StackedLife - Authorized Infinite Banking

031 Main Episode
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John Perrings: [00:00:00] There are only two types of savers in America, and both of them are losing control of their money. So today, I'm gonna talk about how becoming your own banker fixes all of that. By the end of this episode, you're going to understand what the infinite banking concept is actually for. It's not the returns, not the tax situation, not the debt strategies.

These are all real things, and we'll talk about them, but there's one thing that makes every one of those strategies possible in the first place that gets missed among all the social media sales hype around infinite banking and whole life insurance. We'll talk about the two camps of savers and what having control over your capital does for you in either camp, whether you're struggling to save right now or whether you're saving a lot and doing a good job of it.

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 clients and educated [00:01:00] thousands more via my top-rated podcast and financial resources at StackedLife.com.

My friend's dream ski cabin
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John Perrings: I'll start this off with a quick story. I have a friend and colleague who's a huge skier, and about a year ago, his perfect ski cabin became available on the market. It was like a ski in, ski out type of deal in, in Vail, Colorado. And there were a bunch of folks who wanted that cabin that were putting in offers, but they were, they had to go through the standard process of applying for a loan at the bank and going through the underwriting process, which of course takes time.

My friend just called up his insurance company, requested a policy loan, and in five to 10 business days, he had the cash in his bank, no questions asked. So he was able to kind of swoop in and buy it out from under everyone else who had to go to the bank and ask the bank for money.

And the takeaway from this story is he had his money in an asset that wasn't in and of itself about chasing yield, getting the best [00:02:00] return, the tax write-offs, the depreciation. He got his dream cabin because he had control over his own capital.

And if you think about this from just a lifestyle perspective, how could you assign a rate of return to achieving a lifelong dream in finding an opportunity like that? And that's really what this episode is all about.

Control before strategy
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John Perrings: A lot of people look at infinite banking only through the lens of strategy. You know, something where you can increase your returns or implement some kind of strategy like debt reduction, et cetera.

And these are, of course, all valid things about The Infinite Banking Concept.

After all, we use the infinite banking concept and whole life insurance to strategically capitalize, and strategically capitalizing insinuates a strategy. So the strategies are, of course, there.

But what I think a lot of people miss is the actual reason these strategies are even possible in the first place, and the reason is they [00:03:00] have control over their capital. So today, I wanna talk about the two camps of savers that most people fall into and how having control over your capital significantly improves your position which, whichever camp you end up falling in.

The Two Camps of Savers
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John Perrings: And the two camps are pretty straightforward because it's kind of a universal yes or no type question. You're either saving money or you're not saving money. Those are the two camps. So I, I talk about both camps all the time. You're either struggling to save, which is, you know, the vast majority of people saving very little or nothing at all, and you want that to stop.

You wanna stop letting all your money get away from you. Or you're in the camp who is saving already. You, you have a cash flow structured in a way that allows you to put some money away for the future, and you're looking for the best way to keep doing that or, or maybe save even more. So I wanna spend a little time today and talk about that, whichever camp you fall in, [00:04:00] you're either doing a good job saving or you're having trouble saving, whole life insurance and the infinite banking concept can help you get to a better place that will improve your financial life regardless.

Camp One: Struggling to Save
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John Perrings: All right, camp number one, those who are struggling to save, struggling to find a way to put some money away. And these are the, unfortunately, the vast majority of people are really saving very little and maybe nothing at all. And the problem is when you don't have any money put away, when you actually need some, you're forced to go out and find the people who do have money, so you can use theirs.

You have to go to banks, credit card companies, hard money lenders, et cetera,

and you pay them to use their money. Because you have been unable to save or capitalize, you're always in a position of having to ask permission from those who do save and capitalize. And then you're subject to the terms that they put in place to use their money. And by the way, everyone [00:05:00] intuitively already knows this, and they, they know that it's a suboptimal arrangement.

But when you're struggling to save, any alternative just doesn't really feel obtainable, and this happens for a few reasons: The first one is just your level of income compared to how much you have to spend. And of course, the macroeconomics out there are certainly making things harder for people who are trying to save.

And the level of your income compared to how much you spend is a critical component. Which I know seems obvious, but follow this through with me here. We all have the different stages of life. When you're young, you're trying to go out there, you know, make relationships, have fun, and then the next stage, maybe you meet somebody, you start a relationship, maybe get married, buy a house, start having kids, and then it just kinda keeps going up from there.

And this is what we call lifestyle creep. As we go through life, our expenses tend to increase, uh, as our quality of life tends to [00:06:00] change. And lifestyle creep is potentially the most costly factor in our financial lives. And by lifestyle, by the way, I'm not saying frivolous spending, although that can obviously be, be part of it.

