E65: How To Make Money from Taxes Using Infinite Banking

Nate: In this episode, we bring in special guest Ray Poteet to discuss how you can use infinite banking to take the stress away when you pay your income taxes each year and how you can actually make a profit doing so. 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: Well, everyone, we are glad to have Ray back, Holly and I’s mentor. We’re right here in the heart of tax season, which is everyone’s least favorite season. We’re here to learn. Ray has been stressing the last year or two of how it’s possible to recapture money that we send on income taxes, ’cause that’s such a big burden for people and how to make a profit doing so and take the stress of coming up with a big check each year for those of you who have to write one. 

Today, we’re looking to lean on his wisdom of how he’s done it and how he’s teaching people to do it as he’s spent so much time getting started. I know Holly, you and I have clients, too, that have been blessed because of this.

Holly: Well, and I think it’s really transformed their lives in how they actually view paying taxes and instead of it being a weight on their shoulder, it really has brought financial freedom to be able to use this as a resource to pay their taxes and even give more back. I think that’s the biggest change, is not only does it provide hope, it provides opportunity to have more to be able to bless others more.

Nate: Absolutely. We do use this for taxes. That’s kind of the theme for this one, but the same type of thing is happening to charitable giving, and that’s exploding for people, too.

Holly: What you’ll hear just throughout this podcast is the ability that it … You didn’t worry or stress about your taxes and it made more of a cheerful giver. I know I have one client that just seeing it transformed their lives to the point where they’re like, “You mean now we can give more to charities?” Just because of the stress of always having this extra in reserve just in case their taxes was more than they thought it was. They don’t have that stress anymore. Even if taxes do increase, they know the money is there.

Nate: Ray, welcome to the podcast, and was hoping you could kind of share with us the aha moment or whatever you want to call it in your IBC Infinite Banking journey, when you really figured out how to do this and when you started really implementing the tax side. Before you started doing a lot of the things you pioneered, you were just throwing darts, hoping it stuck somewhere and had to learn. It’s been a while since you started doing it, but I thought you could … People would be blessed by hearing how you came about it and what it did for you.

Ray: I’d like to tell you I knew exactly what I was doing and was totally on top of it, but that would not be the truth. What happened, in 2006 I borrowed from my policies for the first time to pay income tax. My income was rising, and of course when your income goes up your taxes go up. Taxes are always more than you think they will be. I’ve not had the privilege of it … Having that phone call saying, “Well, your taxes are less than you thought.” In 2006, I borrowed from my policies, paid my taxes, everything was cool. I would say I was prompted by The Holy Spirit. “Ray, you better pay those taxes back because you’re gonna need ’em next year again.”

That’s probably a pretty good idea because what had happened, I think most of us know taxes are coming. We’ll put some money away and generally we just put it in a checking account or savings account in the bank somewhere to have the money available when the CPA or accountant, your bookkeeper calls and says, “You owe additional dollars”, or, “You owe this much.” That was me. I knew how much my taxes had been the previous year. I’d divided that by 12 and just started putting that back into my policies so it would be available again, and sure enough, it came due again and I had it again and I paid it again. It seemed that that was a pretty good system.

Every year my accountant would tell me … He says, “You don’t seem to get uptight about when I tell you what number is”, and I said, “Well, I got the money.” The reason I had the money is because I was just repaying my policy. I was just putting the money in that I would normally just send to the government anyway, and I was just storing it in my policy until I got that phone call or that meeting or whatever it was. To me it was like this is a good system. It’s working. I didn’t think about it. Just plugged it in, and if the number went up, which it did, I just divide by 12 and put that number in and it’d be ready a year from then when phone call came. That was just the way I was doing it. It wasn’t an aha moment, it was just, “Here’s the way to have the money ready for taxes.” That was 2006.

In 2009, as your income goes up, your giving goes up. Again, prompting of The Holy Spirit said, “You better put that money aside for giving next year.” Not only was the taxes, now it was taxes and my giving and I was just putting it aside and it was neat that we gave periodically during the year, but most of the time, my major giving is last week of November, first week December. I’m not telling anybody else to do it that way. That’s the way I was doing it. I remember my pastor in about 2011, 2012, somewhere in there, said, “You’re gonna write that big check again?” I said, “Yeah, I am.” He said, “How do you do that?” I sort of shared with him. He just shook his head in a yes moment and said, “Well, that was good.” It didn’t have his attention or anything, but he was happy I could do that.

