E59: How to Avoid 50 Years of Money Mistakes with Infinite Banking

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: Hi, Ray. Well, welcome back again. I think the last episode we had. It was very great to have you on. I’m looking forward to this one. Our vision for this one was really just to get you to share with us some of the biggest mistakes you’ve made. A lot of people like to talk about successes that they’ve had, but I think that learning from other people’s mistakes is maybe even easier for people. You’ve mentioned some to me over the past five, six years, back when you started with Infinite Banking and all the way back to the investment world.

We kind of wanted to know some of the mistakes that brought you to where you are. And you’re very efficient with money and you very rarely lose money anymore because of what you’ve learned and the mistakes you’ve made and what that’s taught you. So if you wouldn’t mind just kind of telling us the history of you as an individual getting into the financial world and what brought you to certain areas where you started making mistakes in, I guess would maybe be a good starting point.

Ray: Got into insurance really because I didn’t know what I wanted to do. I had a degree from KU, I dropped out of medical school. I didn’t want to be a doctor. I knew that at the time. But I didn’t know what I wanted to be and got my ear tickled about life insurance, you could make a lot of money. As a young person, newly married. My wife had a great job. She was making good money, so I could spend hers real easily and she supported our family. I didn’t realize that, but she was making about seven times what I was and I could spend my money and hers very easily. But I got into insurance with the one thought that I was going to have to make a sacrifice in life at some point and it would be easier to make that sacrifice at 25 than it would be at 35. Even if we had young children, they would 10 years older or something, so I would say it was due to God’s planting a thought in my mind and allowing me to take opportunity to get into the life insurance business.

Now I was not successful when I first got into the business, not the way that we would say today by the standards of what people would say. But I didn’t have to be because my wife was making good money. And I mean in 1971, my wife made $37,000. Now to give you a scope of that, I was a college graduate and I was making $6,000 a year of $500 a month and my company decided to give me a $50 increase. Now that’s 10% if you think about it, but I didn’t see the value of it. And then came to know the Lord Jesus as my Lord and Savior, 10 days before we had our first child.

And at that point, our plans were my wife would be off about four months and go back to work. Well, that’s soon to be 47 years [inaudible 00:03:48]. But praise God. What happened was I decided, with her acceptance, I’d work two jobs if it was just one vocation. I mean, I put time and the energy and I started selling health insurance policies and life insurance policies and term insurance policies. Anything that I could sell, I was the man to go to.

Now I can remember when I thought up and I was sitting in a barber’s chair and I’m going to sell you a 50 cents a day policy, that’s $15 a month. I sold a lot of those. And I can remember a good friend of mine, he’s since passed, we paid a [huge death claim 00:04:30], but he called me. By that time I’d moved to $1 a day from 50 cents a day. So I was selling a $30 a month policy pretty regular and he said “I’m not worth a dollar a day. I’m worth $2 a day.” I said “I agree with you.” Just like that we went to $2 a day.

Then the Holy Spirit just gave me a thought. That’s 25 cents an hour and I just started using that term with a lot of my clients. You work 25 cents an hour. We’d blow that. And in 1978, I had the privilege of making my first top of the table. As a matter of fact, it’s the only top of table meeting I went to and I had sold something like 560 policies that year. I didn’t keep count. I was just selling. I thought everybody was making it the way that I did, sheer work and doing that.

I got to the $1 million round table and most of the people there made it either with estate planning or employee benefits. I wasn’t old enough to be an estate planner. So I said, okay, I’ll go into employee benefits and I developed Alpha and Omega at the time was a pension company. It was first Alpha and Omega Pension, it later became Alpha and Omega Financial Services. I decided to get into the pension arena because that’s an arena that I could work in and I wouldn’t have to sell 500 policies. It was very good to me. Very, very, good.

