing. You’re not in the right stage.

All you have is a little tiny premium and you have all these other big things going on in your life and you’ve committed to IBC on this very small scale. It’s acting like an emergency fund or a little saving spot. Policy loans are not magic. You don’t just take policy loans for fun just because it’s going to magically create more money. And it’s not a dollar amount of premium. A guy who’s making a million dollars a year in income, his saver stage might have big premiums, but he’s actually just in the saver stage. He’s got big premiums because he’s got a really high income compared to a guy who’s making 100,000 a year, his premiums may lower. Or the guy who’s making a million dollars a year probably has a higher saver stage than the guy who’s making 100,000 dollars a year has on the lifestyle stage. So keep that in mind. It’s not a dollar amount of premium, it’s a dollar amount in proportion to your income.

So saver stage, rarely use it, just getting things going, safe place to store some money. This is also the objective stage. There is no reason for people to be doing regular banking without doing this. Number two though is the capital builder stage. This requires you to start redirecting cash flow that used to go to some other places, maybe a 401K or an IRA or something like that. The hallmark of this is people will start using policies more often in this stage, mostly for personal items. The third stage is the entrepreneur stage, this is when you’re running like a business. Every dollar of free cash flow is going into policies and you’re making lots of moves with it. Policy loans are coming out all the time. You’re making investments, you’re running your business, you’re proactively seeking out things to do with policies to improve your overall situation. That stage comes with the pros of men, opportunity costs is no longer a problem. Every dollar that you’re making is going through the system and earning money for you all the time.

The cons are, yeah, you can get too aggressive even in this stage. And the con is it’s hard to get comfortable enough to do this. Lastly, the lifestyle stage is all the other stages combined. Plus, you’re going to be using it even for regular monthly expenses or monthly or annual recurring items, things like charitable giving, taxes and all sorts of other things. You may have already started that before. But the hallmark of this stage is that you will create a strategic loan balance over time. And you know what you’re doing. The advisor knows what you’re doing. We have a plan. We’re not worried about it because of X, X, X, and we have it all nailed out. And yes, let’s run with it. Not everyone is going to fit into this stage, but if you’re in the entrepreneur stage and you say, “What should I be doing?” This would be the discussion. So understand that, that oftentimes to go from one stage to the next is the answer to how to maximize your IBC.

And so there might be a few little things in each stage that we could offer as suggestions, but if you actually wanted to get more out of it, you’ve got to go down. Sometimes people in the entrepreneur stage, I’ll have to tell them, “No, you’re doing great and you are maximized. You’re doing awesome.” And there are sometimes where I’ll say, “You know what? Actually based on what I know about you and based on your answers to these questions, there might be the final stage to jump into.” Any other thoughts on your end, Holly?

Holly: Nope, you said it all. You did well.

Nate: Oh, thank you. Well everyone, thanks for joining us. If you are enjoying this show, man, we would love it if you would subscribe, whether you’re watching it on YouTube, whether you’re getting it on Apple Podcast, if you would rate it, review it, subscribe, that’s the only way we can get this podcast out there. And we so appreciate you listening. This is Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e160.

Announcer: One last thing before you go, start your journey towards financial security and wealth today, visit livingwealth.com/beatinflation. You’ll gain instant free access to the beginners course Ray, Nate and Holly made just for you. Again, that’s livingwealth.com/beatinflation.