How Does Money Flow in Today’s Economy?

Have you ever looked at the disparity between rich and poor in today’s economy and wondered, “How does money flow?” Now, I’m not going to get into an in-depth economics lesson, but here are some principles that our economy is based that may surprise you.  How your money flows when you work for someone else is not the same as the business owner.

How does money flow if you are a W-2 employee?

If you are employed by someone else and receive a paycheck, your money flows typically looks like this: You trade time for dollars. You work to earn wages. Your employer takes the amount of wages you earn and gives a percentage, usually between 20% and 30% to the governments (federal, state and local), then deducts any extras like insurance premiums or retirement contributions. Then you get the remainder to spend on your expenses. If you are lucky, you get approximately 70% of what you actually earned each month. Depending on your state, your deductions, and other factors, you may only receive 50% of what you actually earned. The governments use the taxes you pay each month to pay for government expenses. Government runs on the W-2 employee. The W-2 employee is the most heavily taxed and the most frequently taxed entity in our entire economy.

How does money flow if you are a business owner?

If you own your own business, how does your money flow look different than the W-2 employee? Well, for one thing, you get to control a lot more of your earnings. You provide a product or service and a customer buys it from you. You receive that payment minus any processing fees that may be associated with that transaction (credit card processing fees, shipping costs, etc.). Then you pay your expenses. But because the tax code rewards businesses, you get to take deductions for many of those expenses off your taxes. This will generally lower a business person’s tax rate to between 12% to 18%, sometimes even lower if you really keep good records.

By the way, I wrote The Small Business Owner’s Tax Guide to help small business owners. It’s available on Amazon. Buy your copy today. A business person typically will have the ability to use up to 95% of their earnings and only pay taxes after they have paid other expenses. And they get to determine for themselves what expenses they pay when. Most businesses pay taxes quarterly, in January, April, June, and October.

How does money flow if you are an investor?

An investor is rewarded even more by the tax code. An investor earns money through the activity of the money itself. They invest the money in something, like a business or stock, in such a way that the money grows in value. Investors make money work for them. This is often called capital gains. Investors pay the lowest taxes, approximately 10% and they typically only pay taxes once a year. They get to use and spend and enjoy almost all of their money all year long.

How does money flow in your life?

Pretty sobering, isn’t it. How does money flow in your own life? It’s no wonder so many people who are working in jobs and getting a W-2 at the of the year are feeling broke. They don’t get to use or enjoy their own money! A huge chunk of their money is spent before they even get to touch it. Owning a business is a lot better, and being an investor is even better than that. Is it time for you to start moving toward becoming an investor instead of an employee?

Owning Your Own Business is Part of Your Solution

In my opinion, everyone needs to find the right vehicle to take them from employee to business owner to investor. I know I am moving in that direction and I am helping hundreds of other people connect with their dreams and start on the path to financial freedom. One of the programs I use helps small businesses grow their sales while also helping me and other families save money on everyday purchases. I can’t guarantee it would be a good fit for you, but for more information, watch this video.

Ask yourself: “How does money flow in my life?” If you don’t like the answer, then it’s time to make a change. I am here to help you every step of the way. Just reach out to me and let me help.

Here’s to your success,

Trina

P.S. I don’t believe anyone who says they”can’t afford it.” If you need some ideas on how to make money out of thin air to make this dream a reality, click here.