80: IBC First Principles: Mastering the Basics of Privatized Banking, Part 2

[00:00:00] Hello everyone. This is John Montoya and this is John Perrings. We are Infinite Banking Authorized Practitioners and Hosts of The Fifth Edition.

[00:00:12] John Montoya: Episode 80, IBC First Principles, Part 2. All right. John we covered one through three in the previous episode. If you didn't get a chance to listen to that episode, highly recommend that you go back to episode 79 and listen to one through three first, but let's kick off this episode with principle number four, money must reside somewhere.

[00:00:36] John Perrings: Yeah. And this ties into a number two that we talked about in the previous episode where there's only one pool of money in the world and it has to reside somewhere. And the kind of part about this, that, that relates to the one pool of money, how much of that pool do you have in your control and where is it residing?

[00:00:55] And I think especially over the last 20 years, there's been. [00:01:00] Really a hyper focus on investing and getting a rate of return. Financial gurus out there on social media talking about how cash sucks and all this other stuff. You'll never be in a worse position with access to cash.

[00:01:14] And so the idea that you should not have some type of liquidity I think is incorrect. And we should all have at least some amount of liquidity happening, at least for an emergency fund and then for an opportunity fund on top of that. And if you look at the really wealthy entities out there, they're sitting on Hundreds of billions of dollars of cash right now.

[00:01:37] Look at Apple's balance sheet and look at Berkshire Hathaway. Tons of cash just waiting in the wings for the right opportunity. The other thing it does is it gives them the ability to weather the storm. One of the things we don't want to have to do is we don't ever want to have to sell anything unless we want to, and unless it's right for us.

[00:01:57] The idea that money must reside [00:02:00] somewhere, where's the most strategic place for your money to reside?

[00:02:05] John Montoya: And not only strategic, but I think of efficiency where can you park wealth, park your dollars here in the U. S. where you can get the ability for your money to do multiple things at one time. If you don't have a system of IBC whole life policies set up, what you're having to do is divide up your money and put it into different places.

[00:02:34] To accomplish different things when you have your whole life policies, you're basically allowing the money that you save. To do multiple jobs you're being highly efficient with your money. You're solving for a death benefit, whether you feel that has value right now, that, that's a whole discussion that we can get into but [00:03:00] there's going to be value later on, even if you don't realize it today.

[00:03:03] For example, if you're single, unmarried and well. I don't really have any dependents. That's something that we can get into, but you're solving for that future death benefit. You're solving for liquidity. You're solving for control. There is a there is a guaranteed growth that's happening that is allowing you to keep marching forward so that you can look to at least.

[00:03:30] Keep pace with what's happening with the, with prices in the world. And what I'm referring to there is inflation. It doesn't solve for inflation directly . I spoke about it in the previous episode that you know, one of the reasons why IBC is so important is because it helps to reduce the impact of fractional reserve banking so that's, a higher level.

[00:03:53] But. You're getting back to my main point, you're accomplishing more things with [00:04:00] the power of every $1 of premium that you save into a whole life policy that you would otherwise have to divide, separate, and really, not get as much value from, by segregating your dollars into different places.

[00:04:15] So being efficient, that's just smart. And the people that look at a whole life and dismiss it. Because they can't see the forrest for the trees. They look at it from a cost perspective in the very first year, second year, third year, fifth year, they don't get what's going on and what we're solving for.

[00:04:38] So knowing that money has to reside someplace, be efficient, be strategic, like you mentioned. Where's the best place to do that? It's what we talk about all day long.

[00:04:51] John Perrings: Yeah, and one final point on that, we talked in the last episode about the actuarial nature of whole life insurance. The other the other [00:05:00] piece to this is Whole life insurance companies, we work with mutual life insurance companies. So what John Montoya is talking about, not separating your capital.

[00:05:10] The other thing we're doing is we're pooling our capital with other people who are also part owners of the mutual company to create a benefit for all of us. So we're all working together to create something that can't be replicated in doing anything by ourselves. And that's the law of large numbers.

