The Compound Interest Formula Everyone Gets Wrong

If you've been researching infinite banking, you've probably seen two extremes. It's a scam or it's a miracle. Most people are stuck in the middle, confused by the noise. Today we're cutting together the confusion a little bit and the marketing, and we're going to answer the real questions that you've been searching for. Now, keep your questions coming. We want to hear from you. So go ahead, leave a comment down below, a question that's burning on your mind about this concept or whole life insurance, maybe specifically, or the utilization of an insurance contract. Those kinds of things. We want to hear from you. So now today's questions are coming from our LinkedIn page. So the first question is, how does uninterrupted compounding occur and why? So it's kind of a two-part question. So first, let's look at Webster's Dictionary of compounding as a verb: to pay interest, air quotes, on both the accrued interest and the principal. So that's what Webster's Dictionary indicates. So essentially compounding means that when it comes to financials, that we're Everyone's heard of the miracle of compound interest. Excuse me. And all we're looking at is that capital is growing on a continual ongoing basis and you're earning interest on interest. That's essentially what we're talking about. So the only way that compounding can properly work though is if money sits still. So we've all seen examples, a YouTube video or some spreadsheet, maybe you even ran your own and you put a number in and then you let it keep growing at some random interest rate., and you'll see this beautiful accumulation, and eventually you'll have this compounding growth curve and it looks really amazing. Well, there's a couple of key elements. Number one, you need time. So time is one of the critical elements of seeing that compounding come into effect. And the second thing is that whatever it is that you are putting at growth, the investment, the asset, the capital, it has to be sitting still. That means you can't delete it. You can't pull it out of the account. So imagine you just have a basic savings account. You put, you know, $50,000 in there. Well, that $50,000 has to stay in that account in order to see the eventual accumulation of compound interest where you have interest growing on top of interest. That's the critical element. So number one, money has to sit still for compounding to work. And then number two, you need to have time. So the only other variables, of course, is the interest rate or what you're earning., and the higher the rate, obviously the shorter the amount of time to reach a given value, et cetera. But the real key element is about that constant compounding accumulation. So if you go back to our question, how does uninterrupted compounding occur? Well, number one, it occurs because or when money isn't sitting still, it's not being removed or depleted from the resource or the account. So in the scenario where we're talking about a whole life insurance policy,, which is the vehicle, the mechanism by which we practice the concept of becoming your own banker, as Nelson indicates in his book, which I happen to have a copy right here. So if you don't have a copy, please make sure you order one. You can click on the description. There should be a link to access our bookstore there. Another book that I want to point out is this one right here, that was just our second book called Cash Follows the Leader. Okay. It's literally uninterrupted daily growth with high cash value life insurance. So when you put a premium dollar into an insurance contract, you're a premium. It's not the same as a savings account, although it mirrors and kind of mimics a similar aspect to a savings account, although it is not the same thing. So I pay a premium. Now I've exchanged the custody of my dollar to the insurance company, and the insurance company now has custody over my dollars. They're not mine anymore. They belong to the insurance company, but I co-own the insurance company, and the insurance company provides me an asset, a whole life insurance contract. That asset has fundamental rules and contractual elements. And one of those elements is that they're going to provide me a cash value. Cash value is the asset portion or the present value of a future death benefit. So we know that life insurance has a death benefit attached, and that death benefit we expect is going to be paid some way, way out down into the future. Now, it could be paid tomorrow. Hopefully that's not the case for me, but sometime out in the future when we reach mortality stage, the expected age that we anticipate that we're going to, you know, be gone. We're going to graduate, as Nelson Nash would say. So that day is way out here, and today's value of cash value is essentially a present value of a future death benefit. So we have present value, we have future value. The future value is that death benefit number. And so all the way along, as— so this is where time comes into the equation— as we accumulate out to this future point in time, mortality age, The cash value must grow, grow, grow, grow, grow to eventually equal that death benefit number. Now, in US, we have contracts today are being issued, a lot of them on an age 121-year contract. So if I'm 21 years old and I get a life 121 contract, that means I have 100 years of time for that compounding to accumulate, if