Ep. 15 Stop Overthinking This: When to Use Your IBC Cash Value (And When NOT To)

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What infinite banking does?
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It actually teaches you
what questions to ask.
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And the more you're involved and
the more you're doing this, you
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start to broaden those questions.
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Don't forget to think like a
banker, if you are just gonna make
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a choice, that's a rash decision.
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Quick choice, quick thought,
and you're not really sure if
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you may return your capital.
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That's not a decision a banker would make,
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I'm gonna stay as liquid as I can.
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It keeps me more in control of my money.
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otherwise it's locked up until
whenever it's at risk of rule changes.
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And so people spend months or years
even building up all this cash value
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and then the moment finally comes
to use it and they pause and they're
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not quite sure should I go forward or
should I not go forward with the loan?
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Welcome to the Infinite Mindset podcast,
the show where we explore the power of
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the infinite banking concept and how to
take control of your financial future.
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I'm your host, Andy, along with
Scott and frequent guest, Jared.
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We're here to help you think
bigger, build smarter, and
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create freedom on your own terms.
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Let's get
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started.
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All right.
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Welcome back everyone to another
episode of the Infinite Mindset Podcast.
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Scott, again, Jared's back with us.
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We're ready to get started.
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So today we're gonna be covering should
I use my cash value or leave it alone?
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Because a lot of people get to a
point where they built up cash value
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and then they start having questions.
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And so people spend months or years
even building up all this cash value
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and then the moment finally comes
to use it and they pause and they're
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not quite sure should I go forward or
should I not go forward with the loan?
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And so that's really what we're gonna
be clearing up today in the podcast.
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That hesitation is where most
people either start understanding
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IBC or they miss the mark and
it starts going wrong for them.
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What we're getting at here when
we're talking about should you
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lose use a loan or not use a loan
is it's not about loan rates.
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It's not about arbitrage, and it's not
about is this better than X investment?
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It's really decision making with capital
and how you start thinking like a banker.
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Remember, this is a
process, not a product.
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So this whole system and how it ties
together, you need to start thinking
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that way in order to use it properly.
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So the big thing, and I think why people
make these mistakes, it's conceptually
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how they're thinking about it.
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So when they're thinking about cash
value, they're thinking about it like a
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savings account and pulling the money out.
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Or they're thinking about the
loan side of it, like they're
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borrowing their own money, which
is not the way to think about this.
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when you have cash value, you're talking
about collateralized capital your
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loan, you're accessing that capital
while keeping the system intact.
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That's really important.
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And so conceptually, if you wanna put all
this together, it really means you're not
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interrupting the growth of your capital.
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And that's really what is key here.
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You didn't actually remove any money from
the system when you took the loan out.
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And then if you're a bit fuzzy
on the cash value or the policy
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loans, I recommend going back to
episode six, Cash Value Explained.
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Where's My Money Really?
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Or Episode eight, policy Loans.
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What Makes Policy Loans Superior
to conventional Banking?
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So if you're not sure about those,
I'd stop the episode here and
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go back, listen to those, and
you can come back to this one.
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Maybe a quick reminder that the cash
value is the current value of a future
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benefit, So there's a death benefit
that's gonna occur down the road.
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We don't know when that's gonna happen.
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It doesn't happen until you graduate.
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Whenever that happens, they're allowing
you to access a portion of that equity.
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Now they're saying, here's your
current value of a future benefit.
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You can get all in the weeds and get all
insurance savvy on what those terms are,
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but that's a quick recap of what that is.
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that's a very good synopsis.
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If you're still a little bit fuzzy,
though, I'd recommend going back
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and listening to other podcasts.
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But yeah, that might just refresh
some people, so it's perfect.
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All right, so the problem is when
people start looking at cash value or
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loans or what they're gonna do, they
start with the wrong question and
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they go, should I take a policy loan?
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And that's a very binary question.
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It's a yes or no.
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There's a lot of other things to consider.
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And so it ignores opportunity cost.
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flow and long-term system impact.
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Those are the things you really need to
start looking at, not just should I take
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the loan or shouldn't I take the loan?
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And so really the right question
to ask is, where is the best
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use of my capital right now?
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And the way I think about this, and
it's the, a simple way to do it is.
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I'm looking at, whether it's a purchase
investment issue, whatever it is, would
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I be comfortable going to the bank
and taking out a loan knowing that I
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have the obligation to pay it back?
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Notice I'm not saying
will the bank approve me?
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It's just my comfort level and whatever
it is that I'm doing, would I be
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comfortable taking that money from the
bank knowing that I have that obligation?
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The answer is yes.
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Then it's probably time to move forward.
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If the answer's no, it's
probably time to reevaluate and
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think about what you're doing.
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All right, so let's break
this down a little bit.
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It's easy to say something like
that, but if you're listening to
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this, you're probably thinking,
well, that's great, Andy.
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What do I do now?
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How do I actually evaluate these things
and make sure that it's gonna work?
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So we have a three, part filter that
we put together, and hopefully it's
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gonna help you evaluate whatever
it's you're doing and see if that
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policy loan makes sense to do it.
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first off, is control you're doing,
does that increase or decrease control?
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And so for the examples, this
just gets into whether or not
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you're gonna take a loan or not.
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So if you're paying cash, we've
talked about this before, your
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control goes down and your capital
has completely left your system.
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you're financing externally,
well, you're no longer in control.
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You're at the mercy of
whatever institution or person
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is lending you that money.
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They are now setting the terms, and then
with the policy loan, you are in control.
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That's the biggest
thing you are in charge.
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So control overall is the foundation.
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Everything else will build on that.
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So that's step one.
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We'll get into a few other details into
where you might take a loan from an
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outside source here in just a little bit.
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But paying cash, typically
I don't like that.
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especially for major purchases is probably
the big thing that I'm getting at there.
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If it's small, little everyday
tasks, then yeah, I get it.
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But when we're talking about bigger stuff,
I'm usually gonna run whatever it is I'm
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doing through my policy first, and then
take a loan against the policy that is.
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The next thing that I evaluate
after control is efficiency.
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And so is the capital staying in motion.
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And there's gonna be a caveat
here at the end, but let's just
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lay out the framework first.
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So first, if it's sitting idle
in your policy, your capital,
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that is, that's low efficiency.
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You are getting your interest and
dividends on it, but that money is
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only working in one place for you.
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The next thing I look at is
paying down low interest debt.
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And we've done topics on this before The
classic example is your home mortgage.
