EP17: How To Make Your LAZY Money In The BANK Work Hard For You: Infinite Banking System

So bottom line, you are your biggest asset. You need to protect your asset, that is you. You need to protect the income that you are bringing in and you have to protect your massive wealth ability that you have that you're bringing in.

Are you frustrated watching your hard earned money ride the knee jerking Wall street roller coaster? Are you looking to diversify into alternate investments and set them on autopilot to achieve financial freedom? It's time to learn the ways of the wealthy. It's time to think outside the stocks with your host, Madhavi Jain, an immigrant from India and ex IT professional who will bring you industry experts to illustrate a passive and holistic financial approach to build not just passive income, but also your generational wealth. Madvi is on a mission to change the financial trajectory of one family at a time. And a thousand more to go. Are you going to be part of this vision? And now, without further ado, here is the host of Think Outside the Stocks, Madhvi Jain.

Hey, hey, hey. Welcome back to Think Outside the Stocks. Another episode with your host, Madhvi Jain. And today we are actually going to take a little bit different path than just the passive income. We have been talking about creating your completely passive income with real estate syndication and our focus has been on real estate syndication. But today we are going to be talk about something different. Different. We are going to talk about a problem you didn't know that you have. Yes, that's correct. We are going to talk about actually making your savings efficient, creating that emergency bucket for you more efficient, that lazy money more efficient for you, and also utilizing that parked position of your money in a very, very efficient manner. But before we go ahead, please note that this podcast is information and education purpose only. We are not the legal tax or advisors. So if you need to seek that help, please do so. So let's jump right in. But before we go ahead, I like to thank you for listening, for tuning in all the episodes that we have provided as education opportunity for you. You have been a very diligent listener, a very diligent student of learning with me of all these different aspect of passive income and passive income generation. Right? So I'm so grateful that you are with me on this journey so far. And from here on we are going to talk about that holistic perspective that we talked in episode one. The holistic perspective not just focused on passive income and financial freedom, but it's also about growing, preserving, protecting and passing your generational wealth. And today's topic, the Infinity banking system, is going to be focused on this Holistic approach. So are you ready for it? Let's try to understand the problem. You didn't know that you had, first of all, you had been hearing about these options of completely passive income in commercial real estate. You had been being excited about it. But what is the problem today? Why haven't you been able to pull that plug and jump into it? Well, in today's market we have three problems and we have been talking about it through our different guests. About this trifecta. Yes, the trifecta about the high interest, high inflation and the recession. And with this trifecta, you are so limited with your choice. There is so much fear in your mind that you are sitting on the sideline. And when you are sitting on the sideline, whether your money is in high interest earning money market accounts about 5% or so, it's still losing it to inflation. So you have negative growth year after year by sitting on the sideline. And this inflation is eroding your money away. So that is your one of the biggest problem. The taxes, we have been talking about taxes that how the interest in this accounts that is impacting your taxes. There is an interest being earned, but this is your actually active income. This gets taxed at the highest bracket. So even if you are earning that 5%, it's getting taxed at that highest percent. And if you have other vehicles of putting the money, the tax free buckets, the tax deferred buckets, These are the 401k plans, your retirement plans, even maybe your education, your IRA, stuff like that, you have a limitation on how much you can contribute to it. There's only so much can go into it. And you also have a limitation on when you can access this money and how you can access this money. If it is retirement perspective, you can access only via retirement age and during that time to create that income. If it is tied to educational purpose, you are tied to education. And you can access this penalty free only for the education. So let's understand why are we talking about this problem when we have the growing concern of bank failures going on right now. Your money, your money that's sitting in your savings account, which is typically your either emergency fund, the money that I call it a sleepwell money, which is focused on if you have a job loss of, if you have say medical health condition that your family is protected in terms of your expenses, in terms of mortgage, your expenses, you have this cushion of say three to six months. Everybody's different. So you have that cushion that you have been saving in there. If you Have a business. If you have a rental real estate, this is your cushion, this is your emergency fund that is going to support your business. And if you have actually investing tendency and you sit out of the market, this is the fund which is the parked money, the part money that sits outside waiting for a good investment, waiting for that good timing to jump in. Let's understand what is your income potential? What is the actual value of your human life? This is very critical component of understanding the infinite banking concept. Unless you understand what is the value that you bring into the table, you cannot understand the banking concept and why you should implement it. So let's talk about the potential that you bring in. If we think about a person, average age 40 and the retirement age is 65 and current income 150k with 100k in his investing account, which is growing say modestly about 6% compounded year after year and he can add only 6% of his income that he's earning to this savings account every year. With that, at the age 65, this person has a potential for income to bring into the table. Around $5 million. Yes, you heard it right, it's about $5 million potential of income coming through this 25 years. That is your income