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The banking business is literally thousands of years old, but the idea of becoming your own banker originated with a guy named Nelson Nash, or at least that’s what a lot of the marketing literature says now. The concept in its simplest form is you create your own private banking system of sorts by saving up some money somewhere. Then use this pool of money to finance everything in your life. If you think about it, it makes perfect sense regardless of what you do in life. Whether you spend your money or you invest it, you have to use a banking system to facilitate the transaction. All of the money in the world goes through someone’s bank and advocates of the banking concept argue that you should keep and set up a “private bank” of your own that you use.
It’s what is known as the infinite banking concept, and I know many of you have heard of this concept. I’ve had a couple of episodes where we have explored the idea and talked about infinite banking. The idea behind infinite banking is for you to be your own banking system through dividend-paying permanent life insurance. That’s a mouthful. Don’t get confused, don’t get lost, and don’t get turned off by it because it’s a very simplistic thing. It’s just the way to properly describe it. Instead of an institution or an individual having control over your finances, you take back that control and control of all the banking functions you do every day. Infinite banking is a strategy that allows people to both save their money and then borrow their money or borrow against their money. You ultimately become the bank and you control what goes in and what comes out.
To elaborate a little more on that, I’ve invited one of my friends and past guests to join me once again to explore this holistic approach to banking and wealth creation. Since he’s a new sponsor of the show, M.C. Laubscher who’s the creator and host of the Cashflow Ninja Podcast and President of Producers Wealth is on a mission to help you achieve financial independence and freedom as soon as possible. He achieves this by integrating this infinite banking concept that we talk about in real estate investments to increase your money’s efficiency, the returns, and recapture that cashflow and that way you’re not even aware that this is going on. You can put it on autopilot but more importantly, a lot of people are not even aware that they’re losing money, and this is a way to put a plug in that. M.C. shares the number one strategy of investors in this holistic wealth creation course at YourOwnBankingSystem.com. With that, we’re going to invite M.C. on the show and we are going to explore this holistic approach to wealth creation.
If you missed our last episode, be sure to listen to Multi-Family Real Estate Investing with Michael Blank.
Enjoy the show!
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A Holistic Approach to Wealth Creation
It’s my pleasure to welcome back M.C. Laubscher to the show. M.C. is a wealth strategist. He’s an educator and a financial freedom fighter. He’s the Founder and President of Producers Wealth. It’s his personal passion and purpose to help individuals, families, small businesses, professionals, and even entrepreneurs build and grow their wealth safely and predictably regardless of the economic or market cycles. M.C., welcome back to the show.
Marco, thank you so much for having me on. It’s an honor to be back.
It’s great having you back. I’ve had many conversations with you between now and when I first had you on, which was way back on episode 65. The episode was called A Wealth Capture Machine. It’s a very fascinating topic. To reconnect you with our old and our new audience, share with us who you are and what you do, and then talk about whatever else you want to talk about.
My name is M.C. Laubscher. I’m originally from South Africa. I came to the US in 2001 with a backpack, a suitcase, a sense of humor, and a sense of adventure. I started my investing journey shortly thereafter. I played sports up until 2007 in a league here in the United States. While I was playing sports, I studied, read, and started my investing journey. I bought my first real estate investment in 2001. A number of things happened along my journey as I grew and learned from mentors. I’m the President and Chief Wealth and Investment Strategist at Producers Wealth. I’m also the creator and host of the Cashflow Ninja Podcast where I interview amazing cashflow ninjas who share how to create income streams in the new economy from asset classes such as real estate, commodities like gold, silver and oil businesses, online businesses, crypto and blockchain assets, and also paper assets.
That’s a very broad list of topics and I am honored to be a guest on your show. I’ve been on there a couple of times, I appreciate you letting me on there. I have a pretty good idea of what you do and some of our audience do, but most don’t. You’ve worked with many affluent individuals and families and you also have these relationships with individuals in advising these families in this family office space. I actually did an episode about the family offices, so we might want to touch on that. You can probably explain what a family office is. After interviewing 350 successful Cashflow Ninjas, what have you learned from these successful people and what are some of the commonalities that they all share? I’d be curious to hear this.
