A hearty welcome to “Grandma’s Wealth Wisdom” with your neighborly hosts, Brandon and Amanda Neely. This is the only podcast that helps you take charge of your cash flow and leverage your assets, simply and sustainably, the way Grandma used to.
Brandon: Hey, I'm Brandon, and welcome to our Grandma's Wealth Wisdom, where we help you break through to a smart, stable financial future, with the tried and true wisdom Grandma used.
Amanda: And, hey, I'm Amanda, and this is Episode 90, nine-zero, which we've titled “Velocity Banking and Infinite Banking: Which Is Best for You?” This is really Part 2 of a series we're doing about velocity banking. If you missed the last episode, we highly recommend going back and listening to it. When we talk about today, we'll definitely be building on what we discussed last time, so make sure you've heard those pros and cons of velocity banking. [01:03.5]
Brandon: And you went into some real numbers there, too.
Amanda: For sure.
Brandon: But before we jump into this episode, we do want to make a plug for two awesome things that are coming up. If there's one thing we've all learned from this last year, it's that going it alone can be tough. I don't think we need 13 more books on financial planning or also how to run a business, or more things to learn and do, and we don't need more uncertainty on inflation. We don't need Wall Street shenanigans or if we all meet our staffing needs. We don't need more of that stuff.
What we do need is less uncertainty and more connection. We need to be with each other. We need to be working with each other, meeting with each other, and generating financial strategies and businesses that last with each other. [02:05.6]
So, we have two opportunities to be with each other and both are virtual, so in this crazy world, we have that virtual thing that we can do. The first is the Not Your Average Financial Summit. Now, if you don't know this, we are part of a community of other Not Your Average Financial revolutionaries and there's a podcast about it.
There's also AN Group. What we're doing in this group is having a conference, a one-day virtual conference for anyone curious about or engaged in the Not Your Average Financial strategies that we've talked about on this podcast, on that other podcast. [02:56.8]
It’s a chance to not just take in more content, but to spend time with each other and to meet with advisors and other clients that are changing their financial future, who are not doing it the average way, but wanting to be above that and change that system.
Amanda: That's the first opportunity. The second is a new opportunity we're calling CFO Hours. CFO Hours are not for CFOs. It's actually two hours per month where regular business owners can get together with other business owners and take time to review your financials, make plans for how to improve them to be the CFO of your business. It's not a chance or it's not just a chance to set aside time for whatever a CEO should be doing and reviewing their numbers, but also a time to be with other business owners and be encouraged and inspired together. [03:59.7]
Brandon: Now, we're starting CFO Hours because we've talked to countless business owners and have found that the finances of their business is often confusing for them, and even if they do get it, knowing what to do to improve their cash flow is a struggle. We don't want growing businesses to wait until they have the funds to hire a CFO to finally figure it out. Instead, many CEOs are already performing that CFO role anyway in their business, or they should be. CFO Hours is the chance to take steps towards getting our profits as high as we know that they can be and doing it with other people.
Amanda: Will you be part of these two opportunities with us? We will put the links to both of them in the show notes. CFO Hours is actually a very easy link at “CFOHours.com”. We'll hope you'll join us at both of those. [05:02.0]
Brandon: Now for the topic at hand, velocity banking and infinite banking. First, what we need to do is define some terms.
Amanda: Yeah, so we're going to define velocity, infinite, and banking.
First with velocity, it comes from physics and it measures movement from a starting point. If you have an object at that Point A and it moves to Point B, and then back to Point A and then back to Point B, and it keeps going back and forth, it has zero velocity. It's not moving in a direction, right? It's just oscillating between two points.
That might sound like what finances look like for too many people, never making progress. They save up a little bit and then they have to spend it on something. Something always comes up. That's like riding a stationary financial bike. Even with all the excitement and the rigor of a SoulCycle session, they're not actually going anywhere, and I've seen videos of SoulCycle sessions. I’ve got to tell you, I don't really want to do one. [06:08.6]
Brandon: I've seen them at the gym, too, and I'm like, all right, that's weird, but people love it.
Amanda: We're the people that would like to go places, I guess.
Brandon: Yeah.
Amanda: And that's actually what velocity banking encourages. Even right there in how it has named itself, right, it's all about movement in a direction, and it's not about going slow. It's actually about going quickly, right? To have a speed is still an important part of velocity, but only speed away from that starting point and not speed just cycling through to the same thing, and so you know you're successful with velocity banking if your net worth is increasing rapidly as you pay off debt. It's primarily a debt payoff strategy.