potential. But wait, your wealth potential is even more when you consider that investing that you are doing and it is coming at 6% compounded interest where you started at. And if you have been adding 6% of your income as savings year after year, that total wealth potential for you, my friend, is about $10 million. This is your true, true potential. This is your true human value that you are bringing to the table. So bottom line, you are your biggest asset. You need to protect your asset that is you. You need to protect the income that you are bringing in and you have to protect your massive wealth ability that you have that you're bringing in. So if you think about the river of money that flows through your system, it is can be considered as, you know, like a pipeline, like maybe like a, from a tank, right? So if you have this huge income potential of 5 million, 10 million wealth potential, it is a water tank, there is a pipe attached to it. Imagine that. And you have only every year only some income that coming, that's coming through that pipe. Now there's the first filter gets applied which is the tax filter. And then the more money gets spent into your standard of living, your lifestyle, your expenses, your mortgages, etc, now from that, that tank, that pipeline every year, imagine that you push some money up. Now this money goes into two Buckets. One say on the right hand side is your savings bucket. Where is your emergency money sitting in? And the left hand side, imagine that it is the investing bucket. That is, that is your investing money, your playground where you can take a little bit risk and you can play a little bit right. The right hand side, the emergency money, this is your foundational wealth. This is your money that you need for your emergencies. This tank should have a tight lid on it. There should not be any evaporation happening. No risk of the money should be happening from this tank. And for the lack of the better vehicle, we tend to keep this money in FDIC insured banks. Now we will talk about that problem a little bit later. But that's what the tendency is on the left hand side, the investing is happening. There is, you know, of course some taxes are being leakaged as well, but there is from time to time you take that risk and there's some evaporation happening in there. So imagine that. Now let's talk about when we have this massive wealth potential and this generation as a, as a, you know, the foundation of this generation that you are creating, you are creating this massive wealth. This is the time that you are building your wealth. Your generations are going to add to it what you have started to build. And most of you have built things from scratch. And I'm so proud of that. You know, this generation, what they have built, it's just incredible amount of wealth that's being built right now. So so far we talked about the problem of the trifecta and we also looked at the flow of the money, the river of the money through this back. Let's continue understanding the problems that we have because unless we understand the problem, we will not understand the solution to the problem. As Bono says, we thought we had the answers, but it was the questions that we had wrong. So let's ask the right questions to get to that solution. Let's continue finding the problems that we have. Let's talk about the second problem, the wealth destroyer, which is the family. To consider this, we have to go back and look at the history a little bit in this country. We had our financial fathers that we learned a lot from. We learned what to do from them and we also learned what to not. Let's look back at three influential figures in this country who worked really, really hard in their generation. They started creating this humongous generational wealth. And let's look at about six, seventh generation, what is their wealth doing in this country? So for example, Cornelius Vanderbilt, great example, when he Passed away, he passed about $200 million, that's in today's dollars, about 1.4 billion. The seventh generation, the heirs that we see here, the known heir, one name comes to the surface, Anderson Cooper. Now many of us know Anderson Cooper, he's a self made millionaire for sure. But it's interesting to understand how much money did he inherited from the inheritance from the Vanderbilt family? It was merely 1.5 million. Now 1.5 million is still a lot of money, but when you consider the family generational wealth passed along generation after generation, it is not a great sum of money. So what happened to the rest of the world? It just got destroyed. Let's look at Andrew Carnegie. Andrew Carnegie had a completely different philosophy. His philosophy was, was pioneered from the philanthropy. He had about $300 million, about $4.8 billion in today's wealth that he passed when he passed away. But his focus was philanthropy. He focused, they focused a lot on building libraries, building, building schools and giving away a lot of money. But they gave away from right where the money was created. So they gave away the money. It is a great effort that what he has done for this country and I have tremendous respect for it. But let's Rockefeller family and how are, how did they do in the past and what is their nth generation, their seventh generation is doing now? John D. Rockefeller, when he built his empire, he passed around $460 million. That's about $9 million in today's wealth. His 150 heirs today, they have been using this generational wealth concept that he created and later on used and being added generation after generation. And they have grown this wealth to $11 billion. That's just the known wealth part of it. They might have, you know, some other LLCs and stuff that they have kind of created a structure which we cannot really go and count that money. But what's interesting is that every generation passes, this wealth just increases, right? It's like a massive wealth creation, building and creating that massive wealth. Kind of a push at the end of a generation. They also contribute multi million dollar in the charity from the cash flow. So the heirs get the cash flow. The heirs get, you know, you know, they use this infinite banking system and we'll talk about that. But they do get the use of generational wealth in a very structured manner. And now when I'm talking to you, why are, why are these things important for you? Because you, my friend, you have started creating the generational wealth for your family. Most of you have built the wealth from scratch. When you are listening to this episode. You