The Personal Finance Podcast - How to Protect Your Wealth From the Crazy Rise of INFLATION! (and Hyperinflation!)

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Starting point is 00:00:49 Countertop wipes and fly traps Hey fruit flies Your baby boom ends here Save the Everyday with Amazon On this episode of the personal finance podcast, we're going to talk about how to protect your wealth from inflation and combat hyperinflation. I'm your host Andrew founder of Master Money. And today on the Personal Finance podcast, we're going to talk about how to protect your wealth from inflation and combat hyperinflation. If you have any questions, hit me up on Instagram at Master Money Co.

Starting point is 00:01:47 And follow us on Spotify, Apple Podcast, or whatever podcast. player you love listening to this podcast. If you want to help out the show, leave a five-star rating and review on Apple Podcasts. And don't forget to check us out on YouTube as well. We're at Master Money on YouTube. Now, if you've seen anything in the news,

Starting point is 00:02:05 you see that inflation is becoming a true problem here in the U.S. And inflation is the silent wealth killer. It's a stealth tax. It's a tax that you don't see, but it's going to eat away your buying power every single day with your money. And it will destroy

Starting point is 00:02:21 your buying power if you let it. In fact, it was just announced that inflation has risen 6.2% in the U.S. for the first time. And that's at the time I'm recording this. This is the highest in 30 years. Now, I've talked about this on the Master Money YouTube channel a little bit on how to combat inflation, but today we're going to take a deep dive because you have to understand how to protect your money against inflation. If you don't understand how to do this, then you're going to allow your buying power to get eaten away by 6.2% every single year for the foreseeable future. Now, typically, the past 10 to 20 years,

Starting point is 00:02:56 inflation has been going up 2%. So 2% over the course of 20 years means your buying power is worth 40% less in the case of two years. But if it's going up 6.2% every single year, well, you have to absolutely protect your money. And if you just stuff your money under a mattress or put it in a savings account,

Starting point is 00:03:14 you are not protecting your money. Some of the biggest economists of all time, Milton Friedman, for example, says inflation is taxation without legislation. And Ronald Reagan said inflation is as violent as a mugger, as frightening as an armed robber, and as deadly as a hitman. See, what happens with inflation is it comes like a thief in the night. And you don't even know it's happening.

Starting point is 00:03:35 You don't even notice it's happening because it happens slowly when you look at it day to day, but it is very gradual if you look at it from a year to year basis. So what you have to understand is a standard inflation rate is normal, and a standard inflation rate is healthy for an economy. But once it starts accelerating, it's not a good thing. So you have to protect yourself once it starts to accelerate. And how do you track which direction inflation is going to go? Well, Milton Friedman said it simply.

Starting point is 00:04:01 You just track the country's money supply. So you can look at the country's money supply, see how much is circulating, and figure out, hey, is inflation rising? You just look at how the Fed prints money. And this is a great conversation starter at the next party you go to. You guys see that money supply rise in which direction it went? So to put it simply, rapid amounts of money poured into the economy does not bode well for any of us. It does not bode well for any single person.

Starting point is 00:04:27 So what the heck is inflation exactly? If you don't know what inflation is, it's the increase of prices of goods and services over time. So you can see this across a bunch of different things. Maybe you see it on the price of cars, where cars have accelerated to 35% higher than they were last year, specifically used cars. Which means what? Now is a great time to trade in a vehicle. Now it's not a good time to buy a vehicle outright, but it's a great time to trade in a vehicle. You can see this rising in groceries, where every time I go to the grocery store, it seems as if

Starting point is 00:04:57 the prices of groceries have risen another few percentage points every single week. You can see this with home improvement items. If you're looking to remodel your house or you're doing something different inside of your house or you're building a house, the prices of standard supply is going up every single day. The same for construction. Or home goods or electronics. everything seems to be rising. So why would this even happen if it's been steady for the last few years?

Starting point is 00:05:23 Well, whenever demand is greater than supply, prices increase. So right now, demand is super high, but supply is super low. And the pandemic reduced supply drastically, and consumers received free printed money in the form of stimulus. So what happened was the Fed printed a bunch of money in the form of stimulus checks, gave it out to consumers. Consumers have extra money that they want to spend. on things, but there's not enough of the things out there for the amount of money that's in supply.

Starting point is 00:05:51 In addition, monetary policies also add fuel to the fire. So when interest rates are super low, it makes way more sense to borrow money for consumers. So more cash floods the market, more people have more cash to spend and utilize towards additional assets. So to put this into perspective, let me show you why inflation could kill your wealth if you don't put a plan together. If you have a 6.2% inflation rate, as we have right now, every $100 that you, you made last year is now worth $93.80. What about $1,000? You can do the same math. It's worth $938. The same $1,000 that you earned last year is now worth $938. Now, what if you saved $10,000? Well, now that $10,000, the buying power is only $9,380. You lost $620 in one year if you

Starting point is 00:06:41 stuff that in cash in a mattress or put it in a safe or same thing if you put it in a savings. account. What if you saved up $50,000? Well, that $50,000 is now worth $46,900. You lost $3,100 in one year just by keeping your money in cash. What about $100,000? Now your $100,000 is worth $93,800. So you lost $6,200 in a year. What about a million bucks? If you have a million bucks stuffed away in cash, the buying power of that million dollars is worth $62,000 less or $938,000 total. See, this is the power of inflation eroding away at your money. Inflation is eating away at your money every single day. So what we're talking about today is I'm going to show you how to combat this.

Starting point is 00:07:29 I'm going to show you how to beat this because people who understand how to defeat inflation are the folks who are going to build wealth. Because if you put it into practice, what we're going to talk about today on how to beat inflation, you will absolutely build wealth. You have every opportunity to build wealth by doing what we're going to talk about today. And think about it for a second. Here's what we're seeing right now. Stocks are at an all-time high. People are starting to complain about gas prices. Home prices are at an all-time high. Corporate bonds are at all-time lows. Mortgage rates are at all-time lows. Cryptocurrency is at all-time highs. And grocery prices are at all-time highs. So this is a

Starting point is 00:08:03 wild time in the financial markets. This is a wild time in the economy. It's going to be something that's very interested to see what happens, but all you can do is worry about yourself, and you can do what you can do every single day. So what we're going to talk about is how can you combat inflation. If you want to understand how to protect your money from inflation, how to protect your money from this silent tax, and figure out why cash is for losers,

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Starting point is 00:11:41 The first thing, and this is the biggest thing of all, say it with me. Cash is trash. So once you have your emergency fund in place, you need to start investing your money. And you need to build up your wealth by investing your money because your money is being devalued every single year. So investing your money allows you to combat inflation and your money grows at a higher. rate than inflation. For example, you hear us talk about all the time how I invest in index funds. Well, index funds historically since 1929 have returned 10%. Now, I like to say 8% to be conservative because we've been in an extreme bull market for the last 10 years. So I like to be conservative

Starting point is 00:12:22 and say 8%. So even at a rate of 8%, this 6.2% inflation rate is still losing to your investments. So if you take, for example, investing in index funds, you're beating out in. inflation. And that's the first place that you can start investing your money is in stocks. So you can look at things like index funds. You can look at dividend stocks, which produce a cash dividend every single quarter for you. You can look at things like REITs. You can look at a bunch of different options, tech stocks or a bunch of various different options, which have high returns in the stock market so you can combat against this inflation rate. You have to invest your money if you want to build wealth. You have to invest your money if you want to take your family's financial future to the next

Starting point is 00:13:03 level. Now, should you invest your emergency fund? Once you have your emergency fund in place, you absolutely should not invest your emergency fund. If you haven't heard our episode called the Stairway to Wealth 2.0, we talk about the order you should put your money in. If you haven't heard that episode, I'll link it up in the show notes. That's definitely one that you want to tune into. The next way you can invest your money is in real estate. Now, real estate has made so many millionaires. It's incredible. You can either buy physical property like single family homes or multifamily homes, but you can also have passive real estate. If you don't want to deal with toilets or tenants, you can get into passive real estate.

Starting point is 00:13:38 So things like real estate notes where you are the bank and you're lending out money to people who want to invest in real estate and you collect interest every single month in that money. You can invest in REITs or real estate investment trusts, which are essentially real estate portfolios that trade on the stock market. You can invest in real estate crowdfunding, things like Fundrise where a bunch of people pool money to buy properties with real estate crowdfunding. All of these are amazing ways to invest in real estate, and there's a number of great ways to do this.

Starting point is 00:14:06 We have an episode called 17 ways to invest in real estate. Eight of those ways are completely passive. So if you don't want to touch properties, there's passive ways to invest in real estate as well, and this is great to pair up with stocks and bonds and various other things to get diversification and exposure into each area. The next place to invest your money is businesses.

Starting point is 00:14:26 Now businesses are one of the coolest ways to accelerate your wealth. They're one of the fastest ways to accelerate your wealth as well. Now, what do I like? I like small cash flowing businesses, and a lot of them are boring. So things like car washes or laundromats or things like that where you've heard me talk about these before,

Starting point is 00:14:42 but I like these small businesses. Why? Because people are still going to use a laundromat in a recession. They're still going to use a laundromat in any climate. So this is something where look for recession-proof businesses that you can put your money towards so you can start investing that money, and your money starts to work for you. And you're building

Starting point is 00:14:58 up an asset. So investing your money is so incredibly important because it's the only way to defeat inflation eating away at your money. Now, if you look at what we just talked about, the easiest way to do it is just to invest in the market. Investing in index funds is by far the easiest way in the market, but you can invest in various stocks as well. Then you look at real estate and then you can look at businesses if you are business savvy. But all of these are fantastic options to invest your money so that you don't have your money sitting in cash, losing value every single day. The next way to combat against inflation is making sure that you defer large purchases when it comes to liability. So right now the prices of a lot of things are high. We just

Starting point is 00:15:36 went through a lot of them. Things like home improvement. If you defer and waiting on improving big ticket items with home improvement and supply goes up for a lot of products that are needed to supply those home improvement products, then a lot of times those prices are going to go down. So one of the biggest things that you can do right now is defer large purchases. You can also look at things like cars where car prices are at an all-time high. And right now, you're looking at a time where new cars are the same price as used cars. Or if you're looking to buy toys like boats or anything along those lines, deferring these large purchases is going to help you take your dollars further down the line because right now you're going to be paying the highest of high prices.

Starting point is 00:16:17 Number three is to increase your income by negotiating your salary. So if you want to keep up with inflation. One of the best things that you can do is reduce your expenses, invest your money, but also at the same time, increase your income. And what's happening here is when you reduce your expenses and invest your money and you increase your income, there's a major gap between your income and your expenses. And that gap, if you can invest that gap, you are going to patapult yourself to wealth. This is the way to accelerate your wealth path that much faster. So growing that gap is so incredibly important. So think about the gap.

Starting point is 00:16:56 Think about how you can grow that gap. And one of the best ways to do this is at your job, negotiating your salary. So if you haven't heard our episodes where we talk about how to negotiate your salary, I'll link them up in the show notes because they are fantastic episodes. And I also wrote a free ebook that you guys can check out on our exact system on how to negotiate your salary. Because the way we talk about this is not a negotiate your salary and you're going to get a raise the next day.

Starting point is 00:17:20 What we talk about is a six-month. plan on how to prep your boss on how you're going to ask for a raise and you want to raise, but you want to perform for your boss and do the things your boss wants you to do so you can earn that raise because this is how you get a stable increase in income every single year. So if you haven't checked out that system, I'll leave a link to the ebook in the show notes as well so you can check that out. Now, if your company is struggling, then there's other ways to get compensation as well. One of the ways is look for compensation in company stock.

Starting point is 00:17:50 maybe they can pay you additionally in company stock or something of that nature. Or if they truly can't pay you more and you need to make more money, you can switch companies. Every time I ever switch companies when I was in the corporate environment, every single time I made more money. So looking to switch companies, taking that leap, I know it's hard. I know it's hard if you're comfortable in your job. But if you can take that leap, you can absolutely make more money. The next one is to reduce your costs by negotiating your bills. So we have an episode talking about how we negotiate our bills.

Starting point is 00:18:19 but there's a bunch of bills out there that you can go out and negotiate to reduce your costs every single month. One of the biggest ones that you can do is your cell phone bill. You can also do your cable bill or services. If you have a lawn service or pool service or something of that nature, those are also great things to negotiate. So look at your bills, put them in order, sit down with your partner and see which bills can I negotiate. Put a list of them all the way down. Make a spreadsheet. I don't care what you do, but put a list together of all your bills and say, hey, which one of these can I negotiate?

Starting point is 00:18:48 because if you negotiate five of them, say one Saturday, I know it takes a little bit of time. It's kind of annoying to have to do that. But if you negotiate down five of them, say 20, 30, 40 bucks, where you're looking at a couple hundred dollars that you need to negotiate it down and reduce your costs every single month. And then the next one. This is one I don't hear a lot of people talking about, but this is a major one. Hold off on paying off low interest debt. That's right. Your boy, the personal finance podcast is telling you don't pay down debt.

Starting point is 00:19:17 Because here's something you've got to understand when inflation is starting to accelerate. Here's something you got to understand. Inflation is actually good for debt. Because if you're currently in debt, inflation is actually your friend. Because when the dollar is losing value every single year, the dollars you use to pay off your debt represent less actual purchasing power than they did when you first took out the loan. So let me put this in as an example. Suppose it's 1973. You're wearing bell bottoms.

Starting point is 00:19:44 You got some brown pants on, a floral. button down shirt, you're getting ready to get in the most magical time of all, the disco era pretty soon. You're just living life. And you decided to buy your first house with a 30-year fixed-rate mortgage. And let's say, for example, the house costs $40,000, which is not out of the ordinary back in 1973. And your mortgage interest rate is 5%. That gives you a mortgage payment of about $215 a month. Now, the following year, inflation shoots up to 12% and it stays above 6% for the next eight years.

Starting point is 00:20:16 So each year, prices are rising above 6% or more, and your income is also rising to match. But think about this for a second. Your mortgage payment stays the same at $215 a month year after year. And you're paying a smaller percentage of your income each year for housing. And all at the same time, the bank that loaned you the money is getting less and less value for its investment. So what you see here is that you paid a certain amount for the house. And your income is rising, and the value of those dollars aren't worth as much. so debt becomes your friend in this situation.

Starting point is 00:20:47 So what should you do in this situation? Well, interest rates are extremely low right now. So you can refinance your high interest debt and see if you can lock in some lower interest rate. Now, what do I consider a high interest rate? Anything above 5% I consider a high interest rate. So you should definitely look into refinancing that if you can. Banks know this, and that's why when inflation is high,

Starting point is 00:21:06 they usually raise their interest rates to make up for the declining value of the dollar. So you can do this with all kinds of things when you want to refinance. Your mortgage, your student loans, your car loans, anything with a low interest rate, it's not worth paying off when inflation is accelerating. Just make the monthly payments and invest the money instead. So these are all a bunch of examples of what I would do as inflation starts to rise. These are ways to safeguard your money and combat against inflation. It is so incredibly important that you do this.

Starting point is 00:21:33 It's so incredibly important that you invest your dollars and put your dollars to work for you every single month because, A, that's how you're going to achieve financial independence. That's what we talk about on this podcast all the time. If you want to retire early, you want to allow. your family to have generational wealth, then investing your dollars is the biggest thing that you can do. But also following these other steps to make sure that you're growing the gap between your income and your expenses so you can invest those additional dollars. So what can you do right away? What can you do today? Well, the first thing I would do is just start looking into how much you're

Starting point is 00:22:05 spending and look at all your assets. And put a quarterly reminder to look at all your assets. Look at your stocks. Look at your bonds. Look at your real estate businesses. Whatever you have, every single quarter make sure you're looking at everything and looking it over to make sure everything is aligning because remember luck favors the prepared and if you're prepared financially if you prep for this and you're ready every single month then you are going to come out ahead no matter what happens in the economy because nobody will care about your finances like you do so you have to pay attention and if you've never had your money working for you if you've never invested your dollars it will absolutely change your life i can guarantee you that learning how to

Starting point is 00:22:41 invest your money and it's not hard there's very simple ways to learn how to invest your money listen to this podcast that's what this podcast is here for is to teach you simple ways to utilize investing your money so that you can grow your money for the long term because it's totally up to you on how your money grows but you can do this you're going to wish you started today if you don't so look into investing your money make sure you look into your finances because this is going to absolutely change your life it's going to reduce your stress it's going to help your family build generational wealth and you're going to change your family's life forever. Listen, I hope you guys enjoyed this episode.

Starting point is 00:23:16 If you have any questions, hit me up on Instagram at Master Money Co. That's Master Money CO. And follow us on Spotify, Apple Podcast, or whatever podcast player, you love listening to this podcast. And if you want to help out the show, leave a five-star rating and review on Apple Podcasts. And don't forget to check us out on YouTube at Master Money on YouTube as well. Thank you guys so much for listening to this episode. I appreciate each and every one of you. We'll see you on the next episode.

The Personal Finance Podcast - How to Protect Your Wealth From the Crazy Rise of INFLATION! (and Hyperinflation!)

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