One of the most common questions I get from the participants in my monthly tax and wealth coaching teleconferences is, “Is XYZ a good investment?”

XYZ may be storage units, gold, international funds, mobile homes, businesses, commercial real estate, you name it.

The answer I give to each participant is the same.  It depends.

It depends on your personal wealth strategy.  

The Magic of a Wealth Strategy
The magic of creating a personal wealth strategy is that you can answer all of your own investment questions simply by referring to your strategy.

When developing a wealth strategy, there are several key questions to answer so you can answer the question, “Is XYZ a good investment?”  I’ll share 2 of these questions right now. 

Question #1: What are your personal preferences?
Different types of assets have different types of characteristics.  A successful wealth strategy is able to match the characteristics of a particular asset to your personal preferences.

Is your preference High, Medium or Low when it comes to certain investment characteristics?  Here are a few personal preferences to consider:

• Rate of return
• Cash flow
• Interaction with other people
• Tax advantages

 Once you have identified your personal preferences, you can begin to navigate through the specific type of asset to focus on. 

For example, if you have a high preference to interact with others, then you can weed out assets that do not have this characteristic.  The more personal preferences you can identify, the more you can narrow down the choice of assets that best match your preferences.

What is your investment criteria?
Once you have identified an asset, you are still left with an overwhelming number of options. 

For example, let’s say you’ve selected commercial rental real estate as your asset.  There are thousands of investment opportunities with commercial rental real estate! 

How do you narrow down these options?  By quantifying your preferences.

For example, you may have a preference for a high rate of return and quantify it as expecting to earn at least a 20% return on your investment.  And if you have a low preference for cash flow, then you may set your cash flow criteria as $0.

How do you set these numbers?  The numbers need to work with your wealth goals.  This means you need to run the numbers.  If you apply the numbers to where you are today, do you get to where you want to be?  If you don’t, then your numbers need to change.

The end result is a specific set of criteria that an investment opportunity must meet in order to investigate it further.

Using the example criteria above, if an investment opportunity has a rate of return of 15% and cash flow of $1,000, you will pass on it because it does not meet ALL of your criteria.

It also means if an investment opportunity has a rate of return of 50% and negative cash flow, you will pass it up because it does not meet ALL of your criteria.

Taking the time to select your asset type and set the investment criteria for that asset is often a huge time saver.  Imagine being able to sort through 100 investments in just a matter of minutes to find the 5 investments that meet your criteria.  Plus, you can now focus your time on doing your due diligence on just those investments that meet your criteria.  This is a powerful system!

Is This a Good Investment?
So, getting back to the original question – Is this a good investment?  The answer: It depends.  It depends on if it meets your investment criteria.  If it does, then pursue it. 

Warning! Most investment mistakes come from not following a well thought out wealth strategy.  I know several people right now who are struggling with their financial situation. Why? When I look at what they have done, it is clear that they did their investing without a clear strategy.  Or, they had a strategy and deviated from it.

The following sessions from the School of Wealth Strategy will help:
Your Wealth Vision
Massive Passive Income
Building Your Wealth Strategy

Focus on your wealth!
Tom Wheelwright

What happens if you are ready to get started on your wealth strategy and don’t have any money?

This question comes up often when I am speaking to those interested in developing a wealth strategy.  They usually think they must wait until they have “enough” money to get started.  They are always pleasantly surprised when I tell them that they can create and implement a wealth strategy without any income at all. 

Your Capital
Successful wealth strategies focus first on accumulating capital.  Simply put, capital is the amount you OWN less the amount you OWE.  Another term for capital is net worth. 

Most people realize that it takes capital to make capital.  But what if you don’t have much in the way of capital to begin with?  How do you accumulate capital?

Types of Capital
It’s often forgotten that there are different types of capital.  The capital we normally think about is financial capital.  But there are two other types of capital that are at least as important as financial capital – time capital and intellectual capital.

Financial Capital
Financial capital is the type of capital most people think of when it comes to investing.  This is includes all of our cash, stocks, real estate and other assets.

Financial capital can usually be leveraged fairly easily, which can help accumulate capital even if starting with a small amount of capital.  The most common form of financial capital leverage is a mortgage.  If you buy a $150,000 property, you could pay $150,000 in cash, or you could get a $120,000 mortgage and only come out of pocket $30,000.

Time Capital
Time capital, though often overlooked, is pretty easy to understand.  It’s the amount of time we can devote to our wealth strategy. 

