E101: You Need to Know These Infinite Banking Answers

Nate: In this episode, we discuss the most common questions we get from individuals who are thinking of starting an infinite banking policy, whether it’s their first policy or simply adding a new policy to their system. 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, just a little bit of a warning before we get started with this episode. It’s kind of a hodgepodge to some degree. Holly and I were trying to say, man, we get all these questions from people that we’re talking with, and we have some answers and explanations that we want to share. So we just thought we’d throw them all together here on this. So it’s going to be a bit of a shotgun approach to answering some things, but we do want to dive in and talk about some of the most common questions that we get from people who are maybe just getting started with their first policy ever. They’re curious about things like, what do I need to do to get started? Should I start now, or should I start later? Because maybe I have some debt to pay off, or something like that. Am I really someone who can benefit from it? All those types of questions.

And the same thing goes for the people on the back end. If you already are listening, you have a policy already, you’re doing it, those same types of questions come up. When should I start my next policy? Should I do it now? Should I do it later? And those types of questions that we get all the time, this one podcast probably won’t answer everything that you could ever ask, but this I think will help us all be thinking on the same line, the same line of thinking.

Holly: Because it’s so common, the questions that we get, hopefully if you’re considering starting a policy, if you have a policy, hopefully this will help answer some of those questions maybe you just don’t want to ask, or you don’t know who to ask. And I think one of the most common questions we get, or I get, Nate, is when do I start a policy? When should I be starting that policy? It’s kind of like trying to buy your first house and you’re just trying to get on the property ladder. And so you buy a house that maybe isn’t your dream home, but it is your starter home or your first home. And so I’m going to say you should start a policy as soon as you’re able to start a policy, just to get the process and the system implemented.

Nate: Yeah, I think that property ladder idea is really good. I mean, just getting your first home under your belt. It doesn’t have to be the dream home yet. It doesn’t have to be a big policy yet, but just getting something going is really crucial. And I think people overthink their first policy, or even overthink whether they should buy a second policy. Some people ask me, they’re like, “Nate, when do you know it’s time to buy another policy?”

It’s not that complicated. Do I have some money? There is no scientific, well, once this happens, and the full moon strikes, and we have the next solar eclipse and then I’ll start, or this many years since I last bought one. I mean, it’s nothing like that. The question really just is, do I have money that is sitting outside the system that needs to move in, or has my premium level that I’m at right now, is that really allowing me to put all the money I want to in without needing to? So that’s really the question. Do you have money outside the system that needs to be moved in, or that you want to move in, I would say that it’s more of a want than a need potentially, that you want to move in. And that’s very common. So I think people overthink it, though. They’re like, “I’ve just got to find the perfect amount.” So if I’m saving X amount, I’ve got some money here and there, how can we build this policy out? As you said, Holly, just getting something going without having to think about too much.

Because Holly, how many clients just end up with one policy, and that’s it? It’s so rare. And if you’re listening to this and you’re one of those people, it’s not like we’re trying to degrade you and you’re not doing it right or something like that. But [inaudible 00:04:13] the most common thing to do is get started with one policy and then realize sooner or later that you would like to be putting more in than that one policy can hold.

Holly: I think, Nate, too, it’s that end all, be all belief that I’m so concerned that I start it exactly correctly, that I have this amount. I don’t want to start too high. I don’t want to start too low. And I think the reality is that we spend so much time waiting to get started that oftentimes two things happen. So much time goes by, it’s a year later or two years later. Or the other thing that happens is that you spend the money you had saved to be able to start the policy. We realize the cost of waiting, that there actually is a realistic cost to waiting a year or two years before you actually jump in and start that policy or that second policy. There is no magic formula of when X plus Y equals Z, I should start a policy or I need another one. It really is, do you have money that is just sitting there? And it’s better to start the system with something than to never start it at all.

Nate: Yeah. Don’t worry so much about whether the premium amount or the funding amount is exactly right, because there’s no way that’s possible. Your life will change. Your desires will change. 20 years down the road, I hope you’re not earning the same amount of money and saving the same amount of money, because that amount of money with inflation is going to be even worth less. We hope you’re more successful than that. But besides that point, Holly, you’re exactly right. It’s like some people get so paralyzed with analysis, trying to figure it all out, and then they end up just not doing anything.

And that’s a good thing that you brought up, Holly. I thought we could dive into a little bit too, which is the cost of waiting. There is a real numerical cost from waiting to get started. So some people ask me for a whole bunch of different reasons, it happens all the time, they say, “Well, I really want to do this system, Nate, but I have this going on.” So maybe that is, I have some debt. Should I pay that off first, or should I get a policy going first? Or maybe it’s, you know, I’m changing jobs and can we wait six, 12 months, and then figure that out, or I’m starting a new business, or I’m selling a business. Life is always a little bit up in the air. So they say, can we just wait for a future time period? My answer is always, “Of course you can wait. You can start whenever you want to.” But we all have to understand that there’s a cost to waiting to get started, and it’s not just the cost of infinite banking waiting is hard.

