How Does Infinite Banking Actually Work?

We do the same thing, we talk about the same concept, but you view it completely different than I do. Like, I don't know of any other paper asset that gives me that many benefits today and in the future and allows me to have access to capital to do other things, but I still get all the benefits of life insurance.

Investments, you want to get the highest rate of return. Totally. Investments though can what? Lose money. Yeah, whole life insurance policy with a mutually owned company can never lose money. It's guaranteed to grow. But if I can take this and go make more than what they're charging me, I've just done exactly what the bank does.

If it's so amazing, why don't more people know about it? It's not an asset that makes you rich. Hey guys, this is Will Adams with, first off, DE is a function of your, in your words, what's the simplest way you can explain what infinite banking is?

Yeah, the way that I explain infinite banking is your money, when you create value, you have money come into your personal economy and your money has to flow somewhere. So your money can only really do two things. It can be consumed and gone forever or saved for a future consumption date. Infinite banking concept, and what I talk about in the AND Asset, this concept of life insurance, is a middle account that allows you to save your money and use it more efficiently throughout your life.

So your greatest financial need is using money. Your greatest financial need is that concept. And so the idea of infinite banking is not changing what you spend your money on, not changing what you invest your money in, it's where does your money reside and how do you use it? And when set up and used properly, a whole life policy that's max funded is an amazing place to storehouse some of your dollars, that they're protected, they protect you as an individual and your future ability to provide value to the world.

But they also, it allows your money to grow the rest of your life with many tax advantages and gives you the ability to use that money throughout your life to do whatever you want to do. And when you look over 10, 15, 20, 30, 40, 50, 60, 70, 80 years, using a life insurance policy at the foundation versus like a bank account or other assets you could put your money in, create multi uses of your dollar, and it's those that create the massive benefit. So the concept of infinite banking is essentially like looking at where money flows, being efficient with your money and using whole life insurance at the foundation of it when set up and used properly. And I say set up and used properly because there's a lot of people that don't set it up and don't use it properly. But when set up and used properly, it's an amazing foundational asset that's not an investment, but an amazing place to storehouse and use your money throughout your life.

Yes, not an investment. Whatever. I have so many people saying, oh, but the rate of return is only this. That's, you're looking at it as an investment. Investments, you want to get the highest rate of return. Totally. Investments though can what? Lose money. Yeah, whole life insurance policy with a mutually owned company can never lose money. It's guaranteed to grow. So it is not an investment, it's a storehouse for your capital.

So for those watching this, this will be like a good illustration. So this money I have here, this is actually my haircut money. Love it. Because my barber, even though it's 2023, does not accept credit cards, he only takes cash. So I only have cash on me for haircuts. Love it. So let's say, guys, this money here, okay, this money is going to flow somewhere, right?

Most people, it flows right to a bank. They get a direct deposit, they don't even touch the money. Government takes their taxes, they do a 401k, right? So let's say they're left with whatever else. It goes directly into their bank account, they don't touch it, sitting in the bank account. Now that it's in the bank account, it's subject to lawsuits, judgments. So if you get sued, someone can take that money, right?

In a properly structured whole life insurance policy, in most states, can't touch it, right there. Yeah, there's creditor protections in every state. Yeah, so it's more safe sitting there than it is in a bank. If this money is sitting in the bank, it's earning on average .6%, less than .1%. That's an insult. And that is actually taxed. In a policy, guaranteed to grow with anywhere from 2% is the guarantee to three and a quarter, way more, guaranteed, tax-free, right? So it's growing more, it's protected against lawsuits and judgments.

In a bank, where most people flow their money, yep, that money is in a place that's not really stable. Banks are insolvent all the time. Why? Because they don't have to keep all this money. They keep a fraction of it, lend the rest out. So if everyone tries to get their money, guess what? They don't have it. Yeah, so they're insolvent. They have to sell off assets. If they sell those assets at a discount, yeah, that's when banks go out of business.

In a life insurance policy, the money goes there, they can only lend what is in the general account. They don't go out of business. The companies we use, we use I think the same companies, right? One America, Lafayette, Guardian, Penn, Mass. These companies have been around. Mass has been around for 169 years, I don't know, something like that. Long time. Long, long time. Through the Great Depression, World War I, World War II, meltdown of 08, swine flu, bird flu, COVID, through all of those things that have the economy crash, these companies are profitable.

So do you want to put your money into a bank that's not protected, grows very, very slowly, insolvent, have to get bailed out by the government because they're not profitable through many things? Or would you rather put them in a place where protected against lawsuits and judgments, grows guaranteed tax-free way more than anything else, doesn't fold? These companies are not insolvent, they're growing and profiting every year. When they profit, because it's a mutually owned company, they share those profits with you because you're a part owner of the business, right?

And then here's the kicker, this is the AND Asset part. So you put all this money into infinite banking policy, overfunded whole life insurance policy with a mutually owned company, it's very important what it is. Once it's there, I can leverage against it. This money continues to do all those things.

I just said, but now I can leverage against it, borrow my future death benefit. Now I control, and we should talk about future death benefit, cuz I think that can be... Yeah, borrow against your cash value. Yeah, so your cash value, whatever's sitting there, say 100 grand in there cash value, I can borrow against that. That's the collateral to get a loan from my future death benefit.

So now I'm borrowing the insurance company's money. My money's sitting there getting all those benefits I just explained. So now I'm borrowing this money, I control this money, for an interest rate. Yep. But if I can take this and go make more than what they're charging me, yep, I've just done exactly what the bank does. I've made an arbitrage, a spread on money.

If it cost me 5% to control this money and I can take it, lend it to you, and you pay me 15, I'm paying five to make 15, so I made 10%. What's the rate of return on that? I know you know this, but most people don't. It's a lot, right? It's a lot. So five to make 10 is a 200% cash on cash return.

