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The Golden Rule Thumbnail

The Golden Rule


In Becoming Your Own Banker, Nelson writes about the “Golden Rule.” This is the third out of five human problems that Nelson Discusses in his book. The Golden Rule states “Those who have the gold make the rules.”

I don’t believe Nelson coined this term, and while my research was not 100% conclusive, I think it first appeared in a comic strip called the Wizard of ID where it was written “Whoever has the gold makes the rules.” Our focus for this blog will be why this rule matters!

Savings habits of Americans.

Over the past 25 years the household savings rate in the United States has been above 10% 2 times, that happened in 2012 and most recently in 2020. Over the seven years between those years it was nearly exclusively between 6-8%. The 17 years prior to 2012, it crossed above 8% one time.

Saving money is almost a non-existent concept to the vast majority of the population.

What is the problem with this?

You are dependent on 3rd party capital to finance nearly everything. When opportunity presents itself you either have no access to capital, or can’t even see it (the opportunity), because your bank account doesn’t even have the next month’s rent in it yet. If you do see an opportunity, you still have to acquire the capital, which can be quite time consuming and generally labor intensive for you. Nelson pointed this fact out in Becoming Your Own Banker, and I would refer you to page 68 for a refresher.

If you understand banking, you would save capital in a place you control.

I love when Nelson writes “Most people know there is a play going on out in the world-but they don’t understand it. Worse than that, they can’t get the characters in the play straight,” which he played off a somewhat similar quote from William Shakespeare. Here, Nelson is directly referring to the fact that we forgo the opportunity to perform the banking function in our life. If you have money you give control to financial advisors and banks who profit from YOUR money, and they make a fine living doing this.

My question to you is, why aren’t you the one profiting instead of them?

If you don’t have money, well obviously you haven’t beaten Parkinson’s Law and need to spend some serious time thinking about the situation you’re putting yourself in.

You should also be cognizant of whether you are saving or investing.

What is the difference?

When you save money, there is no chance of loss, i.e. no risk. Investing money presents the opportunity for gain, but the risk of loss comes with that. Investing is not the same as saving, and it does require saving to invest, but not investing to save. Here is a brief example.

Investing in your 401K at work required saving. Yes, I said investing in your 401K, it has the risk of loss, and if you don’t believe me ask someone who had a 401K through the Great Recession of 2008. Now to invest in your 401K you had to save money out of your paycheck, but saving money out of your paycheck did not require you to invest in your 401K. There are other options than 401K’s and other qualified plans, you just have to educate yourself to make an informed decision of what will help you achieve your personal financial goals.

Remember the Golden Rule, “Those who have the gold make the rules.”

When you apply for a loan at the bank is there not a lot of paperwork?

They tell you how much you can borrow, what it will cost, how long you can have the money and how much collateral it will require. That sounds like making the rules to me.

When you go to the bank, do you ever notice the banks have the biggest, nicest buildings, and there may be 7-10 different banks in a small town of less than 5,000 people (I’m thinking of my own example in a town near me)?

Why is this?

It is because the banks control the cashflow. They perform the banking function in your life and because of this they reap the profits.

We can begin to take control of our finances though. We just have to start by remembering what Nelson said, “Everyone should be in two businesses-the one in which you make your living and the other should be the banking business that finances whatever you do for a living.”

Let’s begin to move toward your solution to mastering the Golden Rule now.

When you practice the Infinite Banking Concept you are creating a pool of money that you possess total control of. To master the Golden Rule, you not only need capital, but high liquidity of that capital, and the IBC gives you that control. The IBC is a form of saving because there is no risk of loss. You can contribute up to 25% of your gross income toward an IBC policy, and potentially even more depending on your situation. If you practiced this amount of saving you would not only see opportunity, but you would have opportunities coming to you!

You should realize that the IBC is not actually a banking business, but it allows you to act with the same behavior as a bank. This is what the word banking refers to in Infinite Banking Concept. I can think of 4 critical functions a bank must have for operation:

  • Depositing
  • Withdrawing
  • Borrowing
  • Repaying

An IBC policy has all these functions.

  • Paying premium (depositing)
  • Partial surrender (withdrawing)
  • Policy loan (borrowing)
  • Repaying your policy loan (repaying)

The question that should be going through your mind now is why would practicing the IBC with a mutual insurance company be better than just going to your local bank?

The answer is you are an owner. Instead of the bank sharing all the profits it made off you with its stockholders, you receive the profits of the mutual insurance company in the form of a dividend. That’s a good deal for you!

Give me an answer as to why you wouldn’t want to share in the profits of a business you’re an owner of if you already NEED a business that accomplishes the same thing in your life, which doesn’t share profits?

Are you on your way to mastering the Golden Rule?

The Infinite Banking Concept is not a get rich quick scheme or something magical. It has very basic principles that allow it to work, and over time you reap the rewards of performing the banking function in your life.

To get started you will need to capitalize the system which requires discipline. Ideally you will keep adding capital as well.

Do you plan to keep making money 10 years, 20 years and even 30 years from now (I realize this depends on your age)?

Won’t you need a place to store this money?

If you have a system that allows you to perform all the aspects of what a bank does that you are an owner in, wouldn’t you choose to use it before the local bank?

Wouldn’t you want to be rewarded for performing the banking function in your life?

Is it true that if you don’t perform the banking function in your life someone else will (think about what you’re doing today, where does your paycheck go)?

If you said yes to these questions, I think you’re well on your way to mastering the Golden Rule. You just have to take action; learn what the IBC is, and implement the solution. For help in learning and implementing the IBC you can Book Your IBC Discovery Call with Cash Value Solutions.