Ep. 315 – The True Value of Money

“When I lent money to my son at 9%, it like broke the internet. I was the meanest person on the planet. He’s my son. I should not be charging him interest. But my money has value. If roles were reversed, he should be charging me 9%. So people think, I’m going to be debt-free and I’m going to save my money in a savings account and I’m going to buy that vehicle and I’m never going to replace that money with interest because my money doesn’t have value. That’s how banks can get by with paying us no interest because we truly believe our money doesn’t have value. We’re like, okay, you can give me nothing.”

Hello, hello, hello and welcome back to the podcast. Thank you very much for being here. All right, we’re back. John and I are back and we’re going to go over BYOB again. And it is not bring your own beer, people. It is Becoming Your Own Banker. So if you’re new here, which would be a surprise, but if you’re new here, Becoming Your Own Banker is the book that Nelson Nash wrote about the infinite banking concept. So John and I have been going through breaking it down chapter by chapter and explaining it. So we are on creating your own banking system through dividend-paying whole life. It’s a big one.

It is a big one. It’s multiple pages.

That’s how you know what’s a big chapter in Nelson’s books when they take up multiple pages. It’s important.

Yes, he’s going over a lot of stuff here. So this could be one podcast. It could be two podcasts. I’m not sure. We’ll see how long it takes us to get through it.

But I think that a lot of people maybe miss the very first part of that chapter, which is his Bible verse. Now, there’s a lot of people that don’t like this book because of the Bible verses in it. And I have had a lot of people tell me I don’t trust him because of all of his Bible verses. But it says you should have put… he was talking about Mark 25, 27. You should have put my money on deposit with the bankers so that when I returned, I would have received it back with interest. And so basically what Nelson is saying is it’s biblical to not just put your money in a savings account and hoard it and wait for a rainy day because he wasn’t very happy with one of his people that did that. So I think that that is interesting. And I think that we forget about that a lot. We talk a lot about the Bible’s money is evil. Money is the devil. But we’re not talking about the fact that he was, if you use money correctly, that’s not the case.

Yeah. Yeah. And I mean, it is easy to look past those when you’re reading the book here. So.

Okay. So then he says banking, the business of a bank originally restricted to money changing and now devoted to taking money on deposit subject to check or draft. Loaning money and credit. And that is the Webster’s dictionary of the bank. I don’t know if you’ve seen the, have you seen the three hour Tucker Carlson interview with the guy that talks about the Federal Reserve?

I probably saw clips of it, but I didn’t… I’ve been sitting for the whole three hours.

Well, I have not listened to the whole three hours because it’s, I’ve listened to about 45 minutes of it and it’s painful, John. But it is super interesting that Tucker is sharing that the Federal Reserve is not federal. And so what Nelson is trying to get through in this little piece is that the banking system is corrupt. This is like the chapter where he exposes the Federal Reserve.

Oh yeah. You can, he gets on a few tangents in there about, I mean, there’s other chapters coming up too where he, you get his feelings on that situation.

Yeah. Yeah. So the banking, what a lot of people think is that they’re depositing money in a bank when in fact they’re sort of loaning their money to the bank and then the bank is lending their money out and they’re making 7% and paying you a tiny little bit of money.

Yeah.

So thanks for giving them the money to make more money.

Yeah. And you wouldn’t know that unless you looked into it for some reason or did your own research. You wouldn’t have a clue about that.

Right. Right.

So that next paragraph there is, I mean, this gets repeated all the time. The very first principle that you must be understood is that you finance everything that you buy. You either pay interest to someone else or you give it up or you give up interest that you could have earned otherwise. And that gets repeated all over.

Yep. And I talk, yeah. And I talk about it a lot. It doesn’t matter if you pay cash or you finance something through the lender, you finance everything that you buy.

Yep. There’s a cost there.

Right. And he says, the alternate use of money must always be reckoned with. And I don’t think that when I was reviewing this chapter, I never really paid attention to that sentence before until I was reviewing this. But he’s right. The alternate use of money must always be reckoned with. So if you’re going to do this instead of this, you’re giving something up. And I don’t think people truly understand that.

No. Well, even if you hear like, you know, that’s opportunity costs. Even if you know what that means and you understand the effect that has, like, it sounds simple until you run the numbers and you see what, what effect, you know, I paid cash for that. What effect did that cause? I borrowed this. Until you run the numbers, you don’t actually see it.

Well, that’s funny you say that because Nelson says in here, people give lip service to this fact, but they don’t put it into practice in their own financial dealings.

Yeah.

It’s equivalent to thinking that the law of gravity applies to everyone else but you. And so, oh, yeah, I know that I’ve given that up, but that’s, it doesn’t apply to me. It just, I understand lost opportunity costs, but it’s not a big deal.

Yeah. Until you run the numbers.

Yeah. And you actually see it. Then it’s a big deal because you can see it on paper.

