The Infinite Banking Concept
Americans today are often spending 1/3 of their income on servicing their debts. This creates wealth for the banks. At the basic level, infinite banking allows you to create your own tax-favored “bank” where you can store your money to use when you need cars, a new roof, college education for your children and so forth.
All households have these kinds of expenses. The financial press teaches us to put our savings in pre-tax IRA’s and 401(k)’s, so, when we need money for these ordinary, predictable household capital expenditures we have to go to the banks and borrow the money. This creates long term wealth…for the banker. Infinite banking is about breaking this cycle and creating long-term wealth for yourself rather than the bank by becoming your own banker, and paying yourself interest in an income-tax free environment.
By paying yourself interest, as you would have paid the bank, an average family can create three, four or five hundred thousand dollars of wealth at retirement that they would have transferred to the bank over their working years, while reducing their financial risk.
Think of it, people are paying a third of their income to debts. They are maybe putting 5% or if they are lucky, 10% into savings. What if you could convert a portion of that debt service to your own wealth creation?