Tuesday, June 15, 2010

How Much Does It Cost To Get Started?

How Much Does It Cost To Get Started?

By John Montoya

June 15, 2010

This is probably the most common question I get asked after sharing with people how they can bypass the traditional banking system and create a banking system they can own and control, and therefore generate profits from. The answer is really simple. However, in order from someone to really understand the concept of Infinite Banking, I answer their question with a question so they can begin to wrap their mind around the concept:

"How much does it cost you to save money now?"

It's a pretty straight forward question but I never get the most obvious answer. The cost is nothing, nada, zilch. For example, if you save $200 every month, it cost you nothing to save that $200. It certainly requires discipline to save money, but there's no cost involved. According today's article in the L.A. Times, there is $5.06 trillion dollars sitting in passport savings and money market accounts earning closing to 0%. That's really quite astonishing on many levels.

The reason why our savings rate is increasing is because people are scared about losing money. I think a certain level of paranoia or call it caution, is a good thing considering the amount of risk people were willing to stomach in the past decade in order to chase rate of return. Being weary of losing money means people are being more rational about the risk/rewards of investing. If people start to take a greater interest on the return OF their money versus the return ON their money, I think this "lost" decade won't have been for nothing. However, some could argue, and perhaps rightly so, that having so much money currently sitting on the sidelines is an extreme over reaction to the volatility the stock market has been experiencing since late 2008.

Whatever the case may be, people are saving money and I mean really saving money the old fashioned way. I don't mean "investing to save" which is what most people do with their 401k/IRA contributions. True investing means that money is at risk of loss or has the potential for gain. Saving is simply socking away money which you know will be there when you need it. So many of us have been hypnotized into believing that money we put into our 401k/IRA's is our savings, but there's a reason why government statistics do not include qualified retirement contributions as part of their savings statistics. I believe it's because this 401k/IRA money could be here today and gone tomorrow which we all know can happen with stock market investments no matter how savvy an investor one may be. Here today and gone tomorrow hardly implies savings you can count on when you need it.

So what has it cost the American public to save $5.06 trillion dollars; money deposited into accounts with the confidence it will be liquid should it be needed? The answer is nothing. Every dollar of that $5.06 trillion dollars is liquid and available for withdrawal.

It works the same way when you own and control your own banking system. It costs you nothing because ultimately what you will have funded the banking system with will include every dollar you saved. Furthermore, the longer you have the banking system, the more profitable it will become.

So what are the next most frequently asked questions?

"It sounds too good to be true. There has to be a negative or more people would be doing it. Why aren't more people doing this and what are the downfalls, if any, to implementing this strategy?"

Stay tuned as I will answer this for you as well.

For more information about Becoming Your Own Banker or to attend a workshop, please contact JLM Wealth Strategies at 800-208-6141

Monday, June 14, 2010

Why is money held by a life insurance company safer than money deposited at a bank?

Why is money held by a life insurance company safer than money deposited at a bank?

by John Montoya, Founder-JLM Wealth Strategies, Inc.

Based upon the fractional reserve system, banks are allowed to lend money they've created out of essentially nothing. They do this in order to earn interest (on money which didn't previously exist mind you) which of course translates to a very profitable business. But if all depositors were to ask for their money back at the same time (known as a "run on the bank"), banks wouldn't actually have it all. FDIC is a private "insurance" corporation back by taxpayers (you and me) to insure that all bank accounts to a certain dollar limit are protected. However, the FDIC itself only has a limited amount of dollars available as resources to cover claims i.e. deposits. Last information I read stated the FDIC had $115 billion available in assets & lines of credit. However, there is over $5.06 trillion sitting in bank accounts nationwide. That's why FDIC isn't really insurance because the FDIC's claims paying ability (also known as insurance!!) aren't 100% back by capital reserves. Like the banks it is supposed to support due to insolvency, FDIC operates on a fractional reserve system as well. This means the FDIC is just as highly leveraged as our big banks. Yikes!

Of course, if worst came to worst, the Federal Reserve can create more debt/issue more paper dollars (fiat currency) with no gold backing to create a bailout and everything is back to normal, sort of... increasing the money supply by creating more dollars has the adverse effect of causing inflation which everyone pays for unwittingly (unless of course you read my posts or others like it). Inflation is the hidden tax I've written about before. (If you haven't read some of my previous posts on Facebook, simply put, most people are aware that the price of things go up over time and think that things just cost more. In reality, the value of the dollar is actually eroding or losing value which means that it takes more dollars to buy the same thing. So what cost $2 a few years ago is now $4 today. This is the hidden tax known as inflation and erodes every dollar will attempt to save.)

Life insurance companies, on the other hand, are truly the SAFEST FINANCIAL INSTITUTIONS in the world! There is absolutely no leverage to create wealth unlike our traditional banking system. Here in the United States, our regulatory system requires that each life insurance company maintain sufficient capital reserves to cover all liabilities. This makes sense, right? After all, whenever we buy a life insurance policy, what we really are buying is the promise of that life insurance company to pay a death benefit which is a greater amount than what we've paid into the policy. Ultimately, what this means to us as a policyholder is that if every life insurance policy resulted in a claim today (a run on the bank, so to speak), life insurance companies would be able to pay each claim and still have money left over to conduct business tomorrow. That is SAFETY and PEACE OF MIND!

As an example, during the Great Depression while over 10,000 banks went out of business and people lined up outside of banks to get their money back only to be turned away (FDIC hadn't been created then, though as you now know, FDIC doesn't have the reserves to cover all bank accounts and furthermore was never intended to). Meanwhile, during the greatest financial crisis to ever hit our country, people who had faithfully paid premiums into their Whole Life policies were able to withdraw or borrow from their cash values to ride out the worst of times. This is an amazing feat to think about given our economic times and how close we came to the brink of financial calamity in late 2008.

So how secure do you feel about the money residing in your bank account now? When you learn how to become your own banker by owning and controlling your banking system, you will ride out the storm like some of the fortunate did a few generations ago. You will also learn to recapture all the interest and principal, and ultimately profit from the major purchases you will make in your lifetime by learning how to bank with your own money versus give it to your big bank who will only lend back to you for their own profit. This is a simple, foolproof foundation to building wealth and it all starts by raising your awareness to how money is actually created and how to best protect your family with a financial asset that has survived the worst of times and will continue to do so in the future.

For more information or to attend a workshop, please contact JLM Wealth Strategies at 800-208-6141.