Yeah, in this next paragraph here, he’s talking about a Fortune magazine article about economic value added and how understanding EVA, understanding that EVA is easily today’s leading idea in corporate finance. Earning more than the cost of capital is the oldest idea in enterprise. When I read that this morning, I was like, you know, that sounds simple to be earning money on your capital. But until you actually try to find a tool that does that and allows you to do that, it doesn’t work. You have to have the right tool to pull that off.

And a guaranteed tool.

Yes.

I mean, if we’re going to talk about the tool, is it real estate? Is it equipment? Is it cattle? Is it land? Is it a IRA? What is the tool? And ironically, dividend-paying whole life is the tool that nobody knows about. And there’s all this misconception about.

Yeah. Right. So a lot of this chapter, I mean, he’s talking about the EVA here, but he’s also going to go into why this is so misunderstood.

And I think that people just want the quick answer when we’re talking to them, but they’re not looking at the big picture of, hey, this is solving lost opportunity. And this is the tool for the EVA.

Yeah. Like a guaranteed tool for EVA.

Yeah.

Because they just don’t, not educated on whole life insurance enough.

Right. It’s not mainstream.

Yeah. And Nelson is doing that. He says then, he goes on to talk about EVA. And I have highlighted that these, the banks are paying interest, but they were willing to pay interest to the bank when we borrow money. Right. But we’re treating their own capital as if it had no cost. Or they were treating their own capital as if it had no cost. So we’re willing to give the bank money, but we’re not willing to pay ourself money as if it has no cost. So people will say, well, Mary Jo, you’re going to lend money to John, but you’re going to not, you’re not going to charge him interest. Right. Because he’s your friend. Wrong. Yes, I’m charging him interest because my money has value. When I lent money to my son at 9%, the internet, it like broke the internet. I was the meanest person on the planet because they’re my son. He’s my son. I should not be charging him interest. But my money has value. If roles were reversed, I should also be charging, he should be charging me 9%.

Absolutely. Because there’s a cost to that.

Right. So people think, I’m going to do the, I’m going to be debt free and I’m going to buy that. I’m going to save my money in a savings account and I’m going to buy that vehicle and I’m never going to replace that money with interest because my money doesn’t have value. That’s how banks can get by with paying us no interest because we truly believe our money doesn’t have value. We’re like, okay, you can give me nothing.

Yeah. When you just do that method where you’re just saving money in a bank, it isn’t creating you any value. So yeah, you just get used to it. I think that’s the way it should be. We don’t think that we don’t see our value in a lot of stuff, not just money.

Right.

I mean, how many employees are like, oh, well, I didn’t get a raise because, you know, they didn’t think I was worth it. Like we don’t see our own value in a lot of things we do in life and that carries through to money as well.

Because he says here, EVA’s basic premise is if you know what’s really happening, you’ll know what to do. The same applies to the infinite banking concept. And we hear that a lot as well. If you know what’s really happening, so if we don’t know what’s happening at the banking system, we won’t be looking for the answer for that. If we don’t know that we’re actually lending our money to the bank for 0.3% interest and then they’re going to lend it to somebody else at 7%, we don’t have a problem. As soon as we know that that is what they’re doing, now all of a sudden, we’re looking for a solution.

Yeah. How can I do that and take advantage of that same process?

Exactly. Yep. And then it’s funny because he says it’s creating, in creating any product, it all begins with engineering. First, you will suppose that I get the next one and then he talks about it. Okay. Oh my God. Let me rewind. We rewind. In creating any products, it all begins with engineering. So you could have the same car. I guarantee you, all of you listening, John and I could have the exact same car made on the same day at the same place. Exact same car. John’s will probably last longer than mine because John probably does not drive like I do.

I drive like an 85-year-old man.

I do not. I let my car warm up and do all the things. But Nelson is talking about that. You could have the exact same vehicle and one is going to last longer than the other. And now, while we go through this, you need to think about why is somebody saying, my infinite banking policy works better than yours, John? Depends who built it. It depends who engineered it, but how we use it as well. Right? I might be using mine and paying back 10% interest and you’re using yours and paying back 5%. Well, why is mine working better? Because I’m using it differently. Maybe I’m paying more premium. Maybe I’m doing all the things Nelson says to do in the book while somebody else is just doing the minimum. So, there’s a lot of factors. Who was the engineer? Who was the company? Who was the agent? But how are we using it as well?

So, then he talks about the engineers in a life insurance company. One of those is the actuaries. So, they are dealing with people’s lives. And they’re screening to see, an actuary is screening to see, based on health, how long somebody is going to live. And they’re going to do that over 121 years is a lifespan in these new policies. So, there’s multiple engineers within the life insurance company. One is the actuary. And a lot of you listening, some of you may have run across Gary Brecka online. And he was an actuary for a life insurance company. He says that he can tell almost to the day when somebody is going to die. And it’s because that’s their business. They always want to make sure that they’re insuring healthy people because they need to have enough premiums for enough number of years to be able to pay a claim.