have, you know that you have built that wealth from scratch. And this is the build the found the foundational of your generational wealth from here. Based on what tools, techniques and structure that you put in place, your next generation is going to get benefit from it or otherwise on the contrary, get a chance to destroy this wealth. So let's talk about what worked well for the financial fathers and what did not work well. Right. First of all, family threads, when you have generational wealth, it gets divided say into three years or two years after that generation pass and then multiplied by two, multiplied by two, multiplied by two. When this wealth gets distributed and disintegrated, what happens is that some air are not going to take it seriously. They're going to splurge away this money. Some actually are going to get impacted by either lawsuits, by maybe divorces or maybe some mental instability that they are not going to able to grow this wealth. There is a financial ignorance. What happens is when there is a life experience structure, tools and techniques that one person, one generation learns and that's by the way is you, you know a lot about your family structure, your experience, how you have grown and built this wealth, when that one person just knows and he passes away, all the life experience are going to go away. All the structures, the tools, they are going to go away. So the lessons learned is that don't do it right. Don't give the the next generation a chance to destroy your wealth the form the family threads. And also don't leave them without that proper structure so they can get destroyed. The wealth can get destroyed, right? So what is it that the Rockefeller's family did well that we would like to learn from? First of all, no Division 1 structure. With their estate planning, with their trust that they created, they created one structure. And only the cash flow is getting distributed to the next generation. It's not the essential, the core wealth that's not getting divided, that's not getting distributed. They created the tools and techniques in terms of how they're creating the structure of the infinite banking, how they are investing in different ways vehicles, what is that percentage that they are going to, you know, invest in different vehicles. And with that, you know, they're protecting and preserving like a family vault. Every time there is new system that they learn, that new system gets added to that, that generational wealth strategy. And that's how my friends, they are passing this generation wealth and massive increase of generational wealth is happening through this inheritance of not just the money, but the, the inheritance of Structures, tools and techniques and the experiences that they have heard. Let's talk about our next problem. What is another wealth destroyer? The taxes. We talked about how rich pay the taxes and how, you know, especially the W2 employees, they pay the taxes, right? When they are paying the taxes in 30 to 40,000 bucket, the wealthy are say paying zero to nothing taxes on the income they are earning because they are creating a lot of tax strategies. Let's take a case study. If you were able to create 50,000 additional income per year, long way to go. I know it's difficult, but it can be possible, right? And you are considering three brackets, 0% on that just extra income. I'm not even talking about your W2 income. I'm talking about just that additional income that you are making 0%, 15% or 25%. Say if you get a compounded growth of 7% year after year for just about 10 years. In that 10 years, the range between what you are getting, what the growth that you have achieved on this money, it's going to range from about 594,000 to about 794,000. That's a gap of 200k. So the money that you're losing on taxes is not just the money that's going out of your pocket. It's not just that 5,000, 10,000 extra that you're paying, paying, but it is that harnessing the growth of that leakages, what that money can in future make the money from the money that you're losing. If we consider that, you know, in this example it's about 200k difference. And that's why I want you to focus on avoiding that tax leakages. And when we are providing you this tax efficient investment strategies, that's really, really important to know that at least the money that's coming in that should have some stack strategy in place for you. Let's talk about our next problem. The qualified plan, which is the retirement plan, either IRAs or the 401ks, even the educational plan where you're putting the money and it's growing and you know when you are, it's going tax free, when you're going to take it out. If it is for a particular purpose, for educational purpose, maybe you will not have taxes, but if it is retirement purpose, you are paying deferred taxes. Now the tax free versus tax differed is a very interesting concept, right? Say for example if you contributed to your retirement account about 500k. And I'm just keeping it simple, right? 500k that you contributed, you saved, say Minimal taxes, say about 22% taxes, which is about 110k in taxes. Say if that money grows from 500k and to a million dollars by the time you retire and now you have the same 22% tax bracket. Now typically people say that, you know, hey, my tax bracket is higher right now and when I retire I'm going to have a lower tax bracket. Is it really going to work like that? The cost of living, the inflation is increasing when you are able to spend 100k and if you are managing your expenses when you retire. So 20 years down the line or 10 years down the line, the inflation is going to require you to take at least 150, 200k out, which is equivalent to maybe the salary that you are earning today. So your tax bracket is not going to be different. So in the same example, let's just assume that it's just still 22%. So what you avoided paying taxes on is about $110,000. That's the total tax savings that you had. Now the taxes that you're going to pay is 220,000. That's twice much the taxes. But wait, what about the tax brackets? Are you sure that it's going to be about 22%? If you look at the history of the marginal tax rate for the highest and the lowest wage earners in this country, if you go back and look at it like say in 1920 or something, the highest tax bracket was close to 80%. In 1960s that was even higher, close to 90%. Then it started coming down not too long ago about in 1980 it was close to 70%. It has been little bit lower and it has been consistent over the last few years. But based on the administration, this has