289: Infinite Banking FAQs | Chey & Garrett, US Advisor

Foreign.

Welcome to wealth on Main street, where conversations about growing your wealth are fun and entertaining. Wealth isn't just about money. It's the skills and the knowledge that we develop to pass on to future generations. Tune in each week to grow your mindset and your net worth at the same time. Frequently asked questions, common questions about the infinite banking concept, things that come up, how do we address them? What are a couple of these items? I'm joined today by two incredible gentlemen from our American area of the company. Thanks for being with us, guys. I've got Cha o' Brien here joining us for the first time on the podcast. And I've got Garrett making his second appearance. Happy to have both of you guys with us.

Now.

We, you know, kind of an impromptu episode that we've got here, but I'm excited because, you know, Che, you posed a really interesting question that kind of came up and something you thought would be a good topic for us to dive into. And then we're going to dig into a couple of these things. But I'd really love to hear what for our listeners, what is it that we want to frame up here today so we can just have a good roundabout on this, this topic?

Well, Richard, I do appreciate you having me on the wealth elementary podcast today. And really, the one thing that has been coming up, quite a few of the clients that I work with is, you know, I get the whole life insurance thing, I get the whole paying premium. They're good with paying premium, but now they're starting to try and flow their income through it via policy loans and blown repayments. And what I start, what I'm starting to find is they're asking me questions about what is the benefit of me flowing my capital through policy loan repayments when it really doesn't get me any. It doesn't move the needle forward. It just, it just gives me access to capital again. And so for them, they're just like, I just don't see the benefit in doing that. And for me, I, I really don't know how to answer the question. So I wanted to pose this to you and see what you thought.

So it's a really cool question. And I think where this stems from to give everyone, our listeners, a little bit of background. Of course, you know, everything that we do kind of stems from this amazing 92 pages of becoming your own banker. And there's a couple points in here where Nelson kind of infers that ultimately a person should be at a position where, you know, premiums and income should match. And in fact, he's got on page 48 and 49, he literally has a chapter called expanding the system to accommodate all Income. So, you know, you could say he's a little bold about it to some degree. And Nelson isn't saying that, that that should happen in. In exactly the same way. What he's indicating is, shouldn't you plan or prepare yourself or have big goals around that activity based on the concept that when you put a premium dollar in and it creates this multiplication, multiple utilization effect over multiple areas of your life, would there be any downside to doing that? So it's a thinking question more than it is like, oh, in practice, Nelson's telling me, I have to go do that. Some people really go ultra literal with this, and they try to like, oh, my God, I'm. I read the book and I'm so pumped. I'm going to have every single dollar that I make under the sun from planet Earth, from my tax refund to this, to my Christmas gifts that come in. I'm going to sell everything on Etsy and on Facebook Marketplace, and, you know, I just sold a paddle board. I got $200. I'm going to get that income into the policy. Like, they get really granular and wrapped around the weeds on these little things, because I think that's what they're supposed to do. And the other thing that Nelson says in there, which people often miss or don't connect with, is that he says, you know, it would take the average person about 20 years or so to reach that level. Now, I haven't been doing this for 20 years. I'm getting up there, though, a little bit, realizing how long I've been doing this for, actually. And. And I don't. I don't do that. I don't have every income dollar going through a system of policies. I mean, I'm certainly trying to increase my system. I think I do a pretty good job of it, but I don't have it running that way. And the other thing that Nelson indicates is he's trying to say that, you know, ultimately should be in premium. The only thing that grows a policy. Grows a policy is premium. Premium makes it grow. Loan repayments doesn't make it grow. Loan repayments is about being a good banker. Loan repayments is about good habits. Loan repayments is about not stealing the peas, which is one of Nelson's golden rules. Which, by the way, if you have a copy of the book, reread the grocery store, please, because the grocery store is one of the most important things in that Book, don't steal the peas. In other words, don't take a policy loan. You've got money in your system capital, you're borrowing against the system using the insurance company's money. You co own the insurance company, you're using their capital to go do things in life. Pay for cars, buy for this, pay down my mortgage, buy a rental property, buy an investment asset, pay for my kids college, go take my family on vacation, buy a cell phone. Okay, whatever the thing is that you're doing here. So you're using the insurance company's money to do that. You owe the insurance company your policy is the collateral policy continues to grow as though nothing has, you know, nothing is in the way there. That's basically the, the, the magic of the system. Okay. There's no real secret sauce here. The secret sauce is what's between your ears. It's how do you perceive and then implement in actuality that secret sauce on a day to day basis. Now we are all creatures of habit. Would you guys both agree? Absolutely. Now do we have maybe some really good positive and conducive habits that we've built and maybe a couple on the other end of the spectrum?

