Last week, Laura commented on my monthly income report and was interested in what I was doing with selling gold/silver coins. She had mentioned that she received an inheritance of gold coins, and what she should do with them.
To be completely honest with you, my view of gold has significantly changed since I watched this short clip of Warren Buffet about six months ago. He talks about how over 100 years a productive asset (land/stock market) will kill a non-productive asset. Land for example can produce a crop every year for 100 years, but what has gold produced? Nothing. No matter how much you like holding it or “kooing” to it, you will never see anything produced from owning it year over year. It is merely a hedge against the fiat currencies and inflation. Take a look at this short clip (see about 2:38 into the video):
Laura I'm sure a lot of other people have the same type of question. In order to answer this question you need to first realize that each person's circumstance is different. Here as some assumptions that you need to have before answering your question.
Depends On Your Circumstance
Adequately Funded Emergency Fund – do you have 3-6 months worth of living expenses saved up? If not, then figure out how much that amount is for you and your family, and convert your bullion into cold hard cash.
Retirement Savings – are you saving 15% of your take home pay? If not, then consider how you can use some of your gold to fund your 401k/403b/Roth IRA. Making sure you have sufficient retirement funds will make sure you have long term stability
Debt Freedom – do you have any outstanding debt besides your house? If you are looking for freedom from your debt, then paying off credit cards, student loans, and any other unsecured debt. Wouldn't it feel so much more freeing to be unchained from all of your debt monthly commitments?
Making Your Assets Work For You
Now is time to make things happen. Once you've gotten all of your protection worked out with an emergency fund, retirement, and debt freedom, then you can put your gold to work for you. What does that mean? That means converting your gold/silver into an asset that will make money for you month over month. Just like Warren Buffet pointed out in the above video, over a long period of time, productive assets will outproduce a non-productive asset. Granted gold/silver will have some better 6 month/1 year/5 year performance periods, but over 25 – 100 years land or equities will outperform them.
So what am I doing? In my monthly report, I have been actively selling my gold/silver at either a local coin shop or online (eBay). Lately I've been primarily selling my coins on eBay, because I get about 50%-75% more than if I went to a pawn shop or coin store. I use PCGS as a good gauge of how much my coins are worth. When I walked into my local coin shop they just bashed PCGS, and said their valuations were completely unrealistic. However, if you sell your coins at auction (to a large audience), then you'll truly no the value of your coins and not what some tells you (coin shop or PCGS).
What Do I Do After I've Sold My Coins?
Laura, over the last four months, after I've sold a small portion of my coin collection I've depositing those proceeds directly into my Schwab Monthly Income Fund and Lending Club. It is providing me two different income sources as I grow the principal balances of these diversified asset. One in equities and one in peer-to-peer lending.
As you can see through my examples of the last few months I've taken my coin sales and eggs sales, and am converting them into other productive assets. Even though the amount is small I'm trying to show that you can start anywhere to make a passive income stream. Eventually, I hope that my income streams will yield a big enough income to ease me into retirement. The other option is that I can use the Schwab Fund and/or LendingClub fund to pay for a rental property or a small piece of farmland. The who concept here is that one productive asset can feed another productive asset. That is where you can start getting multiple streams of income, and I hope to show that it involves a little upfront work, that will reap long term benefits.
What Income Streams Are You Working Towards?
Now I've laid out what I'm focused on developing over the next few months. I'd love to hear from our reader on what income sources you are working to develop. Are you actively selling gold/silver to fund some other asset? If so, then leave a comment below.