06: The Ideal Candidate for Infinite Banking
006 The Ideal Candidate for Infinite Banking
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Why some thrive and others struggle
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Ever wonder why some people absolutely thrive with The Infinite Banking Concept while others seem to struggle to get started? As much as I hate to admit it, the surprising truth is that IBC just isn't for everybody. But the list of who IBC is not for is a lot shorter than the list of who it is for.
Today I'll reveal who should avoid IBC and who stands to gain the most from this incredible strategy.
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 and authorized Infinite Banking practitioner.
I've implemented IBC for hundreds of my clients and educated thousands more with my original content from podcasts, articles, and courses at StackedLife.com.
By the end of this episode, you'll understand the specific characteristics that make someone an ideal candidate for IBC, and you'll be able to determine if this powerful wealth building strategy is right for you or if you should look [00:01:00] elsewhere.
Today we will first discuss who should avoid implementing IBC. Then we will look into some of the hallmark traits of strategic thinking that makes someone an ideal candidate for this concept.
I'll share a little bit about my personal story that led me to IBC. We will examine how IBC benefits different financial situations from those needing that "forced savings" that you hear about to those looking to eliminate debt, manage large expenses, and finally enhance investment returns. So let's get into it.
IBC Has Many "Ideal" Candidates
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The first thing to note about the ideal candidate for The Infinite Banking Concept, some of you may not really care about this side of things, but from someone who's a practitioner, and this is my business, one of the trade-offs of dealing with The Infinite Banking Concept and helping people understand it and implement it, is that it applies to so many people that it's actually been challenging for me to really establish what people would call a niche in the [00:02:00] marketplace where, I have an ideal client that I go after.
I have people in all walks of life, everything from just getting started in their job all the way to high income earning professionals, doctors, et cetera. The reason I'm bringing that up is because IBC I really believe can be so helpful and can work so well for so many different people.
There's not really necessarily an ideal candidate.
And as I mentioned in the opening, the list of who it's not for is probably a lot shorter than the list of who it is for and who it can help. And we will talk about both. We'll get into some ideas of who can benefit from it. But let's just start off by talking about who this really is, not for.
Short List of Who IBC is NOT For
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And the main type of person that I can think of who IBC is definitely not for is someone who really cannot or will not have the ability to think long range. And when I say this, I'm not saying it as a [00:03:00] dig, I'm not trying to admonish someone because there could be legitimate reasons why someone is currently not able to think long term.
They could be in a situation where they have very high expenses for a period of time. They could be in a situation where their income has been affected, or they could just be in a situation where they have something coming along in the horizon, in the near future, it's gonna require a lot of capital.
And in some of those scenarios, it may not be the best time to start The Infinite Banking Concept because of the capitalization period required to start a whole life insurance policy. I also do think there are people out there that really just are not thinking long range for really no good reason at all. Nelson Nash talks about this in his book, becoming Your Own Banker. One of the key mindset requirements is the ability to think long range. Because what we're doing is we're strategically capitalizing, which is a fancy way of saying saving [00:04:00] money in a way that's going to give us some strategic advantage. And unfortunately, what has happened in the. Recent past is that people have started treating The Infinite Banking Concept like a hack, and they've tried to make it so that the capitalization period is little as little to non-existent as possible.
And as I've mentioned in previous podcasts, all things being equal. We would of course want that to be the case. But, with insurance, all insurance, in fact, not just life insurance. Everything is a trade-off between cost and risk. I got that from Todd Langford who got it from his mentor, Norm Baker. There are no deals in the insurance business and so we have to look at the trade-offs that exist when people try to make life insurance act like it's not life insurance.
And this gets into a big problem where we have people with the inability to look at their financial [00:05:00] lives from a long-term perspective where people just want to make something happen as quickly as possible and they don't want to take the time to properly set up the structure to make sure it all works.
And that's what we're doing with IBC and that's what we're using whole life insurance as the platform to do that.
