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The concept of infinite banking allows individuals to transform their active income into passive income through a well-structured financial system. This process is facilitated by using life insurance products, particularly through mutual insurance companies, which can provide dividends and ownership benefits. The passive income operating system helps to streamline cash flow management, enabling individuals to track their income and expenses effectively. Learning to organize cash flow and automate savings into an insurance policy creates a pathway for generating passive income that exceeds monthly expenses.