The Road To Combining Velocity Banking and Infinite Banking: Finding Cash Flow To Direct To Your Infinite Banking System
I have not written about Infinite Banking in a couple of months and I have a draft of a detailed post on combining the concepts of both Velocity Banking and Infinite Banking that will be released once I am actually doing it fully. I share this because today’s post is a detailed real world piece of what will be included in that post.
The overall arching theme of what most self help money gurus and concepts are trying to accomplish is financial efficiency. Whether the focus is on income generation, debt elimination or restructuring; it all comes down to a simple question we must all ask ourselves.
Where is your cash flow going and is it flowing in the most financially efficient way possible?
We will begin by digging into one area of my cash flow, as it pertains to 3rd party debt/bills and Infinite Banking.
My wife and I recently said goodbye to the last of what most consider bad 3rd party debt. That left us with one last 3rd party debt obligation: a residential mortgage on the family house. There is much debate when it comes to residential mortgages. Debates rage over 15 yr vs 30 yr, interest rate, how much house can we afford and the list goes on and on.
When we went back to the question posed earlier in the post, it became apparent that there were 4 financial inefficiencies within our current residential mortgage.
- PMI (Primary Mortgage Insurance)
- Property Taxes
- Homeowners Insurance
- Interest Rate
The inefficiencies of the first 3 were that they were tied to a monthly escrow obligation. Every month they were apart of the payment we made to the mortgage servicer. Our property taxes are due every September and December, of every year. Our homeowners insurance is due once a year. The PMI was tied to the origination of our mortgage having an LTV (Loan To Value) of 97%. The last inefficiency only became one due to the unprecedented low interest rates that are available in the market today.
The opportunity to redirect cash flow to our financial benefit was to large to pass up. That opportunity included the elimination of PMI/escrow account and a lower interest rate. Here are the real numbers (rounded up to the nearest dollar).
Current Mortgage
Overall Mortgage Payment: $1325 (4% @ 30Yrs)
P&I (Principal & Interest): $993
PMI: $90
Property Taxes:$1482
Homeowners Insurance: $1416
Refinanced Mortgage
Overall Mortgage Payment: $816 (2.75% @ 30Yrs)
The decision to refinance our existing residential mortgage increased our monthly cash flow by $509 ($1325 minus $816). Now we still owe property taxes and homeowners insurance; however the elimination of PMI and lowering our interest rate; added $267 to our positive monthly cash flow.
Now you might be thinking that is not the whole picture and it is not.
What about the bills that come due each year for property taxes and homeowners insurance?
I’ll ask you a question.
Where do you think you should store the extra $242 a month in positive cash flow we now have by not having an escrow account for property taxes and homeowners insurance?
If you answered Infinite Banking, you are on your way to understanding what Nelson Nash meant when he said “If you could store your money in a bank you own or someone else's, which one would you choose?”
As stated earlier in this post, the redirecting of cash flow in a more financially efficient way by using a residential mortgage, is a bigger piece to the larger post to come later on Velocity Banking and Infinite Banking.
We are ultimately driving to the idea of income equals premium.
My hope with this post is that I’ve stimulated your mind to start looking for cash flow efficiency opportunities in your financial life.