The Money Advantage® Podcast | Infinite Banking Concept & Family Banking

By Bruce Wehner & Rachel Marshall | Family Banking GuidesBusiness Entrepreneurship Education Self-Improvement Investing

The Money Advantage® Podcast | Infinite Banking Concept & Family Banking episodes

June 12, 2023 Becoming Your Own Banker, Part 6: The Power of Whole Life Insurance Dividends
In this episode, we dive deep into Nelson Nash's book Becoming Your Own Banker, and the power of whole life insurance dividends. Many people are unaware of how they contribute to the growth of cash value and overall efficiency. We also explore the importance of thinking long-term when it comes to Infinite Banking and building a legacy through whole life insurance policies. By understanding the mechanics of whole life insurance dividends and focusing on long-term growth, we can create a powerful financial tool to pass on to future generations.
https://www.youtube.com/watch?v=nKfnZU7mkSg
This process may take time, but it is essential to build a solid financial foundation and leaving a lasting legacy. Join us as we uncover the secrets of the infinite banking concept and how it can help you take control of your finances and create lasting effects on your life.
The Benefits of Infinite BankingThe Power of Whole Life Insurance DividendsOver-Engineering Life Insurance PoliciesAre You Getting Overcharged?Is Life Insurance Safe? Book A Strategy Call
The Benefits of Infinite Banking
People have a need for financing over their lifetime. Access to capital can help you partake in opportunities, grow your wealth, and also enjoy your wealth. Life insurance can also help you protect your family from unexpected death. Infinite Banking combines these two needs into an asset that is ultra-efficient and fulfills both.
When you pay premiums, you are contributing to an ever-increasing (and never-decreasing) supply of money. This is money that you can use whenever you want to, for whatever you want to. So you can be confident that the money you pay each month or year is doing something meaningful, in more ways than one. You’re not throwing money into the void.
The powerful thing about Infinite Banking is that you are in control of your capital. Many people believe that if they really need money, they can simply go to a bank. However, it can be incredibly difficult to secure financing from the bank, unless you can prove yourself or provide collateral. It’s not a reliable system, because the bank can easily deny you funds. By creating your own pool of capital, you can ensure that you always have money available to you when you need or want it.
The Power of Whole Life Insurance Dividends
When you have whole life insurance, your policy is always growing. This growth is a combination of three things: your premiums, guaranteed interest, and non-guaranteed dividends. These dividends may be non-guaranteed, however, they’re more likely than not. When you work with a mutual company, you get to partake in all company profits via dividends. Since they can’t guarantee profit, they can’t guarantee dividends, however, most major mutual companies have been profitable for over a hundred years.
Because you can count on these things, your policy becomes more efficient over time. The uninterrupted compounding growth, plus using your policy's dividends to purchase more PUAs, make your policy better at growing each subsequent year. This is by design, and you can think of it as a reward for holding up your end of the insurance contract, which is to pay premiums and loans on time.
[24:56] “Nelson is saying if you fulfill your end of the contract… then the company is going to be more profitable than they’re projecting on the illustration with the dividends.”
Over-Engineering Life Insurance Policies
In Becoming Your Own Banker, Nelson shares that life insurance policies are “over-engineered.” He compares this to the fuel light in your car. When that light comes on, telling you that you need to put gas in the tank, it creates an immediate need. However, cars are actually over-engineered to have some space in the tank even when the fuel light comes on. The light creates urgency, yet the reality is that you should have plenty of gas to get to a gas station, and then some.
Actuaries, who do all the extensive mortality calculations, use this concept when determining life insurance rates. They do extensive research about longevity and health and determine how much it would cost to provide insurance to a 30-year-old over a 50-year-old. Or, they might determine what it would cost to insure two people of the same age and health, except one smokes and the other doesn’t.
This determines the premium you pay. The over-engineering comes in because the actuaries add a little room for error.
[17:35] “That over-engineering is additional profit to the company, and that additional profit is just in case something would happen.”
This additional profit works in your favor, because the company can invest this. Then, it contributes to the company’s profits. Those profits translate to your dividends. So this whole system works in favor of you and the company so that everyone benefits. That is the power of whole life insurance dividends.
Are You Getting Overcharged?
Because of this over-engineering, people who don’t understand life insurance insist that dividends are simply a return of overcharged premiums. This is an oversimplification. This can be a part of it, because of the way the actuaries over-engineer costs. However, this is not all that dividends are.
Dividends represent all the various ways that companies profit. This includes investments, interest from loans, and yes, overpayment on premiums. However, life insurance companies don't allow anything to go to waste, and they put any overpayment to work to make more profits for policyholders.
This over-engineering is good and allows insurance companies to be more profitable than they even predict. It’s not unusual for dividends to actually be more than projected.
Is Life Insurance Safe?
What we’ve noticed is that many people separate their need for finance from their need for protection. They’ve got “spending” money (or investing money), and they’ve got emergency money. Infinite Banking suggests that you can combine the two and become far more efficient that way. By solving your need for finance with an asset that is safe and certain, you also create protection.
[38:25] “When we’re talking about life insurance, there are guarantees—there are literally guarantees. You have a guaranteed death benefit, a guaranteed amount the life insurance company will pay out to your heirs should you pass away. You have a guaranteed cash value amount, which is literally a floor—the minimum amount of equity that you are able to access in the policy at any given time. It is a place to store cash for that purpose because you can depend on that guaranteed cash value. There’s also guaranteed premium.”
This guaranteed premium is a HUGE benefit because it means you’re locked in for life. The minimum premium you pay now will be the minimum you pay forever. The life insurance company cannot change your premium on you, nor can they change your benefits. Everything is bound contractually.
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
1 hr
June 05, 2023 Can Infinite Banking Overcome Inflation?
If inflation is on your mind, you’re not alone. With three years of high inflation figures and your pocketbook saying it’s even higher every time you buy groceries, how will your money keep up? Can Infinite Banking overcome inflation and provide a long-term solution?
https://www.youtube.com/watch?v=-6wZtPKGOHI
Today, we discuss a listener question about how Infinite Banking can be used to combat inflation. We also discuss the five tenants of infinite banking, such as 'don't do business with banks,' how it can help in an inflationary environment, and how life insurance policies are interest rate driven. Finally, we explore stewardship and generational wealth, discussing the concept of 'human life value' and how clever insurance strategies can be leveraged to benefit future generations.
How Does Inflation Happen?Can Infinite Banking Overcome Inflation?Inflation vs. Death BenefitOvercoming Inflation in a Tax-Free EnvironmentPremium Improves with InflationFamily Banking - The Next GenerationsBook A Strategy Call
How Does Inflation Happen?
[1:47] “Inflation is simply the increase of the money supply. And people argue about this all the time, but Milton Freeman said that only the government can increase the money supply, so the government is solely responsible for inflation.”