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Do you want to take a policy
loan and pay that down?
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I would argue no, because
you're going back to step one.
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You're losing control.
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Your capital's all now locked up.
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In order to access the equity in your
home, you're gonna have to go through
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some outside institution and so that
is usually not the most efficient way.
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This probably doesn't coincide with
all the thinkers in the IBC community,
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but I'm probably gonna always have
a mortgage on my home 'cause I don't
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like the capital locked up there.
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And then the next thing we have
is keeping the capital deployed.
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And so when you do that, you're
compounding your system and this
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is what we try and do, but you
have to do it intelligently and
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this is where it comes back to.
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But I'd be comfortable taking this
loan from the bank and deploying
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the capital in that manner.
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And so if you're looking at this
and you're trying to figure out
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what I'm getting outta here, we're
talking about sequencing of capital.
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Go back to episode seven, and
we talk about that as well, if
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that's a little bit fuzzy for you.
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But in all these, really what is coming
out down to is economic value added.
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If I'm improving what I'm doing,
then I'm gonna move forward with it.
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If I'm not, then I'm probably
not going to do that.
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I just wanna take a side
note here real quick.
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When I'm evaluating these things, I'm not
always just looking at the return on, I'm
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more concerned with return of capital.
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So it's not just what are
they gonna be paying me back?
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How secure is this capital?
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How quickly can I get to it?
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Is it gonna be locked up for years, or
can I pull it back quickly if I need it?
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So all these things go into it.
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It's not just should I take the
loan, but that's how I evaluate
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outside opportunities as well.
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And I will, this is a caveat
that I was talking about before
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when I was setting this up.
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I think some people, when they
get to the point where they have
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cash value, they feel like they
need to put it to work right away.
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And so this is that balance.
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I know I'm contradicting myself, but it's.
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Putting the capital to work
and then rushing into something
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that you shouldn't do.
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So you're never gonna have a
perfect situation, but you'll
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have ideal situations where
you can deploy the capital.
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But if you're so paralyzed looking
for the perfect situation, that's
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really what we're getting at here.
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That's not good either.
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So there's that window, bumper
lanes, wherever you want to call it.
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We're on one side of it.
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You're not doing anything
on the other side.
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You're going too aggressive.
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And then there's that middle ground,
which is really what we're looking
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for, where you've got the ideal
situation to deploy your capital and
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you've got your cash value to do that.
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Maybe to add something here.
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just to, help maybe determine
where those bumpers are or what
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that middle road looks like.
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Remember that this is a process, This
is a long-term strategy of which you're
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struggling with the, what these choices
may look like month in, month out.
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big picture stuff, You don't, you're not
gonna take a policy loan to buy groceries.
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you're gonna take a policy loan
for something that you would've
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went to the bank to get a loan for,
except you're in control of it now.
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So just framing it in that
sense, and then also saying that.
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Don't forget to think like a
banker, if you are just gonna make
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a choice, that's a rash decision.
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Quick choice, quick thought,
and you're not really sure if
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you may return your capital.
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That's not a decision a banker would make,
that's not something they're gonna do.
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So, when in doubt, revisit becoming
your own banker by r Nelson Nash and
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see what those human factors are and
keep your human factors in check to
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see is this a good or a smart choice
Just in financial choice decisions.
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is, where does that look like?
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How does that help my household, Is
it something I was gonna buy anyway?
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Is it a cash flowing asset?
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all of these things go into helping
you realize where those bumpers are.
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'cause you're exactly correct.
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you may end up at a spot where you've
got tens, hundreds, millions of dollars
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sitting there and doing nothing with them.
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Okay, great.
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Maybe that's part of your plan.
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Or maybe you have over leveraged
on the other end of it to
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the side where you're like.
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God, I hope something doesn't collapse.
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'cause if it does, I can't pay X bill.
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those are the two ends of the
spectrum that you should never
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really see either of them.
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So I just build off of
what you were saying.
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I hope that helps add some.
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Oh, that's huge.
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And then I will say the other
thing I've done too, when I look
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at Worm and Deployment capital, I
have two criteria that I look at.
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and it doesn't have to be both.
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It can just be one or the other.
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But number one, do I trust the
person that I'm working with?
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No, don't get me wrong.
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I'm gonna have paperwork and stuff
there just in case, but can I do
230
00:10:13,457 --> 00:10:14,867
a handshake deal with this person?
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00:10:14,867 --> 00:10:16,817
If the answer's no, I'm not
gonna work with that person.
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00:10:17,507 --> 00:10:20,387
other side of it is, if I'm not working
somebody else, maybe I'm doing this
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00:10:20,387 --> 00:10:22,447
on my own am I an expert in that area?
234
00:10:22,747 --> 00:10:25,417
When people trust me doing it,
do I trust myself doing this?
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00:10:25,417 --> 00:10:28,357
If the answer's no, and you're just
trying to figure stuff out, I'm probably
236
00:10:28,357 --> 00:10:31,567
not gonna commit a large sum of capital
to that until I get smarter on it.
237
00:10:32,212 --> 00:10:33,022
Oh, do you guys do
238
00:10:33,217 --> 00:10:33,962
It's spot on.
239
00:10:34,762 --> 00:10:35,052
Yeah,
240
00:10:35,227 --> 00:10:35,587
Okay.
241
00:10:35,667 --> 00:10:36,177
the same.
242
00:10:36,267 --> 00:10:36,897
Same here.
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00:10:37,297 --> 00:10:41,707
and then the other thing I wanted to
add too is I do keep my emergency funds
244
00:10:41,827 --> 00:10:44,407
in cash value in my policies as well.
245
00:10:44,647 --> 00:10:47,497
So I'm never gonna leverage
these things to the tilt where
246
00:10:47,497 --> 00:10:48,577
I don't have anything there.
247
00:10:48,877 --> 00:10:51,217
People say six months, a year,
whatever it is, you have to figure
248
00:10:51,217 --> 00:10:54,487
out whatever sum of capital that is,
but you want to have an emergency fund
249
00:10:54,487 --> 00:10:57,787
there, and I usually have an a little
bit of a buffer even on top of that.
250
00:10:57,787 --> 00:10:59,077
I'm fairly conservative.
251
00:10:59,497 --> 00:11:00,577
I'm very happy.
252
00:11:01,377 --> 00:11:05,427
Investing and getting returns, but I
don't ever want to get to the point
253
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where my head is going onto my pillow
at night and I'm uncomfortable because
254
00:11:08,547 --> 00:11:09,567
I don't know how I'm gonna make things.