Being Strategic in Your Actions
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And so when we talk about being strategic, being strategic is about making trade-offs. One of the hallmarks of being strategic is the willingness to forego immediate gratification so that you can create a better future outcome, often with less effort. But that's the thing, is you have to be willing to make that trade off in order to have a better outcome with less effort. And that's what we're doing with IBC in a nutshell.
And what's interesting about this is if you think about anything of value, it's almost always a long-term play. When you first start in a career, would you expect to go in as a new employee, brand new to this type of job and expect to make [00:06:00] top dollar? I don't think most of us would expect that. You get started, you do the work, you learn the job, you get better at the job, you become more effective at the job, and then you master the job and that's when you get top dollar payment for that type of job.
Or just look at starting a business, would anyone ever expect to put startup capital into a business and be able to get that startup capital right back out immediately, in the next 30 days? And the answer should be no. If you look at anyone who's put startup capital into a business, they typically have a pretty long horizon on when they expect to get money back.
The typical venture capitalist or a VC firm, they're operating on 10 year windows. So this idea that we should be able to, put money in when we're starting something and getting it right back out instantly, is I think a little misguided.
Another way to think of it is building a house. What do we want when we build a house, what we want is the [00:07:00] use and enjoyment of sitting in the living room or the kitchen with our family, or out by the pool or the beautiful landscaping that we have. But if you did the landscaping first or built the pool first. When you had to bring in the equipment and all the people and supplies to actually build the foundation of the house, you would end up destroying the landscaping anyway. And that's actually not a bad analogy for what happens in people's financial lives when they put the cart before the horse and they try to get this growth with no structure in place first. And really what we're doing here is we're building the foundation for the rest of our financial future, and we have to take some time and do that correctly, or the whole thing is at risk of falling apart if one thing goes wrong.
Whether you're just getting started getting your financial house in order, or even if you're a seasoned investor out there, having done many deals, using The Infinite Banking Concept [00:08:00] to build a strategic foundation will pay in spades over the long term and make everything you're already doing work even better.
The Two Questions to Ask Yourself
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So there are really only a couple of questions you need to ask yourself to determine whether or not IBC is ideal for you. And the first one is, do you want maximum control over your capital? And the second one is, do you want to be strategic? That's pretty much it.
Because the typical way of doing things, working with banks and other financial institutions, they do give you the ability to be strategic if you want, but they give you very little, if any, control over how that works.
Because when you don't control your own access to capital, you must seek permission from those who do have control over capital. While you might gain a little bit of ability to be strategic, you can only do it when you go by their rules and their payback terms.
"Forced Savings"
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So now let's talk a little bit about, who _is_ this for? Who is IBC [00:09:00] ideal for? And again, there's so many use cases here. I don't want to. Hamstring anyone's thought process at all. We're really only limited by our creativity here. But I think it might be helpful to just lay out a few things where I think people could benefit from a macro perspective.
And I'll start by sharing my own story. I was in my late thirties and I woke up to an overdraft protection notice on my phone. I got a little notification on my phone, first thing I see when I wake up, and it was one of those moments where-
it's not a real rock bottom, but it's definitely a wake up call where you're just kinda like, what's going on? Like, I'm here, I am 38 years old getting an overdraft notice on my phone. I've been working in tech for years. I make good money. Everything's going fine. And here I am bouncing checks and not in control of what's going on with my money.
And that was really like. The [00:10:00] final little wake up call for me to really get my financial house in order and, I've always been interested in economics. So I was reading an industry magazine one time, an article by Bob Murphy, and he mentioned whole life insurance and The Infinite Banking Concept.