When the money supply increases too quickly, there’s an oversaturation of money compared to goods on the market. This raises demand for goods, while supply is low, and prices increase to account for that. When prices for certain products or goods increase, this tends to affect the prices of other correlated goods.
Can Infinite Banking Overcome Inflation?
We recently had a very thoughtful question from a podcast listener that we wanted to address. It’s such a powerful question that we think you’ll benefit from reading it in his own words, as follows:
“Thanks for the content. I'm of the belief that inflation is not transitory (I'm 44 yrs old and I remember when a candy bar was $.50). I am a student of the Austrian School of Economics and only think that inflation will be exponentially worse as the U.S. monetary policy continues to stay the same (increasing the money supply) as that is their only option unless politicians want to be responsible which we know they won't be.
A method that has worked in the inflationary environment since 1971 when gold was dropped completely is to borrow money and pay it back in cheaper dollars (think 30-year mortgage on a house).
I love the thought of IBC in normal monetary times but I just can't wrap my head around how a death benefit (30 years from now (ideally)) will be worth much as prices continue to increase. And I think I would rather borrow from the bank and pay them back with the cheap dollars instead of doing that disservice to myself.....
I just think that the dollar will only devalue more and more and I'm not understanding how IBC has any defense against that. Everything else is great about it in my mind.”
As you can see, he’s put a lot of thought into this topic, and we’re excited to unpack it with you now.
Inflation vs. Death Benefit
There are several reasons that your whole life insurance Death Benefit is still a powerful tool even with inflation. First and foremost, the whole life insurance dividend is interest-driven. This means that as the Federal interest rate rises and falls, so does the dividend. This also affects the guaranteed interest portion, too. This means that you tend to do better than in a savings account alone. Add this to the compounding effect of your cash value, and that slow and steady growth is going to be powerful.
Remember, too, that with PUAs as your Cash Value grows, so does your Death Benefit. The two are intrinsically linked since the Cash Value represents the equity of your Death Benefit. You could start with a DB of $1 million and end up with several million by the time you pass, or your policy endows.
Remember, too, that the whole time you have your insurance, the banking function is all within your control, not the bank’s control. This can give you access to financing and opportunities you wouldn’t get from the bank. And when you die, your family receives a payout that they otherwise wouldn’t receive. If that date occurred within a few years of you buying insurance, that would certainly outpace inflation.
[19:05] “When you have a properly structured whole life insurance policy that is performing as efficiently as possible for you, one of the keys is to have your dividends purchase paid-up insurance. Which means that because of that feature, you have a continually rising Death Benefit.”
Overcoming Inflation in a Tax-Free Environment
You must also consider how taxes erode wealth. If all of your capital is tied up in tax-deferred assets, you may appear to have more money. Yet with every withdrawal, a hefty tax bill comes due. This can make your account dwindle much faster than anticipated. So what seems to beat inflation, doesn’t.
Contrast that with whole life insurance, which can be accessed tax-free while you’re living, AND passed the Death Benefit to heirs tax-free. The Net wealth transfer to your heirs could potentially be much more significant, even if it’s technically less because there are no taxes due.
Premium Improves with Inflation
Our listener also mentioned something interesting in his question about paying for assets with “cheaper” money. For example, when you buy a home, the actual dollar cost of your mortgage stays the same for 30 years. Yet as money inflates, the value of those dollars decreases. So by the end of your loan, you’re paying with “cheaper” dollars.
This is true, and it also applies to everything—inflation doesn’t discriminate. Your insurance premium is also a fixed payment, which means that over time, it’s going to feel like less and less to you. However, the value of your asset is always increasing with interest and dividends.
Mortgages and whole life insurance premiums are actually two of the best assets for this principle because they have fixed-level payments over a long period of your life. There are few other things that behave this way.
Family Banking - The Next Generations
And, at the end of it, when you create this banking system with assets you control, you leave a legacy to your family at the end of the day. If you seek all your financing from the bank and save elsewhere, you lose that ability to transfer wealth. And that wealth can be used to seed the next generation’s policies.
[32:52] “So if you could purchase life insurance on yourself, have that leveraged up Death Benefit—so it’s more than you paid in—pay out to your kids, they use that [Death Benefit] to purchase as much life insurance as they can get. Then their Death Benefit that pays out to your now grandchildren is going to be higher than what they paid in premium. And if you just continue to use that capital to seed future generations' policies, there’s a tremendous advantage because the starting capital is going to be way higher each time.”
This gives your kids, your grandkids, and many generations in the future a pool of capital to access while they’re still young. You’re helping your family out into the future, and that’s thinking long-term.
[35:40] “Let me give a shout out to one of my buddies, Tony Fine. He used to always say money doesn’t cause character flaws, money exposes character flaws.”
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
43 min
May 29, 2023 Becoming Your Own Banker, Part 5: The Cost of Capital
https://www.youtube.com/watch?v=OWptb6M-_RM
In this fifth installment of the "Becoming Your Own Banker" series, uncover the hidden cost of capital that can make or break your financial future. Find out the benefits of having control over your debt. Get insider information on the cost of capital and become your own banker.
The Cost of Capital: You’re Always Paying InterestInfinite Banking is Like a BusinessBuild a Sustainable PolicyWhere Do Policy Costs Go?The Cost of Capital and Company ResponsibilityThe Cost of Policy LoansBook A Strategy Call
The Cost of Capital: You’re Always Paying Interest
Whether you realize it or not, there’s always an interest cost. As Nelson Nash says, you either pay it, or you pass it up. What this means is that any time you spend money, even if you’re not financing it at a cost, you’re losing the ability to earn interest on it, too. So, at the end of the day, there is always a cost of capital to your financial decisions.
Another way of thinking about this is opportunity cost: What is the cost of making one decision over another? And this has a bigger impact on your life than you think.
The Infinite Banking Concept can help with this because it reduces the cost of capital. When you leverage your policy with a policy loan, you can finance something while still earning compounding interest on the full capacity of your Cash Value. This is a powerful shift that allows you to optimize your financial decisions.
Infinite Banking is Like a Business
[08:35] “I think we mentioned this before; Infinite Banking isn’t something you just try… It does work the way you think it works if you think about it as building your own business. You don’t just open your doors the very first day and all of a sudden people just come into your business and you’re profitable right away. You have all this cost of startup. It’s the same way with the Infinite Banking Concept.”
If you want to start an IBC policy, you’ve got to give it a fair shot. It takes some time to build up your cash value and hit that “break-even” point. Part of the reason your policy isn’t immediately “profitable” is because the insurance company front-loads the policy costs in the first decade or so. They’re taking a risk on insuring you, and if you die tomorrow, they have to pay whatever they agreed to without receiving a single additional cent. To mitigate some of this risk, the ratio of premium that goes to policy costs vs. equity is skewed. As that risk falls off, those costs become less and less.