And a lot of people are like, well, it should only be five. But it's like, no, it's your double. Like your investment is in your control cost. And yeah, I thought you explained that well. Yeah, so 5% is what I'm paying to control the money, and I go make 15, so net I make 10. I've turned five into 10. Yep, that's a huge return.

At the same time, my money, the collateral, is still compounding and growing. So the longer you give it, the bigger it becomes, so the more you can borrow against it. And all you're doing is you're borrowing that future death benefit. So I love the concept. I am obsessed with it, cuz I use it for everything, right? All my real estate deals, my daughter's braces, I bought this watch using it, my 911 I bought, I bought an R8, I buy all my trips, everything.

So talk about the death benefit portion, yep, and the collateral. So like, let's say, I know the answer to this, but let's say I borrow against my death benefit and I just never pay it back. Yep, so what happens there? Let me explain, cuz let me explain how I explain the strategy and then we'll talk about that, if you're cool with that. Yep.

So like the concept of the AND Asset, when we talk about life insurance in general, it goes back to efficiency. Every single person that I know owns a smartphone. Why do they own the smartphone? It's because, there's negatives to a smartphone, but it's very efficient. It was my plane ticket to get here, it was my alarm clock, I spoke with you, I can text you, flashlight, calculator, all kinds of things. It gives us the ability to do multiple things.

So is our cell phone an investment? Is it the it factor? No, but it's an amazing tool that allows me to do all kinds of things. I believe everyone wants efficiency. Going back to my core belief, the reason I'm a huge fan of life insurance is I believe there's no greater safe asset that someone could have at the foundation of their life, because of some of the things that you just said. It's safe, has some amazing tax advantages, it protects you and your family, which is incredible, it allows you to have control and liquidity and use and leverage ability over your savings.

And also I believe life insurance is an asset. There's so much study out there that's saying life insurance is an asset, gets really good in the future years, gives you options that you could do with other assets. Like it actually enhances future cash flow, which is what we should call retirement. Like we should call it future cash flow planning, because that's what it is, right? So when I start learning about life insurance, I'm like, this is amazing. Like literally just like a phone, I'm able to put a dollar in a place and it literally gives my dollar more than one job.

Or if I put my money in a bank, if I put my money in an investment, it's doing one or two things. Like I put my money here for return, for cash flow, I put my money here for safety and liquidity. But putting my money in life insurance, it gives that multi-dimensional aspect. Not investment, but like if I understand all the benefits that I yield from putting my money in that, it's amazing.

And then the really cool thing, this is why it's called the AND Asset, is the ability to, like if someone says I can get a better rate of return, or opportunity cost, the opportunity cost of what could I else be doing? If all life insurance was was a place to invest your money or park your money, I would not be into it. But the ability that you have, the ability to use your money throughout your life for other initiatives that you care about, other initiatives that may help you be more valuable in your life or create more value for other people, that idea is, I don't know of any other paper asset that gives me that many benefits today and in the future and allows me to have access to capital to do other things, but I still get all the benefits of life insurance.

So we talk about compounding, which is awesome, but what is compounding? It's just growing future benefits. So it's not just your cash that's growing, it's all the benefits of life insurance that are going to be growing, your death benefit and all these other things. So anything that you want to comment on that, because then I want to talk about the death benefit comment. But it's like, I look at it less as like infinite banking and banking concept, and more of like, I believe everyone wants to be most efficient.

If you understand life insurance, when set up and used properly, is an amazing efficient asset by default, just like everyone has a car, everyone has a phone. I don't mean everybody, but like people use efficient areas in their life cuz we value efficiency. If we understood the value of life insurance, we wouldn't look at it as an investment, we would look at it as, I'm more efficient because this thing's a part of my portfolio to get to my why, to remove friction, to get to where you want to go. Yes, right, living more intentionally, whatever that is for you. I believe life insurance enhances your ability to show up, not just now, but into

The future. I love what you said, because we do the same thing. We talk about the same concept, but you view it completely different than I do. You view it as just more of an efficiency thing. I view it as literally just a banking concept. How can I control that concept of banking more? That's how I view it.

So what can I learn from you? I can learn how to pull some of what you believe into it, which will help me to actually be the goat. So let's talk about this. Do you have a calculator with you, or your phone? Yes, I have my phone. Can you pull up a compound interest calculator? I use NerdWallet. Yes, so pull that up.

And I want you guys to understand something, that this was something I really had to learn about money in order to excel. At 31 years old I was bankrupt. I had $300 to my name, literally $300. I couldn't afford the apartment I was living in. I was a single father at the time, my daughter was nine. We had a one bedroom apartment, I couldn't afford the rent, I had to break my lease.

I was down to 300 bucks. I had to move in with a friend, sell my bed. I had to sell most of my belongings. I'm renting a little room from a friend. Me and my daughter are sleeping on a mattress on the ground just to be able to barely get by. I started learning how money works.

This $100, right, this is opportunity cost, guys. This 100 bucks, let's just say your book. It does not cost a 100 bucks. How much does it cost? I don't know, 20 bucks. It's 20 bucks. And then if you have an Audible, is it on Audible? Not yet, it will be. Get it on Audible.

So let's just say it costs 100 bucks. You have the book. I give you a 100 bucks for the book. Right, that 100 bucks got me the book. That $100 is not mine anymore, right? Yep. That $100, I'm 38 years old, can never make me another penny for the rest of my life. It is gone forever, right?

If I keep it, how much can I make with the $100 over my lifetime? This is opportunity cost, guys. So take a $100, and then let's put it at just the guarantee with one of my favorite companies, One America, 3.25%. Okay, I'm 38, let's put it at 50 years. Okay, so I would be 88 years old. What does a $100 grow into? $494 at three and a quarter. Yep. Are you sure? Yep.

