Hello, and welcome to another exciting episode of Get Yourself Optimized! I’m your host, Stephan Spencer, and today we have Ray Poteet with us. I’ve known Ray for well over, I think, two years now. I got turned on to Ray through mutual friends—a very successful power couple who are making a lot of money and they want to protect and shield that wealth so they have used a tool called Infinite Banking, which we’re going to learn a lot more about from Ray in just a minute. I was introduced to Ray through Dave and Yvette Ulloa, who I met through Tony Robbins’ Platinum Partnership. We met in Israel and Egypt on a trip back in 2010 and then several years later, they introduced me to Ray. Now, they were very excited to introduce me to Ray and they actually ran a workshop for a bunch of their friends—me and my fiancée, Orion, were included in that—and the workshop was Ray coming in and explaining how Infinite Banking works because it’s such a powerful way to protect your money, build wealth, and build legacy. It’s got tax advantages. It’s got ability to, basically, be your own bank and sidestep the expenses involved with using other people’s money. You can also use your own money in these accounts to loan out to friends, family, your business, and other people whom you trust with collateral and various stipulations, of course.
Ray has been doing Infinite Banking from, I think, pretty much its onset and he’ll tell us more about that but he’s been doing financial planning for something like four decades since 1972. Ray, you and I have a common background in biochemistry. I was reading through your bio and I had forgotten that. I have a master’s in biochemistry. I was studying for a PhD and then I dropped out to start my agency back in the 90’s, which was called Netconcepts, and you have a degree in biochemistry as well—it’s very cool! As I said, Infinite Banking is something I got into after learning about it from Ray. I took the workshop and got all set up and it’s something that builds over time. The compound interest is very powerful. It’s a safe investment, right? I wouldn’t even say it’s an investment vehicle, it’s more like a banking vehicle, which you can use in combination with another form of investing—let’s say, you invest in real estate. You could pull money out of your Infinite Banking account and use it as a down payment on real estate that you have purchased, for example. Ray’s based in Lawrence, Kansas and his original company was called, Alpha & Omega Financial Services, which they recently rebranded to Living Wealth and that was with my help because after me being a client of Ray’s client for, I think, at least a year, Ray then became a client of mine. I helped them rebrand, I’m helping them with their new website, sales funnel, and all that so we’re having a lot of fun working together in multiple capacities. So, that’s a little background on Ray. He’ll tell you a bit more about himself and why he is so passionate about Infinite Banking and so forth but let’s go ahead and dive right in. First of all, thank you, Ray, for joining us today!
I’m glad I could be here!
Well, let’s go ahead and dive into what exactly is Infinite Banking because most of our listeners probably haven’t heard of that concept before. They haven’t heard those two words used together so let’s start with the definition.
Infinite Banking is a way to create your own private bank and use it rather than a conventional bank.
Well, I would say that the definition is a way to create your own private bank and use it rather than a conventional bank for all items that you’ve used conventional banking for previously. From loans and storing money to borrowing for a house, a car, a vacation, or education. In showing you how to use your product—it’s called Whole Life Dividend-Paying Policy—exactly the way the banks use it, it allows you to keep the profit rather than allowing the banks to keep the profit.
Right, so you’re saying that the banks use life insurance policies to protect and store their money in a safe environment that earns them a really good return versus putting into other vehicles. Is that correct?
That is correct. You can check this out since 2006 through the Feds but they now have a line item and it’s called BOLI, which stands for Bank-Owned Life Insurance, and the banks not only in the US but around the world are the biggest purchasers of permanent life insurance so we are just mimicking what banks do on a scale that each person can handle.
Wow, that’s pretty cool! So, a majority of a bank’s money would go into life insurance policies or BOLI, as you say?
Well, they’re Tier 1, which is their capital that they have to keep on-hand as liquidity should there be a run on a bank and that permanent life insurance is the largest asset held in the Tier 1 income. It’s not the only asset, of course, because cash and some other things are also used but this is the majority of the assets into your one liquidity for bank that they use. Of course, the banks’ biggest asset are their loans but for liquidity, it is permanent life insurance and cash.
Wow, and this is also a strategy of the ultra-rich—to put money into these life insurance policies, not just life insurance that they have for themselves where they are insuring themselves, family members, key people in their company, and anybody that they have a relationship with where it makes sense for them legally to have life insurance on. Is that correct?
The banks’ biggest asset are their loans but for liquidity, it is permanent life insurance and cash.
That’s correct. Absolutely! I have it on all our employees here at Living Wealth.
And you also have it on other family members. You have it on, I think, you have something like 70 or 80 policies from memory, is that correct?
A little over that but yeah, good memory! I have a little over a hundred now. I’ve added 16 or 17 in the last year.
Wow, that’s amazing! And so, you start a policy and you keep paying into it, it builds value over time and you can’t expand the policy beyond what you initially set it so you just keep paying what you initially set it up for and that’s why you have to keep adding policies.
That’s part of the reason we had policies. The other reason is, the way we designed it, it becomes very, very efficient in the 3rd, 4th, and 5th year and every year thereafter. What we do is, by actually even moving money from one policy to another can make huge amounts of money in a tax-free environment because the cash value build-up of life insurance is not taxed and this month, that, for me, was over $70,000 so I had a good month.
Wow, that’s great! So, in order to get to that point where it becomes very efficient, you kind of load it up at the beginning using paid-up additions riders.