I learned the pension business and did very well in it. But during that time, the insurance industry and the financial service industry and the investment industry was really all muddled together. Don’t leave money on the table, doing things like that. I decided to get some more designation to be qualified in these areas and I did that. Because of people having pensions, they had money. Well, let’s invest that money rather than just let somebody else invest.

Nate: You started managing money then.

Ray: Yeah, I started managing money. One of the things that happened in the ’80s was real estate and they had real estate limited partnerships and writs and this and that and I got involved in it pretty heavily because you got a pretty good write-off. You were supposed to get your money back. I didn’t think much about that at the time until … This was my second real estate collapse. In the ’70s, there was a real estate collapse. A lot of people don’t remember this, but Gerald Ford became President because Richard Nixon had quit, or resigned, and he put it in because houses weren’t selling at credit because there was a real estate hindrance and mortgages were eight, nine, 10%. That’s when the variable market mortgages came in and everything.

So I was in this real estate market and I was selling a heck of a lot and making a lot of money. A lot of money. To me, it was a lot of money, six, seven times what I’d been making. Then it collapsed. I had enough phone calls that I dreaded the phone ringing about what’s happening-

Nate: Where’s my money? Yeah.

Ray: What’s happening to my investment? What’s going on? When am I going to get it back? Various things like that. Not only had I lost a lot of the client’s money, I lost a lot of my money because I thought … My dad had shared with me that if it isn’t good enough to buy, it isn’t good enough to sell, so I bought it too. I was wondering the same thing: where the hell was my money? I didn’t have any of it. At that point, we had three kids. We didn’t know if we were going to have twins until they came out but we’re glad we got them. They were growing and expenses were going up. It was the real first time I crashed, I would say, is with the real estate investment market.

Nate: Now, do you think you crashed … As we’re talking about mistakes you’ve made. Is it because you just got your ears tickled by the green guys and you said, “I’m jumping in. I’m bringing all my people with me, all my clients.”?

Ray: That was the trend and not having had a mentor, having done it on my own, not having an older person that maybe had walked the path of life. Not wanting an older person to tell me what to do, maybe, because I was a hot shot or I thought I was. There were a lot of reasons for those mistakes. My uncle, who really helped me start with Alpha and Omega, had got me into saving money, putting a value on my life so I wouldn’t be a slave. So I was saving money and I was spending money. I borrowed money from my insurance to buy cars and I borrowed money from my insurance to make a down payment on a house. I borrowed a lot with never one intention of ever repaying it.

Nate: This is before IBC and you were just spending the money, right?

Ray: Long before IBC. Yeah, I was using insurance as a storehouse rather than a bank. In other words, save money that you’re supposed to save. I was practicing one rule and that was I was paying myself but I wasn’t seeing that as a storehouse to use it for other things except to spend when the urge came. Because I’ve got all these people, and I mean hundreds of people, involved in-

Nate: All the real estate deal.

Ray: I literally had to rebuild my business.

Nate: Because once you lost their money they didn’t want to stick with you?

Ray: Yeah, no way they stuck with me during that. Now I built a pension business that even some of them who were in real estate … I lost them as pension clients, but a lot of my pension clients I had not gotten into real estate because you couldn’t use qualified money. So those that just had qualified money which was pretax dollars, it was okay.

So after that collapse, and that was the Resolution Trust Corporation … So we had Gerald Ford in the ’70s, we had the Resolution Trust Corporation in the late ’80s, okay? Much like the meltdown that we had in 2008, 2009, was what happened in the late ’80s, some 20 years earlier.

I started focusing just totally on getting money under control, money under management and had a model and various things and was doing quite well. I mean, quite well because you get one percent of what was going on.

Nate: You’re talking about your income was quite well.

Ray: Quite well.

Nate: Yeah.

Ray: In a way.

Nate: Whether they made money or not.

