Episode 085 - Don’t be rich

We live in a time where out of control government spending and tax policy reminds me of growing up in business in the 1980s in Australia – when taxes were mega high, interest rates over 20% for a home mortgage and we learned to build a quality life while being poor. Today is much the same, yet we are not seeing things for what they are and we all fall victim to that mistake. In this episode I will explain the social & financial climate we live in, the massive risks and how you can get out of the blast zone of high inflation, high taxation and be unconstrained.

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Show Notes

WARNING:  I’m going to do some macro-level ranting in this episode.  But I’m going to quickly bring it back to the average Joe or Jane, and how we can find ways to break free of the global or national control that will try to enslave us and live an unconstrained life successfully.

I grew up in Australia, a democratic/socialist country, where the government controls most of your life.  Although I’m sure many would disagree with me on this, the reality is that govt is the biggest industry there, defines how you can earn your money, how you can keep your money, and most critical services.  If you own land, you can’t dig out the wealth underneath it – the govt owns that.  If you get sick, you MUST go to a govt run healthcare facility.  It was the case prior to the 90s where the govt ran the biggest bank there – the Commonwealth bank, as well as the phone company – Telstra, the power company, the gas company, etc.  In this episode I will tell you how I navigated in this mess, until it was just too much and I had to escape it, but what I learned in not being a victim to this.

Much of that has changed over the years, but not the spirit of it.  Although there might be private companies running the power stations, banks, etc. they still control the population.  You don’t get choices – you just have to pay what they want.  In most cases, it costs more than it did under government control, but probably just run better.  The population fall into some hypnotized slumber because the private companies can use marketing to make them look like a some knight in shining armor, while the government….  Well they are the government.  And to be honest, no one likes the government.

I have to admit, sometimes I laugh when I hear my American friends talking about “freedom”.  Yes, I get it.  Being a sovereign & free citizen is important.  Most think of freedom as “freedom from government control”.  But we have swapped that for the same as Australia – the private sector now rival the government in terms of power.  We are not free from the mega-powerful corporations and bankers.

The freedom that I signed up to in the constitution of the USA seems a long, distant memory of past centuries rather than a living, breathing document given the respect it deserves.  Instead, power brokers have employed armies of attorneys, accountants and psyops experts to find a way to change the laws enough to benefit them at the expense of everyone else.  Nowhere in the constitution does it restrict any one company from overtaking government in terms of power, yet we live in a world where a handful of mega-corporations control the concept of thought – from the answers to questions we might have in a search engine, to our newsfeed, to how our social culture thinks about things.  And during a global catastrophe that is the pandemic of 2020, we seemed to have doubled-down on this.

Our stock markets spin lies beyond belief.  The borrowing of money from the citizens by the dysfunctional government sees no end, yet we, our kids and our grandkids will be stuck with the bill for this out of control spending.  Our secretary of the treasury refuses to address our national debt because “it’s not the right time now to think about that”.  Really?  When exactly is the right time?  Is it the right time when you are in debt 100:1 against your income, as seems to be the direction other countries and their citizens have gone?  Is that an easier time to get out of debt?  When you are $1 million or $2 million in the whole?  Or $30T in the case of a government?  When is it the right time?

This might seem like some anti-government rant, but it is not.  What I am trying to do is to shine a light against the stupidity of the human race and our over-reaction to the “now” at the expense of the future.  We see some crisis like a mass-killing, and all of our attention goes to that problem.  Only to see it get lost in the static of history when another crisis takes our attention.  This is “shiny object syndrome” at its finest and it is amplified and perpetuated with the news feeds controlled by those same mega-corporations.

When you see how humans react (or over-react) to things, it is not surprising that the power brokers who control the news fees, the search engines, the audio/video media that we consume, see an opportunity – an opportunity to use the very same citizens as pawns on their chessboard.  To play 3 moves ahead with them and ensure that they are enslaved to keep working, keep earning and keep paying them until the day they die.  Meanwhile we blindly go along with this because “it was reported on the evening news”.

Well I hate to tell you this, but all good things must come to an end at some point.  Eventually the debt that we have been hypnotized to signing up for, or the poor health that we have given away to McDonalds and Burger King, will eventually come back to bite us.  And that time is now.

