If you’ve been following my blogs for any length of time, you probably already know the answer.
“Help! I’m a high-income W-2 worker and I want to pay less tax! What do I do?”
Usually the request is more specific with the kind of work the person does, how long he or she has been doing it, and how hard they work.
But it all comes down to one thing.
How come you work so hard and you have so little to show for it?
There are X ways to keep more money in your pocket.
- Make more money,
- Have less expenses, and
- Make your money work for you.
How can you make more money?
You can find a better job. You can work more hours. You can start a business. Those 3 ideas can generate literally 1,000s of additional ideas. In fact, I have a free workbook I’m finishing up that has 1,000+ business ideas that work in today’s economy.
Most people, though, think first they need to look for a better job. That’s getting harder and harder to find, though. And so it can become just an unhappy situation with you getting paid less than you believe you’re worth.
For some people, especially those just getting started, the job market is especially hard to break into. Instead of one full-time job, you end up having to take 2-3 part-time jobs at lower pay, no benefits and more hours away from home.
Working harder or in a better position just isn’t that easy anymore.
I like the third option. Start a business. I talk about it a lot for two big reasons: You control your own financial future and you’ll pay less taxes starting on day one.
Yep, start your business this weekend and take home more money with your next pay check from your day job.
If you’re interested, then go to the Facebook group https://web.facebook.com/groups/DianeKennedysUSTaxGroup/ and follow along with the Steps to Success. I post every 1-2 weeks with another step.
#2: Have less expenses.
When you realize it’s time to make a change in your financial situation, most people think about huge changes.
I’ll make $10,000 more a month! I’ll cut my expenses by thousands a month!
In reality, though, small changes, consistently applied will make the biggest differences. Give up the $4/day, 5 day/week coffee and you’ll have an extra $1,000 a year. Not a lot, but it’s a start.
How about packing your lunch? How about buying in bulk and cooking up big batches to freeze and heat up throughout the week? You’ll eat healthier and pay a whole lot less. Now we’re talking a savings closer to $5,000 – $10,000 per year.
Take a look at all the monthly recurring expenses you have. Do you really need cable TV, Hulu, Netflix and Amazon Prime? Maybe you can cut back on some of that.
Little changes consistently applied will make a big change.
And, of course, my favorite, pay less in taxes. Look for ways to turn every single one of your expenses into a legitimate business expense.
It’s possible, but you have to have the right business and run it the right way.
The final way is to look at how much return your money is giving you. This is especially true with real estate investments. Maybe you have a property you want to leave to your kids, even though it’s got a negative cash flow every month. Or maybe it’s a house you always hope you can live in some day, even though it’s got a negative cash flow every month.
Just realize it’s not an investment. It’s a luxury. If you make enough money that you can afford an expensive luxury like a house, awesome. If so, you’ll probably quit reading this blog anyway.
If you’re like most people, though, and you have a negative cash flowing property that you’re attached to for some reason, probably you can’t really afford it.
Most people don’t drop it, though. Instead, they try to use the real estate aspect to justify something.
You should be easily getting 8% cash on cash return on your real estate investments. (Our last one got us 25% cash on cash return.) That mean if your real estate has equity of $200,000 and costs you money every month, (common in Californian markets), you’re not only losing the monthly cash flow, but you’re turning your back on $16,000 per year.
Make your money work as hard as you do.
Make money the right way (with a business). Make sure every dollar you spend makes your life better now, and in the future. And make sure your investments give you a positive return, at last most of the time.
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