that makes sense. In Canada, we still operate on a 100 contract. So, if I'm 20 years old to age 100 is now 80 years. Same idea. If I'm 50 years old, there's 50 years left to age 100. You can kind of see how the math works there. So if I'm older, usually I have more money to work with. I can do more premiums because I've got a better earning potential, but I have less time. So I actually need more money to get the same effect. If I'm way out here at 20 years old, I could probably put less in than the 50-year-old. Because I have more time and at age 100, we could have a similar number. So maybe this person's putting in $10,000 a year and the 50-year-old is putting in $50,000 a year, but because of the amount of time difference, we might end up at a similar point at the same age, if that makes sense. So the relevance of time has a lot to do with all this. So why does uninterrupted compounding occur, or the accumulation of cash value, which mirrors compound growth? Why does that occur inside of the insurance contract? It has to do with that contractual element. So again, age 100 or 121, depending on which country you live in, whatever your starting point is. So if you're, again, if you're 45, you're 50, you're 60, whatever your starting point is, that's the remaining amount of time you have for your accumulation to occur. And what amount of premium are you putting in, which is you're exchanging that for custody to the insurance company. You co-own the insurance company. They're going to guarantee accumulation of cash value and they're going to guarantee a tax-free death benefit. So that's what you receive when you put premiums in. You're not just putting money into a savings account, you're putting it into a contract and that contract provides you a bunch of really fantastic contractual features. Okay. That's a little bit about how it works. So we're going to look at an example. I thought I would put something together just to showcase a few different things. And then we have another question to get to. So I'm going to bring up my screen and we'll walk this through. This example, before I bring it up, I'm going to be looking at a spreadsheet. So I don't want to scare everybody away. Okay. The purpose of this spreadsheet is to carry forward and show the compound potential over a really long timeframe. And the value of having that uninterrupted growth taking place without sacrificing liquidity. Liquidity is the real issue that happens in most other structures. Okay? In every other structure that you want to get or create uninterrupted compounding, you have to leave the money in and let it sit there. So if you're doing a quote unquote investment, you might generate compound growth. People say compound interest, but that's not accurate. Because the only way you can get compound interest is if it's in an interest-bearing account. Okay. Or something that mirrors an interest-bearing accumulation. Whereas what most people are talking about in this day and age when they refer to compounding is they're talking about growth in an investment and investments can go up and they can go down. So compounding can actually go both directions. Same thing if you have debt and you have like a mortgage or a car loan or a line of credit, compounding still operates there. It's just operating against you instead of for you. Okay. So both of these things are important to understand. Which side of the compounding coin are you on? And are you generating interest? In other words, it's more safe, it's more secure. It's not subject to risk of loss. Okay. Or are you generating compounding because of investment gains? So investment gain growth and compound in that format, I don't think should be aligned the same way. You would be really be looking at gains in your investments. While it might mirror a compounding format, the reality is most investments don't have that continual consistent structure. You might have huge jumps in gains followed by a few years of losses. And so you have to take in consideration those ebbs and flows, which means it's not uninterrupted. So what we're talking about for the purpose of our question today is the uninterrupted compounding potential and how a small reasonable interest rate can create a really massive effect over a long timeframe. This is based on a Canadian life insurance illustration. I'm not showing the illustration itself. I'm just going to show the spreadsheet. I'm going to start with a 45-year-old male, okay, and a nonsmoker. And I'm going to show $50,000 a year in premiums going in. Now, for the purpose of our example, I'm showing that going in every single year to age 100. Now, the reality is a person may not do that. We do encourage it., but I'm going to show it so that I can show both. Number one, I'm going to show two different versions of the same illustration, basically same $50,000 going in, but going in two different ways. So there's a little bit of discussion we can have on that. The next thing I'm going to show is I'm going to show the impact of what that looks like at age 100 or 55 years later. And I'm just going to use a very basic free future value calculator to show you how we can essentially mirror what the overall growth rate or compounding growth rate of that policy is over a timeframe. Now, here's the missing link, the thing that's really important. What this static illustration or this spreadsheet is going to