Escaping Inflation And Becoming Wealthy

Last Update: February 23, 2021

The target inflation rate for the US dollar is 2-3% per year. This is taken for granted as a "good" thing. I disagree, but whatever, I don't work at The Federal Reserve, so I'm not going to change anyone's mind. The best I can do is try to work within the system and leverage the rules to my advantage.

The sad thing is that inflation is destorying people's wealth, and most people are unaware.

What 2% Inflation Means To Savers VS Investors & Property Owners

2% inflation may seem like it's not a big deal, but compounded over time, it's a massive deal, and should not be ignored.

2% over 10 years means that your purchasing power is reduced by is 20%. In other words, what $100 will buy you today will be reduced to $80 in value after 10 years. You'll still have a $100 bill, but it'll buy you less stuff.

Now for the real kicker. Over 20 years that's 35%. Over 30 years, that's 50%. That means if you start saving money in your 30's, by the time you retire, whatever is in your bank account will be worth 50% less.

I'm pretty sure my grandparents would feel pretty rich if they had $1,000,000 in cash back in 1970.

It's shocking to see, but that million bucks from $1970 has the same purchasing power of just $140,000 per day. While my Grandparent's could have retired very welathy with a million bucks, the truth is that today I could not retire even if I had a million dollars.

Long story short: saving money is bad. You need to invest it smartly to preserve your purchasing power.

Two of the smartest ways to preserve the purchasing power of your money is by investing in stocks and real estate. Stocks have historically returned 7%. Real estate is a bit more complicated, since it depends on where you live. Across the US, returns over the past decades have been around 1.5%, but in popular areas it may be betwene 5% up to 10%.

Either way, it's better than -2% which you get by holding cash.

Using Your Business To Escape The Hidden Tax Of Inflation

"Investing" is not limited to just stocks and real estate though. One of the smartest ways to invest money is to invest in yourself. In this case, I mean investing in your knowledge and learning how to build an online business.

Building your own business puts you in control of your income by giving you economic freedom. You set your own wage. You determine the value of your time. If you need more money to pay for stuff, you can just work more hours and make it happen.

The cool thing about owning a business is that as things get more expensive, you get paid more in "new money". Everyone knows that inflation causes the prices of things to go up. Instead of watching the price of ribeye take more and more of your monthly income each year, you get to watch your income from selling those ribeyes go up and up each year.

As the economy grows, your business will grow with it. When people start buying more stuff, you can start selling more stuff. Owning a business means you get to participate in the growing economy rather than sitting on the sidelines.

Even better, you can take that money you earn and then choose to re-invest it in the business by buying more assets (outsourcing content, buying other websites), and increasing your profitability over time. You could also choose to puchase alternative cash-flowing assets like rental properties or dividend stocks.

Don't Get Left Behind. Create Wealth With Your Business

Inflation is just part of the way our current monetary system works in the world. If your money is sitting in a bank in cash, it's losing purchasing power each year. It sounds crazy to say this, but saving money is losing money.

I receive daily emails from newbies who are concerned about spending $49 to join Wealthy Affiliate because they are not sure if it's worth the cost.

At the surface level, it's pretty obvious that $49/month is worth the tools that Wealthy Affiliate provides you. Hosting. Training. 1-on-1 support. Yeah, that's worth $1.50 per day. Less than a coffee these days (can you imagine your grandparent's paying $2.75 for a black coffee?).

At a deeper level, learning a skill that will help you keep up with the inflationary fiat economy and create true wealth is a hidden benefit I don't see talked about enough!

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etseil20 Premium Plus
Hi Nathaniel,

What an excellent post-it's very relevant to the times we live in. It rings a bell to the financial dangers the world faces in the long-term.

Unfortunately, governments and central banks worldwide (i.e. Federal Reserve) will continue to make poor decisions now and in the future. Me as just one person (or we as a community at WA), there's not much we can do about it.

But as you brought up, investing (whether in stocks, real estate, or in ourselves) is the best thing we can do moving forward. Spending the time and effort to build an online business and creating real wealth (here at WA) is a great way to do that. It's something I continue to do and strive to be successful no matter what.

These are great points you made- thanks for sharing!

All the best,

nathaniell Premium Plus
Unfortunately, the citizens of countries suffer the consequences of poor decisions by central banks and the fed, which we have little control over. It's not like we can vote for the fed chair, can we?

The best we can do is understand that system we're in, learn the rules, and use those rules to our advantage. One of those things is to take advantage of "cheap money" and use it to purchase property through a home loan, or acquire business assets that cash flow!
hmommers Premium
Very true, Nathaniell, and you are so lucky already to be aware of this while you're still young.
I learned it the hard way when my business turned downward over a decade ago. And was lucky enough to bump into business seminars of a Tony Robbins' adept. That's when I finally learned to think smarter :)
Thanks for your lessons.
nathaniell Premium Plus
Tony Robbins is a big inspiration to a lot of folks around the world!
AlexEvans Premium Plus
Don't get me going I am an exploader, who bites his tongue more often than not. The more one looks at the financial systems that run the world and "our work all our life to retire and maybe enjoy some years of retirement path that we all follow, your post makes very good sense.

Some businesses are a job that you own.

The cool thing about creating online is the opportunity to manufacture time. Looking at what is created; it continues to work long after we have knocked off for the day.

A better inflation buster I have not found.
BrightSales Premium
I hate the this topic about inflation for the fact that most people don't understand how it can affect them or how it works. People who don't invest, think that since they are making more money, inflation will not be noticed. But as you've stated here, the dollar is being devalued every year.
So for those people who don't invest, but do have an increase in income, are actually swimming upstream trying to count the only value they have which is money.
It has been noted that the top 1% of rich people have a little over 1 million dollars spread in various bank account despite having them worth in the billions. Like for example; when people learned that Jeff Bezos worth is now 200 billions, I heard then say that Mr. Bezos should use that money to help the poor.
Sadly, they think that he has that amount sitting in the bank. If they only understand the power of investing, they would know that it has nothing to do with how much money you have in the bank, but how the money was invested to accumulate wealth.
Also, the rich people know how to make money work for them and the people who don't invest, work for money. This is a true statement that separates the top 1% from all the rest. Thanks for this reality check post. All the best!
nathaniell Premium Plus
One benefit of modern society is that stock investing is more accessible now that you can invest as little as $1 through apps like Cash App. I think it would still be even better if people had more investing options, but there are limitations due to the requirements of being a "credited" investor (i.e. wealthy). What a crazy world where only wealthy people are allowed to invest in certain types of business opportunities.

The best strategy I guess is to become wealthy, so you can join the elite club!
MHaber Premium
Excellent post Nathaniell. People that think $49/mo is too much obviously do not understand basic economics and return on investment. I had a brick and mortar business for 20 yrs, and always invested to to keep ahead of inflation, but now I'm trying to teach my kids which is a bigger challenge :). WA is my next level of investment, which I know will pay returns!

nathaniell Premium Plus
I totally agree with you. It's the internet, so people's opinions of how much stuff should cost is skewed a bit, but I think folks in the brick and mortar business are more familiar with the typical cost of running a business.