Be an Owner, not a Loaner
The high inflation has me worried about a number of things, especially the future costs of everything from rent to food. When I chose my Freedom Number 30 years ago, it seemed like a ridiculous amount of money. Now, it seems inadequate and is shrinking rapidly. Thankfully, I have investments that are exceeding the pace of inflation. If I had left my money in the bank, I would be losing money and purchasing power daily to inflation. With banks paying less than 1% in interest and inflation currently at 7% or higher, this is devastating traditional savers. Bond holders and people with whole life insurance or annuities are in the same boat.
Never loan your hard-earned savings to a bank, insurance company or the Government.
Owners
People who accumulate valuable assets, I call Owners. These are the people who own their house and possibly other properties. Owners invest a percentage of their income in stocks, real estate or other appreciating assets. They may also own a business and therefore own their income and other business assets. Everything they own tends to grow in value, especially in times of high inflation. Their mortgages and the costs of their other assets tend to be fixed or growing slowly, which allows them to invest their growing income into other assets. As time goes on, they pay down the loans on the assets, which further increases their equity. It’s a cycle that grows wealth continuously, while keeping ownership costs low. Owners can even leverage the income or the equity from their assets to purchase other assets or to pay their future expenses.
Owners have a distinct financial advantage, as their equity goes up and costs remain low over time.
Loaners
People who tend to buy everything on credit, I refer to as Loaners. They rent a place to live, lease a car and borrow for most other things or put them on a credit card. Loaners pay a lot of interest for debt and own very few assets, most of which are depreciating. This initially gives them an advantage of being able to afford things on credit or lease they could never afford to buy outright. However, everything they rent or lease today tends to go up in cost over time, sometimes dramatically. Think about the average cost of rent, cars and houses 10 years ago. They have gone up a lot since then and they will continue to go up indefinitely. Trying to retire while paying the market cost for rent and transportation will become daunting, because Social Security won’t keep pace with inflation.
Loaners are at a distinct financial disadvantage, as their costs go up and they have no equity growth.
The Bottom Line
Prosperity comes in many forms and appreciating assets are one of the most reliable. When you own your home, own your vehicles, own your investments and own your income, you own your future. Be an Owner and prosper.
“To obtain financial freedom, one must be either a business owner, an investor or both, generating passive income, particularly on a monthly basis.” – Robert Kiyosaki
