Why You Need to Increase Your Financial IQ

The average American today works for six months to pay taxes. This is a very long time. The more one work, the more she pays the government.

In this article, we’ll take a look at how taxes work in favor of corporations and the rich, and then discuss the power and advantages of corporations.

When the poor and middle class try to punish the rich, the rich do not bow down and react. Because they have money, power, and are determined to change things. They don’t just sit around and agree to pay taxes. They look for ways to reduce their tax burden, recruit skilled lawyers and accountants and persuade politicians to change laws and create legal loopholes. They have the opportunity to change the rules.

For example, the US tax law provides some possibilities to avoid paying taxes. Many people cannot access these opportunities because they are busy with their own work. These legal loopholes are details only the rich can see. For example, “1031” means the section numbered 1031 of the State Revenue Law. It allows the seller to delay tax on real estate sold to be exchanged for a more expensive property for the purpose of capital increase.

Real estate can offer great tax benefits. If you are not selling for disposal, you will not pay tax on your earnings as long as you trade them to increase their value. People who do not take advantage of the tax savings made possible by law miss the opportunity to grow their assets.

A high Financial IQ is required to be aware of and benefit from these opportunities. And raising Financial IQ only takes four areas of expertise:

  1. Accounting. We can also call this financial knowledge. This skill is a must to build an empire. The more money one takes the responsibility, the more careful one has to be. Otherwise everything will be ruined. Details matter. Financial knowledge is reading and understanding bank statements. This skill allows to identify the strengths and weaknesses of any organization.
  2. Investment. The science of making money. Strategies and equations are important for making the right investments. This skill is linked to creative intelligence.
  3. Understanding Markets. It requires knowledge of supply and demand. It is necessary to know the “technical” aspects of the markets. Whether an investment is right or not depends on current market conditions.
  4. Laws. A company with technical skills related to accounting, investment and the market grows rapidly. But a person who knows the tax law and is under a corporate shield can get rich much faster than someone working for someone else or just someone who owns a small business. This is like the difference between walking and getting on a plane. The difference is huge when it comes to long-term wealth.

Employees earn and pay taxes, and live with the rest. The company earns and spends money and pays taxes on the remaining amount. This is one of the biggest legal tax loopholes benefited by the rich.

This is easy to do if you have investments that generate good cash flow. For example, you can turn your vacation trips into board meetings in Hawaii. Automobile payments, insurance, repair expenses turn into company expenses. You can show your sports club membership fee as company expense. You can add most of the restaurant expenses to company expenses. There are many more advantages like this, but they should be done before paying tax.

The rich hide most of their wealth. They use companies or foundations to protect their assets from creditors. When someone sues a wealthy person, they face a legal protection shield, and often that wealthy person “has no property”. The rich keep control of everything, but they have no property. The poor and middle class try to own everything and lose them to either the state or other people.

In short, if you have legal assets, find out as soon as possible the benefits and protection shield a company can offer you. You will find many books written on the subject. Even if you look at the company establishment stages, you will get detailed information on this subject. The power of sole proprietorships is well described in Napoleon Hill’s book Think and Grow Rich.

Financial IQ is actually a synergy of many skills and abilities. But I think the combination of the four technical skills I listed above forms the basis of financial intelligence. If you have a desire to make a great fortune, then the combination of these skills becomes even more important.

As part of your overall financial strategy, my suggestion is to have your own company equipped with assets.


Please let me know what you think below.

Keep reading with WHY ACCOUNTING KNOWLEDGE IS NEEDED.

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The Robin Hood Ideal

“Why don’t the rich pay?”

“The rich should pay more taxes and help the poor.”

“The only reason the poor survive so hard are the rich.”

We often hear about the idea of taking from the rich and giving it to the poor. When I hear such sentences, I think of Robin Hood. Robin Hood may have passed away from this world hundreds of years ago, but those who followed in his footsteps are still alive.

The idea of taking from the rich and giving it to the poor most troubled the poor and middle class. The reason why the middle class is heavily taxed is actually the Robin Hood ideal. The harsh reality is that the rich are not taxed. The middle class helping the poor, especially high-income and educated ones.

For better understanding, we first need to look at the historical process.

There was no such thing as tax in Britain and America before. Temporary taxes were imposed to cover increased expenses during wars. In the past, the announcement was made by the king or the head of state and everyone was asked to put their hands in their pockets. The introduction of taxation in Britain took place between 1799 and 1816. During this period, Britain was fighting against Napoleon. In America, the first taxes were introduced during the Civil War period between 1861-1865.

In 1874, England turned income tax on its citizens into a permanent practice. The United States made the income tax application permanent in 1913 after the 16th constitutional amendment was approved. Americans used to be against taxation. The famous Tea Party in Boston Harbor contributed to the start of the War of Independence, and the reason was the excessive tax rates imposed on tea. In both England and the United States, it took fifty years for societies to adopt the regular income tax application.

These taxes were imposed to be collected only from the rich. The poor and middle class were told that taxes were levied only for the rich, so the idea of tax was popularized and imposed on the majority. Therefore, the masses voted “Yes” to the law and the tax was legalized. Although the main purpose was to punish the rich, in reality it was the people who voted for him, the poor and the middle class who were punished.

