E244: The 6 Principles Of Infinite Banking

LIVING WEALTH PODCAST

DOLLARS AND NONSENSE: EPISODE 244 TRANSCRIPTION

Introduction to Infinite Banking as a Financial Platform

[00:00] Nate Scott: 

If you believe that infinite banking is about investing money in a whole life insurance policy, then you will think that you can just buy a policy and set it on your existing platform, whatever that is. So if you’re already, and to some degree you can, I’m not saying that that’s an impossible thing or even unwise, but what I’m saying is most people see the policy as a piece of their platform.

Infinite banking is best understood when you see it as a platform to build things on as opposed to an end in and of itself. And infinite banking is not the only thing that works like this. Essentially, Dave Ramsey and Robert Kiyosaki, they essentially both built what I call a platform of which you can build things on, and it’s more of a way of life than it is an actual investment strategy by itself.

So of course you have Dave Ramsey who essentially builds these principles that if you follow, he says, you’ll end up being successful. So essentially he’s created the platform for you to then build something on, build a life on his platform, following his principles. And the same thing goes for Robert Kiyosaki.

Comparing Financial Philosophies

[01:16] Nate Scott: 

He went out and he created a platform that you can build a life on. And so it’s not, he doesn’t tell you he’s not a stock picker or he’s not giving you official investment advice in any way. And neither is Dave deep down. What they’re teaching you is how you can live your life in such a way that it can actually work.

And here’s what is interesting about platforms: one of them is never objectively better than another one, within reason. And so what this means is you can, there’s, there’s a whole swath of the population who says that Dave Ramsey’s platform. Change their life for the better and they’ll never try anything else.

They’re like, this is it. This is the gospel of finance is what Dave Ramsey has to teach. The same thing is true for another huge swath of the population who read Robert Kiyosaki’s book called Rich Dad, Poor Dad, and all of those that are in that series. And they said, we built our life on his platform and we, and it has changed our lives and we’re never going back.

Why Infinite Banking Includes Multiple Financial Strategies

[02:18] Nate Scott: 

It’s the gospel. It’s the truth of how to, how you should build your life. And you could say one is better for some than others. And the other one is better for some than others. And the honest truth about infinite banking is that you’ll never really understand it until you understand that it is a platform for which you can build your life on.

What’s super unique about infinite banking just in general is that it’s Dave Ramsey’s platform, the principles that he calls you to live by. And Robert Kiyosaki’s platform, those two principles are actually incompatible. So in other words, you have to choose whether you’re going to follow Dave Ramsey or whether you’re going to follow Robert Kiyosaki, but you cannot follow both at the same time there’s no question. 

They’re completely incompatible. One is never borrow money ever, ever, ever, ever, ever and pay off all your debts as fast as you possibly can and invest money in passive places like retirement programs. Then you have Robert Kiyosaki, who tells you to do the exact opposite of that. And he says, borrow as much money as humanly possible.

[03:23] Nate Scott: 

Don’t invest money in passive places, buy businesses, buy real estate, produce passive income, produce cashflow. And that is the true way to financial freedom. And so you have these two polarizing views that they both become extremely well known for the platforms that they’ve created, the principles that they’ve created. Infinite banking though, actually stands in the middle.

So if you see, Dave Ramsey on one end of the pendulum and Robert Kiyosaki on the other end of the pendulum, the idea is with infinite banking, you can actually, with the starting point of IBC, you can actually build your life similar to Robert Kiyosaki. You can build your life similar to Dave Ramsey.

You can do something totally different, but in other words, it provides a platform that you get to decide what you’re going to put onto that platform. And it can be, in other words, it almost is a conglomeration of the two ideas. So in IBC, there are some Dave Ramsey-esque things like saving money.

Advantages of the Infinite Banking Concept

[04:24] Nate Scott: 

Living on less than you make, paying down debt, especially unnecessary debt, becoming your own banker. I mean, these are all things that the Dave Ramsey crowd would enjoy about the concept. The same thing is true about Robert Kiyosaki, the idea of never locking money up, deploying money to go achieve multiple things, having your money do more than one job, making sure that your assets produce cashflow, infinite banking helps really achieve a mix of both.

