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Controlling The Banking Equation


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Private Family Banking

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Controlling The Banking Equation

  1. 1. Your Investments<br />Controlling The Banking Equation <br />Ron Doerksen - SUSTAINABLE FINANCES<br />
  2. 2. How banks make money<br />
  3. 3. The Process<br />Seller<br />House<br />Car<br />6%<br />7%<br /> 3%<br />BANK<br />YOU<br />100K<br />Dealer<br />8%<br />11%<br />Visa<br />House<br />Remodel<br />3%<br />Debt<br />Consolid.<br />Contractor<br /> 4%<br /> 5%<br /> 8%<br />______<br /> 20%<br />
  4. 4. Getting In The Drivers Seat…<br />By becoming the “bank” you recapture <br />not only the cost of the purchase, <br />but the interestnormally paid to the bank <br />and other financial institutions as well.<br />
  5. 5. Capitalizing the bank<br />
  6. 6. Key Requirements<br />Safety<br />Liquidity<br />Return %<br />
  7. 7. What Can We Use For A “Bank”??<br />Let’s look at some options<br />
  8. 8. Grandma’s Feather Bed<br />Safe: More or Less Liquid: Very ROR: Nope<br />
  9. 9. Certificate of Deposit<br />Can You Bank On It?<br />Safe: FDIC Liquid: Penalties ROR: Small<br />
  10. 10. Real Estate<br />Money In YourWalls<br />Safe: Less and Less Liquid: Not Very ROR: Hmm! <br />
  11. 11. “Personal Bank”<br />This type of account offers the following:<br />Tax Deferred Growth<br /> TAX FREE income<br />Access to the money (liquidity, use and control)<br />Safety<br />Unlimited Contributions (no IRS involvement)<br />Competitive rate of return<br />Creditor Proof<br />Passive Income (for the Golden Years)<br />Ease of transfer at death<br />No Probate<br />Earns money even when loaned…..this is HUGE!<br />Stock Market<br />Presentation<br />
  12. 12. A product as old as dirt!<br />InterestBearing<br />Dividendpaying<br />Permanent<br />Whole life<br />Insurance<br />
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  15. 15. Business Owners<br />The banking system is wonderful for personal use, but for business owners it even gets better.<br />Reduce taxable income<br />Reposition money from the business to personal on a tax advantaged basis<br />It may be better than a qualified plan i.e. IRA, 401(k), profit sharing plan and so forth.<br />Recapturing ALL the costs and interest associated with purchases used for your business.<br />All without dramatically changing what you normally do in business!<br />
  16. 16. Business loan:<br />Let’s look at a business loan for your business.<br />You loan your business $100,000 at 12% interest.<br />You are in a 35% tax bracket.<br />This is an interest only loan for ease of illustration<br />
  17. 17. Traditional verses Infinite Banking<br /><ul><li>Traditional</li></ul>Borrower<br />Depositor<br />Bank<br />LOAN<br />REPAYMENT<br /><ul><li>IBC</li></ul>LOAN<br />REPAYMENT<br />Business<br />Your “Cash Cow”<br />LLC<br />Sub-S<br />YOUR BANK<br />(INSURANCE POLICY)<br />YOUR<br />Family<br />LOAN<br />$ @<br />12 %<br />Loan $<br />@ 6%<br />
  18. 18. Tax Reduction Strategy – Interest ONLY Loan<br />YOUR BANK<br />(Insurance Policy)<br />Family Bank<br />Business<br />LLC<br />S-Corp<br />$100,000 @<br />12% interest =<br />$12,000 per year in interest<br />$12 K<br />$6 K<br />Schedule B $ 12,000<br />Investment income<br />With IBC<br />K – 1 is reduced by <br />($12,000)<br />Increase taxes ($4200)<br />$6,000 Interest Paid<br />To YOUR BANK (Insurance Company)<br />Schedule A ($6,000)<br />interest expense<br />Taxes reduce by ($4200)<br />Tax Deduction ($2,100)<br />“Opportunity Funds”<br />$ 2,100.00 tax savings<br />+$12,000.00 paid from LLC<br />$14,100.00<br />Deposited into your bank(s)<br />Effect on 1040 ($2100) Tax Reduction<br />
  19. 19. Paying Cash<br />Many business owners pay cash for equipment to avoid finance charges, which<br />is the best alternative until the IBC method is understood.<br />Question:<br />If I was going to sell you stock in a company at $100.00 per share and then<br />guarantee you that in 5 years it would be worth $40.00 per share,<br />HOW MANY SHARES WOULD YOU BUY?<br />
  20. 20. Paying Cash<br />Paying cash for depreciating equipment is like<br />buying stock that is guaranteed to go down. Not only does paying<br /> cash take away opportunity, but in addition <br />the equipment will go down in value……guaranteed!<br />
  21. 21. Your<br />Family<br />Bank<br />The Alternative…<br />BE THE BANK:<br /> Recapture the total purchase price<br /> Recapture and pay yourself the interest<br /> Deduct and depreciate the equipment<br /> Reduce your overall taxes<br /> Use the funds over and over again<br /> Redirect funds for retirement use<br /> Creditor proof your assets<br /> Be in control<br />
  22. 22. Two Businesses<br />You should be involved in TWO businesses…..<br />
  23. 23. Two Businesses<br />You should be involved in TWO businesses…..<br />Whatever it is you do for a living….AND….<br />
  24. 24. Two Businesses<br />You should be involved in TWO businesses…..<br />FINANCING whatever it is you do for a living!<br />
  25. 25. Two Businesses<br />You should be involved in TWO businesses…..<br />And of two the banking is the most important to understand!<br />“The key to wealth is the <br />Banking business.”<br />
  26. 26. Again…..Do exactly<br />What you would normally do <br /> in the course of Business<br />But add the twist…..<br />this time Be<br />the Bank!<br />