FCP 163: Lessons From The Rich – How Money Really Works – Featuring Chris Naugle

Jack: Hello, everyone, and welcome to another episode of the “Forever Cash Life Real Estate” podcast where we talk all things about money, cash flow, real estate, land flipping, and those kinds of things. Today we’re going to talk about how money really works, the state of affairs, and a whole bunch of other things with our special guests. So, stay tuned. We’ll get started in just a second. Welcome to the “Forever Cash Life Real Estate Investing” podcast with your hosts, Jack and Michelle Bosch. Together, let’s uncover the secrets to building true wealth through real estate and living a purpose-driven life. All right. So, we are back and our special guest today is Chris Naugle. Chris, how are you doing today?

Chris: I’m doing wonderful. Thanks for having me on the show.

Jack: Wonderful. I’m glad to have you here. Thanks, you were able to make it. And so Chris, you’ve been in the financial money industry, not the financial planning industry, well, you have been there, too, but for almost two decades, right?

Chris: Right.

Jack: So, tell us a little bit about you and tell us… And by the way, for everyone, we’re not gonna talk about mutual funds and things like that and financial planning and those kind of things. Instead, we’re gonna talk about how money really works. And so Chris, give us a little scoop of what your expertise is. What do you like talking about? And also about, yeah, just you as a person.

Chris: Yeah. So, I mean, from a young age, I was self-employed. I was an ambitious pro-snowboarder. I had my own skateboard snowboard shops that I started at an early age. So, that’s kind of how I got started in entrepreneurship. And in the early 2000s, the dot-com crash, I entered the financial services world, became a financial advisor, rose to the top, one of the top advisors in the firms I was at until 2008 I had been doing some real estate, flipping a couple of houses, got into doing a big real estate development, which was a big strip mall, and borrowed money from the wrong people. Almost went completely bankrupt. And if it wasn’t for my girlfriend paying the mortgage, the utilities, and allowing my friends to move into the house and pay rent, I probably would have went bankrupt. So, during that period of time, that is actually when I kind of hit the bottom because I was crushing it as an advisor and as a pro-snowboarder. So, fast-forward, I started buying real estate again, ‘9 to ’14, got up to 36 units. Then the 37th unit, the bank said no. They said, “You don’t fit the little square box anymore.” And they pulled the rug out from underneath me, froze the lines and everything else, and back right down to the bottom I went. At that point in my life I was a high-level advisor, a pro-snowboarder, self-employed. You’d think I had all the makings, right? I should know how money really worked. But what I learned as an advisor was not the things you need to have long-term success. It’s how to be a professional salesperson, how to sell those things like stocks, bonds, mutual funds, and all that. That’s what I learned and a lot more.

But in ’14 when I lost it all again for the second time, I started seeking the answers. I started figuring out why is it that my successful clients, the ones that own real estate, don’t ride this crazy roller coaster that I’m riding? And that’s where the journey began. I met some people at a three-day seminar. And I learned that… And these were ultra-successful real estate investors. One had a TV show, the other was the bank. And they were talking about what they were doing with money, how they were getting money for their real estate deals. And I started sitting there saying, “Wait a second. Everything I’ve been taught about money and how money works is the complete opposite of what these two guys are doing. So, there’s something I’m missing.” And that’s when I dove in and I started following multimillionaires and billionaires around. I started asking a lot of questions, started really diving into the secrets of the wealthy. Why is it that the wealthy do the complete opposite of what we are taught to do with money every single day of our lives? And that brings me to today as America’s number one money mentor. You know, I got lots of experience with house flipping and real estate investing and rentals. We had a show on HGTV with my wife and I called “Risky Builders.” And that’s what got me out of the financial services industry. I spent 16 years on that side of the fence in Wall Street. And in ’18 when we got our show on HGTV, I decided, “Hey, I’m gonna go after this.” The show didn’t take after the first six, and then after that, I was basically on a hunt to teach people how money really works, the secrets, and that’s what brings us here.

Jack: All right. By the way, guys, just quickly before we continue, you’re wondering what my t-shirt is. We’re recording this show on the hundredth anniversary of women’s rights and women’s equality rights and the hundredth anniversary of the 19th amendment being signed, which gave women the right to vote. Way too late. THey should have been given that in 1776 along with everyone else. And so I’m just wearing this t-shirt. It’s just an, actually, funny story, I put this t-shirt on this morning without even knowing that today is the day, and then my team told me, “Hey, you’re wearing the right t-shirt for the day.” So, anyway, so I just wanted to say that. Let’s celebrate that women have, at least on that level equality, and there’s still ways to go for them. So, now let’s quickly go back to that. So, now that’s quite a rollercoaster ride you went right through and up and down and up and down. And you finally got this epiphany. So, tell us. How does money work?

