Build Your Own Bank! Nelson Nash's Secret 'Warehouse of Wealth'

Dedication and perseverance are the byproducts of intentionality. You need to be focused and purposeful when dealing with your finances. Infinite banking involves a series or system of cash value accumulating policies, not just one. It's important to understand that Nelson's warehouse of wealth was not built overnight, and yours won't be either. The first step is for you to desire change and commit to action. And let's put you in the driver's seat. Of your financial future now.

Hey, it's Richard Canfield here. We've got a great new series that we're launching on Wealth on Main Street. I'm excited for this. One of our incredible advisors, Mike Smela, is going to be walking through our book Cash Follows the Leader. He's going to be going chapter by chapter, sharing all of his notes, his incredible observations, and the critical takeaways, the things that really stood out for him along the way. Now, he brings a breadth of experience and life experience on running different businesses, of course, and embracing this concept of becoming your own banker in his own life. Plus how he is now teaching that concept to other people. So you're going to get a lot of practical, real-world breakdowns from this book. You're going to get a lot out of it. So let's jump right in.

Hi, it's Mike. Welcome back, uh, Cash Follows the Leader. We are in chapter— oh, we're on page number 24, Policies Versus Policy. The late R. Nelson Nash explained that infinite banking involves a series or system of cash value accumulating policies, not just one. Think of it in terms of your own bank. Is there only one branch office for your current bank? We would suspect not. The more the bank grows, the greater the need for additional, additional branches. You will find this to be true as you look to expand the size of your own warehouse of wealth. Each time that you add another policy into your system, think of it as adding a bank a branch office to your own family bank. As a side note, considering assigning a name to your own banking system when you begin this process— families that have fun with this process tend to be more open about it, and it eases the discussions with other family members as they embrace the process. For example, Nelson and his wife Mary had at one time 49 policies on several people's lives, including their children, grandchildren, great-grandchildren, and former business partners. Some of these individuals even had multiple policies on Nelson and Mary. These policies were all branch offices of what Nelson named the First Nash Family Bank. As of 2022, Nelson's son-in-law and president of the Nelson Nash Institute, David Stearns, had built a system of 26 family policies and is still growing. This includes their children and grandchildren and will expand to great-grandchildren, just as Nelson Nash had done during Nelson's lifetime. They even transferred the cash values to the next generations by changing the ownership of the policy. Yes, you can do that. In fact, Nelson indicated that he and his wife Mary had shared over $750,000 in cash values during his lifetime by transferring policies he owned to his children and grandchildren tax efficiently. These policies give you the flexibility to provide those you love with something before you pass, to experience the impact it has in their lives, as well as the joy in giving. This is just another example of that control we talk about, which is so important. When Nelson passed away in March 2019, there were 17 tax-free death benefit checks by insurance companies, and Nelson left 28 cash-producing assets still in force to the next generation as part of his legacy. All of these policies will continue to grow uninterrupted. Why is that? Quite simply, because of the name of this book, Cash Follows the Leader, where the leader is the death benefit. Each of the 28 policies remaining is on a person that is still alive, and each year as the death benefit rises, the available cash value must contractually grow to catch up to it. Nelson began with policies on his own life. As a prudent businessman, from time to time he would joint venture with other partners in various real estate projects. He recognized that if those people passed away prematurely, it would trigger a significant financial loss for Nelson and their partnership. It is common for companies and banks to take out life insurance policies on their key people for that reason. There is certainly an emotional loss, but the policy is there to compensate for a financial loss. Nelson purchased and funded policies on the lives of his joint venture partners as a means of building what he named his warehouse of wealth that he controlled. Think about this, and let's just think banks-wise. How many vice presidents are there in a bank? I remember I used to work, I was a mortgage loan officer for a bank here in, in town, and I was a vice president of the bank. Well, as the vice president of a bank, I was also one of their key employees. I can almost promise you there is a life insurance policy, at least one on me, that the bank owned, that the bank is the beneficiary of, that even though I no longer work there, eventually I'm going to pass away. And what's going to happen to that money? It's going to go to the bank tax-free. Corporations do it, banks do it. As we talked about, or as Nelson talked about, you know, he did it in joint ventures. So there's different ways to put policies on different people. Back to the reading here. On one policy Nelson started on the life of a JV partner, the tax-free death benefit had grown to approximately $250,000 over the years he owned the policy. Nelson had used a large portion of the cash value as collateral for policy loans and utilized the proceeds to pay off his creditors from the recession of the early 1980s. Sadly, the partner passed away several years after their joint venture had ended. At the time of the partner's passing, there was an outstanding policy loan balance—principal plus interest—of $48,000. That entire policy loan balance was repaid immediately with the proceeds of the death benefit, and the remaining $202,000 was paid to Nelson income tax-free. Nelson did not purchase the policy for a death benefit. He purchased it as a place where he could put premium deposits to build up capital that never left his control. He borrowed against the daily cash value growth to get rid of creditors, the snakes and dragons as Nelson would say, one at a time. In combination with other policies he had under his control. For the timeframe the policy was in force, Nelson had only contributed $47,000 in total premium deposit.