And you can go all in on one, all in on the other, but nonetheless, infinite banking does provide a specific platform to live your life on. This is why people get so confused because if you believe that infinite banking is about investing money in a whole life insurance policy, then you will think that you can just buy a policy and set it on your existing platform, whatever that is.

The Role of Whole Life Policies in Infinite Banking

[05:19] Nate Scott: 

So if you’re already, and to some degree you can, I’m not saying that that’s an impossible thing or even unwise. But what I’m saying is most people see the policy as a piece of their platform, like a cool thing to do. Oh, I can open a policy, put money in and I can kind of diversify there. I can usually go accomplish things. 

In other words, it’s a piece to a puzzle that either maybe a framework that they have not actually identified that they’re living their life by, or maybe they have no framework whatsoever, but they don’t actually let infinite banking become the framework in which you can add things onto. That’s the platform methodology.

So what I wanted to do today is really just stress that infinite banking is a platform that you can build your life around in which it will always end up being successful. You could say the same thing about Dave Ramsey’s platform. You could probably say there is something, I know Robert Kiyosaki’s might be a little bit more risky than Dave Ramsey’s.

[06:14] Nate Scott: 

Dave Ramsey’s is the most risk averse platform you could ever build your life on. So for the people who are most risk averse versus of course, Robert Kiyosaki, which is a completely different platform. But either way, what I’m trying to say is that either one has platforms, concepts, philosophies that you can adopt that whenever you add those into your life, it’s likely you’ll be successful.

Well, infinite banking works the same way. If you adopt the principles of infinite banking into your life, it’s extremely likely that you’re going to be successful. So in this episode, I wanted to actually go back and, and redo a little bit of content that I did maybe a year or two ago. I think it was episode 171 and episode 172.

If you want to go into a deep dive of what I’m going to talk about today, I’m going to just kind of do a gloss over of that today of what I call the six principles of IBC. The six principles of infinite banking. And these are like the philosophical approach to this. This is why it is a platform.

[07:11] Nate Scott: 

And if you align with the principles, then you might want to implement this as your platform. That’s the reality. The second thing to note is in the next episode, I actually want to get out of philosophy into practicality. So in the next episode, I’m going to say essentially how you can turn infinite banking into a platform.

I guess this one will be why infinite banking makes sense to use as your platform. And then the next one is how you can then use it as a platform and build your life around it with like Dave Ramsey’s baby steps, you know, or whatever it is, it’s similar to that, to that mentality. So, in this episode, we’re going to dive into the why this is the why of IBC.

These are the six principles that it’s based on. And, and I’m not going to go into full detail on this. As I said, I’m just going to kind of gloss over these. For the sake of time, but I actually did a two part series, episode 171 and 172. If you want to do a deep dive into these principles, I would go back to those two episodes and watch those as well.

The Six Principles of Infinite Banking

[08:05] Nate Scott: 

Let’s go ahead and jump into the six principles. The first one that IBC is built on is the concept that you finance everything that you buy. You finance everything that you buy. And this is a fundamental principle. Once again, this is a fact of life. It’s not an infinite banking thing. This is just a thing thing.

And so the idea that you finance everything that you buy is you can cheat. What IBC does is it forces you to live your life as if this is true. They, but in reality it is true. So everyone should be living their life this way anyway, but they often don’t because their framework, their platform that they’re choosing to live their life on doesn’t acknowledge this as part of its platform.

So the idea of you financing everything that you buy is pretty simple. The idea is, it actually doesn’t matter whether you pay cash for something or whether you borrow money for something. There’s always a financial cost. And so if you borrow money, we all know what the cost is. If I borrow money to purchase a car, I know that I’m going to pay interest back to the bank. That is my cost. 

[09:10] Nate Scott: 

The financial cost of buying the car, apart from actually just the depreciation of the car and so forth. I mean, I’m talking about the money side of things, that there’s a cost to financing it with a loan. And that cost is called interest. The same thing is true, though, if you pay cash for a car, there’s a similar cost.

All of the interest that that cash could have earned had you not bought the car. It’s called opportunity cost. And so you get to choose which one you want. You plan accordingly. You can choose to borrow money and pay them interest, which allows you to invest your money. And earn interest someplace else, or you can choose to pay cash for the thing, not pay anybody interest.

