Which Aspect of IBC Appeals to You?

Infinite Banking is both behavioral and conceptual. We frequently see that some have a hard time initially grasping the behavioral side, but once you understand the conceptual benefits, it becomes much easier. In other words, once you understand the problem, you'll know what to do.

Conceptually, Infinite Banking provides a far superior method of performing three critical wealth creation functions: saving, financing, and investing. While policyholders benefit from all three, we generally find that it's one of these three aspects that initially appeals to our clients. Therefore, we're going to break these down, which may help you understand the behavioral importance of getting started with Infinite Banking.

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Saving

As opposed to the 1960s when savings rates hovered around 10-12%, the national savings rate today is near record lows. Americans are now saving less than 3% of their disposable income. There are plenty of reasons why, but it generally boils down to the ill effects of our government's adherence to Keynesian Economics and our fiat money.

Households generally know that in order to spend, they must either save first or finance purchases and hope that future income is sufficient to pay off debt. The same works for the U.S. economy. Those that prescribe Keynesian Economics foolishly believe that spending drives economic growth. Unsurprisingly, their goal is to punish savers to drive consumption (note: GDP is defined as "growth" & ~70% of GDP is consumption). They do this by pushing interest rates (return on saving) as low as necessary, and once Americans run out of money to spend, the government encourages more and more debt. As a result, banks pay less on your savings and charge you more to finance.

With sound money (pre-1971), there were limitations on our spending. However, now that we have fiat money, economists have found a way to spend more without increasing taxes. Spending is now paid for via money printing, which is inflationary (hidden taxation). As a result, the cost of buying things continues to increase, but the real return on your savings is negative.

Saving still drives household and economic growth, but few know of safe and efficient ways to protect capital. This is where Infinite Banking comes in. Aside from death benefit protection and many other unique features, the chassis of Infinite Banking (whole life insurance) includes key components of sound money, which allows policyholders to efficiently save in today's fiat world.

Financing

Those who cannot afford to save before making purchases are losing out on thousands, if not millions, of dollars in interest paid out to third parties. Many simply look at the rate of interest but fail to account for the VOLUME of interest paid out over time. As an example, let's say a buyer takes on a $30,000, 72-month auto loan at 7.5%. While 7.5% isn't quite as attractive as 3% rates a few years ago, it doesn't sound that awful on the surface. However, over those 72 months, the buyer will have made 72 $518.70 monthly payments, amounting to $37,346.64. By not saving first, the buyer paid $7,346.64 in interest, or ~25% more for the vehicle.

On the other hand, Infinite Banking allows policyholders to borrow AGAINST their cash value collateral. Therefore, while policy loans may still cost borrowers 5%, for example, your cash value asset is still growing (i.e., at 4%). With a traditional amortized 5%, 72-month $30,000 loan, you would have paid $4,786.65 in interest, but your $30,000 cash value compounding at 4% would be worth almost $37,959.57 after the 72 months. Therefore, not only does this save on third-party interest, but it proves Nelson Nash's point that you finance everything you buy. By just paying cash, the borrower would have missed out on the ~$8,000 in interest growth on the asset.

Investing

Some incorrectly view Infinite Banking as an investment. While this is not true, Infinite Banking can still be used as a vehicle to enhance your investment operation. As we just mentioned, the true power of Infinite Banking lies in growing and compounding your capital. Some are less risk averse and just prefer to generate a positive real return on savings. Others focus on saving interest costs. However, those who look to generate outsized returns on capital may choose to invest. The reality is that these opportunities that fit within your core competency don't always exist.

"The trick is, when there is nothing to do, do nothing." - Warren Buffett

Infinite Banking serves as a growing warehouse for our wealth, in which we can access and leverage our asset at any time to capitalize on investment opportunities. When returns are realized (investments are liquidated or we collect cash flows), we now have a place to store our wealth until the next opportunity arises. For instance, real estate investors are frequent users of Infinite Banking, in which they borrow against their cash values to purchase properties as either a fix-and-flip or as a long-term rental, thereby enhancing return on capital.

Dollar-cost-averaging in assets like the S&P 500 can yield strong returns over time if the market repeats recent history, but history also shows us that buying assets at too high valuations yields poor returns. Using Infinite Banking to round out our investment operation allows us to remain patient, ready to deploy capital at the most attractive opportunities, while still getting paid to wait.

Putting it All Together

We frequently see less risk averse clients and those with a need to protect capital and manage risk attracted to the structure and savings benefits of Infinite Banking. Additionally, business owners and households who buy equipment or longer term assets like having the ability to control and leverage cash flow using Infinite Banking's unique financing functionality. Lastly, entrepreneurs, investors, and business owners appreciate the opportunity to increase returns on capital by combining Infinite Banking with their investment operation.

Our traditional financial system doesn't provide many opportunities for business owners, entrepreneurs, investors, or households to take control of and effectively manage wealth. By using Infinite Banking, policyholders can more efficiently save, finance, and invest capital. Which aspect appeals most to you?

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