In 2012, because of the blessing of God on our life, we had brought property in a number of different states and probably the tax that I resent the most or I don’t like paying is the property tax. It seemed to go up even when the property didn’t go up. I’ve got that situation this year and I said, “Maybe we better start putting property tax”, so now we had our property tax, we had our charitable giving, we had our income tax.

Nate: You were just paying it with the policies like you normally would, but I guess the key that you’re kind of bringing that is, you didn’t really look forward as to what that was actually doing.

Ray: No.

Nate: You were just doing it. It was a way of managing it, and it wasn’t I feel like until recently in the past couple of years, you’re like, “Man, these policies that I’ve been using, they’re growing faster than the taxes are growing. They’re growing faster than I can give it. We’re having an abundance, when all I was doing at the beginning was just managing it to make sure I had the money.” Now, you’re showing people how … You put it on paper and you build a policy and pay taxes and giving from it. The numbers can get pretty big as to what actually that … Just [crosstalk 00:07:32] doing that can create.

They get astronomical and that’s really what occurred. Late 2018, our church had went into a renovation project and my wife and I’d prayed about being a part of that. I said, “I wonder what we can really do to be a benefit to the church and to our fellow brothers and sisters in Christ?” I got freaked out a little bit because I’d like to tell ya I was on top of it, but I wasn’t. I’d just been using the policies and keeping ’em separate and doing, like you say, putting the money in and not even thinking about it. All of a sudden, I really went to the policies and we had quite a bit more money than I thought we did. I mean, it was quite large, and I as going, “What the heck is going on?” I’m supposed to know a lot about this and I just put the policies down and really took a look and they had just grown phenomenally more than I had anticipated.

Ray: Even though we had paid back and everything, they were growing. They were huge. It just … To say the least, and was able to do something very rewarding to my wife and I and to our fellowship and what we were able to give an do at that time. I started praying, really asking The Holy Spirit to give me some wisdom and understanding. In March of 2017, sky lit up. We have an individual in our group, our team that does our GPSs. Those of you who know Paul, he doesn’t get emotional about anything. He came in the office and he was … Not really jumping, but he was, “You would know what these numbers look like?” I said, “No.” He said, “We gotta talk.” Having worked with him for over 10 years, I’ve never seen him like that.

We sat down and we started really pushing the numbers, and all of a sudden a lot of things started falling into place. I can think of a couple of clients that were just so enthusiastic with the program as I had shared it with them from 2006 on. One individual that pays over a million dollars a year in tax had come in and I just thought, “Well, it’s supposed to happen.” I hadn’t really pushed the numbers or looked at it.

Even today, right before I came to this meeting, had a young man come in. Anybody younger than 72 is young, okay? He was younger than me. He wanted to know if it was okay to borrow from his policy again. They had done it last year, paid it back, and he wanted to know how much money he had in his policy because taxes came due again. I shared with him what the number was and he said, “That can’t be right”, because it was about three times what he paid in taxes last year and paid back. I said, “No, that’s the increase in the policy and the way it works.” He says, “Well, then it’s not a problem to use it again.”

Nate: Yeah, and that’s what I’ve seen, too, and Holly, I don’t know if you cam attest to it as well, when I’ve shared it with some clients is that I think it’s just nice to have that system where … Or if you’re just … Make it a part of your life, especially if you know it’s gonna profit you, you’re suddenly not as concerned about it. At least that’s what I’ve seen. Holly?

Holly: I have my one. Basically, it’s their second time to pay the policy and ask pretty much the same thing. “How much money do I have in my policy to pay it back?” When you tell ’em and you hear that joy, “What? I have how much? I didn’t put that much back in.” Really, all they did … Like the one person said to me, “All I did was change where I was putting the money. Instead of putting it into the bank, I chose to pay it back into my policy.” That simple step, they’re like, “Our taxes have gone up”, and they have more than enough to pay the taxes. More than enough.

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Nate: Ray, a couple of things I want to do is maybe you share some of how people have been using it and the system overall, of how you typically would look. I think you normally suggest having a policy set aside for it. Kind of want to know why that is and tell everyone why that is, and kind of how the cash flow of it can work, and then I thought maybe we could share some numbers based on what you’ve built with some different programs for people. Maybe you could take us off on that tangent.

