E77: This One Thing Helps You to be Successful in Infinite Banking

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

Nate: Welcome back. As always, it would mean a lot to Holly and me if you guys would rate the podcast, you’d leave a review. All those things really help boost the reach of the podcast. It would mean a lot to Holly and me. But today we’re going to talk more about infinite banking and I know last time we talked about the death benefit and some other things that we normally don’t, but this is kind of going back to the normal, you could say flow of things and today we’re talking about some changes that you have to make on how you think about money due to infinite banking being so unique. It’s so different. It works, but it works in different ways than we’re used to. And just some of the terminology that we use can confuse people. Like just the word premium already has, loan repayment that all these things all have a meaning in someone’s mind already.

But when you enter into the infinite banking world, it’s like we have to redefine words. And then also we have a different philosophy about how money should be used. Infinite banking itself, when Nelson Nash wrote the book on this content, infinite banking, how to use a whole life insurance policy to build wealth in a different way. When he wrote that book, it has one of the things that he mentioned so much, is just the way you think it’s going to be so important because it determines your actions from what you do, what you believe in. And it is true in many things a different way of thinking.

With that we can go ahead and dive in and and talk about some of the changes in our paradigm. Changes in the way we think about certain elements of how to use money, why it works, why people can have a hard time grasping it even though it can be simple. Once people get it, Holly, it’s like an aha. Like why? Why doesn’t everyone do it? That’s something we get all the time. It takes an aha moment because there’s a paradigm shift that most people get and then when they make that shift, everything just starts to click into place.

Holly: It does start with your thinking and your thinking has to shift in how you process and think about money has to change and even the two words that Nate threw out there, premium and loan repayment, those automatically for most of us have a negative connotation to it. We have a negative attitude or viewpoint or thinking of it and we’re viewing it as a payment. What we really hope to do today is shift your thinking into actually understanding what those truly are and how they actually benefit you. Most of the time, the reason it’s negative, a loan repayment on a mortgage is negative because it’s money leaving you and never coming back. Yes, you have the home, but there’s this, it’s a payment and it’s money you earned and worked hard for and it’s gone in our philosophy or way of thinking.

And so the first thing we’re really going to talk about is how we in general and as a society have been thought or think about money is we store it up, we put it somewhere and we park it and we take that money and we store it. And what we look at is what is the best rate of return I can get? And where am I going to park that money with the least risk or the risk I’m willing to take? How much risk am I willing to take to hopefully offset the grip? If I grow a lot, I took more risks then I did okay. Versus, okay, I wasn’t willing to take that risk because I could have lost it all. We will only work with a small amount of money versus the whole sum of money.

Nate: And we’ve had this idea preached to us about compound interest, storing up money, letting them build over time. Infinite banking just works differently. And by that I mean I just was talking to someone today about it can be a difficult change because we’re so used to investing money in the stocks or in the mutual funds or in real estate and our money can just do that. We’re picking between, okay, I can invest in this mutual fund or this one, this one is a little bit more risky, it’s got a little bit more micro or in this one’s more macro. We’re trying to weigh these things, which one’s going to give me the best return with the least amount of risk? That’s what we’re all trying to shoot for. But as Holly was saying, we normally are only taught how to make money on the portion of money that we’re setting aside to store. We’re not making money on a whole bunch of money that flows through our hands.

And that’s where banking comes in, because the vast majority of your money does flow through a bank. It just doesn’t make you any money. Now it might be making the bank some money while it’s there and being moved, but not you personally. The reason why infinite banking can be a difficult thing to grasp is because the purpose of it is different. It’s not a buy and hold strategy. That’s what we’re used to, buy and hold. Retirement, buy and hold style strategy. Infinite banking is more about moving money and we liken it to this. You have a 401k, your 401k does not help you purchase a car, 99% of the time. Your IRA is not designed to help you finance a car, finance a vacation, you’re socking away. All those are supposed to do is just to sit there and hopefully earn interest, earn a rate of return.

With infinite banking though, we’re saying, no guys, you can go on vacation with a policy and have the policy pay for it. That’s not what we had been doing with a mutual fund. We’re actually teaching you how to do things in your life that’s completely different than what you’ve been doing. But by building it up and using it, we can actually make money in ways that we’re not used to making money. We call that making it by keeping money in motion as opposed to just storing money up and hoping for a rate of return in the future.

