Keys to success #6: Own Nothing but Control Everything.

I have to admit, this can be tough for some because creating wealth also creates an attached pride. Once successful, at least maybe initially, you want to enjoy some of the fruits of your labour whan you can afford them. We all fall into that trap... the fancy car, the big boat, the fancy holidays and 5-star lifestyle.

For years now, I have had an annonymous lifestyle. I personally own nothing. However, I control millions because I control the entities that own them.

All the smart money is held in trusts and companies. Personal tax rates can hit 47%, whereas company tax rates are (today) sitting at 32% for a non-trading passive investment company and 27.5% for a company that trades and is active in business.

Why would anyone want to have assets in their own name when they potentially have to pay marginal tax rates up to 47% on dividends???

Even if your current marginal tax rate is 30% today, if you start creating wealth and have all the assets in your own name, the rents/dividends etc will increase your income and hence your marginal tax rate! In other words, the more successful you become, the higher tax rate you will pay - all because you have assets in your own name!

For me, applying for a loan is always a fun time, even for something as simple as a car lease! I am asked about my personal assets, of which I have very little. On face value, I look a bad risk, which is quite funny really.

Owning nothing and controlling everything is an interesting way to live that few can understand except for those of my friends that are actually doing it !!!

If you have ever watched the TV series M.A.S.H, I sometimes I feel like Colonel Henry Blake when Radar used to bring in forms for him to sign and he would just sign them without knowing what he is signing! It's almost like that between my wife and I. She will drop forms on my desk, I would look them over and then sign away and she would then deal with the accountants. Of course, nowadays, it is all electronic signatures and the documents just get emailed to me directly with a copy to my wife.

We have set things up this way with all assets in entities for a number of reasons:

1. It is more tax efficient

2. It separates assets from each other for protection

3. It separates assets from their owners (us) for protection of the assets from predatory law suits.

Imagine if you had (say) $5 million in assets in your name. You are involved in a car accident and it turns out that your insurer decides to "walk away"and not cover you because your vehicle was NOT roadworthy in their eyes. What would happen to your assets if the victim engages a lawyer to sue you??? Getting my drift?!

Yes, you should have insurance. Yes, you should be doing the right thing, but what if the unimaginable actually happens?

You work hard for what you have, and what you have created. Be sure to protect it from predators as well as ensuring your strategy is tax effective. To do that you ned to speak to your accountant regarding the different entity structures available for your purpose.... and by the way, in my opinion, if they suggest becoming a "Sole Trader", find another accountant.

One day, and that day will come, you will become wealthy enough to be content with yourself and won't need to tell or show anyone your net worth. You will be the person next door that can afford to do what others cannot and experience things they never will.

I walk around most days in shorts and a polo shirt. No expensive brands as I have nothing to prove to anyone but myself. I drive a normal(ish) vehicle, live in an average suburb and live comfortably. My financial situation allows me to do whatever I want and live the way I choose.

I'm not saying you shouldn't flaunt your success, but then, do you really need to?

There are a lot of people that waste a lot of time and money, to buy expensive stuff they really don'r need or want, in order to show off to people that really don't matter to them anyway. I don't understand that sort of mentality. Do not become one of those people !

As far as I'm concerned, "empty vessels make the most noise", in other words, in my eyes, those that do all the "showing off" are actually either not truly successful, or they are insecure individuals that need validation from other people - but hey, I'm not a psychologist, so what do I know, right?!

Lessons:

1. Understand the different entities available, their tax implications and protection for your business.

2. Understand the different entities available, their tax implications and protection for your investing.

3. Understand that "investing" is a business - after all, it makes money right?