Yeah. And if you’re not in good health, what do we need to make up for that?

Yes.

You know, you’re so insurable. How do we charge?

Which is number two. In engineers, it is the rate makers. So, if you’re not in good health, if you’re a tobacco user, we’re going to have to charge you more because statistically, the actuaries have said this is when you’re going to die. The rate makers say, well, then I better collect money faster so that I know that the insurance company isn’t able to pay that claim because you’re going to die sooner.

Yeah. Yeah. I had wrote down, you know, this is the guts of how a policy works. You know, that’s kind of the stepping stone to, all right, what’s this going to look like?

And I would go, I would maybe change that to this is the guts of how the insurance company works. Because a lot of people think, oh, the insurance company is getting rich. Oh, for the love of Pete. They got, they have to pay claims. Do they, are they in business to make money? Yeah, they’re not a nonprofit, but it’s mutual. And we’ll get into that piece in a little bit when Nelson talks about dividends. But they have to make money in order to pay interest.

Yeah. And to pay the claims and the dividends.

Yeah. They have to be proper.

And employees and all the other stuff.

Because then, and then he says, then they have lawyers. So first is actuary, two is rate makers, third is lawyers. And the legal department has a binding contract. And that contract is between myself and the insurance company. It’s not between John and I. It’s not between the, it’s not between myself and a client. It’s between the client, the insured, well, the policy owner and the company. Okay. And it’s a unilateral contract. That is, this is important. The company promises to do certain things if you meet the standards of acceptability and make premium payments. Read the contract and it will tell you very plainly that you are the owner of the contract, not the company. The owner is the most important character in the scene. To make the plan work, the owner must make payments into it. And the company, the hired help must put the money to work in order to produce the benefits that are promised. So, I’m going to pay premium. Contractually, the company has to put the money to work so they can pay me the guaranteed interest rate. The thing that a lot of people miss here is where else you can do that? A guaranteed rate.

Yeah, that doesn’t happen very often.

No, you’re going to give money to some financial advisor and he’s supposed to put the money to work for you. You’re putting money into your retirement account. He’s supposed to put money to work for you, but there’s no guarantee, right?

Yeah.

There’s no contract that says this is what you’re going to make. People forget the piece that this is contractual.

Yeah, I’m thinking of like when we’re in a meeting and we’re showing somebody an illustration, you know. I always tell them, you know, here’s the guaranteed side, here’s the non-guaranteed where they’re showing the dividend. And yeah, you do kind of forget to mention that this is this guaranteed side. You’re signing a contract that they will do that.

They are going to do that.

Yeah, that’s literally worst case scenario.

Yeah.

And yeah, the dividend, I mean, that’s the nice thing with dividend-paying whole life is, I mean, that’s the variable. That can go up and down, but that guaranteed side is going to happen.

Yeah, it has to happen. It has to happen because when that policy endows, which means when you are 121 years old, if you live that long, your cash value and your death benefit have to equal one another. So people today that are 100 years old and they outlive their policy, the insurance company pays them the cash out of that policy because it is endowing. It has to do that. It does not have to do that in a universal life product, but it has to do that in whole life.

By contract.

By contract. Yes. And Nelson also says, the owner outranks every potential borrower in access to the money that must be lent. So the borrower, I think that people don’t understand this either. We as owners are number one. We get access to that money before the insurance company uses that money and for other investments. We have access to it. So we don’t, we’re not told, hey, I’m sorry, but the bank is out of money today. And so you can’t, we, sorry, we can’t give you anything.

Yeah, that’s not how that works.

I just had a friend pull $8,000 cash out of his account. And I said, they have that at the bank? He’s like, yeah, why wouldn’t they? I said, why would they? Like, I’ve known people to go in for $5,000 cash and they’re like, you’re going to have to come back in a couple of days. We don’t have that kind of cash on hand.

That’s crazy.

The banks don’t need to have that on hand. Right? But I get first dibs to that money. I don’t get first dibs to that money in a 401(k) or IRA. Because in a 401(k) or IRA, I’m going to have to pay a penalty to access that money. All I got to do is go online, fill out a little form and they ACH the money.

Yeah. And what they get into next is like, what do they do with this money that you’re paying them in premium? And I know you just kind of talked to some of the people at OneAmerica recently about some of the things that they do with their money. But if you’re not requesting it for a loan, they’re going and taking it and doing things.

