If you’ve been saving money all your life, you’re probably thinking, “There’s no way I’m losing money – I’m making money!” Maybe you’re managing to gradually grow your total savings, but if you’re like most Americans, you’re actually losing money left and right. First, you are losing buying power due to inflation, both now and into the future. Second, if you have money in the financial markets, you’re losing money to market volatility and transaction fees and broker charges. And third, if you’re earning more and more income each year, you’re actually losing more and more of it in taxes under our progressive tax system.
The underlying problem most Americans face is that they don’t know how to invest their money in a way that keeps their money moving through investments. This method is known as circular investing, and it’s exactly the opposite of the linear investing strategy that most of us use: We park our money in one place (most commonly on Wall Street) and sit back and wait for a strong rate of return. This ubiquitous linear investing strategy we’ve all adopted is the No. 1 way that most of us don’t realize we’re losing money. Let’s explore the drawbacks of linear investing in more detail:
Stop Losing Money Now
- Linear investing doesn’t build wealth reliably: With linear investing, you count on some external force outside your control to earn you a steady rate of return. And you don’t do anything with your money in the meantime, so if your investment strategy fails, all of your money is wiped out.
- Linear investing teaches you to focus on cash accumulation: If you’re investing on Wall Street and other traditional investment products, your mindset is to grow the total dollar value of your investments – this is the essence of Wall Street’s business model. The problem is that the only way to grow this sum total is to never spend any of it. And that, of course, is just insane: How can you live off money if you convince yourself you can’t spend it?
- You live off your liquid cash: Because linear investing does not set you up to withdraw your money and spend it on a regular basis, you tend to not have liquid cash. Of course, liquid cash is what you live off of, so to tie up all of your money in a linear investing strategy simply makes no sense – you’re really losing money if you aren’t using it.
- You need a circular investing strategy: With a circular investing strategy, you learn to view investments as vehicles to move your money through, where each investment offers you a steady rate of return – and where you’re never allowing your money to sit idle. A whole life insurance policy is the foundation of a circular investing strategy, as it allows you to access the policy’s cash value whenever you want and use that cash value to fund other investments.
When you refuse to let your money sit untouched in a single investment product, you are just saying no to the biggest drain on your hard-earned dollars: A linear investing strategy. The secret to retaining more of your money is to recognize that linear investing does not allow you to build wealth reliably, and causes you to focus too much on the irrelevant goal of total cash accumulation. In reality, you live off your liquid cash and need to use a circular investing strategy to keep your money flowing to you.
For more information about how a whole life insurance policy can become the foundation of your circular investing strategy, check out our infographic on Cash Value Insurance.