1) You shouldn’t hesitate to capitalize the concept by putting as much capital as possible into it, as the more money within the system, the more that can be regained as tax-free “passive income.”
2) You should always be prepared to pay back any policy loans you take from the system.
Nash says that the idea that premiums should match income may sound strange, but the fact that all an individual’s income flows through someone else’s bank now means that doing this is just taking control of your own finances.
Paying a significant portion of every dollar in interest into a banking system that is not your own is not productive, in his opinion. He sees no reason that a person must stop at financing just one car using IBC. In fact, Nash shows how, with significant capitalization, the system can be used to finance multiple cars, and even be extended into the realms of equipment leasing, a home mortgage, and self-insurance.
While Nash’s infinite banking system is by no means a recipe to get rich quick, the calculations he uses shows that it can be a powerful means of structuring your finances to benefit from the ability of dividend-paying life insurance to:
§ Provide a source of financing for major purchases
§ Serve as a vehicle for setting aside funds to use in retirement
§ Provide a death benefit for your beneficiaries
Capitalizing an Infinite Banking System
The IBC enables the use of dividend-paying life insurance to set up a system that has all the hallmarks of a banking system, according to Nelson Nash. The steps needed to get into the business of banking using life insurance include:
§ Choose a high-quality dividend-paying life insurance company to purchase a policy from; preferably offered by a Mutual Insurance Company
§ Capitalize this policy over a period of at least four years, and ideally longer to make the system more profitable
Start Your Own Business
Nash stresses that no licenses are needed nor are customers required for you to operate this “business.” You don’t have to hire any engineers or salespeople. All the hard work of starting up the business has already been done by the insurance company. No other start-up business comes with such advantages, as far as Nash is concerned.
The key to getting started in the capitalization phase, according to Nash, is having the desire to overcome Parkinson’s Law and cut back on your spending to set aside money for this purpose. He recommends finding a life insurance agent who is well-versed in the IBC as well as discussing the process with other individuals who are familiar with the infinite banking concept.
Don’t Wait
Above all, Nash says, you should get started as soon as possible. By waiting to start the capitalization process, you make it harder to amass the sums needed to reach your financial objectives. In discussing ways to find the funds to add to your dividend-paying whole life policy,
Nash brings up the objection often voiced by those who hear about infinite banking for the first time, namely, that they could get a greater rate of return by investing elsewhere. However, Nash says, this misses the point that the IBC is not focused on the yield of an investment, but rather how you finance anything that you purchase. Nash states that “It is always better to finance it through your banking system than out of your pocket.”
Nash also digs into the numbers behind financing a college education, explaining that given the doubtful value of a college degree, or at least some college degrees, a person would be better off investing the sums spent paying for college in a dividend-paying life insurance policy.
The total income generated by such a policy, in his estimation, would likely be greater than the value created by a college degree. While Nash states that he is not against higher education, he worries that students attending such institutions may be exposed to a professor who teaches them that whole life insurance is not a good place to put money.