Chris grew up in a low-income family, but he learned to dream big. His business experience ranged from creating a clothing line and opening a chain of snowboarding shops to working on Wall Street and being one of his firm’s top three financial advisors.
After the stock market crash, Chris started focusing on his real estate portfolio, which was more of a side project at the time. By 2014, he had a sizable portfolio and several other things in the works. Unfortunately, that’s when he learned that banks aren’t always friendly, so he started to find ways to fund his ventures by becoming his own bank. Now Chris mentors others and helps them take charge of their finances.
Chris Naugle Real Estate Background:
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“If we didn’t need a conventional bank anymore, what would life look like?” – Chris Naugle.
Theo Hicks: Hello, Best Ever listeners, and welcome to the Best Real Estate Investing Advice Ever Show. I’m Theo Hicks and today we’ll be speaking with Chris Naugle.
Chris, how are you doing today?
Chris Naugle: I’m doing great. Thanks for having me on.
Theo Hicks: Yeah, thanks for coming on again. So Chris is a repeat guest; his episode hasn’t aired yet when we’re doing this interview, so make sure you check out his first interview; we go and do a deep dive into his background and what he’s focused on today; just go to https://joefairless.com/, type in his name.
Today is Sunday, so we’re doing a Skill Set Sunday. So we’re talking about a specific skill set that Chris has a deep dived into that and how you can apply that to your investing business as well, and it’s going to be on becoming your own bank.
So before we get into that, just a refresher on Chris. He is the co-founder and CEO of FlipOut Academy, The Money School and Money Mentor. He has 14 years of real estate investing experience and has done over 500 real estate deals. He is based in Buffalo, New York, and his website is his name, https://www.chrisnaugle.com/.
So Chris, before we get into today’s skill, could you just kind of quickly give us a refresher on your background and what you’re focused on today?
Chris Naugle: Sure. So background – I just grew up in a very lower-lower-middle-class family. I was a kid that was brought up by my mom to dream big. We didn’t have money, so everything was just a dream; and I turned those dreams into reality. First big dream that came to light was I wanted to be a pro snowboarder; even in Buffalo, very hard place to make it into that pro arena, I was able to do that by doing what everybody else was unwilling to do; it was one of the greatest accomplishments of my life.
And then, at a young age, I decided I didn’t want to trade hours for dollars, so I started a clothing line, which turned into a chain of skateboard/snowboard shops; I ran those from 19—Gosh, 1994. It’s so weird to say that… All the way up till 2010 when I sold them.
In the midst of that I hit a couple of recessions, like the dot-com crash, that forced me to actually enter the workforce again, and I landed in Wall Street of all places, and I became a financial advisor in what was supposed to be a part-time job to get me through those recessionary years; it ended up being something that I loved. I rose to the top, became one of the top three advisors in the firm I was at, all the way up to Great Recession time, 2008… I was crushing it. I was making great money, doing the snowboard thing… And then all of a sudden, in 2008, I started doing a lot of real estate.
I was developing a strip mall using hard money when the great recession hit, and that’s the first time that I was literally brought to my knees, and I saw the signs of – I was going bankrupt. And if it wasn’t for my girlfriend who just moved in, paying the utilities, paying the mortgage, allowing me to move two friends into this house that I lived in, I wouldn’t have made it through that.
And that kind of catapulted me to change my focus a little from all the stuff I was doing with the shops, focus now over to real estate. I started in real estate in 2006 with the first flip, but in 2009 through 2014 I was heavy in real estate; buying apartment buildings, renovating them… And things were going great. I got up to 36 units, I was making good money, still doing the advisory thing and the snowboarding thing…
And then in 2014, I was faced with the harsh reality that banks aren’t always friendly. And they called one of my mortgages, they froze my lines of credit and they told me no, because I didn’t fit their little square box… And again, you know, 2008, I lost it all, and in 2014, I lost it all again. So I had to sell all those properties, and that was the most humbling period of my life. But that’s what got me to where I’m at today… Because at that moment, I went to a real estate training, a three-day training, because they were giving away an iPod Shuffle… And at that training, I met two people; and these two guys were rock stars. One had a show on A&E, the other was the bank.
They started talking about money, which was my space, on Wall Street. And what they were talking about was something so different than anything I’d ever heard about in all my training, all my high-level years doing the advisory thing… I remember thinking to myself, “If I don’t know this, what else do I not know? What do the wealthy know that I don’t?” And that began my journey. That was 2014, we’re in 2021. I’ve made it my mission from that point forward to learn the secrets of the wealthy, to learn the patterns of “What do the wealthy do that you and I don’t?”
And today I’m known – that’s not self-proclaimed, I always like to say that, but I’m known as America’s number one money mentor. My wife and I had a show on HGTV called Risky Builders, we were flipping houses, and… Gosh, so much other stuff, but it’s all hearsay. But today, I teach people the truth about money and what the wealthy do with money that every single person listening to this can do by just adding one step.
Theo Hicks: And is this one step that the wealthy do ultimately becoming their own bank?
Chris Naugle: 100%
Theo Hicks: Okay.
Chris Naugle: It is understanding that general philosophy that you have to be in control of the banking functions in your life. That is it. And it does involve just changing one thing, and that one thing is where your money goes first.
Theo Hicks: So the money goes into life insurance, correct? Is that the strategy here?
Chris Naugle: Correct. Yep.
Theo Hicks: Can you give a high-level rundown of exactly how this process works from someone who already has the cash flow coming in or has the capital to do this, and they’ve never heard it before, they don’t know what you’re talking about? How do I become my own bank by investing in life insurance? That doesn’t make sense to me.
Chris Naugle: Yeah, and it shouldn’t make any sense, because you’ve never heard about in your life, just like I never heard about it. And I was an advisor; you would think an advisor would know about this, but we don’t, because advisors are taught to do traditional financial things. So let’s just keep it really simple here.
So in other words, being your own bank is not about a product, okay? A lot of people when I say, “become your own bank,” or “privatize banking,” they instantly think if they know about it, this life insurance plan; it’s really not, it’s a process. And it’s a process of doing nothing other than mimicking exactly what a bank does every single day with the money you deposit there. That’s where the basis starts.
So let me kind of just dive in. Now, the machine that we use is a very, very specially designed and engineered whole life insurance policy. But when I say the whole life insurance, a lot of people have a pre-conceived notion of what whole life is; they think it’s life insurance and indeed it is. But the way that it was created for banking, the way that banks use it, the way that corporations like Samsung, Apple and so many others use this, and the way the Rockefellers and the Rothschilds used it way back in the day, is not using life insurance for its intended death benefit use. So what you do is we built the whole life policy to almost work just like your savings account does.
So let’s start there. All of you, you get paid, you make money… And again, you mentioned, Theo, that this isn’t for everybody, and absolutely not; this is not something that will work for everybody. This is not the silver bullet. But this will work for somebody that’s saving money, that has a little bit of extra money that they’re putting away and saving somewhere. So I want to make sure I pointed that out.
So you get paid and you go to the bank and you deposit your money in the bank, you exchange your best dollars, your good, valuable dollars to the bank, just for that warm and fuzzy feeling, because that’s what we’ve been taught to do.
Now, what does the bank do with your money? Does the bank take your dollars that you deposit, put them in a little box in the back that has your name on it, and just leave it there so that when you come back you take it? No, the bank doesn’t do that. The bank immediately, when you make that deposit, is lending that money out to somebody else. And what is that lending for? How about somebody buying a car, somebody buying a house, somebody paying off credit cards or financing something? Well, let’s focus on that, right?
What if there was a very simple way for you to take back all of those banking functions that you use a traditional bank for? That’s really the basis, that’s the process. If we didn’t need a bank, a traditional conventional bank anymore, what would life look like? Well, I’ll tell you, it would look amazing, because banks make 400% to 1,300% more than you do on the deposits you leave there. You can check https://www.powerfinancial.com/en/ if you want to verify that.
But you go to a bank—and let’s just use a car, okay? Let’s say you want to buy a car; you go to the dealership, you find the perfect car, your dream vehicle. Then all of a sudden you go to the bank or they bring you to their banks, and what do they do? The bank comes back with a monthly payment, which includes principal and interest, and you’d sign the dotted line and they give you the keys to the car, and what do you do? You exchange monthly payments to someone else’s bank. And over the course of that time, you pay the car off, but who wins in that? You have the car, which is depreciated, but the bank has all that money, all the control of that money, and they didn’t even use your own money.
And then we were going to be the bank. And instead of depositing our money in their bank, we changed and we’ve put our savings, the money that we would put into a traditional bank, that would be i.e. your savings, or money you’re putting in a 401(k) or an investment account – let’s just say we just changed one thing in what you do today, and we change where that money went first. What if we put it into this very specially designed and engineered whole life insurance policy that I’m talking about, commonly called privatized banking policies?
In doing that, let me tell you what would happen. First off, you change the name on the check; it doesn’t go to your conventional bank, it goes to the insurance policy. Now, when it hits that insurance policy, you get a contract from a mutually owned dividend-paying insurance company. And that contract says a few things; it says, number one, that the insurance company as per 2021 – this will be changing in 2022, but as of right now – they guarantee you an interest rate of 4% on your money. Now, unless your current savings account is paying you 4%, already we’re better, right? We’re better making 4% than we are making 1% or less than 1%. So that’s already a plus.
But then, the insurance company also says in this contract that if they have surplus, if they have extra profits at the end of the year – because these are mutually owned – they are willing to share it, to return it, in other words, to you in the form of a dividend, because they’re mutually owned company. So there’s no stockholders; there’s just you, the policyholder. So every year, they pay you a dividend.
Now, let’s just use 2021 numbers; that dividend can be anywhere from 1.65% to 2%. So now let’s just use the 2%—you’re making 6% on your money. That’s way better than any conventional bank. But now we got a problem, because now in the bank, the reason you put money in a savings account is if you need it, you can just go take it. That’s why we use bank accounts.
Well, what if this specially designed and engineered whole life allows you to put the money in there and immediately, within the first 30 days, take that money out as well. Now, you won’t be able to take all of that money. The way these plans are built – and I’m just going to give you a range, because it’s all in the plan design – depending on your needs, your goals and what we’re doing for you, that could be between 60% and 92% that you have access to.
So let’s say 90%. You put 10,000 bucks in this specially designed whole life, and then you need that money, so you take out $9,000 of that money immediately in the first 30 days. Now, the most important thing is if you had access to that money, what would you do with it? Well, you could take that money out.
Now when you take the money from this specially designed and engineered whole life, you’re not using your own money; that $9,000 that you just got in your hand, that you’re holding, that you took out in the first few days, that’s not even your money. The insurance company made a loan to you and you didn’t have to qualify for this loan, you didn’t have to have your credit pulled; you just click a button and within 36 hours, the money’s in your hand. True statement.
So now you got $9,000. That $9,000 is the money from the insurance company’s general account that they just gave you without really anything. Why would they do that? Well, simple. Your $10,000 that you deposited there is still sitting with the insurance company, is still making 4% plus the dividend. So you’re making uninterrupted compound interest, because there’s nothing interrupting that compounding effect on your money, because you’re not using your own money.
So where did this money come from? Well, the insurance company had it in their general account. So why would they just give it to you? Simple, they gave you an advance of your death benefit. Remember we’re talking about a whole life; there is a death benefit. Money that will be paid out to somebody upon your graduation. The insurance company just gladly says, “Hey, we’ll let you use your cash value anytime you want, and we’ll give it to you in the form of a loan, and when we give you this loan, we’re just going to take that loan amount, that $9000 away from your death benefit.” So literally, you’re leveraging your death benefit while you’re living.
Now, what’s the downside to this? The downside is the insurance company is going to charge you interest on this loan. But this loan that they just gave you, which is an advance of your death benefit, never technically needs to be paid back, because they just keep it from your death benefit. So the interest they charge you on this is 5% simple. So let’s just do a math equation, right? How much did I say they’re paying you on money that’s still in your account sitting in the insurance company? 4% guaranteed, plus we’re using a 2% dividend. That’s 6%. But now they’re charging you 5% in the first year. That means now you net 1%.
So how many of you would love to have a bank that pays you 6%, allows you to take some of your money out, 60% to 90%, anytime you want, and they still will pay you another 1% on the money, even though you’re holding most of it in your hand? How many of you think that would be a good use of money?
But let’s get into what the wealthy really know. That equation is just to explain how the machine works. Now, that $9,000 in your hand, this is where the important part comes in. This is you taking back the banking functions in your life. Now, most people that I come across have some form of debt – car loans, student loans, credit cards, things of that nature. So let’s just say this example that I’m using, they put $10,000 in there, $9,000 in their hand, what are they going to do with the $9,000? Because we want to use that $9,000 to make more money. Well, let’s just say you owed Visa $9,000, hypothetically. Let’s take the $9,000 that we just took as a loan from your banking policy and let’s pay off Visa. So now Visa is paid off and paid in full; the $9,000 that the insurance company loaned you from your death benefit pays Visa off. But weren’t you making monthly payments to Visa? You were. Let’s just call that $200 a month; you were paying the minimum interest payment to Visa every single month for $200 a month. And Visa, let’s just hypothetically say there were [unintelligible [00:16:14].22] a 20% interest.
Well, if you were going to take back the banking functions, the most important part in this process is now that $200 you used to give to Visa, if you use your bank, your $9,000 that was from your bank, it’s important that you treat your money the same as you treat the bank’s money, or the credit card company’s money. You had to make monthly payments to Visa, $200 a month, when you owed them money. You’re now no longer owe Visa money because you took a loan from your bank and you paid off Visa. So now what you should do to be an honest banker, to treat your money the same as you treat the bank’s money, is change the name on that $200 check every month.
So instead of writing Visa a check for $200 a month, you write your bank a check for $200 a month. So all the money is the same; you haven’t spent any more money, you haven’t worked any harder, you haven’t given up control of money, you haven’t taken on any risk… And if you change that $200 a month payment and you pay it back to yourself every month – just set up a bill pay, and now $200 every month is going back into your specially designed and engineered whole life as a loan repayment.
You know what just happened there? Let’s go back to the beginning. We were making a 1% spread on our money; the arbitrage, right? 6 minus 5 is 1%. But then we paid off Visa, and the $200 a month was 20% interest that you were paying Visa. But now that $200 a month is going back to you. So did you not just recycle and recapture the equivalent of a 20% interest rate? You did. You were giving Visa 20%, and now you’re paying yourself back 20%. So now you’re net in the first year is 21%, and you didn’t do anything different besides change one thing – you changed where your money went first.
So that’s the general consensus. You can do this with credit card debts, cars—if you did this with cars and instead of financing your cars, you took loans from your banking policy, bought the car and made those monthly payments that you pay right now to somebody else’s bank back to yours, I will tell you what will happen – and I have a great video on my website that shows this. You will get all the money back for every single car you ever buy, drive and own. Now, doesn’t that sound too good to be true? Maybe, but it’s not. And I can prove it mathematically in that video.
How about real estate? So I’m a big real estate investor. And in those early years when I was doing all that real estate, do you know how I was funding a lot of the renovations, a lot of the down payments on those rental buildings? You guys got it. I was doing it by using my banking policy. Me and my wife have done hundreds and hundreds of flips when we had our TV show. Do you realize a lot of that money that I used for those flips, for those down payments, for those renovations, for those overages – everything came from me making loans from my bank; not somebody else’s bank, my bank, to myself. All I would do is I would take loans from my bank, lend it to my company at a rate of 6% and make monthly payments back to my bank.
Folks, I’m just giving you what would be the equivalent of the pimple on the elephant’s butt right now. The grand scheme of how much you can do with this privatized banking system – they call it infinite banking concept, which is a process of taking back the banking functions – is unlimited. I’m just trying to help you understand the concept of you just change one thing and that’s where your money goes. And then everything else is you just following a process and this is the result.
I showed you a credit card. I told you you can get all the money back for all the cars you’re going to buy, drive and own. If we start talking about private lending, buying rentals, buying flips and doing it all with your bank versus somebody else’s bank – this is life-changing. It changed my life, folks.
In 2014 I was done. I was hundreds of thousands in debt. I couldn’t even see the light at the end of the tunnel. Today, I’m not going to get into that, but I live a pretty good life, and all I did, folks, is I changed one thing, I did one thing different, and I stuck to it, and I followed this process.
So Theo, sorry… Hopefully, I didn’t go too long into that, but I wanted to kind of take you full circle on it.
Theo Hicks: Oh, yeah. Thank you so much. I love all the different examples you gave as well. Now, one follow-up question I do have, that kind of personally had me confused in the past… So going through that example, you said, where I invest $10,000 into full life insurance… Can I just invest $10,000 one time and then just continuously use that? Get a loan, pay it back; get a loan, pay it back; get a loan, pay it back. Or do I need to continuously deposit money into that account, with more money than a loan each year? Or can I just do one investment and then just sit on it, or does it depend?
