in this video we're going to set the record straight on when you should borrow against your life insurance policy versus when you should not borrow from your life insurance policy um this video I've wanted to make for a while I've I've shared in a lot of our workshops we've used this in our training when we train other advisers um but I just feel like there's so much misinformation and misleading information and bad math and so much people that have the right um heart I think behind their message but leave viewers really confused and and maybe
mislead them and as a result I just want to I just want to set the record straight and show you when mathematically you should borrow against your policy and when mathematically you shouldn't and a lot of people will say well this this allows you to um you know literally get rich buying cars and I'll share with you why they're right on one stance but I think wrong in another and this will again this will from a mathematical perspective will show you why I'm so avid setting the record straight because I've gotten so many questions of
people that just don't understand the mechanics of how this works and so that's the hope of of this video uh control when life insurance is set up and used properly you can access your money through a collateralized loan um letting your money continue to grow and so obviously that's a huge huge benefit and um it's one of the reasons why I save so much money because I will get all the future benefits of my dollar and I'll be able to use my money that's why I've used that why we call it the and asset and
so this is kind of like a a credit card versus a a debit card um I you know I know Dave Ramsey is not pro credit cards I think a credit card when is a no-brainer you get better protection you get points and um I just would I would never buy things on the internet with a debit card period so this is an example where the reason why a lot of people use life insurance and they we call it the infinite banking or whatnot is you can you know get extra points for spending your money
and those points are your money is continuing to grow so you have the efficiency of your money continuing to grow and so the idea of this is you put your money into a a compounding machine your money will literally compound till the day that you die that's incredible you borrow against the insurance company or a third party and you're borrowing against your money you're not borrowing your own money and so when you borrow against your money your money is continuing to grow and then you can buy an asset or a liability now a lot of
people people will say well I get wealthy buying cars and this is what they mean my money's continue to grow and I buy it I bought that car I pay back the insurance company but my money is continuing to compound the rest of my life that's true that's 100% true um your money is going to compound regardless the point that I want to make is you're not becoming more wealthy buying that car in fact I think you lose a lot of your liquidity I.E the ability you don't have unlimited money that you can borrow against
so you lose some of your liquidity and you buy a liability and yes your money will compound but it will compound regardless if you borrow against it or not so what I'm saying is yes your money grows while you bought that car but it would literally have grown the same way and you just bought a liability with your borrowed funds when you potentially could have gone to a credit union or a bank took out a loan there giving you more credit capacity um and more ability to potentially buy assets that would create a stream of
income and an actual appreciation on your borrowed cash and I'll break that down more so the concept of this of having your money grow while you borrow whether it's for a car or whatnot is based on this this idea of your money will literally grow the rest of your life while you borrow against so again the power of borrowing against this is still the most efficient way to use your Capital because when you pay cash um you kill the compounding curve and life insurance will will allow your money to comp onto the day that you
die and so there's advantages here but um really when we think of what banks do and this is this is what I really want to set the record straight here is like Banks understand the I idea of of of using our own money and and we can do the same thing but we have to follow the math so banks will will give you some type of money when you deposit and um they'll let's just say they'll give you 1% I think that's generous at the time of this recording but we'll just say they give you
1% so I put $100 in the bank and I make 1% okay now they'll loan out that money let's say they charge 4% okay this might be on the low end for for this a time of this recording but let's just say they loan it out for four 4% the question I have for you is what rate of return to the bank make money they I gave them a 100 bucks gave them a 100 bucks they paid me $1 they loan out my $100 for 4% they made a grand total of 300% now that might
shock you because it might you might you might have thought they made 3% but at the end of the day their investment was what they paid me because they're using my money and and Banks can do I mean they can they create more velocity with fractional Reserve lending but the point of the matter is banking is an incredible um incredible powerful mechanism and we can learn how to do this and we can actually leverage against our own money but we have to make sure that the numbers add up and so when does it make sense
to borrow um this is I broke this down and I'm I'm assuming the control cost is 5% why do I call it control cost because this is the cost of controlling Capital we're going to say 5% I know some insurance companies are lower than this some are higher but the point of the matter is if the insurance company says you can borrow against your Capital at 5% why do we want to borrow against our money well we get all the benefits of our money continuing to grow and if we withdrew that money we couldn't put
it back in So borrowing allows us to get this compounding machine um in in the future ever increasing death benefit and using our money so again we can say we're you know it's again there's people that are like it's free to borrow your money because you're earning in your policy no we're we're let's assume you're earning 3% or three and a half percent so you're not getting Arbitrage but the life insurance will give you far greater rate of return or benefit over your lifetime than 5% that is why you would want to borrow that's a
whole another video but life insurance because of all the benefits it's giving you in the shortterm and longterm are giving you a better result to your portfolio than 5% I can break that down but um yes I'm just opened up a can of wordss you just got to trust me that life insurance will give you a better result shortterm and long-term to your portfolio than 5% that's why in this example why you would borrow against it for the future value that life insurance is going to give you um and that's why You' gladly be willing
