By Andres Gutierrez
Do you remember how you felt when mama, tía or abuela would say, “Let’s make tamales”? That was never good news for me, because I knew how much work it was.
It would involve cleaning the corn husk, kneading the dough, adding chili pepper, mixing in the meat, and cooking forever. It seemed like we waited for days just to have half a dozen. But once I had those home-cooked tamales in front of me, I knew the effort was worth it.
Building wealth is a lot like making tamales.
It takes a lot of effort over a long time to see the payoff. However, our society has a microwave mentality. They want instant results with no effort. This is why the lottery is so popular in the U.S. Many people — Latinos included— have lost hope, and they think the only way to strike it rich is a $2 lottery ticket.
But the chances of becoming wealthy with the lottery are one in a gazillion. Enough with the microwaves and the empty promises of the lottery. Let’s get back to building tamales and wealth the right way. It’s not a complex process, but it requires working hard, spending less than you make, and investing money for the future.
There are two things to remember as you build wealth and start investing. First, taxes. Whether you earn money by working or you sell an investment and net a profit, you owe some of it to the government. You can choose investments that will let you pay more or less in taxes, but at the end of the day, you’re going to pay something, so plan on it.
Another ugly thing: inflation. The basic idea is you want your money to be worth more in the future than it is today. Inflation makes the price of stuff higher every year. This means if your money doesn’t grow and keep up with rising prices, a year from now your money won’t buy what it buys today. You lose purchasing power.
To keep up with inflation, you need to make about 6 percent with your money. When you understand this, you’ll eliminate pretty much all banking options as investments to build wealth. Government bonds are also not a good idea because, long term, they do not earn enough to beat 6 percent. And burying your money or sticking it in the cookie jar is crazy — in 50 years, that $100 bill might not be enough to buy even the worst store-bought tamales!
That leaves us with one option for long-term investing: businesses. I’m not talking about your compadre’s restaurant; I’m talking about multi-national companies like Apple, Google, Wal-Mart, Coca-Cola and Toyota. And I don’t mean single stocks either.
Invest in mutual funds made up of companies like these so you don’t lose the farm if the latest thing tanks. When you own a little bit of a lot of companies, one will always be up when another is down. The average of all these little bits is one of the most reliable — and safest — ways to beat inflation and make some money.
Remember, the tamale approach works, and the microwave approach is a lie. If you understand this, you’re on your way to enjoying a plate of tamales and refried beans…I mean, financial peace!
Andres Gutierrez is a financial expert, host of “The Andres Gutierrez Show” and creator of Paz Financiera. A successful entrepreneur and small-business owner, Andres Gutierrez knows what it’s like to start with nothing and build lasting wealth. In 2009, Andres joined Dave Ramsey’s team to bring the message of Financial Peace to the Hispanic community. For more information about Andrés Gutiérrez visit his website “Andres Gutierrez” and follow him on Twitter at @elshowdeandres and on Facebook.