Hey, if you're enjoying this book walkthrough of Cash Follows a Leader led by Mike Smella, that's fantastic. If you don't already have a copy, make sure you get one. Go to CashFollows.com. That's CashFollows.com. Get a copy right to your inbox. Go ahead and do that right now.

Nelson was already well on his way to accomplishing his objective of taking control of the banking function in his life, using policy loans to pay off his creditors, when this windfall event happened. When Nelson shared this story with others, he always said, didn't that windfall of $202,000 cancel out a lot of financial mistakes I made in life? I did not buy the policy for the death benefit, but these things do happen. I bought it as a place I could store more money so I could get rid of the snakes and dragons. It's important to understand that Nelson's warehouse of wealth was not built overnight, and yours won't be either. As his cash flow increased, Nelson was intentional about saving money and placed any new funds strategically into new policies as he was able. Time and dedication are key factors in creating and growing your own banking system, but the result of this effort creates a peaceful, stressful piece of life financially. So picture a day when you're living a peaceful, stress-free way of life financially. How would that make you feel? Pretty amazing, wouldn't it? We use the word intentionally and emphasize it because it does take dedication and perseverance to create and maintain. Dedication and perseverance are the byproducts of intentionality. When you do anything with intention, you do it for a reason. You are focused. And let us tell you, you need to be focused and purposeful when dealing with your finances. For example, have you ever heard about Parkinson's Law? Well, it states that expenses will rise to meet your income. It's a common occurrence where you get more money coming in, such as a pay raise or tax refund, your spending habits rise, double it all up, and unfortunately, and unfortunately for many North Americans, the more income you make, the less diligent you are on how you spend it. And despite the commonality of this phenomenon, it can be a great killer of cash flow necessary to create your family banking system. So again, how do you become intentional about your finances? You monitor your free cash flow. First, let's define free cash flow. Money comes in and goes out. That's cash flow. You earn an income and pay for the expenses needed to live your life. Free cash flow is the money not earmarked for specific regular bills. It's the extra or surplus, if you will, that is all too easy to squander. It is these funds that will be used to kickstart your family banking system and provide for a financially secure future. By embracing the learning process and working with an authorized Infinite Banking Practitioner on our team, you will actually practice the steps of being your own banker. By staying connected and active with your ongoing mentorship, you will begin to see ways to naturally increase the size of your program as you go. It has worked for us, and we both actively continue to expand our personal systems. Summary: as you picture this happening in your life, you will be purpose-driven to get, to get it going. We've both done it personally, and it's been a game changer within our families. As of the time of this book is written, Jason is adding policy number 67 into his family banking system, which includes multiple policies on himself, his wife, his 4 children, extended family members, and several business partners in the Lowe family group of business, uh, Lowe family group of companies. One of the policies is even on the life of Richard Canfield, the co-author of the book. Nelson Nash taught us to think about the word diversification as diversifying in lives insured as we build our warehouse of wealth. Richard has added 3 new policies, a third on his wife and 2 new ones on his young children, bringing him to 13. It all began with one policy, and then we applied the same mindsets and actions we are sharing with you to expand our system. The first step is for you to desire change and commit to action. Our subsequent chapters will detail how you perform each step toward your goal. We will be with you throughout the process. So join us and let's put you in the driver's seat of your financial future now. So what I take from that part of this is, like, in my own situation, I have one policy on me. Um, earlier in this past year, I wanted to create an additional policy or two on me, and unfortunately, because of a history of cancer, I was not able to do that. Unfortunately, my wife had cancer as well, so what I ended up doing is I was talking to my son, my daughter-in-law, and they have a 7-month-old— he's now 10 months old— grandson. And we ended up creating new bank branches, a policy on my son, policy on my bonus daughter, and a policy on my grandson. So we now have 4 branches of the Smela Family Bank. And currently, both myself and my son own the two policies on us. Myself and my bonus daughter own the policy on her, and myself and my son own the policy on, on our grandson, my grandson. So, so long as I am here, I'm going to continue to fund it. If they want to contribute, they can too. We have a couple of policy loans on one of them, out on one of them. One of them I've already paid back. Another one we're doing for my son and, and, and bonus daughter, for them to start getting the snakes and dragons out of their lives. So we're all as a family controlling the policies. Eventually, when I pass away, since the insurance and the policies are on them, they will be able to take over the payments, the, the premium payments on that, and eventually the same thing on their son, on my grandson. Down the road when, God forbid, my son and daughter-in-law pass away, all of those funds that are in there will be able to go to your son and hopefully more grandkids. Hopefully. Um, but the big part is we are also going to be teaching and, and learning and communicating how to effectively utilize, utilize our banking system rather than turning our money over to someone else for their— for to keep in their banking system. So we'll start on Chapter 2 tomorrow. Hope you're getting a lot of good information out of this, and we will talk with you soon.

Thank you. All right, check out the next chapter as Mike goes through it right here.