But of course that money is no longer within your hands to invest and earn interest. This is a fact of life and you get to choose which one makes sense for you at the time. The idea of infinite banking though, is it kind of forces this on you. The idea that you finance everything that you buy, whenever you use a policy loan, you kind of get the best of the both worlds.

[10:13] Nate Scott: 

You do have to pay interest on a policy loan. While your money is continuing to earn but you’re paying interest back to the entity that’s crediting your account the profits. So it’s kind of, it’s as best we can get to be in the middle of those two polar opposites in finance, everything you find is everything that you buy, if you don’t understand this one though, you’ll never understand why it ever makes sense to take a policy loan.

If you, cause they always say, well, why am I paying interest? I could just, you’d pay cash for this. Why wouldn’t I use that? Why would I pay interest to the insurance company to take a policy loan? Well, here in you’re missing, the first you’re missing first principles. You’re missing the understanding of yes, a policy loan does charge interest, but it allows your cash value to continue.

To continue to earn interest in dividends. You could instead take a withdrawal of money from your policy if you wanted to pay nobody any interest, but then that cash value is not in the policy anymore. It has been withdrawn and it no longer will earn you any interest. Of course, you get this choice within the infinite banking system that maybe you don’t get with others.

[11:08] Nate Scott: 

So that’s the principle number one in truth. The next one is that banking is inescapable. Banking is inescapable. And so in point number two, the idea is this, if you’re honest with yourself. There is no way from now until the day that you die, that you will not be involved somehow in the process of banking.

This is, it is inescapable. You will have cash flows coming into your life and cash flows going out of your life from now until the day that you die. Doesn’t matter if you retire, doesn’t matter if you leave your job, doesn’t matter if you start a new business. It doesn’t matter. The process of banking is simply what are you going to do with your cash flows?

How are you going to manage those cash flows? But the process of banking must take place. This is, it’s inescapable. So you will be involved in banking until the day that you die. The choice that you get to make though. Well, here’s one more point before I get into this. One more point. One last point too is this:

Banking is an Inescapable Reality

[12:05] Nate Scott: 

It is essentially objectively true that using dividend paying whole life insurance policies built for the infinite banking concept and high cash value produce a better banking environment than conventional banking sources for over a long period of time for your life. It’s just an objectively true statement that has been for a long time proven in the past.

It’s proven in theory. It’s proven in the future. The reality though, that you have to ask yourself is not is Infinite Banking a better place to do banking than conventional bank products and conventional resources? The question you have to ask yourself is, is it worth it to me to build my own banking system?

That can be a subjective answer though, right? So in other words, there can be things that are better than other things, but just because they’re better than other things doesn’t mean they’re right for you. So that, and that’s one thing I just want to leave you with this. So banking is inescapable.

Infinite Banking as a Personal Banking System

[13:03] Nate Scott: 

You’re going to do it until the day that you die. Infinite banking presents an alternative to conventional banking systems. Instead of using checking and savings accounts to store capital and taking bank loans, you pay premiums with your excess cash flows instead of checking and savings accounts. And then you borrow against the policies and pay the policies back instead of borrowing from banks.

And so this process of banking is going to take place in your life. The question is not, in other words, if you are still stuck on whether infinite banking is a better place to do banking than regular banking, then I can’t help you because that should be very easy to find out very quickly. It is better.

The question that you should have yourself though, is how big of a banking function do I really need to replace? At what scale? You’ve heard me use this term with my four stages of IBC commitment. Content, which I really believe is one of the best contents that you could ever, you know, view in the infinite banking world, especially for implementation strategies, but in the four stages, if the question is not, does infinite making make sense and can benefit me?

[14:00] Nate Scott: 

The question is at what scale does it most make sense for me? And that can go back to first principles. Once again, if banking is inescapable, how big of a banking function do you actually have in your life? Some people have large ones, some people have smaller ones. 

You’ll have a small banking function if you have just a small balance in your checking account and you’re storing all of your money in passive, long term, appreciation based investments, typically found in 401ks and IRAs. If that is your platform that you’re going to build your life on, then Infinite Banking would have very little effect if that’s what you want to do.

If instead, you want to build some sort of, you want to become something new financially, maybe you already have a business, maybe you want to build a business, maybe you want to get into more active investment investing, then you’re going to need capital. You’re going to need more and more and more capital.

