Schedule Appointment »
317-912-1000
317-912-1000
When it comes to personal finance, the choices we make early in life often have ripple effects that extend beyond what we initially imagine. The story of twin brothers Alex and Aaron demonstrates how different approaches to financing major purchases can lead to dramatically different financial outcomes over time.
Alex and Aaron were identical twins, but as they grew up, their financial philosophies began to diverge. Their story begins when they were just 10 years old. Their parents and grandparents joined forces to secure their financial future by investing $20,000 annually—$10,000 for each boy—into participating whole life insurance policies. This decision, made by their family, would prove pivotal as the boys entered adulthood.
Fast forward to their 21st birthday. Like many young adults, both brothers found themselves in need of reliable transportation. With a taste for adventure, they set their sights on pickup trucks—not just any pickup trucks, but heavy-duty models built for serious work and play.
Alex had always been drawn to Ford trucks. He’d grown up admiring their rugged design and reputation for durability. Aaron, on the other hand, had developed an affinity for Ram trucks, appreciating their powerful engines and comfortable cabins. As fate would have it, both brothers found their dream vehicles with identical price tags: $50,000 each.
Here’s where their stories take different turns. Alex, eager to drive his Ford F-250 Super Duty Power Stroke Diesel home immediately, opted for the dealership’s financing plan. The terms: 10.087% interest over 96 months (8 years), resulting in monthly payments of $761. Without hesitation, Alex signed the paperwork, received the keys, and proudly drove his new truck home that day.
Aaron approached his purchase differently. Having learned about the benefits of his whole life insurance policy, he decided to leverage the cash value that had accumulated over the past decade. He contacted the insurance company to request a $50,000 policy loan to purchase his Ram Heavy Duty Diesel outright. This process required patience—it took about a week for the funds to be transferred to his bank account before he could complete the purchase.
One month after Alex drove off the lot, he made his first $761 payment to the dealership. Aaron, inspired by his brother’s payment schedule but not bound by it, decided to repay his policy loan at the same monthly rate of $761. This decision set the stage for a fascinating financial comparison over the next seven years.
Let’s follow both brothers through their repayment journey:
Alex’s path was straightforward but expensive. He made 96 monthly payments of $761, totaling $73,056 over eight years. That’s $23,056 more than the truck’s sticker price—the cost of financing through the dealership.
Aaron’s repayment schedule looked different. Because his whole life insurance policy continued to grow and earn dividends even while his loan was outstanding, he was able to fully repay his $50,000 loan with 75 payments of $761, plus one final payment of $518. His total repayment amount came to $57,593—significantly less than what Alex paid for the same priced vehicle.
The difference between their total payments? A substantial $15,463.
But the story doesn’t end with the final truck payments. To fully appreciate the financial impact of their different choices, we need to look at the status of their insurance policies at the 18-year mark, when both brothers had fully paid for their trucks.
Alex, who chose not to utilize his whole life policy for the truck purchase, saw his policy grow to a cash value of $162,722.
Aaron, who borrowed against his policy, ended up with a cash value of $158,963—about $3,759 less than his brother.
At first glance, it might seem like Alex made the better long-term choice, since he ended up with more cash value. But that analysis would be incomplete without considering the total financial picture:
The bottom line? Aaron came out ahead by $11,704 compared to his brother. This represents a huge financial advantage that resulted from a single decision.
What explains this difference? The key lies in understanding how participating whole life insurance works as a financial tool.
When you own a participating whole life insurance policy, you build cash value over time through your premium payments. This cash value grows tax-deferred and can be accessed through policy loans. The distinction is that when you take a policy loan, your cash value continues to grow as if you hadn’t borrowed the money at all.
This is different from withdrawing money from a savings account or investment, where the withdrawn funds no longer earn returns. With a policy loan, the insurance company uses your cash value as collateral, but your policy values grow uninterrupted.
In Aaron’s case, while he had a policy loan outstanding, his policy was still growing. This growth helped offset some of the interest costs and allowed him to repay his loan faster than Alex could pay off his dealership financing.
Aaron also benefited from the structure of policy loans. Unlike traditional loans, policy loans offer flexible repayment terms. There’s no set monthly payment or repayment schedule. Aaron chose to match his brother’s payment amount for comparison purposes, but he could have adjusted his repayment strategy based on his financial situation.
One of the biggest lessons from Alex and Aaron’s story is about the hidden cost of interest in our financial lives. It’s easy to focus on the interest rate of a single loan, but harder to recognize how interest affects our overall financial picture.
Financial experts estimate that Americans spend 35% to 50% of every dollar on interest in some form—mortgage interest, car loan interest, credit card interest, student loan interest, and so on. This represents a massive transfer of wealth from consumers to financial institutions.
