Wealth Building Methods and Tactics - Beat Inflation

Posted: 26 Feb 2008 | Categories: Wealth Building

Have you ever wondered where those small increases that we pay for everyday needs end up? Inflation is a bigger drag on everyday life than most people think. Inflation increases the input costs for everything grown or manufactured. My favorite anti-inflation methods are at the end of this article.

The farmer who grows crops has increased seed costs, soil nutrient costs and machinery costs. The farmer who produces livestock has increased feedstuffs cost, building construction costs, transportation costs, and animal health costs. These examples are just a small indication of the many costs of production.

The manufacturer who produces products for consumption constantly has transportation costs in both directions (raw materials in, finished product out), labor costs, governmental red tape and restrictions. Again these examples are just a small indication of the many costs of production.

Where does this cost inflation come from? A few of the causes are as follows:

Legal costs due to litigation (even the fear of litigation costs). A radio commentator recently reported that 12% of the cost of “everything” is due to legal costs. This also increases health costs for everyone!

Government “red tape”, all businesses have to comply with quarterly and yearly record keeping besides their own record keeping to determine a proper income to cover these and other costs.

Government prints FIAT money to cover government and private (”FED”) commitments. Does your dollar read “Federal Reserve Note”? No longer does it read “Silver Certificate”, It is an IOU that is backed with only a promise and NO precious metal.

No government jobs produce a commodity and all government jobs are paid with your tax money. Since there is no new money or worthwhile product produced all government busywork can only be considered a drag on the economy.

Consider that most states largest employers are State governments with Federal government a close second. All public school systems (k-12, colleges and universities) are funded by your tax money to subsidise tuition and building costs.

Consider your assets, they may be liabilities!

The home you live in is called an asset by the bank holding the mortgage. It is, but only to them-to you it is a liability until it is paid off. Try missing a payment or two! Interest paid on a mortgage is inflation above the purchase price of your home.

If you are paying monthly for a car lease or loan against a depreciable “asset” you are not gaining! If you sold these items would they bring more or less than you paid for them or presently owe on them? They are a liability and you personally caused the inflation!

Consider these as helps:

Start a small part time business. If you have a job and taxes are withheld from you and paid in directly to the IRS you are at their mercy. The tax code is beneficial for even small business and legally allows numerous deductions which can lower your taxes. Use a tax advisor/CPA for information. Get second opinions read books and other information.

If you are a fan of the stock market carefully consider “penny stocks”. Their purchase price is lower, but if you do diligence and find a winner now and then a greater percentage move can be rewarding. Use only “fun” money to invest in these stocks.

Government schools don’t teach proper financial management; find a mentor, attend seminars, use books and internet.

YOU DON’T HAVE TO GET IT RIGHT….YOU JUST HAVE TO GET IT GOING! words of Mike Litman…motivational speaker.

My favorite help:

My favorite is this advice of professional investors: Keep a percentage of your investments in Precious Metals. The beautiful 1oz Silver Eagle coin is a good example. It will always be tied to the base silver price so it will retain a constant purchasing power regardless of inflation or recession. Remember your dollar is not constant and your stocks can lose some or all of their value.

I have made many, many investment mistakes and do not tell you the above points are infallible or usable for everyone, but they are from my personal experience. I am not wealthy and realize that I am still learning, but I am now more conservative in my investing endeavors than I have ever been. Check out the “Bashful Investor” at: http://BashfulInvestor.smmsite.com/13225

Richard Monson is an entrepreneurial spirit with many interests. He has succeeded and failed in many endevors, but his deeply held belief in freedom to live and freedom to learn has provided him with insights and experiences beyond what most others acquire in a lifetime. He would never tell anyone to do exactily as he does, but encourages everyone to experience their own personal freedom. More information at: http://BashfulInvestor.smmsite.com/13225

Article Author :Richard_Monson