Seems like it'd be more. Let's see. 100 bucks future value. Okay, cool. So I guess it's just a smaller amount, right? I mean, we could do what Dave Ramsey does and put 12% and it's 28,000. It's all relative.

So like this 100 bucks though, if I give it to you it will not turn into $400 and something dollars, correct? But if I have it in a policy, it's guaranteed to turn into that $400 or whatever dollars in 50 years. And guess what, I can still use it the entire time to go make more somewhere else, right? That's opportunity cost for you guys. The second you spend your money, it's gone forever. You'll never make another penny off of it.

And going back to efficiency, it's just, I see opportunity cost or wealth transfers is just friction. So it's like we should want to remove as much friction to our financial lives as possible. So we're saying the same things we're talking about. And that's what's really cool about this podcast is like we're able to go back and forth, and I think people's IQ will increase because they're hearing people talk about things. And what I don't like is people just stating things, and they just state it and they just move on. Like I want to question things.

So like let's talk about the death benefit comment, because there are people that have come to us and they're like, can I borrow again from my death benefit? And it's like, no. But you're not wrong when you say you're borrowing using your death benefit as collateral. So let me try to explain this. So any other financial institution that you get a loan from, you have to pay them, you have to pay them. You can't just have a guaranteed unstructured loan, which you do get if you're with a life insurance company.

Okay, so it's like, why do they require you to have to pay that? Real quick, yeah, unstructured loan, what does that mean? Because some people might. Unstructured loan means you have no structure in when you have to pay it. No repayment terms. No repayment terms while you're alive.

Okay. The reason you have that is they're a financial institution. Insurance companies are a financial institution. They're hedging your mortality, your death, and also hedging interest rates, whereas majority of institutions that we work with don't have anything to do with your death. They're just interest rate. So they're playing this cash flow game and they have to get a stream, they have to get structured payments, otherwise it would be like infinite risk and they would be dumb to do that.

The reason life insurance companies allow you to take an unstructured loan and don't require you to have to pay it back at any time is they know that they will get that money eventually, because you will die someday. And they're either going to get their money one of three ways. You're going to cancel the policy and then they'll just take the difference between your cash value and your outstanding loan and give you the difference. You're going to die, which they have a permanent liability on their balance sheet called the death benefit, which is an asset to you, a liability to them. They pay you the death benefit subtracted the outstanding loan that you have. Or you're going to pay them back.

The insurance company is positioned because of their long term way of thinking, they're going to win regardless. They actually have zero risk because they already have a liability on their balance sheet. There's no other institutions that can do that. So when people say you can borrow against your death benefit, I think a better way to say that is you can borrow against your cash value, and because you get the best terms of all time, unstructured, is because the death benefit. If you didn't have the death benefit, you wouldn't be able to have these structures. So you're right, your part of it is your collateral as a death benefit, but it's an indirect collateral that's allowing you to not have to pay it.

...back because you will die someday, and that death benefit gives the insurance company the permission slip to say, "So if I take a loan against your policy and you don't have to pay it back while you're alive because we will be made whole at one point." I might have worded wrong then, because exactly what you said is what I meant if I didn't say it like that. Yeah. So what it is, guys, is you're think of a house. When you buy a house, the house is the collateral to get a loan from the bank, right? Yep. If you don't make your payments on the house, what can the bank do? They can take the collateral, right?

Your policy, you're putting money in. That money is the collateral, the house. Yep. Houses go up in value, they build equity, right? You put your money into a policy, your cash builds equity, it goes up in value guaranteed. You can borrow against it just like a house. You can get an equity line of credit from the bank, right? If you don't pay the bank, they take the house, they take the collateral.

In a policy, your cash value is the collateral, so you can borrow against that. You're not borrowing against your death benefit, you're getting an advance of your death benefit. They're basically lending it to you while you're alive, using that money as collateral. So if you don't repay it, they know without a doubt you're going to die, they just don't know when. Yep. They hope, and you hope. This is why I love life insurance, the incentives are aligned.

Yeah, you're in partnership, literally, because it's a mutually owned company. You own the company. Yeah, you own a fraction of the company. You want to live for as long as possible, they want you to live as long as possible. The longer you live, the longer they can manage that money and grow it, right?

So like, if I put money into a policy at 38 years old, let's say 100 grand, and I'm giving just arbitrary numbers, guys, so don't take us with the grain of salt. If I put 100 grand into a policy and it gets me a $10 million death benefit, if I use all 100 grand as a policy loan and I don't repay it and I die the next day, they have to pay out $10 million minus the 100 grand. Yep. That's a lot of risk. They do not want you to die soon. Yep.

But if I've been putting in all this money over my lifetime and they've been able to make all these profits, their risk shrinks the longer you live. Yep, right? So yes, they are dealing with an inevitability. Yeah, not an if. They know you're going to die. Yep. So if you don't pay back your policy loan, they just don't pay that amount to your family, death benefit minus what you didn't pay back. It's a beautiful thing.

And that's one of, when we go back to efficiency and multi-dimensional use and benefits of a life insurance policy, it's more than just rate of return, using your money, which are two amazing things. And that's actually the book, The AND Asset, I wrote that like five and a half years ago, and I mainly focused on compound interest and use of money, control, costs, control and compounding. Those are like two C's. And now like five years later, six years later, I'm like, okay, those are, that's right, I don't, it's not anti, I'm not anti what I wrote in that book, but there's so many more. It's evolved. It's like there's 20 benefits rather than just two.