Yep. And they’re going to, here’s the thing that I think a lot of people don’t understand is they’re doing the same things everyone else is doing with their money. So the insurance companies are doing the same thing that the banks are doing. They’re doing the same thing that any wealthy institution is going to do. This is what I was told by the CFO of the company at one point. He’s like, there’s only one pool of money in the world. Right? Same thing Nelson always says. There’s only one pool of money. We all invest in the same things. It’s just where do we allocate it? And insurance companies don’t allocate hardly anything. The insurance companies we work with don’t allocate hardly anything to the stock market. It’s real estate. It is bonds. It is things that they know that are going to pay out because there is a guaranteed side to the policy.

I always kind of think of it as, you know, if they’re a farmer, they’re 100% hedge. Like they, they always have their butt covered. They’re doing the same things as everybody else, but they’re doing it in such a smart way and a calculated way that they, there’s not a ton of risk there.

Yep. And they are, and he says, he talks about that in here, right? He, in the very last sentence of this side of the page, he says, actuarially, the actuary is a kind of engineer that, and all engineers overbuild everything by design. So when you say they’re hedging themselves, that’s a really great example, because they’re going to say, hey, I’m going to invest X amount. I’m going to get, they’re going to say, we’re going to get a smaller return, and they’re going to under, they’re going to overestimate how many people are going to die. So less people are going to die. So that means we’re going to get a dividend.

Right.

And so Nelson is saying in this piece of the chapter that they have overdesigned this. And then he goes into his airplane.

I kind of like that though. You know, if you peg out an airplane, you’re, you’re going to be all right, he says for a little while.

Yeah. Because they’ve built in a fudge factor. Right. It’s like saying my car doesn’t go over 80, but I can actually go over 80 miles an hour with my car.

Yeah. That’s why life insurance works too, is because they’re not, I mean, they’re building enough margin in there. Where they, they’re pretty sure they’re going to be profitable and then they can pay you a dividend. You know, if they overshoot that, yeah, you’re guaranteed might be a little higher, but you’re not probably getting a dividend if they didn’t factor that in right.

Right. But they’re building in the fudge factor. So a lot of people during COVID said, oh my gosh, did this hurt the insurance company? No. Because they have such a big fudge factor that it, did they pay death claims during COVID? Yep. And they were COVID related. It did not hurt the company. It didn’t even, the words of a CEO of the insurance company we use said it didn’t even, it didn’t even qualify as a blip on the radar. Because the fudge factor is built in to the point of, yeah, it’s going to look like a return of premium.

I’m, I could be wrong, but I’m pretty sure that, you know, in the years after COVID, we went to one of, OneAmerica’s events and they talked about how they do stress tests for things like that. What if we do have a global outbreak and it is even worse than COVID? How do we handle that? Like they, they think of all that stuff and they plan as good as they can for it.

Think about it. The company is 147 years old. Like, of course, they’re going to have, they’ve lived through all these other outbreaks. They’ve lived through coming off the gold standard. They’ve survived through the ’08, ’09 crisis, right? They have survived through all of this stuff. And we’re like, oh my God, it’s COVID. Are they going to be okay?

Yeah. Well, and you don’t factor in all the, you know, car accidents are probably down because people are driving less. And there’s, there’s other things that help balance it out too, I’m sure. But yeah, it doesn’t even affect them because it’s built in.

Yeah. Then he says the policy is engineered to become more efficient every year, no matter what happens. That is because a cash value is guaranteed to ultimately reach the face amount of the policy by age 100.

Oh, I was just talking about that.

Yeah. That’s the endowment that you were talking about earlier.

Not too many people are familiar with the concept of getting better, not, no matter what. And that is, I highlighted that because I thought that was kind of funny. Because we’re like, hey, this is guaranteed. No matter what you do, it’s going to do this. And they’re like, scam. Why is that so hard to believe?

It is.

I don’t understand. Like you want a guaranteed product, but then when we give you a guaranteed product, you’re like, scam.

Yeah, you don’t even believe it’s possible. That comment kind of makes me, in the efficiency part he was talking about, that makes me think about, I believe Nelson says somewhere else in here about how it’s like starting a business, right? I mean, you’re literally starting your own banking business. So just like any business I could go start, is it going to be as efficient as possible the first couple years? No, because there’s startup costs and other things happening. But the longer I’m in that business, you know, my cost of production and all that should go down. That’s the same thing that happens in a life insurance policy.

Right. You’re capitalizing it and then it starts to work better. And it is by age 100 or age 121 or whatever your policy goes to, it has to endow.

Let’s see what he talked about. I kind of didn’t have anything highlighted until that next page there where he says, you can safely say that the results will never be exactly a match to the illustration provided at the beginning. But once the dividend is declared, its value is guaranteed from that point on and it can never lose value in the future, as can the value of securities.

