StackedLife - Authorized Infinite Banking

022 Main Episode
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[00:00:00]

Introduction: The Flawed Foundation of Conventional Financial Planning
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John Perrings: Imagine your financial future, like building a house. You're told by the experts to start with the roof, the high returns, the popular or fancy investments, all the stuff that looks and feels good before you even pour a foundation. That's really the reality of conventional financial planning, which is a flimsy house of cards built on hoping, praying, and variables that you don't have anything to do with and you can't control.

It is the reason you bury your head in the sand when the market drops, and the reason you're always following the herd right into buying at all time highs like we've seen over the last decade. Stop being a victim of variables based planning.

In this episode, we're exposing the mess of the status quo, financial planning and showing you three time-tested principles that you need to build a rock solid financial foundation. One built on guarantees, control, and liquidity.

This is Stacked Life, the podcast that teaches you everything you need to know about The Infinite [00:01:00] Banking Concept, whole life insurance, and the strategies that make it all work. And I'm John Perrings. An authorized Infinite Banking practitioner. I've implemented IBC for hundreds of my clients and educated thousands more via my top rated podcasts and financial resources at StackedLife.com.

The Problem with Variables-Based Planning
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John Perrings: Let's talk about financial planning. Most people, when they're trying to figure out their financial lives, they'll go learn about financial planning. That's kind of the main thing that's out there. They might talk to a financial planner. They might do a lot of reading or learning about financial planning in general.

I think financial planning is a little bit of a misnomer, the status quo financial planning advice. I don't really know what it is about financial plans that make it a plan at all. Because if you think about it, what do we actually know about our financial plan? A plan is supposed to be something that you can map out and execute.

I'm not [00:02:00] saying every single plan goes the way we think it's gonna go with no adjustments. We know that's not the case. But when it comes to financial planning in particular, there's literally nothing about a financial plan that you can count on to work that actual plan. Everything with a financial plan is a variable.

We have no idea what the growth of our financial plan will be. We have no idea when the gains or losses will happen. We have no idea when we'll need the money from our investments. We have no idea how much we'll actually need or when we'll need it. And not only that, but we don't even really know how much we can even get.

And then of course, because of all these things, we have no idea how long that money will last. And if we just look at the rules around our 401k, we know that those things are true. And you know, with our 401Ks, our IRAs, we might say, well, at least I know how much I'll put in, but we don't really even know that.

If you look at what a [00:03:00] 401k or IRA is, these are what are called defined contribution plans, but the defined part of the contributions or the rules around how much you can put in, it's not defined by how much you'll actually be able to put in or how much you want to put in.

We really don't know how much we'll be able to contribute, especially if something happens to our ability to work like a disability or a death. We, we really just don't know.

At the end of the day, a financial plan is really just what I call variables based planning, where everything is a variable. And with this many variables, how can we even call it a plan? But here's the thing, even with all that stuff I just said, everyone is doing this.

The Herd Mentality and Market Bubbles
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John Perrings: Everyone is looking at their money the same way, and they're all doing the exact same thing. Everyone read an article on Motley fool.com 30 years ago that the best thing you can do with your money is to put it into a low cost index fund and maybe some bonds.

And I'm, I'm not [00:04:00] saying index funds are bad, there aren't really many investments you can put your money into that beat the S&P 500, for example, from a passive stock market investing perspective.

The problem comes in again, is that everyone else is doing this too. And if we look at the definition of a bubble or a mania, what's the definition of a bubble or mania? It's when everyone is buying the same thing at the same time, regardless of price.

And then if we think about the number one rule of investing, the number one rule of investing is to "buy low and sell high." But if everyone's doing the same thing, that means everyone is buying at all time highs. I mean, just look at the last 10, 12 years or whatever. And as the market has continued to go up, every time someone puts money into it, they're buying at the new high.

So of course, when the bottom drops out, every once in a while, everyone gets affected because everyone is doing the same thing. And when that happens, very few people [00:05:00] have any liquidity to actually buy at the bottom or buy at at the low when they're supposed to.

But if you look at the very best investors, the Warren Buffets of the world, you know Berkshire Hathaway is sitting on hundreds of billions of dollars in cash right now, just waiting for the prices to come down so that they can buy at the right time. No one in personal finance thinks this way though.

