StackedLife - Authorized Infinite Banking

018 - Principles vs. Tactics
===

John Perrings: [00:00:00] When we talk about The Infinite Banking Concept, it's really pretty crucial to distinguish between the principles of what we're doing with IBC and the tactics or applications of how we use IBC. There are a lot of financial strategies out there that can be used in conjunction with Infinite Banking, but the principles stay the same at all times.

In this episode, you'll learn how to focus on the core principles of control, leverage, and liquidity to build a solid financial foundation so you can adapt to changing tactics without getting caught up in the weeds or reacting to economic shifts.

This is StackedLife, the podcast that teaches you everything you need to know about The Infinite Banking Concept.

Whole life insurance and the strategies that make it all work.

Starting Over After Market Crashes
---

John Perrings: And I'm John Perrings, an authorized Infinite Banking practitioner. I've implemented IBC for hundreds of clients and educated thousands more via my top rated podcasts and financial resources at StackedLife.com.

I remember back in [00:01:00] 2000 and again in 2008. When I was working in the tech world at startups. Startup employees are some of the first people to get laid off during market corrections, and I'd been doing the same thing everybody else does, putting all my money into 401(k)s and you know, working at startups, hoping my stock options pay off, and just really kind of hoping it would all work out.

But then when the market would crash and I'd get laid off both in 2000 and 2008, I was back to square one.

It caused me major problems at the time, and I realized I needed a better foundation. I needed something that worked for me that was in my control.

And that's what led me to The Infinite Banking Concept. I discovered principles that gave me control so that I wasn't always at the mercy of economic conditions and outside financial systems.

Principles vs. Tactics in IBC
---

John Perrings: The core of what we're doing with Infinite Banking is we're becoming our own banker. We're taking over the banking function, creating [00:02:00] our own financial system that gives us control over our capital and our money. And this whole thing is built on principles, not just specific tactics and strategies of investing or getting leverage.

Leverage is part of the principles, but the specific things you're getting leverage on are not. Those are the tactics that are used.

Tactics are things like investing in real estate, real estate syndications, using policy loans to pay off debt, doing personal lending, things like that. These are just ways to deploy the capital we've accumulated in our Infinite Banking system, but they're not the principles of IBC itself. Unfortunately, people get a little caught up in the tactics rather than focusing on principles.

The thing is, tactics always change. We don't know what interest rates will be in the future, for example. You know, we've seen them fluctuate a lot and sometimes interest rates completely change, which tactics are [00:03:00] optimal. People are seeing that in real estate right now. And so at StackedLife we focused on principles, and when we put a policy in place, we do talk about tactics to help connect the dots for people and help them visualize what's possible, because tactics can kind of connect with people who are already doing them and show them how to make things better.

But really we're focused on principles, and I want to dive into some of the core principles of The Infinite Banking Concept here on this episode.

Core Principle: Control
---

John Perrings: The first and most important is control. Nelson Nash identified the problem in his book, _Becoming Your Own Banker_.

The problem is the perpetual cycle of financing through outside financial institutions. We're constantly relying on external financial institutions for credit and loans. We're always prioritizing someone else's financial system rather than our own paying interest to others and causing our money to flow out of our control into their system.[00:04:00]

And it's not just loans either. You know, if you look at a typical 401k or IRA or even a ROTH, you know, we're kind of on autopilot sending money to outside systems with. Significant rules on how we can get it back. You know, if you look at the four rules of the financial institutions, number one, they want us to send them their money.

Number two, they want us to send it to them on an ongoing basis, regularly scheduled, preferably on autopilot. Number three, they wanna hold onto that money for as long as possible. And number four, they distribute it back to us in a limited manner when it's time. And if you just look at your qualified plan, you'll see that those rules are true.

Most people are sending money away out to the out of their control because some benefits or HR person told them that that's what they should do.

And another piece of the control is looking at your expenses versus your income. If your expenses grow at the same rate as your income, which is "Parkinson's Law," [00:05:00] are you really in control of your financial future? Building wealth means using the difference between your income and your expenses. That's the only way you can build wealth, and it all comes from that difference.

And if you just ask yourself, how much money were you making five years ago? And the second question is, are you actually saving the difference? And almost no one can say yes to that question. We're all letting expenses grow with our income, and, and it's a huge problem. Everyone's doing it, whether you make $50,000 a year or $500,000 a year, this is one of the number one problems out there.

