E60: How Infinite Banking Helps Make Your Money Work Like a Business

Nate: In this episode we will discuss how infinite banking is more like starting a business than simply saving money and how you can start to operate your finances like a business instead of as an individual. She is Holly and she helps people find financial freedom.

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

Nate: All right, so here we are again, Holly, talking about infinite banking and some ideas. I feel like every time we talk about these types of things it’s more on the lines of as Nelson Nash says, for those of you who are new to our podcast and [inaudible 00:00:54] infinite banking, some of the alternative things that we suggest you do, the guy named Nelson Nash wrote a book called Becoming Your Own Banker and he’s the one who really started this whole solution of infinite banking and how to use a policy to do that.

Anyway, he always says, “Infinite banking at its bare bones is simply a change in the way that you think.” So a lot of the times Holly and I are up here, we telling people how to think differently and today is true of that, the difference in how you’ll operate if you really see your whole financial picture, whether you are a business owner already or if you’re just an employee, it doesn’t matter if you see yourself as in business, things especially with infinite banking starts to make more sense just based on how you think about it.

Holly: Nate, Nelson even says in his book Infinite Banking Process you should be in two businesses. So what you do for a living, whether that be working and whether a business owner or as an employee in banking. So he even calls banking a business, but I think most of us don’t actually realize, we don’t actually understand that concept that when we’re talking about infinite banking it literally is you are becoming or starting a banking business. You have to start thinking like it is a business and treating it as if it was a business.

Nate: I think some of the confusion on infinite banking comes from the fact that we bring our old mentality, our old ideas more individual ideas into infinite banking and it is exactly like starting a business. It’s more similar to that than it is to just investing or saving money. You know, the goal of this podcast is to kind of show you what we mean in reality when we’re talking about how infinite banking is like a business, but also how as a business it’s going to change things, the way you operate.

So you’ll be operating your finances more like a business would as opposed to an individual just by taking part in infinite banking essentially. So Holly, get us started on how infinite banking falls on the business side than just like the investing or saving side of an individual.

Holly: If you look at banks, they’re in the money business so really what you’re trying to do is create your own private bank, and as a bank you’re putting in dollars in order to have something in the future. Most of us wouldn’t start a business or even a bank only to have it last one, two or three years. We would start it in order for it to hopefully leave a legacy and to produce more profits.

So when we first start out you expect most businesses aren’t as profitable or profitable from day one or year one, but as you get and think about hey, I’ve put a dollar in today and when I put that same dollar in maybe three years from now I can get $1.25 more out or maybe it’s four years. You can get more than the dollar you put in. You start realizing that your money’s actually working for you, but the beauty of that banking side is you’re the one that owns the bank and you control the money, and so you don’t just get the benefit of owning the bank, but you get the benefit of using the money as well.

Nate: You’ve got to think of this as a banking business, not as a deposit in someone else’s bank like we’re so used to. It’s actually your bank. So we’re so used to putting the dollar into a savings account and maybe the bank pays us some interest, maybe not. Just kind of depends on the bank. Some is practically zero and we just got used to it. We put a dollar in and we’ve got a dollar available. That’s what we’re so used to.

Now it comes at a cost. It’s kind of like more like the main reason people want to start a business just in general, Holly, is because they want more freedom of their schedule a lot of the time and be able to do things they want to do, and a lot of times it’s because they want the opportunity to earn more money instead of being just set on a salary working and helping someone else build their business, you want to go build it for yourself.

That’s really kind of what we’re trying to do with IBC if it makes sense, Holly. We’re trying to provide more freedom and control than you would if you just used other people’s banks because you own it now, you write the rules, and then secondly we’re doing it so that we can make more profit than it would if we just used somebody else’s business as our bank. So that’s the mentality coming into it.

