Infinite Banking

Nate: In this episode, I answer the question, why is it so difficult to get people interested in the infinite banking concept? I’ll offer suggestions to you that may help you successfully discuss IBC with the people around you. And if you’re new to IBC and are trying to figure out if this is a worthwhile endeavor for you, answering this question will help you understand why IBC can feel so difficult to comprehend to its fullest. Welcome to Dollars and Nonsense. If you follow the herd, you will be slaughtered.

All right. Well, it’s great to be back with everyone today. So excited for this show as always. This is Nate. I’m taking it solo again to answer this question. And some of these solo episodes that I’m doing are really just to dive in a bit deeper to some concepts than we do in our regular biweekly show that we do with Holly and me both. So just kind of keep that in mind. I’ll be doing some off-week episodes, whether I’ll be interviewing new guests, maybe or doing a solo to answer a question.

And if I sound a bit stuffy, it’s because I’ve had a cold this week. But with that being said, “This is a question, why is it so difficult to answer or to get people interested in infinite banking?” It’s a question that comes up quite often and it’s something I’ve been thinking about quite a bit and probably more so lately than ever before.

I think that how I’m going to answer this, so for those of you who are already practicing IBC and may have tried to tell people, you’ve probably run into this before. And for those of you who are new to IBC, I think that answering this question can help you by the way. As I brought up in the intro, I think it can help you understand why IBC feels odd. Okay? So IBC can feel odd and it can feel salesy, and it can feel too good to be true. It can feel gimmicky. I’m here to explain all of this if I can in this show. 

I come into this with essentially no notes. I may write down the introduction, but once that’s done, there’s no notes. So I may ramble a bit, so please pardon me for that. So either side of the spectrum has a lot to gain from this episode. And whenever we dive into it, people ask me this question quite often and people run into this problem quite often because it’s very natural when someone has adopted this concept. They’ve done the research, they’ve started a policy. The rate is spread, the news, spread the gospel of IBC.

They attempt to do so and it is so often that they get turned down and shot down. That can be discouraging. It can be discouraging for a couple of reasons as well, which we’ll get into. So it can be discouraging and there’s a right way and a wrong way to do it. But if you’ve ever spoken with me, you know that I don’t give simple answers to simple questions and it’s a problem, but I’m addicted to it.

So I’m addicted to trying to answer every angle around a question. So I wanted to not only just give you ideas for how to make suggestions, that would be the easy route for this episode, I’m actually here to say that the reasons why I think it can be so difficult to spread this and why it’s taken so long for infinite banking to start becoming more mainstream. It is becoming more mainstream, by the way. So let me give out a few points just right off the beginning.

Number one, infinite banking can be difficult to spread because the words you use to describe IBC can oftentimes sound salesy. And by the way, to answer the question why is it difficult to comprehend, especially if you’re new to this because there’s a lot of content online that is salesy content, that is actually doing a disservice to IBC. On the flip side, there’s also content that over simplifies and focuses too much on some analytical pieces of the policy where it also produces confusion and is unhelpful as well. So there’s a lot of content out there that’s very difficult to weed through and it can sound very salesy.

Some of the terms we use can sound salesy. I’m going to dive in. The number one reason why infinite banking can be hard to spread. By the way, I’m trying to hit both people. So the people who are existing clients of ours and the people who love IBC, who are trying to tell people and are feeling discouraged. And on the flip side, also, the people who are trying to learn about it. You always feel like you understand a lot of it, but you always feel like there’s something about it that you can’t quite put your finger on.

So you’re wondering if that means this is a scam or some sort of gimmicky thing, or it’s not actually true because you can’t quite put your finger on it. So I think both of these things are actually pointing to the reason. And the reason why is that infinite banking requires a paradigm shift in order to be accepted.

So you’ll hear this in the infinite banking circles a lot that IBC is caught not taught. And the idea is mainly that it requires more than just facts in order to convince this. So I’m going to describe why IBC requires a paradigm shift. That would then help us answer the question of how to go about it because everything in life that requires a paradigm shift has to be done in certain ways in order to get someone else to be convinced of this paradigm shift.

So my premise for this entire concept is that the reason why it’s difficult for you to fully comprehend if you’re new to this and why it’s difficult for those of you who have been trying to tell other people what you’re doing and why they’re not accepting it is because it requires a paradigm shift. And if you try to convince somebody of something that requires a paradigm shift, you have to do it a certain way. So this is the premise.

And by the way, this podcast, I’ve had a couple clients just this last couple of weeks who have been describing to me that they’re trying to get people on board and they feel like they’re messing it up. They’re trying to get people excited about it. And they’re probably listening to the show. Garrett being one of them and Brian being another. So welcome to the show if you guys are listening. I know you guys normally do.

Brian was one of the guys who had mentioned that he’d been trying to get some buddies involved. It was kind of discouraging because he thought that they would kind of love it and they would see it the way he sees it. He goes and meets with a group of people, three or four other people, and they just didn’t like it. They thought it was weird. They didn’t want to get involved with it. And it was of course discouraging, because then he’s maybe concerned whether, “Well, is this actually a good idea?” And discouraged that he wanted these people to be running mates with him.

So that’s what this episode is really all about. So I’m going back to my premise that it requires a paradigm shift. I’m going to talk about why that’s the case. But just to start with, I’m going to mention that everything that requires a paradigm shift has to be introduced in certain ways, especially if you’re not any good at sales, by the way. I am not good at sales. I’m in the sales world. I’m just actually not very good at it and I don’t enjoy it. And so that’s one of the reasons why I think that people can bypass the normal route for paradigm shift is just by being an extremely charismatic salesperson.

And there are some extremely charismatic salespeople in the infinite banking world and they’re convincing people en-mass to join in. A lot of times what they’re saying is that is not true, but people are buying into it because of how charismatic they are. I wish that was me sometimes, but I’m not. So that being said, unless you are a charismatic salesperson, you’re going to have to go about this certain way.

And by the way, if you’re learning about IBC and you are turned off by charismatic salespeople, then you’re not going to dive in because of a charismatic salesperson talking to you. You’re going to need to go about this the way I’m about to say. So I was thinking about this on a deep level. I’m a philosophical person. I was thinking about this on a deep level in my own life, I have a paradigm. I’m a believer in Jesus Christ. I believe that he was a real person who came. I believe that he rose from the dead.

And I believe that because he rose from the dead, he’s the only person in history to predict his own death, how he would die and to predict that he would rise again. And then he claims to offer that to anyone who puts their trust in him and becomes a disciple of his. So if I choose to believe that as my paradigm, which I have, that will then filter its way down into everything that I do, that is a paradigm of mine. So the universe is seen through a paradigm where there was a guy who was alive, who equated himself with God, who called himself the son of God essentially. Essentially calling himself divine and who said that through him there is eternal life and that he would author it and it would be proven to the world by his resurrection from the dead.

That’s what he came to do. And that in him, there’s forgiveness of sins in life forevermore. So he goes out and says this and he does it. And so my entire view on life and in the universe is filtering through that paradigm, that that actually happens. So that then paints a picture of everything I see in some way that Jesus is somebody worth following and that his teachings are worth investigating because of this paradigm I have of course.

So what I’m saying is that it filters everything about me. If an atheist or a non-Christian, a non-believer or certainly an atheist, and I’m sure there’s some listening, I’m not trying to attack you. We can be best friends, without you being a Christian of course. But what I’m saying is, if they were to come to me and then try to convince me that my paradigm is wrong, they had better do it the right way or else it’s going to, of course, produce nothing at all.

And then the same is the reverse, by the way, that if I was to sit down and have a conversation with someone who was not a believer and maybe was even opposed to it, the way that you would shift a paradigm has to be done delicately and it has to be done in a certain way. What I mean by this is the only way I would relate to it and the way I think most people do, is that to shift a paradigm, you have to do some research. You’re not typically going to be sold a new paradigm.

I’m not talking about the regular bell curve of people. A normal within a standard deviation of people at the top of the bell curve are not going to be sold new paradigms. They can adopt new paradigms, but it has to be done through a process of learning and research. So if somebody was an atheist and I was going to talk to them, I would not be able to convince them in 30 minutes to an hour that my paradigm is true and yours is wrong. Of course that can’t happen except for there’s the isolated two standard deviations away from the norm, then they may be able to see things more clearly. Also, I would say that the more entrenched a paradigm is, the more the research has to be done.

So if you have a paradigm and you’re just not very tied to it, maybe you’re a Christian, maybe you’re a believer, but you’re just not really that confident, well, then it wouldn’t take that much to maybe get you to shift. But the more confident you are in your paradigm, the more delicate you have to take the scenario.

And so the same thing goes for the atheist as well. In other words, I would not expect someone who is staunchly an atheist who of course doesn’t believe like I do or has the same paradigm that I do of the universe who must obviously believe that Jesus was not divine, Jesus did not rise from the dead, and there is no spiritual realm. If that is a staunch belief, of course, we’re going to have a conversation and convince each other of changing your paradigm and you’re wrong?

I mean, obviously it’s ridiculous. And so what I’m saying is every time there is a relatively strongly held paradigm that someone comes in with, if you’re going to convince them or try to introduce a different paradigm that you believe improves their situation somehow, it’s got to be done delicately. Normally, it has to be done through them having enough desire to research it on their own. So that’s the same thing if I was going to get convinced that my paradigm is wrong, it would take a lot. And then vice versa for other people who are on the other side of the aisle.

So I bring this up to say, most people when they get interested in IBC, they do not require their friends and family to go through every step that they went through to get this new paradigm. And then they’re confused as to why the people they’re talking to are not that interested in what they’re doing. It’s because you are trying to give them the cliff notes version of a paradigm shift that can only come through someone taking a delicate time through research to change the paradigm.

That’s the big problem in the infinite banking community as well. Now, IBC is not as a big of a paradigm shift as religion. That was the extreme. IBC was a much smaller paradigm they’d have to shift, but it has to be taken the same way. And so with infinite banking, most of the time the people run a foul of this when they decide to try to talk to somebody with the cliff notes version. They’ll paint it with numbers. They’ll paint it with policy illustrations. They’ll paint it with little vague ideas and then people will automatically shoot it down the same exact way that if someone was trying to convince me that atheism is correct and they throw me some little one-liner, some little punchline, some little things, it’s not going to do anything to me.

It’s going to have to take me being willing to dive into some evidence. And so on a much bigger scale. I mean, obviously, the IBC paradigm is not going to be as life transforming as getting saved, and completely changing your idea about the fundamental realities of the universe. So I’m aware of that, but I’m saying to the extreme. So here’s my suggestion to the people who are listening to this.

So number one, to the people who are listening to this, trying to actually tell people around them about IBC and get them interested. You cannot get anybody interested if they’re unwilling to learn about it on their own unless they like to be sold things, unless they’re easily sold or unless you have a huge amount of trust. In other words, they trust you so deeply that anything you tell them to do, they will go after it because they love you, they trust you so deeply.

So there are certain relations. I’m just saying the average relation, the average person you’re going to talk to. This is why we tell every agent who joins us, by the way. So we have agents who are spreading the news as well. They want to become an agent. By the way, if you’re listening to this and you’re a client of ours and you’re interested in telling people and getting paid to do so, feel free to talk to me. But what I’m saying is everybody who comes on and says, “I want to teach IBC,” it would be a huge mistake to go out in the world and just start running life insurance policy illustrations and handing them to people, and trying to sit down for coffee and throwing numbers and ideas at them.

What we always suggest you do is you have to simply give enough info where the whole point is to get them a resource in their hands with any sort of paradigm shift that would take place. Research has to be done. You cannot do it without research. And so the reason why I think that IBC requires a paradigm shift, and it comes in multiple ways, this is why we’ve always said, you need to read Nelson’s book. You need to listen to this podcast. Go consume a lot of episodes. You need to take the beginner’s course.

Anyone who’s going to get started with this and wants to join IBC should change their paradigm first. And so to do that, it can’t be a simple little conversation and it can’t simply be a run of numbers. Oftentimes, it involves you telling your testimony. That’s a common paradigm shift advice by the way. You tell your testimony what it’s doing for you. I switched my paradigm and I’m getting these results. I’m really liking them. Maybe you would like them too.

Don’t go into numbers, don’t go into the analytics. Here is some resources if you would like to learn about this new way of building wealth. That’s a normal route before. And I have so much to say. I’m already deep into this conversation. And so I’m going to try to get through this very quickly.

A couple more things to note, and I know I ramble. Nelson Nash, when he wrote his book, the way that he wrote his book, the book called Becoming Your Own Banker, the book that started the entire infinite banking concept as an idea, when he wrote his book, he was very careful to write it in a certain way and the way he wrote it irritates some people. Some people actually like it, but it irritates some people. Because first off, he’s not a great writer. He’s not some educated author. He wrote the way that he speaks and he speaks like a guy from Birmingham, an old timer from Birmingham, Alabama for sure.

So it’s fun to read. He’s a character and his character comes through the book. But he wrote it in a certain way because I believe he fully understood that IBC must require a paradigm shift. And that’s why in his book, he oftentimes speaks in metaphors and he oftentimes does not give answers away with concrete numbers and details. He did not write an IBC treaties on the mathematics behind why infinite banking works.

Now, of course there’s math in there, but what he was trying to paint is that this concept, this idea of becoming your own banker is deeper than just a life insurance policy and it’s deeper than just the benefits you can put on paper because he was trying to pitch it as a new paradigm. That’s what he was trying to pitch. And if you’re going to have someone shift to a different kind of paradigm, they have to think for themselves inside of that new paradigm. They cannot be force fed the new paradigm unless you’re a very charismatic salesperson or unless they’re outside the standard deviation bell curve in which case they’re looking for that type of thing.

So that’s the way Nelson Nash wrote it. He wrote it as a paradigm shipping. He would remind yourself of this metaphor when this question comes up. But go back to this page. If you’re thinking this question and that doesn’t quite make sense to you, go back to this page where we discussed this metaphor and people are like, “Ah, I don’t want to do that.” But he’s trying to help you see that it requires a paradigm shift. He’s not here to sell you on this idea. He’s here to say, this is the new way of life.

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Nate: So a couple reasons why IBC, I put it into the paradigm shifting worldview. It’s got to be a paradigm shift. Number one, oftentimes people already are stuck in certain paradigms financially. And so the retirement idea, the of retirement is a strong paradigm. One that I feel, and it’s not exactly tied to IBC fully, but there’s more on that. In other words, you can retire with IBC too.

But I’m saying that the paradigm of retirement planning or retirement programming is so locked in that for us to present infinite banking, we’re essentially saying to them, they’re essentially bringing their paradigm with them, which is, “How does IBC help me retire?” And while I think that’s a fine thing to say, and while I think that we can certainly help with that, retirement being the ultimate and only goal for money is a faulty premise to build your financial life on to begin with.

And so that was one of the things Nelson tried to uproot when he wrote his book. So in other words, if we were to simply pitch… This is what I’m saying, the difference between pitching an idea that’s inside of your existing paradigm and how you go about that and shifting paradigms completely. I’ll give this as an example. So if we were to say… And IUL policies are sold like this all the time where it’s just a retirement plan alternative. It’s like, “Okay, you are in a paradigm customer that you really want retirement. And you are planning for this concept of retirement in the future. Come to me and I will show you a way to remain in this paradigm and just get better results, better retirement results.”

So people can pitch IBC that way. So they’ll say the IBC plan allows you to grow money without the volatility of the market. When you get to retirement age, you don’t have to worry about market collapses dropping 50% of your balance of your accounts and your 401k and IRA. You can feel safer, more secure in retirement. The policies are going to grow by four to 5%. We can spend off tax-free income from them instead of taxable income from the 401k and they will just pitch and they’ll call it IBC.

But they’ll just simply pitch this idea that it is a good retirement plan alternative. Once again, that pitch does not require a paradigm change. That pitch is just simply saying, we have a different asset to replace your current retirement program assets. And then people decide which ones they want. If you remember the last episode we did too with Holly, episode 160 and we talked about the four stages of IBC commitment in that episode.

I was trying to mention, and I think you can get the vibe, stage number one of IBC commitment actually requires no paradigm shift at all. And that’s why so many people find themselves starting out in that world of stage one commitment because it is what fits their existing paradigm. They didn’t have to change anything to go into it. So when people pitch infinite banking as a retirement program alternative, then suddenly doesn’t require paradigm shift. It’s actually easy to sell. It’s easy to understand the benefits and the cons of it and it’s easy to make a decision.

But Nelson Nash didn’t compare it that way because to him it was about a bigger paradigm that needed to be shifted. A retirement focused paradigm is super involved with people. So that means that they’re going to say, “How does IBC help me retire?” It’s a bridge that we could talk about, but I think if you just call IBC a retirement program enhancer, then I think everyone listening to this show would be quite obvious that that paradigm… Bring IBC to that paradigm will limit what you actually do with it.

And then the same thing goes if we go further. So there’s a paradigm that the rate of return of your investments is the ultimate goal. The ultimate goal is to get the highest rate of return possible in your investment. That once again is a paradigm that comes in. This is also a super common. And so whenever people are pitched IBC, that’s always their first response.

