Infinite Banking

Podcast transcript for episode 120: Protect Yourself from Inflation

Nate: In this episode, we discuss how the current political environment is flashing warning signals that inflation is on its way and also how the infinite banking concept can protect you from the negative effects of inflation. She’s Holly, and she helps people find financial freedom.

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

Nate: Well, if there’s one subject that seems to get brought up all the time by most of our listeners, our clients, even ourselves in the current environment is inflation seems like it’s on its way. Or we can’t imagine that if the current political environment with Biden proposing huge spending plans, finance through government debt and flushing the economy with money, we can’t really imagine how that would not cause some inflation, which is rising prices in the marketplace. In fact, I think we can see that in certain ways. So that’s certainly got us worried, got our clients worried, and we’re here just to give some of our opinion on what’s coming up, how to position yourself. What we thought we could shine some light on, particularly as we go forward, is how the infinite banking concept and your policies can actually improve your situation when it comes to inflation and at least reduce the negative effects that inflation can have on money. So Holly, inflation’s coming, we think.

Holly: Or it might be already here, Nate.

Nate: Probably is. I mean, we spent a lot of money last year, a lot of money this year. So here we are, we’ve got clients worried, we’ve got people listening worried about what to do when inflation hits. We’re here to try to give some ideas. As I said, I think most of these most people already know, but we definitely felt the need to at least have a podcast discussing IBCs effect, because that’s also a big question.

Holly: When you look around at what is taking place right now, not just in the US but in the world, the cost of stuff is starting to rise and it’s not because that stuff is worth more than it was last year really, I think it has a lot to do with that dollar is not worth as much as it was. And you can see the concern for having to buy something now, because who knows how much it’s going to be six months from now, let alone three months from now. And the reality is even with inflation, when you have a policy, it actually benefits you in regards to the inflation.

I mean, I sat down with clients yesterday who were so concerned with the money that they’re going to have to spend and the rising costs of everything and saying, “We’re not going to have any money.” And we looked at their policy and they’re like, “Oh wait, wait, wait. We’re okay.” Because what they’re putting in today is growing by more than what they’re putting in. So in some regard it doesn’t really mean that they won’t have money, it just means that as inflation rises, their policies are growing so they have the money to use it in the future, as well as today.

Nate: This also goes back to almost confirming some things that we’ve discussed about retirement. So if you’re new to the podcast, you know that while we certainly do help people with retirement, I personally think the conventional concept of retirement is destructive and should not be, for most people, a primary goal of building wealth. It should be maybe a result and effect from somebody who has built wealth, but I don’t think that should be your only goal for building wealth.

I think there’s far superior options, but the effect of inflation seems to bother and worry and fill anxiety with people who are retired or who will soon retire because of that very thing you said, Holly, which is how can I plan for a retirement income when I don’t even know what the dollars are going to be worth? It’s a worry for everybody. But once you get closer and closer to your quote-unquote retirement, it becomes even a bigger worry because you’ve planned for a certain amount of income that you think your lifestyle can support and then suddenly you have to keep on spending way more money just to keep the same dog food or something like that.

Holly: But Nate, that’s true. I’ve had clients and individuals, I’ve even read articles where people that are living on their retirement or their pension, what they honestly can afford is dog food. And that is very sad if that’s the case it is, but if a client saved $200,000 and they thought that’s going to last me for the next 10, 15 years, and they retire at 65 and they live to 88, it’s gone before they know it. And then they don’t know what to do because that was their only backup. And that question is, “What will I have in retirement? If I do this, what can I see myself having? Versus I know that the money I put in today if I just leave it there in a traditional retirement program.” Literally my client said to me yesterday, “It won’t be there when I get to retire, I have 20 more years,” and the belief is that money won’t be there, it’ll be gone. And they will outlive that money in retirement if they don’t do something else.

Nate: Well, that’s very true. And as I mentioned, one of the big things why I feel like retirement is a scam or it certainly brings fear and anxiety automatically, when in reality, the alternative, and we’ve actually had a guy, Rabbi Daniel Lapin, who embedded this in us, we’ve had him on our podcast before. Quite a while ago, we should probably get him back on. Essentially retirement itself is a flawed idea. Nelson Nash talks about it, rabbi Lapin talks about it, and I believe it causes more angst than anything, especially when it deals with inflation. Your alternative should be to continue to produce value for as long as you can doing, something that you can get on board with. It’s just not worth living in a job that you don’t enjoy for 40 years just for your ability to retire and then be afraid about money for the rest of your life.

That’s a pretty lame life. So I guess what I’m trying to get at is inflation is a bigger fear for individuals who are planning on retirement than those who are not because I would be afraid if I was going to retire, but since I’m not planning on retiring, I know I’m going to continue to produce value. So I would just encourage you with that when it comes to inflation. But I do feel, and Holly, you feel, that inflation is most likely coming. It would be hard pressed for us to believe it’s not. The Federal Reserve is announcing that they want more inflation because it’s been lower than their 2% goal for a while. And they say, “Instead of us trying to keep it at 2% all the time, we need to make up for all the time that it wasn’t at 2% for the last 10 years or so.”

So we’re going to ramp up inflation and we need buy-in to print money, we need us to keep interest rates low longer than they need to be. All these signs are pointing to inflation. It will worry you if you’re putting your goal in the dollars value, as opposed to putting your trust in your ability to produce value. But how can we protect ourselves from inflation? It’s still a thing. Whether or not you’re planning on retirement or not, if you feel inflation is coming like we feel, what can we do to protect ourselves? What you want in an inflationary environment is assets that will improve in value, increase in value during that inflationary timeframe. What you don’t want is money in the bank, which is what we’ve been teaching forever because money in the bank does not really increase in value.

In fact, due to inflation, if you don’t have a 2% interest rate on your savings, it’s actually costing you money to leave your money in the bank. So, the fact that you have money in the bank, they may have no fee checking account or no fee savings accounts, but it legitimately in real terms costing you money if you’re in an inflationary environment, which we are all the time, and you have money in the savings account. Which is why we say get rid of banks, but nonetheless, so whether it’s Bitcoin or gold and silver or real estate, all the things that you’ve probably heard us talk about before and push forward that you should be investing in, these are things that typically do pretty well in inflation. So I’d say continue to do that.

Holly: And I would say, for some reason, Nate, we really believe there’s safety and security, most of us, if our money’s in the bank, it’s protected, it’s insured to an extent, yet what we don’t realize is that money sitting in the bank really isn’t growing, like you said, at all. It’s not earning you anything sitting in the bank.

Nate: It’s losing you money. Absolutely. So essentially this is actually pushing us towards infinite banking. So if you listen to us very long, you know that we actually are not treating infinite banking as an alternative to making investments. And that’s never been the goal of infinite banking. Banking is just a natural thing that’s going to occur. It’s going to be money exchanging hands in some form or another. And it doesn’t matter if it’s inflationary period or deflationary period or anything, my goal is just to have more money, make decisions and do strategies that put more money in my pocket than otherwise. So with infinite banking, what we’re saying is that you can practice banking from these policies, the same things you were already going to do with the bank account, just do with these policies, and it will actually produce for you more and more money than you would have had during the conventional banking sense.

So even if the dollars do start to lose value, we’re able to create more money through our use of these policies in order to offset the effect of inflation. My policies this year are going to grow by over $20,000 more than my premiums. So I’m going to pay a certain amount of premiums, pretty big premium, but I’m going to pay a certain amount of premium, I write checks to the insurance company to pay premiums on my policy. I’ve got nine of them, I believe. And I could then pull out, this year, $20,000 with no tax more than I was able to put in.