Ray: Well, from the late ’80s to the late ’90s was a great boom time. You could throw a dart and make money. Then the dot com came and that was a disaster. Much like you guys are talking about the bubble or something, that was disaster. Normally if I got one or two phone calls a day it was normal. Boy, after the dot com, we were getting one, two, three an hour. “What’s happening to my money? What are you going to do about it?” Emotionally, I was a wreck. I was still making money because people were still putting money into retirement programs and I got paid by the amount of money under management, so I was doing quite well, but emotionally I was doing terrible. I felt totally betrayed.

I heard about a program called LEAP. I went to its training down in Dallas, Texas. I know the day: January, 4, 1994. I heard about it and it said compound interest. Then I thought, boy, after this crash, compound interest they had said wasn’t true. I ought to check that out. By checking that out, I learned about the infinite banking concept because I’d gotten involved in something VIVAS during the late ’90s. That was just unlimited deductions on life insurance. Boy, that was right up my alley.

Nate: That sounds good.

Ray: Yeah. I was doing it and I did it personally. I did it with a lot of close friends. The government came down and shut it down with one stroke of a pen. One day I’m making really, really good money and the next day, I’m wondering what am I going to do?

Nate: And that’s when IBC came rolling in, really.

Ray: It did come rolling in. What happened, and I didn’t know this until I did the eulogy on Norm Baker’s funeral, Norm and I had traveled a lot together with VIVAS, all across the country riding shotgun right next to one another driving. He had sent me this book, I didn’t know it until, like I said, I did the eulogy at his funeral. His wife told me because I wondered. But it came. I read it and I didn’t believe it.

Nate: I think a lot of people will hear about [inaudible 00:13:27] and don’t believe it the first time.

Ray: I read it and it made so much sense, I called Nelson and I said, “Is this true?” And he said, “Absolutely.” I started just thinking about everything I’d done, so I spent time and money and energy trying to figure this out. I heard Nelson four times in the first 10 days. I heard him in Overland Park, Kansas, two days later he was in Murphysboro, Tennessee. Three days after that he was in Fresno, California, and four days after he was in Birmingham, Alabama. I couldn’t believe I was the CLU, I was the CHSC, I was the CPC, I had all those designations after my name and couldn’t believe that not one of those in the hours of studying the hundreds of dollars I spent to get those designations, not one of them had told me you could do this with a life insurance policy. I was just, and still feel that way, totally betrayed by my industry.

You could use this tool called a life insurance policy to buy cars. Later you would say take vacation, buy diamond rings, have weddings, own houses, help with education, give to churches, all kinds of things that we sort of thought about and still do. What I did, I spent 190 hours going back because from 1977 to 2001 when I learned about this, I bought 26 cars. Now I didn’t say 26 new cars, I mean, we had five primary drivers and they needed a car to drive to school and things like that. So our driveway looked like a use car lot and I think a lot of parents think that way. It wasn’t anything to buy one car a year if you had five because one was breaking, going out or something like that. But I had bought 26 cars. I had zero to show for it. I paid cash for every one of those cars just like my dad had told me to do.

Now, the first thing that I would say that I learned about IBC that hit me, if cash was the best way to do things, why didn’t I have any of it? I had zero. I went back and I was a thorn, you might say, in the insurance company’s side because I was getting in-force illustration, past illustrations, doing the work and I came up with … And I owned insurance remember. I was paying big premiums for insurance. It would have been in the ’80s and ’90s. I was putting close to six figures into life insurance and the reason I was doing that was because of what my uncle said that I was making sure that I was getting paid. The only way I could make sure that I got paid was I created a bill for me. I created a bill for everybody else, I created a bill for me.

I found out that if I had used life insurance like Nelson was saying to do, I could have had $183,000 that I didn’t have.

Nate: That’s a smack in the face.

Ray: That was more than our house cost. That was more than anything. I was going, a smack in the face. It was absolutely being pissed off.

Nate: I mean, that’s just something we have to tell people all the time. Why didn’t I know this? Or I owned a policy, no one told me I could do this. It’s amazing that there’s this tool out there that no one knew how to use until Nelson wrote this book.

