Imagine having control over your finances and creating a better financial future for yourself and your family. Until recently, this would sound like pure fantasy. Luckily, there are techniques and tools you can use to turn your dreams into reality.
Gaining and maintaining complete control over your finances is possible and available to you through Infinite Banking. The concept of Infinite Banking sounds foreign, but actually, it is not. To implement Infinite Banking successfully, all you have to do is move all your savings into a whole life insurance policy.
Once you move your savings into a whole life insurance policy (designed for Infinite Banking), you can start eliminating banks and start depending only on your finances. Although it might sound scary, the thought of not having to pay taxes on the growth inside of the policy and the possibility to borrow against your policy at any time without disturbing the interest growth should be encouraging enough to move forward with this journey.
Helping people own their own lifestyle is our mission – that’s why we created this guide explaining 52 ways to own your own lifestyle. Hint: it all starts with a whole life insurance policy.
In this blog post, you will learn:
- What is Infinite Banking
- How does Infinite Banking work, and what are its benefits
- How to start Infinite Banking
- How to own your own lifestyle
- How to eliminate debt using Infinite Banking
- How to start investing using Infinite Banking
- How to lend money to others using Infinite Banking
- How to start family banking using Infinite Banking.
By the time you finish reading this article, you will learn all you need to know about Infinite Banking, and you’ll be ready to implement at least one of the proposed 52 ways to own your own lifestyle.
To help you move even faster, we offer to design your policy in a way you can have cash available to you within thirty days of the premium payment. Whether you decide to borrow from your dividend-paying whole life insurance policy to pay off debt, create cash flow, or create a legacy, you will be earning a guaranteed rate, plus dividends (that are not guaranteed but highly likely).
If you need any last encouragement, let us bring you one more perspective. There is one crucial thing standing between you and owning your finances – the banks. Banks are ingenious systems that make 500-1800% off your deposits annually, and that is just the tip of an iceberg. Now imagine instead of giving away your money to banks, you keep it to yourself and ensure steady, predictable growth, year in and year out.
Without further ado, let’s get to the bottom of the Infinite Banking concept and go through every implementation step!
The concept of Infinite Banking
The concept of infinite banking is about strategically using your whole life insurance policy from a mutual insurance company as a personal endless banking system. In other words, Infinite Banking is essentially being your own banker.
Nelson Nash created infinite Banking in the 1980s, who was a finance expert and follower of the Austrian School of Economics. While Nash named this concept and popularized it in his book Becoming Your Own Banker, the Austrian School of Economics created a school of thoughts around the infinite banking concept.
Out of this same school of thought, Nash developed the idea of individuals becoming their own bankers to achieve better their own unique, individual financial goals and how individuals can be their own bankers instead of having to rely on financial institutions.
How does Infinite Banking work?
Infinite Banking provides an extremely tax-efficient system, delivers a competitive interest rate for how stable it is, can never decrease in value, and allows you to use money in both your whole life insurance policy and elsewhere.
Infinite Banking involves:
- Overfunding (with after-tax funds) a high cash value whole life insurance policy from a life insurance company
- Accumulation of Cash Value(tax-free) throughout the years you are a policyholder of your Whole Life insurance policy
- Tax-Free Loans taken out against your whole life insurance policy’s cash value to use for your individual financial expenses.
The way infinite banking works allows you to mimic the way a bank operates and borrows money.
Instead of borrowing from a bank, you are borrowing from yourself while still allowing your whole life insurance policy to earn dividends (money) even though you are using that money elsewhere.
Whether for your child’s education, for a downpayment on the house, or medical expenses, borrowing for yourself and being your own bank allows you the financial freedom and control of your money.
The purpose of Infinite Banking is to serve as your personal savings system, where your money grows more conservatively, your money is guaranteed never to decrease in value and can be dependably accessed tax-free through policy loans at any time.
The role of Whole Life Insurance Policy in Infinite Banking
Nelson Nash determined that the best financial tool for Infinite Banking is whole life insurance. It allows the policyholder to act as the banker of the whole life insurance policy (the bank). It is a tool that can be used to replicate the banking system using your own money.