So I just increased my money supply through having this system. But the fact that I’m putting money into the policy does not actually limit my ability to then pull out that 20,000 of profit if I want to. And I can go use it to do things that I think are going to increase in value during inflationary periods, whether that’s Bitcoin, whether that’s gold and silver, or whether that’s raw land or real estate, things that will typically increase with inflation. The fact that I own these policies has allowed me to buy more of those other assets than if I was doing typical banking. I can’t write a check to a bank account and get 20 grand of profit to go do something else with. And if someone else knows how to do that, let me know.

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Holly: The reality is there’s never been a system or program like this that you can put money in to it, take money out of it and make a profit by putting the money in and buying those assets. I mean, really what we’re saying is if you own an infinite banking life insurance policy, it will allow you to go buy those assets that will hold their value in that inflationary environment, and still allow you to create more money.

Nate: I don’t think we’re going to have no dollars soon. I mean, maybe at some point in the horizon, but I don’t think all of the world currencies are going to completely go to zero in the next 20 years. Now don’t ask me what’s going on beyond that. We’ll have to experience large amounts of inflation before that occurs, which talk to me one-on-one if you want to know more about my thoughts, but all that to say, the fact of the matter is it still costs dollars to buy things. So people might want to buy Bitcoin and gold and silver, and that’s great, but you can barely buy anything with Bitcoin. And certainly, it’s really hard to buy things with golden and silver right now. You have to trade in your Bitcoin’s and trade in your gold and silver for US dollars, so then you can go buy the cheeseburger.

You can’t just walk to McDonald’s with your Bitcoin. It just happens to be that those assets are going to increase in value as the dollar is devalued. Inflation is just a comparatory term. In other words, the value of the dollar is decreasing compared to the value of a cheeseburger. That’s why the cheeseburger price goes up because the value of the cheeseburger is the cheeseburger. The value of the dollar is just relative to the value of the cheeseburger. The same thing goes with Bitcoin and gold and things like that. As the dollar is devalued in comparison to these assets, then we can buy Bitcoin today and sell it a year from now and get far more dollars than what we bought for it. That’s great, but nonetheless, you still need to practice banking and banking is still going to occur in the form of US dollars for quite some time, if not for forever, but all that to say, my policies are an automatic hedge against inflation.

The fact that they’re going to grow guaranteed this entire time at a very high rate with no taxation on the growth means I automatically have a guaranteed inflation hedge inside of them. But then my ability to leverage the policies to buy other assets that I feel are going to increase in value or produce cashflow, that in of itself is banking. And that’s what, hopefully, we’re trying to teach is that sure, the policies are good, but if you’re just going to let all the money sit in there, you’re doing banking wrong.

Holly: No bank in the world lets dollar sit there. Whatever the currency is, any bank in the world continues to move that money and keep it in motion. So your policy is the bank. It’s not the investment, it’s the bank and it’s supposed to be used. So if you have a policy and you’re not using it, I’m going to say start using it because you’re not being a banker. And it’s not really a bank. It’s just a savings account sitting there.

Nate: Exactly right. And I mean, the savings account is nice, I guess, but if you’re not going to bank with it, you’re not practicing IBC. And banking would then require us to put the money in motion. And that’s another thing that inflation occurs mainly on assets that sit still. That’s the one thing are most negatively affected. That’s why we always talk about good dollars today and weaker dollars in the future. And what banking allows us to do as opposed to retirement programs and these other types of vehicles that require money to sit, it allows us to use dollars today while they’re still valuable and while we can still buy stuff with these dollars while it’s actually worth something to buy something with, as opposed to hoping 30 years down the road when we can finally retire that the dollars inside of the account are worth something in that time.

So, the fact that you’re practicing IBC as opposed to stationary money, retirement program style systems can actually help you overcome inflation simply by getting your hands on the dollars. So the question of, “Well, Nate, what happens to the policies in inflation?” I’d say, “Well, it’s the same thing that happens to anything during inflation. If you’re telling me that you’re planning on having all of your money sitting in policies doing nothing, I think it’s your fault. Not the system’s fault. You just haven’t been using it. You haven’t been working with them.”

Holly: It goes back to exactly what he said a few minutes ago when if your money’s sitting in the bank, you’re losing profit on that. You’re losing money because it’s not going to be worth the same dollar. $1 today, even a month from now in my viewpoint, will not be worth the same, you’re losing money on it. And in a policy in the same way if you just park that money, the system does not have a way to create or generate additional money. I mean, yes, it’s compounding and it’s just sitting there, but you have the ability, like he said, to take out that money and buy assets that will hold their value and you didn’t have to go and take your gold or silver and turn it into dollars to go buy the asset that you want or to go buy the car or the food, all you had to do was use your policy to do it.

Nate: Inflation is coming, whether we like it or not. The fact that retirement is such a big goal creates more anxiety for inflation than otherwise would be warranted. That’s why I encourage people to think beyond retirement. That should not be the ultimate goal of building wealth. That’s just a by-product of someone who has built wealth, is they can retire if they want to. But I would try to get my mentality to change from that. There are certain things that we all are aware of that we can do to produce better results, which would mainly be buying gold, buying silver, things that increase in value, whether it’s Bitcoin or real estate, real assets that increase in value compared to a devaluing dollar. The fact that banking is going to occur no matter what is important because during an inflation, you actually want as much money as you possibly can rolling through policies and back out more than ever, because you need to turn bad dollars into more dollars to go buy the good stuff.

So, that’s what we’re doing with policies, paying premiums and every single year, the cash flow is going to grow by more and more than it did the year before. So I can put 10 grand into one policy and get 12 grand this year to go play with, and then I can put 10 grand in next year and get 13 grand to play with and so forth. So actually, I have a natural hedge against inflation through the use of the policies, but then it also empowers us to use them to buy these other assets that grow faster and faster against the devaluing dollar. And so the common question is, “Well, Nate, what’s going to happen to policies when inflation hits.”

First off, you’re going to get a good hedge against it due to the growth of policy, but nonetheless don’t think of the policy as the investment. It’s not the storage tank just to sit money on, it’s the banking tool and banking is going to occur in inflationary periods or not, and I just want to have more dollars than the next guy does, and I can do that by creating a profitable banking system.

Holly: And the key there is that no matter what, banking is going to occur. Doesn’t matter. Banking is so going to occur, the question to ask yourself is are you going to be the one controlling your bank or is somebody else going to be controlling your banking experience, really?

Nate: And especially who’s making the profit from it. So no matter what we do, IBC is a concept, not a product. The concept is going to work in high interest rate timeframes, low interest rate timeframes, inflationary timeframes, deflationary timeframes. The simple truth is we can make more money as an owner of the bank than as a depositor of a bank. That’s going to be the case this whole entire time. I would encourage you though, to be wise, knowing inflation is coming and to set aside some of your money that you’re building up in your policies, or if you haven’t started a policy, that’d be step number one, start a policy to get money rolling in there so we can create money by movement as opposed to just by investing. That’s what banking is.

But I would say, for those of us who are already doing IBC, to be wise about what’s coming and make sure there are some real assets in your portfolio, whether that’s gold, silver, maybe even Bitcoin now, that will increase in value as inflation hits. There are certainly assets that do great in inflationary timeframes. I think it’s a good time to buy some of those before inflation really strikes and use your policies to fund it, then you get to win on both sides.

Holly: If you don’t do infinite banking as a concept, it doesn’t matter what happens with an inflation, the profits are all going to go to somebody else but you, and you’re just going to lose money on your dollar. And I think it’s really important that if you do have policies, you guys do have to be aware, you have to start putting your money in there and through it. Not just leaving it sitting in somebody else’s bank account to earn them money.

Nate: As inflation starts to strike, you want more money flowing in out of policies, not less. In other words, we all do banking. Most of the time, it’s pretty much all through a bank account. We’re trying to change that. Let’s do as many transactions as we can through a policy, roll as much money in and out of policies through the premium that we possibly can. That way we can create more and more profit that will help us automatically hedge against inflation. And we can utilize the cash values that we’re creating to help buy other assets that would also do well in inflation.

