Wednesday, September 25, 2019

IBC - Which is Better? Direct vs. Non-Direct Dividends ("YOU'RE MAJORING IN THE MINORS!")

Let's start by getting a couple things out of the way when it comes to dividends on a participating Whole Life policy:

1.  You have growing cash value (guaranteed interest and non-guaranteed dividends that become guaranteed once declared) when loans are taken.

2.  One option is not necessarily better than the other.  That said, someone trying to sell you a policy might try to persuade you otherwise for their own purpose (they might only work with one type of company).  

3.  Infinite Banking Authorized Practitioners are (or at least should have been trained to be) completely agnostic.  They shouldn't favor one over the other for reasons explained below.

What follows below is a deeper dive into the world of Whole Life dividends to help further your Infinite Banking (aka IBC) knowledge.  


There are two types of dividends you can get in the Whole Life world. 

  1. Direct Recognition Dividend
  2. Non-Direct Recognition Dividend

From a marketing point of view, advisors will “sell” non-direct as the best option because dividends are unaffected by loans. 

However, this is a half-truth. 

There is no free lunch which we all know to be true in life.  Same lesson applies here with direct vs non-direct.  If a life insurance is paying the same dividend regardless of whether a person requests a loan, that means there is something else going on. 

Here is the other half for the full picture on non-direct dividends.  Life insurance companies that pay a non-direct dividend pay out lower dividends to everybody to offset the cost of borrowing from the general fund of the life insurance company for those who do take loans.   

Essentially, those who do not take policy loans are subsidizing those that do.

So the question becomes would you rather have the potential for the highest dividend you can get every year?  Or would you be happy with a lower but level dividend for all years?  With a direct recognition dividend, you have the highest potential for dividends without having to subsidize other people who may or may not take policy loans.  You still get declared dividends when loans are outstanding.   They are not taken away from you because you have a loan.  However, you will get a reduced portion of the dividend if a loan is taken.

Back in 2007 I emailed Nelson Nash, author and creator of Becoming Your Own Banker (the pioneer of IBC) and he surprised me by calling me out of the blue.  He was already well into his 70’s at that time.  I wasn’t expecting an email back let alone a phone call.  I had emailed him about direct vs. non-direct because I wanted to know which was better for my own situation before I started recommending a particular choice to my clients.

The first thing he said to me after introducing himself was to thank me for reading his book and for  helping him to spread his message about IBC by being a professional in the industry.  Then in his thick and sage Alabama accent which I recognized as Nelson’s right away even though we’d never spoken before (no introduction needed!), he said something I have never forgotten.

He said in that kind, old man Alabama drawl, “Now son, you’re majoring in the minors!”

What a thing to say!  If he didn't already have my utmost attention, he surely had it then.

Now you have to know Nelson had a certain way of teaching fundamental truths.  If you’ve read Becoming Your Own Banker (it’s worth re-reading from time to time), you know he uses analogies and euphemisms quite a bit to explain important points that should not be taken for granted.  

That's exactly what he did with me over the phone at 7:53am PST while I was packing my little ones into the car for a ride to their pre-school.  It instantly hit me what he was saying and has stuck with me ever since.

Direct vs. Non-direct ultimately doesn’t matter in the big picture of IBC.  

The whole point of Infinite Banking is to own and control a system of money that you are constantly directing your flow of money into so you can eliminate the middle man (traditional banks).  The freedom of control and use of money for any purpose while enjoying all the perks of an ultra-safe and ultra-liquid cashflow management system where you are guaranteed to have uninterrupted (tax-free even!) growth and access for life is the main point.  

Banks become super wealthy because they rob of us this freedom by fooling us into believing we need them.  We don't!  They are the middle man in the money game that seeks to control the flow of your money for their profit.  

He went on to explain to me that all I need to do is have “a good administrator (life insurance company) to handle administration and paperwork.”  The dividends will be there as they have been for 150+ years and counting. 

So to return to the discussion of direct vs non-direction and understanding the difference… while it may be good to know (especially if the only thing learned is a half-truth), it ultimately isn’t the reason why you choose to go with one life insurance company or another. 

Getting back to Nelson’s bigger picture, if a person is really doing IBC correctly, they are going to have multiple policies (with different companies – direct and non-direct dividends) over time which will eventually incorporate their total cashflow.   

It’s not an either/or proposition on which is better because you are going to receive dividends whether you have a loan outstanding or not.  It essentially comes down to: 

Are you okay subsidizing yourself and others who take loans (non-direct) and therefore take a reduced dividend for all years or obtain the highest potential dividend based on your own loan borrowing and repayment schedule… 

But as Nelson reminded me years ago: don’t lose sight of the bigger picture ("don’t major in the minors!").

Nelson instructed everyone to do 4 things to achieve Becoming Your Own Banker:

  1. Think long-term.
  2. Don’t be afraid to capitalize (open a policy and max-fund a properly designed Whole Life policy).
  3. Don’t steal the peas (repay your loans at a “higher interest rate” – another euphemism meaning re-capitalize quickly so have capital for your next opportunity).
  4. Stop working with the middle man (i.e. traditional banks).

