StackedLife - Authorized Infinite Banking

Three Paths to Financial Freedom: Principles-Based Strategy
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John Perrings: [00:00:00] When it comes to your financial life, you're constantly being bombarded with all kinds of options, noise, hacks, hot takes, and opinions. Everything from 401Ks to real estate investing, debt snowballing, Social Security, HSA accounts, and life insurance. There's just all kinds of stuff out there. And with all these factors, the reality is, is that it takes decades to know whether any particular financial strategy is really working for you.

And if that strategy is flawed, by the time you find out, it might be too late. So today, I wanna walk through the three main paths that I see that you can take with your money. The first one being the one that almost everyone kinda just defaults into. The second one is what I see a lot of frustrated people turning to instead.

And then the third one is the one that I think actually deserves more of our attention and trust. So by the end of this, you'll be able to tell the difference between all [00:01:00] three of these, and you'll understand why having at least one rock solid place in your financial life can literally change everything about how you can create the ability to take advantage of risk that comes in a- along in our lives and kinda give you a permission slip to take those risks that come along, that are oftentimes in the form of opportunities that could change your life forever.

This is Stacked Life, 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. 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.

Lesson From My Life in Startups
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John Perrings: I'm here in Silicon Valley, and when I first started in the working world thirty years ago, you know, I was, uh, in the kinda regular mindset that I see a lot of people taking, especially here in this area, [00:02:00] where everyone is obsessed with getting stock options and working for these high-risk startup companies, which I'm not bashing any of that.

That's what I did, and I, I loved it for a long time. But working at high-risk startups, kinda chasing these big payoff with stock options, um, they really come with a risk. And, and I'm here to tell you that for most people, it usually doesn't pan out. And the reason I'm telling this piece of it is because it's tied to kind of the status quo that I see out there.

And one of the things is, like, when you're young, the story you tell yourself, and quite frankly, the story everyone else tells you as well, is that, "Hey, I'm young. I can take all the risk in the world. Like, I can recover re- regardless of what happens. I have time."

And then what happens is life happens. And, and some of these things you, you really can't recover from if you see what that loss means [00:03:00] in terms of lost opportunity cost over the course of your life. You know, just going back to my, you know, startup world, you know, back in the DotCom bust and the Great Recession, you know, I got laid off a couple times because these startup companies are the first people to, you know, let folks go when you see these total market corrections.

I'll talk more about that in a second. And I needed money to live on, so I had to liquidate my 401. And this is something that I think happens to a lot of people because what catches a lot of people off guard is that when things go bad, it's often because of these total market corrections, so to speak.

The market goes down and you lose your job at the same time. And, uh, the, you know, people in the startup world are especially susceptible to this. And, and so you have nothing to fall back on. So you end up, you know, having to liquidate all of these investments that you made anyway at the worst possible moment. And that experience is a big part of why I [00:04:00] talk about what I talk about today.

So what we're talking about today, when you're deciding on a financial path to take, there are really three main

Path 1: The Default Route
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John Perrings: options. Path number one is you just do what everyone tells you to do, basically. You know, you go fill out your paperwork at, at your job, and the benefits person or the HR person hands you your 401paperwork.

By the way, these are people that are handing you paperwork to make w- you know, one of the biggest financial decisions in your life. These are completely unlicensed people from a financial perspective, so I always find that interesting. And, you know, so you're doing all this stuff, and you're kinda just doing the default we've all been taught to follow for the last several decades, which is, you know, max out your 401, your IRA, send all your money to Wall Street and these qualified plans where you lock it away in "401K Jail" for literally decades.

And I've called this variables-based planning in the past because with these, it's [00:05:00] all based on variables that we have no idea what those variables will be. You know, you give up control of your capital, you take all the risk, and you do all this just for the hope that you're gonna get some kind of average return, which, by the way, I don't know why anyone's okay with average in their financial life, but that's, that's really what's going on.

And if you think about, um, everything you don't know about these variables, right? You don't know how much you'll put in, you don't know what it'll grow to, you don't know when you'll need the money, you don't know how much you'll need when you need it, and you don't know how much you'll be able to get, and then finally, you don't know how long you'll even need it, you know, as you s- you know, when you're talking about things like retirement or if you have some kind of an emergency.

And so I'm always just asking the question, like, what is it about a financial plan that is a plan at all?

Why Typical Financial Planning Fails
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John Perrings: And a big problem is that pretty much all financial planning, like typical financial planning, is built this way. It's all [00:06:00] based on probabilities and statistics, which are all based on past performance. And not only that, but everyone's essentially planning on the best-case scenario.