And so part of what we do is we analyze cash flow and we create an automated system to disconnect the growth of your expenses from the growth of your income. And now we can turn that difference into cash flow, but you have to have the savings first.

You can do all the strategies you want, but if you don't have much money to work with, you'll be subject to the same pressures as everyone else taking on risk to [00:06:00] get high returns.

Instead, if you just keep more and invest more of what flows through your hands already, you won't need to get high returns. You can just literally win by default.

Cashflow and Infinite Banking is a solution for control. If we have a system that captures every dollar coming into our life before it goes into our spending accounts, and then we deploy that additional capital into a whole life insurance policy to start capitalizing and becoming our own banker, taking over the banking function with IBC, and then a process to deploy capital from the policy to do all the strategies that we want to do.

The principles are there, and that's where we focus, especially at the start.

Core Principle: Leverage
---

John Perrings: Another principle is leverage. Most people are familiar with leverage, especially investors and real estate folks. They borrow from a bank or a hard money lender to buy an asset using other people's money to increase their returns. But relying on external [00:07:00] financing means you're subject to their terms, you're subject to their terms, their repayment schedules, and the risks.

The external factors can impact your access to capital. Terms can change, terms can end. Just look at a typical HELOC. You have to renew it every few years. Wells Fargo pulled home equity lines of credit during COVID. A lot can happen that affects your ability to get leverage in a safe way.

And if we look at a simple example, let's look at a tactic like house flipping. Talk to quite a few people that do that in the IBC world. If you're using other people's money. Any delay in the process of a house flip puts you at massive risk. Imagine the peace of mind if you had the principles to become your own banker, controlling the capital and payback terms.

With policies, the only thing you don't control is the interest rate, if it's variable. Everything else, you pay back whenever you want. So control makes [00:08:00] leverage much better and much safer.

Infinite Banking is safe leverage through policy loans. The underlying collateral is guaranteed by the lender itself, the insurance company, and it's one of the best loans you can get.

Unlike your house or the value of your stock portfolio, the collateral never goes down. It's guaranteed only to go up. That's only true with whole life insurance.

We don't want to use risky products in our financial system if we're becoming our own banker.

There's an advantage to not using risky products in our financial system when we're taking over the banking function. A lot of people will argue that they can get similar leverage with a HELOC or using margin loans on their stock portfolio, but you know, whole life insurance is a cash equivalent, and the lender, the insurance company, already has the value on its books. So, because it's a cash equivalent and because of its guarantees you can get way better loan to value ratios. It [00:09:00] can't go down, the value can't go down with stocks, you know, the risk you have with margin loans means you have a lower loan to value ratio in order to protect yourself. Otherwise, you just take on a lot of risk and you're putting yourself in danger.

With whole life insurance, you know, there's no risk in the collateral, so higher ratios are safer so you can actually access more cash, often.

Core Principle: Liquidity
---

John Perrings: The third principle I wanna talk about is liquidity. You know, going back to 401(k)s, IRAs, even real estate, they're really not that liquid with a 401k or IRA, you know your money is locked up for decades. Self-directed IRAs let you do a little bit more, but the profits go back to the IRA. So it's not doing anything to build your financial life today.

You're sending your money away, really just kind of hoping for the best, with no access. Unless you wanna pay taxes and penalties. You know, there are limited rules for things like first time home buying, but you're playing by their [00:10:00] rules. And regardless of what you have, whether it's real estate, 401k, stocks, you're playing by someone else's rules, asking permission for credit or loans.

Everyone finds themselves in this, what I call "permission based" system, where you have to provide financials, go through underwriting wa for approval and hope they say, yes. And if that permission is ever revoked, it can really mess up the timing on your transactions and put you in a, in a world of hurt. With whole life insurance, we have unrestricted access to liquidity.

The only restriction is that early capitalization period where cash value is less than premiums paid, which lasts for a few years. Whole life insurance is a cash equivalent asset. It can be an emergency fund, it can be an opportunity fund, it could be used for major purchases. And your cash value grows even with an outstanding loan, ensuring the money does more than one job at the same time. And that's why it's a strategic place to store cash.

It [00:11:00] earns very respectable returns, typically exceeding that of a typical bank and with all these other benefits that come along with it.

Mindset and Long-Term Thinking
---

John Perrings: Mindset matters too. And people get caught up in tactics because of short-term thinking. With IBC, we wanna shift to long range thinking. Nelson Nash makes this point many times in his book. And unfortunately, you know, super high PUA policies in the early years come from short range thinking, short term mindset, turning life insurance and IBC into a hack in order to take advantage of quick tactics.

