INVEST Less And EARN More Using The Infinite Banking Concept

Why should I use the process of becoming a banker, the infinite banking concept, for investments when I can use my own cash or I can borrow money from someone else to accomplish the objective? And again, going back to what Nelson says, it's not what you're going to buy, it's how you're going to buy it that's going to be the difference.

Why is it better to finance an investment utilizing the process of becoming your own banker, the infinite banking concept? So I'm joined today by my dear friend, my colleague, my teammate, Sarblo Gill, and we're going to answer that question for our listeners and for our viewers. Sarblo, welcome.

Thank you, Jason. Good to be here.

Yeah, you know, we were just having, actually we were having a conversation as I was enjoying a quick salad for my lunch. And one of the things that we were talking about was so often we meet with people who are actively investing and whether that's in real estate or businesses or just a wide variety of different things. And one of the questions that comes up in their journey of learning about this process is why is it an advantage for me to utilize my policy as basically a source of capital to be able to take advantage of this investment opportunity versus if I just take my own capital and I decide to participate in that opportunity? And it reminded me of what R. Nelson Nash said, not only in his book titled Becoming youg Own Banker, but also frequently throughout the years, as you recall, Sorbolo, when he would clarify for people that the process of becoming your own banker, the infinite banking concept is not about investment of any kind. And it's certainly not about addressing the yield of an investment. It's all about how you go about financing those things that you need in life, which can certainly include investment. Could you expand on that, Sarblo? And I know you've got a great example to illustrate the teaching point as well.

Absolutely, Jason. One of the things that Nelson talks about is that every decision that we make with the use of money is a financing decision. Every decision, we either borrow money from someone and we paid this someone back interest on the borrowed money, which is financing, because interest is involved. As borrowers, we can relate with the interest payment because we can see the calculation. So we know it's financing. The other way is we save up cash in someone else's bank and once we have enough money saved, we take that cash to accomplish the objective of using money to buy that goods and services. We do accomplish the objective of buying that goods and service, but the money is completely gone. It's been permanently transferred away from us personally or from a business. So we make a financing decision of using cash, and the decision is not to ever earn interest on that money. Not just over our lifetime, but a lifetime for the next generations to come. That cost of lost opportunity is permanent.

And the thing is, we never do the math on cost of lost opportunity because we cannot relate with that sometimes.

That's right. And.

I've heard over the years so many people use those words, lost opportunity cost, but when we dig a little bit deeper, not any single person that I've met with has ever actually reckoned with it where they can provide an example of, yeah, I utilized my own cash to purchase this item and I gave up the opportunity to earn X amount of dollars of interest just during the course of the remainder of my projected lifetime. It just doesn't happen. But there are no exceptions. You either pay up or you give up. There cannot be any exceptions. And so that's a very good point that you illustrated there.

One of the most frequently asked questions that we get is.

Again, going back to the topic, which is.

Why should I use the process of becoming a banker, the infinite banking concept, for investments, when I can use my own cash or I can borrow money from someone else to accomplish the objective? And again, going back to what Nelson says, it's not what you're going to buy, it's how you're going to buy it. That's going to be the difference.

That's right.

So, Jason, is it okay if you dive into the example right now?

Yeah, let's go for it.

Let's go for it. Okay, perfect. So let's consider an investment opportunity where. So, Jason, I'm going to use you in this example. Sure. So if you are getting 20% rate of return in an investment guaranteed, would that excite you to capitalize on that opportunity?

Yeah, I think it would excite any investor.

Absolutely. So just use an example of investing $20,000.

Okay.

So if you take $20,000 and you put into an investment that's going to yield you 20% over the year, you basically increase the investment value by $4,000.

Right.

20% of 20,000 over the year is $4,000. I'm going to use that example. So I'm going to share my screen here quickly.

Okay.

I'm going to bring up my trusted annotator.

Got to love the PDF annotator.

Yes. Well, I'm going to use a blank camera, say right in front of me from an Excel.

Okay.

And then I'm going to just, just Just annotate on it to. To demonstrate the. The comparison. Because everything that we do in life is. It's a comparison, right. If what I'm doing is making sense. Well, compared to what.

Compared to what everyone else is doing.

Right. So. So in this example, so this is an individual, okay. And his objective is to invest into something that's going to make him 20%. He has an investment that's going to make him 20% and he's got $20,000.

Okay.

And I'm purposely using 20,000 in this example because I'm going to show you why $20,000. But it doesn't matter what the value is. Just a teaching point.

Got it.