Build a Sustainable Policy
Does this mean that IBC isn’t good? Of course not. It should actually comfort you, as a partial owner, that the insurance companies are running their business sustainably. You want your insurance company to be successful so that your policy can be successful. And that takes time.
Life insurance is a contract. When you agree to pay premiums, the insurance company agrees to take care of everything else. If it’s in the contract, you can count on it. And on top of that, your contract cannot change. If there’s anything you can trust, it’s your life insurance contract. More importantly, you are the owner of the contract, not the insurance company. This positions you as the most important player.
No two cars perform the same, even if every single thing about them is the same. We can also say this about whole life insurance—even if all variables at the start of the policy are the same as another, the choices you make will change it. All you can do is be a good steward of your policy–-make interest payments on loans (or greater), maximize your PUAs whenever possible, and stay in good standing with your premiums. These decisions will optimize your “mileage” on your policy.
Where Do Policy Costs Go?
We touched on some of the internal costs of life insurance, so let’s dive a bit deeper. What are the costs that you’re paying, and where does it go? Just like your IBC policy is like a business, the life insurance company is actually a business. This means that they have employees to pay and overhead costs to cover. Some of the policy costs are strictly for this.
Some costs also contribute to death claims. Insurance companies use premiums to contribute to and replenish their reserves for death claims. They’re able to come up with a cost based on actuarial math that works on a 120-year lifespan for the 10 million or more lives they insure. The math is based on life expectancy data, compared to your current health and habits. It's incredibly complex and often proprietary, but highly accurate. The actuaries can then determine how they should charge you personally to make sure their business model continues to be profitable long-term. And remember, this benefits ALL policyholders.
The Cost of Capital and Company Responsibility
The company also has a responsibility to the policyholders to be profitable. They’ve got to employ some of their funds to produce any and all promised benefits. There’s a dollar amount of guaranteed interest they must pay to policyholders each year, but they also want to be profitable in general.
This doesn’t mean they’re investing all over the place, though. Part of the insurance company’s responsibility is to invest conservatively. They can’t be in the business of losing money, so they invest in bonds and mortgages, amongst other conservative investments. This is a major reason why dividends, although not guaranteed, are often paid to policyholders each year.
[23:49] “I’ve said this dozens of times on the show. There’s not that much difference between each mutual company that has good financial ratings. There just isn’t. You’re not going to get a lot better performance out of one company than another… 75 to 85 percent of every company’s portfolio is simply going to contain government and corporate bonds.”
The Cost of Policy Loans
While policy loans allow you to mitigate some of the cost of capital, you must still pay interest to your life insurance company. There are a few misunderstandings about the interest you pay on a policy loan. The first is that because you pay interest, you’re negating any growth you have in your cash value. This isn’t necessarily true because of the compounding effect of your policy growth.
The more volume you have in your policy, the more impact the interest and dividends have on your cash value growth. Your policy just gets better and better over time, for the cost of using a policy loan. Remember: you’ll never escape the cost of capital, however, some strategies are more efficient than others. Another advantage is that when you pay interest to your life insurance company, you’re contributing to the company’s profits, which eventually come back to you in dividends. Would you rather bolster your insurance company or the banks?
This, however, leads to the second misconception about policy loans. Many people mistakenly believe that when you pay interest, you’re paying it to yourself. This comes from inconsistent and inaccurate language about policy loans. When you take a loan, you’re borrowing money from the insurance company. That means that you have to make payments to the insurance company. And while there are many reasons this is to your advantage, this means paying yourself interest is not one of them. You simply get to benefit later from any profits, and the interest you pay might contribute to those profits.
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
1 hr 1 min
May 22, 2023 Simplify and Scale Your Business with Strategy Sprints®, with Simon Severino
Simon Severino, a strategy advisor for F500 Boards from NY to Beijing, helps companies scale by discovering how to run their company more efficiently. From digital agencies to service and SaaS businesses, Simon's work results in sales that soar. He is the CEO and Founder of consulting agency Strategy Sprints, and Creator of the Strategy Sprints® Method that doubles revenue in 90 days by getting owners out of the weeds. His insights are sure to help you scale your business and stay at the forefront of your industry, whatever that may be.
https://www.youtube.com/watch?v=mR35UW3Jwz4
Tune in as we interview Simon Severino to discuss how to double your revenue, so you can create more freedom, impact, and revenue every month.
The Beginning of Strategy Sprints®Scale Your Business with the 9 Stages of a SaleFalling in Love with the Problem, Not the SolutionConnect with Simon SeverinoAbout Simon SeverinoBook A Strategy Call
The Beginning of Strategy Sprints®
Simon began his career in market strategy, and what inspired him most were the entrepreneurs and business owners that were truly passionate about that work. These are the people who, if Simon identified an area for improvement, would happily stay at work longer to solve the problem.
Still, Simon saw that there was room for improvement, so he put his head down for a year to create a methodology that would make sales much more efficient.
[6:19] “We focus on the B2B sales problems. So the length of the sales cycle, the complexity of the sales cycle. So that’s why our method is really for the high ticket B2B offers, that is. Consulting agencies, marketing agencies, PR agencies, recruiting agencies, financial advisors, attorneys–everybody who has a high ticket offer and needs just a few big deals, a few good clients per quarter.”
Scale Your Business with the 9 Stages of a Sale
In Simon’s Strategy Sprint® Method, there are 9 stages of a sale that you have to go through with your client to complete a transaction. These stages are:
Visualization
Pains
Importance
COI
Budget
Concerns
Decision
Start Date
SOW
The first step, visualization, is what Simon describes as “closing the loop” between what you say and what’s landing with the client. This could mean providing a visual while you’re speaking to a client so you can bridge that communication gap. Doing this builds rapport with clients and helps them to trust you. The second step is about finding out your client’s pain points. What is frustrating them? Only then can you identify how to help them.
[10:39] “It’s so interesting how so many people want to go straight to a product or a solution, when if you don’t have a problem you’re trying to solve, then there’s no solution that matches.”
The next steps are to figure out how important this is to your client in the grand scheme of things. Then, determine the “Cost of Inaction” or COI. What will happen if your client doesn’t do anything? (We would call this opportunity cost.) After that, determine your client’s budget, address any concerns they have, and have them make a decision. You may have multiple decision-makers, so this can take time and coordination. Finally, you determine your start date and create a statement of work (i.e. a contract).
[13:25] “The number one enemy of sales is the status quo–’I can just do nothing.’”
Falling in Love with the Problem, Not the Solution
[28:55] “Whatever your offer is, if you fall in love with the solution, there will be a much better solution soon. Technical solutions always, always innovate.”
In other words, by falling in love with solutions, you run the risk of being slow to adapt to new technology and advancements. By falling in love with the “problem,” you ensure that you’re always seeking new and even better solutions. This helps you to stay flexible and innovative. As a business owner, you want to be seeking innovation. Innovation helps you to scale your business and stay relevant.
