92: Solving for the Banking Function: A True Financial Revelation

092 Banking Function

[00:00:00] Hello, everyone. I'm John Montoya, and I'm John Perrings. We're authorized Infinite Banking Practitioners and hosts of the Strategic Whole Life Podcast.

John Montoya: Hello everyone. Welcome to the Strategic Whole Life Show, formerly The Fifth Edition podcast. We are on episode 92 today, solving for the banking function. And what we're going to do today is build on a little bit of what we touched on in the previous episode, episode 91, Five Myths Your Financial Advisor Believes.

And we're going to hit on three main subjects here. Number one, identifying the problem. Number two, you finance everything you buy. And number three, how much cash value do you need to solve for your own banking function?

The first thing that Nelson used to say is, if you know what's going on, you'll know what to do. And this is a great place to start because for so many people, We have, one of our challenges [00:01:00] is identifying the problem in our financial life, right? We become partners with someone else's bank and we never we never established our own family banking system.

And so what ends up happening is the value that we create in our life, our monetary value we ended up passing that through. A fractional reserve banking system, and it becomes a wealth destroyer in our lives constantly taking value away from us and from our families, because we never realize that we can establish our own banking system, and we never solve for this major problem in our life, which is the banking function and in perhaps more layman's terms the banking function I we'll also call it the lending function because when people think about the banking function why we bank most people will tend to think we need a place to park capital, which is absolutely true.

And Nelson would also say that money needs to reside [00:02:00] someplace. And he'd point out whatever what better place than a cash value, whole life insurance policy. And that's a bit redundant because all whole life policies have cash value, but you get what I'm saying. But let's identify, let's go a little bit deeper here.

What does that whole life policy that Nelson taught us to set up and practice and utilize in our life? What is it? Solve, it solves for a need for financing and our need for financing is actually greater than our need for life insurance. So if you know what's going on you'll know what to do.

And instead of having all this money going outside your financial system, you can redirect that flow back towards yourself and within your own financial system so that you can use it and reuse it again and again.

John Perrings: I would say also the, if you know what's going on, you'll know what to do. And, the what's going on part, we talked about in episode 91 and we've talked about it in several episodes here, but we just talked about [00:03:00] five myths your financial advisor believes and those are sort of the very common five things that a typical financial planning system will get you. So that's what's going on. The other thing that's going on is that if you think about it, everything we do when we follow The typical advice, everything we do is under the control of someone else.

We have to ask permission to get capital from our own assets, where, you know, especially if you're looking at qualified plans, where you, you know, pay penalties and taxes just to get that, just to get that out. Or if you want to borrow against it, you're very limited in terms of what you can do. If you want to borrow against your home equity, you have to ask permission from a bank.

So you have to ask permission to get to your own money, [00:04:00] number one, and then because you can't get to your own money, you then end up having to ask permission to borrow theirs. And so it's, we're essentially in this loop of very little control over our financial lives, and this is what's going on.

And so what we're trying to do with The Infinite Banking Concept is. Turn that around where we have control over what's going on and that's one of the reasons Whole Life Insurance is a great place to store cash because we have this, unilateral contract where we have control over access to our own capital.

John Montoya: Yeah, absolutely. And what we're solving for here with the banking equation the banking function that, that's something that 99 percent of the advisors out there, they don't solve for. They're solving for, how are you going to retire? And if you haven't noticed the goalposts get moved.

Every few years and the [00:05:00] percentage or the amount that you need becomes greater and greater. And the percentage withdrawal amount that you should take that fluctuates too. Everything's a moving goalpost. And, the here and now, solving for your need for finance, how many advisors are actually discussing that with you?

It's not even on their radar. So like I said, in the previous episode, you have to be your own best advocate and you have to realize all the things that you finance in your life, all the major capital expenditures. You either, again, this is the first principle and this is number two you finance everything that you buy.

So you either give up the interest that you would have earned on your capital by spending it, or the other half of that equation is what you pay interest to a third party. Because you're financing it with someone else's money. [00:06:00] So either way around, there's no getting around it.