Yes, that’s correct!
How does that work? Because I know a bit about that because I’ve been paying into paid-up additions rider but there’s some math involved that makes it more efficient as time goes on. I guess, kind of the compounding interest and all that so, could you explain a bit further?
Well, there are two ways I want to explain it. First of all, when I talk with Stephan Spencer, I would say stuff, and what’s more important to you: cash or death benefit?
We buy the smallest amount of life insurance for the maximum amount of money to develop the best cash.
Yeah, regardless of your age. My billionaires, one is in his mid-80’s and the other one just turned 80, and they’ll tell you cash all the time. Most people when they think of life insurance think of death benefits so what we have done is exactly what the banks do—we buy the smallest amount of life insurance for the maximum amount of money to develop the best cash. A way to think of it in a visual is the Space Shuttle. Think of the paid-up additions rider as Saturn and two Titan rockets and the Space Shuttle as the payload. Well, once those rockets get the shuttle into space or into orbit, they drop off because they would be a drag on the efficiency of it and that’s exactly what we learned how to do—to make it very, very efficient and get it going up very fast to get it into orbit, drop it off, and start another one so that, eventually, the total payload of what even the Saturn rockets were, we can get into orbit and be using all that money available to you rather than to the government.
Right, and so compounding interest is a really important concept for everybody to grasp because if you put, let’s say, a $1,000 away and let it just continue to ride over 40 years, you’re going to have a massive amount of money in comparison to taking $10,000 and letting it ride out whatever interest rate and then be safe and typical for a, let’s say, five years or ten years.
Correct! That’s a good way to look at it. The other way is that, I like what Rick Warren says: “Life is like a marathon. It’s very crowded when you start but it thins out rather quickly,” so most people don’t realize that from an investment or a planning standpoint, it’s not how you start to race but how you finish the race. If you have somebody who has a good vision on various things and can think about 6, 7, or 8 years where your deposit that you have grow by 30-40% percent of the amount that you put in with no taxation, my question would be, “How much money do you want growing at the rate at that point and after 20 years, it’s growing by over 100% per year, again, in a tax-free environment. When I say tax-free environment, I mean, you, using the funds—I don’t want them to set because motion is the key to life—
Right, and many vehicles like, 401K, when you pull the money out, you’re taxed so with this, you pull the money out as loans and the entire value of the policy—the cash value—continues to cook at whatever percent, let’s say, guaranteed minimum 4% and you could draw it all the way down to, essentially, the entire amount and it’s as if the whole thing were still there cooking at 4% or better. You can use that for your own purposes or you can use that to loan out money to friends, family, and etcetera and you’re not taxed on that like you’re taxed when you pull the money out of a 401K at retirement age.
Correct! That’s totally true and you get to use it during those years where in 401K, somebody else is using it.
Right. Let’s say that you’re using it for others. Let’s say, your child wants to buy their first car and rather than go to the bank, they’re going to go to you. What would be some of the tips that you would recommend to ensure that this is a good use of the money rather than just kind of throwing it into something that could end up not getting you any return whatsoever? Like, if they’re not very responsible yet or there’s no collateral, or they sign over, and that sort of thing?
Okay, you do exactly the same thing a bank does. Even with your children, you become the “loss payee” on the car insurance policy. You call the agent and say there is a lien on it. When you file for the license plates in Kansas, they ask if there’s a lien and there absolutely is—that’s mom and dad and their names go on a title so it can’t take a car back. I believe the really most important objective as a parent that you would have with a child helps them to understand that they’re going to get all the money back because that’s part of the legacy program of it. When we die, you get all the money back for all the cars that you’ve bought. You don’t have to wait until we die, our children are using that money for houses, vacation, education, and trips right now so it’s not something that is delayed total gratification but if you understand, I bought cars for, actually, 38 years when I learned about this system—
And it really made me a little upset. In the 25 years prior to learning about it, we had bought 26 cars—now, you say, 26 cars, wow!—but we had five primary drivers and I didn’t say, “new cars,” I said, “cars.” If you buy one car a year, that’s really every five years when you have five primary drivers and we had zero cash from all those cars even though I paid cash for about four of them. When I realized that since 2001, when I learned about Infinite Banking, I can actually show you on my financial statement just cars from our family, I’ve gotten over $700,000.
Wow. Now, you wrote a book about how to set all this up and that’s something that people can get for free from your website. It’s on the top of every page, I think—The Tree of Wealth: How to Build a Legacy.
It’s got a hundred and some pages so that’s definitely a must-have for any listener who is interested.
Yeah, and what it really shows is, it’s third-grade math and what’s really important to realize is that, this was in our educational system until 1913 and they yanked it out. They were teaching everybody how to basically create their own private banking system until we got income tax in this country.
Why take that out of their curriculum when it’s so valuable? It seems like a secret knowledge these days that only the ultra-rich know.
There is a conspiracy to keep the laborers as laborers and the wealthy as wealthy.
Well, I’m not a conspiracist but there is a conspiracy to keep the laborers as laborers and the wealthy as wealthy. I mean, you can see that on a bell-shaped curve, and part of it is the understanding of how to use it. It’s not complex and they realized that. So, if they tell you to store money with them, you wouldn’t store it with yourself and that’s what all banks, insurance companies, mutual funds, and Wall Street—they are all depositories. They all want your money but they don’t want you to move it and they just want you to leave it there. That’s why I say, motion is really the key of everything. Even us being able to have these communications today is because of electrons moving over lines or something. I know something’s happening to make it all happen and recorded but if we were just static or not moving at all—you couldn’t hear me, I couldn’t hear you, and nothing would be happening.