You know, like everyone gets told like, "Hey, put your money in the S&P 500 with dividends reinvested and you'll get," you know, whatever they're saying these days, "a 12% average rate of return." And then everyone builds their whole plan around a 12% rate of return. And the problem is that that plan ignores all the volatility and risk that goes along with it, and it only accounts for the growth stage, which is one big problem.

But it also-- the other big problem is 70% of the time, the real returns of the market are less than the average return. So there's a couple things going on there.

But one of the big ones is that it completely ignores the part where you actually have to take money out and get distributions, like in, in retirement, so to speak.

So it kind of ends up being this thing where you're just walking around hoping for the best and, [00:07:00] and you really don't know if it's working until the end when it's pretty much too late to make any adjustments.

Something to think about is that 401Ks have really only been around since the '80s. So we're just now starting to see the results that people are getting in actual retirement. You know, there's really not much of a track record to base whether or not these things even work, and it's, it's become so ingrained that you literally have to opt out of a 401K now rather than opt in.

So everyone sends all their money away somewhere where they can't get to it, and then when they need money today, they don't have any. So it creates this scenario where everyone's racking up debt because if you don't have any money when you need it to buy a house or buy a car or send your kid to college or pay for college on your own, if you don't have any money, you've gotta go to the people that do have it, and they're gonna make you pay for it.

And so this is how, you know, people start getting into debt. And the [00:08:00] worst kind of debt is credit card debt. And if you think about it, how can you possibly get ahead chasing a ten or twelve percent average return when you've got 20%, 22% credit card debt? That just doesn't make any sense.

401(k) Problems
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John Perrings: And here's another thing about 401Ks. Even if they do work, even if they're a great place to accumulate and grow, which obviously I don't personally think they're all that great, but even if they are, they're a really bad place to distribute from.

Every time you pull money out, now you have to pay the income tax. You know, even if you do it at the right time, if you pull it out early, you pay the income tax and a penalty. And what's crazy is there are accountants out there, professionals, CPAs, who will talk about a 401K and they tell their clients and they brag about how, "Hey, if we put more money into this, I'll get you a tax deduction."

And I'm always just super surprised by that because contributing to a qualified plan is not a tax [00:09:00] deduction, it's a tax deferral. And if you don't like paying tax today, how much are you going to like paying tax 30 years from now when you need that money to live on with inflation and everything else stacked against you?

You know, the creator of the 401K himself, you know, is on record saying he never meant the 401K to be a primary thing. It was only meant to be supplemental for people who already had pensions and other things like that. So it's been misused for decades, and it's really not all it's cracked up to be.

Now, what's actually happening to retirees who are using all these things? So not only would I say that it's a bad place to distribute money from, but what we're finding is that most people aren't even really funding these 401Ks. According to Federal Reserve data, ninety percent of people who retired for the first time in twenty twenty-three had less than a million dollars saved.

And if you look at the, you know, conventional "4% Rule", [00:10:00] which is a kind of a retirement rule of thumb, which says that if you have a million dollars, for example, on the day you retire, you can safely withdraw 4% every year, which is forty thousand dollars a year with somewhat minimal risk of running out of money before you die.

But when you look at the actual research, it's really only about a seventy percent chance that that account survives thirty or thirty-five years. So even the four percent rule is a little misguided. And imagine saving a million dollars and trying to live on forty thousand dollars a year, which I'm not saying you can't live on forty thousand dollars a year today, but if you track inflation forward twenty or thirty years, forty thousand dollars is really not going to be a whole lot to live on.

So meanwhile, this conventional wisdom tells us to just blindly fund these accounts, lock our money away, and let the government basically be in charge of the rules around it. They [00:11:00] can change the rules and change the tax brackets whenever they want. So we traded all that control and liquidity for what's basically been an experiment

So what happens when people wake up to all this? You know, un-unfortunately, a lot of them, you know, they'll go out and they'll look for something different because they're kinda not buying into it anymore. And unfortunately, a lot of them will flip to the other side of the coin and get into what I call the financial hack culture.

Path 2: The Financial Hack Culture
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John Perrings: And let me just start off by saying I completely understand it, and, you know, people are looking for alternatives because, you know, they might be feeling behind, or they might not trust, you know, the, you know, what's gonna happen twenty or thirty or forty years from now. Um, and now, of course, everyone has social media.