And instead of building up that capital and banks, you should be building it in your own banking system. So now it makes sense to do infinite banking at a high scale because banking is going to be a bigger piece of your life moving forward. So banking is inescapable. You get to choose whether it’s worth it to you to become your own banker, start these policies and build it this way.

Financial Success Through Structured Processes

[15:08] Nate Scott: 

Or whether it’s insignificant to you, that’s going to determine how big the banking function is going to be in your life moving forward. The third principle of IBC is: people succeed best when they implement a process. So success equals process.

It’s essentially what I’m going to put down for you, you succeed best whenever you implement a process. And this is just, this is true in life. I mean, that’s why Dave Ramsey has been so successful. That’s why Robert Kiyosaki has been so successful. They present to you a framework that involves a process. And if you follow the process, it works.

I was actually listening to an episode of Alex Hormozzi’s podcast. And in that episode, he had interviewed Dave Ramsey, by the way. And he was mentioning this to some other person. I can’t remember who he was, who he was talking to at the time about his interview with Dave Ramsey. And he was trying, he was saying– 

Whole Life Insurance as a Banking Tool

[16:00] Nate Scott: 

He was trying to figure out why Dave Ramsey has been so popular. He should figure out why he became such a– he blew up to become this huge figure in the financial world. And he kind of brought it back to something as simple as this, that Dave Ramsey’s advice works 100% of the time. That is a true statement.

Now, of course, someone like myself would push back and say, well, there’s just so much other things you could do with your money that would actually work better than Dave. But what I can’t argue with is that if you live on less than you make and you save money and you use money to pay down debt and you save more money and you keep saving money because you live on less than you make, then at some point you will have money.

And you will have more money than you used to have. And so it’s a simple concept for a simple financial strategy that anybody could implement and probably be successful. So typically you are more successful when you implement a process. If you don’t have a process to live your life by things get confusing.

[17:05] Nate Scott: 

Anything could be a good idea. You’re very diluted. Your focus is diluted. So it’s hard to know if you’re actually gaining ground or not. You compare yourself to other people. It’s just unfortunate without a process. Same thing of course goes with Robert Kiyosaki’s processes that he teaches you in frameworks.

He teaches you to implement this. Same thing goes with infinite banking, that as soon as you buy a policy, you kind of implement a banking process. You’re building capital in the bank and you’re taking loans out and you’re going to repay those loans just as if you had borrowed it from somebody else’s bank, and this is, it’s a simple process.

I save money into my policies. I borrow from those policies like I would borrow from, if I was taking a loan out from a bank. And I repay those policies just like I would have repaid a bank for a similar transaction. Simple process. Guaranteed to produce results. Like that’s the same thing with Dave Ramsey.

[17:56] Nate Scott: 

It’s like, if you do this process that we’re teaching, you will end up having more money. As time goes on, there’s no question the only people that people may say, well, Nate, if I had done this other thing with money, I’d be even better off. Or if I had invested in Apple in 1982, look where I’d be now. I say, of course, but what you want at the foundation platform of your life is a process that works for you all the time.

So IBC is a process that works all the time. IBC works. If you follow the process guarantee, it’s going to work. You may not want to follow the process. You may not think it’s the best process. And it’s just a process that works along with a bunch of other people’s processes that work.

That’s why I’m going into first principles. If you listen to all of what I’m saying here today, you’re like, I don’t actually care about any of that. Don’t do IBC. Be crazy. 

[19:24] Nate Scott: 

The fourth thing that IBC is built on is the fact that capital attracts opportunities. Capital attracts opportunities. And this is just a way you live your life. Capital attracts opportunities. If you don’t believe this, then don’t do that.

Even the bank, as simple as that, the idea is this: most people stuff all of their money into stock market based programs, typically retirement programs. It’s the conventional advice. And there is headwinds and friction to getting that money out of those things. Typically with taxes, penalties and whatnot.

Even if it’s just a brokerage account with capital gains, taxes, selling your mutual funds and pulling them out of any of these sorts of accounts. There is windfall. I mean, they’re not windows. There’s headwinds to doing that. There’s friction. So in other words, you don’t feel as if you have capital that you could use to take advantage of opportunities.

