Lessons - How To Be Your Own Bank | Chris Naugle - Co-Founder & CEO of The Money School

In this episode, you'll learn how to implement a private banking system that allows you to earn on both your savings and loans. The conversation highlights the importance of changing where you save your money, using specially designed, whole life insurance policies to act as your own bank. By making a spread on loans, paying off debts strategically and reinvesting, you can leverage your money to work for you multiple times over a strategy used by the wealthy for generations. I still need to better understand this private banking system. So what do you teach over? I don't want to misinterpret this and I'm just coming at this for the first time ever. So when you work in this system, like you're finding deals, you're acting as a bank, but you're funding the bank yourself or you're basically acting as like the broker and you're finding high net worth individuals and you're bringing all the deals. It's all my money. So think of it this way, right? We all had been taught to go on work for money. We had a monetary value on our hours and we do that. So for those of you listening, some of you are watching, I'm holding a hundred dollar bill. We make money. And when we make money, most of the money goes out and gets spent on our living expenses. If you live in Toronto, all of it goes to your housing, just kidding. But you know, not a lot. Not a lot. Very true. We make this money and you know, the smart ones, not all of them, but the smart ones save or follow their six laws to wealth. I'm writing a book on it. It would be my fourth book called the laws of, it would be called the laws of wealth, but it's about the laws of wealth. And law number one is you must keep or save one tenth of your money. Now I knew this for a long time. Pay yourself first. A lot of different things. But when we save money, where do we save it? Well, in Wall Street or in one case, bank accounts, money markets, brokerage accounts, all the different things that we sold. But when I found out as none of the wealthy individuals started with their money there, they changed one thing. And they changed where their savings went first. And the wealthiest, the Rockefellers, the Roth Childs, the I can go on for days, they're great crocs, the Walt Disney's. They all did this, okay? And right up to the sitting president today, Lovemer Haydom, he does this as well. And they just changed where their money goes. They don't trust banks and banks are the only ones that make money when you deposit money. They even give you a sucker. Tessess in Florida, you have these. Go to any bank in Florida and get, you know, make a deposit and grab a sucker. There's out a bank in this country that doesn't give away dumb, dumb suckers. They're telling you something. So I changed where my money was saved. And I put my money into these. And now in the other thing to remember, I said it was a whole life instantly. People go to negative thoughts because regular whole life is not what I'm talking about. These are specially designed and engineered contracts. Credibly specialized. There's only a couple giant mutually owned insurance companies to do this. But we create this, this policy that serves and acts like a bank account. So I take the money that I would normally save and I just change where it goes. So I take it from my left hand or my right hand and I give it to my left hand, which is my policy. And I put it into this specially designed whole life. Now the next phase, when you make money and you save money, what, what is the next thing you do? Well, you buy things, right? People buy cars. When you buy a car, you either lease it, you pay cash for it or you finance it. And when you finance it, you make monthly checks to somebody else's bank, okay, whatever your bank is. That's where you're paying. And then when you finance other things, dirt bikes or boats or anything, you make payments. We've been conditioned by the system to give up control of all of our money for the things that we want. This concept that I learned from Mike and Brent is a banking concept, but it's now I've got the money in the policy. Now there's one thing the policy pays me a guaranteed interest rate plus dividends. To do it by today's numbers is about five to six percent, okay, which is way better than what a bank pays you. And in of that five to six percent, three to three point two five percent depending on the company is guaranteed forever. Okay, so I'm earning a pretty good return on my money. But the coolest part is is now it doesn't matter what I'm earning on my money. I need to make that money go to work as law number two is make your money work for you. So now what I'm going to do is I'm going to figure out where can I make that money go to work. And I remember back in my story when I first started this, I had lots of debt. And if you think of a credit card, if any of you have a credit card, your credit card probably charges you north of 20% interest. In every month, you're making a monthly payment of which most of that goes to interest. Have you ever thought about what, you know, and then when you're thinking about investing money in Wall Street or the market, you're like, oh, man, I wish I could make a 20% return. Ding, ding, ding. You're giving 20% away to the credit card. So why don't we start there? This is what Brent taught me. So I took the money that I saved. And instead of investing it, I took it and I then paid off credit cards, lowest balance to highest balance. And I'd pay off a visa. And if I was paying visa a hundred bucks, I took that hundred bucks. I was paying visa. And I set up an automatic transfer or bill pay that paid back to my policy. Now remember, it's especially designed in an engineer's whole life, but I call it my bank. So now that hundred I used to give away, now I pay it back to my policy. Here's the kicker. Okay. That doesn't sound too sexy. And it's really not. But there's one thing that I left out that's critical. And this is why the wealthy families do this. Let's just say I'm, let's call it a thousand bucks that I would visa. So I had to have a thousand bucks in my policy in order to pay visa for a thousand. We don't understand that. You can make money out of thin air. But when I had a thousand in my policy and I took that thousand out to pay off visa, I took a loan against my policy much like I would take a loan from a bank. I took a loan against my policy. But here's a unique thing. If I had a thousand dollars in my policy paying me six percent and I take a thousand dollar loan out of my policy, how much money Scott is left in my policy? I started with a thousand and I took a thousand out. How much is left? If it's a loan, there's still a thousand in your policy. Smart. Now a lot of people that are listening to this would think zero. Well, you had a thousand and took a thousand zero. The insurance company never touched my thousand bucks. They made me a loan that was collateralized by my