If you have more questions you'd like answered about Infinite Banking, let me know!  You can find me at

Thank you,

John A. Montoya
JLM Wealth Strategies, Inc.
Bank On Yourself® Authorized Advisor
IBC® Authorized Practitioner
CA Life#0C42222
Calendar: Schedule Now

Monday, August 26, 2019

“Paying Extra Interest” on Life Insurance Policy Loans (Infinite Banking Concept)

Over the years one of the most frequently asked questions I seem to get from my Infinite Banking clients is how they can pay extra interest on their policy loans the way Nelson Nash, the pioneer behind the Infinite Banking idea, teaches it in his best-selling book “Becoming Your Own Banker”.

It’s a great question because Nelson Nash, the creator of the Infinite Banking Concept (IBC), had a unique way of teaching which a lot of the time incorporated euphemisms. 

First, what’s a Euphemism?  It’s expression used as a substitute for the actual thing.  For example, one might say “he passed away” instead of “he died”. 

“Paying extra interest” is the euphemism Nelson used to explain how to re-capitalize Whole Life policies when loans were taken. 

“Paying extra interest” in effect means sending larger loan repayments to accelerate the payoff of a policy loan. 

One of the unique things about policy loans is that 100% of the loan repayment automatically reduces the balance of a loan.   If you have a $10,000 policy loan from your IBC policy and submit a loan repayment for $500, all $500 is applied towards the $10,000 loan balance.

Not one cent first goes towards interest which is what you will be familiar with when borrowing money from a bank.   

In contrast, a bank loan will demand a payment schedule where the banks charge you interest first and then applies the rest towards the principal.  In this way traditional banks collect more interest upfront and delays the payoff of loans for as long as possible in order to maximize the interest collected.

This is why Nelson talked a lot about Volume of Interest being more important than the Interest Rate.  Check out a mortgage for the best example.  A “homeowner” might have a 4% fixed rate mortgage for 30 years, but are they actually paying 4%? 

Far from it!  We all probably realize the volume of interest on a mortgage is over 80% in the first 10 years.  If a person keeps and pays off the mortgage in 30 years, the volume of interest will eventually come down to the mid-30% range. 

Did the homeowner ever pay 4%... at any point?  They actually paid 1/3 of their mortgage in interest over 30 years. 

It’s financial deceit at the highest level.  And banks will do this with car loans, credit cards, personal loans, etc.  We should not think of banks as friendly institutions which is what Nelson really wanted you to know!  Banks want a pound of flesh and they do a masterful job of drawing out the interest on loans for as long as possible.

Understanding Volume of Interest is critical to your financial base of knowledge but unfortunately consumers are fixated on interest rate.

With IBC, the policy loans from Whole Life policies have a true Volume of Interest of 5% (the average borrowing rate from IBC approved life insurance companies) because it is a simple interest loan.  Every dollar repaid goes towards the balance with interest assessed at 5% at the end of the policy year, not upfront and certainly not compounding like a bank loan.

So if you decide to re-pay the policy loan on an 8% schedule, you’ll pay off the policy loan sooner.  This is good because it recapitalizes the policy making more cash value available sooner for the next use.  This is the first and most common way to “pay extra interest.”

Eventually when the loan is fully paid, you’ll have a good problem though.  You’re accustomed to making a loan repayment each month but now with no more loan balance, you have that extra cash flow from the 8% schedule of payments to do something with. 

This is where Nelson talks about “Overcoming Parkinson’s Law.” 

Simply put, most people will use extra cash flow to go buy something they don’t actually need.  Instead this extra cash flow should go back to the insurance company but now as premium to purchase Paid-Up Additions (PUA) rider. 

PUA’s turbo-charge the cash value right away.  The structure and use of this PUA rider is what sets an IBC Whole Life policy apart from any other type of permanent life policy.

The other way to “Pay extra interest” is to break up the loan repayment into 2 parts:

  1. Schedule a loan repayment for 5% (you always decide the time period… for example 5% over 12 months or maybe 60 months, etc., you decide based on your cashflow!)
  2. Any amount “extra”, you send a separate check to be applied towards the PUA rider.

Either way, you will accomplish “paying extra interest” which essentially is Nelson’s way of instructing you to be a disciplined saver and grow your wealth in the smartest place possible.

Benefits of IBC:

·       Safe from market losses
·       Available for any reason (investments or debt acceleration)
·       Always growing uninterrupted even with loans
·       Policy Loans are Tax-Free
·       Additional death benefit protection for loved ones
·       Shielded for college aid formulas
·       Protected from creditors/lawsuits (check your state)

Need a review of your policy or have additional questions?  Perhaps you’re ready for another Infinite Banking policy?  Many of my clients, including myself, have multiple IBC policies.

Schedule time to connect here:

Thank you,

John A. Montoya
JLM Wealth Strategies, Inc.
Bank On Yourself® Authorized Professional
IBC® Authorized Practitioner
CA Life#0C42222

Friday, April 19, 2019

The Banking Secret We Never Learn As Kids

The Banking Secret We Never Learn As Kids

One of my first financial lessons as a kid was the discipline of saving money.  I remember my mom taking me to the bank with a passport savings book and she would always show me my deposits, tell me money was safe and growing every year.