We often use Kodak as an example of a company that was in love with their solution, rather than the problem. They fought hard for film cameras. Yet other camera and media companies have outlasted Kodak because they innovated their mission. They saw photos as a way to preserve memories, so going digital and innovating in that space wasn’t a problem for them. Now those companies are still around and innovating, while Kodak is just a memory.
Connect with Simon Severino
Youtube: Simon Severino
Access free resources or book a call with Simon’s team at strategysprints.com
Get Simon’s book, Strategy Sprints
About Simon Severino
Simon Severino helps business owners in SaaS and services discover how to run their company more efficiently, which results in sales that soar. He is CEO of Strategy Sprints and Host of the top 2.5% podcast called "Strategy Sprints. " This CEO-to-CEO experience dives deep into practices that help you, the CEO of a small to medium business, scale your business and create more freedom, impact, and wealth every month.
Simon created the Strategy Sprints® Method that doubles revenue in 90 days by getting owners out of the weeds. Simon is the CEO and founder of Strategy Sprints, which is a global team of certified Strategy Sprints® Coaches that offers a customized strategy to help clients gain market share and work in weekly sprints, which results in faster execution. He is also a Forbes Business Council Member, a contributor to Entrepreneur Magazine, a TEDx Speaker, a member of SVBS Silicon Valley Blockchain Society, and teaches strategy and growth in select business schools, including as a member of Duke Corporate Education.
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
47 min
May 15, 2023 Becoming Your Own Banker, Part 4: Laws of IBC
If you're going to "Become Your Own Banker" and use the Infinite Banking Concept, you need to understand the laws of IBC. In other words, you need to know how to capitalize a bank and how to manage a sustainable bank.
https://www.youtube.com/watch?v=FWgW2T8_WD8
Nelson Nash uncovers the fundamental laws of IBC that must be upheld for any bank, including your own banking system, to last. Join us as we continue the conversation through Nelson Nash's book, "Becoming Your Own Banker," today.
What is Banking?The History of BankingThe Laws of IBC: Building Up Your Banking SystemPersonal Responsibility and the Laws of IBCExpanding Your Banking FunctionFamily Banking and the Laws of IBCBook A Strategy Call
What is Banking?
[3:12] “Really it’s a process of saving and lending. That’s what banks do. They take in people’s deposits and then they lend out for interest.”
This is a simplified overview of banking, though, at its core, that's all banking really is. And if you want to control the function of banking for yourself, that's what it's all about—saving and lending. In your own system, though, you raise your own capital to use, and the insurance company lends it to you, rather than the bank. This is advantageous, though, because you don't have to appeal to banks to get funds. Insurance companies are happy to lend you money if you've got the collateral in your Cash Value.
By learning how to control your own banking function, you create a lot more freedom in your financial life, and reduce your dependence on bank institutions.
The History of Banking
Banks haven’t always existed, but the earliest concept of banking came to be when the currency began to include gold, silver, and other precious metals. Because these metals were scarce and precious, they were highly desired, and robbery was common. Banks offered a solution: put the resources in one place that was heavily guarded, and it would be more secure than your home.
After some time, early bankers noticed that people were depositing, but they weren’t really withdrawing. So they wondered if maybe they could use some of that money to make more money, rather than letting it sit idle. So they started offering loans to people seeking a little capital.
Then, at some point, banking stagnated again, because not everyone was depositing their gold and silver. So they added an incentive: an interest rate on their savings.
Over time, this became what we know today as our banking system, and this function is the same thing that you can do in your personal banking system. Your life insurance policy is not an actual bank, but you can make it function like the above by financing opportunities through your own pool of capital.
The Laws of IBC: Building Up Your Banking System
If you’re building a banking system, what do you need? Capital. So in the early stages, you want to really focus on accumulating capital. Eventually, when you feel like your pool of capital is hardy enough, you can start capitalizing your cash. When you do this, you can create cash-flowing investments that make paying your policy loan and your premiums simple.
Over time, what you’ll be able to do is accelerate this process. For example, once you pay off a policy loan with the cash flow from a property, you can redirect that cash flow to your premiums or even to funding a new policy. Meanwhile, the capital you’ve freed up inside of your policy can be used to buy another property, and you can repeat the process.
This takes some research and know-how, but you can create a whole system of wealth by capitalizing on your banking system. While there’s time for accumulation-only phases, don’t be afraid to actually use your policy when a good opportunity arises.
So let’s recap:
Open a policy.
Continue to make deposits by paying premiums.
Don’t be afraid to capitalize.
Be an honest banker and pay back your loans.
Personal Responsibility and the Laws of IBC
[36:45] “This really comes down to, again, personal responsibility, because if you are going to run an Infinite Banking system, you need to be in a position of making wise investment decisions.”
Your banking foundation depends on your ability to make wise choices with the capital you accumulate. After all, according to Nelson's laws of IBC, you want to be paying back any loans you take so that you can reuse your capital. If you make speculative investments that don’t pan out, and you aren’t doing your due diligence, it’s going to get difficult to pay back those policy loans.
While you technically don’t have to pay those loans, you really want to in order to have a successful banking system. When you don’t repay your policy loans, you severely limit your access to capital and reduce the usefulness of your policy for times when you really need it.
Expanding Your Banking Function
Another possibility for your personal banking system is providing loans to other people. You could open opportunities to your family members, for example, or people you know that you’ve personally vetted.
If you don’t have capital needs at the moment, and you have excess, exploring this opportunity can be fruitful. Of course, you want to ensure that you do your due diligence and create contracts when you lend. But by exploring this avenue, you can provide tremendous value to other people in your life while also earning a percentage. This is when the banking function really feels like a bank.
Family Banking and the Laws of IBC
We mentioned offering loans to family members, and this is a really exciting prospect with family banking. Depending on how you structure your family, you can actually teach your children about the laws of IBC, or the Infinite Banking Concept early on. This may look like conversations about money, financing, and responsibility while your kids are young. When they’re a bit older, maybe you give them the opportunity to apply for funding by creating a pitch and a plan for repayment.
A family banking system may even enable your kids or grandkids to attend college or start a business.
You can also expand this to include your extended family. Maybe your parents need to finance a home repair and can get a better deal through you than their HELOC. By being in a position of liquidity, you can create these powerful opportunities for your loved ones, too.
[46:53] “I think that this is just a profound exercise in imagination here. Because if you realize that by capitalizing your own banking system, and by gaining capital by having deposits (by paying your premiums), that is the key that allows your ability to then lend out capital. And if you have unlimited ability to lend out capital, then why wouldn’t you want to begin by capitalizing and putting deposits in by paying your premiums?”
