I’ve been a bit obnoxious in this post so be warned…
Your two biggest expenses in life are not what you think. Your biggest expenses are not (and in no particular order) your wife, husband, girl friend, boy friend, rent, alcohol, cars, kids, education and so on, although they often are significant costs. Your two biggest expenses in life, in fact are taxes and interest on loans.
Yeah! Isn’t that the most exciting thing you’ve heard all day? Don’t you just rip out of bed every morning and say with enthusiasm: “I just love paying taxes and interest!”? Isn’t that what you’ve always dreamed of?
This system has got you pretty good hasn’t it? It’s got you hooked. You need it. It pays you just enough not to have you homeless on the streets, but not enough so you keep coming back every Monday morning. It’s brilliant. You don’t know why, but you know your life depends on it.
So you’re going to work, going to work, going to work, going to work, going to work…only to have 60 – 70% of what you earn go straight down the drain into income tax and interest on that home you’re going to be paying for, for the next 30 years.
What are you going to do with the remaining 30%? Throw a big party? Go on that dream holiday? Buy some great stocks? Fund your retirement? I don’t think so…you’re barely surviving month-to-month, paycheck-to-paycheck. I guess that’s why they’ve termed the word J.O.B. as “Just Over Broke”. Quite a dream lifestyle, huh? And when a recession hits and you get the cut, then what do you do? Cry your heart out, give your house back to the bank and start over…
If you think you can pay off that house in just 7 years…good. But if you’re like most urban professionals you’ll be upgrading to a flashier one in that time, and another, and then another, so you can expect to be in debt for the rest of your working lives. Forty years man…going to work, going to work, going to work…never to have the time and the money to do what you really want. What a life!
When you finally get to retire at the age of 65, what level of income can you expect from all that “survival money” that you’ve worked so hard to save over the past 40 years? Statistics consistently show in Australia, for every 100 people at the age of 65 (dead and alive), 25 have already passed on, 20 have annual incomes below the poverty level, 51 have annual incomes below $35,000, only 4 people have an income level above this amount. Are you excited? Some people don’t even have the luxury of retiring anymore…
But, 1 person out of the 4 that have an income above $35,000 is very rich. A millionaire. How did he or she manage that? Did he the lottery? Maybe, but stats have also shown that windfalls have no effect on a person’s wealth in the long term. I bet you it was because he was financially savvy. Which means, he learned how to develop or acquire assets, unlike his counterparts who became very good at acquiring liabilities. He learned to play the game, while all the others were just pawns in the game. And the game rewarded him well.
He build and bought assets in the form of businesses, stocks and real estate that eventually paid him an ongoing income, whether he liked it or not. I bet you he did like it. Moreover, he protected those assets with legal entities, such as corporations and trusts, which resulted in him paying far less tax than the pawns. Very clever indeed.
It pays to spend a bit of time and money getting financially educated, doesn’t it?
