Who Is Harnessing The Financial Energy Of Your Capital? (Canada)

Whether it's principal or interest, every dollar that you pay is actually money flowing away from you. And someone else is harnessing the control over the motion of that money. What are we taught to do? We're taught to take our money and put it at risk in order to grow it. The rate is nothing more than a distraction. The rate is a tool that banks use to attract money.

We need to get really clear. One of the things that Nelson taught us is before we worry about a solution, capitalizing a policy system, numbers, implementing the process, we need to get clear about why on earth we're implementing this process in the first place. In other words, we need to clearly identify the problem that's happening to you in your life right now as we speak. Because once you understand the problem, once you can clearly identify the problem, you're going to know exactly what to do. And the way to solve that problem is by implementing the solution. The process of becoming your own bank, or the infinite banking concept for Canadians. Now, what I want you to think about the capital that you're earning today, money, it has two values. It has the value of what it can purchase today and it has the value of what it can grow into. It has growth potential, uninterrupted growth on your capital. As I go through this example and I start to identify the problem, I want you to be thinking about who is harnessing the financial energy of your capital today? Who is harnessing that financial energy? Wherever wealth resides, someone will try and steal it. This is a quote by R. Nelson Nash. And I just want you to think about, are we seeing some rises in costs right now? Are we seeing inflation? We know that taxation is obviously a thing. This is what Nelson is talking about. They will find a way somehow to recapture that wealth. Now ask yourself, who is the banker in your life today? What does the banker do? Well, the banker is the one who grants access to capital and they tell you the terms of which that capital has to be returned, a loan, repayment, etc. You're taking your income, okay? You earn an income today. That income must be deposited. Where does it get deposited? The money that you work for gets deposited into someone else's bank, okay? That's a key thing for you to think about. Just listen to those words. Your money is being deposited in someone else's bank. If it's someone else's bank, who has 100% of the control, the bank, right? So you're taking your capital and you're unknowingly and unwillingly handing over control to the bank. And you have now become a creditor to the bank. That's not your money anymore. They just owe it to you. But they're going to give it back to you on their terms. And right now, there's a hidden problem. Banks are very reliable of making sure that when you swipe your debit card or when you transfer money electronically online, it just moves. So we don't really see the problem. We don't realize that they're actually controlling that entire function, and it's on their terms. So we don't see that there's a problem because they're really reliable just to make sure that that money flows. And we don't, for lack of better terms, catch wind of what's actually happening in the background now that capital is flowing to someone else's bank. They're putting that money to work to grow profit. Not for you, not for your family, but for the owners of that bank. Starting to see what's happening here. You're doing all the work, and they're harnessing the financial energy, the growth potential of that money. So what do you do? You're just living life. You go back to the bank, you access money, you. You pay your light bill, you put some money in your rsp, you pay your mortgage, you lend some to your child, you do all of the things that you need to do with money that you're already doing, and the money is spent and it's permanently transferred away. It's gone forever. You've now transferred that financial energy away from your family for the rest of time, while the bank has already harnessed that financial energy. In other words, you're doing all the work and someone else is getting all of your money. You now have to go back to work, to work real hard to pile up that money again. How does that make you feel? Does it make you feel like this? Jim Carrey, one of my favorite actors of all time, I'll tell you, as I go through this process, one of the things that Nelson said is the more that you see this process, the more you'll see that you didn't see. As I walk through this with you right now, I think about it, I'm very grateful for the fact that my family has implemented the process of becoming your own banker. We're controlling the banking function as it relates to our needs. But I still feel like this. I'm frustrated. And the reason why I feel like this is I feel like this for you and all of the other Canadians out there that are not aware that there is a problem and that that problem can be solved. It just requires thinking differently and starting to examine what's actually going on with the process of banking and the power of controlling the process of banking. This is a great quote. If the minority of people are accumulating the wealth and control the wealth in the world, why do we continue to do financially what the majority of people do? So there's a certain, a small population of the world doing something with their money and they're controlling and accumulating the wealth. But yet we continue to do what the majority of people do. And we wonder why we're not getting ahead financially. So if you understand the problem, you'll know exactly what to do. The solution will become clear. So the key thing is the dialing in on the problem. So let's dive a little bit deeper and examine it. What we're going to do is look at what the average Canadian household, many Canadians, what their annual pattern of spending looks like. So Canadians love their cars, right? Everybody seems to have a nice fancy car, at least in Alberta. I'm looking around, there's a lot of nice cars flown around. Most people are making payments or they're saving money in someone else's bank and using that money to pay cash for the car. But automobile financing is going to make up approximately 20% of our household spending. We have housing. So maybe you're renting, maybe you have a mortgage, but housing costs maybe approximately 30%. So that's all of the money flowing into the home. Earning $100,000 per year. Let's say I'm spending approximately 20%, $20,000 per year financing a vehicle. I'm spending $30,000 a year, 30% of my, this is net income to fund my housing. Now living, I have to pay for my cell phone. I have to pay for my Internet and cable and, you know, all of the things, maybe a financing or servicing some credit cards. There's all of the expenses that are just already always happening. They're happening no matter what. They must happen. Okay, so living expenses, groceries, all of that. And now let's assume we're being favorable here, but let's assume that, you know, we've been taught, hey, save 10% of your income. We know that most people are not actually doing that, but let's assume that 10% is going to savings. So that makes up 100% of, of the money that's coming into the house. Now, what's sort of hidden is we're seeing the payments here, but what about the interest? The interest volume? Okay, what you hear about out there and what we're taught to focus on is the rate of interest that we're paying or that we're being charged. You know, 1.99% rate on my mortgage. I've got zero percent financing on my car. Well, zero percent. I mean, we all know that that's not really a thing. It sounds great, but they bake the interest into the cost of the vehicle. But I'm financing vehicles, I'm paying for my mortgage and I'm looking at the rate of interest. But what I'm not looking at is how that interest or how that loan is actually structured. Because you're not the banker. Someone else is controlling how that loan is structured. How that interest is being compounded and how it's being calculated has nothing to do with the rate. It has all to do with the volume of interest. So I may be paying 2% interest on my car financing and 1.99% on my interest on my mortgage. But if you look at the percentage of every dollar that's actually flowing away from you, what percentage of that dollar went to the principal of your car or went to the principal of your mortgage, There's a lot less than 93% going to principal. It's about 50, 50, especially if you look early on in a mortgage. The way that that mortgage amortization schedule works is that all of the interest is front end loaded. So we're paying very high volume of interest early on. And overall, we're going to pay a lot more interest than what the rate would suggest. So it's a little subtle, but what are Canadians doing? They're refinancing, they are consolidating debt, they are selling homes, and they continue to be in that new cycle of high volume of payments all the time. So every dollar that comes in, most of it is flowing away in the savings. We're generally putting it in some financial prison. So you're doing all the work and someone else is getting all of your money. And a huge amount of that money that's flowing out 35% in this example, $35,000 per year of your net income and $100,000 is literally just flowing permanently away from you and actually not giving you any progression at all. It's just pure profit flowing to the bank owner, the banker. So we're starting to see why I want to become the banker in my own life.