Well, what is the rate of return of the life insurance policy and how does that rate of return compare to the investments I’m making out here? And this is a paradigm that has to be shifted to IBCs, why it requires a paradigm shift because we are now presenting a new idea that the individuals had not thought of before. So if you’re listening to this, this is why you’re trying to convince yourself whether this is good or not. This is why you can feel like it’s difficult to comprehend because you have this paradigm that says, “My main goal in life is to produce the highest rate of return I can on my investments. And I’m not totally sure if this whole life insurance policy is going to produce the rate of return necessary to offset what I could have used the money to do otherwise.”

Obviously, some of you know where this conversation oftentimes goes that infinite banking is not about investing money in life insurance. It’s not meant to be focused on the rate of return of the life insurance policy. It’s an important piece to it. But what I’m saying is that it’s not actually the ultimate paradigm that you’re adopting when you come. In other words, people don’t become, or people shouldn’t practice IBC because they love the rate of return of a life insurance policy.

What IBC is trying to teach is that everything in life is financed. The banking function has its tentacles everywhere. So whether you are someone who is just living paycheck to paycheck and borrowing money from the bank to do various things with credit cards and car loans and different things and paying them interest, or you’re on the flip side and you’re an investor and you’ve got lots of money going through your hands and that are going out to buy different assets, everything requires the banking function to be taking place.

So what IBC is trying to paint itself as is that it is the ideal banking solution for almost every person and every situation. As we brought up in the last episode of the four stages of IBC commitment, there are some levels of commitment that actually are not objective anymore, that they’re subjective which means that not everybody should do them based on your own situation.

What I am bringing up is the idea having a policy as part of your life and borrowing from it to do things can actually create a world in which you’re more profitable than if you didn’t have the policy at all and you were just to pay cash for things is a difficult paradigm to shift to. But it’s the most important one to shift to that the IBC is not selling you a rate of return like an investment would.

See, I’m on Facebook sometimes and you’re getting investment ads. Come invest with me. I’ll give you 12% cash flow rate of return. All of these investment are pitched to investors by promising or hoping for rates of return to take place. IBC is not exactly doing that. It’s trying to say that you can practice IBC in a way that’s going to produce a new way to make money, which is why we call a new paradigm.

So if you try to convince people to accept a new paradigm, you can’t assume they’re already living in your paradigm. Don’t make the mistake of giving them the cliff notes version of the paradigm and expect them to do it. So what we have found, and it remains to be true is that if someone is not willing to actually research the concept, then they’re really not worth spending a lot of time with.

So if you’re not willing to research it, because it’s going to require a paradigm shift, which means you’re going to have to learn about it and you’re going to have to shift a paradigm through that process. Because it required a paradigm shift, you have to allow them to go through the same process that you went through when you came to this decision.

If you try to convince them without that same exact process and you’re wondering why it’s not working, well, it wouldn’t have worked for you in that process. There’s one more step to it as well. The third reason why there’s a paradigm shift taking place is because oftentimes people already have a paradigm. They already have a viewpoint of insurance, of life insurance whether it’s from Dave Ramsey or Suze Orman. So there are many paradigms that have to get flipped around and rethought in order for IBC to be practiced well.

I would tell you as I brought up, that there are different stages to commit to IBC, there’s different levels of commitment that you can practice IBC at. Stage one for sure actually doesn’t require a paradigm shift. So oftentimes this is where people start. And if you don’t know how to help people switch paradigms, then you’re going to have to convince people only with the discussion that would take place in paradigm number one.

But that’s the problem is that even really IBC, if a paradigm has not shifted. It’s why Nelson Nash focused so much on the way you think and people don’t like that. People want to be sold the numbers. People want to be convinced by evidence. And there is evidence out there. But what I’m saying is Nelson Nash was trying to convince people. Actually, it doesn’t really matter what the numbers are or the evidence is if you tried to bring existing thinking into IBC.

I know people don’t like when I talk like this. I also don’t like to talk like this, but I know it to be true. So sometimes you have to trust me that the reality is that a paradigm shift has to take place. For those of you who practice it well, you have shifted a paradigm. For those of you who are trying to learn about it and you’re trying to feel out why is it so difficult? Well, it’s oftentimes, it’s difficult because you are trying to bring IBC into your paradigm.

And that’s not judgemental. I’m just saying that’s what we do all the time. So if there’s a retirement centric paradigm, a rate of return centric paradigm, normal paradigms, and then you try to bring IBC and try to convince yourself, “Okay, I’m only going to do IBC if it helps me retire based on dollars and dollars out.”

So if I contribute 20 grand to a 401k or I contribute 20 grand to a life insurance policy, which one is going to help me retire? That is trying to force IBC to be a retirement program based on the paradigm you’re bringing to it. What I’m saying is I think we wish it was that simple, but it is a more complex subject that requires a paradigm shift to understand where it fits overall in your financial life.

This is one of the reasons why we also call it the gateway drug, by the way. We’ve said this over and over again and I’m loving it, that oftentimes people are attracted to IBC who either are already doing entrepreneurial hands on investment ideas with their money. In other words, they are not doing just the conventional in the box strategies that are pitched by Wall Street and banks and so forth.

They are the ones who have already shot out of the normal paradigms and are investing in different paradigms, so they’re excited to learn about new paradigms. The flip side to be the case too when we bring this up… So also, if you were in the conventional, and this was the first thing you learned about, suddenly you’ve switched paradigms once into this world and now you actually see differently about what your goals for money would be and how you’re going to achieve them. You start to become someone who takes more advantage of the various things that are out there and focuses on the more entrepreneurial style investments, which I feel are the way to true wealth.

That’s one thing we say is once you shift this paradigm… This is why we say it’s the gateway drug because suddenly it opens up a whole new world of ideas that you would not have even thought about if you hadn’t started with IBC. The vice versa could be true as I’ve brought up too, that if you were already in that world, then IBC actually becomes a cool idea because you’re already out of the conventional boxes of paradigms.

So to sum this up, the reason why it can be so difficult to get people interested in infinite banking is because it is not simply offering them a better alternative and remain in their existing paradigm about money and what their goals are and how they should think about things. So the way they think is they will try to interpret IBC as if it was just another solution to their existing paradigm.

It can be. People are doing IBC that way all the time. We have plenty of clients who didn’t switch paradigms who they just think that IBC is a better way to accomplish their existing paradigm. I would tell you that anyone who’s doing that is not going to go very far with IBC. They’re just using it as a tool to accomplish their existing paradigm. And so the reason why it can be difficult to teach other people is because you give them the cliff notes version. You give them what you think is going to convince them with some numbers and some details and some little snippets of what you’ve learned that you think are really cool that you’ve convinced yourself of.

But in reality, you were convinced through the journey of education that suddenly helped you shift paradigm and see that it was actually worthwhile for what it’s saying it’s going to be worthwhile. If you’re listening to this episode and you were someone who is trying to convince yourself whether it’s something to do or not, understand that sometimes if you haven’t made the paradigm shift yet, then it certainly can be difficult to understand why people overcomplicate.

In other words, why don’t they just compare a policy to a 401k and then I can finally make a decision? Once again, that’s based on a paradigm that the policy is a retirement program alternative. It can be, but that’s actually not what we’re preaching either. There’s a reason we’re not, and sometimes it can take a new paradigm to see that. If you think, “Why does it feel so different?” It’s because it is. We’re actually telling people that IBC helps them make money and do things differently than what their existing paradigms we’re trying to tell them they could do, which can make it a bit more confusing.

I know I’ve gone long, guys. I’m so thankful you showed up. I actually had more to say on this, but I rambled too much. But I think that the question is very common. If you want to help people around you learn about IBC, you cannot do it over just a cup of coffee unless you’re a charismatic salesperson.

They are going to need to follow a similar track to which you did to bring yourself to the point where you decided it was a good strategy. A lot of times, somewhere in there, the paradigm started to get softened and you started to see IBC for what it’s trying to be. And you’re not trying to force it to be something that you are looking for money to begin with. And that can only be done through research. Just like any paradigm shift. Any paradigm shift oftentimes needs to be treated delicately, and it can’t just be a simple little solution, a simple little change.

I do know that people are selling IBC that way on YouTube and different things. They’re just saying, “Hey, you just keep doing everything you’re always doing. Just change where the money is going and come into it.” I’m like, “Yeah, well, that’s essentially true.” But then you’re going to see people treat IBC possibly even as well as a way that it’s not supposed to be because they wanted a simple sales process.

And while you can present IBC through a simple sales process and get people excited to do it, I find their understanding level can be quite shallow of the actual meaning behind it. So I love IBC for what Nelson Nash taught it to be. I’ve devoted my life to it. It certainly is a paradigm shift. It’s taken me years to fully be confident in the shift. I hope this lesson has been helpful to you. If you want to talk to me a little bit more about this idea of the paradigm shift, and actually if you’re saying, “Nate, I have struggled talking to other people about it. What should I do?” I’m here to offer suggestions as well.

If you are new to this and you’re trying to figure out why it’s so difficult to comprehend, come talk to me and give me what your hangups have been. You can email me your hangups at nate@livingwealth.com. Email me your hangups. Email me your thoughts. I’m happy to answer them and I think we’ll have a good conversation. This has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Announcer: Listeners, 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 beginner’s course, Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.

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.

Nate: In this episode, I answer the question, does it ever make sense to own a modified endowment contract, otherwise known as a MEC? We’ll dive into what exactly is a MEC, what are the pros and cons of owning a MEC, and under which situations is a MEC desirable? This is Dollars and Nonsense. If you follow the herd, you will be slaughtered. Well, everyone, welcome back to the show today, I’m taking it solo to discuss the modified endowment contract. So we’re going to be a bit technical regarding what a MEC is, how it applies to the concepts that we promote and so forth. So we’re going to go ahead and just dive into some content.

For those of you who are relatively new to the show, who are maybe new to infinite banking as a whole, and this whole concept, you’ll certainly hear this idea of a modified endowment contract brought up all the time. And there’s a lot of confusion around it. I know there’s a lot of videos out there, let’s say on YouTube or podcast done describing it. I don’t know if they all do it justice. I don’t even know if I’m going to do it justice on this show, because I am certainly a why guy. So everything needs to go back to why. The idea of why even discuss what a MEC is, and why it acts as almost a curse word in infinite banking circles, and I don’t think it really needs to be that way.

So I’m hoping to paint a really solid picture of what it is. I know we’ve actually discussed a little bit of a MEC in previous podcasts episodes as well, so we’re going to go ahead and dive in. So for those of you who are pretty new to the idea of infinite banking, which is what we promote and what we love to talk about here in Dollars and Nonsense, the whole goal that we’re trying to communicate is that you can become your own banker through a specific type of life insurance policy, specifically dividend-paying whole life insurance policies issued by mutual companies. And so the infinite banking concept is all about paying large premiums, and by large is a relative term. I mean, for your situation, we’re trying to put in as much money as we possibly can into these policies, then use those policies like a banking system.

And I know it sounds kind of marketing, I’m just saying that’s what we’re doing. So we’re putting a lot of capital into policies relative to your situation, and then we’re pulling money out of those. We’re leveraging the cash values that are produced inside the policies to live life, to make investments, to go on vacation, to buy cars. I mean, anything that you do that needs money, we want to use essentially what we call your own bank, which is funded with through these policies. It’s the source of capital for all the things of life. So that is the concept in a very quick nutshell. What this means to you and me though, is that, obviously whenever you’re trying to build a policy to solve for the banking function in your life, you would want that policy to have as much cash value as it possibly can for every dollar that you deposit into it.

This is where the idea of the MEC even comes about. This is why it’s even worth talking about. This is why we bring it up. This is why it’s common to bring this up, because the IRS, the Internal Revenue Service, has essentially created a formula that insurance has to follow in order for them to call it life insurance. And life insurance, everybody really knows, or if you don’t know it, I’m just saying it’s just common knowledge in the world that life insurance policies have very favorable tax treatment. So life insurance policies will grow tax free essentially, and can be accessed tax free under the vast majority of circumstances. So you can take out a policy loan will always be a tax free distribution, and even withdrawals, the vast majority of the time, are going to be tax free up to your basis in the contract.

So this is not exactly going to dive in too deeply into what that means, but essentially everyone would like to have a life insurance policy with the tax advantages alongside with it. The problem was, especially back in the 1980s, there were people really taking advantage of the tax advantages of life insurance, which they should do. We should take advantage of every tax break that we possibly can. And so people were just doing what was called single premium life insurance policies. And what these were, was they were essentially just individuals dumping large premium dollars, multimillion dollars one time. And pretty much in a single premium policy, which by the way is a MEC, and we’re going to talk about that. Practically, every dollar or premium goes straight into cash value. It starts earning the guaranteed growth of the policy, and producing dividends right away on the full amount. And the death benefit was very small on these single premium policies.

So wealthy people would just dump millions of dollars into single premium whole life insurance policies, and live off the tax-free growth of the money. And the IRS got upset, and they came in. And they were essentially saying, guys, you guys are taking advantage of this. This doesn’t even look like life insurance anymore. This looks like an investment. And so they created this idea that we now call a modified endowment contract, where essentially it’s a new classification for a life insurance policy that does not pass the MEC test. And so now all single premium life insurance policies that were designed back then are now called the MEC. Now of course, if you owned one before the regulations came about, you were grandfathered in. But now if we were to build one under today’s circumstances, it would be called a modified endowment contract.

And a modified endowment contract essentially removes all of the real tax advantages or the main tax advantages from the life insurance policy itself. So it will look like a life insurance policy, it will act like a life insurance policy. You can use it like a life insurance policy, but you just don’t have the same tax favorable treatment of the policy whenever it’s classified as a modified endowment contract. And so we’re going to dive into today what exactly it is, how you can avoid it, what are the pros and cons of a MEC, and then of course in that, we’ll describe the situations that actually owning a MEC and forgoing the tax favorability of life insurance, can actually make sense for certain individuals whenever they want to practice the infinite banking concept.

So the MEC itself, the IRS essentially created a formula that all policies have to pass in order to be called life insurance policies. If they don’t pass this test, then it’s called a MEC. And the idea behind the formula is essentially the IRS says, the death benefit of your policy has to be large enough for whatever premium dollar you want to put in. If you want us to call this thing life insurance, and you want us to offer the favorable tax treatments that everyone can understand about life insurance, there has to be a satisfactory transfer of risk, which is the fundamental definition of insurance. The death benefit is the transfer of risk. The death benefit is the risk of dying early, and the life insurance is going to be paying on a death claim. They’re essentially saying the death benefit has to be large enough for whatever premium you want to pay.

So you can start a policy with any premium amount that you want to. You can start a small policy with a few $100 a month, and you can start a large policy with millions of dollars of premium going in every year. You can start any size policy you want, as far as how much you’re funding into the policy. But what will limit the design of the policy is going to be this idea of the MEC, which essentially says, if you want to put $10,000 a year into premium, the death benefit has to be at a certain level, and it’s a formula. The same thing would go if you wanted to put a $100,000 of premium in, the death benefit would have to be at a certain level above the premium. I wish I could say that the formula was just a simple like, hey, the death benefit has to be 10 times the premium at a minimum or something like that. Unfortunately, that’s not how it works.

The test that is used is technically called the 7-pay premium test, and I really don’t think it’s actually useful to go into what that even means or how that applies, because it really doesn’t matter. But what we can draw from the idea of this test is that depending on how old you are and where you’re at in the process, that the death benefit has to exceed a certain amount. And pretty much, you want the illustration software that you use to build policies to tell us what it is. Because it’s not just a simple little formula, it’s going to change and vary based on your age, gender, and health class. So all that to say, the MEC itself is saying there needs to be a legitimate transfer of risk by the insured to the insurance company in order for it to be called life insurance.

So that’s why the old style policies of single premium style policy where you could just… Let’s say somebody comes up to me with a $1 million in just cash. Back in the 1980s, early 1980s, they could legitimately just write one check for a $1 million, plop it down into what’s called a single premium life policy. All that million would essentially be available in cash value, 90 to 95% of it, and the death benefit would be relatively small comparatively. It would be maybe like one and a half to $2 million of death benefit, which is a relatively small amount of death benefit for the premium they just contributed.

But all that to say that’s what they could do before the 1980s, before the MEC concept was written into law. Then immediately that cash value would start growing and earning interest and dividends in the policy, and you could live on it tax free, that would’ve been great. The problem today is that now to be able to put in a million dollars, there needs to be a satisfactory transfer of risk involved. If you were to write one check for a $1 million, then the death benefit would have to be at a satisfactory level. The problem is carrying a large death benefit just to allow for a one-time high dumping of money, can be not practical. So we’re going to talk a bit about that too, and I know I’m opening a whole bunch of loose ends and not closing them, but I’m going to try to close them as we go on.

So essentially what you would have to do nowadays is make sure that the death benefit is large enough to allow for a million-dollar contribution. If you want to put in a $1 million, then you have to have a death benefit high enough to allow for that, which used to not be a thing, that’s essentially what a MEC is. And this is where you run into it. So what is a MEC? It is essentially a taxable version of a life insurance policy. So I’m going to describe a little bit of that. I’m going to describe how we avoid it. I’m going to describe the pros and cons of it, and then we’re going to end with what situations make sense. So as far as the tax consequences of a MEC, whenever you own a modified endowment contract, the IRS doesn’t tax it as life insurance. They see it as its own, almost like a deferred annuity of sorts, which I’m not going to go… That would be the technical tax classification.