Time capital is the type of capital that is most severely limited.  We each have only 24 hours in a day. 

So how can you accumulate time capital with this limitation?  The answer is leverage. 

Just like financial capital, we can leverage our time capital.  How?  A wealth team.  A wealth team is a group of advisors, coaches, mentors, employees, vendors and other contacts that assist you in building your wealth.  Identifying the right members for your wealth team can result in the rapid accumulation of time capital.

Intellectual Capital
The one type of capital that is frequently overlooked but which is truly unlimited is intellectual capital. 

What exactly is intellectual capital?  Think about all of those great ideas you have had over the years to improve your situation or create income.  These are the result of your own intellectual capital.

The problem most people have is that they do not realize the extent of their own intellectual capital.  Whether your wealth strategy includes starting a business, investing in real estate or investing in the stock market, your intellectual capital can add leverage and velocity to your wealth accumulation.

There are multiple ways to take advantage of your intellectual capital.  You may have ideas that you can market through a book, website, or seminar.  You may have ideas to improve the distribution of your product.  You may figure out a new way to find a good real estate deal.  Or, you may have an idea for a new financial product that you could market.  This is all intellectual capital. 

You don’t have to have financial capital to get started.  Many of the wealthiest people in the world started with little or no financial capital (Bill Gates comes to mind).  They used other types of capital to start building their fortunes.  And so can you.

These sessions from the School of Wealth Strategy will help:

Building Your Wealth Strategy
Identifying Your Wealth Team
Your Personal Role

Focus on your wealth!
Tom Wheelwright

The general population views taxes as something you deal with once a year. I look at taxes differently. Taxes are a tool that can help you create wealth, and what better way to do this than every single day!

Every day you have opportunities to reduce your taxes.

When you are making money, there is an opportunity to reduce your taxes.

When you are spending money, there is an opportunity to reduce your taxes.

When you have a new investment, there is an opportunity to reduce your taxes.

When you make a new deal for your business, whether it’s with a vendor, a customer or an employee, there is an opportunity to reduce your taxes.

Making it a habit to look at every day as an opportunity to reduce your taxes will create the right habits to actually reduce your taxes.

What did you do today that may reduce your taxes?

• Did you buy breakfast, lunch or dinner?
• Did you drive your vehicle for your business or real estate investing?
• Did you go shopping?
• Did you attend a seminar?
• Did you get an early start on holiday gift buying?
• Did you make an investment today?
• Did you hire a new professional for your team?
• Did you sell an investment?
• Did you make travel plans (even if for the holidays)?
• Did you file (or throw away) receipts?

This is just a small list of what many of us do on a daily basis. All have the opportunity to reduce our taxes.

Make Tax Savings a Daily Habit
It really boils down to focusing on where your money comes from and where it goes.

When you make money, think about how the money will be taxed. Are there better ways to receive your money so it is taxed in more favorable ways?

When you spend money, consider how it can be a legitimate deduction for your business or investing activity. If it can, then be sure to keep the proper receipts and documentation. And, make sure your business or investing activity pays for the expense if you have separate entities for these activities.

Here’s a daily habit I have.

I carry my business credit card and a manila folder with me at all times. Having my business credit card on me makes it very easy to have my business pay for my business expenses.

When I use my business credit card, I write the business purpose and other notes on the receipt. These notes give me the proper documentation to support my expense as a business expense. Then I put the receipt in the folder. The next time I’m in the office, I hand over the receipts to my assistant who scans and files them.

With this habit, my business is properly paying for the expenses and I can easily pull up the documentation to support my expenses at any time. You may notice that this is not a fancy system. But it works, because I do it the same way every time. My receipts don’t get lost, I know exactly what they are for and my tax savings are protected.

Imagine how different this scenario would be if I tried to do the documentation and filing only once a year!

There are many opportunities available to business owners and investors in the tax law to reduce their taxes. Understanding how these rules apply to you will help you create the habits in your daily routine to reduce your taxes.

Our monthly coaching subscriptions help you reduce your taxes.

Focus on your wealth!
Tom Wheelwright

Your taxes can help you build your wealth. In fact, taxes are often the greatest contributor to the success of a wealth strategy.

Reducing your taxes goes hand-in-hand with your wealth strategy. For most people, taxes are their single biggest expense. This means that reducing their taxes results in instantly increasing the amount they have available to invest.