Chris: Well, I mean, there’s a lot more than just, like, the magic, you know, the answer. But basically, what we’re taught… I’ll give you kind of the summary of it. What we’ve been taught our whole lives is to give up control of money so that somebody else is in control of your hard-earned dollars. And in doing that… I mean, let’s dissect that one layer deeper. What do we do with money? From a young age, we’re taught to put money where? In banks. Right? And what do banks pay us for the money that we leave there? Right now it’s next to nothing. But let’s just say it’s 1%. But the banks then turn around, and how much money do the banks make on the money that we leave there?

Jack: A lot more.

Chris: The answer is 400% to 1,300%. You can go to Bauer Financial and you can see any bank in the United States, that’s what they’re making on the money you leave there. So, why is it that they give us 1% and they make 400% and 1,300% on that money? It’s because we allow it. We give up control. We give the bank money. And you know, the funny thing about what we do with banks is we go in and we put our hard-earned deposit money there and we feel good about it. What the bank does is turns around and moves that money and continually keeps moving that money around and making money on every single transaction of it. Then when we want our money back, we almost sometimes have to beg for all of our money back or wait several days to get it. You’re nodding your head. During COVID or 2008, how long would it have taken you to get all of your money out of the bank if you had over 10 grand? Well, I can tell you, probably about a week, and it would have been a long arduous process with paperwork. If you’re in control…

Jack: Yeah. I remember even the… Actually, we were a little worried about people doing a bank run and stuff like that, so we went to the bank and they limited it down to, I think, $3,000 a day and something like that.

Chris: Yes, correct. Correct. That’s exactly…

Jack: So, I was like, “What?” And then, I think, for about a week or two, they limited down to below that even. So, I was like… I couldn’t believe it. So, we increase the limits on our debit cards. And it went to different debit cards and we got some cash, and then, I mean, things eased out again, but it was crazy. Yes. So, 100% I’m with you. So, go ahead.

Chris: Absolutely. And then what do we do? We borrow…we deposit money from the bank, but then we borrow the money right back out at a higher interest rate. High lines of credit, home equity lines of credit, car loans, everything else. And during this whole process, we never think twice about it. And all we’re doing is we’re basically paying the bank interest in principles on money that we basically gave them. But that’s not where it really ends. The worst part about it is the biggest thing we’ve been taught, I know at a young age I was taught, to put money in 401K’s employer-sponsored retirement plans. So, what are we doing when we put money in 401Ks? Well, essentially, you’re doing the same thing. You’re giving up control of your best dollars today. Now, Jack, I’ve listened to your podcast and I know you talk about inflation a lot and I know you also talk a lot about money in its essence. But your dollars right now, if you pull out a dollar bill from your wallet, is your a dollar bill worth the most today, or is it worth more in the future?

Jack: Well, it’s worth…depending. If I just keep that dollar bill in the book and under my mattress, it’s worth more today than in the future.

Chris: Right. And you can prove that because your dollars today, if you go back 20 years ago, that dollar would have bought more candy bars than you could buy today with it, but inflation hits it. So, when we give up our control of our dollars to these 401K companies, we give the money to them because we want the tax deduction, they’ve made it easy, and we wanna grow that money. Those are the three main reasons. But when you’re putting the money in, you’re getting a tax deduction on the seed to pay tax on the harvest. Now, is that what they taught? Is that what you wanna do? You wanna pay tax on the seed, don’t you? That’s what you wanna do, but you don’t wanna pay tax io the harvest. But what we do is we actually pay…we forego paying tax on the seed to pay tax on the harvest by doing that. So, essentially, you are compounding the taxes on your 401K money because taxes, do they go up or down? They go up, right? Even if they don’t go up, they find more crap to tax us on. And then we ride this crazy roller coaster of the stock market, which works in very rhythmic patterns, almost like sound waves. It’s every 7 to 10 years you have an economic, you know, some type of correction. In this one right here right now, what we’re in this is 12 years. We’re approaching 12 years in this cyclical cycle. So, you’re gonna ride another roller coaster here very soon. If March wasn’t enough, that wasn’t even the monster showing its ugly teeth because what’s to come next, that should really scare you. But that’s what you do. You put your money there, and then when you wanna take your money back, what happens? You get penalized. You get taxed. So, are you in control of your dollars? You are not.

Jack: No.