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
1 hr 5 min
May 08, 2023 2023 Nelson Nash Think Tank Recap: Infinite Banking
Every year, IBC practitioners and advisors convene at the Nelson Nash Think Tank. Here, some of the best advisors in the Infinite Banking space remember the core truths of Infinite Banking, improve their understanding and ability to serve you, and "sharpen iron."
https://www.youtube.com/watch?v=-lRc64JVi0E
Bruce attended the 2023 event earlier this year, and today, we'll share the highlights with you.
So if you wished you could have attended and would like to be in the know about what matters most for you as an Infinite Banker ... tune in now!
What is the Nelson Nash Think Tank?Preserving the Purity of Infinite Banking with the Nelson Nash Think TankOvercoming the Human Condition in FinancesThe Conversations and Speakers of Think Tank 2023Book A Strategy Call
What is the Nelson Nash Think Tank?
The Think Tank is an annual event hosted by the Nelson Nash Institute to talk about IBC and connect with like minds. Prior to 2009, which is when Bruce became involved with Think Tank, the event was your typical Mastermind type of event. People in the insurance industry with an interest in IBC would get together and share best practices for running a business.
In 2013, the IBC practitioners program came to be, and the event reached its “next level,” as Bruce recalls. The practitioners’ program is a way for advisors who are interested in the Infinite Banking Concept to become certified. This ensures that advisors who use IBC strategies (and advertise such) can be held to a higher standard. That way, clients who want IBC can work with a highly qualified IBC professional.
[6:21] “[Bruce] has attended what I would call probably the most elite… conglomeration of minds that are coming together and discussing Infinite Banking.”
Preserving the Purity of Infinite Banking with the Nelson Nash Think Tank
The IBC Practitioner program was designed by Nelson to ensure that advisors who were sharing IBC with their clients were upholding it to the highest standard. Otherwise, what Nelson noticed was that people would say they promoted it, only to have incorrect ideas about how IBC worked, which was damaging the perception of IBC.
In order to be a certified IBC practitioner, you have to go through a rigorous process that ensures you have a good understanding of the concept. So if you want to implement IBC specifically, you can actually work with a certified practitioner to be confident you’re getting what you want.
The process starts with an interview, where the NNI makes sure that applicants have the right mindset for IBC. This means you understand Austrian economics, you want to solve people’s need for capital, you understand that you finance everything you buy, and you see the benefits of life insurance on a large scale.
The next step to becoming a practitioner is to take a proctored exam. Once you pass, you then go through a mentorship program where you work with a current, certified IBC practitioner. Finally, you get to become a fully certified member, which culminates in receiving your certificate at the Think Tank. As you can see, it’s an incredibly thorough process.
[15:43] “This, hopefully, enables people to find a person that was either trained directly by Nelson like I was, or by people that were trained by Nelson, to actually uphold the integrity of the actual Infinite Banking Concept, and not some of the things that are marketed as the Infinite Banking concept.”
Overcoming the Human Condition in Finances
[24:15] “Nelson actually is helping people overcome the human condition of how they handle money.”
As human beings, there is a huge emotional aspect of finance that is hard to overcome. We’re only human, and we all have to face these deep-seated emotions we have about our money. What Nelson Nash has done with IBC and his institute is to help people overcome these emotions and find a sense of control and freedom.
A good IBC practitioner will help you see the long-term effects of your money. For example, when you fund a policy, your advisor shouldn’t be pressuring you into a policy you’re unsure that you can afford. You don’t have to start with the biggest policy possible, and you shouldn’t if you don’t know how to fund it. You’ve got to think about Year 1 premiums, and every year after that too.
It’s also critical that you have good habits in place before you start your IBC policy. It’s human to spend what you have, but it’s not conducive to your banking system. Being able to make deposits and think critically about capitalizing your money is important. And starting a policy without those good habits isn’t necessarily going to help you get there. It takes discipline, and a good IBC practitioner can tell you that, and help you get there.
The ultimate goal of your advisor, whoever you choose, should be someone who helps you be a good steward of your money, and overcome that human condition.
The Conversations and Speakers of Think Tank 2023
There were many powerful discussions and speakers at the 2023 event, and all of it was really to contribute to the greater understanding of IBC within the community. The speakers helped life insurance agents reaffirm what they already knew, and get clearer on how to solve problems that are arising in the industry and the economy at large.
Some of the speaker topics covered over the event include:
[35:48] The power of holistic tax planning
[43:17] Benefits of mutual insurance companies
[45:39] The power of generational wealth and legacy
[56:00] How can the IBC community make the industry better
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
1 hr 4 min
May 01, 2023 Becoming Your Own Banker, Part 3: Your Need for Financing
Your need for financing is greater than your need for saving. Most people try to make more money or get a better return on their investments to get further ahead. But these strategies fail because they focus on the wrong problem. In Becoming Your Own Banker, Nelson Nash identifies the most prevalent problem with most Americans' financial lives is that they are spending 34.5 cents of every dollar on interest, turning the wheels of the banking industry, yet hardly saving even 10 cents of every dollar.
https://www.youtube.com/watch?v=9GFF2wRjiAA
The answer isn't to stop spending but to spend differently. To learn how to control your financial environment, and turn a financial drag into financial fuel... tune in now!
The Need for FinancingBecoming Your Own Banker: Start with Good HabitsFinancing and Interest CostThe Cost of FinancingHow to Solve Your Need for FinancingBook A Strategy Call
The Need for Financing
[2:30] “What Nelson is saying is that the need for finance is much greater than the need for savings. And that sounds weird, but what he’s saying is if you really calculate how much money goes out the door for financing things, then you’re going to see that that’s a lot greater amount than how much people actually put away for savings. So if you can eliminate the need for finance, then that money can obviously be shifted into savings.”
Nelson believed that if everyone got control of their own need for financing, it would also be great for the economy. It’s also just a great way to live your life. When you control the need for financing, you have much more safety, certainty, and security. And that’s priceless.
Becoming Your Own Banker: Start with Good Habits
The thing about Infinite Banking is that you’ve got to go into it with good money habits already. You can’t start a policy with the intention of financing your life if you have bad money habits. Or, you can, but you won’t have the results you want. If you're becoming your own banker, that requires a certain level of personal and financial responsibility. You've got to start with good habits.
For example, let’s imagine you have out-of-control spending habits and have racked up some credit card debt. If you buy a policy, you’re now responsible for those credit card payments and your insurance premium. If you then take a policy loan to buy something new, You’re going to have an additional payment. This can quickly get out of hand if you don’t already have good habits of paying down debt and living within your means.
IBC isn’t going to magically cure your financial woes. It’s a system and a concept that has to be built on a firm foundation. This doesn’t mean you can’t have an Infinite Banking policy if you have credit card debt. However, you might need to be honest with yourself about where you’re at and where you need to be in order for IBC to be right for you. (And there are still other insurance options for you in the meantime.)
