The first and biggest “merger of wealth” is taxes.
Our tax system is designed to punish employees who work hourly, and at the same time reward entrepreneurs and business owners. Employees who receive a salary pay taxes based on what they receive, and business owners pay taxes based on what they receive. To that end, most people think Fortune 500 companies are sorting through little guys. Keep in mind, you don’t need to be a big business to get big tax benefits. Even startups get huge tax breaks. So instead of complaining, maybe you should run the business from your kitchen table.
To be eligible for tax benefits in this business, the IRS says you must intend to make a profit. If this standard is met, you are automatically eligible for dozens of tax deductions that you do not receive as an individual. Most losses and start-up costs can be written off to other income from your work (there are restrictions, so get a good CPA for the business to work with you). Realize that no one else (not even your CPA or taxpayer) cares how much you pay in taxes, so it’s your job to understand how the system works and how to use it effectively.
Loss of chance of compound growth
Another set of huge wealth costs is the loss of the investment capital market you manage. If the value of real estate stocks drops significantly, it may take you years to get back to par. And of course, there is no guarantee that it will return during your investment life. The less capital you have invested, the less you can benefit from the power of adding up growth.
If the addition curve of your money is broken by market losses or premature withdrawals, it has a massive impact on your ultimate wealth. For example, if you were offered a job that lasted only 36 days and you had two pay options that you would take? (A) At the end of each day you may be paid $ 5,000 per day for a total of $ 180,000. (2) Your second option would be to pay one cent starting on the first day, but your payment is doubled each day – by 100 percent – and paid at the end of those 36 days.
If you jumped to $ 180,000, you missed the power of true money making. If your colleague who does the same job chose the lineup, he wouldn’t be a millionaire. In 36 days … he will become a wealthy multimillionaire with a final check of $ 343,597,384. Obviously, your investment will not experience such a rapid (or consistent) connection growth, but calculate – the strength of the addition curve over time is strong – unless you break it with large losses (which is not always possible) control (or withdrawal) (which you can).
Money lost in fees and interest for banks and financial companies
The next massive inflow of wealth we face is interest and fees paid to banks or financial companies. Cash lending has existed for thousands of years, and any business model that has lasted so long is a winner for the business. But when you do the borrowing part of the deal, it brings the wealth together, especially when most of the borrowed money is spent on asset depreciation
Now people will tell you that if you can borrow money cheaply and invest it in something that has a higher return than the interest rate you pay, you are using the levers correctly. This may be true, but those trying to take such a step should be aware of the reservations. Try this simple exercise: add up all the money you’ve paid for your life in monthly payments. Then compare that amount to the amount of money you saved on retirement and see which one is bigger. (If you want, we’d like to know about your results in the comments section below.) Then think about how to become a lender, not a borrower.
Depreciation of vehicles and other major assets
Another massive influx of wealth comes from the depreciation of cars, boats, equipment, appliances and most of the other major assets we buy. Most people will lose more money on cars in a lifetime than ever save on retirement, not to mention all the other depreciation assets they will buy. But you can make money on these subjects.
Think of your financial life as a big pie. Don’t give in to the old trick and focus only on what’s going on with your one piece of the pie (i.e. your gains or losses). Instead, pay attention to the whole pie and stop your massive showers of wealth.