REI Wealth Monthly Issue 05 | Page 48

THE TRUTH ABOUT TAXES AND HOW WEALTH IS CREATED MATT THERIAULT Unfortunately, most people are trained to work harder at their jobs in order to earn a bigger and better income. This widely accepted philosophy is flawed because, when you work for someone else, the more you make, the more you pay in taxes. In reality, the only way employees can legally pay less tax is to earn less. Sounds depressing doesn’t it? It’s nothing a little knowledge won’t fix. Stick with me. You’re going to need some vocabulary here. Robert Kiyosaki has made a huge impact on the world of financial education, and one of the most important ideas he’s introduced is the Cashflow Quadrant. In this quadrant there are four types of players in the world of money. Get it, quad, four? Anyway. On the left live the E’s and the S’s. • E stands for employee. • S is for self-employed or small business owner. On the right are the B’s and the I’s (how wealth is created by 95% of the wealthy). • B is big business (>500 employees). • I stands for investor. Every position in this quadrant is necessary for the economy to function. I’m not telling you to be in any particular quadrant, but it’s important to understand what they are and the tax ramifications of them. Here’s a significant bit of information – The quadrant decides the taxes, NOT the profession. A lawyer can be in all four quadrants, as can a house cleaner. The quadrants are determined by how money comes to you, not the service you provide. If financial freedom and building wealth are of any importance to you, then understanding tax structure is a non-negotiable