Question from someone doing their homework on the Infinite Banking Concept (IBC)/Bank on Yourself
Comparing this scenario to how things would work in my current TD Bank account: If I withdraw $3,000 from my TD Bank account, then I spend that $3,000 to pay my credit card bill. I then replenish my TD Bank account with an additional $3,000 that I've generated through my job. Is the only difference that I am getting to keep some interest on the money?
My answer via email:
There are a couple of ways to explain this. This is the first one that comes to mind because I just heard it recently and thought it was an interesting take on IBC.
“Would you rather attempt to earn 10% on money you save, or 4% on money you spend?”
Most people spend in excess far more than they save on an annual basis but we get caught up with chasing rate of return on the fraction of take home money we save. Wall Street and the Banks have programmed us very well in that regard. We focus our attention on the investment returns with what we save vs. recapturing all the money going out the window we’ll never see again. Which is the larger amount, the fraction you save or amount you spend?
You bring up a good a point about losing out on just a little bit of interest on that $3000. It is a little bit of interest on a small amount of money and especially if you are thinking in terms of a short time period like a year or two years. I’d like to challenge you to think bigger and to focus on what's going out the window.
How much of your take home pay goes to pay expenses? Of those expenses how much of your expenses do you pay with cash? Paying cash is another form of financing. Instead of paying interest to a finance company, you are now losing the ability to earn interest on the cash used for purchases and not just for a year or two, but for the remainder of your life. It’s the opportunity cost of paying cash. How much of those expense are just for paying interest (mortgage, car, student loans, etc)?
Once you’ve determined how much money you have going out the window that you’ll never see again, I want you to skip forward 30 or 40 years. What is the lifetime loss of your money?
You don’t have get specific with the numbers. I’m sure your imagination is at work. I’m guessing it’s a very large chunk of money that you could have redirected back to yourself if you had a financial system you controlled. With IBC, you re-direct the flow of your money back to yourself and because you own the system, you also profit from it. That is the essence of banking.
Banking is the most important business in the world. No other business can operate without it. The problem is that banks have tricked us into believing we need them for the banking function when in fact we don’t. (Have you ever heard that the greatest trick the devil ever played on people was convincing them he didn't exist? I'm not suggesting bankers are the devil...BUT it is a pretty neat trick to convince people no other banking options exist.) We have all the characteristics of a traditional banking system with a dividend paying mutual life insurance company. (Side note: care to guess which business buys more cash value life insurance policies than any other?)
With a traditional bank, there are four components:
1. Shareholder
2. Employees
3. Savers
4. Borrowers
With IBC, we’ve replaced the shareholder with the policyholder. We hire the employees to manage our banking business. We’re saving money with each premium paid and we all act as borrower whether we realize it or not. Remember that paying cash is just another form of financing. Ultimately, the money borrowed is our own. We pay it back with interest. The employees get paid. After all expenses are subtracted from income, there is a profit leftover. Since we’ve replaced the shareholders of banking system with ourselves (mutual life insurance companies are owned by its policyholders), we share in the profits in the form of dividends.
At the end of the day, an insurance contract is one of 3 places where you can put cash: Traditional Banks, Wall Street, and Insurance companies. It’s easy to understand why people who do their homework on IBC/Bank on Yourself end up choosing life insurance contracts. Dividend paying Whole Life insurance contracts provide the greatest safety, liquidity, and tax-favored contractually guaranteed growth versus any other place where money can reside, and that’s just on the surface of what you see. The "unseen" of IBC/Bank on Yourself is the ability to have your money working 24 hours day (for the rest of your life) even when you use it for other purposes.
Focus on the bigger picture and you'll avoid the lifetime loss of not getting started with Bank on Yourself.
Best,
John
P.S. Traditional banks are the largest purchaser of cash value life insurance contracts. A good portion of a bank assets that it keeps in reserves has to reside somewhere that is ultra liquid and ultra safe. What better place than a life insurance company? Do as the banks do... they don’t buy mutual funds!
John A. Montoya
JLM Wealth Strategies, Inc.
(925) 386-6639 Office
Authorized Advisor-Bank on Yourself®
CA Life#0C42222
DRE #01390017
