Infinite Banking Mistakes: The Human Problems That Derail IBC
“It’s not the math. It’s the mindset.”
When Bruce recorded this episode solo, he opened with something we’ve learned after thousands of client conversations: the biggest Infinite Banking mistakes aren’t about policy illustrations or carrier choice. They’re about us—our habits, our thinking, and the quiet patterns we bring to money.
https://www.youtube.com/live/tvSGb9GkRG4
I remember Nelson Nash repeating, “Rethink your thinking.” That line annoys the part of us that wants a clean spreadsheet answer. But it’s also the doorway to everything you actually want—control, peace, and a reservoir of capital that serves your family for decades.
In today’s article, I’m going to unpack those human problems—Parkinson’s Law, Willie Sutton’s Law, the Golden Rule, the Arrival Syndrome, and Use-It-or-Lose-It—and connect them to the most common Infinite Banking mistakes we see. Most importantly, I’ll show you the behaviors that fix them.
“It’s not the math. It’s the mindset.”What you’ll gain (and why it matters)Infinite Banking Mistakes #1 — Treating IBC like a sales system, not a lifelong conceptInfinite Banking Mistakes #2 — Short-term policy design (and base vs. PUA confusion)Infinite Banking Mistakes #3 — Misunderstanding uninterrupted compoundingInfinite Banking Mistakes #4 — Ignoring the five human problems Nelson taughtParkinson’s Law: “Expenses rise to equal income”Willie Sutton’s Law: “Money attracts seekers”The Golden Rule: “Those who have the gold make the rules”The Arrival Syndrome: “I already know this”Use It or Lose It: “Habits decay without practice”Infinite Banking Mistakes #5 — Forgetting that illustrations aren’t contractsInfinite Banking Mistakes #6 — Not paying policy loans back (on purpose)Infinite Banking Mistakes #7 — No written strategy or scorecardListen To the Full EpisodeBook A Strategy CallFAQsWhat are the most common Infinite Banking mistakes?Should I prioritize PUAs or base premium to avoid Infinite Banking mistakes?Do I have to repay policy loans in Infinite Banking?How does Parkinson’s Law cause Infinite Banking mistakes?Are policy illustrations reliable for Infinite Banking decisions?What did Nelson Nash mean by “think long range”?How do taxes relate to Infinite Banking mistakes?
What you’ll gain (and why it matters)
If you’re new here, I’m Rachel Marshall, co-host of The Money Advantage and a fierce believer that families can build multigenerational wealth with wisdom, not stress. The primary keyword for this piece is “Infinite Banking Mistakes,” and we’re going to name them, explain why they happen, and give you practical steps to get back on track.
You’ll learn:
Why behavior beats policy design over the long term
How short-term thinking shows up in base/PUA decisions
The right way to think about uninterrupted compounding
How to use loans and repay them without sabotaging growth
The five “human problems” Nelson warned us about—and how to overcome them
If you can absorb the mindset, the math becomes simple. If you skip the mindset, no design hack will save you. Let’s go there.
Infinite Banking Mistakes #1 — Treating IBC like a sales system, not a lifelong concept
The mistake: Looking for a quick fix—“set up a policy, borrow immediately, invest, done”—and calling it Infinite Banking.
Why it happens: Our culture loves shortcuts. We’re used to products, not principles. But IBC isn’t a product; it’s a way of life. Nelson was explicit: it’s not a sales system. When we treat it like a gadget, we ignore the behaviors that made debt a problem in the first place.
What to do instead:
Adopt a long-range view. Commit to capitalization for years, not months.
Build rhythms. Premium drafting, policy reviews, loan repayment schedules.
Measure behavior. Not just cash value growth; also repayment habits, added PUAs, and opportunity filters.
Infinite Banking Mistakes #2 — Short-term policy design (and base vs. PUA confusion)
The mistake: Designing a very small base with heavy PUAs purely to juice early cash value, or, conversely, insisting on an all-base design without considering your funding capacity and behavior.
Why it happens: Short-term thinking. People want maximum day-one access or fear they “won’t be able to fund later,” so they underbuild the foundation. On the other side, some rigidly push all-base as a rule rather than a fit.
Bruce says that behavior is more important than design. He’s seen small-base policies work when owners think long range, repay loans, and continue capitalization. He’s also seen all-base work beautifully when owners behave like bankers—disciplined repayments and consistent additions.
What to do instead:
Design for you, not a trend. Balance base and PUAs to match your cash-flow reliability, target capitalization, and intended uses.
Think in decades. Will this design still serve you when the economy changes?
