This is a YouTube transcript of a Bankers Vault episode (hosts Henry Wong and Roman Pushkar, authorized Infinite Banking Practitioners) addressing whether a client should use personal cash or take policy loans from a participating whole-life policy to pay off debt (a trailer loan). They present a numeric example: the client has $25,000 cash value inside his policy and $50,000 in checking (a $75,000 pool); the hosts argue that using policy loans preserves the money pool and future compound interest (an opportunity-cost example projects $25,000 at 3% over 60 years growing to about $150,000), while paying cash permanently removes that capital. They recommend borrowing from the policy (becoming your own banker), paying interest to the policy, and replenishing the policy loan to retain long-term growth.
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It's almost like you're in a hamster wheel. In this journey of life that we're on, you're earning money, you're sending money away. You're earning money, you're sending money away. You're always caught in this hamster wheel.
This is Henry Wong, chartered accountant and authorized infinite banking practitioner. And you're joined here with Roman Pushkar, who's also a authorized infinite banking practitioner. We're both from all from the Nelson Nash Institute. And what we wanted to talk to you about is from a very common question that we get from our clients. They are practicing this process of becoming your own banker. They have the system installed, but they have a very common question that they asked us and we want to use this time to share about that question.
So some of our clients are asking us when is the right time to take my first policy loan? Right. Should I use my cash for now to pay for my expenses, for my bills? And particularly today, we want to talk about debt recapture. So basically this client that I recently talked to, he is asking me should I use my cash to pay off my trailer loan or should I use my policy loans to pay my trailer loan? And if you are first time on our YouTube channel Bankers Vault, welcome here. You may not be familiar with what we're talking about. We're talking about the infinite banking concept and setting up your own system, your own banking system. And we do it with participating dividend paying whole life insurance policy. And you can read more about this in this amazing book which is called becoming your own banker by R. Nelson Nash. If you haven't read this book, you should do it. There is a link below this video with the direct link to purchase this book. And then this book will give you a great understanding how exactly it is.
Structured before we kind of dive into it. The concept is actually described in here on this book, page 41. And when it comes to building our own banking system, we are working with participating whole life insurance policies. And so we're bounded by a specific maximum that we can and this in this particular example that we have here, the client has already made their maximum contribution to their banking system, so they're capped and now they have some available cash available.
The question he's asking is why would I borrow from my policy loan if I still have cash available? What should I choose to use first? My cash that I still have in a bank, sitting in a bank. And in this particular example.
Let'S say he has $50,000 saved in his checking account, sitting in his checking account on top of that, he already put in 25,000 K. And let's imagine he has access to all of this amount, right? 25,000 K. He can borrow against his cash value that is growing every single day in his account. Now his total money pool is $75,000 to begin with. $25,000 in his own banking system. And 50K is still sitting in a bank somewhere doing nothing. When we talk about it, first thing that comes to my mind is opportunity cost. And Nelson Nash always talked about opportunity cost that that everything you choose to purchase, even with cash you finance. What it means is even if you pay cash, then you are given up opportunity to make money on this cash. So not only this cash is leaving your family forever, but also all the interest that this cash can produce to you during your lifespan. Let's say that Here he takes 25,000 out of his checking account and he pays off this trailer loan. What happens to the $25,000, the money.
That I have had that I built up in my checking and Savings account. That 25,000 I had, I've sent it away and I paid off the loan. But my now money pool is now smaller from that 75,000 down to 50,000 and I can't even get go back to that bank that loaned me the money to re lend me more money again.
Exactly. And then let's look at how much actually he's losing. Is he losing only $25,000 and then giving up the opportunity to only 25,000 or is it actually bigger? And let's look at a very simple opportunity cost calculator that I found online. So $25,000 is a principal that he wants to send away from his family forever. And then let's imagine that he doesn't do it. He holds onto this money and he invests it somewhere to very.
Conservative investment vehicle. And let's assume that it is just keeping up with inflation. Let's say 3% over a period of 60 years. So let's say he's 30 years old and now he has about 60 years to go. And then we will graduate him at year 90, age of 90. So 60 years at 3%, $25,000. Let's hit the compute button and then see so this, in this example, he's losing $125,901 of interest. That potentially this $25,000 principal can make him now together altogether his $25,000 can potentially turn into $150,000 in 60 years. So all this money is leaving his family forever. And Never coming back.