I mean, it would be anything in the financial world where, just like in the world of real estate investing, if you waited a year or two to get in, there’s a real cost of that. There’s one or two years of value and growth that you’re going to miss out on. You know, I did this with a guy, he actually listens to the podcast. So maybe he’ll remember this. He just sold a business, starting a new one, and trying to figure out when’s a good time to get his policy going? And he’s like, “Well, I’ll just wait for about two more years, when my next business is up and running and things are more stabilized, and then I’ll get started with it.”

I said, “That’s fine. You’re free to do whatever you want.” But I ran some numbers, and by waiting those two years to get started with the policy, I pushed it out to age 67, I want to say. He’s in his fifties. I pushed out to age 67. I said, “You’re going to have $11,000 per year less in income that you could take every year passively from this policy for the rest of your life. If you live for 20 years, and from age 67 to 87, at 11,000 a year, that’s $220,000 to you that you could have had, but you waited to do it.” Now, I’m not saying that, that’s not the end all, be all. There can be real reasons to wait. The reasons have to outweigh the benefit.

In other words, hey, if I got started now, that’s $220,000 of income, not including anything we do with infinite banking. That’s just policy, the premiums, and so forth. If we added banking to that, that could even increase. There’s a real cost to waiting to do it, and that’s because compound interest, the most important element is typically time. How long has it been compounding? Any compound interest chart you’ll see, as the further out, or as the years go by, the thing starts to really skyrocket. In the early years, it doesn’t. So you want to get to the skyrocket part of compound interest as fast as possible.

Holly: Well, and Nate, also with the costs of waiting in the compounding, the longer you are in, or you own a policy, the more profitable it becomes, very much like investments, that the longer you’re in it, the more profitable that becomes. And we have to understand the policies are built to basically mature, and basically in those latter years produce more profit because of the uninterrupted compounding. So you talk about $11,000 less he would have by waiting. I’ve even seen clients who’ve cost themselves hundreds of thousands of dollars in death benefit just by waiting.

Nate: That’s true. And by the way, it’s $11,000 per year of income. The dollar figure was a lot more, but 11,000 per year of just pure profit that the policy was spinning out at that same age. It’s a big number. There’s not really a seeable benefit to waiting to do many things in the financial world. Infinite banking is a huge one of those things that if we wait, typically only bad things happen. You might become uninsurable. It happens all the time. The product might change. So all this to say, there’s typically no real benefit to waiting, even if you have debt to pay off. I mean, that’s a very common one. Hey Nate, should I get out of debt first, or should I start a policy first? My answer is just yes, you should probably focus on getting out of debt, and you should probably start a policy now, and then use the policy to help you get out of debt.

That way you won’t miss out on the compound curve. You’d start that now, instead of waiting two years until you’re out of debt, or one year until you’re out of debt. That’s when you want the compound curve to get started as fast as you can, even if you have to borrow against the policy to pay off the debt.

Holly: Yes, we want you to get out of debt, and yes, we want you to start a policy, but by starting a policy, that can also help you get out of debt. So it doesn’t have to be one or the other. And that comes back to that overthinking, or mentality, it’s either all or nothing, Nate.

Nate: Yeah. Yeah, that’s a great point. And that kind of brings us into our last topic, that we believe that really everybody can benefit from this banking concept. Anybody, everybody. Some people say, “Well, I don’t know if it fits my situation.” No, it does. It does. It will make you more money, because it’s math. That’s what supports them, the math behind it. If someone else can find a better system to buy cars with than a policy, let me know, or to go on vacation with, let me know.

I really believe that everybody can benefit from infinite banking, from these policies, using them the way we teach. The question becomes scale. That’s the question. I know so many people, they became clients of mine, but they had been talking to other advisors, and this happens all the time. And by the way, I’m sure it’s actually happened in the reverse. I’m sure I’ve talked to people who didn’t get started, and they went to other advisors and ended okay. But anyway, I talk to many clients who came to me and they said, “I was going to get started with this other guy years ago, but I just got a little bit scared, a little bit timid,” and it turns out to be that the premium that they were talking about for that policy made them a little worried.

