There are two basic gameplans: Accumulation, and Cash Flow; and there’s a world of difference between the two.
Most financial investment plans — the tradition Wall Street stock market, stocks and bonds mix, annuities, etc. — don’t provide cash flow.
They provide accumulation. That’s their gameplan, and advisors will tell you that you need 3 million, 4 million, 5 million dollars, in order to retire.
Is that true? Do you really? Or can you learn how to make your money work for you and increase in value, even when you’re retired?
I know you can. I’ve done it. Many of the people in Freedom Founders have done it.
But here’s the deal… no matter where you are on this road, you have to be wary of the cost of inflation.
Let’s dive into what that looks like. We’ve had relatively low inflation rates over recent decades… about 3%.
Now, keep in mind that the government is providing these numbers. Do you believe the government’s numbers? I certainly don’t.
I think the cost of living has always been higher than what they report, but let's just use their numbers and say 3%.
Well, 3% is still going to have a devastating effect on the cost of living over 10, 20, 30 years.
If you start with a certain pile of cash at one point, that money is going to be decreased in its ability to purchase what you need down the road.
We know that the cost of healthcare, and everything else in this world, is not going to go down.
In fact, I think we're going to see high inflation rates of 5% or more in the coming years. What does 5% plus do?
Think about the Rule of 72, which is the compounding effect of returns on investment.
You take your ROI and divide that by 72, and you’ll know how quickly you can double the compounding effect of your investment.
So, the cost of inflation is essentially the Rule of 72 in reverse.
Let's say we have a 6% inflation rate on average over so many years. If we take 6 and divide it into 72, that comes up to 12.
That means that every 12 years, your dollar bill now only buys 50 cents-worth of the same goods or services.
In other words, the purchasing ability of your dollar has been cut in half at a 6% inflation rate, in just 12 years.
So let’s say you were planning on a retirement of 20-30 years. Most people retire and live upwards of 30 years.
How many times does 12 go into 30? About two and a half times. So, two and a half times, your dollar would be cut in half over that period of time.
How in the world are you going to keep up with that?
This is why you must learn how to invest in real capital assets that have an inflation index hedge that will keep up with the cost of living.
That’s the key: investing in the right assets… cash flow assets. Not accumulation, finger-biting gambles like Wall Street.
You cannot provide and secure a real retirement lifestyle while riding a rollercoaster.
No more leaving your money at the mercies of inflation.
It’s time to take control of your financial future.
This is Part 2 in the Breckenridge series. To read Part 1, click here: The Cost of Trading Time for Dollars
Stay tuned for Part 3, coming July 10th!