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on May 8, 2010
I agree with all the reviews that criticize this book for its anecdotal, infomercial tone- the writing is more irritating than informative, and I was annoyed by all the come-ons that insist only the author's website and stable of very special "Certified Advisors" can construct such an insurance policy for you. If it's really so old and established, surely a fee-only, non-commissioned insurance broker, lawyer or other third-party professional could help you construct your own plan and not be confounded by the concepts in this book (as the author claims). For $15, I expect that I am paying for solid information I can use, not a drawn-out advertisement. Thank goodness I checked it out of the library first. It gets three stars for presenting an interesting financial tool, but gets docked 2 stars for the bad presentation and shameless self-promotion. But here is the plan boiled down, as best I understand it (and I'm no financial whiz- if this is totally wrong, someone correct me):

You take out a whole life insurance policy with a mutual/ participating insurance company (this means you are automatically a shareholder in the company as well as a policyholder, as opposed to insuring with a commercial, publicly-traded company in which you only own your policy and have no stake in the company unless you also buy stock- kind of like a credit union vs a bank, so you receive dividends on the cash value of your policy). Your policy allows flexible paid-up additions riders (PUAR) to be paid in addition to your premiums, up to the IRS limit per year. Your policy also must allow non-recognition loans, so that you can tap your cash value for policy loans without sacrificing the dividends paid on the total cash value of the policy (including the amount you took out on a loan). So if you take out a $3,000 loan on $10,000 in cash value, you will still receive dividends based on the full $10,000 as long as you are repaying your loan (or at least the interest).

Essentially, every month you will pay your insurance premiums for your base policy death benefit (using totally arbitrary numbers, say, $500 a month for $250K in death benefit), plus a PUAR payment, let's say $250, that buys you additional, fully-paid death benefits, but does not increase your base premiums, so even though your death benefit continues to rise, your premiums remain the same. So you're on the hook for the $500 in premiums, but you put in $750 to accelerate your cash value. So after a few years you may in fact have a $275K death benefit, but still only have a $500 premium obligation. There's no magic here- you paid cash for that additional death benefit, but it is paid in full, rather than stretched over time like your base $250K benefit. The PUAR allows the cash value of the policy to increase faster than in a typical whole life policy, and your dividends are based on this cash value. Dividends are tax-free as long as they remain in the policy, so you are encouraged by the author to use them for purchasing more PUAR insurance year after year. The more PUAR you purchase, the higher your cash value, the higher your dividends, the more PUAR you can purchase the next year etc., etc.. Essentially, you are compounding your dividends, as you would compound interest in an interest-bearing investment. But you have to be careful- there are IRS limits on the amount of PUAR you can put into a policy, and you can lose tax benefits if you overstep those limits.

It takes some time to build enough cash value to take out a large enough loan to buy a car or take a vacation, but once you do, you can take policy loans out against your cash value and then pay them back to your policy with interest. This is supposedly how you "get back every penny" on your major purchases. But wait- you are still paying those premiums and PUAR payments at the same time you are repaying the loan with interest, so let's pretend you are now paying $750 a month to repay your policy loan in addition to the $750 you are paying to keep the policy in effect AND increase the cash value with PUAR payments. Essentially, while you are "paying yourself back", you are paying double ($1500 a month). Yes, the money is coming back to you (going into the cash value of your policy), more or less (the interest is not credited to your account, but you get a portion of it back in your dividend), but you will have that much less to live on during those months. Boiled down, this is a forced savings plan, and essentially you could do this much on your own with a bank account if you have iron discipline to continue high payments without a contract over your head. Fortunately there is a little leeway here- you can always stop PUAR payments during loan repayments if your policy gives you that flexibility (though your cash value will increase more slowly), and if things get really tough, only pay the interest on your loan and not the principle (though if you die, your death benefit will be reduced by the outstanding loan amount). Plus you are getting your dividends in full, as opposed to a bank account where you would lose the interest on any amount you took out.

