E130: Should I Borrow From Whole Life Insurance Policy or Use Cash
In this episode, we discuss one of the most commonly asked infinite banking questions. Should I borrow from my whole life policy or use cash? And when should I use my infinite banking policy to pay for something, and when should I use my own cash?
Most new practitioners of the Infinite Banking Concept deeply struggle with this question. It takes a paradigm shift to fully appreciate the answer and finally know exactly what to do. Today, we make the choice easy for you.
- Should I borrow from my whole life insurance policy or use cash?
- Can I borrow from my whole life insurance policy?
- What it means to become your own banking and why it matters
- Understanding the two basic ways you pay for something
- The fundamental problem Infinite Banking attempts to solve
- The real costs of paying cash
- Is cash really king?
- How money in motion makes more money
- Why compound interest is like magic
- Example expenses you never thought you could use policy to pay for, but can
- Gain access to our Secret Banking Masterclass now FREE to listeners of the podcast here now
- What is Infinite Banking
- Who was Nelson Nash?
- CREDIT: Episode art background photo by Soundtrap
Episode 130 Transcript:
Should I Borrow From My Whole Life Policy or Use Cash?
Nate: In this episode, we discuss one of the most commonly asked infinite banking questions. When should I use my policy to pay for something and when should I just use cash? 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, we’re excited to be here today, talking finance, talking infinite banking. For those of you who are new to the podcast, we welcome you. Infinite banking is something that we think can help everybody grow, become financially free, become more in control of money. So we’re excited to share or really just discuss, Holly, one of the most common questions that’s asked. It’s got to be, even if someone’s not asking it, we’re all thinking it, it’s like, when should I use my infinite banking policy? When should I just pay cash for something? How can I tell which one is the best to use in which option? I think, Holly, you said you’ve been asked a couple times even just this week that very thing, or people just didn’t know the answer to that.
Holly: Yeah. Or they just didn’t know they could use it for things. They have the policy I think, Nate, and they use it for a few things or some things, but they haven’t had what you and I would call that paradigm shift of, we really should be using every dollar that we don’t put through to a policy that we just take out and of give to somebody else is a dollar that we don’t have to use in the future, really.
Nate: Yeah, it’s a dollar we can’t make any money on. So I guess maybe if I set the stage here too, Holly, take a step back and just let me set the stage. Infinite banking is a process that uses dividend-paying whole life insurance as essentially a new banking tool, essentially as much as we can as a replacement to the bank, for those of you who are new to this. When we are entered into adulthood, we are really entered into a certain paradigm, a certain way of life. And in that way of life, as far as banking is concerned, we really only have two options to pay for things. I’m going somewhere with this, so stay with me, everybody. I’m going somewhere with this.
We really only have two options to pay for things, to finance the things of life. You’re you’re going to grow up and we’re all put into this, and it’s all using banks, by the way. The only two options we’re offered is using banks. The two options are, okay, if I need to fund something, I either borrow the bank’s money to fund that thing, that’s option number one, or I have to build up money in a bank account to pay for that thing. These are the two options you have. Let’s say we’re going to go on a vacation. Let’s say we’re going to go buy a car. Let’s say we’re going to fund an investment. Anything in life, we have essentially been presented two options. I’m either going to borrow the money from a bank or I’m going to build up money in a bank account so that I can then pay for whatever it is I’m trying to do.
The truth is, though, neither option makes you any money. That’s the problem. This is what the whole process of infinite banking is trying to solve. The borrowing money from the bank option obviously doesn’t make us any money. It loses us money, because we’re now paying somebody interest to use their money. And even the paying cash for things option, that might be better than losing interest, but once again, it’s not actually a profitable option. It’s a zero sum game. I may not be losing interest, but I’m not actually making anything either.
So those two options are really all we know until, for most of us, the infinite banking option comes along and it completely shifts the paradigm, which can be hard to do, because now we’re saying there’s actually another way to fund things and we’re going to build up money not in a bank account to fund things, we’re going to build it up inside of a policy to fund it. And by using the policy, we’re able to actually make a profit on the banking side of things.
