“Old men are always advising young men to save money. That is bad advice. Don’t save every nickel. Invest in yourself. I never saved a dollar until I was forty years old.” — Henry Ford
Saving money does not work.
It’s been said that a penny saved is a penny earned.
That’s not necessarily the case anymore.
The game has really changed.
The government is printing so much money.
You’re seeing this again and again with inflation
Is it 8%? 15% or 20%?
I tend to believe it’s closer to 15-20%.
You can check out shadow stats to confirm this.
Inflation is continually getting worse, especially when you take into account rent growth.
So what do you do?
How do you play this game while inflation is going on?
We’re gonna give you three steps that will teach you how to take advantage of inflation.
1. Saving Doesn’t Make Sense Anymore
When I was ten years old, my grandmother took me to a community bank in Seattle.
While we were there, we opened a bank account for me.
I started to put my $2 week allowance into the account.
Saving was seen as a virtuous thing, particularly by older generations who lived through the depression era.
Saving was an incredible value.
That’s not necessarily the case anymore.
Even Robert Kiyosaki has been saying this for years:
Savers are losers.
But just because savers are losers doesn’t mean they have a capital L on their forehead.
They are people who are losing their capital.
They keep their funds under the mattress and in their banks with no interest.
Since the federal reserve was created in 1913, the dollar has lost over 96% of its purchasing power, according to the Bureau of Labor.
You can see the M2 money supply (which is physical currency) in this chart as well as money and bank accounts.
They continue to create more and more currency.
This will only continue, so it’s really important that you prepare.
My friend Mark Moss recommended I read a book called Thank God for Bitcoin.
I have changed my tune on Bitcoin in part because of this book.
It talks about the idea that money itself can be corrupt.
If I have dollars, and all of a sudden there’s new dollars being created, the value of my dollars goes down.
That is theft from the people who hold dollars.
If you buy that logic, then the currency becomes corrupt.
When the money itself is corrupt, the nature of money is corrupt.
It encourages more corruption and more theft.
We really don’t have sound money anymore.
Why can’t the government stop spending?
If they stop, the whole debt-based system and asset prices will come crashing down.
What do you do then?
What are some ways that you can take advantage of this?
2. Spend Dollars to Buy Stuff
What can you do about all this?
The first thing is to spend dollars to buy stuff.
Costs are continually rising.
We know in the future, all the stuff we buy will cost more.
A way to get a return on your investment is buying stuff now that you’ll need over the next year or two.
The second thing you can do is buy money. Wait, what do you mean Bronson? How does one BUY Money?
In the past, you used to be able to exchange currency for silver and gold.
Now you’re not able to do that.
JP Morgan once said gold is money and everything else is credit.
This was a hundred years ago.
If something happens, like a tightening of credit, your currency may not actually be worth what you think.
You can use currency to buy real things that will hold their value such as gold and silver.
You can also buy Bitcoin, art, collectibles – anything that will store value.
The third thing is you can buy assets that pay you to hold them.
This is very different from paper assets.
Typically you buy paper assets such as stocks and bonds, but they’re very volatile.
If you own actual physical assets that pay you to hold them, it can be a real advantage.
Our business is multifamily real estate.
We have over $200 million in multifamily assets and we get paid to hold these properties.
We get paid every month through the rents.
The properties will appreciate and will be worth more because of inflation.
Rents will rise over time.
There’s an inflation hedge built in, which is an incredible advantage.
Other assets that pay you to hold are self-storage and mobile home parks.
Things that are not real estate related could be energy and private placement deals.
The biggest thing is to not lose wealth.
If you’re wealthy, your goal is not necessarily to become wealthier…
It’s to hang onto your wealth.
You can lose wealth by holding onto currency.
Warren Buffet says: “Rule number one of investing is don’t lose money. Rule number two is don’t forget about rule number one.”
Preservation of capital is so important.
When inflation is high, holding money in the bank or holding certain assets will not keep pace with inflation.
That’s why I love real estate!
It generally keeps pace with inflation and rents usually rise over time.
3. Use Debt to Your Advantage
How can you use debt to your advantage?
We talked about how savers are losers and how the whole system is debt-based.
A lot of people think of debt or loans as really bad.
There definitely is such a thing as bad debt.
Dave Ramsey and a lot of other gurus talk about this.
You should not spend more than you’re taking in.
If you’re going to buy boats or trips or other stuff you don’t need, that’s not an investment.
An investment pays you to hold it. It’s an asset!
Even a single family house may not necessarily be an investment if it doesn’t pay you to hold it (meaning it’s your primary residence or if it is a rental and doesn’t cash flow).
If you don’t get paid, you’ll speculate.
You’re thinking the worth may go up but it will actually cost money to hold.
Then the investment would be more of a liability.
But fear not!
There is such a thing as good debt.
I’ll give you an example:
In the last year I was able to get a personal line of credit.
A bank loaned me $100,000 at 2.75%.
It wasn’t backed by any collateral and is a 10-year fixed rate.
I can use this loan to do other investments where I know I can get a much higher return.
I can conservatively get a 15% return in some of the investments that I’ve gotten into.
Sometimes you can use something called arbitrage to buy high-return investments.
I’m not advising you to do this next idea, but it is worth mentioning.
Some people get a home equity line of credit to tap into their home equity and use that to go buy other assets.
These are just a few ways to use debt to your advantage.
My friend George Gammon says when you buy a single family house at a low interest rate, the asset is not the house…
It’s the loan.
You’re getting debt at 4-6% or so.
We know inflation is higher than that.
Having that cheap 30-year fixed debt on a home can actually be a benefit.
This is what we do with our business.
We buy apartments, putting 20-25% down, and see the properties appreciate over time.
They appreciate because rents typically keep pace with inflation.
If our property that we’ve put 20-25% into rises by 20-25%, we’ve doubled the value that we have in the property.
Even a small increase in the value can really have a dramatic effect because we’re using debt and leverage.
You should also consider your downside risk.
There are higher risks in some investments.
If you put a bunch of money into crypto or other similar things, you should know the risks.
I’m not saying to go out and get a whole bunch of debt.
But if you’re buying assets that are pretty stable, there are some ways to potentially take advantage of this.
The conclusion here is to use your currency to buy stuff.
You can use debt to go buy assets that pay you to hold them.
Over time you’ll handle this pretty well.
That’s really the challenge with all of this.
A lot of people who aren’t as wealthy or sophisticated don’t have the ability to borrow or take advantage of these methods.
So please share this post around!
People need to hear this message.
If you’re curious on other ways to take advantage of inflation, we do regular investing panels and talk about inflation.
Now I want to hear from you!
What are you doing to take on inflation?
Let us know in the comments below and help grow our community.
Before you leave, make sure to check out our special report about investing. It compares the stock market to real estate, and it also includes how the pandemic affects your investment future.
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Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.