We have a new administration in the White House now.  An administration that unashamedly states that they will raise taxes on the wealthy.  That they have no issue with continuing to spend for the social good, but with money they don’t have.  They are not the only ones, of course.  The previous administration raised the national debt at levels never seen before in history and never did it under the moniker of a global pandemic.  They did it because they wanted to see a shift of wealth to the mega-powerful donors that put them into power.  The subtle, yet effective changes in tax policy allowed those with wealth to accumulate at the expense of everyone else.  At no time in history have we seen wealth gains during a global catastrophy by the rich at the expense of the poor.

And this means that the growing homeless problem that we all have to take ownership of, or the child poverty rates, or the out of control healthcare system that costs 10x more than it does in other countries, are not (apparently) a result of poor management.  But just something we all have to accept.  This is “our lot” as they say.

The unconstrained don’t accept this.  It is not our lot.  We don’t accept that not buying things we don’t need or can’t afford, should be frowned upon.  We don’t accept that just because someone else is stupid enough to go into mega-debt, that the responsibility of this should fall on us to bail them out.  Yet this is what we are being told.  We are told that fiscal policy can continue to promote 0% interest rates that clearly favor those that want to be further enslaved into debt by the mega wealthy, at the expense of the future.  Yes, that debt MUST be paid back at some point.  You can do all the fancy math you want, but you are spending someone else’s money.  And they want it back.  With interest.

If we look at historical cases where this has occurred in other countries, some very interesting things can be observed.  I’ve seen this with my own eyes, growing up in Australia and trying to make a go of running businesses in the 1980s.  A time when interest rates were as high as 20% for a home mortgage, and no one had debt because no one could afford it.  Anyone in that time that had money, was taxed.  And taxed.  And taxed.

Any human being that appeared rich, was just a human wallet to the government & the banks.  So the secret was to exist with a high quality of life, but never to appear rich.  If you did – if you bragged about your wealth, you lost it.  Either a thief with a hoodie would take it, or a thief with a suit & tie would.  You never wanted to appear rich.

Take, for example, a number of over-blown news stories about people from Arizona who have been robbed – usually at gun point – when they travelled into Sonora, Mexico.  A country with no real debt to income ratio, but a population of hard working people that just don’t have the opportunities there.  That is changing, but in this transition, the rise of the criminal cartels becomes the #1 news story of Mexico.  Mind you, the same could be true of degrading Italy if all you talked about is the gypsies trying to steal everything from you at the Metro Train station or the airports.  If all you saw was that, you’d miss the point about the country.  

But back to Mexico – I’ve seen many news stories here about some family that got robbed and had their car stolen in Mexico.  Like that is Mexico’s fault.  Dig a bit deeper into the story and you find they are driving an expense brand new truck worth $50K+, and in some cases towing a trailer with 4 ATVs on it.  Yes, some stupid idiot family thinks that you have no responsibility to not looking like a target or a victim in a country of poverty.  WTF?  

Yet meanwhile hundreds of thousands of other Americans drive in and out of Mexico everyday with no issues.  Why?  Because they don’t look like a target.  They don’t look rich.

Imagine if you had the most audacious house on the street.  House burglars are canvassing the street all the time.  Would they not target you over anyone else?  Are you not openly advertising that there is a payload in store if they can breach your barriers?  If you want to be stressed out at the constant attacks on you, then continue to have a welcoming target on your back.  Be the attack vector that they choose to exploit.

I could go on and on about not locking your front door, openly advertising your wealth, telling everyone how much money you have in the bank or in your Bitcoin wallet, etc. but I’m not going to assume that a listener to my podcast is stupid.  I know you are smart – you wouldn’t be seeking out solutions to being financially free or unconstrained if you were not here.  So I’ll give you to the compliment of not treating you like an idiot.

Unfortunately your government won’t do that.

And that brings me to the core part of this episode – how to look poor (and have a great quality of life).

No, this is not about being poor.  This is about looking poor.  I want you to be rich, but I don’t want you to appear that way.

Why?

Let’s look at some “on the ground” reasons.  First, you know taxes are going up.  So you also know that the tax system in most western countries are scaled so that the more you earn, the higher the rates.  This will become more profound as we move further into the Biden administration in the USA.  Once the pandemic transition blows over, the move towards changing fiscal and tax policy will begin.  At that point, if you are so in debt that you have to earn and earn and earn, you will be the target of all of this.