So, motion is the key. In other words, speaking, breathing, hearing, and when you’re reading a book, your eyes have to move. So many people don’t realize this but this is also true with money. Our passion is to try to help people understand that this is a natural law of God. He created it and what the institutions want to do is, violate that law and stop your motion so they can benefit from it.
Right, so I’ve, for example, use my policy to loan money to my youngest daughter. She needed $9,000 and instead of going to the bank, she went to me and I had her sign a promissory note with all the terms and conditions because you have to “trust but verify,” as they say.
Right, and if you educate your children to the power that this is as we have. Many of our clients have no problem making the payments but I’d like to give an example. My youngest daughter, who lives in Carlsbad, California, called and said, “Dad, I don’t want to make my house payment for three months. I want to buy equipment for the office,” and because I was carrying a note, we were able to do that and then after those three months, we added back in the interest that I did not get for those three months. It actually resulted in a $92.00 additional payment for 29 years and 2 months. I mean, I did very well. I’m going to get the money. The outside source didn’t get it because we kept it all in the family.
But why would you charge market-rate interest to family members and not cut them a great deal?
Well, first of all, you have to realize that if you’re paying interest to yourself, you want a high rate but if you’re paying it to someone else, you want a low rate. By paying the market-rate—what they would to anybody else—they don’t only get the interest back but the principle. A good example was my grandson who just got a car. The car was just a shade under $30,000. He’s going to pay me about $36,000 to almost $37,000 with the interest and principal but the actual value that he has allocated for himself through that transaction isn’t $37,000 but about $52,000 that he can now use from us and he will receive upon our death.
If you’re paying interest to yourself, you want a high rate but if you’re paying it to someone else, you want a low rate.
How did you come up with a value of $52,000?
That’s actually what the policy grew with him putting the money in. We can actually isolate a loan within the policy and show what it created in true value so that it is available to them.
All right, okay. So, you pass this down upon your death so it’s not as if they’re just paying market-rate interest and like, “Wow, you’re greedy! Thanks for not giving me a deal!” but, actually, this is going to come back to you at some point so this is part of your legacy that you pass on to your children and grandchildren.
Absolutely! With my daughter, what we started with was a $206,000 home—now, I realize in California, that’s just the front yard but here in Kansas, we can get actually a house on that.
And the reality is, she will receive—for doing that and has, over the period time, she started in 2001 and has borrowed an additional $400,000 that she’s created through that—but just on that one loan, we have set aside $1,441,000 to her on our death.
Right, so you can separate it. You separate it out like, if somebody in your family borrows a large chunk of money for a house, a car, assets for their business, or whatever, you allocate all the earnings from the policy to that person upon your death so it’s not like it just kind of randomly gets put up. It’s specific to whatever the investments were and by children and grandchildren, etcetera—how much money they used and what they used it for—it all comes back to them, specifically, earmarked. That’s quite cool, I didn’t realize that piece!
Yeah, we’ve actually done now. We had a child who said, “Well, that’s not fair!” because she didn’t want to borrow from us and I said, “Well, if you can find fair in a bible, we’ll talk about it.” She knows that it isn’t there so it’s not a discussion point but the more you use the program and that’s true of everything. In other words, I noticed my iPad is getting a little slower especially on some of the games I play on it and I said it might be wearing out. I’ve had it a couple of years of various things that I don’t know but I’ve used it and it’s better for something to be used than not used and you can see that in real estate. It’s better to have a house occupied than vacant. It’s better to have a car driven than sitting. It’s better to use a computer than not use it.
This motion is universal and what we decided to do because as we get older, our children and grandchildren right now generate over $40,000 a month in income to us. That money was leaving a family so we know how to do it. We teach your clients how to do this. We isolate each one of those loans so the more they benefit us as we get older, the more we’re going to benefit them. Now, they do not have to wait until we die because this amount of money is in an account so if they want to go buy another house, or if they want to take some additional classes, or if they want to buy a piece of equipment, or go into business, we have the ability to do that as a family unit rather than having to go to the bank and wondering if they’re going to approve the loan or not.
It’s better for something to be used than not used.
Now, do you, sometimes, not approve the loan? Like, one of your family members or friends comes to you and says, “Here’s what I need the money for and here are the terms that I’d like,” and you just say, “Nope, not going to happen!”?
It just recently happened with my niece—my brother’s daughter. She hadn’t done her investigation and I knew that. I mean, if I want to lose money, I can put it out in the middle of the street and let the wind blow it away. You know? My brother, because it was his child loaned her when I hadn’t loaned the money. Now, we were just at the Big 12 Basketball Tournament last week and said to me, “I wished I’d never done it,” and I said, “I tried to tell you.” He’s going to recover the money even though it was a bad loan because the policy, as you mentioned earlier in your introduction, continues to grow as though the money was still there so even if it went south—in this situation, if my brother lives 11 years, the value of the policy will have grown and made up that amount of money that was lost. Of course, it would have been bigger if it had been repaid but it isn’t and doesn’t look like it’s going to be.