Holly: Well, we use other banks, most of the time we have to get our money from that bank and what we don’t realize is that bank is making that profit like you said. That’s really key here. Like when you’re the depositor in somebody else’s bank, it’s the bank that’s making that profit, not you. You’re not profiting on that money and more often than not, when you need to use the money even to get a loan you’re going to have to pay the bank to use your money.

Nate: Let’s backtrack again as well, Holly. We talked about opening a business, if we’re going to open a business and you’re going to invest some money to get the business started, most of us don’t expect to if I put a dollar into a business to start my own business, that I will then just have a dollar. In other words, in the savings account where I put a dollar in, I didn’t start a business. I just plug into someone else’s business. They’ll give me a dollar back the next day.

If I want to go invest $20,000 to start up a small business or $100,000 to start up a small business, whatever it is, I understand that there’s going to be a cost to it, but I didn’t expect it to remain a cost. I expect it to start producing profit and hopefully sooner rather than later. That’s one of the big differences about infinite banking as well is that it’s more like opening a new banking business that didn’t exist before. There’s some cost to it initially, but we’re going to put money in, maybe only a dollar, and we’re only going to be able to pull out 50 or 60 cents on that dollar for the first year or two, whatever the number is on your policy, on your business you would say.

But the goal is to build it out so that we can have more control and freedom than we wouldn’t have had otherwise, and to make more money. That’s why you can make four to five times more easily, maybe 100 times more depending on where you’re at doing banking in your own business. Now, we don’t start there. Just like no business typically starts immediately being extraordinarily profitable day one. It doesn’t really happen, but the goal is it’s more like a longevity view, as you already mentioned, Holly, that you’re only going in and going out.

Typically, you’re trying to build it to produce an income and maybe leave a legacy with it and have a family business. That’s kind of what we also see, Holly, that we can get into as well is the family aspect and how we can treat IBC as a family business and bring everybody into it. But that may open a whole new can of worms. I don’t know if we want to go there or not, but essentially IBC is more along the lines not of just saving money, putting money aside, letting it sit. It’s more of a business building which means we’re also not just going to be putting money and setting it aside and never touching it.

It’s going to create more of a transformation not only of how you’re “saving,” but also how you’re using money all across the board in your life.

Holly: Well, and I think too, Nate, if we think of it as a business, the one thing that we want to be able to do, like you mentioned, hey, we put $20,000 into this business, most of us wouldn’t even expect that the 20,000 you put in even the first year that you might have access to $10,000 of it to use. Reality is most of the time when we’re putting our money in somewhere we’re expecting a little bit of time before we get a good amount back and even saying hey, I can put 20 in and you mean I still could use $10,000 of that $20,000?

I mean, that is mind blowing in and of itself because most of us can’t do that, but I want to add one piece to that. What if when you use the $10,000 you still have uninterrupted compounding taking place on the $20,000 you put into that bank?

Nate: I like what you brought up too that so many times we’re comparing this to somebody with like a 401K or something like that and we put in 20, we can use 10 let’s say or 12 or whatever the number is. They’re coming from a world where they’re putting money in a 401K where they can literally use zero. They’re putting money in and they couldn’t use it for like 20 years or more, you know, depending on where they’re coming from.

Because of that fact, not only that you can use it but we suggest using it and we coach you to use it. We are more like business consultants. I don’t know if that’s the way you see it, Holly, but that’s kind of how I see it. I’ve got all these little clients of mine, individuals that have their businesses, I’m just their consultant on how to build the best business, the best banking business they can build.

It’s not just buying a product. You’ve got to get that mentality out of your head. You are investing in a business that you’re starting up and you’re going to be in charge to a certain degree of how well you do. We have many clients who have policies. Some of them are more profitable than others. It has nothing to do with the insurance policy, it has nothing to do with the product. It has to do simply with how these people are using it.

Some people are wanting to really take it to the next level, other people have a more simplified approach and don’t use it for too much. That’s okay, but just know that if you would take more ownership of it and enter into it saying I’m going to use the money like a business owner, like I’m in the money business, it will create more of a transformation of how you’re dealing with money across the board. That transformation is what we’re after, not just selling you a product.