But essentially what it’s going to do is, it still grows tax deferred. Which means, as it’s earning interest and as it’s earning dividends, you do not pay income tax as the money is earned, which is a bit different and it’s still slightly favorable that way if you would compare to let’s say, owning a bond portfolio that’s earning interest. Well, the interest is just taxable in the year that it’s paid. The same thing goes in like a CD at a bank or a savings account. Those types of things will pay interest, and it’s taxable the year it’s earned as interest income. Well, in a MEC, it still receives a tax treatment that’s slightly favorable, and that as it’s accumulating interest and dividends, those are built on a tax deferred basis. So you don’t pay tax as it’s being accrued, as it’s being earned. But the big difference is, you will pay tax when you start to access the funds inside of a modified endowment contract.

Let’s say you had put in a $1 million into a single premium policy, and it’s growing with interest and dividends. And a few years later, it’s $1.2 million of cash value, and you want to come take a policy loan or a simply withdrawal. All of the gains will be taxed in what’s called a last in, first out accounting structure. Which essentially to you and I, means, the million that you put in, you can actually get back tax free, but you can’t get at your principle until you have withdrawn all your interest and dividends. So that’s what last in, first out means. Which means all of the growth, all of the interest and dividends are withdrawn from the policy first, and then you can access your principle. The principle amount is still tax free because it was after-tax money that you put into the modified endowment contract, so it’s only the interest and dividends.

So let’s say you had a $1 million that you put in, it’s worth 1.2 million and you want to pull out 500,000. How that would be accounted for is 200,000 of it, the interest and dividends would be taxable as interest income that year. And then the $300,000 of your principle that you were withdrawing, of course you can get back without tax. But no matter what, you’re going to pay tax on the gains first. Which, if you compare that to a typical whole life policy the way we would normally design it, it’s done completely different. First off, a policy loan in a regular policy is never a taxable event. So you can always access 100% of the funds with no tax at any time, and you can withdraw your principle first before you withdraw any of the interest and dividends.

So you can take out your basis and actual withdrawals, and a regular life insurance policy that passes the MEC test, you can do it tax free. So that’s the main issue with the MEC is essentially the tax consequences that come about if you choose to go forward with this idea. And for the vast majority of clients, it would not make sense to own a MEC by the way. Because the tax consequences, as the account grows and grows and grows, and you start to receive more and more interest inside of it, the tax consequences, which is the con of a MEC, will not overcome the pro of owning a MEC. And so I thought I would also mention though, that it’s not all bad. That’s why I don’t like how the word MEC is used as a curse word in these circles when trying to build banks. Is that it’s not actually a curse word, it’s just a thing. It’s just a thing, and it has a set of pros and cons.

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Nate: For the vast majority of people, the cons greatly outweigh the pros of doing a MEC, but what is the pro of a MEC? Essentially, if you were going to design a perfect banking system like what we think we’ve done with dividend-paying whole life policies, designed the way we’re doing it. We’ve already brought up that you would want as much cash value as you possibly can get per dollar of premium. If you know anything about how these policies are designed, we understand that the death benefit of the policy and the cash value of the policy, oftentimes work contrary to each other. Where if you weigh one side of the equation, you normally get a reduction in the other side.

So what that means is if you wanted to get a big death benefit, if you want to buy a pulse with a large death benefit, let’s say you want to pass on a very large estate or you’re really concerned of taking care of your family if you die. Or your main concern is death benefit, and you build the policy accordingly, then that means that for every dollar of premium, you have a high death benefit, but your cash value will not be as efficient. As the reverse design could be, you come in and saying, I actually want cash value, and I want as much cash value as I possibly can. But in order to do that, you have to build a policy that, for the premium you’re putting in, the death benefit is relatively small or the cash value is as large as you can get it. So that’s what we’re dealing with.

Obviously, for infinite banking, for the people who work with Living Wealth and follow us, everybody’s on the cash value side. You don’t even have to tell us. Some clients I’ll talk to, they’ll say, I want to start a policy, I want to do this, and I really don’t care much about the death benefit. I really want to make sure it’s focused on cash value. I’m like, “That goes without saying when you’re practicing the infinite banking concept, that every policy design is going to maximize cash value and minimize death benefit.”

The reason why I’m bringing all of this up is to say a MEC will technically do that better than anything else. Because by definition, a MEC can be the lowest death benefit you possibly can and the maximum amount of cash value, especially in the short term. So the main pro of a MEC kind of comes in that form, in lieu of getting a huge set of tax advantages and having to fall prey to taxable distributions on all gains anytime you want to access. You get a policy with the very lowest death benefit as possible and the highest amount of cash value per dollar of premium, especially early on. It never outweighs the tax consequences in 99% of the people we would work with. The cons of paying tax on every dollar of gain every time you use it, always outweighs the lower death benefit, and in return, slightly higher cash values.

We want to avoid the MEC as much as possible. So the way you would build a normal policy for infinite banking, let’s say someone wants to put in a $100,000 of premium a year into a policy. What you would do is design that policy to where the death benefit is as low as you can get it and still allows for a $100,000 of premium. That’s what you would want it to do. So you’re getting the least amount of death benefit and the highest amount of cash value per dollar premium that you’re paying. And there’s a lot of different ways to do that. I’m not going to dive in too much into that. There are times though where a MEC can actually make sense. And that’s why I feel like it’s trampled down and pushed down so far, that there are occasionally times where a MEC will make sense to own. And I can think of two primary situations.

One of the situations, practically nobody listening to this podcast is going to care about. So I’m going to fly through that one. The second one though, I think every one of us will end up caring about or know people who would care about it. So the first situation where a MEC can actually make sense is if you happen to be affiliated with a nonprofit organization. So if you are a nonprofit, let’s say you are a pastor of a church, or really you raise money for a nonprofit organization that you love, or you lead one, or you’re on the board, or you work for one, just thought I’d let you know for that very small subset that’s listening to this podcast. A nonprofit can own policies on important people. Whether it’s donors, whether it’s board members, whether it’s executives in the nonprofit, whether it’s a pastor.

And so a nonprofit can, if they have capital, which we’ve had different churches and different nonprofits as clients of ours. Where they’ll have a lump sum of money, and they can actually own a MEC without experiencing tax consequences, because they’re a nonprofit. Which means they’re a tax-free entity, they don’t pay tax themselves. So they have $500,000 sitting in the bank waiting for a rainy day as a kind of a reserve fund for their operations. They could write a $500,000 check into a single premium modified endowment contract, and have all of the money practically hit cash value, operate with it, knowing that it’s technically a taxable policy, but once again, they’re a nonprofit, so that won’t apply to them.

I don’t know if that information’s going to be useful to you listeners too much, but you may attend a church, you may want to pitch them IBC, talk to the pastor or something like that, and it could wind its way down to it like, okay, yeah, for the church who can own a MEC without any consequences, it’d be great. But the second grouping is the one I actually want to spend some time on. The older you get, the more beneficial a modified endowment contract may become. There’s a few reasons for that. So if you start getting into your mid to late 70s, let’s say, the reason why a modified endowment contract or a single premium style policy may make sense is, there’s a few reasons for it, which we found in the past.

Number one, the amount of life left to live is obviously, you’re at the tail end of life, not to be morbid or anything of that sort. But we’re at the tail end of life as we’re in our mid to late 70s. Which means, under a normal circumstance it takes four, five, six, seven, eight, nine, 10 years depending on how the policy’s designed, and depending on how it can be designed, before a policy would even break even per se, as far as premiums paid in, to cash value that can be pulled out when you’re building it to avoid the MEC rules. And obviously the later you get in life, the less time you have to wait for the gains of the policy to make sense. And then there’s not actually a lot of time after that to live, in which case you would experience the tax-free gains inside of the policy.

And so what we find is a lot of people in that stage of life may have liquid money, just savings accounts or brokerage accounts, or various things, maybe they’ve sold a business. So they’re sitting on this money and they don’t really know what to do with it. To them, it very well could make sense to pursue a modified endowment contract, because the tax cons may actually at that time not outweigh the simplicity pro of a MEC, just having a one-time contribution, as well as the immediate availability of capital pro that you can gain instantaneously. So let me back up one more point I forgot to mention. That in order to pass the MEC test, you would oftentimes have to design your policy where you are going to fund it for a few years, you really can’t do what’s called the single premium policy.

If you are 50 years old, and you came to me with a $1 million after selling a piece of property or something like that, we oftentimes would move that money into a policy over a few years, maybe $350,000 over three years. Or 250,000 over four years. We would move it in over a period of time, because we really can’t get away with just doing a single premium for 1 million and have it not be classified as a MEC. And for a 50-year-old who might have 40 years left of life, the amount of gains in that policy is going to be astronomical. That would be a foolish decision. There is no way that the pro of being able to add it in all at once quickly is going to exceed the cons of the tax consequences of the MEC. There’s just no way it’s going to happen.

But if you are 75, 77, 78, then it can start to make sense where you could just take, let’s say as I was bringing up the person with $500,000. They can just write one check into a single premium policy, and immediately keep access to the vast majority of it. It would actually come with a death benefit. Let’s say maybe you write a check for 500, and you get insured right away for 800,000 a death benefit, something like that. So that would be maybe a 1 million, it kind of depends on age. And immediately the policy would be growing in a tax-deferred manner, and you would only pay taxes on the capital that’s accumulating if you were to use it. So what we find is that the older you get, the more it may make sense to own a MEC, because the timeframe for the compound interest to accrue in any asset, of course, policies included, has shrunk down the older you get.

So let’s say that if they lived for 10 years, the policy would’ve grown from 500 to $700,000 or something like that. That’s great. The 200,000 may have been taxable over that 10 years if they’d accessed it. But what I’m saying is the tax consequences may not actually outweigh the pros of being able to get it all in, have it all available in liquid cash, and be able to break even much sooner according to single premium policy. So number one, the policy itself is going to simplify things for that individual. They don’t have a huge time horizon for compound interest to occur no matter what they do, but you want to get as much of it as possible in the time you have left, which a MEC can obviously do that better than any other type of policy per se. And the con of having a taxable situation may not be as much of an issue at that time.

The other thing to note is that you’ll meet with a lot of people who they’re actually hoping at that age, they’re actually hoping that they never would even need to touch the money, that’s their hope. So it’s not that we would discourage you from practicing IBC in your upper 70s into the 80s, but I’m just saying that people we’ve talked to, they’re like, yeah, I would like to put money in here to keep it safe and accessible anytime I need it. But deep down, I kind of hope I don’t have to. If I have to start touching that, that would mean that I’m starting to dip into savings I was hoping not to touch. So you run into those people as well. Some of that may be your parents. For those of you listening to the show, where you have parents who are sitting on a lot of money, a lot of capital, they want to keep it safe.

They want to keep it growing competitively. They want to leave as much as possible to their next generation, and they’re not really even thinking they may need to use the money, but they’re kind of at a loss for where to put it. Once again, a MEC can start to fit the bill in their age, possibly even better than a typical policy that’s non-tax. For all of this to say, a MEC is what we all have to deal with it. 99% of the people we talk to, it would not make sense, it would be foolish to try to create a MEC. We don’t ever create MECs by default, unless you are a part of the population who would come talk to us. In which case, we may recommend a MEC. I don’t think it should be a curse word, it shouldn’t be something so to be avoided at all costs, under all circumstances, at all ages. I think that would be kind of foolish. It is actually a viable tool to fit certain specific people.

There’s a lot of benefits to it. Pretty much in every circumstance, the cons will outweigh it, unless you start to get upper in ages with a large pool of capital, you want to keep safe, secure, growing in a very competitive manner, and accessible at all times, a MEC will fit that bill. And it still produces far better results than any other sort of safe money you can get it. As far as on the you and me level, a MEC by its nature, is essentially a formula that’s been developed by the IRS that’s going to determine how much death benefit a policy needs to have in order to contribute whatever you want to contribute. So let’s say like a $10,000 premium if you wanted to start, would need to have, let’s say a $100,000 of death benefit.

Comparatively speaking, if you wanted to put a $100,000 of premium in, you would maybe per se need a $1 million of death benefit. In other words, the death benefit has to be at a sufficient level in order for the policy itself to be called life insurance by the IRS. That would mean that there’s some repercussions of that. The single premium policy of old can no longer be done by itself. It oftentimes would need to be split up over a few years, to dump in large contributions like that over time, without creating a MEC, is essentially how that would go for the vast majority of us.

I have gone even longer than I had wanted to go on this topic, so I’m going to have to shut it down. I may revisit it later. If anyone here has questions on a MEC, or possibly maybe you’re thinking of your parents or maybe you’re thinking of your church, or you’re thinking of some sort of other nonprofit organization that you would like to chat about this, or you think that’s a cool idea, just go ahead and ask me questions. Anybody here can email me, nate@livingwealth.com. I’d be happy to answer your questions on this, or for the people you’re thinking about. Are you just interested in learning more about how MEC applies to the infinite banking concept and to the policy design? I’d be happy to chat about that with you as well. But it’s been fun. I hope it was beneficial to you. I’m sure we’ll talk about it again, but this was at least a good intro discussion to what a MEC is, and which circumstances it would make sense to own one. This has been Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Announcer: With that, we wrap up episode number 159 of Dollars and Nonsense. Get show notes, transcripts, and other resources by going to livingwealth.com/e159. Listeners, 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 beginner’s course, Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.

Nate: In this episode, I sit down with Ray Poteet, the founder of Living Wealth, and we discuss how he is using his infinite baking policies to produce passive income, mainly through his lending business, and how that has completely removed the fear of retirement from his life. So let’s go ahead and dive in. This is Dollars & Nonsense. If you follow the herd, you will get slaughtered. All right everyone, welcome back. We got an exciting episode today. It’s just Nate today. And I’m sitting down with our founder, Ray Poteet, a popular guest on the show. So it’s good to have you back, Ray.

Ray: Thank you so much. Looking forward to it.

Nate: Yeah, absolutely. And so we’re excited to have him on. And what we love and what I think our listeners love and the people who tune in is that every time we bring you on, there’s something that you’re actually living out that you can share. So of course we try to do that, but we like to target that type of content whenever you’re here. So living this out, as you brought up even before the show, the idea of retirement is still a concern for a lot of people. How they’re going to fund it. We bring this up in the show a lot. Retirement produce a lot of fear and anxiety in people’s lives, whether they are on track to save enough, invest enough, produce enough income. And then even when they are retired, whether they’re going to outlive their income or not. So a lot of things to uncover today. But yeah, just good to have you back. And where are you at right now, Ray?

Ray: I’m in Poipu, Kauai, Hawaii.

Nate: Yes, I thought so. So you’re living the dream. You got business on top, swimsuits on the bottom type of situation. About to go spend some time at the pool.

Ray: You got it. Amen.

Nate: But all that say Ray, let’s go ahead and dive in. I have some questions to ask, but I thought maybe you could give a rough overview of what you wanted to really focus on in this conversation.

Ray: Well, the main thing I wanted people to realize that the control you have and the flexibility that you have and the lack of concern about what the future holds that I’ve noticed over the last three, four, five years as my age has continued to accumulate, which is normal. And a lot of people ask me, “Well when are you going to retire?” And I’m saying, “Well, I’ve been retired, but I’m doing what retired people ought to be doing and that’s enjoying and sharing life and IBC with people.”

Nate: Yeah, exactly right. And so, one of the things that stirred this was you had been getting asked questions by clients as a concern, “How does IBC result in retirement? That is my goal, no matter what Nate says on the podcast, that’s what I want to do.” How does IBC end in retirement? And you wanted to bring into view not only what the policies are doing, but the fact that you have a large lending business that’s being funded from the policies, both with a lot of loans to family members, let alone loans to all the third party entities that you work with.

Ray: That’s true. And every year, even if I didn’t increase loan capacity, or volume, or dollar amount out there, the amount coming back in continues to increase because of the way the policy works. So regardless of inflation, and we do have inflation, I mean it’s all around us, but I don’t think about it because the increased volume of money that is made possible through the banking system and it’s not taxable just to really blow me away. And as I try to share with people not to worry, that’s not what they have in mind, because they do worry. And I’m trying to bring into the fact that we can take away the fear, take away the anxiety, and really enjoy life to its fullest as we get older and with our kids, grandkids, and great-grandkids.

Nate: Okay, that’s great. I wanted to uncover a few other things too in the conversation really. So right now, Ray, if you were to retire tomorrow, how would your infinite banking system be producing the income? So by the way, spoiler alert, Ray Poteet’s not a man who wants to hang up the hat. I know he’s in Hawaii right now talking to us, but that does not mean he’s living the retired life. Of course, he works harder than anyone else at the office spreading the gospel of infinite banking for sure.

But I think if you could paint a picture for what you mean whenever you say IBC can help alleviate the fear, what is it that you’re living out, at age 75, practicing IBC for almost longer than anybody living right now. And there’d be a very few people who’ve been practicing it longer than you, or as heavily as you, especially by putting it in, implementing it into your life.

I’m just curious what you’re experiencing right now through IBC, having been doing it for 22 years, and what you’ve done with it that produces a comfortable lifestyle based on what we’ve talked about. And then I want to ask some follow up questions to that. So I thought we could start there, and then I wanted to dive in and compare that to what were you expecting retirement to be like before you even found out about IBC?

Ray: Okay.

Nate: And what’s the difference between what you’re doing now, and what you could have done just sticking with the normal things that you were doing. But I wanted to start, instead of waiting until the end, I wanted for the audience to hear from you what would it look like right now? And so they can maybe emulate that with their own systems.

