Saving Your Way to Retirement
We all look to the future with both hope and concern. Gone is the generation that gets out of school, finds a good job with a good company, and stay until they retire at 65 with a great pension. Those times simply don’t exist anymore. The first step to achieving your goals in today’s financial environment is to change you financial attitude. You absolutely must think differently, and act differently than those before us.
With the world’s financial markets in disarray, one common thread among many folks has been to save money. Having enough cash on hand to cover short term expenses and emergencies is important. One primary goal is to have 4-6 months cash readily accessible. After that, cash in the bank is a losing proposition. Cash, in general, is a depreciating asset.
CASH?
Let’s say it again… Cash is a depreciating asset. Cash, earning 1% (if that), is actually losing 2.8% in value when adjusted for inflation. This means that if you have $1000 in savings and earn 1%, you will have $1010 at the end of the year. However, it will only have the buying power of $975 as compared to the previous year. As inflation increases and interest rates remain low, cash loses its value. In 1966, $2500 bought a brand new Mustang; today $2500 barely covers the taxes. You cannot save you way to retirement.
For those that plan to retire, savings will not get you there. Passive or residual income, wealth generation, and appreciating assets, represent you best opportunities to achieve your financial goals. So, how does the average person do it? Since cash goes down in value, use cash to own and/or manage appreciating assets. For many years the push was real estate. People where commonly able to leverage their cash to purchase real estate that can be flipped for more cash, or rented for cash flow. Today’s market has everyone on edge. 25% of mortgages are upside down. Can money be made in real estate today? Of course. It’s just a bit tougher than in years past. Plus it takes a higher cash investment then it used to and carries much more risk.
STOCKS?
How about the stock market? We’ve all seen what the market can do for us… and to us. There’s a saying… “If you want to make a million in the market, start with two.” Today’s market still serves as a good investment tool for those that can tolerate the risk and the time it will take to recover.
THEN WHAT SHOULD I DO?
Invest in, and collect, commodities and appreciating assets. Corn and pork bellies are prospecting investments. Purchases can be highly leveraged, but they’re risky. You can win or lose, big. Precious metals have a long standing history of appreciating. Collecting precious metals provides for long term asset appreciation and builds personal wealth. Gold and Silver in particular has provided a 500% and 550% ROI, respectively.
Passive/residual income will provide cash flow even after you stop working. Unlike someone who is self employed and only earns money if they work, larger business owners and investors earn income whether they work or not. Robert Kiyosaki says that you’ve built a successful business when it runs just as well, if not better, when you’re not there. Kiyosaki uses his four-quadrant model to explain and adjust the financial mindset of folks and help them down the path toward financial independence. It is well recognized that owning you own business is the best method to establishing financial independence. What type of business is very subjective. There are an unlimited number of product and service business that one can operate.
Finally, for those that learn to adjust their mindset, are open to new ideas and opportunities, and are willing to invest their time… the opportunities to build long term wealth and financial independence are abundant. Even in today’s rough economic market, there are plenty of opportunities.
I wish everyone the best in their endeavors.