The Federal Reserve (FED) has been confiscating wealth for decades through inflation and debt – this is nothing new. What is new is a prolonged zero to negative interest-rate world.
According to former Atlanta FED President, William Ford, he estimates savers are losing $300 billion a year due to low interest rates. It’s very sad, the war on savers has crushed the elderly who depend on fixed income.
Saving money is a discipline and a chosen lifestyle. The FED has complicated savings, since there is literally zero return at your local bank once inflation is accounted for.
Here Are 5 Saving Strategies We Suggest:
- Physical Precious Metals
- Specialized Whole Life Insurance
- Safe, Dividend-Paying Stocks
- Single Family Houses
- Peer-to-Peer Lending
With yields on the lower side for corporate bonds, we don’t currently recommend them. We do want to additionally point corporate bonds out as a safe way to save money. When lending money to companies like Johnson & Johnson, Apple, and Microsoft, there is very little risk of default.
Despite the day-to-day fluctuations of a bond, it is important to remember that if you hold a bond to term, you will have received all of your principal back, plus your annual yield. These returns are contractually guaranteed and you are a legal creditor for these businesses.
With low interest rates, though, we can't commit cash for 10 years in order to receive a 2 to 3% annual return. After taxes and inflation, this strategy would end up being a wealth stealer.
Let’s Cover the 5 Strategies We Are Using
1. Physical Precious Metals:
Here is the one investment that you can truly keep a secret, and you never have to worry about it becoming worthless.
You can make delivery purchases or contact a storage company like Brinks through MilesFranklin.com, where you can store your precious metals and have them delivered to you anytime you want. Or you can sell them easily when you need to.
This savings strategy is very conservative and pays zero interest, so you don't want to put all your eggs in this basket, however, we believe precious metals should be at the core of our savings.
2. Specialized Whole Life Insurance:
Less than 1,000 agents in the country know how to set these up correctly, because this isn't about the life insurance – this is about an accelerated plan to build up your cash value. It’s money that you have access to anytime you want, is contractually guaranteed, and continues to grow – even when you take out a policy loan.
Do not try and set one of these up with a normal agent. These agents have to be certified in a very specific strategy. In fact, only a handful of insurance companies even qualify to help you since you only want to do business with private mutual insurance companies.
3. Safe, Dividend-Paying Stocks:
Businesses that have a consistency of raising and paying out a dividend deserve your attention. Remember, volatility doesn't equal risk, especially for the long-term saver. One of my favorite businesses to save in is York Water (YORW), a business that has paid out a dividend every year since 1816!
Even during the Civil War, when this small water utility company was occupied by the south, management still made sure a dividend check went out to shareholders.
Today, YORW is priced too high, but finding safe, boring, stable businesses that reward shareholders with a dividend check is a great way to save and compound your wealth.
4. Single Family Houses:
Buying a rental property with a P/E of 7 or less is a sure way to safely store some money for 10 years or more. Single family homes tend to appreciate in value and deliver better tenants, which means a more consistent cash flow. And they aren't easy to sell, which makes them a great way to force yourself to continue to save.
You want it to hurt when you dip into your long-term savings, and the entire process of selling a house is just enough to help you leave your savings alone.
5. Peer-to-Peer Lending:
Our only recommended company is Lending Club. Becoming one of their lenders is easy, and currently, our own experience using them for the past 12 months has been excellent. We are currently seeing an annualized return of 13.8%.
Lending Club is also the only peer-to-peer lender who is traded publicly, though we do not recommend them as a stock suggestion.
A Commitment to Save
Saving is an act of protection, preventing you from future financial pain. It also helps you build more wealth, giving you both the peace of mind and confidence to make great investments that will present themselves in your lifetime.
If you already save, save more. And if you have any influence on someone younger than yourself, encourage them to save, too. Right now, our 18- to 35-year-olds in this country have a negative 2% savings rate, meaning they save nothing and spend more than they make.
Committed savers, after a few years, become an unstoppable force. From my own personal experience, saving becomes fun after a while, especially when you start to see the fruits of your labor from previous years.