How To Do Infinite Banking When You Have Low Funds

by David Lewis

Infinite Banking policies are premium hungry.

To make this strategy work well, you kinda-sorta have to commit to substantial premiums for many years (think a decade or longer). But what if you don't have a lot of extra income at the end of the month? How will you fund your infinite banking policy (assuming this is a top priority for you)? 

Time to get creative.

10 Ways To Save Money For Your Infinite Banking Policy

#1: Pay Off Nagging Debts To Fund Your Infinite Banking Policy

If you have a bunch of niggling little debts sucking up all your monthly income, time to pay off those debts. They're clearly getting in your way of saving money. Infinite banking, and really, any cash value life insurance policy, requires substantial, ongoing premium payments——especially in the early years of the policy. Without these early premium payments, the policy will collapse on itself.

Think of this like starting a new business. These policies are very capital intensive. The more you're burdened by debt, the less financial stable you are. Get rid of the debts, and fund your policy.

#2: Use Cash Back Rewards To Fund Your Infinite Banking Policy

I wrote extensively about cash back rewards in my book, The 10-Minute Budget. The short version is, if you can sign up for several credit cards with generous sign-up bonuses, plus cash back rewards, you can easily generate between $1,500 and $10,000 per year in extra cash savings. 

I know I just told you to pay off nagging debt. The credit card strategy can (ironically) help you pay off that debt, but it can also help you kickstart your savings, which can then be put into an infinite banking policy. 

They key to this strategy is to use the credit cards to pay for bills you're already paying right now. For example, did you know you can pay your taxes using a credit card?

You can.

You can also prepay many utilities with a credit card. There are even special services that allow you to pay your mortgage and rent payments with a credit card, insurance premiums, and other bills that you otherwise cannot pay by credit. You pay be charged a fee for this service, but if the sign-up bonus and cash back rewards are generous, it will easily be worth the fee and net you a tidy sum of money.

For example, it's not unusual for folks to pay 2-3% in fees just to pay their bills via credit cards, but then turn around an net between 5-7% cash back from their credit cards (when done properly according to the strategies outlined in my book). Add in the sign-up bonuses, which can range from $500 to $1,000 or more and you can easily make many thousands of extra dollars each year.

And, as long as you're paying your bills with this money, the cash back rewards and sign-up bonuses are tax-free (at the time of this writing).

#3: Use Rebate Sites In Conjunction With Credit Cards To Fund Your Infinite Banking Policy

Take the above credit card strat, and add rebate sites to the mix. Here's a few examples of what I mean:

  • Top Cash Back
  • Rakuten
  • BeFrugal
  • Upside
  • Ibotta

These aren't recommendations. They're examples. 

Each cash back website is going to cater to a certain demographic, or specialize in certain kinds of shopping or shopping experiences. For example, Upside is great for food, gas, and groceries. There's some limitations with the app, but if you shop with their partner stores, you can save a lot of money every year. 

If you want to know which cash back websites will be best for you, you're going to have to use a comparison website. The big picture here is to use your cash back card when shopping these websites, and start stacking rewards. Then, cash those rewards in to either pay off your nagging debts or start funding your infinite banking policy. 

This strategy works best when you're shopping for stuff you have to buy anyway, like food, gas, and so on.

#4: Liquidate Savings Accounts, Bank CDs, Money Markets, and Other Low-Yielding Assets To Fund Your Infinite Banking Policy

Liquidating your savings account is an easy way to fund an infinite banking policy.

I hate the often excessive focus on "rate of return", but even if that's your primary concern (which it shouldn't be), the rate of return on an infinite banking policy is excellent, so why keep long-term savings in short-term investments and accounts?

It just doesn't make sense. Ditch lower-yielding accounts, and consider liquidating your other accounts, like money markets, bank CDs, and other low-yielding assets. Put this money into a high cash value infinite banking policy instead. 

If it's a sizable sum, you won't be able to stuff it all into a whole life policy in the first year. Instead, you might have to use a premium deposit fund or a special annuity contract to pre-fund your infinite banking policy over several years.

#5: Refinance And Consolidate High Interest Debts To Fund Your Infinite Banking Policy

This option isn't quite as attractive as it once was due to the sky-high rates we're currently experiencing, but when rates fall again (and they will, eventually), consider refinancing high-interest debts. 

Even today, though, I think there are some instances where refinancing or consolidating debts to fund your infinite banking policy makes sense. Think 24% APR credit cards. Those can potentially be refinanced into a lower rate using a HELOC or something similar. Even an 8% line of credit is going to be better than paying interest on a credit card.

#6: Increase Income To Fund Your Infinite Banking Policy

I don't know why so many people overlook this one, but just increasing your income will solve a lot of problems and can paper over a lot of financial mistakes. 

Whether that's getting a second job, or picking up a side hustle, or starting a small business on the side, more income means more money you have to fund a life insurance policy.

#7: Make A Spending Priority List To Fund Your Infinite Banking Policy

A technique I learned for prioritizing important things in my life involves making a list—three lists, actually. The first list is a list of "essentials" or "must haves". These are things you can't live without. 

This list has a tendency to become inflated, which is why you make a second list called "negotiables". These are things in your life you really like, but don't absolutely have to have. You could take them or leave them. If you're being honest with yourself, this list will probably be your longest list.

Next is your "don't need" list. These are things in your life that you're better off without. Again, if you're being honest with yourself, this list will be pretty long. It might include a bunch of stuff that initially seems fun and exciting. Long-term, these are things that undermine your happiness, health, and overall wellbeing. 

I'm sure you know what I mean.

Getting rid of the "dead weight" in your life is a great way to free up both time and money so you can make a new life and start funding your infinite banking policy.