I think you have to be wise and just as shrewd as you would. You can do things. I don’t have to have the same regulatory rules in place with a family member or good friend as a bank would because as long as they have proper assets and various things, I’m good. It’s more of the character of the person. I have a medical doctor in Memphis, Tennessee that I said, “You shouldn’t borrow money from me,” and he said, “Oh, you’re good! I’d rather pay you than someone else,” and he’s paid me as much as $18,000 a month and that’s down to about $8,100 a month now but I would like to see where he would get away from me and we have designed a program that he won’t have to borrow any money from me and in 21 more months, he’ll be on his own because that program will be generating $2.17 for every dollar he puts in. Now, if he can’t make it work on that then he does not need financial help—we need to get him to a psychiatrist to find out what’s going on.
Ha! Okay, so let’s say that a listener has quite a lot of debt across different credit cards, student loans, or whatever else. They’re paying a lot of creditors and this idea just seems high in the sky because Infinite Banking is for the rich and people who don’t have debt but that’s not true because you can actually do debt-consolidation and then use the power of interest and start building that money-machine. Can you elaborate?
Sure! We have individuals who are putting in as little as $150 a month to clients who are putting in just under $2,000,000 a month so that’s a wide variety of individuals and I’d like to, in December 2015, my daughter got a call from one of her client, who has been putting in $200 a month for about 8-9 months. Now, their dishwasher broke and they are a Hispanic couple down in the San Diego area. She was just in tears and said, “Is there any money in there?” and my daughter called back and said, “Yeah, there’s about $1000,” she said, “Really?” and they needed $300 and some to fix the dishwasher but the e-mail and letter that she sent my daughter, basically, explained for the first time in their 12 of marriage, they actually had a Christmas with their children through the banking system and saw that it really did work.
Here, it can be a small amount of money or it can be big. The key is recapturing the money you make. If you ask people, Stephan, if they had a piece of paper in front of them, or a contract, or book, and say, “Let’s say, that’s a contract and that contract says that if you sign it, you’ll be my slave,” I’ve never had anybody said, “Oh, let me sign it!” but then, I explained to him they’ll earn money, they go into the world and they give money to the “house” people, the “food” people, the “car” people, the “credit card” people, the “tax” people, and the “entertainment” people. They did all the work and everybody else got all the money. There is absolutely no difference between having one master or many masters if you’re in financial slavery and that’s why our tagline is: “Breaking the bonds of financial slavery and creating a generational legacy.”There is absolutely no difference between having one master or many masters if you’re in financial slavery. Click To Tweet
Right. Let’s say that you’ve taken out all this money and used it to build a great business, to fund your daughter’s wedding, another child’s education, a house, multiple cars, and so forth, and then you die, and all that money is still out in use, tell me about how this relates to the death benefit because basically the benefit first goes to pay off the loan. Could you elaborate on that?
Yeah, and I’ll use myself as an example here. I have, just on my policies, right at $2.7 million dollars loaned out. Let’s assume that I don’t get to be with my bride tonight and I graduate. My wife, from the insurance company, will receive $2.7 million dollars less because I’ve already gotten that money, loaned it out, and used it. What she will receive, because the loan is paid off to the insurance company but it’s not paid off to me, the creditors would continue to pay my wife and she’ll get $68,000 for the next 71 months—that’s a little over $4.6 million. I did not cheat her out of one dollar. It just where it came from.
Right, and so, this only works though if you have a certain type of life insurance policy. You mentioned, it’s “Whole Life” insurance, and one detail that listeners need to know is that, it needs to be through a mutual life insurance company and not one that a stockholder held, but that the insurers own the company.
Correct! That’s a mutual company where the policyholders are the owners of the company. They’re not trying to please shareholders who are doing it from a cash flow basis. I think that’s really important if they want to do some little investigation that not one mutual life insurance company has collapsed during this crisis that our country and the world has went through since the bubble burst starting in 2000 to 2006 to current and yet, many banks and many insurance companies have. I mean, many banks and many finance companies but not one mutual life insurance company has failed. Many people want to say that AIG failed—AIG failed but it was their casualty, part of the company that ensured all the payments on the subprime loans. Their permanent life insurance side is A+, the highest rating possible. It never flinched because it was regulated by the states rather than by the Feds.
Right, so what would happen if you made a mistake to set up your life insurance policy through a stockholder-held life insurance company? Why would it not work?
All the great life insurance companies may start as mutual companies and some of them demutualized out of greed.
Well, because the profits go to the shareholders rather than to the policyholders. If a company—a mutual company—makes loans, makes a profit, and those are paid back to the policyholders in the form of a dividend. Those dividends are not taxable if you look in Webster’s or even Google at life insurance dividends. The reason it’s not taxed is because it’s a return of premium so it’s not a taxable event. What you have as an ongoing greater and greater amount of money coming to you tax-free every year in the form of a dividend. But remember, it comes to the policyholders because we have no shareholders. The policyholders own the company and all the great life insurance companies may start as mutual companies and some of them demutualized out of greed.
So, how long has this Infinite Banking concept been in place for the elite who knew how it worked?
Well, the elite have really been using it since about 1951 and knew about it but we weren’t aware of it until R. Nelson Nash wrote his book in October of 2000. If you look at it, it’s only been around a decade. Nelson didn’t sell 10,000 copies in the first three or four years of the book. He sold over 300,000 now but it it’s amazing that this information was available but didn’t get out to the public until 2000—well, actually, 2001.