Whole life insurance provides a cash value benefit to policyholders. Every time you make a premium payment, a portion of your payment is put towards a savings portion of your policy – called cash value. With each payment, the cash value accumulates at a taxed-free rate and can be utilized as needed and as you see fit.
Whether it’s to pay off debt, use it as a down payment on a house, put it towards your retirement income, or purchase more insurance with a higher death benefit to leave the family more money, the cash is yours. This is where the infinite banking system starts.
The cash can be accessed either through a withdrawal or a loan. The benefit of accessing it through a loan is, it does not disturb the compound interest in the policy. With a whole life insurance policy, after the policyholder is gone, the policy’s beneficiaries will receive a guaranteed amount of money.
In addition to cash value accumulating at a tax-free rate, whole life insurance offers a tax-free income sum of money known as a death benefit. Your policy’s cash value is the amount of your death benefit the insurance company makes liquid to you. If you were to cancel your policy while still living, the cash value is the amount the insurance company typically pays you. But again, as long as your policy premiums are paid, your policy’s cash value can be used for personal and business loans with your policy as collateral.
Another thing to consider is there are two different types of whole life insurance: participating and non-participating.
The main difference between the two is that participating in whole life insurance policies allows you to participate or receive dividends based on the insurance company’s profits.
With non-participating policies, you do not participate or receive dividends from the insurance company.
If you use a participating whole life insurance policy for Infinite Banking, your cash value increases every time the insurance company pays dividends.
It also increases when you pay policy premiums and earns a guaranteed interest rate.
Essentially your “bank” consists of a portion of premiums paid (money from you) + guaranteed interest earned + potential dividends (money from your insurance company).
So instead of using a savings account in a bank that offers minimal returns, you save inside of your dividend-paying whole life insurance policy, where it grows tax-free with a higher rate of return and is essentially having your money work for you in two places at once.
Main benefits of Infinite Banking
Many benefits come with Infinite Banking, and as we mentioned before – Infinite Banking is the crucial ingredient in owning your own lifestyle. However, we decided to highlight some of the main benefits of Infinite Banking before explaining to you how to implement it.
Non-Correlated Asset
Whole Life insurance is an asset that is not tied directly to the stock market, also known as a non-correlated asset.
Given how the stock market can fluctuate, whole life insurance provides a safer and more secure asset that does not change based on the market.
This is not to say you can’t or shouldn’t have assets tied to the stock market.
However, Whole Life insurance’s guaranteed annual cash value growth provides a more stable way to manage your finances in a world that does not always offer that stability.
Liquidity and Cash Flow
When you utilize your Whole life insurance as an infinite banking system, you automatically improve your cash flow and liquidity.
Whole Life insurance is a highly liquid asset compared to other assets such as real estate, stocks, bonds, or other investment plans such as your 401(k) or IRA.
The other benefit to your cash flow is that you don’t need to go through the paperwork of getting a loan from a traditional bank.
You can request a policy loan from your insurer, and funds will be made available to you. Be mindful that the cash from your whole life insurance policy can be accessed either through a withdrawal or a loan.
The benefit of accessing it through a loan is, it does not disturb the compound interest in the policy, which is an essential distinction from making a withdrawal. Ensure to check with your whole life insurance agent to see what makes sense for your specific situation.
Because whole life insurance is liquid, it serves as a valuable part of your financial foundation, acting as your emergency savings if you will. Whether you run into unforeseen expenses such as medical bills, job loss, or costly home repairs, whole life insurance policy loans offer a safety net.
You can even use your insurance policy to pay yourself an income for any reason needed.
An example of how an infinite banking system through your whole life insurance policy can be used can be seen here:
If you had a $20,000 car with 100% equity (i.e., you owed zero), most people would tell you, “you are debt-free”. However, what if you owed $20,000 on that same car, but you also had $20,000 in your whole life insurance policy earning tax-deferred compound interest)? Would you still be debt-free?
In reality, you would have a 20,000 debt, but you would also have $20,000 liquid cash available for you whenever you needed it. Your balance sheet would reflect ZERO overall debt. At Paradigm Life, they advocate funding a whole life insurance policy as a savings vehicle before considering other investment strategies like real estate or the stock market as part of our Perpetual Wealth Strategy™, and refer to this type of portfolio structure as The Hierarchy of Wealth™.