Ray: Well, and he wrote it, and I still believe and I still give him all the honor. I’m thankful that he had to have a heart attack to put it into print because if you hear his story, it was in he was in recovery after a quadruple heart bypass that the Lord spoke to him and said, “Get up out of the bed. You’ve got ideas in your mind nobody else has.” Evidently it was a meeting with God and the way he wrote, “Becoming Your Own Banker” is like scripture: don’t mess with it. I still read it. I still benefit from it. He’s been used by God in a mighty way. So I started learning this, I started practicing it, I started doing it and becoming quite successful.

Nate: As we transition into the Infinite Banking area where you made the mistakes, lost a lot of clients, lost a lot of their money and got the government involved. All through that chaos, Nelson Nash comes along with this book and you started doing infinite banking, but as I’ve heard you say many times, Nelson Nash had this book but that was about it. He didn’t spend a lot of time telling you the day to day practicality of doing infinite banking.

Ray: No, he just said you could do it.

Nate: Yeah, and he didn’t tell you how. So you made some mistakes earlier and I thought that would help some of the listeners now.

Ray: Well, we thought a loan was the answer.

Nate: Loans, okay.

Ray: We actually still have a client, praise God he stayed with us, but we have a client and we did 77 loans on in one year.

Nate: Out of his policy loans on one policy.

Ray: Yeah, one policy.

Nate: Yikes.

Ray: And got the insurance company mad at us. We really didn’t care. We knew that. But we didn’t see that we were ahead.

Nate: You guys thought that back in the day it was the loans. Taking the loans from the policy and repaying them, that was-

Ray: Making the money.

Nate: And the more we did that, we could explode it really fast. That was the concept.

Ray: Well, I really did it fast but we were nowhere better off than if we had we not done one loan.

Nate: Right.

Ray: And we wondered, what’s happened? It was really due to an insurance company executive that was upset with us in doing all these loans and he was threatening to fire us and we found out that this thing we called our segregated account was the key to it all.

Nate: Were you learning at that point too that it wasn’t the loans and the loan payments that drove it and propelled it, it was the premium and trying to structure it. So that’s what we’ve also … We’ve mentioned this on the podcast and some of the courses where instead of paying a loan and repaying as fast as you can, that’s when you started teaching people and rightfully so to maybe extend their repayment so it leaves more money in their pocket to pay more in premium to boost the actual cash value.

Ray: And insurance companies again, they had to realize they didn’t know as much as we did sometimes. What we did, we found out that the key wasn’t … We thought it was a paid up addition because that was something totally new. It wasn’t new to the industry but it was new to every policy and we found out was again, not to pay up additions but the base policy, so where we had made the base as small as possible, we found out 10, 15, 20 years from now, we hurt ourselves. Much like I talked in the last session about, I wished I hadn’t made the base so low on my grandchildren’s policies. Well, we were doing that because we were only looking at the current money rather than future money. That was a process we went through and learned. We were doing a lot of loans and had to go back and say, “Time out. Let’s stop. Let’s rethink this. Let’s do it. We’re not doing it right.” We found out with grandkids and every policy was structured the same way. We weren’t changing it at all. Now I realized that we needed to. So I had done things wrong.

Nate: And you had lent money … When you started learning about IBC, becoming a banker, started lending money to other people at that point and gotten burned doing that.

Ray: I did, because you have this money you’re used to now saving. You’ve got the money, you’re about being a banker. Well I want to be a banker so you become a banker. Well, you become a lousy banker. You don’t do what a regular bank does. Now when we make a loan as we did yesterday, we got his homeowners involved and made sure that we became a loss payee, we’ve got a mortgage certification that the mortgage is in our name, we’re first. We do everything a bank has done.

Nate: Because you were doing signature loans to begin with.

Ray: Oh was I and I got burned on it.

Nate: And people stopped paying you back, there’s no recourse actually at that point, or at least very difficult to get anything back at all.

