*Disclaimer: The views expressed here are not investing or legal advice, but solely the opinions of the writer. Please see your legal and financial counsel for advice.
Since it is not possible to simply save your money to become wealthy (https://mcintyrekingcompany.com/is-the-money-in-your-bank-account-real-money), how can we actually save money and build our family’s wealth in this inflationary world? We will answer this question today, but first, we need to give a brief explanation as to what the true definition of inflation is and, just as important, what it is not.
A basic definition of “Inflation”
If you watch any of the news shows on money (CNBC, Fox, etc.), you will find that many assume that the definition of inflation is simply the rise in the cost of goods. This is mistaken. Inflation is actually the increase in the money supply within a country or location. Rise of the price in goods is simply a symptom that inflation has occurred.
A simple analogy to explain this is the relationship between having a fever and having the flu. The flu itself (or the increase of the flu virus) is the sickness of the body, while the fever is simply the symptom made present by the flu. So, whenever you see the increase (over the long-term, i.e. 5–10 years) in the costs of your groceries, gas, and other services, then you are seeing the real economy’s “fever” in response money inflation.
How Can You Save “Money” When All Currency Fails To Be Real Money?
A) Set Up Your Emergency Fund
Now currency (or your cash) is not sound money, but you should save some for an emergency since it is the legal money in our society and the means through which we buy goods and services. A simple way to begin this is by setting up an automatic savings plan with your bank or financial institution that will transfer a set amount every time you are paid into a separate saving account used SOLEY for emergencies.
A good place to being is to strive to set aside $1000.00. After this, you can slowly increase it to a month of your living expenses and, eventually, aim for six months of your budgeted living expenses. Now some people do less than this (3 months of living expenses saved) and others do more (up to 1 year’s worth of living expenses), but the lesson is the same. Whatever level you shoot for, once you reach it you should not keep putting money into your emergency fund except to keep up with the increased cost of your living expenses (see the effects of inflation here!!!).
B) Start Saving Cash In Gold and Silver Bullion Coins
Alongside setting aside cash for your emergency fund you may also have the desire “save” money long-term. The problem here is that your cash is losing value every second. So how does someone who finds comfort in saving money do this in this environment? The answer is that they have to begin buying gold and silver bullion coins (bullion is government coins, i.e. US Gold & Silver Eagles, Gold & Silver Canadian Maple Leafs, etc.).
Now I already hear the howls and criticisms here. Most people will point out that their broker or financial planner told them how investing in gold and silver did not make as much money as the stock market over the long-term. While the assumptions in that statement betray themselves, let us assume for argument’s sake that that is the case. But what I am advocating here is not investing in gold and silver to make a profit in dollars, but little by little saving gold and silver in order to preserve the purchasing power of your cash for the long-term (think 20–30 years down the road).
This is simply saving money and not worrying about the daily dollar price changes in the gold and silver market. Over the long-term, you will find that cash you saved in gold and silver will have the about the same purchasing power when or if you exchange it as it had the day you saved it in gold and silver.
C) Set Aside Cash To Invest and Build Long-Term Wealth
You should also begin setting aside some of your income temporarily in another savings account separate from your emergency fund in order to build up a stash of cash to invest for long-term wealth building. You should begin doing this from the start along with your emergency fund and saving cash in gold and silver bullion, even if you do not know how to or what you will invest in. Even if you do not know what you want to invest in, that is ok!
Take time to learn and see what type of investing you are interested in (real estate, stocks, and bonds, and/or starting a business) while you set aside this cash for this purpose. Remember, this pile of cash is meant to eventually be spent on vehicles that will make your income as a part of your investment and wealth-building plan. You should allow this pile of cash to grow to a good size before making any moves.
This will make you accountable to yourself to truly learn about something before you invest in it since by this time you will have some substantial “skin in the game” so to speak.
Now you may ask, “How do I even begin to implement this plan in my finances today?” This question will be tackled in our next blog on how one should set up their budget to allow this plan to begin to function and bear fruit.
To our success,
Joshua Rodning McIntyre