Most people, I include myself here, and most of the people I know, we all want our lifestyle to get better as we get older, meaning we get better at our jobs, we become more valuable out there, we start earning more money. So we wanna create a better life for ourselves and our family. That's totally normal.

But I don't care if you make $30,000 a year or three million a year, whatever it is, most people, as they start making more money and their income starts going up, their expenses tend to go up at the same rate as their income.

And if you look at where wealth is created, it's created in between the difference between your income and your expenses. There's just no getting around that. So obviously, there's a challenge of macroeconomic prices always continuing to go up, [00:07:00] and there are certainly challenges to getting ahead because of that.

But it's really the expenses tracking at the same rate of your-- as your income over the course of people's lives that really prevents them from becoming good savers.

Financial gravity on our money
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John Perrings: I've had the founder of Currence on the show before, which is a cash flow management system. And in Currence, we have a concept called financial gravity.

With financial gravity, you know, money comes into our lives, and before money even reaches our bank account, especially for a, W2 employee, you have all this financial gravity pulling down on the amount that actually reaches you. You've got whatever it is, thirty, forty percent of your income peeled off by taxes, FICA, Social Security, et cetera.

That gets pulled right off before it even hits your checking account. You've got your automatic 401K deductions that get pulled off. You've got your benefits that get pulled off. And so by the time the money hits your bank account, you've probably got less than half of it left before you can even try to save it.

After all that, [00:08:00] you still have to pay your bills, and then you have to try to save only what's left over after going through all of that. And so for most people building their financial systems, their, their savings, their investable capital, it, it's usually sitting in like seventh in line after all that other stuff.

And that's what we call financial gravity, and it's the opposite of how things should be if we want to prioritize our own financial system over the systems where our money tends to go on autopilot. So figuring out ways we can reduce that financial gravity by having a better way to service debt and create additional income streams that are taxed lower than W2 income, those are really powerful ways to fight against the financial gravity in our lives.

Another place that makes it difficult to save and a real-- And it's a really difficult thing for a lot of folks, is a lack of financial resiliency. You know, something like sixty percent of Americans have less than five hundred or a thousand dollars in their liquid savings. So when life [00:09:00] happens, like a job layoff or a medical bill, a car repair, whatever it is, it's hard to roll with those punches. And if you need money because you don't have any, again, you're forced to go out and borrow it from the people who do have money, and that typically takes the form of high interest debt like credit card debt.

Or you have to liquidate other accounts, like your retirement accounts, paying penalties and taxes potentially, so, so that you can just get money today that you need. And now you're losing all the growth on that money for the, for the rest of your life. Now, here's kind of the crazy part of this. You know, people who are having trouble saving are sometimes actually doing some saving, but they're doing it in a way that locks them away from their money when they need it.

401K Jail
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John Perrings: And so that creates some of the same problems. And of course, I'm referring to retirement savings plans like 401Ks, IRAs, and other qualified plans. And when I ask people what they like about their 401K, the most common response by far is [00:10:00] that it's a type of forced savings. So according to most people, they really don't value their 401Ks other than it forces them to put some money away.

But putting your money away where?

This is a scenario where if you're having trouble saving and you're getting into situations where you don't have enough money to deal with the financial bumps in the road that come along, or by the way, opportunities as well, it doesn't always have to be bad news. What ends up happening is most people find that their money is tied up in these qualified plans, and they can't get to it without paying taxes and penalties.

So if cash flow is tight and you're having trouble saving, why would you prioritize sending your money away to "401K jail" for twenty, thirty, forty years, depending on your age, where you can't touch it without paying those taxes and penalties? You know, 401Ks, five twenty nine plans, health savings accounts, all of these types of special accounts that give you some [00:11:00] benefit, they all come with strings attached.

You know, if you need that money for any other purpose than what that account was created for, you're now subject to the rules of how that account works. And you're not going to be able to get to that money without having some additional hoops to jump through, and that's just the best case scenario.

So if you're listening to this and you're having trouble saving or you're thinking, "How can somebody start infinite banking or really anything else for that matter if they can't even save money?" Well, I'm here to tell you that it's absolutely possible. Because I was that person.

I remember being in my 30s, waking up one morning, grabbing my phone to check my email, and seeing an overdraft notice from my bank, and I remember thinking to myself like, "What is wrong with me? I'm in my 30s and I'm bouncing checks," you know. Like, "I've gotta get it together."

And that was kind of one of the primary wake-up calls that I had in my life.

Why don't people do what companies do?
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John Perrings: If you've listened to this podcast, you guys know that I've had a, I had a 20-year career in tech. At that time that I got that overdraft [00:12:00] notice, I was working in data center finance. I understood how money worked at the business level. I could see how companies used capital, managed cash flow, and made financial decisions.