Ray: Well the easiest thing is to just live life and allow things to happen, where previously I tried to control things. You don’t control money, it’s spent when it’s needed to be spent, but let’s just talk about a car or vacation. What I mean by this is we have dollar amounts that come in and we have a tendency to use that same dollar amount for the future. Well I can tell you, especially since our current administration’s in power, that in truth, things have all gone up. And I don’t have to think about, well, do I have to get the ticket today? Do I have to purchase something today and try to make, control it? Almost be in a frenzy about not spending too much.

I know that next year, money will increase through my system, whether I make any additional loans or not, just because of the way the policy works. So I don’t have the concern about will I run out of money that I used to have. And that how much do I need? I don’t know? But I know I’ll have more than the next guy. So the real thing that has occurred is that I don’t think about how much I’ve got to control and accumulate to live in the future as I used to.

Nate: Yeah, and I mean, I guess one thing I would ask is why is that? How did you set it up to be sitting at this place where there’s so much passive income coming in, How’s it coming in? Give us a little bit of an inside look into your financial IBC picture as it sits.

Ray: Well, first of all, I did everything that Nelson said not knowing what would happen. So I’d like to just put a caveat in there and say, I didn’t realize it was this good when I did it, I was just following instructions. But the policies, I use a thousand dollars as a foundation coming in today produces 17, $1,800. And I’m talking monthly. So I’ve got a seven to $800 increase with no taxation from the policies. That money that I got came from me loaning money from the policies, whether it be for investment, car mortgages, house mortgages, or some type of loan that I had made. So the individual is paying me a thousand dollars a month, where that thousand then goes into the policy and it increases, which allows me, because I don’t need the total increase to live to actually take the surplus and create another loan.

Nate: So essentially what you’re saying is right now, not only are the policies growing themselves, but the passive income that’s coming into the policies from the loans, you’re essentially getting almost two streams coming in. So in your example, you made a loan to somebody for a thousand bucks. And so there’s a passive income maybe on a mortgage coming back in of a thousand dollars a month that you could choose to live on. But as soon as you put that into the policy, it’s actually producing growth in the policy due to the compounding of the cash values that are happening underneath all the numbers. And so it’s actually turning a thousand of passive income into a policy to produce 1,700 actually of passive income.

But I’m curious too, as listeners are trying to figure this out. Not everyone’s Ray Poteet, not everyone has enough business acumen or contact to build out a large lending business to third parties. But I think what a lot of people can grasp is, well, we’ve got kids, they got mortgages, they got car loans, they got student debt. Until Biden wipes it out for us. Do you think it would work out real well just doing the family? How much do you have going just with your family, based on mortgages and different things, and car loans you have through them?

Ray: Just within the family, including my own home and various things, and car loans, we have a little over $3 million.

Nate: And what do you think the cash flow from that pool of family loans comes back into you as?

Ray: $27,000 a month?

Nate: Okay, 27,000’s coming back in. You’re thinking to yourself, “That’s not a bad lifestyle.” But all of that money doesn’t just go into a bank account and sit there, obviously, it goes back into the policies. So you’ve leveraged $3 million, approximately, from policies that you own, that you’ve capitalized to lend just to family for all the mortgages and car loans and different things that they’re coming to you for. And they’re all paying back money that normally would’ve gone to somebody. And what do you think that’s producing in the policy?

Ray: Just a shade under 38,000 a month.

Nate: Okay. So essentially, that’s the real figure. You got the 27,000 just by switching hands turns into 38,000 due to the growth of the policies. What I hear you saying is that this concept has taken away the anxiety that you thought you would feel.

Ray: No, I did feel. I did feel [inaudible 00:10:45].

Nate: Well you weren’t there yet, so you thought you would be feeling it when you got there, is what I’m trying to say. Whenever you were planning retirement, the fear of it is starting to dissipate. Because back in the day, I’m sure you were thinking on normal lines, the way that everyone comes into this world thinking that I need to build out a huge big nest egg of money, just sitting around. And you’re going to have to sell stuff out of the nest egg to get the income. So that does lead me to a question I wanted to get from you. How did you envision your retirement looking like from 1970 to the year 2000? How did you envision it? How did you think you were going to fund it?

Ray: Well, I was funding it, because I was in the employee benefit arena. So I had a retirement program, like a 401k. It was called the Defined Benefit Pension Plan that I was putting big money in. And it was my objective to have enough money, when I was 65, to have a 80 to $90,000 a year retirement.

Nate: Were you ever worried that you’d get there, is what I’m trying to figure out. The people we talk to are always worried whether they’re going to get there or not. And even when they’re there, they’re still a little bit worried about whether they actually made it or not.

Ray: And I actually see that, Nate, today with people my age and that, that are concerned that some got there, some didn’t, some are still changing things. And my thought that goes through my mind is I wish I could have talked to each one of them 20 years ago, rather than today or something, because of the change. But while that was happening, while the markets were up, I was a very good person mood wise and everything. When the markets were tanking or going down, I was not a person that you wanted to be around. And it felt like the more I looked at the computer screen, the worse I felt whether the market was going up and down. I realized now it was because I wasn’t in control of things. And I couldn’t change it by looking at it, I had to put my money in and actually trust somebody else with my money.

Nate: I think that’s very insightful. I think that we would like to have some sort of control or some sort of say on what actually happens. We like control, we like being in control as people. We would like to have some say in or some control mechanism in place that would determine our ability to succeed. And that is one of the big complaints that we hear from people who are seeking out other ways to do it, or infinite banking we’ve said many times is the gateway drug that opens up a whole new world of financial independence and control. Most people, it’s the first step towards being more in control as you brought up.

Because so many people I think are really just tired of falling prey to external factors that are way outside their ability to control, will actually be the determining factor in whether they succeed or not financially. And so you’re just saying that was you, you were tired of, “I can save as much money as I want, but if the mutual funds that it’s with and the managers of those mutual funds, or the politicians in Washington, or the economy as a whole, if someone declares war and the stock market crashes, the plan is gone. I had no say on whether or not it was actually going to work out by the time I get to the end of the rainbow.”

Ray: And that’s true. As a family, we had a lot of money going through our hands, but we’re keeping such a small percentage. And today, let’s say the amount of money is the same, but the percentage that is being recirculated and reused is many times greater. And that takes, again, the stress off, because you’re able to reuse money, like a bank does. That’s why we call it infinite banking and personalized banking, because you can do things in a family without trying to have to go to a conventional bank or something to get money to make an idea take flight, whether it’s buying a car, or a swimsuit, or taking a vacation.

Nate: Yeah, I agree with that. I mean, I’ve ran some numbers on my own family and it’s been a while since I’ve ran them. My wife and I, we have three kids already. We’d like to have at least one more. I’m certain my wife wants to have at least one more. Let’s just say we end up with four. I would like to be able to fund all of their mortgages when they’re ready to buy a home. That’s what I’d like to be able to do. So I ran the numbers. I don’t know what a starter home’s going to be like in 20 years when my first one starts to be looking into the market to buy a home. But in 20 years, if a starter home today in the Kansas City area, a good home is 300,000 right now, I don’t know? Honestly I can’t remember, but probably somewhere around there. I was saying it’s probably going to be close to 500,000 at that point.

And so if I’ve got four kids, I need to get up to about $2 million of cash value of capital built up. Which of course, I’m on pace to do that and hopefully blow right past that. But all that to say, that would be my goal. And man, I should have had the, I didn’t know I was going to talk about this, or else I would’ve had the file up really quick. But if I was to do the two million with these boys, then the payment is going to be approximately 12 to $13,000 a month, depending on how much interest I sucker them out of. Let’s say it’s 13,000, somewhere in the 12 to $13,000 a month range on a 30 year note to dad. First off, that’s not a bad passive income, just from the family. But then if you consider the fact that I’m going to roll that cash flow into policies over that 30 year timeframe, the total amount of value that it’s going to produce in the policies to me is going to be closer to about $9 million over that timeframe.

So in other words, they’re going to put in 150,000 times 30 years, that’s 12,000 a month times 30 years is 150 grand. So they’re going to give me about 4.5 million in mortgage payments that were going to go to somebody anyway. And I’m just going to take the 4.5 million, roll them in through my policies. The cash value that’s going to end up sitting there after 30 years is going to be more like $9 million of, and so possibly more. I was kind of low balling those figures.

Ray: That’s pretty low I would say.

Nate: I was assuming the policies were not going to be doing that good over that time, and I’d be happy. But all that to say, I’m thinking to myself that’s a totally different mentality than I’m going to put $2 million in a mutual fund and hope for the best. It’s a different idea. And actually, to me, produces a more fulfilling way to make money. It’s not like I’m gambling. It’s not like it’s just funny money that may disappear. It’s like, “Hey, my kids need financing. I would like to be the bank. I would like for them not to have to see the bank, unless we want to.

And I’d like to be able to have their mortgage payments bring value to me and the family. And then, of course, when I pass away, anything that’s left, which is obviously going to be a lot, is going to filter back down to them.” And I’m thinking this sounds more fun to make a lot of money, it sounds more fun and fulfilling than, “No kids, you’re off on your own. Go deal with the banks. I’m just going to sit here, invest money in the stock market.” Wouldn’t care for that.

Ray: It’s a family function, and I haven’t done as well as I would’ve liked. But I enjoy the way our family comes together in a financial deal and realize keeping money in the family means it can be recycled over, and over, and over. And I can tell you that, yes, here’s the first loan or here’s the first house, and we did it with a daughter. Well she’s in their third house now. Each one we’ve taken over has been easier each time. Even though the dollar amount where it was a $206,000 house the first time, the last time it was 670, a house in between there. The same is true with the other children.

So the deals that we have been able to pull off, realizing yes, they’re amortizing a loan, but all the money, interest and principles, staying in the family is great. And teaching them how money works is great. And that it stays there so that they can benefit. And so the legacy, my wife and I will be able to leave, Nana and Papa, is so much different than we anticipated. And we don’t really think about it. It’s supposed to be for the family. Whereas before you’re hoping, “Well this is left, or I got something here I can do…” I don’t even go through those thoughts anymore because it’s all family. And that’s what God really wanted was the family to benefit from your efforts of work and knowledge.

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This in depth and easy to follow course teaches people how to create and profit from infinite banking, you can become debt free, in control, and achieve financial security and significance. Stop letting the banks on Wall Street dictate your financial future. Go to livingwealth.com/beatinflation today to instantly receive free no obligation access to this priceless course on infinite banking. Again, that’s livingwealth.com/beatinflation. Now back to Nate and Holly.

Nate: So why do you like the end game retirement scenario through IBC, through having practiced infinite banking, what would you say are the reasons you’ve enjoyed it so much and you gravitate towards it, as opposed to the more conventional planning that you were used to promote and practice yourself?

Ray: I would say, first of all, it’s taught me how the game’s really played and where I thought I knew the rules [inaudible 00:21:37] previously, I really didn’t. And so it allows me to make and take advantage of situation because of understanding what the end game is, where it really is. Because being the bank, I control the payments, I control the amounts, I control the interest rates for my children and grandchildren, and being able money that they’re going to spend just staying in the family.

And as a child of parents, I love my parents and if I could have helped them by making all the car payments that I had and mortgage payments that I made, I would’ve been happy to pay them, rather than the bank. But that thought had never ever came into our mind because of the programming that went on. Now that is not the situation that currently occurs. My grandchildren come and ask me if they can get a mortgage or buy a car and I love that. And we sit down, we talk about it as a banker, but also as a grandfather. And just trying to put knowledge into them and let them grow from this experience to realize they’re going to get some efforts from their labors, which before it was just going to somebody and gone and the only way to get it back was to go out and earn it again.

Nate: Again. Well it’s certainly really powerful, and as I brought up, I’m not there yet, Ray, but I foresee what it’s like and I’m enticed by it through just the family loans. And obviously, Ray, that’s not the only thing you’re doing IBC with, having done a lot of different investments and deals and huge loans to people who are not family members. But what I’m hearing is, even if you didn’t want to do any of those, just the family economy, staying true to the family itself, and utilizing each other’s money to pay back to each other, that’s enough. Now anything else is just fun money.

Ray: Right. And I would agree totally. We have three daughters, nine grandchildren. Three great grandkids. Pretty much a normal sized family, maybe a little big, maybe a little small, just depends on who you talk to. But I would say within our family, I know one car has already been bought. Two cars this year within the family. So even to just have two family members fund cars based on our models, that’s huge. Well it’s not unusual, like two years ago we had five cars. And that’s not unusual with the other words, we’re just buying cars. I mean, Nate Scott bought a car. Okay, why? He didn’t like the other ones, so he got [inaudible 00:24:21]. Okay, big deal.

Nate: You got to. You got to do what you got to do. But I’m not using you anymore Ray.

Ray: No.

Nate: Maybe I should, but I [inaudible 00:24:30].

Ray: But it’s still family, you’re family. It’s staying in that, whether it’s the Scotts, or the Poteets, or the [inaudible 00:24:41]. Doesn’t matter. The family unit. Whether individually you practiced banking and the control and you enjoyed it and was able to make those decisions. And as you pass that on to your children, my great-grandkids, the wisdom of how this can work and keep families actually above water during weird economic times and not struggle or stress, is well worth it.

Nate: I think you brought up an interesting insight in some ways too, that as the family, as an entire unit starts to practice infinite banking, the amount of legacy that’s being created, if every generation buys into it. For mortgages and different things like that, you own my first mortgage, but then I didn’t need you for the next house, because my system was large enough to handle it myself. All that to say, as a family progresses in time, there’s this huge abundance that’s being created, not only during the infancy stages where everyone’s just going to be using the patriarch’s money. Presumably the patriarch oftentimes has more money. They’ve been around the longest. That’s not always the case. But oftentimes that is the case.

Ray: Until right now, I forgot about your house. Actually, they’re on castle. You don’t think about it as a family unit or what’s going on. I don’t care which family unit benefits from it, as long as the family unit can use and benefit. [inaudible 00:26:10].

Nate: Well, the patriarch would only really need to be used in the scenario while the younger generations are building their systems, with the goal being they would only end up using the patriarch’s money for the bigger, bigger, bigger items as time goes on.

Ray: Or you can actually take the family units and pull the money together for major loans and really make things happen.

Nate: And different investment opportunities to pull together the family and get money working together for different things other than just inter-family loans. But that was the main gist you wanted to get across in the episode was that, “Hey, Nate, if all we could do was share with people, there’s a lot of money in the family in children and in grandchildren and those types of generations that they’re going to be going to banks for. And if you can commit to capitalizing your system to have enough capital to handle a lot of these things, then the passive cash flow coming back into you can produce a lot of income without having to count on any sort of external factor to support the income streams.” It’s just the family supporting each other and profiting from each other, kind of old school. And the thing about old school stuff is, they oftentimes work.

Ray: Yes, it does work. I’m first generation, my children are second, grandkids are third that we got it in, at least at my level now that it can be passed on onward is just, it’s exciting to watch the day that Pania gets his first car, or graduates and gets another car, or buys the first house, or meets his bride. All these things that can be done within the family unit. And families spend money, but it’s the recapturing of the money they spend and reusing it is really the key and the fun part of it, because you don’t have to go out and earn it again to use it again.

Nate: Yeah, because it’s money you’re going to spend anyway.

Ray: Right.

Nate: And I think sometimes we try to paint pictures of IBC, we don’t want it to sound too magical. It’s logical, it makes sense. And so we don’t want it to sound, but it’s almost hard to, we’re so used to things, they’re so ingrained in us, like the perspective of once you get older, you don’t want to be dependent on your parents. And rightfully so. But we’re saying that there is a way for families to work together that can benefit everybody in the family. No one’s really given much thought to banks have kind of filled the role and it’s hard to explain what life is like practicing IBC in a way that people can grasp, because I always like to say, Ray, that there’s hard money, and soft money benefits of IBC. There’s the obvious hard money, analytical, numerical calculation-driven numbers on a screen style benefits that exist inside life insurance policies and how they’re growing and what you can do with them.

Nate: But then there’s the stuff as we’re bringing up the soft side, which is what does life look like while you’re practicing it? And do you enjoy the way life looks like practicing it more than the old way of doing it? In which case, for most people who’ve been practicing for any period of time, and practicing it, right, of course. Some people have no idea what they’re doing. But besides that, if you practice it the right way, no one ever looks back and says, “I wish I hadn’t become my own banker. I wish I didn’t have a growing pool of capital that is fully accessible to me at all times. I wish I was never in a position to fund my kids’ mortgages.” And it’s hard to get across the soft picture without sounding almost salesy, per se.

What Nelson Nash envisioned when he wrote the book and when he created the concept was not just purely data driven benefits, though of course he added those in throughout his book that he wrote throughout this presentation. It was a lot of emphasis on the soft benefit of IBC, the ones you don’t exactly put on a piece of paper. And sometimes that gets lost in translation. I’m super analytical, as you know, Ray, that was one of the reasons we had some bickering early on where I was like, “Now show me the numbers.” And obviously, here I am loving IBC. The numbers are incredible if you give them a chance to show themselves for what they actually are meant to show. But I guess what I’m trying to bring up here is, it took me practicing the concept to become a believer in the soft value that was hard to put on a spreadsheet.