to pay 5% now if you took a control cost of 5% and invested in a 2% CD congratulations you earned a negative 60% rate of return now you might say well Caleb my policy grew and so actually I made out I made 2% my policy grew at three or 4% so I you know I actually made out more my question to you would be why in the world would you borrow at five take on an additional 5% control cost to make 2% your policy is going to grow regardless so that activity just got you a
negative 60% rate of return that's why when I look at people that use their policy to buy cars and they say I made a bunch of money because I bought this car it's like no your policy continued grow maybe that was the most more efficient than paying cash I'll give you that but you can't tell me you made all this money buying this car your your money compounded in your policy but that activity didn't necessarily put you ahead if you borrowed at 5% to earn 5% that Roi would give you zero again I wouldn't do
that deal if you borrow at 5% turn 7% boom now you make a 40% rate of return on your money remember your money's in your policy it's going to continue to grow whether you borrow against it or not so that's at at the point of borrowing that's not relevant I don't care about the money growing in your policy it shouldn't justify the next activity that you do your money's growing regardless when you borrow at five and you earn seven now you're earning 40% rate of return on your money because you're again you're not using your
money you're using the insurance company's money and if you you know borrow at five to earn 12 now you're getting 140% return on your on your activity and earn return on investment so again when I talk about people utilizing their policy um and giving your dollar more than one job you can only give your dollar more than one job in a good way if you're actually earning a greater rate of return than 5% now let me break down the car example again because it's it's what a lot of people use is it possible that you
could earn a greater rate of return by having a type A Car let's say in in a certain in a certain profession the answer could be yes so if you're in sales and you drive a nice sports car you might say hey this sports car is going to allow me to earn uh you know extra $100,000 because the people I can impress with the sports car that's a whole another video on on identity you might have to you know follow my personal channel for that at the end of the day let's just say you make
that you're going to make more money with the sports car then you need to factor this into the equation um if going on vacation mentally puts you in a better head space so you can make more money great or you just need to admit like hey this doesn't make sense from a rate of return standpoint but I want to live intentionally and it's intentional living is worth the negative 60% rate of return that I'm earning from borrowing to making you just have to understand how the math works we can't lie to oursel uh about bad
math and think that we're making the right decision um and that's where that's where I'm passionate about this concept so this is the actual mathematical equation if you want to do this at home you take the investment you minus it by the control cost and then you divide it by control cost it gives you a number you multiply that by 100 and that's your rate of return so for example at 12% say it takes you 5% control cost um that divide that by 5% it gives you a 1.4 multiply that by 100 that's 14 4%
that's how you can break down any anything so you take the investment minus the leverage divide it by leverage you get that number multiply it by 100 now one thing I will say is this equation is not factoring anything about risk so a 12% investment most likely has more risk than a 5% investment so you have to figure out how to factor that in and everyone has a different risk tolerance but that's the big mistake that people make when they borrow against their policy they're just looking at some stated rate of return but they're not
factoring in Risk to that rate of return um third party lending is something that we use and it's why do we use it it's because if the insurance company will give me a control cost of five and I can earn less than I can control my money at a third- party lender that will that I can give my policy to for collateral and said instead of 5% let's say it's 3% then I take the same investment and earn a 300% rate return the risk didn't change in this equation the only variable that change is my
cost of controlling capital and so again um as a as a Savvy uh investor we should always be looking for different ways that we can improve the deal and in my case and a lot of our clients use thirdparty lenders to improve the term of accessing and controlling capital and as a result they take the same investment instead of earning you know a good rate of return they earn a great rate of return just because they're lessening the actual cost of controlling Capital so um what are what are the takeaways life insurance is an incredible
place to store and use your money um your money will continue to grow whether you don't borrow whether you buy cars or whether you buy assets it will continue to grow but we can't say that borrowing from our policies making us more money if we're buying liabilities we we can't say that now we if we understand the math and say I know that going on vacation or buying this liability is not going to make me richer but but it will help me unlock intentional living or whatnot I'm totally cool but the only way that we
can make a mathematically like get our dollar is doing more than one job in the borrowing function is if our activity is earning a greater rate of return than the cost of borrowing our funds and if that's the case your life insurance is one of the only paper assets that can give you amazing growth and amazing benefits to your policy now in in the future and give you the access to use Capital to make rates of return cash flow if you can do both you literally get a dollar doing more than one job love to
hear your thoughts would love to hear if you have any other questions on this I think again my I I'm passionate about helping people think differently but thinking correctly as it relates to the math and how this works and uh that's why we make videos so if you're not subscribed to this Channel please do so um please let me know if there's any other videos that I can make that can help answer your question also if you have more questions about um life insurance the and asset how it's structured um go opt into our and
asset Vault our and asset vault is a free Vault that gives you a master class gets you a 50-page and asset handbook gives you um an amazing podcast series that I did with like I I chopped up the best from all the amazing people that I've interviewed on this subject of infinite Banking and the andon and they just you'll hear from different perspectives on retirement and um infinite Banking and control and you'll just it's just so incredible um and so make sure to check that out and if you want someone like us to look at
maybe a policy that you have or if you have questions about does this will this help me with my financial goals we would love to help you and so um just know that whether you have questions or or have desires to implement we are are willing and would love to chat with you and help you in any way possible with that have an intentional rest of your day [Music]