And the more that I just interact with people, I'm like, wow, that's a really powerful thing to be able to say, because if we just understand the benefits, that translates into value. And that's why I believe if it's set up and used properly and if it's best understood, families should want that as a part of their life, because everything in their life will get better if they understand the kind of asset that they have. Yes.

So let's talk about, I get this all the time and I'm sure you get it as well, if this is so great, infinite banking is so amazing, if the AND Asset, privatized banking, or whatever people call it, if it's so amazing, why don't more people know about it? How do you answer that? Yeah, I'm curious how you answer that, but I'll tell you after.

One of the things that I'll just point out is banks, over 3,800 banks in the United States of America today own what's called bank owned life insurance, BOLI. Research that. There's billions of dollars in some of these top banks where they, so like banks own this and they can take some of their tier one assets and so they do that. There's benefits to their employees, there's benefits to the bank, there's benefits to their ability to loan against it, there's a lot of reasons they do that. A lot of companies use what's called COLI, corporate owned life insurance, and a lot of the wealthy, presidents on both sides of the aisle, a lot of people do use this. Now not everyone talks about it as infinite banking like you talk about it kind of deal. A lot of them just use life insurance because it's an amazing asset for estate planning and other things, and there's other tax advantages to it, but people do talk about it.

Now here's the thing, there's nothing sexy about life insurance, so it's like, why would you talk about it? Like I understand, we talk about it more because we're in a business of helping people set the stuff up, but there's a lot of people that are clients of ours, there's a lot of people that I know that own massive amounts of life insurance and they don't want to be known. Like why would they want to be known? Why would they be sharing this thing?

And the last thing that I'll say is it's not an asset that makes you rich. It's really an asset that helps you be more efficient with the money that you already have. And it's not the thing that's multiplying crazy money, and it's not the thing that creates crazy money. It's kind of the thing, like how many people are talking about estate plans and other things that they're doing with their money? It's just not fun and exciting. So I think there's a lot of ways you can answer that question, but there are a lot of wealthy people that are doing it, hence why I got drawn to it to begin with. I think it's the most misunderstood asset of all time, the people peddling it, the people own it, and...

The people that, you know, that are against it, I think if there's one thing that I can like agree with, is like life insurance agents, people that buy life insurance, and people that are anti-life insurance, they all misunderstand it in some capacity. I mean, we could talk about our industry all day long. There's so many people that I look at videos that they do on TikTok and things, and I just want to like face palm. I'm embarrassed, I'm angry, because I feel like people are preying on people, saying the sexy thing to say, but at the end of the day, like, their clients are going to be worse off for having this.

So I'm saying a lot of words right now, but the whole concept is, I think it is a very misunderstood asset, and as a result, if people don't understand things, they usually criticize it or they usually downplay it, because there's no upside into misunderstanding something.

I love it, man, because you made so many points that are so valid. I never explain it like that, which, some of the things you said I would actually start explaining. I would throw those in now. So here's how I usually, I love it, this is good, how I usually explain it is, well, couple things. There's not a lot of incentive. These kind of policies, the ones we're talking about, overfunded life insurance policies with mutually owned companies, they're paid the least amount of commission to the agent, right?

Because basically here's how it's structured, guys. You have premiums. Of the premium, a regular whole life built for the death benefit is base premium. Yep, so it's 100% base. That gets a big old death benefit. All that base is where all the commissions are. That's what agents want to sell. They want to sell what gets them the most commission, right?

What we're talking about is lowering the base, lowering the initial death benefit, and I say initial because the way they're built, the death benefit rises. We'll get into that. But we lower the base premium, lower commission, lower death benefit, and then we overfund it to an extent. You can only do it so much before it becomes taxable. It's called the MEC, yep, modified endowment contract. That's called paid up additions. You put those in, those are basically prepaying for more insurance without a bunch of cost. So it's instant cash value, right? Not a bunch of commissions. We get paid like 0.2% commission on them.

So one, the agent has to know how to do it, how much PUA to put in, when the PUA become MEC. They need to know when to put a seven-year term rider, when to put a 10-year term rider. They need to know how to structure it. Most don't know how, because think about this: if you are an insurance company, are you going to teach your agents how to make less money? No. Most people can't make a living as it is in this space. So I'm going to teach you how to make less? So what would you probably do if I did that? You'd go somewhere where you could make more.

So there's not a lot of incentive to teach agents how to do it. That's the first thing. If the agent knows how, they don't want to. They want to make more commission. So you need the right agent that knows how and is willing to set it up like that. That's the first reason. I tell people it's not really talked about much.

Second thing is, the most profitable policy for an insurance company: term insurance. Why is that? You're 27, right? If you get a 20-year term policy, the likelihood you're going to die by 47 is slim to none. The insurance company knows that, knock on wood. Right? But they know you're probably not going to die. So let's say you get a million dollar death benefit. You pay on it for 20 years, you outlive that death benefit. It happens 99% of the time. It only pays out 1% of the time.

So 99% of the time, the insurance company collected all those premiums. Now you're 47. Well, I need another million. Now you're more likely to die than 20 years. So what happens to your premiums? Going to be way higher. Way higher, just to get the same coverage. So let's say, oh, you're like, all right, I'm going to get another 20 years. Now you go to 67. You're more likely to die, but still not really that likely. You outlive that one. All that money went to the insurance company.

Now you're 67, you want another 20 years. You're not going to be able to afford it. They're not going to do it. 20 years on a 67 year old, you're just not going to be able to afford it. So for 40 years you paid into something that they never had to pay death benefit on. So what's always pushed? Term, term, term, term, because it's the most profitable for the insurance company.

