The Fundamentals of the Infinite Banking Concept

According to Money, and based on the median income and the cost of living expenses in all 50 states, there are 18 states in the United States where your take home pay feels like you made more than you actually do.  In 16 states, it feels like you make less than you actually do. And in the remaining 16 states it feels like what you actually make is what you make.[i]

This means that living in one of those 18 some states that feel like your take home pay is more than it actually is should give you an advantage of being able to keep more of the money you make because the cost of living compared to your income is lower than in the other states. And because 90% of Americans retire dependent on Social Security for a significant portion of their income,[ii] it becomes important to understand IF where you live could be a determining factor in how well you will fair in retirement.

Living in Alaska, California, Connecticut, or Hawaii, for example, where it feels like you earn 14% to 16% less than what you actually earn, has the potential to limit your ability to keep more of what you actually do earn. While living in Alabama, Nevada, Ohio, Montana, and Utah, where it feels like you are earning 10% to 12% more than what you actually do, should make it easier for you to keep more of what you earn.

Paradoxically, these facts don’t seem to correlate with the amount of money people are actually keeping from their earnings.

Connecticut, the top ranked state where it feels like you earn less that what you actually do, has the highest median savings rate in the nation, while Alabama, one of the highest-ranking state where it feels like you make more than you actually do, has the lowest median savings rate in the country.

Now to be fair, the median savings rate only tells you that 50% do better than the average and 50% do worse than the average, but even so, the fact that what you make and what your personal economy makes it feel like you are making doesn’t seem to play as big of a role as what you might think when it comes to how much you actually keep of what you earn.

It has been said that what you believe about the economy has more to do with what you keep than the actual economy in which you live.  And that is a good thing to remember.  Nelson Nash the author of Becoming Your Own Banker and founder of the Infinite Banking Concept, (aka IBC) used to say that “If you can save and pay cash for everything you purchase, you will win by default because Americans don’t save anymore.”  That’s a belief that many have endorsed in America.  And that belief might hold true, if not becoming a slave to creditors is how you define winning. But if you want to stop losing money to the cost of interest in your life, you will have to accomplish more than merely paying cash for everything.  And this idea is the fundamental basis of the Infinite Banking Concept or Becoming Your Own Banker.

Now, it’s a demonstrable fact that there are thousands of households across America that earn the same amount of income, have nearly identical expenses and liabilities, and yet somehow some of these households manage to keep more of their income than others.  Empirically this proves that what you believe plays a larger role in how much money you keep compared to the environment in which you live.

Knowing this fact means you are the most important person in the room when it comes to keeping more of what you make.  Environment might play a minor role, but you are the one who determines what you will and what you won’t keep, not your environment.  In other words: You decide to afford what you want to afford.

And so, the age old 10-20-70 principle still pertains to you regardless of what State in which live.

The 10-20-70 principle goes like this:

• 10% of what you earn is yours to keep, NEVER to spend (it becomes the seed to your wealth)
• 20% of what you earn is the MAX you should ever allow non-secured, or credit card debt to extract from your earned income
• 70% of what you earn is what you live on. This includes your taxes, your giving, your housing, your transportation, your student loan debt, food, clothing and utilities, as well as travel, entertainment, vacations and anything else you need or desire.

If you believe, and use this age old principle to guide you, you will keep more of what you make WITHOUT feeling like you are on a tight budget or merely working to pay the bills.  This will free you up, so you don’t feel like a slave to your job anymore.

But even more importantly, following the 10-20-70 principle will provide you with the ability to leverage the 10% you keep in order to finance the 20% of your income used to pay off debt to others.  And when you coordinate this “internal refinancing” deal, and pay it off, you will have accomplished what most Americans believe is impossible. And that is, you’ll be keeping 30% of what you make!

At this point, you’ll be building some serious wealth for yourself. Obviously, where you keep your 10%, and ultimately your 30%, makes a huge difference if you want to avoid taxation and control the liquidity of that money yourself.  That is where Participating Whole Life Insurance becomes such a valuable tool for you.

Participating Whole Life Insurance, (aka the sweetheart of the tax code,) allows you to keep earning a return plus dividends on the money you are keeping, while allowing you to leverage it and use someone else’s money to invest or expand your potential earnings. In essence you become your own banker.

The Infinite Banking Concept, defines what you need to do to Become Your Own Banker.   Once you accomplish that then you can manage all these “internal financing” deals and keep more of the money you make.   To take the Infinite Banking Concept one step further, you’ll need the Perpetual Wealth Code™, a system of managing your own money which will allow you to build sustainable wealth with the extra money you are now keeping.

Understandably, sustainable wealth is what you must build in order to ensure that you will NOT run out of money before you die, AND that you will not have to depend on  Social Security for your income like Americans are having to do today.[iii]

At McFie Insurance, we design, sell and mentor you to become your own banker and implement the Perpetual Wealth Code™ because we believe that regardless of what state you live in, you never want to run out of money before you die. And we know that building sustainable wealth is the only way to turn that belief into a reality for you.  Becoming Your Own Banker using the Infinite Banking Concept is great, and building sustainable wealth is even greater.

Suggested Resources:

What type of life insurance do you really want?

Should I buy multiple policies or just one big one?

[i] http://money.com/money/5177566/average-income-every-state-real-value/
[ii] https://www.fool.com/retirement/2018/01/28/how-much-do-seniors-really-rely-on-social-security.aspx
[iii] https://www.aarp.org/ppi/info-2015/people-aged-65-and-older-who-rely-on-social-security-for-90-percent-of-family-income-and-average-monthly-benefit-by-state.html