This Tuesday will mark the 290th birthday of America’s first President and founding father George Washington.
He only lived to see 67 of those years, but he left behind a legacy that’s still remembered the world over. And rightly so. Washington was a man of almost mythical proportions. A leader unlike any other we’ve ever known.
As we look forward to an uncertain future in 2022, it’s hard not to wonder what he might have thought of today’s world.
What kind of advice would he have for us? How would he relate to a 21st century life?
History tells us that he loved dogs, so he probably would’ve gotten along with most Americans today. He was also plagued by health issues and many of us can relate to that.
But the most important part would be his reaction to our investing, our personal finances.
Because in addition to his already long list of superlatives, we can add that he was also history’s wealthiest president (until 2016). In total, Washington owned 50,000+ acres with a value equivalent to 0.19% of the country’s gross domestic product.
In today’s terms, that would make him worth $43.6 billion. Richer than Michael Dell.
So, what was Washington’s secret for building a fortune that outlasted even him?
George Washington’s 3 Steps to Lasting Wealth
After “retiring” from the presidency to Mount Vernon, George Washington stayed a very busy man. He was an entrepreneur, a farmer, a brewer and real estate speculator.
And through all of these (largely successful) pursuits, it seems like Washington stuck to a few simple principles for building wealth:
- Avoid debt. Ol’ George learned this the hard way, after struggles with debt in his early years. According to Washington: “Avoid occasions of expense … and avoid likewise the accumulation of debt not only by shunning occasions of expense but by vigorous exertions to discharge the debts, not throwing upon posterity the burden which we ourselves ought to bear.” In other words, live within your means, and don’t leave it to your heirs.The key to a fulfilling retirement is to manage your cash flow. High credit card balances and unnecessary borrowing pose a huge risk to your financial security. Take Washington’s advice here, and don’t get in over your head.
Of course, it wasn’t just personal debt he hated. In his farewell address, Washington warned about the dangers of debt to the American people … a situation that has spiraled out of control in modern times.
- Real estate. When he was elected, George Washington was already one of the largest landowners in the country. By the time he died, he owned 52,000 acres. These holdings were a great source of wealth for him and his descendants.But unlike our first President, you no longer have to trek across the Ohio Valley in search of the perfect property deal. Now all it takes is the click of a few buttons by investing in real estate investment trusts (REITs).
REITs are specialized companies that invest in real estate of all kinds — from residential to industrial to scientific. They trade just like stocks. And because U.S. tax law requires them to distribute 90% of their taxable profits as dividends, they typically return much higher yields than industrial and other companies. And REITs have tripled the average returns of the S&P 500 Index every year for nearly 25 years.
One easy way to gain exposure to this market is with the iShares U.S. Real Estate ETF (NYSE: IYR).
- Diversify. While most plantations just grew tobacco, Washington branched out and started growing wheat and other crops. Not only that, but he also bolstered his extensive real estate holdings with a mix of stocks and bonds.Diversification is crucial for any investor. Consider offshore opportunities with the SPDR S&P International Dividend ETF (NYSE: DWX). And make sure you’ve allocated at least 5% of your portfolio to gold, either via exchange-traded funds (ETFs) like the SPDR Gold Shares ETF (NYSE: GLD) or by owning the metal itself.
Bottom line: Don’t put all your eggs in one basket.
So remember: avoid debt, consider investing in REITs and diversify. You may not end up with a $500 million fortune like George Washington. But it should help you secure a nice nest egg.
Enjoy your Presidents Day.
Editor, The Bauman Letter