Living on Pretax Dollars in a Post Tax World, Part One - Why You Need to Start Your Own Business

Are you an employee -- and do you get a W-2 form? If you do, you're in big trouble, at least financially. Read on to discover why that is and what you can do about it.

Here's the reason why being an employee is not a good place to be in when it comes to finances: It's because of what happens to your cash flow when you work for someone else: You make money, you pay taxes on it, and then you have money left over to spend on your lifestyle.

Compare that to the way it works when you have a business: You make money, then you spend it on everything you need for your lifestyle. If it's done correctly, you then pay taxes on what's left over.

So what you're doing is essentially that you're creating something that allows you to deduct as a business expense everything related to your activities.

Here are some examples. Most people have car payments. If they have a job, those are usually not deductible. They also pay insurance, and that, once again, is usually not deductible. If they go out and have a meal in a restaurant, that is typically not deductible either. And neither are any trips they might take.

So how can you go from paying huge amounts of taxes to getting wealthy instead?

Business are typically set up in order to create wealth, because you're not going to get wealthy as an employee. Sure, there may be a few people who manage to accumulate quite a bit of money even as employees, but it's far from typical. Most of the time you never get really wealthy as long as you collect a salary.

Of course, what does "wealthy" really mean? The fact is, what constitutes "wealth" is really in the eye of the beholder, but to become financially independent, you do need to work for yourself and not for somebody else.

If that makes you feel intimidated because you've heard the statistics about all those businesses failing within their first few years, check out this interesting fact:

Most of the wealth in this country is not actually produced by big companies. Instead, the bulk of it comes from small businesses. In fact, it comes from very small businesses, not even medium sized businesses.

And that is really very exciting. It means that you do have the opportunity to create wealth, and therefore become more independent and stand on your own two feet.

And in addition to that, when you formalize your activities and integrate your personal life with your business, then everything goes from being an after tax event, which means you do not deduct things, to a pretax event, so it will become a tax deduction.

And that in its simplest form is what this is all about, and why you should consider starting your own business, at least if you would like to become wealthy.