Now.

What we're going to do is we're going to dive a little bit deeper on volume. Now you can see here we're Going to look at a mortgage example. So I get, you know, rates change, they go up and down. This is just an example of a rate 2.92% interest, maybe you can get a little bit less, maybe you're paying a little bit more. Right now, it doesn't really matter. It's the example of where the money is flowing that matters the most. So we have a $400,000 home amortized over 25 years at 2.92%. And that's going to generate a monthly mortgage payment of 1800 and $80.24 per month. So now if we look at month one, brand new home, you're excited, you got the job, Maybe you're just got married, maybe you're bouncing a little baby on your knee, doing real life things like everyone else is doing, or maybe you're a little further along in the journey. Excuse me. This is all going to connect as they go through the first payment that you make, $1,800. You can see if we look at month one, a whopping $906, almost $907 went to principal. Meanwhile, $973 went to interest. So far I'm not seeing 2.92%, are you? You can see month two. Oh, we're starting to gain some serious momentum here. A couple extra dollars went to the principal, but still most of it, or 50% at least, is going to the interest. So we're working really hard, we're sending a lot of money away and we're not making a lot of headway. So at the end of year one, you can see that $11,000 went to the principal. Meanwhile, we paid 22,000 course of that year. So that means that the equity in your home, you got to keep a little less than 50% of what you actually paid and the bank got the rest. And whether it's principal or interest, every dollar that you pay is actually money flowing away from you and someone else is harnessing the control over the motion of that money. Whether you're hitting the principal or interest or whatever it is, you're still sending the motion of that money away. The this is just a little bit more painful to see how it's actually occurring with the interest. You can see end of year three. So we're chugging along here. At the end of year three, we've put almost $68,000 toward the mortgage, but still only 34,000. About 50% is in principle. So we're gaining a little bit. We're starting to hit more and more of that principal and we chug along and what's the usual renewal period? Maybe five years. So, Richard, if you're there, could you give me a hand for a moment?

