How is that true for money appearing out of supposed thin air? Because our refund check is our own money.
Even worse, the corporation for whom you work has been earning interest on your cash...what you owe in taxes, plus your refund amount. This figure may not be much, but it adds up—and it’s stealing your financial freedom.
Accountants speak of two primary forms of income: direct income and passive income. Direct income is based on your work: your hourly rate, salary, commissions, plus your year-end bonuses. Passive income is when your money works for you.
As your 401(k) and other investments grow, your “capital gains.” Real estate income and business equity returns are also forms of passive income. When your passive income exceeds your living expenses, you are financially free: You no longer have to go to work for a living.
The easiest and most common form of passive income is the interest our bank pays us. The more cash we have in our interest-bearing accounts, the more passive income we make. By conveniently withholding our tax payments (plus our eventual refund), we lose the opportunity to gain interest on it. Moreover, they get our passive income. (It’s actually quite clever, if you think about it – that is, if you were the Corporation.)
Previous Page Next Page