Yeah.

Oh yeah.

I don't know about you guys, but I definitely have some on the other end of the spectrum I could maybe work on a little bit. And so we all develop those and we develop them financially as well. Whether it's in your household, you might have different spouses with different habits and maybe they're not always connected or gelling on those habits. And so you're going to insert a new financial way of thinking and way of acting. It's a way of thinking because thinking comes first before action. And then action is the banking activity in the doing, moving money from here to there, here to there, here to there, here to there. Does that make sense?

Yeah.

Okay. In the practice of doing that, if you've been doing something a certain way for 10 or 20 years in your household and all of a sudden you're going to insert something new into the middle of it, is it going to require a little bit of practice and some retraining of your mind?

Yeah, 100%.

You got to set up some new bill payers, you got to get used to making loan repayments, maybe communicating in some emails to a life company and you know, the coach that you're working with, you're gonna jump through a few hoops a little bit, there's a little bit of effort. Anything worth doing takes a little bit of effort. And you have to learn that over time. Some people will pick it up literally in almost nanoseconds. They just get it. They're ready to do it right away. Some people might have more complicated financial circumstances. They might have more ins and outs, they might have more bills to pay, they might have more debts to take care of, et cetera. And for them to insert it, it might take a longer time and more practice. That's just the nature of life. Everyone's where they're at, and we can only start with where you're at. Does that make sense?

Yeah.

But the quicker and the faster you can go through those repetitions, those repetitions, repetitions. That's how we learn, is through practice. That's how we begin to really absorb things and internalize them and get really good at them. You get good at sports through practice. You got to go to. You got to go to pr. They literally call it practice. Oh, where are you going today? I got practice. Basketball coaches needs me to be there. You might have to run lines, you know, you might have to do laps. You got to do all these things because you're practicing with your body. You're training your body and the muscles to do better. When it comes to game time. Okay, well, financial game time is happening all the time for you. Do you want to jump into the game with no practice and not be prepared when a big decision comes up, or do you want to make sure you have enough reps and you've been to enough practices with the team and with the coach before you jump into game time? That's the big financial decision. Does that make sense?

Yeah.

Okay. Never used this analogy before, so I hope you guys like this.

No, it's good.

All right, so the more that you can institute getting some of those repetitions early on, the more success you'll likely have with this process. Now, that doesn't mean you gotta do granular, you know, hundred dollar policy loans on every little thing, but it's a. It's about making some of those commitments. And to kind of circle back to your question, Shay, it's like, look, do you need to run a bunch of your expenses through a policy? Some people really want to do that and they figured out a way to do it that works for them. But just because it works for one person doesn't make mean it works for everyone. I can tell you personally, I don't run a ton of my expenses through like, I do some of them, but not like a ton through the system. And the only reason I don't do that is because to me it becomes transactional, can become a transactional burden. I don't want to be over transactionalized. Does that make sense? You know, a colleague of ours, Vern McCarty, great guy, he's, he shared, you know, from some of his stages and some of our events how he does it. He kind of does it on a quarterly model. So he's got multiple policies in the family. He's got a wife, two kids, got a business partner. He's got a bunch of people, you know, insured. And the way that he does it is like every quarter I take a big giant loan and I use that. I know what my budget is. I have a very clear and defined budget for my, my day to day living expenses. I have that now set aside for three months. I draw that down and then every new dollar that comes in goes to policies, it goes to loans if no premium is due. It goes to premium if premium is due. So he just looks at it that that's how simple he keeps.

That's so nice.

