Infinite Banking Mistakes: The Human Problems That Derail IBC

 “It’s not the math. It’s the mindset.”

When Bruce recorded this episode solo, he opened with something we’ve learned after thousands of client conversations: the biggest Infinite Banking mistakes aren’t about policy illustrations or carrier choice. They’re about us—our habits, our thinking, and the quiet patterns we bring to money.

I remember Nelson Nash repeating, “Rethink your thinking.” That line annoys the part of us that wants a clean spreadsheet answer. But it’s also the doorway to everything you actually want—control, peace, and a reservoir of capital that serves your family for decades.

In today’s article, I’m going to unpack those human problems—Parkinson’s Law, Willie Sutton’s Law, the Golden Rule, the Arrival Syndrome, and Use-It-or-Lose-It—and connect them to the most common Infinite Banking mistakes we see. Most importantly, I’ll show you the behaviors that fix them.

Podcast: Play in new window | Download (Duration: 26:08 — 29.9MB)

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What you’ll gain (and why it matters)

If you’re new here, I’m Rachel Marshall, co-host of The Money Advantage and a fierce believer that families can build multigenerational wealth with wisdom, not stress. The primary keyword for this piece is “Infinite Banking Mistakes,” and we’re going to name them, explain why they happen, and give you practical steps to get back on track.

You’ll learn:

• Why behavior beats policy design over the long term
• How short-term thinking shows up in base/PUA decisions
• The right way to think about uninterrupted compounding
• How to use loans and repay them without sabotaging growth
• The five “human problems” Nelson warned us about—and how to overcome them

If you can absorb the mindset, the math becomes simple. If you skip the mindset, no design hack will save you. Let’s go there.

Infinite Banking Mistakes #1 — Treating IBC like a sales system, not a lifelong concept

The mistake: Looking for a quick fix—“set up a policy, borrow immediately, invest, done”—and calling it Infinite Banking.

Why it happens: Our culture loves shortcuts. We’re used to products, not principles. But IBC isn’t a product; it’s a way of life. Nelson was explicit: it’s not a sales system. When we treat it like a gadget, we ignore the behaviors that made debt a problem in the first place.

What to do instead:

• Adopt a long-range view. Commit to capitalization for years, not months.
• Build rhythms. Premium drafting, policy reviews, loan repayment schedules.
• Measure behavior. Not just cash value growth; also repayment habits, added PUAs, and opportunity filters.

Infinite Banking Mistakes #2 — Short-term policy design (and base vs. PUA confusion)

The mistake: Designing a very small base with heavy PUAs purely to juice early cash value, or, conversely, insisting on an all-base design without considering your funding capacity and behavior.

Why it happens: Short-term thinking. People want maximum day-one access or fear they “won’t be able to fund later,” so they underbuild the foundation. On the other side, some rigidly push all-base as a rule rather than a fit.

Bruce says that behavior is more important than design. He’s seen small-base policies work when owners think long range, repay loans, and continue capitalization. He’s also seen all-base work beautifully when owners behave like bankers—disciplined repayments and consistent additions.

What to do instead:

• Design for you, not a trend. Balance base and PUAs to match your cash-flow reliability, target capitalization, and intended uses.
• Think in decades. Will this design still serve you when the economy changes?
• Stress-test with loans. Don’t just stare at year-by-year illustrations. Model loans, repayments, and changing rates. Illustrations aren’t contracts; they’re snapshots.

Infinite Banking Mistakes #3 — Misunderstanding uninterrupted compounding

The mistake: “I’ll borrow against my cash value, toss it into an investment, and because it’s ‘my money,’ I don’t need to pay it back.”

Why it happens: People grasp the idea that dollars can continue compounding inside the policy while you borrow against them—but miss the second half: policy loans have a cost, and not repaying them has a bigger cost.

Fix the thinking:

• Opportunity cost cuts both ways. Spending cash has a cost; taking a loan has a cost; not repaying has a compounding drag.
• Repay like a banker. Principal + interest. Treat added PUAs as “extra interest to yourself.”
• Match loan terms to asset behavior. Shorter paybacks for consumptive uses; structured, documented paybacks for productive investments.

Infinite Banking Mistakes #4 — Ignoring the five human problems Nelson taught

Nelson’s “human problems” aren’t theory; they show up in daily decisions. Let’s link each one to your IBC habits.

Parkinson’s Law: “Expenses rise to equal income”

Three expressions Bruce highlighted:

1. Work expands to the time allowed.
2. A luxury enjoyed once becomes a necessity.
3. Expenses rise to equal income.

How it breaks IBC:
You design a policy to capitalize, then lifestyle creep absorbs the margin that was supposed to repay loans and fund PUAs. Loan repayments “can wait,” and soon the policy feels like a burden instead of a bank.

Actions:

• Ring-fence capital. Automate premiums/PUAs the day income lands.
• Name the luxuries. Write them down. Decide which remain luxuries.
• Give raises a job. Allocate a percentage of every raise to capitalization before you see it.