show, it's only going to show static math. It's not going to show the timing of when the policy owner put the premium in, which would, could impact results. And it's also not going to show what would happen if they missed a year or didn't put premiums in for a year, or they only went for 10 years and then they stopped.. It's not going to show any of those variables. The reality is the policy owner, the policy owner's behavior, okay, their actions have more to do with the output and the reality than the insurance company ever does. In this example, I'm going to show, I'm showing the policy owner's putting in the behavior of a premium every single year at the beginning of the year, like clockwork, never missing a year. We're also assuming that the insurance company is paying dividends, which They all do pay dividends. It's just a matter of whether a dividend is declared in that given year. So for the purpose of our example, we're assuming the dividend based on, at the time of this recording, we're in March of 2026. We're assuming that dividends are declared each and every year on an ongoing basis. The company I'm showing this with coincidentally has never missed a dividend since the inception of when they started paying dividends, which I believe began in 1936 for the purpose of our example. So. There we go. That's kind of how the lay of the land. Let's go ahead and bring it up and take a look. Okay, here is our first example. This example is showing, excuse me, $50,000 a year. Apologies. Showing $50,000 a year going into the policy. And we have a minimum premium. You can see guaranteed required premium. So the minimum here is $20,000, which means $30,000 is the flexible amount for the purpose of our example.. It has a starting death benefit of $869,000. I just rounded up to $870,000. And in this example, there is no term insurance used or added. Now I'm going to show version 2, which shows term insurance and a slightly different structure, but the same $50,000 going in. And the result is they're both pretty darn close to one another. There's not a lot of difference between this version versus that version. The difference is going to be in a little bit more starting death benefit in version 2. And actually a little bit less cash value for the first 10 to 15 years until they even out. And it kind of, they, in other words, they're both good. And the scenario for the individual would dictate what makes sense given their circumstances. Okay. So the same $50,000 is going in. This one is 100% whole life with no term insurance. And it starts off at $870,000 of death benefit. You can see that there's guaranteed cash value. And then over here, there's the total cash value. Which is at the end of the year. So beginning of the year, we pay $50,000. At the end of the year, after receiving the dividend, it gives us a little bit of a boost. Okay. Most of that, that boost is coming from, sorry, most of the cash value is coming from our original premium dollars and the, and the method in which it's outlaid. Some of it as the guaranteed cash value. Some of it as a paid-up insurance cash value in the example here that we're looking at. And then we're going to get a boost with a dividend at the end of the year. And you can see the dividend in this case is $2,800 at the end of the year. Dividends are paid on the anniversary date of a policy, never before. Okay. And a policy has to be in— just understand that dividends are always shown on the anniversary date. That, that's the key element here. All right. Next thing I want to show is I have a little bit of an example here of the total premiums funded. So you can see in 5 years we have $250,000 and you can see the cash value compared to premiums. So you can see that when we get to year 4, we've put in $200,000. Our Cash value is $196,000. We're not quite at a point where we've got every dollar of premiums that we've funded represented. It's not the same thing as growing to equal, but where there's a representation that's equivalent in cash value. Yet in our particular example, we see that that does take place in the 5th year. So we put $250,000 in, we have a cash value or an asset value that is equal to or greater than in this particular example. So some of that has to do with the size of the policy and the age. You know, if we were 20 years older and we put the same amount of premium in, we would get a less death benefit, number one. And then number two, it might take us maybe one more year to reach that metric. Okay. So everything is perspective relative to things like age. And so every policy that we put together for a client is structured and customized based on what's going on with their needs, their ability to fund premiums, their consistency of premiums that we're looking at. So all that planning goes into the conversations that we have with our clients. You haven't had one of those, we'd recommend you should be a link in the description down below. You can go ahead and book a time with one of our coaches and learn more about that and go through that process. It's a lot of fun. It's also good just to unpack how you're structured financially and you might get some great advice along the way. Now scrolling down, uh, go to year 10. We can put $500,000 in and you can see that now we have $113,000 more dollars in the cash asset column compared to what we funded in total premiums. So we have a cash value of $613,000. So