Control
Another benefit to infinite banking is that you control your financial assets through your whole life insurance policy; again, you are your OWN banker.
Each time you loan your money from your policy to yourself, your family, your business, etc., you are charging interest. The cash value growth in your policy is tax-deferred, and when you borrow against the cash value in your policy again, in the form of a loan, not a withdrawal, the cash value continues to grow in your policy.
As an example of this, if you borrow $50,000, you are taking a loan from the insurance company. The company is using your cash value as collateral. But the cash value remains in your policy and still earns interest, plus any dividends.
So, even when using your cash value elsewhere, compound interest is still growing in your policy, essentially having your money in two places at once. The result is that over your lifetime, you have increased your financial assets through your policy.
Leverage
The life insurance death benefit of a whole life insurance policy provides a leveraged payout in the early years should you die prematurely. Having a lump sum death benefit provides peace of mind knowing that your loved ones are cared for if you die young.
So the death benefit is there from day one, which is substantial financial leverage dollar for dollar when you consider you only put a fraction of money into the policy. Let’s think about this concept with other assets, such as your 401(k) or IRA.
If you pass away with money left in either of your qualified 401(K) or IRA, yes, the remaining funds will still be passed onto your beneficiary. However, it will be taxed as ordinary income (the highest taxed type of income). While there is still the guarantee that your beneficiary will receive something, you can not guarantee the amount due to future tax rates.
In contrast, with life insurance, the death benefit is tax-free.
With Whole Life Insurance, there is a guarantee that your beneficiary will receive a substantial amount of money that is also taxed free.
Tax Benefits
Whole Life insurance provides a variety of tax benefits. In addition to the death benefit being tax-free, as stated above, where we discussed it as a benefit in delivering leverage, the cash value growth in a whole life insurance policy is also tax-deferred.
Furthermore, you can also take out a loan against the cash value, and the whole life insurance loan is not taxed. Lastly, dividends received from the insurance company given to the policyholder on an annual basis are also not taxable. These are some ways that the infinite banking system gives you a tax benefit and advantage compared to banking in a more traditional sense.
Guarantees
An adequately structured participating whole life policy provides many incredible guarantees.
According to Guardian, based on your life expectancy, the insurance sets four guaranteed benefits:
- Guaranteed level premium: As long as you keep paying premiums, the policy will stay in effect.
- Guaranteed Death Benefit: the amount paid to your beneficiaries will never decrease
- Guaranteed Cash Value: A cash value guaranteed to grow at a set rate each year until it is equal to the face amount of the policy at a specified age, typically age 100 or 121.
- Guaranteed Endowment: The death benefit is guaranteed to be paid if the insured is still living at the age specified in the contract, typically age 100 or 121.
Along with the above guarantees, you can also earn dividends through your whole life insurance policy. Having a whole life insurance policy that will allow you to receive dividends is another way to ensure you can create an infinite baking system through your policy. These guarantees are yet another reason why properly structured whole life insurance is ideal for Infinite Banking.
Eliminating Debt with Infinite Banking
Now that you are familiar with the Infinite Banking concept, we can move forward with its implementation. Benefits are countless – we will start with teaching you how to eliminate debt using infinite banking.
You might often find yourself in a situation to have some kind of debt you have to pay off.
No matter how carefully we plan our finances, debt is almost inevitable if we don’t have complete control over them.
Whether you choose to improve the quality of your life by investing in education, buying a car, renovating your home, boosting your business, etc. – you’ll need adequate resources.
That’s how most people find themselves with:
- Mortgage
- Car Loan
- Student Education Debt
- Payday Loan
- Credit Card Debt
- Business Equipment Finance Cost
- Medical Bills
- Business Coaching Fund
- Debt caused by Unemployment
- Taxes
- Start-up Business Cost
- Home Improvement Cost
- Recreational Equipment Cost (Boats, RVs, ATVs).
The list seems to be endless, and if you can find yourself in it, then you’ll probably relate that it feels eternal, as well.
