It is a popular belief that the only way to make your money grow is to get higher rates of return. Every time I hear “higher rate of return,” I ask a question: “Who is at risk, you or the one making the recommendation?” There is another way to increase your wealth without the worry of risk. It is called the Efficiency of Money. Now I’m not talking about strict budgets, buying off-brands, and doing without. I’m talking about the complete opposite. You should have the finer things in life and enjoy them. The only thing stopping you from improving your lifestyle is money, and more precisely, transferred money. We unknowingly and unnecessarily transfer away most of our wealth and it’s out of our control. Have you ever stood in a supermarket line with that ½ gallon of ice cream you forgot to get for the kid’s birthday party, only to have the person in front of you contest the cost of one of their items? The argument starts out polite enough over this $.10 difference in cost, and escalates into a conflict between the store manager and a cell phone call to the shopper’s attorney. Finally, it is resolved with some U.N. intervention. Meanwhile, your fudge swirl delight is dripping down your arm onto your new shoes. The shopper leaves the store victorious in battle, proud and happy, eager to share the success of their confrontation with all who will listen.
Did I get off track there? Not really. If we had the passion and the knowledge to confront the transfers of our wealth, we would surprisingly win most of the battles. Instead of a $.10 victory, the savings could be in the thousands of dollars with no risk of loss.
Here is a list of major transfers of your wealth.
- Tax Refunds
- Qualified Retirement Plans
- Owing a Home
- Financial Planning
- Life Insurance
- Purchasing Cars
- Credit Cards
- Lost opportunity cost
We will be discussing some of them in great detail in future articles. You will need some encouragement to begin thinking a layer deeper than you are accustomed to. Remember, the purpose of taking you a layer deeper is not to uncover defects in your thinking, but to expand your thought process through knowledge so you will be able to make better financial decisions. Without this process, you may suffer unintended consequences in your financial future.
About 6,000 months ago, it was a widely accepted scientific fact that our planet, the Earth, was flat. About 600 months ago, my father was told he would probably retire to two-thirds of his income, thus, he would be in a lower tax bracket. About 60 months ago, we were told of such enormous surpluses controlled by the federal government that our society would prosper from increased government programs. All of these beliefs turned out not to be true. Tax reform acts designed to relieve tax burdens on the public, actually resulted in the government collecting more revenue than ever from its citizens, you and me. The shell game of lowering tax rates while eliminating deductions has been very profitable for the government. Back in our grandparents’ day, Social Security was the save-all safety net they needed in lieu of the lack of retirement plans. Although well intended it was the first step of a long journey of dependency on the government. The 16th Amendment of the U. S. Constitution allowed taxation of income of its citizens.1 Originally, the idea of income tax was ruled unconstitutional in the 1890’s. Article 1, Section 9 of the Constitution states clearly that no direct tax “shall be laid, unless in proportion to the census or enumeration herein before directed to be taken.”2 The 16thAmendment gave new powers to the federal government that conflicted with the 10thAmendment that reserves any other power, other than stated in the Constitution, to the individual states.3 In 1913, 400 pages of tax law were created. Today almost 47,000 pages of tax codes and rulings exist. We will continue, later on, to look into transfers of your wealth to the government, created by the government. Four score and several years ago our forefathers brought forth onto this continent a new notion, that all men are created equal . . . when it comes to taxes. Once again, most of the popular beliefs have been handed down generation to generation, father to son, mother to daughter with very little effort given to studying these beliefs. Now we are at a point where there is confusion between myth, opinion, and fact. Misinformation has caused all of us enormous amounts of lost money, in the form of transfers that we’ve made unknowingly and unnecessarily.
The government isn’t the only player trying to share your wealth. Banks are notorious for dipping into your wallet. One rule of the bank you must understand. If a bank is late on doing something it’s called a “process.” If you are late with the bank it’s called a “fee.” Most recently, a bank charged me a $360.00 fee for not doing something – for not setting up an escrow account for a mortgage. Think about it, $360.00 for doing nothing. When they were questioned about this fee, they said it was simply part of the process of the mortgage. The process of setting up nothing. When asked where that money goes . . . well, the silence was deafening. I could actually hear the crickets chirping.
1U. S. Constitution, Amendment XVI.
2U.S. Constitution, Article 1, Section 9.
3U.S. Constitution, Amendment X.
The bulk of this article is quoted from a publication of the Wealth and Wisdom Institute, it is the thoughts of a growing number of financial planners across the nation, and those who educate themselves through these principles increase their wealth. There truly are those who get rich from the loss of others, and they do so “legally”! By each of us really educating ourselves and taking control of our circumstances we can live with financial peace.