Tax Tip 2015: A penny saved is a penny earned
Keeping track of your receipts is a very important step in creating your own path to becoming a millionaire. We don’t often think of saving money in the same way we think of earning money. But the net effect is the same. Benjamin Franklin’s famous book The Way to Wealth couldn’t have put it better, “A penny saved is a penny earned.”
When thinking of saving money, most of us understand things like using coupons, comparison and holiday shopping, or even buying in bulk through warehouses. Rarely do we think of saving money through organizing taxes properly. I have been guilty of this myself and have needlessly thrown away thousands of dollars through missing tax deductions and losing receipts.
In Robert Allen’s book, Multiple Streams of Income, he suggests that what separates millionaires from non-millionaires is the extra 10 minutes they spend per transaction. Namely “they expect, ask for, and always get a receipt. They always examine the receipt for errors. They file the receipt as soon as they get home.”
Earn a 25% Return buying a pencil?!
To quote from Robert Allen’s book again: “Just how much are those lost receipts worth? Suppose you buy a pencil and instead of throwing away the receipt you actually keep it, categorize it, and file it for tax time. Now you have proof of a tax-deductible expense for your home-based business. You can deduct this expense from your income before you calculate your taxes. What is this wroth to you? An immediate 30 percent return on your money!”
That’s right folks. Maybe you are in the 25% tax bracket instead. Well this still means every dollar you categorize as a tax deductions gives you an IMMEDIATE 25 percent return on your money!
Now in all fairness, I hate keeping track of expenses as much as anyone. It is laborious and tedious work. BUT HELLO? WHERE ELSE CAN YOU EARN A NO RISK, IMMEDIATE 25% RETURN? Yes when you look at it that way, it is foolish not to do the work!
This 2015 tax tip remains valid for all time. Let us all conclude: Save those receipts! It’s worth it!