Infinite banking for farmers is one of those ideas that sounds too good until someone explains it plainly. So for this episode I brought in an expert: Mary Jo Irmen, author of Farming Without the Bank. Her whole approach is teaching farmers to build their own banking system so the bank becomes plan B instead of plan A, and she does it through a dividend-paying whole life policy that also creates generational wealth and a death benefit.
I want to be clear up front: this is Mary Jo’s strategy and her area of expertise, not a product I sell. My job is to make sure the pieces of your plan work together. But her thinking lines up with everything I’ve seen, so let’s walk through it.
The short version:
- When you control the loan, you decide how and when to pay, even in a bad year.
- Most farms carry too many notes bought when prices were high.
- You have to know your numbers before you can be your own banker.
- Life insurance is a farm expense, like fuel or seed, not a luxury.
Listen to this episode: Ep. 8 – The Infinite Banking Concept
When You Control the Loan, You Control the Bad Year
Mary Jo’s core point is control. When you own and control the loan, you can pay interest-only when grain prices are bad, or skip a payment if you need to. As she put it, if you were the banker, you could do that. The cash value of a dividend-paying whole life policy gives you that control, and it lets you recover some of the interest you’d otherwise pay the bank back to yourself.
Right now, as we recorded, grain is low and cattle are high, and a lot of her farmers are asking how they’ll make the payment. Her answer starts with a hard look at why there are so many payments in the first place.
Stop Letting the Bank Run Your Business
Here’s where Mary Jo gets blunt. Too many farmers carry a note on almost everything, operating, equipment, land, cattle, because they bought when commodity prices were great without looking seven years out. The accountant says buy the tractor to avoid taxes, the banker lends on it, and nobody asks whether it still pencils out at $3 wheat instead of $5. As she says, the banker gave you the money and the accountant said you could buy it, but you wrote the check.
Her line that stuck with me: don’t let your banker run your business. The bank is in business to make a profit, that’s capitalism, and you chose to go there. But if you let them run your operation, that’s on you. And a lot of lenders, she points out, don’t know the difference between wheat and durum, let alone how to run a business.
Know Your Numbers Before You Open a Bank
This is the part I loved, because it’s true no matter what strategy you use. Struggling farmers, Mary Jo says, often don’t know their numbers. They hand her figures off their tax return and don’t have a P&L or a balance sheet. If you’re going to use life insurance this way, you literally become the banker, taking loans and paying them back, and that takes discipline. She’s not going to babysit your accounting.
And it has to be a team effort with your bookkeeper, which on a lot of farms is a spouse. Her rule is simple: if you’re not looking at the books or communicating with the person who is, you don’t get the say on the next purchase. You can’t be mad you can’t make a payment on equipment you bought over the bookkeeper’s objection.
Do you actually know your farm’s numbers?
You can’t be your own banker without them. My free resource library has worksheets to help you get a real handle on your finances before you build any strategy on top of them.
Life Insurance Is a Necessity, Not a Luxury
Because it’s Life Insurance Awareness Month, Mary Jo made the case I wish more producers heard: life insurance is not a luxury, it’s a necessity, and it should be built into your farm expenses just like fuel, seed, fertilizer, or feed. For a guaranteed need, you want a guaranteed product, which to her means whole life, not universal, variable, indexed, or term. And you should get it now, not wait until you’re 65, because none of us knows when we’ll die.
We both see the cost of skipping it. I’ve had to sell prime farm ground to cover an estate with no liquidity, and Mary Jo has watched the same thing happen. A simple policy could have saved that ground.
What a Surviving Spouse Actually Needs
One last idea worth its own episode. When people ask Mary Jo how much death benefit they need for their debt, she says she doesn’t care about the debt. She wants the surviving spouse to have enough to make years of payments, not to rush and pay everything off, because a grieving spouse takes one to two years just to get their bearings.
She told me about a widow with about a $300,000 benefit whose late husband was still farming in his late 60s. The bank told her to pay off her roughly $280,000 in land debt, and financial advisors told her to invest it. Mary Jo told her to do neither yet, because once she rented her ground out and drove for an Amish Uber, those two income sources wouldn’t even cover a year of living expenses. As Mary Jo says, the vultures come for that money fast, and sometimes the best advice is to slow down.
Want to see how the pieces fit your plan?
Book a free discovery call with me and let’s look at how financing, life insurance, and your transition plan work together, with someone coordinating the whole picture.
Frequently Asked Questions
What is infinite banking for farmers?
It’s a strategy my guest Mary Jo Irmen teaches: using the cash value of a dividend-paying whole life policy to build your own banking system, so you finance operating, equipment, or cattle through a policy you control and make the bank plan B instead of plan A.
How can a farmer become their own banker?
By funding a whole life policy and then borrowing against its cash value, so you control the loan terms and can pay interest-only or skip a payment in a bad year. But as Mary Jo stresses, you literally become the banker, which takes real discipline and knowing your numbers.
Why should farmers know their own numbers?
Because a farmer is a business owner. Mary Jo finds many struggling farmers don’t have a P&L or balance sheet and read their figures off a tax return. If you don’t know your numbers, you can’t control your financing, and you’ll let the bank run your operation by default.
How much life insurance does a surviving spouse need?
Mary Jo doesn’t size it to the debt. She wants the spouse to have enough for years of payments, because grief takes one to two years and rushing to pay off debt can leave them short on living expenses, as it nearly did for a widow with a $300,000 benefit.