And Nelson’s book is, Becoming Your Own Bank.
Right. Becoming Your Own Banker.
I actually read that and I listened to the accompanying CD. It was a great primer on how this all works so that I could then take the next step with you, guys, and start putting money away and building up my nest egg. Now, one key point here that, I think, we haven’t touched on yet and needs to be touched on is—how is a safe investment that has a guaranteed return? So, 4% is basically about the bottom. That’s the minimum that you would get per year and why is that? What could it get to if things are going really well with the markets or what have you?
Okay, the main thing to realize is that the interest rate is locked in and most people say, “Well, what you mean by guarantee?” I, first of all, like to say, “What rate are you getting on your savings account?” and I’ve heard people say 1% or .5% or even 10 basis points, which one-tenth of 1%, and that’s not guaranteed—that’s what’s currently being paid. Life insurance actually has a guarantee and a way to think of the dividends is what the banks are doing and what are they currently paying. We believe we’ll pay more but there’s no guarantee of the dividends, okay?
So, that is very, very important and why the rates can be so high, Stephan, is through our course and through the training that we’ve learned, you can actually manipulate the rate you get by using 4% as a base in paying yourself a higher rate on a tax-free basis in various types. It’s quite astounding and sort of mind-bending, the amount of money you can actually make on a car, and when I say “make”—I mean, above the principle and interests. You can actually make over $100,000 on a vehicle. My wife and I each have newer cars and each one of those cars, I’ll get all the principal and interest back plus about $108,000 on my car and $122,000 on my wife’s car and it’s because of how we used the policy and how we manipulate our own interest rate inside that policy to get the type the return over a five-year period.
Now, that’s hard to wrap my head around but one thing that you, guys, do that I think is pretty rare is you help with the implementation. It’s not like, “All right! We’ll set up the policies!” and you, guys, get paid or get a commission off of the policies that you sell so it’s mutually advantageous. You guys get paid and we get, as clients, our stuff set up but then, you work with the client on-going and advising them on how to best leverage the Infinite Banking set-up that they have, which I think is pretty special like, you’ll go to meeting with a client such as myself, you’ll walk us through where to best utilize or put the money, and keep it in motion. I have asked for things like, for example, promissory notes and suggestions on whether a loan is a good loan or a bad loan to make and you, guys, give unfiltered feedback on that and I have not loaned money, thankfully, in cases where I felt compelled to do so. I’ll let you guys be the bad guy who said, “No, not going to happen. I’m sorry. Yes, I have the money in my policy but no, I can’t loan it to you,”
Right. Well, what we’ve seen across the country is, a lot of individuals who we are currently working with started with another firm but all they got was a policy. If I sell you a policy and don’t help you implement it, all you have a policy. Its sort of like I buy a computer and I don’t know what programs are on it or how to access them—all I’ve got is a computer that I can’t use. The strength of Living Wealth is helping you implement it so you can use it and benefit from it. That’s what we’re well known for—it’s the implementation of the product in the process so that you can truly benefit from it and take the dollars away from the other financial institutions that you were willing to give them previously without having to change your lifestyle or working any harder to just the difference of the direction of the money and it comes back to you rather than to them.
Right. Let’s say that you’ve got the cash on hand and you’re very liquid. Here comes a big expense like a wedding, or a car, or buying a house—you could pay cash but why would you not pay cash? Why would you use the policy?
Well, two reasons: First of all, when you pay cash, you lose the interest that you were earning on that cash and you have to start over as though you had none, which would be the situation. If you put the money in a policy and, as you said, build this platform, that platform just got bigger by the amount of money you put in so it’s earning at 4%. You take a loan on it, all that money is still growing at 4%. That’s why I described that my brother would get his money back because even though he borrowed it out of the policy, he actually took a loan from the life insurance company and putting his policy up as collateral so it’s continuing to grow and it will grow enough to pay that loan off if he chooses to or to pay the interest whereas, if you use your cash, it’s like a roller coaster—you go down, you’ve got to start over and build up.
If you use your cash, it’s like a roller coaster—you go down, you’ve got to start over and build up.
This is very common and we’ve seen with people who like to buy real estate—they’ll save up the money and they’ll go buy the real estate. Well, using that same system, we’ve been able to help clients purchase the real estate they want—sometimes, one, two, or even, just earlier last month, four years quicker. Well, if you can own that four years sooner, it means you get all the growth and the potential of it that you wanted and not having to wait because of the way the system works.
Right. Essentially, if you have cash that’s just sitting, maybe, in your mattress, that cash is losing value every day because of inflation and quantitative easing like, basically, Banana Republics, basically all of our government has become Banana Republics just printing more and more money and their cash is becoming worth less and less so if it’s just sitting there, it’s losing value. We’ve got to take that and put it in motion by putting it into policies and start earning 4% minimum or, let’s say, it’s a good year and it’s 5% or whatever, but if it’s just sitting there on a mattress and basically, disintegrating, that’s not a good situation.
Right. I’d like everyone to realize that 1% over generations—and I am just going to point to this out—if it has been over five but let’s just say, it’s four and we’re able to do five, over a 50-year generation on a $20,000 a year program ends up to be in about $2.7 million more. People say, “No, that’s not right,” and you can just run tables and see 1% becomes huge over multiple years.
So, the rule is 72. For those who are listening who are not familiar with that, that’s a really good thing to understand how quickly your money doubles depending on the interest rates so if you could just describe the rule of 72?
