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Speaking about Finances
Let’s face it, finances are usually a tough topic whether it is with family, significant other, or close friends, so why should you care about your finances? The answer is simple, because knowing and understanding your finances can significantly benefit your future, allow you to potentially retire early, and not be dependent on a job in order to provide for yourself and your family. One major aspect that some may forget during their financial journey is that getting your finances in order takes time. Previously we wrote a two part series on how to get your financial house in order (you can find part 1 here and part 2 here), but we didn’t talk about why you should care about your finances.
The average college graduate graduates with $30,000 worth of student loan debt, housing in certain areas of the country has skyrocketed (in Tampa, FL for example, the average rent has risen 30%) and all while salaries are not increasing at the same rates. Last week we wrote about inflation (you can find that article here) and generally when people speak about inflation it is in a negative light. Yes inflation is not good for the average person, but there are ways to make inflation work for you. Investing is one of the biggest ways to benefit off of inflation, although it may not help in the short term if you are buying and holding assets, you can then grow the value of your portfolio quicker than you may have otherwise done in an average year. 2021 is far from an average year, year to date the S&P 500 is up over 25% and has continually hit new all time highs and in an average year the S&P 500 increases around 11%.
How to sift through inflation and good investments?
Now this is a very difficult question because the reported CPI values of inflation are not necessarily the true value of inflation and depending on the area you live in, you may experience a different amount of inflation to another person. So in the overall macro-environment, we at Green Candle have been using Bitcoin as an inflation hedge (and we described why last week). So I have started analyzing investments, whether it’s real estate or stocks in relevant return in Bitcoin opposed to USD. I have started to use this as well as comparing the value of assets to the reported CPI inflation numbers.
The bottom line is each investment has its pro’s and con’s. It seems the gold standard we analyze is Bitcoin, but unless you liquidate some you do not reap the benefits of the initially. I have written about my current house hack and I feel that being able to borrow from banks at extremely low interest rates can be one of the best inflation hedges because the amount of housing has increased is astronomical and the rental prices are inflating as well therefore cash flow is increasing. During this past year I have experienced my home value increase about 32% with rental prices increasing 30% with my mortgage staying relatively stagnant other than a slight change in property taxes. With the power of house hacking, I have had my equity in my home increase significantly on a loan that was 96.5% of the original value of the home all while having renters pay down my mortgage. Because it is a duplex, I have to pay some each month to cover the mortgage, but that amount has decreased by a good amount after the drastic increase in rent.
For those worried about a housing crash or the housing market to correct, I am not an expert on the housing market by no means but I will say that if you are in for the long term timing the market is very difficult to do and you may miss a great opportunity by sitting on the sidelines. Housing will continue to increase and it is very unlikely your salary will keep pace. This is why I am a believer in house hacking and I think there is no better time than now to get into the game!
If you do not have the funds for a downpayment on a house, we described last week why we believe Bitcoin is a great inflation hedge and investment. The last investment we will breakdown are stocks and the overall stock market. The volatility of the stock market may scare some that are also worrisome of the volatility of Bitcoin, but the stock market seems to be skyrocketing these days, therefore there is no better time to get in than now! The drastic increases can help offset the negatives of inflation and the bottom 42% of Americans have no investable assets, therefore they are falling behind at an exponential rate of inflation. This is all to say, I have my opinions on what investment is the best, but at the end of the day getting invested is the best thing you can do for yourself now and for your future self.
If you were to invest $115 a week into an S&P 500 index fund for 40 years, you would then have $1.7 million while only contributing $239,200. This is only with the average return. It is absolutely vital to get invested and start today!
If you’re new to stock investing, check out our introduction to stock investing series:
If you’re new to real estate investing, check out our real estate investing series:
Have a great rest of your week!
Brandon & Dan
Disclosure: The article was written by Daniel Kuhman and Brandon Keys, and it expresses the author's own opinions. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock, asset, or cryptocurrency. Brandon and Daniel are not financial advisors. We encourage all readers to do further research and do your own due diligence before making any investments.