How to Bank on Yourself and why

I have read books, researched online, and have watched numerous videos explaining this concept and have found that the information given to consumers leaves a lot to be told. No one wants to talk about specific products and no one wants to explain really how the products achieve this goal. I am going to try to put it in a nutshell how it works.

People have been banking on themselves and even banking on their assets for years and years. No one called it this though. A few years ago, everyone was banking on their homes. They were taking out home equity loans that counted towards the value of their home, assuming home values would decrease and that by borrowing the money from the equity, the home value would continue to increase. They would then be able to get what they wanted, pay back any and all loans, and if they desired to sell the home, would be well off. This concept of borrowing from equity in an asset that you thought was going to grow isn’t a bad idea; it’s just bad that it was in an asset that has volatility.  

The whole bank on yourself concept is based upon purchasing a permanent life insurance policy. The difference between life insurance and a home is, there are guarantees and no depreciation (when structured correctly). As you pay the policy off, you gain equity, which you can therefore borrow from. Unlike a bank loan, you get to choose when and how you pay it back. You may choose to never pay it back and when you die (which we all will do), the loan and any interest is taken out of the death benefit.

The benefits to borrowing from the life insurance policy are the way your money grows in the policy. Each company recognizes loans differently, which is why it is very important to choose a company that uses a non-direct recognition of loans. This means that when the company pays interest or dividends, they look at the actual cash value (total equity) not total cash value minus loans outstanding. By doing this, your money in the account gets to grow even when you have it out on loan. An example of how this works and why it is so powerful is this: If you invest $100 at 5% interest, that money will double to $200 in 14.4 years. If you borrow $100 at 5% interest and pay it off in 14.4 years, you will have only paid $140.48. By having the non-direct recognized account value to $100 and at the same time borrowing that money, you have a net growth of $59.52. That is incredibly powerful.

How do we set these up? Check out the next blog = )