The Controversy Continues…

As I mentioned yesterday in part one of this series, I fully realize that I’m taking a major gamble by putting myself on the line and calling out one of the biggest sacred cows in all of finance.

That being said however, it is my greatest hope that by doing so that you’ll start to look at your finances in a whole new light and start making better decisions that will lead you to the goal we all strive for – financial independence.

Now as you’ll recall, in part one we approached this topic from somewhat of a philosophical standpoint in which I pointed out that focusing on how to reduce expenses to optimize savings is a strategy that can lead to a scarcity mindset.

Although you may have more money, the way in which you acquired it caused you to focus on not living the way you wish to live. By abstaining your desires for the acquisition of dollars, you are simultaneously killing your inner drive and spirit.

Granted, there is a difference between reducing expenses to optimize savings and simplifying a cluttered lifestyle. However, this is a topic for another day and another post.

What I want to talk about today moves away from the philosophical angle and cover the real day to day financial outcomes & consequences of saving money.

Once you see what I’m about to show you next, you’ll quickly realize why the rich keep getting richer, why the middle class is shrinking, and why the poor keep getting poorer.

“But wait!” you say… “I thought this website was about how to build wealth and abundance? This sounds like more doom & gloom…”

Although I try my very best to bring a positive outlook to an otherwise negative filled world, the reality is that unless you understand what you’re about to learn next, you will continually work harder and harder and wonder why you’re not getting ahead.

On the flip side, if you do take this to heart, you may soon find yourself in possession of a small fortune as you’ll understand what is coming down the pike and how to position yourself and your assets for it.

Enough chit chat though, let’s now talk about…

Why Savers Are Losers

Since 1913, the US Dollar has lost more than 95% of its purchasing power.

In other words, what cost a dollar back in 1913, now only purchases around 5 cents or so of goods & services today.

The reason why this has occurred is because when the Federal Reserve was created, they were given the authority to print the US dollar. When the US went off the gold standard in 1971, the Fed now had the ability to create as many dollars as they wished.

Because of this decision by president Richard Nixon to move to a completely fiat currency system, over the past 40 or so years we have seen massive volatility in the markets, sky rocketing prices in energy, food, housing, equities, etc., and a greater divide between the rich and the poor.

So Why Doesn’t Saving Work Anymore?

The primary reason is because money is no longer money. The dollars in which you are paid from your job are currency units which can be created in unlimited quantities by your government no matter where you are in the world.

Although you may be receiving some interest on cash you have in the bank (nowadays it’s next to nothing), you simply cannot earn enough interest in the bank to offset the impacts of money printing & inflation.

While you might be a prudent & responsible saver and put away a portion of your income from every paycheck you receive, the problem is that the longer your money sits in the bank, the less valuable it becomes over time which in turn means that it will not buy as many goods & services as it does today.

Most people have generally come to accept that this is a natural part of life however, what they don’t realize is that if they aren’t continually increasing their earning power over time to offset this, they are actually falling further beyond and having to devote more of their income to basic living expenses – i.e. food, energy, housing, etc.

As time moves forward, the overall trend of the dollar is clearing going to go down which means that prices are inevitably going to rise.

But what happens when the amount of dollars in circulation suddenly sky rockets by over 400%? What impacts do you think that might have on your standard of living?

Yes I know 400% sounds crazy, but unfortunately I’m not joking here…

Since the financial crisis in 2008-2009, the Federal Reserve has increased the monetary base from $825 billion to over $3.2 trillion.

In other words, what took close to 100 years to go to $825 billion, in less than 5 years that number has more than quadrupled.

Now it doesn’t take a PHD in economics to understand the basic principles of supply & demand and the effects that has on price(s) in our economy.

If the supply of money is skyrocketing, what impacts do you think that might have on prices on the things you buy? On your standard of living as a whole?

Now are you starting to see why saving money in the bank is not the smartest strategy to build your wealth?

Keep in mind that I didn’t show you this to scare you, but rather to make you aware of what is happening in the world today and although you may not like it, the more you understand this the more you can use this to your advantage to build incredible wealth – as the rich & the wealthy have long since figured out.

So What’s The Solution?

The solution is simple as it is profound.

Instead of being a saver, you need to learn how to become an investor.

By learning how to turn the currency you are paid into real assets that produce wealth, you can use these trends to accelerate your way to wealth & abundance and start living life on your own terms.

Because of the enormity of that subject alone, we’ll cover more strategies in future posts on exactly how to do this.

But for today I want you to look at what you’re currently doing and ask yourself, “Am I saver? Or am I an investor?”

If you’re a saver, just understand that you’re taking the hard road and although I applaud you for your self-discipline, I am also greatly concerned about your future if you do not change course and learn how to handle your money in today’s world.

If you’re an investor, congratulations! If you understand exactly what I presented here today, you’re well on your way to creating the life you want.

So what was your big takeaway from today’s lesson? Share your comments and feedback in the box below and let me know what you thought.

I’ll be answering questions and reviewing comments personally.

Stay tuned for the final part of our “Fallacy of Saving Money” series where I will show you how to value your time and explode your income. Trust me, you won’t want to miss what we’re going to share with you next.

To your abundance,
Michael Stead
Founder, The Abundance Society

Author's Bio: 

Michael Stead is the mastermind behind The Abundance Society – an online membership community that gathers world leading experts and thought leaders to bring the financial education and wealth creation secrets of the top 1% to the struggling middle class of the world.

After personally witnessing the destruction the financial crisis of 2008/2009 had on people's lives, Michael has made it his personal mission to uncover and share how the wealthy are investing & growing their wealth right now so he can teach others their secrets.

The Abundance Society differentiates itself from other financial websites by taking a holistic approach to creating wealth and abundance by showing its members how to design their ideal vision of a sensational life, how to overcome their internal barriers to abundance, and how to take control of their financial destiny.