And I think you’ll have a winning recipe to overcome inflation and profit from inflation so that you don’t get the negative side effects, which is, “Hey, I got these dollars and they’re buying less and less stuff.” Well, let’s get more dollars and let’s buy some things with those dollars that increase faster than the devaluation of the dollar. If we can do that, we’ll be in good shape.

Holly: I agree.

Nate: All right. Well, thanks for being with us again. 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/e120

Announcer: Dollars and Nonsense Podcast listeners, one more thing before you go, ease your worry and start your journey towards security today. Visit livingwealth.com/secretbanking. You’ll gain instant free access to the special one hour course Holly and Nate made for you. Again, that’s livingwealth.com/secretbanking.

Nate: In this episode, we discuss the age-old question. Should I buy more assets or should I pay off debt? She’s Holly, and she helps people find financial freedom.

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

Nate: All right. Well, welcome back to the show, everyone. We’ve got another… We’ve been answering a lot of questions lately about infinite banking, about other things. And this is just a question that seems to pop up, not only in our circle, but in just the financial world at large, whether it’s Dave Ramsey or whether it’s Robert Kiyosaki or whoever it is, there seems like there’s always people on two sides of the aisle.

There’s the “invest every dollar that you have, borrow as much money as you can, and go buy assets as much as possible.” And then there’s the other crowd that says, “No, your main focus should be solely on paying off debt and never touch debt again.”

And so we’re going to give mainly a discussion. This is pretty unscripted for Holly and me, as is almost always. We may come with a few concepts or points, but today we’re just really going to have a dialogue that we hope will shed some light on this. What should you do? Everyone is a bit different. Everyone, their stage of life is different, but should I buy more assets right now? Or should I focus on paying off debt?

So, Holly, what is your initial thoughts on this? If someone was just to call you up and be like, “Hey Holly, I’ve got some debt. I also want to buy some assets. What should I focus on?” I mean, what would you say?

Holly: Well, I think it does definitely depend on what their goals are and where they are in life, but more often than not, my response is, “I firmly believe you should buy assets, and that it’s not always in your best interest to pay off debt, especially the debt that’s in the future or debt to the life insurance policy.” Really, if it’s debt to the life insurance policy, I say put the money in paid up additions and buy those assets. Go buy the assets and let your money or your dollar do more than one thing. Because if you’re going to buy the asset, it can go up or down. But if you’ve put the money in the policy first and then bought the asset, you’re winning because that money continues to grow, irregardless what the asset does.

Nate: That’s true. And I definitely have changed over time too. I remember when I first dove into infinite banking. I feel like this happens to a lot of people who dive into infinite banking. We think that the main goal of becoming your own banker is to get rid of debt. I try not to give that impression anymore, because it’s certainly not, and has never actually been the primary goal. But that is something that comes with the picture, really, is that, “Hey, if you want to become your own banker, do we really need to have any loans with other people?” So it can produce this pressure on some of us, if we do practice the “becoming your own banker” concept. Maybe we shouldn’t owe anybody anything. But we have changed a little bit, certainly, because it used to be that was part of the process.

If you were to talk to us like in 2010 or something like that, 10 years ago, 11 years ago, almost all of our clients were debt-free, and we would strongly encourage don’t ever borrow from a bank ever again. And some people still love that, but we have definitely changed some to say… Well, there is definitely a difference between good debt and bad debt, and not all debt is bad and not all debt that is good. So, as you said, there’s different stages of life that I think can be helpful with this. So if someone came to me and they said, “Nate, I’ve been looking at your stuff and we’ve got this car loan. We’re paying 4% on it. We owed 20 grand on it. Should we pay that off? Or should we do something else?” A lot of people think it’d be nice not to have a car loan.

So they say, “Well, let’s go pay 20 grand to pay off the car loan.” The problem is you always have to look at the alternate use of money. So while paying off the car loan and saving that 4% interest on the car loan is a helpful transaction, it may not be the best transaction for you to do. It all depends on what else you could have done with the money. And I believe that in the world right now, there are lots of opportunities. If you want to take advantage of them to earn more interest with the… In other words, I can take that same 20 grand, instead of writing a check to the car loan people, I give that 20 grand… I mean, here in Kansas, probably not where you are at, Holly, in California, but here in Kansas, you can make a down payment on a three bedroom, two bath house in Raytown, Kansas City area, something like that, and rent it out, and make it a $20,000 down payment to buy a $100,000 house.

And not everybody wants to do that though. And I understand that. In fact, I don’t want to just always buy more property. I don’t know if I’d go so far as the Robert Kiyosaki “borrow every dollar you can and buy rental properties and gold with every dollar you can.” I’m probably not there, but I would say the alternate use of money should come into play. So whenever I deal with my own clients, and we’re trying to figure out, especially those that have policies, we’re trying to figure what to do with money.

Some of them really do want to pay off debt. And I have to sometimes tap the brakes. “Well, I would like to pay off debt too, but you do realize that if we focus all your money on paying off debt, we have no other money to go do anything else. So are you sure you don’t want to do anything else?” So I think everybody has to come to that decision themselves. What is the alternate use of money? I can pay off debt. I can buy assets, and there’s a time and place for each one.

Holly: In the beginning, and I say, yeah, 2010, 12, 13, pay off all the debt. But what happens is if you have a goal even for your family, or like me. I got three girls that are going to come up near college. Now whether they go to college or not, it’s their choice, right? But some of us, if we’ve taken all the money and paid off all the debt, then basically we get to the point where all our kids are going to school, and then we have to take on more debt, when maybe if we put it into the policy or bought some assets, we actually could’ve used that money in the future for the education or for a house remodel or whatever it may be like you said.

So I think you have to see it. What are those goals that you want to do? And how do you want to benefit you the most? And I have to say again, Nate, if it is cheaper to use the bank’s money in that, then maybe you’re better to use the bank’s money and not tie up all your money. I’ve said this before. If I want to go buy a house, I don’t really want to tie up $300,000, $400,000 into a home that I’m paying back to myself when I could use that money for something else.

Nate: Yeah. I mean, not having a mortgage is nice, but also having $400,000 in your pocket to do whatever you want is nice. So what nice do you want? And financially speaking, you’re exactly right, Holly. If the banks are offering [treat money 00:07:00], which they are today, it does stir us to want to use their money to make more money. But nonetheless, we definitely switched. So I’ve been meeting with people today, and especially those who own their own business. They have some debt and they’re trying to figure out, “Well, I’ve got some money. Should I?” And this could be money… We’re not even talking about IBC yet, Holly, or infinite banking. We’re just saying money, just generically. “Should we buy assets or pay off debt?” I mean, if you have debt at five, six, 7%, but you’re also able to turn some inventory rather quickly and make a lot more profit, my suggestion, obviously, it would be, debt in itself is not evil.

It is not bad by itself. The question always is, what else could I do with this money? So I can devote money to pay off debt, or I could devote money to expanding the business or buying more assets, and which one makes more sense to me right now. And so, I think there’s kind of two stages of life, potentially, that can come into play. One is growth mode and then one is kind of sustained mode or something like that. So if someone was 65 years old, and they came to me and they’re on the doorstep of retirement. They’re thinking about leaving their work and so forth, and they’ve got a bunch of assets pulled up and they’re holding onto this mortgage and they really feel that they should get rid of the mortgage.

I’m fine, at age 65, if you don’t want to go take risks. You don’t want to go buy any new properties. You don’t want to go do all these different things. Could it make sense, right in the doorstep of retirement, to just cut off the mortgage expense? It is possible. It could. It’s possible. But if that same person was 35 years old, and they’re like, “I’m about to go throw $200,000 over the next two or three years towards my mortgage balance, because I just can’t wait to get this mortgage paid off.” I’d say, “That is foolish. That’s not wise. Your mortgage at 3%, you’re telling me that you can’t put your $200,000 in anything else that can earn you more money than 3% tax deductible? Which would [inaudible 00:08:53] all right now.” And so I would say that definitely your stage of life can matter.