just to walk you through kind of the first 10 years and how this looks like. Now I'm not going to break down each and every year, but one key thing I do want to show, this cash value number over here, this is what you can borrow against, borrow against. You're never depleting or pulling out, although that's an option that you can exercise. We would never recommend it. You can borrow against this asset. So that's where the liquidity comes from. So now in year 5, if I wanted to borrow, I can borrow 90% of this number. So I'll just do that quick math here, $254,000. Times 0.9. So that's about $229,000. So I can borrow $229,000, but my $254,000 never leaves the policy or the contract. It stays there. It is always accumulating to meet its contractual feature, like I talked about and how we discuss and indicate inside of this book, Cash Follows the Leader. So that $254,000 and each and every year it's growing and it's accumulating. And if I borrow against it, I might have a net value that's lower because I have an outstanding policy loan, just like if I have equity in my house and I have a mortgage. Well, there's a difference between those two numbers and there's a net equity. Okay. I have a value of a house is $1 million and I owe $800,000. Well, then I only have $200,000 of equity. If I borrowed $229,000 here from this contract, well, I would have $254,000 minus $229,000. I would have $25,000 of equity left inside of the contract. All right. Now, when I'm borrowing against the policy and I'm taking a policy loan, you can also do collateral loans, but for the circumstance of today's conversation, we're going to discuss a policy loan. Then that loan is arranged with the insurance company directly. I have first right of access to whatever can be lent against my policy. It will accumulate interest to the insurance company who I co-own. So if any interest accumulates or is paid to the insurance company, that goes to the benefit of the insurance company, which supports every single person who has a participating policy in that entire pool. So it's a very free contract, mutual benefit type scenario. Okay. So there we go. Not to dig into all the mechanics of policy loans. Now I'm going to scroll down and I'm going to go all the way to the bottom here just to highlight something. So you can see I kept paying that premium each and every year. And at the end, you can see the cash value and the death benefit are the same number. So again, this is a Canadian contract, age 100. So the cash and the death benefit must be the same. This is an example where you can see that. So this was the future value at age 100, $12,287,000. And you can see that last dividend was $288,000. That's a, that was a, that was a big one. And you can also just look at the accumulation year over year between these two numbers. I mean, we have a substantial difference between those two numbers, as you can indicate. So now if I go over and I take a look at the total premiums in this scenario, we did 55 years of $50,000. So $2.75 million of premiums went into the machine over a 55-year timeframe., but we have a $12.2 million output. So this was input, this was output, which means if we borrowed or got $2.7 million out of this machine, then we would technically have $9.5 million of excess created over and above what we put in. So that would, you could isolate and say, well, that's the interest accumulation. Our principal is the $2.7 million in the scenario we're talking about compound interest, you know, just to make the reference point. Between a savings account. So what would be similar, though it's the technical language is different, where an insurance contract looks like or looks similar to a long-term savings account would be in this model. We put $50,000 a year each and every year. We save $50,000 by way of premium payments each and every year. It accumulated a death benefit. The death benefit pulled cash value along with it, kicking and screaming for 55 years to age 100. The end result is we have a $12.287 million death benefit. And you don't have both of these numbers. It's not that you get the cash and the death benefit because they're actually the same thing. The cash value is a representation of a future death benefit. It's a present value of a future death benefit. Well, the present value and the future value line up at age 100, which is the contract, you know, timeframe relative to the Canadian contract that we're looking at. So there you go. There's a bit of an understanding. Now let's take this one step further and we're going to look at a future value calculator. Just to line all this up so you can see exactly what I'm talking about. So let's go, uh, new share. Okay, so now I have a basic future value calculator here. This comes from vertex42.com. Shout out to them. They've got some great free calculators. I really like using these ones because they're available to everybody. And while I have some great tools that are, you know, I pay for that are more exclusive, you know, I would rather use a tool that anybody can just go and download and use for themselves. So here I have the same example, $50,000 a year for 55 years. And the number that we had on the bottom of our sheet. So the value at age 100 after 55 years was $12,287,000. Well, this is pretty darn close. We're about $2,000, $1,800 further ahead in my, in this particular example. And you can see that the interest