Holly: It really is a mind shift. It’s really a thinking process of having to change. The ones that are the most successful actually are the ones that are actually thinking and treating it like a business and they actually are being I’m going to say whether it be more aggressive or not, but they’re not using it just to store money. The bank isn’t a place just to store money. It’s actually a source of where they can actually create other funds.

Just like a bank they view it as a loan, and I’m going to take it a step further. Most of us when we borrow from a bank, a loan is a liability to us. It’s very hard to not think of a loan as a liability but when it’s a loan that you’ve made to yourself or to your business from your life insurance policy, your own privatized bank, basically that becomes an asset just like a loan to a bank is an asset.

Really considering this is a business and when I make a loan, this is not a liability, it is truly an asset to this business I started my bank, whatever that may be. Call it a loaning business if you want to but really that is now no longer the liability. It’s created an asset and we have a hard time sometimes of people feeling like I owe money. Well, when you owe money to yourself probably the hardest thing in my viewpoint is to pay yourself back because we don’t do it traditionally when we take money out of our savings account. We normally don’t pay that back, or when we do it’s not a systematic approach.

Really like Nate said, we want to educate you. If you take a loan out we want to show you how you take over that loan and you pay yourself back and what that means to pay yourself interest so you truly are doing it as a business and setting it up as a business and viewing it as a business.

Nate: I think whenever you do get involved in infinite banking you’ve got to change your mentality as well on someone’s out to get me or make money off of me. I think so often people think well, how does the insurance company make money? It’s kind of coming back to my depositor mentality that I don’t own this thing. Someone else owns this thing, I’m just using it. It pollutes a lot of the things we do financially.

You have to understand that whenever you buy a policy from a mutual life insurance company, the ones that are used for infinite banking, you own the company. A company is solely in existence to make money, to make profit for who? Whoever owns it. The company is solely in business, no matter what the corporation is, to make a profit. If it doesn’t it goes broke, so it’s got to make a profit and then that profit has to go to somebody. It happens to be that if you own the insurance company it comes to you.

The insurance company’s just in business to profit you. It’s different than a bank. So you have bank is in business to make money off of you to give to its owners. That’s why it exists. The mutual life insurance company is in business to make money for its owners just like the bank is, not to make money off of you. You’re an owner of the company. It’s just a different world so businesses are all about processes.

Most of the time people don’t bring a process to their saving or their investing. Most of us, we put money in a savings account because we need the emergency fund, we go get a job at a good company where we start throwing money into a 401K and there’s not really a process to it, it’s just kind of setting money aside in these various places. With infinite banking there is a process involved because it’s not just a buy and hold strategy. It’s going to be a we’re going to put money in, we’re going to utilize it, the goal being that we take control of everything we’re doing financially and then we have a process using the policy to make profit even when we’ve taken the money out.

So when we’re talking about process and transformation that’s really what we mean. If you’re not willing to change how you’re kind of working with money just a little bit, it might be difficult to adapt and adopt the IBC concept because there is going to be a process involved which might mean it may be different than the one you’re doing. Probably is, but it works. It’s not a product, it’s a process that works and if you follow the rules you’ll make a lot of money. That’s what’s great about it.

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Holly: Well, and I think part of that process, Nate, is understanding that you have to start viewing the money that you’re putting in not as a payment. It’s not a payment at all. It is literally a deposit. It’s a premium deposit and it’s something we have never made too many deposits into our own bank accounts. We have never made too many deposits into our own businesses even if we own our business. We tend to really look at whether it be the 401K, okay, I’m going to go back to that, but how can I save taxes?

