Money is not the most important thing in life, but you need it to enjoy the best things in life that are free. Here's where to find it.
Money joins politics and sex as personal topics not allowed in polite conversation. I expect it's the reason we know so little about any of them. We seldom if ever talk about our income, or especially the money we owe, and while we may talk about investments it's always about winners. We conveniently forget the dogs that cost us dough.
With men, managing money is a macho thing. We think we're supposed to know how to do it, and not knowing is a reflection on our intelligence. With women, admittedly the brainier species, it's a matter of security and being able to show others they have it. Whichever, whether we admit it or not, we all have a lot to learn about money, and how to use it.
During his lengthy career as a financial advisor, this 80 year old curmudgeon discovered startling information about the money we earn. Information that can make a wonderful change in your life. I'm happy to say it has already changed the lives of hundreds. Some of them say the change in their finances is a "miracle"-- of course that's only in comparison to the tough time they were having before they began using this new information.
New information? You can't possibly believe this unless we start at the beginning. This won't be a boring lecture, because it can save you several hundred dollars a month right from day one-- and that's only the start!
To set the stage we're going to go back in time to the early 1900's before World War I. You have a job. Don't be shocked by the low wage you're earning-- there's no income tax to pay, and there aren't many things to buy other than food, much of which you probably grow yourself, and clothing, some of which your good lady makes for the family, tools, and since not everyone has a Model A Ford or other flivver as yet, maybe some harness and horseshoes. Whatever, here's a surprise; you have to work just as long to buy a $5.00 suit of clothes as you will a hundred years later to buy a similar suit at $300. It's the same with other things we have today that existed back then. Their prices have changed dramatically, but their cost-- the time you put in at work to pay for them, is about the same!
But I digress. There's no income tax, remember? So when you buy that fancy $5.00 suit, that's how much you have to earn to pay for it. Now, back to the present. You're going to buy that same suit for $300. How much do you have to earn to buy it? $300? Not on your pink bippy! Now we have income tax. If you are average, your "effective" tax rate is about 40%. So you have to earn $500 and pay $200 tax, to have $300 for that suit. If you happen to live in Canada you may have to pay about 14% gst and pst. The price of the $300 suit is then $342 and you have to earn $570 to buy it Your cost is almost twice its price!
How about say, $3,000 property tax? If you live in the USA it's deductible, which helps. But in Canada? You need $5,000 income which after $2,000 tax leaves you with $3,000 to pay your property tax. If you could instead use that extra $2,000 income for something else, after tax you'd have an extra $1,200 cash in your pocket. This means you pay $1,200 hidden and totally unnecessary "cost of tax" resulting from double taxation. Hard to believe there is such a thing as hidden cost of tax? Pretend your $3,000 property tax is deductible. You'd get a $1,200 tax refund.
But again I digress. You want additional money in your pocket right now.
Start with the first of several steps that will make a remarkable change in your life: reduce "impulse buying" to the minimum. You're going to say it's just common sense, and not all that important and you don't do it anyway. Right the first time, wrong the second and third. Everybody does it to some extent, admittedly some a lot more than others. Don't buy something you aren't specifically looking for. Not even that extra cup of coffee. If you need encouragement, think how much time at work will be wasted on it.
Your "tax factor" gives you the answer. If your top tax rate is 40%, you have 60% left in that tax bracket. Your tax factor is $1.00/.60=1.67 which is the mathematical way of saying that because of income tax, $1.67 income ends up being $1.00 to spend. You have to earn 1.00x1.67= $1.67 for that $1.00 cup of coffee. Or, earn 199 x 1.67= $332.33 for that $199 widget you have your eye on. If you still want it, buy it, that's what your money is for. Otherwise... that widget could use up a whole day's effort at work!
Take this seriously, pilgrim. Using your new shopping attitude makes you smart, not a miser. You'll have a lot more money for things you really want! It will come to your rescue in other ways too: this is only the beginning, the first of two procedures called maximizing your savings ability. They are followed by several procedures that must be done one after the other to make an almost unbelievable change in your financial life!
It's all there for the learning at www.gettingaheadfinancially.com
