There are two types of money: Government Controlled money and, what we at The Institute for Financial Independence like to call, Usable Money.
What is the Governments Role with our Money.
Government’s main role is to collectively take our money and use it to build more wealth for society as a whole.
They do this in two ways:
Through the income tax and sales taxes they take a portion of our income and redistributed to others in society through government programs in order to enhance and support Governments role in providing society more security. Or through TAX incentives such as the capital gains tax, lower tax on dividend income from stock's, municipal bond tax exemption, and pretax capabilities in IRA or retirement accounts or the Mortgage Deduction to name the most commonly utilized by individuals.
The government is smarter than the typical individual. They Tax us whenever they can get the most amount of money. They don’t Tax you when you buy a home, they TAX you when you sell a home because it has historically been an appreciating asset. When you buy a car they Tax you when you buy it, not when you sell it, because it is a depreciating asset. When an individual puts money in retirement account it is pretax but when most clients take it out they have to pay taxes in a time when they have little deductions remaining.
What does the government require in all tax incentive programs.
The government controls the taxes that we will pay in the future. If we withdraw money early we may not only have a tax but a penalty. If we don’t use retirement accounts we will be subject to taxes and an even stiffer penalty.
In order to maintain the tax break we must invest our money where someone else can use our money in order to make money for somebody else.
The typical allowable investments are stocks were we take all the risk while someone else is using our money to build money primarily for somebody else: corporate executives, their company and ultimately the shareholders who assumed the majority of the risk. Bonds, were someone else’s is borrowing your money to make money for somebody else. Or bank accounts, where the bank is using our money to lend to someone else in order to make more money for their stockholders
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