You're going to finance everything. And, for those that are, cash spenders here's the biggest problem that cash spenders have is that all they do is replenish the principle that they spend. They don't think about the interest that they would have earned on that money.

Not only that, but they forget about the compounding interest on that money throughout the years. And so all they're ever doing is just getting back to where they were before. And that just is not good enough. You're never going to build wealth for yourself by always getting back to where you were.

And you're certainly never going to build wealth for your family that way long term, generational wealth, that is because, what's the future value of that Cash that you're saving and spending and getting back to the same amount. It's going to just be the, the same amount.

In fact, it's going to be less than that [00:07:00] because it's going to be devalued, every year for the rest of your life. So you need a better system to part capital. You finance everything you buy. And so if you realize that, then, again, you will realize what you need to do.

John Perrings: You finance everything you buy, you either. Pay interest to someone else when you use their money or you give up interest you could have earned when you use yours. So there are a lot of Prevailing financial advisors out there who talk about having zero debt getting out of debt, having zero debt, not differentiating between types of debt, obviously getting out of high interest credit card debt and student loan debt and that type of thing, completely valid, of course, and worthy.

However we also Should not throw the baby out with the bathwater. Certain types of debt when used correctly help [00:08:00] us create that tailwind behind us that we'll talk about, that propels us through our financial life in a way that we can't do if we're always starting back at zero. Montoya was just saying.

If you borrow money, you borrow it and you pay it back, and now you're back at zero. If you pay cash, you save up and then spend it, and now you're back at zero. Neither of these things are necessarily bad, it's just how you're implementing them in your life. And, as opposed to Paying interest to someone else, or as opposed to paying cash, what if you had a system that every time you used your cash, you weren't depleting it, you were leveraging it, so that that cash never stopped growing on the back end, and so anytime you have a large expense or an investment, when you Replenish the cash and what I mean from a whole life insurance [00:09:00] perspective is you pay back the policy loan, you have what that money would have grown to at the end of that instead of starting back at zero.

It just comes down to a decision of, and Montoya and I were talking about this before we started recording, it's really a decision of do you want to be strategic with your capital or not? The, there's a lot of. Worry out there about man, I don't know if I want to get started yet because I don't have enough to get this thing firing on all cylinders, that kind of thing where they're concerned, it's really a concern about the capitalization period of the life insurance policy and. The problem with that mindset is you never will get started. If that's all you're concerned about, you have to start somewhere. And so the decision is, do I want to start the process of infinite banking or not? And if not, then no problem. We're not here to [00:10:00] admonish you, but if you want to start being strategic with your capital and getting more than what you can do by spending cash or using other people's debt Then you have to start just like when you start a business or actually just like when you save cash to go buy something let's say you're a real estate investor and you save a bunch of cash to go buy that real estate property. Is that cash firing on all cylinders while it's sitting in the bank as you save it up to go buy the property? No, it's not. And so this idea that. Infinite banking has to be quote unquote firing on all cylinders from the get go or there's this period where you're not getting as much out of it.

It's all just noise. You have to start the process or you don't. That's it. That's the only decision. The, financing everything you buy has a lot of, has a lot of factors to it, but it's a very simple concept and you either are going to do it or you're not. That's all it boils down to.

John Montoya: And [00:11:00] I'll say, or I'll add that I think for me, it comes down to your system of values, whether or not you're going to get started, because if you're chasing yield and you're chasing the next great shiny investment. This is not going to be a priority for you because it goes back to identifying the problem.

You really haven't identified the problem in your life. If you think that you can chase the next investment to get ahead, there's always going to be investment opportunities out there. There's,

John Perrings: cash opportunities tend to have a way of finding you when you are well capitalized.

John Montoya: yeah, exactly. Think about your system of values. Recognize the problem that exists financially in your life. If you're chasing shiny objects, you haven't realized the [00:12:00] true value. And this is a whole life policy. You're probably still thinking in the terms that most people will think when it comes to life insurance and whole life specifically, and that it's only for death benefit and it's an expense and all these mental obstacles that people will put in their own way.