Ray: And it’s hard to explain the soft value until you’ve done it. The hard numbers are easy to explain. They’re hard. But the soft numbers, I share the example, you can’t learn to swim without getting in the water. Well you can’t learn IBC without practicing it. You can just talk about it. It’s no different than anything else. It’s [inaudible 00:30:50] putting it into practice and living it, and watching how it changes your life.

Nate: That’s right. It has the potential to change your life. It really does. And that’s not an exaggeration. Sounds like we’ve spent too much time around the campfire drinking the Kool-Aid, Ray?

Ray: Well we have, but it’s-

Nate: We have.

Ray: … good Kool-Aid.

Nate: It’s good. It tastes great.

Ray: I’m going to keep drinking it.

Nate: Whatever they’re putting in it, let’s keep it up.

Ray: Yeah, it’s good.

Nate: But that was actually the whole agenda, was not, it wasn’t just, “Hey, whole life insurance policies can be used to finance things of life. Let’s show everyone the numbers and prove to them that it’s a better way.” While Nelson’s book, of course, did that on the technical side of things, what he actually envisioned and what the whole movement envisions is actually just a change of perspective on money in a lot of ways, and a change in how you act in a lot of ways. So it’s meant to have a lot of soft value. It’s meant to attract the people who want the lifestyle that it can provide, is essentially, I guess what I would say.

It produces a way of life in someone if you want to practice it. Now, you cannot even want to live that and still practice IBC because the numbers are good, but it really attracts the people who not only want the value numerically, but also the value of this is a way of life. I just want to be my own bank and this is the best way to do it. I never even thought I wanted to be, but the amount of control and different soft value that can come from, it is the way of life that it teaches you to run.

Ray: Amen. Amen. I agree totally with that.

Nate: Anything else, Ray?

Ray: Just to ask people to listen to what was said, may God use it to bless you and help you move forward.

Nate: Exactly. Amen. Well, I mean, to sum it up, Ray, there is something unique about IBC that as someone who spent 30 years in the conventional financial planning world to then switch over to IBC, you’ve noticed a drastic change in the idea of what retirement could be, and how it can be funded, how it can be financed, and the level of control you can have over the end result. And IBCs been the driving factor between that producing a life where you’re not worried about it anymore. And I think everyone can see that. Now I’m sure there’s a lot of ways to do it, and we’re not saying we have the only way per se of feeling secure, financially, but it’s a way that’s tried and true that works and that you can be quite in control of, which is quite powerful.  I hope you guys enjoyed the podcast. Give us a like, give us a review. That’s how we get the word out to more and more people. That’s how the algorithms like us. And so we really appreciate all of our listeners. This has been Dollars & Nonsense. If you follow the herd, you will get slaughtered.

Announcer: With that, we wrap up episode number 157 of Dollars & Nonsense. Get show notes, transcripts, and other resources by visiting livingwealth.com/e157. 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 beginner’s course, Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.

Nate: In this episode, we discuss how rising interest rates will start to impact the economy as a whole, and also how rising interest rates impact infinite banking. 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. Well, it’s great to be back with everyone today on another show. Holly, it’s good to be here. We’re talking about something that’s pretty timely today with the interest rate environment that we’re in. Rates keep going up. They keep going up. The Federal Reserve every single time they meet, it seems like they’re saying, “We got to keep rates going up higher. I got to keep it going up higher.” So we’re going to talk a little bit more about how rates impact or really what to expect, Holly. We’re going to talk about what to expect in the coming months. We’re going to talk about what to expect in the coming years, especially if we’re going to be in a higher interest rate environment for a little bit longer of a period of time.

Right now, it’s longer than… First off, what’s crazy to me is the Federal Reserve back last year in the summer was still saying inflation was going to be transitory. It’s just going to be a little short period of time of inflation. We’ll get in. We’ll get out. It’s the COVID bottleneck and all sorts of things. Well, it was here to stay. It’s way worse because they were too slow to move.

Holly: They were late to the party like we like to say.

Nate: Yeah, they were late to the party. They totally missed it. And when Biden essentially won an election really by promising to give out more stimulus that nobody needed. So we are flooded with money and there was way too much stimulus being sent out, especially in 2021 and with inflation going rampant. So the Federal Reserve says, “You know what? We were late to the party and we’re sorry. It’s going to cause a lot of pain.”

At the very beginning they were saying, “Hey, we’re hoping for a soft landing. We’re going to just try to tinker with this thing. We’re going to try to slowly get inflation under control, but not cause a recession.” But as you and I, Holly, were talking before the episode, that’s never happened yet. So why would they expect it to happen this time?

Holly: Well, and it’s like history repeating itself. Why do we keep doing the same thing over and over again expecting a different result?

Nate: Yeah, it’s crazy. That’s the world we live in.

Holly: And what has happened really and that they were hoping to happen for the soft landing was that by raising those inflations-

Nate: Interest rates.

Holly: I mean, the interest rates, the inflation then would affect employment and you would see some unemployment taking place. But we haven’t seen that happen.

Nate: Yeah. It’s the weirdest timeframe. We had a podcast, I don’t know, maybe it was a couple months ago. I can’t remember when it was launched where we talked about what are the things that are typically hallmarks of recessions? What are the things that you normally see in a recession? A lot of people believe we’re in one. I believe we’re in one by the standard definition of GDP falling for two consecutive quarters.

So the gross domestic product, the actual economic output of the country is slowing down dramatically and it’s going backwards now. So normally people would say we’re in a recession. The stock market would also say we’re in a recession. But one of the hallmarks of recessions is that unemployment goes up. People start losing jobs in recessions and that’s one piece we haven’t seen yet.

The job market’s unbelievably steady and I think the Federal Reserve is essentially saying now they’ve increased rates dramatically super fast, faster than they ever have before. Every time they’ve raised rates, it’s caused a recession. With no exceptions that I know of. Every time they raise rates, it causes recessions. So why do they think they could do it this time? Dumb. But either way, it’s not going to happen. They believe they have some sort of special powers that the world doesn’t know about.

But all of that to say, there’s one piece that’s keeping inflation super heavy right now. And that is the fact that everyone still has jobs. No one is losing jobs. So demand is way out of control. And they’re losing control of it. So we are going to have to cause some pain and suffering to get this inflation under control. We do that by raising rates because raising rates makes everything more expensive. It makes it more expensive to buy homes, makes it more expensive to by cars. Makes it more expensive to do anything in this world.

On top of that, the big key is corporations, it makes it more expensive for them to raise money. So when people can’t really raise money or it’s too expensive to raise money, there’s not enough liquidity in the world and people start losing jobs, people start getting laid off.

We’re seeing some of that, especially in the technology companies, but we’re not seeing that in the economy as a whole. And so here we are, Holly, as we brought up a few weeks ago, this raising rate environment is… It’s going to keep going. Now, essentially, they’ve stopped even talking about a soft landing. They’re essentially saying, “No, we’re going to cause a recession. We’re going to cause people to get laid off. People are going to lose jobs.” And that’s when crap hits the fan.

Holly: Exactly. People get upset and they’re like, “What are you doing?” But it’s our federal government causing it. Here, as the Federal Reserve raises the rates, just be aware they have to have people lose their jobs because of the influx of money in the economy and because the demand is still being met and people are still buying. They can’t have that happen or else they-

Nate: Yeah, you’re right. So they can’t get control of demand if people still have awesome jobs. That’s exactly right. So yeah, if we can still buy stuff, stuff is going to keep going up. So we could talk all day I guess, of just the pain situation that we’re in with inflation and what’s about to come because of it all thanks to Uncle Sam and the bureaucracy that exists. So we’re kind of beating a dead horse there. But I guess what I’d like to say as far as expectations go is understand that risk based assets were super overpriced.

The stock market especially was super overpriced. It’s already had a huge correction. I think it’s down 20% for the year as a whole. So it was super overpriced. But no one cares to put money in risky things when say for instruments like bonds and treasury bills and different things start paying real interest rates, start paying real money to save money there.

So you’re going to start seeing more influx out of the riskier areas, moving more towards interest rate bearing things like money markets, treasury bills and all sorts of things like that. Bonds and so forth, which is going to cause more pressure on the stock market. But then when people start losing their jobs, it’s going to cause even more pressure because now people are going to be selling 401ks, mutual funds inside 401ks because they got to survive. It’s always a hallmark of what happens that people start selling their stuff to live during a period of unemployment. And demand goes down because the stock market is also a supply and demand gain.

So it goes up in price because people buy stocks. But if you have people selling stocks cause they lost their job and they’re no longer buying any because they lost their job, they don’t have any income. I mean I think that you’re going to see a 2008 real great recession style scenario. I would be surprised if you don’t. Right now stocks are down 20%. I think it’s probably going to get down to 40% before this is over with. It’s times like this where people start turning to infinite bank and droves.

Holly: Or what’s the other option? What is another safer method that we can do it if we don’t want to tie up our money in a bond for years. You don’t want to tie it up in a CD where it has to stay there and you can’t really access it or use it unless you lose that interest. So really the reality is you have to start thinking of what are my other options other than these safer areas to invest in something that’s still going to give me access to my money but still is going to be beneficial where it’s still growing even if I’m using it.

Nate: Yeah, exactly right. I mean there’s so few… As we’ve said on this podcast, we are Kool-aid drinkers. We love infinite banking. We’re biased. Take whatever you want with that. But I would say that it’s so rare to find an asset that is good in good times and is good and bad times. It’s been here for a long time. Dividend paying whole life policies have been great when times are good and they’ve been great when times are bad. And that’s rare to see.

Now, the fact that you can leverage the money you have stored up in policies to buy cheap discounted assets after recessions is really where a lot of wealth can be made. I mean, there’s a lot of people who lost a whole bunch, lost everything in the last great recession in ’08. A lot of people are multi- millionaires set for life because of what they did during that crisis. A lot of times it depends on how much liquid capital you have to take advantage of the opportunities that are going to present themselves.

If all your capital is stored up in those assets that are losing value, there’s no way to save yourself. You’re just going to lose money. You can’t take advantage of it. You’re falling prey to the poor situations. So it’s rare to find an asset that grows really well in good times and grows really well in bad times. I think we’ve got something pretty cool.

Holly: And Nate, I think, having lived through the ’08 recession and stuff like that, I’m realizing that because we drink the Kool-Aid, I’m going to say or because I have these infinite banking policies, I have my banking system in place, it didn’t really affect anything in life other than, yes, it’s more expensive. But the reality is the same thing I had back there in ’08 is still performing well right now today, irregardless of the interest rate that takes place, it’s still going to keep improving and it’s still going to give me the ability to have liquid asset and to be able to do things that I wouldn’t be able to do. You guys have to get ahead of that curve ball. Right now the federal reservist said this is going to happen.

Nate: We’re going to cause pain.

Holly: We’re going to be doing this. We have to keep raising the interest rates and people are going to start losing your jobs. So you have to start thinking ahead or futuristic to get ahead of it or else you’re going to be in the majority that is like, “Oh my goodness, this just happened.” Now we’re the ones selling all our stuff at a loss just to be able to survive.

Nate: Yeah, I agree. I mean, that’s why we called the show Dollars and Nonsense, if you follow the herd, you’ll get slaughtered. There’s danger all along the financial world. Most time people don’t talk about it. Most time people just fall prey to it. I mean, it’s a shame. But I think all this to say the economy is destined for some real trouble. We haven’t even started to see it yet. I mean, it hasn’t even totally been priced in yet, but I’ve read some articles, different things where the pros are essentially saying right now the market, all the leaders of the professional investors are pricing in the fact that the Federal Reserve will be starting to lower interest rates again next year.

They’re all pretty much saying if that does not turn out to be true, the stock market is still dramatically overpriced. So we’ll see what happens. We’ll see if they can get inflation under control without causing a massive sell-off and massive unemployment. We’ll see.

Holly: But, Nate, they’ve been doing this for a year and nothing has actually happened in regards to the economy. Yes, I agree. We’re in a reception, but nothing’s happened with people losing their jobs. People are still being employed and there’s still so much money out there that they really don’t have an option other than to be more aggressive. So that’s why we’re really talking about this is what are your options to prevent this from dramatically impacting you and your family and how do you keep your money safe during this time? I mean, Nelson wrote a book on it, right?

Nate: Yeah.

Holly: The banking concept. And back then when he wrote the book, the dividends and all that from the insurance company were a lot higher. But you could go to the bank and get a CD for 5.5%. So you had way better options. I think you’re going to see that start coming into play and that’s why you want to be ahead of it instead of behind it.

Nate: That’s right. I remember a story Ray told me too, back when he was hanging out with Nelson. I think they were all in a trip. I want to say maybe in Italy or something. And it was during the great recession, I want to say. Don’t quote me on this people, but-

Holly: They were in Vienna.

Nate: Yeah, okay. They were in Vienna and the world was going down the crap hole. Everyone was losing that ton of money and they would just wake up jokingly stretch and just say, “Ah, my cash values went up today.” I was like, “That’s the life you can live.” Right now, whenever you’re an infinite maker, you almost look forward to recessions. You’re like, “Yeah, man, I hope it happens.” Because you’re like, “I want to-”

Holly: I’m going to help my policy.

Nate: I know. I’m going to go out and I’m going to have all this money. I’m going to go take advantage of things. And so it doesn’t mean that we are not looking for opportunity beforehand, but it’s like opportunity is all over the place when people are afraid.

Announcer: Is the money in your bank account losing value instead of growing? Are inflation and taxes going to get better or worse? Conventional banking makes the bank rich using your money and pays you little to nothing in return. We believe in challenging the status quo. After all, most of those conventional tools only seem to make someone else rich. Let us show you how to beat the banks and inflation.

Visit livingwealth.com/beatinflation. You’ll receive instant access to what we call the beginner’s course. This in-depth and easy to follow course teaches people how to create and profit from infinite banking. You can become debt free in control and achieve financial security and significance. Stop letting the banks in Wall Street dictate your financial future. Go to livingwealth.com/beatinflation today to instantly receive free no obligation access to this priceless course on infinite banking. Again, that’s livingwealth.com/beatinflation. Now, back to Nate and Holly.

Nate: So I guess that does lead us to the next part of the podcast is we’ll often get questions, well, what does raising interest rates in the economy, what does that do to policies? How does that impact IBC? Doesn’t it at all… And Holly, you already kind of started to allude to that too, that typically some things you can expect during times of raising interest rates and a higher interest rate environment that’s been different than what we’ve lived for the past 10 to 15 years. Because interest rates have been incredibly low since 2009. Artificially low.

We’re just now getting back to a normal interest rate period in the history of… I mean we’re not even there yet, actually. We’re still low. But all that to say, so how does rising interest rates impact infinite banking? How does it impact policies? One of the big ways, Holly, is that, which obviously we talk about all the time, is that in times where in rates are higher, dividends from the insurance companies are also a lot higher, which makes logical sense.

If you go back to the basics of IBC and you understand that we’re plugging into a company that’s essentially just a big bank. That’s what you say, describe all the time. The only difference between a mutual life insurance company and a bank is the sign out front. They have the same business model. They take other people’s money. They lend it out to other people. They get paid interest back in and they credit some to their deposits and they make a profit.

Obviously, what we’re after and the reason why you only want to use mutual insurance companies is because we want the profit. And so you buy a policy from a mutual insurance company, you become an owner of the company. And it’s only owned by US policy holders. That means all the profits that the company is able to make trickle their way down in the form of dividends to policy holders.

That doesn’t go anywhere else. It only goes back to us. There’s no third party taking advantage of it. So all this to say though, it does seem logical that as rates go up and the insurance company is able to invest this big gigantic pool of money, which is what the insurance company be really is just a big giant pool of money. They’re able to go out and invest it for higher yielding investments. Because the main thing they do is lend money through the form bonds, mortgages, US treasuries, all sorts of things like that.

Higher interest rates will start to impact the profitability of the companies. They’ll become more and more profitable when they can get higher yields on their investments. So that would say, Holly, that’s pretty good news for us.

Holly: That’s good news. But I think the same hand, Nate, we want to say, “But it’s not instantaneously.” Just because interest rates are going up, doesn’t mean that instantly your dividends are going to go up, that it takes a period of time. Just like when we’re in a recession, it takes a while to get out or as we keep raising inflation, you start to see what happens. The same is true of the life insurance company that it is not instantaneously, “Oh, tomorrow my dividends are going to go up.

Nate: That’s right. You’re exactly right. So that’s a good point and that’s a point I wanted to make too, Holly, was that your policies are not tied to the interest rates. So the interest rate is going up, interest rate is going down, that does not have a direct impact on anything inside of your policy. What it does have an impact on is the profitability of the company, which shows up in the form of our dividends every year. But as you brought up, it’s a lagging thing.

So as interest rates go up, the insurance company still has all of these old loans, all these old bonds and all these old things at the previous interest rates, so the low rates. And so they saw have the majority of their account. It’s called the general account of the insurance company. The big investment pool of money. It’s still all at the low rates. They’re slowly replacing it with the higher rates. It’s not like as soon as rates go up, well my dividend next year is going to be bigger.

I mean, it may or may not, but that’s not the real… It’s not a direct impact. So it’s going to take some time for the insurance company profits to start realizing a higher interest rate environment. And the same thing is true in reverse as well, Holly, at times of… Back in Nelson Nash’s day when he wrote the book that started this, dividends were way higher, but he wrote the book in the year 2000. What were interest rates back in 2000? I mean, as we already brought up, he compared in his book practicing IBC to practicing it with just a CD at a bank that was paying you five and a half percent.