Chris: Not only that, you’re paying a fee for someone else to be in control of your dollars to go make more money. See, but this is just… This isn’t anyone’s fault. None of your listeners, this isn’t their fault. This is just what we were taught. This is what I did as an advisor because I had the rosy-colored glasses on and I was taught to do this. But that’s not what wealthy people do. Wealthy people are in control of their money, but they also understand that their money has to move like a raging river or a raging stream. Think about fish. Right? Would you go… If you went fishing in a raging river and you caught yourself a nice trout, if you like fish, that would be a good meal for you. But then would you ever go off the beaten path off the creek and go to that stagnant pond, drop your line in there, hook a fish, and eat that fish? It probably wouldn’t taste good. You wouldn’t eat it. But yet, our money, what we’re taught to do with it is literally leave it in that stagnant pond, that pond that isn’t moving that does nothing because we don’t understand how to move our money the same way banks do. The wealthy do. And they found very interesting ways and places where they can put their money that will move that money while still maintaining and earning uninterrupted compound interest because that’s the ticket. Albert Einstein said it best. He said, “Compound interest is the eighth wonder of the world. Those who understand it, earn it. Those who don’t, pay it.” Well, most of us go through life just paying it and wondering why we never get ahead. Those that understand it, they found a way to earn it over and over and over again and they understood the power of it.

So, that’s some of the baselines of what we need to do. And let me go one step further. COVID is an interesting thing. And I love what you say about it because, you know, a lot of people right now they’re living in, like, what I call an illusion, a magic trick. What is happening, what you’re seeing out there, what you’re seeing in the stock market, folks, this isn’t real. It’s not even close to being real. The stock market is at an all-time high, yet Main Street’s still shut down. Restaurants still are running half capacity if they’re even open. Businesses are going bankrupt every day, but you don’t hear about that in the news. Oh, no. You just hear about Apple, Google, Netflix, Microsoft, and all the big tech companies. Why? Because they’re the only ones making real money. And why are they making money? Because we are so dependent on technology that they’re literally printing money. Apple just turned $2 trillion in capitalization.

And when you look at the stock market, you have to understand that the indexes, the Dow Jones, the S&P 500, they’re made up of large companies. Well, who are the large companies in today’s world? Aren’t they all those companies I just named? And because they’re so big, don’t they make a large portion of that index? So, does it make any sense or does it not now make sense why the indexes are high, but yet when you actually take the glasses off and you look beyond the smokescreen and you see what’s really going on out there, it doesn’t look so good? Your friends and your family are losing their jobs. They’re surviving because of handouts from the government from stimulus money that they printed out of thin air that steals its value from your current dollars. It’s called inflation. Inflation… So many people have been brought up to believe that inflation is the increase of the prices on the things we buy. And that is absolutely not correct. Inflation is a hidden tax that basically makes it so your dollars buy less, so you need more dollars to buy the same goods and services. So, the goods and services really don’t go up in value. It just takes more dollars to buy them

Jack: Even gold prices went up right now. Everyone is like, “Gold price is going up.” No. Gold prices didn’t go up. The dollar went down.

Chris: Exactly. So, you just nailed it. And eventually, my hope, and I’m gonna speculate a little, is that eventually, we get back on track in this country. Otherwise, we’re not gonna have a country as we know it. We need to get back on track. And one way we need to do that is we need to go back on the gold standard. Our dollars right now are only the main dollars because it’s the main means of exchange for oil. When that’s gone and we lose that, our dollars are worthless, worthless. Do you remember the pictures of the guys back in the depression with a wheelbarrow? I think it was the Depression. It could be even older.

Jack: That was Germany in 1923.

Chris: Thank you. Thank you. You knew the history better. But the wheelbarrow full of money to buy a loaf of bread. Do you want that here in the States? No, you don’t. Well, stop thinking that these handouts are right for you. They’re not. They’re only gonna hurt us all. They’re gonna not just hurt us. They’re gonna hurt our kids, our grandkids, and everything else. So, I’m going up on…

Jack: So, I wanna just quickly jump in a couple of things here. So, the first thing is I couldn’t agree more. It never made sense to me to put money into, like, IRA or 401K in order to because, first of all, my intention is to make more money…to pay…to have a higher income when I retire than when I work. So, why would I go and put something in tax-deferred only to then, later on, pay more taxes? Secondly, if I see how the tax rates are right now, they’re lower than ever. And that’s not sustainable. They’re so low that the country cannot efficiently… Well, the country is never gonna run efficiently because the government is in charge. But that’s a different question. But there are countries running at a deficit even if no additional social service or medical service or not a single government program is being added. Even before COVID, the government was running on like the $1 trillion deficit per year. So, the only way to overcome that is by increased taxes. So, chances are in 10, 15, 20 years when the population in the U.S. is much older and they all wanna live on Social Security, the taxes for those working need to be much higher in order to be able to afford those payments. So, therefore, why would I put something in there right now that I could just pay the highest tax rate 36% taxes on in order to then, as you said, grow it. So now, I’m avoiding paying the 36% taxes right now to then grow it to then on a much larger sum pay 50% taxes down the road? It just doesn’t make sense. It never made sense to me.

Chris: It’s not even logical.

