E71: The Most Important Thing for Success with Infinite Banking

In this episode, we discuss the most important element for success with infinite banking, and how it can free you from financial slavery forever.

Success with Infinite Banking topics Discussed:

  • What is Parkinson’s Law and what does it have to do with money
  • How things expand to fill the available constraints
  • The sneaky thing having more money encourages you to do (that’s not good)
  • When money is finally freed up
  • Mindsets to redefine constraints

Episode Takeaways:

  • The Parkinson’s Law of money is this: As our income increases, our expenses increase.
  • When you start using infinite banking, you have to start recognizing that we do finance everything in this life. But you must be responsibile.
  • There’s really no difference between having one master or many masters. And the real reason that we’re doing Infinite Banking is to help people be freed from financial slavery, even if you didn’t realize they were in it.

Episode Resources:

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Podcast transcript for episode 71: Important Thing for Success with Infinite Banking

Nate: In this episode, we will discuss the most important element in being successful with infinite banking, and how it can free you from financial slavery forever. She’s 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. Welcome back everybody to another episode of Dollars and Nonsense. I would like to just encourage you, if you guys are really enjoying this podcast and getting things from it, if you wouldn’t mind liking it on, or sharing it on social media, leaving a review. Rate the podcast on the various sources you can, and that really helps get the word out there. Holly and I would certainly appreciate it. And with that being said, we’re going to dive into today’s material.

One of the things that most people go back to as sort of the Bible of infinite banking, which is a concept you’ll hear us talk about on this podcast quite a bit, they go back to Nelson Nash‘s book, Becoming Your Own Banker. I call it the Bible of banking. Holly’s read it a whole bunch of times. I’ve probably read it like 30, 40 times. I don’t know.

So, and every time I read it, just like when I read the Bible, I seem to get new things from it every time. And it’s amazing. I know Ray who has been on this podcast before, and our founder and mentor, he used to read it once a month, every month for years and years and years. So if you haven’t read that book, I would encourage you to get it.

But we’re going to talk about one aspect that Holly and I think is the most important aspect that you can get from it in order to be successful with infinite banking. And it’s not the most technical thing either. So we’ve talked a lot about the technical things of infinite banking, technical things to help you build wealth. But this one is more of the human element involved in that, how you and I can be our own worst enemy at times.

So with that, Holly, we’re here today to talk about something called Parkinson’s Law. Nelson Nash is probably the only person who’s ever used that. So if you don’t know what that is, don’t blame yourself. But Parkinson’s Law and conquering it is one of the most important things you can do in anything you do. But especially true here in infinite banking. So when we talk about Parkinson’s Law, Holly, what do we mean?

Holly: Basically, as our income increases, our expenses increase. I see even a difference between needs and wants. We want a lot of things, we don’t need a lot of things. It doesn’t have to be that way and it’s more of a human nature. Like what Nate said, that Parkinson’s Law really is the ability to conquer the fact that you do not need to increase or spend more just because your income has increased.

Nate: Yeah, exactly. Right. And Parkinson was a real guy, and you’ll hear about that in Nelson’s book. He made this law. He said this is a… This is something that everyone deals with. This is a human nature issue. It’s a law of humans nature that expenses tend to rise to match income. And once a luxury is enjoyed, it soon becomes a necessity.

Holly: Yep. That’s a big one.

Nate: Sometimes I worry, you know, if you start staying in the nicest hotels, or if you start buying the nicest cars, you’re living in the nicest homes, it’s much more difficult to draw back the lifestyle if needed, then to create it. So learning to be content is something that I’ve tried to create in my own life. Being content without having to have the best necessarily, though I love to experience life to the fullest, so I don’t want you guys get me wrong. But it is true that I’ve noticed in my own life, once a luxury is enjoyed and me personally, it soon becomes a necessity where I can’t imagine going back.

Nate: I don’t think my wife would stay at a Holiday Inn anymore. You know? It’s like once you experience the higher end, you don’t really want to go back to it. And Parkinson showed us that, and it has so many implications to us financially, with this law that for whatever reason we have a hard time keeping our expenses lower than our income. And every time we get a raise or earn more money, there’s something that we find that we can do with it to spend it. It just seems like an automatic thing.

Nate: And if we start spending it and our income drops, it’s like the end of the world. We can’t imagine going back to the old way of living. You know, eating ramen noodles like a college student. We all did it. We enjoyed life then too, sometimes the simpler life people enjoy more. In fact, I’d say almost every time, when you really think about it.

