How the Infinite Banking System Works and Why We Love It!

You may have heard of something called, The Infinite Banking Concept (IBC or the Infinite Banking System), but if you’re like most people you have no idea what it is or how the Infinite Banking System works.  I’ve been teaching this system and helping people to implement it for years because it really works.

I absolutely believe it is the most powerful method available for small businesses and “not-uber-rich people” to grow, protect, and utilize money.

It can work for anyone, but it is even more effective for small business owners and real estate investors because they utilize so many loans.

This idea has also been popularized under different names like Bank On Yourself, Becoming Your Own Banker, the Perpetual Wealth Strategy, or as we call it “Cash Flow Banking”.  In the end, these are all based on the same powerful principles, so don’t let the different names confuse you.

Here’s how the Fundamentals of the Infinite Banking System Works and I’m going to keep this article conceptual and easy to understand, so please don’t get distracted by the details.

The main idea to the IBC is that you’ll build your own private banking system and treat your own money the way banks treat money. They’ve managed to have the biggest buildings in every downtown in the country, so it’s clear they know what they’re doing, right? You’re going to mimic their successful concepts.

Just like the banks, the primary advantage to the IBC is that once you’ve put a dollar into the system, it will earn for you for the rest of your life - even if you utilize it for purchases, investments, or retirement.  This unbroken growth ensures that you are always growing and compounding your wealth - no matter what happens.

Here’s how it works…

You will begin by saving money into a special type of “supercharged savings account” inside of a properly structured whole life insurance policy.  By using this type of account you’ll ensure a guaranteed rate of return, gain tax advantages, and protect your money simultaneously. (Protection varies state to state)

[NOTE: Some people believe that whole life insurance is a terrible place to put money. These people are correct IF you choose the wrong insurance company or if your agent doesn’t structure the policy correctly. You could say the same thing about nearly any financial vehicle if it is used improperly.

Life insurance is a tool, and just like any other tool it can be used correctly or incorrectly. So you need to work with an agent (or team) that understands how to properly implement this strategy. Most agents build policies to maximize their commissions and minimize your advantages, so please beware!

Structuring your plan effectively is not super difficult, but more than 90% of insurance agents and investment brokers don’t understand how to do it correctly, so you want to work with someone who specializes in Infinite Banking. Our firm, Big Life Financial, deeply understands this concept and can ensure that your plan is optimized to minimize fees and maximize your results correctly.

If you aren’t sure or want to see what the numbers look like, simply reach out to us here, and we’ll be happy to show you.]

Once the money goes into your life insurance it will begin to earn a guaranteed rate of return. At the time of this writing the companies we work with are guaranteeing a 4% rate of return which is 800-1000% higher than most bank accounts. That difference alone is huge over time.

I compare this life insurance account to a savings account because as your money builds up in the life insurance it is liquid – similar to a savings account - and can be accessed in 3-7 days. Most other accounts that pay a comparable interest rate are highly illiquid making it difficult to access your money.

Also, there is no waiting period or penalty for using the money, so it is readily accessible for whatever you might need. Being able to get to your money quickly and easily is VITAL to this strategy.

In addition to the guaranteed rate of return, you’ll also earn a dividend from the life insurance company.  We only work with dividend paying Mutual companies and they share their profits with policy holders each year.  These dividends aren’t guaranteed, but we choose to work with companies that have paid for the past 100+ years in a row, so I believe they are a very safe bet.

So if you got a 1% dividend, that would be added to your 4% guarantee and total 5%.  This will help your money to grow safely as you build it up.  Obviously, the more you save into the account, the faster it begins to grow.

Once you have enough money in the account, you can begin using it as your own banking system. For example, you’ll begin using this account to fund larger purchases where you might have gotten a loan in the past. So instead of getting a loan from the bank, you’ll get a loan from your own account.

Let’s use the example of buying a car to illustrate why you’d want to be your own banker for large purchases.

When you buy a car (or any large purchase), traditionally you have 2 choices:

1)     You can get a bank loan.

2)     You can pay cash.

OPTION #1: Bank Loan

If you chose to get a bank loan you will borrow the money from a lender and then pay the principle back plus interest. So, if you paid $40,000 for a car and financed it over 5 years, you’d end up paying $46,398.72. That’s $6,398.27 in interest to the bank.

You might think that means your cost for financing the car is $6,398.27, but in actuality it’s MUCH more.

What you don’t realize is that you’ve now robbed yourself of the ability to earn money with that $6,398 FOR THE REST OF YOUR LIFE.  In other words, you didn’t just lose $6,400 (rounded). You lost $6,400 PLUS it’s earning power.

If you are 30 and decided to retire at age 70, that $6,400 paid to the bank could have been worth $45,043 by retirement (if you got 5% annually).

So you gave up $45,000 in earnings by getting 1 bank loan to buy a single car at age 30. That’s probably a lot more than you realized.

Now, $45,000 isn’t a game changer all by itself, but most married couples buy a new car every 3 years (each gets 1 new car per 6 years).

That means that between age 25 and 65 (40 years) that is 13 cars between the 2 of you.  If we average the “total cost” of each car at $40,000, that’s a total of $520,000 in missed earnings.

In other words, you gave up $520,000 in potential income just because you got bank loans on your cars.

Keep in mind this doesn’t include paying for your house, education, vacations, or other large purchases. This is JUST YOUR CARS.