Jack: That’s our thing. My IRA has like $5,000 in it. Right? And because I set it up one time and then shortly after, didn’t qualify for it anymore, anyway at least for a Roth IRA. And so the only one that would be coming into possibility would be a Roth because there you obviously pay taxes now and then you don’t pay it later on. So, I finally got that that point. And for those who are Roths who have done that, make sure you talk to guys like Chris who understood that. Don’t talk to your financial advisor necessarily because the financial advisor, particularly, if they work for the company that you put that in with like the Charles Schwab, the whatever their company names are, they’re gonna be making a commission of being able to use that money that you put in there. Right? So, they’re not gonna ever tell you to not put the money in there. So, I agree with that part. I agree with what you said about inflation. Inflation is really not that the prices go up. It looks like the prices go up, but what’s really happening that somebody takes a piece and cuts off your dollar bill. It makes it less and less. And if this costs the same, you now need $2 bills to pay the same thing, but your income hasn’t gone up that much. Right?

Chris: Yeah, absolutely correct.

Jack: So, that’s… I 100% agree with that. So, now, how do the rich do it then? How do the rich …?

Chris: So, how do the rich do it? Well, the rich understand that their money has to always be in motion. So, the rich don’t just park money places. What do the rich do? And I’ll tell you, I can show you a timeline and a history of all the people on my podcast, these multimillionaires and billionaires, they all do the same darn thing. And what are they doing? Well, they decided, just like the Rockefellers back in their day, that banks weren’t the place where they wanted to keep their money because banks weren’t secure enough, they didn’t trust them, and they couldn’t pay them the interest that they wanted. So, what they found is that they found by moving where their money went first, they could change the entire dynamic. And this was kind of pioneered back in the Rockefeller days because of the amount of money they had. And they looked at the most successful largest financial institutions there were out. And what were they? Giant, mutually-owned insurance companies. So, what did the wealthy start to figure out how to do? They wanted to create a banking system, and the banking system had to be more secure than a bank because back then it was dangerous to park that much money in banks. You could lose it all.

So, they went to these insurance companies and they figured out how to create a banking system called privatized banking, commonly today known as infinite banking. And how they do it is they use not what you know of insurance, but whole life insurance, but designed totally different than anything you’ve ever seen and how you’ve seen whole life designed. It’s designed to work as a banking system. So, they put money into these insurance companies through this machine called the whole life policy. Again, totally different than the one you’re thinking of. And then what they do is they take that money right back out. But here’s the difference. When they do this, the insurance company in the contract agrees to pay them a guaranteed interest rate. Today it’s 4%. So, they’re making 4% on their money. Better than a bank, but you still need to continue to make that money even when you take money out because the trick is not compound interest. That’s what they’ve taught you to believe. But for compound interest, you got to park your money. Uninterrupted compound interest, now, that’s the ticket. So, these insurance companies will pay you interest on all of the money when you put it there and when you take the money out.

So, you can park the money there, take the money out, but your money never stops earning interest because when you take that money out as a loan, you see, you’re not taking your own money. The insurance company is giving you a loan from their general account. Now, are they charging you interest on that loan? Absolutely. But let me just give you some numbers. By today’s standard, which is one of the worst dividend scales you’ve seen in insurance companies in history, right now certain companies will pay you 4% plus 2.2%. That’s 6.2%. So, if your money is making 6.2, and the insurance company lends you the money at 5, what is your arbitrage? It’s 1.2%. So, you’re making 1.2% on money that you now have in your hands. But when people think of whole life, they think, “Well, if I put money in a whole life that I have, I can’t take money out in the first year, I can’t take money out in the second year, and I can barely take any in the third year.” What if I told you these plans, you could put money in and you literally could take up to 94% of that money out immediately in the first year? So, you put, let’s just say, 10 grand in, you immediately could take out $9,300 and go use it for a real estate deal, go use it to buy land, go use it to pay off your credit card.

Now, let’s do a little exercise because this is where it gets wildly fascinating. If the insurance company still pays you 6.2 but you have the money in your hand, it’d be like you making money on money that doesn’t even exist, but it does. And then you take that money that you just took from your specially-designed and engineered banking policy and you pay off Visa. You take 9,300 bucks and you pay off your Visa card. Now, Visa was charging you how much? Let’s just speculate and say 20%. You’re paying Visa 20% every month and you don’t even think about it. You just make the payment, the minimum payment. But now what if you paid off Visa and you took that minimum payment used to give the Visa and you paid it back to yourself? You effectively now made money twice because you’re making 1.2%, the spread, the arbitrage on the insurance policy, and you now made 20% for paying out Visa. That same strategy right there works for getting all the money back for all the cars you’re ever gonna buy driving. Just change who gets the money. Building wealth is so simple. It involves understanding how money works…

Jack: So, let’s walk through that…

Chris: Sure.

Jack: Let’s walk through that just one more time for everyone to understand. So, you have your special whole life policy that you described. So, what you do is, like, instead of paying off…instead of paying for cash per car, you mean, right, or instead of paying…

Chris: Yeah. We can do a car. We can do credit cards. It’s just whatever one.

