12: Eliminating Your Biggest Expense
If you haven’t noticed, the last few weeks have been pretty focussed on tax mitigation. I’m always shocked by how little time people spend trying to navigate the tax law.
The reality is that most of the tax law is gray and one of the specific things that wealthy people do that higher paid professionals do not, is to try to figure out how to legally pay less taxes.
You see, I’m a business guy and I can’t help to view my personal finances the same way that I do my businesses. In business, you have revenue and you have expenses. What’s left is profit and that’s all you care about. You can increase profit by increasing revenue or decreasing expenses.
In personal finance, your revenue is obvious, right? Revenue is how much money you make. If you are an employee, it’s simply your salary. Of course, your expenses are pretty obvious too. You have to pay your rent or mortgage and your car payment etc. Now–think about it a moment and tell me what is your biggest expense?
For most of you, taxes are your biggest personal expenses of all. You may not think about it because you are used to withholdings. However, if you have a salary of say $200k, how much of that do you really see? That’s a huge chunk right?
Everyone wants to make more money but it might actually be easier to pay less taxes. The key here is to understand that there is nothing wrong with paying less taxes. The federal tax code is 74,608 pages long. 99 percent is devoted to tax exemptions and credits.
Are you paying more than your share? Probably. Did you know that there are ways to legally reduce your taxes even if you are a W2 wage earner? Last week, Investor Club had a presentation on how to literally write off half your W2 income.
Now, if you’re wondering where I learned all of this stuff, I’ll tell you right now. I learned it from Tom Wheelwright, Robert Kiyosaki’s CPA. And, in case you guys have not signed up for any of his stuff yet, start with this: