The Power of Volume: Why Infinite Banking Trumps Traditional Saving Strategies
In the world of personal finance, conventional wisdom often falls short of delivering true financial freedom. Enter the Infinite Banking Concept (IBC), a strategy that challenges traditional financial advice by emphasizing the power of volume over mere rate of return. This approach, centered around properly structured whole life insurance policies, offers a compelling alternative to the standard “save 10% in your 401k” mantra. By focusing on channeling a larger portion of your income through a financial vehicle you control, IBC has the potential to lead to greater wealth accumulation and financial flexibility over time.
The Conventional Approach: Saving 10% in a 401k
For decades, financial advisors have preached the gospel of saving 10% of your income in a 401k. While this approach has its merits, it also comes with significant limitations:
1. Limited contribution amount: By focusing on just 10% of your income, you’re leaving 90% on the table, potentially missing out on greater wealth-building opportunities.
2. Market volatility and risk: 401k investments are typically tied to the stock market, subjecting your retirement savings to unpredictable ups and downs.
3. Lack of liquidity and control: Your money is often locked away until retirement, with limited access and control over how it’s invested.
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Nelson Nash’s Revolutionary Focus on Volume
One of the most groundbreaking aspects of Nelson Nash’s Becoming Your Own Banker is its emphasis on volume rather than rate of return. This perspective fundamentally distinguishes IBC from traditional financial strategies:
1. Shifting the Paradigm:
Traditional financial advice often recommends saving 10-15% of your income in tax-deferred accounts like 401(k)s and IRAs, while focusing on achieving high investment returns. In contrast, Nelson Nash proposed a radically different strategy.
Nash advocated for channeling your entire income through a properly structured, tax-advantaged whole life insurance policy. He recognized that this was an ambitious goal, one that might take 20-25 years for the average person to fully implement. However, Nash firmly believed that this approach, emphasizing volume over rate of return, was the ultimate path to building substantial long-term wealth.
2. The Power of Volume:
Nash argued that the sheer volume of money flowing through a properly structured whole life policy could lead to wealth accumulation that far exceeds traditional investment methods. He believed that by focusing on volume, the total returns could surpass what’s achievable in the stock market, even with potentially lower percentage returns.
3. Nash’s Personal Example:
To illustrate the scalability and power of his volume-based approach, Nash himself owned 49 life insurance policies at one point. This demonstrated that the concept could be expanded to accommodate growing financial needs and amplify its benefits.
4. Compound Growth on a Larger Base:
By utilizing a larger portion of one’s income, the compounding effect becomes more significant over time. This effect is amplified by the ability to borrow against the policy for investments or expenses while the entire cash value continues to grow.
5. Rethinking Financial Control:
Nash’s volume strategy puts a larger portion of an individual’s money to work, rather than leaving it idle or in the control of traditional banks. This approach aligns with Nash’s criticism of the traditional banking system and his advocacy for personal financial sovereignty.
6. Long-term Perspective:
Nash emphasized that success in IBC comes from consistently growing your banking system over time. He compared this to successful retail businesses that focus on volume rather than high profit margins on individual sales.
Amplifying Volume with Velocity
While volume focuses on the amount of money in your Infinite Banking system, the velocity of money addresses how efficiently that money moves. Together, these concepts create a powerful synergy for wealth-building.
Understanding Velocity in Infinite Banking
Velocity refers to the speed at which your money moves through your personal financial system. In Infinite Banking, your money is kept in perpetual motion:
1. Growing through interest and potential dividends
2. Remaining accessible for investments or emergencies
3. Funding your lifestyle
4. Building a legacy
All while continuing to grow your policy’s cash value.
The Volume-Velocity Synergy
Combining high volume with high velocity creates a potent wealth-building engine:
- Maximized Growth: Your entire cash value grows, even as you use policy loans.
- Increased Flexibility: A larger, fast-moving capital pool provides more opportunities.
- Compounding Effect**: Volume and velocity together accelerate compound growth over time.
By mastering both volume and velocity, you’re creating a dynamic financial ecosystem that continuously builds wealth.
