Do you need infinite banking to achieve financial freedom? The simple answer is no. There are other ways to achieve and earn money without it, but that doesn’t mean it won’t help. In this episode, Chris Miles shares the different ways you can benefit from having infinite banking when creating passive income. Find out how you can make the most out of your investments and achieve greater returns by tuning in!
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Do You Need Infinite Banking to Create Passive Income
This show is for you. You worked so hard for your money, but you want your money to start working harder for you now. You want that freedom and cashflow now, not 30 or 40-plus years from now, but right now, so you can live that life that you love with those that you love. Most importantly, it’s not just about getting rich. It’s about living a rich life because as you’re blessed financially, you can bless the lives of others.
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I love to read your questions. Thank you so much for submitting these questions, whether you do it through our website or on live events like we did a Facebook Live not so long ago for our Money Ripples Facebook page. Thank you so much for you guys tuning in because those questions are huge. A question I got a couple of times within the same week, people were saying, “Chris, do I need infinite banking to be able to make these work with investing?” Some of you even said, “I don’t know if I can make this work because I don’t know if I can get an infinite banking policy.”
Here’s the truth. I’m going to give you the short answer to this, and then we’ll go longer. You don’t need infinite banking to become financially free. In fact, many of our clients had become financially free before they did infinite banking. Do they work hand-in*hand? Yes, they’re awesome, but do not think for one minute that the key to financial freedom is infinite banking, which is for those of you who don’t know, using whole life insurance as a way to create a supercharged tax-free savings account. That is not the tool. If there’s anybody out there telling you that is the way to become financially free, it’s BS. It’s bull. It’s not true. It’s completely wrong. They’re just selling you something if that’s the case.
I’m not denying it. It’s a great tool, but it’s one vehicle that has to work with many vehicles to create financial freedom. How do I know? It’s because I’m there and we’ve got clients doing the same thing. Most of these people who are selling you insurance policies are not financially free. Probably about all of them are not in the place where they could just stop working if, all of a sudden, they stopped getting paid from these life insurance policies.
Coming from an investor perspective like mine, you do not need it, but it is an amazing way to enhance your returns. Let me tell you why. We’ve got many clients. We have some clients that are either in their 70s, and maybe it’s not a good option for them now. Maybe their health is horrible, or maybe they don’t want to do it yet. Many people won’t do the actual infinite banking part, but they will go and invest their money and create passive income returns from these alternate investments, whether they’re in real estate.
You don't need infinite banking to become financially free. Click To TweetThere are various forms of real estate, whether rental real estates like single-family or multifamily homes. It could be apartment buildings, self-storage, land, or oil and gas type of mineral investing there. It could be in businesses. It could be in franchises. There is a myriad of ways to create passive income so that you work because you want to, not because you have to. Not once did I say that’s infinite banking, did I? No. Infinite banking does not generate passive income. What it does do is allows you to store and collect the money from those passive investments to then use to create multiple returns at the same time.
For example, say that you’ve got $50,000. You can invest that $50,000 into a real estate property and be done. Maybe you’re making $400 or $500 a month on that real estate property. You could use your savings account, but when you use your savings account, the money leaves, and then it’s gone. You no longer make money on that savings account. It’s all just in the real estate property. That’s perfect. When we use the life insurance policy, where we use that as a savings and say you have $50,000 in there, you then get a line of credit against it, whether it’s through the insurance company or the bank. That’s usually, in most cases and most markets, lower than what they’re paying you.
Let’s say for example you’re getting paid 6% on your life insurance, but they charge you 4% for the loan. You make 2% because while they’re paying you 6%, you made a 2% spread on your money. You then go and invest in real estate. Say that real estate is paying you 10% a year, or to make it easy, $400 to $500 a month, but that $50,000 is earning you an extra 2% a year. That’s $1,000 a year. You now went from making $5,000 or $6,000 a year to making $6,000 or $7,000 a year because you use your life insurance instead of just using your cash from your checking or savings account. That’s the difference.
I’m going to show you the basic flow of how it works to make it work, where you can get a much higher return even just with $1,000 or so when you do this. I call it supercharged savings. We’re using whole life insurance, not Indexed Universal Life. It doesn’t work the same way with that policy of whole life insurance that we create high cash value. We want to make sure that this policy has lower costs so you can have higher returns.
Most people go and take money, put it into an investment, and create cashflow, and then that cashflow goes back to their checking or other savings account. You then start to build that up over time as you get paid that cashflow to then reinvest again. Using that same example, say it’s $50,000. You take that money and invest it into that real estate deal. You’re getting paid $400 or $500 a month. It goes back to your checking or savings account.
You’ve got to build that up over time before you have enough money to do your next investment deal. You’re doing the exact same strategy, but instead of using your checking or savings account, which pays you point nothing percent, and then if it does pay you anything, you get taxed on that point nothing percent. Instead, we use life assurance, which is tax-free, paying you much higher returns. What you do is you have your cash inside your life insurance policy, and you get a line of credit against it.
