How Banks Use Your Money and How You Can Take Control
- jmealpha1
- Oct 30, 2024
- 3 min read
When you deposit money into a bank, it doesn’t just sit there waiting for you to withdraw it. Banks use your money to make loans and investments, earning interest along the way. While this system works to keep the economy moving, it raises an important question: What if you could take control of your own finances, using the same principles banks rely on, but for your benefit instead of theirs? Enter the concept of using an Indexed Universal Life (IUL) policy as your own personal bank.
What Happens to Your Money in a Bank
Banks act as intermediaries between depositors like you and borrowers. The money you deposit into your checking or savings account isn’t stored away in a vault; instead, banks lend most of it out in the form of personal loans, mortgages, business loans, and even credit cards. For instance, when you put $500 into your savings account, the bank might lend $400 of it at a higher interest rate to earn a profit. You might be earning 4% on your deposit, while the bank is earning 10% on that loan. They pay you a portion of the interest and keep the rest as profit.
This model is what allows banks to make money—using your money. But what if you could flip the script and use your own money to work for you, growing your wealth and giving you access to funds when you need them?
What Happens When You Create Your Own Bank with an IUL
Now, let’s look at how you can take that same banking concept and apply it to your personal finances using an Indexed Universal Life (IUL) policy.
When you use an IUL as your own bank, the cash value of the policy grows based on the performance of an index like the S&P 500, but without the direct exposure to market risk. You’re not just relying on a bank to hold and lend out your funds—you’re building a personal source of wealth that you can tap into at any time, tax-free.
Here’s an example of what that might look like:
Example: Using an IUL as Your Own Bank
Imagine you’ve been paying into your IUL, and you’ve built up $100,000 in cash value. You want to start a side business or invest in a rental property. Instead of going to a bank for a loan and paying them interest, you can borrow from your IUL’s cash value—at a lower interest rate—and use that money to fund your investment. Because the loan is tied to your IUL, it’s tax-free, and you don’t have to go through the same lengthy approval processes or credit checks that traditional banks require. Best of all, the cash value in your policy continues to grow, even while you’re borrowing against it.
This means that, like a bank, you can create liquidity by using your own funds. The interest on the loan you take out from your IUL often works in your favor because you can earn more in your policy’s growth than what you’re charged on the loan. Over time, your wealth increases, and you avoid the risks and fees associated with traditional banking.
Why This Matters for You
Banks make money by lending out your deposits to others. By creating your own financial “bank” with an IUL, you get to play by the same rules. The difference is that you’re in control, using your money to grow your wealth, fund investments, or cover expenses—without the hassle of going through a traditional lender.
Additionally, because the cash value in your IUL grows tax-deferred, it can provide you with a reliable stream of tax-free income during retirement. This setup offers you liquidity, growth potential, and security, ensuring your funds are always working for you.
Take the Next Step Toward Financial Control
If the idea of taking control of your financial future and creating your own personal bank interests you, it’s time to explore how an IUL can help you reach your goals. It doesn't require a large deposit; remember this is your personal bank for the long haul. Contact us today for a complimentary financial review and start building a more secure, flexible, and profitable future for yourself and your family.
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