[20:19] Nate Scott: 

Even though technically speaking, I guess you could close down your IRA and go start a new business with the funds. People do that. I’m just saying you have produced a framework that is not, or at least an environment that is not going to propel you into that way. Environment is so crucial. So I’m going to make a note here, just your environment will decide so many things in your life.

Infinite banking presents a way of life that provides an environment that allows for opportunities to just fill in the voids. Other environments put headwinds to doing new things with money whereas infinite banking produces a tailwind to doing new things with money. And so the idea is simply this capital attracts opportunities.

The people who have liquid available money who are seeking opportunities often are ones that find them. And that’s even a testament of my own life. For years, I was just building capital and policies, not kind of waiting for the right time. And it wasn’t really until God kind of spoke to me and said, Nate, it’s now time to deploy stuff that I said, okay, let’s go do this.

[21:24] Nate Scott: 

And was able to find, you know, four or five different opportunities to deploy the capital that all have been wildly successful. People ask me, Nate, where do you find all these wildly successful investments? Where do you find these people to partner with and so forth? I’m like, I don’t know. God brings them to me, but here’s what I do know that I would never have even looked for any of these people had I not done infinite banking 12 years ago.

Is infinite banking the best solution for everybody? I don’t know. It was an awesome solution for me. It’s been a great thing to build my life around, that I have a ton of capital and opportunities are attracted to me. And I’m taking advantage of them. It’s been fun. You might want that. You might not, I don’t really care.

I’m just saying, this is a principle IBC. You have to either believe it or not. The fifth one is where you get a little bit more detailed. And that is if you’re going to become your own banker, you have to find the platform to do it. And so of course, what we believe is that mutual life insurance policies provide the best way to plug into the banking system as an owner.

[22:17] Nate Scott: 

So essentially, you know, permanent life insurance, dividend paying whole life insurance equals banking as an owner. That’s why I’ll write down here. So permanent life insurance equals banking as an owner. So of course, this goes back to the tenants of infinite banking. But if you, I mean, as soon as you buy a policy from a mutual life insurance company, you become an owner of the company, the mutual life insurance companies, they are just big banks is essentially what they do.

They take our capital and they go lend it to other people. Primarily they go invest it mainly through bonds and other forms of lending, which receives interest. That’s paid back into the company and is then distributed. I mean, of course, expenses are paid and whatever’s left over is distributed back to policyholders in the form of a dividend every year.

And just, so in other words, it’s a way to plug in as an owner. This of course is why in number two, we said banking is inescapable and the inventory banking concept typically encourages you to go open up a permanent life insurance policy, of course, to serve as your banking instrument, and it’s why we believe that it’s pretty much objectively better than doing banking in the conventional route.

[23:20] Nate Scott: 

This goes back to it. The idea is simply, it’s going to be very difficult for Wells Fargo to offer a better banking alternative whenever they have to create benefit for their stockholders versus a mutual life insurance company that creates value for their policyholders who are the only stockholders.

In the company, you have to believe that or not. I’ve had some people push back on this and I’m just, I’m not going to answer the questions about it anymore. I mean, if you have a different belief, then don’t do this. Like if you actually believe that banking from Wells Fargo is better than buying, you know, building capital and policies and employing it.

And you want to make that argument. Then don’t do this. I just think it’s going to be hard to prove. So it doesn’t really matter. Let’s keep going. So the last point, and these are points that I make one more thing to note. Nelson Nash had his own rules and different things that he involved when he created different banking concepts.

And I’m playing off some of those as well, but I’m also kind of adding the Nate flavor to it. No, there’s no question I’m adding the Nate flavor to it, but I believe that things are more impactful to people whenever they are more of a personal testament. I’m not just regurgitating information that somebody else told me.

Building an Antifragile Financial Life

[24:20] Nate Scott: 

I’m just saying, this is why. I’ve spent 12 years in this, this is what I believe is the reality. So the very last one is that, essentially to become antifragile, to build a robust financial life that keeps you from experiencing pain during certain instances. In other words, this goes back to the book that I read, Antifragile, which I’ve mentioned on this podcast show many times.