And of course IBC blew it out on the water. But that’s what we’re saying is in times, why was the policies in the year 2000 look so incredibly good? When you compare them to today… Which they still are great today, but I’m saying why were they so much better back then? Well, that’s because you could get five and a half percent out of a CD. What does that tell you that interest rates were back in the year 2000, significantly higher. So you would expect dividends to a bench significantly higher than as well. So all that to say, as rates rise, it actually makes infinite banking I think a little bit stronger, which we’ve all been hoping for, which we publicly said as well that being in a super low interest rate environment, everything is still great, but it’s like, “Man, we miss the days when we could get actually high dividends on the policies.”

I was having another thought, that’s why I kind of stopped there. The other thought was also, it’s actually rare that you can get loans for things like cars and homes for less than the policy loan rates at the insurance companies. That’s actually rare historically. But we were in this period of time where banks were offering such cheap money for things like cars and homes and so forth that it would actually sometimes make more sense just to use the bank’s money as opposed to your policy to go do something.

We’re still proponents of, “Hey, if the bank is going to offer you extremely cheap money, go ahead and take it. Use the money.” Some people think that there’s some sort of magic about the policy loan. That’s not really true. But it has been true historically that having policy loans has been cheaper than most other types of loans you can get. So now we’re seeing that too. It’s actually cheaper to get a policy loan to buy a house with all cash than it is to go borrow money from a bank. That’s actually been the way it’s normally been. That’s just not what you’ve seen lately.

Holly: Well, you haven’t seen it really, Nate, in the last 20 years really. Or really 12 years. I mean, you look at ’08, right? You’re talking about 10, 20, 12 years, 15 years where it hasn’t actually been that way. So now you’re seeing it revert back to that. And that is what really helps even with the policy loans. Because even right now if the interest rate went up on the policy loans, most of the time right now it’s still going to be lower than if you had to go to the bank and use their money. It’s going to be a lot harder to get the money from the bank than it is to be able to borrow from your life insurance policy.

Nate: So it used to be that’s always the thing is that policy loans have some amazing benefits besides just the interest rate, partly because it’s no credit, no application, no anything, no hoops whatsoever. You just ask for money, they send it to you. Whereas if you do go to a bank, you got to kind of do some different things. Go through the financial Proctology exam to get the money. So some people would still choose to use policy loans, even if the bank was offering super cheap money for different things. They would just pay cash for a real estate investment property just cause they didn’t want to deal with the bank at all, even though the bank could have maybe offered them cheap money at the end of the day. Now though, as you brought up, now it’s not even really a question. You should just use policies to fund it all.

Holly: Yes, absolutely. It’s not even a, “Can you compare and contrast what I should do?” No. I mean, it’s always better to use the policy loan right now.

Nate: Yeah. Pretty much.

Holly: And I’m qualifying it, but it is better right now. Your money still grows and all that and you can get it relatively, and I say relatively, but seriously you can get it quite quickly.

Nate: A few days, yeah.

Holly: Versus how long am I going to have to wait to get this money from the bank and what am I going to have to disclose to do it?

Nate: That’s right. One thing I also like to say too, Holly, is that infinite making is not about the interest rates. Nelson Nash talked about it all the time and it’s hard to get people to believe it. It’s not about the rate of the policy loan. It’s not about the internal rate of return on the policy. It doesn’t only work in times of low rates. It doesn’t only work in times of high rates. It just works because it’s built on a concept. And we don’t really have time to delve into every little detail. Go read Nelson Nash’s book if you haven’t yet and read it multiple times to really get what we’re trying to say here.

But with that being said, I guess what I was trying to say is some people get confused because we may be in it like it’s been a confusing thing to them that I could go get a mortgage for 3%. Why would I borrow money from my policy to buy a house when I could get a mortgage at 3%? And it’s been a bit confusing. They’re like, “Does that mean making banking doesn’t work anymore?”

And what I’m saying is, guys, you can’t use short term things that are happening in the environment to determine whether a strategy makes sense or not. So in that moment we could say, “Well, yeah, just go ahead. Anybody who’s going to offer you 3% money, take as much of it as you can get because that is not a normal scenario.” That was a federal reserve induced scenario that we are unwinding right now. We’ll see what happens.

But infinite banking has never been about… It wasn’t about the policy loan rates being cheaper than money you could borrow elsewhere. That wasn’t what it was about. It wasn’t about the internal rate of return being greater than a policy loan rate. That’s not what it was about. Sometimes that’s happening, sometimes it’s not. But the strategy is what we’re trying to implement.

So rising rates impact the economy extremely negatively because it always causes a recession. We’ve never once not done it. Interest rates go up, recessions are the next thing you would expect. Very painful. Infinite banking though kind of operates as a contrarian idea. Once again, that’s why we call the show Dollars and Nonsense. Once again, it’s a contrarian idea. It looks even better when other things start to look bad.

It looks good all the time, but then it looks even better when everything start to go bad. So that’s what’s happening when enter rates started to go up in the insurance company world. It’s going to take some time, but it starts to settle in at a higher dividends when rates go up, which we enjoy quite thoroughly. So it is like you can actually look forward to it because at some point you may be able to make so much money tax free in your life insurance policy that you wouldn’t even care to borrow from it to go invest in something else that would be even more risky. 

So right now that can make a lot of sense because of what the Federal Reserve was doing. With low rates, it was assets were going up like crazy. You could borrow money to buy Bitcoin. You could borrow money to buy stocks. You could borrow money to buy real estate from your policies and make a lot of money. But at some point when rates get to a certain level, there’s not even really much of a purpose to get to that risk because your dividends and growth of the policy can be seven, 8% tax free like it was in Nelson Nash’s book, like it was back in the 1980s, 1990s, early 2000s.

We just haven’t been there because of the low interest rate environment. That doesn’t mean infinite banking isn’t as good now. Once again because you could get a five and a half percent CD back then. So it’s always relative, but it’s always relatively better is the whole point of Nelson Nash’s book.

Holly: I think too, Nate, the process too is… And we say this a lot. We’ve said this, it is a concept. Like you said, it’s a process. It is not the investment, it’s the process of what you’re going to use to be able to do other things. So you have to start somewhere. If you don’t have a policy, you can’t even do what we’re talking about because you haven’t even implemented the concept in order to be able to take that next step. And that’s what we really want to encourage you guys with as the interest rates are going to rise, that you guys start thinking, how can we get ahead and what can we do to not only protect ourselves, but to protect your family or the people even around you so that it’s not as a dramatic impact versus all I’ve got is 401k, all I’ve got is these stocks. Because what you’ve seen happen is people start panicking and they start selling those things off and then they have even less than they had before when all of it’s said and done.

Nate: That’s right. So I guess a couple of takeaways from this episode would be expect some more pain and misery. We haven’t even entered the fullness of the recession. We’re still teetering on the edge. We’ve gotten a little bit of a flavor of it. But if things stay this course and the Federal Reserve really does have to start impacting employment in order to get rid of this high level of inflation we’re in for, that’s when stuff gets fun. So that’s when stuff is going to… We’re going to learn a lot of things in that time. So because of that, now might be a good time to consider turning into more safe environments.

If you have money in the stock market, if you have money in retirement programs, you might want to move out of growth funds and mutual funds, different things into safer places. You might even want to start transitioning more money into things like policies that would be protected not only in this environment, but also in every environment.

And that we could then leverage those out to take advantage of the opportunities that I do hope start to surface once the recession actually hit starts to impact asset prices even more dramatically. So that’s one takeaway. The other takeaway is just to understand that raising rates also impacts IBC. It’s not a direct correlation to policies. Policies are not tied to interest rates. They grow guaranteed and they earn dividends.

So the dividend function benefits from higher rate periods like Nelson Nash wrote in his book and so forth. When rates are higher, you can save money in a bank can earn high rates of interest, but the policies are also proportionately better than that because dividends are also much higher. It’s always more profitable to be the owner of a bank than it is to be a customer of the bank. In a nutshell, someone asks, “What’s infinite banking?” It’s always more profitable to be the owner of the bank than it is to be the customer of the bank. I’ll leave it at that.

But all that say, infinite banking is affected by it and normally in positive ways as rates go up. And so you can expect that. You don’t expect that in the next couple of years. It would have to be kind of a sustained environment where a lot of the old bonds at lower rates start to turn over and start to be reinvesting to higher rates. And so if the cash flow and the insurance company starts going up then dividends started to go up. That’s what we’re all hoping for. That may cause some pain to those who are only in volatile areas. Their pain is our gain. So we’ll enjoy it. Anything else, Holly, before we close it down?

Holly: No, you summed it up perfectly.

Nate: All right. That’s cool. Well, thanks so much for joining us. As always, guys, we’d love to get this word out. If you enjoy this podcast, go ahead and subscribe or like it wherever you’re consuming it, whether it’s on YouTube, whether it’s on Apple Podcast or Spotify, wherever it is you’re getting it, if you would like it, if you’d leave a review, if you’d leave a rating, that would really bless us. That’s the best way to get the word out and best way for us to grow the brand. So we’d love to have that. This has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e156

Announcer: Listeners, 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 beginner’s course with Ray, Nate and Holly made just for you. Again, that’s livingwealth.com/beatinflation.

Nate: In this episode, we discuss how Warren Buffet is essentially practicing the Infinite Banking Concept on steroids and how you can mimic what he’s doing on your own level through what we will call financial synergy. 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, well, everyone, welcome back to this week’s episode. We’re so glad you could join us. As always, man, we appreciate you. We hope we’re producing valuable content and if you’re getting things out of this, really the best thing you could do for us and as a show would be to rate and review the podcast wherever it is that you’re consuming the podcast at. That’s the number one way that podcasts get noticed and the word gets out there, so if you haven’t yet left us a review or a rating of any kind, man, we’d really appreciate it. But let’s go and dive in today, Holly. We have some real fun, I think, and real fun conversation. Something that actually came up when I was meeting with somebody and we were just talking about it and I was thinking to myself, this really sums up what we’re doing really well in a way I hadn’t recognized before.

So I called it synergy, financial synergy and really where we’ll go with this is really how infinite banking is all about synergy, but if we take a step back, that’s actually what business is all about. So I thought we could dive in a little bit and talk about how essentially a guy like Warren Buffet is doing what we’re doing on, of course, on a bigger scale with a little bit different dynamics than what we can do. But nonetheless, we’re really… I guess things like this, Holly, are things I like to bring up to say infinite banking is not all that unusual in the world, if that makes sense. The reasons why it works are also the reasons why other things also work. It’s the same ideas promoting and that are good business practices that people would adopt anywhere. They can also adopt while practicing infinite banking and that’s why infinite banking works the way it does, if that makes sense.

Holly: It does make sense and I think, Nate, the reason you call it financial synergy is, a lot of us don’t think we have the ability to create that financial synergy we’re going to discuss today when actually it’s not that hard to create it. You just have to have the right product and the right process in order to be able to do it.

Nate: That’s a really good point. You’re exactly right. And I guess one of the reasons why I think it’s going to be a cool thing to talk about, which we need to dive in, but why it’s going to be a cool thing to talk about is exactly because people who aren’t in business or even those who do, we rarely think in terms like this. So I think it’s a good perspective to have. I think it will help in life in general, but certainly as you practice infinite banking or are learning about this process of infinite banking and how it works and why it would make sense for you, I think this does a really good job nailing it down. It sums it up in a really great way. So should I dive in, Holly? Let’s talk about it.

So financial synergy. What do I mean by that? And I could use some examples, but essentially business is always about some sort of synergy involved, or as people are growing businesses, a lot of times there’s some sort of, this thing called synergy where two parts when added together can make a brand new thing that’s way better than either part by themselves. I guess that would be a good definition of synergy, I guess. Adding something can make both of the things better. That’s pretty cool.

And businesses always deep down is trying to figure that out. So it’s one of those things like if you are a commercial real estate investor, and you’re looking for deals, you’re trying to find deals and that’s your business, you’re a real estate investor, it is not very uncommon and it’s very logical for that real estate investor to decide, you know what? It would make sense for me to actually just go get my commercial real estate license and become a real estate agent. I’m already doing all these deals, I’m already buying lots of properties, I’m already selling lots of properties, there’s a lot of movement going on in my life as a commercial real estate investor. So many of them would say, you know what? It can make sense for me to just go get my real estate license and then it’s called synergy.

I’m already going through all the work to find all the deals, do the deals, and I’m hiring someone to be a part of it, but I can go ahead and do it. And then on top of that, some people will even say, well, you know what? Me and my colleague here, and we jumped into deals together at various times. You know what? What if we actually started a real estate agency together? We got enough deal flow coming in, we could bring a team in and really make this bigger than what we could. So in other words, they wouldn’t just have a real estate agency, they wouldn’t just have a commercial real estate investing business, but add them both together and each one can be more profitable than without the other piece, if that makes sense. And that’s synergy.

And you see it happen all the time. You see it happen when a bookstore opens a coffee shop. You see it happen. Because people love to drink coffee while they read books. Okay, let’s do that. They could go open a coffee shop and they could go open a bookstore all by themselves, but if they bring them together, they have this whole new thing, much more easy to manage. There’s some synergy available and we could keep going Holly. But big business is buying other businesses. It happens all the time. You have these business conglomerates where you’ll have one group owning many other businesses and a lot of times there’s some synergy involved in the businesses where they’ll expand. You’ll see Facebook buying some software company. Why would they do that? They’re a social media company. Well, of course, they use software and, of course, someone’s got to design it and that company’s already profitable and has customers and we need to also design software all the time. So let’s go buy them.

We’ll get access to their software. They’ll have a huge client in us, Facebook or Meta or whatever. And so we’ll be able to pour money into that company and make it profit just with us on top of the fact that they’ve already got customers. So it’s called synergy. It’s when forces are joined together to create a new thing that is better than each individual piece by itself. And essentially, Holly, where I’m going with all of that is that we were talking about Warren Buffet with a client. He gets brought up every now and then. He is pretty cool dude. Essentially his whole business is based on this idea of financial synergy. She goes out and buys whole businesses. He buys businesses that are, of course, valuable in of themselves. They can get for a good price. But then he also, he loves businesses that if you own one side of a coin and you can buy the other side of the coin, things are going to work out really well.:

And that’s one of the reasons why he talks about how much he loves owning GEICO, the insurance company. So Warren Buffet or Berkshire Hathaway owns GEICO. They talk about how much they love owning an insurance company. They talk about it all the time, because they say, well, the insurance company itself is profitable, but it also is just this big gigantic pool of money. That’s what an insurance company is. They have a lot of money. That’s all they are. They’re just big banks. They’re selling financial products. In other words, an insurance company’s product is money. Just like a bank’s product is money, insurance company products are money. They’re not selling gadgets and software or more tangible things. They’re selling money products, selling contracts, so forth. All that to say, it’s just big business. He says, well, the business itself is profitable, but by us owning the insurance business, we now have an automatic way to finance things our other businesses need. So we can own the bank that’s going to finance these other businesses.

So the GEICO has all this capital, they have to put money to work mainly through loans like most insurance companies. And he’s saying, well, we have a whole bunch of businesses that could use money. So why don’t we have GEICO lend money to our businesses? They’ll pay GEICO back the interest and we will become a bank through this insurance model. And so this is what it is. He bought GEICO because it’s a good business, and it opens up some opportunities to create some financing opportunities for his other businesses, which is really cool. And lo and behold, Holly, this is exactly what we’ve been saying infinite banking really is all about. Infinite banking is all about this idea of synergy. The idea is the policies themselves are valuable assets just like GEICO was.

The valuable asset is going to grow, but the concept is not exactly just, hey, you should buy an insurance policy, or it’s not like Warren Buffet, hey, I just want to buy an insurance company. It’s what the policy or the insurance company, if you’re Warren Buffet, what it allows you to do, how working with the policy in other areas of your life can create a profitable scenario that you can’t really find elsewhere. So that’s really what it is. IBC is all about synergy. Why we say Warren Buffet’s doing it on steroids is mainly because he doesn’t have to buy life insurance policies. He can just go buy the insurance company. So good for him. Okay. So I won’t be able to buy the insurance company, but what’s the next best thing? That’s what we can do.

Holly: Yeah. And the next best thing that we’re talking about is most of us would never be able, Nate, to buy a bank, to buy an insurance company. We couldn’t do it. But what can you do? You can buy a whole life insurance policy with a mutual company, because then now you own a share of that company, that’s the getting started. That’s allowing yourself to create this financial synergy to do other things with your money other than to just park it in the bank somewhere, wait to be able to use it.

Nate: That’s exactly right. So really what we’re saying is, and Nelson Nash said this beautifully in his book 2 book, everyone should be in two businesses. You should be in the business that you operate in, that you make money, and then you should be in the business of financing your operating business. We’ve always said that, but that’s essentially what we’re talking about. That’s financial synergy. That’s exactly what Warren Buffet is doing. That’s the whole reason that he bought GEICO and loves insurance. And now he owns other insurance companies as well, but GEICO’s the household name. I think he owns like American General and some other, I think he owns a re-insurance company, which is a whole next level craziness, financial wizardry can go on there. But all that to be said, Nelson Nash was the one who said this 21 years ago. He said this before Warren Buffet even bought GEICO.