So whether or not you’re buying a car, going on vacation, paying taxes, giving money to charity, making investments, you have now three options. I can borrow money from a bank, I can build up money in a bank account, or I can build up money inside of a banking policy, we call it, and make that banking policy the hub for these types of transactions. Only one of those is profitable. I know that was kind of a long-winded thing, but I think that’s a good place to put the foundation to answer this question.
Holly: Even when we talk about it, or in the past, we used to even say, what’s the difference between the policy and a bank account, really? And we would say, it’s the name on the door. But really, if you think of your policy as your system or as the place where you’re depositing your money and using it, then that policy number becomes like your bank account number. I think if you start shifting it that way and actually seeing that as, this is my bank account number, this is my bank account, versus it’s just a life insurance policy.
Nate: Yeah, you’re right. The reason why I felt the need to set the foundation there was just for us all to realize we grew up in a paradigm thinking the bank account is my hub for my financial life. Everybody comes into adulthood with that. We’re groomed by the financial institutions of the world, by our parents, or whatever it is to believe that. And that’s where we set off. So all of us feel good when the bank account has a lot of money.
And even when we become infinite bankers, it’s still really difficult to change the paradigm that I can actually do banking differently. There’s different processes to it. We understand that. There’s different ways of thinking. It’s not a overnight change for 99% of the people. It has to be a progressive change, moving forward to actually see your policy as your hub, as the banking hub, and all the other things that you do in life come out of that hub, as opposed to the normal paradigm where I have a bank account and all my transactions are paid for from that bank account. I build up money and store it up in that account so that I can do the things I need to do in life.
Where actually infinite banking is saying, hey, there’s a more profitable way of living life, doing banking, than that. And we’re trying to hopefully answer one of the most common questions, which I felt like we needed that foundation just to be able to answer the question. Maybe take a step back. The question was, when should I use my policy to fund something, and when should I use cash to fund that same transaction? My issue with that question is it’s a question based on the old paradigm. In other words, it’s essentially saying, Nate, I have all this money sitting in my bank account. Why would I borrow it from my life insurance policy to fund this, when it’s just sitting here ready to be used in my bank account?
My answer would be, hey, the real question is not really which one should you use? The actual question is, why do you still have money stored up in a bank account at somebody else’s bank that doesn’t make you anything, when you know how and you’ve been enlightened on this profitable way to do banking? And yet you still have one foot in the old paradigm, and you’re trying to put one foot in the new paradigm. It’s kind of hard to operate with that, because it’s true. I’ll just say, Holly, if someone’s just sitting on a whole bunch of cash, there may not be much of a reason to borrow the policy money just so that they can leave a whole bunch of cash sitting in a bank account. It doesn’t make a lot of sense.
But what does make sense is to start really moving the money out of the bank account and limiting your bank account money, because that’s not a profitable system to operate from, and getting as much money flowing into policies first, which then we can use from the policy. And always remember, when money hits the policy and it produces cash value, that cash value is guaranteed to grow and earn dividends every single year for the rest of your life, no matter what. Constant compounding, even when we take loans against it. You really do want as much money doing that as you can get.
So the question is based on having one foot in each paradigm, and the answer is a little more difficult, because if you stay with that, you’ll find yourself never using the policies, because you still are operating with the bank account mentality, and all the money that you need to fund your life is in the bank account, so you’ll always have that same question. When should I use the policy? Well, you should be using it all the time. The problem is not, when should I use it? The problem is, what’s keeping that foot still in the old paradigm? What’s keeping the money in that bank account?
Holly: I think it’s a false sense of security, Nate. I think you have to ask yourself, it’s either because this is the only thing you know, and this is the only thing you’ve been taught, so it must be right. Because we’re not really taught to question, so it must be right, because that’s what we were told to do, and those are our only options. Or it’s a sense of, well, it’s in a bank. Banks are a good thing. And I think you miss out on the fact of, that if it’s in a bank, it’s not yielding you any money, it’s yielding the bank owners and the shareholders of that bank. So it’s profitable to them, it’s just not profitable to you.