I mean, am I in growth mode or am I not? So if you talk to, Holly, to someone who was building a real estate business, they may have a few, a little properties and they want to grow. So, let’s go borrow more and start more. Let’s not focus on pay off debt yet. Let’s focus on buying new properties. But maybe when you get to 10, 11, 12, 13 properties, you may be kind of like, “Hey, I’m pretty much maxed out. I don’t know if I want to keep expanding anymore. Maybe I’m comfortable.” So then it can change to paying off debt. So I think determining, am I in growth mode or am I kind of cut expense and sustain mode and just make it more sustainable, that may help you decide if you should buy asset or pay off debt.

Holly: Well, and I think, Nate, too, that’s a really good analogy of, am I in a sustaining or am I in a growth mode. There’s people that pay off things really quickly, right? And then what they have is they’re asset rich, but they’re cash poor. And so, because of that asset, I’m asset rich and I’m cash poor, paying off the assets didn’t really help them do anything. It just tied up their money.

And then when they really want to be able to go invest in something or an opportunity, they don’t have the cash to do it. And I think that’s where you really have to say, how much money do you want tied up just on assets that’s doing nothing for you, or how much do you want to be able to control the money, really, and be able to make it benefit and work for you? And I think that’s the other thing you have to look at. If all the assets are paid off, but you have no cash, then when that opportunity comes along, you have no money to put into it.

Nate: You’re exactly right. I actually remember sitting in a hotel lobby with Ray, meeting with a client when I was kind of a newbie in the business and just shadowing Ray for the first couple of years. And it was right at the turn where we started to realize this. I remember the meeting we were in, and it was with a professional, I believe maybe a dentist or chiropractor. And he owned his own business. He had bought some policies and was using the cash value that was building up in those to pay down debt. And a lot of it was going into the home equity line of credit and mortgage balance, because that was the main one he had left. And he said he was excited to see the mortgage balance decline, but then he said, “I’ve also noticed I don’t have any money. I feel great that my mortgage is going down, but I would like to have some money to work with in my business and elsewhere.”

And that’s when Ray and I both realized maybe paying off debt isn’t everything. Maybe there are times when we should focus on growing something, as opposed to just sustaining it. You can see this, even in the world of big business. Why does big businesses, who could have all the money in the world, why do they borrow other people’s money? Why do they raise money in that way? It’s obvious that they feel that they are in growth mode at the time, that if they use other people’s money, they can turn it into a profit because they’re in growth mode. Whereas other businesses that are large, they may say, “You know what? We don’t need to borrow money. We’re going to pay off debt and become more nimble.”

So, definitely depending on… I feel like if you run your own life as a business, you can see that. When is it a good idea for me to borrow money? When am I in growth mode? What am I trying to grow my business? Whether you really have a business or whether you want to think of your financial life and investments as your business side, if you’re in growth mode, I don’t think you should focus all your money on paying down debt. I think the Dave Ramsey approach, nine out of 10 times, which is pay cash for everything and pay off your house as soon as possible and never borrowing any money ever again, I do think that is a foolish way to live life. I do not agree with that at all. There may be a time to do that, but for most people, especially if you’re good with money, I don’t think that’s the main goal.

Now, if you know yourself and you’re like, “Nate, if I start borrowing money, I’m going to become undisciplined and go deeply into a hole.” I mean, first, is there no other way to get disciplined? I guess if you have to do it, you have to do it. But I mean, it’s not financially wise to throw everything at debt, if you’re trying to grow your wealth, if you’re trying to build wealth. Sometimes it can make sense to buy assets instead, especially if the debt itself is not bad debt, whether it’s cheap car loans, cheap mortgages, or even like a business line of credit that you need to help grow the business while it’s in its fledgling stage. These things, while we may want to pay off later, it’s okay [inaudible 00:13:12].

Announcer: Are you still stuck in insecurity and uncertainty? Do you want to feel like a financial genius and confident about your future? Holly and Nate have prepared something exclusively for Dollars & Nonsense listeners. It’s called the Secret Banking Masterclass. You can gain free access to this course by visiting livingwealth.com/secretbanking. That’s “secretbanking”, all one word. The course will share with you how the conventional system stacks the deck against you, and exactly how to break free from their system. We believe in challenging the status quo. We believe in defying conventional wealth tools while maintaining traditional values. After all, most of those conventional tools only ever seem to make someone else on the inner circle rich. Visit livingwealth.com/secretbanking. That’s “secretbanking”, all one word. Ease your worry, and start your journey towards security today. Visit livingwealth.com/secretbanking. Now, back to the great episode with Nate and Holly.

Holly: You want some freedom and you want some flexibility. If you never borrow another dime from anybody again, or you always pay cash for something or for everything, then where is that… When there is an emergency or something that happens most of the time, you don’t have the money to pay for it. And you do go back into that cycle of debt. And like we said, good debt versus bad debt. If all you’re doing is maxing out the credit cards because you can’t control your spending, that’s bad debt. But there is good debt, and it’s okay to have some debt and be able to have the flexibility and freedom to use your money how you want to use it when you want to use it.

Nate: Yeah. I love the freedom and choice. That’s the same thing that I’ve dealt with in my own life. I have enough money right now to pay off my mortgage inside of my policy. I don’t need to have a mortgage, but I love the flexibility of being totally in control of that money. If I was to borrow it all out and use it to pay off the mortgage, then I’d have to go back to the bank to ask for it. So the alternate use of money needs to be involved. And the same thing applies when I have clients who are just starting out with infinite banking and they may have 20, 30, $40,000 of cash value in a policy. It’s capital. If you don’t have a policy and you’re listening to this, that’s great. You’ve got some money and it’s time to buy a new car, and you got to figure out, “Do I want to buy this car with the money I have or do I want to use the bank’s money?”

And once again, it can depend. But if you’re in that situation, you need to figure out, “I can borrow the bank’s money at 4% to buy this car, or I can use cash and it doesn’t cost me anything, but then the money is stuck in the car. Is there something else I could be doing with this money?” Maybe we need to focus more on the goal setting. In other words, if your goal is just to pay off all debt, that’s okay goal. Maybe not the best. If they talk to me about that, if they own their own business, I say, “You know what? I bet you, we could find somewhere to put this 30, $40,000, inside your business, where you’ll be happy to have it in your pocket. And if we don’t find a place, we can always pay off the loan at the car later? But let’s keep our options open instead of closing the door.”

Holly: When you’re looking at it, and you’re wanting to pay off this debt, if that interest rate you’re being charged is so low, I mean, there’s 0%, right? 1%, 2%, 3%, even on a mortgage like, “Oh, I got three and a half where I got 3%.” I mean, that is a good interest rate for most individuals, for all of us, I would say. So sometimes, why do you want to go and change that and have to pay yourself, if you’re borrowing or paying yourself 5%, or you paid off the mortgage, like you said, Nate, and you have to go back to the bank to get the money in the future. We don’t know what that interest rate is in the future. You might actually have paid off the debt and tied up your money, and now you are dependent on the bank to dictate the terms and conditions of the loan that you have to agree to, to use the money in the future.

Nate: That’s right. And I think no matter what, whether you’re paying off debt or buying assets, the value of having capital in your control, just to begin with. So that’s why I may say a little bit different than Robert Kiyosaki style of things, because I believe there’s something to be said about having money, capital that you control in your pocket. So I’m of the opinion that you should have some money available to you and that you shouldn’t only have assets or only be debt free. That’s the problem.