So if you could double-pay yourself using a bank account, what's the real benefit? Your insurance benefit, the non-recognition status of your loans and the tax benefits of receiving dividends without increasing your income tax obligations (as opposed to bank interest, which is taxed). Eventually you will have such a high cash value, thanks to your PUAR payments, that at some point the dividends will be enough to pay the premiums in full for your original, basic benefit (your $500 a month for $250K death benefit), and the plan can be free-standing- you won't need to shovel in the cash every month to keep the policy in effect, but it also won't grow in cash value as fast unless you continue your PUAR payments. It will still increase, just more slowly. There are tax and legal protections for life insurance policies that will benefit you, as well as guaranteed benefits for your beneficiaries. Ultimately, you have to decide if you can live with the pinch and pain of overfunding a life insurance policy, particularly in the early years when you accumulate almost no cash value, and then during loan repayments, to also get the insurance, tax, and legal benefits. But I would definitely consult a trusted lawyer, accountant or insurance professional to understand the real ins and outs before signing on to the plan.
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on November 19, 2010
I suspect the four and five star ratings are for the principle, not for this particular book. The entire book is a marketing ploy, and advertisement and sales tactic for the author's company. The essence of concept could have been written in two pages, but then, a person would not be able to sell that as a book...
This is a pretty complicated and controversial topic. I have a background in investments, formerly licensed to sell securities, etc. Proponents of this often recommend multiple policies, with premiums of thousands of dollars a month. I'm not convinced that they couldn't be doing better by conservatively investing in something else and having some term insurance, although I can see the value of permanent insurance as well. Nevertheless, paying thousands a month on whole life insurance, a person could have $20,000 or more in cash at the end of a year at that rate, and pay for things up front. Obviously you are paying for the insurance coverage, which is great if you need it, but I can't comprehend buying more than you need.
As I said, the more you investigate, the more confusing you will find it. I was in the actuarial profession for a decade, although not life insurance, but I can assure you it is not as simplistic as people would have you believe. I have tried to dig deeply into the numbers. Again, my suspicion is that some people don't understand it. The jury is still out for me as I continue to research.
It would appear this book is based completely on the Infinite Banking by Nelson Nash. I haven't read it, but would start with that book first next time, plus do some internet research.
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on May 5, 2009
Others may say this is hype and an infomercial but in reality it is a different way of looking at how money works. You have to get over the fact that this is a whole life insurance policy. When you really look at whole life insurance without its name (one of my good friends sales used cars that doesn't make him a bad person) it is not so bad.

The book points out we finance everything either we pay interest to others or we give up interest on our money to an institution (ie banks). I have done this with an advisor and know others who have as well and there are no complaints (try surveying people that have been in the market for the last ten years and see if they ALL are happy with thier decision). The key here is that your money is always working for you and how the insurance company treats your loan seperate from your account.

-So if your cash value = $50,000 and you took out a $20,000 loan for a car the company still gives you dividends on the $50,000 and charges your loan the going interest rate.

-So first off you are being credited interest on $50,000 instead of $30,000 like a bank.

-Lets say the bank is paying net (after taxes) a rate of 3% and the insurance company (insurance companies costs are lower since they don't have braches/ATMs on every corner of your city) is paying 5% and your loan rate is 7%

-In the bank you only receive interest on the $30,000 or $900
-In your insurance policy you receive $2,500 ($50,000 at 5%) - $1,400 ($20,000) or $1,100 or 22% More

-In the next year (say you paid off 20% of your loan or put back $4,000 in your savings account)

-At the bank you receive 3% on $34,900 or $1,047

-In your insurance policy you receive $2,625 ($52,500 at 5%) - $1,120 or $1,505 or 44% more!

This does not work with mutual funds because they are too volatile (we never really know what we are going to have in the future), we don't know how we will be taxed, and we have to sell assets to get to our money.
This does not work with 401k/qualified plans because we have to wait until age 60 for no penalty (if the govt doesn't change the rules), most 401ks are full of mutual funds, we again don't know our tax rate, and again you have to sell off your assets

There probably are two reason people get hung up on this topic: one being that it is a whole life policy and the other is rate of return argument. People forget it is not about rate of return but rather money in your pocket. I'd rather have 2% of $100,000 than 10% of $10,000.
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on May 10, 2011
For those of you looking for a step by step guide to B.O.Y., this is NOT it! Thoroughly disappointing, it is a compilation of stories of folks and the things they have spent their money on. How did they do it? Bank on Yourself! How do you do that? Call an advisor! I did read the entire book, which I purchased on Kindle as Nelson Nash's Infinite Banking is not available on Kindle yet. An absolute waste of time... you can find out much, much more simply by googling "infinite banking". I do plan on getting into a whole life banking system, but please - don't spend your money on this gal's infomercial. And on top of everything else, it's boooooooring...
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on December 22, 2010
This book is just one big advertisement. It was nothing more than a pressure-sell. There are no "a-ha!" financial insights whatsoever, just a bunch of testimonial baloney, and a complete waste of time and money.
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on August 30, 2011
As I read the reviews of the skeptics who say Bank On Yourself is a scam, I could easily identify with their skepticism; I felt the same way after reading just two chapters of the book and then finding out that this was another Whole Life Insurance 'thing'. However, after losing up to 45% of my 401-k in 2008 and for the 3rd time in 15 years, what did I have to lose? Recognizing that I only had 15 years to rebuild once again, I was willing to 'finish' the book! After completing the book, I didn't stop there. I made the phone call and spent the next 2 months getting all my questions answered and clarified. What did I have to lose then? Probably another 40 or 45% a few years down the road - - if I wasn't willing to go with the GUARANTEE.

Tomorrow I complete my 2nd year of Banking on Myself! In this short time I've accumulated far more than enough to buy that new car Pamela talks about. However, I've chosen to use it for different purposes, all the while still earning dividends on the $30-k+. As to repaying 'myself' for these loans, I budgeted that money BEFORE I set up my B.O.Y. Policy knowing that I would still be buying cars and other big ticket items over the next 15 years.

