Monday, September 30, 2013

Avoiding This Financial Mistake Can Make You Millions Over A Lifetime

If you could create a positive cash flow that's potentially worth millions of dollars over a lifetime without any luck, skill, or guesswork, would you do it?  

When it comes to finance it's important to note that each one of us are all 1 of 3 different types of people:  a Saver, a Debtor or a Wealth Creator.  99% of the public are either a Saver or Debtor because they have never been introduced to what you are about to learn. 

As I tell everyone, this isn't a get rich quick scheme.  It requires the discipline to save money so you can begin to harness the energy of that accumulated capital which can be used over and over again without ever interrupting the growth of your money.   Ever!  

This financial strategy does require patience and discipline to fully grasp but if you are serious about increasing as well as protecting your net worth each year regardless of what happens in the economy, it's important you commit to understanding how the Bank On Yourself or IBC (Infinite Banking Concept)  strategy works. 

(Please note IBC is the original trademark name for the strategy created by R. Nelson Nash.  You can find an IBC practitioner in your state by checking the Infinite Banking web site by clicking here: or you can request a personalized solution by visiting

One of the best benefits of Bank On Yourself/IBC is that it's like having your own bank but you won't have the need for a physical building or the need to hire bank employees to manage your new personal financing business.  

Why is this financial strategy so important?  
Before I explain how it works, there is one very simple, but very important, concept you need to understand.

It's the law of uninterrupted compounding.

Compounding is a simple investment strategy in which you put your money in an investment that pays interest. At the end of the year, you take the interest you earned and reinvest it with your original stake. Now your interest earns a return too. The next year, you'll get a bigger interest payment. Then you can reinvest it, and so on…

A snowball is the best analogy for compounding. As you roll the ball through the snow, the surface area gets bigger. The more surface area on the snowball, the more snow it picks up. The snowball gains mass slowly at first… but pretty soon, you can't move it because it's so huge.

Compounding is slow and boring at first. But gradually, the interest you earn grows and your re-investments increase. And each year you leave your money to compound uninterrupted, the more it grows.

The key to compounding is to let it work over many years. The chart below shows how money grows when we grow it at 10% per year over 60 years. We call this the "hockey stick" chart, because the money grows slowly for several decades and then rapidly after about 40 years.
The Hockey Stick
If you don't interrupt it, compounding produces a fortune

It takes 40 years for your $10,000 to grow into $411,000. That's the red arrow.

That's pretty good. But do you see what happens next? The growth of the account explodes.

By year 50, it's grown to just over $1 million.

By year 60, it's grown to more than $3 million.

In short, the power of compounding is most effective when you let it work over many decades.
Interrupting the Compounding Process

The compounding process works only if you don't interrupt it… i.e., you don't pull money out of the account along the way.

The chart below shows what would happen if you pulled $150,000 out of your account in year 40 by making an early withdrawal.

As you can see, first, the balance in your account drops. That's the red line you see dipping below the black line. Second, there's less money in the account to produce interest. You've interrupted the compounding.

Look what it does to your wealth…

In year 50, you've got $713,000, instead of $1 million. And by year 60, you're left with $2 million, instead of $3 million. Your account balance is $1 million less in year 60.
Interrupted Compounding
One small withdrawal causes your wealth to plummet
Interrupting the compounding process by liquidating part or all of your funds in the single biggest destroyer of wealth.

These interruptions are not always easy to spot. For example, a decline in the stock market of 20% interrupts the compounding process in your 401(k) account. That's because your account balance dropped by 20%. And you have less money producing interest.

You could cash out part of your 401(k) or IRA to buy a new car or house or to give a gift. That interrupts compounding too.

Or consider a college fund for your kid. You start putting money into it when your child is born. It compounds and grows tax-free in a Coverdell or 529 Plan.

But when your child reaches college age, you liquidate the account to pay for your child's college. You've interrupted the compounding process after only 18 years.  Funding college through 529 accounts is one of the largest wealth transfers a family makes because the growth on that account balance is gone forever once liquidated to pay for schooling.
The Holy Grail of Finance

The holy grail of finance is a vehicle or account that relentlessly compounds our money without interruption.

Bank On Yourself/IBC offers us this. We put money in a specially designed dividend-paying whole life insurance policy, and it compounds for the rest of our lives. We capture the power of uninterrupted compounding and we grow wealthier each year no matter what happens in the economy.

Pretty simple, right?
You can borrow money from your policy. Then you can use it to buy big-ticket items, such as cars or vacations. You can also use it to make investments and start small businesses.

Not only is taking loans from your policy extremely easy and convenient, but by using policy loans to finance your expenses and investments, you can create a positive cash flow that's potentially worth millions of dollars over a lifetime.

This is what IBC (Infinite Banking Concept as it's originally known) advisors call "supercharging" your policy.

