“Becoming Your Own Banker” Summary – Infinite Banking Book

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The book, “Becoming Your Own Banker: Unlock the Infinite Banking Concept,” is where the Infinite Banking Concept gets its start.

The book suggests many philosophical ideas, centered around using whole life insurance as a tool for creating your own banking system–written by author R. Nelson Nash.

In this Becoming Your Own Banker summary, we look at the core principles that are found in the book and summarize the main topics.

It should be noted that this book is filled with Infinite Banking and whole life insurance policy examples. These are difficult to summarize and, we think, unnecessary for understanding the concepts.

This summary should provide a good sense of the book’s theories. If you are interested in getting the deeper ideas or seeing the direct policy illustrations, we suggest you buy the book on Amazon.

With that, let’s begin.

Part I

Chapter 1: Becoming Your Own Banker

Quote – “If some authoritative power distributed all the money in the world equally among all the people in the world, within ten years time 97% of all the money would be under the control of 3% of the people.”
Most individuals do not understand banking and how important it is in the world.
There is only one pool of money that exists. Like the oceans, it’s all connected. And just like water, it passes through each of us and ends up back in the ocean.
Money always ends up back in the banking system. The question is, “how much of the banking function do you control as it relates to your needs?”

Chapter 2: How Infinite Banking Started

Nelson Nash started in forestry.
Forestry is similar to investing, it takes a long time to see results. You should have a long time horizon.
Nash was a big real estate investor and loved books on real estate investing.
These books taught him that the central message of real estate investing is not land, but leverage.
They sounded so wonderful. Just buy a property on borrowed money and sell it when it goes up.
But what happens when it goes the other way?
Nash followed these books and became highly leveraged in real estate.
Things were good for a long time until the 1980s when interest rates jumped and his payments skyrocketed.
Around this same time, his home was burglarized, his brother died of a heart attack, and his five year old granddaughter was diagnosed with cancer.
Nash was $500,000 in debt with a large monthly payment and praying (literally) for a way out.
The answer he received was that he could borrow money from his life insurance policies at a much lower cost than the bank loans he had taken out.
The only thing limiting him was the amount of money he put into the life insurance policies.

Chapter 3: Imagination

Infinite Banking is an exercise in imagination.

Chapter 4: Grocery Store Analogy

You decide to go into the grocery store business.
The grocery business is all about turnover.
For instance, if you sell a can of peas for 60 cents and it costs you 57 cents to buy a new one, you must turn this 15 times to break even.
17 times if you want to make a profit.
Now imagine you own the store and your wife comes in to buy groceries.
Is she going to pay for those groceries? Probably not!
If she takes just one can of peas you must sell 20 cans to make up for it.
This will destroy your business.

Chapter 5: The Problem

Nash analyzes a scenario about an “All-American” family.
A 29 year old young man who earns $28,500 per year after taxes.
How does he spend the money?
20% transportation – 30% housing – 45% on living
Many of these items are financed.
The items that are not financed are still paid with cash that could potentially earn interest but is not.
He saves less than 5% of his money.
Let’s be generous and say he saves 10% of his money.
The problem is that all of these items are being financed by banks.
Take a car for example, interest payments are made monthly, and most cars are traded in for a new car purchase before paying off the car loan.
At an 8.5% interest rate, if a car is traded in, 21% of every dollar spent on that car went toward interest over the life of that loan.
The volume of interest paid is more important than the annual interest rate payment.
Leasing is even worse.
Now let’s look at housing.
The problem is, after purchasing a home, the individual will move, sell, or refinance within five years.
If you do the math, at 7% interest rate, 86% of the payments in the first five years goes to interest.
He will end up paying interest on his boat, credit card, real estate, automobiles.
If you add it all up, 34.5% of all his income goes to pay interest to banks.
If you save 10% of your money, but spend 34.5% on interest, that’s a 1 to 3.45 ratio.
Yet many people focus on getting a high rate of return on the 10% instead of putting the 34.5% back into their own pocket.

