Why You Aren't Rich: 3 Basic Tips
Because only with its help will we be financially independent of the payments made by our employers, pension funds or other institutions. That is why more people than ever are striving for additional income - for example through securities, real estate, participations or other forms of investment. But no matter how well things are going financially, the high expenses in particular thwart the corresponding bill. Many people barely have enough money to set aside. In addition to rent, loan installments and consumer spending, taxes and duties are the main contributors. In fact, the expenditures that the State demands of us form the largest item in most households. Anyone who intends to build a fortune has to escape this logic, and this is what my strategies are aimed at. They allow even average earners to create value by reducing the tax burden. But my solutions should not only help save taxes for a long time. My concern is our financial independence and the ways to get there.
1. Rethinking is required
First of all, the implementation of the strategies requires a rethink. This begins with taking responsibility and no longer letting the state decide on your own money. Because opportunities to build up wealth are particularly available to those who actively use tax law for their own purposes, i.e. who control taxes. In doing so, dear readers, you will stumble across an unusual confession in many places: I love taxes. The reason for this is simple. Our tax law is complex and is based on numerous rules. Since these laws can be used in your own interest, it is fun to play the tax game and thereby realize chances of winning. As with any good game, the one who dominates the front is the one who knows the rules. Therefore, in the first section of this book, I show how the true amount of taxes and duties is calculated, and what principle is behind the many paragraphs in this area.
2. Rules for lower taxation
Then there are rules that will help us reduce taxation. As a central element on the way to your own wealth, I would like to introduce you to my three-pillar strategy. In short, the latter consists of optimizing income and expenditure for tax purposes and structuring the resulting assets in such a way that they generate a positive return. I will show you how to use the existing rules for your own benefit. And where the taxes saved enable profits, these funds can be invested and used to build up wealth. You will see that my proposals are neither particularly complex nor that they require the financial means of rich people.
3. Assets Protect
After all, you should know the rules on how to protect the created assets effectively - be it from the bankruptcy of your own business or from other, unforeseen incidents. In addition, the book looks beyond the death. After all, your own family should then benefit from the assets saved up until then rather than the state. Finally, I will give you the necessary information on implementation. Please take these tips to heart if my strategy convinces you. After all, it is important that you actually work around avoidable mistakes. In any case, it is advisable to seek expert advice in order to implement my concept. Over and over again, the sections of this book show you how closely intertwined values, income, expenditure, and debt are. I am describing these dependencies using the picture of the money propeller and with this book I would like to convey to you the basics of how your personal money propeller can be turned faster when building up a fortune using the appropriate tax strategy.
The tax game
Anyone who reads the German Income Tax Act (EStG) has to work through 99 paragraphs, each with countless sub-items. Section 7 alone ranges from 7a to 7k (of which, however, only 7a, g, h, and i are still in force), and each of these paragraphs has up to nine more or less detailed paragraphs. Like all laws, the EStG is also written in a language that is often only understood by experts. For most people, such texts are the opposite of exciting reading; they are happy when the annual tax return is submitted and maybe a tax advisor does most of the work. Almost everyone complains about the high deductions, but sees them to some extent as compensation for not having to deal too much with taxes and duties.
Anyone who relies on the state and accepts the setting of wage tax and duties and maybe not even filing a tax return must pay the corresponding price in the form of high deductions. You can keep it that way, but it doesn't have to be. For example, I find this situation extremely unsatisfactory because I prefer to keep my money and decide for myself how I handle my property. The state only gets what it needs. But what does "what is necessary" mean? It certainly does not mean to throw money in front of the tax authorities with crooked tricks. But neither should we give up responsibility and forego design options. Instead, how about understanding the many paragraphs of the various tax laws as rules of the game instead of turning a blind eye to the supposedly inevitable?