That is one thing that I’ve been fortunate enough to have mentors in my life. I don’t think I was smart enough at that stage or knowledgeable enough to figure out that that’s what I was supposed to do, is to try and find a mentor. You could truly download all the knowledge from that person, their life experience and their knowledge. He was a very wealthy individual that has a massive real estate portfolio in the Chicago land area of multifamily properties. That’s the first one that I came into contact with as a family office. A family office structure is modeled off the Rockefeller family office in the United States where all of the team members and players of the family or the individuals are all under one roof.
The accountant, the asset protection person, the estate plan or the insurance specialist and advisor, all of these different key team players are all under one roof. When you get to a certain net worth levels, a mistake of your CPA and your tax strategist not communicating something properly to an estate planner or an asset protection person, there are a lot of zeros behind that mistake. They keep them all under one roof. They know exactly what the family is trying to accomplish, where they’re going, and what the overall objectives are and the strategy is. My journey and also interviewing over 350 Cashflow Ninjas right now, one of the things that I’ve learned is some of the things that they value is very different from what a lot of people perceive that they value.
For instance, they value philosophy. They value worldviews, core beliefs, principle and values, intellectual and mental capital. That includes ideas, creativity and knowledge over things and stuff. Those are the things that are important to them and they continue to invest in that. That’s developing their mental capital and their intellectual capital. They also value and continue to invest in relationships. They are always looking to grow their network and grow relationships in areas that they might not have them. They’re always looking for A team players and advisors. They’re talking to people. They’re investing in masterminds. They spend quite a number of their resources and money on masterminds and meeting people because they value the people more than the money, which ties into a very big lesson that I learned from a mentor of mine, which is your mental capital times your relationship capital will equal your financial capital.
It was very powerful just that overall wealth formula because if you look at very wealthy and successful people and ultra-affluent and especially these families, we’ve all seen these billionaires, for example, go broke. They lose almost everything and then all of a sudden, these folks bounce back, and people look at them and go, “How did that person lose everything or have their backs against the wall and they keep coming back?” That’s because they valued that mental capital, that intellectual capital, they continue to grow it, and expand it. Then also the relationship capital. They had the relationship and the network to take the new idea to and build out this new business. These are two key things that I’m personally also trying to invest in that will help you to not only thrive but survive in an economic downturn and/or a recession.
I like that formula. I don’t think I’ve heard that before. A lot of this seems to be the mindset. One thing I learned from one of my mentors is that 10% of your success comes from the hustle. 70% of your success comes from the people you either know or the people that you will bump into and get to know in the future. He was making a point that whenever you have this major turning point or major success in your life, a lot of times, 70% of the reason for that came from the people you met or the people that you know that helped you go from that point to the new point, not so much the amount of work and effort you put in which was the hustle. That’s something that stuck with me and I looked back and reflected on many of the turning points that I had and a lot of it came down to the people I knew in my network of people.
I look at my journey, and it’s a series of mentors and relationships of where I am now. I could point at the relationships and the mentors that I’ve had and it’s so powerful. They truly know this.
Let’s talk more about the strategic approach of these affluent and wealthy people. When it comes to an investment strategy, something my audience can model in their real estate investing, can you share what a powerful strategy would include that my audience can use to power their own investments?
Markets go up, down and sideways. A lot of people who have strategies that are successful when markets go up. When it goes sideways and when it has a downturn or recession, that’s when you look at the power of a strategy and how it performed. When we look at a strategy and what the framework for a strategy that we’ve learned from the people that we study, is that they are the asset themselves. Robert Kiyosaki talks about that the risk is not in the investment, it’s in the investor. They know that they are the number one asset and they are the creator and producer of everything that comes into their life. They also know that their number one investment is always in themselves and around their unique ability, their strengths, their knowledge, what they know of and the relationships. Maybe there are people that can help you implement and execute it.