Yeah, there are two ways to understand the rule of 72. If you’re earning 9%–now, this is a general rule so it’s not absolute—your money, if you’re making 9%, take 9 in the 72 and your money would double in 8 years. If you were making 8%, it will be 9 years. 6% will be 12 years. There’s a little bit of difference on those, or if it’s 12%, it will be 6 years so, the rule of 72 or if your money doubled in 9 years, you can know that you made 8%. If you see, just by that 1%, in 8-9, we cut off a year. That’s pretty cool. Well, what if it was 12%? Instead of doubling in 9 years, it doubled in 6 years—wow!
So, in the end, the next doubling is even—you know, it doubled from 2 to 4 and you’re just at 12 years. The other person, if he’s making 8% has to take 18 years when by the time you hit 18 years, you’ve doubled again so you’re now at $16 million and he’s just at 8, or 16, or whatever. It’s really a fascinating way and when you realize that you can manipulate that interest rate within a program, it can benefit you. In other words, if I’m going to pay myself, I want to pay myself a high rate and your children have to realize that they are part of the family but what the banking and the financing institution wanted you to do is when you got married is to leave the big Spencer family and start a little Spencer family while I started the little Poteet family.
Well, when I learned this, I brought all my brothers, sisters, aunts, uncles, cousins, and nephews back together—those who wanted to participate and were doing quite well now keeping a lot of more money than we were previously. I mean, a lot more in the family than outside the family. That’s what the “super-wealthy” or “the extremely wealthy” have done for ages and we didn’t understand it because my dad said, “You’re not a man unless you stand your own two feet,” and unknowingly, he could have financed the first four or five houses that I’ve purchased and had extreme wealth but he was helping me grow up, I guess. He didn’t know it, you know.
“You don’t know what you don’t know,” is what they say.
So, some people would argue though that if you put pre-tax money to work, it doubles a lot faster than post-tax money. The difference between putting, let’s say, $10,000 pre-tax versus post-tax, maybe, it’s $7,000 into whatever vehicle, it’s going to get to $1,000,000 dollars a lot incredibly faster if it were pre-tax money but this is post-tax so, what would you say to those skeptics who are saying, “No, no! This is not good because it’s not pre-tax?”
Everything in life is a seed and a harvest.
Two things. From 1978 to 1994, all I did was pre-tax. Actually, it was called Alpha & Omega Pension Services and Employee Benefits. We did all pre-tax but a couple of things we realized was—and I’m just going to give three illustrations: One, the dollar under today than in the future. All banks, insurance companies, mutual funds, and Wall Street want our dollars today, okay? Second, what do you believe is going to taxes?
Now, this is a personal opinion. I can’t prove it but it’s an opinion. I believe the only way taxes can go down, the government has to shrink and since we’ve only had one president in the last 90 years shrink government, I don’t think there’s much chance of that happening now. The third thing is, we pay taxes either on the seed or the harvest. What I mean by that is, everything in life is a seed and a harvest. You plant one to make a plant and you get a bunch of tomatoes. Plant one seed of corn and, hopefully, you get a stock in two or three years or at least one. Plant one seed of wheat, you get a whole head of wheat.
Now, the question is, do you want to pay taxes on the little amount or the big amount? Everybody says little amount. With the retirement program, you violated those three rules. One, you gave them good dollars today to get back weaker dollars at some point in the future—at a higher tax rate. I know. I put money in an IRA when I was in 15%, 18%, 21%, 24%, 27%, and 42% bracket. When I took it out, my total tax was 47.8%. Now, that wasn’t very smart. Delay the use of good dollars and pay a higher tax that you pay it on a whole amount. Now, I think the best that I could tell people is—John Bogle, who created the Vanguard Funds has a great YouTube on this: Are you really benefiting from a retirement program?
They’re holding some of the largest retirement dollars in the world and they just go through that you pay ordinary income tax on everything in a qualified plan where you might have made it long term, or capital gains in various things and not pay that rate if it’s on the outside but if it’s inside the plan, you do. The flexibility, the emotions, and the other thing I would say is, I don’t think Donald Trump, Warren Buffet, Anthony Robbins are worried about their 401K. It’s what you can do with what you have today and we’ve been programmed, I mean, we are seeing right now today, people who thought they could retire, the money would be there, going back to work. All you have to do is, look at all the seniors that you see just traveling or in restaurants, Walmart, or wherever. Even in professional jobs, I have three dentists—one is in his 80’s and two in their 70’s who don’t feel like they can quit because of what’s happened in the market.
It’s unfortunate. I’ve heard all these horror stories of people putting all their life savings into Enron or whatever and then, losing it all—it’s heartbreaking.
Well, I had a client that retired from KMart and her retirement income was around $1,700 a month. She’d been retired for right at 13 years. Kmart collapsed and came out of bankruptcy but her retirement income went from $1,700 a month to $38 a month.
She had to go back to work and after 13 years of being in retirement. It’s not the best time to move—for a market and for a person of that age to just jump back into the job market but that was forced upon her just based on what happened financially with the stock market.
That’s horrible. And then, there are other ways you could lose money too where, let’s say, you put all this money into the bank and expect that it’s being protected through the FDIC Now, this FDIC, in small print—you might not know of it—but it’s only up to $250,000 and you also might not know that, they don’t have enough money to cover even a small percentage of all the money they are insuring. Do you want to say anything about that?