Now I would argue that it probably shouldn’t have, there’s probably some misconceptions about what the premium is, and how flexible it is, and what it does. But either way they saw this number of premium. They said that, “It stressed me out. I didn’t want to do it. So I didn’t do anything.” Are you kidding me? You did nothing? Was the agent saying, “Hey, if you don’t start a policy at this size, I’m not going to work with you.” I mean, hopefully not. I guess they could have said that. But some people get this idea that it’s kind of an all or nothing thing. I’m either going to do this policy, or I can do my 401k. The question typically is not, should you do infinite banking? The answer is yes. The question is just the scale. When do you want it to accomplish? You don’t have to change everything you’re doing just to [inaudible 00:12:48] for the bank.

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Holly: It works for anybody. It’s not just, like Nate said, I can do this or that. It is a matter of if it doesn’t work for you, either the system hasn’t been implemented correctly, or there’s something missing in the process of it. But we’re not saying you have to stop contributing to your 401k and start an infinite banking policy. You could do both. Or, “Oh, well I want to do real estate investment. I want to do some ventures with that and really do that.” Then use your policy and do that. They can work together. And in fact, they actually help your ventures, your investments, your real estate. It helps you in both.

It can be both, but oftentimes it is that belief of it’s all of this or nothing. Eventually, you might stop contributing to your 401k, or eventually maybe it’s that I want to do the infinite banking more. But I think the reality is, is that so many times we hear you have to only do this and you can’t do the other, instead of realizing that, and we talked about this on our previous podcast, this is the system you’re implementing to do those investments and to do other things with that money. This is a matter of, hey, I’m in my accumulation phase. I’m in the phase of my life where I’m earning money and I’m able to do something, and we don’t just want to store it somewhere. We want actually to use that money significantly, so that when you go and retire or 20 years down the road, that cash value growth of $11,000 Nate was talking about is significant. You can now then have money to live on, residual income that came to you just by being disciplined of getting the policy started and moving forward. It wasn’t a matter of stopping something else you were doing. So I think that that’s the biggest misconception, is that all or nothing, is I can’t do this and do a policy. You can do both.

Nate: Yeah, and that’s why we say the [inaudible 00:16:15] principles work for everyone. It just depends on how much you want to do. I know with some people I’ve talked to who are into real estate and they’re trying to figure out, I think what happens is they really see the value of the policies. So this is why they come to me, and they say, “You know what? I do see that if I am able to fund a policy and then buy all these properties with it, I’m going to make more money than if I just avoid the policy and just buy properties.”

So they say, “I want to buy all my properties using a policy.” That’s their idea. And I’m like, “That sounds awesome.” But then when we try to build out a policy, maybe there’s a kink in there that we couldn’t … Here’s the problem. We can’t fund the policy fast enough, if that makes sense. In other words, they’ve got $100,000 in cash and they want to move it in as fast as possible and buy properties with it very soon. But due to some constraints that we have to build, buy with the [inaudible 00:17:02] limit and certain things, maybe we can’t move it into the policy fast enough to achieve all the deals they want.

And that almost becomes like a deal breaker. They say “Oh, I shouldn’t do the policy.” Wait, wait, so you’re saying to me that the only reason you were going to do a policy is if you could fund a hundred percent of your real estate deals immediately from the policy? And if that happens to not work out, then the whole concept goes south and it’s not worth doing? Obviously it doesn’t make any sense when we talk like that, but that’s kind of what happens for people. It really is. If they can’t accomplish some short term objective, they may not get started with anything. And all I’m trying to say in this concept is that it works for everybody. The question just is scale.

Well, if we can’t get into the properties fast enough, that doesn’t mean you shouldn’t get a policy, but maybe we just don’t put all your money into it day one. Maybe we start a smaller policy. You go ahead and use your policy to help finance it. We just know we’re not going to find that it’s everything for the policy. And then as time goes on, we will add new policies, to where in the future, all the deals will come from policies.

The same thing goes for a car. Some people say, “Well, I’ve got to buy a car in a year. I’ve got to buy a car, would really love to use my policy to buy it.” That’s great. I’d love it, too. But then it just so happens to be for whatever reason that they didn’t have enough cash value, or they couldn’t move it in fast enough. Or what if we could finance the majority of the car with the policy right away, and then pay the rest of the car loan off the next time we pay a premium, right after that? The system’s still going to work great.

So all this to say, everybody can benefit. There’s not a single person on this planet who couldn’t benefit from becoming their own banker, the process, using dividend bank whole life insurance. The question really comes into, what’s the scale going to be on your very first time? How much of your assets are we going to move, and how much of your cashflow should we move in? And it’s not an all or nothing thing, necessarily.