Ray: Yeah. How we’ve used it is just … I see the policy I say as a holding tank, a checking account. What I’ve noticed in my own life is that once you start owing something, you somehow or you get into your mind that isn’t going away, and you start putting money aside to pay that, especially those annual things. Again, income tax come to mind first, but real estate taxes, if your house is paid for or charity, that really … Tithe is really, really important to me and that’s something that I believe we … You can’t outgive God and it’s proved in our own life, but that system is, where do you put the money?

What I realize is it’s the same money that we would put … Send to the county for property tax, or send to the state or the feds for income tax, or send to our favorite ministry if it was giving. We put it in a checking account and we’ll write a check out. Well, the only difference is the same money is put into the policy, and when you take it out you take it as a loan. Generally, what we’ve found out is we’ll talk to our clients, and we have about … Right now about 35, 40. Not a great number because this is not something we’ve been pushing in [crosstalk 00:15:09]-

Nate: It’s more of a recent [crosstalk 00:15:10]-

Ray: Yeah, it’s the last year [crosstalk 00:15:12]-

Nate: Push.

Ray: And those individuals that … I can tell you the main individuals that have jumped onboard are especially income tax, and those individuals that are paying significant amount … Significant can be any number to anybody. I mean, the amount they, that this individual gave was very significant to him and it might not be to someone else, but it was really neat that he could actually recover this money for about 12 bucks a day and use it again next year without a lot of stress in his life. You just take those three, property, charitable giving … Divide by 12, add a little bit, that’s the interest. Following the rules, pay yourself, pay yourself interest. Recapture, we’re recapturing every year by paying the policy off.

Now, we use a separate policy or policies for this for … Or I do for one simple reason. We … A lot of the recommendations that we have used with private family financing, the interest is deductible, and therefore it’s easy to track that with those policies if it’s only used for deductible items. Interest on income tax, real estate tax, or property tax and charitable giving is not deductible, therefore rather than try to use the same policy for both aspects, I separated ’em. Simply don’t want to have to do extra work, so if you pay interest on one and it’s not deductible, don’t have to … If you get it back, what’s it matter? The [crosstalk 00:16:50]-

Nate: Well, and also … Something I’ve thought, too, and been doing personally is that it’s nice to earmark it, ’cause I know you’ve gotten into a bind a time or two when you didn’t really earmark it for paying tax or charitable giving and you used it for other things, and then when the tax bill came due, oh, well, your … The policy you thought the money was gonna be in, you used to invest here or do something, to lend somebody money here, and suddenly it’s a stressful situation. That’s the opposite of what we’re trying to create for people, is being able to give and be able to pay taxes without even really thinking about it. Just making it a part of your life, and then if we know we can make hundreds of thousands of dollars doing it, is we’re feeling pretty good.

Anyway, you separated for … Keep it personal instead of the business side, which you got a lot going and you also just to make sure you got the money.

Holly: It helps, too, for accounting purposes. I know from mine that is charitable giving and I have a separate one for taxes. I know, even my accountant knows, that’s the only policy I use that for, so there’s never a question of what it was used for or where are we getting the money. Like Nate said, that’s key. If you use the money for something else and it’s time to pay taxes and you don’t have the money, then you’re searching for it.

Ray: Right. Yeah, Nate was I think referring to the time I spent my charitable giving money … Or I had spent it on something other than charitable giving and had to hustle to get it in there, and I haven’t had to do that since I realized that and I kept that policy separate from now on. Personally, I probably felt like I was … The Lord hadn’t let me down and I was letting Him down and I probably put more pressure on myself than I should have, but it was just who I am and we made it happen, but I sort of swore to myself and tried to make a commitment. “Don’t ever let that happen again”, and from that time to the current I haven’t, and that’s because the policies are separate. I don’t go to that policy for anything except the giving and taxes and that.

Nate: What you had kind of mentioned was the goal for doing … Paying the taxes or the charitable giving and having a policy set up is to try to be able to fund ’em in a way that’s not gonna increase too much the input from the individual.

Ray: That’s right. There will be some input or some change. Again, I’d like to say based upon the number, it’s not significant, but it may be to them. I’ve not had anybody really not do it because of that number.