The secret behind using your taxes to build your wealth is to incorporate your tax saving strategy into your wealth strategy. To do this, and to truly maximize your tax savings, you need to know what rules the government wants you to follow. The government wants you to reduce your taxes, you just have to follow the rules.

Here’s an example of what I mean. The government wants to create more jobs, so they encourage and reward those who create jobs by giving them huge tax benefits. As a result, the government gives entrepreneurs tons of tax breaks. This is why it is so important for entrepreneurs to know the rules!

The same is true for real estate investors. The government wants to provide affordable housing so the government gives real estate investors all sorts of tax breaks.

Your Tax Strategy is Part of Your Wealth Strategy
Once you understand what the government wants you to do in order to reduce your taxes, you can use this information in your wealth strategy to invest in assets that not only fit with your wealth goals but also produce tax savings.

This is a powerful formula and one that can be used over and over and over again because many of the tax benefits for entrepreneurs and real estate investors produce ANNUAL tax savings.

Our monthly subscriptions can help with your tax strategy and wealth strategy.

Focus on your wealth!
Tom Wheelwright

Bookkeeping is one of the most powerful tools when it comes to maximizing tax savings. It’s where the activity gets captured and when done properly, it can capture additional tax savings.

While bookkeeping is often viewed as a necessary evil, it has the ability to supercharge your tax strategy in many different ways. Here are just a few of those ways:

Bookkeeping Captures the Biggest Offenders
Creating better information can lead to greater tax savings.  The areas that are the biggest offenders are:

• Home office
• Travel
• Vehicle
• Meals & entertainment

Bookkeeping can help in all of these areas. Let’s use the home office as an example. Some of the expenses related to a home office include:

• Mortgage interest
• Property taxes
• Utilities, including water, gas, electric, sewer
• Pest control
• Security
• Association dues

While most people capture some of these expenses, many people miss the smaller ones. And these smaller ones can really impact the tax savings because these expenses create permanent tax saving.

This is where bookkeeping can supercharge your tax savings.

The expenses listed above are all paid personally. Keeping a set of books for your personal activity can really pay off in the form of additional tax savings. Any time you pay a bill that relates to the occupancy of your home office, code it accordingly in your bookkeeping.

For example, have a group of expenses in your chart of accounts that is used only for your occupancy expenses. Then for your tax planning, you simply have to print out the summary of the activity.

Plus, bookkeeping for your personal activity can help identify expenses you may not have thought to include as part of your home office.

Bookkeeping Captures the Timeliness of Your Distributions & Salary
A very powerful form of permanent tax savings comes from how you pay yourself from your business. Many times there is a delicate balance between distributions and salary and using the right amount of each is what creates permanent tax savings.

This makes distinguishing the two very important – especially given that these amounts will be scrutinized if audited.

This is where your bookkeeping can give your tax strategy a boost. Your bookkeeping documents two key factors related to distributions and salary:

• The amount
• The timing

Your bookkeeping is a fantastic tool to track how much you have paid yourself in distributions and how much you have paid yourself in salary.

Even more important, is the timing of your distributions and salary.

Think about when your pay your employees. Is it a set period or is it whenever you feel like it? Of course, it is a set period. The salary you pay yourself should also follow this pattern. Your bookkeeping captures this pay period pattern, helping to support your salary as part of the company’s normal payroll.

Now, think about how large corporations pay their shareholders. Typically dividend distributions are quarterly or annually. Your distributions should follow a similar pattern. Your bookkeeping provides documentation of the actual timing of your distributions which is very important in your tax planning.

These sessions from the School of Tax Strategy will help:

Basics of Bookkeeping
Basics of Bookkeeping with QuickBooks
Making the Most of Your S Corporation
Travel, Meals and Entertainment
Home Office Deductions
Vehicle Deductions

Focus on your wealth!
Tom Wheelwright

I hear many reasons as to why someone doesn’t have a wealth strategy:

• They don’t really know what a wealth strategy is
• They don’t know how to get started
• They think they need to wait to get started because they don’t have any money
• They think they need to get out of debt before starting their wealth strategy

The fact is, everyone needs a wealth strategy, regardless of goals, age, wealth, income or debt.

The First Step to Creating a Wealth Strategy
The first step to creating a successful wealth strategy is knowing where you are going. I call this Your Wealth Vision.