Your Maximum Potential Earnings
Before we delve deeper into the power of volume in Infinite Banking, it’s crucial to understand the big picture of your financial life. How much money will flow through your hands over your lifetime? And more importantly, how much of it will you keep?
In a revealing webinar, Steve Gibbs and Barry Brooksby use the Maximum Potential Calculator to demonstrate the staggering impact of taxes, debt, and lifestyle choices on your lifetime earnings. This eye-opening presentation sets the stage for why a volume-focused approach to Infinite Banking can be so transformative.
Let’s take a look:
The Infinite Banking Approach: Funding a Whole Life Policy
The Infinite Banking Concept flips the script on traditional saving strategies. Instead of setting aside a small portion of your income, Infinite Banking advocates for channeling a much larger percentage through a properly structured whole life insurance policy. This approach emphasizes:
1. “Paying yourself first” through your own banking system
2. Using a larger portion of your income to build a financial foundation
3. Focusing on the volume of money flowing through your policy, rather than just the rate of return
By doing so, you’re not just saving money โ you’re building a financial asset that can serve as the cornerstone of your wealth-building strategy.
Why Whole Life Insurance Makes an Ideal Banking System
Why does overfunded whole life insurance work so well for the purpose of creating your own banking system? The answer lies in its unique combination of features, with one standing out above the rest:
- Guaranteed Principal Protection: The primary reason whole life insurance excels as a banking system is that you can’t lose money due to market fluctuations. This guarantee allows you to overfund the policy with a significant portion of your income without the risk of loss that comes with market-based investments.
- Borrowing Power with Continued Growth: Because of this guarantee, you can confidently borrow against your cash value to cover expenses or invest in opportunities. The key advantage here is that your entire cash value continues to grow, even on the portion you’ve borrowed against. This feature is unique to life insurance and is not available with traditional savings or investment accounts.
- Tax Advantages: Whole life insurance provides tax-deferred growth of your cash value. Moreover, when structured correctly, you can access this cash value through policy loans tax-free. This tax treatment enhances the efficiency of your personal banking system.
- Growing Death Benefit: As you overfund your policy, not only does your cash value increase, but your death benefit typically grows as well. This increasing death benefit serves as a form of asset protection and legacy planning tool.
- Flexibility and Control: Unlike traditional banking or retirement accounts, you have significant control over your policy. You decide when to take loans, how much to borrow, and how to repay them, without the restrictions typically associated with 401(k)s or IRAs. Additionally, these policies are designed with flexible premiums, so you can pay a minimum and maximum each year that varies significantly. For example, a policy might be designed so the minimum payments is $1,000 a month and the maximum payment is $10,000.
- Multiple use of money (asset multiplier): Your cash value continues to grow even while you’re using it for other investments, making your dollars work harder. See our article on the Asset Multiplier Blueprint.
- Non-correlated asset: Whole life is not tied to stock market performance, providing portfolio diversification.
- Legacy creation and estate planning: Build a financial legacy for future generations with tax-free death benefits.
By overfunding a whole life policy for Infinite Banking, you’re essentially creating a financial reservoir that you can repeatedly access and replenish. This system allows you to recapture the interest you would typically pay to banks, all while your money continues to grow in a tax-advantaged, guaranteed environment.
This combination of features โ principal protection, uninterrupted growth, tax advantages, and flexibility โ makes whole life insurance uniquely suited as an alternative to traditional banking. It provides a stable, growing pool of capital that you can use throughout your life, giving you greater control over your financial future.
The Amplifying Effect of Volume in Infinite Banking
When we examine infinite banking through the lens of volume, we uncover a powerful hidden benefit that goes beyond mere accumulation. Volume acts as a multiplier, enhancing every feature of an IBC policy and creating what we might call a “Personal Financial Ecosystem.”
Here’s how volume amplifies key aspects of Infinite Banking:
- Tax Advantages: Greater volume means more tax-deferred growth and potential for tax-free access.
- Compound Growth: A larger base amplifies the power of uninterrupted compound growth.