[00:05:30] And so when we start to look at the value of how our money is treated Working together creates a better result than trying to go it on your own.

[00:05:41] John Montoya: Absolutely. And I'll just leave off with the whole life is the best place for fiat because wherever we park our dollars, there's no other place where we can get access to it. Under our control and know that it's always doing work [00:06:00] for us, no matter what it's guaranteed to increase in value every single year, no luck, skill, or guesswork required that there is no other place where you can park your wealth and have it do all the things in one place that a whole life policy does.

[00:06:17] And if you find it, let us know, because I've been searching for it ever since I came across IBC and whole life policies. I park wealth here because I haven't found another place. Where I can get all the attributes that I want in one place in a system.

[00:06:37] John Perrings: That's right.

[00:06:39] John Montoya: So principle number five, whole life is a private invention. Now I thought of this as a first principle, because I wanted to share with people the idea that government didn't create insurance, life insurance. private [00:07:00] individuals did, and they did it to solve a need for widows and orphans when it specifically, when it comes to life insurance.

[00:07:08] So it's really important to me that people understand that we need to take personal responsibility for our lives. And. I believe that buying life insurance is perhaps one of the most adult things that you can do. You're taking responsibility for yourself, for your loved ones, and the government really is there as a safety net.

[00:07:38] And as I tell my kids, the last thing you ever want to do is rely on the government and being able to be an individual sovereign to, to not have to rely on the government. That's a really important value. And this is a, an [00:08:00] idea that You know I personally want as small a government as possible.

[00:08:06] And so the idea of utilizing a private invention created by individuals, I want to lean towards that because I don't want to lean on a 401k. IRA where the government, Congress, our politicians, whether we like them or not, doesn't matter if you vote blue or red or, whatever other option exists.

[00:08:26] You don't want to rely on other people. And Congress basically passes the laws and sets the rules. And, here's a place for money that was created In the private sector, it predates the IRS. The IRS knows about life insurance. This is not some hidden secret. It's there. It might be hiding in plain sight because people are conditioned to, go to a bank and stuff their 401ks and IRAs government accounts, [00:09:00] but whole life as a private invention.

[00:09:03] That's pretty powerful because the last thing that that we all want to do is outsource our control and to have a place where we have a contract that we agree to, and it's a unilateral contract, that's what these whole life policies are, that this was created in the private marketplace.

[00:09:25] And once we have it It's ours, and it just, it allows us to take back power control in our lives that that we just can't get through any government government created idea. And I'll point to. An example that I had in my head as far as insurance that government attempts to solve for and what is social security that, that essentially is insurance.

[00:09:56] It's old age insurance, people who Don't [00:10:00] have enough to retire on they, they have social security at a minimum, which okay. But the fact of the matter is that government got involved and it's completely insolvent. I shouldn't say completely insolvent we're forced to contribute.

[00:10:17] Every single worker in the U. S., if you're on the payroll, you are contributing to Social Security. And so the government gets to spend that money before you do. And the Social Security Administration they're basically going to be Bankrupt insolvent in another 10 years, which means reduced benefits or more taxation for everyone.

[00:10:39] Whether or not you're going to realize the benefit. You could pay into social security and never realize a benefit. And that's not the case with whole life. Whole life as a private invention. You're solving for the death benefit. By the way, you can turn your cash value into a future source of income too.

[00:10:59] These are [00:11:00] all things that are solved for privately. We don't need the government to we don't need to pass the baton to the government to do this. And it's better that we. Take control of this and do it ourselves. So the mentality there that I'm trying to get to is that in this principle, whole life is a private invention.

[00:11:17] We don't need to rely on the government and we shouldn't, we, we should take responsibility for our own lives and whole life allows us to do that.

[00:11:25] John Perrings: Yeah, just real quick on the Social Security, deal in 2020, the annual report of the Board of Trustees for Social Security. They basically said in starting in 2021, so this is two years ago social security costs started exceeding the money it earns from interest and taxes, right?

