After you know what you really want, the next step is figuring how
to get there. The third step on your way to financial freedom is
evaluating your situation and developing a strategy to get you
moving on the path to your goals.
What are your financial goals? Our clients have had goals such as:
• Providing a safe cushion for my family.
• Increasing my passive income by $10,000 all the way to $100,000
per month.
• Reducing my tax liability by 30 to 50 percent.
• Protecting my assets.
• Retiring in five years with a net income of $50,000 to $1 million
per year.
Make sure your advisors know your goals before you start creating a plan.
Don’t assume that they know what you want.
And, hopefully, you’ve also asked your advisors what plan they will
use to evaluate where you are. If they don’t have a systematic approach
to reviewing your data, you will likely have a very customized approach.This means the process will be more expensive and the results will be
untested. And, that means more cost and more risk.
If you’re ready to move forward on your own tax-advantaged wealthbuilding
plan, start with an evaluation of where you are and what goals
you have. Figure 3.1 is a copy of the First Step Financial Profile that we
use in working with clients. Reference the information we receive as you
follow along with the evaluation for Ted and Ellen. How does your information
compare? What are your goals? Make sure your advisor understands
and supports those goals for you. Otherwise, the strategy you
receive won’t help you achieve what you want.
Evaluating Where You Are
I like to use the Jump Start! method to evaluate current financial
strategies. This method looks at the three major components for taxadvantaged
wealth building:
1. Business.
2. Real estate.
3. Home.
There are seven steps in a comprehensive Jump Start! plan that are
demonstrated in Figure 3.2.
The plan begins with a business. Not everyone wants to have a business,
and it is possible to build wealth without owning a business. However,
if you want to maximize tax loopholes and your own wealth
potential, consider starting a business. That’s where the loopholes are!
Under the business component, there are three specific steps. Step 1
identifies the loopholes available for the income that flows into the business.
Step 2 identifies the loopholes of tax-free benefits for you that are a
deduction for the business. Step 3 is to pay your taxes! But you’ll pay
your taxes using every legal method to first reduce the amount you pay
and then defer the payment as long as possible.
We will now focus our attention on real estate loopholes. Step 4
identifies the ways you can invest money from your business into real estate
to provide the best possible advantage. Step 5 utilizes the tremendous
real estate loopholes to take money out of your real estate tax-free!