When somebody just focused on paying off debt, they’ll throw all their money at the debt for three or four years and never have any money themselves. So then they’re broke afterwards, but they’ve got no debt. The same thing can be said about people buying assets. They buy a whole bunch of rental properties and all their money’s stuck on those properties. They got no money, and maybe they borrowed some and they put their own money in, and then a crisis happens and all these people went broke. They went broke because they couldn’t survive long enough.

And the downturn, because they had no money. They had the assets. They were asset rich and cash poor. So, I think there’s something to be said, no matter which direction you choose to go, that building up of capital first sustains both options. And I do think… We wanted to mention a few things here at the end too, because we’ve been asked questions many, many times, and we’ve answered a few of these styles of questions before in previous episodes. But, Holly, you had gotten a question from a client, very common question in this similar vein, but as it applies directly to the infinite banking concept and the policies that we use inside of IBC. So expound a little bit on your thoughts with the question that you got.

Holly: So the question really was, “Do I take my cash I have, that’s not in the policy?” So this is money that you haven’t actually put into the policy at all. “And do I pay down the principal, the loan of the policy? Do I pay that on the policy loan or if I’m able to, do I put it in the policy as paid up additions rider?” I knew the client pretty well, and I know what they’re trying to do. Like you said, Nate, they are trying to purchase assets and to be able to have flexibility and freedom with their money. But in the goal, they’re in the building mode, right? They’re in that “I am trying to grow and build wealth.” And so, my recommendation was not to pay down loans. The recommendation was actually to put the money into policies because they could, and use it. That way, they were putting the money in as paid up additions, in addition to the premium they had paid.

And the reason why I recommended that is, number one, advise them a guaranteed death benefit. And that money is more than the money they put in. So if they put $10,000 in and they get like $15,000 of death benefit, it’s worth it because you just got more death benefit in the event something happens. But the other reason is that money is going to grow tax-free for them, and it’s going to grow. But they’re also going to be able to use that money. And so, for this individual, for me, it’s… You put it in towards paid up addition rider. The reason I didn’t recommend either paying down the loan is, with the policies they have, when we repay principal, all it does is yield you the principal to borrow again. And so the money was growing. It was compounding in their policy already, even though they’d borrowed money out to use it. So it made sense to let that money keep growing because it was there, instead of just replace the principal and take it back out and use it again.

Nate: Yes. The IBC age-old question. “Should I pay premium or should I pay back my loan? Should I start a new policy or should I pay back my loans?” I mean, it’s the same type of thing. And you’re exactly right. It just kind of goes back to what we were talking about previously, that the premium, whether it’s the paid-up additions rider or whether it’s starting a new policy with this money, if you have a certain amount of money, can I put money into my PUAs? Can I put it into a new policy? That’s like buying an asset, and then obviously if I pay back a policy loan, that’s like loan repayment. The questions we still get the same. Doesn’t matter if you have policy or not. Is buying assets more important or is paying off debt more important? It’s the same solid question. And it goes back to that whole concept we talked about.

Are you in growth mode right now? Are you in sustain mode right now? Like if you are in policy growth mode were you’re trying to expand the system and make it bigger and bigger to improve the future outlook, then obviously premium is the way to go, not repayment of the loan. So premium is buying assets. That’s what we could call it. And it’s would be more for those folks on growth mode. It kind of goes back to that same thought. I’ve actually had a couple of clients who are nearing retirement or trying to figure that out too wade through this question. And, as you get closer to retirement, maybe it can start to shift. When the time horizon is less, maybe you’re not quite as much into growth mode and expansion mode, and you’re more kind of consolidating things and making things simpler, more efficient, maybe at that time, instead of focusing on buying new policies or flooding money into PUAs, maybe we would switch to repaying some of the loans and pouring money back to repaying loans.

But we would not have done that while we were in growth mode. So, it really depends on each individual’s position. You may be a person who’s really just got a ton of premium already and congrats to you. And maybe it would start to make sense to pay back some of the loans you had. Certainly individualized, but I think that the growth mode and sustain mode concept can be helpful there. Am I trying to grow the system and make it bigger and bigger? Or is it pretty big enough for me now, and I just kind of want to make it a simplified sustainable system? Maybe I’ve got some extra money, I’ll throw it in as loan instead of expanding now. And everybody has to decide where they’re at, but as Holly said, for the most part, premium and pay [inaudible 00:23:01] does more for your future than simply repaying a loan. So that’s eight out of 10 times, is probably the option for most people.

Holly: And I think you do have to say exactly what we’ve been saying from the very beginning. If you’re in, later on in life, and you’re in a sustain mode and you want money or something to be able to live off of, and you don’t want to actually have to start a whole new policy or get that started, then it might be that, “Hey, yeah, I’m going to pay the loan back. And it gives me more to live on later on in life.” But the reality is, nine times out of 10, Nate, maybe even nine and a half of 10, put it into premium, in something that is growing because it causes growth in the policy, not just in death benefit, but in cash to be able to use an excess.

And that’s what we really have to look at is, what is the value if I put this money in the policy and how does it work for me? And, if you’ve got policies and you don’t want to start a new one and you can dump it in an existing one that makes sense, but ask yourself where you’re headed. Are you reaching the sustain mode or are you still in that growth mode? And Ray is 73 years old and I still think he’s in the growth mode. I don’t- [crosstalk 00:24:10]

Nate: That’s a good point, yeah. [crosstalk 00:24:11]

Holly: He said before he’s in the growth mode. It’s not in a “hey, I’m slowing down and I want to be able to sustain,” it’s “I want to keep driving this and making it grow. And the more I make it grow-” [crosstalk 00:24:23]

Nate: Yeah, premium is the only way to do that. [crosstalk 00:24:25] You’re right. You’re right. So, I mean, if you want to continue to grow the system bigger and bigger, it’s got to be through the form of premium. It’s got to be through buying assets. People’s goals can change. So Ray’s obviously always going to be in growth mode and there’s no retirement ever for him, but I know some people who, in the real estate business that they’re in, they’ve got quite a few properties and they may think at this point, “The amount of rental income I’ve got now is great. I may just focus instead of expanding and complicating things, I’ll just pay off some of the mortgages on these properties and pour money into there to free up some more cashflow as opposed to trying to buy new assets.”

There can definitely be a switch for everybody, but I’d say most people listening to this podcast are probably more in the growth mode side, as opposed to simplifying and sustaining side, which would mean I would point you, if you were my client, to focus on finding investments and buying other assets or investing in your business in ways that produce larger amounts of value, than focusing all your money on just paying off the mortgage, paying off the car loans, paying off the student loans, and then having nothing to show for it other than no debt. No debt is great, but producing profit and having assets can be even better depending on where you’re at. Any last words here, Holly, before we can close it down?

Holly: Just ask yourself, what’s more important, right? Growth or sustainability? And, remember you want to be able to have the freedom to control that money. And, in some ways, when you’ve put it all in assets, because you paid everything off, you kind of lose the buying power that that money generates to be able to have the flexibility to go and do what you want to when you want to.

Nate: Yeah, I think that’s a good point. You’re exactly right. And that there’s a healthy level of debt and a healthy level of assets for every individual based on their own emotional makeup. You had to find that for you. What’s a healthy level of debt? And what is, at the point where it’s causing you stress? And one thing that can solve both of those, whether it’s a healthy number of assets or healthy number of debt is honestly having capital. You need to have some capital buildup. And that’s what IBC specializes in, building capital that you can deploy either to pay off debt or buy assets, but you want to have a solid base of capital. That way you’ll never get into a situation on either side of being asset rich and cash poor. Nonetheless, we hope you enjoy this. We hope it provided some clarity, but this has been Dollars & Nonsense. If you follow the herd, you will get slaughtered.