Holly: I think too with that, it’s also infinite. It’s infinite. What can we do? What do we finance? We asked that question in lot of clients, what do you finance? We honestly are financing everything. Yes, we might be doing all the work, but our money is going away to everybody else. It really is. And so it’s not just in keeping the money in motion, it’s also changing the direction of that money. Instead of it going away from us all the time, teaching you how to bring that money back to you. And the only way to do that though is to not park your money somewhere and let it sit because then you can’t use that to your ability. It doesn’t do any good to put it in the 401k and let it sit there and think, okay, I can’t do anythingelse with it. Most of us do that for retirement. It’s only doing one purpose, serving one goal. What if your money could do more than one thing? And that’s what infinite banking is letting you do.

Nate: Exactly right, because you’re right, because with a policy I can put money into there and it is going to continue to compound and grow. Even if I wanted to use it, I can borrow against it without hurting it. I actually be saving for retirement, quote unquote. But inside that whole process, I’m using it every day, or maybe not every day, but certainly quite a bit. It is a different animal because I think one of the big confusing things is that as people will say, “Well should I do policy or should I invest in the stock market? Should I buy a policy or should I invest in real estate?” And the reason we get that is, back to that thinking that the world puts on us is that okay, you’ve got to pick and choose where to store money up and it can only be stored in one place at one time.

That’s just what we talk about. With a policy it’s different because we have so many clients who have put money into policies who are then using the funds there to make those other investments. It’s a different paradigm because we’re not comparing it to other investments. We’re not discouraging investing money elsewhere necessarily. Though I may have issues with various places and various tools that most people use, which you can listen to our podcasts and see quite easily. We don’t make it a secret, but however it doesn’t matter to me if that’s what you like to do. If those things are something that really you find a lot of value in, we can just use the policy as a different source. It is a bank, it’s not an investment. It’s not an insurance policy, quote unquote, that’s not its purpose. Its purpose is to bank with it and we find that the people who actually use their policies have a lot more fun with it and a lot more confidence in it. We have some clients who are using it just as a storehouse. There’s some value there, but they’re missing out.

Holly: Or there’s even some clients that have come and said, oh, they’ve been told they can’t take that policy loan. They have to wait or they should wait 10 years to take a policy loan. And in my head I sit there and I hear it, well how much is your loan availability? And if somebody tells you they’ve got $1 million to use, that’s just sitting there and it’s earning the interest whether they were using it or not. If you think of a bank and you think of this as a bank, a bank is a business. It’s in the money business. Bank would never just sit there and let a million dollars sit around and collect dust is what I say. I think really that’s the goal, is to really change that shape. You have to do a shift. You literally paradigmly have to in your brain shift and say, “Okay, I’m going to do this and this.”

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Nate: If you’ve never, ever, ever done something like this before, it’s obviously going to be hard so don’t stress out about it being difficult to grasp. Sometimes you actually have to do it to grasp it. As Holly said, I’m going to have my money to do more than one thing, well we’ve never had our money do more than one thing. We maybe have saved up money to buy a car in this account, we’ve had a retirement account we put money in, we’ve got some emergency fund money. We got all these little jobs for money, they’re only doing their one little job most of the time. With infinite banking, you can have your money doing a lot of jobs at the same time while it’s saving for retirement, while it’s funding, your kids’ college education while it’s being used for a car and it’s all in this one thing. It can be difficult.

And that brings us back to some of just the terminology that confuses people. We bring in to infinite banking ideas about what words mean. When you hear the word premium, I get asked this question, how much is the premium? That’s what insurance is. You go into the car insurance guy and you say, “I bought a new car. What’s my premium going to be?” That’s that, this is a different concept entirely. We have this premium word we’re so used to, we all have all had premiums. Every time we pay a premium to somewhere else, normal insurance, that money is gone. I pay my car insurance premium, I don’t get that money back. It doesn’t do anything for me. It does one job. That job is to cover me in case I get into an accident and hurt somebody or whatever. Same thing for the home insurance and term insurance and all these different insurance products we have, so when we hear the premium word, we don’t like that word.

It has this negative connotation to it. We like to keep our premiums as low as possible and with infinite banking it’s a little bit different because for me, I try to get as high a premium as I possibly can. It’s a different world, but that’s because when in infinite banking, the premium acts more as a deposit in your own bank that does a payment. A payment means the money’s gone, a deposit means we can use it again. It acts more as a deposit into the bank as opposed to a payment. And that can be a difficult paradigm shift just because of the terminology.

