How long do we think it will take?

*5 minutes*

Who are we talking to?

*Moolahwise’s audience, people that believe the taxes will be the same.*

What is the point of making this video?

*Help people understand how taxes will impact their money and their savings!*

**Intro: **Hi guys, it’s Giang from Moolahwise.com and in today’s video I wanted to illustrate the impact of taxes on your money. First we will be showing you a simple example of compound interest via a story then we will apply the 25% & 33% tax rates respectively, to show you how much of your money will be eaten away from taxes.** **

Ok let’s get into it.

**$1 doubling everyday for 21days: **Would you rather have a $1 that doubles everyday or would you rather have $500,000 in cash? Lets look at the numbers. As you can see $1 on day 2 will become $2 and $2 dollar will become $4 and so fourth. As you can see in day 10 you’re still only at $512. Hmm that $500k seems a lot better. Even on day #19 you are still only at $262K. If you will notice that it isn’t until the last two days in this example, that the amounts actually surpasses the $500,000. And on day #21 your money will have grown just over a $1M. So what is the point? This is a simplified version of what we call compound interest. Compound interest just means that your interests earns interest. But what does that have to do with how taxes will impact my money? Because I wanted to create this video to illustrate how much taxes will eat away my money if I am not careful.

Let see how the taxes will impact this amount.

**25% tax rate on the same amount: **So let see what it looks like if it is tax as earned or what we call the tax now bucket. If you don’t know what the difference between tax now or tax later or tax advantage , please watch my other video of the 3 buckets of taxes explained. So as you can see $1 doubles into two and then you take 25% off that you will end up with a $1.75. A $1.75 doubles to $3.50 and minus the taxes on it you will have $3.06 and so fourth. So if you pay taxes as you go then, you will end up with $72,570 instead of $1 Million. So what is the point? The point is that taxes acts like a speed bump to the growth of your money. The bigger the taxes the bigger the speed bump on your money! And guys keep in mind that this example is at the 25% tax brackets and so lets see what it looks like when we do the same example but with 33% tax brackets.

**33% tax rate on the same amount: **So let see what it looks like in a 33% tax bracket. As you can probably can guess that you will end up with WAY less amount of money in the 33% tax bracket then in the 25% tax bracket. As you can see at the bottom you will end up with $27,362 thousand instead of $1M. Which translates to about 2.7% of the total only. I don’t know about you but I didn’t work so hard so I can end up only keeping 2.7 % of my own money! Now guys keep in mind that this is only an example using 25% and 33% tax brackets and so if the tax rates are higher then you will end up with much less then as shown. Keep in mind that this is only an example to illustrate that if you aren’t putting your money in more tax efficient vehicles then you will lose a big chunk of your money to taxes.

So what is the point of all of this?

**Paying taxes on the seed or harvest?: **So to wrap up this video, I want you to ponder this question. If you were a farmer, would you rather pay taxes on the seed or the harvest? I know have used this analogy before but it bears repeating. If you pay the taxes on the seed then yes you can get the taxes over with and done with. At least that way you will know the tax rate that you will be paying. Like I always say if you have to buy something anyways then, doesn’t it make sense for you to pay for it when you know the rate and in this case the rate that I am talking about is the tax rate!

However if you keep deferring the taxes then you are just letting the taxes compound against you. And the scariest part is that you don’t know what your tax rate will be in retirement. If you don’t know what your tax rate in the future then wouldn’t you agree with me it is better to pay the taxes when I know the rate?

To sum it up think of rates of returns, as how fast you’re money is growing . There is a simply formula to calculate how fast your money will grow given a certain rate of return. If you don’t know what this formula is then watch my other video called the rule of 72 for a deeper explanation of this formula. While taxes are like speed bumps to how fast your money can grow.

Well, I hope you learned in today’s video that taxes will have a huge impact your savings over time. So put your money in more tax efficient accounts like an IUL only if you want to keep more money in your pockets over time. If you don’t know what an IUL is then watch my other video about what is an IUL to see if it is right for you.

We have a mission of educating 1 million families on how money works. Please text me at (415) 385-9116 or email me at [email protected] if you have any questions or comments about IUL that I can answer in my next video. Thanks for listening and bye for now.