- Policy Loans: Larger cash values provide greater borrowing capacity for investments or expenses.
- Multiple Use of Money: Volume increases potential for simultaneous growth and investment use.
- Asset Protection: Larger policy values offer more substantial creditor protection where applicable.
- Retirement Planning: Volume creates a more substantial supplement to traditional retirement accounts.
The Power of Volume in Action
The true power of the infinite banking approach lies in its emphasis on volume. By channeling a larger portion of your income through a whole life policy:
1. You’re building a larger base of capital, leading to more significant compounding effects over time.
2. Your entire cash value continues to grow, even when you borrow against it for other investments.
3. You have the flexibility to invest in other assets using policy loans, potentially amplifying your returns while maintaining the stability of your policy’s growth.
This volume-based approach can lead to exponentially greater wealth accumulation compared to traditional saving methods that focus on a small percentage of your income. And volume + guaranteed returns + time = true uninterrupted compound interest growth.
Addressing Common Objections to Whole Life Insurance
Despite its benefits, whole life insurance often faces criticism. Let’s address some common objections:
1. “Whole life insurance is too expensive”: While premiums may be higher than term insurance, properly structured policies focus on cash value growth, making them a powerful financial asset rather than just an expense.
2. “Returns are very low”: When structured for IBC, policies can offer returns comparable to other safe money options, with the added benefits of tax advantages and financial flexibility.
3. “You can’t change your mind once you set it up”: Modern IBC-designed policies often offer premium flexibility and options to adjust your coverage as needed.
4. “It takes too long to build cash value”: Properly structured policies can provide significant cash value in the early years, allowing you to start leveraging your policy sooner.
Risk Considerations
While the infinite banking strategy offers many benefits, it’s important to consider potential risks. Although there is a lower overall risk due to guarantees in whole life insurance, providing a stable financial foundation, there is one potential risk worth mentioning. During the capitalization phase when you’re building up your policy’s cash value, it’s crucial to maintain sufficient cash flow during this period so you can adequately fund your policy. The good news is these properly designed policies have a lot of premium flexibility built in and you can also use your cash value to pay premiums for a time.
Who Can Benefit from this Approach
While the Infinite Banking Concept can be beneficial for many, it’s particularly well-suited for entrepreneurs. Here’s why:
1. Entrepreneurs already take on significant risk in their businesses. An IBC life insurance policy provides a counterbalance with guarantees and stability.
2. Asset protection benefits can be crucial for business owners.
3. The ability to borrow against the policy for business opportunities aligns well with entrepreneurial needs.
4. Legacy planning aspects ensure that an entrepreneur’s hard work can benefit future generations.
However, anyone looking for greater financial control, tax advantages, and a more holistic approach to wealth building can potentially benefit from this strategy.
Conclusion
The Infinite Banking Concept, with its focus on volume over traditional rate of return, offers a compelling alternative to conventional financial wisdom. By channeling a larger portion of your income through a properly structured whole life insurance policy, you can potentially build greater wealth over time, enjoy more financial flexibility, and create a lasting legacy.
This approach challenges us to rethink our assumptions about saving and investing. Instead of settling for the standard advice of saving a small percentage in market-dependent vehicles, infinite banking empowers individuals to take control of their financial future, become their own bankers, and build a stable financial foundation from which to pursue other opportunities.
As with any financial strategy, it’s crucial to thoroughly understand the concept and consult with knowledgeable professionals before implementation. However, for those willing to think differently about their finances, the Infinite Banking Concept offers a powerful tool for building long-term wealth and achieving true financial freedom.
Next Steps
Ready to transform your financial future? Schedule a free consultation with one of our Infinite Banking experts today. Check out ourย Pro Client Guidesย and connect with one of them to discuss an Infinite Banking Strategy for you, using your own numbers.
Your Pro Client Guide is also your infinite banking coach, helping you navigate your financial future. This is a complimentary, no-strings- attached consultation where you can see how powerful this strategy is for yourself. What are you waiting for? Book you appointment today!