You’re getting a loan, but this loan does not require monthly payments. You can pay it back however and whenever you want. If never, the deadline for paying back the life insurance loan is your death. That’s where they’ll take the money, pay out the death benefit, and then pay the rest of your heirs or family tax-free.
There is no major requirement here. It’s not like it’s on your credit. This is off the books, a private loan with the insurance company or with specialized banks. You now take this money. Instead of taking the cashflow and putting it into your checking and savings, you’re taking the cashflow and putting it to pay down that line of credit. You don’t have to pay off the line of credit. You can still use the line of credit all you want. You can leverage anywhere from 95% to 100% of the cash in there.
Think of it. It’s like any equity in your house. It’s a standing home equity line of credit. The bank says, “You can get to it whenever you want, from 95% to 100%. If the house appreciates, we’ll give you a line of credit to increase as well, so that falls the value of that.” It’s the same concept, but you’re not locked in having to make monthly payments. Unless you’re at 100%, the banks will say, “Pay us interest only to keep it from going over 100%.”
The nice thing that banks do and the reason why they’re willing to do it if you get a 95% loan is because they know the interest of you being charged won’t be nearly as much as how much it grows by, especially when they are designed the right way, which is what we do here at Money Ripples. That’s how you’re using it. You’re taking the cashflow from the investment, putting back towards this line of credit, paying them the balance down, then running it back up and using it again. You’re constantly flowing the money back and forth and in and out just like you would normally, but you pick up more along the way.
As I mentioned, it’s tax-free. It’s also protected from creditors and lawsuits in most states. In most states, it’s 100% protected. You can have millions in here. Even if somebody wins a lawsuit against you, they can’t get this money. They can get to almost any other asset that you have, but this they cannot get to. There’s a guaranteed growth of at least a 4% to 5% average growth. Many of the guarantees might be 3% or 4%, but companies we use have been paying dividends above their minimum for at least 100 years straight. Many of them are at least 150 years straight in a row. That’s through depressions and everything.
There are no stupid limits and penalties like what you would get with Roth IRAs, IRAs, or 401(k)s. You don’t get slapped with penalties or anything like that. There are no extra costs or fees for borrowing your money other than just paying interest. I already mentioned bank leverage, and you have access to cash now.
Infinite banking is a great tool, but it's one vehicle that has to work with many vehicles to really create financial freedom. Click To TweetLet me give you an example. Here’s a real estate property. Say it’s a $250,000 down payment on this apartment building. I know that’s a lot of cash, but I’m using this for those of you that might be thinking even bigger. Say the cashflow is only $2,500 a month. That’s about 1% a month or 12% a year cash-on-cash return. That’s good for a property. If you use your savings account after nine years, where you’re getting this $2,500 a month or $30,000 a year, you’ve put $270,000 into your savings account. Guess what the total interest was after paying taxes? You made a whopping $1,200, earning your 0.1% on a savings account if you’re earning even 1.1%. It’s nothing too exciting.
Versus if I use life insurance doing the same strategy, and I use my own real numbers, here’s what happens. After nine years, you have a $126,000 profit. I increased the line of credit. I only made about a 1% spread on the line of credit. Despite having a 1% spread, it still comes out with a $126,000 profit. I want to ask you a hard question. Would you rather make $1,200 interest over 9 years or $126,000, which is 100 times more? That’s a no-brainer. That’s what we’re talking about here.
This is my point. It’s an amazing vehicle to use, but it’s not required. You do not need to have an infinite banking policy to become financially free. We can do that regardless. We’ve had clients do that. The majority of our clients use this in coordination. You’ve probably read that in some of our interviews with people. I never asked them to give feedback to say, “Tell us about infinite banking.” Most of them volunteer because they think it’s awesome. They know that once they understand and use it, they’re like, “This is a no-brainer. Why not use it?” That’s why.
Is the key to financial freedom infinite banking? Not at all. You can never make enough money in the infinite banking policies to truly become financially free. The numbers don’t work out. You don’t make enough money. The only way to do that is for you to be able to take that money and invest in things that are different, whether it’s your business, alternate investments, or both. You need to be able to invest in alternative investments that give you double-digit returns. There is the key to freedom. If you want to accelerate it even a little bit more and give a little bit extra juice to it, add infinite banking, and you get those two hand-in-hand working together, that one-two punch, and you’re unstoppable.
I appreciate the questions because I didn’t know that I wasn’t explaining this right and correctly. As always, if you have questions, reach out to us at MoneyRipples.com. Ask us whatever it is, whether it’s about passive investing, how to create more passive income so you can become financially free, or infinite banking. Reach out to us. We’d love to be able to serve you in any way possible. Go and make it a wonderful, prosperous week. We’ll see you later.