Jack: Let’s do credit a card. So, how much do you owe on your credit card? Let’s put up an example.

Chris: Let’s say you owe nine grand. Keep the math simple.

Jack: Nine grand. Okay. So, what do you do? So, you have nine grand. Instead of paying through the credit card, you pay it over there?

Chris: Well, now, let’s start with your savings account. Let’s say you got 10 grand sitting in your savings account earning… Well, let’s say it’s earning 1%. Well, actually, you’re losing about… If you’re earning nothing, you’re losing 3.2% to inflation. So, instead of having it over in your savings account, let’s just say you change where that money is. You change just that one thing. And that money goes into this specially-designed and engineered whole life plan. So, you put 10 grand over here. But immediately as soon as your check clears, you take $9,000 of that $10,000 out. Now, let’s stop right there so I can kind of unpack that. The 10 grand you just deposited into that insurance company, how much money are they paying you? A guaranteed 4%.

Jack: Four plus the…

Chris: The dividend.

Jack: …dividends I think. Right?

Chris: And just so you know, the dividends are not guaranteed, but right now we’re at a 30-year low on dividends. So, that’s 2.2%. So, you’re making 6.2. Then you take $9,000 out. So, when you take that $9,000 out, unlike a bank, they don’t make you fill forms out. They never ask you why you’re taking it. As a matter of fact, the money hits your account 36 hours later, or if you pay for the wire, the next day. So, you now have nine grand in your hand. And that nine grand you have in your hand is still…the full 10 grand is still earning that 6.2, but you gotta pay the insurance company 5% of that. So, you’re making 1.2 on all of that. We take that nine grand that’s in your hand and we pay off…

Jack: And pay off your credit card.

Chris: Pay off your credit card, which was charging you 20%. Now, instead of just saying, “Okay. Well, that’s gone. Thank goodness,” you have to be an honest banker. You’re creating a banking system. And if you owned a bank, you would never take money from your bank, use it, and not pay it back to yourself. And here we’re just not creating new money. We’re using the exact same dollars that are leaving your family today, which are going to Visa, so Visa is winning. You’re losing it by 20% a year. So, now you paid Visa off. Take that, let’s just say it’s a $200 monthly payment that you make to Visa. Take the $200 and take that money and put it back in your specially-designed and engineered whole life.

Jack: Okay. So, you’re avoiding paying 20% interest.

Chris: Correct.

Jack: But you keep the discipline of paying the minimum payment, let’s say, the $200, which you don’t have to pay any more technically because the credit card bill is paid off. And you move that into your insurance plan now to keep earning another 6.2%.

Chris: But you’re actually earning $20 because you were giving 20% away.

Jack: So, you’re saving $20, and instead you’re making 6.2. So, basically, you’re making 26%.

Chris: Bingo. And what changed there? Did you have to work any harder for that?

Jack: No.

Chris: Did you have to work any longer? You didn’t take on any risk and you didn’t lose control of your money. You actually took back the control of your money. You see, that one example we just did there, that’s what wealthy people understand. Now, I just did it with a credit card. We could do that with land. We could do that with rentals. We could do that with flips. We could do that with your car. Instead of going to the bank or going to the car company and buying a car, paying them, you know, exchanging the car for a monthly payment, what if we didn’t do that? What if we just took the money from our bank and we paid for the car? And then instead of paying the car company, we just paid ourselves the exact same amount we would have paid for the car. I did this for my wife. We just bought her a really nice SUV. And instead of taking financing out, I went through the motions, I negotiated, and I found out, “Okay. The payment is gonna be $954.”

So, at the end of the transaction, they said, “Okay. Are you ready? Here’s the loan documents.” I said, “No, no. I don’t need the loans.” And they said, “Well, why do we do that?” I said, “Because I needed you to tell me how much my monthly payment should be when I pay myself back.” And then all I did, I went into my online banking, I set up a bill pay for $954 every month. Every month, I get a check into my banking policy for $954. She drives the car and enjoys it and I love making car payments back to myself because I know I’m making money twice now. If you do this in real estate, you can get up to making money four different times on the exact same transaction that you do now to make money one time, and you changed nothing except for where the money went first. So, this is such a novel… It’s a… People wanna…

Jack: This is cool. This is really cool.

Chris: People wanna make it… It is.

Jack: I’ll try this.

Chris: People wanna make it complicated, but there is nothing complicated about it. Actually, it’s kind of boring. All we’re doing is exactly what the banks do with your money. We put money one place, we move it to another, we take it, and we move it back in. And we constantly move the money. Remember, I talked about that raging stream that you’re gonna catch that trout from. That’s now your money. How many times can you do that and move your money? A lot. And all you had to do is just change where your money went first. Instead of that money going to a savings account, instead of that money going to that silly employer-sponsored retirement plan where you gave up all the control of, you change where that money goes first. You don’t lose control because as soon as the money gets there, it starts the interest, the uninterrupted compound interest, and then you take the money out. But we didn’t cover one thing and I’m surprised you didn’t bring it up yet. I knew you would because I know you’re thinking this. If we’re taking loans from the insurance company, aren’t we building more debt? Well, everybody gets me on this one. They’re like, “Oh, yeah, but you took a loan from that insurance company. You gotta pay them back.” Yeah. This is the funnest part about this.

