Should I repay my very own home before investing?

It doesn’t feel all that long ago that Milwaukee,Wisconsin and the rest of the country was coming out of the worst financial crisis in a lifetime after the housing market and stock market crashed in 2008. But by 2010,as the rest of the country was starting to bounce back,Milwaukee embarked on a historic comeback,marked by strong financial indicators and a building boom.

At one point in time,U.S. Bank had the tallest building in the area,at a whopping 42 stories. But in the last 10 years,more and more structures have popped up,including the $524M Fiserv Forum arena,the massive home of the Milwaukee Bucks.

With all of this building has come an increased demand for temporary housing and short term rentals,as more and more people are looking to work in the newly revitalized city. It’s a trend that has been occuring in other big cities across the United States as the economy has continued to improve,including in Downtown Chicago.

Rocky Marcoux,the commissioner of the Department of City Development,points to certain investment numbers to show just how much the boom is helping Milwaukee,especially in District #21. The district includes the the booming downtown city center and has seen about $5B in development since 2005 alone – and that’s just one district in the city. In less than 20 years,experts expect that number to rise to $7.7 in additional development in the city center. This could include retail spaces,restaurants and corporate housing.

Marcoux points to housing numbers as well to demonstrate just how much development has increased in the same period. About 11,000 housing units have been built in downtown Milwaukee,and another 8,000 have been constructed in nearby neighborhoods.

“Once you factor in that in the past 15 years,give or take,we had the greatest recession since the Great Depression,and there was really no measurable activity during that time,that makes the numbers even more impressive,” he said.

If you are contemplating working through an umbrella company, you will likely spend a large amount of time comparing your options. In doing so, you will almost certainly see advertisements from umbrella companies that claim to offer “90% plus take home pay”.

As a contractor seeking to maximise their earnings, 90% take home pay sounds like a dream come true – but unfortunately, these claims can quickly turn into a nightmare.

90% take home pay is never feasible

The idea of being able to keep 90% of what you earn may be tempting, but it can only be achieved under a very specific set of circumstances. Let’s crunch the numbers:

• The rate of tax is the rate that anyone earning above the tax-free personal allowance must pay by law.
• Everyone receives a tax-free personal allowance of £11,850.
• Anything earned after this amount is taxable. This means that anyone in full-time employment must pay tax, as a full 40-hour week at the national minimum wage exceeds the tax-free allowance threshold. If you work full time, you must pay tax.
• If you earn between £11,851 and £46,350, you will pay 20% of your taxable income in tax.
• If you earn between £46,351 and £150,000, you will pay 40% in tax.
• If you earn over £150,000, you will pay 45%.

Given the above, we can conclude that unless you are earning less than your personal allowance of £11,850, you must pay tax at a rate of 20%.

So how can you legally achieve a take home pay of 90% – which is just a 10% tax rate – with an umbrella company? You can’t. It’s illegal.

So why do companies advertise 90% take home pay?

There are two reasons an umbrella company may advertise a 90% take home pay, and neither are positive:

• They are advertising this rate with a caveat – i.e. you can achieve this rate if you earn less than your personal allowance. This isn’t technically a lie as it can be true, but if you work full-time, you will definitely earn over your personal allowance – so really, it’s just marketing spin that applies to only a tiny percentage of contractors.
• More worryingly, a 90% take home pay could indicate that the umbrella company are involved in a tax avoidance scheme. If this is the case, working through such a company could have catastrophic consequences for you in the future.

HMRC and tax avoidance

Tax avoidance schemes are always illegal.

If HMRC find that you owe money in unpaid taxes, they will issue a demand for payment. You can try to argue that you did not avoid tax – your umbrella company did – but HMRC have the power to demand you ‘pay now, dispute later’. Due to this, you would still need to pay the back-taxes even if it is the umbrella company who were at fault. You could then dispute this with HMRC and claim a refund, but only after you have settled the debt in full – and even then, there’s no guarantee that the appeal would be successful.

So what should you do instead?

• Ignore companies that claim to offer you 90% take home pay, as this cannot be legal. This point cannot be overstated enough; there is no such thing as a legal or permitted tax avoidance scheme – no matter what companies claim on their website!
• Look for an umbrella company that pays you via the PAYE system
• Check all monies received to ensure that you are paying the right rate of tax for your income.

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By John Sage sales coach

Congratulations! You’ve made it to the next instalment in my Rules of Life blog series. In the last edition,we discussed the significance of having guidelines,how to create your own guidelines,and a few other ideas to embrace a wealth state of mind.

Let’s not squander any time and get to the next three rules. These are a little bit various than the last,and I desire you to think of the time you invest showing and analysing previous choices.

Guideline 5: Know thyself

Do you truly know yourself? No,I suggest do you actually know yourself? Do you understand your habits,failures,successes,insecurities,and so on? The response might amaze you.
We have blinders on in our everyday lives. It does not matter whether you’re driving to the doughnut store or signing a multi-million-dollar property investment offer,you’re most likely not looking closely in the mirror.

The important things is,all of the finest investors worldwide understand themselves within and out and you can too with a little bit of practice.
It’s everything about comprehending your process for evaluating investment choices. If you can establish a system to objectively comprehend the danger and benefits of a decision,you’ll make better choices in the long-run.

More from John Sage sales coach here:https://john15106.wixsite.com/johnsagereviews/blog/rules-of-the-game-know-the-rules-so-you-can-break-them-by-john-sage-property-developer

Guideline Six: Ethics and value exchange

I wish to pick up a minute to make one thing clear: these are 2 various things that I’m describing.

Worths are the overriding principles that direct you throughout life. They’re your morals,ethics,and help to keep you from losing control of your life. With these worths,navigating troubled waters becomes a lot easier as you basically already have a roadmap to use to base all of your choices.

Worth exchange,on the other hand,describes the procedure of wealth exchange. To construct wealth,you need to give something of worth in your corner of the exchange.
You can’t have one without the other,and if you wish to end up being wealthy and adopt a wealthy state of mind,you require to establish worths that you can then exchange. To put it simply,to construct wealth,you need to include value.

Guideline Seven: Honesty

Anybody can lie,cheat,or take in the investing world. In reality,Hollywood movies like Wall Street and others reveal this practice and have shifted the general public’s understanding. Let me tell you something: you will not make it extremely far in the long-run without some integrity.

People capture on to the phonies and cheats in the investing world,and although you could get some short-term success,it will go out,and your track record will be garbage.
So,to top off this blog post,I wish to summarise a couple of points:

• To make it anywhere in life,you need to understand yourself. You need to come face-to-face with your successes,failures,fears,needs,and desires.
• You likewise need to define your core values in life. What ethics assist you? Once you can determine this,you can begin including value to wealth exchanges.
• Lastly,you require to have stability and do everything honestly. It may take longer to see success,however you’ll have much better luck in the long-run,develop stronger relationships,and more steady wealth.

John Sage Sales Coach – Direct To Your Inbox

The last three rules await you in my next blog. Register for this blog and follow me on social media to never miss an update! www.johnsage.com.au