However, there is another side to the coin and good news you should be looking for. Infinite Banking brings you a solution – if you implement it step by step, you will eliminate any kind of debt you have and start owning your lifestyle.
How To Eliminate Debt using Infinite Banking
The first step in the process is to own a whole life insurance policy. Your whole life insurance policy should be designed in a way to support Infinite Banking. To pay these items off, you should request a loan from your whole life insurance policy.
Because you are borrowing against life insurance – in other words – your own money, there is no complicated procedure in place.
One of the advantages of a life insurance loan is that you can borrow against life insurance as soon as you have sufficient funds in your cash value account. You also don’t have to worry about the amount of money you are taking out or explaining what you need the money for, as there are no limitations or special requirements to be fulfilled.
Simply, if you want to take out a loan, you should contact your insurance company to let them know. They will explain to you the simple procedure, and soon you will have your funds available to be used as you find the most suitable.
Bear in mind that this would be the best moment to ask your insurer about the interest rate. Even though you borrow your own money, interest is paid to the insurance company – either with a permanent or variable rate.
If it is a fixed interest rate, you will know exactly how much you are expected to pay every year. On the other hand, the variable interest rates can vary from year to year, and you can expect them to be disclosed on your policy’s annual statement.
You should also know that even though you have taken out the money from your savings account, it can still grow.
These gains will be delivered to you in the form of dividends at the end of the fiscal year, but most probably with a lower rate; If you decide to return your loan, make sure that you check with your insurance agent whether the repayment date should be set.
Don’t forget that this is a unique loan that does not require you to repay it while you are alive, but if you choose this option – your beneficiaries will repay it in a way since they will receive the payout minus the loan balance.
After you request a loan from your whole life insurance policy, you should continue the same payment you are paying the banks until your statement pay-off date. Not only that your debt will be paid off, but you will also have all of the money that you would have paid the bank back in your possession.
That money — that is completely yours — can now be used to finance your lifestyle and pay yourself back the principal and interest as you would pay your credit cards and loans to the banks.
You can apply this system and recoup all the principal and interest you are paying the banks with all of the following items:
- Mortgage
- Car Loan
- Student Education
- Payday Loan
- Credit Card
- Business Equipment Finance
- Medical Bills
- Business Coaching Fund
- Unemployment
- Taxes
- Start-up Business Cost
- Home Improvement
- Recreational Equipment (Boats, RVs, ATVs).
Investing with Infinite Banking
Investments usually come with high rewards but require managing high risks as well. The good news we have for you is that Infinite Banking helps you make investments in much better circumstances.
Can you imagine making an investment and not losing your principal? Sounds dreamy, but it is a real thing. Through the concept of Infinite Banking, you are using something we call OPM – other people’s money to invest while your money stays tucked away.
To make things even better, this means that if you gain money, 100% of the profit stays with you. If — for any reason — your investment goes south, you will have your whole life insurance to pay the OPM (other people’s money) back.
This is the list of items you can use to implement the system of investing with Infinite Banking successfully:
Are you interested in finding out more? Let’s go through the implementation process of Investing with Infinite Banking.
How To Start Investing using Infinite Banking
The first step in the process (after you have purchased a whole life insurance policy) is to request a loan from your whole life insurance policy. Bear in mind that it should be designed for Infinite Banking.
Once you make money, you should keep the profits and pay the principal back to the insurance company. The result of this would be:
- You will still have your money.
- You have the profit.
- The insurance company is paid off.
This is an ideal win-win scenario that is guaranteed once you start investing with Infinite Banking.
This is the list of items you can use to implement the system of investing with Infinite Banking successfully:
- Own Single Family Homes
- Duplex/Triplex/Quad
- Apartment (Multifamily Building)
- Retail
- Mixed Use-Commerical & Residential
- Industrial
- Self-Storage Facilities
- Mobile Home Parks
- Land
- Short-Term Rental/Airbnb
- Tax Liens
- Notes
- Fix & Flip.
Lending Money with Infinite Banking
When you think about loans, the first thing that comes to your mind is a bank. Why is that? Banks are intelligent systems designed in a way to generate money through their clients.