[08:10] “I tell people all the time [that] Nelson’s book is more about the human condition and the mindset than it is about the numbers. And yet everybody tries to make it about the numbers.”
Financing and Interest Cost
What we often see is that the catalyst for someone to transform their money habits is to be so fed up with paying interest that they’ll do whatever it takes to stop. Whether that’s credit card interest, or interest to the banks, everyone has a threshold. And while interest is always going to be a factor of money, there are ways to reduce your interest cost and increase your interest earned.
The problem is that many people are often focused on the wrong thing. For example, you may want to pay off your highest interest rate card first, but you also have to consider volume: You may have a high interest rate on a card with a low balance, and a high balance on a card with a moderate interest rate. At that point, you might save more actual dollars by paying down a high balance first.
This, hopefully, helps you put things into perspective. When you finance anything, it’s a good idea to ask yourself how much of your income is going toward the cost of financing the purchase you’re making? It’s more if it takes you time to pay down a credit card. You’ll likely find you’re spending way more than you think just for the privilege of buying something, not even the actual purchase itself.
The Cost of Financing
[22:10] “If every dollar you make, you’re spending 34 and a half cents for finance costs, and you’re saving only 10 percent of your income, that’s only 10 cents of that dollar.”
If you eliminate some of these financing costs, you can really gain momentum with your savings. And you can eliminate those costs by delaying gratification (even temporarily) until you can build up your own personal banking system with cash value life insurance.
[32:18] “People try to solve [the financing problem] by one of two things that are both not very effective. One: just make more money and it all solves every problem. [This] doesn’t work because you still carry those same money habits with you… And secondly, just trying to get a better rate of return on the small amount that you’re saving does not overcome this finance cost. [Nelson] says the most profitable thing you can do is learn to control the environment. If you can control the environment that you’re flying your plane in, or you can control the environment that you’re doing your financing in… then you’re in a position of having the most profit.”
How to Solve Your Need for Financing
[36:26] “It’s not that there’s no hope. What you need to recognize is that there’s no tactic or strategy or… strategic method of manipulating what you’re doing well enough that will overcome that. Really, what is needed is a complete mindset change about money in general.”
You can get yourself out of the hole you’re in, if you’re in one. It’s not hopeless. Nor is it magic. It simply takes a serious desire to change, and a willingness to put in the work. It can take time to correct your habits and get to a good place. But once you do, and you can take control of your banking function, you open up a world of possibilities and opportunities for yourself, your family, and the generations to follow.
If you don't know where to start, try reading Becoming Your Own Banker, and see what happens.
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
42 min
April 24, 2023 Is There a Banking Crisis? Silicon Valley Bank 2023
If you’ve paid any attention to the news recently, then you’ve probably heard about what’s happening with the Silicon Valley Bank. The news isn't good, and it's probably raising some questions. We’re here to unpack what you might be thinking about. Like, are we entering a banking crisis, and what does this mean for the greater economy? How does Infinite Banking compare?
https://www.youtube.com/watch?v=kqOWPOdD8eY
In this podcast, we'll examine the factors that led to the Silicon Valley Bank collapse, and how Infinite Banking can be a solution. Join us for a discussion of the state of banking, and how you can best prepare to weather any economic storm.
Is This Normal?The Timeline of the Silicon Valley BankHow Do Banks Get Behind? Reserve Requirements for Banks and Insurance CompaniesInsurance Product vs. CashCould Life Insurance Companies Be Safer Than Banks? Bank-Owned Life InsuranceResources for Bank Failure InformationIs There a Banking Crisis?Book A Strategy Call
Is This Normal?
We want to start this conversation by sharing that boom and bust cycles are a natural part of any market when the free marketplace is working. This means there will be inevitable highs and lows for everything. Those who are savvy can learn to time the markets by paying attention, although no one does this perfectly 100 percent of the time.
What sets people apart is the assets they can control with certainty. And one of the many positives of Infinite Banking is that life insurance is not correlated to the stock market. So despite what’s happening in the economy, your cash value is safe and certain. This is the kind of protection that is not even guaranteed when all of your money is in the bank. It’s critical to build your foundation on something strong and within your control.
The Timeline of the Silicon Valley Bank
To get a good understanding of what’s happening with the Silicon Valley Bank, it’s worth examining the timeline. At the time of this crash, Silicon Valley Bank was the 16th largest bank in the country and had been just 40 years old. The crash occurred because of large withdrawal attempts and is the largest crash since 2008.
On January 1st of this year, the bank had $91 billion of held fixed income securities or held maturities. They also had $200 billion in assets, mostly Venture Capital and tech assets.
Out of the $91 billion, the bank’s unrealized loss was going to $15 billion if people pulled out of their maturities due to a need for increased liquidity. They knew they’d be in trouble for the reserve requirements.
On March 8th, the bank announced that they needed to shore up their balance sheet and raise $2 billion in capital. They proposed a sale of their bond portfolio at a $1.8 billion loss, but there were no interested buyers.
On March 9th, customers began to withdraw due to impending trouble, and the bank’s stock fell 60%.
On March 10th, the Silicon Valley Bank failed to meet its reserve requirements, so the FDIC stepped in and seized control.
The fear, it seems, stems from the reality that this was a huge bank that seemed like it could never fail. No one expected it to, so when it did, people got extremely nervous about their banks and their ability to meet their needs as well.
The problem is that when people are fearful and lose faith in the banks all at once; it creates a vicious cycle. Because the more people that pull their money out at once, the harder it is for banks to meet their reserve requirements and other obligations.
As Bruce points out in the show, this is also the first time such a large bank failure has occurred in the age of social media, and so the information is more readily accessible. While it’s good to be informed, this can also lead to a lot of fear because things spread like wildfire on social media.
How Do Banks Get Behind?
[8:50] “What happens here is we’ve been going from a very low interest rate, almost no interest rate, environment, to a relatively—what we think is high but is more normal—interest rate environment.”
What happened with the Silicon Valley Bank, specifically, had to do with rising interest rates. Once the interest rates rose, many people decided they needed liquidity and pulled money out of securities, or they pulled money out of the banks completely. This means that banks would have to sell securities at a loss if depositors decide they want their money back early.
Another reason banks can get behind is if they invest heavily in startups and risky endeavors, and aren’t doing their due diligence. Silicon Valley Bank had a large portion of assets tied up in Venture Capital and startup investments. And while many VC investors can be incredibly successful, it’s by thoroughly vetting those investments and their viability. Of course, we can’t speak to SVB’s vetting process, and even the best due diligence can sometimes have negative results.
That being said, if investments don’t pan out, this can also cause banks to lose their reserves if they get hit over and over again.
Reserve Requirements for Banks and Insurance Companies
Generally, banks are only required to hold about 10% of reserves against their checking and savings deposits. This means that if they have $100,000 worth of deposits into checking and savings accounts, they’re only legally required to have $10,000 of that money in reserves at any given point. The rest they can use to loan money, invest, etc.