Yes. So that’s exactly where I started highlighting too. Nelson used to say the illustration is lies, lies and lies because the dividend is going to go up or it’s going to go down. It’s never going to be exact. It’s going to be pretty close. But I also think what a lot of people miss is once the dividend is paid, it is declared, which he says there. What that means is that dividend is paid. It moves over to the guaranteed side and they can never take it back. So now you’re compound interest and more dividends on that guaranteed number. So when we run in-force illustrations, we can see and we see it all the time. The guaranteed side is way better than illustrated because the dividend has moved over to that guaranteed side and now it’s even working better for us. So a lot of people are focused on the non-guarantee when in fact the guarantee is also an important piece to be looking at when you’re looking at the dividends.

And you get them and then they continue to earn compound interest for you.

Yep.

And anytime I’ve went and done, you know, I’ve done this for six years now. So if I go back and run an in-force even on my own policy, like, yeah, it’s not dead on, but it’s pretty darn close. Higher or lower, I can’t remember. But I mean, it’s right in the ballpark.

Yeah.

OneAmerica does a good job of being pretty accurate on those, I would say.

Yes. And that one thing that people need to look at, and it’s something that I’m very aware of when I’m choosing a company, there are companies out there that are going to make their, if somebody’s shopping around and they’re looking for insurance, they’re going to go, oh, well, the guarantees are higher on this company than OneAmerica. But do they pay out what they’re illustrating or are they illustrating to sell insurance? Because there’s one company out there, and I don’t know that they still do this, but in the past, they, and I’ve never wrote with them, but I have colleagues that quit writing with them because they were illustrating 30% higher than what they ever paid. So by year two, you took a 30% hit on that policy because they were over illustrating dividends. So they’re looking at the non-guaranteed side and saying, oh, this company pays a higher dividend. The companies can say whatever the hell they want on an illustration. They can over project to make a sale, but do they ever actually pay that? And so when I look at companies, I want to make sure that company, if I’m going to run an in-force 10 years later, is it really close? So a lot of people will look at companies like OneAmerica and go, oh my God, their illustrations look terrible. Yeah, because they’re very conservative with their illustrations. I would much rather come back to a client and say, oh yeah, it’s nearly exact versus, oh, it’s 30% off.

Yeah. I just saw one of those last week too, where I was like, they only had the policy for a few months and it looks pretty nice. But I’m like, I don’t know that they’re actually going to pay out this dividend they’re claiming they are.

Yep. Yep. And that is something that, and a lot of people will say, well, I want to see dividend history. And you can go online and find the dividend history. I don’t know where you find it. OneAmerica always shows us their dividends compared to other companies, which is really nice. But you can find the dividend history. But yeah, just because they always paid a dividend, what did they illustrate they were going to pay versus what they actually paid?

Yeah.

The best way to, and now it’s even hard to compare because previously companies always had a 4% guarantee on their contract. So no matter what, it was a 4% guaranteed contract and then it was dividends. So it was kind of easy to see. Now companies, their guarantees are anywhere between 2.5% to 3.5%. And so you really have to, and then if it’s a 2.5% guarantee, well, they should be able to pay more dividends. So now you’re not comparing apples to apples anymore.

Yeah, it definitely gets harder to make an even comparison across all the companies.

Yeah. The end of the day, it better be a good company.

Yeah. And he gets into talking about the dividend more here in the next few paragraphs. I guess the biggest takeaway for me in there is that when they pay you a dividend, he says, most people have the impression that that is a taxable event. This is not so. And then here’s where he kind of gets into a little spiel about the income tax act of 1913. And you can tell he probably wouldn’t have voted yes on that one if it was up to him.

But I think this is important. I have the exact same thing I highlighted. Because people think that this is a tax loophole. This tax doesn’t start until 1913. Insurance is 200 years old. So this came before the tax code came. It has always been classified as a return of premium. That is why it is not taxed. So then you have people, talking heads of the world out there, who are like, oh, well, that means they overcharged you for life insurance. So you shouldn’t buy it because they overcharged you. No. Remember Nelson said actuaries and rate makers and lawyers are supposed to do that because they’re engineering the policy and they’re engineering it conservatively. So that we as a company can stay in business if something like COVID happens. If something like, oh, we’re going to come off the dollar and go to crypto. Right. A lot of people are like, oh, my God, what’s going to happen if we go to crypto? Then you’ll get paid out in crypto. What happened when the dollar came off the gold standard? You still got your dollar. It just wasn’t worth as much. And so it doesn’t ultimately matter. The companies are preparing for those things exactly like you said, because they have that built in fudge factor. And so it is a return of premium, which is not a taxable event. And the return of premium goes back in to buy more insurance so that we have more death benefit, more cash value, more compound interest, more dividends.

Yep. And he says the result is an ever increasing tax deferred accumulation of cash values that support an ever increasing death benefit.

