How to Keep More of Your Money and Grow Your Wealth
You may think that you have no choice about how much tax you pay. Everyone has to pay taxes, right?
There are millions of people who legally pay little or no tax. What’s their secret? Do they know about loopholes that are in the law that allow them to get away with not paying tax? No. They simply understand how the tax law works. They understand that the tax law is not something the government uses only to raise taxes. The tax law is a tool the government uses to shape the economy and promote social, agricultural, and energy policy.
So how can you use the same tools the rich use to pay less taxes?
First, you must understand how different income is taxed differently.
Robert Kiyosaki’s rich dad taught his son and him that there are four different types of people in the world of money. He defined these four types with the diagram below, a diagram he called the CASHFLOW® Quadrant.
E stands for Employee
S stands for Self-employed or small business owner
B stands for Big business owner
I stands for Investor
The CASHFLOW Quadrant separates income earners into four quadrants. On the left side are the employees (E) and the self-employed individuals (S). On the right side are big business (B) and investors (I). You’ll notice each quadrant is taxed at a different rate represented by the number in each quadrant.
If you do the activities that the government wants you to do, you will not only permanently reduce your taxes by 10 to 40 percent or more, you will also begin building more wealth and cash flow than you had ever imagined possible.
So what does the government want? First, they want to create more jobs. Who creates jobs? Entrepreneurs. Therefore, entrepreneurs get all sorts of tax breaks that act as subsidies to encourage job creation. What else does the government want? Affordable housing. Real estate investors get all sorts of tax breaks that act as subsidies to encourage building of affordable housing.
You just need to shift some of your income-earning activities to the B and I side of the quadrant. Thankfully, that’s not difficult to do.
Become an entrepreneur: Thousands of individuals all over the world have home-based businesses or invest in real estate, energy, or agriculture—and they all enjoy the benefits that come from saving money through the tax code.
Become an active investor: That means you have to be an investor who actively invests for passive income, not earned income. Very simply, passive income is income that comes from dividends, rents, and business. It’s taxed at a much lower rate than earned income, which comes from appreciation and capital gains, or from your paycheck. In order to become a super investor, you must find good, cash-flowing investments that produce passive income.
Become a passive investor: I’m not talking about the typical investor who invests in the stock market through a mutual fund or an exchange traded fund (ETF). I’m talking about someone who invests their money with an active investor who is working directly in a business, real estate, agriculture or energy—the tax-preferred types of investments. Passive investors also enjoy the benefit of deducting many of their expenses. With the right tax strategy, they can even deduct losses from the investment against income they earn from other sources.
The key to saving more in taxes is to become a super taxpayer and enjoying the benefits of the right side of the CASHFLOW Quadrant. The best way to enjoy deductible expenses is to start a business or to start investing for passive income. You don’t have to quit your job. Just start small.
To get more of tax-free wealth strategies, get my book Structures Of a Solid Investment which will teach you about dividend investing—