Fraud Blocker

How Much Does Tax Really Affect Your Ability To Build Wealth? You May Be In For A Terrible Shock …..

Article by WealthSafe.

Date Published: 10 Feb 2015

Want to get a big raise at work?

Want to greatly increase your ability to build wealth with little effort?

If the answer is “yes” to these questions, structure yourself to legally minimize your tax. This will put more wealth in your pocket.

The thing to realise is it’s not just the immediate tax saving. It’s the long term compounding effects of wealth building.

Let me demonstrate with an example that will blow your mind …
Untitled 1

Let’s assume you can save 10% tax with some good planning or accounting help.

At first glance, 10% might not seem like a big wealth hit. But regularly having 10% of your income taken away by taxes causes tremendous damage to your ability to accumulate wealth over the long term.

It’s like trying to fill up a bucket of water with a leak at the bottom.

To get an idea of the damage a 10% annual tax hit will cause over the long term, let’s look at the 20-year career of a successful fly in fly out worker, or executive. We’ll keep this example simple to zero in on the core idea.

Let’s say our successful worker earns $250,000 per year for 20 years. That’s $5,000,000 in earnings over the time period.

Now, let’s say our executive pays an additional 10% tax every year because his accountant fails to properly plan for his tax.

At that rate, he will pay $25,000 per year ($250,000 x 0.10) … for a total tax bill of $500,000 over 20 years.

$500,000 is a lot of money. But the damage is actually much worse when you factor in the “missed opportunities” that taxes take away from you.

You see, that half a million dollars is money which can be directed into investment vehicles like blue-chip stocks or real estate. By not being able to invest it, you’re hit with a big “opportunity cost.”

If our executive managed to minimize his tax to get rid of that 10%, he could keep that $25,000 per year… and direct it into good investments.

If he kept just one of those extra $25,000 payments and put it into an investment that could compound tax-deferred at 8% annually for 20 years, he would have $116,523.

If he were able to plow each extra annual $25,000 payment into an investment that compounded tax-deferred for at least 8% annually for 20 years, he would have more than $1.2 million.

By some simple tax planning, our executive goes from down $500,000 to up $1.2 million.

That’s a “swing” of $1.7 million.

It’s a huge difference in wealth… caused by a seemingly small 10% tax.

I kept this example simple on purpose. Now … I know not everyone is going to make $250,000 a year. The “swing” for a lot of people will be $100,000… $250,000… or $500,000. Still, those numbers are huge for most people.

Maybe a 20-year time frame is too long for you. So how about getting a raise next year? Don’t hit up your boss for a raise. Do some 100% legal planning around your taxes.

Whether it’s over the short term or long term, and whatever your particular circumstances are, paying an additional 5% or 10% every year in taxes is a major hindrance to your ability to build wealth.

That’s why – if you’re interested in building wealth – having a good accountant is an essential part of your wealth creation team.

It’s a way to immediately increase your earnings with no additional effort. And over the long term, it can drastically affect your level of wealth.

Finding a good accountant is not always easy … but it is worth the effort to find one.

Book Your Free
Tax Saving Assessment.

Wealth Safe

Related Articles

View more tips & insights