Build Wealth by Starting Your Own Personal Bank

it's been said that if all the money in the world were distributed equally among all the people in the world within 10 years time 97% of all the money would be under the control of 3% of the people why banking those who understand the banking equation capture and control the money most people think they understand banking they write cheques put money into the savings and get loans at the best interest rate they can find but they fail to understand the most important part and as a result the average consumer pays over 34% of their after-tax dollars on interest over their lifetime think about that they willingly give away over 34% of all their after-tax dollars in interest that's banking it's great if you're on the right side of the equation most aren't most people focus on two things when they buy something price and interest rate look at the results of this approach 25 percent of every dollar spent on car payments goes toward interest even with a car loan at eight point five percent APR over eighty six percent of the average Americans mortgage payments go toward financing even at 7 percent fixed APR as you can tell the volume of interest is the real issue not the annual percentage rate it's like going to the doctor's office to get a shot of some kind it's not the rate at which the medicine is injected into you it's the volume too little and it won't do any good too much and it can kill you the truth is that price and interest rate are not the reasons why Americans waste over 34% of their income in interest it's the banking equation that's the problem you are about to learn how you can pay yourself the thirty four point five percent interest that you are currently paying to banks and financial institutions that change will have a dramatic financial impact for you in just a few short years in fact it could amount to over 1 million dollars on your next 11 car purchases alone the first principle you must understand is that you finance everything you buy you either pay interest to someone else or you give up interest you could have earned otherwise which is called opera tunity cost as mentioned earlier the average American spends thirty four point five percent of all of their after-tax income on interest for their mortgages car loans and credit cards and saves less than five percent yet all financial discussions focus on getting a higher return on the 5% of savings completely ignoring the 34.5% spent on interest what a tragedy that's like making $100,000 per year in after-tax income spending thirty four thousand five hundred on interest and saving five thousand dollars you would have to get a six hundred ninety percent return on your five thousand dollars in savings to make up for the thirty four thousand five hundred spent on interest do you know anyone getting a six hundred ninety percent return on their savings each year the real problem is the thirty four thousand five hundred being spent on interest it's not practical to think you can make it up by getting a higher return on the five thousand dollars in savings that's like flying an airplane that's only capable of flying 100 miles per hour right into a three hundred forty five mile per hour headwind no matter how hard you try you're moving backwards at two hundred forty five miles per hour you'd be better off to land your plane and wait until the wind changes direction eventually you'll get a nice tailwind of three hundred forty five miles per hour then your 100 mile per hour plane will be moving at a ground speed of 445 miles per hour now we all know that in the airplane world you can't control the environment in which you fly however in the financial world thanks to the infinite banking concept you can by becoming your own banker this will allow you to recapture all of the interest you're currently giving to banks credit card companies and other finance companies so you can literally pay yourself all of the money that you are currently paying out in interest and other financing costs so in our example instead of paying banks thirty four thousand five hundred per year in interest you can pay yourself thirty four thousand five hundred per year in interest which amounts to 69 thousand more per year not including the five thousand dollars you're already saving becoming your own banker does not require getting a bank charter from the bank Commissioner or a building or anything like that the simplest way to becoming your own banker is to use a mechanism that has been around for over 200 years called participating dividend-paying whole life insurance known as permanent insurance which is very different than term insurance term insurance is the equivalent to renting coverage for a specified period of time or a specific term and pays the beneficiary a promised face amount as a death benefit if the insured person dies during the term if not the cost of the insurance increases since the insured person is now closer to death this continues to happen until at some point it is simply cost prohibitive to continue with term coverage so the coverage is typically dropped permanent life insurance on the other hand insures a person for life the insurance company hires actuaries and rate makers to estimate how much money must be collected in order to pay the eventual death benefit yet still make the profit they desire in order to determine this they estimate how much money they will earn through investing the premium payments how much it will cost them to manage the investments the time period over which premiums will be paid and the life expectancy of the insured person finally to determine the amount of the premium payments they must know how often and over what time period the premiums will be paid which is known as the payment period shorter payment periods have higher premiums because they are effectively paying in advance for the cost of insurance the shorter the payment period the better suited it is for the purposes of the