Before I give you what you want and what you need, let me introduce you to the Inflation Calculator.
This is a great tool to understand how inflation works. You can calculate any amount of money over any period of time to instantly understand how the money you hold is vanishing into thin air.
Even more frightening, is that the tool that I linked above is calibrated to reflect the government’s calculations from the Bureau of Labor Statistics.
We all know that the actual prices of goods are hardly reflective of the government’s officially published inflation rates. Just looking at the Big Mac index is proof enough that the real market is hardly affiliated to the manipulated (government) market.
Using the Shadow Stats calculator, we can get a much better idea of how our purchasing power has greatly diminished throughout the years.
I’m not here to complain about inflation that is gobbling up our savings – we all know about it, so we can prepare for it.
However, I do want to point out that you and I should not be pursuing the normal paths of life – we should be utilizing new strategies to create wealth and freedom for ourselves.
So, that is what I’m giving you: Permission to pursue what nobody else will let you do.
Sounds a bit narcissistic right? That I would have to give you permission.
Unfortunately, that’s the reality though. Because as humans, you and I seek approval from our peers, our families and from those who are judging us. We have a deep seated feeling that drives us to do things that will make others happy. We are rarely brave enough to follow things that make us happy.
In addition, we rarely have the guts to pursue things that are actually better for us – we just follow the status quo, even though that status might be completely wrong.
Here is an example: Home Ownership.
Owning a home is beginning to make less and less sense (cents).
Let’s say you’re going to buy a home for $500,000.
You’ll have a one time up front payment of $100,000; that’s you’re 20% down.
Your one time annual payments will be at least $10,000; that’s $6,250 for property taxes at 1.25%, about $2,200 for home owner’s insurance and then at least a couple grand in annual maintenance fees for various home projects.
Your monthly payments will be right around $3,000 per month; $1,909.66 for your mortgage payment (30 year fixed at 4%), an average of about $200 for HOA dues and then various charges like assessments, trash, community fees, road repairs, etc.
So… for your first year of living in your new home, you’d be in the hole at just under $150,000. Every year after that, you’re looking at about $50,000 a year just to maintain your house and make sure you are keeping up with all payments and maintenance.
Renting a $500,000 home is going to set you back around $3,000 a month, which is $36,000 a year – significantly less than owning a home of similar value.
Now, I know what you’re thinking… Yes, there are lots of tax incentives that go with owning a home, your monthly payments are going toward paying down your mortgage and the value of your home goes up with the market every year.
All of which is true and not true at the same time, because all of the ‘advantages’ that I just mentioned are extremely subjective to each individual AND to the state of the market when you buy a home AND when you sell.
Traditionally speaking, buying a home was a way for people to ensure that they had security in retirement. Once someone retired, if they had worked for thirty years and had a thirty year mortgage (kinda convenient how the government set up 30 year loans, huh?) they could either live in the home mortgage free or sell the home and take the money.
But, it’s not that simple. Because even if you completely pay off your home, you still have to pay property taxes every year. And if you decide to sell your home, you have to pay taxes on any profit over $250,000 ($500,000 for a couple), so the government again gets their way.
Essentially, home ownership is just a forced savings plan.
And by the way, we identified that the government is going to collect property taxes throughout the entire time you own your home, but guess how much a bank makes over the life of a $400,000 loan? It’s just under $300,000 – yes, it costs almost as much in interest as it does for the total amount of money you borrow.
What I’m trying to drive home is that owning your house is not what it’s cracked up to be and that it should not be your only option to preserve your wealth. It’s also OK to NOT ever own a home and instead invest your money in different ways.
Go check out that inflation calculator again, but this time think about any of the investment advice you’ve ever heard. Like, when the bank tells you that they’ll give you 0.2% interest in your savings account – that’s less than inflation, so you’d literally be losing money in an account like that.
So there you go, you have permission to not buy a house, because there might not be anyone else telling you that.
Subscribe here. There will be lots of investing opportunities and outlooks on traditional strategies like the one above. You may not agree or even like it, but challenging yourself to question the status quo is one of the most difficult and rewarding things you can do.
“The true sign of intelligence is not knowledge but imagination.” -Einstein
