The living wealth blog

Why the financial system is stacked against you

May 16, 2016 By Living Wealth 0 comment

Ever feel that the financial deck is stacked against you?  For many of you, there’s so much money that is going out the door every month that it’s hard to get ahead, let alone secure your family’s future.

You may have gotten an inkling of it on that momentous day when you signed your mortgage papers. I remembered the first house I bought. Nervous and excited, I was rather intimidated by the big stack of paper I needed to read and sign. In that big stack of paper was a disclosure of the total cost of the mortgage.

My realtor jokingly told me not to look too closely at the number. For good reason, it was shockingly big! Even at today’s low interest rates, the total cost of $200,000 loan at a 3.95% interest rate over a 30 year period is a whopping $341,667.

Americans are being crushed by debt

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The average American pays $280,000 in interest costs over his or her lifetime. It’s not just mortgages that sneakily take money from you; car loans, credit card debt, student and business debt all take their toll.

In fact dental students typically graduate with an average of $247,277 of student debt. That’s on top of the business debt incurred by setting up a practice. Medical equipment is not cheap!

Most financial advisors advise us to pay down our debt as soon as possible and invest into the stock market.  Let’s see how good this advice really is:

Paying down your debt can be dangerous

On the face of it, paying down debt quickly seems like pretty good advice.  The faster you pay down your debt, the less interest you pay right?

Yes, but this strategy can make you cash poor. Once you pay that money, it’s gone forever. What happens if you have a financial emergency or your business has several down months in a row? That extra money you paid against your debt is no longer available to you to be used as a cushion, leaving you potentially exposed to financial hardship.

Investing into the stock market doesn’t work for the average investor

As it turns out the average investor is shockingly bad at investing. Research from Richard Bernstein Advisors shows that for the 20 year period from 1993 to 2013, the average investor had an annualized return over just over 2%. That’s lower than the inflation rate!

It doesn’t take a math genius to realize that if you are only making 2% in the stock market but paying 4% or more in interest on your houses, cars and other debt, you not likely to build much wealth.

Did you know that banks are prohibited from investing into the stock market because it is too dangerous? For the sake of our wealth, maybe we should start thinking like a bank.

The Banking System of the Ultra-Rich

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There is a way to grow your wealth safely; it has been quietly been leveraged by the ultra-rich tax-free for decades. Instead of paying the bank the interest on the loan, you instead pay yourself. Essentially you become your own banker, self-financing your own loans just like the big banks do. We call this system infinite banking.

Banks use BOLI (bank owned life insurance) for their financing needs. The good news is that we can use dividend paying whole life insurance

Think about it. What if on that $200,000 loan you got to keep that $140,000 in interest? Wouldn’t that be helpful to your balance sheet?

And thanks to the miracle of compounding interest and a little bit of patience, that $140,000 can turn into a much bigger number. In fact, in one scenario just financing nine $25,000 cars over your lifetime can create $892,253 in wealth!

What’s more that money is yours to reuse for future needs, cars, houses, business financing, even vacations!

Do I need money to start?

One of more frequent questions we get is whether you have to be rich to use this system. The good news is you can get started with very little money. However, you do need to have the discipline to be able to live within your means and stay within a budget.

Everyone can take control of their debt, and build a wealth legacy for their family. If you would like to stop lining the pockets of the financial institutions and turn your debt into an asset rather than a liability, you should take advantage of the infinite banking system. To find out more, join one of our frequent online presentations that you can watch from the comfort of your home. To sign up click here. (link to /financial-freedom-webinar).

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