Nate: All that to say, it’s gonna be difficult if you pay 20,000 a year in taxes to just build the policy and pay yourself with 20 grand a year. We’ll probably have to add some extra, but I call it that the oil makes the machine run. We gotta add it in, but I guess that can bring us into what they’re building. Normally, you only want to put something in extra based on what it’s gonna produce, and so I thought we could get into maybe … I’m looking at a program you built for me that you shared with someone who had currently about 20 grand a year in taxes that they were paying.

Ray: Right. They had 20 grand and then taxes, charitable giving, and real estate taxes, and it could be all one or a combination of three because those are three areas you don’t recover. We built that for them with the intent that they would put that money in and pull it out at the time they needed it. We have individuals that pay quarterly taxes still, and they pull it from the policy. We have individuals who give quarterly or even monthly to charities.

Real estate taxes are generally once or twice a year based upon which state you’re in and how that works, but the reality, it’s just money. You know what it is at the end of the year because you paid it. Add a little bit and put it in, and just that little bit … What I realized when I got on the bandwagon you might say or really pushing this is we pay a hundred percent and have been paying a hundred percent of those items forever.

Nate: What do you mean by that?

Ray: I mean if it’s a thousand dollars we paid a thousand dollars with none of it getting back. We used 100 cent dollars to pay it and expected it to leave our account and be gone forever. That’s what I meant by that.

Nate: All of the money we’ve sent is … We’re not getting any of it back. You mean a hundred percent of it’s gone.

Ray: Right [crosstalk 00:21:17]-

Nate: Hundred cents on the dollar [crosstalk 00:21:18]-

Ray: It’s out of our system and in someone else’s system. This is the reason that Paul got excited. It’s the reason that I’ve been pumped ever … I’m still as pumped about it today as I was two years ago, and that is, you can literally do it for … Depending on the age and the amount for somewhere between 27 cent dollars to 16 cent to 15 cent dollars. That means instead of having to pay a hundred percent, and let’s say it was a thousand dollars and you could do it for 15% dollars, you only have to put out 150 and you still paid the thousand. That’s what’s mind [crosstalk 00:21:56]-

Nate:
It only costed you the 150 [crosstalk 00:21:57]-

Ray: You … 150 [crosstalk 00:21:59]-

Nate: To pay the thousand [crosstalk 00:21:59]-

Ray: The difference you have in your system working for you and your family for the legacy of your children and grandchildren. That’s just a mind-bender to me.

Nate: Yeah, so what I’m looking at here is we start a policy and we start funding these taxes and charitable giving through policy loans and started out at 20 grand and I see that we … Every five years we boosted how much they were given and paying in tax, just kind of a natural progression we hope as they earn more money and getting more [crosstalk 00:22:30]-

Ray: Well, just the inflation [crosstalk 00:22:31]-

Nate: And inflation.

Ray: The inflation’s gonna cause that. I mean, I’ve talked to a lot of people and generally, even some retirees, their income tax hasn’t went down since they started.

Nate: Yeah, I bet not.

Ray: Yeah. Okay, and real estate taxes have not went down as long as they’ve kept their real estate. I pray that they’re charitable giving hasn’t gone down, that it just has increased, too. I’m just saying under normal routine progression called life, they’re gonna go up.

Nate: All of that to say, we did that for 30 years when we were giving, paying taxes … Let’s say it was just tax we were focused on. The total amount we did was just a shade under 1.2 million over 30 years on this guy, and the total amount of money that he put in was … Out of his pocket was 331,000. That was more than he took out of it to pay the tax, right?

Ray: Yes.

Nate: That was … The 331 [crosstalk 00:23:27]-

Ray: Well, yeah [crosstalk 00:23:28]-

Nate: Over 30 years.

Ray: The 1.2 million was what he took out, and what he really put in was the 331,000.

Nate: Right, and at the end of that timeframe, he’s got over $600,000 in cash value. We got 1.2 million in taxes paid and we made a profit on that of $300,000 over that 30 years. Essentially what we did is we paid the taxes plus got 300 back in pure profit.

Ray: That’s … Right.

Nate: 600 if you count the total amount we’ve got, but …

Ray: The way I do it, I take the total amount we paid and I subtract the total amount that we put in, and they gave us about $800,000. Then I take the amount of the cash value, subtract the amount I spent, which was another close to 300,000, so I have about 1.1 million in my checking account or my policy or somewhere, and I paid everything that I was supposed to. Rather than being minus the money with no record of it or availability, I’m just the opposite. I look at it as over a two-million-dollar swing.