Jack: Go ahead.

Chris: An insurance company when they write you a contract for the specially designed and engineered whole life, there’s another promise that they make to you. And that promise they make is the day you graduate, the day you die, that’s just… The graduation is a nice way of saying die. The day you graduate, that insurance company promised to pay your family, your beneficiaries, a tax-free death benefit. So, when you take loans from the insurance company’s general account, really what you’re actually doing is just using your death benefit before you die. So, those loans… We call them loans because is a loan taxable? Nope. When you take a home equity line of credit from your house, do you pay tax on that? No taxes. So, when you take a loan…

Jack: So, yes, you’re increasing your debt. That is 100% correct. You’re increasing your debt every time you take a loan out, but you also have it covered by the amount… Well, it’s not covered, but it’s…

Chris: No, it is because you’re just taking your death benefit while you’re living. And actually that loan…the insurance company will never ask you to repay that loan. Now, you can repay it because we’re gonna try to move that money in and out, so you would want to repay the loan. But you’re repaying it because you’re being the bank, not because the insurance company says they need the money back. The insurance company is actually perfectly happy just charging you the 5% interest on the loan. And they don’t care if you ever pay the loan back because someday, it’s just a number on a screen, that death benefit reduces by the amount of the loans that you didn’t pay back. That’s all.

Jack: Right. Exactly, right. So, that’s where I was going. So, that was the last thing. But isn’t there another death benefit to this? Just literally I had a conversation with my insurance broker about that because you’re right. I see a lot of smart, smart finance people talking about this infinite banking model and I was like, “Okay. I have to admit that I have not used it.” And so I was like, “Okay. I gotta… There gotta be something,” because once a few people that I really respect in the industry as smart thinkers, once they started talking about is like, “Okay. There’s gotta be more to that that I can see.” And a lot of it is what you just said. So, I love that the timing coincidence is perfect that you just literally bring this up right now. The second thing is, though, isn’t there another benefit too that you’re now making money on the money that you invested in there, the 6.2%, let’s say? You’re taking the money out, it costs you 5%, so you’re making 1.2% on that money. Well, once that insurance policy…

Chris: Well, that’s only in the first year too.

Jack: Once that insurance policy is fully funded, and if you die, which obviously is not a good thing, but don’t that insurance policy pay two or three times as much of what you paid into that thing in the first place?

Chris: That is correct.

Jack: So, if your money gets… If you just look at it… Unfortunately, you have to die in order to realize that, but just from a monetary point of view, not only do we make net 1.1% on the money and you still have the money in your hand, you also…the money has an ultimate whenever your date of death happens another like 100%, 200% return on it, right?

Chris: That is correct. So, I like to call it self-completing. So, when we build these, we don’t build these plans for the death benefit, but there’s always going to be one. And it is going to be 2, 3, 10 times what you’ve put into the plan. And that’s just the nature of how it works. It can’t work any other way. But the other thing too that you said, I wanted to make sure I’m clear on, is remember that 1.2% arbitrage, the 6.2 minus the 5% loan? So, the one thing you have to understand is that’s just the first year. Remember your money, that 10 grand you put in there, is compounding at 6.2, so the next year you got $10,620, hypothetically. Now, you’re compounding on $10,620. You get what I’m saying? Every single day your money goes up more than it did the day before because of the compounding. The loan that you took from the insurance company, that simple interest, that interest never changes. It’s the same, so it’s static.

So, as one goes up, one either remains the same or goes down if you’re paying it back. So, by the nature of the compounding, I’ll give you some numbers off my plan. By the fifth year of my plan, after I’m putting money in… Forget about taking it out. Let’s just pretend I never take a penny out. My plan is not making 6.2% anymore. Because of the compounding, the cash-on-cash return in my exact plan, and I’m 43 years old today, 5 years from today, I’m making 11.1%. Now, people probably would say, “Well, wait a second. How can you make 11.1 when you started making 4 plus the dividend?” Well, because you don’t understand uninterrupted compound interest. Remember, those who understand it, earn it. Those who don’t pay it. You’re compounding on a balance going up. So, it doesn’t matter how you do. It doesn’t matter what you do. That changes nothing in your life. You’re going to make more money every day.

