The Global Neighbor Project | Finance Ideas

Archive for April, 2011

Does Tax Season get you down?

Here are 4 simple steps that any small business owner can take to lower your tax bill this year.

STEP #1: Understand How Serious Your Tax Problem Is

Are you aware of just how much in taxes you are paying?

Here’s how much the average family spends on various consumer categories — as a percentage of income.

You must realize that it’s not how much you spend on taxes that is important, it’s how much you spend on taxes as compared to all other major categories of spending.

Consumer Spending:

How Do You Spend Your Hard-Earned Dollars?

Taxes ———————- 32.0%
Housing ——————– 16.7%
Medical Care ————— 11.5%
Food ———————– 8.2%
Transportation ————- 7.9%
Recreation —————– 5.7%
Clothing ——————- 4.1%
Savings ——————– 1.4%
Other Miscellaneous ——– 12.5%
TOTAL ——————— 100.0%

So, if you think you are being “nailed” by the government, you are absolutely right. You spend more on taxes than any other category of consumer spending.

In fact, you spend more on taxes than on food, clothing, and housing combined.

And it’s not just federal income taxes we’re talking about here. There’s also state and local income tax, payroll tax (Social Security and Medicare), sales tax, excise tax and property tax.

Maybe you already knew “intuitively” that your tax bill is outrageously high. If not, the picture I’ve just painted should thoroughly convince you that you pay too much tax, period.

STEP #2: Get The Right Attitude About Your Taxes

What do I mean by this? Well, you simply must have a certain “mental attitude” toward this whole idea of paying taxes. I’ll get right to the point — you must have an attitude about taxes that says, “Enough is enough. I’m paying way too much tax and I don’t like it. And it’s about time I did something about it — TODAY!”

After reading those numbers above, how do you feel? Doesn’t that just make you furious? If so, great, then you are on your way to solving this problem. The old cliche is true: “You can’t solve a problem until you admit you have one.”)

If you saw those numbers above and said, “Big deal. So I pay 32% in taxes. So what? So does everybody else in this country” — well, I’m sorry, but you might as well just stop reading this article right now. You will continue to pay too much tax because you really don’t care about it.

To reduce your taxes, you must be committed to the idea of paying less taxes.

Before today is over, go get last year’s personal income tax return (Form 1040) and look at how much tax you paid.

When you have Form 1040 in front of you, do you realize where the most important number is on this form?

No, it’s not Line 71 — the refund amount.

No, it’s not Line 74 — the balance due amount.

The most important number on Form 1040 is Line 62.

It says: This is your TOTAL TAX. That is how much federal income tax you paid for all of last year. When it comes to reducing your taxes, it doesn’t matter whether you got a refund or whether you had a balance due.

What matters most is: What was your total tax liability for the year. That’s the “magic number” that should just make your blood boil and your heart beat so fast that you can hardly stand it.

Now that I’ve got you all “riled up” about paying so much tax, let’s move on to Step #3.

STEP #3: Realize That Reducing Taxes Is The Easiest Path Possible To Creating Wealth

Consider this simple fact: Reducing your taxes by just $4,000 per year is the easiest way possible to becoming a millionaire.

Let me elaborate.

Let’s say you implement some new tax-saving strategies that reduce your taxes by $4,000 each year. Now, if you take that $4,000 per year in tax savings and invest it over the next 30 years, assuming you earn 11.5% on your investment, you end up with $1,048,745.98 at the end of the 30 years.

And here’s the best part about this scenario: Where did you get the $4,000/year to invest? Well, you got it from money that would have gone to Uncle Sam. It’s money that you used to spend on taxes, part of the 32% of your income that goes to taxes each year.

In effect, it’s free money. It’s money that was always there — you just didn’t realize it.

Is this a good deal or what? By simply reducing your taxes, the government will finance your million-dollar retirement.

And let’s say your tax situation is such that you save $2,000/year instead of $4,000/year. Same assumptions: you invest the $2,000 each year at 11.5% for 30 years. End result: $524,372.99. Not too shabby, eh?

So all you have to do is come up with the tax-saving strategies that will put $2,000 or $4,000 in your pocket each and every year. Which brings us to Step #4.

STEP #4: Get Hold Of The Tax-Saving Strategies That Will Make You A Millionaire

You know, it doesn’t really take much information to save a bundle in taxes. It is true: just a little bit of tax knowledge goes a very long way.

Useful tax information is freely available. On the Internet, at your local library, and through your local tax professional.

The question is: Are you willing to spend some time this year learning about effective tax strategies that can save you literally thousands of dollars?

Here’s a simple goal to set for yourself: Over the next 10 weeks, set aside just an hour a week to read up on tax-reduction strategies. That’s all, just 10 hours.

Chances are you’ll find 2 or 3 strategies that reduce your tax bill by $1,000 this year.

So you spend 10 hours and, in effect, pay yourself an extra $1,000 for your time. Not a bad hourly rate, eh?

Many times, that’s all it takes to pay less tax.

There is a common misconception that people who cannot store their unaccounted wealth in their own country open accounts in Swiss banks. Even though this may be true to an extent, Swiss banks are well known for their sophisticated and discreet banking services.

Many of the rich and famous like film stars, business entrepreneurs, top government officials, presidents, etc, are reputed to have Swiss bank accounts. Then again, it is also said one need not be a multi-millionaire to open a Swiss bank account.

Brief Background of the Swiss Banking System

One of the most prosperous and economically advanced nations, Switzerland has the world’s largest gross domestic product (GDP). There are nearly 400 banks in Switzerland, which range from the “Two Big Banks”, to smaller banks, serving single communities or selective clients. Considered as the world’s largest offshore financial center, the Swiss banking sector is renowned for its privacy, stability and protection of their customer’s information and assets. The Federal Banking Commission (FBC) regulates these banks.