Brandon: The next term is infinite, never-ending as Nelson Nash would say. The more you see, the more there is to see is what he says. Too many people stick with what's just conventional, without exploring other options and ideas. [07:11.8]
We’ve found this to be true for ourselves and many others. When we started using the infinite banking system, we thought we got it and knew what we needed to know, but as we continued using it, we've found that there's a lot more to it and we keep seeing new ways to use it to grow our wealth. We're barely even touching the surface or the surface ourselves.
What infinite banking encourages right there in what it chooses to call itself is seeing the openings of possibilities and opportunities that wouldn't be there if you weren't using the system. I mean, again, an example is getting your money to do two things at once or more than two things at once. [08:02.2]
Amanda: Then we come to the third term, banking. Officially banks are approved institutions that act as intermediaries between depositors and borrowers, and banking is the practice of banks as they act as the intermediary between the people that are putting their money in the bank and the people that are borrowing from the bank.
As you might guess, neither velocity banking nor infinite banking comply with the official definition of banks. They're not approved banks and the actions of those approved institutions known as banking is not what velocity banking or infinite banking are really doing. In a way, both titles are considered non-compliant in the financial sector.
What proponents of velocity and infinite banking, though, are referencing is a more informal idea of the movement of money within our personal lives. Really, they're both cash-flow-management type systems where we're all three parties, the depositor, the lender, and the banker. [09:05.5]
Neither velocity nor infinite banking involves setting up a bank. Let's be clear about that. We're not actually setting up a bank. Instead, they encourage individuals, families, and business owners to think like the bankers think with regard to the cash that's flowing through their hands.
Brandon: And that's exactly what a lot of people miss when they are exploring velocity banking, infinite banking, or bank on yourself and other terms that use similar concepts. They revolve around this idea of taking control of the banking function of your life and using financial institutions like banks and insurance companies towards your benefit. At their core, velocity banking and infinite banking, both appeal to this part of us who wants to control, wants to avoid paying interest to the banks, and create a system of self-reliance and increased opportunity. [10:06.0]
Amanda: But their biggest divergence is whether they are thinking long-term or short-term. One of these systems is very much about thinking short term and one is very much about thinking long term.
With velocity banking, the primary focus is getting out of debt as fast as you can. The assumption is that then you'll save later and you'll have more to save later, so get out of debt and then be aggressive with saving, and get out of debt as quickly as you can short term as fast as possible.
Infinite banking is built on the core principle of uninterrupted compound interest and the main idea is that the sooner you start saving in a way where the growth is never interrupted by fees or taxes or volatility, then the greater your savings can grow over time. Uninterrupted compound interest is very much a long-term play. It takes a while for that compound interest to truly compound and grow like it can. The longer you wait, the more it grows. [11:12.2]
Brandon: If someone is choosing between the two systems, they need to ask themselves, which is more important, a) to reduce the amount of interest they pay to the banks in the short term and then start saving later, or, b) to start saving now so that they don't have to depend on the banks in the future. For example, would you rather pay extra on your car loan or save the same amount, so that you don't need a car loan the next time you buy a car?
Amanda: And I’ve found this scenario helpful. Let me give you a fun story, because this can be a hard choice to make. Do you focus short term? Do you focus long term? What do you do? [11:55.5]
Grandma always said, “Eat your vegetables. Look both ways before crossing the road, and never risk your financial future on elements of the market you can’t control.” That Grandma, always good for some tried-and-true advice, and although some of her wisdom seems to have skipped a generation, you don't have to be left behind.
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Amanda: Imagine. You can close your eyes if you want to while you're imagining this. Imagine you're walking down a road that represents your financial path, and as you walk down this road, you come to a fork in the road and there in the middle of the fork, just before it, there is Gandalf the Gray standing there.
Brandon: Wow, there you go. That's epic.
Amanda: Yeah, and he does not say, You shall not pass. Instead, he tells you that he knows where both of these paths lead.
If you go to the left, you will reach your financial goals more quickly, but 30, 40 years down the road, you're going to be a little more stressed because you haven't built enough wealth. [13:12.5]
If you go right, it's going to take a few more years to reach your financial goals, but in 30 or 40 years, you'll have more wealth and more financial stability.
Which way do you go? Do you go left and reach your goals more quickly or do you go right and build long-term wealth and financial security?
Brandon: Now, here's the fun thing about financial paths, though. You don't have to pick right or left. Some of your money could do the right side and some could do the left side. That way you hedge your bets or, as financial people like to use that term, diversify.