But what if we want to pay for a vacation? Or a car? Wouldn't that interrupt compounding?

If this money were in a bank account, yes, it would. When you pay for the vacation, you liquidate your savings account. The capital is not working for you anymore. You can't compound it.

Here is a rough representation of how saving up and paying for things looks graphically. First, you save up for five years, earning interest along the way. Those are the green lines. Then you liquidate your account to buy something… maybe a car. You save up. You liquidate. You always end up at zero.
Saving up for Big Purchases
By paying cash for your big-ticket items, you interrupt the compounding process

But with Bank On Yourself/IBC, you can still pay for these things AND compound your money uninterrupted.

How is this possible?

You save up money in your Bank On Yourself/IBC policy. But at any given time, the insurance company lends you the money you need (up to the amount you've saved in your policy). And you pay it back to the insurance company at your own speed. Remember, you can get these loans in under a week with no credit check or 30-page application.

The insurance company is willing to do this because it has nothing to lose. Even if you decide not to pay back the loan, the insurance company simply needs to deduct whatever you owe from the death payout when you die.

In short, because of the lending provision that comes with our insurance policies, if we need money, we can borrow it from the insurance company. And because we use the company's money, nothing interrupts our compounding.

Remember our uninterrupted compounding chart from earlier? Here it is again.
The Hockey Stick
The path our money is taking in an IBC policy


Let's look at what happens when you use your Bank On Yourself/IBC policy to buy something.

You still save your money. But when you need to make a purchase, you don't liquidate your savings as you did with our example earlier. You take a policy loan from the insurance company and repay it.

Because you took out a loan and used the insurance company's money, your money continued to compound and grow… uninterrupted.

Now, five years later, you've repaid your policy loan. But the cash value balance in your policy is much higher because you let it compound uninterrupted.

Using a series of loans to take your fancy vacation or make car purchases throughout life, you never interrupt the compounding process.

The illustration below shows you how this process looks. The black line is a close-up of the "hockey stick" compounding curve. The blue dots represent points in time at which you take policy loans. The red lines represent your shrinking loan balance each year as you pay back your loans.
The Path to Uninterrupted Compounding
Use policy loans to pay for your big-ticket items

In short, by borrowing money from the insurance company, you can continue compounding within your policy even as you spend.

Borrowing money from banks, credit card companies, and other lenders is the most damaging thing you can do to your wealth. When you take a loan to finance a purchase, you start in the hole and claw your way back to zero every five years, giving interest to the bank along the way. You never get ahead. It looks like the chart below.
You can see how devastating the action of interrupting the compounding process is. And now you know how the average person destroys his or her wealth by doing this throughout life.

Bank On Yourself/IBC is the only solution I know of that allows you to harness the power of uninterrupted compounding… but still lets you spend money when you need it.

Once you've set it up, you'll never pay cash or use a traditional loan for your big-ticket expenses again, because that would interrupt your compounding. You'll use a policy loan and pay it back over time.

John Montoya

JLM Wealth Strategies

Phone: (925) 386-6639

John Montoya, founder of JLM Wealth Strategies, began his career in financial services in 1998 and is one of only 200 financial advisors in the country who have successfully completed the training program required to become a Bank On Yourself© Authorized Advisor as well as an IBC practitioner with the Infinite Banking Institute.  John holds a B.A. from the University of San Diego. In 2013 John co-authored “The Secret to Lifetime Financial Security” with Best-Selling author Pamela Yellen along with other leading financial advisors and was added to the National Academy of Best-Selling Authors website. In his free time John is a youth soccer coach and also volunteers as chapter president in the San Francisco Bay Area for the Society for Financial Awareness (SOFA) to help increase financial literacy at companies, churches, and organizations.

Friday, September 20, 2013

Borrowing Money On Your Terms Will Never Be Easier Than This...

Borrowing money from a Bank On Yourself/IBC (Infinite Banking Concept) policy is the easiest way to borrow money in existence…  
Loan Approval in Less Than Five Minutes 

Applying for a loan is a major hassle.

Here are some of the things you'll need to get a loan in America today: 
a long application form
a close analysis of your credit report and score
a steady job
a certain income level
a certain amount of assets
proof of job, income, and assets with documentation such as pay stubs and tax returns
few other debts
money to pay loan origination and mortgage broker fees
mountains of signed paperwork.

After all this hassle, there's no guarantee your bank will approve you for a loan.

What if there were a better, easier, smoother way to borrow money? 

IBC/Bank On Yourself policy policies come with guaranteed loan provisions. In simple language, this means that the insurance company has a legal obligation to lend you money whenever you want. It won't ask you any questions. And you won't go through any loan application process.

The insurance company is willing to do this because it holds your money, so it's not taking any risk by lending to you.

