Estimated reading time: 2 minutes, 52 seconds
If your goal is to get rich.. you can't usually do it with linear income.. You can earn 350k a year and your net worth could be in the shitter. Someone who earns 30k could be "richer" than yourself. Why? Because they leveraged their income to buy assets.. then bought their toys.
Those who buy nothing but toys and junk with their money (and add nothing to their asset column) only keeps them beholding to the struggle...and the tax man. People who earn linear income pay taxes First... which puts them at a distinct disadvantage to those who do not.
I respect those who have escaped the rat race. You can have whatever you want, but do it with other people's money... not the money you struggle to earn. Just think, that poor soul you look down upon, could just be better off than yourself.
Let's put two people under the microscope, Jan and Jessie.
Both work at a hospital, however Jan earns 30K a year and Jessie earns 350K, both gross, before taxes.
Jessie, of course, a lot more in taxes and is subject to the dreaded AMT, or alternative minimum tax.
Jan, the 30k a year gal buys real estate with her money.. she leverages her income to buy a small bread and butter house, with help from the FHA. After a couple years, per FHA guidelines, she rents it out then starts the process over. The income from the rental now goes into her income column and the house in her asset column. She continues this into the stratosphere. She reads about real estate, surrounds herself with like minded people and gets rich in the process. She decides that her job is getting in the way and decides to become a real estate agent, to be closer to the deals and to other like minded people.
She then dives into intellectual property, buying licensing opportunities, stocks and virtual properties with an established income. Her net worth continues to grow, surpassing Jessie's by leaps and bounds.
During this time, Jessie, the gal earning 350k a Year is paying the alternative minimum tax, she bought a huge fancy house ( which is NOT an asset unless you are renting rooms out), she bought a couple fancy cars, boat.. all of which drain her of her hard earned money. All of these assets depend on her waking up everyday, going to work just to stay in the rat race. All of these expenses go directly out of her expense column, relying on her income to pay for themselves.
Jan, however will have all of those things and more. She was smart and leveraged her income to buy assets.. she can then borrow against these assets (free of tax) to buy her fancy house and cars. She eventually quits her job and focuses on her budding enterprise.
Janet must remain in the rat race in order to pay the bills.
It turns out that the gal turned real estate agent who Janet looked down upon was smarter than she realized.
Looks can be deceiving, can't they? Barbara Corcoran is a real estate agent who became uber rich in a relatively short amount of time.
It really is that easy to escape the rat race.