#8: Hunt For Deals To Fund Your Infinite Banking Policy

This takes some creativity.

There are usually several different avenues to get what you want. The easiest, most convenient, most straightforward avenue is also usually the most expensive.

So, be willing to go out of your way to save money on things you either must have and even for some of the things on your "negotiables" list.

#9: Use The 10% Rule To Fund Your Infinite Banking Policy

Before you spend any money on anything (even bills), set aside 10% for yourself. That's money that will go into your life insurance policy. 

Yes, I realize this is easier said than done. But, it's simple. It's probably the simplest way in this list to start saving money.

#10: Invent Your Own Money Saving Ideas To Fund Your Infinite Banking Policy

Years ago, I wrote a book titled, Business Economizer. In that book, I write about an exercise you can do at home to build up your brain power and force yourself to become more creative. 

Creativity is a skill. 

You can learn it, and if you need more money so you can start your infinite banking policy, then I'd argue you need this skill. 

Anyway, this exercise allows you to invent your own money-saving ideas. The more you use this exercise, the more creative money saving ideas you'll come up with.

Budgeting For Infinite Banking

Nothing happens without a budget. So, build your insurance premium right into your monthly budget, and it'll become just like any other bill you have to pay.

Here's some very basic things to think about when budgeting for a new insurance premium:

  1. Set a realistic budget for an Infinite Banking Policy. Don't get yourself in over your head. Most policies can be built around any arbitrary number. If you absolutely need a hard number, go with 10% of your net income.
  2. Always fund your budget each month with your W-2 or business income. Funding your budget with cash, as you earn it, is the simplest way to make sure those premiums (and everything else) gets paid for, on time.
  3. Revise your budget to cut expenses you don't need, or that are contradictory or counterproductive to your long-term financial goals.

Use Waiver Of Premium Rider On Your Infinite Banking Policy

Waiver of premium rider is a special rider that waives the premium on your policy when you're disabled. Before you can take advantage of this rider, you:

  1. Must be disabled (duh) and;
  2. Must meet the other conditions of the rider. Usually, this includes having a licensed doctor affirm you are disabled and then waiting out the black-out period for the rider before it kicks in (i.e. several months). Some insurance companies also have a waiting period that applies to the use of the rider, meaning you might have to wait a year (or longer) before the rider can be activated or used at all.

But, if you're disabled, and cannot afford to pay your infinite banking policy premiums, this might be an option for you. 

Another option is obviously disability insurance, but that's a bit more of a financial commitment.

Use Premium Offset or Alternate Pay Options For Your Infinite Banking Policy When You Have Low Funds

Using premium offset on your infinite banking policy might also help if you're having trouble paying premiums. Premium offset or "alternate pay option" is when the insurance company uses a combination of your current dividends and paid-up additions to pay the current base premium due. 

By doing this, you're essentially taking from the left hand and put it in the right hand, but at the same time it's meeting the required premium payment for the policy. 

This option is sometimes used when a policyholder takes out a policy loan, and cannot afford to keep paying for the monthly premium while the loan is outstanding. There's only so much money to go around, after all. So, making both the loan payment and the normal premium payment might be out of the question. 

Premium offset solves this problem.

Apply For A Better Rate Class On Your Infinite Banking Policy

If you have a substandard rating on your policy, you might be able to get a better rating. 

Might.

It all depends on the reason for the substandard rating. 

Some ratings are simple to change (in theory). For example, if you were a smoker but quit (for at least a year), many insurance companies will rerate you as a non-smoker. Some insurers want to see 2 years nicotine-free before they'll re-rate you as a non-smoker. Getting your smoker's rating removed from your policy will save you a truly ridiculous amount of money, and is an easy win——you're healthier and you save a buttload of money on premiums.

If you initially got a substandard rating due to "build" (too heavy for your height) and you lost a significant amount of weight, you might qualify for a standard or better rating now. This can save you a substantial amount of money in most cases.

Use A Blended Whole Life Policy For Infinite Banking

A blended whole life policy is where the agent blends term insurance into the base whole life policy. It's a sort of hybrid whole life policy.

These policies have lower required (guaranteed) premiums, and tend to have higher paid-up additions rider (optional) premiums. With the extra flexibility, you can reduce the premium when needed without losing your policy.

The old school Infinite Banking practitioners never used blended whole life policies. They believed them to be either too risky or unnecessary. Instead, they used a combination of base premium plus paid-up additions. This made the policy more rigid and less flexible. In some cases, it made the policy more stable, too. But, in many other cases, it simply increased the risk of lapse if a policyholder couldn't afford the higher base premiums.

Start With A Convertible Term Life Policy For Infinite Banking

If you simply can't afford the higher premiums of whole life insurance, don't sweat it. Start with a convertible term insurance policy with one of the major mutuals. 

Mutual companies sell convertible term insurance that can later be converted (clue is in the name) to dividend-paying whole life.

Prioritize Your Infinite Banking Policy

Sometimes, it just comes down to prioritizing your Infinite Banking policy over other expenses. You might not be able to afford to do everything you want to do this year. You'll have to pick and choose what you can (or want to) afford. If spending money is a higher priority for you right now, then Infinite Banking isn't for you. 

If saving money is a priority, then it'll be easier to get rid of unnecessary expenses, or expenses that are getting in the way of funding your new policy. By prioritizing your Infinite Banking policy, you're providing capital for your future, and building real, long-term financial security for yourself and your family.

Get to it.

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About David


David Lewis is a licensed life insurance agent, and has worked in the life insurance industry since 2004. During that time, he has worked with some of the oldest and most respected mutual life insurance companies in the U.S. To learn more about him and his business, go here.