rate now in order for me to get there, and I just did this through trial and error, was the equivalent to 4.575%. In other words, effectively, or the IRR, so I'm not a big fan about time or rate of return on here, but I just want to isolate what's really going on. Internal rate of return showing that the policy accumulation from the dollars shown to go in relative to the output over that same timeframe would be the equivalent of a compound growth rate uninterrupted from day 1 of 4.75% in this example. Now, the reality is. On several of the individual years, the growth rate is substantially greater. And in the early years, you remember I had some red numbers where we were actually negative or we were behind the amount that we contributed versus what, what we had available in cash value. So this number that we're looking at actually shows the reference point of blending all that together and showing the actual true internal rate of return of this particular policy contract. In this example for our 45-year-old. Now, here's the next thing. Obviously, you can see our compound growth here, very nice and easy and simple. You can see it accumulates, it gets even, and it starts to outpace, outpace. And then as we go further and further in time, because time is important, we can see that drastic impact. What's different in this tool is that, of course, we're seeing the balance, an accumulated balance that's larger because then the cash value shown in my example, because We're assuming it's a savings account. So this is where these two things are different, but the net effect over the timeframe is the same. And that's really the key value after 55 years, $12,289,000 value on my example, $12,287,000 and change, pretty much the same number, very, very close. And that's how I isolated the growth rate compound effect uninterrupted over time. Now, is this a massive crazy rate? The answer is no. But what's awesome is the total control because here's what's not being shown is what else was I able to do, or the, the policy owner able to do with this machine while they had access to it? This is the power of having a machine that allows you to tap into the ability to access equity and use it somewhere else. So if I took a policy loan for $200,000 and did a down payment on a suited rental house or a multifamily building of some kind, and I use that to generate cash flow, well, that rate of return is outside of the policy. So we have an outside rate of return compared to the internal rate of return. And what we haven't also factored in, something I learned from my friend Todd Langford with Truth Concepts, is the eternal rate of return. Because at some point in time, we're going to talk about that life insured person in the past tense, and there's going to be a tax-free death benefit. So let's examine that for a moment. Let's go back to my example. We'll look, go to the policy here. So here we have this up again on the screen. It's on a different screen, mind you. If we go up to the top and you can see the death benefit growing and growing and accumulating by the 10th year, it's basically more than double. It's $1 million more than what we started with by the 10th year. That's the power of paid-up additions, by the way. The combination of funding a paid-up additions premium plus increasing dividends, those things work hand in hand in tandem and they accumulate that death benefit. So it buys paid-up blocks, paid-up blocks, and the cash value has to chase after those new numbers each and every year. It's really powerful. That's how the uninterrupted compounding is created because we're growing the death benefit. Once that death benefit rises, the cash value has to try to leapfrog after it and chase after it each and every year in an accumulating fashion. Now, I'll just go down to the next example here. This is year 20. So I went to year 20. We've put in $1 million in this example, and we're $637,000 $50,000 more in the asset value. Pretty good exchange. I mean, it's taken a while to get there, but each and every year is getting more efficient. Here's the key thing that I want to look at from year 20 to 21. You could see the growth between these two numbers looks like, okay, what do we have? We got $63,000 and $63,000. It's like $120,000, $127,000, roughly speaking. So we put $50,000 in., and the accumulation over the same year was $127,000. So that's a really powerful machine. If you had a machine like that, that every time you put $50,000 in, it created more than double the output, how often would you want to put the $50,000 in? That goes directly to page 85 of Nelson's book. Now, many people who know me know that that's one of my favorite pages of the whole book. So I've got that right here. It's called Points to Consider. And Nelson says that if you knew at passive income time, You would be getting back everything you paid into a system tax-free or potentially tax-free in Canada. Would you object to putting any more money into it? It's a rhetorical question. Obviously, you're— no one's going to answer no to that. But this is a perfect example, looking at an illustration here on a spreadsheet where you can see exactly that. Putting $50,000 in, in that same year, year 21, and the growth from year over year, the output, which would never happen if we didn't get the first 20 years done the same way. So we're creating that output on the whole machine now at that