It is never too late, and most certainly never too early, to learn about financial principles. The biggest challenge is that no real financial education exists in our school systems.
Is inflation coming?
I’d say it’s already here. In fact, I’d argue that we are near the brink of a massive spike. Think this can’t happen? I’d urge you to look at real estate from the mid-1970s as compared to the early 1980s when prices almost tripled.
The fact of the matter is 30% of all currency that exists in the world today has been created over the past year.
Please read that statement again.
Money never rests.
It is always working for someone. It’s either working for you by earning around an abysmal 1% in a savings account, or it’s working for a bank by earning money from loaning that same savings plus some (but we can talk about fractional reserve lending another day).
Most of us are aware that when you take a loan from a bank it is considered a liability for the borrower but an asset for the bank. The question is, can this liability act as an asset?
With inflation the answer is YES!!!
Say you purchase a home for $1,000,000 and have a 30-year fixed mortgage for $800,000 and pay $4,000 a month for the $800,000 mortgage.
If your 30-year fixed interest rate is at 3.75% and inflation clips along at a rate of 5-10%, you are benefitting anywhere between 1.25% to 6.25% per year on the $800,000 borrowed.
In essence, by letting inflation erode the debt, you have turned the fixed loan from a liability into an asset.
A different way to look at the same question is to ask how many hours might you have to work to generate that fixed amount of $4,000 per month today vs. 10 or 20 years from now?
Our mission is to help passive investors become financially-free by providing high quality alternative investments. If we can help you in that way, it would be an honor to do so. Feel free to schedule some time for us to chat.
Until next time…