255
00:11:09,567 --> 00:11:09,867
Right.
256
00:11:10,407 --> 00:11:14,297
I think if you're your policies to the
point where you're in that position,
257
00:11:14,327 --> 00:11:17,567
you're not really doing this the way you
should be doing it, my personal opinion.
258
00:11:17,567 --> 00:11:18,647
But that's just where I'm at on
259
00:11:18,661 --> 00:11:18,951
That.
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00:11:19,401 --> 00:11:22,461
and then the last filter that
we get to is replenishment.
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00:11:23,261 --> 00:11:26,621
I think sometimes people brush, I
don't know if they brush over too
262
00:11:26,621 --> 00:11:30,451
much, but this is at the forefront
of just about everything that I do.
263
00:11:30,511 --> 00:11:33,901
Do I have an intentional way
of repaying that capital?
264
00:11:34,081 --> 00:11:35,821
Now, it doesn't have to
be structured like a bank.
265
00:11:35,821 --> 00:11:37,051
It could be a long-term play.
266
00:11:37,171 --> 00:11:38,131
Maybe I've got something.
267
00:11:38,131 --> 00:11:41,791
I know in 2, 3, 4, 5 years, whatever
it is, I'm gonna be able to get that
268
00:11:41,791 --> 00:11:43,441
capital back and repay the loan.
269
00:11:43,651 --> 00:11:46,471
I'm at least gonna have a plan
to pay the interest every year.
270
00:11:46,501 --> 00:11:48,391
'cause I don't want that to
compound and get away from me.
271
00:11:49,191 --> 00:11:53,751
But if you're doing stuff and constantly
taking loans and it's kind of, wow, I
272
00:11:53,751 --> 00:11:57,081
hope this works out, or, I hope X goes
this, or Y goes like this, and that's
273
00:11:57,081 --> 00:12:01,301
your game plan for paying back the loans,
you're probably not doing it right now.
274
00:12:01,301 --> 00:12:03,041
I will say, we've talked about it before.
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00:12:03,071 --> 00:12:05,861
There are gonna be things that pop
up and they're unforeseen and taking
276
00:12:05,861 --> 00:12:07,631
a loan and paying for those things.
277
00:12:07,811 --> 00:12:08,681
No issue with that.
278
00:12:08,681 --> 00:12:09,641
Go ahead and do it.
279
00:12:09,911 --> 00:12:12,461
Just realize, hopefully at some point
you're gonna have a way to pay that
280
00:12:12,461 --> 00:12:16,211
back, but that should not be the norm if
that's how you're continuously operating.
281
00:12:16,556 --> 00:12:18,746
Infinite banking probably is not
for you, and we probably need to
282
00:12:18,746 --> 00:12:21,296
get back to the human factors and
figure out how you even got yourself
283
00:12:21,296 --> 00:12:22,466
in that position to begin with.
284
00:12:23,266 --> 00:12:26,416
Human factors in this is
really a big thing I think for.
285
00:12:27,216 --> 00:12:31,506
For a lot of people is you gotta, you
gotta beat Willie Sutton's law or more,
286
00:12:31,536 --> 00:12:33,276
more Parkinson's law than anything.
287
00:12:33,696 --> 00:12:34,956
but also protect yourself.
288
00:12:34,956 --> 00:12:36,216
Be a Willie Sutton's law.
289
00:12:36,216 --> 00:12:41,156
And the, the human factors in
Nelson's book are I, I enjoyed that
290
00:12:41,156 --> 00:12:43,046
section, I guess to put it out there.
291
00:12:43,126 --> 00:12:43,906
important stuff.
292
00:12:44,656 --> 00:12:45,171
It goes back
293
00:12:45,231 --> 00:12:51,431
you, if you gotta, you gotta be a saver
and Beat that, that human nature before
294
00:12:51,761 --> 00:12:53,531
everything really starts clicking.
295
00:12:53,771 --> 00:12:54,161
Good.
296
00:12:54,341 --> 00:12:54,821
So
297
00:12:54,856 --> 00:12:55,956
took that part for granted for.
298
00:12:55,976 --> 00:12:57,236
yeah, it's comes back to
299
00:12:57,336 --> 00:12:58,416
Yeah, that's exactly right.
300
00:12:58,416 --> 00:12:59,286
Don't steal the peas.
301
00:12:59,496 --> 00:13:00,186
And I was,
302
00:13:00,986 --> 00:13:04,286
I have it through my, I. Yeah, I took
it for granted through my twenties.
303
00:13:04,286 --> 00:13:06,586
No, no, no, no lie.
304
00:13:06,586 --> 00:13:08,746
Even into my thirties, I
was just like, ah, whatever.
305
00:13:08,806 --> 00:13:11,296
And, but after I read
it, I was like, oh, hey.
306
00:13:11,476 --> 00:13:16,746
Yeah, I was about 32 when that all, you
know, of started sinking in a little bit
307
00:13:16,775 --> 00:13:18,630
yeah, like what a blessing that.
308
00:13:19,230 --> 00:13:25,020
You may have thought 10, 15, 20%
out of every paycheck that comes in
309
00:13:25,200 --> 00:13:26,640
that you're able to set that aside.
310
00:13:27,330 --> 00:13:31,740
Well, if you are already doing that,
why not just take control of that?
311
00:13:32,070 --> 00:13:35,600
Why quit turning that capital over to
somebody else If you're already doing
312
00:13:35,600 --> 00:13:39,290
that, it's such an easy decision to
make that decision on taking control.
313
00:13:39,470 --> 00:13:40,670
But maybe you're not doing that.
314
00:13:41,420 --> 00:13:46,380
Maybe, scraping up 3% of every
paycheck is really hard for you.
315
00:13:47,010 --> 00:13:51,060
That, and as, as crazy as everything's
gone in terms of inflation and
316
00:13:51,060 --> 00:13:54,000
cost to this and cost to that
and throw all that together.
317
00:13:54,000 --> 00:13:54,300
Right?
318
00:13:54,660 --> 00:13:57,360
I, I think there's a lot of
people in that scenario that.
319
00:13:57,690 --> 00:14:00,750
That saving a couple of bucks every
month is really, really challenging.
320
00:14:00,750 --> 00:14:04,180
So I encourage you, if nothing else,
pull this book up and read the first four
321
00:14:04,180 --> 00:14:08,080
or five chapters that talks about the
human factors that Scott's talking about.