Chapter 6: Creating a Bank

You finance everything you buy.
Either you pay interest to someone else or you give up interest you could have earned.
Also called “opportunity cost.”
All capital has a cost, whether borrowed or not.
When you buy a life insurance contract, you are the owner, not the life insurance company.
Life insurance companies invest their money conservatively in bonds, mortgages, etc.
However, as the owner of the policy, you outrank all investments the life insurance company makes.
This means you can access 100% of your money at any time.
Life insurance policies are engineered to become more efficient over time.
Every year the life insurance company declares a dividend.
Once that dividend is declared that is value you have that you can never lose in the future.
This dividend is a “return of premium” so it’s non-taxable.
If the owner uses this dividend to purchase Additional Paid Up Insurance (PUA) the result is an increasing, tax deferred accumulation of cash value and death benefit.
Now the life insurance salesman comes in. He calculates the present value of all your future earnings and then looks to sell you a policy that insures you for that amount.
Then he tells you just how little you need to pay to get that insurance policy.
But you are paying 35% of every dollar to interest. Your need for finance is greater than your need for insurance protection.
By purchasing dividend-paying, whole life insurance, you automatically get more life insurance while recovering interest paid to banks.
The ability to finance your own purchases comes from funding a life insurance policy.
When money is borrowed from the policy, it must be paid back at the fair interest rate that would have been paid on the purchase made.
This isn’t done through one life insurance policy but through a series of policies over a lifetime.
It will take around 20-25 years to fully build your own banking system.

Part II

Chapter 7: Human Problems and Parkinson’s Law

Now let’s look at human problems.
Parkinson’s Law is this: “Work expands to meet the time envelope allowed.”
The time it takes you to complete a job will expand to fit the amount of time allotted.
Parkinson also noted: “A luxury, once enjoyed, becomes a necessity.”
Also: “Expenses rise to equal income.”
We must overcome this tendency on a daily basis.
Otherwise we become slaves to the system.

Chapter 8: Willie Sutton’s Law

Willie Sutton’s law is this: “Wherever wealth is accumulated someone will try to steal it.”
This comes from a bank robber named Willie Sutton who said he robbed banks because that’s where they keep the money.
The biggest thief in the world is the IRS.
Government does not produce anything, it is a parasite.
Government sponsored plans were created as an exception to the rule to solve a problem the government itself created.
The real solution is to get money out of the government’s control.
Dividend-paying, whole life insurance is not a government sponsored plan or a government idea. It is private property.

Chapter 9: The Golden Rule

American savings rates are abysmally low and often negative.
This means someone else must provide the capital for us to sustain our way of life.
Whoever has the gold (capital) makes the rules.
Capital should be treated with respect.
People have given away their opportunity to create wealth from the banking function. They gave it to the banks and they are making the most money off of it. And whoever has the gold makes the rules.
We have given the banks and the government control and taken it away from ourselves.

Chapter 10: Arrival Syndrome

“The greatest obstacle to discovering the earth was the illusion of knowledge.”
The hardest job of those learning about creating their own banking system is being able to open up your own mind.

Chapter 11: Use It or Lose It

It’s not about interest rates, it’s about the flow of money.
When you cut out interest payments to others, and pay those interest payments to yourself, your situation improves.
Infinite Banking must become a way of life.

Chapter 12: Creating the Entity

Life insurance revolves around mortality rates and projections based on health.
There are many types of policies.
Term insurance is just insurance.
We want permanent insurance.
Some permanent insurance plans have shorter premium payment timeframes like single premium or 20-pay policies.
We want a premium timeframe that allows us to put money in over a long period of time and use the policy for banking purposes.
The best policy for this is an ordinary life policy or life paid up at 65 policy.
If a life insurance policy becomes a MEC, or Modified Endowment Contract, it becomes taxable.
This happens when we don’t have enough insurance coverage.
We don’t want to cross the MEC line but want to be as close as possible to maximize advantages.
You want a policy with a PUA, or Paid-Up Additions, rider. The policy pays dividends and the rider pays dividends.
By doing this we are “overfunding” the policy.
Most insurance policies are created to buy the most insurance possible, we want the least amount of insurance and the most cash value possible.
Universal life insurance is simply one year term insurance with a savings element.
It looked good during high interest rate periods.
Illustrations that Nash looked at kept “falling apart.”
Variable universal life is similar.

