Americans from all walks of life today are struggling to maintain their standard of living as inflation continues to eat away at the purchasing power of our dollar, making everything less affordable. Combine this with stagnant wages, rapidly growing debt, and an equally rapid decline in consumer confidence, and it’s easy to see why people are worried.
Unfortunately, every piece of data indicates this isn’t going to be reversed anytime soon. In fact, looking at just one data point makes this abundantly clear, which is the fact that the interest payment alone on our national debt is greater than our entire national defense budget.
Keep in mind — that’s just the interest and doesn’t even account for the principal payment. Corporate and personal debt are also at historic records. All signs indicate that our economy will most likely get worse long before it starts to get better, and a substantive recovery will take years if not decades because first, the financial bleeding needs to be stopped, then bad economic policies need to be repealed, and where applicable, effective economic policies need to be put in place.
As a result, financial experts and entrepreneurs are starting to focus on adapting to today’s devolving economic environment, and they’re sounding the alarm for fellow Americans in the process.
Education plays a big role in this effort. While financial commentators, like Charles Payne, host of Fox Business’s Making Money, have been breaking down the real data on the economy and explaining how to adapt, primarily in traditional assets, like stocks, bonds, and other securities, while the Alternative Asset Investor Summit was hosted this past October, with numerous experts speaking on leveraging non-traditional assets in today’s economy.
"Schooling doesn't prepare the average American for real life when it comes to taxes, credit, investing, and other financial topics are not a focus of most school curriculum," explained Nate Hare, Vice President of Strategic Relations with Directed IRAs, a speaker and key participant at the event. "I went through school, an MBA program, and even got my real estate license, but even then, I hadn’t learned about any ‘alternative’ investments.
"When I first finally learned there were all sorts of investment options that offer significant tax advantages," Hare continued. "That was in 2012, and following that revelation, I made a career shift. I left the corporate world of real estate investing and mortgage brokerage, and started teaching people how to use self-directed IRAs. I thought, I needed to know about this 10 years earlier!’
"Over time, I found that every one of my clients had the same philosophy. And that's where I got really passionate about it because we're not really selling investments, we're just selling an idea, an idea that's not taught to us in school, of how to create tax free wealth and pass on generational wealth to our heirs."
Shenoah Grove, a speaker at the event, said, “The Alternative Asset Summit represented a room full of sophisticated and accredited investors with money looking for deals to take advantage of the disruptions in the real estate industry and the economy. Some conferences are for people who want to learn, this conference was for those who are ready to take action and invest.”
But it’s not just high level investors and financial experts discussing these topics—this is happening at all income levels. This past October, the Hernando County School Board in Florida hosted an event focused on teaching financial literacy at Weeki Wachee High School, with over 1,700 local residents in attendance.
Amanda Webster, COO of Fund&Grow and one of the event’s key speakers, shared her experience from the event, saying, “According to the data, most Americans are not financially literate, so I didn’t think there would be anywhere near as many attendees as we ended up seeing.
But every time I looked around during my presentations throughout the day, the room was packed and people were lined up outside in the hallway for as far as I could see. As much as I’d love to say that’s because I’m such an awesome speaker, the truth is it’s a sign of how worried people are about the economy today.”
Webster has a unique insight into how the entrepreneurial community feels about the economy because of her firm’s role in small business funding, which she discusses on her weekly show on Daily Flash. Think of this relationship like an early warning system, kind of like the proverbial “canary in the coal mine” since entrepreneurs are typically the first impacted, often months or even years before the general public.
“Credit levels are already at record highs, and despite that, I’m seeing a dramatic increase in entrepreneurs seeking new funding, and at much higher amounts than I’ve seen people seeking in years,” she explains.
The combination of economic factors in play creates a dire outlook for Americans.
“What's really affecting most Americans, and even the younger generations that have the support of their families, is that the cost of living is way up and wages have not increased in years, so most people have less money in savings and aren’t able to save as much as in the past.
For a lot of people, housing makes up as much as 50% of their income, and then after that you've got food, groceries, vehicles, and insurance, and then what you're left with, you're supposed to save for retirement, and that's getting smaller and smaller for everyday Americans. You can complain and just not save for retirement, or you could take different approaches to investing for retirement,” Hare said.
Dr. David Phelps, a nationally recognized financial expert and columnist, said that it’s far worse than most people realize or will admit, and he warns we’re entering a 1970s style stagflation period.
He explains, “Our economy has crumbled into a pile of rubble over the last few years, with inflation soaring, wages remaining stagnant, and government, corporate, and personal debt at historic levels. Our economy is sitting on a powder keg right now and a bunch of hoodlums in DC are smoking cigars next to the fuse.”
Dr. Phelps was recently asked to speak at the Alternative Asset Investor Summit to share his unique insight alongside several other notable experts, with other investors seeking more effective strategies that work in today’s economy. The event drew an audience of over 300 attendees, who see the writing on the wall and want to take proactive measures to protect their finances.
“What's really affecting most Americans, and even the younger generations that have the support of their families, is that the cost of living is way up and wages have not increased in years, so most people have less money in savings and aren’t able to save as much as in the past.
For a lot of people, housing makes up as much as 50% of their income, and then after that you've got food, groceries, vehicles, and insurance, and then what you're left with, you're supposed to save for retirement, and that's getting smaller and smaller for everyday Americans. You can complain and just not save for retirement, or you could take different approaches to investing for retirement.”
Our economy appeared fairly strong since recovering from the 2008 housing crash, although the underlying fundamentals were still weak and growing weaker by the day. That’s all now catching up with us, forcing us to adapt for today's economic reality by investing more cautiously and strategically. Experts say the key to surviving in this environment is multifaceted, and the status quo that worked over the last decade plus won’t work any longer.
Dr. Phelps, who recently published a book on the topic titled, Building Your Financial Ark: How to Survive and Thrive During the Next Economic Storm, explains, “If we want to do well financially over the coming years, we all need to become a lot more cautious in the due diligence we conduct for our investments. In this economic environment, our goals need to be focused more on reducing risk and hedging against inflation, rather than trying to score a home run on each swing.”
He says that while we should minimize risk, we should also be looking for ways to increase income or revenue and reduce debt in order to tackle the challenge on all fronts. The debt aspect is particularly important because it adds an extra burden to your budget, and it’s easy to fall into the debt trap—especially during an economic downturn.
Webster says this is an all too common occurrence.
“When things slow down, entrepreneurs are often quick to tap into credit to keep their business afloat. That’s exactly what business credit is for, but it’s critical to have a clear picture of your budget, as well as how your industry and the economy as a whole are doing. This helps to avoid getting over extended and putting yourself into a downward spiral financially,” she explained.
Dr. Phelps says he has been advising members of his community, Freedom Founders, on how he’s adapting in his own business, and educating the general public through his financial column at Newsmax. His advice is to implement more comprehensive underwriting, becoming more selective in the strategies employed, and focusing more on preserving assets than growing them in today’s economy.
“It’s important to surround yourself with people who have been through this before and follow their lead. While today’s economic climate is rough and it’s going to be that way for years to come, it absolutely is survivable if you adjust your strategies properly. This isn’t the first downturn, and it certainly won’t be the last, so prepare accordingly and you’ll build a financial foundation that will weather storms like we’re facing today,” he explains.
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Lori Greymont is a seasoned real estate investor, creator of the hit TV show, Funding Faceoff, and founder of a private mastermind community with the mission to help 5,000 real estate entrepreneurs get their real estate deals done and create true financial freedom.
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