We actually had a slide from a. I mean, it's a little outdated now, but it was from Money Sense magazine, I think it was in 2014. There was a report and the average time frame at then that a Canadian held a five year fixed mortgage was three and a half years. That means that on average, people were busting those apart either to sell or refi a property every three and a half years, meaning they're paying that the penalty that associated with it and stuff as well. So, you know, the key thing that's happening here with Vern's identifying, it's so critically important. You know, you get to that stage, you hit that five year mark, you're up for renewal. And life, life is coming at us at all times. We can all agree at that. Things change over a five year period. And now we need to add another kitchen, we need to do that renovation. We got to get the bigger house, we got to upgrade, we got to, you know, move across town, move to a new job. These things happen for everybody. And so now what happens is we break that contract or we reset that. Typically we're now refining that property for a higher amount of money. Yeah, the interest rate might be different on the new loan, but the volume of the balance alone usually goes up. And so then you go hit those five years all over again. Vern, just scroll through that one more time. It's literally like we're just restarting. You get out to that next five year mark and then, boom, we go right back to square one and we just hit that cycle on repeat.

So that's what happens when we see all these ads and we see all these things happening where the bank is telling you, hey, come on in, refinance your mortgage, let's renegotiate your payments. Payment. And they get you to focus on the payment, which is, which is great, maybe that helps your family. But what you're not seeing is exactly what Richard is saying. We're going backwards and we think we're making progress. All of a sudden we got this new mortgage, we refinance, we got a lower payment. But now we're on that treadmill in that cycle of we're actually doing a lot less damage on that principle and we're hitting so much more interest because we keep getting back in that high interest volume situation. Now if we take it all the way out, let's assume that we actually paid the mortgage for the full 25 years. We didn't do the refinancing. We kept the same interest rate. We kept making those payments all the way through for the entire 25 years. You can see here, we purchased the home for $400,000. We actually end up paying the bank 564,000. So we paid $164,073 in interest volume. So if you divide 400,000 into our interest amount here, my math might be a little off here, but I think we're going to get somewhere around 30%. Does this look like 2.92 to you? So the rate is nothing more than a distraction. The rate is a tool that banks use to attract money. Same with investments. Hey, this fund here has had an average rate of return of 12.5% over the last 10 years. Well, the consumer might think 12.5%. Gosh, that sounds great. I want to get in on that investment, thus attracting money. You see the flashing sign outside your local bank and it says, oh, come in today and talk to us about refinancing at 1.99%. You go, oh, I got 2.92. Gosh, I'm going to go in there. I know I'm only four years into the renewal cycle here, but I'm going to go in there and see what they can do for me. So that rate is there to attract the money. It's as simple as that. Now again, if we can learn how to become the banker, we're the one who's going to attract and and recapture not only the interest, but the payments that are presently flowing away. And we're going to have all the control. Let's think about this for a moment. What are we taught to do? We're taught to take our money and put it at risk. In order to grow it, we have to do all the work. We have to access the money, we have to put it at risk and hope that the money increases in value so that you can eat when you're 75. But think about the banking, the underlying fundamentals of banking. What do banks do? They lend with security. They lend with security. So if it's an unsecured loan, they're going to go up one side and down the other and prove that you're a model enough citizen to prove to them that you don't actually need the money and you can make the payments and maybe they'll grant you a loan. Or you come in again, crystal clear credit. Great. T4 income. I have a Lot of equity in my home. They're controlling the entire process. There is an underlying asset security, your home, showing that they can protect their risk. They are lending with security to create streams of income rather than taking that money and investing it with risk. So if banks are pretty good at creating profit, last I checked, they're doing pretty good. Why wouldn't we just do what the wealthy are doing? Why wouldn't we just follow the banking process? And as I mentioned, this entire time, while this is happening, who's in control of the money? Who's actually in control? Who's harnessing the growth potential on that money? It's the bank. It is the bank. Now let's think for the bank for a moment. Think like a banker. You want to buy the home, or if it's a rental property, whatever it is, you want to buy the home. But what is the underlying asset to the bank? Is it the real estate? Does the bank want you to actually default on your mortgage? Do they want you to. Do they want to repossess the home? Or is it the stream of payments that the bank cares about? The bank just wants to secure those streams of payments. Think about any wealth seminar you've been a part of, any YouTube ad that you've heard, hey, multiple streams of income. Multiple streams of income. That's what you always hear. Don't become overly dependent on one stream of income. Well, who's really good at creating multiple streams of income? That's banks and bankers. So why do we want to become a banker? Because when you're a banker, you attract payments. Whoever controls the motion of money, whoever's harnessing that financial energy is going to be the one who accumulates the wealth. And let me just dive a little deeper with this next example here to show you exactly what I mean. And for most Canadians, when they see this next set of slide that I'm about to share, it'll probably start to look quite familiar to you. So first thing in the middle, we have the bank. Now, banks are reliant upon and dependent on deposits. The bank must be capitalized. A bank cannot issue a loan unless they have capital to lend out. So the deposits come in. Now, you'll notice that this says, though here it says you, you deposit 50,000. Not a banker or an investor. I mean, lots of money's flown into the bank. But we're depositing money. Your money is being deposited in the bank. This should be changed. It should say someone else's bank. So you're depositing. In this example, let's say $50,000 into the bank. Now let's assume, I don't know where you're getting 2% interest on a savings account today, but let's assume that the bank for you, depositing your money there and giving them control over that money and over the motion of your money, they're going to pay you 2%. Okay, great. Let's see what happens now. Well, what are people doing? They're buying homes. This could be you or this could be some other customer comes into the bank. Now they want to qualify for a mortgage, so they're going to buy a home. And their rate in this example is going to be 4. So the bank is paying you 2 and the interest rate on the mortgage is 4%. At the end of this slide, we're going to see how much more the bank is actually making on our money than more than we're making. So we have 2% here. Now what happens? The cash doesn't actually flow. We know that the banks create money with a keyboard. It's just electronic dollars. But we purchase the home, the seller now gets the money. And what is the seller going to do with that capital? It's going to flow right back to the banking system. It doesn't matter if it's TD or cibc, whatever bank it is, it's all one system. There's one pool of money. So the money flows back to the bank. Now, hey, you know what? I got the house, I got the job, I have my lovely wife and my kids. I better get a car, something reliable so that I can go to and from the office and do the things that I need to do. So now I'm going to go and finance a car. I'm going to go and access money from somebody else's pool and they get to set the rate and all the terms. And they're going to charge me 5% for the car. So now we have 2% on the, on the mortgage here and we have 3% on the car because they're paying us 2. Right. Okay, great. Now last I checked, the dealership doesn't have a giant safe or a big mattress in the back of the warehouse. What are they going to do with the capital that we use to purchase the vehicle? Well, they're going to go and send that money right back to the bank, allowing the bank to turn it over and multiply the money even more. So this is why the banks are creating record profits right now in the lowest interest rate environment in history. Isn't that interesting? Well, we're a couple of Years along in our journey now, and we've got the house and we've got a car, and, you know, times are changing. Maybe we get a raise. And we think. You know what? I think I'm going to remodel the house a little bit. I'm going to upgrade my kitchen. So now I'm going to go and apply and see if I can get myself a line of credit or something like that.