How not to lose to the Treasury every year
What will happen if we take a closer look at the logic behind these rules and try not to lose again every year - against the tax authorities, which deduct half of our income from us without asking? This was the consideration at the beginning of my professional life, which is one of the reasons why I became a tax advisor. This has given me the ambition to use the rules of the tax game for me and my clients. I've always been particularly annoyed that the state doesn't ask me; he just takes. So my goal was to regain control. You think keeping track of things doesn't work? If you leaf through the relevant laws, you will quickly notice that there are more exceptions than rules and that the tax authorities assess the same facts completely differently - depending on the situation. Many people complain about this fact and find it unjust that large companies, for example, pay almost no taxes. For me, however, this finding is rather positive; obviously a lot of taxes are not that inevitable after all.
They feature great for good reason Companies extensive tax departments that make sure that not too much money goes to the state. Small craftsmen, the self-employed, landlords, investors or employees can only dream of this; however, the tax laws apply equally to everyone, big and small. For this reason I would like to make some of the successful strategies available to small and medium-sized taxpayers as well. Some of my basic principles are not overly complex and can also be implemented on a smaller scale. The strategies that I would like to present to you on the following pages were developed from this basic idea. First of all, it is important to take the reins of action into your own hands. Personal responsibility is the prerequisite for using tax law in your own interests. Everyone is therefore well advised to know the direction they want to take. The tax game only works if you set goals. The point is not to achieve this one hundred percent in every case; everyone will adjust their plans sooner or later. But the personal strategy grows from these goals.
Taxes and duties steal your wealth
Our complex tax law shows that we are only able to structure taxes optimally if we act individually. In addition, personal goals provide the necessary motivation. But everyone should remember one thing: personal responsibility means work. As with any good game, you have to stay awake when it comes to taxes and constantly rethink your moves. If we follow these rules, there are various starting points for reducing taxes and duties. After that, the bottom line is that we have a lot more money left over to build a fortune. However, that means that we are only halfway on my strategic path. Because the desired financial independence requires that we think about our entire financial concept. But how do we use our money wisely? We answer this question when we deal with our economic goals and clarify how we want to invest or how we would like to make a living. Because almost every flow of money has a positive or negative effect on our assets - depending on how we shape it.
But before it gets into the full potential, a word on the occasion of the frequent newspaper reports on tax evasion and the like: This book makes sure that the strategies presented are one hundred percent legal and do not aim to cheat the tax authorities. I only explain why German tax legislation is the way it is and how you can build your own wealth on its basis. The tax laws that apply in this country give us all enough leeway. It is up to us to take advantage of these opportunities. The tax laws are barely legible because the state has made them so complicated. However, this complexity includes numerous rules and exceptions that can be used to advantage for the taxpayer. You are therefore asked to take the initiative and control the taxes yourself.
The location determination
After the first third of one's professional life at the latest, a painful realization often comes: Income hardly turns into wealth. This problem not only affects employees, it also affects numerous freelancers and entrepreneurs. After all, many have their own property, but this often belongs to the majority of the bank and the property is mainly expressed in high loan installments. Anyone who has children, needs a car or two and indulges in little things usually results in a tie - only a few hundred or thousand euros accumulate on the account per year; income is more or less equal to consumption. Anyone who also reads the reports on demographic change and hears warnings of inevitable pension cuts often puzzles over their future financial situation.
Whether you believe the illusion of pensions or not; Nevertheless, most people strive for additional security in the form of their own savings. Almost everyone undertakes arithmetic games about possible wealth, and the path to financial independence is probably a constant topic in every second family council. But where do you get it if you don't steal it? Especially since the accounts of many households show that a luxurious lifestyle by no means prevents the surplus at the end of the year. In almost all cases, the odds and ends make a difference. Rent or loan installments, insurance, cars, groceries or fees of any kind decimate the monthly income beyond recognition. Unfortunately, the bitter realization is that all expenses are more or less fixed costs that can hardly be reduced. This book is therefore not intended to optimize your personal payments. After all, you shouldn't be on a spending diet. You also know best what you need. On the contrary, our entire economic system is based on the fact that we consume, and those who do not play along simply starve to death.
Don't go on a spending diet: checklist for your personal situation
In terms of personal finances, we don't care how much an individual needs or which consumer goods are appropriate in each case. We start with taxes and duties - and these can definitely be optimized. “You shouldn't go on a spending diet” This approach is particularly effective in optimizing expenses, because taxes and duties are usually the largest item in personal financial accounts. That is why savings are particularly effective in this area. But wait - one step at a time. Before we learn about the strategy to reduce taxes and duties, it is important to first consider the basics of personal finances. Even if it sounds trivial, the path to more wealth and less taxes can only be successfully trodden by those who know their monetary status quo in detail and have an insight into their own finances. Experience shows that many people do not know their financial situation well enough and incorrectly assess values, income and expenses.
It is therefore advisable to answer these four basic questions for yourself first:
- What values do I have? W.
- What debts do I have? S.
- What income do I get? E.
- And what expenses do I make? A.
Values generate income
What are your values? A car? A property? Shares? Jewellery? The list of personal values almost always includes the points mentioned. However, at least two of the four do not act as values, but as their opposite, as liabilities.
The car can easily be identified as a loss maker. The car doesn't bring any money into the till. For example, it costs 30.000 euros at the dealer and is therefore "worth" this amount, but it loses a large part of its value on the first trip home. When you sell your vehicle, which is only a few years old, you often don't even get half the purchase price. A clear case of loss of substance. As if that weren't enough, owning and using the car cause daily, monthly and annual costs for fuel, maintenance, MOT, insurance and taxes. This creates no income, but expenses. Therefore, a car is usually not part of the assets, but a liability.
Is your own property worth it?
The valuation of owner-occupied property is a little more complex. As a rule, this does not generate any income and is therefore of no value according to our definition. But it doesn't look that bad, because in many cases a property at least helps to reduce expenses. However, as surveys in this context repeatedly show, most property owners overestimate the savings made by owning a house. Despite ownership, a property regularly costs.
- Property tax,
- ongoing expenses for maintenance and minor repairs as well
- Refurbishments that are necessary at longer intervals.
These costs eat up a large part of the rent saved and in some cases exceed them. In purely financial terms, buying your own property is therefore very rarely worthwhile. In addition, assets like your own house are not so easy to sell. Firstly, the loan agreements ensure binding, secondly, the homeowner needs a roof over their head, and those who have lived in the property are reluctant to go back to a rented apartment. That is why it is right to classify your own four walls as a liability.
Please do not get me wrong, because I do not want to devalue home ownership. There are good reasons for your own house, such as the high feel-good factor or the extensive design options. These arguments do not arise from the investment side, but represent reasons for consumption. Ergo, I do not assign a property that I use to the values, but to the consumption expenditure. This view has a profound effect on personal finance accounts, as we shall see later.
This is how you identify your personal values
My definition of values with regard to their main task described here arises from a different thought. Values have two central functions for building wealth:
- They increase their value or at least keep them until I sell them and
- they give me income.
According to this definition, different examples of values can be cited, such as rented real estate. In the case of the latter, the rent represents the income. In the case of securities, dividends or interest generate income. In the case of company investments, it is the distributions that generate income. The examples mentioned also enable an increase in value. Gold and silver have also proven to add value over the long term, but they do not generate any ongoing income. "Wealth is built according to purely mathematical criteria."
In order to identify your personal values, you have to ask whether certain objects (can) bring you something, or whether, viewed in the light, they tend to put a strain on your wallet. It is very important to make this list unsentimentally. Because your wealth does not ask about preferences or hopes; it is formed according to purely mathematical criteria. However, this restriction should by no means prevent you from creating value according to personal preferences, i.e. investing. Because you definitely need one thing as a prerequisite for success: It is necessary that you deal with your values and your assets. Only if you do this will you acquire the necessary know-how and recognize the opportunities for profitable investments.
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