Your wealth vision is your picture of your ultimate lifestyle. Where do you live? How do you spend your time?

Now, we can all close our eyes for a few seconds and imagine the lifestyle of our dreams. But to truly define your wealth vision means being very detailed and specific.

For example, in just a few seconds time, we may imagine our ultimate lifestyle to include traveling. In those few seconds, we may imagine the excitement that goes with traveling, and a snapshot of a place we’d like to go, but the details probably aren’t more specific than that.

This is much different than someone who takes the time to specifically define how they see travel fitting into their wealth vision. For example, a more specific wealth vision might include travel details such as:

• Flying to Paris every other year and spending 3 weeks there
• Driving to visit family in neighboring states 4 times a year
• Purchasing a cabin in the nearby mountains and spending a week there every other month

The more detailed and specific the wealth vision, the more likely it is to be reached.

Avoid This Mistake When Creating Your Wealth Strategy
Many people skip this first step. Why? Many think that their wealth vision is simply to have lots and lots of money so defining it is a waste of time. Plus, they are eager to move on to the next step. But this first step is critical because you cannot get to where you are going if you don’t know where it is you are going!

Take Your First Step Now
The School of Wealth Strategy session on Your Wealth Vision will help you.

Focus on your wealth!
Tom Wheelwright

If you do not have a tax strategy yet, then you definitely want to get your tax strategy done before you file your next tax return.

A tax strategy is a step-by-step action plan that ensures you are paying the least amount of tax allowable by law, regardless of your business or investment situation.

How do you know if you really need a tax strategy?
If you are an investor or if you own a business, then you absolutely need a tax strategy. The tax law is designed to benefit investors and business owners. A tax strategy is designed so you know exactly what you need to do to maximize these benefits.

Many of you are in the position of thinking about starting a particular investment strategy or a business and you just aren’t sure if you should do your tax strategy before or after you start your investing or business.

I always recommend getting your tax strategy done BEFORE you start your investing or business because then the foundation can be in place and ready for your new venture. Plus, in most cases, it is possible to keep the foundation flexible enough so if your venture takes you in a different direction, your tax strategy can adapt to these changes.

Best of all, by doing your tax strategy before, you can get a jump start on the rules you need to know as an investor or business owner to legally maximize your tax savings. This is one area that most people neglect to focus on early and by the time they do focus on it, it is a huge project that requires a ton of catch up. In fact, most people in this situation never get caught up. As a result, they aren’t able to maximize their tax savings.

How long does it take to create a tax strategy?
If you leverage off the system we have developed, creating your tax strategy a very efficient process. Your tax strategy can be completed in just a few months in our monthly subscriptions.

How long does it take to get my tax savings in my pocket?
In many cases, it’s possible to start reducing your current tax payments immediately, whether it is by reducing your withholding or reducing you estimated tax payments, so you can put some, if not all, of your tax savings in your pockets immediately.

Our Monthly Tax Coaching Series subscription can help you with your tax strategy.

Focus on your wealth!
Tom Wheelwright

My response is always the same:

The 3 most expensive words in the English language are do-it-yourself.

Having a team brings leverage and velocity to investing which leads to better and faster results. This is what businesses do. They build a team with their employees, vendors, customers, advisors, partners and so on.

These same principles apply to investing. Investors who create a business of investing and run their investing like a business, enjoy the same results enjoyed by a successful business owner, including bigger profits and bigger growth.

Investor A v. Investor B
Let’s look at an example.

Investor A and Investor B both live in Arizona and both have the goal to invest in commercial real estate in Utah. Both are developing their initial plan to reach their goal.

Investor A will follow the “do-it-yourself” method. He will do everything himself from researching the market, to learning the rules, to analyzing the properties.

Investor B is following the business method. He will form a team and have members on his team who have the market expertise, who know the rules and who can run the numbers for him.

Which investor do you think will reach his goal faster?
In my experience, an investor like Investor A achieves his goal in 14 months on average. An investor like Investor B achieves his goal in 3 months on average.

Which investor do you think will have higher profits?
Many people who follow the “do-it-yourself” method do so because their perception is a team of advisors is too expensive and they can’t afford it. They think their profits will be higher if they do it all themselves.

Just like in a business, when done right, building a team for your investing can generate the greatest leverage and velocity which leads to greater profit and greater growth.

The key is building the right team and structuring the compensation for each team member strategically. I like using incentive compensation.