Quantitative easing is legal counterfeiting to make your dollar worthless.
Well, that’s one of the reasons we have quantitative easing was because of the amount of money the banks needed that they didn’t have. Quantitative easing is just, really, legal counterfeiting to make your dollar worthless but the whole point is, at banks and insurance, we have to have a banking system to be able to do the things we do and exchange money rather quickly. From being at a grocery store, or a restaurant, or a gas station, to somebody else paying that so the banking system is good. It’s just that when it gets corrupted and expanded more than it should, there are banks that fail and there are individuals who had more money in their accounts than was covered. I know two individuals who, before they went to $250,000 had more than $100,000—one is in California and one is in Arizona—and that’s all they got when the bank went under from 2006 to current.
Wow. Even if all that you get out of this episode is take the $500,000 or whatever you have in the bank and split it out across multiple bank accounts so that you’re protected under FDIC rules to $250K, if there’s anything beyond that, good luck.
At least, do that but, really, you’re kind of foolish to not apply this info and concept in your life. How would you describe this up to our listeners? How to combine Infinite Banking with other investment vehicles that they’re doing? Maybe, their doing stock market investing. I just had Phil Town on a previous episode here at Get Yourself Optimized and he was describing Warren Buffett’s approach in investing, which was so powerful. So, let’s say, you’re investing in the stock market or you’re buying real estate so you’re buying homes or doing flips, this is, maybe, quite lucrative for you and you want to combine it with Infinite Banking. How would that work?
First, as you know, with anything you’ve got to have money. Whether it’s investing in stocks, real estates, or whatever. So, I would say, first, put your money in your policy. That’s like a checking account—let’s think of it as a checking account, and then pull it out, and do the investment so you get to do two things with one dollar. You got to start your program and you’ve got to do something else. I’m in a position as many of our clients are after the fourth year where every dollar I put in grows by more than a dollar.
Let’s say, I put in $100 and I have $110. Well, if I did that, I could put $110 into the market or $110 into the real estate and we always ask, “Are you doing this for the short term or the long term?” I never had anybody said, “Well, I’m just doing it for the short term.” Well, what is short term to you? Long term today is five years. If I can show you how to do both and by 10th year being able to put twice as much money into what you favor—whether it be real estate, investments, or anything—and have the protection to be able to bring the money back in and keep it away from lawsuits and judgments, do you want to know how to do that? So, I never say, “Quit doing what you like doing,” but just add this to it.
Yup, kind of like getting sugar to your tea or to the coffee.
Perfect, and then one concept I learned from David Bach, which was pay yourself first. It’s like pay the government first–the tax comes right out of your paycheck. If you pay yourself first, put that away before you even notice it’s there, it’s just into another vehicle so that it starts to earn interest and you don’t touch it. Basically, we live up to our means so if we make double the money, we’re going to find ways to spend double the money too. His premise is, if you just take that money off the table immediately before you even see it and know that you can spend it all and waste it on lots of more expensive entertainment and so forth and put that money to work so combining that concept where I just have a chunk of money coming out every month, I don’t even see it and it just automatically goes into my policy and they could have gone into a bank account that I don’t touch but instead, it goes in my policy so that I can get further leverage like all that we’ve been talking about during this episode. So, how do you teach folks to have that kind of financial discipline? Let’s say, they’re in trouble and they’ve created a lot of debt for themselves. If they’ve got a lot of credit card debt and paying some insane amount of interest rate of 21% or whatever. How do you school them on, “Okay, you need to be disciplined now and not be irresponsible?”
When you use your money, you pay your self-interest just like you would a bank, a credit card, or somebody else.
Sometimes, you just have to shame them but that’s to let them realize that they’ve done all the work and where are they going to be five years from now if they continue on the same path. Every time they create a credit card debt, what they are, literally, doing without thinking about it is, they’re reducing their spendable income and increasing their expenses so they’re making it almost impossible to accomplish that. So, yeah, I would play little games like, “Are you worth $2.50 an hour?” Until you think you’re worth $2.50 an hour, which is $20 a day, which is $100 a week or $5,000 a year, nobody else does. A lot of people like to make excuses. For professionals, we say, “Are you worth one office visit a day?” and the highest-paid medical profession is your radiation oncology and that’s about $700 for an office visit and I have a number of radiation oncologists that will put away $700 a day on the days they work. Basically, it is giving them a concept, an idea, or something that they can identify with and help them to implement it.
Now, if some people are concerned about that, what we will do is actually say, “Don’t start anything right now. You try to tell me what 10% is or 5% but you need to get to 10% or you’re never going to whip this game.” You’ll find people that have an extreme wealth, they’re saving 60-80% of their income because they realized, you can’t spend it all but I mean, what do you have to do to really enjoy life? It’s not that you have to save it either, it’s to put it into motion. It’s a way of helping them implement paying themselves first and if you want to scripture on that, it’s 2 Timothy 2:6. Even God said to do it, okay? And since he’s been around since creation and it has worked, I think we ought to do it. The second thing we encourage is that, when you use your money, you pay your self-interest just like you would a bank, a credit card, or somebody else and then, we teach them how to recapture it. You have to pay yourself first. That’s the first pillar. Everybody said it from the beginning of time to currently, Tony Robbins, thinking big–I don’t care who it is, The Richest Man in Babylon. You’ve got to pay yourself and most people is, you have to create a bill for you that you created for everybody else and that’s the way to do it. Get it out of sight and out of mind.