I want to point out that because I had that exact same thing highlighted. I want to point out that he says it’s an ever increasing tax deferred accumulation. It is not a tax free. So a lot of people think like, oh, I’m just going to take this money out tax free. You don’t take it out tax free. You borrow against it for it to be income tax free. And so it is tax deferred. If you’re going to withdraw all of your money, you’re going to pay taxes on the growth of this policy. So people need to pay attention to that and not listen to a lot of people out there touting IBC or touting cash value life insurance as this tax free magic pill. You are going to pay tax on the growth if you do not correctly use it when you buy. Take it out or borrow against it. There are ways to use it to get the tax benefit. If you’re not working with the correct agent, well, good luck to you.

Yeah, that’s another thing that definitely takes proper advice. I mean, you can’t just be willy nilly about it.

And I’ve run into people, accountants, who have said, well, this doesn’t work because I had to pay tax. Well, yes, Mr. Accountant. Because first of all, you had a UL policy. And secondly, you took it out. You withdrew it. Didn’t borrow against it. So now you have somebody that has a title behind his name that acts like he knows everything that he’s doing and he does not. And so finding the right person is extremely important.

I like that he says the results are only limited by the imagination of the policy holder. That is pretty true. I mean, you can do whatever you want with this. It’s just up to your imagination.

Yep. And run it through. Nelson said, imagination, reason, and logic, right? That was like in the very first chapter. And then he goes on to talk about the policy he had from 1959. And now the dividend is 10 times the annual premium. And then I don’t have anything else highlighted really in that chapter.

Yeah, not at that page at least. Okay. He’s kind of just talking about that guy and how he figures out how much his human life value is.

Right. Oh, well, let’s let… Yeah, I’m sorry. Let’s do talk about that for a moment. So a lot of people think that it’s ridiculous how much money the insurance company thinks they’re valued at. And so your human life value is what the insurance company believes you are worth if you die. And so right now, if you are under, if you’re 40 and under, it’s 30 times your gross income. So you need, if you make $100,000 a year, that’s $30 million, right? Three. $100,000, not a million. At $100,000 a year, you have $3 million death benefit. So when we get into people that make a half a million dollars a year or a million dollars a year, and they’re worth, what do you mean I’m worth $30 million? Or I’m worth, you know, $150 million. Well, yes, that’s a factor of your human life value because the insurance company says, hey, if you died, you can no longer work. If you, this is what you would have earned if you kept working. And so this is what your human life value is.

It’s no different than if you get in an accident with somebody, John, and you kill them and you go to court, they’re going to say, hey, that was a surgeon. And their value of their life was X amount versus, hey, this guy was just a surfer and he didn’t have a big value on his life, right? So the insurance company, don’t be surprised when the insurance company is willing to insure you for more than that. And in that little section, Nelson was saying, you should be insured for human life value. You should have as much death benefit on you as humanly possible.

I would say that’s kind of something you should never actually achieve either because you’re, as your income grows, you should be doing more things with your cash flow to go make yourself worth more. So I mean, that should be the constant chase.

Yes. And here’s the other thing. Sometimes it’s not a fact. It’s a factor of your gross income or your net worth. And so you can also, if your gross income is lower than your net worth, then we can insure you for your net worth.

Yeah. That’d be more common for like older people if you’re, because as you get older, that factor goes down. So, you know, if you own a bunch of land, your net worth is probably higher than what your gross income value would be.

Correct. Correct. And then as he was talking about human life value, he said, so your need for finance, you understand that your need for finance is much greater than your need for life insurance protection. Because we’re financing things while we’re alive, but we only die once is basically what he was saying. So if you solve for the, if, if you solve for the need for finance through dividend-paying whole life, you would automatically have much more life insurance and recover all the interest that you are now paying to someone else. And how many times have we seen this? Like people are like, ah, I only need a hundred thousand dollars of death benefit. Well, I’m sorry, Mr. Client, but if you’re going to put 10, 15, 20, 30, 40, $50,000 of premium in, you’re going to have millions of dollars of life insurance. And that just works that way. Like we’re solving the need for finance, which is providing more death benefit than you would have normally had. And it is rare that I ever set up a policy that somebody has less death benefit than what they already have in place.

Yeah. When we’re in a meeting with somebody and they’re like, well, I want a million dollars of death benefit. It’s like, we kind of do it backwards. Normal person’s like, well, I’ll sell you a million dollars. We’re always thinking on the premium, like the financing end of it. And yeah, like you said, you’re always going to have a pretty large death benefit to go in hand with that. So, I mean, it, it is true. Your financing will take care of the death benefit part of it.

Yeah. The more we’re going to, by default, we’re just going to most likely create more death benefit than what you would have ever bought before. Because we’re solving the need for finance today.

Yeah.

What are you buying? Where is money going? The death benefit piece follows. And I had a client, here’s just an example of that. I had a client that passed away at 32. When I looked to see how much death benefit she had, which I did not, I didn’t know. I just structured the policy for finance, right? There was 600 some thousand dollars of death benefit there. Well, I was shocked. I was like, holy crap. Like, that’s a lot of death benefit for somebody in their 30s. But because I structured the policy so that we can put extra in year one, that we could finance whatever she was going to do with it the rest of her life, we created this astronomical amount of money, which was fantastic for the beneficiaries.