You know, they like to emulate the Warren Buffets or talk about the Warren Buffets of the world, but they don't actually do what they do. You know, they just put their money into stuff and kind of hope and pray that it all works out. Meanwhile. When these big market corrections come along, they're forced to react to the situation rather than take advantage of it because they're usually just so illiquid. They don't have any, any cash available to do anything. This becomes a really big problem in retirement too, by the way, especially with what's called "sequence of returns risk" if the market goes down, especially if it happens. Early in your [00:06:00] retirement and you have to liquidate more shares at a reduced share price to get the money you need to live on, it's very difficult for your account to recover when the market goes back up because you have fewer shares working for you to make that account recover.

Sequence of Returns Risk and Market Volatility
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John Perrings: Imagine retiring in 1999 and coming out of the DotCom Bust three years later and having less than half of your retirement savings left. This is the kind of thing that, uh, people are really, um, unfortunately unaware of, and they're not tracking that when it comes to just typical financial planning models.

Every time we have a market drop, I hear someone in my world say something to the effect of, I don't even wanna look at my account right now. I'm not even looking at it because I don't want to know.

When the market's down, this is when you should be buying, not hiding. But meanwhile, most people, they're just kind of burying their head in the sand so they don't have to think about what's happening with their money.

It is unfortunate, but how bad of a financial life do you have to have if the only thing you can do is [00:07:00] bury your head in the sand when changes come along. There's really not too many people out there that are positioning themselves with any kind of significant form of cash where they can actually make adjustments based on the changes that are happening in the marketplace.

They're all just completely subject to the whims of the market, so. Here we are with all these advisors out there who are pretty much all saying the same thing with maybe just a slight variation on how to arrive at that thing. You know, put your money into stocks, maybe some bonds. The difference between the advice that you'll get is really just how much you allocate to those things.

Maybe you'll do 64% into stocks instead of 60%, and that's really the extent of the planning, in my opinion, the strategies are really all the same. It's just putting your money into stocks, putting your money into bonds, but you're getting the same variables, the same, hoping and praying, the same lack of [00:08:00] control, and the same dependence on third party performance and the conventional format.

A Principles-Based Approach to Financial Planning
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John Perrings: You take a hundred percent of the risk for only the hope of, whatever they're telling us these days, a 12.4% average rate of return or whatever the number is.

So now that I've just taken liberties and kind of bashed conventional financial planning, it's like, okay, there's all that stuff, but what are we supposed to do about it?

Before I get into that, if you find these concepts are resonating with you and you'd like to learn how to make a change, you can schedule a free, no obligation, 30 minute consultation with me, and at the end of our call, you'll know if and how these principles are right for you, and the next best step that you can take, you can easily book a time with me right at StackedLife.com.

So. A principles based approach. Let's talk about that. A principles based approach to financial planning, so to speak, means that we're not looking at a, at financial planning as a series of [00:09:00] predictions and hopes and contingent variables that are all based on past performance, by the way, that we know will never happen again.

Principle One: You Finance Everything You Buy
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John Perrings: We're looking at it from the standpoint of what are the principles that are always true? What are the principles that you can actually build on? And the first principle is this, and this comes from the book Becoming Your Own Banker by R. Nelson Nash, who this is the source material for everything having to do with The Infinite Banking Concept.

And the principle is "you finance everything, you buy." Everything. You either. Pay interest to someone else when you use their money by borrowing it or you give up interest you could have earned when you use your own money by paying cash. The economic term for this is just called lost opportunity cost.

You may have heard of that, and you can never get away from it, but you can minimize it by using your money strategically, which is what The Infinite Banking Concept is all about. So [00:10:00] you finance everything you buy. Understanding that one simple fact helps us to better understand how we should be looking at cash as something other than "bad,"

like many of the financial entertainers out there tell us constantly.

Principle Two: Building Your Financial Foundation First
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John Perrings: The second principle, which I mentioned in the beginning of the episode, if you're going to build a house, you don't start with the roof before you, before you build the roof, before you do the landscaping, before you put in the pool, you have to build the foundation first, and that foundation from a financial perspective.

It needs to have three characteristics. It needs to have guarantees. You need to have control over it, and you have to be able to get to it, which is called liquidity. You want liquidity in your financial life. Most people are trying to build the roof before they've even poured the foundation. They're trying to get into investments and get,

you know, returns before they've even established the basics of what they need to weather, the storms that come along in [00:11:00] our life. And not only that, but to take advantage of opportunities. The thing about pouring the foundation to your financial house is that unfortunately it's boring, you know? But if you don't do it, the first storm that comes along, your house will come down and you'll end up having to do it anyway. But this is the way that sucks and causes a lot of pain.