Holly: The key there, premium payment or premium deposit. Your thinking has to become premium deposit. That it’s a premium deposit because a payment means it’s gone and it’s not coming back. It left me. It’s gone. Most of us, when we think of a payment, we think it left my bank account, it’s not going to be returned. That is not true of a premium. The premium has been deposited and you get to use it. Because you get to use it, it is not a payment, it is a deposit.

Nate: That’s a good point. We think that our bank account’s where we want our money, anything that takes money out of my bank account, I don’t like. For me personally because listen to me, I have money in bank accounts, not a ton and I’ve got quite a bit in my policies. That’s the way I want it. I actually don’t even see them as different entities. It’s just money to me. It’s a hurdle for some to jump through. I love anytime I have the opportunity to pay a premium to move money out of my checking account into my policy, it’s just moving money and I could move it back into my checking account if I need to.

I see them as the same thing, it’s just cash. I’ve got cash in the checking account, cash in the policy. Where do I want the cash to be? Always a policy. When a premium comes due, the old person thinks oh man, I got to pay this darn premium. And that comes up when people talk about how long do I have to pay premiums, they’re thinking, when can I get rid of this thing. That’s so far from where my mind is, is I’ll borrow from one policy to pay for the premium on another if I need to, I don’t care. I’m just, I’m happy to move money around to pay premiums at any point because I know especially now I’ve got some policies that are seven or eight years old. I’m paying in a dollar of premium and it’s growing by a $1.40 for every dollar I pay. You’re telling me I don’t want to do that or that’s a bad thing?

It’s a different animal. And sometimes you have to experience it to believe. I know that sounds spooky, but it can be so different because we’re not just setting money aside for the future. It’s just a different mentality altogether.

Holly: And I think that that’s where the thinking comes in. Where we’re talking about this paradigm shift. When you think premium, premium deposit, if you keep telling yourself it’s a premium payment, it’s your brain thinks of it differently. It just does. The other thing that Nate brought up and we want to talk about is loan repayment. There’s a loan and there’s interest. That’s what I always get, okay, I can take a loan, but how much is the interest? It’s the very next question. What do you mean about loan repayments? And I go through the analogy that a loan to a bank is an asset. And so for them this is a loan to themselves, but it’s very different like you said Nate, in thinking that we automatically assume this loan repayment is money going away from us and it is leaving us not to return to us.

Nate: And Nelson Nash mentioned that in his book. For those of you who have read Nelson Nash’s book, who wrote the book on infinite banking. Creator of the concept, wrote the book Becoming Your Own Banker. And he mentions that in one of his examples, he actually showed someone purchasing cars with a policy as just an example to show that banking function. Which is where we get it, if you’ve seen any of our examples, we do a lot of those types of things too from him, his mentorship. With that, he decided not even to use a policy model, he just took out policy withdrawals to pay for a car and then put money back into it because he said if I use the term loan, some people’s brain goes into a deep freeze. That was his word and he’s right. We hear the word loan, it has a connotation, loan is bad. I don’t like loan.

Holly: Loan is debt.

Nate: Loan is debt.

Holly: That’s how we think about it.

Nate: I have to repay it. I’m under their schedule. I don’t like loans. I’ve never liked them before and it is different. One is a policy because as Holly was mentioning, when we take a loan against the policy, as we’re paying it back, that money is all just becoming available in the policy. They don’t see, they want to pay the minimum back on the loan. They want to just pay a little bit. Because they don’t want money to leave their checking account and it’s hard. I feel for you guys. It’s different because the checking account makes us feel nice. But if you look at what we’re trying to accomplish, becoming your own banker is about limiting bank’s function in your life overall. We’re trying to cut them out.

We don’t want loan from them. Any loan from a bank, you make a payment. Where does the money go? It doesn’t go back to you. Any deposits you make in the bank account who’s making the vast majority of the profits earned on that money? It’s not you. It’s the bank. We’re saying, if that’s true, why would we leave money there? Let’s put as much as we can in a policy and as little as we can. Now how that works, it can be hard. You don’t have to start as an expert. But it is true, you have to be willing to change. You have to be willing to change your mentality to adopt this new way of working with money. It’s different and that can be hard sometimes. And we’re here for and we’re hoping to educate you on some of these topics that will help you.

Holly: It means that you have that money again to use. That’s just one of the things of when we say shift the mentality, whenever did you make a mortgage payment to a bank that wasn’t yourself and they gave you that money back to use again? They don’t. And so oftentimes, depending on the policy, that what’s your paying back in, you can even take more than what you made in the payment back depending on the policy.