Now that's one way, that's just one way of doing it for one guy, one family.

Okay.

Some people might do that on an annual basis, but the reality is he's been doing it for a while. He's been capitalizing for a while. He had some policies that were some small ones. He started like 15 years ago before he learned about infinite banking, you know, so, so there's some momentum built. There's some things he has to work with. And he's also putting substantial premium into his system. If you're, you know, have you ever thought about, you know, if, if you think about having like, you know, it's summertime, you have like a pool you want to fill like one of those inflatable pools and all you have is a little garden hose to fill it, it's going to take you a long time to fill it, right?

Yeah.

But if it takes all day and it's a really hot day and you started in the morning and you can't use the pool until night when it's cooled down, how much juice did you get out of the pool? And then the next day it's going to be cold. So what was the point of getting started in the first place? Yeah, there was no point. Right. You didn't have enough flow of energy of water coming into the big pool. If you needed to enjoy the pool and get its purpose utilized, you needed a lot more volume of water coming in in a short time frame. So that's policy design and a Commitment level to capitalize and pay more premium. So you just gotta recognize are you trying to do too much with too little of a system? And those are good conversations to have with your course. Some people, people get it in their mind that they want to do A, B and C, but they're not building and committing to being able to do A, B and C. They want their cake to eat it too, but they're not even ready to bake the cake.

Yeah.

You know, one of the things that you said that I really liked was, is just the practice and the repetition. And I think when we, when we're reading Nelson's book or watching all these videos, we're kind of, we're taking something so, so simple that Nelson says this con, this concept is so simple. But we as humans, we make it over complicated. And just the act of the repetition and the practice, like you said, taking something new and adding, adding, adding it in and just making it part of everyday life. Making, creating those new habits, those new repetitions, I think that's really a missing key piece that people just, they overlook when they add the system into their, into their lifestyle.

And those are the behavior elements that this is really all based on. So yes, we hate.

Oh man.

Newsflash. We use insurance policies. Get over it.

Okay.

It's an insurance policy. It's like not that big of a deal. It's, but it's, you have to use it. It's the key word there is use.

Yeah.

Use is in the activity and the actions that you do. That's the banker's role. That's you as the banker. It's making the rules, making the decisions, doing the actions, creating the habits and the behaviors. You can have a wonderful, amazing, the best design policy since sliced bread. It'll only do what the policy will do, what you do and how you intersect with it. And your decision making matrix is what's going to determine how successful that policy becomes. You know, and so, and, and, and then some people say, well, I'm already paying the max amount of premium that the policy will allow. It can't get any better. You're right. If that policy is paid to its maximum level and you can't put any more into it, you're right. That can't get any better. But your behavior can because your system can improve. The way the system improves is by expansion. You know, when a bank, Wachovia bank or bank of America or TD bank, they. A new development opens up in a neighborhood, in a city because people are moving there in migration. You Guys are familiar with what that looks like. You're both in kind of hot spots, I think, and where you live, you know, you're seeing increase in, in migration to your areas. Well, when the new neighborhood goes in and they've got the new shopping center, what's the first thing to open up in the shopping center?

Bank.

There are like several new banks right by my house because they're building it out. There's like, they're the first ones there.

You get like a subway and like some like fast food joint and a gas station. They're usually the first ones up. And second one, well, they were used.

They were there for years before.

Right.

But.

But as soon as they really start doing development, it's always a bank that goes up first. That is not a coincidence. That is a pattern. That pattern is a behavior that a major banking institution does. You're just going to mirror and model the same behavior. That's it.

So when you're talking about repaying loans, Richard, I think we're so conditioned too to think, oh, this is a loan payment. And like getting used to wearing the hat of the banker hat just takes, it takes practice, right? Like I've been doing this for six years and I still, sometimes I'm like, I don't want to pay back the Paul, like paying a policy loan and interest is not, doesn't feel good all the time. It's because I'm still wrapping my head around what that means to be a co owner and that you got to wear the banker hat. But it's just it. We're so conditioned to think loan payment bad, interest payment bad.