So if you take $20,000 and we invested into investment with which is going to yield us 20%, we're basically going to make $4,000 per year in the investment. So our new account value is going to be $24,000.

Right?

$20,000 is the original principle. And $4,000 is what you make in the investment. Objective accomplished. And the same individual is asking us question, why should I do it through the process of becoming a banker? Because I got to pay interest to the insurance company.

Right.

They cannot understand the rational behind how the system works. They will focus on the rate. The rate doesn't matter. It's a process that matters. Right? So this is one process of how they can accomplish the objective, which is what they already are doing. They film with it because they see it every day.

That's right.

And I say to them, it's not what you're going to buy, it's how you're going to buy it. What I'm going to do. Mr. Client. So this is us IBC practitioners because we understand the process called banking. It's not about just being an investor in the transaction. There's value in not just being the investor, but also being the banker along with the investor in that transaction.

Be the investor and the banker. I like that.

So the reason why I use $20,000 in this example is because I have a policy which has a premium of $20,000, okay. And this particular policy I started in August of last year, okay?

So what I say to this individual is, I'll do what you do to accomplish your objective. I'm just going to change the process to accomplish the objective. I'm not going to change the objective. The objective is to invest. I'll do the investment, but I'm going to change the process to get to the objective.

Okay?

So I took my $20,000 and I started a Policy.

And it just so happened it was started in August 2020. So now as of today, what I can borrow from the policy via loan.

Is $12,000.

Okay, now how do I know how much I can borrow? Well, it's my policy. I got access from the insurance company. I can log in and check my values every single day. As of today, what I can access is $12,000.

Okay?

Now in addition to what I can access today, my account value with the insurance company so called loan available is also day because of the contractual guarantees by the insurance company that by age 100 your cash values must match your death benefit.

Right?

So every single day this account increases by $8.

Just in, just in the first year.

Just in the first year. Because Jason, this is. Thank you for bringing that up. I'm just getting started. I just capitalized my system. So just in the first year, my daily cash growth in the policy is $8. Okay, I wait one more day, I can use 12,008, I wait two days, I can use 12,016. Every day is increasing by $8. So I say to this client, I said, okay, if the objective is to invest into this investment, that's going to make you 20%. I'm going to do that, but I'm going to change the process. What I'll do is I took my money.

To start a policy which is created. I created my own banking system for financing things in life. Now I'm going to do is finance investment. So I know today I can borrow $12,000. So I called the insurance company and I initiate something called a policy loan. And insurance companies, they receive my request on a single page document which says my policy number, my name, how much do I need, signature, date and how do I want to receive that money. In this particular case, I'm going to request it via eft, Electronic fund transfer. Insurance companies are going to ask me questions around why do I need the money, am I employed? There's no credit check, there's no income verification, there is no consent to repayment terms, there's no questions asked, the money shows up. What they did is they used my cash and the policy as collateral for the loan and they put a lien on my death benefit. So in case I die, the loan is outstanding, they'll deduct it from my future debt self. I'm okay with that.

Okay, So I took that loan and I bought the same investment.

Now the person, the prospect client is using 20,000 to invest into 20%. I'm only using $12,000 because that is what's available in my policy. Right. So I'm working with less money towards the investment to begin with. So I take $12,000 and I invest money at 20%. Well, I'll make $2,400 for the year.

I guess. I think I did the math right.

20% on 12,000 is.

$2,400 per year. That is how much I make in the investment. And then this prospect client says to me, sir, well hey, that's not over. I know you make $2,400 which is less than what I made. I made 4,000 Cerro, you're making 2,400. But in addition to that you have to pay interest to the insurance company because you took a loan. I said, yeah, Mr. Client, I'm not done yet. Let me do the math for you. So the interest from this particular insurance company is at 6.2% simple interest for the year. So $12,000 is what I borrowed at 6.2% interest for the year. The interest that insurance company is going to charge for the whole year in case I do not pay anything back is $744.

And that accrues on a daily basis. So if you wanted to know what the daily simple interest in dollars is, you would take that 744 divided by 365. There you go, $2.04 a day.

Perfect. Yeah, that's exactly right, Jason. But for the year it's 744. So interest accrued on the loan is. So I'm going to put that here. Interest on my loan from insurance company is 744. So my real gain in the investment is 2400 minus 744 because I got to pay insurance company the interest because I didn't use my money. I'm using insurance companies money to accomplish my objective, right?

That's right.

So 2,400 minus 744. So my net gain in the investment is 1656.

And now my Mr. Client is laughing at me even louder. He's like serba, how does it make sense? You must do math differently in Edmonton.

