Reading "Becoming Your Own Banker" Part 3 - A Guided Overview
Part 3 – How to Start Building Your Own Banking System
(Pages 41–50 of Becoming Your Own Banker)
This is the part of the book that changed everything for me.
It’s where the lightbulb goes on — where Nelson Nash shows the difference between using a banking system and owning the banking system.
Through a simple comparison of five ways to buy a car, Nelson makes one of the most powerful points in the entire book: control is everything.
The Five Methods
Nelson compares five different ways to purchase a vehicle:
Method A: Leasing
Method B: Financing
Method C: Paying Cash
Method D: Controlling the banking function (without owning it)
Method E: Owning and controlling the entire system
He then plots each method on a chart, showing how they perform over time. Let’s break down what’s actually happening in each.
Methods A, B, and C – Lease, Finance, and Pay Cash
Leasing and financing are the most common. You borrow someone else’s money, use their system, and follow their rules. You get the benefit now, but you pay interest for the privilege and give up control of repayment. Miss a payment, lose the vehicle.
It’s common — but that doesn’t make it harmless. When you owe someone else money, they own your time and dictate your terms.
Then there’s Method C, the “pay cash” option.
It feels like the smart move — no debt, no interest, complete ownership. If you’ve saved the money over time, you’ve even conquered Parkinson’s Law (spending what you earn). That’s great discipline.
But here’s the problem: when you pay cash, you’re giving up all the future growth that money could have earned. You’re still financing the car — you’ve just chosen to finance it with lost opportunity cost instead of bank interest.
Nelson’s chart shows it clearly: paying cash keeps you above zero, but you never actually get ahead. You’ve traded control for finality — and both have a cost.
Method D – Controlling the Banking Function Without Owning the System
This is where the imagination kicks in.
In Method D, you act like your own banker — but you’re still using someone else’s system. Nelson uses Certificates of Deposit (CDs) as the example. You overfund your savings, earn 5.5% interest, and then withdraw the money to buy the car once your system is capitalized.
The result? You’ve created structure, discipline, and growth.
But here’s the catch — every withdrawal is a taxable event, and the overall profit still goes to someone else’s institution.
As Nelson put it:
“He is playing honest banker with himself, but he is using someone else’s bank to do it. The dividends of the bank are going to the stockholders of the bank.”
Your behaviour is right — but the ownership is wrong. You control the flow of money, but not the system itself.
The result is a good gain over time, but we can still do better.
Method E – Owning and Controlling the Banking System
Now we get to the breakthrough.
In Method E, the person behaves exactly the same as in Method D — saving, capitalizing, withdrawing, and repaying — but they’re using a Participating Whole Life Policy instead of a bank account.
Same behaviour.
Different outcome.
Why? Because now you’re the depositor, borrower, banker, and bank owner — all four roles in the financial play.
The difference between Methods D and E is the difference between earning just interest, and earning interest plus dividends. The life insurance policyholder gets both — and the impact over time is massive.
And on top of that, you get something banks can’t offer:
A guaranteed death benefit that protects your family and estate.
Tax-advantaged growth that compounds every year.
Permanent control over your access to capital.
The numbers Nelson shows in this section aren’t the point — the principle is. When you own the system, you keep the profits. When someone else owns it, you don’t.
Understanding the Tables
This is the first time Nelson introduces tables and numbers in the book. Don’t get hung up on the math — it’s not about precision, it’s about perspective.
The tables compare Method D and E side by side to illustrate one thing: the power of dividends.
In Method D, the system eventually runs out of steam because interest alone can’t sustain it. In Method E, decades of earning dividends create enough wealth to sustain income through retirement — all because the person controlled and owned the banking system.
The lesson is simple: earning interest and dividends beats earning interest alone, every time.
This is why we use Participating Whole Life Policies for Infinite Banking. They’re the only tool that allows you to play all four roles — depositor, borrower, banker, and bank owner.
Expanding the System
Nelson closes this section with a vision for the future: expanding your system until all your money flows through it.
That’s not a starting point — it’s the destination. It takes time, consistency, and confidence.
As you see the system work, you’ll naturally expand it. You’ll start financing bigger purchases, recapturing more interest, and building capital faster. Eventually, your personal banking system will handle all your financing needs — efficiently, profitably, and completely under your control.
One clarification: when Nelson says “premiums and income should match,” what he really means is that your inputs — premiums and loan repayments — should equal your income. That’s when your entire financial life truly flows through your system without interruption.
That’s the goal — and it happens gradually, as your system grows and your mindset shifts.
Final Thought
This section of Becoming Your Own Banker is where the Infinite Banking Concept becomes real.
It’s not just about saving money or paying off debt — it’s about shifting from being a customer in someone else’s system to being the owner of your own.
When you understand that distinction — and you behave accordingly — you unlock the real power of banking: perpetual growth, total control, and financial peace of mind.
