Become Your OWN Banker
Updated: Apr 26
TRUTH - The core values of honesty, integrity and "objectivity" - when planning for your own financial future - and searching for financial advice - are absolutely paramount, in these tough economic times.
It is my personal belief that unfortunately, most financial "advice" given today is not only UNobjective - but also, severely "biased". This is not to say that all such advice is bad, because there are indeed, many financial professionals out there who will have your best interests at heart.
However, "let the buyer beware" is a good motto to follow. I believe it is critical for any individual or any business person to do their "own" homework carefully - to gain the right "financial education" - in order to know every major fact when considering the choice of a financial advisor, a service, or a product.
Sadly, the real "truth" is that many of the major facts within financial products being sold today are conveniently "not fully disclosed" to the customer / client / investor. And too much of what is out there is complicated, even overwhelming, and very time-consuming, to understand.
Risk - Also, I believe the North American public has been "brainwashed" into believing they must accept risk, volitility and unpredictability in order to grow their net worth substantially, and to build real wealth.
Well, nothing could be further from the truth, because in this Blog Post, you will learn of yet "another" way you CAN build wealth - safely - "without" the usual, violent gyrations of stocks, mutual funds, futures, real estate, gold, and other such investments.
Becoming Your OWN Banker
Please Note - The brilliant concept referred to here is "in addition" to our VIRTUAL WEALTH FORMULA (which stresses the "Recurring Passive Income" component as the most critical one in the Formula). In another Blog Post ("Virtual Wealth Formula => on STEROIDS"), we show you how you can "fast track" to FINANCIAL FREEDOM.
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The "Become Your OWN Banker" strategy is something you can implement AFTER you have first achieved the Virtual Wealth LIFESTYLE ... not before. I simply want to make you "aware" of it in this Blog Post. Let's dig in a bit further ...
Reality - With the dismal failure of many (perhaps most) INVESTMENTS over the past two decades, the job losses, the rapid fall of company pension plans, the housing bubble, the bankrupt social programs, the past "fiscal cliff" fiascos in the US (which Canada is "tied" to), etc - a great many people are now either stressed out, or taking 2nd jobs (if they can find them), or really "hurting" financially, or post-poning their retirement plans. Their financial worlds have turned upside down - they want more control.
The most damaging aspect of our personal finances is not the small rate of return that we MAKE on our INVESTMENTS ... it is the large amount of money we SPEND every month on our personal DEBT (car loans, mortgages, credit cards, etc) - and the money we LOSE every month to interest+ taxes + the "opportunity cost" (the growth our money 'could' have earned, had we not payed 'cash' for our purchases).
It is that part (what we SPEND, and LOSE) - that adds up to a financial FORTUNE, over time. And that (otherwise lost) "fortune" can be totally RE-CAPTURED!
UP FRONT - I wish to disclose that, although my own professional background and my education has been largely in the field of counselling clients on business and financial matters - I do not personally 'market' this outstanding (IBC) financial vehicle (I am not "licensed" for that) - nor do I receive any financial compensation or rewards whatsoever for recommending it, or referring the few Special Advisors who do specialize in it.
I do applaud the IBC idea, but more importantly, I feel I am able to provide you with a totally "independent" view on this, as I have "no ties" to any IBC financial product, or company, or promoter.
My Goal - I simply believe that the concept, and financial principles of the IBI (Infinite Banking Institute) and the IBC (Infinite Banking Concept) are SO important to your (our) economic health that I felt compelled to put this Blog Post together, to at least "expose" you to it - to give you some "basic" information about it - to "guide" you, should you wish to explore the IBC further with a well qualified professional.
What follows therefore is, hopefully, helpful to you. Let's get started...
BANKS - The time-tested - 5,000+ year old principles of BANKING have shaped - and created WEALTH - for some of the biggest corporations and institutions in the world - bar none.
Their ASSET strength on the Balance Sheets is enormous.
Their Secret - Doing what THEY do is the major key - instead of doing what they have been "telling" YOU (us) to do, for centuries!
FINANCING - Commercial banks are in the FINANCING game ("fractional banking").