Announcer: For free transcripts and resources, please visit livingwealth.com/e119. Dollars & Nonsense podcast listeners, one more thing before you go. Ease your worry and start your journey towards security today. Visit livingwealth.com/secretbanking. You’ll gain instant free access to the special one-hour course holly and Nate made for you. Again, that’s livingwealth.com/secretbanking.

Announcer: Listeners, Nate would like to offer you something special. He’s prepared a virtual workshop to walk you through how to make your mortgage really work for you. Go to livingwealth.com/mortgage, to watch the free on demand presentation. You’ll see the easy to understand numbers and full scope of what he and Holly are sharing with you in this episode. Go to livingwealth.com/mortgage, to watch the free on- demand presentation.

Nate: All right. Well, we’re about tackle a topic that we’ve actually probably talked about a couple of times before Holly, but it seems like it’s been maybe two years or something like that since we last hit this, maybe even longer, I don’t know. It’s been a while and this is a podcast focused on mortgages, how actually to take advantage of the bank’s money. And really there’s a lot of misconceptions that I believe banks want us to believe about mortgages and interest rates and what you ought to be doing. Mainly to benefit them and less focus on benefiting you. So we’re trying to paint this to say, “Hey, stop believing the things that are not true and understand the truth, so that you know what to do better.”

Because I do think Holly, there’s many things in many sectors, but probably the biggest one in the world of home buying. That banks want us to believe that we really should not trust them. I think a lot of people don’t really trust banks, but really in the world of home buying and mortgage, we all have a healthy level of mistrust for what they’re telling us to do. And really what we ought to be doing in light of the low interest rate environment that we’re in.

Holly: Yeah. And we are in that low interest rate environment, but because it’s so low and most of us have never really thought of the banks as anybody not out to get us, but why would they encourage something if it’s not good for me? Is a question you need to ask yourself, is this really in my best interest? And whether it be pushing a 15 year versus a 30 year mortgage, that we’re going to talk about and we have talked about, or whether it’s paying that extra principle payment. I sometimes doesn’t even come from the bank Nate.

For me, my experience was I had an individual that was doing all my mortgage documents, signing off telling me, how the best plan for me and ideas that I should make one extra principle payment a year on my 30 year mortgage. And I could pay my mortgage off two years earlier. And I told her, I would never do that.

Nate: Yeah, you drink a lot of the Kool-Aid, with us. Right?

Holly: Yeah. Yeah. [crosstalk 00:02:47].

Nate: Once you taste it, you don’t want to go back.

Holly: She’s like, “Yeah, but then it doesn’t take you 30 years to pay it off. It only takes you 28 and really not even 28, it’s just part of 27 years and a little bit.” And I was like, “I don’t want to do that. In all honesty, where did you hear that?” And she goes, “My bank told me this.” And it was a great conversation. And leading to why you shouldn’t do that, not just because I’m giving strong dollars away today, instead of paying it off with weaker future dollars. The best way of looking at an extra principle payment on your house is, would you ever take that same money and buy or purchase an investment that yields use zero percent rate of return? How exciting is that?

Nate: Yeah, I’d never do it, but that’s what we we’re to do.

Holly: Yeah, we’d never do it. Nobody would, they don’t do an investment for zero percent return on their dollar.

Nate: Yeah, absolutely not. And so, one thing we can probably dive in to do is, maybe the first myth here Holly, that almost all of us are kind of pushed from banks, is that a 15 year mortgage is better than a 30 year mortgage. Almost every time you go to a bank, for whatever reason, they’re pushing you to get this 15 year mortgage, which is surprising. I would think it’s set in this light that they’ve really got your best interest at heart because what they’ll pitch it to you is, “Hey, look at this. In the 15 year mortgage, here’s how much interest you got to pay us. And then here’s the 30 year mortgage and you got to pay more interest to us for the 30 year mortgage. So we would think it’s probably best if you take this 15 year mortgage.” There’s a lot of holes in that argument though, because the problem with a 15 year mortgage, I mean, there’s many different things. But the question that I would always ask people is, why is the interest rate on a 15 year mortgage typically lower than the interest rate on a 30 year mortgage? And the reason that it’s lower is because for a 15 year mortgage, it’s actually less risky to the bank to offer you a 15 year mortgage than it is for them to offer you a 30 year mortgage.

And so, if it’s less risky to the bank, it actually means it’s more risky to you. And somebody will be like, “Well Nate, how is a 15 year mortgage more risky to me?” Well, you have signed this agreement to make this payment for 15 years, set and fixed in stone. And that payment is greater than the 30 year payment. In other words, the only way you’re able to pay off a mortgage … If you take out a $300,000 mortgage to buy a home and you’re paying back it over 15 years. Automatically, that means your payment is going to have to be a lot more to pay that off in 15 years than it would be for the 30 year option. So you’re committing to pay this larger payment over this 15 year timeframe.

The problem is the bank has a lien against the full value of your home until the last penny is paid off. The reason it’s less risky to them is because you’re giving them the money back faster and faster, which means if they were five years into it, if they were to have to foreclose against you, you would have actually paid a lot of the principal back already in those five years. So it means that there’s less risk of them getting hit real hard with a foreclosure and having the house be worth less than the balance of the mortgage at that time. But the reason it’s more risky for you is because you are locked into this greater payment and you go in five years and then some sort of financial situation occurs, where you’re not making enough money, or maybe you lose your job or your business fails. And you’re stuck with this larger payment for this 15 year mortgage.

And so whenever you’re stuck with this larger payment, you come back to the bank. You’re like, “Guys, five years ago, you gave me the option to choose the 15 year or the 30 year I chose the 15 year. I thought it would be good. Well, now I’m in this tight place. I don’t really have enough money to keep paying on it. Is there any way I can switch it now to the 30 year option? In fact, can I get back all that extra money I had sent you for these five years? And can I just pretend now that I actually took the 30 year option with a lower payment now, and with that equity back.” And of course, they’d say, “No, you can’t do that. You have to go through the whole refinance process. And because you don’t have a job right now, you’re not going to get approved for a refinance, which essentially just means we’re going to foreclose on the house.”

So the 15 years actually puts you at a riskier place because you’re locked into a higher payment amount. And while you’re locked into this, the bank is going to foreclose on you, if you don’t pay it back in complete over that 15 years. So in other words, even in year 14, if you stop paying them, they’re going to come take the house. It actually is less risky for you to take the 30 year because then if you had to foreclose, first off, you have less of a payment owed and saying, you haven’t been building up as much equity to lose to the bank, and if they come take your house. So I would just say, first off a 15 year is not better than the 30 year, just because you’ll pay less interest. We have to see deeper than that. What else could we do, if we chose the 30 year instead of the 15 year mortgage, Holly?

Holly: Well, I think one of the other things that you honestly can do is, you can take that difference in the money you were paying and use it for a whole life insurance policy. Number one, that protects you and gives you death benefit. But number two, if you want to use that money and invest it, you can do that too. Plus a 30 year mortgage, it’s a great play. It’s weaker dollars in the future. I mean, Warren Buffet says that. That a 30 year fixed mortgage is a better play for the American dollar. Like use that to your advantage, use a 30 year mortgage to your advantage, 15 years more of payments, but they’re at a lower rate. It might be a higher interest rate, but actually most of us, we hear lower interest rate and we think it’s cheaper for us. And in reality, the only thing you get to deduct from your taxes is your mortgage interest. So by paying a lower mortgage interest, you’re also now increasing what you pay to the federal government on a 15 year mortgage versus a 30 year mortgage.