He says, the idea is you can use insurance to finance other things and you can be in two businesses at the same time. You can be in the business of operating a business, and that business can receive all of its money from your banking business, your financing business, which happens to be on the you and me level. The best way to do that, that we know of, is to open up a whole life insurance policy. That’s the honest truth. You could go open up an actual bank or an actual finance company and raise money and get a banking charter and do all sorts of things like that, or try to open an insurance company. That would be very difficult. And what’s funny, Holly, is he actually goes through all of that in his book if you remember. He goes through the whole thing.

And his book’s not long, it’s 80 pages. And so he’s wasting three or four pages describing all the painful process you’d have to go through if you wanted to open up an actual bank. And he is like, you could do that. You could try to raise $20 million, you could get a banking charter. You go through the years, you can go through all the regulations and fees and so forth, and you could make it a full-time job saying, I want to get in the banking business, it’s very profitable. I’m going to go open up a bank. And it would be more profitable for you to open a bank than it would be just to use dividend bank, whole life insurance policies as a bank. At the end of the day there would be small risk involved, but there would obviously be possibility for more return.

But he is saying, man, for you and me, it is so much easier just to simply plug in to a system that already exists and lo and behold, anything you would want in a banking system essentially exists inside dividend paying whole life insurance policies. And so he is saying, you should be in the banking business as well as in whatever it is you’re doing for a living, whether you’re in business or not, you should be financing the things of life. Someone is going to fulfill that role. A bank is going to fulfill that role or you can through a policy. And what I mean by that is that doesn’t mean you have to borrow money, but money has to be spent, cash has to be stored, capital has to be accumulated. Some entity, something’s going to fulfill that role for you. The most proper way to do it is to own the insurance company that you’re borrowing from and through a life insurance policy, just like a Warren Buffet’s able to do on a grander scale.

He owns the insurance company that his other entities are borrowing money from. So he gets to win- win in both scenarios. And that’s all we’re saying. We’re trying to do the same thing. We can own an insurance company through dividend paying whole life because as soon as you buy a policy, you become an owner of the company. Now we can’t own the entire company, but we can own essentially the cash values of that contract. We can own the rights to those. Maybe we don’t have the rights to the entire company, but maybe one day you will. Although, the aspiring Warren Buffets. But for you and me, this is truly the next best thing, at least in my opinion.

Announcer: Is the money in your bank account losing value instead of growing? Are inflation and taxes going to get better or worse? Conventional banking makes the bank rich using your money and pays you little to nothing in return. We believe in challenging the status quo. After all, most of those conventional tools only seem to make someone else rich. Let us show you how to beat the banks and inflation. Visit livingwealth.com/beatinflation. You’ll receive instant access to what we call the beginners’ course. This in depth and easy to follow course teaches people how to create and profit from infinite banking. You can become debt free, in control and achieve financial security and significance. Stop letting the banks and Wall Street dictate your financial future. Go to livingwealth.com/beatinflation today to instantly receive free no obligation access to this priceless course on infinite banking. Again, that’s livingwealth.com/beatinflation. Now back to Nate and Holly.

Holly: Well, and, Nate, I think too what the reality is, is that most of us cannot own something like a bank. We can’t own it or the insurance company, but to be able to control your own money instead of parking it in a bank for them to use. The ability to own your own policy and to be able to use that to finance things you need in your life, or even that you don’t need in your life, versus giving that money over to a bank and financing it through them all the time where they’re making all the profit is much more freeing to have this policy, the system in place that allows you the freedom to decide when and how you want to borrow your money and how you want to use it. And you don’t have to ask permission to use it. You just get to.

Just think about the ability to make money by going on vacation and creating memories versus I have to go to a bank maybe to borrow that money because I don’t have the money to go on vacation, or I’ve got to take it out of my bank account and then it’s gone. I just think it gives the power back to people to create their own financial freedom and their own financial synergy by adding this component to things we’re already doing. Most of us are already investing money, we’re already putting money aside maybe for retirement or saving for something. This just allows you the ability and freedom to have even more access to that money and to make it do more than one thing versus taking it out of your bank account and it’s gone.

Nate: One of the big reasons, and I’ve always had this hard time putting it in words. One of the big reasons I haven’t loved retirement programs, there’s many, but I think because it violates this law of synergy in a lot of ways. The biggest problem with your conventional retirement programs is that by owning your assets through a government sponsored retirement program where money is locked away, we can’t really use it to produce synergy anywhere else. So we can’t access the funds very easily, obviously without taxes and penalties and it creates this lack of synergy. Whereas in the world of business, that’s really what you want. If we go back to a bookstore example, the bookstore opening a coffee shop, the idea is that the coffee shop will hopefully be profitable, but that more people will want to come to the bookstore because it has a coffee shop. It’s quite a common phenomenon.

You go to Barnes and Noble, how often do most people go there and they don’t end up getting a cup of coffee while they’re shopping around or whatever it is. Maybe that’s just me, I don’t know. But all that to say, we appreciate it as customers, this type of synergy, we like it. It’s a win-win situation for most people to have synergy, and that’s what infinite banking is supposed to provide for people. That’s the whole reason in a nutshell why we’re doing this, is to create financial synergy. It’s by saying, because I have this policy and I have chosen to build wealth in this way, all of these other opportunities can now be funded because of this initial decision I made to become my own banker. That’s the whole idea. And then on top of that, if I’m going to finance commercial real estate, let’s use that guy.

So you have a real estate investor who decided to become a commercial real estate agent because he is already doing all these deals, he might as well be involved fully in it. Well, why don’t you also own the bank that’s going to finance all your real estate deals? Now you have three pieces and you didn’t even have to put in any work to establish a bank. The work is done for you. You can just simply plug in to the existing system through dividend paying whole life insurance policies. And now you’re in the banking business, you’re in the commercial real estate business and as an investor and you’re also the real estate agent. That’s all we’re trying to say this whole thing’s about. And Nelson Nash did a great job in his little book that started this whole thing, Becoming Your Own Banker. If you don’t have it, you should go get it.

He did an amazing job simply describing this fact that banking exists. You are plugged into it already. You have to be. You’re left with two options, you can either start your own bank to start making money out of it, or you can just be a customer of someone else’s bank, and they’re going to make money off of you. And so since most people are not going to go through the crazy amount of difficulty it would take to start a real bank, we have a third solution now that he created or that he thought of, which is this idea of banking through an existing, essentially banking system in the same way that Warren Buffet is doing it, but on our level. I know that sounds markety or something. I’m just saying that’s exactly what he’s doing. He’s simply bought the insurance company to finances other operations.

The GEICO is profitable and is a big pool of money that he can now pull to go do other things as well. That’s pretty cool. And that’s exactly what infinite banking’s all about. The policy is profitable in and of itself, and we’re going to leverage that policy to go do other things that are profitable in and of themselves. And by the fact that we have both of these working at the same time, we’ll be more profitable than if we just had one piece or the other, hence financial synergy. And that’s technically why the entire book was written by Nelson Nash.

Holly: And I think really the reality, Nate, is that also this financial synergy allows you to do the same thing rich people are doing, or Warren Buffet’s doing, just like you said, but it’s on our level. So we actually are able to control our money, but we’re able to create and do more things than if we never implement the system. If we never implement financial synergy in our own lives, then all we’re doing is giving over that power to a bank or somebody else to create it. And we’re never creating that freedom for ourselves. It works hand in hand and it allows you the ability to do what you love and also to be actually profitable in what you want to do later on in life and create passive income and have the ability to just invest in something you want to invest in, but not having to go into that business per se.

I just think that if you want to be where Warren Buffet is, you got to start somewhere. And somewhere is on that rung of, hey, let me at least get a whole life insurance policy so I can create financial synergy in my life versus never doing it. And you never understand why it doesn’t work out the way you planned, even with retirement or this or that.

Nate: Yeah, that’s right. And I think as I brought this up, I’ve mentioned this in the past, that infinite banking oftentimes acts as the gateway drug for other types of active financial endeavors that in other words, if you’re in the herd mentality, which we’re all in when we start our financial life, we save money in bank accounts, put money in our company 401K match program and whatnot, and we’re just in the herd. We’re just going by, we’re just living life. Everything done for me and don’t really put much thought into it. Oftentimes infinite banking shakes that up. It starts to rattle that up. So you start on this process of infinite banking, you say, oh, okay, I want to do that. Suddenly I think it’s just an automatic thing, you start looking for other synergistic opportunities. So you’re starting to look, okay, well I have cash value now. I can use this cash value. No one is telling me I can’t use this cash value.

Nate and Holly have a podcast. They’re telling me maybe I should look into some things to put this cash value to work in. Okay. So I can go borrow against my policy and buy X asset, and that asset’s producing cash flow and I can roll the cash flow back into my policy, and I can borrow back out again to do it again. And I can create this rhythm of life that has synergy involved where your banking system is profiting and your investing side’s profiting, and they’re working together in tandem. It’s like an automatic thing. And it’s one of those things you can’t put on a spreadsheet that well, Holly. In other words, we can show you, of course, what it would look like to invest in something or fund your business or pay taxes or we can lay things out as an idea of what it would look like if you did do it.

So, you can do that, but what I’m saying is so many people would get caught up maybe in the rate of return of a policy or is it going to grow by X amount, or they get caught up in all these things. And what we’re trying to say is, well, what are you going to do because you have it that you wouldn’t have done if you didn’t. That’s the real idea and people don’t give it enough consideration, this idea of financial synergy and what we can do because we are in a certain position in life, what we can do because we have decided to become our own banker can open up doors that we would never have even walked through. And I know I can say that for myself in many ways. And now that I’m thinking on this light in very technical terms, I’m adding verbiage to it.

I’m just doing it more and more, Holly, I’m thinking more and more how can I add synergy to our insurance business right now as agents in the life insurance world? How can I add synergy in my banking world? How can I add synergy in my real estate world? How can I make things work together? How can I open up other businesses that maybe I’m using my policies to fund and maybe other people are running that will create some synergy to what I’m already doing? So anyway, I think it’s a cool way to consider your endeavors, trying to add things that produce synergy based on what you’re already doing. What’s nice, Holly, and I’ll be quiet, I’ve been talking for a lot, but what’s nice is that everyone’s already been doing banking. If we can buy the banking enterprise it automatically, it’s going to create synergy because everything you’re doing requires banking to exist to do anyway. So you might as well be profiting from it.

Holly: I say this a lot, Nate, even to clients is, the worst thing they can do is try it. The worst thing they can do is never to try it. But the best thing they can do, not the worst thing. The worst thing is just that, okay, it’s not for me, fine, and we will not convince you to do it, but the best thing you can do is to try it because of what it opens up in your life, of what it allows you to be able to continue to do that you never thought you could do, Nate. I think you and I are the same and we have done a lot of different things we never dreamed were possible of doing because we had the infinite banking policies and we have this system in place to be able to do it.

And if we never had it in place, then we never would’ve had some of the opportunities we’ve been able to invest in, or not even invest in, in giving to more organizations or your church or whatever it may be. It allows so many other doors to open to allow you to go in and experience things you never would’ve experienced because of the synergy it creates. And so the worst thing you can do is not listen to anything we’ve said. The best thing you can do is just start with one policy and see how it impacts and can change your life and transform it.

Nate: Yeah, I think that’s very good way to end it. And as I’ve mentioned the very beginning, I guess I can wrap up with that, is that what I’ve been coming to find out is that infinite banking, well, I think it’s really special. It’s not actually unusual, or the things that make infinite banking special are not unusual. They’re not magic. You can always find examples of similar things working in similar ways. And what I’m saying is the fundamental reasons why we love infinite banking, why it works well, are the same fundamental reasons why lots of other things work well. The fundamental reason why infinite banking exists and why it works well and why people are gravitating towards it, is the same reason that Warren Buffet gravitates towards buying GEICO and having insurance company inside of his huge conglomerative companies. He thinks that not only is it a valuable thing in and of itself, but it’s also a valuable tool to use amongst my other companies.

And that’s exactly what Nelson Nash wrote his book to describe, that a policy is a valuable tool in and of itself, but it unlocks so many other things in your life by producing this idea of financial synergy that it can make everything else you do, every investment you make, every business you start more profitable if you own the banking piece as well. That’s why we love it, Holly, but any last words? Should we close it down?

Holly: No, let’s close it down.

Nate: Let’s close it. Okay. Well, everyone thank you guys so much for showing up. Once again, if you wouldn’t mind rating and reviewing the show, we’d really appreciate it. That’s certainly the best way to get the news out about IBC and our podcast specifically. With that being said, this has been Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e155.

Announcer: Listeners, 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 beginner’s course Ray, Nate, and Holly made just for you. Again, that’s livingwealth.com/beatinflation.

Nate: In this episode, we discuss how the Infinite Banking Concept empowers you to grow financially in many different ways. This is why we call IBC the financial gateway drug. It’s often the first step to take back control of your finances and spearheads your journey to financial independence. 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, well, welcome back to the show. We appreciate everyone who listens. We appreciate that you take the time out of your day to spend it with us. And we really do hope you’re getting quality content from us every other week. Man, we’d really appreciate it if you’d take some time to review and rate the podcast, if it’s something you enjoy, that’s the best way to get the word out. If you’re a big fan of Infinite Banking and you can leave us a positive review, it’ll boost us up on the charts and more and more people will get to hear the news, but let’s go ahead and dive in today, Holly. We’ve got a fun episode. I don’t know how long we’ll be here for it, but I think it’s going to be exciting.

I thought I would start right off the bat and say this podcast, especially for those who are getting into infinite banking and maybe on the fence about it, and they’re trying to figure out if it’s something that they want to do or it’s too good to be true, or trying to investigate it, that a podcast like this at face value may seem like just two people, Nate and Holly, getting together who are big fans of it, who drank a whole bunch of Kool-Aid around the campfire and are just going to try to sell you on this idea.

I’m probably biased, but I really want you to take this content as being real to Holly and me. In other words, this is why we do what we do. This is why we enjoy this concept. This is why of all the financial concepts and strategies that exist, this is something that we gravitate to, and this is why I personally do it and have enjoyed every second of it for the last 10 years and why I have 10 policies and I’m opening an 11th policy this year. It’s why I pay a huge proportion of my income into policy premiums to practice this concept. And the real truth is that infinite banking is not meant to limit you in any way, it is meant to empower you to accomplish things financially. That’s the whole reason we’re doing it. And we’re going to talk about why we do it. Control, empowerment, all these different things are really what I was after financially, and it’s why I was drawn to this concept.

Holly: Well, and I think what we’re really going to share too, is Nate, how we use it, how it actually empowers us to be able to make financial decisions or investments and to use it in a way that it’s not just a life insurance policy. It is like drinking the Kool-Aid, it’s a lifestyle in my viewpoint. It’s a lot easier when you start to understand and use this banking system, this process than just waiting on the sidelines and watching everybody else do something.

Nate: Yes, you’re exactly right. I think one thing that everyone has to overcome when they start learning about it, and most of our listeners are probably already practicing IBC, they’re already working with Living Wealth and they’re just listening to our podcast, which is awesome. And I’m saying a lot of times, either you had to at one point, get over this, or you still need to get over this. And so when we talk about empowerment and certain things of that sort, that it’s supposed to offer more freedom for life. Many times people, when they get involved, they get worried about some of the scary words that exist in IBC. So the words like premium and the words like loan, policy loan, and they hear these words that, yeah, they’re scary. They don’t sound like the most freeing words in the world and they bring it, they assume that it must be somehow limiting because we’re using these types of words. I’m here to say that the truth is, the world is who wants to limit you financially.

So the whole reason to do IBC is to break free from the herd. In other words, when I say the world, I mean just the normal government sponsored, retirement program, Wall Street funded scenarios are actually designed to restrict you by nature. Maybe they think that they’re trying to do what’s best for you, because you can’t be trusted. You can put money in here, but you are penalized and taxed to take it out. And so it’s very discouraged because if you take it out, your retirement’s going to be ruined. But the whole thing is meant to limit you. The same thing when you work with banks and you borrow money from them, there’s all these rules first off, whether you can even qualify for the money and then there’s very strict rules on how it has to be repaid. And so you’re very limited in life under the normal ways.

What I’m encouraging you to do is don’t bring your previous limitations into the world of IBC. You will not do very well here. So, because the whole purpose of IBC is to take back control of your financial situation, hopefully spearheading your journey to financial independence. And it’s supposed to empower you to achieve things in life. That’s the whole point of doing it.

Holly: When you think of that scary word premium, there’s a word that goes after it even in life insurance, it’s premium deposit. As soon as I realize and change that mindset in my head that I’m making a deposit into my own bank account, I am paying myself, I’m depositing, I’m enriching my life. Deposits actually create income. When people make positive deposits into your life, they’re not taking something out and withdrawing, they’re putting it in. So I think that, that’s the way you have to look at the premium. And I’m just going to say on a loan, I just went through this with a client, but banks view loans as assets, that’s the same way you should view a loan. It is an asset, it is not a liability, it is an asset. And to take those scary words and make them the positive words in your life, assets empower you to do something, to make a change, to enjoy something, it’s not taking away from you, it’s not creating a liability, it’s creating an asset.

So I think that when you take those scary words and you actually say, oh, this is a premium deposit, I’m depositing into my life, my family’s life, I’m creating a better future for them, for ourselves. It changes the ideal of what you’re actually doing to make it that empowering like, look what I get to do now. And having that mindset of this is what it’s going to allow me to do. And I hope that, that’s what you guys get out of this podcast today, is how it can empower your life and your family’s life, and the people around you.

