The Infinite Banking Concept
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Free Infinite Banking Primer
What is the Infinite Banking Concept?
The Infinite Banking Concept (IBC) can be quite confusing without a proper foundation. On this page, we’re going to set the context, offer a simple definition, explain the problem IBC fixes, and what results when you solve that problem.
Foundational Context
The Infinite Banking Concept is a savings strategy before anything else. It’s about using the proper tool to save, protect, and grow capital which you then put to work. We are not talking about investments, rate of return, or anything of the sort. Infinite Banking is about mindset and behavior; it’s about taking control once you’ve capitalized your system.
Our Definition
Infinite Banking is the process of safely growing and leveraging your capital using a specially designed, dividend-paying Whole Life insurance policy, which allows you to maintain permanent control of your capital and provides you with a far superior way to save, finance, and invest.
The Problem IBC Solves
As R. Nelson Nash wrote in his book, Becoming Your Own Banker:
"You FINANCE everything you buy. You either pay interest to someone else or you give up interest you could have earned."
Conventional financial wisdom tells us there are two ways to pay for large expenses. You either borrow from a bank and pay them interest or you save up to pay cash and give up future interest and opportunity. The first way allows you to acquire something more immediately while the second allows you to avoid debt. Both ways leave you swimming upstream financially. Borrowing forces you to pledge future income (and thus future savings), while paying cash steals the power of compounding on your money.
How Do We Fix This?
You may have noticed that you're always a customer of the bank, whether you're depositing or borrowing. You may or may not pay fees for your checking and savings accounts, but the banks are lending your deposits and profiting handsomely from doing so. The interest you earn, if they pay any at all, is minimal. When you borrow from them you pay fees and interest. Profits are paid to bank shareholders, not account holders. So how do we stop being a customer of the bank and take over the saving and lending functions ourselves?
The Solution
To solution is to create an asset which mimics those functions where the control resides with you. You can build a system where your savings compound without interruption, while simultaneously serving as protected collateral to make those same purchases.
The asset we use to solve this problem is properly structured, dividend-paying Whole Life insurance from a mutual company. Each one of these distinctions matter and we’ll expand on them as you read further. By changing the location where we save, where our income flows, and where our wealth resides, we get to take permanent control of those dollars, recycling them in our system over and over, even when we need to use them for something else.
What Results?
Wealth creation begins with saving, not investing. Most people spend right through their savings and if they have anything left over they're encouraged to invest it in order to get a higher "rate of return." Besides the risk involved, there's little to no liquidity on those invested dollars, so they passively wait and hope for those investments to meet their future needs. This is not necessary. We help our clients focus on increasing their savings rate because savings are liquid. If you add compounding interest and dividends to the mix what you get is an ever increasing pool of capital you can deploy for those major purchases with greater opportunities to invest in things you care and know about. What if, over a long period of time, you could compound 50%, 75%, or even more of your income at 4-5% tax-free, instead of taking risk and hoping for an 8% return on 10% of your income? This is the power of the Infinite Banking Concept.
If you'd like to dive deeper, sign up for our newsletter and we'll send our Infinite Banking Primer to you right away. Or if you're ready to talk and see how this can work for you, schedule a call with us.
