How Infinite Banking Actually Works (An Example Case study)
Alright, let’s talk about this whole Infinite Banking Concept (IBC) thing in real, practical terms. Because, let’s be honest, it sounds a little out there at first. Borrowing money from yourself? Growing your cash while you’re spending it? If you’re like me, you probably thought, “Come on, this can’t actually work in real life.”
But it does. And I want to walk you through an example to show you how. Picture this as something you—or someone you know—might actually do.
Meet James: A Dad with a Plan
James is a family guy. He’s got two kids, a house, and a whole list of financial goals. Right now, he’s focused on two things: replacing their old, unreliable family car and building long-term wealth.
Instead of going to the bank to get a car loan, James decides to use his Infinite Banking system. A few years ago, he started putting money into a specially designed whole life insurance policy (you know, the kind specifically set up for this kind of thing). Now that he has paid about $60k in premium, he’s built up $40,000 in cash value—money he can borrow against whenever he wants.
Buying the Car with Infinite Banking
James finds a reliable SUV for $30,000. Instead of signing up for a loan at the dealership, he borrows $30,000 from his policy’s cash value.
Here’s why this is a smart move:
•No Bank, No Drama: There’s no loan application, no credit check, and no hoops to jump through. James is essentially borrowing from himself.
•His Money Keeps Growing: Even though James takes $30,000 out, the full cost basis of $60,000 (the total amount of premium paid into a policy is referred to as the cost basis) in his policy continues to grow as if he never touched it. That’s the magic of uninterrupted compound interest.
Paying Himself Back
James sets up a repayment plan, just like he would with a bank loan, but this time he’s paying the interest back to himself and his “business partner” the insurance company, not to some bank. This “business partner” has been in business for 150 years and has been profitable every year. So they got your back. Let’s say he decides on a 8% interest rate over five years. James is willing to pay slightly above the going interest rates for a couple of reasons.
Your partner, the insurance carrier, charges interest on policy loans. The carriers I recommend charge in the ballpark of 4.75% - 5.3%. For this example, let’s assume a 5% policy loan interest rate.
The interest that is paid above the carrier policy loan interest rate (in this case the 3% interest) has the ability enter the policy as additional premium in the form of PUA or paid up additions. This allows James to beef up his death benefit, cash value, dividends, and his ability to earn interest.
Every month, James makes a payment into his policy. That money (plus the interest) goes back into his cash value, so when the loan is fully repaid, he actually has more money in his policy than when he started.
What’s the Catch?
You might be thinking, “Okay, this sounds great, but what’s the downside?” The key is discipline. If James doesn’t stick to his repayment plan, he risks depleting the cash value of his policy. But James is serious about his goals, so he treats it like a real loan. The name of the game is cash flow management. Just like any great business, you must know your numbers and execute.
A Step-by-Step Breakdown of James' Infinite Banking Scenario
Why This Works for James
By using Infinite Banking, James avoided taking on debt from the bank, kept his money growing, and maintained control over his finances. Now, five years later, the loan is fully repaid, his cash value is even higher, he’s ready to use it for the next big expense, AND he has a paid off car in the driveway. Next time maybe he wants to pay off some consumer debt, start another policy to help save for his kid’s college tuition, or make a down payment on an investment property.
Is This for You?
Look, I’ll be straight with you: Infinite Banking isn’t for everyone. You need to be in a stable financial position and be willing to commit to the system. But if you’re like James (or me), always looking for ways to build a strong financial future for your family, this might be worth checking out.
The bottom line? It’s not about getting rich overnight. It’s about thinking long-term, staying in control, and making your money work for you. If that sounds like the direction you want to go, Infinite Banking could be a game-changer.
Are You Ready to Take Control of Your Finances Like James?
James has a solid plan for his family's future, and part of that plan involves managing his finances in a smart and intentional way. Just like James uses Infinite Banking to build long-term wealth, you can take control of your money by starting with the basics—like budgeting.
If you're feeling inspired by James' strategy but unsure where to start, the Budget Makeover Workbook can help you lay the foundation for financial freedom. This workbook is packed with easy-to-use budgeting templates, financial goal-setting tools, and debt trackers that can guide you step-by-step through creating a sustainable plan—whether you’re managing your current expenses or preparing for bigger goals like James.
Get Your Finances on Track:
Whether you’re thinking about using Infinite Banking or just want to make smarter financial decisions, the Budget Makeover Workbook is the perfect starting point.
Why You Need the Budget Makeover Workbook
Track Your Income & Expenses: Understand where your money is going and set goals for saving and investing.
Set Financial Goals: Much like James set goals for his family, you can create a roadmap for your own financial success.
Debt-Free Path: Stay on top of debt payments and track your progress to achieving financial freedom.
Ready to build a financial system that works for you? The Budget Makeover Workbook can help you start organizing your finances today! Click the link below to grab your copy.
Link to Budget Makeover Workbook
Is This for You?
Just like Infinite Banking, the Budget Makeover Workbook isn’t a one-size-fits-all solution. But if you’re serious about taking control of your financial future and committed to staying disciplined—whether it’s paying off debt, saving, or investing—this could be the perfect tool to complement your journey.
Interested in diving deeper into scenarios like James’? Leave a comment or send me an email to learn how you can apply these strategies to your own life.