Let me give you a cool analogy. I think this will really be a good way to explain it. I want you to imagine and I want all your listeners to visualize and imagine you have a vending machine in your garage. And you go out and you try your vending machine that you just bought for the very first time. So, you take $1 out, you put it in the vending machine. And then the vending machine gives you your dollar back. You’re like, “Darn it, the damn thing is broken.” But then all of a sudden a cup drops down and it pours you a coffee. So, you got your $1 bill,. You got your coffee. You’re like, “I like this vending machine.” Then all of a sudden you’re about to walk away and you hear ching, ching, ching. It drops some change. You’re like, “Man. This thing is cool. So, what would you do if your vending machine did that? You’d try it again. So, you take another $1, you put the $1 in the vending machine, the vending machine gives you the $1 back, and you’re like, “It’s not broken. It just works this way.” It drops the cup and it gives you another coffee.

And then you’re just, like, waiting, and then it goes ching, ching, ching. You see, in this vehicle, in this machine that the wealthy use, this privatized banking system, every single day of your life using this system, you will have more money than you did the day before. You don’t have to work harder. You don’t have to take out any more risk. It just happens that way. And it can happen no other way because that is how uninterrupted compound interest works. And the best thing is that coffee that you got there, that’s you taking your money out and going and making money a second time on it. The change was just the interest that you’re earning on it. So, if I showed numbers for this, it would blow people’s minds because they just in their minds can’t comprehend that. We all just think static. We think how a bank works and we think how our money works in the bank or the stock market. We don’t ever understand how it works and how the wealthy use it.

Jack: One simple question. Why does insurance companies do that?

Chris: Well, because they always have for hundreds of years. And I’ll tell you why it’ll never change and why it never has for hundreds of years is because all the wealthy people, they control all the laws. This is where the money’s at. To name a few, Walt Disney. Okay? Ray Kroc. Back in the day, the Rockefellers, the Rothschilds. How about Warren Buffett? He does it a little different, so he doesn’t use it the same way I’m explaining it, but he uses it. Oprah Winfrey, public knowledge, she uses it. I’m not getting political, so please, I don’t talk politics. But Biden has openly said he uses this. Give or take, like him, don’t like him, but he uses it. McCain before he passed away all the time talked about this. Those are just a few to name. So, if they’re all using this, why? Do you think they know something?

Jack: No. I mean, in terms of, like, the insurance company could choose not to offer this anymore. Why do the insurance companies offer it? How does it make financial sense for the insurance companies?

Chris: Oh, that’s easy. Well, if you think of how we invest money, we invest money relatively for short-terms, you know, 20 years at the longest. Insurance companies invest money for 100 years. They’ve been planting seeds for hundreds of years and waiting for those seeds to become a harvest. Seeds are, they bought 30-year treasuries 30 years ago. They’ve invested in real estate hundreds of years ago, and they still own and benefit from that real estate. They’ve made loans 20 years ago that paid them 8%, 9%, 10% interest. You see, insurance companies can invest very long spans of time. And they can wait for those returns because they basically print money. So, how insurance companies can do this, how can insurance company pay you 4% plus a dividend and still make money in today’s world? Because they’re writing the perpetual tailwinds of what happened 30 years ago, 40, 50, you know, all those years ago. They’re always doing this. So, they can continually pay it. It doesn’t take anything out of their pocket to pay you that 4%. All you’re doing is sharing in the returns of the insurance company’s general account.

Now, the interest rate that they charge you on the loan, that interest rate can fluctuate. When I first started in the early 2000s doing this, that interest rate was 6%. It is now today five because we’re in a low-interest-rate cycle. Dividends right now are 2.2 with the company I’m mentioning, which is a company called MassMutual. Thirty years ago, their dividends were like 5%, 6%. You see, everything is relative to the times and the interest rates in the environment, but it doesn’t matter. The insurance companies aren’t losing money doing this in any way, shape, or form because this is how they’ve always done it. They found ways to make money. And they also know how to play the game of mortality, and it’s called actuarial. They know when we’re gonna die. So, they can predict with a very fine science exactly how much money they’re gonna charge us for these vehicles in order for that to happen. And there’s always a cost, but cost is an issue only in absence of value. So, you’re paying for that death benefit. Okay? But that death benefit, those numbers I gave you, was wrapped into those numbers. That 11% in year 5 in my policy, that took out the cost of the insurance. So, that’s how this works. And if you’re making 11 and you’re paying 5, what is your net arbitrage? Higher than 1.2.

Jack: Right, absolutely. No, a hundred percent. Great. Man, that was a storm of information right now. I absolutely love it. Now, I actually love this session because I love how you can also even apply it to real estate. Right?

Chris: Correct.

Jack: You can literally… Let’s say if you wanna buy… If you’re in a lucky situation somebody wanting to place $100,000 investment or a $90,000 investment into, let’s say, syndication of a parking complex, you take $100,000, move it into one of these vehicles, take $90,000 out, and invest those, get a 7% preferred return, a 15% return on that while your money is actually still in the insurance vehicle making a 1.2% net in our example, net return. And in case you pass away, obviously, it completes itself and it takes this $100,000 out of the death benefit, but if you have a million policy, then your loved ones get still paid out $900,000 or $910,000.

