It’s ironic that most of the time the solution is right in front of our noses but is hard to see because of our addiction. It is obvious to the alcoholic that all he needs to do is stop drinking. The alcoholic will argue that if he does that he will lose his drinking buddies and also have to finally face those troublesome thoughts that plague his mind. The solution is obvious, stop drinking and live a longer healthier life. Unfortunately, the choice is usually to keep on with the daily grind and fear change.
When it comes to money, it’s no different. Most people want to have more money. The solution is clear, save more money, invest well and educate yourself in finance and investing. The problem is that to do so requires time and effort. For the modern busy citizen, it’s very hard to make time for anything. We all want more things, and not just basic items but the best things money can buy like a Lexus instead of a Honda or a 60″ 4K HDTV instead of a 40″ HDTV. The reality is that most of us can’t afford all of these things but we buy them anyway. This leads us to the first obstacle of wealth, paying interest. Most of us take on lots of debt to buy things we “have to have”. These things usually require credit cards that can charge anywhere from 14-25% interest in addition to penalties and late fees. In addition to these things, we over leverage ourselves by buying cars and houses we can’t afford. We also take on school loans that can never be negotiated down, even in bankruptcy. All of this debt has a cost. This cost is in the form of interest charges. I challenge each one of you to look at your credit card statements and loan amortization charts for loans that you have and figure out how much money you lose each year to pay the bank for stuff you probably didn’t need. Interest charges are a huge consumer of your wealth but there is another one that is even bigger.
We all want a check from the government when we retire. Recently we asked for “affordable healthcare”. That’s fine as long as you realize there’s no such thing as a free lunch. The second obstacle is taxes. The fact is that there was no income tax in America before 1930. Once FDR enacted his policies, someone had to pay for all the welfare programs. In fact, every time you get a free service from the government, you can be sure that taxes will rise. When you begin to add up your federal, state and sales taxes, it’s not hard to pay 35% or more of your hard earned money back to the government to fund these programs that you wanted. This is why the wealthy make it a priority to reduce their taxes as much as possible by investing in tax advantaged investments. Many of the richest people in the world pay either no tax or only about 10-15% when it’s all added up. That’s why the political argument that raising taxes on the rich is political smoke and mirrors. They know they will never pay more taxes anyway as long as the deductions are still in effect. Think about how your life would be different if you got 20% more money each paycheck. That’s how the wealthy play the game.