Ray: We’re still waiting for those. So it’s more than difficult. It’s impractical, it’s impossible because you’ve heard me say it was good money chasing bad money. I would have to spend an attorney more to get the money back that I was owed than I would get back.

Nate: And that’s what we’ve really been able to help clients do is because we’ve lost the money, we can show you how to make loans to where you’re not going to lose it. That’s the main goal, is we’ve got all the documents and the system now to be able to do that.

Ray: Yeah. One of the things I’ve learned is if you’ve got me in your life, it’s because you can’t have a conventional bank in your life most of the time. Because I’m not going to charge you, I’m not competing with a conventional bank, but I’m going to do everything they do but loan to value bases is much different with me. I don’t go over 65%. A conventional bank will go up to 80%, maybe even better. I won’t even come close to that. Car loans, I’m not going to compete with them.

What we found out is that many professionals don’t want to keep accurate records and don’t want to put the records together they need to get a proper loan so they’ll pay me one point, two points, three points, more than they would a conventional bank because they have a monthly payment. They’ve not looked at the actual amount that they’re paying me more, but they’ll do it. What that’s showing me is that those people will borrow money from somebody and if they know me and they’re going to borrow from somebody, why don’t I loan them the money and keep it in our family than in someone else’s family.

Nate: You know, I’ve heard you mention this before too, it’s almost a mistake. It’s not just with losing money or building a policy wrong or churning money in and out and not seeing a profit from it, but also just mentally that were some mistakes when you first got started with infinite banking. I’m sure that you carry it with you for a long time, but mentally why you’re doing things today and having the premiums that you have you would never have dreamed of that early on because it was a mental block I would say maybe.

Ray: Yeah. And it’s training and programming information that you have. Think of the brain as a computer. If I could have just bought a new computer with a brand new hard drive on it, I wouldn’t have had to go through this stuff, but even though you might have cleaned the hard drive or thought you did, it’s got glitches in it and it keeps catching. I was so concerned about the premium. What’s going to happen? I had the fear that things wouldn’t continue good. So, oh, I better not buy too big a premium or too much of a premium. I didn’t understand Nelson’s book, page 48, where it says it might seem a bit strange when I tell you that your premium should equal your income. I knew that was a misprint. It isn’t. It’s a reality.

Nate: Yeah, and you’re pretty close to it, if not there.

Ray: Well, if I could get there, if they’d let me do it, I would be there and in many ways I’m over that. But it’s because of those things of growing through and learning what it is, I had to see it as a deposit.

Nate: Not as an expense, yeah.

Ray: And I honestly, probably five or six years into it still, I saw it as a payment. I’ve got to come up with ‘X’ amount of dollars. Now, you don’t ever complain about the size of the deposit you make. You do get upset with the size of the payment you make. I can tell you I paid some pretty sizable premiums that I see as deposits since August of this year and because they grew substantially I’m glad I saw them as deposits.

Nate: It takes a bit of time I think for most people to see that switch or experience that switch from premium as a payment to a deposit, but that’s a big mistake that can cost you a lot of money down the road. If you always see it as an expense you can never know what you can accomplish with it.

Ray: And generally, the way that it’s being taught is that most people do not see it as a deposit until the third, fourth or fifth year because they haven’t been programmed with what we call our GPS system. If we can get our client involved in the GPS, whether they take a loan for credit cards, a car or schooling, a remodel or air conditioner, I don’t care what it is and see that coming back in, they don’t see it as quickly. What we have tried to do and I believe very successfully, I got the client on his repayment schedule and transferred money away from them and recapturing debts. So money’s coming back to him and they’re eager to expand the program once they see the value of it.

Nate: Yeah. I find that if you’re not willing to use it, and you’re just paying premiums and letting them sit, that can feel like a pain because it’s just sending money and nothing’s coming back.

Ray: Well, we have clients like that.

Nate: Really?