So I went on a tear to understand what that meant. And when I implemented it in my own life over 10 years ago it really believe it or not, solved almost all my problems. And the reason I'm telling this story is I like people to know, if you've lived, if you've listened to my stuff before I've made all the mistakes, probably more than once. I've made all the mistakes. I've had all the problems out there. And, to be sure, some of those mistakes were just spending mistakes. I was just not using money wisely. But the biggest mistake I think I made is sending money away to places where I don't have any control over it. Sending money away to [00:11:00] places that is locked away from my use for decades without paying penalties and taxes.
And by the way, things came along that were serious enough that I ended up liquidating qualified plans like 401(k)s because I needed money to live on. I was around during the dotcom bubble, when that burst, and I was around during the great recession. I had some stuff going on with family that I had to pay for, and so because I was prioritizing sending money away, part of me was thinking I was doing the right thing. I was putting money away for my future, but then when push came to shove and I needed, some money, I had to get it from somewhere. And so one of the big problems that I think people face today is even though they're doing everything right, according to what they've been taught, when it comes time to deal with a problem and roll with the punches, they really just don't have any money to do it.
And that's where this idea of forced savings comes in. I don't really like the word "forced savings," but it is a, it is something that, [00:12:00] it did help me in my life, but what helped me even more was changing the location of where I put that forced savings into a place where I could actually get to it.
Because again, I think rolling with the punches is probably the number one thing people could put in place that they just don't currently have.
How We Know Resiliency is the Biggest Problem
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And we know this is true. Because if you go out there and you look at some of the research by the Federal Reserve, 90% of the people who retired for the first time in 2023, they had less than a million dollars saved.
90% of retirees had less than a million dollars. Can you imagine that? If those people were max funding their 401(k)s. By the way, the, the 401k has really only been around since the eighties, so we're starting to see the first tranches of people who went through an entire work life working life, putting money into things like 401(k)s. And if you just back into some numbers, it's a little bit loosey goosey [00:13:00] because we don't know how much, they would've put in there. But if you just look at a max funded 401k during those times, and let's just say they got to a million dollars, it's like a barely a 1% rate of return on their money, but most people don't even have that.
So why is that happening? And I don't know exactly, but I have to assume that it's because people needed to get to that money and they, liquidated their 401(k)s. Sometimes when people leave jobs, they just liquidate the 401k and keep the money, which tells you that they don't really appreciate 401(k)s.
But, I really think there's an issue where people they're putting their money places where they can't get to it, and so they, when they do need to get to it and an emergency comes along, they liquidate whatever they have it in, and then now they're starting over. With IBC, if we need cash, we can always get to it via the policy loan provision.
And we never lose the growth on that money. Obviously we need to pay that back, but at least we have that opportunity [00:14:00] to pay that back. Never having lost the growth all along the way. It's an incredibly powerful tool just to do things like roll with the punches and have an emergency fund. If there's one thing, like for the people like getting their house in order, this is an unbelievable tool to help you do that, maintain liquidity, and never lose the growth on your capital for the rest of your life.
Eliminating Debt
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A second place where I think IBC can help a lot is in eliminating debt. On one hand, we have people who have trouble rolling with the punches again. And when they need access to cash, they don't have it. And what ends up happening is, they don't have the cash, so they end up going to people who do.
And those are the financial institutions, the credit card companies, et cetera. And so people, not only do they not have a lot of money saved up, but they also are racking up a lot of debt. And so one of the biggest costs in our financial life is actually just servicing this debt. Studies show and in Nelson Nash's book, becoming Your Own [00:15:00] Banker talks about how about 35 cents of every dollar of money that comes into people's lives goes back out towards servicing debt.
And if we look at The Infinite Banking Concept using whole life insurance policy loans we can use those to more efficiently pay down debt with much more control. And I think this is an excellent use case for IBC.
You know when people have debt, a lot of them the best thing that they learn is to prioritize sending money to those financial institutions in order to get out of that debt as quickly as possible. The problem is once you're done with that and you've gotten out of debt, you typically don't have any money because you've been sending it all to the institutions.