And.

And I'm going to borrow from the bank. And in this example, it's going to be 7%. So now the bank's making another five. Okay, well, when you renovate your home, are you going to be the contractor? I know Jason and I joked about this before. He's not big on renovations. I have some skills. I certainly don't love doing it. I'd rather hire a contractor. So now we send the money to the contractor from the line of credit. And what's the contractor going to do? It's going to put the money right back in the banking system. So you can see there's a trend here. The money is always flowing away from the family and always flowing to someone else's bank. And they're harnessing the control over the motion of that money. Now again, now we've got the renovation going. We got the car, we got the mortgage. We've got a lot of financial tools. A lot of debt maybe is piling up. And we think, you know what, I need to do something about this. I want to have one payment instead of all these different payments. I want to lower the amount that I have to pay every month or whatever it is. I'm going to go and see if I can qualify for a consolidation loan. So now we're going to wrap all that debt up. It's going to be at a higher interest rate because we're consolidating all that debt. So we got a 12%. Now the bank is earning 10% on this new loan. And then we pay off all the credit cards and the creditors and all that stuff. And I'm pretty sure they are also using the banking system. They're storing their capital right back in the banking system. So you can see the arrows all point to the center. And let's take a little bit of a deeper dive here and see how much more is the bank making than what we're making. We're always convinced that, hey, I'm getting 1% or 2%. Banks lending it out at 3 or 4. They're getting the spread, but they've actually multiplied the spread because they keep getting the capital back and they can keep on turning those dollars over. Look at this math. I'm asking, how much more is the bank making than we're making? So first things first. We have 2%, that's from the mortgage, right? Because they're paying us 2% on the savings. We have 3%, that's from the car financing because they're paying us 2%. We have 5%, that's from the renovation because they're paying us 2%. And then we have the 10% from the 12 because they're giving us 2 for the savings. Right? So, Rich, if you wouldn't mind, how much more is the bank making than what we're making?

400%. 18%.

Oh, we're getting. Well, 400. We're getting closer. Let's see what's happening here. Rich, thanks so much. Okay, let's just take a look at this little equation here. If you can see in the bottom right corner of my slide, it says 20%. So we know, obviously, we saw that over here, I added up all those numbers. The bank's earning 20%, but we have to divide that by the amount. The rate that they're paying us 2%. What does that equal? It actually equals a thousand times more than the depositor. I repeat, the bank is making, in this example, a thousand times more than the depositor. How are they able to do that? It's because, again, they're harnessing the control, the motion of that money. He or she who controls the motion of money is going to be the one who accumulates the wealth. And the moral of the story, simply put, is this could be you. So we're framing up the problem. We're going to dive into the solution later to see how we can shift and put you from this side of the desk looking at the banker. We want to put you in the banker chair so you can become all four characters in the financial play so that these payments and all this money that's being deposited in someone else's bank today is going to flow back to you and your family.