When we first started infinite banking, our sole purpose of doing this was just to get out of debt. But through some creativity and awareness into our spending, we were able to earn 36% interest just by paying back rent. That’s the power of infinite banking.
Our Goals for Infinite Banking
As we became more aware of our spending, studying Nelson Nash more, and just really being diligent to the three rules, a light bulb clicked. We thought, “Oh my gosh. We can make money off every single transaction we make.” It didn’t just have to be about debt or our business.
When we realized that, we became super aware of our spending and our expenses so that, as every single dollar was leaving us, we were trying to figure out how to get it back in a boomerang effect. We wondered how we could make ourselves the most expensive bill. If you’re the one who’s making all the money, everyone else is getting paid but you. To change that, you make yourself a bill and pay yourself money. We decided we wanted to be the most expensive expense in our budget. But how could we do that?
Step 1: Pay Off Credit Card Debt
All of this started with our very first policy, which was a $10,000 policy designed for maximum cash value growth. In the very first year, $5,466 was available immediately because we did an annual premium. At that point, we asked ourselves, “What do we want to get accomplished with this insurance policy? How do we want to utilize infinite banking to put us in a better position financially?”
For us, that was paying down our credit card debt.
With our very first premium, we got the loan. It direct deposited into our personal bank account. Then we took that money and paid off our Chase Southwest, BB&T, Wells Fargo, and Amazon cards, which had minimums of $50, $53, $94, and $105, respectively. The minimum payments also included interest. We used infinite banking to recapture the principal and interest back to ourselves. By adding up the minimum payments, we found that we were paying $302 a month to those credit card companies.
We then redirected those funds back to our segregated account, which is just a separate bank account. Our goal was to keep our payments back to ourselves and our everyday expenses separate. Therefore, we created a separate bank account at a different bank. That’s a segregated account.
Now we have $302 a month going into our segregated account. As a result, we became hyper aware of our spending. When you become aware of your spending, you start to see exactly where your money is going—and what spending may not necessarily be the best thing for you. You see where your money is going toward your wants instead of your needs. We recognized that, so we started putting more money into our segregated account just because we became more aware.
More Money = More Options
In doing this for ourselves, we realized that we had additional funds available. That led us to get a second policy for Darius. There was a huge difference though. We decided to add an additional PUA, or additional cash value, of $4,000. We were able to do that because of Darius’s age and health, which gave him a good rating to add funds to the policy. That’s called getting up to your MED, or modified endowment contract, limit. Because we added the $4,000 to the policy, the immediate cash value jumped to $9,136.
The interesting thing is that Darius still had a $10,000 policy premium for the next four years. We started to ask ourselves what we would do with the $9,000. What was the biggest expense we had? And how could we make paying ourselves the biggest expense?
Remember: Our segregated account is us paying ourselves. That’s money going back to us.
Step 2: Pay Off Our Rent
We made ourselves the biggest expense by looking at paying back rent. First, we looked at different opportunities to see what we were able to negotiate because of the fact that we had cash available. We were able to negotiate a new 11-month lease for $1,400 a month. Next, we asked the leasing office if we could get a discount if we paid cash. Could we leverage our cash?
We were told, “If you pay in full, we’ll give you $2,500 in credit.”
Instead of owing $15,400 to the leasing office, we now only owed $12,900. That meant we had to go about using infinite banking to start to recapture this principal and credit back to ourselves.
In Darius’s policy, we knew that we had $9,136. In our segregated account, we were recapturing $302 from our credit cards every single month, plus additional funds we were adding to it after becoming aware of our spending. We had more than $5,000 available in our segregated accounts. We took $3,764 from our segregated account and transferred it to our personal bank account, which is the account from which we wrote the check to the leasing office for paying back rent in full for the next 11 months.
Paying Back Rent to Ourselves
Now that our rent was paid off, we technically didn’t have any obligation to them. The only thing we had to do was recapture the money by paying back rent to ourselves, including the principal and interest. Our monthly payment was $1,400. If we wanted to make it less than that, we could have because we had room to do so. We could make that decision. We chose to stick with what we would have paid them anyway and started paying back rent to ourselves in our segregated account.
For the next 11 months, we paid $1,400 into our segregated account for a total of $15,400 that we had available in our segregated account just from paying back rent. We now had additional funds because we were still paying $302 from our credit cards into our segregated account. We could just use some of those funds to pay our rent.
When it’s all said and done, we wrote a check to the leasing office for $12,900, but we maintained a payment back to our segregated account for $1,400 a month for 11 months. That’s a total 36.9% rate of return because, even though we got a $2,500 credit, what do people typically do with credit? They just don’t pay back their rent. Instead, we chose to continue to pay our rent. We just paid it back to ourselves so that cash was now available inside our checking account.
The Benefit of Infinite Banking
This process is what we’re doing outside of our insurance policy. This is infinite banking. Infinite banking is the process of using the cash value from your insurance policy to do things that you are going to do anyway. We were going to pay $1,400 a month on our rent anyway. We just chose to redirect it exactly where we were going to put those funds. And that resulted in making 36.9% interest just by paying back rent.
When it comes to using the concept of infinite banking, your options are, well, infinite.
This is just one thing that we decided to do with the money that was sitting in our segregated account. A lot of times, we get questions from our clients such as, “What do I do with the money in my segregated account?” This is one option. Of course, every situation—every person—is different.
We challenge you to think about what you would do in this situation if you had the money sitting in an account.
We’re the founders of Wealth Nation, and we are dedicated to showing you how to own your own lifestyle through a concept called infinite banking. Through our blog and videos, we show you different techniques to grow and manage your infinite banking system.