infinite banking concept to understand why let's break down a typical premium payment assume the actuaries and rate makers determine you would have to pay $20 to the insurance company for them to be able to run their company make their desired profit and be able to pay your beneficiaries the death benefit upon your passing if $20 is their best estimate they're going to charge you $25 to build in a little margin for error let's say you decided to shorten the payment period so your actual premium was 50 dollars a little bit of that say 50 cents will be spent by the insurance company to pay their employees who run the company the insurance company will invest the remaining amount into bonds mortgages real estate developments or joint ventures with other private organizations unless the owner of the policy exercises their contractual right to use the money elsewhere that is the key to becoming your own banker every life insurance policy which is a contract plainly states that the owner of the policy who is the person that pays the premiums outranks every potential borrower in access to the money that must be lent so what does this mean this means that the owner has absolute control over the investment function of the company the insurance company can only invest the money if the owner of the policy does not exercise his option to use the money instead so what can the owner use this money for anything he wants now listen closely because you are about to see the power of becoming your own banker remember that 8.5% car loan that ultimately cost you 25% instead of buying that car today if you fund your bank for the next four years by making premium payments into your permanent life insurance policy you will be able to borrow from your own bank which is the cash value in your policy to pay for the car then instead of making payments to the automotive financial company you make the payments to yourself by making the payments back into your policy to maximize the power of becoming your own banker you must pay yourself at least the amount of interest you would be charged by the automotive finance company preferably more what does this amount to let's assume you'll buy a new car every four years for the next 44 years so 11 cars total each car will be financed for ten thousand five hundred fifty dollars and can be financed at eight point five percent interest for forty eight months you have a choice with how to pay for these cars you can use one of five methods you can buy them through a bank or other finance company lease them pay cash for them use an interest earning savings account or use your own Bank by using the infinite banking system let's look at each method in further detail buying the car through a bank at 8.5% interest would cost two hundred sixty dollars per month which is three thousand thirty dollars per year over forty four years that amounts to one hundred thirty seven thousand two hundred eighty dollars leasing a car costs a little bit more why because you lease from the owner of the car is the owner of fool know he will make some money on the activity let's then assume that leasing will cost you one hundred seventy five thousand dollars paying cash for the cars will first require you to save up for the car so you would have to defer buying the first car for four years the overall cost for the cars would be one hundred sixteen thousand fifty dollars which is the ten thousand five hundred and fifty times eleven cars the last two methods both involve having a banking mentality the difference is using your own bank versus using someone else's let's compare assume that for the last two methods you understand the need to capitalize your bank so you accumulate five thousand dollars per year for seven years before purchasing the first car you could accumulate your money in a savings account and buy certificates of deposit at someone else's bank in the amount of $5,000 with a yield of five point five percent Interest however this interest is taxable so the after-tax effect is four percent assuming a thirty percent tax bracket after seven years you would have forty-one thousand seventy one dollars in your account so you buy your first car and continue making the three thousand thirty dollar car payments into your savings account by year fifty you would have two hundred fifty eight thousand nine hundred twenty seven dollars in this account alternatively you could accumulate your money in a dividend paying permanent life insurance policy instead of it someone else's bank for the first fourteen years putting your money in someone else's bank comes out ahead but from that point forward the infinite banking concept is favored in an accelerating fashion in fact by year fifty you will have nine hundred sixty four thousand six thirty-eight dollars that's seven hundred and five thousand seven hundred and ten dollars more than putting your money in someone else's bank why is this because when you become your own banker you are the only owner of your bank so you receive the profits that would otherwise go to the bank it's that simple and that powerful there really is no comparison plus by using a dividend paying permanent life insurance policy is your bank you get the other inherent benefits with life insurance policies namely the dividends paid on a life insurance policy are not taxable the money you borrow from the cash value is not taxable and the cash value is protected from creditors and judgments in most states by becoming your own banker you will soon be in a position to stop supporting the employees and shareholders of other banks and finance companies through all the interest you're paying to them and instead use that money to support you and your family becoming your own banker will prove to be one of the wisest decisions of your lifetime

Channel: Nathan Rogerson Financial

Views: 710,275

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Id: 9lAT3y1X7Cg

Length: 12min 24sec (744 seconds)

Published: Fri Oct 03 2014