Why Care About Inflation?

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Inflation is 7% (as of this writing) - that's right - 7% !

Most people don't understand inflation, and if they do aren't really sure what to do about - specifically how to mitigate its deleterious effects.

What does inflation even mean, why is it important - and what can you do about it?

Where's My Cash?

Do NOT sit on cash savings!   You are not saving - you're storing - and the inflation rats are eating it away every day while it sits in the storage bin.

If 12 months ago you had $10,000 in savings, it's now only able to purchase $9,300 of goods and services. Forecast out just a few future years and you can see what's going to happen to it.

For the sake of argument - presuming inflation normalizes to a 3% rate next year - in 5 years your $10,000 is now only worth $8,233.

If it settles in at 5% for the next several years, rather than a value of $8,233 - it's now only worth $7,575 - a loss of $2,425 in value.

What if you have $100,000? $500,000?  Today's $100,000 will only be worth $75,750 in 5 years having lost $24,250 in value.  Today's $500,000 will only be worth $378,745 in 5 years having lost $121,254 in value.

What if you have 1,000,000 (wouldn't that be nice)?  You get the point.


Can I Get It Back?

Normal inflation rate is 3.22%/year - the price of goods and services increase each year at 3.22% - but it's almost never negative (-3%, -7%, etc.) - which is called Deflation.  Think of the new car and housing prices when you were young as compared to what they are now.

You can't lose money in year 1 and then plan to have it come back to you in year 2 with a negative inflation rate.  Even if it did, you'd only be back to 0 - stagnant.

So here's the hard truth - you aren't ever getting that money back - it's gone forever.

That should create a sense of urgency for you - get rid of cold hard cash and cash savings as fast as you can - and put that money to work as soon as you can.  It's rotting away in your wallet, bank, brokerage, IRA, 401K accounts.

I'm Earning Interest at the Bank

Technically - but not enough.

The average interest rate on savings accounts is 0.06%.  Notice where that decimal is.  That's not 6% - it's 6 hundredths of a percent.  It will take 1,200 YEARS to double your money.

The current US 10 Year Treasury rate is 1.7%.  It will take 42 YEARS to double your money.  That's right, you give the US Government your money for 10 years and they pay you a rate that requires 42 years to double.

All the while, the purchasing power of the money WITH interest is significantly below the prevailing inflation rate.  You're earning .06% or 1.7% on your funds while inflation is eating its value away at the rate of 7%.  Which one do you think is going to win that race?

Preserve Your Capital

I wish I had learned earlier in life to quit outsourcing my financial future to other people.   I'm passionate about this and wish someone had explained this to me.

MOVE your depreciating cash into an asset class that is:

  • REAL (not virtual)
  • APPRECIATES (grows in value)
  • CASH FLOWS (while you wait for the appreciation)
  • INFLATION HEDGE (what we're talking about here)

Moving your depreciating cash into a different asset class does NOT mean the stock market (see my other blog post "The Stock Market Casino" to understand why).

Don't allow yourself to accept that losing your hard earned money is inevitable nor acceptable. Get into STABLE (cash preservation), APPRECIATING, CASH FLOWING, TAX FREE/ADVANTAGED, INFLATION HEDGE investments.

What Checks ALL the Boxes?

Cash Flowing Real Estate (like multifamily apartments).

The majority of wealth in America is built using real estate.

Yes, you can invest in multifamily real estate through your qualified retirement accounts.  Transfer a portion (or all) of your account into a self-directed IRA or solo 401K and the world of investment options opens up.

I love sharing my personal "testimony" and what multifamily real estate can help you achieve.

Call me.