The 6 Basic Principles of the Infinite Banking Concept
Building anything of value always starts with the same thing – the basics. Infinite Banking can come off as a complicated strategy only the wealthy can understand and use, but the basic principles that make up the Infinite Banking Concept are actually quite simple when you break them down.
At its core, Infinite Banking is a process that involves using specially designed whole life insurance policies to create a personal banking system. What does that actually mean? How can you truly become your own bank? Let’s break it down below with the 6 basic principles of Infinite Banking:
Using Whole Life Insurance Policies
Often when people first hear the term “whole life,” alarms go off in their head. Many people view whole life insurance as a waste of money. And often, this is true. But not for these specially designed whole life policies.
What does “specially designed” mean? Well, every whole life policy accrues cash value. But most are not designed to maximize this feature. A whole life policy that is specially designed for Infinite Banking use is different in this way because the cash value component is the main focus from day one.
The Power of Uninterrupted Compound Interest
The greatest advantage of using what we call “stupid whole life insurance” is the ability it gives you to utilize the power of uninterrupted compound interest.
What exactly does this mean? It means you can use the cash value inside your banking policy without taking away from its growth through compounding. Normally, people are used to compound interest where their money needs to “sit and stay” for it to accrue interest. But not with Infinite Banking. Not with these whole life policies. When you become your own bank with one of these specially designed whole life policies, you allow yourself to save and spend at the same time!
Maximizing Cash Value
The goal of these specially designed whole life insurance policies is to maximize the cash value growth inside the policy. As time goes by, the cash value increases in value, making the policyholders borrowing capabilities increasingly more impactful.
The best way to achieve this is to pay regular premiums to fund your policy’s cash value growth, keep the policy in force for as long as possible (ideally until the insured person “graduates”), and to minimize the cost of insurance.
Borrowing from your policy, NOT withdrawing
As cash value becomes available inside your specially designed whole life policy when you make these premium payments, you, as the policyholder, will be able to borrow against the cash value in the form of policy loans to finance things like investments or other expenses.
This act of borrowing from your policy is unique in that you’re borrowing from “your bank,” from yourself. You’re able to utilize the cash value growth to fund the things in life that are important or necessary to you, without needing to involve another financial institution who can impose their rules and regulations on your borrowing needs. You have control. You make the call.
Commit to Repaying Yourself
As R. Nelson Nash put it, “Don’t steal the peas.” When you borrow from your own “bank,” make sure you treat this money as if it were the big bank's money. Don’t assume that because it’s “your money” that you don’t need to pay yourself back. This will be your biggest hindrance to building wealth if you decide to steal from your own bank by not repaying the cash value you borrowed.
And when you pay yourself with interest, you’re helping your policy and your banking system grow even further.
Rinse and repeat
Once you’ve used your policy’s cash value for a financial need you have, and you’ve paid yourself back (with interest), you’ve now replenished the cash value. This means you can now borrow against the cash value inside your policy again, creating a cycle of borrowing and repaying your cash value that’s able to be repeated indefinitely.
This is why we view these specially designed Infinite Banking policies as a personal banking system, because you’re able to rely more and more on your own cash value rather than traditional banks or lenders for your financial needs. This is exactly what the wealthy do. And this is how millionaires insure their money and keep growing it.
Maximize cash value in your specially designed whole life policy, borrow against your cash value, repay yourself with interest, and repeat. That’s as simple as it gets, ladies and gentlemen. Infinite Banking isn’t hard once you understand it. And the benefits of becoming your own banker with Infinite Banking are truly undeniable. Don’t waste anymore time wondering, “Is this too complicated for me?” Just go back to the basics and you’ll see it can help anyone looking for a better way.