When Aaron borrowed against his whole life policy, he did pay interest to the insurance company. Because his policy continued to grow during the loan period and because the insurance company operates on a mutual basis (meaning policy owners share in the company’s profits), a portion of that interest came back to him through policy growth and dividends.
With traditional financing, as Alex chose, 100% of the interest paid goes to the lending institution. None of it returns to the borrower in any form.
The concept Aaron employed is often called “becoming your own banker” or “the infinite banking concept.” At its core, this approach is about recapturing the interest you would otherwise pay to financial institutions when making purchases.
The question shifts from “How can I find the lowest interest rate?” to “How can I finance this purchase in a way that allows me to recover the cost and retain the compounding growth of my savings?”
This strategy requires patience and planning. It takes time to build cash value in a whole life policy to use it for major purchases. The twins were fortunate that their family had started policies for them at age 10, giving them 11 years of growth before they needed to make a big purchase.
For most people, implementing this strategy means:
Over time, this approach can create a perpetual financing system that grows more powerful as your policy cash values increase.
While Alex and Aaron’s truck purchases provide a clear example, the same principles apply to other financial situations:
Education Funding: Instead of taking student loans with fixed repayment terms and interest rates, a policy loan could provide funding with flexible repayment options.
Business Opportunities: Entrepreneurs can access capital without bank approval processes, credit checks, or rigid repayment structures.
Real Estate Investments: Down payments or even entire property purchases can be financed through policy loans, increasing return on investment.
Emergency Funds: When expenses arise, policy loans provide immediate access to funds without the need to liquidate investments at inopportune times.
Major Purchases: This strategy can be applied to boats, RVs, home renovations, or any large expense you might otherwise finance.
Like any financial strategy, this approach isn’t without considerations that should be carefully weighed:
Initial Premium Commitment: Building meaningful cash value requires consistent premium payments, usually for several years before the strategy becomes fully effective.
Policy Design Matters: Not all whole life insurance policies are created equal. For this strategy to work at its best, policies must be designed to emphasize cash value growth rather than maximizing death benefit.
Insurance Company Selection: The financial strength, dividend history, and policy loan provisions of the insurance company are crucial factors.
Discipline Required: The strategy requires discipline in repaying policy loans. While repayment terms are flexible, failing to repay loans reduces your policy’s death benefit and future borrowing capacity.
Not an Investment Strategy: This approach is mainly about financing and capital management, not maximizing investment returns. The growth in whole life policies is generally conservative compared to equity investments.
One of the most valuable aspects of Alex and Aaron’s story is the demonstration of how seemingly small financial decisions compound over time. Had we ended their story after just the truck purchase, the difference would have been $15,463 in Aaron’s favor—already significant. But by looking at their bigger financial picture 18 years after their policies were started, we see an even more meaningful divergence in their financial trajectories.
This illustrates an important principle in personal finance: the best financial strategies don’t show their full value immediately. They require patience and a long-term perspective. In a culture that emphasizes immediate gratification and short-term thinking, the discipline to implement strategies with distant payoffs is rare and valuable.
If the approach Aaron took resonates with you, here are some practical steps to consider:
A Tale of Financial Wisdom
The story of Alex and Aaron illustrates a powerful lesson about how financial tools, when understood and utilized, can create an advantage over time. While Alex followed the conventional financing path, Aaron employed a strategy that put him ahead by over $11,700 from a single purchase decision.
Imagine the effect if this strategy were applied to multiple purchases over a lifetime—cars, education, homes, business opportunities, and more. The financial advantage could grow to hundreds of thousands of dollars.
The brothers’ paths serve as a reminder that in personal finance, conventional wisdom isn’t always the most profitable path. Sometimes, the road less traveled—like using participating whole life insurance as a financing tool—leads to greater financial prosperity.
As you consider your own financial journey, remember that the most powerful strategies require looking beyond immediate convenience to embrace approaches that create value over the long term. The patience and discipline required may not be easy, but as Aaron discovered, the financial rewards can be substantial.
Whether you’re just beginning your financial journey or looking to optimize strategies you’ve already implemented, the principles illustrated in this tale of two brothers offer valuable guidance for making financial decisions that serve you well for decades to come.
Tomas P. McFie DC PhD
Tom McFie is the founder of McFie Insurance and co-host of the WealthTalks podcast which helps people keep more of the money they make, so they can have financial peace of mind. He has reviewed 1000s of whole life insurance policies and has practiced the Infinite Banking Concept for nearly 20 years, making him one of the foremost experts on achieving financial peace of mind. His latest book, A Biblical Guide to Personal Finance, can be purchased here.
This free binder has the information to build your own Infinite Banking system.