Yep, I think you're 100% right. Whereas it's super misunderstood, and as a result, there's a lot of life insurance that you and I would not be a part of at all. It's like, you and I are not an apologetics for the insurance industry. Quite frankly, there's a majority of people selling life insurance and pitching it are making their clients worse off for having it. 100%. It's hard for me to say that, but it's just the reality and the truth.

And so you're 100% right, the way that we're structuring these policies is like, goes against the traditional knowledge. It's like, why would you want to make a fraction of what you could make? And it's just like, well, if you provide a ton of value, people come all over to work with us. And so it's been one of the reasons why people work with us, is because of our specialty. But the reason why majority of people don't do it is for the same reason that you shared.

Yeah, I get that question all the time. Well, dude, why would you set this up if you're making... I'll literally be totally transparent with my clients. Anyone watching this, they'll know, like, yeah, Devon's told me how much he's made off my policy. I'll literally tell them, look, base is 25% of the total you're putting in, PUAs are 75. I'm going to make this much off the base, this much off of the PUA. I'll literally give them my commission. If I did a regular whole life, it would have been this. They're like, then why would you do this? Why would you just sell a regular whole life? I tell them, because

A regular whole life is probably not the best policy for you.

Efficiency, yeah. Probably not the most efficient thing for helping you accomplish what you want to accomplish. Great for your family when you pass away.

Yeah, you and I both have seen overfunded policies have a greater death benefit. True, because you're buying a ton of paid up additions, and so maybe in the first couple years it's not what it could be, but at the time of your death it could be greater than a typical policy. And we'll talk about that, how it grows.

Yep. Okay, but people will ask me like, dude, why don't you just do the other ones? Well, it's not the best thing for you. Okay, if I do this policy and you have instant access to your money, and then with that money I can show you how to pay off this debt, this debt, this debt, this debt that you're paying all this money to and you're losing wealth transfers, that money now you can plug that hole in your cash bucket. Now your cash bucket starts to overflow, you've got more money. What are you going to start doing? You're going to start telling people, and when other people say I want to do that, where are you going to send them?

Yeah. So guys, I have sold, I hate saying sold because I never sell a policy, I explain it and then every call ends with, well, how can I do it? Then I'm like, glad you asked, and I just set it up. So since March of 2021, I've set up over 1600 policies. Awesome. So it's just like I make a lot less per policy, but I've done so many policies that I still make a lot of money.

Yeah, right. But let's talk about how the death benefit grows, because to my point earlier, we're building them with a lower base. Yep. So up front the death benefit is minimized, the cash value is maximized. Yep. Explain to people why over time the death benefit grows.

Yep, so if you were to get a typical life insurance policy and it was all base, and let's say the life insurance policy didn't pay dividends, your base, you'd continue to pay in the base and your death benefit would remain level, meaning if you started with a million dollar death benefit, it would stay at a million dollars. Okay, so that's like a typical vanilla whole life policy. Now, to clarify on that though, the reason why that is, guys, is because what you're putting in is guaranteed to reach that at endowment age. That money is slowly growing into that number. Yes.

Okay, so now if you take an overfunded or max funded whole life insurance policy, we're doing a couple things. Number one, we're with a company that pays a dividend. Okay, so there's different ways that we could have that dividend come to us, and what majority of our clients choose is to do what's called a paid up addition, meaning they're paying a dividend and it's going back into the policy, but to do that in a tax advantage way you need to buy extra life insurance. Majority of what we structure life insurance policies is what's called a paid up addition rider.

What a paid up addition rider is, think of it as like Legos. Every year that you pay a paid up addition, it's like you're adding Legos to your policy, and majority of it's going into cash, but to make it tax advantage you need to buy a little extra death benefit. So every time you use a paid up addition rider, that death benefit contractually has to grow to make life insurance, when set up and used properly, tax advantage. So every year that you're funding and every year that your dividends are getting paid to you, you care about the cash value buildup, but as your cash value is building up, the death benefit has to grow, otherwise you're going to get a modified endowment contract, and a lot of the reasons why you have life insurance in general is it's you lose a lot of tax advantages.

So the death benefit is constantly increasing as your cash value continues to increase, and a lot of times your death benefit is increasing greater than what your cash value is increasing. And so when people say that you lose your cash value, when like the companies steal your cash value, that would be true if your death benefit never grew. It would be true if you for 10 years contributed, contributed, then you died and you got a million. But it's not true if your death benefit is greater at the time of death than what you like, minus what you've put in.

I don't know if that's making sense, but if like over 10 years you put in and your death benefit is greater than the initial death benefit plus what you've put in, it's like it's best of both worlds. And so a lot of our policies over time, it's just fun to see how they grow massively. And that's great because inflation, like you want your dollars to, you want everything to grow over time, it has to just keep up with the buying power that the US dollar is decreasing at every year.

So to your point earlier of questioning things. Right. So I'm going to question something that you did and challenge you on it. Yep. Is a regular whole life, you're putting money in, you're putting money in and the death benefit staying level. So I get this all the time, oh well, you don't get both the cash value and the death benefit. Well, yeah, because they're one and the same. The cash value is slowly growing into the death benefit over time, right?

So let's say regular whole life, not what we do, you've put in so much money, your cash value is 500 grand, your death benefit's a million, you pass away, your family is getting a million. Correct. Your cash value was 500 grand, they're getting 500 grand plus another 500 grand. They're not losing the cash value. Like, you're not going to get, but you can understand where someone could say, if you put in half a million versus like if you would have died year one, you would only put in, you can see where someone can say that it steals your cash value, even though you and I both know that's not true. You can see.

Oh, so you're saying like first year if you put in 10, you passed away, you're getting a million. Got it, got it. But now you were a sucker and put in five years, and so that's why. I see what you're saying. Okay, yes. So it's not.

