Cash is Trash
If you’ve been following our stuff for sometime now, you’ve learned that we like to lean in on certain principles. Inflation sucks.. you should probably invest in assets. Your 9 to 5 sucks.. invest in assets. You wanna take care of yourself and your family’s family.. invest. in. assets. Why? Why not just save money like ma and pa said to do. Harsh truth for you. Here it comes. Brace yourself. If your ma and pa said that, they were likely not worth much.. fiscally speaking of course. I’m sure mom has a heart of gold but unless she educated herself on how to generate and sustain deep wealth, it’s unlikely she knew to tell you the simple truth.. CASH IS TRASH! Only telling truths ‘cause we care.
In order to understand why cash is trash, it’s important to become familiar with cash as a currency itself. Sit up in your chair, ‘cause here comes a history lesson.
Money is simply a medium of exchange. Its only value is what we as a society agree on. Before money, there was the barter system, then salt, followed by gold and precious metals. For years, right up until the 70s, our money was backed by that thing in the ground called gold. After we left the gold standard, our dollar became what is called fiat currency aka fake money. This means the feds can hypothetically and sometimes literally go bananas and print say.. oh I don’t know.. 40% of all the money in circulation in a year due to a pandemic. (hint: this actually happened)
This is what is causing the current inflation you see happening today. For more on that, read our last blog on that exact topic below.
I can already hear you say, “Hey guys, how the heck is cash trash? I use it all the time to pay rent, food, gas, etc. You guys are wrong. Cash is KING!”
Ok sure, you need some cash to live and all that but realistically you need that plus a few months living expenses for the rainy day fund and THAT’S IT. Everything else should be making YOU money and working for YOU.
Get rid of that cash because it is currently losing you nearly 6% annually. That means if you had $100,000 last year, today it’s actually worth $94,000. In a way, you actually LOST SIX THOUSAND DOLLARS.
This is why we, for instance, just pulled $150,000 from an asset in a refi and are actively looking to toss that right back into an asset with our next partner (btw that could be YOU) that will keep growing so we can do it again and again and again but for bigger amounts each time.
This strategy is way more effective compared to the theory of just save save save and eventually hope to invest in an asset. You’re playing a losing game at that point because you will likely not be able to increase your income at a rate that comes close to the appreciation rates of homes (the best asset there is). And you know what, even many stocks and broad index ETFs average better than current inflation. You should be AT LEAST doing that!
See our video on Stocks VS Assets below
To wrap, the takeaway is this:
- Save/earn enough to be sure you can cover current expenses
- Save a little extra to cover rainy day just in case emergencies (typically 3 to 5 months living expenses)
- INVEST EVERYTHING ELSE