Becoming Your Own Banker, Part 23: Practical Wisdom for Perpetual Wealth
Do you want perpetual wealth that continues growing in future generations?
Today, we’re continuing this power-packed series through Nelson Nash’s famed book, Becoming Your Own Banker, as we discuss the benefits of buying life insurance for your grandchildren.
So if you want to see how thinking generationally is a long-term target on wealth that gives you the advantage so you can build more, how to transfer a wealth mindset to your kids and grandkids, and how to ensure wealth grows continuously … tune in now!
Table of Contents
Forestry Management and Infinite Banking
In Becoming Your Own Banker, Nelson Nash compares the banking function of whole life insurance to forestry management. Both are long-term processes that bear fruit for generations to come when you manage them properly.
He expands on this by explaining how forestry works. If you want trees on a 40-year growth cycle, you have to divide your land into 40 even plots of 100 acres each. Every year, you’ll harvest whatever is on one 100-acre parcel of land, and replant it. That way, in 40 years, when you’ve harvested every parcel of land, you’ll be ready to harvest the very first plot all over again. You’re creating a sustainable, perpetual source of lumber, and therefore income. There are also some intermediate cuttings over the years to allow the strong trees better growth.
This can be likened to whole life insurance, where you’re “planting” an annual premium while you’re also growing your cash value each year. Every year it’s able to grow uninterrupted, and you can pass it on for generations. And the more it grows, the more you can use it to purchase new investments, assets, and other quality-of-life improvements. It’s a long-term, lifelong process with major benefits if you’re willing to see it through and be diligent about it.
Building a Long-Term System for Perpetual Wealth
Whole life insurance is the preferred asset to execute the banking function because it’s long-term and has many guarantees. The policy loan function allows you to replenish your wealth, much like replanting your forest, while the death benefit provides the seed to the next generation.
The reason term insurance can’t work is twofold: first, it isn’t permanent. Term insurance only stays in place for a set term of your life. Because of this, there is no cash value component, which is the second reason you cannot use term for the banking function. The cash value component of whole life insurance is like the equity of the death benefit. It’s a benefit to policyholders for placing so much money (and trust) with the insurance company. Since the death benefit is not guaranteed if you have term insurance, you can’t really build equity in it.
This doesn’t mean that there’s no place for term insurance in your banking system. Many people choose to have convertible term insurance to supplement their whole life insurance policy. This guarantees that over some time, you can convert some of your temporary insurance into permanent insurance, without having to re-qualify. Even those who do not choose to convert the insurance may feel a sense of peace at having a little extra death benefit during certain periods of their life, like when their children are young.
All of these decisions hinge on one thing: long-term planning and your ability to act for your future self. You cannot predict what will happen to you or your loved ones, however, you can prepare to be capable of overcoming whatever life throws at you. Customizing your banking system allows you to prepare for many outcomes.
Good Stewardship and Perpetual Wealth
Just like with forestry, Infinite Banking requires good stewardship. If you don’t take measures to protect and maintain your forest plots, you run the risk of fires, poor yields, and more. If you don’t take measures to properly fund your policy and repay loans, you run the risk of having your policy lapse, or your cash value shrinking to cover your loans.
The way that you operate your banking system also includes actions such as how you invest and use your capital, and how you teach your family to be good stewards of their money, too. These efforts help to ensure that you’re in a position to control capital now and that your children and their children can also be in a position to control capital.
“A good person leaves an inheritance for their children’s children…”Proverbs 13:22
[55:48] “I love that principle and that idea of recognizing that we have a calling, a responsibility, an exciting adventure to… live our life in a way that we are able to leave an inheritance. And that has been such a compelling call to myself and to my husband that we have written a book that is all about that.”
[56:56] “We need to be paying attention to our financial decisions. Everything that you place attention on has the ability to expand and grow. If you ignore it, it does not thrive and flourish. Your health doesn’t, your nutrition doesn’t, your relationships don’t, your marriage doesn’t. If you have anywhere in your life you’re putting your attention, you will be able to grow and expand in that area of life.”
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