Willie Sutton’s Law: “Money attracts seekers”

Willie Sutton robbed banks “because that’s where the money is.” Today, the biggest “robber” is taxes—completely legal and entirely predictable. The more efficient you become, the more attention your dollars attract—from marketers, litigators, and the tax code.

IBC response:

• Be tax-intentional. Coordinate with your CPA before year-end. Where can after-tax dollars be channeled into assets that grow efficiently and can be accessed strategically?
• Protect liquidity. Keep capital where it is visible to you and less vulnerable to others.
• Say “no” more. High-income earners are targeted with “shiny” offers. Your bank gives you patience to wait for the right opportunities.

The Golden Rule: “Those who have the gold make the rules”

With cash, you negotiate better, move faster, and sleep deeper. Bruce calls this the awareness effect: once you hold capital, you see opportunities others miss—and you’re not forced to take them.

IBC response:

• Accumulate patiently. Opportunities find cash.
• Price from strength. Ask for discounts, better terms, or favorable contingencies.
• Use cash as a filter. If the deal doesn’t clear your bar, keep compounding.

The Arrival Syndrome: “I already know this”

This one is rampant. When you think you’ve “arrived,” you stop learning, stop imagining, and start defending yesterday’s views. In IBC, Arrival Syndrome shows up as rigid design rules (“only this company,” “only this base/PUA ratio”), or dismissing Nelson’s “think long range” as old-fashioned.

IBC response:

• Be a student, always. Re-read Becoming Your Own Banker. Review your policy annually. Ask better questions each year.
• Invite challenge. If a practitioner says “only X works,” ask why and request proofs across cycles.
• Protect imagination. IBC is an exercise in imagination—fund it.

Use It or Lose It: “Habits decay without practice”

People fund policies for a few years, never borrow, compare to a market chart, and conclude “this isn’t working.” They forget the purpose: to control the banking function—store cash, deploy it, repay it, repeat—without external permission.

IBC response:

• Create usage plans. What will you fund? What will you finance? How will you repay?
• Build cadence. Quarterly loan reviews, monthly repayments, annual PUA targets.
• Measure the right thing. Compare to your prior debt/interest outflows, not a naked index.

Infinite Banking Mistakes #5 — Forgetting that illustrations aren’t contracts

The mistake: Treating the illustration as a guarantee, especially in loan scenarios.

Fix it:

• Pre-commit behaviors. If X happens, I’ll reduce PUAs by Y, increase repayment by Z, or pause deployments for N months.
• Document the banking policy. Yes—write a one-page “family banking policy” with usage rules, repayment schedules, and review dates.

Infinite Banking Mistakes #6 — Not paying policy loans back (on purpose)

The mistake: “It’s my money; I’ll let the interest ride.” Or, using loans for consumptive items without a repayment plan.

Why it matters: Banking is a system—inflows, outflows, and disciplined loan cycles. Skipping the “repay” crushes long-term compounding.

What to do instead:

• Treat every loan like a business line. Tie it to a purpose and a cash-flow source.
• Amortize it. Even if it’s interest-only for a season, schedule principal curtailments.
• Add “extra interest” to yourself. Channel it as PUAs to accelerate capitalization.

Infinite Banking Mistakes #7 — No written strategy or scorecard

The mistake: “It’s all in my head.” That works—until it doesn’t.

Build a simple map:

• Targets: Annual premium, minimum PUAs, minimum cash buffer.
• Rules: Who can request a loan? What documents the request? Required repayment terms?
• Scorecard: Premiums paid YTD, PUAs funded, loans outstanding, current cash value, available capital, deals evaluated vs. deals taken.

When you can see it, you can lead it.

What this gives you

When you correct these Infinite Banking mistakes, you gain:

• Control: You stop outsourcing your banking function and start governing it.
• Capacity: Capital grows because behavior supports compounding.
• Calm: You move at your family’s pace, not the market’s mood.
• Continuity: Your system keeps working across economic cycles—and across generations.

Design matters. But behavior multiplies design. If you’ll think long range, capitalize, repay loans, and keep learning, you’ll experience what Nelson promised: opportunities find cash—and families who steward it well.

Listen To the Full Episode

Podcast: Play in new window | Download (Duration: 26:08 — 29.9MB)

Subscribe: Apple Podcasts | Spotify | Android | Pandora | Youtube Music | RSS | More

In this episode, you’ll hear:

• Why policy design is secondary to behavior
• How Parkinson’s Law quietly steals your repayment capacity
• The tax lens of Willie Sutton’s Law (and what to do about it)
• The power of the Golden Rule when you hold cash
• How to spot and defeat Arrival Syndrome
• Practical rhythms to “use it so you don’t lose it”

If you’re ready to stop repeating mistakes and start building a system that serves your family for decades, listen now—and then let’s talk about your next right step.

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