For example, maybe you and your audience listen to podcasts such as this. They read on real estate. They grow their knowledge base about real estate and then they bring a team to help them invest in real estate because that’s what they’re knowledgeable about. The third component of that is to have control and it’s very underrated. I’m not the first person that has ever told anyone that. This is nothing new, but having control in all areas of a strategy is very powerful. Having control over your cashflow, your money, the accessibility, the use of it, and then also having control over how you deploy it and in which assets. With real estate, you’ve shared on the show how you can create cashflow and improve an investment or having control over an investment property. Alignment and focus are the next part that’s very key. In the world now, we collectively have the attention span of a gnat.
We have a lot of distractions like, “Bitcoin, what was I talking about?” We’re all over the place. It’s very important to focus and align all of our resources with that focus. Know what we want, why we want it, and who we do we need to become to achieve that? Now that we know what we want, let’s align all of our resources. For example, if we’re looking to achieve financial independence and freedom through real estate and cashflow, is a bunch of speculative stocks setting in an IRA going to help us? Are all these other different buckets and baskets going to help us? This is one thing that I’ve seen from the wealthy and ultra-affluent people. They focus. They pour all of the resources and they go in on that goal that they have for themselves.
I always talk about aligning all of those resources, focus until you hit the target until you get to financial independence and until you get to financial freedom and now you can dabble in more speculative stuff if that’s what you’re looking for. Efficiency is one super key area. The majority of people focus on getting a better return of 5% to 10% of your money. One thing that struck me in family offices is not just the simplicity of what they’re doing, but how common sense it is where a lot of folks chase that 5% to 10% of their money, use that, deploy and chase returns where they look at the 90% to 95% of the holistic approach to wealth creation. That means how efficient is your savings? Where are your savings allocated? Where are your savings positioned? How efficient is that? How efficient is your asset positioning currently?
With regards to opportunity costs, is there money that you’re unknowingly losing in your own economy? Are there ways that you can be more efficient? What I mean by that is the tax is a big wealth destroyer, probably the biggest one out there. These families, for example, know that if they reduce their taxes by 20% by just fixing inefficiencies in their personal and their business economy, there’s no return out in the marketplace that’s going to generate that for them consistently over 30 to 40 years and then over to the next generations. The efficiency of income, Robert Kiyosaki talks about the cashflow quadrant, where he has the employee and the self-employed. The E and the S on the left-hand side and the B and the I on the right-hand side with obviously the most efficient income coming from the passive income, the quadrant as an investor which is the I.
How can you convert active income that you’re generating as an employee or a self-employed person into business income or passive income? Protection is the next part of it. We have to make money. We have to create wealth, but also protecting it and there are a lot of different ways to do it through asset protection, estate planning, positioning for taxes and against other financial predators that are out there. We live in a litigious society. For example, risk management. There’s a political, economic, markets and institutional risk. Do we know and understand all the different risks and how do we position our assets and our portfolio to manage all those risks? Dollar maximizations is another part of this where basically what that means is $1 needs to do many different jobs within your personal and business economy.
We want our money working for us, but we want our money also to do many different things simultaneously. There are protective, defensive and offensive things that the same dollar can do in your own personal and business economy. Then momentum, we want uninterrupted compounding, but we also want to multiply our wealth. With real estate and other different strategies, there are most certainly ways that we can do that. If you have all of those components of a framework for a strategy, now we’re looking at also collapsing time in our overall plan where we achieve the results that take people 30 to 40 years to achieve in ten to fifteen years.
That’s a very robust list. That was a lot of information packed into a list. Let’s break down a part of this here. You mentioned the importance of efficiency and stressed the importance of efficiency in positioning your assets and your savings and having efficient income, and then you touched on the true cost of opportunity cost. Can you share an example or a case study that would illustrate the power of the investment philosophy and strategy that you’re talking about here?
I’ll walk your audience through a quick little case study. The first thing when we look at a case study example where this will be clear and show how this works in practice is we have to be clear on our vision and our mission for ourselves, what we want, why we want it, and who do we need to become to do it? We touched on the wealth formula. Then once we have all that broken down, we look at a passive income number and at four levels of financial success. The first one is security, the second one is financial independence. This is where your passive income exceeds your living expenses, the cost of living per month and annually. Then the third level is financial freedom. The fourth level is financial significance. When you get to, “Now what?”
Let’s look at financial independence and let’s say that number would be $10,000 per month, $120,000 per year. To determine the financial freedom numbers, we times it by one and a half obviously because there are other variables in play and then we double it. What we’ve seen the wealthiest folks do is they save 40% to 50% of their income, so that gives us a number of $30,000 per month, $360,000 per year. If we are looking to generate that and we can consistently generate a return of, let’s say hypothetically 8% per year, we know that within over a period of time we would have to deploy about $4.5 million of capital. There are different ways of how to reduce and compress time.
Sticking with that example so we know what we need to become financially and economically independent, we have a number and a target. We know what our financial freedom number is. Now, we bring in systems to build that. We build the liquidity system and an income system is what we talk about. In the previous episode, I went into the liquidity system, I spoke about a wealth capture machine. We integrate a dividend-paying whole life insurance with a mutual insurance company. We integrate that with real estate because both of those vehicles provide cashflow.
The life insurance board has liquidity. There are tax advantages in both. There’s an equity buildup in both. There’s appreciation of both. There are control and leverage available to both. They also serve as an inflation hedge. With the insurance, we go into a much deeper detail added in the previous episode if your audience is interested in learning more about that. The insurance, the way that we structured it is based on the infinite banking concept. You have full control over your money, control, use and accessibility. You can access it at any time. There are guarantees on the money that you put into this insurance policy and on the principal in the growth. You earn dividends, although they’re not guaranteed. These companies have paid them out for 100 years consecutively.
There are tax-free growth and untaxed distribution of them. When you access money, it’s not a taxable event. There’s no contribution or distribution limit. It’s not like a Roth where there’s only a certain amount of money that you could put in there. It’s private, so nobody knows that you have it. There’s asset protection available, so in all 50 states, this is protected. As a side note, some of the Enron folks structured these high cash value life insurance policies and they couldn’t even claw back that money in litigation. It shows you the extreme asset protection that it has. There’s a lot of flexibility in these vehicles. Then there’s a death benefit because you’re dealing with an insurance vehicle that also provides income tax-free treatment to the beneficiaries. That’s why we use it.
We integrate these two with the real estate and with that in this overall strategy. We first fund the insurance vehicle, and then we borrow from it. We deploy that capital into the real estate, the cashflow from the real estate is then redirected back into the insurance and this is how it grows. I mentioned a number of $360,000. First, before I say this, this is just a disclaimer, insurance is different for everyone. This was just a quick case study, a quick rough number. There are many different variables at play here, so all situations are different. Let’s say it’s a 40-year-old male that over the course of twenty years will put in about $240,000 per year into the system. If he did it without the insurance, for example, he would deploy that $4.5 million. He would deploy that around nineteen, twenty years and he would hit his target. He’s going to be able to achieve his target of passive income.
If he integrated it with the insurance, we actually ran the numbers, the same thing around the year seventeen, he would hit his target and he would get that $360,000 of passive income per year at a consistent return of 8% deploying $4.5 million. He would have an additional close to $1.9 million tax-free available. We touched on opportunity costs. Opportunity costs, this might be money that you’re unknowingly losing, you’re not even aware of and that you could have earned if you were more efficient. To your point, you don’t have to do it with the insurance. You would still hit your target and do it. Is there a way that you could do it more efficiently and have an additional amount of capital available in a very efficient vehicle, tax-free? Yes. This is what they do in some of these family offices to integrate these vehicles as part of an overall strategy because the focus is on the strategy, not on the products or at the end product.