[00:11:42] And in 15 years, the main social security fund will be fully depleted. Yeah, don't rely. The last thing you want to do is have to rely on the government to come and save you. we're from the government. We're here to help.

[00:11:56] John Montoya: Yeah we can probably end it there. Otherwise it'll just be a [00:12:00] rant. But yeah, take control of of your life and do it with a private invention. We have it within our power, it's all available but something that we've mentioned previously that I'll add is that you can't just buy life insurance.

[00:12:15] You have to qualify for it. So you have to be in good health. So the sooner. That you realize what's available with a whole life policy, what it can accomplish in your life, the sooner you need to get on it. If you're procrastinating, you got to wait a month, three months, a year, we've talked about convertible term policies, lock in your health now, because most likely as we age, it's not going to get any better.

[00:12:44] So at a very minimum, even if you're not. Ready to fully fund a whole life policy. You can at least lock in your human life value now with a convertible term policy.

[00:12:59] John Perrings: That's [00:13:00] great. And speaking of that, starting with a convertible term policy principle number six is get familiar with the concept of getting better every year. So to John's point that he just left off on, even if you're not ready to, fully commit and jump on board and pay, some of the larger whole life premiums, by the way, they don't even have to be that large.

[00:13:20] Just so we're clear on that. Start off with some convertible term insurance and build up to it, but get better every year, right? That's the idea that we want to try to focus on. And another, And John Montoya has some points here as well. But another area that I think is really important to look at in terms of getting better every year is being able to control the growth of our expenses, like our lifestyle, our debt service, our taxes, all those things that pull money away.

[00:13:51] And, As Montoya mentioned in the last episode, just completely overwhelm anything, any kind of high rate of return you [00:14:00] could get on the money, on the little bit of money that you can invest, instead focusing on controlling the growth of your expenses, because as income goes up Parkinson's law tells us that so will your expenses, typically for most people expenses.

[00:14:14] Grow at the same rate that our income grows. So if that's something you can start to get a handle on and just slow the growth, you don't have to cut your expenses out or anything. Slow the growth on that. You will get better every year by default.

[00:14:29] John Montoya: And specifically when it comes to a whole life policy, the concept of getting better every year, it's a financial unicorn to me. Because think of all the different places where. Money can reside. We talked about that as the fourth principle. And just real quickly equity in your house, 401ks, IRAs, bank accounts annuities really anywhere that you can park money.

[00:14:59] Where can [00:15:00] you. Park money and have it get better every single year, contractually guaranteed. A whole life policy does that on top of everything else that it does. But to me, it's a financial unicorn because we're not accustomed to being able to just relax and know that our money is working for us.

[00:15:24] And one year from now. It's going to be a greater amount than where we started off the previous year. If you think about all the pressure that we deal with in our day to day lives, money is another one of them. And unfortunately we live in a world where. Not only do we have to work our 40 hours a week doing whatever it is that we do, but now we have to become, professional investment money managers.

[00:15:53] And we have to worry about how our money is growing. Yet we have a place where we can [00:16:00] park wealth, where it's going to get better every single year for the rest of our life. That's really impactful for me because it just allows me to. Take a deep breath and know that, okay, I am liquid. If something happens, I have access to reserves that will allow me to write out any economic storm.

[00:16:22] If something happens to me in my life, I'm not guaranteed to live to, next year or age 90. My family's taken care of. This is going to get better every single year, even if I'm not around to see it. And it's just, it's so important to me that principle of getting better every year, that I have that in my life.

[00:16:47] Because I can live a fuller life knowing that my, my needs across the board are solved for my need for financing, my need for an [00:17:00] emergency account, my need to, protect my family, my need to have the ability to produce income in retirement, which a life insurance policy, a whole life policy, Thank you.

[00:17:12] Solves for, and not just in a direct way where I can take distributions from my cash value and then take policy loans. That's one of the ways to create income from a whole life policy, but through other options and how a whole life policy will complement other assets that we accrue in our life.

[00:17:33] There's just so much within a whole life policy and to have that ability to get better every single year. It just adds to everything else that we're doing in our life that you can't replicate. And so I highly encourage all of you listeners to get familiar with the concept of getting better.