Part III

Chapter 13: How to Start Building Your Banking System

There are five methods to finance a car purchase.
These examples are based on buying a car every four years over a 44 year period.
Leasing is the worst.
Financing from a bank will cost you $175,000.
Paying cash is next. The total cost will be $116,050.
Paying cash is the same as leasing, the payments are simply made to a savings account.
Not much difference in these first three approaches.
Fourth method is the CD method. This requires previous capitalization.
Save money into a CD–for this example at 5.5%.
After taxes, that’s a 4% interest rate.
Save up in a CD, make the car purchase, begin saving into a CD again.
At the end of 44 years he will have $200,000 from using this strategy.
Fifth method is using Infinite Banking and dividend-paying, whole life insurance.
Save up money into the policy
Borrows from the policy then pays it back at the interest rate he would have been charged from the bank.
Using the life insurance method you would have over $800,000 of value in your life insurance policy.
You also would have been able to withdraw $650,000 for retirement and have a death benefit of $1,365,057.

Chapter 14: Expanding the System

All of your money ends up going through a bank.
This is why your life insurance premiums should match your income.
This may sound crazy.
We looked at financing a car. What if you financed another car? What if you self-insured your automobiles comprehensive and collision insurance?
Why not finance your own mortgage?

Part IV

Chapter 15: Financing Equipment

Once a policy is capitalized it can be used to make purchases.
An individual with a logging company could finance his equipment and have tremendous financial results and death benefit.
Financing work equipment and trucks.
Why not finance two trucks?
Interest rates are a function of the market.
When interest rates go down you must pay even more capital into your banking system to make up for lower interest rates.

Part V

Chapter 16: Capitalization and Implementation

Desire is the motivation you need to accomplish this.
Escape the human problem and remember Parkinson’s Law.
This is like a physical conditioning regime, it must be followed.
You must be patient.
Get the game CASHLOW or CASHFLOW FOR KIDS by Robert Kiyosaki. It’s worth it and will help you learn.
Do not wait to start your own banking system. The longer you wait the more you lose out on.

Chapter 17: Retirement Trap

Social Security will fail.
Government sponsored programs will always accomplish the opposite of what they are intended to accomplish.
The most dangerous thing you can do is put money into a government sponsored program.
Socialism and programs based on socialist principles, like these, do not work.
They will collapse.

Chapter 18: Cost of Acquisition

Businesses have a cost of acquisition.
There is a cost of acquisition and a cost to acquire the financing.
Getting the financing is often the harder part.
With Infinite Banking there is no cost of acquisition to get the financing. You already have it.
This allows you to make the decisions you want, exactly when you want to.

Chapter 19: Striving for a Higher Rate of Return

Everyone is always focused on getting a higher rate of return.
You will get a higher overall yield by putting the banking system into your life.

Chapter 20: Even Distribution of Age

When doing forestry, the best design was to have an even distribution of tree ages by planting some trees every year and rotating land.
It works well but takes 40 years of planting every year to accomplish.
You can do this with banking by putting policies on children and grandchildren.
When the older generation dies the death benefits goes to beneficiaries.
This creates more policies which are used to fund purchases like cars and mortgages.
This offers significant advantages like tax savings, death benefit, no need for social security, and estate planning is simplified.
Also the mentality of banking is passed down to the next generation.

Chapter 21: Looking at the Monetary Value of a College Degree

When Nash started in the business, college started being sold as a need.
This was based on the value college helped you earn as opposed to without it.
College degrees are overrated on a value level.
Educators get into teaching because they were unsuccessful professionals.
Costs continue to get higher and higher.
Financing a banking system, instead of college, may be a smarter option and offer more monetary benefit.

Chapter 22: What About Uninsurable Individuals?

If you are uninsured you can simply put a policy on a spouse or a child and use the policy in a similar way.

Chapter 23: Points to Consider

There are two ways to make money. Work, or put your money to work.
If you put all your money that you earn into someone else’s bank, they get all of your money and the benefits of that capital.
The government creates a problem, then manipulates you with a “solution” to a problem they created.
Wealth has to reside somewhere.
Real estate is a frozen asset.
Stocks are only for those who are willing to put in the time to make intelligent decisions about stocks.
You finance everything you buy. You either pay interest to someone else or give up interest you could be earning.
Your need for finance is greater than your need for insurance protection. By solving your need for finance through whole life insurance you inevitably solve the insurance protection problem.

Applying the Infinite Banking Concept

This book is the origin of the Infinite Banking Concept. Ideas like becoming your own bank, borrowing from yourself, and paying yourself back with interest all originate from this book.

For those interested in going further, contact us and we will help you better understand how to implement the concepts from this book into your financial life.

Joshua Thompson

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