One thing you do for clients is you create a financial GPS with them to help them see where that money can go and how it can be utilized and leveraged. Could you describe a bit about the financial GPS?
Sure! Basically, it’s a road map. Before they had the physical GPS, now you have maps and you could tell, I’m supposed to go through that town because it’s on the direction of where I’m headed, but the best thing about a GPS is, if you want to go someplace else, it can take you there because it knows exactly where you’re at. Most people need to find out where they’re at financially. They know where they want to go but they don’t know where they’re at and if you don’t know where you’re at, you can’t get to where you want to go. I mean, a good example, let’s say, we’re in Los Angeles and the GPS thinks you’re in San Diego, and if you say you want to go to Albuquerque—well, you’re not going to get there because it’s not reading it right.
The GPS, as life changes and you buy a car, or a kid gets hurt, or there’s a broken arm, or a dishwasher, or a washing machine needs to be fixed, or there’s been a flood, or whatever it maybe—we went through all those situations. We can correct it and correct that problem because we know where you’re at and help you use it. So, the GPS gives you a distinction that you’re making progress and you know where you’re at—just like a road map does. We do that for each individual as often as those events occur. Some of them occur three or four times a month. Some three or four times a year. We don’t care. You need to stay current. We need to know where you’re at so that we can help and guide you.
And those financial GPSes are available for all your clients? It’s a client-specific thing so somebody can’t just come to you and say, “I just want the financial GPS from you, guys!” They actually have to be a client using Infinite Banking that you’ve set up for them. Let’s say that somebody is just really green to this whole thing and they want to learn more before they take any kind of leap, what would you recommend as far as a course or a book? I mean, we talked about the R. Nelson Nash book—Becoming Your Own Banker but you also have an online course. Could you tell us more about that?
Yeah, we’ve got a beginner’s course and we just brought out during the first of the year and it’s called Lifestyle Banking, and if you go to LivingWealth.com, you can actually take it. It’s nine courses, I think, the longest one is 22 minutes and shortest one is about 8 minutes so it breaks it out and helps you understand what we’re trying to do and if that sort of stimulates you and it allows you to contact us for a free hour webinar where we’ll go through and teach you how it works and if you have an interest, great, but if you don’t, great. There is no cost or obligation to investigate. I would tell you to really learn how many works. Learn how the system is really not slanted towards your side but you can turn it to you and benefit from it just by having knowledge. Everybody has said from the beginning of time that knowledge is power and you need to have this understanding that’s available to you—whether you make $10 an hour or $10,000 an hour. If you don’t do this, you’re cheating your children, your grandchildren, and your great-grandchildren. I would just encourage you to get it, learn about it, put it into play in your own life, and benefit from it. You never lose control of your money. That’s what I like best.
I had you on the show because I was so impressed and appreciative of you, guys, and you, in particular, Ray, for getting me set up on a much more solid financial foundation. I was not paying myself first before we met. I was not using good financial discipline. I was not putting my money away in safe investments. In fact, I lost $250,000 on stupid investments doing options trading that I had no business doing. I had no protection in place. I was not hedging myself or anything. It was just crazy. I could have just left that money in the street and let it blow away in the wind and it would have been the same thing. You really saved my bacon and I want to share with the world the power of this little known concept that the banks, the elite, and the ultra-rich are using so, thank you for sharing all your wisdom and experience with my listeners.
Well, thanks and I hope it helps them. It is our prayer and desire that everybody can use this.
All right! Thank you very much. Take some action and don’t just listen to this and say, “Well, that was interesting! It’s really good stuff!” Put it into use because from the motion, you’re going to get the value. If you don’t put it in the motion, it’s just another interesting, intellectual idea. Until next time—I’m your host, Stephan Spencer, and have a great day!
Checklist of Actionable Takeaways
The first step in investing in any way is to determine what you can afford. Create a budget and decide what you can set aside for your account every month.
Create a contract with terms and conditions for any loans that you may give out to family or friends, it’s important for them to understand that it will financially benefit them to pay it back.
Check out Ray’s course called Lifestyle Banking on livingwealth.com. It’s nine courses that breaks down Infinite Banking with a free hour webinar.
Do you need to learn financial discipline? If you need to get on a more responsible path, use Infinite Banking as a debt-consolidation tool.
Create a financial GPS! Putting together a map of your finances, where your money goes, where you want it to go, and where you are making progress. This can help you stay on track towards reaching your goals.
To manipulate your interest rate to work for you, use the rule of 72 to decide your rate based on when you want to double your income.
To get additional information on how Infinite Banking works, read Becoming Your Own Bank by R. Nelson Nash.
Talk to your family and friends about opening an account on their behalf within your account. You can isolate the loans so each person knows what they are making and can use.
Don’t hand out loans to everyone. Make sure the people you give money to are responsible and will pay it back, if you need advice, a professional like Ray can advise you.
While you are looking at companies for your account, only consider Whole Life Insurance companies. Otherwise, the interest will not be coming back to you.
About Ray Poteet
Ray Poteet is the founder of Alpha and Omega Financial Services, which has recently been rebranded to Living Wealth and uses the system of Infinite Banking. Using his concepts and financial products, he has provided countless homes, college educations, and retirement plans for families, bettering the lives and financial situations of people around the country.
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