That you get less money. It's the big argument, is like that's what a lot of people say and they're not wrong with like typical life insurance. Like if you Google or YouTube whole life insurance, and anyone that's like anti-it is going to compare life insurance and they're going to compare the death benefit. They're going to say you could buy a term insurance policy for X, or you could buy the same amount of death benefit with a whole life insurance policy. And it's like, yeah, I agree. Like, I'm not here saying to try to cover your insurable interest with whole life insurance. Like we're talking about apples and oranges.

We're talking about like there may be a play where whole life insurance, when set up and used properly, creates more efficiencies for your dollars. But a lot of our clients also have term. Yeah, a huge fan of term insurance. I'm a huge fan of convertible term insurance that gives you options in the future. Why? Because a majority of people cannot afford to insure their greatest asset, which is themselves, with whole life insurance.

So we figure out, number one, let's protect you, because that's the first and foremost the most important thing that we can do. And then if there's extra dollars that we can access to this, let's convert some of that into whole life, and you have best of both worlds. But at the end of the day, that's kind of the conversation that we have. So I'm pro term insurance, but it's for pure protection, it's not for anything else. Whole life insurance is not an investment, but I don't look at it as solely a protection asset. I look at it as multi-use for your dollars.

Yeah, so we look at things definitely differently, which is good. It's good. I don't like term insurance. Yeah, because the way these are built, guys, is, again, the modified endowment contract. We've talked about this several times, and I pulled up one of my policies because I want to give you guys some actual numbers. Modified endowment contract, this is something I tell people all the time: the wealthiest individuals use life insurance.

The Rothschilds, the Rockefellers, like there's a reason the Rockefeller family has become wealthier and wealthier and wealthier over nine generations. They have trusts in place, they have life insurance with every single child that's born into that family. Everyone dies at some point. When they die, that tax-free death benefit goes into a trust. Trust dictates that the trust is buying more life insurance policies on the next child, right? So it's just a little bit of planning.

In 1988, the Fed stepped in because really, really wealthy people were just dumping millions and millions of dollars into these life insurance contracts as a loophole to not pay taxes. And at the time, dividends were like 16% on policies. So think about what you're making tax-free. Yeah, with no limit. You could buy a $100,000 death benefit and you're putting $10 million into a policy to grow tax-free. The government stepped in and said, we need to make some guidelines on this. That alone should tell people, like, well, if all the wealthiest people were doing it, why wouldn't I, right?

So I don't like term because it boosts the death benefit and makes it to where you potentially can't get approved for more policies. Because if you're using them the way I teach people how to use them, which is put the money in immediately, use it to go make more, be more efficient, it's compounding and growing over here, put it into something that you know and understand. So there's no, you're hedging the risk outside of the policy. For me it's real estate, private lending. For you, it's probably your businesses and different things. Yep.

So if you can hedge the risk, you're putting it into something that you know and understand, it's not very risky, you're making a good return. As you make that return, you feed it back to the policy. You can only do that so much before it becomes a MEC. You have to get another policy. If you put a bunch of term on there, your death benefit's higher, they might not approve you. You're saying you don't like putting term in a whole life insurance policy because it increases the death benefit? I'm saying it multiple different policies, two different ones.

So it's like, hear me out here. You have a permanent life insurance and then you have term insurance that can be converted, and then if you want to start another policy, you just convert some of that term into another policy. But we definitely, I will say, and this could be a discussion that we have, we're less like, we don't teach our clients to borrow immediately against their life insurance and how to, like for me it's like I, we teach that like you can do this, but I would say a lot of our clients don't borrow against their policy in the first year. Mainly because just if you look at in general, number one, we're not giving investment advice, we're not telling people what they should do with their money, but just in general, I just want our clients to build a solid foundation. And again, like I believe that emergency and liquidity, like a lot of people should have six months to a year, to maybe a year and a half of like reserve before they do any type of investing.

So we're not like, there's a lot of our clients are like, where should we put our money? And I'm very careful to be like, there's a ton of opportunities out there, but I think I'm really careful to be like, we're going to teach you about life insurance and how it works, but I cannot cross a line about where to put that money, because that, now we're talking about investments, and that's where you got to be really careful. And I would say probably if you look at the way that we articulate, versus like, we're just less about the whole banking. It's a great concept, but it's not something that we focus a ton of time on, because again, we're going back to efficiency and we're trying to look at your entire financial model and say, how do we be more efficient?

That's why we're a big fan of life insurance. It's less about having your own, but the whole concept gets them the same type of product. And so it's kind of like, there's going to be multiple different ways that people articulate strategies, and as long as a person is better off for having met you, I'm a fan. Yeah, I love it, dude. So just two different ways of looking at it, and it's all the same thing at the end of.

The day, I think the problem, and what people need to look out for if they're watching this and they've heard infinite banking and people talking about it, just be careful that you're not dealing with someone that doesn't do it themselves. Yeah, like it's super hypocritical if people are selling something and actually not living it themselves. Yeah, like for me, I never even sold it, didn't even have the inclination to do it. I had four policies my first year. I started my first one May of 2020. By December I had four policies and I was using them for everything.

I did like four flips that year with it. I bought a rental. I multiplied the money five times on one deal just by how I moved the money from my policy and made a note to myself, paid the note back into a high yield savings account, just ninja moves. And then I hit up Chris Naugle, my mentor, and I'm like, dude, I figured out how to make money five times on one deal. He's like, what? I got to get you on like a case study. And that's kind of when it all... That's what got you in. Yeah, that's cool.

