105: 5 Ways Inflation is Crusting Your Wealth, and How to Beat it!
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Hey guys, news alert, you may not know this, but there’s an APB out for the thief who is robbing you blind right now!
Yeah, that’s right, literally at this exact second there’s an insidious thief lurking where you least expect it, systematically robbing you of wealth.
We hate to break it to you , but every year that your money sits chilling in your bank account, the thief is making sure that its value is vanishing before your very eyes. And if nothing is done about it, at the current rate, your comfortable retirement nest egg can lose almost 10% of its value each year. 👀
This means that in just 5 short years, 50% of your money’s value in the bank will vanish and go up in smoke before your very eyes.
Are you outraged at this point? We are too! Today we will show you why inflation is crushing your wealth and also how with a couple small tweaks, you too can beat it like a pinata – in a fun way, we promise!
Let’s get into it. 👇👇
What is inflation?
Unless you’ve been living under a rock, you’ve probably heard that inflation is a pretty big deal right now, and not only has it been in the news lately, it has also risen dramatically over the past 12 months. We see it manifested in prices of everyday items like eggs, gasoline, and household supplies as well as across the board with larger purchases like electronics and cars.
So, what is inflation? 🤔🤔
Think about what it means to inflate something, like a balloon. All you’re doing is making it bigger. Well, the same goes for the economy. Inflation is simply the rising cost of goods and services, which can be a good and normal thing, provided it doesn’t happen too fast or too slow, all of which affects the purchasing power of the dollar, YOUR hard earned money.
Another way to look at it is that your dollars are worth less and less each year, so essentially it takes more of it to buy the same item that used to cost less, which affects the cost of living and general economic growth.
Nan, you know what, a chart by the in 2013 dollars website, shows a visual representation of how the U.S. dollar has lost buying power over time. Basically what it shows is that If you look at the period of time between 1900 and today (so 2022), $1 of purchasing power in 1900 equates to just about $35.48 today. We know you can do the math, but just think about the numbers there, which is over $34 in 122 years, which is also a 3,400% price increase. And we get mad when Amazon Prime raises its rates…
So how does this apply to your life? Well, this means that there’s truly nothing safe in the long run about depositing your money into a savings account. Doing so 100% guarantees that your money will continue to be robbed of its value. And we don’t want you to get robbed!
Just saying that out loud makes us angry. But the good news is that with a few tweaks, you too can beat inflation and can make it actually help you grow your wealth instead of destroying it! Let’s learn how. ☝️☝️
No. 1 Leverage debt to your advantage
Okay so first, and we say this all the time, you have to leverage debt to your advantage. Trust us, at one time, when we didn’t know how to leverage debt to our advantage, we were trying to combat inflation by doing everything else, but securing very low-interest rate debt. Leverage is simply small input and massive output.
Archimedes said, “If you give me a lever and a place to stand, I can move the world.” And any time we can borrow money at an interest rate below inflation, that’s considered free money.
We know, we know, you are saying wait a minute, but aren’t interest rates sky-high right now? Yes, they are. So the best way to avoid leveraging high-interest debt is to purchase assets with loan assumptions that have lower fixed interest rates.
Essentially, when you are able to buy a property with a loan assumption, you are able to take over the seller’s lower fixed debt from the loan that they got when they originally purchased the property. Here’s an example… We know interest rates today are around 6 to 7%, but on a loan assumption, this doesn’t matter because we are taking over the seller’s original loan with an interest rate let say of 3.50%. That’s quite magical. 🤓🤓
Again, since the interest rate is lower than inflation, it’s like free money. And we love borrowing money for free, buying a cash-flowing asset that covers the debt payment, and using less of our own money increases our cashflow and return on investment.
We also love income-producing debt. It allows us to grow exponentially with a relatively small input of 20-30% of the purchase price, but also gain ownership of the entire apartment complex.
No. 2 Invest in cash flowing assets
The second way to beat inflation is by saying goodbye to cash and investing in cash flowing assets.
And no, you don’t have to have millions of dollars to do this. It takes way less money than you would think in apartment syndication. Keeping cash is usually the number one thing holding people back from generating money using inflation.
Always remember that cash flow, not cash, is king 👑. Keeping money under your mattress or in the bank is dangerous and only benefits the financial institutions. Think of cash like a river, it needs to flow to do its job, and we need that flow to be continuous.
No. 3 Invest in assets that will appreciate over time
Third, you need to invest in assets that appreciate over time. Real estate is an inflation hedge and what we mean by that is that as the cost of materials and labor go up, so does the cost of real estate, particularly, in apartment complexes both new and pre-existing.
So if you’re looking to invest in apartment syndication today at let say the purchase price of $70 M, with inflation hovering at almost 8% at the time of this recording, you’ll gain at least $5.6M in a year’s time from just inflation alone. In 5 years, that’s $28 million dollars. 💰
And of course, we’re not even talking about rent growth increases, other incomes, reducing expenses, compressing cap rate and all the massive tax benefits. We’re just talking about inflation here!
No. 4 Use inflation for the tax advantages
Fourth, the truth is the real value of tax decreases with rising price levels. This one might actually be a twist if you’ve never thought about it this way before.
So let’s say you earned $100,000 income in 2022, does the IRS tax your income in 2022? No! You got all the way until April of 2023 to file before any penalty kicks in.
No. 5 Let inflation buy back your most valuable resource: TIME.
And finally, fifth but definitely not least, let inflation buy back your most valuable resource: TIME. 🕰️
We say it all the time, time is our currency. We realized a couple of years ago how very fleeting and special time is. It’s the only non-renewable resource that we have and it passes by day by day, marching faster than we’d probably care to realize.
We can’t get our time back, right? But what does that have to do with inflation? We’ve spent a large portion of this episode so far talking about using inflation to generate more profit; however, would it be ok if we take a quick step back and discuss why we are doing all this?
If you are able to grow your wealth faster because you don’t allow inflation to rob you blind, what will that do for your life and your family? Will it mean you don’t have to work those overtime hours? Does it mean you can coach your daughter’s 5th-grade basketball team? Or take those long evening walks with your spouse? 😊😊
Imagine that inflation is like a sand clock, and your wealth is the sand. Every second of every day, less and less sand will be left in your sand clock, but now that you understand the way to turn things around and crush inflation instead, you will be able to have more of your precious time to spend on things that truly matter in your life and create the impact that you were meant to create in this life. And that’s beautiful.
So that’s it for us today, thanks for tuning in, and PLEASE share this important content with your friends and families! We love helping other people, and your success is our success, so drop us a line, leave us a comment, ask questions, and as always, stay curious.
Until next time, Cashflow Multipliers! 🙏🙏
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