"The Problem"

In this week's episode, Scott explores "the problem" with traditional finance in North America, a concept introduced by R. Nelson Nash, the founder of the Infinite Banking Concept and author of "Becoming Your Own Banker:" you finance everything you buy, whether by using your own money and losing potential interest, or by paying interest when borrowing someone else's money.

Scott explains how this traditional approach results in lost opportunity cost, using the example of buying a car. Whether you save and pay cash or finance and repay a loan, you end up at zero, missing out on potential growth for your money.

But there’s a solution. Learn about the simple, yet effective strategy for avoiding "the problem." This approach allows you to avoid lost opportunity costs and keeps your money growing, even when you use it.

Break free from the cycle of losing interest and start financing your future in a more efficient way with Magnify Wealth.

Transcript

Hello everybody and welcome in a bit of an abbreviated episode of the Magnify Wealth podcast. We're here with our host Scott Gannon. Good day everybody. And today what we're going to be talking about is what Nelson Nash, the founder of the infinite banking concept and author of the incredible "Becoming your own Banker." What Nelson has coined "the problem", the problem with finance in North America today. What's that Scott? You want to fill us in with what the problem is? 

Sure. The problem is Nelson defined it is you finance everything you buy and what he means by that or any everything in life. And what he means by that is you either give up interest by using your own money or you pay interest when you borrow someone else's. But the reality is, is when we flow that money, through regular commercial banks and just pay cash, that money is gone and gone forever. So what happens is we lose what's called lost opportunity cost because once you spend a dollar, you could never spend it again, it is gone forever and so is the growth that dollar could have had. 

So a great way to visualize this is to think of, let's just say you're buying a car. Do you finance that car or do you save for it first? I meet lots of people that say I pay cash for everything. So they save. They save, save, save, save. Whether that takes a year or five years. And then they make their purchase. They go back to zero. Then they save, save, save, drive their vehicle, replace it, back to zero. Save again, back to zero.

Get the idea? So they're gaining interest on that by the way, but the other side of the coin is if somebody wants their car right now and they don't have the savings, then they finance. Okay, so they borrow the money and they continually pay it back. Borrow the money, pay it back, and so on. The thing that's exactly the same about these two scenarios is you always end up at zero. So if you visualize that you own 30 cars over your lifetime or 20 cars or 10 or 100. I don't care how many it is. All you have left is whatever the residual of that car is worth at the end of your spending years on vehicles. I just use cars as an example. It's not something that we do a lot with, financing cars, but it's definitely something that is, that is, easy to to describe the problem and it's where a lot of people end up giving up interest over the course of their lives.

For sure for sure just by saving to do it or or paying interest, right? So so the key here is is as long as you're giving that money over to somebody else that money's gone and gone forever. And whatever you got is the residual value of the last car you own so Nelson Nelson found a solution to the problem. 

How about we get into to what the solution is and really what we what we help people do at Magnify Wealth. Sure, so the solution really is is creating a system of financing yourself and i.e., becoming your own banker or the infinite banking concept something we talk about all the time around here and it truly does work. 

It's about creating a bank of your own so that when you need money to finance a car, finance an, ideally finance an investment. That's really what we like to talk about is use this money for investment purposes. But understand that all your money, you want to be as much as possible. flowing through your bank. And when it does, it continually grows. 

And this is how you avoid lost opportunity costs is, you accumulate this money and it always grows. Now, I can't go into the weeds about how the infinite banking concept works. The product you use is very specifically designed for life insurance, but that's for another episode. That's not the concept. The concept is creating your own bank. There just happens to be a product that is the best at doing that. Sure. Exactly. The infinite banking concept is a solution to that problem.

I guess, why don't we explain to the viewers a little bit about how, how this causes you to not have that interest flowing somewhere else. Like how do you actually, like if you've built your own bank, the wealth creator, well, if you've built your own bank, how do you go and buy that car? I know, I know we, we often talk about buying investments, but we've been talking about a car. How do you, how do you buy the car? Well, you can, you can.

Well, you can choose. if basically our position on this is you finance it. And again, you finance it whether you pay cash or not. Never pay cash for it unless you're borrowing it against your own bank. So if you were borrowing it against your insurance policy, which is your own bank, then go pay cash for it. So there's no lien on it. It's unstructured payments. So there's lots of benefits to having your own bank. You don't have to apply for the loan. It doesn't appear on a credit report.

And again, it's flexible. So if you run into problems, you don't have to, you know, you can skip a payment if you want. So there's lots of benefits of doing it that way. But really what it is, is understanding how that mechanism works inside the policy is you are borrowing the insurance company's money, not yours. Your money is still growing. You have fifty thousand, a hundred thousand, a million dollars, whatever you have in that policy, whatever you leverage out of it or take out of it for the purchase of a car or real estate property or whatever.

That is borrowing the insurance company's money. Your money is still growing at the same number it was. Let's just say it was 100 grand. Well, you could borrow $90 ,000 of that, 90 % of the cash value on demand without applying, and your 100 is still growing at interest, tax free from 100, not 10. So the reason that becomes a solution to the problem is because you have that 100 ,000 growing from 100 and not 10,

You are not giving up interest to do this. You are accumulating interest on your savings, your entire savings, the whole time, even while you go and finance that car. So you're financing it in really, in a way that doesn't, doesn't give up that interest, like paying cash or financing in a traditional method. Well, another way to put this is we just talked about the zero line, right? So you save.

You save your money, pay cash, you go back to zero. Borrow money, pay it back, go back to zero. Well, this way, right from the first payment, you're never going back to zero. That money is guaranteed to be there forever. As long as you don't withdraw it or cancel it, you use it as a borrowing machine, or like a bank does, it will never be zero. It will continually grow for the rest of your life. When you pay it back, you're not.

Yeah, you're still paying it back to a bigger number than you left it. Exactly. And by paying it back, what you're doing is you're just creating yourself more capacity to borrow again for something else.

Do you have anything else to, to input into the conversation or do you think we should, let our audience go with, you know, a little bit of a, an idea for the future. So, so we'll, I'll finish this off with this. the one thing to understand is exactly what I just said is once you start putting money in the idea, if If you visualize that you're at zero whether you save whether you're a cash purchaser or a financer you're always back at zero.

You can be away from zero forever with writing your first, paying your first premium on a well -designed dividend paying whole life insurance policy. A.K.A. your own bank. Your own bank. Exactly. All right. We'll see you guys next week. Thanks for tuning in to the Magnify Wealth podcast with Scott Gannon. Thank you very much.