By the way, I know this personally because I've lived through it. I've done it multiple times before I learned about these principles myself, so you might as well do this in the right order and do it as soon as possible. The third principle is this. We want to use that foundation.

To take over and take control of the banking function.

Principle Three: Controlling the Banking Function
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John Perrings: So we're not starting our own bank, we're becoming our own banker and taking over the banking function. We're putting ourselves in a position where we're always in two businesses, and those two businesses are the business that you're in, whatever that may be.

Whether it's, you know, you work at a grocery store, you're [00:12:00] a nurse. You work at a tech company, a car dealership, you get the picture. So we're in the business that we're in, but we're also in the business of banking because the banking function is happening all around us, whether we control it or not. The only question is, are we gonna be on the side that's paying for the banking function, or we gonna be on the side that's profiting from the banking function?

And this is what The Infinite Banking Concept is all about. You know, there's a ton of info out there that kind of makes it look hacky or gimmicky. It's not a hack, it's not a gimmick. It's not some trick to squeeze out a few extra basis points out of a return that you're getting already. It's a complete reorientation of how you think about your financial life. And, I know it sounds a little daunting when I say it that way, but it's really not hard to do, and this is where whole life insurance comes in. Infinite Banking is a principles based process that brings generally accepted corporate [00:13:00] finance principles into the world of personal finance. Whole life insurance is just the product that we use to implement it.

How Whole Life Insurance Creates Your Foundation
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John Perrings: If you look at whole life insurance, whole life insurance is considered a cash equivalent asset. It gives you guarantees, it gives you control, and it gives you liquidity. All those things we mentioned earlier, and it allows you to finance the things that you buy and redirect interests that used to go to other people's financial systems, back into your financial systems so that you benefit you and your family benefit from it.

Whole life insurance is what we use to strategically store cash, and this allows us to build that foundation that we've been talking about and, and it's a foundation that we can always count on because it's guaranteed. And now that we've built the foundation of strategic capital, we're in a position to strategically deploy that capital to buy growth assets.

Whole life insurance is not never meant to be an investment in itself. It's [00:14:00] not meant to be a growth asset. It's a cash asset. And so what we want to do is we want to strategically use that cash to buy growth assets to get the growth component of our financial life. And what happens is we have the ability to safely use leverage to our advantage to get the dollars in our system to do the work.

Strategic Capital Deployment and Leverage
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John Perrings: Each dollar does the work of two, three, $4, et cetera. Using the policy loan provision of the insurance policy, we can borrow the insurance company's money using our cash value as collateral to buy another asset. And since we didn't take the money out of our policy, we only borrowed against it, our cash value grows and compounds uninterrupted while the asset that we also bought with the insurance company's money also continues to grow at the same time.

When the policy loans paid off the capital or the cash value is freed up to be deployed all over again, and then again, and [00:15:00] again and again. And so in this way, we're essentially using the same money over and over and over again to buy more and more assets. And this is partially where my company name StackedLife comes from.

We no longer have to take on risk to get great growth if we can stack several safe returns on top of one another, the stack of smaller returns created by the same money essentially creates a really big return in the aggregate and with much less risk.

It's boring at first, like I mentioned earlier. All you're doing is saving money when you first start this, when you first start this process. But, even though I said IBC is not a hack, once this gets rolling, everything starts to feel like a hack. The liquidity and the control you gain by implementing this process makes everything so much easier in your financial life becomes much more peaceful. But the only way to get this is to do it responsibly and start from the beginning and start by [00:16:00] building your foundation. Do you want more information about these principles but aren't ready to talk yet?

Join my Infinite Banking 101 Webinar
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John Perrings: My live weekly Infinite Banking 101 webinar could be the next best step for you.

This isn't one of those like fake, "live" webinars, but, really, a prerecorded webinar. This will be me live walking you through the basics of The Infinite Banking Concept. You can just watch or ask questions in the chat. It's entirely up to you, but it's a live webinar hosted by me.

You can head over to StackedLife.com/ibc101 to register today. That's StackedLife.com/ibc101. That's it for today. Thanks. See you on the next one.