You get on Instagram, YouTube, Facebook, and you see, you know, some guru, which by the way, I'm kinda one of those guys. I'm another guy on social media telling you my [00:12:00] opinions. But the hack crowd is always selling the hack. You know, they're always, like, standing in front of, like, a rented Lamborghini or some nice house that they pay the hour for, and they're talking about all this stuff, and it all really seems pretty fake.

And I, I think people see this, but they don't know what else to turn to because it's, you know, you either have, like, the thing everybody's doing, and that's what you know about, or you have the stuff you see on social media.

High Time Preference & Risk vs. Return
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John Perrings: And the problem with some of the hack culture is I think it kind of reinforces a negative behavioral trait called high time preference.

But in a little bit of a, a little bit of a spin on the traditional definition. Because high time preference is an economic term, and it just means you have a high preference to consume today rather than later. And so a low time preference means you'd rather save and invest than consume right now. And the hack culture [00:13:00] kinda makes it feel like you're, you're learning about investing and that you have a low time preference, but it's all just kind of a shortcut and oftentimes very risky or very expensive.

And so what I kinda look at is it kinda boils down to a high time preference, so to speak, for risk. And it's really-- that's another way of saying people just get FOMO or fear of missing out. And so people buy into these strategies without understanding the risk attached to them, which of course, risk is the likelihood of loss.

Risk is not a good thing, like some people say. Like, a lot of people will be like, "Hey, I wanna get some more risk so I can get a higher return." High risk equals high return, which unfortunately has made its way into the lexicon of our, uh, how we talk about finances. But risk is the likelihood of loss. And just like growth, losses can also compound.

You know, everybody loves the idea that if you have money sooner, it [00:14:00] has longer to grow, and you get that compounding effect And so going back to the-- what we were saying about young people, young people are told, "Hey, you're young. You can afford to take risk. You know, you have time to recover." And there is some truth to that, but what gets missed is the compounding losses over time, the compounding lost opportunity cost of losing money when you take high risk.

Because yeah, you're young, you have time to recover, but all that time also compounds how much you really lost when you lost it. And I think that part of the equation is, is not looked at as much as it should be.

Now, something that's interesting about the hack culture is that the hacky stuff shows up everywhere. You know, you got stock options, high-risk startups. That's not really a hack, but it's just high risk. You know, um, and I guess high-risk startups were sort of my version of, of a hack, if you will. I was like, "Hey, if I do this, you know, I'll get these stock options [00:15:00] and I can kind of jump the line."

But you got, you know, it shows up in real estate, uh, all kinds of like different ventures, and it's hard to figure out which ones are real, and it even shows up in life insurance, by the way. That's the whole high early cash value nonsense that I talk about all the time, where people obsess over getting the highest early cash value, where, you know, essentially they're trying to get something for nothing, and it treats the infinite banking concept like a hack rather than a process we can follow to get what I'd consider maybe the ultimate control over our capital compared to almost anything else.

But the, the reason I was saying it's, it's a little bit of a, a nuance is because all of these things also have positives, right? There are principled ways to get into all of these things that turn them into positives. There are, there are great ways to get into stock options. There's great ways to get into real estate.

There are great ways to get into, to life insurance. There are [00:16:00] great startups out there.

There are principled ways to get into all of them that turn them into a positive. And that's why so much of what we talk about here is

Process Over Product
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John Perrings: process over product. And, and if we can nail down the process, we don't have to go buy some product or pull off a hack that makes things grow bigger or work faster. The process will work for itself.

And to put a little bit of an emphasis on the process side of things, a little story about Warren Buffett. You know, a lot of people love to quote Warren Buffett when they talk about money, but almost no one actually follows the advice he gives. You know, h- his whole thing, he called what he did a "get rich slow scheme" in this interview one time, and he was saying, "You know, what I do is a get rich slow scheme, and it turns out not a lot of people wanna do that, and that's why there aren't too many really any other Warren Buffetts in the world."

And so, you know, if you look at Berkshire Hathaway, you know, Berkshire Hathaway's sitting on hundreds of billions of dollars in cash. But [00:17:00] no one does that in their individual life because the Dave Ramseys and Grant Cardones of the world say having cash is dumb. And so if you look at what some of the best people in the world are actually doing with, with their money, you know, I always say model that. And don't just pay lip service to it.