The catch is that you can borrow only as much as you've saved up in your IBC/Bank On Yourself policy. For example, if you've got $30,000 in cash value, you can get a loan from the insurance company for up to 92% of your cash value.  In this example, you can have a guaranteed loan up to $27,600 with the life insurance company keeping a small reserve as a buffer.

Once you've funded your IBC/Bank On Yourself policy, you'll never use a traditional bank again. Nelson Nash, the originator of the Becoming Your Own Banker concept, at one point had over 40 policies and he's repeatedly said he hasn't needed to step foot in a bank for decades.

What are the advantages of borrowing money from a mutual insurance company over a traditional bank? There are many but I want to tell you about four of them.

Advantage #1 – Guaranteed Loans 

If you have $30,000 saved in your IBC/Bank On Yourself policy borrow as much as 92% from the mutual insurance company, no questions asked. The insurance company can't refuse you for a loan. As part owner of the mutual insurance company, you're given this perk with your policy.
Imagine how powerful this is. When do you need money most? It could be you just lost a job and are in transition to find another one. Or your business could need a small infusion of cash to get through some temporary setbacks.

When you apply for a loan from a traditional bank, there are no guarantees the bank will approve you. If you've just lost your job and have no income… forget it. Your loan officer will never approve your loan.

If your business is struggling, your loan officer may decline you access to new money or a line of credit because of your hard times.

Advantage #2 – No Applications or Credit Checks 

When I first opened my IBC/Bank On Yourself policies, I was in the market to replace a vehicle . I planned to get a loan from a bank to pay for it. But I knew my policy had enough cash for this project, and I wanted to test the loan process to see for myself.

I picked up the phone, and I told the customer service rep I wanted to take out a policy loan. She asked me for my policy number and then asked how much I wanted.

She punched away on her keyboard for a couple minutes and then ended by saying, "You'll get a check in three business days." Sure enough, it showed up in my mailbox at the end of the week.

I couldn't believe it.

Now, if I took out this loan from a traditional bank, I'd likely have to set aside a couple of hours one afternoon to fill out all of the paperwork and gather all of the documentation for the loan officer. Then I'd wait another week for all of the papers to shuffle around to each person involved.

Advantage #3 – Setting Your Own Terms 

With a loan from a mutual insurance company against your policy, you're in full control. You set the terms of repayment.

The insurance company will charge you a minimum amount of interest for the loan. Right now, rates are between 4.5% and 5%. Some mutual companies are lower; some are higher.

And the company charges this interest because if it lends you and other policyholders money, it can't invest it long term to meet its eventual commitments to you.

But do you want to set up a seven-year, rather than a five-year, payback schedule on your loan so your payments are lower? Go for it.

Do you want to pay off your loan over 10 years? No problem.

Or what if you want to change your payback schedule from a five-year payback to a 10-year payback midterm?

Again, no problem.

Once you've funded your policy long enough, you could also have the option to never pay back the loan if you don't want to. And the beautiful thing is that the insurance company couldn't care less if you did.

How can that be?

If you don't pay back your loan, the insurance company will just keep track of the interest you owe it.  
It knows you're going to die someday. And when you do, it'll just pay off the loan and accrued interest with the proceeds of your family's death benefit check.

Advantage #4 – Flexibility 

What happens if you have a car loan from a bank and you start missing payments? First, your credit score will take a hit. Once you miss enough payments, your bank will send the local towing company for a midnight visit to seize your car.

What happens if you start missing your mortgage payments? The same thing. Your credit score takes a hit. You'll start getting letters from the bank. Eventually, the bank will foreclose on your house and kick you to the curb.

With a loan from your mutual insurance company, you've got plenty of flexibility for unknown events life might throw at you.

Need a couple of months to take off making loan payments because you lost your job or just had a big unexpected expense? No problem. You won't have to worry about damaging your credit score, or the bank repossessing your car.

Of course, it's not a good habit to get into missing payments. But it sure is a nice option to have if you need to use it.
Build Wealth Paying Back Policy Loans 

In short, IBC/Bank On Yourself policies offer a powerful, unique, and unmatched alternative to the traditional financing process with banks.

With enough commitment to funding a set of policies, you can work toward eliminating traditional banks from your life for good.

Just be sure to remember the

 4 Golden Rules of Becoming Your Own Banker:

1.  Think Long-Term. (This is not a get rich quick scheme.)
2.  Don’t Be Afraid To Capitalize Your Policies.  (The more you save, the more opportunities you will have.)
3.  Don’t Steal From Yourself.  (Pay yourself with interest when you borrow from your policy)
4.  Stop Working With Banks.  (They are the source of nearly all financial problems we encounter.)

John Montoya is an authorized advisor with Bank On Yourself and an IBC Practitioner with the Infinite Banking Institute.  He can be contacted at (925)386-6639 or