The reality is I get calls every couple weeks where someone buys a high PUA design and then they borrow it all out to invest in something that they're coached to invest in. The problem is things don't always go the way you hoped. You know, if you bleed the policy dry and something happens, like you lose your [00:12:00] job or get in a car accident or have some other type of unexpected expense, it derails the whole thing.

You know, it's like putting. All your money into a 401k and the market crashes. You get laid off, you're back to square one. And I can talk about these things 'cause I, I've lived it. I, I was around, I've been around for a while. I was around in 2000 and I was around in 2008. And I know for a fact that these things happen and they put people in a bad position.

So starting with a foundation of control and liquidity is one of the most important things you can do in your financial life. Everybody puts money into stuff hoping it works, and when it doesn't, you get into major problems and just imagine how much more peaceful your life would be without having to do all this worrying.

You know, every time there's a market correction, someone I know. Always says something to the effect of, you know, like, I'm not even looking at my 401k right now. 'cause I don't even want to know what's going on with it. Which is such a reactive approach. You know, real investors and people with money, [00:13:00] they don't hide, they buy.

You know, everyone likes to quote Warren Buffet when they're talking about money because he, you know, he knows what he's talking about, so everyone quotes it, but no one really does what he says, which is the interesting thing. You know, Warren Buffet talks about not being the princess at the ball. You know when the clock strikes 12 and you turn into a pumpkin, you wanna buy when blood is in the streets. But, the problem is no one's actually positioned to buy anything when blood is in the streets. They're the ones bleeding in the street because they've got all their money tied up in the stock market in places where they can't get to it.

I really think we have to redefine our principles and really focus on thinking long term and, and Infinite Banking. It's the long-term approach to strategic capital accumulation, which is just a fancy way of saying saving money. And the reality is, and I'll be the first to admit this, the first part of doing this is boring.

You know? So people have a really hard time getting over this, and they really get a lot of "FOMO." But [00:14:00] we have to save and build capital before we start chasing investments. And when we do this. It lets you make the next best move that makes the most sense for you at that time, not just chasing the next investment that's in front of you.

Once an investment becomes popular, everyone's doing it. And so is that really the best time to be buying some investment when everyone else is buying the same thing? You're buying. The best investments that you know that I've come across personally, and that people tell me about, the best investments present themselves when you're in the right place at the right time, and you know what you know, you know the people that you know and you are sitting on a bunch of cash.

This also includes disciplined investors. They wait for the right opportunity. They're discerning. In our world, discipline means building the foundation, paying premiums, using policy loans, and then repaying policy loans to [00:15:00] recapitalize.

And we repay policy loans at market rates, not the minimum that's becoming your own banker, where we're paying our system back at the same rate that we would pay an outside institution back that we would've done anyway.

I'm encouraging you to overcome the short-term thought process and consider the long-term benefits of a system that you control a hundred percent. We wanna be proactive, not reactive. And 99% of the people out there are reactive. They're hiding from losses. Again, just going back to Warren Buffett, companies like Berkshire Hathaway. They're sitting on hundreds of billions of dollars in cash waiting for a deal. You know, they're not buying stuff that that's overpriced.

Even though the idea of investing for the long term seems like you have a long term mindset, the problem is most people use invest for the long term, and all they do is just buy the stocks that are in front of them. And then when things happen, [00:16:00] they may not even want to panic sell, but sometimes life happens and sometimes they have to sell just to get liquidity to pay the bills.

And when you do that, those assets don't just go away. Someone comes in and buys them for on the cheap and reaps the growth from there on out.

And as one of my mentors, Trent Fortner taught me one of the, he's one of the best coaches in this business out there. We want to position ourselves to take advantage of the change that we know is coming rather than have to react to it. So by grounding ourselves in these principles, control, liquidity, and leverage,

we can build a safe system that adapts to changing tactics and economic conditions, not just reacting or being at the mercy of what's fashionable or available.

Get a Free Assessment to See if IBC is Right For You
---

John Perrings: Alright, that wraps up this episode. And if you're finding these principles are resonating with you and you'd like to learn more about how they might apply in your life, specifically, schedule a free consultation with me. I'll take you through a short assessment to see if and how [00:17:00] IBC might benefit you.

And if so, the next best step you can take. Thanks. See you on the next one.

​