Because the thing about cash, it's impossible to take advantage of a once in a lifetime opportunity if all your cash is tied up in, you know, whatever investment was just in front of you at the time you, you did it or you just don't have any. Having cash is so key, which is again, that's why Berkshire Hathaway is sitting on hundreds of billions of dollars of it because they believe the best time to buy is when there's blood in the streets.

And right now everything is at all time highs, but most people are just tripping over themselves to just buy and invest in the next thing that's sitting in front of them.

Path 3: Principles-Based Strategies
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John Perrings: Okay, we've, we've covered the status quo. We've talk about, talked about the other side of the coin, which is sort of like that [00:18:00] hacky behavior, which leads us to path number three,

which we can just call principles-based strategies. Instead of planning your one and only life around unpredictable variables that you have no idea about, the principles-based path relies on what I just call timeless financial principles. Thinking long range, maintaining control and liquidity, building your foundation first, not getting over-leveraged, not taking on unnecessary risk that most people, by the way, don't even understand they're getting into. And a lot of this is more traditional than you might think. People call today's, what I would say, typical financial planning, they call that traditional.

But really, what we see right now, the stuff that's going on right now has really only been around for a few decades. Traditional is older than that. For example, people didn't really used to invest in the stock market at all.

That wasn't really a thing for a long time. It was really just something rich people did. And, you know, [00:19:00] the more traditional thing would be to create guaranteed income, things like annuities and pensions, which is just a type of an annuity. Social Security, that's just a type of an annuity, by the way.

People give annuities a bad rap, but what's wrong with guaranteed income for the rest of your life? A-and that's what pensions provided. And so a lot of people had pensions. They had savings. They had rock solid savings because not everything has to be an investment. People used to just save money. My parents just saved money.

They invested a little bit, but they mostly just saved, and they, they did great, and they were able to leave something behind for my sister and me. And if you are going to invest, focus on buying assets that have very little risk and that you have a lot of control over and that can build and compound over time based on the principles of the strategy rather than the hack nature of it.

Investments that produce income are, are fantastic.

And getting to the heart of it, I [00:20:00] talked about how if you're young, you can afford to take some risk, and there's absolutely nothing wrong with taking risks in life, by the way. You know, we all have to have a reason to get out of bed in the morning, and that's a good thing. No one wants to just, you know, watch paint dry with their money.

We want to get out there and try to make things happen. That's how innovation happens. So I'm not saying... I'm not telling you not to take any risk, and I'm not saying all risk is bad, and I'm not saying don't do any of these things. What I'm saying is that most people are risking it all on these things.

But if you can have at least one place in your financial life that you know will work and you know will grow no matter what happens, that you know you can get to it when you need it, and that you know you can replenish when you do use it, so it can keep growing to what it was supposed to no matter what happens, that literally changes everything.

And basically, I'm talking about having control over your capital. And it should be a fairly significant piece [00:21:00] too. You know, it should be one real place of safety, guarantees, and controls, not, not just like a little tiny, amount compared to everything else you're doing.

Because that one piece gives you, again, that permission slip. It lets you go out and take some of the risks that we want to take in life without having to risk everything else you're doing if that thing you're risking doesn't work out.

Whole Life Insurance & Infinite Banking
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John Perrings: So, you know, this podcast is about the infinite banking concept and whole life insurance, and I, I just can't think of another thing that you can do that gives you that place, that place of safety, that one spot in your financial life that you know will work out.

Whole life insurance is just this bedrock financial asset that's been around for centuries. You know, and it used to be the traditional place to save money. You know, I mentioned pensions earlier, but, but folks would have their savings, they'd have their life insurance, and they'd have a pension. And n- now we know we can do some other things with whole life insurance, like implement the infinite banking [00:22:00] concept.

The cash value of the policy gives us access to capital, no questions asked, and then we can get some safe leverage on that capital to go create growth outside of the policy. But the main thing here is just removing the guesswork, right? We don't have to do anything other than pay a premium to know that a whole life insurance is going to work out for us.

So at the end of the day, we don't have to bet our one and only financial life on strategies that take thirty or forty years to verify. And again, I'm not saying you can't have some of that, but cash is for today, and it's also for tomorrow. We need cash today, but we also need cash to invest and create growth for tomorrow.

So using principles-based strategies like infinite banking to build a strategic base of capital that'll be there when you need it for whatever reason, that's really what we focus on in the infinite banking community. So I hope this helped, uh, you know, defining the, you know, three paths that I [00:23:00] see most common out there.

And if you find 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, and we can see how... if and how IBC might benefit you, and if so, what the next best step would be.

Thanks. See you on the next one.