A valid question. He isn’t a celebrity, or someone you’ll see on TV a whole lot, but when it comes to finances, he’s a very smart and important person.
R Nelson Nash was in the forestry business until about 1963. After a while, he got involved in the insurance business.
Now, when the 80’s rolled around, and I image for sometime before that, Nelson Nash started to see a contrast between how banks work and how life insurance companies work. This led to him discovering what he called the, “Infinite Banking Concept.”
At the time, if you went to borrow money from a bank, you were likely to pay 15-20 percent in interest on that money.
At the same time, people were putting money into banks, which was being fractionalized and loaned out. All this meant was that, for every dollar put into a bank, the banks were loaning out 10.
This causes huge problems economically. Especially inflation. That was problem number one.
The second problem was the interest rate itself. Banks loan out interest to make money, but the insurance companies (mutual insurance companies) were different.
Mutual insurance companies are owned by policyholders. This means that the interest rates they charge aren’t determined by the Federal Reserve, but by how much the insurance company is earning on interest.
This was a huge difference between banks and insurance companies. R Nelson Nash found out pretty quickly that where he could borrow money from banks for 15 percent, he could be borrowing money from his insurance policy at let’s say 8 percent, a much lower rate.
That difference led to some other realizations that would really change how people looked at finances from then on. The problem? How people finance purchases.
R Nelson Nash and Financing Purchases
When we buy something, R Nelson Nash realized, we are financing it, no matter what.
If you borrow money from the bank, you pay interest to the bank.
But what about if you pay cash? Are you financing it then?
The answer is yes.
And this is the ideology that changed everything.
The concept you need to understand is opportunity cost. What this means is that, for every dollar you spend, you not only lose out on that dollar, but what that dollar could have earned.
Say you spend one dollar today. You do not only lose out on that one dollar, but if it could have grown to five dollars over 30 years, then you have lost out on five dollars.
This is significant and let me tell you why.
When you buy something with the banks money you take care of you. You make sure to pay it back with interest to the bank.
The question is, who’s money is more important? The banks money or your money?
The answer is obvious, your money is more important.
R Nelson Nash posed a good question, why aren’t you treating your money with that same care.
And thus he wrote the book and coined the phrase, “Becoming Your Own Banker.”
R Nelson Nash’s, “Becoming Your Own Banker”
In the book, “Becoming Your Own Banker: The Infinite Banking Concept,” R Nelson Nash says that you should be the banker. Whenever you are dealing with your money you need to put on the banking hat and start treating your money better than you would treat a banks money.
This will help you make thousands or even hundreds of thousands of dollars over your lifetime.
Why? Because it goes back to the opportunity cost I was talking about.
And life insurance helps us do this.
Under this new ideology, what do we do differently? Well, when we buy a car we no longer are just paying for it, we consider it financed.
And who is financing the car? You are, with a loan from yourself.
You take a loan, and you make the payments back to yourself.
And as a banker, you charge yourself interest.
Now you have put the banking function, or compound interest, in your favor.
If you want more examples with numbers you can look at the Infinite Banking examples page.
But suffice it to say that, over your lifetime, this is a significant chunk of money.
Add that to the benefits of cash value life insurance, and you can see exactly why over your lifetime you will have a significant chunk of money for retirement, and this is all with little or no risk.
Changing Your Focus
You see, as R Nelson points out, most people focus their lives on getting a higher rate of return, and they ignore all the money they lose on financing.
Let’s look at some quick numbers.
Let’s say you make 100 thousand dollars a year.
And you save 5,000 dollars a year.
Now the normal person is going to focus on rate of return. They go out and they try their hardest and let’s say because of the hard work mixed with some luck they can get a 10 percent rate of return.
That year they would have made 500 dollars on their investment.
The question never seems to arise, what about the other 95 percent of your money?
If you are only saving five percent of your money, that means that there is another 95 percent going somewhere else.
You’d be surprised how much is going to financing costs from the bank, and taxes.
If we focus on our financing, and we can recoup just one percent of all the money we are losing to financing costs, how much money will we have?
In this scenario that’s one percent of 95 thousand dollars.
Which is 950 dollars.
We’ve made more money from changing how we finance a purchase than we almost ever could by going out and getting a higher rate of return.
Imagine if we could redirect two, three, four, or even five percent of the money we are already losing to banks and other financial institutions.
Five percent of 95 thousand is 4,750 dollars.
That’s the equivalent of a 95% rate of return on 5,000 dollars.
It adds up fast.
R Nelson Nash’s Mission
Now the last part of this is more opinionated. I’m not saying I agree with it or don’t, I’ll leave that to you to determine.
But R Nelson Nash is largely against the Federal Reserve and the fractional banking system in general.
He believes that if enough people will get their money out of the banking system, the problem will solve itself.
I don’t want to get too political but it makes sense.
This banking concept has some extremely good value, regardless of your political beliefs.
R Nelson Nash has done wonders for the world of finance. This concept works extremely well for some and not so good for others. However, until you are educated and fully understand the concept, how can you know if it works for you?
The best thing to do is study the concept by signing up for a free copy of newest our book based on the cash value life insurance concept on the form below, or you can contact us directly for a personal look at how the concept will apply to your situation.