Becoming Your Own Banker By Nelson Nash

[Osias Baptist]

Howpromoters and life insurance agents often explain how to be your own bank can be sensationalized and over-hyped. In fact, even the most popular publications (seen below) can be downright misleading at times:

There is a unique combination of features, riders, and life insurance policy design techniques that allow for an overfunded whole life policy to optimize these 7 key benefits ideal to be your own bank:

Also, contrary to popular belief, Indexed Universal Life (IUL) can also function quite well as your own private bank if it is designed and monitored correctly. You can read all about the pros and cons of IUL here.

What I find so interesting is that if your local bank offered an account with these benefits, then people would be lining up around the corner to deposit money into. But since the whole life insurance industry has done such a terrible job of positively promoting its own wares, this concept remains one of the best-kept financial secrets in America.

The agent helping you set up the policy should use a combination of policy design features and optional riders to allow for robust cash growth to occur early and often. Designing a whole life insurance policy in this manner will substantially reduce agent commissions and allow for more rapid cash value growth inside the policy to be used for your own private family bank.

And furthermore, we have to assume then that you are disciplined enough to save up cash afterward for your next purchase. If so, you will in most circumstances be much better off funneling those funds through a properly designed life insurance policy and utilizing the flexible loan feature as described above.

Do you like the flatter left-hand side of the curve or the steeper right-hand side of the curve? You want the right-hand side, of course, and how you get there is by not interrupting the curve anywhere along its journey.

Well guess what? The moment you withdraw funds from any compounding asset to pay cash for a purchase, you just killed the compounding. Once you refill your account with the amount you spent, you reset that curve to the flatter side on the left

If however, by becoming your own banker you borrow against this continuously compounding asset class, you can often create more wealth for yourself because your entire balance keeps working for you in this tax-sheltered environment.

Samuel Saver wants to be a cash buyer for everything. So he saves up cash and withdraws it to pay for major expenditures and strategic investments. Once he does, he starts aggressively saving again to bolster his reserves for the next time.

His best friend Benjamin Banker wants to become his own banker with life insurance. So he pays premiums to build up cash value in life insurance and then borrows against his safely growing equity when he has a major expenditure or strategic investment opportunity. Rather than rebuild his savings account, Benji flexibly pays down the lien against his continuously growing cash value and ends up at a higher place in line in his own bank (that also happens to be immune from market risk, taxation, and possibly even suing creditors).

Click here to schedule a call to discuss your unique situation with one of our team members so you can have all your questions answered and start the architecture of your own private bank.

The book has since become the ultimate guide to anyone that is interested in implementing the infinite banking concept. It is a must-read. Still, it is helpful to have a guide to quickly access the wisdom in the book and basic tenets of the financial philosophy that Nash became famous for.

Any type of transaction involves the flow of money, but where does that money come from? It comes from one pool of money managed mainly by banks, insurance companies, corporations, and a few individuals worldwide. The cash flows from the pool to help us meet our needs are primarily out of our control and back into the banking system.

Nash was educated as a forester and spent 10 years as a forestry consultant. Much of his work dealt with compound interest over long periods. This meant that a lot of the work involved looking years into the future and making investments that would not see results for an extended period.

Finally, the concept was strongly influenced by his experience in real estate. As his business ventures went well, he learned about the magic of leverage in the real estate world and was inspired to be part of it. He came across advice that entailed buying real estate, borrowing money, and paying interest rather than selling the property; all you gave up in that scenario was the interest you paid out. However, he was unprepared for what happens when the leverage works against you.

At the time, people could get approximately five to eight per cent of the money from a policy they owned. However, it was dependent on how much you put into these policies. It became clear to him that he had to increase his life insurance premiums to create a pool of money that he could borrow from to pay the increased interest he owed. To do this, he began with revising his spending patterns. With this and a better understanding of how life insurance worked, he devised a system that worked well, which was the beginning of the infinite banking concept.

The boys sat down with their slates figuring this out, but one boy stared out the window, then picked up his slate, wrote down the correct answer, and gave it to the schoolmaster. When asked how he figured it out, he explained how he visualized the solution and simplified it. This boy was Karl Gauss, a famous mathematician.

This example is to stress that Gauss did not invent a mathematical fact. Instead, he discovered a different relationship between fixed numbers that cannot be changed. Therefore, the knowledge he shared with that relationship can now be applied to other similar scenarios, and nothing can be done to change the fact/relationship he discovered.

Continuing with the imagination exercise, Nash looks at the process of getting into a business where you are a consumer and a seller at the same time. An excellent example of this is a grocery store because everyone consumes groceries, and everyone around you is a potential customer.

When you begin studying the grocery business, you find the things necessary to succeed in this field, including a good location, high-quality merchandise, attentive staff, fully stocked inventory, etc. All of this will cost a lot of money.

Next, Nelson asks you to imagine if you were a male, married with children, and your wife bought groceries at your store, would she take groceries from the front or back? Many admit that the wife would want to go out the back door instead. However, this type of behavior is theft and can encourage more theft amongst employees and customers.

Many believe that they can do whatever they want with their business. However, the ones that pay for this theft are the customers getting their merchandise from the front door, and your business will need to sell more products to make up the deficit. The more you make, the more the IRS will take from you; this is another reason people would want to go out the back door instead.

If there is a situation where the profits from the grocery sales are not subject to income taxes, one of the incentives to go out the back door is taken away. The only reason left is the human instinct to use the back door. However, you and your family (plus some others) are captive customers in this scenario. If you charge wholesale prices, you are not creating more proceeds for retirement income. Charging the retail price on the can of peas helps you buy more cans of peas to sell to other customers. If you continue to do this for an extended period, it will create a profit. This will also create more value and income when selling the business down the line.

This chapter focuses on illustrating the problem with the current banking situation. To do this, Nash looks at an example of a 29-year-old young man making $28,5000 per year after taxes and what he does with the after-tax income.

In this example, the young man is spending 20 per cent of that income on transportation, 30 per cent on housing, and 45 per cent on living expenses (clothes, groceries, etc.). This means that only five per cent is disposable income. However, for this example, he allocates ten per cent to disposable income and 40 per cent to living expenses. The problem that Nash notes about these percentages is that banking organizations finance the costs.

This hypothetical person is offered a car financing package of $10,550 for 48 months with an interest rate of 8.5 per cent with payments of $260.04 per month. If this individual trades the care at 30 months instead of 28, 21 per cent of every payment would be interest. If he goes 48 months before trading, the interest will still be 20 per cent.

This same line of thinking can be applied to housing and living expenses. Most times, people end up paying large amounts of interest. Therefore, a portion of the disposable income paid is in interest. For this example, he says he puts that number at 34.5 cents. This would mean that assuming he is trying to save per cent of his disposable income, there is a 3.45 to 1 rate of interest paid out compared to savings.

You are in Birmingham, AL, with an airplane that can fly 100 miles per hour, and you are flying to Chicago. However, there is a headwind of 345 miles per hour. If the air mass is above you, there is no headwind, so that the plane will be going at 100 miles per hour. If you decide that this speed is good enough, you will remain at this speed. However, if you wait for the air mass to move, you will have a tailwind of 345 miles per hour on top of the 100 miles per hour. The plane would then be going at a ground speed of 445 miles per hour.

In this scenario, Nash states that most people in America would be flying with a 345 miles per hour headwind. However, if you have 345 miles per hour tailwind instead, those people have twice the wind than you would. Most in this situation would try to make the airplane go 105 miles per hour. It is better to spend their energy instead of controlling the flying environment. You cannot control the environment when flying, but you can do this in the banking world by controlling how banking relates to you.

3a8082e126