There was a learning opportunity last weekend at a friend’s home. I was invited to attend the lecture given by a so-called expert who knows how to save money through family business.
The contents focused on: the advantage of a family business in saving personal income tax, the kinds of costs to subtract taxable income and even hiring underaged kids to do simple tasks, etc. It was a good presentation, at the end all of the attendants became super excited and many of them started to throw out the ideas on their upcoming family business.
“Why don’t you start a photography studio, then you can include all the costs related to you studio for tax reduction.” One of the exciting friends asked me. “Really, you think so?” I asked her while I was busy eating a piece of cake. “Of course, you can take very good photos!” She seemed very certain. “Look, my dear, in order to get my photography studio ready, I need invest at least $5,000 to remodel one of the rooms in our house (if I don’t rent outside), purchase bunch of lenses and other accessories. Let’s assume the annual total cost is $10,000, we may get $3,500 deduction in tax. But I still paid $6,500, which I have to gain back from my “business of photography”. To tell your the truth, $6,500 annual profit from my photography is almost a daydream. You see, my friend, take a deep breath before you get too excited to jump into any kinds of family businesses!”
“How can we save money then?” She disbelieved my response. “Do you have debts, such as mortgage, car loans, balances in credit cards?” I asked her. “Yes, nowadays everybody has those.” She laughed. “But our family doesn’t!” I told her, “you see, in stead of making effort to start anything new, why don’t you work on your existing money related issues – to reduce your debts or the best bring them to zero. You will save significant amount of interests every year. Soon after you paid off all your debts, you will see a fast growth in your family net worth!”
In my opinion, not carrying any debt is the best way to save money!