Holly: Remember, all those questions Nate’s throwing at you, and we’re throwing at you, is what we started by saying. We often overthink too much that first policy, or when I’m starting my second policy, or what’s this magic number or magic formula for it. And in reality, it’s like buying a car, buying a house. Every single thing has bells and whistles or things that you like or maybe don’t like, but the point is you’ve got to get started somewhere. And the fact that it does work for anybody is a matter of just get started, do something to at least get yourself started in using the process. I don’t regret for one minute starting at all, and where I was at 14 years ago to where I am today is very different, but we got started with what we could afford, with what we knew we could commit to, and I’ve never looked back on it.

Do I wish it had been more at the time? Absolutely. But am I more thankful we have the policy and we got it started? Yes. I’m thankful that it’s 14 years old, and that it’s growing and it’s doing what it was designed to do. And so I think that’s the key. If I can encourage anybody out there, just get started somewhere, so that you can implement the system in your life today versus waiting a year, two years, three years, six months from now, because we’re not promised tomorrow and we don’t know what’s going to happen tomorrow. So in that regard, it’s better to do something than to do nothing at all.

Nate: Yeah. Agreed. And we’re not saying that to try to be salesy anyway, like get started now, the window’s closing. Call now in the next 24 hours. We’re just telling the truth. If you want to take it as a sales pitch, you can. Shameless plug, yeah, we’re in this business. We think you should get started. But besides that, what we’re trying to tell you is there’s a real cost to waiting to get started, to getting paralyzed from analyzing things too much, or from bad thinking of if I do this policy, I can’t do other things, and so forth. All those things are what I think people bring in as hesitation. Maybe you weren’t dealing with any of those.

But one thing, before we close down, what you just said kind of reminded me of a story that Ray tells about, and I’m sure you’ve heard him talk about this, too, about back whenever his dad died. And he told his mom to buy a policy, and Ray was in the insurance industry and the financial planning industry. This was before infinite banking. So this was…

Holly: 1978.

Nate: Yeah, 1978. Okay. And so Nelson didn’t write the book until the year 2000. So Ray got involved with him in the making in 2001, so way before banking. And he told his mom she should buy this policy with some of the money that came from I think maybe some insurance policies that her husband had owned, his dad. And I think it was 15,000 a year in premium.

Holly: It was.

Nate: 15,000 a year in premium. At that moment, that’s a decent amount of money. And he would say that every year, the premium would come due, and he’d get this phone call from his mom, and she’d be upset. “Why the heck do you sell me this stupid policy? $15,000, good grief.” And Ray would just say a couple of things and try to help her out. But even he didn’t know what she had at the time. And then it was years later, he learned about infinite banking. The policy wasn’t exactly built for banking, but it was with a dividend paying whole life company. It just wasn’t max for cash value and things like that.

But nonetheless, we go down, and she’s in her longterm care facility, and she gets this bill. She gets upset, and now Ray sees things differently, and he goes out and he says, “You know, Mom, once you pay this $15,000 premium, the cash value is going to increase by $45,000,” I believe is what it was.

Holly: It was.

Nate: She was like, “Oh really?”

“Yeah, why don’t we just have him send you a check for $45,000 afterward? How’s that sound? Tax- free.” She goes, “Okay.” And so she was using that money to pay for her time in the nursing home, I believe, longterm care facility, a total change from what the crap was this stupid premium, and why’d you sell it to me, to, “Oh, wait, you’re telling me that I can put in 15, pull out 45?” In other words, how you see things is really, really important. And as Holly had said, many times she wished, she actually will go to Ray and say, “Ray, why didn’t you sell me a bigger policy?” [crosstalk 00:23:23]

Holly: Why didn’t you sell me a bigger policy?

Nate: You’ve got to learn what’s going on. And so for years, complained about it. And then at the end of the time period said, “Why didn’t you sell me a bigger policy? You knew I could have afforded it,” and so forth. So all that to say, we hope this helps. These were the main questions and objections or concerns we get for people who are starting out. Or even if you have a policy, you’re probably still thinking, when should I get a new one? Don’t overthink it. Don’t overanalyze it. There’s a cost to waiting. There’s no reason to wait.

And most of the trepidation comes from seeing the premium as a payment or an obligation. And we’ve talked about that many times in the podcast, you’ve got to get that thinking out of your head. It’s just not the way that’s going to work for you. It’s much more fluid than that. It’s just time to become a better banker, and get involved with it.

If you are enjoying this podcast, it would really help get the word out if you would leave us a review, rate the podcast on iTunes or wherever it is you’re consuming it, send it to your friends, let them know what we’re doing. It would really be helpful. With that, this has been Dollars and Nonsense. If you follow the herd, you will get slaughtered.

Holly: For free transcripts and resources, please visit livingwealth.com/e101.

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.