Chris: That’s correct.

Jack: Yeah, $910,000. All of that makes complete sense. As a matter of fact, you could even take the $90,000, put them right back in, and take 80 out right back in and do that multiple times.

Chris: No, no. Actually, see, it gets even better than that. So, I see what you’re doing. You’re using that 90% factor. That 90% number is only the first year. See, the second year you have access to like 98%. The third-year you probably have access to more money than what you actually put in there. As a matter of fact, most of the plans that we build, the money you put in the first year, let’s just use the 90%. That’s the worst year. The first year is the worst year. But by the, like, third, fourth year, you put 100 grand in, you’re taking more than 100 grand out every single time and it just gets to be more and more. So, if you went to your bank and you gave your bank 10 grand, you know, you were doing this every year. You gave your bank 10 grand the first year. You gave your bank 10 grand the second year, and then the third year you gave your bank another 10 grand, but each time you took the money out, okay, you gave 10 and you took it out. You gave it 10, you took it out. But by the second and third year when you went to the bank and you went to take your 10 grand out, they didn’t give you 10. Let’s say they gave you $10,600 the second year and the third year they gave you $11,200. You’d start thinking there’s a problem with the bank. But there’s not. You see, that’s how this works. It’s every single year that compounding makes it so that your cash-on-cash return on your deposit is going to pay you out more. Remember the vending machine. Every year you’re gonna make more money. So, it’s not 90%. Ninety is just the first year. The second year is more than 90. The third year is more than 100. The fourth, fifth, sixth, seventh gets absolutely insane. I just love this stuff. And we didn’t even talk about the fact that all the internal growth, that 11% or by the 10th year it’s closer to like 30%, that’s all tax-free, because remember when you die, it’s paid out tax-free, so when you use it as a loan it’s tax-free.

Jack: It’s tax-free. Yes.

Chris: And it’s protected from judgments and liabilities. So, if you get sued because someone slips and falls in your apartment building, they can’t take this money.

Jack: Right. Well, there we have it, guys. This is fantastic. It’s been a fantastic session. Now, Chris, where can people find more about it because this is fantastic. This is Fitz. And I love that you actually mentioned that you can use it for real estate and then you went there for a little bit. So, where can people find out more about you? And I think you mentioned that they can get a book. I see it in the background from you. So, tell us all about that.

Chris: All right. So, to get… I’m gonna give all your audience a copy of this book for free. If they want it for free, you can just get the e-book. If you want the book for free and you’re willing to pay the shipping, you can go to my website, which is Chris N-A-U-G-L-E, chrisnaugle.com/resources. In the Resources tab, you’ll see both books, this book, and the private money guide. You can get both of these books for free. Just pay shipping. And there’s a ton of training videos on exactly what I just said. There’s training videos to show you how to use the privatized banking to buy real estate, flips, rentals. It teaches you how to do it with private investing. You’re a private lender? Use this system for that. We show you how to get all the money back for every car you’re ever gonna buy driving home. All those videos are free. You just go to my website and you can look at them, watch them, and YouTube.

Jack: Awesome. So, chrisnaugle.com/resources. Grab the book. I love it. It’s actually literally something that we are just evaluating for the last few weeks. So, it’s perfect timing and that’s why we also was excited to have you on the show.

Chris: Thank you.

Jack: And we can’t… That’s something that, yeah, I think if you have… I love the example of everything about it. So, with that said, guys, check it out. And with that, just a couple of last questions. First of all, if you are… From your experience, having gone through the ups and downs, what kind of success advice would you give somebody who is not yet in a position of being able to stash a lot of money away and do things like that? Just overall, what kind of success advice would you give people out there?

Chris: I think something like that is the advice I wish somebody gave me early on is I thought I needed a lot of money to get into real estate, but it wasn’t about the actual resources I had. It was about how resourceful I could get. You have to start learning how to solve other people’s problems and use other people’s money. And that is the biggest advice. That’s where you should start and then learn how to do that because that’s the way to success.

Jack: All right. That sounds fantastic. So, with that, guys, that concludes our session for the day. Thank you very much, Chris.

Chris: You’re welcome.

Jack: That was a wonderful session. I had a lot of fun. And with that, guys, this concludes our latest episode of the “Forever Cash Life Real Estate” podcast with yours truly, Jack Bosch. Give us a five-star review, share this, share this around, share this with your friends. They’ll absolutely love it. And wrap your brain around it because that is a cool concept right here. All right. So, that’s that. Thank you very much. Bye-bye. Enjoyed this episode? Then make sure you like, subscribe, and post your comments and questions below the video. We’re looking forward to hearing from you.