Nate: Well, that’s the thing, is the 1.2 million is gonna be paid whether you use a policy or not [crosstalk 00:24:46]. It’s gonna be paid and we’re just not making profit on any of that. The system to me, and I think Holly you already alluded to this, too, the system to me has a few benefits. Of course, the making all that profit and being able to pay the tax and make a profit on it that’s tax-free profit with the policy, that’s great. I’d do that in of itself, but just the fact that we … Once we get it rolling, we don’t have to be concerned about how big the tax bill’s going ’cause we … Every year we’ve gotten more than enough in the system. We’ve gotten [crosstalk 00:25:20]-

Ray: It’s been true-

Nate: More than we need.

Ray: It’s been very, very true. I mean, from our clients that have huge amounts to the young man I spoke to today that just needed less than 4,000, but that was a huge amount to him. I don’t care what it is, God’s not a respecter of people, that we’re able to work with every individual at every level because it’s important to them and to minister to them. That’s what I think is given me the greatest joy is to work with professionals, accountants, bookkeepers, and our old agents, and them actually having become clients to use the system themselves and introduce their clients to this system. There’s no way around it, you’re gonna pay these.

How you pay ’em can make a big, big difference. What you use … The system you use to hold the money until it’s paid makes the difference, and I feel like you have to get in a zero tax bracket. That means only life insurance allows it to grow on our … Continues a compounding effect without taxation.

Nate: Exactly. Holly, any questions for Ray before we close it down?

Holly: Do you have one great success story you’d like to share?

Ray: Well, I think it would be the young man today, because just how recent it was, right before I came to visit with you guys. He was in our office and he was talking about how stressed his wife was. Last year, having to borrow from policy and then it looked like they were gonna have to it again, and his main concern was how much money they would have available after the loan and actually, they were gonna have more money than they had a year ago, so he was puzzled by that but happy, joyful. He really didn’t care how it got there. I didn’t go into a big explanation of the way the policy had worked, and he said, “Wow, I like that better than just having to take more money out of my check and still have to come visit you.”

Nate: Exactly [crosstalk 00:27:29]-

Ray: I would say from a success story today, I was rewarded just by that individual, and I didn’t know why he was coming in. We were just doing a policy review. He had a different agenda than I did, but we were able to minister one another, and he’s a grandparent that is raising a grandchild, which we have four or five of those and I honor every one of those individuals that have been put into that situation. He was just talking about a couple of trips that they were gonna be able to take with that grandchild now because this system working and just sort of … That was reward enough for me to hear that and say, “Yeah, you’re on the right track. Keep doing what you’re doing. Keep preaching what you’re preaching.” If I could leave one story, it would be that one for today.

Nate: Some people when they’re investigating infinite banking, there’s the math side of it that really does make sense, at least once you really get into it. You really start seeing the math, but it’s the emotional side that you can’t really lay your finger on, and I feel like at times it takes a little bit longer to bring the emotions in or the security, the feelings, or however you want to put it in, where we can run numbers on a page that show how it gives to charities and pay taxes with policies and make a profit doing it.

That’s great, but it is true that just the feeling of relief and control and security that I’ve seen people get when they plug in the infinite banking system can do various things. It can make ’em feel confident, in control, in charge, and feel good about it to where next year, this guy’s not gonna come into the office with a concern about using a policy to pay for the taxes, or a concern about the taxes at all. He knows where it’s coming from. He knows what he has to do, and he knows that there’s gonna be more money next year than there was this year, and we’re gonna feel pretty good about that.

Ray: What’s really great, and he talked about these trips, I said, “After you take the trips, come back in. I’ll show you how to recover those.” Last night, you and I were together, and I was just overjoyed you’re gonna be taking a week’s vacation. I just knew in my own mind’s eye when I had two little ones or three little ones, I took those trips with total dread and guilt, and I saw in your face last night that that wasn’t there because you had already learned that secret. I was blessed because of just our relationship and knowing you know how to use that system already for that holiday, that vacation, and being able to take it a year from now without a hassle.

Nate: Yeah, it’s changed our lives for sure. Anything before we close up, Holly, on your end?

Holly: I think we just want you guys to know that there’s other alternatives to just paying your taxes the traditional way, and keep thinking outside the box when you’re doing it. If we can help, we’d love to.

Nate: Absolutely. Well, this has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly:
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