I always talk that I’m a South African and I love my South African golfers. Ernie Els is one of my favorite golfers. He has an amazing golf swing. They call him the big easy. If I get invited to go play golf at Augusta National and The Masters, if I could take Ernie Els’ clubs or a swing, I’m going to take Ernie’s swing. I could get the other clubs somewhere else. The focus here and what I’m trying to make sure that I communicate properly to our audience is let’s focus on the swinging, not just the golf clubs. It’s part of an overall strategy where we’ve integrated vehicles where we position savings very efficiently. We’ve positioned assets very efficiently, and now through the real estate, we’re also earning efficient income.
This probably sounds complicated to some people, but I can see it because I’m familiar with what you’re talking about and it’s not that complicated. It’s fairly simple. It’s easier to illustrate visually than it is to try and explain it verbally. At least for me, it is. The way I look at it is you have this glorified account like a savings account, which is essentially the vehicle that it sits in as an insurance policy, so you have the ability to save and earn interest on the savings in that vehicle.
You get the added bonus of having a life insurance that piggybacks on top of that. You have the ability to borrow against the money in that savings account while not touching the principal amount that you put in there. You can borrow against it, maybe not 100% but certainly in probably the high range of 80% to 90% at borrowing against it. You’re basically still getting paid on 100% of what you put into it, but you can borrow against it to invest in other investments. I’m sure there’s more to it than that, but that’s the way I visualize it in my head.
Think of it as this is a savings vehicle. This is one thing that I talk about quite a bit. We talk about saving for retirement and qualified retirement plans where you’re not saving because to save is to preserve and protect and most folks aren’t. They’re not even investing, but they’re speculating. It’s a savings vehicle that you’re putting up and you’re collateralizing that savings vehicle to borrow up to 90% of the cash value in this case of the insurance vehicle and then using that to invest in an investment that kicks off cashflow that you now put back into or pay down the policy loan and the money becomes available again as you pay it down. Essentially to break it down, there are two pieces, a liquidity system and an income system. There’s an infinite flow of money from the liquidity system into the income system and then flowing back into the liquidity system.
The average family out there that has a generational wealth, it seems that they evaporate that within eighteen months, which is only a year and a half. It’s not very long that after one generation passes and that wealth passes down to their kids, then it’s gone in no time. You seem to stress and talk a lot about legacy. It’s a core theme of what you talk about. For my audience who want to build their assets and leave a legacy for their families, what are some of the things that you can share that will help them position themselves to do this effectively? At the end of the day, I’m working hard to create my investments and my portfolio and at some point in time, I want to leave that to my children. How does our audience do this to position themselves effectively?
That’s a great question and one of my favorite topics because this is one thing I wanted to do a study in-depth and I’m still reading as much as I can on it and speaking to a lot of folks. It’s quite fascinating that we try to create and produce while we’re here. We try to preserve, protect it, and leave something for the next generation, our children, our families, but how do we do it effectively and how do we also not turn them into trust fund babies? As soon as I’m in the ground, my kids are running around with Lambos and beaches then it’s absolutely destructive. How do you set up not only just your family for generations but how do you do this efficiently in a way that empowers the next generation and doesn’t hurt them? A lot of the statistics is frightening, eighteen months and most of it is gone.
You try to leave something for most of them and the majority of the people do, but that might have done maybe almost more damage than good. What do these families do and what do they do in family offices? One part that’s forced on is the capital and the assets. Everyone knows that. The money, the assets and the estate. What we’ve seen with some of the wealthiest families and individuals is not only do they pause on capital and assets, but they pause on that intellectual capital and knowledge. There’s a transfer of that over as well. If you’ve seen some of these families and I was fortunate enough to go to school with a number of them and I look just to see where these guys and gals are now and what they’re doing with their lives now. They’re so driven. They’re purpose-driven and they truly are successful in not only trying to preserve what the family has and the families’ estate, but they’re also trying to grow it.