You know, we’ve talked about this before but let’s spend more to save on our taxes when if we just paid the taxes we would have had more money. Well, the same is true of the life insurance policy. It’s not a place to store money. We’re not using it just as a savings account to store money and hope that there’s more in the future. It literally is that process of understanding you’re literally making deposits in order to be able to generate money now and in the future and use that money and use it immediately versus waiting 10 years in a 401K or 20 years.

Or you put so much money into your 401K but you still don’t have access to any of that. I mean, I’ve heard so many people that have 200,000, $250,000 in their 401K yet they can only take out if they even want to on a loan per say $50,000. So they really don’t have access to their money. We’re giving you an opportunity to have access to a business that you own and run that is within your control and you are a shareholder. That’s one of the biggest keys. The banks are out to make money for their shareholders. The insurance company is out to make money for you as a shareholder.

Nate:And I love this saying, and it’s true, you don’t actually need the bank, guys. You don’t need the bank. The bank needs you. They need you to keep borrowing money and they need you to keep making deposits. That’s because they make a lot of money doing that. You don’t need them. You can make it just fine building it on your own, and we just have a great place to do that that we know works. That’s what infinite banking is all about, but on top of this Holly, as we’re talking about being a business, and I thought I’d open this can of worms just maybe here at the end to help people see, as you grow with infinite banking, we may talk about it as a business, but it may make a lot of sense to actually start a corporation that manages your IBC system.

You literally do own a finance company at that point, a private finance company, especially if you are going to start incorporating more than just yourself you know, that’s taking loans out, if you’re doing IBC and it’s mainly just you that will pull money out to pay taxes and give and buy cars and do these things that you would do as an individual, you may not need a corporation to run it. You might, but once you start bringing in your family and if you have a business and if you have investments that you’re making, it may start making sense to actually incorporate and have a corporation, a company.

We think of it as a family business, a private family financing business or it would be amazing if you would seriously take a look, if you are a married individual who has kids who’s going to have grandkids, if you look at the amount of money that’s going to walk out the door to banks in your family, it’s going to astound you, whether it’s mortgages, car loans, credit cards, student debt, there’s a huge amount of money just walking out the door.

If you would focus on building a family banking business where everyone can pull money from and repay, all of the money that normally just walks out can stay in the family. You won’t need to go out and invest in riskier places, “the market” or other things that is more volatile just to generate a high enough rate to survive if you’re recapturing hundreds of thousands of dollars from each individual in the family that’s coming back in as the generation one you could say of starting the journey on creating the banking business, you can make a legacy as we’ve talked about many times that does span generations where you have a banking business that everyone can pull from and it only comes back to profit the family using the policy as the funding source really just puts it on steroids. That’s kind of the goal of having that in place.

Holly: What happens too with that, when you start a corporation or when you step back and see all the money that’s going to leave your family, whether it be through car purchases, whether it be through college education, whether it be through weddings, vacations, funding mortgages, you name it, and you actually can step back and say, “Wait, we can create a system where that money stays in the family,” it makes a lot of sense.

It really is an amazing opportunity to say as an individual and as a family we’re going to keep the money in here where we no longer are dependent on the banks. Like Nate said, the banks need you, you don’t need the bank, but do you know how freeing it is, and I’m going to be honest and say this, from a freedom standpoint for me, the fact that I don’t need a traditional bank at all. I can use the bank when I want to. I don’t need their money.

It is a very different concept and mentality and it brings such freedom to know I’m not dependent or reliant on them versus being dependent and reliant on your own banking system or own family banking system. I mean, I said this the other night to a group of people, I have no problem writing a mortgage check out to the family because I know the money’s staying in there. It’s a lot easier for me to do that than it ever was to write it to a bank.

Nate: You know, just the fact that your kids may never have to go inside a bank to get a loan ever. I ran the numbers for me one time, Holly, you kind of know this, my wife and I are expecting to have a fairly large family and I’m thinking if all I do in life financially, and I’ve got 20 to 30 years to build up enough money to start taking over kids’ mortgages. That’s my goal is I want the mortgages at least to stay in the family.