And a really good place, Garrett, that you're mentioning this, that I want to reference people, is if they have Nelson's book and you guys have yours there. I want you to flip to page 26. So if you guys listening, go to page 26 of your book and you'll see at the bottom of page 26, Nelson has a diagram called the money pool. Now the money pool diagram here is all about, you know, the, the inflows and outflows of the, of the insurance company. It's not everything. It's a simplified view. But look, premiums come in. They got to pay for expenses. That's the people that work there. They got to pay the heat bill. They got a building to maintain. They got a technology system, they got a phone system so you can call them. You know, they've got a couple of executives and VPs. There's an actuary that designs the product like these Are all people that need to get paid. That's got to come out of that deal. Another expense line would be taxes. The insurance company pays taxes to the federal government and probably to the state. All right. In Canada they have that set up where there's something called premium tax. Premium tax is technically paid by the policy owner, but they don't see it because they pre bake the cost into the premium.

Yeah.

All right.

They think of everything.

It's a pass through from the policy owner directly to the tax authority. It's just pre done. So they simplified it for everyone. So they don't even really know what's happening. But it is happening in the background. Right. They got to pay for death claims. Claims come out of there. Well, then they got to take. They got to put money to work. It says there's three. There's three key places. They got policy owners, mortgages and joint ventures. Now we could just call that investments as one big bucket, right? Yeah. They got to invest money. They also own a bunch of bonds and stuff like that. And a lot of those things have a repayment model to them. Well, there's, there's. Money goes out. Money comes in. Money goes out. Money comes in and out of the hierarchy. What Nelson's trying to establish is the hierarchy. Who's at the top of the food chain. Policy owners is number one. Because you're a co owner, you have the first right. You as the individual and the ownership mechanism, have the first right to access whatever value your policy has from the big pool as collateral before it goes anywhere else. That's your percentage or level of control. Full. It's full autonomy and control at whatever your equity position is. Now I got to put the money to work anyway. They're going to put it to work. They can choose to put it to work somewhere else or they can put it to work with you. Where do you want them to put it to work? I don't care. Just put it to work. So if the three of us are all with the same insurance company and Garrett, you take a policy loan and you're paying some interest and it's accumulating. Maybe you're not even making payments and it's accumulating. Well, that's reducing the net death benefit that's going to come out when you get paid.

Yep.

Well, if you look at the diagram, death benefits is an outflow.

Yeah.

So we've just reduced the outflow, which means that the net result is the same. It's either an inflow of interest coming in or it's a lower outflow. It's still a benefit to Che and I because we're in the same pool as you and our families by. By, you know, essentially being connected. So that's really all this is. It's just a closed ecosystem of free people all over, you know, just happen to be connected unknowingly through contracts across the. Across the nation.

Yeah.

It's so cool. And with.

Yeah.

You don't have to ask permission to do it. You voluntarily protect your family and get access to capital as you build it, and you can mutually be profitable together because the insurance company's got to put it to work. It's going to put it to work. Some of it can be with you.

Yeah. So good.

It's also. I love being the analytical nerd that I am. I used to work at a CPA firm.

Jay.

We still like that.

It's okay.

But just how the, the stewardship that life insurance companies show and have is just remarkable over their existence. Like, why would you not put your money there? You know, they've done. They've paid out dividends every year since they've existed through the depression and 08. Like, tell me something that's done that. You know, so it's just remarkable.

Embargoes, you know, wars, multiple wars. Every financial calamity that's existed in the last 200 years, they've managed to weather it better than any other organization on the planet, and they've been consistent. And yet people. People who learn about this will say, oh, but it's too good to be true. I'm like, well, if was it too good to be true 200 years ago when everyone was.

Well, what I love about it is, like, the meticulousness of it. So what you were describing about the, the tax, the premium tax being baked in, it's.

It.

It works and it's profitable to the policyholder, even with that baked in. But they've thought of all of those costs on the front end. And, you know, we always joke that they know when I'm gonna die, but I don't know when I'm gonna die. Like. Like they know more about me than I do, you know, so. But it's just. It's amazing the. And like, the history of that. Like, they know more about the population than you know, which is. And it's great, but it's just incredible to see that and to, you know, to put your capital in a system that's been proven to work. They're really conservative, they're really careful and they do a great, they do what they're, what they say they're going to do.

