Why savers are losers and smart leavrage wins

Will savers be winners or losers? Will cash be king or trash? Will comodity prices come down or go higher? These are just some of the questions you and I need good answers to if we hope to truly enjoy a level of financial freedom. With the past global economic meltdown and the sights of a much greater economic challenge on the horizon, old money ideas will have to fly and new money rules must apply if we hope to make it.

A common misconception among the poor and middle class is that reserving money is a sure-fire-way to financial freedom and/or security. Well that may have worked in the in the 60’s when the value a country put on money was backed up by its tangible resources such as gold. And here is why the concept that saving money won’t do much in securing you financially in coming times.

In 1971, U.S President Nixon took America off the gold standard, meaning money and the value it had was no longer supported by the countries gold reserves, money then became a currency. Before this, you could measure your money’s value in gold. When Richard Nixon took America off the Gold Standard he basically took the world off the Gold Standard, since 90 percent of the money in global circulation is the American dollar. Now the reason gold was the money standard is because, gold is a rare commodity, so it was highly valued, thus money could then be highly valued.

With this, the Federal Reserve Bank, in 1971 became the bank to the world and they could now print money out of thin air. As long as national governments needed more money the banks would be more than happy to print it. You may think this is too farfetched and has very little effect on you, but who do you think is paying the interest on those loans? We are! We pay through a myriad of ways, but primarily through taxes and inflation. So with the influx of “print on demand” money in the world economy, its value dropped. That’s why today countries like Zimbabwe, Russia and Germany have lots of paper money but no value attached to it. Today a trillion Zimbabwean dollars won’t even afford you a cup of coffee. This is where the mistake is; what the average person does is, they work very hard, make money and keep it in a bank account and anticipate the interest they’ll make off it. All the while, their money deteriorates, while the Federal Reserve keeps printing more and more money, the value of currency keeps dropping.

This is why saving money as a long term financial strategy is not an intelligent idea. What’s best is that you keep your money moving and actively working in order to leverage against the declining value of currency. The reason money isn’t really money anymore, but a currency is because; its value is determined by the “money” in current circulation.A good strategy would be to leverage on debt. Now, this is part that most people get confused. With all the talk about financial freedom and getting rich, the concept of “using debt” may sound counter-intuitive to the average person. A large part of society has been brought up on outdated “financial wisdom”, we have somehow convinced ourselves that, as almost everything in our world changes, the rules of money have stayed the same. Words like, invest, debt and leverage may cause confusion, maybe even anger or disgust in the heart and mind of the average Joe. Raised on middle-class ideals it’s very hard to imagine that debt can make you rich. Let me ask you something, which is easier; saving a million or borrowing a million? With that said I would like caution the reader, that good debt is the key here. Obviously backed up with a sound business or investment strategy you can get rich using other people’s money.

This is what I mean by “why savers are losers and smart debtors are winners”. When your primary financial strategy is to save your way to a fortune, you’ll be left behind, as the Reserve Bank continues to print more money out of thin air. The intelligent use of smart debt, the kind you use to acquire cash flow generating assets such as, business systems and income generating properties will put you on the fast track to securing your financial future. However, before you take any major action in using debt as financial leverage, I would advise that you invest in your personal financial education and productivity capacity; in this case, reading this blog is great start. Also read up on and study tax and financial management and/or consult with some with more skill and knowledge in this area. I would also recommend Robert Kiyosaki’s book, Conspiracy of the rich) and a few additional resources on his website for better perspective and understanding.