Nate: As you brought up, when you’re paying premiums, it may surprise some people to find out that I’m super excited every time a premium comes due. No, that’s not the case with my car insurance premium, that’s not the case with my home insurance premium and my term insurance premium and all these different things, because normally premiums are payments you have to make, you have to make payments or bad things happen. You got to get rid of that when you practice IBC. First off, because it’s not actually what’s happening, but we associate things with words that we’re familiar with. And that’s the biggest issue. The biggest hurdle is that there are words that exist in the infinite banking world that also exist in your previous world, but they just mean completely different things and they act completely different in every way. So I don’t really have time to go over all of that in this show right now, I’m just saying that, that’s a big hurdle.

We understand that’s a hurdle that you have to complete change your association and the feelings you feel about words and what they mean and how they act. So normally when you have a loan is very limiting. IBC loans are not limiting. Normally when you make loan payments, you lose money to a bank and they have the money. When you make loan payments back to the policy, you still keep all of the money. There’s a lot of different things that are happening here. So we have to retrain and rewire the brain under this new world. But the whole goal, by the way, if you would just take our word for it for at least right now and believe that the whole purpose of IBC is not to limit you in any way, it’s to empower you. That’s the whole purpose of the concept and practicing it. And I think you’ll be able to see some things maybe in a new light.

So I wanted to give an example, Holly, in my own life just very recently, I’m closing on an investment property this month. And essentially what I wanted to paint a picture of is I’m paying huge amounts of my income into premium. Probably 50, 60% or so or more by the end of this year, because I’m opening a new policy, a large one, but all that to say it’s very large proportion of my income in premiums, but I’m not an idiot for doing that nor do I feel limited by that. So the whole purpose of this is I’m stuffing as much money into my policy and I see it as the financial hub for everything else I’m doing. So as much money as I possibly can is funding policy premiums, which is producing cash value that I’m then leveraging to essentially achieve anything I want to in life. That’s the whole purpose.

So some people come into it, and what I love about IBC is that it’s not me trying to convince anybody to remove money from existing investments or that could be invested somewhere else because I have this awesome investment opportunity over here, and I think the rate of return is going to be great. I love how I don’t have to actually talk about that, because all I’m trying to show people to do is how they can change essentially the way they finance everything in life and make a lot more money. So in my own life, I bought a property that we were going to flip that I’m actually going to end up keeping a hold of the property, but it was in Tulsa, Oklahoma. We bought a home that needed a lot of work for 120,000. We put in about $50,000 in remodeling. I’m in a 170 grand and the home’s probably worth $250,000 at this point, I’m actually going to Airbnb it. So I’m going to probably put $15,000 in buying furniture and applying all the things that are going to need for that.

But all I’m saying is I was able to do all of this without a bank. I was able to do this all without needing to raise money from any source. I have all of the money built into my own system that I was able to pay cash for everything without even thinking about it. And what I’m saying is I felt empowered to do these types of things. So this is just one example, obviously of many, but I’m just saying, this is the one I’m closing on this month. IBC didn’t keep me from investing, it’s actually what empowered me to do it. The alternatives, if I hadn’t actually started IBC, I probably wouldn’t be doing things like this. What if I was just plowing money into stocks and bonds and mutual funds and brokerage accounts and retirement programs? What are the chances that I would’ve sold all of those out to do this deal without having ever heard of IBC? Probably pretty slim.

This is why we call it the gateway drug for many people. As soon as you start this, you start seeking opportunities to put your bank in action. The whole point of starting the bank is to empower you to put it in action. And one thing I wanted to get to, Holly, and I’ve been talking for a while, so you can cut me off if you have anything to say too, but the reason why it works so well, not only does it empower you to do it, but it also makes everything you do more profitable. That sounds salesy, but it’s just true. Argue with me if you want to, but it’s just how math works. If you can find another way to do what we’re doing, that mathematically produces better results. Please show me. I’m just saying that I can show you the math and how it makes more profit.

So not only do I have a real estate investment that’s going to be producing positive cash flow and hopefully appreciating over time, but what am I going to do, Holly, with the cash flow that’s being produced by the property?

Holly: Put it back into a policy.

Nate: I’m just going to put it back into a policy, and I’m going to churn it back out again whenever I find another opportunity, and that’s going to produce cash flow and it’s going to roll back into my policy, and then I’m going to turn it back out. And I’m actually going to make a lot more money over time with the hub being the policy than I would anywhere else. I built an example for a real estate group that asked me to speak to them, and I’m not going to go through the whole thing, but they wanted to know what it looked like if we were to make a $50,000 down payment on a home using a policy loan as compared to what if we just build up $50,000 in a bank account to make that same down payment to purchase an investment property. What would be the difference?

And so there were some parameters given, let’s assume that the property produces about 9% cash flow, and let’s say the down payment’s $50,000. So if you were to invest $50,000 in a down payment to purchase a property and you hear the term 9% cash flow, that really just means that after all costs of paying a mortgage and paying property management and setting money aside from maintenance and all sorts of things, that the property’s still going to produce a positive cash flow of about 9% per year, which is $4,500 on a $50,000 investment. So it’s $4,500 per year, which is 350 to $400 a month in that range of cash flow, positive cash flow.

And that’s what they felt that they could get. So I said, okay, I’ll build it based on these things. So I built up a policy over a few years, putting premiums in, saving money in order to make this down payment. Some of you have enough money where you could do that in year one. You could just write one premium check and pull 50 grand out and buy a property. But I was trying to say, hey, this isn’t a game just for rich people. So we just built it up over a few years and built up 50,000 of cash value. We stopped paying premium once we hit that. We just let the policy pay for itself after that. We took out one policy loan for 50,000 and we went out and invested in the property.

The cash flow that comes from the property, the $4,500 a year, normally would just go into the investor’s bank account and sit there waiting for another opportunity, waiting for enough money to accumulate so they could go buy another property, let’s say. All we’re going to do is take the $4,500 and put it back in the policy, which is the hub now, it’s not a bank account anymore, your hub is now your policy, which is your bank. It is your big bank. It’s supposed to encompass everything you’re doing. And we’re going to assume he held the property for 20 years. And if he got $4,500 a year for 20 years in cash flow, he would’ve received $90,000 in rental income over that 20 year timeframe. So if he had a regular bank account, that was his hub, he would’ve received $90,000 in deposits over those 20 years from the renter. And if he’d just let that money store up in the bank account, he would’ve had $90,000 at the end of 20 years, but inside the policy at the end of 20 years, he does not have 90,000, he actually has a $161,000.

So he made $71,000 of profit just from the policy, that’s on top of what he made from his investment. So the 90,000 of profit from the investment on cash flow profit turned into a $161,000 of actual cash tax free without taking any additional risk at all whatsoever. And honestly, he also would’ve received additional tax deductions for the interest he paid back to his policy, which we don’t even really want to get into today. The whole purpose of the policy is to empower you, not only to make investments, but to do many things in life, it’s not supposed to limit you. So while it empowers you, it’s also supposed to help you make more money being the financial hub, and you can’t escape it. So I hope that was helpful.

Announcer: Is the money in your bank account losing value instead of growing? Are inflation and taxes going to get better or worse? Conventional banking makes the bank rich using your money and pays you little to nothing in return. We believe in challenging the status quo. After all, most of those conventional tools only seem to make someone else rich. Let us show you how to beat the banks and inflation. Visit livingwealth.com/beatinflation. You’ll receive instant access to what we call the beginners’ course. This in depth and easy to follow course teaches people how to create and profit from infinite banking. You can become debt free in control and achieve financial security and significance. Stop letting the banks and Wall Street dictate your financial future. Go to livingwealth.com/beatinflation today to instantly receive free, no obligation access to this priceless course on infinite banking. Again, that’s livingwealth.com/beatinflation. Now back to Nate and Holly.

Holly: We’re not just talking about individuals that have a lot of money, we’re also talking about individuals that are middle class, even what some people would consider lower class. It works for every single individual. And whether it be a house that Nate is buying, or it be, I have some clients, new clients, they’re starting a business with modular homes that they are putting on land and they are creating it using their infinite banking system. They had to have a system in place though, in order to be able to use it, even with the prices of houses going up. Now, the interest rate’s gone up.

When we say empower, it allows you the ability not to be afraid to hold onto something. And I’ll say, for example, for me, I moved last year, but we still have one piece of property that I just have never felt like we were supposed to sell. And so we basically did the same thing you Nate decided to do, but we decided we’re going to start Airbnb-ing it. We had to do a little bit of renovation, if you want to say, we had to bring it up to code and this and that, but the money in the future of what it allows us to do, if we Airbnb it is amazing. And I don’t know about you Nate, but in Tulsa is the house that you actually are purchasing, is it something you would go and stay in?

Nate: Yeah, that was actually a good thing you said too, because we have a ton of family in Tulsa, which is why we were even looking in the area for investment opportunities, because we were like, hey, we’ll Airbnb and we’ll make money on it, and then we’ll come and stay, we’re already down there a few times a year as is. And Holly, your previous home was in the Carlsbad area, which is the prime Airbnb area. It’s where everyone wants to be Airbnb.

Holly: And where it is and what it can make, but it gave me the freedom not to be afraid to hold onto it, Nate, and we have the money in our policies that we can put it into it, make it what it should be and start air Airbnb-ing it, and generating extra income versus feeling like because the housing market was going soft, oh my… I need to sell right now. And I’m just going to say this piece of property took two and a half years to find.

Nate: I bet.

Holly: We couldn’t ask for a better location. It’s almost half an acre, which is unheard of, it just gave us the ability to have something. Now I’m going to say this. I don’t ever plan on moving back to California, ever. But do I like the fact that I have a place that if we want to go stay, we can? And Nate might know this, or some of you guys might not know this, but we’re very big into Comic-Con, and it’s in San Diego. So it’s ideally a location we can go and stay at and then go do our stuff that we want to as a family, which brings me to the next point of, it’s not just for investment properties or that, for vacations, things you want to do with your family. And you most of the time say, I’m going to penny pinch it to enjoy that vacation instead of being able to have the freedom to take it out of your policy and enjoy that vacation and make those memories.

So we’re not just talking about investments that you can use it for. It’s also those family memories, those times that you can’t put a price tag on to me.

Nate: There’s something about life, whenever you have these policies built up and you have lots of cash value and a lot of our client, maybe we should have some clients on. So then you don’t have to take our word for it. We drank too much Kool-Aid, our brain’s riddled with IBC, and I understand that. But what I am saying is I wouldn’t trade it for anything. Having done it for 10 years, I wouldn’t trade this life that IBC has empowered me to live, having all of this money that can never go backwards, that can only go forward growing for me all the time, that I’m in total control of without the government getting involved, without having to deal with banks. I like the life. It’s a simple life.

And as you said, it’s not just for investments, it’s like I love being able to go on vacation with my family, using a policy loan to fund it. And knowing that I have this gigantic pool of money that I’ll pay it back and I’ll reuse and I’ll pay it back and I’ll reuse it. But the whole while, the entire pool is getting bigger and bigger. It actually is supposed to simplify, improve life in many ways, but not only that too, Holly, for things like charitable giving, I give way more because of infinite banking. I know that’s hard to describe, but I’m saying it has empowered me to do it. I don’t feel worried about my financial future the way I think some people do, which means that I’m more free in how I can give, because I don’t have a fear that I would have by the way, if it wasn’t for IBC, which I feel like I probably shouldn’t have, because I need to trust in the Lord. But beside the point, I’m saying one less thing that would hinder me doing what I feel God’s called me to do.

So you could hear this as a sales pitch. We just wanted to be open truly and just say, hey, these are why we love it. We could teach anything on this show. We could teach any financial strategy we wanted to, we could do whatever financial strategy we want to, but there’s just something about infinite banking that once you catch it, once you catch what we’re trying to do and what IBC allows you to do, that is unique and very difficult, if not impossible to replicate with any other financial tools, then oftentimes you fall in love with it, which we have done and which we have many clients who have done.

Holly: And I’m going to say the empowering part name. I’m just going to maybe add this on there. But like Nate said, charitable giving, vacations, cars, the list can go on. And this probably for me now is more of a reality where I’m really not worried about it, and I have a lot of friends that are, but I have a daughter that is a junior in high school and she basically can go to college in two years, 2024.

And I am not even worried, Nate, where she wants to go. She can go wherever she wants to go, wherever she wants to go, because of infinite banking, because of the empowering of it, to know that we can send her wherever she wants to go. And we literally are going to recapture or get that money back, the empowering feeling of not feeling like you only have to go to a state school, or these are the only schools you can apply to, because that is all we can afford versus the ability to say, where do you want to go? What do you want to study? Maybe she doesn’t want to go to college right away. I’m okay with all of that, because I know that the money’s there, like we talked about, it’s this big pile of money, but you get to choose where and how you use it, and you never lose control of that wherever you’re putting it.

Nate: It does reduce stress in a lot of ways, because you actually are never scrambling really to figure out where the money’s going to come from. So in other words, Holly, if you had done something else and put all the same money and other things, and maybe you had, let’s say 529 plans to go to school, you think to yourself, I can really just send her wherever I have enough money in the 529 plan, which very well may not have been enough. But then if she wants to go to a school that is more expensive than the 529 plan would’ve allowed her to go to, suddenly you’re having to stress out about pulling money out of retirement programs from here and pulling money out of your income from here and pulling money out of maybe selling a property here. In other words, there are people who scramble if things don’t work out according to plan.

Whenever you are seasoned into this concept and you have policies and you’ve capitalized them for a period of time and you are well funded, the idea of scrambling to pull money together really goes out the window for the vast majority of us, or at least that’s the goal. And when you’re first starting out with IBC, you may not realize that obviously, because there’s just not a lot of money in. You’ve just got started, year one or year two. But talk to me and our other clients, talk to us who have been doing it heavily for 10 years and ask us, was it well worth it? What is life like whenever you’re actually got a fully capitalized operational system of policies that you’re banking with that are more than you could need. I’m like, wow, yeah. I wouldn’t trade it for anything. There’s nothing that I regret. There’s nothing I wish I would’ve done. I’m just super happy to be here doing what I’m doing. So, if we wrap up… Oh, go ahead, Holly.

Holly: And I just want to say, in case you didn’t catch what Nate was saying 10 years in, have been doing this for a while. It is very different than when you first start, but I’m just going to say you have to get started somewhere like Nate, you talked about your premium level. I will be very authentic and say, when my husband and I first started, we could only, and I mean it was a stretch afford $300 a month. That was a huge stretch for us as missionaries and stuff. But we did it because we believed in it. And the freedom that $300 a month starting at 15 years ago to this point today, if we’d never gotten started, I’m going to say, I’d be where a lot of people are, stressed out about where do I send my kid to college? How do I pay for that? We can’t even go on vacation. We can’t even go and do something we enjoy, because we’re so caught up in the circle of working really hard and everybody else getting all our money.

So I just want to say, you got to start somewhere, start where you’re at, Nate and I have drunk the Kool- Aid, but we had to start where we were at to get to where we are in the future. We couldn’t just do it overnight and snap our hands. We actually had to start the program and believe in the process and walk through it in order to get to where we are today.

Nate: There is some hype in the infinite banking community, but I want you to know there’s actually substance. So if you go look online and you read about it and you watch YouTube videos, there’s some people who, the way they describe it sounds too good to be true and magical. And what I’m saying is they’re trying to hype it up, they’re trying to get you excited about it so that you buy something from them. And I’m not trying to disparage them or anything of that sort. The truth is so good that it doesn’t even need hype. I’m just saying there’s substance to it, there’s math behind it. It’s real. It’s been working for hundreds of years. I’m very excited to be a part of it.So if we want to wrap this up, Holly, IBC, the Infinite Banking Concept, the entire idea behind it is meant to empower you to grow financially, to be better with money than you were before, and to unlock potential that you may have been bottled up the way the world treats you. So the world is trying to limit you financially. And I know that sounds, once again, maybe a little bit scary, but we know it’s true. There’s rules and regulations everywhere you go trying to limit your capability to actually manage your own money, that’s how they do it, because they would like to manage the money for you. That’s how they make money.

So I’m just simply saying that whenever you do IBC, it’s supposed to empower you to accomplish things financially. You have to see that going into it. Don’t get worried and don’t bring limitations with you because of the words that are used inside of this world, the words mean something different here than they do everywhere else. And that is just a fact. You’ll have to take my word for it as you get involved. Don’t be worried about the words. The words oftentimes will bring in preexisting notions. We have to change our paradigm when practicing IBC. It’s supposed to spearhead your journey to financial independence, that’s why we call it the gateway drug. Oftentimes it’s the first step someone takes on their journey to financial independence. And it’s not meant to limit you from a taking advantage of opportunities, it’s supposed to empower you to take advantage of opportunities. Not only that, it’s supposed to help you make more money while you do it. That’s why we love it. Holly, what do you say? Does that sound good?

Holly: That’s good. We can wrap it up.

Nate: All right. Let’s wrap it up. Thank you guys so much for being on the show once again. If you’re enjoying it, if you enjoy the content, we would really appreciate you rate and review it, especially. And that’s the best way for us to get the word out, best way to grow the reach of our show. This has been Dollars and Nonsense, if you follow the herd, you will be slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e152.

Announcer: Listeners, 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 beginner’s course Ray, Nate and Holly made just for you. Again, that’s livingwealth.com/beatinflation.