Suddenly paying cash seems like a better idea, doesn’t it?

OPTION #2: Pay Cash

What if you paid cash instead? Surely that would save you a bunch of money, right? Let’s see…

If you saved up the money to purchase your cars in a savings account it would take some time. In this case, let’s say it would take 5 years (which is how long it took to pay off the car when you got a loan).

While that money is sitting in a savings account it isn’t really earning anything (less then .5% at most banks in 2019), so you’re missing out on earning interest while your money is being built up.

To get to $40,000 in 5 years you’d be saving $666.67 per month and then buy the car once you had enough cash.

So what’s the cost to saving up your money in a savings account?

If that $666.67 per month had been earning 5% while it built up, it would have earned you $5,209.38 over those 5 years. However, it was in a bank earning nearly ZERO, so you’ve missed out on those possible earnings.

Over the same 40 years we discussed above, that $5,209 you missed would have been worth a total of $36,672.57. That is the opportunity cost of paying cash for a single car.

Once again, if you did that 13 times (for all of your cars) at an average of $30,000 per car, you would have missed out on $390,000 by age 70.  That’s more than the average person has saved for retirement!

It’s better than getting bank loans, but its still a big chunk of change.

Additionally, this is just the cost of buying cars. It doesn’t include any other large purchases, loans, or credit cards.

NOTE: In both of these cases, the math has been simplified to illustrate the unseen costs and make a point. Please don’t get caught up in the minute details that may have been missed.

So what should you do?

Never buy a car or house? I hope not… because life is made to be LIVED!

But you’re going to miss out on a LOT of potential earning no matter how you pay for it, right?

WRONG.

There is actually a 3rd option: The Infinite Banking System.

This is where the Infinite Banking Concept (Or Cash Flow Banking) comes in. It solves BOTH problems encountered by using bank loans and paying cash for large purchases.

In the simplest sense, the IBC helps you to recapture ALL your costs and earnings along the way and more!

Here’s how it works…

When you build up money inside of the insurance policy it immediately begins earning the 4% plus a dividend. (That’s where I got the 5% earnings rate used above). So you don’t miss out on earning interest while you are saving up for your car. Instead, you’re earning a consistent, tax advantaged return on your money as you save.

When it comes time to buy your car, you simply use the money in your life insurance (known as Cash Value*) to pay for the car. But you’re not done yet, and this part is IMPORTANT.

Your life insurance account has now become the “bank” for your purchase because those funds paid for the car. So you’ll treat your insurance policy just like you’d treat a bank.

So, you’re going to pay your life insurance back for the money PLUS INTEREST just like you’d do with the bank.  This payback captures the earnings you would have missed out on while your money is stuck in “equity” in the car. In other words, the cash you used to pay for the car will keep earning for you (in the form of interest paid on the loan) until you can get it back into the insurance cash value account.

As each payment is made to the insurance account, the money continues to earn the full 4% plus a dividend as it is waiting for the next purchase.

You get the best of both worlds!

So this system effectively captures BOTH the interest you missed while saving up your cash in a savings account AND the money you would have earned on the interest paid to the bank.  So ALL of that money goes back into your account and continues to earn (and compound on itself) for you!

Just imagine if all the money you’ve paid to banks, credit cards, student loans, etc. during your life had been going into an account with your name on it! And even better, what if all that money had been earning 4% plus a dividend the entire time! 

How much more money would you have by now? 

How much more would you have for retirement?

For most people using the Infinite Banking System is easily worth and additional 7 figures!

But there’s one more element that we haven’t even considered, and it’s probably the most important one of all!

If you had access to all that cash throughout your lifetime, how would it have impacted your life?

What if you had cash in 2009 when everything crashed? Would you have been able to NOT lose your house and all that equity to foreclosure?

Instead, could you have bought a bunch of rental real estate for pennies on the dollar? Then what could you have done with all that extra rental cash flow over the past decade?

Could you have started your own business or bought up a competitor’s location at a discount when they retired?

Would you have avoided all those sleepless nights and fights with your spouse worrying about money?

Would you have been able to spend more quality time with your loved ones because your finances were buttoned up? 

Do you see the massive difference this can make? Not just financially, but in your happiness and quality of life?

The possibilities are literally endless!

Here’s the reality…

When you have access to cash, opportunities will seek you out. When you don’t have cash, you’ll never know the opportunities that passed you by unseen. 

The beauty of this strategy is that your money gets to be saved into a place where it grows guaranteed, it’s liquid, and it’s protected.

(Oh yeah, and it also comes with massive tax advantages and a death benefit if something were to happen along the way. We don’t have time to cover those today, but both are HUGE!)

So if you’d like to know more, I’d highly suggest that you reach out to us right away. We can help you assess the best way to utilize this system in your own situation and how to get started right away.

Even if you think you are too old or your health isn’t ideal, we can show you how the infinite banking system works and how it can work for you!

* NOTE: When using cash value, we teach clients NOT to withdraw the money from cash value, but rather to take a loan against their cash value. This allows for them to pay it back and for the cash value to continue earning inside the account. Please talk to one of our advisors to understand this more in depth and to ensure you are working with an insurance company that has the products which allow this type of transaction to take place.

LIKE WHAT YOUR READING? THEN YOU’LL LOVE OUR VIDEOS ON YOUTUBE. YOU CAN WATCH HERE>>>