[00:17:54] Every single year because whole life is a financial unicorn that is [00:18:00] going to allow you to do that. You park money in other places. You're going to have to be a professional money manager. And you can outsource that too. And there's nothing wrong with having a money manager. They aren't going to be able to guarantee you a return on your money and you're going to pay for that service and that's okay.

[00:18:25] People deserve to get paid for what they're doing, including managing your money, but you should get familiar with getting better every year and the place where you can do that. And you don't need to hire a money manager to do that because a whole life policy is a guaranteed contract. It's going to happen for you no matter what.

[00:18:45] And even if you're not around to see it, and that's so incredibly impactful.

[00:18:50] So let's talk about principle number seven, and this is where we're going to leave off today. And principle number seven is no [00:19:00] dollar is wasted. When people think about whole life insurance. You've got a lot of naysayers who, by the way their understanding of life insurance is most likely based off someone else's misunderstanding.

[00:19:16] And what's a common myth or misunderstanding that exists around whole life insurance is that it's a waste of money. You're going to put money in and the cash value is less than the premium paid for a set number of years. That's a cost. That's an expense. That's a waste. I could be putting my money somewhere else.

[00:19:40] This is what people are thinking. And, they're chasing rate of return for one. So they don't know what's going on. So they don't see the value of life insurance. But there's this idea that dollars are wasted. By redirecting wealth to a whole life insurance policy. [00:20:00] And the principle here is that no dollar is wasted with a whole life policy because we're creating economic value.

[00:20:10] On day one by building equity in the policy, but also locking in our human life value and those two things work together. And in fact, that's what makes a whole life policy, uh, incomparable to any other type of life insurance that exists. And real quickly, there's term, which will give you a death benefit guaranteed with a fixed premium only for a certain.

[00:20:39] period, a certain term. And then after that, it's going to increase every single year. And then there's permanent life insurance. And we joke around that only one type of policy is permanent and that's whole life. And the other we put in quotes as permanent and that's universal. And the reason why is because the death benefit It is not guaranteed.

[00:20:59] You're [00:21:00] basically renting or leasing that death benefit and then overfunding it and hoping that wherever those excess premium dollars goes, it'll be able to keep up with the increasing cost of insurance year by year. So it. It's only permanent if you're able to keep up with the premium in a universal life policy without it cannibalizing itself because something went wrong.

[00:21:24] With a whole life policy, no dollar is wasted because every single year, as mentioned with the previous point, it's going to get better. You get a cash value that's guaranteed to increase in value every single year until it ultimately. Becomes the death benefit on the last day of the contract or whole life policy.

[00:21:44] When you really understand how it's engineered, it's guaranteed to endow. You receive a guaranteed blueprint. That's what that guaranteed ledger is. Try to compare it to any other thing you can't, but you have cash [00:22:00] value that is the present value of that future death benefit. No dollar is ever wasted.

[00:22:06] If you think that is true, then you don't understand how a whole life policy works. And you're no better than all the other naysayers out there who misunderstand and don't grasp the power of. Of what a whole life policy does and how it's able to guarantee that step up in value every single year to ultimately equal that death benefit.

[00:22:32] It's going to happen every single year. This is going to get better and better. No dollars ever wasted and beyond the guaranteed ledger. You have non guaranteed dividends, which only add to the value, increase the cash value, increase the permanent death benefit at no future cost by the way, in terms of additional premiums to support that additional death benefit through the dividend.

[00:22:58] So this just [00:23:00] gets better and better, but you start off with a guaranteed ledger that basically shows you no dollars ever wasted. It's it's what makes, it's part of what makes Whole Life unique in how we utilize it to strategically solve for so many things in our life.

[00:23:18] John Perrings: Yeah, some, sometimes the way I describe the different, term versus whole life term is like renting an apartment, you pay all your monthly rents and then, you live there for however many years and then when you move out, you don't get any of that rent money back, right?

