“We cannot solve our problems with the same thinking we used when we created them.” –Albert Einstein
What is the Problem?
Every person faces unique financial challenges. The biggest and most shared challenge is the need for finance (capital), but yet we are taught from day one to give up control of our capital to other third parties.
Who are we giving control to?
- Financial advisors
- Banks that don’t share profits
- We lock up money in qualified plans, forfeiting access unless we pay penalties, taking all the investment risk ourselves, and paying all the fees, taxes and other expenses.
- We are over leveraged and paying large volumes of interest to third parties (vehicles, homes, student loans, business equipment…)
When you realize that you are your number one asset, regardless if you are a business owner or employee, it becomes clear that you need to take control over your finances. You will also realize that no one cares about your money or your success more than you.
Before you hear about the solution…
You must understand the unseen problem you’re facing today.
Nelson Nash did a study of the “All American Family” in his book Becoming Your Own Banker. His study revealed that after taxes, 34.5 cents out of every disposable dollar paid out goes to interest.
He was including financed items like automobiles, houses, clothes, groceries, contributions to charity, boat payments, casualty insurance on automobiles and vacations.
You may think some of these items sound crazy, but do you pay your auto insurance a month at a time?
My own auto insurance is approximately 12% higher if paid monthly instead of semiannually.
What about all the things you charge on your credit card?
Do you pay the balance off in full every month?
Meanwhile we save less than 10% of what we make every year.
This is the savings rate in America since 1960. According to the graph, we have only crossed the 10% savings rate twice (for very short periods of time), since December of 1992. This leads to a perpetual problem of needing capital from third parties.
Which bar do you think you should be focusing on? Take control of the interest paid out to third parties in your life and you won’t worry about the “rate of return” on the 8% of money you save.
Just to be clear, the problem is the volume of interest leaving your personal economy, not the interest rate.
Let me try to further illustrate my point.
Look at a $200,000 30-year home mortgage with an interest rate of 3.5% paid off in 30 years. (This is the mortgage itself only. I did not add in closing costs, insurance or a down payment.)
- Total principal paid at the end of 30 years $200,000
- Total interest paid at the end of 30 years $123,311.97
- The interest is over 38% of the volume of money paid on the mortgage, if you pay it off and don’t refinance.
- After 10 years you’ve paid $107,770.80 toward the mortgage but $62,624.44 went to interest. That is over 58% by volume! If you move before paying off the mortgage, the 38% will be much bigger!!! You can also add in more closing costs which I didn’t even account for here.
Focusing on the massive amount of interest leaving your economy and going to someone else’s bottom line is where you should be focusing. Getting a 10% rate of return instead of 8% on the miniscule amount of money you’re saving will have a much smaller impact on your financial future.
For those of you who are thinking, “well that’s why I got a 15-year mortgage.” We’re still talking about over 22% by volume. The lack of saving money in a liquid place (paying high premiums into properly designed dividend paying whole life insurance issued by a mutual company) to control the banking function in our own lives is the problem.
Let’s see the solution…
What is the Infinite Banking Concept?
The IBC is a thought process of how to control the banking function in your life. Banking is a process, it’s not a building that they call a bank. To perform the banking function, you must be able to deposit, borrow, withdraw and repay money.
You should understand that banking goes on every day, and whoever is performing this function in your life is profiting quite well from doing it.
What about the whole life insurance you mentioned?
Dividend paying whole life insurance is the financial asset that we implement the IBC on. To control the banking function in your life you must build up a pool of capital which you have access to.
I can build this pool of capital anywhere though. Why dividend paying whole life insurance?
I agree, you can accumulate capital anywhere. You can put it in a savings account or CD, the stock market, a money market account or under your mattress. Dividend paying whole life insurance structured for high early cash value has the most desirable characteristics though if you want to perform the banking function in your life.
“Unfortunately, the industry has concentrated on the death benefit qualities of the contract and has neglected to adequately describe the financing capabilities that it presents for the policy owners.” –R. Nelson Nash
Here are some of the attributes of dividend paying whole life insurance.
- Competitive Rate of Return
- When I say Rate of Return, I’m directly referring to the VOLUME of dollars you’ll have access to after all expenses.
- Uninterrupted Compounding
- Every time you withdraw money from an account, you kill compound interest. Once a dollar is paid into this asset, it is FOREVER earning.
- An account where the value goes nowhere but up and can participate in dividends.
- Quick access to a high percentage of your money (principal and growth) without penalty.
- Tax benefits
- Tax free access would be a good thing considering it’s one of the largest destroyers of wealth (you’ll need proper structure and implementation to get this benefit). The others are lost opportunity cost, inflation and fees.
- Private system
- Creditor protection which varies state to state. No need to check your credit score!
- Flexibility on repayment
- With this asset you don’t have structured loan terms. You pay the loan back on your schedule and if you can’t make a payment 1 month that’s okay.
- Multiple jobs for one dollar
- One dollar working for you in multiple places at one time.
Your money must reside somewhere.
Regardless if you want to invest in stocks, real estate, start a business, increase cashflow efficiency, or save for retirement, you need to build a pool of money in order to take action.
Then the process of using your dividend paying whole life policy is much like going on vacation.
You leave your house of residence for 1 or 2 weeks taking with you what you need for the trip, enjoying your time away and then returning, bringing you and your belongings back to your house of residence.
The same concept applies with the IBC and dividend paying whole life insurance. You pay premiums into your policy and have access to the capital to use for investments. When the investment has run its course, you return the money made on the investment to the dividend paying whole life policy. (In retirement the money just doesn’t come back to the policy)
You are creating a system to control your need for finance.
I’ve always heard this is the worst place to put my money.
Financial talking heads don’t have a lot of good to say about whole life insurance.
That comes from a limited outlook on what the true problem is you’re facing and not knowing how to properly structure and implement whole life insurance.
At Cash Value Solutions we design policies to have cash value from day 1 which you can access quickly, free of penalty or restrictions for use. The policies the financial talking heads speak about could take 2 whole years or even longer before you have any cash value associated with the policy.
The final piece no one ever talks about is your massive need for finance in your life. Whether you are an investor, business owner, entrepreneur or as Nelson said an “All American Family,” you have a great need for finance in your life. Answer this question.
Did you think more about money or dying today?
The final question you need to ask yourself..
Are you in total control of your financial future or are you stuck in the unseen problem Americans face?
Albert Einstein is credited with saying “doing the same thing over and over again and expecting a different result is insanity.”
Ask yourself what you like about what you’re doing right now. If you can’t find anything, take action towards a more certain future and learn what the Infinite Banking Concept can do for you.