IS “BECOMING YOUR OWN BANKER” A SCAM?

The question of “becoming your own banker” is growing more and more prevalent today as people begin to realize that just owning or purchasing high cash value life insurance won’t make you significantly richer. Should you become your own banker to grow and protect your financial assets? It depends. Let’s take a closer look.

On a regular basis, it seems that someone calls in and mentions how they paid off a mortgage, a car, or some other lower-interest loan by borrowing from their life insurance policy and transferring their debt to the life insurance company.  Sadly, that loan against their life insurance at a higher interest rate is going to cost more money than if they hadn’t transferred the debt at all. If you want to use the strategy of becoming your own banker to grow your wealth, it is important to understand how the strategy really works before borrowing from your life insurance policy.

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Becoming Your Own Banker

The theory of “Becoming Your Own Banker” was never based on individuals freely borrowing from their life insurance policy without proper knowledge of interest and loans. “Becoming Your Own Banker” is about leveraging the infinite banking concept to increase cash values and your overall wealth. However, over time, the concept of becoming your own banker has been misused by certain insurance agents looking to profit off of some customers’ lack of financial understanding. 

Hearing and reading many thoughts and reviews about becoming your own banker over the years, we’ve identified a problem. Some life insurance agents who have heard about “Becoming Your Own Banker” (aka the Infinite Banking Concept) are using poor logic as they use the concept to sell high cash value life insurance. It baffles my mind how many people buy into some of the “becoming your own banker” promotions that are floated around today. This is why we have so many people wondering if it’s a scam to be your own banker with this strategy. So contemplate the following statement very carefully, “How can raising the interest rate on the money you have to pay back to somebody else, even the life insurance company, ever be a good thing?” 

Here’s where things get interesting…

Borrowing from a life insurance policy only makes sense if the rate the insurance company is going to charge you will be lower than what you would have had to pay somebody else to borrow the same amount of money.

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And by the way, whenever you borrow money always make sure that you can make more money than what you have to pay for the loan, and if you can’t…don’t borrow the money. Making sure you can earn more money than what you have borrowed is called creating free cash flow. This is important if you want to practice becoming your own banker in the way it was originally intended.

Free cash flow is far more critical to creating wealth than purchasing all the life insurance in the world. If you have questions about the validity of that statement, study Jeff Bezos, the founder of Amazon, and find out why he believes so strongly in free cash flow.

The Power of High Cash Value Life Insurance

That being said, never ever underestimate the power of owning and leveraging high cash value life insurance to become your own banker.

Here are some good reasons/circumstances where “Becoming Your Own Banker” may help you achieve your financial goals:

• You need quick money for a project, emergency or investment that surfaces in your life
• You need to make a purchase, but don’t want to give up your returns or dividends
• You want to have more control over the terms of your loan(s)
• You have sporadic cash flow and need a more friendly repayment schedule
• You want to take advantage of the cash back, points or travel miles on your credit card, but never have to pay interest to the credit card company
• You want to be able to spend all you make during your lifetime and still leave a legacy
• You believe that contracts are more dependable than speculations and projections
• You desire to keep more of what you make
• You want to leverage money multiple times annually but only pay interest once annually
• And the list goes on.

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Take the Bull by the Horns

But never get caught up in believing that simply purchasing high cash value life insurance policy is the quick fix solution to becoming your own banker. High cash value life insurance isn’t going to accomplish any of these wonderful things for you if you don’t take the bull by the horns and ascertain the power of wisely managing your money and how this thought process, coupled with owning high cash value life insurance, allows you to become the banker in your life. Through the process, you can become wealthier than you possibly could be without owning participating whole life insurance, but this aspect is definitely part of the process and not just the life insurance product.  

This is the missing link in many “becoming your own banker” sales pitches that many agents leave out.  Many agents seem to conveniently overlook some of the facts to make a quick sale.  Now you know better and shouldn’t lose any money on rushing out to purchase a 7702 account, Indexed Universal Life insurance or any other hyperbole some agent may be trying to pitch to make a higher commission without teaching more of the thought process that bridges the gap between a nice sounding sales pitch and practical results in real life.

Is Becoming Your Own Banker A Scam

The fact is, high cash value life insurance is a good thing to own, and it becomes more valuable if you work creatively to manage and use your money wisely, following the principles we teach through the Perpetual Wealth Code™.  This begins with the design of your policy and extends to the use and management of each life insurance policy that you own.

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It’s simple, but not always easy. That’s why we work with our clients, helping them to better understand the Perpetual Wealth Code™ because once you understand the principles, owning high cash value life insurance becomes an obviously wise tool to use in your overall financial portfolio.  Without the Perpetual Wealth Code™, owning high cash value life insurance can become just another expensive purchase that keeps you from reaching your financial goals. Schedule a strategy session with us to see how The Perpetual Wealth Code and high cash value life insurance can help you fulfill your financial dreams.

Recommended Reading: Understanding the Infinite Banking Concept and How It Works In Our Modern Environment

Dr. Tomas P. McFie

Most Americans depend on Social Security for retirement income. Even when people think they’re saving money, taxes, fees, investment losses and market volatility take most of their money away. Tom McFie is the founder of McFie Insurance which helps people keep more of the money they make, so they can have financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.