Stress-test with loans. Don’t just stare at year-by-year illustrations. Model loans, repayments, and changing rates. Illustrations aren’t contracts; they’re snapshots.
Infinite Banking Mistakes #3 — Misunderstanding uninterrupted compounding
The mistake: “I’ll borrow against my cash value, toss it into an investment, and because it’s ‘my money,’ I don’t need to pay it back.”
Why it happens: People grasp the idea that dollars can continue compounding inside the policy while you borrow against them—but miss the second half: policy loans have a cost, and not repaying them has a bigger cost.
Fix the thinking:
Opportunity cost cuts both ways. Spending cash has a cost; taking a loan has a cost; not repaying has a compounding drag.
Repay like a banker. Principal + interest. Treat added PUAs as “extra interest to yourself.”
Match loan terms to asset behavior. Shorter paybacks for consumptive uses; structured, documented paybacks for productive investments.
Infinite Banking Mistakes #4 — Ignoring the five human problems Nelson taught
Nelson’s “human problems” aren’t theory; they show up in daily decisions. Let’s link each one to your IBC habits.
Parkinson’s Law: “Expenses rise to equal income”
Three expressions Bruce highlighted:
Work expands to the time allowed.
A luxury enjoyed once becomes a necessity.
Expenses rise to equal income.
How it breaks IBC:You design a policy to capitalize, then lifestyle creep absorbs the margin that was supposed to repay loans and fund PUAs. Loan repayments “can wait,” and soon the policy feels like a burden instead of a bank.
Actions:
Ring-fence capital. Automate premiums/PUAs the day income lands.
Name the luxuries. Write them down. Decide which remain luxuries.
Give raises a job. Allocate a percentage of every raise to capitalization before you see it.
Willie Sutton’s Law: “Money attracts seekers”
Willie Sutton robbed banks “because that’s where the money is.” Today, the biggest “robber” is taxes—completely legal and entirely predictable. The more efficient you become, the more attention your dollars attract—from marketers, litigators, and the tax code.
IBC response:
Be tax-intentional. Coordinate with your CPA before year-end. Where can after-tax dollars be channeled into assets that grow efficiently and can be accessed strategically?
Protect liquidity. Keep capital where it is visible to you and less vulnerable to others.
Say “no” more. High-income earners are targeted with “shiny” offers. Your bank gives you patience to wait for the right opportunities.
The Golden Rule: “Those who have the gold make the rules”
With cash, you negotiate better, move faster, and sleep deeper. Bruce calls this the awareness effect: once you hold capital, you see opportunities others miss—and you’re not forced to take them.
IBC response:
Accumulate patiently. Opportunities find cash.
Price from strength. Ask for discounts, better terms, or favorable contingencies.
Use cash as a filter. If the deal doesn’t clear your bar, keep compounding.
The Arrival Syndrome: “I already know this”
This one is rampant. When you think you’ve “arrived,” you stop learning, stop imagining, and start defending yesterday’s views. In IBC, Arrival Syndrome shows up as rigid design rules (“only this company,” “only this base/PUA ratio”), or dismissing Nelson’s “think long range” as old-fashioned.
IBC response:
Be a student, always. Re-read Becoming Your Own Banker. Review your policy annually. Ask better questions each year.
Invite challenge. If a practitioner says “only X works,” ask why and request proofs across cycles.
Protect imagination. IBC is an exercise in imagination—fund it.
Use It or Lose It: “Habits decay without practice”
People fund policies for a few years, never borrow, compare to a market chart, and conclude “this isn’t working.” They forget the purpose: to control the banking function—store cash, deploy it, repay it, repeat—without external permission.
IBC response:
Create usage plans. What will you fund? What will you finance? How will you repay?
Build cadence. Quarterly loan reviews, monthly repayments, annual PUA targets.
Measure the right thing. Compare to your prior debt/interest outflows, not a naked index.
Infinite Banking Mistakes #5 — Forgetting that illustrations aren’t contracts
The mistake: Treating the illustration as a guarantee, especially in loan scenarios.
Fix it:
Pre-commit behaviors. If X happens, I’ll reduce PUAs by Y, increase repayment by Z, or pause deployments for N months.
Document the banking policy. Yes—write a one-page “family banking policy” with usage rules, repayment schedules, and review dates.
Infinite Banking Mistakes #6 — Not paying policy loans back (on purpose)
The mistake: “It’s my money; I’ll let the interest ride.” Or, using loans for consumptive items without a repayment plan.
Why it matters: Banking is a system—inflows, outflows, and disciplined loan cycles.
