Friday, January 20, 2012

Pick Your Poison-Banks Will Get You Either Way Unless You Become Your Own Banker

This blog post comes courtesy of an exchange between Facebook friends after posting this article from Financial Suicide, With The Assistance of Your Bank

Me: Think you have a low interest rate?  Think again.

Tony Russo, Co-Founder of LandMark Mortgage Group:  Yes-ish and no-ish.... The percentage of principal to interest is a byproduct of amortization. The fact of borrowing at 4% (nets to +- 2.5-2.75%) is great. Im paying 4% but a great wealth manager (let's just say at...JLM) is able to help me get more in this economy AND as the economy heals, money market rates move up but my 4% stays. If someone can pay cash for a home these days in sunny California, more power to ya. It's not healthy to leverage heavily, I'm not saying it is. A balance of well advised mortgage with smart financial planning is the key.

Me: Tony, well said on the money management of a mortgage. The significance of the article for me as a Bank on Yourself advisor is getting people to realize the volume of interest being paid to the bank. If people realize the problem, they can seek a remedy to that problem. That's where Bank on Yourself aka the Infinite Banking Concept comes in. 

All loan interest (with a traditional bank) is directed outward to the bankers never to be seen again versus being re-directed back towards the borrower to be used over and over again during the borrowers lifetime. This strategy (Bank on Yourself/Infinite Banking Concept) also creates a tax-free retirement and a multi-generational transfer of wealth with no luck, skill, or guess work required. 

I like where the article says at the end "Unfortunately, average Americans are so busy living life as they know it, they have no idea that they’re killing themselves financially. Alternatives exist. But they require looking at money in a whole different perspective. There are alternatives to routinely bludgeoning your financial future with never-resting bank charges. The financially healthiest Americans are generally not the ones who make the most money. They’re the ones who figure out how they can actually keep the money they make. Imagine keeping the 36.7% that the average American pays to banks. If you take into account that you may be able to pay that interest back to yourself, that puts you essentially 73.4% ahead of that average American." An alternative is suggested but never by name. It should have been. 

The more people know about the Infinite Banking Concept, the better off more individuals would be. I'm a firm believer that if people eliminated bankers from their life, a lot of the worlds problems would be eliminated. Bankers do one thing, they position people into a corner by creating debt. It happens on an individual level as well as it does on a macro level. Look who is running Greece and Italy now. Unelected bankers now called Technocrats. 

Bottom line,when a person controls their individual banking function, they create a greater amount of wealth during their lifetime and as well as for their next generation. To do otherwise, means throwing endless amounts of money to your bank. 

It's like a pilot choosing to fly into headwind versus flying with tailwind. You can fly into headwind but it will take you much longer to get to your destination versus having the wind at your bank. This is where traditional financial planning drops the ball. Financial advisors focus on chasing rate of return on the 10% of money people save out of their take home pay versus the 36.7% that the average Americans pay to their traditional banks/finance companies. 

I'd rather work with the larger chunk money. That's where the tailwind is. The solution is out there, even in sunny CA.

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