How to Be Your Own Bank In Just 4 Steps

If you want to become your own bank, you’ve come to the right place. But first, do you know how banks manage to be the wealthiest institutions in the world?

Let’s say you deposit $10,000 in the savings account. Do you think the bank is going to sit on that money? NO!

The bank is going to take your deposit and lend it out to an individual who needs a new car or house. They’ll lend them your money at a higher interest rate than they’ll pay you back, making sure they make a profit.

Did you know that banks earn between 500% and 1800% more than you?

So, if the banks can basically move money and earn interest that way, wouldn’t you like to do the same?

We would! In fact, we did.

We’ve created our personal banking system, and we’re more than happy to show you how to do the same.

Sounds interesting?

Stay with us and learn everything you need to know to become your own banker.

What Does it Mean to Become Your Own Banker?

The process of becoming your own banker, also called the “infinite banking concept,” is a way to manage your money in which you build up cash value in a well-designed whole life insurance policy and borrow against it. 

You can use the borrowed money for anything you need or want – to fund major expenses, cover emergencies, or take advantage of outside investment opportunities. 

In contrast to traditional banks, infinite banking offers safe and competitive growth rates, tax sheltering, and a number of security features. Most importantly, their liquid assets keep growing even as they are lent out.

A Little Bit of History

Nelson Nash, founder of the Infinite Banking Concept, explains the system in his book Becoming Your Own Banker. He spent years and years as a tireless advocate and activist for free markets, liberty, the Austrian school of economics, and sound money. These ideas and beliefs guided his discovery of the Infinite Banking Concept in the early 1980s.

Nelson Nash was struggling with high interest rates on commercial bank loans, but he successfully got rid of them and started teaching others how to do the same.

One of our favorite quotes from him is: “The very first principle that must be understood is that you finance everything you buy—you either pay interest to someone else or you give up the interest you could have earned otherwise.

4 Steps to Create Your Personal Banking System

Before we explain this process, we want to make sure you understand that this is not a sprint; it’s a marathon.

Being your own bank may sound like you will have a limitless amount of money by doing nothing, but that’s not the case. This banking strategy requires discipline, knowledge, and creativity.

We broke down the process of becoming your own banker into four crucial steps.

First Step: Get a Whole Life Insurance Policy

Wait, wait… I don’t need life insurance products; I need to learn how to create my own bank.

If you have had this thought, we have some eye-opening news: you can use your life insurance policy for other purposes than insurance coverage. And, if you want to become your own banker, the best policy for that is whole life.

A whole life insurance policy is a type of permanent life insurance, as it provides life coverage as long as you pay the premiums. So, the first difference compared to term insurance is the duration.

But that’s not all. Another difference between term insurance and whole life is the cash value. Whole life policies have a savings component called cash value, where interest accumulates on a tax-deferred basis.

So, why do we need a whole life policy? 

As we saw, in the traditional banking system, you have a savings account where you deposit your money, which will earn interest. But the problem is, we don’t get wealthier—the banks do.

Since we want to copy the process of traditional banking, we need a savings account that is self-reliant. Thus, we use a whole life insurance policy for our personal bank, or, as we like to say, a savings account on steroids.

How To Purchase Whole Life Insurance

You purchase the whole life insurance policy from the insurance company in the same way that you would any other policy. Keep in mind that it will require a medical exam.

But even if you have some health issues, don’t worry. It is possible to buy a policy on someone close to you to act as your own bank.

Insurance companies and the IRS aren’t fans of people buying policies for someone else (so-called “stranger-owned life insurance”), but if that person is someone from the following list, it’s okay:

  • Spouse;
  • Children;
  • Business partner;
  • Key employee;
  • Someone who owes you a significant amount of money.

Important note: You have to get your whole life policy from the mutual insurance company. Why? You will receive a yearly dividend payment because mutual companies are entirely owned by policyholders. You can put dividends back into your insurance policy to speed up how fast the cash value grows.

In contrast to “high-yield” savings accounts or CDs, whole life is a true non-correlated asset with strong, steady growth rates.

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Second Step: Funding Your Whole Life Policy

Although you will use whole life insurance policies to become your own bank, you will do things a little bit differently than you would for insurance purposes. Your policy has to be structured properly in order to become your own banker.

As you probably know, insurance policies have monthly premiums you need to cover. With a whole life, that amount is guaranteed for your entire life.