322
00:14:08,110 --> 00:14:10,480
It really is encouraging and empowering.
323
00:14:11,280 --> 00:14:12,300
Yeah, no, that's spot on.
324
00:14:12,300 --> 00:14:15,510
And when you're looking at that, like
I said, go to, don't steal the peas.
325
00:14:15,510 --> 00:14:16,770
'cause that's really what
we're talking about here.
326
00:14:16,770 --> 00:14:18,870
If you can play Honest
Banker, this is gonna work.
327
00:14:18,960 --> 00:14:20,850
Then I like what you're talking about
there, Jared, when you're talking
328
00:14:20,850 --> 00:14:27,090
about 3%, 15%, 20%, whatever it is,
when you are taking that loan factor
329
00:14:27,090 --> 00:14:30,150
in, whatever you are saving, maybe
whatever, hopefully it's an opportunity.
330
00:14:30,150 --> 00:14:31,710
It's investment, but it
might be something else.
331
00:14:32,070 --> 00:14:34,590
Take all that together and factor
in your premium and your loans,
332
00:14:34,590 --> 00:14:36,180
can you make all those payments?
333
00:14:36,300 --> 00:14:39,300
The answer is yes, and I would say it's
probably decent if you're getting to the
334
00:14:39,300 --> 00:14:42,690
point where you're overstretching yourself
and you're gonna be uncomfortable, and
335
00:14:42,690 --> 00:14:45,330
then maybe it's time to reevaluate what
you're doing based on those numbers.
336
00:14:46,130 --> 00:14:46,940
I, all right, so.
337
00:14:47,330 --> 00:14:50,390
It's all great conceptually to talk
about this, but now we're gonna start
338
00:14:50,390 --> 00:14:52,010
bringing back to real life type stuff.
339
00:14:52,010 --> 00:14:54,500
And I know Scott, you had a story as
well, so we'll go through this, what
340
00:14:54,500 --> 00:14:55,520
we were gonna talk about in notes.
341
00:14:55,520 --> 00:14:58,220
And then Scott, I think your example that
we talked about would be really good to
342
00:14:58,320 --> 00:14:59,520
tie it all together at the end there.
343
00:15:00,060 --> 00:15:02,910
scenario one, we're gonna
look at paying cash.
344
00:15:03,285 --> 00:15:04,575
Versus using a policy loan.
345
00:15:04,575 --> 00:15:08,295
when you're trying to figure out which one
you should do, and so we've got a $40,000
346
00:15:08,325 --> 00:15:09,765
purchase, the example that we're using.
347
00:15:10,155 --> 00:15:13,155
And if you pay cash, we talked about
it, the capital has gone forever.
348
00:15:13,155 --> 00:15:15,315
You've lost the compounding
of that down the road.
349
00:15:15,315 --> 00:15:17,595
you've lost the interest you
could have earned on that capital.
350
00:15:18,025 --> 00:15:20,695
obviously if you take the policy
loan, it's still working for you.
351
00:15:21,115 --> 00:15:23,245
And remember, this is not
just about the loan rate.
352
00:15:23,245 --> 00:15:25,165
I know sometimes people are
gonna look outside and we've
353
00:15:25,165 --> 00:15:26,245
talked about this before.
354
00:15:26,275 --> 00:15:29,215
Number one, understand how to actually
calculate what the actual interest
355
00:15:29,215 --> 00:15:30,865
is you're gonna be paying and then.
356
00:15:31,315 --> 00:15:34,695
The other part of it is if that outside
deal is actually better, Go for it.
357
00:15:34,695 --> 00:15:35,745
Go take that outside deal.
358
00:15:35,745 --> 00:15:38,385
But I would leave the equivalent
amount of cash value in your policy
359
00:15:38,475 --> 00:15:41,205
that if something goes wrong, you
can get yourself outta that in case
360
00:15:41,205 --> 00:15:42,585
things don't go as you expected.
361
00:15:43,065 --> 00:15:47,055
But all of this comes down to control, and
that's really what I'm illustrating there.
362
00:15:47,055 --> 00:15:48,645
It's not just about the loan rate.
363
00:15:49,445 --> 00:15:51,305
is free like we've talked about.
364
00:15:51,305 --> 00:15:53,675
If you're paying that cash, you're
giving up the interest and dividends
365
00:15:53,675 --> 00:15:54,605
you could have earned on it.
366
00:15:54,905 --> 00:15:57,485
That all needs to be factored in
as well because it's not just the
367
00:15:57,485 --> 00:16:00,425
rate, it's the long-term growth that
you're missing out on if you go ahead
368
00:16:00,425 --> 00:16:01,985
and just pay cash up front as well.
369
00:16:02,325 --> 00:16:05,475
it all comes down to long-term thinking
and not interrupting the growth.
370
00:16:06,275 --> 00:16:13,105
this concept becomes way easier
to understand as you've built
371
00:16:13,105 --> 00:16:16,205
your business out, Someone that's
sitting on the sidelines going,
372
00:16:16,475 --> 00:16:17,795
I don't know if I should do this.
373
00:16:18,245 --> 00:16:21,845
They look at year one, they look at
the capital outlay, they look at what
374
00:16:21,845 --> 00:16:22,960
they have access to, and they're like.
375
00:16:23,715 --> 00:16:25,065
Boy, that's hard to justify.
376
00:16:25,485 --> 00:16:26,175
Okay, cool.
377
00:16:26,445 --> 00:16:31,425
This is not a year one plan as you build
this out, as you get to year five, year
378
00:16:31,425 --> 00:16:35,745
10, year 20, I don't want to go down
the path of some of our YouTube friends
379
00:16:35,745 --> 00:16:40,095
that, that sensationalize it and say that
they're paying you to buy a car, but I
380
00:16:40,185 --> 00:16:41,775
understand where they're coming from.
381
00:16:41,775 --> 00:16:45,195
They're like, I know enough
about it to know I, I, I get
382
00:16:45,195 --> 00:16:45,855
what they're trying to do.
383
00:16:45,855 --> 00:16:47,325
But it's a little sensationalized.
384
00:16:47,690 --> 00:16:50,650
you are making money already.
385
00:16:51,040 --> 00:16:52,720
By just having a policy.
386
00:16:53,520 --> 00:16:56,370
Who cares what the interest is, what
you're paying, whether you're paying it to
387
00:16:56,370 --> 00:16:58,380
the bank or paying it for a policy loan.