stage. But the same $50,000 is much more efficient because $50,000 is creating $120,000, you know, $127,000 in this scenario if I did the math correctly. Okay. So next thing I want to show you just real quick, just from a comparison standpoint, they're all pretty much the same. So I have the exact same $50,000 going in, slightly different structure of the policy. Neither one is better than the other. They're both good. I see stuff online all the time where everyone's like, this is the best structure. This is the only way to do it my way or the highway. And there's only one way to build an insurance contract. All of that is gobbledygook and completely crazy. Okay. Policy design has to do with what's going on with the individual, their objectives, their cash flow, and trying to make a match between what makes the most sense while planning for strategic future events along the way. There's a lot of work that goes into thinking through the customization of insurance contract, at least the way that we are, our model of thinking about it. So we would encourage you to have these, these good conversations. A coach who's been doing this for a while, will have a good understanding based on the financial dynamics that they receive on what type of an adjustment or tweaking or structure is going to make sense while also having a forward-looking view at things like accumulating another policy, expansion of your system, key timeframes like the ages of your kids, when your mortgage is paid off, mortgage renewals, like all of these things kind of play a role into some of that thinking process. So here we go. I've got same $50,000 going in. You can see the $50,000. It's like $1 less, but it's pretty much the same. And then you can see that we've got a minimum premium, which is a lower premium. The previous one was $20,000. This one is $12,000, but this one includes a term— oops, a term insurance rider. Okay, well, why would we do that? There might be several reasons. One of those reasons could be that we actually need more insurance coverage on this person's life to protect their young family. In the first example, we got about $870,000 of death benefit. 100% whole life. Here we're getting a lot less whole life. It's $449,000, but we're adding a term rider now. So our total initial death benefit is actually higher, and that might support the objective of that family at a better layer. We do have to pay the cost of the term insurance. I rounded it up. It's about $1,500 a year, and I locked it in for 20 years. Well, this person's 45 years old. That's a pretty good deal. If they were 50 years old, That premium would go up more. If they were 60 years old, we probably wouldn't look at a 20-year term rider. We might look at a 10-year term rider. Again, everything is relevant to the unique circumstance of the individual, and we build around these different dynamics based on what's going on in your life, thinking about some of your future objectives, talking through what you see in the future and planning all these things together. All right. Now you can see again, cash value here in this particular example. It looks like about $44,000. In the previous example, it's very similar, pretty darn close. If I go out to year 10, this is $602,000, whereas over here it was $613,000. So this one has the edge. It's about $10,000 further ahead in cash value, but the total death benefit, $1,894,000, and on this scenario we're actually higher because we still have that term insurance in place. So again, what is the scenario that we're looking at here? Neither one of these is better or worse. It's just a matter of of what's, what are we looking at? And if I scroll down to year, looks like this is year 20 here. Yeah, year 20. So we have $621,000 of cash value that's greater than the total premiums that have been funded up to that point in time. Whereas in this other example, it was $637,000. So they're all still pretty close, but the, the one without the term insurance is actually a little bit bigger from a cash value perspective., but the death benefit's a little bit different. So all these things play a role. Here's the other thing we need to look at with the term rider. You can see there's a drop in term insurance in this example, 'cause in year 21, I'm showing that we're gonna get rid of the term rider. That's an option that the policy owner can choose. There has to be rationale on that, and we have to make sure if you're in the United States or even in Canada, that there's not a tax consequence created if that term insurance has been used to falsify temporarily the exempt status of the policy. So this is really where these conversations with your coach and on an ongoing basis, depending on what you're doing, have a real impact to your financial condition if you're not mindful of some of these things as you go. So it's really important to stay in touch with your coach and build a lifelong relationship. This isn't a wham, bam, thank you, ma'am kind of a scenario. You have to really think about this over a long timeframe and the utilization of all these assets. And we carry on down. And again, the death benefit here is very similar to the previous one. It's a little bit higher, but it's negligible. The result is essentially the same, pretty much the same. So it's the same $50,000, slightly different structure. We have a little bit of term on this one and a little bit lower minimum