Holly: I’m going to be honest, it’s often tied to an emotional feeling of this brings me joy or happiness. Yet not realizing that it’s not necessarily that, that’s bringing you joy and happiness. It just was maybe a little easier or a little simpler. Or you might love donuts, but you don’t want to eat a dozen donuts.

Nate: Speak for yourself, Holly.

Holly: I know, I speak for myself. But I mean I even think about the simpler life. When you had less and what you did, sometimes I think you actually created maybe more memories, and you created or spent more time even together, and doing stuff because you weren’t always going out somewhere doing something.

Nate: And I think we’ve talked about it a couple times on our podcast before of learning to live with content, and I think that’s very important, but here in Parkinson’s Law, and Nelson says it’s of vital importance, if you’re going to be successful with infinite banking, and really if you’re going to be successful with very many things, you can’t let your expenses rise to match your income every single time. And you’ve got to learn to live on less than you make, which we’ve talked about before. But we thought we could maybe tilt it more to some of the implications we’ve seen for those who are doing infinite banking right now. And if you’re trying… If you’re thinking about doing it, then it’s just good to know ways to be successful with it. So if you can learn to kick Parkinson’s Law to the curb. One thing I would say, Holly, is that with infinite banking, as with many things, the increase in freedom will also need to be accompanied by an increase in responsibility.

And for most of our lives, financial lives, we don’t have very much freedom. And the reason I say that is because a lot of people are living paycheck to paycheck. A lot of people are maybe living paycheck to paycheck, but they do have a retirement program somewhere where the money’s locked up and they can’t touch it. And we’re used to not having access to money. And when we start doing infinite bankings, and we’re using that method to build wealth, it’s completely different. And we can use all of the money at any given time with no penalties or taxes. And it’s a beautiful world and we love that freedom. But you can abuse it if you can’t kick Parkinson’s Law to the curb. If we unlock that money to you, then now you are, it’s up to you. So when I say the most important element to being successful is… Has nothing to do with the insurance company you’re working with.

It has to do with who you are and what you’re willing to do with the money. Nobody else can come in and mess you up. No other external factor, market crash or recession has proven to mess these policies up. They’re going to continue growing and paying dividends for a very long time, just as they have for 200 years. But the one person in this play who needs to learn how to work their money, especially when you start doing infinite banking with the freedom, is you’ve got to be able to kick this to the curb. So it looks… There’s things that people do, Holly, that are not the best ideas. We’ve seen them where they’ve kind of got a hiccup in the plan, and it plays itself out because they’re not really willing to kick Parkinson’s Law to the curb. So maybe we should start discussing some of that.

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Holly: When you start doing infinite banking and you really start using your policy, you have to start recognizing that, that we do finance everything in this life, but you have a responsibility too now that you’re controlling that money versus somebody else controlling it for you. That you have a responsibility to be diligent and then it doesn’t just mean that you spend, spend, spend. That’s the biggest thing I think that happens is you see this amount of money, and you just go, I’m going to say blow it on something you weren’t intending to spend it on.

Nate: When someone comes to us and they’re working with us to do infinite banking, we love helping you use the cash values that are building up in your policies to free money up in a lot of ways. One of the most basic ways to doing that is we love to start taking over third party debt. You know, if you’ve got car loans and credit cards, and student debt, and mortgages, and all of these things where money’s just leaking out for all these various debts that we have, that’s the low hanging fruit to say, hey, without taking, you know, any income increase into account or changing your cashflow a dime, we can just use the policy to take that debt over and you can start paying you back, and you can make money on money that was just walking out the door before, living the same lifestyle you’re living.

The problem is when we start taking this debt over, our encouragement is to, okay, if you’re paying $500 a month for a car before you had a policy, and then we have a policy and we take that loan over, we should pay us back at the same pace that we’re paying the bank, if we really want to continue to expand and build wealth. No one’s going to force you to do that though, so it comes back to this Parkinson’s Law.

The default option that we’ve been living our whole life is to pay something off, just to have the thing paid off, so that now we can go take our money and do whatever we want with it finally. And when you’re doing infinite banking, there’s freedom in it. But if you want to continue to build wealth and not just live, you know, a sustenance living of paycheck to paycheck, we have to kick it to the curb and say… By the way, I’m making a jump here, but if I free up cashflow, it can feel like extra income can’t it? Because now you’ve got more money and we’re saying let’s… The more money that can go into the policies, the better. If we just spend it and it never hits the policy, you’ll be missing out on the wealth that we’re trying to create.