However, since we want to use the whole life policy for personal finances, we have to treat it differently. We have to put as much money into our policy as we possibly can.

It might seem counterintuitive, but here is why we need to do it:

  1. This additional premium is applied 90–95% to your cash surrender value. In other words, these overfunding payments become immediately accessible inside your private family bank.
  2. The remaining 5%–10% of this additional payment is spent on a small portion of additional permanent death benefits (called a Paid-Up Addition or PUA). What’s wonderful is that PUAs will no longer require premium payments because it has been contractually paid up with this one-time payment. Your mutual insurance company will give you a bigger share of future dividend pools if you have a PUA, and your guaranteed life insurance cash value will go up right away.
  3. Your cash worth is increased by these Paid-Up Additions, which contractually begin to increase at a favorable guaranteed rate of return (even if no dividends were ever paid again).

The reasoning is the same as in conventional banking. Banks need our money in savings accounts to get wealthy, and we need our money in our savings accounts on steroids (whole life insurance policy) to begin our personal banking strategy and get rich.

Third Step: Start Using Your Cash Value

One of the first things we mentioned in this article is that banks don’t sit on money. Investing money is the one and only way to generate wealth. We want to imitate that.

So, when your cash value has accumulated, it’s time to start using it. And here is the part of this process that needs creativity.

infinite banking concept

There are 4 different ways to use your policy, but in this article, we will cover only borrowing.

You shouldn’t turn on the red light just because you saw the word borrowing. Keep in mind that we act in the same manner as banks.

When you borrow money from your whole life policy, the entire cash value balance continues to grow uninterrupted. This is a critical moment because it explains why we use whole life instead of other life insurance policies and why you can become your own banker with whole life insurance and not with a regular savings account.

How is that possible? 

We don’t actually borrow the cash value from the policy. Instead, we use the money from our life insurance company.

The life insurance company collateralizes your account and gives you their money instead of yours. Since you’re using their money and the money in your cash-value life insurance policy keeps earning guaranteed compound interest, you can borrow more and more money every year.

Also, the private family banking concept eliminates all of the barriers associated with credit applications. You don’t have to wait for approval or worry about rejection. 

Important note: When you take loans, none of your cash value ever leaves your whole life insurance policy! Your total cash value balance, including the sum you borrowed, keeps increasing.

tax-free death benefit

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Fourth Step: Repay the Loan

The next step in the process of becoming your own banker is to pay back the policy loan.

Despite having the name “loan,” it is not what most of us think of when we think of loans. 

Policy loans do not appear on credit reports because they are a private contract between you and the insurance company.

There’s even more. You have the flexibility to set your own terms.

  • You schedule when you pay interest and principles.
  • You can make interest-only payments.
  • You don’t need to pay anything until you can make a balloon payment for the total sum.
  • You don’t need to pay anything, ever! In that case, your death benefit will be reduced, but if you have multiple life policies (or you don’t need a death benefit) this might be the option for you.

No other organization provides this level of freedom to act as your own bank. You can plan some form of recurring loan maintenance, but the insurance agents do not demand it.

We did say that this is a four-step guide, but there is one extra step that we want to mention.

Fifth Step: Repeat this Over and Over Again

When we said it’s possible to be your own bank, we truly meant it. And the best part is that you don’t have any limitations on how many times you will repeat this process.

That’s why the process of becoming your own banker is also called Infinite Banking. There are infinite possibilities for how you can use your own bank.

Why Should You Be Your Own Bank?

If you still have some doubts, let’s see the difference between your personal bank and a traditional one. When you become your own bank, you’ll enjoy the following benefits:

  • You will be in control of your own money.
  • You have the flexibility and power to set your own rules.
  • You will erase any debt you might have now.
  • You will never have to pay interest, high fees, or penalties to anyone.
  • You will build wealth for your inheritors.
  • Financial freedom. You can use your family bank for covering any expense.
  • You don’t depend on global economic factors – inflation and recession are not your concern.

Infinite banking is the only way to truly finance your lifestyle the way you want it. That’s why here at Wealth Nation we prefer the term Lifestyle Banking.

Is there anything else that you would need to be your own bank?

Maybe someone professional and reliable who can teach you all the nitty-gritty details of setting up your own banking system.

The process of becoming your own banker isn’t complicated, but it requires a good foundation, devotion, and discipline. If you’re ready to start with infinite banking, we would love to support you!