Here is Ma and me on a new road in Cotacachi, Ecuador. See the importance of this below.
A New York Times article last week left me pondering Social Security for a moment. The article said:
WASHINGTON — President-elect Barack Obama said Wednesday that overhauling Social Security and Medicare would be “a central part” of his administration’s efforts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs.
As the Congressional Budget Office projected a record $1.2 trillion budget deficit for this year even before the costs of the nearly $800 billion economic stimulus package being taken up by the House and the Senate, Mr. Obama stepped up his effort to reassure lawmakers and the financial markets that he plans a vigorous effort to keep the government’s finances from deteriorating further.
Speaking at a news conference in Washington, he provided no details of his approach to rein in Social Security and Medicare, which are projected to consume a growing share of government spending as the baby boom generation ages into retirement over the next two decades. But he said he would have more to say about the issue when he unveiled a budget next month.
Should he follow through with a serious effort to cut back the rates of growth of the two programs, he would be opening up a potentially risky battle that neither party has shown much stomach for. The programs have proved almost sacrosanct in political terms, even as they threaten to grow so large as to be unsustainable in the long run. President Bush failed in his effort to overhaul Social Security, and Medicare only grew larger during his administration with the addition of prescription drug coverage for retirees.
The problem with the Social Security problem is that we have plenty of historical examples to draw upon. They all lead to the same conclusion…Social Security benefits will be cut… probably by inflation. There are too many of us boomers. No money. There is too much debt and not enough younger generation to pay us.
The only possible salvation may be some new technology that makes the upcoming generation so productive that they can earn enough to live well and pay our retirement. But what if not?
Social security problems will grow as 60 million baby boomers have begun to retire. The growing cost of this retirement will create added US debt. The debt will mean a falling US dollar and inflation that severely squeezes retirees.
I am not counting on Social Security and have implemented a plan I wrote about a few months back.
We are seeing global inflation. There are three ways to profit from this; invest in shares (or your own business), commodities and or real estate.
One way to beat this dilemma is to borrow to buy real estate or shares now and use the fixed Social Security income to make the payments…especially if you buy a property that’s distressed.
Merri and I are making this into a fun business that will fight inflation ten years from now.
We applied and receive our first Social Security payments this month. I quickly worked out that the payments will amortize a $220,000 loan (at 5%) in ten years. So we are looking for a $200,000 to $300,000 property.
We’ll buy it in the belief that real estate will maintain purchasing power and be worth something ten years from now while our Social Security payment may not.
Our plan had been to wait until Merri was 70. We are active. We are not retiring and we do not need the money. Why not wait?
Her payment would increase 6.5% per annum for each year she delays taking the payment. Our thought was, “Let’s just wait”.
Then I started working through the numbers.
If Merri waits 48 months, she will receive more then. But she will have forgone $67,200 in payments. It will take her almost 20 years to make it up. Actuarially, with her health, this makes sense. Chances are she’ll be going strong for more than 20 years….except…inflation! That $67,200 will buy much less in 20 years.
In addition the current real estate crash creates real bargains now. Combine this with low interest rates created by the economic clump and you have a wining idea.
The economic slump joined with the real estate crash has pushed US interest and mortgage rates down.
Merri and I hate debt. We abhor debt for consumption even more. We spent an earlier part of our lives paying off all debt and getting ahead so we would never have to borrow. Now of course, we have no debt on anything worldwide.
Yet there are two times when debt can make sense….when you can borrow low and deposit high in a multi currency diversification. The other is to borrow to buy real estate in inflationary times.
If you qualify for Social Security now and do not need the income, instead of waiting, consider dedicating that income to servicing a mortgage and using that to buy real estate.
An alternative is take the Social Security and invest it all in growth equities or to fund your own business.
You should not abandon the Three Cs though…Caution, Clarity and Comprehensive.
This idea makes special sense now because of inflation, real estate and equity doldrums and low interest rates. You still have to research and find good property or create a good business idea.
This is why Merri, our webmaster and I decided to create a new course on how to build a web business with a webmaster. There is a special offer on this new course that runs until tomorrow. See the offer here.
This is also why we have been offer a free course written by Michelle Toole on how to develop your own internet business. Here is Michelle’s latest lesson:
Growing Your Local Business Using the Internet
Do you have a small business that is not using the Internet? Is your clientele mostly local?
Perhaps you think the Internet offers few opportunities for businesses with a customer base clustered in a small geographic area; after all, the Internet is “world wide”… a “global medium.” If you do, you might be surprised at how profitable a web site can be for your local business.
More and more, your potential clients are forsaking those local telephone books and Yellow Pages for Google and other search engines on the Internet. Why? For example, if you were looking for “lawn care service” in the town of Tarpon Springs in Florida, and did not find one, you can widen the search to “lawn care Florida” to get instant results. Try widening your search with the Yellow Pages!
And it’s not just making sure that the potential customers find you, more and more of your competition is coming online. They are using the Internet to:
• build trust and deepen relationships with existing local customers by providing friendly, personal information about the business, great content (ex., valuable “do-it-yourself” articles), “web site only” specials, etc.
• raise their local profile above that of competitors
• promote locally and take customers from competitors
• continue to stay “top-of-mind” and deepen relationships with customers through an e-zine (and build sales, too — ex., “It’s spring, which means it’s time for aerating and fertilizing your lawn.” – OR – “Announcing our Web-site-only-10%-off-your-next-oil-change coupon”)
• build targeted traffic to find new customers, even add entirely new income streams
• leverage their local expertise and knowledge for global clients, selling their goods online, even through online auctions.
If your small, local business does not have an Internet presence to promote itself, to keep in touch with its customers, extend its reach, and increase your customer base, you are losing out on a great opportunity for profit.
Building an Internet presence can help you to grow locally, create new global revenue streams or do both! Either way it is fast becoming an essential business tool in today’s economy.
Look for my future articles where we discuss monetization options, search engine optimization, incoming links, e-zine techniques, link exchange programs and much more…..
You can check out Michelle’s web site at http://healthy-holistic-living.com. To get more great tips, like the ones above and to see how and what tools she used to create a successful on-line business go to http://sitesell-sbi.com
I probably could not get a loan via the Social Security funds to buy Ecuador real estate, but this extra income can free up money that can invested in another inflation fighting alternative, which is to move to a plae that offers a lower cost of living like Ecuador.
This is one reason why Ecuador is booming in some areas like Cotacachi. There is quite a construction boom here and we have been watching road construction over the past few days.
Last week we saw this dirt road where construction was obviously about to come.
The next day we saw that the action had already begun.
We walked there about 6:45 am yesterday and the same time today. All this has arrived since then.
And construction was already underway when we passed… at that early hour.
Yesterday morning’s shot shows that the first phase of the road is almost done.
Real estate opportunities are growing in Cotacachi.
This is why Merri and I are alert all the time when we walk…and we try to amble all over town. Here we are with Ma walking a small path in what would seem a remote rural area.
The appearance is that there are just some rustic houses in corn fields…until…
you hike around the block and see that the rustic house is…
next to a very nice house… and …
The special private school in Cotacachi.
This seemingly rural area is right in the path of progress. You would never know about this unless you get out and off the paved roads and look around. There are numerous lots for sale by owner… some really excellent deals that we’ll see on our upcoming property tours.
This is another way to beat the Social Security dilemma that is rising…live in low cost places that are rich with opportunity.
We hope to see you here.
Join us in Ecuador this February.
Feb. 13-15 International Business & Investing Made EZ
Feb. 16-17 Imbabura Real Estate Tour