While this is fine for day-to-day operations, the trouble occurs when many people want to withdraw large sums all at once. This can happen due to a recession, or because people are anticipating a bank failure. The latter, however, tends to be the thing that speeds bank failure along. It becomes a race to see who can get their money back first, and completely.
Insurance Product vs. Cash
[36:51] “Contrast this to life insurance companies. Every time premiums come in, they’re actually taking that premium and putting it into investments. But unlike banks, they actually don’t have runs on them like a bank would have them, because these deposits or premium payments are actually for a product. So you’re buying life insurance.”
You can access cash value, of course, but insurance companies don’t run into issues of too much coming out at once because they have full reserves. They have to, in order to pay death claims at any time. (Insurance companies have a provision that allows them to delay funds up to 6 months if too much is flowing out, but this is incredibly rare.)
The reserve requirement for insurance companies is about 8-12 percent of anticipated claims for the year. And yet, most insurance companies go above and beyond this requirement.
[37:46] “That reserve requirement with the top 10 mutual companies is about 7 percent higher than what they believe their mortality expenses and other expenses are going to be for any one given year.”
Some insurance companies even have 14% above the reserve requirement for their expenses. Insurance companies have to meet all of their financial obligations because they’re providing a product, so it’s critical that they keep their reserves well-stocked.
Could Life Insurance Companies Be Safer Than Banks?
[41:05] “I want to pose that we’re not saying that this is the case, but could life insurance companies be safer than banks? Here’s something that’s really interesting: bank failure is more common than life insurance company insolvency.”
While we all require banking to some degree—checking accounts are necessary for debit cards and spending money, and even paying premiums—this does compel you to consider where YOUR cash reserves are safest. In addition to your personal monthly cash flow, it’s probably a good idea to have some money saved with the bank, for quick access without much fuss.
However, if you want to stockpile large sums of capital for your future use, there are many benefits to controlling your own banking function. In addition to having very safe and secure assets until you’re ready for them, you also get to grow your cash value at a rate that’s typically better than a bank savings account. It’s also a good long-term product that can last your family for generations with the right family mindset. And of course, there’s the option to leverage your cash value for opportunities without sacrificing any compounding ability.
These are all compelling reasons to have an Infinite Banking policy as your financial foundation, as a means of supporting any banking you do with an actual Bank.
Bank-Owned Life Insurance
In a conversation about banks and life insurance, it’s worth mentioning that most banks own life insurance. This is insurance that the banks purchase on their key employees. They’re allowed to do this because they have an insurable interest in their key employees—if they were to die, it would be a loss to the company, and it could be costly to train a replacement.
Bank-owned life insurance is tier-one capital for banks because it’s safe and it’s liquid. Many banks that have BOLI have billions of dollars worth of life insurance.
[53:10] “What I think is fascinating is that the banking system uses permanent life insurance with the cash value for the purpose of fulfilling their tier one capital asset reserve requirements. Meaning that it’s a safe and stable asset that they rely on using because they know that there are guarantees built into it. And I think that really says something to have one industry using another industry’s product to make themselves more stable.”
Resources for Bank Failure Information
Want to know more about what banks have failed, which banks are in good standing, and other important information? Check out this list of resources for your personal research:
List of bank failures
List of insurance company insolvencies
Companies that rate financial institutions:
A.M. Best
Fitch Ratings
...
1 hr 4 min
April 17, 2023 Becoming Your Own Banker, Part 2: Don’t Steal the Peas
Infinite Banking is an exercise in imagination. And in an act of imagination, Nelson Nash introduced a powerful example of how to capitalize on a whole life insurance policy and be an honest banker. He often referred to this concept as "don't steal the peas,” which he explains in his book, Becoming Your Own Banker.
https://www.youtube.com/watch?v=baPGoTOZ_H4
Today, we’re going back to this book, the “source” of IBC, and unpacking this idea of “don’t steal the peas.” That means examining the principles that make the Infinite Banking Concept work, and how understanding the fundamentals allows you to change your financial life. If you’re ready to jump into the conversation, learn from the original text, and gain understanding and wisdom… tune in now.
Table of contentsAn Exercise in ImaginationBeing a Good Business OwnerDon’t Steal the PeasWhat Does "Don't Steal the Peas" Have to Do With Life Insurance?Book A Strategy Call
An Exercise in Imagination
Nelson Nash said it often: Infinite Banking is an exercise in imagination. So what does this mean, exactly? The way Nelson saw it, if you understand how to think about problems, the solutions will become clear. Imagination is simply a method of thinking about things—it’s how we re-envision what we experience. That can be used to see problems in a new light, one that yields new results.
[9:57] “Imagination is all about a thought process, and getting your mindset in a position to be able to see the capability and the possibility of what you can do in your financial life. And to recognize strategies and tools that will help you do that even better.”
Imagination is how humans achieve innovation. Our ability to see problems in new ways is the reason we have advancements in math, science, technology, and any other field conceivable. We can say the same for finance. And Nelson Nash’s idea of “don’t steal the peas” is a perfect act of imagination that explains the foundation of IBC and why it works so well.
Being a Good Business Owner
Let’s imagine, together, that you are a business owner with a thriving grocery store. As a human being, you also have a need for groceries. So you are both owner and customer. That is assuming you’re not shopping with your competitor.
Keep in mind that as the owner of this store, you need a lot of capital to get started. You want a prime location, a pleasant building for your patrons to be in, and furniture to display your wares. Then, of course, you have the costs of keeping up the store like paying employees, buying stock, maintaining the building, and other overhead costs.
Since you own the store, you might think it’s no big deal to grab something off the shelves every once in a while. A can of peas, so to speak. You can simply write it off as a loss, right? The truth, though, is that it’s not a wash. You’re actually reducing your future value.
The thing about a business is that eventually, you want to sell it. Maybe not this generation, but it’s a possibility. And when you do, that buyer is going to look at your Profit and Loss statements. To get as much value as possible in the sale, you want to have proof of a profitable business. Yet if you spent your entire life taking groceries from the back room, you were actually stealing from your future self. In fact, you’re even reducing your present cash flow by taking what you want instead of paying for it.
Don’t let your business eat the cost. Instead, be an "honest grocer" by buying what you want. This will flow back to you now in your income, and later if you sell the business.
Don’t Steal the Peas
If you're having trouble imagining how detrimental it can be to steal the peas, let's keep this thought going. Let’s talk about the peas, specifically. Let’s say a can of peas comes to your business through the “back door” when you buy it. And every can of peas that comes in through the back door costs you about 57 cents. Every can you sell goes for 60 cents, and leaves through the front door with the customer who buys it.