[00:23:36] Whole life is more like buying a house. So like. You know, some of the, financial people out there that like to bash whole life, they usually have no problem with real estate and for some reason they just don't put it together. That whole life insurance is really like buying a property. Every time you make a premium payment, you build equity in that asset.

[00:23:58] Just like a house, [00:24:00] just like you do with a house. When you buy a house and you put a down payment on a house. Do you have access to that down payment portion of your equity? If you bought a house, you put down a down payment, you're 20 percent and you went to the bank and tried to get a home equity line of credit or some type of loan against the property, a bank most likely would not give you.

[00:24:23] They would not loan you that 20 percent back. So there's this idea that somehow life insurance should have immediate liquidity. After the first premium payment, we do have some liquidity and I would argue it's even better than when you buy a house because you cannot get any money out of that house.

[00:24:39] That's the day after you put some money into it. With a whole life insurance, you can. So the money is never wasted. Yes, you will have less cash value than what you've paid in premiums, but you will have some cash value, especially if designed in a typical, IBC style, quote unquote. So the idea by the way, that that [00:25:00] first premium payment buys you a humongous death benefit that's permanent, like John said.

[00:25:05] So the money is never wasted. It's just, it just matters on what's happening at any given time. So like when you start a business, you put money into a business to start it, you don't get that money back right away. And so, this idea that, we should have one for one value when starting this this this asset from scratch is I think a little disingenuous from a lot of the, so called financial experts out there.

[00:25:36] And it's never wasted. You're always getting something for that premium dollar.

[00:25:41] John Montoya: Absolutely. Really what you shared there. And I want to just say that life insurance, a whole life policy is an asset because you were talking about real estate as an asset. And it just made me think, most people don't realize a whole life policy absolutely is an asset. You can ask your [00:26:00] mortgage broker on a 1003, that's the application to apply for a mortgage.

[00:26:04] If life insurance is listed as an asset on that application, it absolutely is. Now there, most mortgage brokers will never ask you how much life insurance you have because they overlook it. It's just that they're not trained to think of life insurance as an asset. And society in general is not.

[00:26:23] Conditioned or educated enough to think of life insurance as an asset, but it absolutely 100 percent is, and it's an uncorrelated asset to the real estate market. It's a uncorrelated asset to the stock market. It's very much an asset that You need to realize exists beyond just a death benefit.

[00:26:46] And you mentioned starting a business principle number three, banking is the most important business in the world. We've talked about this, and this is a point that Nelson made. That really when you're starting a whole life policy, you're starting a [00:27:00] business from scratch. And as you mentioned, You, you, you don't start a business without capital, so it requires capital.

[00:27:09] And not only that, you don't turn a profit. Your first day, week year most companies actually fail. And here with a whole life policy, you have a guaranteed contract where you have a business that is guaranteed to perform. No matter what condition exists in the economy. So you no dollar is wasted.

[00:27:33] Yeah you're going to have less cash value than premiums paid in the early years, but you're guaranteed that this contract is going to become profitable and that's without any dividends added on top. else do you have the guarantee that you can start your own personal finance business, take control of your lending function, your banking function, and, and know that [00:28:00] everything is going to work out with no luck, skill, or guesswork on your part.

[00:28:05] So the people that think that money is wasted. The dollar is wasted by buying life insurance. You're completely wrong. No dollar is ever wasted.

[00:28:13] John Perrings: Awesome. I think this is a good place to wrap up part two of our first principles. We got one more part coming next week, part three, and if any of this is resonating with you as usual, you can head over to TheFifthEdition.Com and you can book a free 30 minute. Consultation with us, no obligation, and we can talk about how any of these ideas could apply in your life specifically, or if you're one of those people that likes to learn everything they can before talking to someone.

[00:28:43] We have an online course just for you. Same place, at TheFifthEdition.com. You can see it right there at the top. John, thanks a lot. Looking forward to getting into part three and wrapping this series up next week with you.

[00:28:56] John Montoya: Sounds good, John. All right. Thank you, everyone.

[00:28:58] [00:29:00]