T
he government issued Consumer Price Index (CPI) for December 2021 showed inflation at 7% (and it rose even higher in January).
That 7% is a 40-year high – we haven't seen inflation rates like we're having right now since 1982.
What does that mean? Well, first I would say: Do you believe that the inflation rate listed by the government is the real number? I would say not.
In fact, people who I look to for economic wisdom tell me that inflation is really running at least five points higher – in other words, probably 12% to 15% – because the government manipulates the numbers. Just keep that fact in mind: The government manipulates all the numbers.
So if inflation is running a minimum of 12%, what does that really mean for us? Well, that means that every six years, the purchasing power of $100 is cut in half to $50. What does that mean for you in the long run? As long as you have investments that maintain an inflation hedge, such as real estate, or a business where you can increase prices to keep up with that inflation run rate, you’re probably going to at least keep even.
For those who are out of an active business or career and are no longer getting income with raises that help keep up with inflation, and don't have investments with an inflation hedge, this is what's going to happen within the next decade: The value of the nest egg that they thought they were going to retire on is going to get cut in half, and then some. That's not going to work out for most people.
That's why it's so important to learn how to invest in assets that will actually keep up with inflation and produce a passive income run rate, because it's all about cash flow when you retire. When you're out of active income, you need replacement cash flow. If that cash flow is not sufficient to maintain your lifestyle, then your only choice is to diminish your lifestyle. That’s probably not what you thought you were working for over the last 30 to 40 years.
It's a wake up call, and now's the time to get on board. You wait too long, and the devastation of the oncoming inflation could be a really bad ending for a lot of people. It doesn't have to be you, but you have got to make a commitment and make a decision to want to do something differently.
For further reading about inflation and how you can beat it, you can download our “Inflation Tsunami” report here.
To your freedom!
– David
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