388
00:16:58,530 --> 00:17:00,990
That's why Andy's saying who
cares what that number is?
389
00:17:01,140 --> 00:17:02,790
You're paying that regardless.
390
00:17:03,030 --> 00:17:06,900
But what you're not factoring in
is what are you making already
391
00:17:06,900 --> 00:17:08,400
on your policy year over year?
392
00:17:08,790 --> 00:17:12,270
And that takes time for that to mature
and get to a spot that it's really
393
00:17:12,270 --> 00:17:15,030
generating larger and larger benefits.
394
00:17:15,030 --> 00:17:18,150
So I guess I, I just want to
encourage someone who's sitting
395
00:17:18,150 --> 00:17:19,320
on the sidelines going, I don't.
396
00:17:20,085 --> 00:17:21,675
I don't understand how this all works.
397
00:17:22,475 --> 00:17:22,955
Cool.
398
00:17:23,405 --> 00:17:26,885
Maybe look long range and think a
little further down the road as to how
399
00:17:26,885 --> 00:17:28,505
this can generate something for you.
400
00:17:28,715 --> 00:17:32,495
And then when you decide whether you
access it or not, when you put this
401
00:17:32,495 --> 00:17:35,675
into play, then it's the easiest
decision you've ever made because
402
00:17:35,725 --> 00:17:38,365
you've got your capital sitting
there that you have access to.
403
00:17:38,755 --> 00:17:40,315
You're like, I was
gonna buy a car anyways.
404
00:17:40,765 --> 00:17:42,955
Why don't I, why don't
I access the capital?
405
00:17:42,955 --> 00:17:46,165
I control that Nobody's gonna
ask me any question on that.
406
00:17:46,165 --> 00:17:47,527
I can access, tax free.
407
00:17:48,327 --> 00:17:49,437
That all seems very easy.
408
00:17:49,437 --> 00:17:50,847
Why would I, why not do that?
409
00:17:51,647 --> 00:17:54,437
' cause when that decision shows
up, you're gonna follow these
410
00:17:54,437 --> 00:17:56,297
same barriers that Andy's put out.
411
00:17:56,447 --> 00:17:59,657
I love the way you've structured
this and it just makes sense 'cause
412
00:17:59,657 --> 00:18:00,767
you were gonna do it anyways.
413
00:18:00,857 --> 00:18:03,947
So I guess I'm also trying to be
encouraging in the sense it can be a
414
00:18:03,947 --> 00:18:07,817
difficult concept to grasp when you're
sitting on the sidelines not having
415
00:18:07,817 --> 00:18:09,197
an access to your policy right now.
416
00:18:09,997 --> 00:18:12,827
The other thing that, I wanna bring up
here, and I actually heard this the other
417
00:18:12,827 --> 00:18:15,077
day in another podcast I was listening
to, but I thought it was really good.
418
00:18:15,077 --> 00:18:18,317
A lot of times people look at the cash
arbitrage and they go, well, hold on.
419
00:18:18,477 --> 00:18:19,977
I'm paying a 7% rate.
420
00:18:19,977 --> 00:18:22,707
And I'm not saying that I'm just using
arbitrary numbers here, but let's say the
421
00:18:22,707 --> 00:18:23,937
loan rate is higher than the dividend.
422
00:18:23,937 --> 00:18:25,527
and the interest, so you're paying 7%.
423
00:18:25,587 --> 00:18:28,647
But you're only getting
5% on the dividend side.
424
00:18:28,647 --> 00:18:30,327
You go, well, that's a delta of minus two.
425
00:18:30,627 --> 00:18:31,707
Why would anybody do this?
426
00:18:31,707 --> 00:18:35,517
Well, you have your cash arbitrage,
but you also have your value arbitrage.
427
00:18:35,517 --> 00:18:37,227
And this I thought was really interesting.
428
00:18:37,557 --> 00:18:40,227
The value arbitrage, not only
looking at the difference between
429
00:18:40,227 --> 00:18:43,557
the interest and the policy loan,
now you're actually looking at,
430
00:18:43,557 --> 00:18:44,667
well, you've got the death benefit.
431
00:18:45,342 --> 00:18:47,622
got the riders, A lot of times
you have critical illness.
432
00:18:47,712 --> 00:18:50,682
You're not factoring the long
term, which is, if I let this keep
433
00:18:50,682 --> 00:18:53,532
compounding down the road, How much
better off am I actually gonna be?
434
00:18:53,802 --> 00:18:56,352
If you look at Warren Buffet and where
he's at, I know we're not talking whole
435
00:18:56,352 --> 00:18:59,622
life, but as far as compounding what
that does for you, most of the money he's
436
00:18:59,622 --> 00:19:03,642
made has been way later on in life when
that compounding actually took effect.
437
00:19:03,912 --> 00:19:08,122
So I get it, if I wouldn't do
something where I was just, Paying
438
00:19:08,122 --> 00:19:10,192
7% and only making 5% of the money.
439
00:19:10,282 --> 00:19:10,882
I wouldn't do that.
440
00:19:10,912 --> 00:19:11,482
It's stupid.
441
00:19:11,482 --> 00:19:13,042
And I don't think anybody
here would either.
442
00:19:13,432 --> 00:19:16,972
It's you need to factor in all these
other things with long-term, and
443
00:19:16,972 --> 00:19:18,562
that's why this starts making sense.
444
00:19:18,562 --> 00:19:21,232
So if you're just a numbers guy and you're
just looking at those two variables,
445
00:19:21,442 --> 00:19:23,542
then I agree you're not gonna do this.
446
00:19:23,692 --> 00:19:26,422
But if you can look at everything that
this encompasses, and that's when you
447
00:19:26,422 --> 00:19:29,542
start seeing the bigger picture on top
of that, the control and actually being
448
00:19:29,542 --> 00:19:30,592
able to act, which will get in the
449
00:19:30,646 --> 00:19:31,566
That's exactly right.
450
00:19:32,366 --> 00:19:34,646
All right, so jumping into
that, that kind of leads us
451
00:19:34,646 --> 00:19:36,056
into an investment opportunity.
452
00:19:36,056 --> 00:19:39,866
So let's say something pops up,
you have some kind of deal and it's
453
00:19:39,866 --> 00:19:42,746
happened before the bank looks at
it and they go, no, we're not there.
454
00:19:42,746 --> 00:19:45,476
Or, the time and the process
and the paperwork to actually
455
00:19:45,476 --> 00:19:46,496
get this thing moving.
