Top 9 Worst Infinite Banking Mistakes

Infinite Banking has the potential to transform your family’s financial life. However, as this powerful financial concept has risen in popularity, so have the messages that deviate from the original design and intent. Understanding infinite banking as Nelson Nash intended becomes all the more important, as it allows you to recognize the worst infinite banking mistakes.

In order for you to reap the greatest benefits of Infinite Banking, you have to identify these attractive half-truths about Infinite Banking, so you can steer clear of problems and instead build your financial house on sound fundamentals.

Discover how to sidestep common pitfalls, from misinterpreting policy illustrations to mismanaging premium payments. This episode provides a detailed examination of Nelson Nash’s foundational principles, illuminating how deviating from his original design can undermine your financial strategy. 

Navigate the complexities of selecting the right life insurance policies and managing cash flows with confidence. We debunk myths about early cash value and illustrate the importance of balancing safety, liquidity, and growth for optimal wealth management. Learn practical strategies for planning ahead, so you never miss a premium payment and maintain the integrity of your policy.

This episode is all about proactive action and long-term thinking, giving you the tools to confidently implement the infinite banking concept and maximize your wealth. Join us and transform your financial approach today!

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What is Infinite Banking?

The Infinite Banking Concept, coined by Nelson Nash, is the idea of taking control of the banking function in your life via whole life insurance with a mutual insurance company. The banking function primarily refers to financing, because we all have a need for capital, and how you obtain that capital can make a major difference in your bottom line. By accumulating your capital outside of the banks, you can finance your own purchases and investments. Whole life insurance is simply the ideal vehicle or “warehouse” for storing said capital. 

So why is this better than working with a bank? The answer is control. When you work with banks, you have very little control and often have to jump through hoops to get access to cash. In fact, there are many reasons a bank might deny you a loan, regardless of your ability to repay the loan. Bank terms are also rigid and inflexible. So what if you could call the shots, right down to your amortization schedule? That’s what Infinite Banking allows you to do. It puts you back in the driver’s seat.

Worst Infinite Banking Mistakes

One of the major issues is that there’s a lot of Infinite Banking misinformation out there. In part, this comes from detractors, and yet it can also come from well-meaning people who don’t have a fundamental understanding of IBC the way Nelson taught it. That’s why it’s really important to vet your information sources. Ask yourself:

• What’s their skin in the game, what do they get from discrediting IBC?
• How do they know about IBC and what’s their relationship to it?
• How long has this person been practicing IBC, and who are their mentors?
• Are they an IBC Practitioner, certified through the Nelson Nash Institute?

In an effort to combat some of the misinformation out there, we’ve compiled a list of the 9 worst Infinite Banking mistakes we see people make, so that you can learn from them.

1. Comparing Illustrations

One of the worst Infinite Banking mistakes we see people make is that they’re comparing illustrations to make their decisions. This is because they’re too invested in a rate of return, and so they don’t see the whole picture. 

A life insurance illustration is a snapshot in time, based on the current projected dividend. This means that as soon as the dividend is paid or a new dividend is declared, which happens annually, that illustration becomes outdated. Illustrations are there to give you an idea of what’s to come, but they’re not 100% accurate depictions of what will happen.

When you look at history, declared dividends and interest rates fluctuate from company to company. And typically, no company is that much better than any other. When one is up, another is down, and vice versa. In the long run, the difference is usually a matter of pennies.

What matters most is that you make a decision. Every day you wait, you lose out on accumulation and compounding that accumulation. It’s better to choose a company for its strength of guarantees, which you determine by looking at its track record. 

2. Not Planning Ahead to Pay Premium

Another common mistake we see is that people don’t have a plan to pay their premiums. Paying your insurance premium is not only how you keep your policy in force, it’s also how you accumulate cash value. You can think of it conceptually, like making a savings deposit (every time you pay a premium, your cash value grows). For some people, it’s more helpful to think of cash value like the equity of your death benefit, and you build equity when you pay premiums. 

As you can see, premiums are of the utmost importance, and you have to have some idea of how you’re going to pay them. Working with a trusted IBC practitioner can help you determine a premium that is affordable and flexible.

3. Trying to Guarantee the Future Before Starting

It’s difficult to start a new undertaking, especially when you know it’s a long-term commitment. Buying whole life insurance is a long-term commitment, to be sure. And yet, it’s one that offers extreme control and flexibility. One of the mistakes we see people make is trying to have it “all figured out” before starting a policy. 

Unfortunately, it’s not possible to guarantee what the future holds. The things you fear, like a recession, losing your job, or facing a loss may come to pass. But would you rather have some capital built up over 30 years if disaster strikes, or would you want to be exactly where you are now?