Nate: Yeah. That’s what really blows people away is that typically, let’s just say you’re going to buy a home and you go out and you get this price for … Okay, how much is the payment for the 15 year? And then we compare that to the 30 year. The 15 year is obviously going to be a higher payment. So let’s just say that the 15 year mortgage is a $1,000 a month. I don’t know what that mortgage amount would be. Let’s just say they offer you a 15 year mortgage. It’s going to be a 1,000 bucks a month, or you can take advantage of a 30 year mortgage. And the payment is only going to be, let’s say, $600 a month or something like that. And essentially what we’re saying is … It’s obviously true by the way, if you have a loan out for 30 years, you will pay more interest to the bank. That’s true.

However, you had to send them all that money, essentially $400 a month, you had to send them extra. That’s about five grand a year for the next 15 years. So you have to send them an extra five grand a year in this little scenario. The question you should be asking yourself is, what could I do with that 400 bucks a month difference? What could I do with that to produce value for me and my family, apart from just sending it to the bank, to pay off my mortgage quicker. And what Holly and I have found is that typically you could take the difference between the 30 year and the 15 year payment and just use it to buy an IBC policy. And actually, in 15 years, the policy could have enough money to pay off the 30 year mortgage.

So now if you want to, you can get out of your mortgage in 15 years, or you can continue using the bank’s money, leave it outstanding. Because as Holly said, due to inflation, every payment you make them 15 years from now, it’s not going to be the same dollars that it was today, but it’s locked in and fixed.

So that’s what we talked about. You’re getting to pay it back with weaker and weaker dollars, which means that you can use the good dollars here and now to buy assets that produce even more value than the mortgage. And right now, with these low interest rates, we ought to be calling the bank up, asking them to send us as much money as we can get our hands on because you’re getting it at two and a half, three, three and a half percent. And as Holly mentioned, that’s all tax deductible. The IRS is going to help you. Uncle Sam is going to help you pay your mortgage by letting you get a deduction for it. So that means that the real cost to you is even less than that.

The issue is, some people, “Well, I don’t like paying the bank interest.” I don’t either, but if I can use the bank’s money to go buy assets that produce more interest to me, that’s a winning game for me. That’s banking the right way, it’s using the bank to make money, not just as a losing money position.

Holly: I want to put it in dollar terms as well. That $400 difference a month or $4,800 a year. That’s $72,000 over 15 years. That’s a great investment in something else, then giving that $400 to the bank in the first 15 years, just to pay the mortgage off.

Nate: That’s money, that’s locked into your house. It’s not putting food on the table. It’s not producing any income for you. It’s sitting there in equity in the home. That’s really producing no value. That’s why we talk about it being a zero percent rate of return. Yeah, but sending money faster and faster to pay off a mortgage may feel good, but it just locks your money up. When instead you could have taken that same capital and bought other assets that might actually put food on the table. In fact, they might produce enough value, whether it’s a policy or something else to pay your mortgage payment for the next 15 years, without anything coming out of your pocket. This is called having money work for you, not just having to work for money.

Announcer: Are you still stuck in insecurity and uncertainty? Do you want to feel like a financial genius and confident about your future. Holly and Nate have prepared something exclusively for Dollars and Nonsense listeners, it’s called the Secret Banking Masterclass. You can gain free access to this course by visiting livingwealth.com/secretbanking. That’s secret banking, all one word. The course will share with you how the conventional system stacks the deck against you, and exactly how to break free from their system. We believe in challenging the status quo. We believe in defying conventional wealth tools while maintaining traditional values. After all, most of those conventional tools only ever seem to make someone else on the inner circle rich. Visit livingwealth.com/secretbanking. That’s secret banking, all one word. Ease your worry, and start your journey towards security today. Visit livingwealth.com/secretbanking. Now back to the great episode with Nate and Holly.

Nate: We talked about this infinite banking concept, and we’re trying to become our own banker. Some people think that that means we’re trying to pay off all debt. We’re not big fans of debt. And we don’t really like to use the banks. The only time we ever want to use the bank’s money, if it’s a winning proposition for us. I just bought a house last year. I didn’t have to take out a mortgage on the full amount. I could have put down a huge amount of money. I could not have a mortgage today, Holly.

Holly: Yeah.

Nate: I don’t need the mortgage. I could pay it off using my policy cash values, anytime I want to. The only reason I have the mortgage is because the interest rates are so low right now, I’m wanting to get as much money out of the house, keep as much money in my own pocket, so that I can use that money inside my policies to produce profit or take that money out of the policies and produce profit. Whether it’s buying real estate or buying precious metals or whatever it is I wanted to invest in. I just really believe that my interest rate of like three percent, that’s locked in for 30 years, inflation is practically three percent. And then I get a tax deduction on top of it.

So the real rate to me is more like two percent. For me to send money to the bank, whether it’s a 15 year mortgage instead of the 30, or whether it’s me just making extra principal payments to pay this thing off faster. That’s essentially me saying, “Nate, I don’t think I can earn two percent anywhere else.” That’s a lie. Guaranteed in the policies, even more that, or practically anywhere else, any other type of assets. So what we find is that your home is just not a very good asset, Holly. Maybe it’s not even an asset at all.

Holly: And I think that’s a myth, Nate. Is that we’ve been taught to believe our home is an asset. And in all reality, it’s more of a liability than it is an asset, for how most of us are using our homes.

Nate: Yeah, exactly right. I like Robert Kiyosaki, the Rich Dad, Poor Dad. I like his definition of an asset. For him, to be called an asset, it’s something that has to put money in your pocket. And liabilities are things that take money out of your pocket. And for most of us, that’s all a home is. We pay mortgage payments, property taxes, and insurance, and it’s just money walking out the door. It never puts money in our pocket. So it’s really more like a liability than it is an asset. And my hope is that I can turn my home into an asset by pulling the equity out of the home and moving it to a place that actually is going to produce me more profit than what it takes to actually borrow the money. And what I’m saying is, at these low interest rates, it’s easy to find places that can do that for you. It’s not difficult.

Now, if the rates were seven or eight percent for a mortgage, we may change this discussion. But for right now, when you can get a mortgage pretty easily for like three percent or sometimes even less. For 30 years, I would say, get as much money as you can out of that, roll it into your infinite banking policies and then use those to buy even more assets. And you’ll build so much more wealth using the bank’s money and taking advantage of low interest rates. You’ll do it so much faster than if you could just pay off that house early and stuff as much money as you can into the principle of the mortgage.

Holly: Yeah. And I think we don’t think that way, because we haven’t been taught to think that way. We’ve really, really been taught to get the mortgage, you make all your payments, or you make even extra payments. You have your insurance and you pay your property taxes and you do nothing more with the house other than live in it and so it really isn’t that asset. We have to start thinking, what is an asset and what is the liability? And what Nate said is a great definition by Robert Kiyosaki. If it is not putting money in your pocket, it’s not an asset. There’s no way that’s an asset.

Nate: Yeah. So if you’re sitting here and you’ve been making extra principal payments toward your mortgage to try to pay it off quicker, my suggestion to you would be to stop doing that. And I would take those extra principal payments that you’re sending to the mortgage and use it to produce something of value to you, by buying an asset that’s worth more than these extra principal payments. Because they’re not doing anything, they’re just sticking money into the equity of the home. They don’t put food on the table, they don’t help you retire. For me, what I would do, is I would take those extra principal payments that I’m making on a mortgage and I would throw that money into a policy, first. And then a period of time, if I want to use my policy cash value to pay off the mortgage, I can do it, but I don’t have to. It gives me this option. I call this Holly, separate the equity from the home. That’s what I call it.

Holly: Oh, that’s awesome. I love it.

Nate: So instead of building equity up in a home, I’m going to take the money I was going to put into the equity of the home, and I’m going to put it somewhere else. So I’m going to build equity in this policy and I can then choose, if I want to, to take money out of the policy and put it in the home by paying off the mortgage. Or I can choose to take the money out of the policy and put it to work elsewhere, which is honestly the route I would typically go in these types of low interest rate environments that we’re in. And so it gives us this choice. So that’s one thing I would encourage you, if you’re making extra principal payments to a home, don’t keep doing it. There’s so many things you could do of better value to you on your wealth building journey than just trying to pay off a home quicker.