456
00:19:46,646 --> 00:19:49,316
It's gonna take too long, and
that deal is gonna pass you by.
457
00:19:49,646 --> 00:19:50,216
Well, guess what?
458
00:19:50,216 --> 00:19:53,666
If you can take a policy loan,
typically within two, maybe three days,
459
00:19:53,696 --> 00:19:55,796
all of that cash is gonna show up.
460
00:19:56,171 --> 00:19:58,721
In your account and you're gonna
be able to act on that deal.
461
00:19:58,721 --> 00:20:02,801
So as far as the seller is concerned,
you're showing up as an all cash buyer.
462
00:20:03,131 --> 00:20:06,611
And what that does is instead of you
reacting to the terms of the bank or
463
00:20:06,611 --> 00:20:10,421
the seller, you are now dictating the
terms because you have all the cash and
464
00:20:10,421 --> 00:20:13,331
that investment opportunity that may
be somebody else is missing on, you're
465
00:20:13,331 --> 00:20:15,971
able to pounce on it and you're gonna be
in that much more of a better position.
466
00:20:16,436 --> 00:20:19,346
Who has the gold makes the rules.
467
00:20:19,796 --> 00:20:21,416
And we've talked about this before.
468
00:20:21,506 --> 00:20:25,256
It comes down to conditional
versus contractual liquidity.
469
00:20:25,466 --> 00:20:28,316
Conditional is everything needs to go
right, the bank needs to approve it.
470
00:20:28,466 --> 00:20:31,746
Contractual is, like Nelson used to say,
get the gophers out there to give me my
471
00:20:31,746 --> 00:20:33,636
capital because I'm moving on this deal.
472
00:20:33,696 --> 00:20:34,476
They can't say no.
473
00:20:34,476 --> 00:20:36,606
They just have to act because
it's contractually written.
474
00:20:37,056 --> 00:20:38,226
Finally getting into it.
475
00:20:38,226 --> 00:20:39,846
This is scenario three
that we're covering.
476
00:20:39,846 --> 00:20:41,226
It's those major purchases.
477
00:20:41,226 --> 00:20:42,406
Like, Jared was joking.
478
00:20:42,466 --> 00:20:44,056
Yeah, you're gonna buy a
car and get rich doing it.
479
00:20:44,056 --> 00:20:45,166
No, it doesn't work that way.
480
00:20:45,386 --> 00:20:49,596
but whatever it is, you're gonna have
the option to take a loan and pay for it.
481
00:20:49,816 --> 00:20:52,666
most people will drain their
savings or they're gonna finance it.
482
00:20:53,221 --> 00:20:56,911
When you have an IBC thinker, they're
gonna evaluate the control and the
483
00:20:56,911 --> 00:21:00,031
impact to the system before they
take the loan to make that purchase.
484
00:21:00,181 --> 00:21:02,761
And so I wanna be very clear,
this is not an investment.
485
00:21:02,761 --> 00:21:03,991
This is something you were gonna buy.
486
00:21:04,021 --> 00:21:05,581
It's something you were gonna buy anyway.
487
00:21:05,941 --> 00:21:10,381
And probably the major thing that
I want to highlight here is if you
488
00:21:10,381 --> 00:21:12,991
would be comfortable going to the
bank and you knew you could make those
489
00:21:12,991 --> 00:21:14,881
payments, let's call it a car, Ferrari.
490
00:21:14,931 --> 00:21:16,491
somebody has that dream,
they want to get it.
491
00:21:16,491 --> 00:21:18,651
If you'd be comfortable going
to the bank to buy that Ferrari.
492
00:21:19,131 --> 00:21:19,761
Go for it.
493
00:21:20,061 --> 00:21:23,151
But if you wouldn't be comfortable
going to the bank and making those
494
00:21:23,151 --> 00:21:26,301
payments, but you happen to have enough
capital where you can buy that Ferrari
495
00:21:26,481 --> 00:21:29,121
and it's just something you've always
wanted, I wanna do it at this point.
496
00:21:29,121 --> 00:21:31,731
I would wait until you're in a better
financial position to actually do it.
497
00:21:32,531 --> 00:21:34,991
The big thing in all of this isn't just.
498
00:21:35,791 --> 00:21:39,981
Whether or not you can use your cash
value, it's whether or not you can
499
00:21:39,981 --> 00:21:44,331
use your capital intentionally so
you have a plan to deploy it, and
500
00:21:44,331 --> 00:21:46,641
then a plan to pay that loan back.
501
00:21:46,971 --> 00:21:49,401
If you can figure that out,
then you're on the right path.
502
00:21:49,611 --> 00:21:52,341
If you're just willy nilly throwing
capital out there and you're treating
503
00:21:52,341 --> 00:21:55,641
it like a piggy bank, back to what
Scott was talking about, you know those
504
00:21:55,641 --> 00:21:59,201
human factors that we're in trouble,
and I apologize, we Jumped past it.
505
00:21:59,261 --> 00:22:02,681
Scott, did you want to go with
the A scenario that you had.
506
00:22:03,466 --> 00:22:09,336
Yeah, I had just recently, if you go back
a couple podcasts, I was missing an action
507
00:22:09,336 --> 00:22:11,296
spending the night in the, hospital.
508
00:22:11,326 --> 00:22:14,671
So that bill came, it
wasn't too bad, it was.
509
00:22:15,471 --> 00:22:19,611
$4,015 and 38 cents, but it
was a unplanned life event.
510
00:22:20,151 --> 00:22:23,481
so basically what I looked at is
I was like, I was like, all right,
511
00:22:23,481 --> 00:22:24,561
how amm I gonna pay for this?
512
00:22:24,561 --> 00:22:28,721
Do I just wanna, you know, give 'em
the credit card, write the check, do
513
00:22:28,721 --> 00:22:30,461
whatever, and just be done with it?
514
00:22:30,461 --> 00:22:31,991
Or is there a better way to do this?
515
00:22:32,321 --> 00:22:38,191
So mean I have savings, I have policies,
I have an HSA, that I fund at work.
516
00:22:38,671 --> 00:22:42,511
The way I, mean, it was a simple
calculation is like you could have just
517
00:22:42,511 --> 00:22:45,571
swiped a credit card and did this and just
been done with it, but I just wanted to.
518
00:22:46,036 --> 00:22:47,896
See what the best way
to go about this was.