required premium, maybe a little bit more flexibility. But the key difference is that the same $50,000 went in and the output ended up being very, very similar at the end. Whereas this one, the, with the term insurance had less cash value in the first 10 to 20 years. Marginally so, not by much. They're very similar across the board to the point where I would consider them negligible because it's really based on what's going on with the person's financial condition. And this individual might have needed a little bit more flexibility in case they weren't able to continually fund that $50,000 every year. If that was going to be a stretch for them and they needed to make sure they could make the minimum and that minimum needed to be a little bit lower to give them a little bit more peace of mind and confidence around cash flow. In case something went sideways, maybe they have a cyclical income or a seasonal income, like they have a landscaping company or something. Those are all things that need to go into consideration. All right. A lot of information we unpack there. Looking at our example, the end result is we now see an example of compound, compound growth uninterrupted taking place with an insurance policy. And that was the big thing. And you can see why it happens. Well, the reason why it happens is because cash value, present value is chasing the future value, which is the death benefit. Every time the death benefit leapfrogs, the cash value has got to leapfrog after it. And it's just playing follow the leader. That's essentially how it all works. Hence why we've got Cash Follows the Leader. So if you don't have a copy of this, go to cashfalls.com. That's cashfalls.com. Pick up a copy right now. All right, let's get on to our next question. Next question we had was, how long do I have to pay premiums for? So, uh, I already gave you point number 2 on Nelson's book on page 85. And Nelson says, why would you ever stop putting money into it? I clearly showed you in my example. How effective that policy became by continuing to fund premiums. The answer for how long do I have to pay premiums, the right answer to that question is to reframe the question. The proper question you should be asking isn't how long I need to pay premiums. It's how long can I pay them? I want to be able to pay them as long as possible. So how long can I pay them? Not how long do I have to. If you're looking at this as a have-to model, then you're already missing the boat. You need to reread Nelson's book because you're missing the impact of what happens when you build a machine that's extremely efficient, that allows you the potential to access capital at will and deploy it in some other valuable area of your life. That is critical. So reframe that question. How long do I have to pay to how long can I pay and how long should, how long am I able to pay? You want to have the contractual right to be able to pay a premium. If a policy is structured in such a way where we kill your ability to pay a premium and premium is what makes it grow. So, so take a look at the example I ran here and what were to happen if we weren't able to put $50,000 a year every year in, and we had to stop it, let's say at year 8, and you could only put $50,000 in up to year 8. And then in year 8, now you could only do $10,000 a year or $5,000 a year. Well, if a dollar of premium is creating $2 to $3 of value that you can borrow against in the machine, do you want the dollar to be a little one or be a big one? Right? So if I put $5,000 in and it only creates access to $15,000, or I put $50,000 in and it creates access to $150,000, like which one do you want to be able to do? And if you have reduced the structure or the capacity for that policy, to be able to do that because of a design issue, that's going to be a problem. That's why we have to constantly be aware and thinking about expansion opportunities so that we can capture and warehouse the cash flow that's running through your life. Whether it's a sale of a piece of property, sale of a business, large year in your business, an inheritance that shows up. These are things I've had a lot of my clients experience and trying to build a warehouse that is able to accept them actually can be a lot of work. But that's what our job is. That's what our role is, is to try to help facilitate those conversations and the ability to continue doing that. So how long do I have to pay premiums for? There is multiple pay periods for contracts. This is actually a little bit of a sticking point for me. Something that really bothers me. You could say it grinds my gears, if you were. I'll get emails or hear from people say, yeah, show me a 10-pay policy or show me a policy where I only pay for 15 years, a 15-pay. That is BS, and that is incorrect language. There is policies that are illustrated that way where they're shown to only pay 10 premiums or 15 premiums, but that is not the structure of the policy. That is an illustration, and an illustration can be very misleading if it's not explained properly. And so what's happening in most of those scenarios is that the advisor is illustrating only funding for 10 years. And then they're showing the policy in year 11 where it's funding itself. So a premium is still being paid by way of what's called dividend offset, which by the way, there's examples in Nelson's book on equipment financing that show exactly that. So there's