Let’s just say we have six kids. Thirty years from now most of them will have mortgages, houses and houses at that time easily, a starter house even at that time could easily be 300,000 depending on where you live. If I do take 2 million dollars and cover six mortgages for my kids and have them pay me back over the next 30 years, the numbers just on those mortgages, just by keeping the money in the family, I don’t have to take any outside risk, it’s just us working together, the mortgages alone are going to create I think it was 11 million dollars in my policies just on the mortgages.

I’m not seeing the policies as just a savings tool. To me it’s my banking business. I’m trying to make it as profitable as I can, as effective as I can, and family is kind of the low-hanging fruit to help with that, but they should like it too because the death benefit’s going to be over 20 million at that point for them so they’re happy doing business with me, at least they should be. They know they’re going to help build it for themselves in the future.

Holly: When they understand it, when your kids understand it, my kids are a little bit older than yours, I’ll be honest and say that, but when they understand what’s passing to them and the legacy, it’s almost a joy that they know they’re going to help not just themselves but even their kids. There’s a future to think about and to get excited about and to dream about of what you can do because of how you’ve learned about money and how you really treated it like a business and not just a means to an end.

My kids say they get harassed a lot in school because they don’t have savings accounts in a bank, and my kids tell them, “No, but we’ve got life insurance policies and those are a lot better.” That’s how they’re looking at it. This is a policy, they pay it back. To have a 10-year-old know the ability to be able to understand what it means to buy something and pay it back and to have that object, I’m going to use the surfboard, but to have the surfboard, pay it back and have the money to buy another surfboard or do even more things with that just by the simplicity of doing that, there is no greater freedom in my opinion than that because they understand that oh, cars, we’re buying it from Mom and Dad or a house or a mortgage, Mom and Dad are going to help us out.

I have the same mentality, Nate. I just want to be able to bless them just by being able to own their mortgages. The blessing of that, that they don’t have to go through a conventional bank to me is so much more of a blessing as well as keeping the money in the family like you said. They’ll have so much more later on if life.

Nate: I mean, to kind of wrap this up, Holly, it doesn’t matter if you’re doing infinite banking. That is the vein that Holly and I are mainly in, but it doesn’t matter what you do with money. It doesn’t even matter if you’re investing. We talked to Rabbi Daniel Lapem who we’re fans of who’s been on our podcast before. You ought to think you’re a business owner, that you’re in business no matter what you do.

I don’t care if you’ve got a job, I don’t care if you’re totally broke. You’ve got to see the value that you bring to the table as a business. If you have a job you just have one customer. It happens to be your employer and you’ve got to see yourself not as worth whatever that employer or that customer to you is valuing you at, but you’ve got to know what your value is and try to improve that. I don’t care what it is. We’re just helping people but whether it’s investing in real estate or in the stock market, no matter what you do financially my suggestion to you is to start operating more like a business.

You’ve got the funds that you’ve got, what is the best business decision for you to make? Especially when it comes into infinite banking you’ve got to get out of the viewpoint of savings accounts or 401K. You’ve got go we’re building a banking business and the goal is to be very profitable and get more and more profitable as time goes on, but knowing that it’s going to cost money to get it going but we’re buying in for that. If you operate it like a business I promise you you will actually be more successful than if you just think of it as a good place to store money. It might be, Holly, a decent place to store money.

Holly: It’s better than a bank. Remember, the bank needs you, you don’t need the bank.

Nate: It’s just you’re cutting yourself short and that’s what we’re trying to keep you from doing is cutting yourself short, just treating it like a deposit that just sits there. Let’s really think how can we maximize our bank. What can we do in our business to help improve and create more efficiency and how can we transform the way we’re spending money in all these other areas by using a policy and can we produce more profit by doing so? Those are the questions that you ought to think of when you’re doing IBC and you’re starting to think like a business owner.

Holly: Absolutely.

Nate: Well guys, 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/e60.