Self-directed personal finance is nothing new, but the increasing popularity of “bank on yourself” strategies has put this approach back in the spotlight. In its simplest form, bank on yourself means using whole life insurance policies as a savings and investment vehicle. Unlike other investment options, whole life insurance policies offer guarantees and tax benefits that can be especially advantageous for business owners and high-income earners. Here’s how you can become your own banker.
Steps to becoming your own banker
● Start a whole life policy
The first step is to start a whole life policy. Simply put, the method asks you to get a whole insurance plan on yourself if you meet the medical requirements. If not, you can buy a policy for someone close to you and use them as your bank.
● Add-ons to become your own banker
Although a whole life insurance policy is enough for you to become your own banker. You can also leverage the indexed universal life insurance policy. However, IUl is riskier than whole life insurance, therefore, you must do the proper research before adding IUl into your portfolio. To learn more on this topic, you can visit life-benefits.com.
● Proper funding
Without properly funding your life insurance policy, you cannot become your own banker. Paying additional premiums over and above the number required for the basic coverage is one strategy to avoid the internal expenses of a Whole Life policy. When you become your banker, you’ll want to pay a lot more.
● Borrow only from your policy
The goal or concept of Bank on Yourself is to become your banker. It would be a waste if you don’t borrow the money whenever you need it from your policy. Therefore, borrow only from your policy and nowhere else.
● Pay your loans on your terms
Since you have managed to become your bank, you can pay back your loan on your terms. You can decide the date and the interest rates. There is no financial institution or bank available that offers these kinds of flexibilities.
