Advanced Financial Concepts Embraced by Inflation-Resistant Wealth Builders
Hiring a guide service and Sherpa and successfully summiting Mt. Everest is a respectable feat, but precious few who do so will ever step foot on Annapurna, a mountain in the Himalaya known as the most dangerous and technically difficult to climb on earth. While conditioning and perseverance may sustain a climber up and down the former, the latter also requires superior climbing ability, advanced technical gear and the skill set to use it effectively in the most treacherous environment imaginable, where only the most accomplished mountaineers have ever tread, and where a third of them lie frozen in the ice today. Building and retaining wealth in today’s heavily indebted, centrally managed, inflationary culture far more resembles the level of difficulty found on Annapurna, and requires an understanding of financial concepts that go beyond these basic tenets of wealth-building:
Maximize income with hard work and career specialization.
Minimize spending with strict budgeting and prudent debt management.
Establish the financial foundation of emergency savings, a specific plan to eradicate non-productive debt, and the right amount of the right type of life insurance.
Consistently and wisely invest expendable income.
While these four simple principles are sufficient to lead even the most conservative investors to financial success in a stable, sustainable society, continuously excessive government overspending and the destructive policies that always accompany it necessitate an understanding and application of more refined financial concepts:
The biggest risk today isn’t loss of principle, it’s loss of purchasing power. Assuming a measure of increased investment risk comes with the ownership of assets that have historically appreciated in real terms within inflationary cultures, namely stock in high quality businesses, high quality real estate, and other real assets. Much of the perceived wealth-building in America today is illusionary; it is nominal, not real (net of actual inflation).
Concentration on income-producing investments, as opposed to non-income-producing speculations, reduces investment risk, reduces bear market volatility, and results in the compounding of returns over time. Wealth-builders confidently purchase shares of capital-efficient, dividend-paying, industry-dominating businesses when they find them at a reasonable price, and they generally never sell them.
The understanding that when the globe loses confidence in the currency of a nation actively monetizing its debt, three things necessarily occur: 1) further money-printing results in full and immediate domestic inflationary consequences, 2) currency units formerly exported return home, and 3) tax rates escalate meaningfully. ‘Annapurna-like’ wealth builders in America today are fully engaged in advanced tax and estate planning strategies aimed at maximizing taxes paid in lower brackets, minimizing taxes paid in higher brackets, and reducing exposure to future tax abuse. The goal is to achieve the lowest average lifetime tax, not necessarily the lowest tax each year.
Remembering the most important aspect of investing is avoidance of a catastrophic loss, coupled with the knowledge that inflationary policies produce infrequent but pronounced market crashes, engages wealth-builders in asset protection strategies like trust and LLC ownership, separating business and personal interests, increasing insurance coverage on catastrophic risks,¹ and stop-losses orders.
In closing, remember the goal is stewardship, not accumulation. Money is to be earned, saved, invested, enjoyed, given away, and passed from generation to generation. It is something that He who owns everything has temporarily entrusted to us, and we should say thank you with faithful stewardship. Think about it and God bless your 2025, Shaun.
“God loves a cheerful giver” ~2Corinthians 9:7
“A wise man leaves an inheritance to his children’s children” ~Proverbs 13:22
“Without counsel plans fail, but with many advisers they succeed” ~Proverbs 15:22
1 Smart Asset, “5 High-Net-Worth Principles to Manage Your Wealth”, December 28, 2024
The opinions voiced in this material are general and are not intended to provide specific recommendations. Dividends can be terminated at any time by a company and do not protect against loss.
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