Now Henry, what is his other options? What do you think? What would you do in his situation? If you had both a system of policies in place and still have access to cash, what would you do? Henry?
I'd love to share what in terms of practicing infinite banking, how that would look like you see an option one where you have the banking system with 25,000 that is in their banking system and we have 50,000 in checking and savings account. So that total money pool was 75,000. And so what Mr. Client has decided to do is to take this 25,000 to pay off this loan. And now what ends up happening is his revised money pool is $50,000. And giving up that 50,000, giving up that 25,000 over that 90, 60 year period is $150,000. It's actually, instead, it's not really costing him 25,000, it's actually costing him over that period of time $150,000 because he's given up interest that he could have earned with that money. Now what's the difference if we, if we were to do it, the infinite banking, using the infinite banking concept, we were to do that, we would take the banking system and we would then access what's called a policy loan, which is 25,000.
To then pay this bank loan off. So this is also paid off. But now you'll see how we access money is we're actually accessing a policy loan from the insurance company and a policy loan. The first step here is what we've changed is instead of paying someone else's bank, we are now paying our own bank. We now owe money to the insurance company. And why do we want to do that? Well, Roman, when it comes to borrowing money, who sets the terms of borrowing that money?
The banker does.
That's right. And who sets how much we want to pay?
When you borrow from a bank, then the banker tells you to, to consent to his repayment schedule.
And you know, what happens if I, you know, life happens and I don't have enough money to, you know, in the month to make ends meet to pay this loan and I skip a payment with the, Would the bank allow me to do that?
Not really. The bank probably will come after you and, or they will give your loan to collectors and then they will collection agency will be, you know, calling you and asking, hey, why did you miss this payment? What's your plan? When are you paying? And then at some point, if you miss two or three payments, then they may actually seize the asset and.
Just realize it and Then because ultimately they.
Just want to get their money back.
Of course. So they are in control, not you.
Yeah. And so in terms of this process, what we want to encourage is when we talk about becoming your own banker, we want to take control of our own money. And one of the players in the financial play is, as a borrower is we want to be in control of when we borrow money and when we're borrowing money. Of this 25,000 that we're borrowing. Yes. We need to pay interest. That's no different than what you are already paying, except the structure of the loan is very different. And you know that 25,000 that was initially used from your savings account, that money has been sent away. That pool of money is gone permanently. Whereas over here, Roman, what is our money pool that we have?
It looks like it's still 75,000K. Sorry, it looks like it is still 75K.
That is correct. We didn't drop that money pool. And, you know, just for further illustration, you know, this particular policy on the design that we have makes about $12 per day. And the interest that we have to pay on this loan is about $4.25. Yeah.
There is no. The money pool didn't change. But what changed was you now get a loan outstanding. Right, Right. With the insurance company, which you have to replenish at some point, because, remember, we always want to be honest banker. We don't steal the piece from our grocery store business. So now we at some point start making payments back to our system.
When you're working and you're replenishing your system, you're going to replenish this 25,000 too, right?
Of course.
But at least you're not giving up future interest, whereas this still remains intact. Yep.
And if we compare apples to apples, let's say that the money is not sitting still in this scenario, option two, where you take this 25K and then you invest it like we showed in an opportunity cost example. Right. You invested at a very.
Conservative and reliable vehicle where it produces at least 2% so that. That it makes sense to us. So that on the right side, we actually get that 150k in 60 years, right?
That is correct. It's growing. It's uninterrupted, because the balance never went down on option two, the second side, whereas the other side, it did go back down. And you always are working to replenish that pool of money because you just keep sending money away. If you keep. You're. It's almost like you're in a hamster wheel in this journey of life that we're on. You're earning money, you're sending money away. You're earning money, you're sending money away. You're always caught in this hamster wheel.
Absolutely.
Talking about this infinite banking concept, this money pool, we keep growing it, and it just keeps growing and growing and growing. And that. That is how we start getting ahead.
Yeah. So not only this person has to open his system of policies and his own banking system, but he actually has to start using and practicing infinite banking. And practicing infinite banking is actually starting using, taking policy loans and then replenishing the system, paying them back.