So yeah, just be careful, guys. If you're talking to anyone, make sure they know what they're doing, because you can get in trouble with policies if you don't use them correctly. Like if you take a policy loan and you don't feed money back to the policy, that interest that you're borrowing at compounds. So what I do is if I take a policy loan, I make the money work. If it's working and making me more than the control cost, I'm making a positive arbitrage. But what I do, at least, is whatever that interest, that control cost, is at the end of the year, so if I borrow 100 grand, let's say it's 5%, would be 5,000 bucks at least, I write a check from my business bank account, 5,000 bucks, paying for that, so it's no longer compounding and I just got a tax write off on my business, right?

So just make sure you deal with someone that knows what the heck they're doing. Yeah, or this can implode. Yep. Yeah, and I think you said it well. It's really, really, really, really important that you're doing this with someone that understands what's going on. And this might be another thing that we potentially disagree on. I'm a fan of starting small and then getting more comfortable and not jumping full in. I know some people in the space that are like, put as much money as you can, and it's like, personally, it's like we're running a marathon, not a sprint here.

And I just think there's, if there's something that you can probably see and just how I communicate, it's like I'm a big fan of people and I want to make sure that people are continuing to be able to show up powerfully. And I think that when set up and used properly, this is one of the greatest things that you can do with your money that gives you multiple benefits. I think like everything, there's people that overhype it and over pitch it, and unfortunately it gives a bad rap to people across the board that are actually trying to do good, right?

What I would actually love is to sit across the table from someone who's adamantly against life insurance, and I bet you at the end of that conversation, I actually believe I'm one of the best people to have this conversation with people, I bet at the end there's going to be, we're going to have more agreements, because I actually don't disagree with a lot of what they're saying. I just feel like misunderstood sometimes, because it's like, man, I feel like you're not even understanding a fraction of what I actually do. You're just like reading a headline and being like, writing this stuff off. But I think if we actually had conversations, like if Dave Ramsey and myself could talk with no cameras kind of deal, with no ego, I actually think we would be closer to agreeing on almost every issue than not. And that's what I think is so beautiful about... Think so too, like I would love to have that conversation. I would love it.

What I'm doing on my show is I'm having more conversations with people about their money, answering questions. I want to be able to have conversations because I realize that that's something that I do in private a lot. We've had conversations in private. Yeah. I want to be able to have more conversations in public and actually like conversate with people, disagree with people. But like I'm the type of person that can talk politics with someone and regardless of what your political views are, you'll probably think higher of me at the end. Yeah, because like I actually value what you have to say, and the fact that you have an opinion is pretty amazing.

Yeah. And so it's like, just because you don't agree with it doesn't... Yeah, 100%. And there's things that I can learn by just seeking first to understand, thank you Stephen Covey. So it's like there's a lot of this stuff, and that's where it's like, that's where I'm just grateful for our conversation, because I do believe conversations like this is going to better both our clientele but also better people as they're researching, what should I do? It's like you're going to hear different perspectives. What a beautiful thing. Yeah, 100%.

One thing you said, and I can't remember where I heard this, but I've said it several times now, is ego stands for... So you're saying if there's no ego in the conversation, is a freaking beautiful thing, because I've heard that ego stands for edging God out. It's good. It's really good. Think about it. If it's ego, it's about you, it's about me, it's about me, it's about me. What people think, am I right, I'm this, I'm that. God is not in this, even in the picture at that point. It's all about you.

That's good. And you, as a Christian, I'm a Christian as well, I believe that it's God first before anything. Yep. God, and then I would say your wife, your kids, and then friends. Yep. Right? So when you have an ego, you're edging God out. Nothing good can come from that. It's good. You know what I mean? So I love that you said if no egos were involved, the conversation would actually go really well and like you guys would have a better understanding with each other. I would love, if for some reason somehow Dave agrees and reaches out to either of us, oh man.

Can, like, you invite me or I'll invite you so I can... there's going to be so many amazing conversations and it's going to be fun. Dave Ramsey lives in the town that I spend a lot of time. Perfect, if you run into them, just we, and yeah, I would love that.

So we went on a little tangent. I want to get back to the rising death benefit. So guys, this is a policy of mine. This is my second policy I ever did. It's $125,000 a year that I fund it for 10 years. After 10 years I can only put in 50. 50 is the base premium, I'm overfunding for 10 years. So the death benefit at year one starts at $7.6 million, okay?

Because of what Caleb explained, where the dividends that are paid, which is the insurance company's profitability, that is paying for more paid up additions, getting more cash value. As the cash value grows, the death benefit has to grow or it's not a life insurance contract, it's an investment at that point, so they're going to tax you as an investment. So to keep it as a life insurance contract, there has to be a corridor between the cash value and the death benefit. So get this, year one I was 34, it started at $7.6 million. I'm probably not going to die anytime soon, right? Knock on wood. Likelihood that I die, let's say, before 80, it's very slim. I don't live a crazy lifestyle, I'm very healthy, I work out six to seven days a week.

So let's just go to 80 years old. At 80 years old on this life insurance policy my death benefit is $15.2 million. So when I'm likely to die, 15.2 million is a death benefit to my family. The cash value at that time is 11 million, $500,000. So here's the crazy part: I could use all 11.5 million for whatever I want, right? Go buy an apartment building, go buy some houses, whatever. I pass away, my family gets the difference, so they'd get, let's call it 4 million bucks tax free.

Guess what, they also get everything I bought with the cash value. That's right. And again, the death benefit started at 7.6. No bank is giving you $4 million income tax free on death, more than they have to. So that just proves the point of how amazing this asset can be. Absolutely amazing. It just has to be structured correctly, guys. It's a contract.

This is the thing I love about it too. Life insurance, the first contracts were, I think, 1760s. I could be wrong on that. I know it was late 1700s. The tax code came around 1913. It predates tax code. It's private law. It's a contract with you and the insurance company, a private contract. So what that means to me is, one, taxes aren't a thing as long as it doesn't become a MEC. So we already talked about how to do that. Don't overfund it too much, deal with an agent that knows how to structure it that way. As long as you don't overfund it, it's not taxable.

