Wow. Incredible. Just 60 days into 2022, some people may be wishing they were back in 2020. We are definitely living in crazy times which many of us have never experienced. That has probably caused some stress for some of you. It's a terrifying time for many people. I'm not going to tell you what's going to happen. I don't believe anyone knows at this point, but regardless of what happens, we need to be prepared as we can for the days ahead.
My Thoughts on the Current Situation
While the news regularly reports on how dire everything is and doing its best to demonize Putin and Russia, I think it's essential to look deeper than what is broadcast on a daily basis. I am not condoning what is taking place, but I do believe it is wise to review history and what we can learn from it.
Since the end of World War II, the United States has conducted 81% of wars and invasions of other nations. Ouch, and wow. I didn't know this just ten days ago. While as Americans, we are quick to believe these were all justified military actions, I believe as world citizens; we need to use critical thinking as to why our country has dropped over 375,000 bombs on foreign soil over the past 70 years.
Why are we so quick to assume that the United States and our military are justified in invading other countries and dropping bombs on foreign soil, citizens, and their buildings and infrastructure, but automatically demonize Russia and Putin? I think it's a question worth asking. Again, I'm not justifying the current situation, but I think it's wise to ponder the question.
Historically when you consider the reasoning behind invading a country, it falls on three primary causes.
Conquest: When a nation seeks to conquer another nation for the purpose of expanding its territory, subjugating its people, and absorbing its wealth and resources.
Defense: When a neighboring or rival country becomes a threat for whatever reason to another country, it may find itself preemptively invaded in the protection of the government and citizens' sovereignty. In past times, a threat could be a military or possibly an economic threat. In modern times biological threats, cyber and technology-based threats, financial attacks, and energy and power threats have been added to the mix.
Destabilization, Usurping, and Pilfering: A tactic that is little discussed in public today has been widely used by the global bankers and the New World Order, which includes the destabilization of governments and countries' financial systems. This is done the various means, including bribery, assassination, blackmail, and hostile takeovers of key economic points within a country's financial and influential structures. This type of invasion aims to compromise the government's leadership, power, and loyalty to serve the people. Once it occurs, the external groups begin to pillage the wealth and resources of the country for their wealth and benefit. Many examples of this occurring over the last 70 years and many within the last 20 years especially within the Middle East, South America, and Haiti.
In the coming months and weeks, I believe it will become more apparent which one of these three situations is going on between Ukraine and Russia. At this time, I do not believe we are headed towards WWIII. Only time will tell.
What You Can Expect Financially
Regardless of what is driving the current situation, it will affect the US Economy for the rest of 2022. Subsequently, it's going to put many people's finances in a severe bind.
Things you can expect
Higher gas prices: Since early 2021 and the start of the new administration, gas prices have doubled across much of the US from an average of $2.00 to $4.00. I expect these prices to continue rising another $1 to $3 over the next 90 days hitting an average of around $6.00 per gallon. This is based on financial analysts' projections of oil hitting $185 per barrel in the coming months.
Foreclosures: In 2008-2009, home foreclosures were widespread, and bankruptcies were up as well. Many people lost their homes, and many highly leveraged people in rental properties lost their rentals and their equity. Why? Higher gas prices drove part of that as families were paying 2x more for gas along with increases in energy costs. This jump in the monthly gas and energy costs put many families on tight budgets into an even bigger financial bind. Imagine families paying $400/mo for gas to drive a job suddenly having to pay $800! With over 70% of people living paycheck to paycheck in the US, an additional $400 or more of expenses per month is not a good thing!
Stock Market: As the US economy continues to feel economic pressures leftover from COVID, supply chain issues, and now the energy and fuel pricing pressure, the stock market may see a decline as people begin to draw on their investments and retirement to bridge the gaps in their finances. If this occurs, the selling pressure could drive the stock market lower as a whole. However, I would expect some stocks like Tesla to continue to see gains due to the growth in the electric car and green energy markets. Even with a stock market decline, there will always be some winners that defy the trends. Look for those.
