You’ve probably heard or read the phrase, “The rich get richer and the poor get poorer” more times than you can count. Usually, it’s said during the political media frenzy and folks usually end up blaming the government, this politician or that politician, and they never really look at WHY the rich get richer and the poor get poorer.
It really has nothing to do with whether you support Trump, Clinton, Sanders, or the local zoo keeper. It really may just be how you are looking at math in the real world.
In most cases, the rich get richer because they keep doing what makes them rich and the poor get poorer because they keep doing what makes them poor. I know. It would be more exciting to have someone else to blame, but let’s look at a few realities.
Now, we are going to be talking about money in this article. Some folks are already thinking, “It’s not all about the money. It’s about the heart.” or, “But I LOVE what I do. It’s not about my bank balance. That’s fine. But when you go to the grocery store, they aren’t going to ask you to swipe your cheerful smiling heart or ask you how you feel about animals.
They are going to ask you to swipe your debit card. And how well that interaction goes will be determined by what’s going on in your bank account, so let’s focus on the financial side for this article.
Here is a hard cold reality. Most of us were taught very bad math in school. It goes something like this:
Go to school.
Get good grades so you can go to college.
Borrow money so you can get your degree.
Get your degree so you can get your job.
If you are really fortunate, and you land a job that pays $40,000 per year, you probably feel like you’ve done well. But this is where the math gets really bad and this could be why so many folks are poor, even if they have that “good job”.
Most folks look at that $40,000 a year job and they do math like this:
$40,000 a year! With two weeks vacation, that’s 50 weeks a year and at 40 hours per week, that comes out to $20 an hour. 50 weeks x 40 hours per week = 2000 hours. $40,000 / 2000 = $20.
Rich people that created their wealth know this is bad math. Here’s why:
Let’s look at taxes.
Federal Taxes (approximately 11%).
State Taxes (4% or so, depending on where you are).
FICA (approximately 2%).
Do you need a car to get to and from work? I’m going to use very conservative numbers:
Add in a car payment (Let’s estimate $200 per month).
Add in the expense of fuel ($40 per month).
Average maintenance ($30 per month).
Insurance ($40 per month, if you’re lucky)
Do you need clothes for work? Let’s conservatively estimate $800 a year. I know. That’s laughable for most of us, but I’m just making a point.
Are you going to eat out while you’re at work? Throw in another $20 per week (if you eat junk).
Let’s do some basic math:
|Your Annual Salary:||$40,000||Balance:|
These numbers are just directly related to keeping your $40,000 job. Your real income, after these expenses, is now $27,680! Your numbers, based on state taxes, insurance costs, meals, car payment, gas prices, etc… will change but using these numbers, that exciting $20 an hour job is now really a $13.84 an hour job.
(50 weeks x 40 hours per week = 2000 hours. $27,680 / 2000 = $13.84.)
We haven’t even started looking at the cost of the student loan, what it will cost you to pay a mortgage or rent, go out on dates, to the movies, take a trip, etc… At $13.84 an hour, a trip to the movies with a date, friend or spouse, can mean you are trading 2-3 hours of your life to watch a movie and eat popcorn! THIS is why poor folks get poorer! They are on the wrong side of this math. And they were taught this system in school!
This is why many rich folks got that way by starting and building their own business. As a business owner, you can take some of these expenses, or portions of these expenses, and deduct them as real business expenses through legal tax deductions.
In general, employees let the government take taxes out first. You get what is left after the government is done. Business people know that if they structure their business wisely with good legal and financial advisers, they can turn some of these expenses in to legal tax deductions. Business lunches, business miles, business portion of your mortgage or rent for your home based business, business clothing, etc… In many case, the tax savings alone makes starting a home based business a good financial decision!
My advice to you is to contact a local tax professional in your area or check out some of the available resources online to discover what sort of legal tax advantages are available to you as a home based business owner.
Then, get started researching your home based business options right here on this web site.
You may even find a business that lets you satisfy your inner heart cry while building your income and taking full advantage of the available legal tax deductions.