What have I gained by following the plan? 730 Nights of peace & rest! I no longer check the markets daily to see how little I have gained or how much I have lost. I simply log in once a month to see how much my B.O.Y. policy has grown with that month's contribution. I find great peace in knowing EXACTLY what my wife and family will have should I not make it another 15 years, or better yet HOW my wife and I will be able to continue enjoying our family, no matter where they live, when we retire in 15 years! You see, 'It's not about me', it's about them. I love them enough to do what's BEST for them. Do I have regrets about believing all the lies I've been told over the last 30 years. You bet. I regret that Pamela didn't get this information in my hands 30 years ago!

Since I'm now resting in the decision that will most benefit my family, my goal going forward is to let all my friends, associates, and bloggers who may read this know how they too can begin recovering from their losses. Better yet, if they are still young, they can prevent themselves from making the same mistakes and believing the same lies that you & I have believed. Wall Street and the Wall-of-Fame financial gurus either need to come clean and acknowlege the great benefits of this plan or disprove it and collect the $100,000 challenge from B.O.Y. It's been over 2 years since Pamela wrote the book and and her offer still stands. After 30 years in the markets for me, the 'long haul' of stocks & mutual funds never materialized and probalby won't in the next 15 years. The 'short haul' as well as the 'long haul' of B.O.Y. has and will contine to pay great dividends for our future.

I urge all of you to look at this with an open mind, as this Accountant did, and then contact a B.O.Y. agent who will patiently answer all of your questions until you can make a rational decision about your future. Don't wait until it's too late. Life is not long and is not predictable. However, while I have breath, the assurance of knowing my family will be taken care of offers the greatest reward on this earth.
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on April 17, 2011
I'll be brief -- I'm the CEO of a company; I've had years of experience investing and managing finances. There is nothing fundamentally untrue about the "infinite banking" or "bank on yourself" concept, but it's unnecessarily expensive and burdensome when you can accomplish the same thing with a little self-discipline.

The idea here is that you buy a complicated version of whole life insurance (that most people will not understand in terms of the risk/cost/reward/headache factor) and that once you've built up value in this policy (by paying into it for x years), you can then borrow against its value -- essentially from yourself -- and then pay your own account interest instead of borrowing from a bank or credit union for larger purchases. The plus to this system is that your policy continues to accrue dividends on the amount you've borrowed as well as what you've left in the policy. They claim this is tax free -- in a limited sense it is, but only if you have the knowledge and finesse to meet all the requirements of the system.

What they don't tell you is that the easiest way to "bank on yourself" is to forego an expensive whole life policy (which requires a fairly large lump sum up front, by the way), and simply make sure you take a reasonable amount of money (whatever you might otherwise pay into a policy under a plan like this) and park it in laddered CDs and/or a mix of index funds, including a decent mix of safer bonds. Then, when you want to buy a car, boat, whatever, you take money out of this account to do it and, using an amortization calculator like those on bankrate.com and a myriad other sites, calculate what your monthly payment would be on the item had you financed through a bank, credit card, etc. and "pay yourself" back this amount every month via direct deposit from your employer (which also easily enforces self-discipline). Ta da! You've just "banked on yourself"

In essence, all this plan is is a complicated and expensive way to enforce saving for your future purchases. Don't let people like this author (or "Rich Dad" and his ilk) use fear of the big, bad financial / tax system to scare you into making an investment you don't understand. Pay down your debt and save for the future is all anyone needs to do. But then that wouldn't make a very long book nor a snappy title.

Best of luck to you!
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on March 31, 2010
Let me start by saying that I've been happy with the whole life policy I bought (against 'expert' advice) 22 years ago. Compared to the stock market hits I've sustained in 2001 and 2008, it's been a steady, reliable performer, adding to my net worth. But I've also been happy with other investments-- investments that didn't skim significant management costs to their parent company and sales staff (on top of the insurance cost).

So, although I'm not anti-whole life, I also feel it's not the panacea the author describes. It should be one part of a diverse investment portfolio, the majority of which should still be in traditional stocks/bonds/etc. This book is simplistic, and if you don't read carefully, it can be misleading in its pitch to sell insurance. I couldn't help thinking, as I read, that this thing was funded by the insurance industry.
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on September 4, 2010
The fact that "Getting Started" is the title of the FOURTEENTH chapter should tell you everything you need to know -- this book is an infomercial that's heavy on hype and testimonials, and low on useful information. Yellen alludes to the "B.O.Y." system throughout the book as if it's a mysterious remedy for all financial ills. I realize that cutting to the chase -- "buy a whole life policy and borrow from it as needed" -- would make for a very short book, but that's pretty much the sum and substance of this waste of time.

To move yourself closer to financial freedom, begin by not spending money on this book. I'll have to make do with selling my copy. I feel cheated.
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on May 15, 2010
I should have read the other one star reviews before buying this book. As the others have said it is an infomercial albeit without any info. The book is a collection of anecdotes about the success of people who used the "Bank On Yourself" method.
There is no mention of what the "Bank On Yourself" method is until the end when it is revealed to be investing in whole life insurance. Now if you have read my review this far, you already know every bit of information that is in this book.
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