It’s understandable to worry about how you’re going to pay for something so long-term, but that worrying doesn’t do anything for you except hold you back from the actions that would “save” you. If you simply get started, you’ll have money in your banking system to handle whatever life throws. And don’t worry too much about how you’ll keep your life insurance. Insurance companies have baked-in options to help you cover tough times, and there are riders you can add to your insurance that give you even more options. 

4. Not Using Whole Life Insurance

[19:11] “Infinite Banking is a process, it’s not a policy that you get from a company.”

That being said, the process of Infinite Banking is one that plays nice with whole life insurance because of the way it is structured. Since the inception of universal life insurance, many people have tried to make it work, and yet it just does not work in the same way. 

The reason whole life insurance is so powerful, in a way that universal life insurance is not, is because not only is cash value guaranteed to grow, but it’s guaranteed not to lose. On top of that, the costs of insurance are baked into the policy and are also guaranteed not to change. 

While you can argue that universal life insurance doesn’t lose money in the stock market, the cost of universal life insurance is not fixed, and so when the market faces losses, the insurance company passes those costs to the policyholders. This means that your cash value can still decrease with universal life insurance if you’re not paying a sufficient amount of premium to cover new costs. 

5. Focusing Only on Cash Value

While cash value is, of course, one of the highlights of whole life insurance and Infinite Banking, it’s not the only benefit of life insurance. Another major benefit of life insurance is the protection aspect—the death benefit allows you to pass along money tax-free to your heirs, which can also give your family a lot of peace if you were to pass early. In addition, you can add many beneficial riders to your insurance that offer additional protections and insurance types that can protect you and your loved ones. 

Additionally, you can add a term insurance rider to your whole life insurance in order to round out your coverage and get your maximum death benefit, on top of what you can get with whole life insurance.

6. Using It to Pay Off Debt

[33:22] “If you’re starting [from bad habits], and you’re saying I want to get started with Infinite Banking it sounds like a really attractive concept, you’re expecting Infinite Banking to be a rescue plan to fix bad habits. And really what you want to do, the solution is to first attend to and prioritize the proper strategy for paying off debt, and then get in a position where you’re getting as much cash flow from paying off those debts as possible, and then being able to start an Infinite Banking policy.”

This is so important because Infinite Banking is built on good habits. It’s the foundation of everything. If you go into a policy with poor financial habits, you’ll be hard-pressed to see the results you want. 

7. Using All Available Cash Value

The power of Infinite Banking is liquidity. If you use all available capital, you’re severely limiting your options in the future. Of course, sometimes life happens, yet it’s generally advisable to keep some cash value liquid for other opportunities and emergencies whenever possible. That way you’re not caught in a position where you have no liquidity and no flexibility. 

Fortunately, cash value becomes useable again as soon as you repay it, so if you do ever maximize your cash value usage, be diligent in paying down the loan to regain your liquidity.

8. Viewing It as a One-time Event

Buying a whole life insurance policy is not a one-time event, though many people initially expect it to be a one-time situation. After all, you’re insured. What more could you need?

And yet, once people see the world of possibilities that open up after they have this pool of capital, they want more. Fortunately, it’s entirely possible to get more insurance and have more than one policy. In fact, as your income grows, you’ll likely WANT to buy another policy so that you can continue to build even more capital for opportunities. 

9. Not Getting Started

The biggest mistake we see people make is not getting started at all. This happens because people get stuck in analysis paralysis and don’t know HOW to choose. They know they want whole life insurance, but they’re hung up on which company, how much death benefit, how much base premium vs. PUA, and on and on. And while these are legitimate concerns to think about, they shouldn’t prevent you from taking the leap altogether.

Policies and companies fluctuate over time. The company that’s on top today might not be in ten years, and vice versa. You can’t let comparison keep you from transacting. Rather than comparing companies and policies, it’s much better to look at history. Does this company deliver on promises? Does the company have a strong history of paying dividends? What is the financial strength of the company? Let these questions give you reassurance, and then make a choice! 

The reality is, the longer you wait, the less time you have to accumulate dollars and watch them compound. If you’re not quite sure you got what you wanted the first time around, you can always buy additional policies down the line, and they don’t have to be with the same insurance company!

Book A Strategy Call

Do you want to coordinate your finances so that everything works together to improve your life today, accelerate time and money freedom, and leave the greatest legacy? We can help!  Book an Introductory Call with our team today https://themoneyadvantage.com/calendar/, and find out how Privatized Banking, alternative investments, or cash flow strategies can help you accomplish your goals better and faster. That being said, if you want to find out more about how Privatized Banking gives you the most safety, liquidity, and growth… plus boosts your investment returns, and guarantees a legacy, go to https://privatizedbankingsecrets.com/freeguide to learn more.