**Let me tell you more about it.**

How long do we think it will take?

*5 minutes*

Who are we talking to?

*Moolahwise’s audience, people that believe the taxes will be the same.*

What is the point of making this video?

*Help people understand how taxes will impact their money and their savings!*

**Intro: **Hi guys, it’s Giang from Moolahwise.com and in today’s video I wanted to illustrate the impact of taxes on your money. First we will be showing you a simple example of compound interest via a story then we will apply the 25% & 33% tax rates respectively, to show you how much of your money will be eaten away from taxes.** **

Ok let’s get into it.

**$1 doubling everyday for 21days: **Would you rather have a $1 that doubles everyday or would you rather have $500,000 in cash? Lets look at the numbers. As you can see $1 on day 2 will become $2 and $2 dollar will become $4 and so fourth. As you can see in day 10 you’re still only at $512. Hmm that $500k seems a lot better. Even on day #19 you are still only at $262K. If you will notice that it isn’t until the last two days in this example, that the amounts actually surpasses the $500,000. And on day #21 your money will have grown just over a $1M. So what is the point? This is a simplified version of what we call compound interest. Compound interest just means that your interests earns interest. But what does that have to do with how taxes will impact my money? Because I wanted to create this video to illustrate how much taxes will eat away my money if I am not careful.

Let see how the taxes will impact this amount.

**25% tax rate on the same amount: **So let see what it looks like if it is tax as earned or what we call the tax now bucket. If you don’t know what the difference between tax now or tax later or tax advantage , please watch my other video of the 3 buckets of taxes explained. So as you can see $1 doubles into two and then you take 25% off that you will end up with a $1.75. A $1.75 doubles to $3.50 and minus the taxes on it you will have $3.06 and so fourth. So if you pay taxes as you go then, you will end up with $72,570 instead of $1 Million. So what is the point? The point is that taxes acts like a speed bump to the growth of your money. The bigger the taxes the bigger the speed bump on your money! And guys keep in mind that this example is at the 25% tax brackets and so lets see what it looks like when we do the same example but with 33% tax brackets.

**33% tax rate on the same amount: **So let see what it looks like in a 33% tax bracket. As you can probably can guess that you will end up with WAY less amount of money in the 33% tax bracket then in the 25% tax bracket. As you can see at the bottom you will end up with $27,362 thousand instead of $1M. Which translates to about 2.7% of the total only. I don’t know about you but I didn’t work so hard so I can end up only keeping 2.7 % of my own money! Now guys keep in mind that this is only an example using 25% and 33% tax brackets and so if the tax rates are higher then you will end up with much less then as shown. Keep in mind that this is only an example to illustrate that if you aren’t putting your money in more tax efficient vehicles then you will lose a big chunk of your money to taxes.

So what is the point of all of this?

**Paying taxes on the seed or harvest?: **So to wrap up this video, I want you to ponder this question. If you were a farmer, would you rather pay taxes on the seed or the harvest? I know have used this analogy before but it bears repeating. If you pay the taxes on the seed then yes you can get the taxes over with and done with. At least that way you will know the tax rate that you will be paying. Like I always say if you have to buy something anyways then, doesn’t it make sense for you to pay for it when you know the rate and in this case the rate that I am talking about is the tax rate!

However if you keep deferring the taxes then you are just letting the taxes compound against you. And the scariest part is that you don’t know what your tax rate will be in retirement. If you don’t know what your tax rate in the future then wouldn’t you agree with me it is better to pay the taxes when I know the rate?

To sum it up think of rates of returns, as how fast you’re money is growing . There is a simply formula to calculate how fast your money will grow given a certain rate of return. If you don’t know what this formula is then watch my other video called the rule of 72 for a deeper explanation of this formula. While taxes are like speed bumps to how fast your money can grow.

Well, I hope you learned in today’s video that taxes will have a huge impact your savings over time. So put your money in more tax efficient accounts like an IUL only if you want to keep more money in your pockets over time. If you don’t know what an IUL is then watch my other video about what is an IUL to see if it is right for you.

We have a mission of educating 1 million families on how money works. Please text me at (415) 385-9116 or email me at [email protected] if you have any questions or comments about IUL that I can answer in my next video. Thanks for listening and bye for now.

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