capability of changing. Can you time your retirement age and when you start pulling out that money, what that tax bracket is going to be? So number one, not only you're going to pay higher taxes, but you don't even know what tax bracket is. It is going to be. It's almost like somebody's giving you a loan and they say that okay, you can return the money whenever you want, but at the interest rate that I'm going to ask you at that time. That's exactly how it is because you don't know what your tax liability is going to be, what your tax bracket is going to be when you retire and if you have any money left over in there. So for example, if you have a million dollar left in there with a secure act now, your heirs have to take that money out within 10 years. So imagine if your heirs, your generation, next generation is at you know, 30, 40 or you know, 45 age, where that's their peak of earning age and they have to start taking this almost 100k 200k out from your retirement account. How much money are they going to pay in the taxes? So the lifetime that you are creating, when you are creating this immaculate strategies of saving your money, investing and you know, reducing the taxes, that same money is going to face the light of taxes in a very, very heavy manner when it's time to take out the money or is it time for the heirs to take out that money? So to summarize, you know, as per mono said, right? It's the questions that we have to ask, right? And that's when we have the right answers. And our answers to summarize, the problem is number one, the generational wealth depletion. When you are building your wealth right now, you need need to put a right structure in place so you can create that generational wealth which is not getting destroyed. The tax leakages that you have, which hampers your growth of current and the future potential that that money can have. The lower interest environment that the banks are providing you, which is very volatile by the way, it was 1% sometime back, it's 5% right now, but it is also being taxed. So that is the problem. The volatility of bank itself is a big problem. We have so much of problems. So much of you know, articles, news is coming out of the SVB or the likes of the banks that they are failing. So the banking institutions, I mean there has been several times in history that the banks have, have failed and feds had to rush to save these banks. So I question you that is your money that you are putting on the sideline is safe in the banks? Is it really safe in the bank? Another restrictions that you have on the tax free or the tax deferred accounts is there is a limitation on how much you contribute, what purpose you can contribute and limitation on how much you can take back and you can take it out based on the number, the age or the education, that purpose that you have right on top of it. This does not provide any asset protection for you. There is absolutely zero asset protection. So if somebody puts you in a legal hassle or have a lawsuit against you, the money that's sitting in the 7 savings account, that's easy accessible, the money that's sitting in your brokerage account or your rental real estate, all these things, all these assets that you are creating that is having no asset protection at all, which by the way infinite banking system. We will talk about that. It is providing you that asset protection. And on top of it, when you are saving this money in this bank accounts, are they providing you any additional benefits? This is why we need to look at, we need to realign and look at the, the solution which is the infinite banking system. Now when we keep on saying the banking, banking, banking, right. Why am I insisting of you to start thinking like a bank? Let's talk about that, that a little bit. Let's explain the business of the banks. The bank when you deposit say thousand dollars into the bank and they give you right now 5%. Sometime back it was 1%. If they give you that $50 in interest now FDIC permits them to leverage one is to four. In simple terms, what does it mean? It means that now they can give four people that thousand dollars as a leverage. They do not have to hold all that money into the banks. So now the banks can charge the interest rate anything between say 8 to 12%. So they're giving you 5%. They're taking about 12%. That's you know, that's almost 700% profit. And they can use that money four times to create that much profit. And that's the reason why you should think like a bank. So you can harness that power of leverage and still grow your money. That's the reason you should think about the infinite banking strategy. So understanding the need, what is the problem? Focus on investing. You have insufficient savings and you have created that portfolio imbalance. The need is to protect that savings, that part growth of the money, provide an inflation and tax hedge to it and create that solid foundation for you. With infinity banking, it's not only creating that efficient savings that just one part of it, it is also creating an and asset for you. Essentially be able to look at this compounding growth in the banking structure that you are creating. But use the same dollar at two different places and it's called and asset for a reason that you can use the same dollar and invest in somewhere else. And it is building you a generational wealth and to be your bank. This is why it's really, really important in part two of understanding the infinite banking strategy. I will continue with some basics and also the structure of this banking system that you need to understand and you need to know so that you can implement it in your own structure. It is important to understand that and I will continue that in part two. The part two is available for you right around the corner. So let's just jump in and start talking about the basic and the structure of the infinite banking system again. Thank you so much for listening to another episode with Think Outside the Stocks. I will continue on the other part of this banking system. Thank you for tuning in again and listening to this episode. If you are curious about the infinite banking strategy and just want to learn if this is the right fit for you, please schedule a call with me. Just a 15 minute quick call and you will get to know more about this. And you can do that by going to bit lyly callthink just one word lowercase. So bit lee callthink and jump on a call with me and talk about if this is even a right strategy for you. Thank you for tuning in again.

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