This week on The Wealthy You!; Acquisition of defensive-minded assets.
Generally speaking in the world of financial literacy, there is a concept of assets and liabilities. Assets are things that puts money in your pocket or bank account and liabilities are things that take money out of your pocket or bank account. Both are very important and both are needed in ones life. However, acquiring too many liabilities can risk putting poverty in your life. And having just assets with no or little liabilities can lower ones quality of life as well. For example, a household of four, husband and wife with two kids. The husband and wife both work and bring an income for the household, so they become assets for the household. With that income they pay the mortgage and the other bills, buy food and purchase all the things their children would need for school and other pursuits. The money begins to disappear as soon as they earn it. The things that make your money disappear are liabilities, but it isn’t a waste of money because you get something in exchange for it (money is a medium of exchange). Think about heat in the winter, AC in the summer, transportation to get to work, school, the store and anywhere else you want to go. Vacations. Entertainment. They all take money out of your bank account, that is what liabilities do, but you get to enjoy life. All of that would be impossible though without you first becoming a valuable asset for your household. The purpose of this post is to talk about defensive-minded assets.
Defensive-minded assets will help protect your household from your money being eroded by inflation and by getting you in the habit of paying yourself first before you pay your other bills, at least 10%. Defense means using the income you get from a single job to become wealthier and more valuable (Offense will be going from a single income from a job to building and owning your own billion dollar business). This means paying on a mortgage and owning a home versus paying rent for an apartment. After 20 years of paying a mortgage, you get some money back when you sell. Renting the same place for 20 years will get you nothing when the lease ends and you move out. Not even a security deposit, typically. Wealth is about the ownership of assets, when you rent you own nothing. Renting has a purpose for transient folks who plan on moving about every 1-3 or 4 years. Home ownership is more of a long-term play and strategy.
For those who do rent an apartment, the purchase of stocks, bonds, gold and other assets that appreciate over time can be more appropriate. Stocks tend to rise when interest rates are low. As interest rates rise, stocks tend to not rise as much. Interest rates are raised to help fight inflation. The higher inflation goes, the higher the interest rates will need to be. U.S. Treasuries (bonds) are viewed as some of the safest assets in the world. When there is a crisis somewhere in the world or an economic crash of some sorts, people flock to U.S. Treasuries. They are notoriously stable, with minimal wild swings in its price. Purchasing U.S. Treasuries alone, as a way to pay you first with every paycheck, can be a decent strategy for The Wealthy You!-DEFENSE. They also pay a dividend each month, the more bonds you own the higher the dividend. Stocks can be similar, but tends to lean more towards The Wealthy You!-Offense, they follow a completely different road. Speak with a financial advisor to learn more.
Gold and real estate are other defensive-minded assets. There is a website called www.jmbullion.com, where you can purchase gold, silver, platinum and other types of metals. You can get coins and bars from around the world, gold notes, and jewelry. There are gold currency notes that contain 1/1000th to 1/20th Troy oz of pure gold that start at about $3.50 and goes to about $175. And they have 1 oz gold bars that are $2,000. The price of gold is always changing, which means the price of their gold is always changing. Check often and maybe you might find something interesting. Purchasing gold jewelry from a local jewelry store is another way of acquiring gold. Owning real estate instead of paying rent is another strategy of The Wealthy You!-DEFENSE. A portion of each payment you make goes to your house, which you own. That doesn’t happen with renting.
Having your own place to live and rest your head each night, purchasing bonds or U.S. Treasuries, and purchasing gold and other metals, combined with each of your paychecks will help protect your money and wealth from inflation. Getting in the habit of doing this before starting your The Wealthy You!-OFFENSE will allow you to collect billions of dollars’ worth of gold, bonds, stocks, and real estate once your offense does begin.
Next week on The Wealthy You!; making or not making decisions.
Become The Wealthy You!