Let’s say you have a salary of $48,000 per year. In other words you are paid $4,000 per month to mind your employer’s business. Then you get your paycheck and it is for only $2,500. The $1,500 of withholding taxes is you minding Uncle Sam’s business. Then you have to make your mortgage payment to the bank of $1,500, which represents you minding the bank’s business. Oh, and let’s not forget that credit card balance that you let get away from you. That $400 payment is you working for the credit card company. Another $440 goes for living expenses. What are you left with? At the end of the month you are lucky to have $160 for investment, that’s $1 per hour that you are earning working for yourself.
Let’s review:
Salary $4,000 You working for your boss less:
Taxes $1,500 You working for the government Mortgage $1,500 You working for the bank
Credit Card $ 400 You working for the credit card company Living $ 440 You working for your creditors
Net $ 160 You working for you!
It isn’t how much money you make that counts, it is how much money you keep. Most people work for everyone else but themselves. Financial struggle is often a direct result of people working all their lives for someone else, and at the end of their working days they have nothing left for themselves.
To become financially secure, you need to mind your own business. Your business revolves around your asset column as opposed to your income column. Learn the difference between assets and liabilities by reading Rich Dad Poor Dad and start buying
or building assets. The rich focus on their asset column while everyone else focuses on their income column.
Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities or personal effects that have no real value once you get them home. Build your asset column and keep it strong. Once a dollar goes into it, never let it come out. Think of each dollar as your employee. Money in your asset column is money working for you instead of you working for money.
Many people think we are telling people to quit their jobs. For some people that may be the right answer, but it is not the right answer for everybody. We want people to take more responsibility for their own financial decisions. Realize that you have the choice with every dollar you receive how you are going to spend it.
It is very difficult to get rich on an extra $160 per month. So what choices do you have? 1. Work overtime?
2. Get a second job? 3. Downsize your house?
4. Start your own business on the side, part-time?
All of these options will give you more money, but which one might help you on your way to wealth the quickest? The first two, working overtime and getting a second job just make your situation worse and result in you spending more time working for others. The third will help reduce your mortgage payment each month and may be a viable option for you, but it is still a one-time reduction in expenses. Let’s examine the fourth option, starting your own business on the side, even if you need to keep your job temporarily.
The difference between the employee and the business owner is that the employee pays taxes FIRST and then pays expenses. The business owner pays expenses FIRST and then pays taxes. The business owner will always pay less tax than the employee simply because they can reduce the income amount they have to pay tax on!
As a business owner you can also take advantage of tax deductions that are not available to employees. With proper advice and documentation, you might even be able to convert some personal expenses into legitimate deductible business expenses. Of course, your business must have a legitimate money making business purpose other than just saving taxes. Here are just some of the business deductions that you might be able to take advantage of:
1. Home office expenses
2. Business equipment (computers, cell phones) 3. Office supplies
4. Internet and telephone service 5. Software and subscriptions
6. Mileage and other auto expenses 7. Travel, meals and entertainment 8. Business gifts
9. Medical insurance premiums 10. Medical expenses
11. Tuition and seminar educational expenses 12. Child labour expenses
13. Furniture
Look for expenses like these that may be tax deductible if they meet the criteria set by the IRS as outlined in the Internal Revenue Code Section 162(a): “There shall be allowed as a deduction, all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.”
As a business owner you have additional advantage of having the use of the money from your business to reinvest into building your business before you pay taxes, instead of the government taking its share even before you receive your income. We do not expect you to become a tax expert, but by becoming more aware of the tax laws and deductions available to business owners you can maximize your income and minimize your taxes legally. It is very important to seek competent tax advisors to help you create the strategy that suits your business and investment needs and to know what questions to ask of your advisors,
Have Fun Minding Your Own Business!