Have you heard about Nelson Nash, Infinite Banking, and Becoming Your Own Banker ... and want to learn more?  Or maybe you’re already using Infinite Banking but would like to be able to explain it better to your spouse, parents, children, business partner, or friends.

https://www.youtube.com/watch?v=ZoKCkrLgSMs

Today, we're unpacking the fundamentals of the Infinite Banking Concept and discussing what Infinite Banking ISN'T.

Table of contentsInfinite Banking is NOT: MagicInfinite Banking IS: A Long-Term Habit, Skill, and SystemThe Importance of Long-Term ThinkingInfinite Banking is NOT: A Get Rich Quick SchemeHow Should You Split Your Premium?Can You Pay Premiums with Cash Value?Book A Strategy Call

Infinite Banking is NOT: Magic

Sometimes, what gets lost in translation when talking about IBC is HOW it works. While it is a powerful tool when structured properly, it is definitely not magic. Unfortunately, the way some people talk about IBC can make it seem that way, which is a disservice to how well it works from a logical and contractual standpoint. 

Life insurance is a contract. Whole life insurance, in particular, tends to be a very beneficial contract. Since it’s permanent insurance, it offers a lot of living benefits. The loan provision, for example, is one such benefit. However, the loan provision is valuable because of the financial principles you can apply, NOT because you’re getting “free money,” nor even necessarily “tax-free” money.

In reality, the loan provision works like any other loan. It just has the added advantage of flexibility, because it’s 100% collateralized by your cash value. Every other seemingly “magic” or “too good to be true” feature of life insurance has a similar explanation. It’s a product that is highly efficient and works well, but it has checks and balances like any other financial product. 

[6:50] “This is what Nelson [Nash] knew: that human conditions get in the way… If you don’t have good money habits to begin with… you’re not going to be a good saver either. And that is what the Infinite Banking system is. It’s a place to store or save money. It’s not an investment.”

Infinite Banking IS: A Long-Term Habit, Skill, and System

In reality, Infinite Banking is a long-term strategy to employ by way of whole life insurance. To put that in different terms, whole life insurance is a savings vehicle. Infinite Banking is the strategy for saving and using your money. 

The reason IBC works so well is that it rewards good habits. The first habit is one of saving: by paying premiums, you increase your equity in your insurance policy. This equity is called cash value. 

The next good habit is paying down your debt. When you leverage your policy to make a purchase, you benefit by making regular loan payments. You free up capital to use, and you can even apply some of that loan payment as PUAs that increase your cash value. All the while, you continue earning interest and dividends because you’re using a system that puts you in control.

Your whole life insurance policy is the place you put your cash until you have somewhere to deploy it. It’s a system that makes your savings more efficient, but you have to have those good habits already.  That way, you can access and use your capital. 

The Importance of Long-Term Thinking

The tether that ties the entire system together is long-term thinking. To truly reap the benefits of an IBC policy, you have to set your sites on the long game. That means considering how your actions today can affect your future self in 30 to 40 years or more. Saving, paying loans, and creating a wealth system can all have positive impacts. Not doing those things can leave major holes in your personal economy. And more importantly, if you don’t adopt long-term thinking in your use of an IBC policy, you may struggle to see the results you want.

The policy you have can only work as well as you are able to manage it.