When we examine the history of taxes, we are faced with an interesting perspective. As stated above, the implementation of the tax system was made possible by the masses believing in Robin Hood economic theories, which argued that income should be taken from the rich and distributed to all. But the state loved money so much that it soon imposed taxes on the middle class, and taxes spread to the lowest class of society.

The rich took this situation as an opportunity. Because they play the game by different rules. Even in the time of sailing ships, they established insurance companies for goods carried on the voyage. The rich invested money in the company to cover travel expenses. The companies was hiring seafarers who would sail to the New World in search of treasure. Even if the ship sank during the voyage and the crew died, the loss of the rich was limited to the money they invested on that voyage.

Knowing the power of the company’s legal structure is what makes the rich superior to the poor and middle class. Thus, although the masses advocated “buy from the rich,” the rich sooner or later found a way to overcome them. That was why, the middle class was also taxed. The rich got what they wanted because they were aware of the power of money.

Companies and governments always protect the rich. But many people who have never started a company do not know that a company is really “nothing”. The company is almost a file containing some legal documents registered in the government office in the law firm. It is not a big building with its name on the top. It is neither a factory nor a community of persons. The company is nothing more than a legal document that creates a soulless legal personality.

As soon as the income tax was made permanent by law, the benefits of companies came back on the agenda. Because the income tax rate of companies is lower than the individual income tax rate. Thus, the wealth of the rich was once again preserved.

As a result, this war between those who have property and those who do not have been going on for hundreds of years. This is the “take from the rich” war of the crowds against the rich. Wherever and whenever laws are made, this war will be fought. It will take forever. The problem is that the uninformed ones are the losers. These are those who get up early every morning and go to work and pay taxes. If they understood the rules of the game the rich are playing, they could play better too. Then they could gain their financial independence.


Please let me know that what are you thinking about the taxes below.

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Taxes and Credit Debts

All over the world, taxes are rising steadily. Because the social demands in return for the tax charge require an increase in the value of wealth, income and sales taxes. Higher incomes cause taxpayers to enter even higher tax brackets. Thus, tax rates increase gradually to meet social services. Today, governments face serious problems with social service programs such as Social Security and State Health Insurance for the elderly. As a result, they cannot pay their debts.

For most people, taxes are the biggest expense item. Most people consider these taxes are income taxes. However, for most developed countries like America, the highest tax is the premium paid to social security. Employees pay roughly 7-8% tax on social security contributions and health care. However, this rate is actually 15% since the employer pays the social insurances to complement this rate. This is the amount that the employer cannot pay the worker. Moreover, the employee also pays the income tax of social security contributions deducted from her salary. In fact, this is an income that she never received since it goes directly to social insurances.

Let’s explain this subject with a simple example. Imagine a newly married couple. This educated young couple rented a small flat. They start making some restrictions to make a living. After a while, they realize that they are spending as little as they did before they got married. So, they save some money.

But one day, the flat they rented starts to seem too small for them.

They want to buy a bigger house to have children. Now, they want to save more money. They start working more.

Their income gradually increases.

As their income increases, so does their expenses.

When they think they have enough money, they buy their dream house. Meanwhile, they learn about a new tax called property tax. Over time, they buy furniture for their new home. They also buy a new car . They suddenly realize that their column of passive funds is now filled with mortgage debt and credit card debt.

They finally have a child. The couple work harder. The same process repeats. The more they earn, the more taxes they pay. They get new credit cards. Their debt increases gradually and becomes equal to the value of their homes.

A company that provide loans to the couple recommends “debt consolidation” while the couple’s credit ratings are high. The company also states that the best thing to do is to pay off their credit card debts and high interest consumer loan debts. Besides, interest on home loan will be deducted from tax. They accept and pay high interest credit card debts. They feel a little relieved. Credit card debts are over. Now they have added their consumer loan debt to the house mortgage debt. Loan installments decreased because they extended the repayment for another 30 years.

Discounts begin in various stores and markets. The couple do not intend to buy anything, they just want to go and walk around. But they also take their credit cards in case they see something necessary…

We often meet this young couple. Their names are different, but their financial dilemmas are the same. They all look for an answer to “How can I make more money?” question.

The real reason for their financial problems is that they don’t know how to spend their money. They don’t have financial knowledge; they do not understand the difference between active and passive funds.

Let me say it again: Earning more money is often not the solution to financial problems. The solution is to act wisely. There is a famous quote for those floating in debt:

“If you find yourself in a hole, stop digging.”

Will Rogers

We must be aware of three powers: The power of the sword, the jewel, and the mirror. The sword symbolizes the power of weapons. America has reached this position by spending millions of dollars on weapons. Jewelry is the power of money. Whoever has money sets the rules. The mirror symbolizes the power of self-knowledge. Self-knowledge is the most valuable of these three, according to Japanese legend.

The lower and middle classes are willing to let the power of money control them. They shoot theirselves in the foot by getting out of bed and working hard, not asking themselves what they are doing. Many who do not understand money, surrender to the power of money. The power of money is used against them…

You can continue reading with THE ROBIN HOOD IDEAL.

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