Yeah. And especially for young people. I mean, obviously, if you live a normal lifespan, your death benefit is going to be way larger than it was even at the beginning. So, you’re definitely solving for that issue as long as you live a normal lifespan. Here’s where he says, remember, there’s only one pool of money in the world, too. Just another paragraph down.

Yep. And he says, the fact that any number of organizations or individuals are managing a portion of that pool is incidental. So, exactly what the insurance company said to me. Hey, there’s only one pool of money. We’re all sitting at the same table. It doesn’t matter who we are. We’re all investing in very similar things. He said, this is interesting, too. He said, I have never seen a monthly list of investments from a dozen of major insurance companies that did not include finance companies as a place where they have loaned back, loaned blocks of money. So, a lot of times, and what he goes on to say here is, you’re going to borrow money for a car from a financial, from somebody at the car dealership, and it is a lending institution. So, where did that lending institution get their money? Because they’re not a bank. So, where did they get their money? They got their money from a life insurance company. So, now you’re paying them fees when you could have just went and created your own life insurance policy to borrow from yourself for that very same car instead of paying fees to borrow the life insurance company’s money through a third party.

Well, yeah. If you think about it, every car dealership could create their own bank to do that from, but they haven’t done that for whatever reason, and they don’t have access to that. So, they have to get it from a life insurance company or somebody like that so that they can access that pool of money.

Right. Right. And that’s, and they don’t know who we are, John. So, I actually talked to a used car dealership guy during COVID, and the amount of line, the line of credit he had to have, and the amount of interest he was being charged for cars that he bought at auction was insane. So, he’s using a lender, not a bank. It’s like a specific lender for car dealerships. He’s using a lender, paying an astronomical interest rate on this line of credit, and he’s got money due in 30, 60, 90 days, whatever it was. I don’t remember. But those cars need to get sold that fast so that he can pay back that line of credit to go buy new cars. Right?

Yeah.

Used car dealerships or any car dealership in reality should have their own policies. The car dealership should own the policy on the key men, on the owners of that business, and that money should be used to buy cars. It could be used to pay payroll. It could be used for anything.

Yeah.

But they’re not understanding. I actually, when I talked to the CFO of the company at one point, they had said that at times, they will actually lend money to banks. So, they will lend banks their bonds, and then the banks can use the bond to go get capital from the feds, get money from the feds, and then they pay the life insurance company back. Now, they only do this when the banking system is secure. They’re not stupid. But, I mean, think about it. Like, the banks are going to the life insurance company for money, and you actually think that the bank is more secure? No. Because the bank does not have enough of their own liquid capital that they have to go to the insurance companies. That speaks volumes. And then the fact that the insurance company understands what’s going on in the banking system. So, like, because my first question was, well, my God, how did you guys not go under in ’08 and ’09 when we had a big banking crisis? They said, oh, we saw that coming. We stopped lending them. We stopped lending them any bond money way before that. Years beforehand. So, again, they’re all sitting at the same table.

Yeah, that makes me wonder, too. Just, I mean, obviously, life insurance companies and banks are not in the same business necessarily. But it’s just a whole different mindset on how they manage the money. You know, the bank’s trying to turn it as fast as possible, and the life insurance company is like, I got 100 years here to play with, I’m going to sit back and be conservative. But that gives an advantage.

And the banks are using our money, and the life insurance companies are using our money. Right? They’re the same in that respect, that I’m going to deposit money into the bank, and they’re going to use my money to go lend to other people. And then they’re going to take collateral from those people, and hopefully they don’t over lend, and their books are good, and we don’t have a banking crisis. Or I’m going to give it to the insurance company, and I’m going to pay that in the form of a premium. They’re going to invest and contractually tell me what I’m going to get, and I’m going to give it a death benefit in exchange for that. We have two institutions that are utilizing money to make money. Nobody bitches that the bank makes more, that the bank is getting rich, but we complain that the life insurance company is getting rich. What in the heck is the logic?

Yeah, there’s a disconnect there.

A huge disconnect, and it’s all based on society just opening their mouth without any actual evidence behind it, and understanding of how things work.

I did highlight that he said, and this is good, if the policyholder objects that it’s my own money and I am not going to pay interest at all, I’m only going to pay the 2.9 as seen on the television commercials, then the agent must remind him to go back to the grocery store at the beginning of the book. If he still doesn’t understand, then the agent needs to have him revisit the story of the failure of the First National Bank of Midland, Texas. If he still doesn’t understand, then the agent needs to resign from working with him because he is not teachable and or a thief. Neither of these characters is a desirable business associate.

Yep.