From a very young age too, what you learn and what you experience is you learn that from your parents, that’s very important. How do you transfer that over to the children and how do you throughout the life of the children transfer it on? What these families do is they have the family document which could be a statement of purpose or it could be a family constitution. A constitution worked for the United States. It could work for your family as well. What’s in that document is the philosophy of the family, the core beliefs of the family, the principles and the values of the family, then also rules that govern their behaviors. Then also how and when they can access some of the estate and some of the capital in the estate.
A philosophy, for instance for our audience out there would be the family would codify that they are producers and creators and they’re trying to provide value for the marketplace through products and services. They want to help their causes that they’re passionate about and these are some of the causes that they’re passionate about. Maybe there’s a patriarch or a matriarch in the family, for instance, that had a severe case of cancer and now it’s a cause that they support and fund research. Also what this family stands for and what they’re against, what’s not acceptable? Not only in our personal lives, but a lot of folks know what they stand for and what they want, but they don’t necessarily also write down what they stand against. It might be the other way around too. Share this with your family. Talk about this with your children from a young age. This is one thing that they do and that’s a document that’s a living, breathing document that’s transferred over.
The other thing is a family retreat, and this comes from the Rothschild’s in Europe, their family. There’s a great book called the Five Men of Frankfort and they had a family retreat where the family would get together once a year. They would talk about the mission and the vision of the family, who they are, their philosophies, share experiences, share best practices because the sons were bankers in different cities around Europe. That’s a very big part of bringing that while creating this closeness of the family and having everyone stay on the same page. Then the mechanical stuff is the family office having a working document for the team members of what type of team members and advisors should advise the family? What type of team members and advisors should not advise the family?
With these three things: the document, the statement of purpose, the constitution, the family retreat, and the family offices, you don’t have to be a Rockefeller, a Rothschild or all these other families to do it. You could do little things within your own family and already start that to change the trajectory of the family. The capital and the assets, that’s mechanical, tactical, estate planning, asset protection and so forth. There are knowledgeable professionals that can help people with that. The most important part is to make sure that the next generations don’t turn into trust fund babies or just blow all of the savings and the wealth that we have created in our lives is to make them stewards of the capital and not just to claim ownership over it but control it, protect it, preserve it, and then transfer over to the next generation.
These are all important points because we don’t want our generational wealth to evaporate in eighteen months as it does with the “average family.” Certainly, these are things to think about and maybe even research and look into. Everything we talked about here is important, but it’s also a little bit outside the scope of what people tend to focus on. People are very hyper-focused on investing in the market or investing in notes or building a real estate portfolio, all of the things that are very important. These are single pieces in a larger puzzle and it’s what you’re talking about. It puts a lot of those pieces together into a more cohesive, bigger picture that is probably sounder now but it allows you to carry it forward to future generations. This is a big topic and for some people, it’s hard to wrap their head around it initially. It requires a further conversation with someone like yourself or some other materials or resources. Is there anything else you want to point out or wrap up with?
This holistic wealth creation approach might be a little bit difficult to grasp first. If we look at other areas, for instance, when it comes to our health, we need to eat properly. We need to exercise properly and then also we have to recover properly. That’s a holistic approach and that will help us increase the success of the goals that we’re trying to accomplish within our health. Our wealth is the same. There are many different moving components. Everything’s connected. It’s all tied together. It doesn’t remain in a vacuum. You summed it up nicely.
For people who are interested too, we do have a course that goes deeper into this. It’s a free course that they can access at YourOwnBankingSystem.com. In this course, we walk them through all the different topics that we spoke about and we get into much deeper detail. If anyone’s interested in infinite banking or the insurance strategy, they can reach out to me at Info@ProducersWealth.com. I’ll shoot them a copy of a book that also explains it if they’re interested in learning more about integrating this insurance strategy with their real estate goals.
M.C., I appreciate you taking the time here to go over this. This is a bigger picture, holistic thing but it’s important because it brings it all together and people need to think about that. It’s certainly something that I’m thinking about now, especially with my daughter getting older.
Thank you so much, Marco. It’s always a pleasure to speak with you.
We’ll talk to you soon. Thanks again.
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