519
00:22:47,896 --> 00:22:51,526
So I knew that if I paid it outta my
savings, like we were talking about
520
00:22:51,526 --> 00:22:55,486
before, if, if you just pay it in
cash or, or pay the credit card off
521
00:22:55,486 --> 00:22:58,696
in cash or whatever, however you're
gonna do it, it, it's just gone.
522
00:22:58,756 --> 00:23:02,986
I mean, you weren't really losing
out on much growth, especially if
523
00:23:02,986 --> 00:23:04,156
it's sitting in a savings account.
524
00:23:04,186 --> 00:23:07,696
'cause you know, savings doesn't
really get you much anyway, but the
525
00:23:07,696 --> 00:23:09,286
cash is outta your system forever.
526
00:23:09,286 --> 00:23:13,396
That, that money, that water and the only
pool of water that we have is just gone.
527
00:23:14,196 --> 00:23:17,766
if I took a policy loan out for it
and then, you know, use that to pay
528
00:23:17,766 --> 00:23:21,666
it off, I would've had obviously a
plan to pay that back fairly quickly.
529
00:23:21,946 --> 00:23:23,056
4,000 bucks.
530
00:23:23,056 --> 00:23:28,066
But, it's basically, it was $320 a
year to have that policy loan out.
531
00:23:28,066 --> 00:23:30,046
It's 87 cents a day, roughly.
532
00:23:30,756 --> 00:23:35,396
The drawback, the con to that
would be that capital can't be
533
00:23:35,456 --> 00:23:38,936
combined with other capital to
deploy it to other opportunities.
534
00:23:38,936 --> 00:23:41,096
So it's like, what's the opportunity cost?
535
00:23:41,096 --> 00:23:41,546
I don't know.
536
00:23:41,546 --> 00:23:44,966
But it's probably more
than $320 for the year.
537
00:23:45,356 --> 00:23:47,216
So it was like, all
right, well we got that.
538
00:23:47,216 --> 00:23:50,836
Now I have this HSA sitting there,
that's been funded pretty good.
539
00:23:50,896 --> 00:23:53,296
You know, I've been doing it
for my four years here at work.
540
00:23:53,796 --> 00:23:55,776
I'm like, okay, it's, it's tax.
541
00:23:55,836 --> 00:23:56,796
It goes in tax free.
542
00:23:56,796 --> 00:23:57,576
It grows tax free.
543
00:23:57,576 --> 00:23:59,376
It comes out tax free,
which is why I do it.
544
00:23:59,846 --> 00:24:03,806
my methodology on my HSA, just to throw
this out there, is I've just been pooling
545
00:24:03,806 --> 00:24:07,436
up receipts for whatever it may be,
and I was just gonna turn 'em in when
546
00:24:07,436 --> 00:24:09,356
I retire and take that cash back out.
547
00:24:09,356 --> 00:24:13,146
The shoebox method for lack of better
terms, what some people refer to.
548
00:24:13,446 --> 00:24:18,686
But anyhow, if I just figured
7%, $4,000 at 7% for 20 years.
549
00:24:19,056 --> 00:24:25,546
It'd be 1200 or 12,150 some
dollars of interest growth.
550
00:24:25,586 --> 00:24:29,336
I'm making a big assumption that I
will continuously get 7% every year.
551
00:24:29,396 --> 00:24:31,436
You know, so I just use that number.
552
00:24:31,436 --> 00:24:35,396
It's a pretty standard number that
people use, but that's, I figured out
553
00:24:35,396 --> 00:24:40,526
to be, it's $607 a year average, like
two 80 in the beginning, and like
554
00:24:40,526 --> 00:24:43,256
1100 at year 20 in interest growth.
555
00:24:43,506 --> 00:24:47,376
but average it out, it's
$607 a year, it's, it has tax
556
00:24:47,376 --> 00:24:48,816
savings, so it's incentivized.
557
00:24:49,266 --> 00:24:50,976
But if I take it out.
558
00:24:51,726 --> 00:24:54,276
give up that growth,
it's still gone forever.
559
00:24:54,726 --> 00:24:58,136
But if I don't use it,
it's locked up there.
560
00:24:58,226 --> 00:25:03,386
I have no control over it until either
decide to turn that receipt in later
561
00:25:03,386 --> 00:25:07,086
on in life or another, qualified event.
562
00:25:07,086 --> 00:25:08,436
I mean, it's government controlled.
563
00:25:08,436 --> 00:25:11,466
They could be like, oh no, it's
gotta be a receipt from this year.
564
00:25:11,706 --> 00:25:14,466
You know, so I'm taking a risk
there maybe on later on in life,
565
00:25:14,496 --> 00:25:15,876
'cause they can change the rules.
566
00:25:16,326 --> 00:25:17,376
So I was like, well.
567
00:25:18,176 --> 00:25:19,436
Now money's locked up.
568
00:25:20,066 --> 00:25:24,446
I can probably do better with my
$4,000 in my policy as you know,
569
00:25:24,446 --> 00:25:26,126
keeping me as liquid as possible.
570
00:25:26,516 --> 00:25:33,266
Is that worth the $607 average or $280
this year versus 320 that I'd pay for
571
00:25:33,266 --> 00:25:38,536
my own and My simple answer was, yeah,
I'm gonna turn this receipt into my HSA
572
00:25:38,536 --> 00:25:40,786
and take a chunk of money outta my HSA.
573
00:25:40,846 --> 00:25:42,286
I'm gonna stay as liquid as I can.
574
00:25:42,586 --> 00:25:45,346
It keeps me more in control of my money.
575
00:25:45,586 --> 00:25:47,146
It gets me back in control.
576
00:25:47,546 --> 00:25:49,046
for, for a brief amount of time.
577
00:25:49,046 --> 00:25:52,216
'cause I'm gonna pay this, pay
this hospital bill with it, but
578
00:25:52,266 --> 00:25:55,386
it's gonna gimme control of what
I'm going to do with that money.
579
00:25:55,776 --> 00:25:59,946
and just it, I mean, it's, otherwise
it's locked up until whenever
580
00:25:59,976 --> 00:26:01,626
it's at risk of rule changes.
581
00:26:01,626 --> 00:26:04,746
So I just, that was kind
of my thought process.
582
00:26:04,776 --> 00:26:06,006
It's, I mean, it's a smaller amount.
583
00:26:06,006 --> 00:26:09,846
We're not talking about buying a vehicle
or anything wild or crazy like that.
584
00:26:09,846 --> 00:26:10,836
It's just a simple.