So you just brought up a really cool point that I think I point out because we're in Nelson's book a little bit today. So page 36 of Nelson's book, he's got this great, great diagram here. For anyone that's got the book in your hand, go to page 36. He's talking about how they create the entity for this. So he's explaining like how the insurance company kind of does things. And he's got this diagram. This is basically a mortality table. Now it's from 1958, but the mortality table today looks the exact same. The only difference is it's stretched out wider. So Nelson used to say the pig in the python. You know, when a python eats a pig, it kind of has a big lump and then the lump goes through and it gets smaller as it goes down to the end. Yeah, that's what this diagram is. It's the pig in the python.

It does look like that.

And so out of a thousand Americans or North Americans born, a thousand die. Oh my God. Go figure. Isn't that amazing how that works? That's called science, everybody. Okay? And unfortunately, and this was a problem for the longest period of time in human existence, a large bulk of them die, unfortunately, before age 21. And you can see there's a big strong line there that is still the case today, but that is a much more minimized case because of the advances of modern technology, which is amazing. We love to see that. But now as you go forward, you see that, that, that each year it's how many die each and every year. And well, it gets wider and wider and they don't know which person is going to go, they just know how many. And so mathematically it's actually very easy for them to calculate this. They do pandemic modeling, do all of this stuff. Right. They just, they just do it on a massive scale and it's the power of, of like, you know, large numbers being aggregated. And so we get the privilege to pay a little itty bit for this big, massive benefit because they understand how those flows work over 100 year time frames. Yeah, I mean, so yeah, we couldn't do that on our own, not without hiring an actuary and overly capitalizing.

Well, many actuaries.

Yeah, but, but they've, they've done it already for 200 years. So they've already established the foundation and business structure and the data to be able to do it even more Effectively they're more efficient than they've ever been.

Yeah.

So they're getting better at it, not worse.

You know. You know what gets me is people I, and I've had this question quite a few times is they ask me, well, why can't I just do this? I can just do this through my bank account or my CD or this or that. And I'm like, go right ahead. The, the process of becoming your own banker can be done with any other tool. It can. But do you want the most efficient tool to be able to solve the problem that you want to solve? Well, it makes the most sense.

And it's again interesting that you mentioned that because on page 45 in the Twin sister example we have a comparison of two people doing something very similar. Similar cash flows, money going in inputs, car loan repayments. They're both quote unquote self financing cars. One's using a CD or a GIC in Canada at their local bank, the other one is using an insurance policy, but they're doing the same activity. The difference is one of them co owned the entity, the other one didn't. And here's the thing that you don't see on that page. What you don't see is okay, the one twin used a cd. They had to put money away every four years. They're basically locking it up for a four year guarantee contract. If something happened in that four year period and needed access to the money and they had to break that contract, are they going to take a penalty or are they going to lose out on some of the interest in the gains and then they're going to go backwards. So the scenario for the CD sister, Nelson was actually overly conservative and he showed what has to be the absolute perfect scenario with no changes at any time to ever interrupt it. But for the infinite banking twin it wasn't the case. They had total control and autonomy. So even if there was changes, they had way more control over those changes and way less restriction. Fundamentally they had to wait a longer period of time to become more operational, but the time was going to go by anyway.

And it's really cool that you said that because people don't realize. They say they want this get rich quick scheme, they want this, you know, I need it now, you know, mentality. And then you have to see that there is no perfect, you know, system. Like you were saying with the twin sisters. We do the CD example, you know, life is going to happen, guaranteed that something is going to happen. It's not going to be perfect. You're Not. It's not. It's just not going to work out perfectly. Would you rather have it in a way where you could access it if you need to, or would you rather have it locked up and have to pay this penalty that it just does? It goes back to. Nelson always says, you know, you want to get to the point where you don't have to do business with banks. Obviously, we can't 100% do that because you do need a checking and a savings account, which he does state in the book. Right. For the debit, for the access and convenience of debit. But other than that, we need to get in the habit of storing our money somewhere where we have 100% ultimate control. And if we need to do something in life, we don't have to go and ask permission.

