Have you ever wondered what life would be like if you acted as your very own banker as opposed to relying on established banks or investing in unreliable stocks? Well, it is possible and it comes with a wide range of advantages. But just like anything, there are always two sides to the coin, which is why we have decided to equip you with a list of pros and cons with regards to this system. Infinite banking method can also be referred to as a family-banking concept, perpetual wealth strategy or becoming your own bank. Essentially, it involves investing your cash in a whole life insurance scheme while subsequently creating a flexible money reserve that you can utilise as your own personal bank. When making any big financial adjustments to your life, it is important to ensure you’re well researched and understand what it is you’re signing up for. Lets dive straight into the pros and cons of this method.
Pro: Non-Correlated Asset
It’s vital to invest your money in areas that are not directly correlated to the rising and falling stock market. Infact, we cannot stress this enough. Whole life insurance is an asset that will remain unaffected by the ebbs and flows of the external market and guarantee gradual, annual growth making it an excellent safe bucket for your earnings.
Pro: Improves Cash Flow And Liquidity
Imagine you have invested your cash into a property and you’ve run into a situation where you need access to that cash. Now, the only way you’d be able to go about this is by taking a loan from the bank and simultaneously using your property as collateral. This can be a major risk if let’s say, the property market happens to drop. Alternatively, investing in a whole life policy guarantees ease of access to your money without the risk of the policy decreasing in value.
Pro: Interest Earned On Loans
A major pro of being your own banker is that you’re in full control. For example, If you have a company that requires a loan, you can easily provide this from your personal policy while still charging the company interest on this loan. This means that in the long run, you’re increasing your earnings exponentially.
It is recommended that for this method to work to your advantage, you need to be putting away around 10% of your income each month. For those who struggle to make it by as is, this may be an unrealistic request. Which is why unfortunately, this scheme may not be for everyone.
Con: Money Growth Takes Time
Sadly, this method of growing your asset is going to take some time. Infact, it could take more than 10 years before you start noticing some really impressive changes starting to occur. Therefore, patience is a virtue with this avenue of investing.
Con: Regular Contributions Are Vital
In order to maintain this system, you have to be making regular investments if you want to see anything good come from it. If you run into a financial wall for whatever reason and are unable to make the same contributions you’ve been previously making, you may see your policy begin to fall in value or worse yet, completely lapsing.
Infinite banking can certainly be an advantageous move for the right candidate. From tax-free benefits to full control over your cash, you really can follow a path of financial ease and much reward. However, revising the criteria is imperative due to the evident disadvantages that may come with this method. Call us today and we can assist you in making the most valuable investment decision.