And so a lot of times people go back into debt because again, one thing goes wrong and now they need money again. With IBC, we can deal with this a lot more efficiently and with a lot more control. Imagine, let's just look at credit card debt, [00:16:00] whatever it is, 18%, 20%, 22%. What if you could trade out that high interest debt for low interest policy, loan debt of, call it 6%. You could build up capital in a life insurance policy.
Borrow against the cash value. Pay off a high interest credit card, and now you've got a much lower interest policy loan debt that's
you can pay back according to your own schedule. You're in complete control. Now, of course, we want to be good stewards of our whole life insurance policy and treat it with respect and be "honest bankers" with ourselves. So if we're taking out policy loans to pay off debt, we need to pay off that policy loan as well.
The point stands is that you can do this however you want, whenever you want, you're in control. And what's great about this is because of that forced savings component to it, where you're gonna continually also pay a premium when you're done paying off the credit cards and [00:17:00] then you're done paying off your policy loans, you're debt free and you have a bunch of money.
So it's a much superior way to paying off debt. And if you think about it, paying off high interest, call it 20% high interest debt. That's the same as getting a 20% return get, just paying off that debt. So it's a pretty big deal, especially when you look at getting outta credit card debt and stuff like that.
Now, the one caveat I guess, or the one thing I want people to pay attention to there's also been a little bit of what I think is a suboptimal, use case for IBC or just getting out of debt in general. We know about The Infinite Banking Concept because you're listening to this podcast.
There are also the things out there like velocity banking and things like that where you use a HELOC to pay down your mortgage more quickly. I wanna put a little bit of a warning out there. The interest rates in this case matter. A lot of times when you know these mortgage pay down strategies, at the end of the day, [00:18:00] after you parse through all the information of how everything's working, all you're really doing at the end of the day is paying more principle on your mortgage.
So you've got the, you're creating a complicated strategy to just pay extra principle on your mortgage. You don't need a complicated strategy if that's what you wanna do. However, with mortgages, especially for people that got 'em, when they were like 3% or less, it really does not make sense to pay off.
3% mortgage debt especially using, call it 6% policy loans, it does not make sense to swap out 3% debt for 6% debt. I don't care what anybody says. You have to look at the interest rates as a job you're giving each dollar. If you're paying down 3% debt, the only thing you're saving on there is the interest on the principal, and that's 3%.
So you're giving every dollar a 3% job. If you could just take those extra dollars and make those, make [00:19:00] additional whole life insurance, premium payments or put it into even, I don't know, a cd, anything's almost better than 3%. So if you can get, put that into investments that are growing at a higher rate than 3%.
That is a better use for your money over the period of that 30 years for that mortgage than trying to pay it down more quickly. So that's a little bit of an aside there, but I did wanna put it out there. Since we're talking about debt, I really think that people need to pay attention to the type of debt that they're paying down. Getting out of high interest debt is a much more worthy cause than focusing on paying down low interest mortgage debt.
Paying for Large Expenses
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The next piece here is things are starting to get better, so we're covering the first two bases of really getting your house in order now that your house is in order. Another thing we can do with The Infinite Banking Concept is pay for large expenses, an even bigger cost to us than servicing debt because
you're usually getting something for [00:20:00] that debt service. An even bigger thing is just the expenses that are leaving our lives, especially large expenses like big ones, like buying cars, paying for college, taking vacations, paying property taxes, things like that. IBC gives us a way to manage those larger expenses.
Even some of the recurring ones, like your property taxes or buying cars every X number of years, five years, whatever it is.
IBC and whole life allows us to build up the capital for those expenses, pay for them using policy loans, and then pay those policy loans back, again, according to our own schedule, we're in control and since we didn't spend our own money, we spent the life insurance company's money, we never lose the future growth on that cash value
all along the way for the rest of our lives, we merely used it as collateral. To use the life insurance company's money to pay for these large expenses. And this is a way to minimize the lost opportunity cost [00:21:00] on some of these purchases.