Holly: What’s really important is to understand exactly what Nate said, you feel like it’s income. Like this money’s freed up. Yet in our entire life, what we have been taught to do is work, and pay something off. That’s what we’ve been taught to do. And then when once we pay it off or we’ve accumulated the debt, and we’ve paid it back off, we’ve never paid ourselves back that money.

In reality, what this is teaching you to do is not just pay the debt off that you owe to somebody else, that low hanging fruit as Nate talked about, but also to pay yourself back in return, so that the money just didn’t leave your hands. Because most of us, and when we think about this, once the debt’s gone, we’ve paid for the car, or we paid off the credit card, or we’ve paid for our education, whatever that may be, once it’s done, the money left. We did all the work, we gave it all away, and there’s nothing to show other than we have zero debt owed to somebody, but there’s nothing even in our bank account.

Nate: Yeah, I mean that goes back to something that you and I both were taught from Ray a long time ago. And I’ve heard him ask it to hundreds and hundreds of people this question, and it really helps us paint it in the right light, I think. But Holly, I know you’ve probably been asked by him as a have I, but he asks you, “Let’s pretend this paper in front of you is a contract, and if you sign it, you’ll be my slave. Will you sign it?”

Holly: If you sign that paper, what you’re agreeing to is that everything you make from here on out belongs to somebody else.

Nate: If anyone wants to sign that deal, by the way, I’ll take them up on it.

Holly: Just give us your money and you work for us. Everything you make is going to belong to Nate, or it’s going to belong to myself, one or the other. Now, if we asked you that question right now, how many of you out there are jumping to sign that paper and say everything you make from here on out, it’s going to belong to me?

Nate: You know I’ve never heard a single person say, “You know what? Sign me up, Ray. Sign me up, Nate. Let me come on down to Kansas and I’ll work for you for nothing.” But yet that’s exactly what we do in reality if we take a look at it. We do all the work and then the food people get the money, the house people get the money, the car people get the money, the entertainment people get the money, the gas people, the medical insurance, you do all the work and everybody else gets all the money.

There’s really no difference between having one master or many masters. And the real reason that we’re doing infinite banking truly is to help people be freed from financial slavery, even if you didn’t realize you were in it. It can’t be done without kicking Parkinson’s Law to the curb because if we cannot learn to live on less than we make, then we might as well just dig a hole, jump in, have someone bury us down there because we’re going to be a slave to the world til the day we die

Holly: And it defeats the spirit too. When you’re doing all the work and everybody else is getting all the money, it defeats you as an individual. What’s the joy of going to work when you know that everybody else is going to get all the money?

Nate: It causes depression. I mean financial stress is one of the biggest causes of heart attacks and illnesses. I mean, the stress that people are dealing with money wise is enormous. If infinite banking… If you can’t imagine something of value that it brings. The number one is the freedom and the control that can get you out of that stress, and out of that slavery. There’s nothing like having more money than you need. Very rarely does anyone get there. With infinite banking you can get there if you follow the rules.

And that that has some implications elsewhere, Holly. Like we’ve heard, they don’t see the policy in the right light sometimes, I feel like. They don’t actually want to send money to it, it seems. I think it’s because they don’t make the jump of having the policy be a bank. They see their checking account as the bank, and they want to have money in there, but they don’t see the policy as the real bank, so for whatever reason there’s a mental limit on that. They think, “I can’t really just unleash myself to pay myself more into my policy.” I don’t know what causes it, but I thought maybe we could uncover that a little. What is behind the fear of putting money there, whether it’s a premium and paying more there, or whether it’s paying loans back and putting more money. Some people can just feel like, “No, I don’t want the money to be there.” Maybe they don’t see it as paying themselves back or paying themselves first. Maybe they see it in a wrong light.

Holly: Well, I think that they see it and they view it as another payment, Nate. Even the premium payment that pays for that life insurance policy is viewed as a payment. They don’t view it as a deposit. And I’m going to say this, banks want as many deposits as you can give them. In the same way, if you viewed your life insurance policy truly as a bank, and a bank account, you would want to be making as many deposits into it as you could. And we don’t view it number one that way. We automatically start thinking it’s another payment. We don’t see the benefit of it. And the other thing too is that we have been taught that all of our money should be in a bank. That’s what we’ve been taught our whole life. You take it somewhere and you park it, you put it somewhere else.