Nate: It’s amazing to catch that.

Holly: But it’s an amazing thing to see, what? I’m putting in and I’m going to use me. I put in $824 and I just…

Nate: As a loan repayment?

Holly: As a loan repayment on a monthly basis.

Nate: Is that for a car?

Holly: It was for a truck. And actually this is kind of funny, we actually loaned the money to somebody else. They’re paying us and then we’re putting it into the policy. And I just looked the other day to see what is it really doing when we do that every month and I’m able to borrow out $1,200 right now when we put that. After you put $824 in.

Nate: Every time you put $824 in, it produces 1,200 in cash back.

Holly: That’s 400 bucks, almost 400 but I’m just, okay.

Nate: Of profit.

Holly: That’s pure profit and does it hurt me at all? I said, instead of going into the bank, it goes deposited in the bank and I just have an automatic draft to the insurance company and I was like, this isn’t hurting us at all. If anything, it’s helping, we’re repaying the loan, but there’s even more money to use then. And the reality of that, now it’s an older policy. I’m going to be honest and say that. I think it’s 12 years old, but the reality is is that this is the only thing I can think of that I don’t mind putting that money in there when I know, hey, it’s coming right back.

Nate: Yeah, so it is true that for the first couple of years of the policy, before your policy’s profitable, it takes a few years for a policy really to pick up steam and get moving then some of these things may not be able to be realized that well, but once you get your four year, five year policy, and you’ll notice that I’m making a loan, a quote unquote loan repayment, but every time I write a check, it produces more cash value available than the check I just wrote. It’s hard to even grasp that concept. We clock it down in our budget as a loan for a car. I’m paying 500 bucks a month back to my policy instead of a Ford Motor and it fits the same line item, but one of them produced $0 of money, the other one produces $550. Which one do you want? The one that produces zero or the one that produces 550? I’d say let’s go 550 if we can do it.

Holly: And I’m going to say that even if I, all I got back Nate was the 500 I put in, a 100 that I put in, it wouldn’t matter to me if I had that 500 to use again because it literally is coming back to me. It means that that money is available to use, should I need it. And so I think that’s where we talk about that paradigm shift is, nowhere else can you make a loan repayment where you get that money back to use.

Nate: Yeah, it’s a different concept. All of infinite banking’s a different concept. If you’ve been listening to this podcast for a long time, I just don’t know if I can really get it. We’re there with you. It’s very normal. It is unique. It doesn’t follow the herd, but there’s so much value in it. We wanted to make this podcast really to say that there’s some changes in the way that you think. You have to acknowledge that. And I think most of you probably have by now that man, we’re not taught to think about money this way. We’re taught to think about money in a couple of ways, spend it or set it aside.

And we’re hoping to make a good return on the money we spend aside and this money we spend, we obviously just start to get used to that money to being gone. If there’s a way to kind of combine the two, that’s what infinite banking really brings. It does take a change of paradigm. We have to change the way we see words being used. But if you can make the change, it starts to make so much sense and you’ll probably will drag some of your old way of thinking into it. That’s fine. Just to grow with it, experience it. Even if you have to start something small, just to experience it. I think you, you’ll really enjoy it.

Holly: And I’m going to just say, remember it’s a premium deposit and even with loan repayment, you get it back. Just those two starting months that small will really make a difference. Hopefully your paradigm shift will begin. If it hasn’t yet, we look forward to working with you. If it has, remember too, you have to keep remembering to change the shift because it’s easy to go right back.

Nate: It is. Even when I talked to Ray, sometimes he’ll talk about a month came in, where he had a whole bunch of premiums due, because he’s got a 100 policies and he has a whole bunch of premiums due, large amount and he’ll get stressed out about it just for a split second and then he’ll remember, oh wait, why am I so stressed out about it? Because most of his policies are four or five years old plus, which means that if he moves in $100,000 of premium in a month, it’ll probably boost by a 120 grand or something like that. He’s like, oh yeah, I can find the money to move into a 100 to get 120 back, just by moving money from policy to policy.

It is true. You have to keep reminding yourself that even Holly and I do, if you can change your paradigm, it starts to make a lot of sense, don’t come in with the whole buy and hold storing strategy. Understand that this is a different purpose. It’s going to be used differently. It’s not for the same purpose we’re used to. It’s going to take a different way of thinking to implement it. And once you make that switch, everything comes to fall into place. This is Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts of resources, please visit livingwealth.com/e77.