Usually by May most people have paid all the taxes we owe to the government by mid-May. What this means is that what you have earned so far this year is the amount you would have to pay in taxes to the government. So if over the five months you earned $12,500 or $3,500 a month is the amount of taxes you will pay to the government for the entire year.
Another way to look at it: If you decided that you would just pay all you earned from January to May to the government instead of paying a part each week or month. This would mean you did not receive a single paycheck, but paid only to the government what you earned.
Now what am I getting at with this example? Well, the best thing someone can do since you can’t avoid paying taxes is to eliminate debt or earn more money.
People always say they don’t want to pay a lot in taxes. I look at it differently. My personal goal is to be in the highest income tax bracket. Why? Simple. It means I am earning enough money to be in the highest tax bracket and living a better life.
For example, let’s say I was earning $35,000 a year and paying 25% of my earnings in taxes or $8,750 in taxes. This is what I was earning a couple years ago. Now my goal is to earn 10 times this amount or $350,000. Now the taxes I would owe would be 35% or $122,500.
Again most people would say that they don’t want to pay $122,500 in taxes. So they would rather pay $8,750 and pay a smaller amount. My math is simple $350,000 minus $122,500 is $227,500 in my pocket after taxes. I can have a lot of fun or help a lot of people with some of that money.
Who would do the most good? Paying a small amount in taxes or a big amount? The decision you have to make is what good do I want to do: Earn a lot & Pay a lot OR Earn a little & Pay little.
My decision is simple. I hope yours is also. Happy Tax Free Day.