Chris Naugle: Great question, Theo. So you can’t just make one deposit. There’s a lot of rules and a lot of the rules are IRS rules. So all the money that’s in these banking policies is potentially tax-free. So if you just put money in one time, it would never work. So how we structure these plans is we build them around your current savings program. So if you’re currently saving $500 a month or $1000 a month or whatever you’re saving, we just changed where your savings goes. But we’re not going to just — you used the word investment. We’re not investing money here, because remember, there’s zero risk. You’re putting money, you’re saving money making i.e. deposits into this specially designed and engineered whole life; it’s not an investment because you can’t lose money… But you can’t just put money in once.
So if we toko that $10,000 example and we built the plan to hold $10,000 a year, here’s how it would work. You’d make a $10,000 deposit — or maybe you don’t have $10,000, you just want to make monthly payments, right? $10,000, you make monthly payments of whatever you want into the plan equal to $10,000 per year. So I believe that’s $833.34 per month. You could do that every single month to get to $10,000.
But let’s just say year two, you set it up to hold $10,000 a year, and usually, what we’re going to do is we’re going to build the plan to hold $10,000 a year; that’s the most you can ever put into the plan. You can never put $11,000 or $12,000, and you’re going to be [unintelligible [00:22:01].13] The Modified Endowment Contract rules – it’s an IRS terminology. So $10,000 is the max you can put in. But let’s just say year two, for some reason, you don’t have the $10,000; you just can’t make that $10,000. Things happen and you just didn’t have it. Great. All the plans that we built have flexibility, and you can reduce from $10,000 down to $4000. We can even build it to have a fluctuation of going from $10,000, all the way down to $1,000. So we can build all that flexibility in, but there will never be a plan that we build that only allows you to put money in once. The shortest period of time we can build a plan to hold money is for 10 years. So you’re going to be putting deposits into this system for a period of 10 years. But you can fluctuate the amounts anywhere from what you start, all the way down, depending on how we build it, let’s just say to 60% to 90% lower.
Theo Hicks: You’ve proactively answered my question, too… It was “Do you need to keep doing that 10k forever?” So you said the shortest amount is going to be 10 years, and then I imagine up to whatever. Super fascinating stuff. So Chris, you said that, this is the—I like your analogy, “a pimple on the elephant’s butt”. So where can we get the whole butt? Where can we learn more about this strategy more, about the specific rules, if there’s something that people are listening are interested in learning more about?
Chris Naugle: Yeah, so I give everything away for free. So you just go to my website, https://www.chrisnaugle.com/, and just go to the free resources tab. There’s so many videos on there, showing you everything from how to get the money back for all the cars you’re going to buy, drive and own, how to use it for real estate and to do private lending from it… And then if you really want a deep dive, go to my YouTube channel, which is @thechrisnaugle, and oh my goodness, there’s everything. We have tons of case studies; professionally done and edited case studies of our students and our clients actually going through, using this. And you guys, if you’re in real estate you would love — there’s one [unintelligible [00:23:50].14] called “Solving the money problem in real estate.” He shows you how he uses his banking policies to get and make money five different times on the single deal he was doing; he was doing a BRRRR deal, and he’ll walk you through exactly how he does that, and it’s all on the YouTube channel.
Theo Hicks: Perfect, Chris. Well, thank you so much for joining us today and walking us through this process of becoming your own bank through these specialized life insurance policies. We went over specifically how it works. We went over examples and we went over how banks, corporations, the Rockefellers used this to become super-wealthy. And I like how you position it – it can be something where the only change you make is where you’re depositing your savings; instead of depositing it in [unintelligible [00:24:31].28], you deposit it in this bank. And then from there, there’s an infinite number of things you can do to use that money to become your own bank. Or you can just simply use it as — I know you said as an investment, but as a way to make a guaranteed return on your money that’s better than a savings account.
Chris Naugle: That’s a big thing right now, capital preservation. People are scared of what’s coming, so they’re looking for just a way where they can preserve their capital that they have. So I’m glad you mentioned that.
Theo Hicks: Good point, capital preservation. So Chris, thank you so much. People listening, if you want to learn more about this, https://www.chrisnaugle.com/ and then make sure, again, make sure you check out his earlier episodes. So Chris, thank you so much for joining us today and kind of breaking this down for us.
Best Ever listeners, as always, thank you for listening. Have a best ever day and we’ll talk to you tomorrow.
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