The most deliberate and dynamic path to reaching your financial goals is increasing your income. While there are many other facets of building a nest egg, such as spending smartly, planning and investing well, creating multiple streams of income can catapult your financial strategy.
Teaming income methods with tax strategies offers a win-win for your financial plan. While paying as little as possible in taxes may sound like scarcity mentality, this strategy actually allows you to give even more to the causes you support; giving is an important element of wealth building, as outlined in my book, Earn Grow Give.
The most common wealth building strategies that successful investors use include:
Small business ownership– Use of an entity when owning a business can both legitimatize and capitalize on tax savings that are related to your business. While this doesn’t always need to be done during the initial business launch and testing phase, more deductions are available through some entity structures vs. a sole proprietorship. In fact, it’s probably smart to test your new income idea without the extra cost of an entity unless you need it for legal protection or other reasons during the testing phase. Be sure to research the best option for you, or check with a CPA or tax attorney first.
Rental real estate– This wealth building strategy actually has the advantage of providing capital appreciation potential, as well as income and tax benefits. While it’s hard to believe during down cycles, just like the stock market, over time, real estate does appreciate in value. The key is to buy low, as with with all of your major purchases, personal or investing.
Oil and Gas– These income generating investments can have tax savings related to depletion and the ability for exploration and drilling expenses to be deducted from related income. There are ways to invest in oil and gas through the stock market, or, for high net worth investors, in private or small fund investments.
Remember, its how much money you have left AFTER taxes and investment expenses have been paid that accumulates. Be sure to take steps to incorporate tax benefits into your investment plan. Seek a CPA that will give you proactive advice about smart investments that will grow your wealth account.