The Cost Of Being A Millionaire

Date Tuesday, September 16th, 2008

You have finally achieved financial freedom and may have achieved your version of success. You are living your dreams and pursuing your passions. You are a millionaire. The good news is that you have achieved a financial status that many people do not have the drive or ability to achieve. The bad news is that once you achieve this status, there are many people that will try to take advantage of your financial situation to their benefit and to your detriment. Keep in mind that not every investment opportunity that is presented to you will be bad, but you do need to be extra cautious of over zealous opportunists that have not fully researched or fully disclosed the ramifications of the investment opportunity.

There are ways to limit the possibility of being approached with a questionable investment opportunity. The most effective way is to decline all investment opportunities that are presented to you and instead, invest only in the investments that you find. The advantage to this is that you will be the one gauging the effectiveness and potential profitability of an investment. The disadvantage of this situation is that, absent very active searching on your part, you will not find as many investment opportunities (and thus, the possibility of finding a great investment will decrease) as you would if you allowed for active engagement. Both of these situations offer advantages and disadvantages, and thus, you have to weigh your privacy against the possibility of making more money but having to defend against less desirable investments.

Another big cost of being a millionaire is that you are going to have to pay a lot of taxes. There are conflicting statistics as to what percentage of the “top earners” pay what percentage of taxes. However, it is safe to say that if you are “rich” you will pay more taxes than will those with less plentiful financial means. However, even though you will pay more in taxes, you have the ability to make more money due to your disposable income. Disposable income can be used to invest in other ventures. This is great because there may exist some tax advantages to having your money “tied up” in an investment. For example, in the United States, a 1031 exchange is a great way to defer paying taxes on profit from appreciating real estate.

The point is, there are costs associated with becoming financial secure. However, as discussed above, if you can avoid devious investments and investors and find ways to legally defer or limit your tax liability, you can enjoy your success for as long as you want.

by Marco Angioni II

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