The US Dollar and Inflation: The US dollar will be challenged as the world reserve currency. Thought leaders like Jim Rickards and Robert Kiyosaki have warned us of the times of change related to the dominance of the dollar as the world reserve currency. China has been preparing for decades to challenge the US dollar, and that time has now come. While the government says inflation is between 7 to 10%, Financial experts now say the actual inflation rate is over 15% and possibly pushing 20-30%. Have you been to the grocery store lately? Boom! As a currency begins to dissolve, inflation will continue eroding its value and purchasing power until the end, at which time the financial system needs to change and be reset. This is currently underway via the World Economic Forum, and it's not a particularly good thing. For learning more, read up on The GREAT RESET.
Gold and Cryptocurrency: With the assault on the US dollar, inflation, and the stagnation or decline of the stock market, investments like gold and cryptocurrency should see significant gains in the short and long terms. Gold has typically been a store of wealth in all economies, especially during fiat currencies like the US dollar decline. Whether or not you are comfortable with cryptocurrency is irrelevant. Cryptocurrency is here to stay. I recommend you start learning about it.
Steps You Can Take to Prepare
Sound financial principles never change and allow people to win over generations consistently. Therefore, it's important to understand generational wealth building and financial strategies to win, regardless of the economic situation.
Real Money. Real Wealth.
Real money and real wealth exist as gold, silver, land and real estate, and business. These four forms of wealth have survived for thousands of years.
Today, I fear that much of people's wealth exists inside a fake wealth system called the stock market. While people can use the stock market to build wealth, it has not proven itself across generations, governments, empires, and countries at the same level as the others. For example, the New York Stock Exchange was established in 1792. One of the foremost wealth-building teachers of our time, Robert Kiyosaki, avoids the stock market. Instead, he invests only in gold, land/real estate, and Bitcoin.
Alternatives to the Stock Market
If you feel like you're overexposed in the stock market, there are several other options you can consider to diversify your investments. Some are easier to pull off than others.
Self-directed IRA. Under a standard 401k or IRA, investments are limited to the options provided by organizations holding your 401k or IRA. You have additional options under a self-directed IRA, including REITs, real estate purchases, precious metals, cryptocurrencies, individual stocks, and more. Moving some of your retirement funds into a self-directed IRA can offer you some protection against a stock market slump.
REIT: REIT stands for Real Estate Investment Trust. Rather than buying a piece of property yourself, you can buy into a REIT, a property-based investment similar to a stock, except that they only purchase real estate and manage that real estate to make a profit. So instead of buying real estate yourself and managing it, you buy into a REIT, and they manage it. As a result, some REITs offer greater than the average growth of the stock market as you get to benefit from the profit and cash flow of the investment. Still, you also benefit from the properties' appreciation and the REIT's share price increase.
Currency Diversification: I'm sad to say that the US dollar is dying. Inflation is killing it, the government is printing too much of it and racking up more and more debt, and China is attacking its dominance. The good news is you have some currency alternatives to protect you. Gold, silver, and cryptocurrency are all forms of currency that will appreciate during the world's transition away from the US dollar. And the beautiful thing is that you can hold gold, silver, and crypto as reserves in your emergency fund, essentially protecting your emergency fund while you keep your monthly cash flow and budget needs in your bank account. If something comes up and you need to tap your emergency fund, sell some of your gold, silver, or cryptocurrency to meet your emergency needs.
Debt Reduction: Having too much debt could be risky during this time. I'm an anti-debt guy myself. Although I'm currently carrying a $150,000 loan on one of my properties, I hate it! I plan to pay it off this summer to get the debt off my balance sheet! Many financial advisors and educators will tell you that good debt (on items that go up in value like real estate) is okay, but don't have bad debt (consumer debt on cars, credit cards, etc.) Whichever way you roll on the debt issue, make sure you know the risks. What would happen to you if you lose your job and can't work for three months? 6 months? 1 year? What happens if one or more of your renters don't pay their rent? Debt ALWAYS carries some level of risk. It can't be denied.
Finally, as we navigate these crazy times as a society recovering from COVID, enduring economic turmoil, and living through uncertain times in eastern Europe, take a look over your finances and shore up the holes in your financial plan...if you have one!