They "accept DEPOSITS" from their customers (the depositors) - and they also "grant LOANS" to their customers (the borrowers). But ... there's a HUGE difference in the INTEREST rates between these two consumer groups (the interest they "pay" to their depositors -vs- the interest they "charge" to their borrowers)!
For example, banks (currently) pay depositers no more than about 2% -- whereas they charge -- for home mortgages, about 4-5% -- for car loans, about 8-9% -- for credit cards, about 18-22% . You get the picture!
Leverage - This (interest rate "spread") is one of the major ways that BANKS make their gigantic PROFITS, and show wealth (their billions in ASSETS), on their Annual Financial Statements.
About your OWN Family Bank ('Private BANKING System')
Now (when the timing is right) YOU can do the very same thing the BANKS do!
You do this by using this very same Wall Street / Bay Street financial model (financing) - to grow YOUR asset base - to build YOUR wealth - to protect YOUR financial future - without any RISK.
Over time, your own "Private Banking System" (PBS) can become the central HUB for almost all of your financial decisions (mostly, the "financing" of future purchases).
This (IBC concept) is truly different. It's a NEW (yet proven) way for YOU to grow your cash flow, grow your net worth, and build wealth - safely. In fact, it will enable you to SPEND your money, while "at the very same time", GROW that same amount of money ... you get double-duty on your money. You can keep spending, yet grow your wealth at the same time (sounds weird, but it's absolutely true).
It's NOT 'Saving & Investing' - It is very important to note a KEY "distinction" here. Creating your own family bank (your Private Banking System - PBS) is not about "saving & investing" your money (surprise)!
NO, it is about doing what the BANKS do - "financing" (in this case, SELF-financing).
With your own PBS, you will be "financing" the major purchases you make during your lifetime (the cars, home improvements, furniture, equipment, vacations, drapes, carpets, etc) - and thus, build wealth.
It's NOT a 'Get-Rich-Quick' Deal - This is not about a Home Business opportunity, or a Franchise, or Network Marketing, Affiliate Marketing, etc. Nor is it about some kind of over-night "rags-to-riches" deal - this about truly securing (actually "guaranteeing") your financial future, over time.
Over time, your own PBS will creates large, and growing (predictable, and totally risk-free + tax-free) liquid CAPITAL FUND for you - one that you can "depend" on (in fact, it is contractually 'guaranteed') - one that is creditor-proof - one that can greatly expand your net worth position, and build real WEALTH for your future.
Again, this is after you have first, achieved a Virtual Wealth LIFESTYLE, as outlined in the opening Blog Post on this site.
When you are ready to buy your next car, or to pay down student loans, or to purchase an item, or pay for a service, or buy equipment for your business or practice, etc - and you have enough capital in your PBS -- instead of paying cash, or financing it, through a "commercial bank", you utilize the funds, or finance the purchase, through your OWN bank loan - you are "both" the CUSTOMER and the BANK.
INTEREST - Ask yourself - without looking - how much do you, or your household, SPEND each month - purely on FINANCING charges (the interest paid).
Write this 'guess' down on a piece of paper, and refer to it.
Then, the next time you pay the bills, try to calculate the "actual" number - remembering that it includes not just "obvious" items (like the explicit finance charges on credit cards), but also that component of "mortgage" and "vehicle" payments that does NOT go to principal reduction (again, the interest paid).
The result will probably "shock" you. What this number means is - this is how much extra income (cash flow) your household would "have available" each month - IF it's "debts" magically disappeared (most of which is INTEREST)! It shows you how much "past" decisions to accumulate debt (to spend beyond the household's means) at the time - are constricting the household's "current" finances.
Uncommon - The IBC process is a sharp paradigm shift from where most of us are in our financial minds. It is different from what we're used to. It goes "against the grain" of most traditional Financial Planning and 'Financial Entertainment' gurus. It is a concept that has been around for at least 150 years, yet it is seldom ever discussed by any Wall Street or Bay Street advisors as a means of generating wealth for their clients.
This is partly because most do not have "access" to the IBC process or financial vehicle (and therefore, there's no financial incentive), but it is also because they stick to the "traditional" means of building wealth (by "investing" in more risk prone financial vehicles). They do not know (or truly understand) the huge impact this (IBC) strategy can have on your financial security, or more importantly, your future wealth.
