Infinite Banking and the Way to Beat Inflation
The high rate of inflation we have experienced since the early part of 2020 is the result of three things:
3. Monetary Policy set by the Federal Reserve Board, Jerome Powell
Inflation occurs when there is too much money in circulation, which is a direct result of loose Monetary Policy. Restricting access to energy drives up the cost of everything because everything sold must be transported, which requires energy. And when government spends money it hasn’t collected, it must borrow money from the Federal Reserve, which puts more money into circulation. Before long, it’s like having a tiger by the tail. Nobody knows exactly how it all started or how to let go safely.
Recommended Read: The Stealth Tax and How You Can Fight It
Raising interest rates, which the Federal Reserve does, increases the costs consumers pay even though it removes money from circulation. This is because banks are not as quick to loan money and put it into circulation when interest rates are higher. One of the reasons for this is Banks make a larger percentage of profit on interest paid for loans when interest rates are lower.
· For example, if interest rates are 4% and the Bank pays depositors 1%, then the Bank keeps the other 3% , which is 75% of the interest collected on loan repayments
· But when interest rates are 7% and the bank pays 4% to depositors, the Bank still keeps 3%, but this is only 42% of the interest collected on loans
The increased costs which are the result of inflation are never reduced once inflation is brought back under control. The cost of eggs and gasoline are suffering today from both inflationary cost increases and supply issues. Once the supply side is corrected, prices will come down but the inflationary price increases are historically likely here to stay, even after the supply issues have been overcome.
This is true with the cost of other things as well. When inflation is reduced to the 2% the Federal Reserve is aiming to achieve, we will still see prices remaining higher than they were before inflation drove them up. Because of this, Americans need a way to overcome the cost of inflation if they intend to have a secure and sustainable financial future.
Some believe that buying and holding the S&P 500 is the best way to overcome inflation and build a sustainable financial future. But this has its limitations. Namely, the S&P 500 has only returned an average 6.184% since January of 1999, while inflation has created an accumulated cost increase of 93% over this same time period.
As Infinite Banking is about recovering the cost of things purchased, it is an amazing way to combat inflation while building a secure and sustainable financial future. Consider the following:
· Identical twins each decide to finance an identical vacation package for $2,900
· Both twins charge the $2,900 on their credit card to earn the points their respective cards provide
· Twin #1 paid her credit card balance off with cash when her statement came and then for the next 3 years she saves $87 per month which is what the first minimum monthly payment her credit card carrier would have charged her on the balance of $2,900
· Twin #1 put this $87 monthly savings into an account earning 6% much like what the S&P 500 has returned over the past 25 years.
· Twin #2 paid off her credit card balance when the statement came by taking a $2,900 policy loan against her participating whole life insurance. Then with her $87 monthly savings (the minimal monthly payment the credit card company would have charged) she repaid the policy loan.
Three years later, Twin #1 has accumulated $3,422 ($87 @ 6% for 36 months) in her account, while Twin #2 has accumulated $4,535 of cash value in her participating whole life policy ( $11,237 - $6,702). To have achieved this elsewhere, Twin #2 would have had to earn over 24% on her $87 monthly payment over the past 3 years. Twin #2 did not compromise the compounding growth of her policy’s cash value when she refinanced her credit card debt of $2,900. Because the policy cash value kept growing Twin #2 was able to combat the cost of inflation better than her sister.
Recommended Video: How an "Infinite Banking" whole life insurance policy works.
The compounding growth in Twin #2’s participating whole life policy started the day she initiated her policy and will continue until the day she dies or cancels the policy. Paying just $1,000 a year for the first 9 years of this policy she developed $9,278 of cash value as seen in year 10 of this illustration. At that point she stopped paying any further premiums for the policy and started putting her money towards the purchase of an additional participating whole life policy. The reason why is because she wants to have more cash value to finance more of the purchases she makes during her life time. She knows, when leveraged to finance things she purchases, the compounding growth of the policy’s cash value will significantly reduce the cost of inflation over time.
Government spending and the Federal Reserve Monetary Policy will always inflate the real cost of goods and services. But Infinite Banking can help recover the money we spend so that the cost of inflation doesn’t affect us as much as those who keep their money locked up in banks, 401Ks, IRAs and even some investments.
The first step is to save. By paying premiums for participating whole life insurance, savings automatically happen as you purchase something…the death benefit. Once begun the compounding growth will continue to build in the policy cash values even if the cash values of the policy(s) are leveraged to finance something else. This means money spent can be recovered and in so doing the cost of inflation is reduced.
McFie Insurance has been helping others for 19 years recover the cost of things purchased so the cost of inflation doesn’t steal the opportunity to build a secure and sustainable financial future. Call 317-912-1000 for your no obligation free consultation to see if beating inflation is possible for you.