Banks, large corporations, and the wealthy all around the world have used the same process to generate a lot of wealth. Nash's book finally reveals the secrets.
But, this concept, if understood and used, can be your key to wealth.
"You finance everything you buy. You either pay interest to someone else or you give up the interest you could have earned otherwise."
-R. Nelson Nash
Most do not realize this lost potential. When we buy things like cars, homes, boats, etc., and use our cash or finance through a bank, those dollars leave our money system and along with it, the potential to earn interest.
Let's say you finance a $30,000 car at 5% interest with IOU Bank for 5 years. At the end of 5 years, you would have paid the bank $33,968.22 ($3,968.22 in interest).
That means $33,968.22 are forever gone from your money system and you no longer have the ability to earn interest on those dollars. Instead, let's say that you had that money in a vehicle (no pun intended) earning you 5%.
In 20 years, it would grow to $90,127.80. In 40 years, it would grow to $239,135.89.
|20 years||40 years|
Nelson Nash describes how to recapture this lost potential by becoming your own banker. Instead of using the bank to finance your purchases, you use your own personal bank. Infinite Banking utilizes dividend paying whole life insurance policies to build your bank.
However, it's the understanding of the process that makes this strategy such a powerful one. Here's how it works:
It is pretty simple. You are the customer and the bank. Let's revisit the example above to see what would have happened if you financed it through your Infinite Bank.
Let's say that you had the $30,000 in cash value in a policy that grows 5% per year. Instead of financing the $30,000 with IOU Bank, you finance it through a policy loan.
The insurance company charges a higher interest rate of 8% and you end up paying your policy loan back in 5 years. Here, your total outlay is more than the previous example $36,497.51. By financing through your own bank, you paid $2,529.29 more in interest.
How is this a better strategy if I am paying more interest to the insurance company that Bank IOU?
Remember, you took a policy loan against your cash value. Your cash value acted as collateral so the cash value never left the policy and it continued to earn interest and grow.
By financing through your own personal bank, you have a 5 year old car and $38,288.45 ($30,000 growing at 5% for 5 years) in cash value. You have recaptured the interest that you would have paid to IOU Bank.
|Finance Through IOU Bank||5 years||-$33,968.22||Paid $3,968.22|
|Finance Through Infinite Bank||5 years||$38,288.45||Earned $8,288.45|
Going from being out $33,968.22 (financing through IOU Bank) to having $38,288.45 (financing through your Infinite Bank) is a difference of +$72,256.67
You have gained back the entire cost of the car, the interest, and then some.
On average, Americans pay 34.5 cents every dollar to interest while only saving 5-10 cents of every dollar. We pay so much attention to how much interest we are earning on that 5-10 cents, that if we just looked at how much money is lost from the interest charges, we could gain so much more ground.
Becoming your own banker allows you to finance your purchases so that you are paying the interest charges to your banking system and growing your own bank. This is one of the advantages of whole life insurance.
If there isn't a need, there definitely should be a want.
Not a lot of people are aware of this concept revealed in Becoming Your Own Banker, regardless that it uses whole life insurance. Even more unfortunate, a lot of agents in the insurance world are as oblivious. It takes an advisor well versed in the strategy and a special type of insurance policy to effectively and efficiently utilize this process. But this strategy does exist and has been exercised for a very long time.
The Infinite Banking Concept, as described in Becoming Your Own Banker, is the foundation to our financial strategies. It has stood the test of market crashes, the declining real estate market, and bad investment decisions. We are so thankful to have learned about it at such an early age to fully utilize the banking strategy.
But, don't take our word for it. Do your own research. If banks, corporations, and the wealthy do it to build their wealth, why can't you bank on yourself? It starts with an open mind.
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