But my personal finances were a disaster. And so I'm just like, "Why am I not applying the same things in my own life that I know are true in the bus- business world?" And so when I found The Infinite Banking Concept and I bought my first whole life policy, it solved so many problems for me. I stopped sending my money away to 401Ks.

I stopped sending money to places where I had no control over it. And I, of course, also had to batten down the hatches a little bit on my spending. But for the first time in my life, I had a structure that helped me actually build money. And so then when life happened, as, uh, as it always does, I had options.

My money wasn't tied up in places where I couldn't get to it. I had access to capital that allowed me to handle the bumps in the road without - completely knocking me off [00:13:00] track. And so, as I got more organized, I was able to start investing in a way that didn't also put me in a position of weakness.

And that's why I think this can be such a great starting point for somebody who's, um, you know, trying to get ahead. Because it's a really simple approach.

You create that forced savings that people appreciate about 401Ks, but now it's in the form of an insurance premium that you have to pay every month or every year. But with whole life, you still have access to that money if you need it. And for a lot of people who struggle to save, the real problem is not a lack of opportunity.

The biggest problem is usually the emergencies that come up. Something unexpected happens, and they get thrown off course. And so if you can use a policy loan to handle that emergency, you have the ability to pay that loan back whenever you want, and your cash value continues to grow the entire time.

And that can be incredibly powerful for someone who's serious about building a savings structure and [00:14:00] finally getting some traction. Now, the only thing with this is that if you have a real spending problem, IBC does not solve that on its own. That's something you should be aware of. You know, where I've seen people buy a whole life policy, pay their premium, build cash value, and then they borrow against it just to go buy things that they maybe shouldn't be buying, which is a spending problem.

You can control the terms with a policy loan to buy a car, for example, but you cannot get rich buying cars with IBC. So you still have to create some structure around your spending, which is really where Currence comes in, and that's why we've implemented Currence in our practice here at StackedLife.

Camp Two: Already Saving
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John Perrings: Okay, so that's the people who are struggling to save a little bit. Now camp two. What if you're-- what if you are actually saving? And these are the people who are significantly prioritizing saving and investing, and they've actually created the structure and the discipline to do it. And if this is you, you should feel [00:15:00] good about this, of course.

But I would argue that you likely have some of the exact same risks and challenges as those who struggle to save at all. And it has to do with where you're doing your saving and investing.

So let's walk through it a little bit. When you're, when you're doing a good job saving, what are your options, uh, to save some of that money? It's either going into an actual savings account. Most big bank savings accounts are really not earning anything, like whatever it is, 0.1%, maybe even 0.01%.

And there are obviously some high-yield savings options out there, but they're typically nothing to write home about. So that maintains your safety, control, and liquidity, but you're not getting much growth. Then you have stuff like CDs. With CDs, you can increase the growth rate a little bit, while maintaining safety, but there are terms associated with it, and you lose the liquidity on, on those types of assets.

And then you've got the regular stock market via your brokerage account. You're gonna [00:16:00] put your money into the brokerage account, buy whatever stocks and funds you wanna buy, index funds, mutual funds. When you do that, though, you're introducing significant volatility and/or risk, and you're also introducing some tax friction.

Most people passively put their money into funds, and those, those funds always have turnover. When the individual stocks are bought and sold in and out of those funds, taxes have to be paid on that, which you do pay. And if you buy and sell stocks yourself, you, of course, you have to pay tax when you sell as well.

You could also buy bonds to hypothetically reduce risk, but if you go back to 2008, bonds weren't really, protecting, anyone that well in some of those downturns that we've had r- in the last 20 years. All the people that had their money in the stock market and had bonds as well, everybody got hit in, in those total market corrections.

And the big problem with bonds is that most people [00:17:00] are actually buying into bond funds these days and they work kind of like an index fund. But with these bond funds, they're highly illiquid. So these big market corrections, which is typically how people lose money because they're just doing more of a passive investment strategy, with these big corrections, people can get trapped into a bond fund 'cause there just isn't enough trading activity in those funds.

And then, of course, which we've already touched on a little bit is we have our favorite 401Ks, IRAs, and all the other so-called tax advantage plans, where we defer tax from a date when we know what the tax is to a date in the future where we have no idea what the tax will be. And in doing so, we give up access to that money for decades.

Your lifelong need for financing
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John Perrings: And now let's look at this through the lens of financing. No matter which camp you fall into, whether you're struggling to save or you're already doing a good job saving, everyone has a need for financing throughout their life, and that's one of the [00:18:00] core tenets of The Infinite Banking Concept. And that's you finance everything you buy.

