Blog - Finding Money Through The Infinite Banking Concept
I’m not talking about the hidden treasure behind the X that marks the spot. I’m taking about money that you are (unknowingly or unwillingly) giving away to a third party.
For instance, if you are financing a car you are likely giving away money in the form of interest on the loan. Or, you may be doubling up on payments working to pay off a loan quickly.
Care to learn more about how to find this money and discover ways to redirect it back into your pocket?
We see it all the time. This time, Jim and Cindy have a seat in our office to discuss creating a financial plan and what is best for them. Before presenting options for the couple it is crucial that we determine where their money is currently being sent. You can use the budgeting tool that we have created in this post to do this (more on that later).
“Each month I feel like I am emptying a bucket that is empty by the 30th. We try to refill it twice a month but it seems like I am getting nowhere.” Jim explains.
“We are putting some aside into savings every month but like Jim said we really don’t know where all of the rest is going. We are sick of paying off loans and paying down on debt. We want control back.” Cindy pipes in.
Let’s walk through 3 crucial steps that can make you aware of your cash flow, find money and redirect dollars to take control of your debt and cash flow. (If you do not want to redirect the dollars to take control than focus on steps 1, 2 and the budgeting tool at the end of the blog).
1.) Cash Flow Analysis
Jim and Cindy open up (to their level of comfort) about their cash flow. They begin to tell me first level points about where their monthly income is going. Things like:
- Car Loan: $500
- Credit Card Debt: $350
- Lifestyle: $750
- Home Mortgage: $3000
- Car Insurance: $150
- Savings Account: $1000
So, at the most basic level it is clear that the couple are spending $4750 and saving $1000 each and every month. At this point, we also have a good feel for where their money is going. Now, let’s take it to the second level.
2.) Finding Money
Jim & Cindy are saving nearly 17% of their income! According to the federal Bureau of Economic Analysis that is 12% higher than the average American personal savings rate! Job well done! However, let’s dissect further to see if there are any places that the couple can afford to save more. I ask Cindy a second level question about her current loans and the repayment rate/schedule on each of them.
“Our only car loan is for 5 years at 2.5% but we are cutting that time period in half to 2 years. There is $12,000 left on the loan. Jim and I really want to have it paid off quick so that we can use that $500 elsewhere. Also, the credit card minimum payment is $50 but we want to be aggressive to get rid of it. There is $2500 total of debt. We feel trapped in our present mortgage but that is the minimum payment that we can afford on the home and we do not feel like refinancing is an option for us.” Cindy explained to me in a more serious voice.
So, at the second level it appears that Jim and Cindy are spending (repaying) $550 additional dollars per month toward their current debt. Would it be smart to save all of those dollars and not put it toward the debt? No, probably not. Especially depending on the interest rate of the loans (as you know, credit card rates can bury people).
However, there may be a way to redirect that $550 back into their control all while continuing to pay off the debt.
3.) Redirecting Money
The following scenario is not for everyone and a detailed analysis of one’s financial situation must be made before taking any action described below. No one situation is the same, nor should it be treated the same.
By redirecting their cash flow, Jim and Cindy accomplished:
- Paying off a car loan and credit card debt of $14,000 in 2 years
- Allowing their money to continue to grow at a guaranteed rate
- Taking advantage of compounding interest
If you would like to see all of the details on how we arrived to these facts and figures, access our White Paper Case Study on redirecting found money into Infinite Banking policies by clicking below:
In the above 3 steps (including the White Paper Case Study) we helped Jim and Cindy:
- Discover their cash flow
- Find money ($550/mo) being spent unknowingly or unwillingly
- Redirect that money to an efficient savings vehicle
- Pay off a car loan and credit card debt of $14,000 in 2 years
- Allow their money to continue to grow at a guaranteed rate
- Take advantage of compounding interest
We did all of the above without changing any cash flow or sacrificing the couple’s current day lifestyle.