a, there's a dividend offset scenario taking place, or alternatively, someone has shown an example where the policy's in a status referred to as RPU or reduced paid-up. That is really bad in my opinion, not bad. There are certain circumstances where those are preservation mechanisms designed to support a policy because someone is literally no longer able to pay premiums. They've had a major financial shakeup and it preserves the policy. That is fine. But if we're intentionally reducing paid-up policy, then we're killing the ability to fund a premium again in the future, which directly contravenes Nelson's principles of thinking long range, not being afraid to capitalize, not stealing the peas, et cetera.. And so you want to have the contractual right to be able to pay a premium. There are also policies that you can get that actually have a fixed endpoint to the premium based on when you get them at the beginning stages. So you can get a 10-pay policy, you could get a 20-pay policy. They're actually still quite common. You could get a life pay to 65. So if you're 30 years old and you get a life pay to 65, that means you're going to pay for 35 years. And then after year 35, at after age 65, you will not be able to pay a premium. You lose the contractual authority to pay one. So if you wanted to pay it, you can't. In a 20-pay contract, you pay for 20 years, and at the end of the 20 years, in year 21, you cannot pay a premium unless there's capacity with the life insurance carrier to allow you to still fund paid-up additions premium. Base premium and paid-up addition premiums are two different things, and every company has rules around that., and you might have to do certain things to make sure you can maintain the ability to fund a paid-up additions premium. One thing you don't have to worry about is the ability to fund a base premium. And so if you've created a contract structure that says you can only pay 10 base premiums and you can't pay an 11th, now you've contractually eliminated the ability to pay a premium, which could be a real damaging event. Even David Stearns with the Nelson Nash Institute shows an example of a policy that was set up by Nelson many, many years ago where they did a 10-pay structure. Still shows up on his giant spreadsheet of policies, but he's irritated because he can't pay premiums on that guy. It's still a good policy, but he wants to pay premium, can't pay premiums on it. So you don't want to eliminate that ability. Okay. So, so take the advice of people who've been doing this for a while and heard stories of people much older than ourselves who have ran into a position where they cannot pay a premium anymore. We meet with clients all the time that come to us with 20-pay policies where they're at the very end of that lifespan, or they've already exceeded the lifespan of that 20-pay model, and they want to put another premium in and they can't do it. They don't have the ability to pay paid-up additions anymore because it might not have been set up that way with the original advisor on day one, or they did something with their behavior along that 20-year timeframe and they lost that contractual ability. So they might have had it at one time, and because of their behavior from not funding it for a number of years, they've lost the ability. So your behavior has a bigger impact on the long-term output of a policy than anything else that the insurance company does. That's a fact. There you go. So that's how long you have to pay premiums for. You should be planning to pay them as long as possible. Do you need to pay the entire amount? Maybe not. If you have a minimum premium that's $10,000 a year and you can put in $40,000 a year. Well, maybe you want to put that $40,000 in for 10 years. And then starting in year 11, you're going to pay the minimum or you're going to drop to $20,000 or you're going to, you know, drop to $15,000 and you want to continue going. So you always want to plan to pay that base premium and you should have a policy in your system that allows you, or multiple policies that allow you the ability to always pay a contractual premium. Once you're starting to add more layers onto your system, you might choose one or two policies where maybe you don't want to have to pay a premium because you already have several that you always can. All right? So that has more to do with your system and a conversation you would have with your coach once you've been doing this for a while and had a lot of practice and you've been practicing the behaviors of repaying policy loans. So there you go. A lot of stuff we unpacked here today with our two questions. I might have went a little bit over the deep end, but I figured Every once in a while people yell at me and say, Richard, show us a spreadsheet. So that's what I chose to do today. I hope you enjoy it. Last thing I would say here for, of course, you know, those tuning in, look, you've been researching infinite banking. That's great. You might want to know what's one question that you're still not getting answered to? What's something that you're missing? What's a missing link for you? Drop that in the comments below. So if you're searching it, there's a chance that someone else is probably searching that question too. Thousands of people are looking at this process all the time, so we might include your question in one of our future upcoming episodes. Thanks so much.