If you wanna see my model on paying for large expenses like cars, property tax, et cetera, check out my online course, IBC Mastery. You can get that at StackedLife.com/IBCMastery. And I have a module in there called Recurring Expense Funds, where we create little virtual funds inside of our life insurance policy cash value to pay for these large recurring expenses like cars, property taxes, et cetera.
Accelerating Investments
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And the last thing I'll we'll talk about here is using IBC to enhance our investments. There are really two ways I think IBC does this. The first is by creating certainty. Most people have their entire financial lives exposed to risk in one form or another. By owning whole life, you at least get a portion of your financial life, some portion that's guaranteed.
And by owning whole life and having these guarantees in your life, it gives you a kind of permission [00:22:00] slip to take some risk in other areas of your life. So that's number one. The second is because of the leverage you get when using policy loans. Think about it.,
What do banks do with our money? When we go as depositors to a bank? The bank takes our deposits, they pay us a little bit of interest on those deposits, and then they take that money and lend it out to borrowers at a higher interest rate --and just leaving the Federal Reserve out of it and all that stuff--
that's essentially what banks are doing. They're renting money for a little bit to lend it out for "alotta bit." And they're capturing a spread on the difference, and we can do the same thing, can't we? By capitalizing whole life, we get no questions asked access to credit, collateralized by our cash value.
We can borrow from the insurance company at some lower rate, (otherwise, we wouldn't do it) and then we can buy another asset that nets us a higher rate and [00:23:00] capture the spread. Here's a simple example. What if we could pay 5% per year to the insurance company to borrow their money, collateralized by our cash value, and then buy an asset that returns us 10% per year?
What's the rate of return on that? If we can pay $5 to earn $10, didn't we just double our money? And isn't that also called a 100% rate of return? And that's all while our cash value grows uninterrupted while we do all this. And so essentially what we're doing in this realm is we're allowing every dollar that comes into our system to do the job of $2, $3, $4, $5.
And when we start paying the policy loans back, it frees up that line of credit again so that we can reuse it over and over.
Stacked Interest Acceleration
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And this is partially where the name of my company, StackedLife, comes from. We can [00:24:00] essentially. Use capital, use the insurance company's money. As we pay it back, it frees it up again to then use all over again. And we just do this over and over. And every time we do this, we create a new layer in our financial "stack," so to speak.
And each one of those layers is a. Compound growth rate behind it or some type of growth rate. So we're getting this almost geometric compounding where we're compounding compound interest.
And so it starts off a little bit slower because again, we're capitalizing whole life. But then as we start to deploy that capital, we almost get to reuse that same capital over and over again, creating a new layer. And think about it this way, I. If we could create five layers of safe, 4% returns, each one of those layers getting 4%, and we recycled the same money to do that, isn't that the same as getting a 20% return?
That's [00:25:00] exactly what we're able to do with The Infinite Banking Concept and whole life insurance when we know how to structure our finances properly. So again, it starts off a little slow, but if we can think long range, we create the foundation, we create the structure for what we need to then add the layers in our financial stack, and that starts to soon create massive acceleration in our financial life
that you just can't get anywhere else with way more control, way less risk, and then through some of the strategies that are available just by owning whole life insurance, probably less tax, where you have more to use and enjoy during your life while you're alive and you can pass along more after you're gone.
So if any of this was resonating with you and you'd like to learn more about how some of these concepts could apply in your life, specifically, head over to StackedLife.com. You can book a free 30 minute consultation with me right there, and we can talk about your life specifically. Or if you're not ready to talk to someone just yet, [00:26:00] head over to StackedLife.com and you can get access to all my resources. I have a free newsletter, where you can get exclusive financial insights that are not part of my podcast. You can sign up for one of my free courses, one of my paid courses.
Lots of information for you right there at StackedLife.com. Appreciate you listening. I'll see you on the next one.