Back in those days (early-1980’s) interest rates were averaging 6 to 8% which really had an impact on my savings.  The good old days, right?

I loved seeing my money grow and so the discipline of saving stuck and for that I am forever grateful to my parents.  But what also stuck was the idea that banks are the place park money for future use.  My mom didn’t know of any other alternative so naturally neither would I. 

These days I know better… and I choose better for my kids.  I have 3 kids and each of them having their own Infinite Banking designed Whole Life policy because I don’t want them to ever rely on banks.  Instead I’m teaching them to profit the same way bankers do with their own banking system they’ll eventually own and control.

Rather than a passport savings account, I show my kids their annual statement which includes information like the picture above.  In fact, that’s from my daughter’s latest statement ending last year. 

What’s really cool is that the combined wealth my kids have already accumulated has helped them fund a stake in an apartment complex where projected investor returns will average 8.8% cash-on-cash and 19.1% annualized return on investment (ROI) over a proposed 7-year hold period.

Meanwhile, the cash values they’ve accumulated will still be growing in their policies… money working in two places at one time which I call Dual Compounding. 

Pretty cool, right?  And did you notice the death benefit is just coming along for the ride, too?  I’ve not only set up my kids for financial success when they come of age but I’ve also created a legacy that will impact multiple generations of my family tree.

What will you choose for yourself and your kids?  Click the photo above and I’ll show you how to get started in 3 simple and easy steps.


John Montoya
IBC® Authorized Practitioner

Tuesday, January 1, 2019

RE: Application Denied

Regret to advise that due to the medical history and recent accident noted in the medical records… application has been denied.

You’ve heard the saying: “early bird gets the worm.”  The last thing you want when planning for your future is to receive a message like the one above.  Unfortunately, I deliver a message like this every once in a while.

Case in point, I had recently been working with an individual who I first connected with in 2016.  For two and half years this person was on the fence about the Infinite Banking Concept (IBC) strategy although this was a referral from one of my most successful clients, a client who has purchased multiple Infinite Banking policies for himself and family across different insurance companies for diversification purposes. 

As one of my strongest client advocates for IBC, he has impacted many in his sphere of influence sharing the many benefits of IBC with family, friends, and work colleagues.  Suffice to say, referrals from this client don’t need much convincing.  They have the testimonial to know Infinite Banking works.

However, sometimes people simply struggle to grasp IBC.  They still believe it is too good to be true. It happens and no word of endorsement from a trusted colleague or recommendation from an experienced advisor is enough to spur a final decision in moving forward.

Never quite ready to pull the trigger we lost touch for over a year.  Then from out of nowhere I get an email end of summer.  This individual is now finally ready.

We pick up where we left off only making minor revisions to update the plan.  Application is submitted, exam and medical records ordered.  Then a few weeks later there some issues with medical records.

You see it turns out this individual had a reason for their sudden motivation.  As the message at the top alludes, something happened.  A car accident earlier in the year was suddenly more serious than noted at the time of the application.  By physical appearances, the individual seemed in good health when we met in person.  In this case though, the eye test failed.

The bottom line, coverage was declined.   

Don’t let this happen to you!  Car accidents are one thing, but I’ve seen people wait only to later be diagnosed with life threatening illness.  We are not immortal.

If you’re on the fence about getting started, there’s a simple solution.  Lock in your insurability with a 10 Year Convertible Term Policy.

This is the shortest timeframe available for a Term Policy that will convert to a custom designed Infinite Banking Whole Life policy.  As an additional perk, a few of the IBC companies I partner with will apply as a credit the previous 12 months of premium paid upon the conversion of the Term Policy to Whole Life.  That’s like getting a move-in special of free life insurance for a year!

How much time does it take to pull the trigger on getting started with IBC? 

For most people, they get started with my simple and easy “3 Step Process”.  In fact, for those with an exceptionally clean medical and driving records, they get approved in as quickly as 48-72 hours from the time of application without even needing an exam.  I’ve even had people get approved with an hour of the application.  Simple and easy!

It’s the 80-20 rule.  Most will start immediately, but some will just choose to watch more videos and wait for a better understanding of the strategy, or who knows.   

My advice: Just don’t wait too long and allow life to get in the way.  At least do the sensible thing.  Get temporary protection and lock in your insurability with a 10 Year Term.   You’ll be able to convert that Term to an Infinite Banking Whole Life policy when the time is right (assuming this is done by the end of the 10 year term period).  No need for a future exam to determine your eligibility.

You’ll have 10 years to cozy up to the idea of guaranteed growth, access to your money tax-free when you want or need it without interrupting the growth, and the peace of mind of knowing the foundation of your financial plan along with your legacy is set no matter what happens around that curve in the road called life.

If you’ve been on the fence, let me know.  It costs you nothing to get a quote on a 10 Year Term Policy.  The choice you make from there is entirely yours.

Have a prosperous 2019!

John A. Montoya

JLM Wealth Strategies, Inc.
IBC® Authorized Practitioner
Bank On Yourself® Authorized Advisor
CA Life#0C42222
Contact me here: