We’ve all heard the phrase: The rich get richer and the poor get poorer. Well today, I am going to show you why that is with some real life examples, and HOW you can turn the tables and come out on top.
In order to do that, we have to first identify what is financially screwing us right now. And there are 2 factors that stand out to me.
Factor #1- Inflation
-It doesn’t take a genius to know that we have an exorbitant amount of inflation right now.
-Now for those of you who don’t know, Inflation is a general increase in prices which in consequence, lowers the value of your dollar. Now, Inflation is actually good for the economy IF it is controlled and maintained at low levels. The federal reserve targets 2% inflation per year, but inflation right now is at 8.6%! We have not seen levels this high since 1982! Most of this inflation is being caused by various factors like supply chain shortages, and the war in Ukraine, but those are topics for another video. The point, is that inflation=high prices.
- And we are getting hit with higher prices all over the place! We’re seeing it in groceries, apparel, and transportation. Gas prices, right now in Texas are around $4.50 a gal. This time last year, you were getting $2.70 a gal! And of course, Real Estate. Nationally, we have seen Real Estate prices skyrocket with new homebuyers having to offer $25, $50 and sometimes even $100,000 over asking price! In order to combat this inflation, the federal reserve has hiked interest rates.
Factor#2- Interest Rates
-Federal reserve has hiked fed funds rate in order to combat inflation
- That causes interest rates on all loans to rise, making it more expensive to borrow money. I paid 3.375% interest on my loan just 8 months ago. Now, the lowest rate you could get would be 6%! That amounts to about a $400 difference every month.
Factor #3- No wage price spiral (FOMC Meeting June 15th 41:33-41:51) ECB Forum (1:23:49
- What is a wage-price spiral? Well a wage price spiral basically means that if we were to get an increase in wages, people will be likely to spend more money which will increase demand for goods and services. That in turn causes prices to go up which causes wages to go up turning this into an upward spiral until the there’s no inherent value to the currency anymore.
-So in regards to the Economy, going through a wage-price spiral would be terribly bad. But this also means that us as the middle class can’t get ahead! The system is literally rigged against you! You’re getting double wammie’d by high prices AND no wage increase to keep up with the high prices!
Turning the tables
- So. I said earlier in this video that we can turn the tables on this. How do we exactly go about that?
- We have to own assets. Assets are things of value and can make you money. My favorite asset for the moment is REAL ESTATE.
- My wife and I bought our first piece of real estate back in 2018 and have been able to grow our portfolio since then. We now have 3 investment properties that generate us income every month and that helps us ride this inflation wave.
-Assets can provide support and insulation against the worth of your cash. And if you’re diversified in your investments, meaning that you have investments amongst different asset classes, then you will be in the best financial shape you can be.
