They say that the two things in life you can’t avoid are death and taxes. I’d like to add another one to the list: inflation. Inflation is a powerful force that affects us all in ways many people don’t even think about.
But I predict we’re all going to be thinking about it a bit more very soon. Because when the world starts opening up again after the pandemic is under control, we’re going to see a huge spike in the cost of daily living.
What $100 buys you today will decrease in 12 months’ time. That’s bad news for everyone out there that is currently relying on their savings or paycheck to get them through.
To understand how to protect yourself from post-pandemic inflation, it’s important to understand the driving forces behind inflation, and how inflation works.
Basically, inflation is just a side effect from central banks and the government printing tons of money.
Years back, we used to joke about Zibillion when the Zimbabwe Central Bank started printing a 1 Trillion dollar note. But what most people don’t know is that when Zimbabwe gained independence in 1980, their dollar was worth two British pounds. It had a very high value. But the government did silly things. They borrowed too much and built infrastructure that wasn’t going anywhere. So the government was in a lot of debt, and to repay the debt, they started printing more money.
The problem is, if a government starts giving money away like it’s Monopoly money, soon it becomes worthless.
Now, in the last few months, we are witnessing some exciting property price rises. What people don’t realize is that now you need more money to buy the same type of property you might have been considering purchasing a year ago. Because the money in itself is losing value, but the houses are remaining the same.
So, at the moment, when there is inflation, you must choose what to hold on to. You choose to hold money or property. Because there are always two sides to inflation.
Another interesting thing is also happening. When there is inflation, there is always a higher interest rate. If you remember, in the 80s, there was a 16% interest rate during a high inflation period. If you left your money in the bank, you would have earned 16% in interest.
But at the moment, interest rates are incredibly low. I have calculated and found out that if you left your money in the bank today, it would take 83 years to double.
Whereas if you put your money into a good property in a good area, you’ll probably double your money in about ten years.
Australia’s Current Printing Frenzy
Right now, central banks are going crazy. Australia’s reserve bank is printing about $100 million a week. In the US they’re printing about 20 to 30 trillion per week. Right now they have about $150 trillion in debt, of which the interest rate is growing faster than the country’s GDP.
They’re crazy numbers.
Now the truth is, it’s not going to get any better. If you remember well, there was a time when the Zimbabwe dollar could buy you four loaves of bread. And they kept on printing and printing. Now it’s worth a small fraction of that.
So, what do you think will happen if the government keeps on printing more money?
I think you’re getting the picture.
How To Inflation-Proof Your Wealth
Keeping money in the bank is a fool’s game. The value of your savings is shrinking by the day thanks to inflation.
But if you buy assets, you can use inflation to your advantage. A few years ago, I borrowed $100K to buy a house. But by the time I had to pay the $100K back, the house had almost tripled in value. And the value of the $100K loan had shrunk.
Inflation ate away the loan.
I remember I once bought a house in Perth for $220K, and I had a loan of $180K, which I still have. But now, the house is worth $760K. Thanks to inflation, I have so much equity in the house now that if I wanted to pay off the loan I could quite easily.
But instead I’m going to use that equity to buy more properties. Then I’ll hold them and let inflation raise the value of my asset and increase my wealth. As an investment strategy, property is much better than a bank account!
I’m applying the simple principle of supply and demand here.
If you keep your wealth in cash reserves, well there’s a lot of supply right now. Money is being printed like crazy. Whereas they’re not making more properties in the types of areas I buy in (my research-backed Top 100 suburbs in Australia).
In the areas I buy in, and that my property coaching clients buy in, are high demand, low supply. They’re only going to go up in value, because they’re not making any more land in these areas, but people still want to live in them.
Making money takes time. But some ways of making money happen faster than others… and I’m certainly not prepared to wait 83 years to double my money in the bank!
It’s Already Happening
You might not notice that we are experiencing inflation. The fact is, central banks are printing money now. Inflation is increasing. Money is losing value day by day.
You won’t notice it now. But in years to come, you’ll realize you can’t buy anything with the same money you have now. If you have money in the bank, it will keep on losing value.
So, now you have to choose which side you want to be on. You can choose to lose money by keeping it in cash, or you can invest in growth assets.
But if you choose to invest in property, then you’ve got to know what you are doing. That’s why we have a 14 day challenge to help people who want to create their own Blueprint for investing in property.
Over 14 days, participants hear from the experts and learn from me how to develop your plan, fix your credit, look good for the banks, organise your tax structure, choose the right property, set yourself up for 5-10 properties (instead of getting stuck at 1), and much more.
The Challenge helps you get educated and create an informed plan for getting your first, second, third and beyond cash flow positive investment properties.
It’s a great way to get your ducks in a row and start on your path to becoming a property investor in a safe and steady way.
At the moment I’m offering entry to the challenge with no payment upfront, so there’s basically no risk involved.
If you’re interested in finding out more, go visit this link to check it out.