In order to accelerate your movement along the wealth building curve, you absolutely MUST have your own business. I don't care if its real estate investing, a sales company or a service business. But you must own it yourself or with a partner. Why, because the tax laws are tilted in favor of people who are in business for themselves. Let's take a closer look. If you are not in business for yourself, you are earning your money as a W-2 employee. Unfortunately, this is the highest tax form of income that there is.
In fact, the average American gives up between 42% and 55% of his or her income in the form of taxes.
Sounds high? Well, consider this: Currently we have a federal tax rate of approximately 39%. States can charge as much as 9.6% and some of us even have to pay a city income tax as high as 3%. Then, there is the Invisible Killer Tax known as FICA or Social Security.
Why do I say that it’s the Invisible Killer? Please let me explain. Social Security tax is broken down into two components. The first component of 7.65% is paid directly by the employee. It's taken directly from your paycheck before you even touch it. In addition to that, your employer must “match” your contribution by paying another 7.65%. All this happens BEFORE you see a nickel of your paycheck. It’s like the government is playing a game of now you see it, now you don’t with your money. Isn’t it true that if your employer has to pay that money to Uncle Sam, it’s less money that he could be paying to you?
THAT’S OVER 15% OF YOUR HARD EARNED MONEY THAT YOU ARE LOSING RIGHT OFF THE TOP!!!!!
Can you see how hard it is to get ahead when you are paying out roughly half of your earnings in taxes?
There Are Two Income Tax Systems In This Country:One For The Educated And One For The Uneducated.
Decades ago, a Supreme Court Justice named Learned Hand made the following observation: To paraphrase, he said "there are two income tax systems in this country: one for the educated and one for the uneducated." I want to give you the opportunity to become one of the educated and accumulate wealth instead of giving all your hard-earned dollars to Uncle Sam.
The following two diagrams hold the secret to tilting the tax laws in your favor. The first one illustrates the tax system for the UN-educated: "Earn, Pay Taxes, Spend." The second illustrates the tax system for the Educated: "Earn, Spend, Pay Taxes." Both systems start, of course, with earning income. However, in the UN-educated tax system, your taxes are immediately deducted from your paycheck, BEFORE you ever see it. Then, you have to live on what's left over.
Let's Apply Some Numbers To The Uneducated System:
Earn = $100,000 Income, Pay Taxes = $ 50,000, Spend = $ 50,000. That is: what you have left to live on. Not such a pretty picture. Want to do better than that. It's easy: read on!
Contrast This With The EDUCATED System:
"Earn, Spend, Pay Taxes." We start with earning income. Then look closely at the next line. In the EDUCATED system, you get to spend your money BEFORE you pay taxes. Can you see how this could have a HUGE impact on your financial well-being? This is the first step. This is one of the strategies that people like Ross Perot, Donald Trump and Bill Gates use to reduce their taxes from the 50% that the average American pays all the way down to 4%-5%! That's right: 4% - 5%.
Now you know the first step, You MUST have your own business.
That's not all folks. Think about the possibility of 300 deductions that are already available and sitting waiting to be used: by you! – a bona fide business owner! Let me show you how to put some of these deductions to work to dramatically reduce you taxes!
What is the Smartest Way to Pay for My Fun?
In his best selling book, "Rich Dad, Poor Dad", Robert Kiyosaki warns people against the dangers of buying what he calls "doodads" - you know, junk, spur of the moment items. Those things that you didn't know existed until you read about them in an in-flight shopping catalogue and now that you know about them: you just can't live with out one.
Keep it Simple and Strategic
There Are Several Keys To Handling Your Business Record Keeping... * The first is keeping complete and accurate records. * The second is separating the business from your personal finances. Let's start with this part first..
Mr. CPA, Can I Deduct a Pizza?
Recently, I stumbled across a concept that could change your financial life. You can call it a paradigm shift, or a new perspective, or just a different way to look at things. This single concept can save you tens of thousands of dollars in taxes each year. It's so powerful and yet completely under-utilized.