The teaching point here is I didn't use my money. My money is had the policy growing every day. That $8 per day growth in the policy has not been interrupted by me taking that loan from the insurance company.

Right.

So this is what I made in the investment after paying the interest to the insurance company. But I'm also making $8 per day in my policy. So by $8 per day multiplied by 365. So in one year my policy increased by $2,920. Eight multiplied by 365. So I make 2,920 as growth in my policy in one year plus I make 1656 in the investment. So overall what I make is 2920 plus 1656.

Which is 4,576.

And you invested less money.

And I invested less money. So I said let's. Now who's coming out ahead on the Math?

You make $4,000 by giving up an opportunity to earn money on $20,000. I only used 12,000 of my money and I came out way ahead. I didn't take on any risk. I just changed the process to get to the objective.

And.

The simple interest that you actually paid because you used the policy loan proceeds to produce a taxable gain.

That simple interest is deductible.

Yeah.

Provided that you used it for this purpose to produce a taxable gain and that you actually paid it.

And I paid it back. Exactly. So to summarize, I came out ahead.

And I saved taxes.

And had life insurance and I'm not even factoring in the dividend that I'm going to receive in my participating dividend paying whole life policy. This is just by virtue of me.

Putting the premium in and the fact that whatever you repay, you get to re access again. So if all that you repaid was the $744, you're going to gain access not only to the 744 all over again because your $8 per day was producing more policy loan amount available every day. And so you've got $2.04 of simple interest on a daily basis compared to $8 per day of cash value accumulation. You've created essentially $4376. You used less money and you became all four characters in the financial play. R. Nelson Nash reminded us of that so often. If you become all four characters in the financial play, then you will come out ahead financially every single time. Yep. And. Go ahead.

I just want to say one more thing, Jason.

So this $20,000 made this person 20% my $20,000 that I use as premium. Well, overall because of that premium, I bought a policy. Because of policy, I made 4576. So what I made using my $25,000 is 4576 divided by $20,000 multiplied by 100. I made 22.88% return.

By using a policy.

Whereas this person who uses cash made 20%.

For obtaining the same objective.

And you're not interrupting the daily growth of your own capital.

And so Again, it's all four characters in the financial play. The depositor, the borrower, the banker and the bank owner. The prospective client was only two of the four characters. The depositor and the borrower. Now when I say the borrower, I mean because the prospective client used their own capital, their own cash that they had sitting in someone else's bank that they handed control over to someone else, they made a financing decision as you walked us through earlier. So you're always dealing with borrowed money, even when you pay cash for things. So the depositor, the borrower, not the banker, not the bank owner. Whereas in your same scenario, the objective didn't change. You just changed the process of how you went about executing to the objective and achieving it. And now you become the banker and the bank owner. When you request a policy loan, you're the one that controls the repayment schedule. When the insurance company that you co own.

Produces a divisible surplus, which they've been doing every single year since inception, you receive a dividend every single year that a dividend is declared. And when it's declared, it's contractually guaranteed to be paid. It cannot be repossessed, it cannot lose value. And every single day that the insurance company's money was invested, your pool of financial value continued growing daily uninterrupted by the policy loan that you accessed from the company that you co own. And so what a great example. Very simple, too easy to understand. And so what was the reaction of your prospective client in that scenario? Was there an aha moment? Was there more direct conversation that you had about it? What was the outcome of that?

Well, Jason, there was an aha moment for sure. And the client's like, well, I never saw it that way, the way you showed it, cerebral. I would just to focus on the rate. And now I know what the process can help me achieve versus just thinking in terms of the rate. And he said it in his own voice. Now you understand when you guys say it's not a matter of rate, it's a matter of how do you go about financing things in life, including investment. Now I get it.

Good point. And Nelson, again, going back to his book Becoming youg Own Banker, he said that a fatal error is thinking that this is a matter of rates. It's all a matter of where the money is flowing to and who that money is being put to work for. And Sarblo, this was a great example. We're going to be doing many more of these for everybody who's tuning in on the YouTubes and for everybody who's listening in. Sarblo, pleasure having you. I know that you've got a great meeting coming up here with one of our other teammates, Frank Abate and a doctor and a couple other folks, I guess, that you'll be meeting with. So we'll let you get to that. And for all of our viewers on the YouTubes, if you just look right over here, you're going to see a playlist, a recommended playlist, so that we would encourage you to continue your journey of learning on the process of becoming your own banker, the infinite banking concept. Thanks for tuning in. Have a wonderful rest of your day.