Where does it start?  Well consider the restrictions that have been subtly put in place over the past decade.  If you bought a house and lived in it as your primary residence, you used to be able to sell it without having to pay capital gains tax on it.  But that all changed during the previous Presidency when caps were introduced as to the maximum gain you could enjoy.  In a world of rising home prices due to the very same inflation (or reduction in the value of a $USD), the scales don’t change.  In 1980, the average home in the USA was $50K.  In 2020, it was $280K.  So if you have an above-average home that you bought in the 1980s for, let’s say $150K, and you sell it for $800K in 2020 (it is the same home BTW), your gain of $750K – which is not really a gain; it is more of statement in the reduced spending capability of the $USD, now gets taxed on the $250K of income after the $500K threshold has been reached.  But you have no say in the matter.  The fact that the home sells for such a high price is great – but when you have to buy a new home to live in, guess what the price of that will be?  $800K.  Meanwhile you are paying tax on some artificial transition of money.

Let’s look at the out of control healthcare system.  If you are a young family and resent having to earn money at some job when the boss has a gun to your head all the time, so you can’t take vacations without massive guilt, or your security is constantly under threat so you work and work and work to try and be the one that they don’t fire when the layoffs come, because your bank demands their pound of flesh for your student loans, car payments, kid’s braces, etc., I’m sure you want to find a way out of that.  So you decide to start to seek out others in the FIRE movement who have a message of hope that there is a way out of this mess.

You learn to live frugally – save 70% of your money.  Year after year after year.  You put that to work in the stock markets, hoping that the markets won’t crash at the time when you need the money.  You get to the point where you think you have hit your “FI Number” and you start to tell everyone you are going to quit your job and live free.  Part of that is the fear of losing income and going into the unknown.  You look to others and their journeys into this, but they are few and far between.  Everyone wants to tell you that they are on a journey towards FI, but few make it.

But let’s just say, you are part of the 5% that actually.  You quit your job, you relish your $1 million in liquid savings or whatever you have, and you exit the workforce.

What greets you on the other side of this?  The first thing is the high cost of medical insurance.  If you live in Arizona, for example, the most likely candidate you will have is Obamacare, or the Affordable Care act, plans and you see that the enrollment window is open, so you go out looking for your insurance because your employer won’t be providing that.  No one told you that your employer pays, on average, $21K for the average worker’s family in health insurance, because you never cared.  The company had a great healthcare plan and that’s all you know.  Sure, there might have been annual deductibles you had to meet, and the average family spends about $5800 a year on those, but you just accepted that as a cost of living in the USA.

But what now?  The cost is on your back.  You go shopping and you find that the average policy for 2 adults and 1 kid, is $2000 a month.  Holy crap!  I didn’t expect that.  How can I afford that when my planned draw down rate on $1 million is 2.5%?  The $25,000 there has most of it lost to health insurance?

Then you see that the government will subsidize your health insurance if you collectively make less than $85,000 income per year.  So $1250 of that plan is paid for by Uncle Sam.  Phew.

But you can see where I’m going with this.  The fact is that if you choose to make $100K (which you may have been doing before you left employment), no subsidies for you.  You would have to earn $125K per year now just to absorb the health insurance.

Remember – IT’S NOT WHAT YOU EARN – IT’S WHAT YOU KEEP.

The whole reason you are trying to quit the workforce is because you are on the hook for everything.  From your bank wanting a perpetual interest stream from you, to your government wanting a perpetual tax income stream.

The more you earn, the more you are targeted.  Do you think that the IRS audits people who make $50K per year?  Hell no.  They don’t have the budget for that.  They go after the top earners.  Do you think that if you drive into a bad neighborhood in a new sports car that the bad guys don’t see you coming and try and rob you?  You know human nature, right?  The guy with the Rolex watch will get robbed, mugged and that watch stolen unless they want to live in some gated community and only spend their time at the secured country club.  The fact is that the world is out to steal from you if you have money.

So what is the answer?  Simple.  You (the person) cannot earn more than $85,000 collectively per year.

Yep, that’s it.  That’s how I got through the 1980s.  Learn (as an individual) to not earn that much.  You need to start to spread earnings around to entities under your control – entities that can pay for your human needs and get tax deductions so that they are not subjected to large taxes or become a target either.

If you made $250K per year, but you spread that around to $75K personal earnings, but $150K earned by the company, and the company paid for your cars, power, phones, insurance, food at restaraunts, travel and health insurance premiums, you would not look rich.  And the company gets all these benefits of asset protection due to charging orders, etc. (a topic too vast to cover in this episode), but the only protection you get in times of catastrophy is bankruptcy.  You can live like a king if the company pays for it all.

Let’s face it – you are doing that right now if you have a job and your employer is paying for your health insurance.  They are deducting that as a tax deduction, and you just receive the benefits.  What if you created a structure that did the same?  But with a company that you control and own?

