How To Avoid Being Rich
Want to avoid becoming (or staying) rich? Good news, it’s simple to do! Just follow these five foolproof rules and you’ll be well on your way to the poorhouse:
1. Blindly pay your taxes without a plan. Good tax planning in your income earning and retirement stages can save considerable amounts of money. Income splitting opportunities exist in both your working and retirement years as well. If you own a business, tax planning strategies can go even farther to reduce your tax bills and keep more money out of the government’s hands. If you’d rather be poor, simply skip all tax planning strategies and pay whatever the CRA bills show at the end of the year.
2. Guarantee a loss for your investments. Skip all forms of tax advantaged investing such as TFSAs, RRSPs & corporate investments and invest any money you do put away in a simple non-registered account. Make sure any money goes into ultra-safe GICs and term deposits that are paying out only one or two per cent per year. Once you take inflation (averages around two per cent per year) and taxation (could take away 50 per cent of your earnings) into account, this will mean you are guaranteed to lose money. Earning two per cent per year gross and paying half of that back in tax, you’ll be left with a guaranteed negative net return after inflation.
3. Wait as long as possible to start saving. Make sure you don’t start putting money away at an early age as compounding will significantly multiply the growth of your savings over time. For example, if you were to put $200/month away starting at age 20, you’d have $733,804 by the time you reach age 65 (based on a seven per cent average rate of return) If you wait until age 45 to start saving and put $500/month away instead, you’ll only have $263,191 to show for it.
4. Don’t prepare for emergencies. You don’t need to purchase any disability, life or critical illness insurance as I’m sure nothing unexpected will happen to you or your family. And certainly, don’t worry about putting aside an “emergency fund” with six months of living expenses in case something occurs. I mean, it’s not a big deal that two out of five Canadians are expected to develop cancer during their lifetimes and I highly doubt anyone has ever lost their job or had to take time off work due to a family member’s illness, right?
5. Don’t have a financial plan. When it comes right down to it, it’s probably best to have no plans at all. To ensure that you won’t be financially secure, you should probably avoid planning for your goals, risk tolerance, unexpected events, retirement needs and other financial obligations altogether. If you just keep paying your monthly minimum bills and spend whatever is left (or better yet borrow money to buy what you can’t currently afford), I’m sure things will work out just fine on their own.
That’s it! Avoiding becoming rich and losing what you already have is just that easy. Follow these simple steps and you’ll be living on the taxpayer funded government’s handouts, or even back in your parent’s basement, in no time!
Or if you want to be financially secure and retire comfortably, I guess you could just do the opposite of my suggestions too. It really is just as easy to choose either path. But the choice is up to you…