I’d also say the same thing really quick, Holly. For the 15 year verse 30 year mortgage people. If you’re sitting here with a 15 year mortgage, because you were told that’s the best, and that’s what mom and dad told you to do, and I want to pay less interest. Your heart was in the right place but I think the numbers, if you run them, will kind of show you a different reality. That if you were to go to the bank today and refinance that 15 year mortgage to a 30 year mortgage, which would lower your monthly payment, allow you to free up some cash flow, that you could use and then build other assets like a policy, or build up equity elsewhere. That’s going to put you in a safer position because you’re going to have liquid money to use for any sort of unexpected expense that comes your way or any opportunity that comes your way.

So all in all, I would just say, “Hey, let’s not see the mortgage as this evil thing that we’ve got to get rid of as fast as possible.” Because the downside of doing that, is just having a whole bunch of money stuck in a house and less money able to work for you and put food on the table, which is really what we want money to do.

Holly: The desire of paying off your mortgage is one of those things that some people have. I just got to get this debt off of my shoulders per se. Yet, if you switch and change your mindset, it doesn’t become so much debt because really what you’re doing is using the money you would have used to pay that off and doing more than one thing with it. And it really actually helps you and your lifestyle and your family. Like Nate has said over and over again, the difference of this is doing something with your money that does put food on the table, that does provide for your family. That does actually benefit you. And especially, if you put it into a policy, you got your money working for you and growing for you. And I think the reality is, we would love to be able to show you how it actually works for you in a real scenario, based on what you’re going through with your life.

Nate: I love what you’re talking about, with money doing more than one job, because you’re exactly right. Whenever we stuff money into the principle of the home, it really just does one job. It saves us like mortgage interest, I guess. That’s the only job it can do. But if, we were to then take money out of the equity of the home, we can have it do a lot of different things. Maybe if you’re sitting here listening to this podcast and you do have a home that has a lot of equity built up in it, and you look at this big amount of equity and you realize, “Well, it’s not putting food on the table. It’s not producing income for me. It’s just kind of sitting here.” I would strongly suggest to you to reach out to Holly or me and discuss, what can I do with this equity? Should I refinance the mortgage and pull some money out? Or should I open up a home equity line of credit? What should I do to get my hands back on this money? That I’ve sent to the bank. It’s my money. It’s my home. And I’ve got all this money sitting here in my home that’s not doing anything for me. How can I start moving that out to work on my behalf?

And we can show you exactly what we think would make sense with real numbers. And you’ll just see, holy cow, you’re saying I can do this with this equity and make this amount of money with it? Because for some people it’s hundreds of thousands of dollars over a lifetime. If they would just get their hands on this equity, as opposed to leaving it sitting in the house or sending extra money to the bank. But if you actually get to work on it, it opens up a world of opportunities. Take advantage of the equity that you have. Don’t just let it sit there.

And one more thing, I had a thought while you were talking Holly. As I told you guys, I have enough money in policies to where I don’t need a mortgage. So I’ve got more cash value available to me inside my policies than what my mortgage balance is. The way I see it, is that I don’t actually have a mortgage because any day I could just go write them a check and I suddenly don’t have a mortgage, but what I do have now is options. So since I have this mortgage, I can choose, do I want to keep this money in cash value? Or do I want to pay off a mortgage? That’s really going to be my goal for forever is to continue pulling money out of the home at anytime there’s a decent amount of equity that gets built up over time. I’m not going to do it like every year, refinance. But every four or five years as I’ve paid down some of the balance in my 30 year mortgage, my home is hopefully appreciated, but who knows? I don’t count on it. I don’t really care, but once there’s some equity up, I’m going to pull it out and put it in my policies because that’s just where I would rather have my equity.

And if I want to pour all that money back into the house, I’ll just pull it right back out of my policies and send it back to the bank and get them out of the picture, if I ever get tired of dealing with them, they’re gone. I don’t need the mortgage, but I’m going to use the bank’s money. I’m going to use the mortgage for my own benefit.

Holly: And Nate, when you have the ability to do that, it does give you options. And for me, I looked at, do I want to tie up all this money in a mortgage by paying myself through my policy? Or if I can use the bank’s money and pay them back and I still have the freedom to use this other money I’ve built up. Then it benefits me in many ways by giving me those options. So I think the reality is, I pull money out when I need to, not even need to, when the interest rates are really low, I’ve got enough cash value in my policies. I’m like, “Hey, might as well use the bank’s money.” Because my house, as old as it … We’ve been here, nine years, it has equity in it. And that equity doesn’t do me any good, if I’m not using it.

Nate: If you leave it there, yeah it’s just idle money.

Holly: Yeah. It’s idle money doing nothing for me. And the only way it does something is, if I choose to use that equity and put it to work.

Nate: There’s some people, the reason that they leave the equity there is because they just don’t know what they could do with it. If you’re guaranteed to grow money and you’re actually guaranteed to make more money inside the policy than what it costs you to borrow money out from the mortgage people, then it can make sense with no risk really. So in other words, we’re not just pulling money out, just to pull money out. We’re pulling money out because we’re very confident. In the world of policy, but even in some other areas that we are going to receive more in interest than the two, two and a half percent real cost of this mortgage.

Holly: And that’s the reality, Nate. Is that when you look at it that way, sometimes it’s that fear, like you said. I wouldn’t just go put it in the stock market or hope you invested it wisely and you don’t lose the money, but when you’re actually putting it in something that has a guaranteed rate of growth for you, and it’s better and higher than what the interest rate is on that loan, then it makes sense to do it over and over again, as long as you can.

Nate: Absolutely. So we’re really big on putting as much money to work as possible you can, being efficient with money. That’s really at its core, what infinite banking is all about, is keeping money working for you at all times. And the one of the biggest places we find that people just have idle money, is sitting in the equity in their homes and learning how to keep that money in motion and utilize it to produce value. I think we could keep going with this Holly, and there’s actually quite a bit that we didn’t even really have time to get into that as it’s zooming through my mind. So maybe we’ll have to do a follow-up part two, to this at some point, but all that to say, there’s many myths out there about the mortgage. It’s a big topic for most people because it’s one of the biggest things you’ll ever purchase in your life and a huge decision financially.

So knowing the right way to treat it is key. So we would say, go ahead and get the money for as long of a timeframe as the bank will allow you to do it and commit to taking as much cashflow as you can and putting it towards assets that you control. Putting it in place where you can build equity, where you control, as opposed to the house, where really the only way to get the equity out of it is to go trust the banks and try to get approved under their rules. So you’re really not in any control of the equity. So we would prefer to be in control of as much money as possible and have it be working for us as hard as possible, which would mean let’s stop sending so much extra to the bank. That’s what they want you to do. They want the money back as fast as possible, so that they can reuse it. No, you keep it, you reuse it, you utilize it and get the bank out of your life as much as possible.

Holly: I think you wrapped it up really good, but I think we could go on.

Nate: We better stop for your sake, as you guys are wanting to get on with your life. This episode, we could keep going for hours, but let’s go ahead and close it down. This has been Dollars and Nonsense. If you follow the herd, you will be slaughtered.

Holly: For a free transcript and resources, please visit livingwealth.com/e114.

Announcer: Listeners, a friendly reminder. Nate made something special just for you. He’s prepared a virtual workshop to walk you through how to make your mortgage really work for you. Go to livingwealth.com/mortgage to watch the free on-demand presentation. You’ll see the easy to understand numbers and full scope of what he and Holly shared with you in this episode. Go to livingwealth.com/mortgage to watch the free on demand presentation. Again, that’s livingwealth.com/mortgage.