Are you under the illusion of building wealth?

Navigating the financial landscape can be daunting, especially when the stakes are your long-term wealth and retirement. The difference between success and failure as an investor often hinges on understanding and outperforming your break even rate—the critical threshold your investments must surpass each year to maintain purchasing power against inflation. This is where the Fynanc Break Even Calculator becomes an indispensable tool.

The break even rate, or break even return, is the yearly appreciation your portfolio needs to achieve to outpace inflation. Without this, even seemingly profitable investments may fall short.

But there’s good news. The key to overcoming these challenges lies in understanding your break even rate and using strategies like strategic debt to lower it. By doing so, you can shift your financial approach, allowing for the growth of wealth without needing to chase sky-high, risky returns.

In this article, we’ll explore how the Fynanc Break Even Calculator can help you measure your portfolio’s performance against the break even rate and what you can do to lower this rate, empowering you to achieve your financial goals more effectively.

How Can I Achieve My Financial Goals?

You’ve spent your life working hard and making sacrifices to build the wealth you need to enjoy the lifestyle you want. Ideally, you’d like to reach those goals so you can enjoy doing the things you want to do, rather than only doing the things you have to do to survive.

But here’s the hard truth: simply having a portfolio of appreciating assets won’t necessarily get you there. Inflation and other financial forces can erode your purchasing power over time.

Calculating your break even rate will show you the annual returns your portfolio needs to generate to achieve your financial goals. Unfortunately, for many people, this rate is so high that it’s almost impossible to achieve, making financial goals seem out of reach.

The Fynanc Break Even Calculator

Before we discuss lowering the break even rate, let’s first recap what it is and how to calculate it.

The break even rate (also known as the break even return”) is the rate at which your investments must appreciate each year in order to beat inflation and maintain your purchasing power. You can use a simple formula to calculate the rate at which your portfolio needs to produce returns, year-over-year, to beat inflation and maintain your purchasing power.

Using an effective tax rate (R) of 30% and an inflation rate (I) of 8%, you calculate a breakeven return of 11.43%. This means that every year, your portfolio must appreciate 11.43% to maintain your purchasing power.

The break even rate explains why it is so difficult for you to reach your financial goals. It also illustrates why, despite having a portfolio that appreciates every year, you are moving backward financially in terms of purchasing power. As you know, generating those kinds of returns without taking on massive risk is incredibly difficult.

Lower Your Break Even Rate With Strategic Debt

Strategic debt isn’t just any kind of debt. It’s a carefully planned and calculated form of debt that shifts the burden of inflation onto the lender. This type of debt typically comes with specific characteristics, like a fixed interest rate. However, it’s crucial to understand how much debt to take on, as each asset can only handle a certain amount.

The key point is that incorporating strategic debt into your financial strategy is a powerful tool you can use to achieve your financial goals. When you are able to make informed decisions about using strategic debt to build your passive income, you are able to achieve your financial goals much faster, while avoiding unnecessary risk.

Let’s see what happens when we add strategic debt to the break even formula:

Let’s see what happens when we add strategic debt to the Break Even Formula

How To Use Debt To Make Money

Let’s take a look at buying a rental property with a mortgage as an example. Typically, you’d put down 20% of the purchase price as a down payment, and the bank finances the remaining 80%.

Here, your 20% is your capital, and the 80% financed by the bank is what we call strategic debt.

Now, let’s use the same tax rate and inflation rate from our earlier example. But this time, you’re only using 20% of your own capital. By leveraging strategic debt to purchase the rental property, your break even rate drops from 11.43% to just 2.29%.

In other words, by using the bank’s money to finance your asset, your rental property only needs to generate a 2.29% return each year to maintain your purchasing power. That’s a much more achievable target compared to the original break even rate of 11.43%.

Lowering your break even rate means you don’t have to rely on risky investments to generate sky-high returns every year. Instead, you can invest in stable, lower-risk assets that offer moderate returns. The best part? Even with these lower returns, you’re still increasing your purchasing power, not just maintaining it.

In this example, we used real estate because it’s something many people are familiar with, but the good news is that there are plenty of other assets where you can apply strategic debt—many of which require far less time and effort than managing real estate.

Your Wealth-Building Choices

Now that you understand the illusion of building wealth and why so many people never achieve their financial goals, you face a crucial decision.

You can keep working hard for the rest of your life, sticking with the same investments, and telling yourself that as long as your portfolio appreciates, you’re on track. But if you choose this path, you might reach retirement only to realize that you haven’t built enough wealth. You’ll find that time, energy, and health are no longer on your side.

Or, you can take a different approach. You can invest in stable, lower-risk assets that generate moderate returns. You can leverage strategic debt and other proven strategies we teach our members to achieve your goals in record time and without taking unnecessary risks. With this approach, you’ll continue to work, but with the confidence that your portfolio is building wealth every year, bringing you closer to the lifestyle you’ve always dreamed of—sooner than you ever thought possible.

If you want to learn how to lower your break even rate using proven strategies together with cutting-edge technology, make sure to join us for our upcoming Wealth Journey Workshop.