Nate: You’re right. There is nothing about the conventional banking system that has you in mind. We are cogs in the system to churn out profit for bankers and other financial institutions. And the only way to get out of that, that we know of, is through the use of infinite banking, the dividend-paying whole life insurance policies issued by mutual companies, a company that you now own as a policyholder and that sole existence is to make money for you, the policyholders. This is what I liken it to, Holly. We talked about this a little bit before, but it would be like your family owning a small little rural bank or something like that. Like you guys own this little tiny bank operating in a small town somewhere, because that’s similar to what we’re trying to build, I guess, is our own small family bank to begin with.
But you can do that without IBC. Anybody here listening to this could technically attempt to go open a bank, maybe. I would probably steer clear from that. There’s a lot of legwork to go into that. But all that to say, if you did happen to own a small bank, you were the owner of a bank, why on earth would you still keep your accounts with Bank of America and Wells Fargo and US Bank and all these people that we bank with? There would really be no reason to keep accounts over there. Would it not make sense to have your own bank that you own handle all your financial transactions? I don’t get it.
Holly: Yeah, let me deposit it in somebody else’s bank.
Nate: Yeah, if you owned a small grocery store or something, why would you go grocery shopping at Walmart? It doesn’t make sense. You would just do it at your own store. You’d do it at your own thing. But yet in the banking world, we just don’t have that paradigm shift yet. In IBC, so many people when they’re looking at it, whether they want to do it or whether they are already doing it, they don’t actually understand that all we’re doing is talking about a paradigm shift from using third party conventional banks to using the policy. There are some steps that are needed. Maybe we should do a part two to this podcast, honestly, to really-
Holly: We might need to.
Nate: I mean, we’re already bumping up on time-wise and stuff like that, so we may end up doing a part two. But all that to say, it wouldn’t make sense to utilize somebody else’s bank, but yet that’s what we do, because we’re just so used to it. It’s just so normal. We’ve got to change the paradigm. It wouldn’t make sense to shop elsewhere.
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 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 toward security today. Visit livingwealth.com/secretbanking. Now back to the great episode with Nate and Holly.
Nate: As we’re talking about this policy versus cash thing, I would just mention a couple things. First off, it really doesn’t make a ton of sense to borrow from your policy to fund something when your checking account is flushed with cash. The problem is, the checking account probably shouldn’t be flushed with cash. We ought to move that cash into your own banking system and then pull it out to finance the things of life. As much as we can do that, it’s going to put you into a profitable banking situation, as opposed to an unprofitable situation or at best a zero sum game.
That’s really our whole goal, is let’s make money on the banking side of things. So the issue is not really, to answer the question, which one should I use? Which one’s better? IBC is always better, but it’s prefaced by an assumption that we make. The assumption that we are making here is that you have all your money in the policy to begin with. That’s where all the money’s at. And so when you compare financing everything of life from a policy and having all your money flow as much as we can into a policy first and then being used, that’s always far more profitable than the zero sum game of a bank account.
Nate: I’m here to say it, living testament.
Holly: And I’m going to say, I think really you guys have to stop. It’s not an overnight process, but it is. We talk a lot, Nate, about how it’s a process. You’re literally implementing your own banking system for yourself to use, so that the benefit that banks get right now by you banking with them, you now have access to. And the reality is, it is the only system in the world that works this way, where you can have compound interest accruing tax free, even on money that’s borrowed out.
Nate: Yeah, that we’re using. Yeah.
Holly: Yeah, that you’re using. No, I just think that paradigm shift is important, and it’s something that you might have to do on a daily basis of shifting that paradigm. I get the question, “Well, what can I use my loan for?” I’m like, “Anything. Anything that you are spending your money and it’s going out of your pocket to somebody else, you can use that for. You can use it for groceries. You can use it for gymnastics classes.” The reason I’m saying that is, talking to a client just this week. Their child’s in gymnastics. It’s a very expensive sport per se. And I said, “Well, why aren’t you guys using your policy to fund that?” And they’re like, “We can?”