It’s kind of a slog to read, not for everybody. But the idea is simply antifragile things gain from chaos, whereas fragile things typically break when chaos strikes. And so to build your life in an antifragile way really just means you’re so robust. that you’re doing well in good times and you’re doing even better in bad times.

So to become antifragile, you need to have safe capital. Safe capital is the first step to becoming antifragile. Safe capital is the first step to antifragile. And the reason why this is so important is that if you never have any capital that is safe, And secure that you’re in control of, you’ll always feel like you’re fragile.

[25:34] Nate Scott: 

Maybe even you won’t be fragile. You’ll just be so rich that you shouldn’t feel that you’re fragile. But here’s what I’m saying. You will feel fragile. Most people build their life with really no security involved. I mean, they stole their money, retirement programs over the best. And then the market drops and they feel horrible.

And I’m like, it’s not even worth it. By the way, the emotional roller coaster for a lot of people is not even worth it. Like if you like it, go for it. All power to you. But for some people that are like, nah, I just don’t want to deal with that. I’d rather build my life in more of an antifragile way. Well, of course, it’s impossible to do so, if you don’t have any capital that is going to grow, no matter what, guaranteed.

So you have, it’s the first step to becoming more anti fragile in your life. So these were the six principles of that, that the platform that you have to buy into, that you have to believe, so that in other words, you have to believe these principles before you could buy into the platform. Once you believe the principles and you’re like, I’ve got to implement infinite banking, because I believe in these principles and I want to adopt this platform.

[26:39] Nate Scott: 

And so the six principles are: you finance everything that you buy, so make decisions accordingly. Banking is inescapable, you’re going to be involved in the banking function till the day that you die. Infinite banking presents a better banking alternative than conventional banks offer. Your question is not does infinite banking work or not per se.

Your question really is. Does it make sense for me? Is it worth it for me to build my own banking system based on my goals that I have for the future? If you don’t need a banking system to help you achieve your goals in the future, then don’t do infinite banking. But if you do think that would be helpful.

Number three is that your success equals process. Almost every time, if you implement a process, you’ll become more successful. So infinite banking provides a nice, simple process to live your life by. Live on less than you make, put money into policies, and whenever you borrow from policies, repay it as if you had borrowed it from somebody else’s bank.

[27:30] Nate Scott: 

The fourth thing, the fourth principle is that capital attracts opportunities. Whenever you have embedded banking, you’re in an environment with liquid capital that opportunities will be attracted to, especially if you keep your ears to the ground. Number five is that permanent life insurance is the best way to really plug into the banking system as an owner and benefit from it in a very similar way to what we’re used to with conventional banking without taking a bunch of risk or anything like that. 

So it’s the best way in a risk free way to become your own banker. And then lastly number six is that safe capital is typically the first step to becoming antifragile. You can’t truly be robust and antifragile if all of your money is at risk at all times. So of course you can choose where you want to put your safe capital. We would just throw dividend paying whole life insurance policies built by you know mutual companies. We’d throw that name into the ring and say that we think that that’s better than anyone else for a few different reasons, but you’re welcome to choose something else.

[28:26] Nate Scott: 

But nonetheless, to become robust and antifragile, you need to have to choose where you want to store up safe capital. And as I said, I really do believe that dividend bank whole life insurance policies fit that bill better than just about anything else. 

So these are the six principles of IBC. This is the platform or the belief system that somebody would need to adopt to then build their life around this platform of infinite banking. Just like Dave Ramsey has a platform that you can build your life on, Robert Kiyosaki has platform that you can build your life on, Nelson Nash created a platform for us to build our life on. 

And in the next episode, I’m going to dive into, really the practical way, that how you can, build infinite making into your actual platform, the practical steps, step one, step two, step three, and so forth that you can do to really turn it into a platform, similar model to maybe like a Dave Ramsey, baby step formula type of situation.

[29:19] Nate Scott: 

So I really hope you join us for next week’s episode when we do that. But for now, that’s all we have for today. This has been Dollars and Nonsense. If you follow the herd. You will be slaughtered.

By the way, if you want to schedule a meeting with either me or one of the other agents on our team, you can do so at https://livingwealth.com/ Just go there and fill out the consultation request button. We’ll be happy to meet with you and talk through the power of infinite banking and what it can mean in your life. We’ll see you there.