There are so many tricks here that are all legal and ethical, and used by every small business operator through to corporate executive.  You think that the human executive owns the private jet that they travel around on?  No – the company does.  You think that the small business owner driving their BMW to Starbucks owns that car?  No, the company leases it.

The fact here is that you can live a high quality of life, but you can’t do it if you think that only you have to own everything in your name.  If you do that, and you have the income, no government subsidies for you.  If you have a larger income, your tax scales go up, yet if you own assets that appreciate, you get the lowest level of taxation based on capital gains rates.

And companies can traverse international boundaries.  So you can spread income generation around to regions that are more conducive to lower tax rates.  Now US citizens have to pay tax on worldwide income, but if the income in a foreign region is taxed there, that is deducted against US taxes due and in many cases the taxes in foreign regions can eliminate the taxes in US.  Sure, there are many compliance costs you will have in the USA if you do that, but by spreading things around you may be able to get the benefits of other country’s government policies.  Like the $1 EUR Italian property if you agree to fix it up to a government standard in a defined amount of time.

But even if you don’t want to have a high-flyer lifestyle and just want things to be simple, if you don’t get things out of your name, you will be a victim to the changing government policies as they start to restrict downwards.  Sure, most changes in fiscal policy affect earners of $1 million or more per year.  So don’t earn $1 million or more.  Let your companies earn what you need, have them pay for everything based on legal, tax deductible means, and you earn very little.  If you believe that there will be no social security in the future (as I do), then why are you earning a ton of money, paying SS taxes into that fund, if it won’t be there for you in the future?  Would it not be better that your company buys some income producing real estate and rents it out, and you live on the rents?  

Using the concept of a company to structure everything for you, you can even be your own bank here.  You can have the company buy real estate or life insurance and use it as an over-funded capital asset.  An asset that generates a dividend based on its book value – not the equity that you have in it, so that you can loan money against it to fund larger purchases like cars, etc. and you pay the company an interest rate that is basically you paying yourself.  Is the $50K of money you loaned for the car income to you?  No.  it is a debt.  Debts don’t get taxed.

The wisest people out there don’t live lavish lifestyles.  They don’t sacrifice peace and tranquility for audacity.  They don’t openly advertise their wealth.  This is why Warren Buffet lives in a humble home and drove a beat up truck for decades.  Yes, the richest man in the world did that.  

If you get to a certain level of wealth where you can afford to hire an army of attorneys, bankers, accountants and security guards, then you could exist.  But do you want that?  Never being able to go out to your favorite restaurant without being mobbed?  That landing in an airport has to be done through some back-channels to avoid the crowds who might recognize you?

Do you want to detach from society because you feel that everyone is out to get you?  

The answer is simple.  Don’t advertise your wealth, and better still – don’t have a lot of wealth personally.  Lock it all away in structures that pay for you and your family’s very existence and get favorable tax treatment.  

Because you, as the individual, will not.  If you appear poor, the government will subsidize your existence.  From Federal money grants for university costs to subsidized health insurance premiums, to other government services aimed at those near the poverty line.  

Look, many will disagree with me here.  Many will say, “But Myles, you should pay your fair share of taxes.”.  My answer to that is, “Who defines what fair is?  Is it you?  Or is it the tax agencies that want to pay for unbridled spending that never benefited you in the first place?”

Yes, there are costs to run a country.  But like a dysfunctional HOA, are you on the hook for a bunch of unqualified and incompetent managers who decide to paint the buildings chartreuse green and you are on the hook for the costs of that, even though you hate that color?  Is their incompetence something you should be paying for?  Is the fact that we ran up $30T in national debt your problem, or theirs?

Yet you, your kids and their kids, will all be on the hook for it.  There is no pretending this away.  No magical monetary theory will make it go away.  Either we will lose everything or we have to find a way to detach from it, and doing what the herd does makes you a target.  Because the bad guys, depending on who you want to put in that category, are eyeing the herd every day – waiting to pounce.

Being unconstrained is a human right.  You were born free and without debt and you should strive to live a life that perpetuates that.  If you detour from it to a world of out of control government spending, high taxation and a bankster run financial enslavement, then you really only have yourself to blame.  The information is out there – certainly here at beuncosntrained.com, on this podcast and in my teachings, but the truth is that most won’t go to it.  They will follow down the shiny object syndrome with the herd so that the mega-powerful can play with them in their playpens – like some giant looking over an ant farm.

And they are the willing.  Don’t be the willing.  Don’t be a target and try not to be rich.