Amanda: Now, I have to say possibly, Brandon, that could be a route that people might take with their money, put some towards short term, some towards long- term, but others might be like, That's way too complicated or it's hard to know. How much should I put towards the short term and paying down my debt? How much should I put toward the long term and building wealth? [14:16.2]
In theory, I guess you're right, and often with financial decisions and financial journeys, the choice isn't so cut and dry, like choosing a fork in the road. Maybe you can give us some tips about which we would choose.
Brandon: And that's partly why we used “and” rather than “or” in the title of this episode. How might you use these two systems together, or how could they work together? I mean, could they work together?
Amanda: I think you've got some for us.
Brandon: Maybe for some people, velocity banking gives them the practical steps to set up a way of life that stops any going into debt further and sets them up to start using infinite banking to set funds aside for their longer-term future. [15:08.8]
Amanda: Yeah. Infinite banking very often doesn't work if you're going more and more into debt each month. Perhaps, people kind of start with the velocity banking as a way to set up their cash flow system as kind of a first step to getting toward a more sane, stable cash flow, and then they build infinite banking on top of that. That sounds pretty good.
Brandon: Maybe for some people, infinite banking gives them a place to start growing their savings habits, so that if something goes wrong with velocity banking, they have a sufficient emergency fund. Now, go back to that previous episode for some of those things that could go wrong if it’s …
Amanda: Yeah, as we shared in the last episode, there are definitely plenty of things that can go wrong with velocity banking, and for some people, having infinite banking as part of their financial lives serves as the strong foundation for their entire financial journey and allows them to recover if some of those risks turn into reality. [16:12.4]
Brandon: Maybe for a real estate investor, they use velocity banking to be able to start making purchases, and then they also use infinite banking to reduce their dependency on other people's money and keep more of their profits for themselves over the long term.
Amanda: Yeah, I've seen a few real estate investors do this kind of strategy, and rather than use a cash-out refinance on their mortgage or maybe they'll do a cash-out refinance, or they'll use a HELOC, one of the two to get a down payment for an investment property.
Then they'll start to split their profits from the property, and some they'll use to pay down their debt and some they'll put into a whole life policy for future investments or in case something goes wrong, rather than putting everything towards their debt and then they can't get maybe the opportunity to do a cash-out refinance or their HELOC goes away. [17:07.0]
Over time as they make more and more investments, they are using policy loans more and more, and they're HELOC or cash-out refinances less and less, which means they get to keep more of their profits over time.
Brandon: Maybe exploring both systems helps people get clear on their goals, too, and how to achieve those goals.
Amanda: Yeah, I love this one. I've seen people explore infinite banking and velocity banking, and sometimes they'll ultimately do one or the other or choose neither. But as they've explored these systems, I've seen that it often helps them get clearer on what they like and don't like, what they feel comfortable with and what they don't feel comfortable with, what they want their money to do and what they want to keep their money away from. Even just the exploration seems helpful in terms of the clarity that people get on what they want their money to do for them. [18:01.2]
Brandon: As we wrap up today, remember, be sure to listen to that last episode, “Velocity Banking: An Honest Review”, and learn more about the pros and cons of velocity banking. Then reach out to us to learn more about the infinite-banking pipe part and how that connects with velocity banking.
We'd love to empower you to take control, avoid paying interest to the banks, and create a system of self-reliance and increased opportunity, whether that means sending you to a velocity banking expert or helping you start infinite banking, or some combination of the two or something else entirely. As we say, in every episode, it's all about helping you break through to a smart, stable financial future, and we'll add, as you intentionally define that future for yourself.
Amanda: Very important, these are systems that each person can customize and make work for them, if they choose to, if they decide what's right for them. [19:05.0]
Now, we've got some really awesome things coming up this fall and we really want you to hit that subscribe button, check out the links in the show notes for those events that are coming up, and get very excited for the next episode because we're going to dig deeper into how you decide what your financial dreams are. If you're ready to throw out everyone else's shoulds and carve your own goals, we're ready to help you do just that, so hit subscribe. Check out those links in the show notes. We've got some really awesome stuff coming your way.
Brandon: Until next time, keep building your wealth simply and sustainably, so you can break through to a smart, stable financial future. [19:43.7]
The topics presented in this podcast are for general information only and not for the purposes of providing legal, accounting or investment advice. On such matters, please consult a professional who knows your specific situation.
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