There’s only a 3-cent margin on that sale, which means that you’re relying on volume to make a profit on the peas alone. To recoup the cost of a single can of peas, you’d have to sell 20 cans. If you grab a can of peas from the back room, that’s a significant number of sales required to break even on what you took.
You’re entitled to do it, it’s your store after all. However, if you do this every single time you grocery shop, you’re creating more and more work for your store to keep up with. That’s not good for the profitability of your store if it takes 20 cans of peas to cover the loss of one can. On a large scale, this is devastating your profit margin.
Not to mention, you’re modeling to your employees that it’s okay to steal the peas.
[41:58] “More businesses fail for this reason than any other thing.”
What Does "Don't Steal the Peas" Have to Do With Life Insurance?
So now that we’ve entertained this exercise in imagination, let’s apply it to whole life insurance and IBC. Your infinite banking policy is the business, in this example. You want it to be successful by paying your premiums and PUAs so that you have ample cash value. Your goal as the policy owner is to store as much capital as possible. However, you also have a need to access this capital at various points over your life. (Hopefully, you see the correlation, here.)
If you decide to access your capital with a policy loan sometime, you can do that and never actually pay the loan back. Your cash value acts as collateral to the loan in the “worst case” scenario, which means you could be off the hook if you choose. However, by not doing so, you’re negatively impacting the amount of capital you can now access, as well as your future death benefit.
On the other hand, by choosing to be an honest banker and repay your loans, you replenish your pool of capital and maximize your death benefit. It’s all about integrity and whether you want to help your future self or not.
So, will you steal the peas, or will you be the honest grocer?
Book A Strategy Call
Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help! Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.
58 min
April 10, 2023 Non-Food Franchising, with Jon Ostenson
Are you looking for good investment opportunities to put your capital to work? Have you considered franchising as an opportunity for business ownership without starting a company from scratch?
Today, we're talking with Jon Ostenson, a top 1% Franchise Consultant, former Inc. 500 Franchise President and Multi-Brand Franchisee, and author of "Non-Food Franchising." So if you want to learn about the non-food franchising business model, the pros and cons, and why this might be a good fit if you're already in real estate...tune in now!
https://www.youtube.com/watch?v=WEMh7BSNPl0
Finding Your Non-Food NicheIs Franchising Right for You?Franchise Ownership StylesHow to Work with Jon OstensonAbout Jon OstensonBook A Strategy Call
Finding Your Non-Food Niche
Owning a business franchise has been a time-tested way to get into business ownership with a tried-and-true business model. Many entrepreneurs like it for the relatively low barrier to entry. You don’t have to pioneer a new idea, you just have to invest in an existing one. It’s also a way to bring much-needed business to your community.
While many people think of restaurant chains when they think of franchises, there’s so much more to franchising than food. And that’s where Jon Ostenson comes in. He has ample experience in the franchising-industry and sees non-food franchises as a particularly shrewd investment because they’re often necessities. Pet supply stores, auto shops, and pharmacies are just a few examples of essential businesses with franchising potential.
If you think you want to break into franchising, Jon’s advice is to think about the gaps in your community and what people need—not just what they want. Because if a recession hits, businesses that are “non-negotiable” are going to weather the storm.
[7:59] “What I go back to is, what are you personally going to continue to spend on regardless of the economy? It’s the things you care about—your kids, your pets, your aging parents, your home, and your health. And so businesses that operate in these types of industries—again they’re more needs-based in a lot of cases, maybe a little less discretionary—those are the ones that are getting a lot of attention.”
Is Franchising Right for You?
One benefit of franchising that Jon shares is that it’s a way to increase your Net Worth through income rather than appreciation. If you’ve got the capital to invest and you want something that’s already got a blueprint, franchising can be great for you. Especially once your location is up and running, you don’t have to have constant involvement.
In other words, franchising can be great for the investor who’s “been there, done that,” and is ready to take a step back from full-time business operations.
On the other hand, if you’re wanting a business that you can leave your mark on, franchising might not be the way to start. Despite owning your particular location, you’ve got to operate your business within company parameters. You might have a say in some factors of the business, but you won’t be able to dictate anything that messes with the franchise's “brand.” After all, one of the major benefits of franchising is that you get to capitalize on brand recognition immediately. You’ve got a built-in customer base, and those customers have certain expectations of the brand.
If you really want to have a hand in the business down to the last detail, you might find more fulfillment in starting your own business. That way, you have complete creative control over the operations.
Franchise Ownership Styles
While owning a franchise business can be a bit more hands-off than starting your own, it’s not a completely passive endeavor. There’s absolutely some time trade-off when you own any business, including an existing one. However, this obligation can be greater or lesser depending on your own personal management style. Let’s go over the three ownership styles Jon has personally witnessed.
First is the owner-operator. This is usually the person who wants to start a business but doesn’t need full creative control. However, they still want to have some control, so they are involved in the management of the store, at least initially. Most owner-operators have a goal of putting the store under someone else’s management eventually, so they can buy more franchises.
Then there’s the semi-passive or semi-absentee owner. Jon estimated about two-thirds of his clients opt for this ownership style. This is where, from the beginning, the franchise owner puts strong management in place to run all day-to-day operations. There’s still some level of owner involvement, but it’s not constant.
Finally, there is a truly passive investing model. Though Jon only knows of four businesses/brands that truly offer the option to operate under this model. This passive model is when the franchisor will run the business for you. You fund the business, but the franchisor operates it as though it’s a corporate location.
[20:30] “I’d love to see more brands offer that, but only if they’ve got the infrastructure in place to be able to support that.”
How to Work with Jon Ostenson
If you’re interested in franchising, Jon Ostenson can help. His company, FranBridge Consulting, helps entrepreneurs and investors connect with non-food franchising opportunities. Before you connect, Jon advises doing some research and understanding the market as much as you can so you have an idea of what you could do.
If you’re ready to start the process and connect with FranBridge to see if franchising is right for you, you can request a no-obligation consultation. And when you sign up for the FranBridge newsletter, you can get a free digital copy of Jon’s book, Non-Food Franchising.
About Jon Ostenson
Jon is a top 1% national franchise broker, investor, author, and international speaker specializing in the area he has coined “Non-Food Franchising.” Having served as the President of an Inc. 500 franchise system and now as a multi-brand franchisee himself, Jon is uniquely positioned to educate others on franchising and franchise selection.
Jon serves as the CEO of FranBridge Consulting and has helped thousands of entrepreneurs and investors explore business ownership and investment opportunities.
Jon is the author of the book "Non-Food Franchising" and is a frequent contributor and thought leader for publications on the topic of franchising and franchise investments. Prior to FranBridge, Jon was the President of ShelfGenie, a national franchise system with 200+ locations.
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The Money Advantage® Podcast helps successful, legacy-minded families turn wealth into stewardship, unity, and multigenerational impact through the Infinite Banking Concept, Family Banking, legacy…