And then here's the cool thing, it's a private contract. It's a contract. Contracts can be written a million different ways. If it's written correctly, it can be the best foundational asset you can have, hands down. That's what I tell clients. It is the foundation of everything you do. If money goes here as a foundation, you're just going to make everything else you do with your money more efficient. Right? You buy a car, you borrow from your policy instead of borrowing from the bank. You borrow from your policy and you pay yourself what you would have paid the bank. You just made that car buying experience the most efficient way to buy a car possible.

Well, can we talk about that? Yes. Okay, because I've done it four times. When I'm going to buy a car, my first question is, should I buy that car? Let's say yes. Second question is, I'll go to a bank or credit union all day long if they can give me cheaper access to money than my policy. So you're saying if they give you a 2% interest rate, why would I borrow against my cash value at 5% if I could get 2% money over here? I agree. Okay, 100%.

Can I take it one step further? Yes. Let's say I could get a 7% loan at a bank or 5% loan in my policy. What do you think Caleb's going to choose to buy the car? Yeah, see, that gets into how good you are at making money. I'd say the 7%. Yes. Why? Because I value control of liquidity. I can value control of my money greater than 2%. So why would I eliminate some of my access to money to buy something that I could take a loan against?

So the people that are using infinite banking to, like, pay off their homes, I'm like, this is where we'll have a conversation. Even the people that are doing it to buy cars and all that stuff, great, and maybe that's like the best solution that you can do. I'm a fan of using banks and credit unions because I understand control and I understand cost of money. So this is where it's like, does that mean I dislike life insurance? No, I'm trying to save as much money as possible into life insurance. But for me, why would I pay a control cost of 5% over here if I could get it cheaper? Or why would I limit some liquidity over here when I could have an institution allowing me to take a loan? I still have cash over here, so I'm not in debt. Like, you're in debt when your liabilities are greater than your actual assets.

But it's like, why? I just value control so much more that I actually would use a bank or a credit union even if it was greater than the cost of borrowing against my policy, because I value control and liquidity, and I don't know what the next three years are going to look like, but there might be an opportunity that's far greater than the difference of 2%. Yes. So it's not, you're not wrong at all. I just think this is what's fun about having conversations, is like, it gets people to think. And it goes back to efficiency, but efficiency is not just on paper, because it would be more efficient mathematically in that year to take the cheaper money, and your policy could be the cheaper money. But I also, when I think about that, I think of like opportunity cost and control and other things factor in, and that's where we

I can talk all day long about scenarios, and there's actually, this is why I want to talk to more people, is everyone's different and it really comes down to like your financial IQ, where you're at, what you're trying to accomplish. For me, I love business, I love what I get to do. The thought of being taken out of business is horrifying to me, so I want to do everything I can to stay alive, stay in business. I will pay extra for that security. I'm able to show it more powerfully here because I'm not worried about next month's mortgage.

So for me, you might look at my portfolio and be like, wow, you're sitting on a lot of cash, you should leverage your money and make more. For me though, I'm like, I'm able to show up more powerfully because I have this financial situation. Someone could be sitting in the same chair and the exact opposite, the last thing that they should be doing is sitting on cash. They should be doing other things, because if they sit on cash they're just going to go spend it. I'm not a spender at all.

That just comes from self-awareness. Self-awareness, yeah. And I think you even said when you were like 12 years old, you were very self-aware, so that's just inherent in you, so I love that. In my opinion, infinite banking at its core, its very, very core, it's just making a spread on money, that's it. So if you borrow five and you make 10, you're making a spread of five, right? So to your point, if you can borrow from a bank at seven, or borrow from your policy at five and pay yourself back seven, you're making a 2% spread. But if you can take that same money at 5% and go make 20, you're making a bigger spread.

Yeah, so that makes more sense, to an extent. It's all about the numbers. So think about this: if let's say I can make a 10% spread by lending it out on private money and my cash flow on that is, that would be, what is that, a thousand bucks a month, I don't know, whatever. Yeah, something like that. So let's just say it's a thousand bucks a month, if that's what I'm making off of lending the money out. But I can pay off this car loan that's at 7% and the car note is 1,800 bucks. The 1,800 makes more sense even though it's a lower interest rate, even though I'm making less spread. Does that make sense?

Yeah, I mean, I'm not 100% following you, but that's, we'd have to sit down. Maybe we have part two and we have whiteboards and stuff. Yes, that would be good. That's my happy place, is whiteboards. For me, I look at the lens of efficiency. The way that I measure efficiency is cash flow.

And I think, so you're 100% right, we need to look at other things from a standpoint of not just now but in the future. And I just look at the lens of everything like what's the most efficient thing, and sometimes efficiency doesn't show up in just what you could be earning in that year. Efficiency is like across the whole board. But I'm usually helping our clients be as efficient as they possibly can, which sometimes means they should take a loan against their policy, sometimes that means they should take a loan against a bank or use a bank. But it's like, at the end of the day, my hope is that they're better off financially, they have less risk, they have greater cash flow and greater net worth.

And so the fact that you can talk to someone who can coach you on that is going to be amazing. And I actually think, like we're talking about, so like the fact that you're using a life insurance policy versus what majority of people are doing, it's like, we're not even on the same planet, you know. So the cool thing is when you have this set up, you have options. I firmly believe the more options a person can have, the better their life's going to be. Yeah, a lot of people don't even have the options to choose because they have to go into debt or they have to use a credit card, they have to go to a bank. And so what I would say is, I would rather have the options to choose, and every single person that has a policy gets more options, and I just believe greater optionality wins in stand.