That makes me think of how he, I mean, when we go to the think tank and everything, like everybody’s always saying, you know, all the answers are in here. If somebody’s got an objection, there’s somewhere in here they can go read to reset their thinking on it.

Yep. So if your client doesn’t, if you’re a client and you don’t understand, and I say, hey, you should go read the book again, or you need to revisit this, or why aren’t you at coffee with MJ? Why don’t you, why are you not watching those webinars? Right? Why don’t you call John and I? What do you mean that you’re lost and you don’t get it? Well, did you reread the book? Did you talk to us? Can we reiterate it? Because ultimately, not everybody should be a banker. That’s what he’s saying here. You shouldn’t be a banker. Because neither of these characteristics is a desirable business associate. And we’re not in business with these people, but we’re here to help implement infinite banking. And I don’t, I can’t help you if you buy the bank and lock the doors. I can’t.

That’s a good point.

I can’t help. Okay. Anything else on that?

Um, I just, I mean, I had highlighted the paragraph below that in the above example of the car finance, the capitalization period needs to be somewhat greater than four years, which again, he’s just trying to hit on that. He does it on the next page too. Like you have to capitalize the system to satisfy all your financial needs or financing needs the rest of your life. Like it isn’t a, hey, I’m going to pay this for four years. Like he kind of shows later on in the book. You should always be putting money in here because your need for finance always grows.

Well, and I think that another piece of that, the capitalization piece, when he’s talking about that is four years because he’s saying, hey, if you’re going to buy a car, right, it’s going to take you probably four years to save for that car or five years to save for that car.

Yeah.

That doesn’t mean you can’t access the money for four or five years. It’s just, you’re going to have, you’re not going to have access to enough to buy a car, but you might have access to enough to put braces on the kids or go on vacation or put tires on a car or whatever, and then pay that back. And so a lot of people read this and think, oh, why don’t have access to my money for four to seven years? Because Nelson says it’s even better if you go seven. Right? Well, so now people are like, well, I don’t have access to my money for four to seven years. No, in reality, you have access to that money in 10 days. It’s just not going to be enough to buy a car unless you put enough premium in to buy a car. So you have to make sure that you’re like using your imagination, reason and logic when we’re looking at these things.

Yeah. Yeah. That’s about all I had for that.

At the very end, at the very end, I think that this is worthwhile. He said, I am not describing one life insurance policy. It is a system of policies. And so just like your banks have multiple branches, you also have to have multiple banks. You’re not going to get it all in one. We’re going to start, and then we’re going to ideally add to them as your income goes up. Now, a lot of people will say, oh, I want to run every last dollar through this policy. Okay. I want to run everything I make through this policy. Well, I think they start reading this paragraph because at the end, it says it will take the average person 20 to 25 years to build a system of policies through life insurance to accommodate all of their financial needs. So 20 to 25 years, you’re not doing it with one policy in one year. You’re doing it over a quantity of years. Right. And we have to look at that, that it’s not a one and done. And if you’re not going to pay attention to it, then you’re not going to have your system of policies either.

I think you at one point had said, it’s like building a windbreak. Right. Like you don’t just plant one tree and you’re like, oh, I’m going to block all the wind. No, you have a lot of…

More than one.

Yeah. And so it’s kind of the same thing. It’s your system of policies. You’re going to open multiple banks. You’re going to capitalize every single bank. And we’re going to use them. And then you borrow from multiple policies.

You know, we planted a shelter belt around our acreage here in 2007, I think. We planted like 10,000 trees. And it took until at least a decade before they actually did anything. I mean, they’re still barely blocking that much wind. But I mean, that’s… Talk about a long-term thing.

It’s a long-term deal, plant a tree.

Yep. This isn’t a get rich quick scheme. Very similar to that.

All right, guys. If you have not gotten… the Becoming Your Own Banker book, do that. If you’ve not gotten my book, buy both of them at the same time. My book is not a replacement for Becoming Your Own Banker. So go to farmingwithoutthebank.com. Grab that. If you have comments, questions, concerns, go to maryjo@withoutthebank.com. Email me. Happy to answer any of those questions. If you need to schedule an appointment with myself or with John, do that. We can both help you figure out where to get started, what that looks like, continuing education on IBC, all that good stuff. If you schedule an appointment with John, you are still part of my organization. You get to come to all my stuff. We help you at this office. I’ll talk to you if John’s ever out. We need help, whatever. We kind of tag team on that. So it’s not like if you visit with John, you’re out and in a different organization. It still stays within the Farming Without the Bank community. So something to think about. All right. If you guys need me, you know where to find me. Have a good one.

Thanks for listening to the Farming Without the Bank podcast. We hope today’s episode has inspired you to take control of your finances in new ways. Don’t forget to check out our website, farmingwithoutthebank.com, and engage with us on our Facebook page, Farming Without the Bank. Join us next week as we smash more financial myths and empower you to accomplish your financial goals.