Ray: You talk to them, I’m thinking of an oral surgeon in Phoenix you’ve talked to and I talked to and he’s got a couple million dollars and used part of it to buy an office building and he just paid cash for it and doesn’t realize what he could have done with it. Again, you’re have to have a teachable spirit. If you’re going to store money, there’s no better place to store it, but you can do a lot more with it.

So one of the mistakes I made, we have an agent, a very good one and a very good client before he was an agent. I invested quite a bit of money with him, but I invested the money from a loan from my policy. This was in 2011. The investment went south. Now I’ve gotten all my money back because the policy continued to grow even though I had a loan against it. Okay? So that amount of money is already back in the policy.

Why I’m so thankful for IBC, for the private family financing system that we formed, is that if I didn’t do it that way, the only way I could have ever got that money back was I had to go out and earn it. Knowing that I have to earn it a second time, I had to pay taxes again to even have it back in. I didn’t have to do that. The money continued to work even though the investment went bad. I can’t do that with anything else.

I truly see a loan today that I make as an asset rather than a liability. I truly see that deposits are a liability, not an asset because they’re not working. They’re not doing things. But that took time and mistakes and screw ups and all the things that I’ve done, but thankful that if you had the right tool. It’s sort of like a computer: the program is on there. If you find a program, you can now use it. Well, I had the tool. I was learning to use the programs in this tool called life insurance. Then, as we’ve learned how to use it better, it’s sort of like do you want advanced settings or just normal settings on the program? Well, we’re getting into the advanced settings now and being able to share with people. They think that if they make two percent on a loan, it’s two percent, and we can show them it’s 40% or 50% or whatever it might be which is much better than that.

That’s some of the stuff that we’ve learned and we’re passing on to people. That was a mistake at first. Why would I want to pay extra? I didn’t. Now I love paying extra. I thought of getting my income tax back. You just take a normal individual that’s paying income tax, paying real estate tax and giving to the Lord’s work or charity in some form, he’s probably spending somewhere between $10,000 and $20,000 a year. If you can show him today and he’s got a 30 year time period on this, he’s going to have $500,000 to $700,000 dollars available to him that he wouldn’t have had a penny of without our system. That is something that you can serve … In other words, the government still got paid, he paid it, but he got to keep it and that’s what we’re able to share with families today that we weren’t able to share with families.

We’ve taken this step and went a step further. The families are benefiting. The children of those parents that I’m working with are benefiting and their grandchildren will benefit. Not more money. Yes, they will have more money but to see it as a tool because everything in our society, everything comes down to money. The watch we wear, the shoes we wear, the haircut we get, the food we eat: you’ve got to have money. We didn’t see it as a tool. There aren’t enough of us teaching people that this is a tool and we want to teach you how to use it better and more efficiently.

Nate: That’s what infinite banking is all about.

Ray: That’s what it’s all about.

Holly: Yes.

Ray: That’s all we want to do, is to share how we’ve learned. Most of these ideas we’ve learned from our clients. I’d like to say, oh I thought every one of them up. I didn’t. Our clients asked us and because they asked us why, we found out why not? Having that covenant relationship with our clients to see that they can feel okay sharing with us crazy thoughts or any thoughts, that these plans and ideas and the efficiency of this tool can become better and better. It’s almost like it’s an open system, much like the Microsoft software. It’s open, go develop programs, here it is. That’s what I feel IBC is to us. It’s a program and the more the clients share, the more they get on board, the more they ask the questions, the more we can do. Then we must keep an open mind. Be teachable. Admit our mistakes.

Nate: That was the goal of this podcast, was to hopefully show some mistakes and lean people away from it. I think that’s about all the time we have for today, but thanks Ray, for joining us a second time and being open and sharing with us the story and the history of what brought you here. I think it’s great.

Ray: Thank you.

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

Announcer: This has been another episode of Dollars and Nonsense. If you follow the herd, you will be slaughtered. For free resources and transcripts, please visit livingwealth.com/e59.