The IBC concept is indeed "uncommon" to the vast majority in North America.
In a Nutshell - The concept is pretty simple. Rather than spend cash on a 'depreciating asset' - and lose the opportunity cost (as previously discussed) - you save the capital in a Private Banking System (through an IBC contract).
When you need to make a purchase, you "borrow" from it (your Private Family Bank).
The important thing is that you must always treat the borrowing as a bona fide LOAN - exactly as though the money had been borrowed from a lending institution, such as the corner bank - and then repay it (back to your own Private Family Bank - into your IBC contract).
This process will truly, build real wealth (safely) for you.
Establishing your (IBC) Private Family Bank
In order to make all this work, you must first "capitalize" your private banking system (such funds "can" become available once you have achieved your VIRTUAL WEALTH LIFESTYLE (see the opening Blog Post on this site).
Similar to getting a regular bank charter, a newly established Private Family Bank needs to have 'capital reserves' in order for you to make loans from it. So, you'll have to save, transfer in, or invest, some capital into your Private Banking System (PBS).
This funding can be rather quick, or may take a little time. It will depend on your current income and your asset availability. But, there are some ways to do this - without using any "new" money too.
Your (4) Purchase OPTIONS, When BUYING Things ...
The simple truth is - if you use CASH, it should "always" have a firm COST associated with it. When you "spend money" - whether you are buying a new vehicle, or a washer and dryer, cash/capital has a definite COST attached with it. You would normally only have one of three (3) choices when making a purchase, but I’m going to show you a fourth (4th) choice:
1) You can use "someone else’s" money (like the corner bank's), by borrowing from them, and then PAY the interest to them + the original loan amount - for the use of their money.
2) You can use "your own" cash/capital (savings) and GIVE UP the interest that you 'could' have been earning, had you been able to keep your cash saved/invested. This is called OPPORTUNITY COST - the cost of "lost income" (or return) due to disposing of your cash - forever.
3) You can often "lease" your purchase, usually at a lower monthly rate - but at the end of the lease, you have nothing.
4) This fourth option is "new" to most people. You can treat your cash like businesses and corporations do - through the use of EVA (Economic Value Added) and take LOANS on your own cash (capital injected into your Private Family Bank) and "pay the loans back" - with both principal and interest.THIS is what "Becoming Your OWN Banker" is all about.
This way, your own capital is earning a "rate of return", and you are paying YOURSELF (your bank) for "the use of" that capital - rather than paying someone ELSE (corner bank, or finance company) for the use of their capital.
In Options 1, 2 and 3, you will end up with "nothing" to show for it, except the (now depreciated) item you purchased in 1 and 2. For instance, if you bought a vehicle, you would end up with a vehicle, and whatever its depreciated value is.
In Option 4, you not only have your (depreciated) vehicle - you also have your "original capital" -AND- the "interest" you would have paid (either to someone else, or lost, since you "used up" your savings/capital - the opportunity costs).
Note - By using your Private Family Bank, just to finance your different CARS during your lifetime, you could accumulate all the money you need - to fund your children's education - to pay for cruise vacations - as well as your own retirement - and/or any other life goals! With your "own" PBS ...
You can turn just the "financing of your CARS" into an appreciating ASSET.
Imagine the benefits of being able to save for your retirement at the very same time that you are financing cars, financing a home, or financing your children’s education. These are all things you're going to pay for anyway, but they would normally "take away" from your retirement savings, instead of helping to build your retirement savings.
Your net worth will start to increase substantially when making loans to "yourself" for the major purchases (and expenditures) you make.
There is no other choice. It is one of the four (4) above. However, most people never know that there even IS an Option 4. And Option 4 will cost you absolutely "no more" than the other Options.
Yet, look at the huge difference, and consider the enormous "potential" available, when you use the principles of FINANCING (your current SPENDING) to build wealth, safely - instead of INVESTING, to do it (with the possible risks). See below ...
The above Pie Chart shows the “impact” of TAXES on our money