585
00:26:11,176 --> 00:26:15,106
hospital bill that came, but it was
an unforeseen life event with, I mean,
586
00:26:15,106 --> 00:26:17,176
a pretty decent price tag, you know?
587
00:26:17,176 --> 00:26:20,326
So I was like, all right, like,
what's the best way to go about this?
588
00:26:20,656 --> 00:26:22,906
So that's, that's kind
of how I looked at it.
589
00:26:22,956 --> 00:26:24,546
is my money gonna be better suited?
590
00:26:24,936 --> 00:26:27,936
Being I'm not gonna invest
$4,000 on an opportunity.
591
00:26:27,936 --> 00:26:29,886
It's gonna be substantially
bigger than that.
592
00:26:30,176 --> 00:26:33,356
But now it goes back into emergency funds.
593
00:26:33,356 --> 00:26:36,746
I could leave that, you know,
that's still a $4,000 buffer on an
594
00:26:36,746 --> 00:26:40,296
emergency fund if I use some more
from the policy loan, et cetera.
595
00:26:40,296 --> 00:26:43,836
long story short, it keeps
me in control of my money and
596
00:26:43,836 --> 00:26:45,756
keeps me as liquid as possible.
597
00:26:46,116 --> 00:26:51,486
And that dollar amount that it's gonna
cost me in the long run maybe cost me
598
00:26:51,516 --> 00:26:55,141
if everything goes the way it should,
or that people think that it should.
599
00:26:55,941 --> 00:26:58,971
It's worth, it's worth it to
stay liquid to me, that's, that's
600
00:26:58,995 --> 00:26:59,535
To me
601
00:26:59,541 --> 00:26:59,751
it.
602
00:27:00,225 --> 00:27:03,165
what you described, it doesn't matter
how many zeroes are behind that number.
603
00:27:03,915 --> 00:27:05,325
The process didn't change.
604
00:27:05,485 --> 00:27:09,745
really the worst of your options, the
worst one by your description was cash.
605
00:27:10,075 --> 00:27:11,065
It leaves your system.
606
00:27:11,065 --> 00:27:11,785
it's gone.
607
00:27:11,965 --> 00:27:15,065
You lost interest on what could have
made from it, the opportunity cost
608
00:27:15,065 --> 00:27:16,415
of having cash leave your system.
609
00:27:16,595 --> 00:27:20,015
And really the two choices were
HSA or policy loan of which.
610
00:27:20,450 --> 00:27:22,070
Whichever one you
picked, you would've won.
611
00:27:22,390 --> 00:27:23,380
I agree with your decision.
612
00:27:23,380 --> 00:27:24,460
I think you made the right call.
613
00:27:24,510 --> 00:27:26,550
and at the end of the day,
it's not my choice, it's yours.
614
00:27:26,580 --> 00:27:27,990
'cause it's your money, it's your capital.
615
00:27:28,110 --> 00:27:30,100
So you get to pick where
it goes when it gets there.
616
00:27:30,370 --> 00:27:31,720
So, I mean, cool.
617
00:27:31,720 --> 00:27:34,270
That all of that applies to the
story and the description we
618
00:27:34,270 --> 00:27:38,030
just used, that it didn't matter,
what the zeros were behind it.
619
00:27:38,270 --> 00:27:39,860
It applied exactly to what you said.
620
00:27:40,660 --> 00:27:41,410
So kudos.
621
00:27:41,410 --> 00:27:41,950
Thanks for sharing.
622
00:27:42,436 --> 00:27:42,736
Right.
623
00:27:43,536 --> 00:27:44,641
I think that's spot on you.
624
00:27:44,646 --> 00:27:45,936
You hit the nail on the head there, Jared.
625
00:27:45,936 --> 00:27:46,386
Scott.
626
00:27:46,446 --> 00:27:46,746
You too.
627
00:27:46,746 --> 00:27:48,066
Just the way you analyzed it.
628
00:27:48,156 --> 00:27:50,856
I think the big thing for me
looking at this is you had another
629
00:27:50,856 --> 00:27:52,506
option that most people don't have.
630
00:27:52,506 --> 00:27:55,626
By practicing infinite banking,
most people have just been cash.
631
00:27:55,986 --> 00:27:59,556
Or do I go to my HSA with infinite
banking, you have this third option.
632
00:27:59,856 --> 00:28:02,046
And really tying this all together.
633
00:28:02,226 --> 00:28:06,426
Most people looking at this, they are
trying to find an answer to a question.
634
00:28:06,606 --> 00:28:07,776
What infinite banking does?
635
00:28:07,776 --> 00:28:10,326
It actually teaches you
what questions to ask.
636
00:28:10,326 --> 00:28:12,696
And the more you're involved and
the more you're doing this, you
637
00:28:12,696 --> 00:28:14,856
start to broaden those questions.
638
00:28:15,006 --> 00:28:18,006
And so this is just a microcosm what
people are doing potentially on a
639
00:28:18,006 --> 00:28:21,096
much bigger scale, but it illustrates
perfectly what people can do when
640
00:28:21,096 --> 00:28:24,576
they're analyzing the problem or whatever
it is that they have on their plate.
641
00:28:24,846 --> 00:28:26,256
And then there are options
that are out there.
642
00:28:26,805 --> 00:28:27,135
I agree.
643
00:28:27,345 --> 00:28:27,795
Well said.
644
00:28:28,595 --> 00:28:29,045
All right, everybody.
645
00:28:29,045 --> 00:28:31,415
Thanks for watching or listening,
however you're taking in the
646
00:28:31,415 --> 00:28:32,705
Infinite Mindset Podcast.
647
00:28:32,705 --> 00:28:34,355
If you like what we're doing,
go ahead and subscribe.
648
00:28:34,355 --> 00:28:35,195
Give us a thumbs up.
649
00:28:35,255 --> 00:28:38,555
If you don't, please give us that
feedback as well, and we will adjust.
650
00:28:38,735 --> 00:28:39,605
We've talked about before.
651
00:28:39,605 --> 00:28:41,645
If there's something that you want
us to cover, let us know and we
652
00:28:41,645 --> 00:28:42,545
hope to see you on the next one.
653
00:28:46,172 --> 00:28:47,842
Thanks for tuning in to
The Infinite Mindset.
654
00:28:48,452 --> 00:28:51,512
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655
00:28:51,512 --> 00:28:55,062
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656
00:28:55,402 --> 00:28:58,082
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