Everybody needs a storage facility for their capital, their stock, their inventory, the stuff that they leave in their garage. You need a storage shed for your lawn tractor and all the. Your rakes and the tools and the garden tools. You need a storage facility for stuff. You need us under your stairs. You probably have storage in your house. You know, you. You in the attic, you've got storage. Why do we always. We buy properties that require we. Oh, because we know we're going to have totes and things to store. We got the Christmas, you know, tree, and you're. You're moving things out in your physical environment the same way you move money. You need a storage facility. You want one that's efficient. This just happens to be a very efficient one over a long period of time. Now, here's a really cool thing I want you guys to just kind of ponder and think about. You have this incredible tool in this machine. It's working really well for you. You've got all these elements and you've got control over it. Now, contrast that to something you said earlier, Jay. Someone's like, well, I want to do this with my line of credit or my home equity line of credit. I'm like, oh, cool. You know, go ahead and attempt to do that. But during the 2008 financial crisis and even more recently in Covid.

Yeah.

You know, you know, some people lost some jobs in that time frame.

Yeah.

When you lose your job, do you get a lot of advance notice?

No, it's more. Most likely instantaneous.

Yeah. When a massive economic change happens, sometimes without too much notice. I don't know, may. Whatever it's tariffs, like, whatever, that's things that like, kind of mess with what's going on in your business or your business structure. It could really create a massive temporary change to either your industry or something that you can't control. And a banker that yesterday was going to give you money with no questions asked today won't give you a dime. People who had home equity lines of Credits during the 2008, 2009 financial crisis, the meltdown, they locked them, froze them so you couldn't draw from them anymore. And then they turned them into principal and interest payment structures, mortgages, the second position or whatever they were in, and they forced people to make payments and or at least I know in Canada they're demand loans. Demand meaning on demand. We can call this loan due and if you don't have a way to pay it, you're gonna, they're gonna force you to sell the house because if they see the real estate market sliding backwards, they don't want you borrowing against the asset that then was going down.

Yeah.

So you, while you may be able to use it, that's today, but tomorrow you might not have that choice and you don't get to control the decision. Wouldn't you much rather be in the position where you had the control? Well, guess what, with the insurance company, because you co own them, you have all that control. So if you're going to build the line of credit anyway, if you're going to use a credit line facility, if you're going to borrow against equity in some measure or form, don't you want to do it where you have the most absolute level of control versus the least?

Yeah.

And then, then we have to talk about financial energy. Where are you shoving your financial energy? Is it going towards an entity you have very little control over or one that you do? It's really as simple as that. Yeah, you can apply some numbers to it, but at the end of the day, it's a fundamental decision about where do you want their energy going? Do you want it going to someplace with more or less control? It's really can be as simple as that.

I have a HELOC right now because of where we're at, just making things work. And I didn't make the simple interest payment and I got a call and a text and a late penalty fee. And I was like, I'm just too used to the policy. Lines of credit where they don't. You never get a notice, it's on your statement and you pay it once a year and that's it. There's no, there's no text, there's no calls, there's no late penalties. So it feels very different. No slaps on the hand there.

So I think you're muted there, Jay.

I don't know how I did that. Sorry.

Go ahead.

So that's good stuff.

I agree. I agree that it's great stuff.

Great stuff, Richard.

Well, guys, hey, this is an awesome conversation. I want to thank you both for bringing a couple topics in, and I think we got to. What I'm really happy is that we got to jump into Nelson's book a little bit. We didn't really plan for that, but we were able to hit actually a couple of key pages today, and sometimes ones that we don't always go over. We don't really talk about actuarial tables very frequently. We don't always talk about the money pool. So we hit a couple of key pages and I think we covered some of the dynamics, you know, and we, we probably got to the core, I think, of your primary question, Jay, as well. So I, I just want to say I appreciate both of you, A, for the work that you're doing, for your commitment level to helping others in this process and really for your commitment level and your, your own education, your own training. The spirit of being a constant student and always learning is evident. You know, my experience with both of you guys. So I'm excited about that. Continue that ever present journey of learning. Thank you.