So I think the reality is, is that it’s not just the question, Nate, it’s the mentality of, oh, I can do that? Versus you and I probably say, I get to do that. I get to use my policy to do these things, versus asking the question of, can I do that? I can use my policy for this. The insurance, it’s your money to use. When you go and write a check or you take money out of your bank account, they don’t ask you what you’re using it for.
Nate: Yeah, exactly.
Holly: So in the same way, your life insurance policy and the money you’re going to be using from there, it’s yours to use.
Nate: And I understand with clients, and especially people who are brand new to the system and are learning about it for the first time, that there’s a lot of questions as far to what are the rules? What can I do? What can’t I do? What am I on the hook for? Kind of this whole, what’s the catch scenario? Maybe you’re listening to this and you’ve been researching IBC and trying to figure out if it’s for you. Is it really better than what I’m doing? Is it not? What’s the catch? It seems like there’s… And a lot of this is just due to, you watch YouTube videos. You read books, and there’s all these examples, and you feel like you have to fit the example for it to make sense.
I think you just need to take a step back. There is no catch to infinite banking. It’s just a process that uses a tool that by how you use it, you can actually start to replace the banking system. And there really is no catch to it. I know people don’t like that. There’s not really a catch to using a checking account, necessarily. We don’t think about that. It’s like, there’s some gotcha moment or something like that. The vast majority of the time, maybe there’s some hidden fees or stuff that you just didn’t know about.
But aside from that, this isn’t some sort of catchy gimmicky system. This is literally just saying, hey, you can build up liquid money that can be used from a policy in a very similar way that you can build up liquid money that can be used in a bank account. There’s a few different strategic things you have to put into place for it to make sense and for you to understand it. And it’s definitely a new tool, so there’s a lot of things to understand. I’m not trying to short change that, say, hey, there’s nothing new about it, but all we’re trying to say is there’s no catch to it. It’s just a more profitable way to do banking.
And if there was another way to do banking that’s more profitable than the ways we’ve been offered, we would just do that too. But right now, the best way that we know of to have money be moving in and out of your life is through the use of the infinite banking concept and dividend-paying whole life insurance as the hub. It’s not an investment. It’s not a gimmicky little strategy. It literally is just math. And I know this is a podcast. We don’t have time to go into the math yet. Maybe we should do a part two, come out next time. Holly, we’ll have to talk about that after the show and see if we have more to talk about in here.
But it’s not even all that complex, but I know people have questions. So maybe that should be the next podcast, Holly, because I know we’re running out of time. It’s just really like, okay, Nate, so you say, but what about… I think maybe we’ll do a teaser for the next one, of all the questions that I can think of off the top of my head that people ask in response to this type of discussion, which would be some things like, well, if I take a loan out don’t I have to repay it? What about the policy loan interest? What if I did this instead? There are other elements of this discussion, and there’s different things to come into it with understanding, but at its core, the way to answer the policy-first cash question is to understand that it requires a change of paradigm. And once you start to change your paradigm to policy being the hub, all these questions start to dwindle away, because the answers are very obvious, once you’ve changed your paradigm.
Holly: And Nate, I think it goes back to something you even said earlier. As much as we say it’s a paradigm shift, the reality is, and I’m going to pull this out because Nate said it and I don’t want you guys to miss this, okay? But if you store up money in the bank account, and you take it out and buy something and you don’t replenish it, or what you spent, then you have to go into debt to purchase the next item or borrow from the bank or save it up again. So the reality is, as much as it is a paradigm shift, it’s really just shifting who you’re paying that money to, to somebody else or to yourself.
It really is that simple, of we have to store our money somewhere. Where we store it is one of the biggest keys in how we use it. Are we going to give it to somebody else to use, or are we going to give it to ourselves? And I think that’s as much as the paradigm shift is, it’s also truly understanding that when you take the money out of a bank account and go buy something and you don’t replenish it, you have to replenish it or you have to go into debt to buy the next thing. Those are your only two options at this point. The reality is, is that you always are going to owe somebody something in this life if we’re not replenishing, and we always have to replenish. You might as well do it in a system that allows you to be the banker and control the money, versus a system where it’s not in your best interest, it’s in their best interest.
