Today, I will be writing about “money fast passes”. Ever wonder what the “loopholes” of the rich are? Well, I am about to share them with you! You can use this blog series to help you increase your wealth and up your financial IQ!
The government uses incentives to get individuals to perform tasks in two areas (owning a company and real estate) through tax breaks in order to increase free market transactions.
This means that the government gets people like you to perform tasks by giving them tax incentives so that it does not have to perform these functions. In short, the government wants you to provide jobs and housing.
There are 3 types of income
Earned income is taxed at the highest rate. Earned income is the income that you receive when you go to work. The government wants individuals to save their money and reinvest. When individuals re-invest their earned income (which they have already paid income tax on) they get to pay “capital gains” tax on any income or interest that the investment makes. Currently, the capital gains rate is 15%-20%.
The key to investments is that your money works for you, even while you are asleep!!!
Saving Money is a Daily Habit and a Lifestyle Choice:
Someone who earns $1 million and spends $1 million is still living month-to-month. The first step to investing money is finding the money to invest by saving.
You have to be willing to look at your current lifestyle and see how you can reduce your spending, to increase your savings.
Learning tax loopholes and finding investment vehicles isn’t the hard part. The truly difficult part of investing is finding the money to invest.
That means living below your means so that you can set aside the funds to start investing. Remember, saving and investing requires strategy. You must be a student of the game!
To learn more about highly effective morning routines click here. To be successful, you must be a student. Humble yourself and strive to learn one new concept each day. I read a book every week and a half. That is around 30 books per year! You can do it too. Don’t have time to read? Listen to books on Audio!
If you haven’t read “Rich Dad Poor Dad” by Robert Kiyosaki, it’s a great place to start!
Passive Income and Capital Gains Tax Rate:
Ever wonder why Warren Buffet only pays 17% in income taxes (according to a Forbes article, see resources below)?
It is because most, if not all, of his income, is derived from income streams that are taxed at capital gains rates.
He owns many companies, which allow him to write off expenses and roll losses forward (all to come in future blog posts). For now, let’s focus on how to get our income into the capital gains tax bracket.
Passive income usually comes from rental properties or a business that you own equity in.
Portfolio income (think papers in a portfolio) is typically derived from stocks, bonds, mutual funds, index funds, etc.
You must have savings in order to invest and achieve these higher levels of income streams.
AND I know what most of you are thinking… “I don’t have extra money laying around!”.
Where to Find Money to Start Investing:
I am going to give you one $5 example, which you can then apply to every $5 increment in your personal daily spending habits.
Say I were to buy a $5 coffee every morning before work. That is $5 x 5 days per week x 4 weeks per month x 12 months=$1200 per year on coffee!!
One last tip, learn what it takes to go out and achieve your goals by reading this article. Get started building your dream life today!
Be a student of success, and start by downloading the “Rich Dad, Poor Dad” book on Audibles. It has become one of the cornerstone books in finance for beginners.
What else do you spend $5 on that you could save? Have any easy tips for saving money? Please share your thoughts with the community by commenting below!