Wealthy people own not just the dollar but the source of that dollar. Once you wrap your head around that, your perspective on wealth will shift permanently, and you will see why you should stop working for a paycheck. People often have the perception that a big paycheck is what leads to wealth. But most people with a big paycheck expand their lives so that they need that paycheck. A bigger mortgage, a bigger tuition, a boat payment. As long as you’re dependent on someone else you’re never really building wealth.
If you need to make money in order to support your lifestyle full of debts – mortgage, car payment, student loan – you will never be free. If you own Performing Assets that support your lifestyle free of debts – you are truly free!
You must think of your wealth building like a business. Wealth building must BE a business for you for the following reasons:
You Own the Cash Flow
This might seems obvious but the cash flow created by a business is owned by the business. When you work for a paycheck you are helping that business to make money. As an employee you are at the mercy of your company’s cash flow. If it goes down you might be out of a job. Unless you own a position in that business you’re not benefiting from the additional cash flow you’ve helped create. As a business owner you own a pipeline. The cash that flows through your company belongs to you.
You Pay Lower Taxes When You Stop Working for a Paycheck
Business owners are taxed at a lower rate than the employees who work for the business. Let that sink in for a second. If you’re receiving a paycheck you’re being taxed as an individual. Billionaire Warren Buffet famously explained that his secretary is taxed at a higher rate than he. About 20% higher. True enough.
I’m sure you’ve seen pundits on television complaining that Apple or Google or some other big company is taxed at 15-20% while paycheck employees are taxed close to 40%. They’re not wrong but their outrage is misplaced. The tax code in this country is written to benefit businesses. And businesses drive the economy with jobs, production, and innovation. If you want to pay less taxes you need to start a company.
Related Article: The Jaw Dropping Ways The Rich Lower Their Taxes: 5 Ways
Your Expenses Flow Through your Business
With a business you can run almost all expenses through your company as long as they’re legitimate. Let me paint a picture of what it would be like to stop working for a paycheck and start working for yourself.
You start a home-based internet business like a blog or YouTube channel. Now pop quiz time.
Can you write off a portion of your internet costs? Yes you can.
Can you write off a portion of your electric and water bills? Yes you can.
Can you write off a portion of your date nights? Yes you can.
When you follow the IRS guidelines you can write off legitimate expenses. My wife and I routinely do a business date night where we bring our iPads and talk business strategy. During a recent lunch we spent two hours walking through spreadsheets. That’s a business expense. Think about all the ways you can legally write off expenses for your new business.