You either pay interest to someone else when you use their money, or you give up interest you could have earned when you use your own money and pay cash. You finance everything you buy. Using whole life insurance gives us an incredible level of control over our capital, and it gives us a place to finance the things that matter to us throughout life, whether that's a large purchase, an emergency or an investment, or buying an asset.

So for someone having trouble saving, building your own base of capital to borrow against on your terms helps you roll with the punches. It helps you handle the bumps in the road and finance larger purchases. And as that capital base grows, it can become a source of capital to invest. If you're already a good saver, you might already have the ability to do these things that I just mentioned.

The question becomes: how do you make it even better? And a common example in infinite banking, [00:19:00] in the infinite banking world is buying cars. I just kind of mentioned that. You can't get rich buying cars, but you can certainly do things a lot more efficiently when you control your capital. For example, if the going rate to finance a car through a bank or a dealership is 7%,

but we can get a policy loan at 5%, doesn't it make sense to capture that 2% spread and capture that and bring that into our own financial system?

IBC in Action: Cars & Real Estate
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John Perrings: You're buying a car that you would have bought anyway. You're making the same payment you would have made anyway. But now that two percent spread is going back to you as the "banker" because you took over the banking function for that transaction. And then even better, instead of buying a liability, what if we buy an asset?

And let's use investment real estate as, as an easy example, and we'll use easy numbers. Let's say we can get a policy loan at five percent and the investment real estate nets a ten [00:20:00] percent return. Well, if we can pay five dollars to earn ten dollars, we doubled our money, and that's also called a 100% rate of return.

Meanwhile, everyone else out there is on autopilot just dumping money into the 401Ks that they can't touch for decades, all in the hope of getting like a, whatever they tell us these days, a ten or twelve percent average rate of return, even though the mathematical average, for each year's return has nothing to do with the actual return.

And over every thirty-year period of the S&P's, history, the real return was less than the average return seventy-five percent of the time, believe it or not. By becoming our own banker, controlling the banking function, and controlling our capital, you can get a one hundred percent rate of return in an asset over which you have much greater control.

And that asset cash flows, it, it can give you tax advantages today rather than thirty years from now. All these [00:21:00] incredible advantages, and we get a higher return. And now, of course, this caveat I gotta throw in there, this is just an example to illustrate the point using easy numbers. I'm not saying all you have to do is buy real estate with IBC and you'll automatically get a hundred percent returns.

And by the way, I'm not even saying you have to do real estate. You could do anything. You know, I'm just giving a couple of examples of how becoming your own banker and controlling your capital can create a huge advantage. Here's, here's another thing. When... You can get financing from other places, but what level of financing can you get?

Loan-to-Value - whole life can't be beat
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John Perrings: And, and this gets into loan to value ratios.

You can get money from a bank and borrow money against the value of other assets. Look at a HELOC, right? Everyone's comfortable with HELOCs. Maybe they'll give you somewhere in the range of fifty percent to eighty percent loan-to-value on the equity in your house. A whole life policy is very similar, except with a whole life policy, you can get up to [00:22:00] ninety-eight percent loan-to-value on the equity in your policy, which is the cash value, of course.

Another place people get access to financing is through margin loans, right? If you have a stock portfolio, you can get a margin loan. But you can't really use all the value of that portfolio without putting yourself at significant risk, right? If anything happens in the market, you could c-- you could end up with a margin call.

So the effective loan-to-value tends to be lower if you want to avoid taking on significant risk.

And regarding some of these other ways of getting financing, there's data out there showing that, you know, around thirty-five cents of every dollar that comes into our lives goes out in the form of debt service. And that's a significant number, right? So if, if everybody has a need for financing and we had a better way to structure it, what if some of that thirty-five cents, thirty-five cents of every dollar could go back toward building and growing our own [00:23:00] financial system instead of going out the window to someone else's financial system?

Wouldn't that be a significant benefit?

Because whether it's debt, 401Ks, or whatever else, we always seem to be prioritizing other people's financial systems rather than our own. So whichever camp you're in, whether you're struggling to save right now or saving a lot, the primary purpose of infinite banking isn't to take loans and increase returns, it's to have control over our capital.

That control is what allows us to take loans and increase returns in the first place. Having control over our capital lets us take advantage of the changes that we always know are coming in the future rather than react to them. So hope this was helpful. If you find these strategies are resonating with you and you'd like to learn more about how the infinite banking concept might apply in your life specifically, schedule a free consultation with me.

I'll take you through a short assessment and see if and how [00:24:00] IBC might benefit you, and if so, what the next best step you can take. You can book that call at StackedLife.com. Thanks.