thousand dollars. But the loan is a loan that never needs to be paid back. Now this is the thing that most people and when I heard this, I'm like, that can't ever happen. That sounds too good to be true. The loan they gave me was a loan against my death benefit. The insurance company promises to pay a guaranteed interest rate on my money that's in there. Plus they promise to pay a death benefit the day I die. So the insurance company will allow me to use the death benefit up to the amount that I can collateralize with my cash value, which was a thousand bucks in this case. So the thousand dollars they gave me was the insurance company just saying, Hey, here's a thousand dollars of your death benefit today. And we'll charge you an interest rate on that loan. But you don't ever have to pay it back because when some day when you graduate and die, it's a nice way of saying die, when you die, we're just going to true up that we're going to subtract the thousand from your death benefit that you have and we're good. We're made whole. But if you care what I just said, let's just do some math, isn't it? That wasn't a fascinating. It's so simple. But nobody teaches this and I'll tell you why nobody ever has heard of this from an advisor standpoint. Now let's just let's just use simple math. First year, let's say I got a thousand in there and I need a thousand to pay out visa. I'm making six percent on my thousand with dividend and to borrow that money, let's just say the insurance company charges me four. What is six minus four to two, right? Yeah, to two percent spread. When you think about a bank, when you put money into a traditional bank as a deposit, is the bank put your money in that vault like they want you to believe? No, what do they do with your best? They lend it out that those cubicles around the outside, they're lending your money out. So if they're paying you one percent on your deposits, you leave in the bank, are they lending it out more than one percent? They're making a spread. So I'm doing the same thing with this policy. I'm making six and I'm borrowing it at four. I'm making a two percent spread and then I pay off visa. I paid visa a hundred bucks a month, which is all interest at 20% and now instead of just saying, oh, visa is gone. I'm done. No, I treat my money the same way I would treat the bank's money. And instead of paying visa, I just changed the name on the check. A hundred dollars I gave to visa, I just write that check back to my policy, paying my policy loan back, which means now I'm making, I just made money twice. Did anyone catch that? I just showed you how to make money two times instead of one time. I made a spread on my policy between the six and the four plus I took back the 20% that I was giving away to visa. So as long as everybody understands that, let's go round two. So I did this for years and I paid off all my credit cards from lowest balance to highest. So now I'm recapture and all the money I used to give away. So starting to feel like I got some real wealth because I was just giving all my money away now, keeping it also. My policy is now mature and getting more and more money. Now remember, my money through this whole process never left. So there's a thing called compound interest that I'm benefiting from every year. I'm compounding on a higher amount, a higher amount, and a higher amount. So every year without me working any harder or any longer doing anything different in my life, my spread between what I'm making and what I'm paying goes up. Automatically, because I'm compounding on a higher amount so that spread just naturally, mathematics, my spread gets bigger and bigger. So instead of making a 2% spread, five years later, maybe I'm making a 7% spread. Another five years, maybe I'm making a 10% spread. Folks, it's just mathless and I'm not telling you anything crazy complicated. But eventually all the debts are paid off. But we all buy cars, right? Now most people finance their cars like I used to. Well, now I finance my cars, but I finance it with my bank. I take a loan from my bank, the policy, and I buy the car cash. But I then ask the dealer, whoever I buy the car from, how much would this car be if I were to finance it through your finance company? 600 a month? Great. I then write a check for 600 a month back to my policy. Today, it's evolved a lot from there. I lend money out at 12% through our FinTech company called Private Money Club. So I take loans from my policy. I lend it out to, you know, good investors that are buying real estate and I charge them 12. So now do the same math. Remember, my policies are mature now. I'm making a heck of a nice spread. Let's say it's five to 10% and I'm lending it out at 12. When most people got lend money out, they make whatever the interest is they're charging right 12%. I'm making 12 plus my spread. I'm making money twice and I'm doing nothing different than everybody else. I've been doing this now for a long time and see what I teach and I teach it and the reason no one knows about it because it's still like one of the biggest secrets of the wealthy is if I was an advisor and I was to design one of these policies for my clients, I would have to give up 90% of my commission. How many advisors want to take a pay cut of 90% and give you the answer. Zero. None. That's an easy, easy, easy. I wouldn't. I wouldn't. The insurance companies, like in the early years, I worked for a company called New York Life and then I worked for their investment division called Eagle Strategies, but they never taught us this but yet they knew all about it. But they didn't teach us because they don't want an order for the policy to work to explain to where I put a, you know, I put a thousand bucks in and I have almost all of that money to use immediately in the next 30 days. Requires the advisor or the person building the plan who was us today to take a 90% reduction in commission. So we're a normal whole life at let's just use 10 grand, right? For simple math, if somebody put 10 grand into a regular off the shelf whole life with their advisor or agent, that advisor will make a minimum of $5500. That's a good day in the office, isn't it? So you put 10 grand into a regular whole life that advisor just made a pay of $5500. Now flip the script. I design the policy through our company to do what I just explained. My commission is $387. See the difference? Would an advisor rather make $5500 or $387? Doll, right? But in order for this to work the way that Brent and Mike and all these guys use it, it has to built that way. Otherwise, it's always somebody's got to give for somebody else to get and the give has to come from us to design the policies the right way. This is why nobody knows about this. Thanks for tuning in. If you found this valuable, don't forget to hit that subscribe button so you never miss an episode. And if you want to dive deeper into this conversation, check out the links in the description to watch the full episode. See you in the next one.