My real estate investing team finds me deals that are more profitable than I could find doing it myself, even after factoring in their compensation (I require them to do the analysis this way before I decide to invest),.

Because the profits generated by my team are so much greater than the profits I would generate myself, I am much better off investing with a team.

Are you running your investing like a business?
Think about how you do your investing. Do you run it like a business?

Investors who run their investing like a business have:

• A clear written strategy
• Mission, vision and values
• Systems in place to make investing fast, efficient and in line with the strategy
• A team of advisors
• Reporting to tell them their net worth or cash flow at any given minute
• Both informal and formal agreements with their customers and vendors

How does your investing activity stack up? What changes can you make today to run your investing like a business?

These sessions from the School of Wealth Strategy will help:

Building Your Wealth Strategy
Identifying Your Wealth Team
Informal Agreements
Formal Agreements
Internal Controls
Reporting

Focus on your wealth!
Tom Wheelwright

One of the concepts I love to share is:

The Government Wants You to Reduce Your Taxes

It’s true! The tax laws are written to reduce your taxes, not to increase them. In the U.S., for example, there are over 5,800 pages of tax law. Only about 30 pages are devoted to raising taxes. This leaves over 5,700 pages that are devoted entirely to reducing your taxes.

This means 99.5% of the tax code exists solely for the purpose of saving you money.

I even go as far to say it’s actually your patriotic duty to reduce your taxes by all legal means. Many people think I’m kidding when I share this, but I’m not!

Think about it this way. If 99.5% of the tax law is written to help you reduce your taxes, then the government must really want you to do just that. Otherwise, why would they enact so much legislation aimed at helping you do so?

All of the so-called complexity of the tax law is really just aimed at reducing your taxes, not increasing them.

When I share this concept with others, they usually find it interesting, which is great – but I really want them (and you) to think about this concept and how to apply it to their personal situation.

Once you truly believe that the government wants you to reduce your taxes, you’ll realize that you have the right to reduce your taxes every minute of every day. All you have to do is learn the rules.

Now, I enjoy reading the tax code and learning the tax rules. Most people don’t find this enjoyable though. This is where your wealth team can help. The tax rules can be easy to understand, if you have the right tax advisor on your team.

Here are a few cautions to consider when you are identifying the right tax advisor for your wealth team.

Just because someone is a licensed CPA, or licensed accountant, does not mean they understand taxes. Some accountants never deal with taxes.

Just because someone prepares tax returns doesn’t mean it’s safe to assume they understand the tax law well enough to make the rules understandable.

It is key to have a tax advisor on your team who understands what it is the government wants you to do in order to reduce your taxes and, more importantly, is able to put those rules into terms you understand.

Focus on your wealth!
Tom Wheelwright

When properly established, investment criteria is a proven method to analyze opportunities quickly based on your specific goals.

Before You Establish Your Investment Criteria
Investment criteria is one piece of an overall wealth strategy. Before determining your investment criteria, you must first know:

#1 Your Wealth Vision, Mission and Values
Vision, mission and values are not just for businesses. They are powerful tools in your wealth strategy too!

#2 The Type of Asset
You may wonder, if I already know the type of asset I want to invest in, isn’t that my investment criteria? It’s not.

The type of asset is very broad. Let’s say you have decided to invest in commercial rental real estate. Even though this is a specific type of asset, there are still thousands of opportunities in that category.

Here’s why you must know these 2 items before determining your investment criteria
Investment criteria is simply a list of standards an investment must have. These standards are specific to you and must be consistent with your wealth vision, mission, values and asset type.

Knowing these 2 items first makes your investment criteria more compatible with your overall wealth strategy.

Examples of Investment Criteria

• Specific investment criteria may include:
• Minimum appreciation
• Minimum rate of return
• Minimum cash flow or cash on cash return
• Price range
• Maximum amount of investment
• Location of investment

Once established, the process of using investment criteria is quite simple. If any part of an investment opportunity does not meet the minimum requirements listed on your investment criteria, throw that investment opportunity out.

This process enables you to sort through all the opportunities in just minutes and identify the ones that will best fit in your wealth strategy. Then you only spend time further researching those that meet your minimum investment criteria.

Using investment criteria helps you stay focused on the right opportunities for your wealth strategy.

The School of Wealth Strategy sessions on Massive Passive Income and Building Your Wealth Strategy will help.

Focus on your wealth!
Tom Wheelwright