Becoming Your Own Banker
Author: R. Nelson Nash
Release Date: January 2008
I was loaned this book by (surprise) a guy interested in selling life insurance. Despite the title of the book, the entire 80ish pages is really an extended advertisement for the benefits of life insurance. That being said, it was actually pretty well written and combined enough examples to remain an interesting read.
The basic premise for becoming your own banker is that any time you are paying interest you are losing tremendous amounts of money. However, we often still need to get financing for things like house payments, car payments, college, etc. the author’s solution is the idea of the Infinite Banking Concept. Essentially a person should purchase life insurance, capitalize it for at least four years, and then take loans from the insurance policy to pay for those expenses (obviously larger expenses would require a lengthier capitalization period). Then, instead of paying the interest on the loan to a bank, pay back exactly what you would have to the insurance policy instead. The result is all of the interest payments grow your policy (which is owned by you). Similarly reinvest any dividends you receive into the policy. The effect is when you near retirement age (which the author had done strong feelings about) you can withdraw passive income (surrender the cash value of paid-up additions) which is tax free until it equals the cash value of the property. Doing this doesn’t change the death benefit which would still pass on to the beneficiary.
It’s an interesting concept but the idea takes a lot of dedication to personal accountability. The author also repeatedly talks about how safe the investment is because it’s based on bonds and real estate, however anybody who has seen The Big Short already knows the fault in that logic.