Nate: The most common objection to this is, well, if I build up cash and pay cash, I don’t have to repay it. You don’t actually have to repay a policy. I think that’s a misconception. For all of you who’ve borrowed money, has there ever been a required repayment schedule on any of your policy loans? The answer is no, there’s not. It’s an interest-only loan for life. You can pay back the day you die, if you want to. But I guess as you said, Holly, if you borrow someone else’s money to finance the things of life, obviously we all know we have to pay them back for that. But what goes missing in people’s understanding is the cash payment. If I pay cash for everything, I don’t have payments to anybody.
That’s not true. The only way you’re able to pay cash for everything is because you replenish your bank account once money is spent. If you didn’t replenish your bank account once money was spent, you couldn’t pay cash for everything, because there would be no money in there. So you are constantly subconsciously repaying everything you’re buying, through deposits made to the bank account. It goes back to that thing of buying a car. If we finance the car from a dealer or a bank and we make car payments back to the car dealer or the bank, that we understand that when we pay cash, people are like, well, I don’t want to make payments. I’m going to pay cash. Well, if you didn’t pay yourself back for the car over time, whether you call it a payment or not, you end up not having enough money to buy the next car, and so you have to go into debt to get it.
So it actually does not matter if you borrow money from somebody or you pay cash for things. Payments are being made, whether or not you’ve realized it or not. Obviously, if you’re making a payment to a bank, it’s pretty simple to see I’m making a payment, but if you’re paying cash for things, the only way you have that ability is because you live on less than you make and you’re storing up money in a bank. That’s all we’re doing with IBC. We’re just changing where the money’s going to, to replenish the storehouse that you have.
I would try to encourage people not to overthink it, not to think of the IBC in a box, where it’s like I got to follow these strict rules and strict payments and repayment strategies. Actually, it’s not that complex. I literally just treat it like a bank account. When I have money, I send it back in to pay back loans. If I don’t, I don’t. And just now instead of deposits, I make premiums and policy loan repayments. But in my mind, those are the exact same thing as what I used to do with a bank account when I made deposits. I’m just putting my money back into my storehouse, so that I can reuse it when the time comes. But instead of being a zero sum game where I don’t make anything, I’m now making a lot of profit.
That’s really the best way I think we can put forth to change the paradigm, to start thinking of banking as the hub, the policy’s at the hub, and to try to remove yourself from thinking my bank account is my hub. That’s the best way to answer this question.
Holly: Yeah. And really, it’s the wrong question to be asking. Once you have that paradigm shift, it’s not a question you ask yourself anymore.
Nate: Yeah. I’m not sitting here asking about which one should I use? It’s actually obvious which one you should use, depending on if you’ve been following the strategy appropriately. It’s obvious to use the policy, because that’s where all your money is. If all of your money’s not in the policy, then you have this question. Well, which one should I use? I got money over here not doing anything. I got this policy. The reason that it even comes up is because you haven’t fully changed your paradigm.
By the way, if you’re new to this, you don’t have to throw everything into a policy all at once. In fact, I would recommend you don’t. But what I’m saying is, that’s the trajectory you need to go on. At some point in the next four, five, six years, this question should fall by the wayside, because so much money of your capital is based in policies and a very limited amount is in a bank account.
So when things come up, the only option that you’ve created for yourself happens to be the best option, which is to use the policy. In other words, hey, that’s the best option to begin with, and we actually have to do it, because that’s where all my money is. Whether I’m making an investment in a real estate property, whether I’m going on vacation, whether I’m paying taxes, the question starts to go by the wayside when all the money’s in the policy to begin with. And that’s actually also how you become the most profitable doing banking. Any last words, Holly?
Holly: No, you’ve summed it up great.
Nate: All right. Sounds great. Well, thank you everyone for being on the show. This is Dollars and Nonsense. If you follow the herd, you will get slaughtered.
Holly: For free transcripts and resources, please visit livingwealth.com/e130.
Announcer: Dollars and Nonsense Podcast listeners, one more thing before you go. Ease your worry and start your journey toward 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.
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