Becoming Your Own Banker, Part 31: Compound Interest Revealed

Is compound interest magic or discipline? A stroke of luck or the product of sound fundamentals? Fantasy or reality? https://www.youtube.com/watch?v=l3Wyh618yjI If you want to reap the reward of compound interest, you need to understand the game, the roles, and get on the right side of the board. Today, we'll answer: Why you are always paying interest? What is compound interest? How do you earn compound interest? When it comes to interest, what's in your best interest? Unlock the secrets of your finances and take control like never before as we dissect the fascinating world of interest and compound interest. This podcast promises to transform your understanding of wealth as we delve into the teachings of Nelson Nash, discussing the power shift that occurs when you transition from a mere interest-payer to a savvy individual wielding the banking function in your life. We bring to light how this shift can drastically alter your financial trajectory, using the potent combination of whole life insurance and the principles of Becoming Your Own Banker. Imagine harnessing a tool that empowers you to borrow with ease, ensures your money's uninterrupted growth, and offers historical reliability. That's what we reveal through the lens of a whole life insurance policy in this episode. Discover how this method can serve as a disciplined savings vehicle and a means to build and transfer wealth through generations while respecting the might of compound interest. The conversation also uncovers the strategic moves used by the affluent to maintain financial control and how you can emulate these practices for long-term gain. In our final exploration, we dissect financial contracts and ownership within the realm of whole life insurance, clarifying the various roles such as policy owner and beneficiary. The episode goes a step further by illustrating how the Infinite Banking Concept can be practically applied in your life. By modeling successful behaviors and understanding the nature of these financial tools, you're invited to embark on a journey that could redefine your approach to personal wealth and set you on a path to becoming your own banker. The Concept of Compound InterestAverage vs. Actual Rate of Return and InterestThe Compounding CurveWebster's Definition of InterestOther Glossary Definitions in Becoming Your Own BankerDefinition of Lease/Lessee/LessorDefinition of a MortgageDefinition of OwnerBook A Strategy Call The Concept of Compound Interest There are several ways to think about interest, and one is the cost of money or the cost of banking. When most people think about banking, they think about the banking industry. However, we want to talk about the banking function, by which we mean HOW money is handled. The banking function includes making deposits and withdrawals, buying financial products, and moneylending. While banks typically perform this function, there are ways to perform this function outside of banks, like with the Infinite Banking Concept, which allows you to perform the banking function with your own capital (as well as your insurance company’s capital). Interest is the cost of using that banking function. You can pay interest to institutions for the ability to use their money, or they can pay you for storing your money with them or buying one of their products. You can also pass up interest earnings by paying for things in cash, rather than financing them and continuing to benefit from compounding interest earnings on your pool of capital.  So interest, essentially, is the cost of money. It can flow toward you or away from you, yet it’s a factor in every financial transaction you make, even if you’re just passing it up.  Average vs. Actual Rate of Return and Interest Many people equate interest with a rate of return. And while both involve percentages, they’re not quite the same. First, let’s take a look at what people think about rates of return.