And they don't actually see. All the value that is inherent into a whole life policy. And, Nelson, I heard him say, the life insurance industry misnamed, the, this product, they should have never called it whole life insurance. They, should have called it something else because.

The problem with calling it life insurance is that people just think about the death benefit, but they lose sight of the fact that you have a present cash value that you can leverage to become your own banking system to solve [00:13:00] for that banking function. And I think to transition to the third point that we wanted to hit on in this episode.

How much cash value do you need to solve for your own banking function? I think that's a terrific question to ask and it's really open ended because everybody's situation. is different, but you need to realize that you finance everything over your entire life. You finance that house that you want to buy.

You finance the cars that you buy. You finance sending your kids to college. You even finance your retirement. So you know, the size of your policies, that's. That's going to be different for everyone. And I think one of the most common questions I get feels like most recently is what's a good amount.

And people try to compare, in their head, is a [00:14:00] thousand dollars a month or X amount of dollars a year good? Is that a good starting point? And, maybe the better question is how much do you need to have in order to finance your life? How much do you need to have?

To sleep well at night.

John Perrings: That's right. And by the way we recorded an episode number 48, how much premium should you pay? And so you can go back to that episode and listen to some of the other things we have to say there. But it's really a matter of what if you could fund all the large recurring expenses in your life?

What if you could save for those one time and then reuse that capital over and over again for the rest of your life to pay for those things that are going to come up every so often? Property taxes, automobiles, vacations, all of those things. The normal way to pay for that is you save up and then you spend it and you [00:15:00] never, that money leaves your life forever.

What if you had a way to save for that one time, you create a little fund for cars or a fund for your annual vacation. You save up for it once, go on your vacation, pay it back, and now you're recycling that same money over and over again. That's the kind of thing that, we're talking about with creating tailwinds in your life.

When you fly from San Francisco to New York, it takes around, four to five hours. When you fly from New York to San Francisco, it takes five, six, seven hours because you're flying into a headwind. What if you could create a system that you always have that tailwind behind you that is pushing you through and adding some acceleration to your life.

And this is exactly what IBC is designed for.

John Montoya: Yeah. Hey man, I think you said it well there. So I guess just to finish up on my [00:16:00] end, like how much cash value do you need? I don't think we can answer that here on the show because again, your situation is going to be different from everyone else's and you can't compare your situation to the average person. There is no right answer for this.

It's just, it's open ended and depends on your objectives and goals. And again, it will also first depend on you identifying the problem. If you don't, if you don't identify this problem in your life, we can't have. The remainder of the conversation, we can't put together recommendations for you but you first have to realize this is a problem.

This is a financial problem in your life and you need to redirect the flow of money that is exiting your life and put it back into your own family banking system. And that's what becoming your own banker, The Infinite Banking Concept. We'll solve in your life. And[00:17:00] I firmly believe that every household would be in a better position if they solved for this, even at a minimal level.

And, we talked previously about this cash value asset being, you know, an, an ultimate asset for cash. Your rainy day savings account, start there and then start to think bigger and we can help you do that.

John Perrings: Absolutely. The best place to start is where you currently are and something that's sustainable that you can do for years to come. And the best time to start is right now. The life insurance never gets any better than it is today.

All right. Well, That was a good talk, John. I think that was a nice follow up to Episode 91. And if any of this is resonating with you and you'd like to understand a little bit more about how some of this could apply in your life specifically, we were just talking about premium amounts and things like that. Those are all conversations that can be had one on one. You can go to [00:18:00] strategicwholelife. com and you can book a free 30 minute consultation with us right there. No obligation. Or if you're the type of person like I was that likes to do all the learning and reading and education they can do before talking to anyone, we've got an online course just for you called IBC Mastery.

You can go to strategicwholelife. com and there's a link to that right at the top and the banner at the top of that website to get access to that course. All right, Montoya, good talk as always.

John Montoya: All right. Thank you, everyone. Thanks, John.