Opening a Swiss Account

Often freely available, a Swiss bank account provides total confidentiality, strict privacy, and is tax-free. However, certain documents are required as proof to open a Swiss account. For example, people who are not residents of Switzerland need to furnish their passports, along with a passport size photograph. Depending on the profession, a current bank statement would be required to determine the client’s current financial condition. Along with this, certain personal information, like the date of birth, country of origin, etc., is also required.

A useful feature of Swiss banking is that it can also be done via correspondence as long as the customers follow bank rules and regulations. The bank and customer could interact through the Internet, telephone or snail mail.

However, a drawback of Swiss banking is that non-residents are expected to pay a hefty amount as deposit, and, the smaller accounts are more expensive to maintain. There is a clause especially for US citizens wherein they are expected to refrain from making any business transaction through their Swiss accounts, to keep their account privacy intact.

Deposit

A security deposit is needed in case the customer wants to obtain a credit card. Approximately 1.5 to 2 times the monthly credit limit is demanded, depending on the bank the customer chooses. This deposit is returned when the customer decides to discontinue the credit card, and has paid all outstanding bills.

Confidentiality

There are legends about mysterious numbered accounts in Swiss banks. Some high security bank accounts are given pseudonyms or special names instead of issuing them in the name of the customer, to preserve the anonymity of the customer. This number or name is used wherever the customer is referred. Moreover, even bank employees are expected to respect the customer’s privacy, the failure of which could land them in prison for several months.

However, Swiss banks, being very particular about preventing money laundering, crosscheck the authenticity of the information provided by the customer. If, during the scrutiny, the bank finds the information of a potential or existing customer connected to some criminal activity, a Swiss judge or prosecutor issues a lifting order. These investigations could include international criminal investigation for tax fraud, insider trading, or the infamous terrorist financing of recent times.

Closing of an Account

Despite a few negative notions about Swiss banking, closing an account is said to be easier than expected. No financial penalty is demanded, and neither is the money held hostage, like it is done in other off shore banking.

To conclude, the secrecy and discreet nature of Swiss banking makes them convenient and dependable. This not only helps customers to save money, but also is a viable means of attaining economic superiority in the business world and society as a whole.

Forex Trading has many advantages as compared to stock or equity trading. Due to the current uncertainty of the stock market, many stock or equity traders are now thinking to trade the Forex market. Their main question and concerned was why trade the Forex market? What are the advantages of the Forex market as compared to the stock market? In this article, I will go through some of the advantages of Forex Trading.

24 Hour Global Market – The Forex market is truly a 24 Hour Global Market opens from Monday to Friday. The Forex market starts each trading day from Sydney, Tokyo, London, and finally to New York. Regardless of whether it is in the day or night, there are always market participants actively trading the Forex market. Forex traders can respond very quickly to any currency fluctuations or breaking news immediately unlike the stock and future market. The ECN’s (Electronic Communication Networks) in stock and future market are relatively new products derived as an after hours extension to the regular trading hours. Many of these ECN’s have ill liquidity and there is no guarantee that a trade will be executed, or at a fair price. Usually, stock or future market traders would have to wait until the real market opens the next morning in order to execute a trade at fair value.

Liquidity – The Forex market is the largest and most liquid market in the world. According to a survey conducted by the Bank for International Settlements (BIS) in April 2007, average daily trading volume for the Forex market reached an all-time record high of US$3.2 Trillion. A 71% increase from US$1.9 Trillion that was traded in April 2004. This increase is due mainly to the participation of retail investors utilizing broker’s electronic trading platform. This tremendous turnover is more than all the world’s stock markets combined on any given day. With a daily trading volume larger than all stock market combined, this will ensure price stability. With such liquidity, Forex Trader can open or close a position without much difficulty and most importantly, will receive a fair market price.

Opportunity to Make Money in Both Direction – There is no such thing as “bull” or “bear” market in Forex. In Forex, it is of no concern whether the economy is booming or in a recession. For stock trading, profits are usually made when the economy is booming. But we all know that the economic cycle is cyclical – all things that go up must come down. This is not the case in Forex market. Regardless of how major economies are performing, currency exchange rates are always fluctuating, and this in turn will provide trading opportunity for traders to gain profit.

Simplicity – There are not many major currency pairs traded on the Forex market. Therefore, traders may have a better feel of price movement patterns and behavior. Where as in the stock market, there is literally thousands of stock to monitor and it is not easy to follow so many of them.

Small Trading Capital with High Profit Potential – Nowadays, the minimum amount needed to open a trading account is less than $300. Due to competition, some brokers may even accept much lesser amount. In Forex market, this small trading amount could potentially earn hundreds of dollars per week. In stock market, this may not be possible. Of course both market have potential to lose as well, but in the Forex market, traders can make good money with much lesser trading capital.

High Leverage of 100:1 – 100:1 leverage is commonly available from online Forex brokers. This is substantially exceeds the common 2:1 margin offered by equity brokers, and 15:1 in the futures market. Some brokers even offer higher leverage of 100:1. However, it is important to remember that while this type of leverage allows investors to maximize their profit potential, the potential for loss is equally great. Leverage is a double-edged sword and necessitates the use of proper money management. Without proper risk management, this high degree of leverage cans also lead to big losses as well as gains.

Demo Account – Forex Trading has a unique feature called “Demo Account” or simulate account. This “Demo Account” allows the trader to trade using real-time price on the broker’s trading platform with the exact interface and function as a real account. With this simulated account, Forex trader could gain real market experience in trading without risking any capital.

With Forex Trading unique advantages, its of little wonder that more and more retail investors are participating in the Forex market utilizing broker’s electronic trading platform that are widely and easily available.