If we asked you whether your deposits to banks are liabilities or assets, what would you say? The correct answer is that they are liabilities. On the other hand, loans are assets to the banks, and there is a simple explanation.
Loans bring cash flow to the banks. Banks get principal and interest payments from their clients every month; that’s what makes loans so valuable to the banks.
You probably haven’t imagined that there can be a different scenario here, but it is possible. Instead of being a pawn in the game of banking system, you can use Infinite Banking to start acting as a bank and lend money to others. You will get the same advantages as banks get regularly!
If you can relate yourself to the items listed below, you are eligible for lending money with Infinite Banking:
How To Lend Money using Infinite Banking
The first step of the process is to do the research. Before determining how much you want to charge someone, you should look at the bank’s current terms and interest charges. Once you define charges, you should proceed with requesting a loan from your whole life insurance policy (designed for Infinite Banking).
Pick wisely to whom you are willing to lend money – it should be someone with a legit form of collateral. The contract is non-negotiable. Make sure you do additional research and create a legal contract that both parties will sign.
Lending money to others as a bank means that you act entirely the same as the bank. This included collecting principal and interests payments regularly, just like a bank would.
Bear in mind that your principal stays protected as you are using OPM (other people’s money) to lend money. When the term is up, you should pay the insurance company their money and keep the interest to yourself.
This will result in:
- You still having your money.
- You having interest payments from the loan.
- The insurance company being paid off.
Lending Money using Infinite Banking is possible with any of the following items:
- Hard Money Landing
- Car Loan
- College Loans
- Medical Loan
- Personal Loans
- Consolidation Loan
- Home Improvement Loan
- Mobile Home Loan
- Bridging Loan
- Commercial Mortgage
- Business Loans
- Home Mortgage
- Equipment Finance.
Starting Family Banking with Infinite Banking
Have you ever taken the time to calculate how much money your family is spending on an annual basis? If you have, you probably earned a headache and started thinking thoroughly about what you are spending your money on.
There are things that you need to pay for sure – almost nothing is free of charge. On the other hand, you can eliminate some costs and most definitely choose where you want your money to go.
Family Banking allows you to keep all of your money within the family. This means that Infinite Banking helps you act like a bank — borrow the money to your relatives — have them pay you back principal and interest, and keep the money inside the family.
This is the road that takes your family towards building wealth. These are the examples of when the system of Family Banking can be applied:
Let’s learn how you can start Family Banking through Infinite Banking!
How to create a Family Bank with Infinite Banking
Creating a Family Bank is similar to the process of lending money to others as a bank. The main difference is in your “clients” – instead of having your friends or acquaintances as clients, once you start a Family Bank, your clients will be your family members.
What is Family Banking becoming more and more popular? The truth is that people find it as a way better option to pay the necessary principal and interest rate to their family members rather than to a financial institution.
As the one starting the Family Bank, your job is to own a whole life insurance policy (designed for Infinite Banking) and request a loan from it. Once you get the money, you are in a position to lend it to your family members who need it for different occasions.
To ensure that everything goes smoothly, make sure to have an official contract with your family members and that they have proper collateral. These things might seem irrelevant, but actually, they are necessary if you want to keep a good relationship and lead your family towards wealth building.
Make a family gathering and align everyone with the terms. Once everyone is on board, you can start your Family Bank.
These are the situations in which Family Bank (created through Infinite Banking) can be implemented successfully:
- Family Vacations
- Christmas
- Birthday
- Kids Sports
- Back to School Expenses
- Music Lessons
- Wedding
- High School/College Graduation
- Dining Out
- Gasoline
- Entertainment
- Charitable Giving
- Retirement Income.
Final Thoughts
We’ve come a long way since the beginning of this article. So far, we have covered the very basics of Infinite Banking, and we presented you with 52 ways to own your own lifestyle.
This means that you have learned:
- What is Infinite Banking
- How to Eliminate Debt using Infinite Banking
- How to Start Investing using Infinite Banking
- How to Lend Money using Infinite Banking
- How to Create a Family Bank using Infinite Banking.
To be completely honest with you, this is just the beginning. At Wealth Nation, we created a unique program called Money School, through which we teach you everything you need to know about Infinite Banking.