Three Truths About Tax

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Hong Kong

When I moved to the US, I went from a 5 to 30% tax rate.

Why move?

Because it saved me money.

Taxes are one slice of your family budget

I used to live in Hong Kong, a low-tax part of the world. Thing is, it’s a high cost location – especially for school fees and residential housing.

Landing in in the US, I chose a part of the country with an excellent public school system. With three kids, that choice saved me a lot of money.

But there are trade-offs.

I grew up in Canada and my family’s basic healthcare needs were covered by the provincial government.

Not so in the USA.

My insurance, HSA contribution and dental cleanings mean I pay $25,000 before anyone’s gotten sick.

I run the $7,000 HSA contribution down against my family’s $14,000 deductible.

Anybody breaks a leg, I’m quickly over $30,000 for the year.

Still cheaper!

In my last year in Hong Kong (2000) I was living in a place that cost $100,000 per annum to rent. The senior partners paid 3-5x that amount.

School fees: friends pay up to $50,000 per kid, per annum. Mine go to public school, a $75,000 saving.

Taxes are the price we pay for living a wonderful life.

Clean air, pleasant climate, easy access to nature, an ability to avoid traffic.

As a friend pointed out, all those Californians moving to Austin are going to find out something… they’re still complaining about taxes, it’s hot as stink, they’re sitting in a traffic jam AND they lost the benefits of living in Cali.

The ability to escape tax policy is 100% in our hands.

Here’s the game.

Take your tax bill and divide it by your net worth.

In my mid-20s, I worked in London. I earned $75,000 and paid $18,000 in taxes. My net worth was $20,000. My tax bill represented 90% of my net worth.

A change in tax policy, or a move to Hong Kong, would have a material effect on my family finances.

Most of us, can’t change hemisphere’s for work.

Many of us, can work remotely from a lower cost location.

Go deeper.

Consider time.

My former self, he saved 50% of his take-home pay from 1990-2008.

Year after year, his family net worth grew.

The government’s 90% take is now under 5%.

We freed ourselves from tax policy.

It’s in your hands.

Teach this to your kids.

  • Taxes are one piece of the family budget
  • The goal is a wonderful life
  • Taxes are a cost of living well
  • Over time, we control the government’s tax take

PDF Link on Dropbox

gDoc Link with view rights open, make yourself a copy.

I think these ideas were inspired by The Millionaire Next Door.

Teach your kids to become experts at applying wisdom across time.