We view the bank as the vehicle that we’re using instead of actually understanding that this life insurance policy is your bank. And Nelson even says, you know… In his book he says, “It seems strange, but your premium should equal your income.” And the reason he’s saying that is because if you truly viewed every single dollar that you made as a deposit into your bank account, because right now that’s where it’s going. It’s going into a regular bank account. Okay? But if you change that to going into a life insurance policy, and your premium, and that life insurance policy is your bank, you would want all those deposits, all those direct deposits to be going directly into your life insurance policy, actually not into a bank account.

Nate: Yeah. And then as long as you’re living on less than you make, and putting more into the policy’s total than what you’re pulling out, you’re going to be way ahead. The problem is when people you know, get to that point where they’re just putting in money and pulling it all out just to live on, and they’ve got no delta between what they’re putting in, what they’re taken out. But absolutely you’ve got to make a switch to where you see your premiums as paying yourself first. And you see your loan repayments as replenishing the shelves on your bank here, so that money can be reused. And the more you put in, the better off you’re going to be financially. It’s just the truth. The more we put in, the better we are. If we hold back, we have a tendency just to blow them money or it disappears somehow, and then we’re just left with a little.

And if you knew for a fact, which it is a fact, that if you… Every dollar you put into your policy is going to be available in the future to live off of tax-free for passive income time, plus all the growth obviously. Do you really want to put in as little as possible? Or do you want to put it in as much as possible? So Holly and me are probably some poster childs for that, of paying as much as we can into policies because we wanted to have as much money as we can. I’ve never had too much money. If I do, you guys can all stand in line, and I’ll start handing it out. But don’t get your hopes up, I don’t think that’s going to happen.

Holly: You mentioned also the fact of we view this loan, right? From our policy even, you’ve taken out a policy loan, and yet you would always repay a loan to a bank or somebody else. And yet one of the things we miss understanding is that a loan, even on our own policy is an asset. It’s not a liability. We view a loan from the bank as a liability because it’s what we owe them. Okay? But this is you using your money and it’s you paying yourself back. Who wins in that situation?

Nate: Always you.

Holly: And instead we’ve continued to let everybody else win with our money. We’ve continued to pay everybody else. And I’m going to be honest and say whether you paid cash for a car, or whether you financed a car, the only person that won in both of those situations, if you weren’t, your banker, was the car dealership. That’s the only person that won. Whoever got the money for the car, it wasn’t you. And we need to view that in the same way and light as we live. Is that right now, like Nate said, you are doing all the work. I really hope you understand that you guys are working so hard and you’re doing all this work, and yet every single other person other than yourself right now, if you’re not doing infinite banking is getting all that money.

Nate: Exactly right. And we got to conquer it. So I guess to kind of close down a little bit, Parkinson’s Law is something we’ve got to learn to kick to the curb. You can’t allow your expenses to rise to match your income. In fact, life is better if you have money. If you’re somebody who’s never really experienced having money, which I know that there’s plenty out there, who’ve never really had very much money at all. Just know that if you can make this one switch, and start living on less than you make and build up a reservoir inside of a policy, it can change your life. We’ve seen it time and time again, and it snowballs on itself. So we’ve got to kick it to the curb. You can’t see the policy as a payment. The more we put in, the better off you’re going to be financially every time.

Premiums and loan repayments, they’re both boosting your wealth, the available money you have, and the more we put in, the better off we’re going to be. So we can’t be afraid of holding onto the old way of thinking, we’ve got to enter in the new way I think you’ll be very much better off. Nelson had it right. You know the technical aspects of infinite banking are great, but if we don’t get past the human elements and the issues that all of us bring to the table, it’s hard to succeed financially with the culture that we’re in. And if we can get break free of this, you’ll be so far ahead of your peers. It’ll be amazing.

Holly: Well you’ll switch places, you will no longer be that slave. In order to live on less than what you make, you basically break that freedom. That’s what Nate and I are trying to tell you, and you’ll actually become financially free because you’re no longer the one giving all your money away to everybody else.

Nate: And at least if you are going to spend money, start running that money through a policy first because then we know how to recapture it. If you just keep spending cash without running it through the policy, you’ll never really get in the groove of recapturing it, and never get in the flow. The money will be gone. It won’t earn a dime for you ever. So that’s kind of the advanced part of this, is we’re not against living life. We’re not just saying cut your budget down, and do nothing. But how you do it can be important. But at least if we’re going to continue to spend some money, let’s make some money on it through the process of infinite banking. Run it through the policies first. Don’t be afraid of the policy. It’s your friend. So you know, with that, I guess we can close it down. Holly, any more thoughts on your end?

Holly: No, I think we’ve summed it up pretty good, Nate.

Nate: All right, well, 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/E71.