Forums / Community / Opinionated! / Surely that CAN'T be right !! ….. or is it??

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  • Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Have you come across situations where you hear a statement, read someone’s story, or even see a picture that just seems “Wrong” in some way? Our initial reaction is “That CAN’T be right!”

    I’m sure we all have – they get stored away in our individual memories, and might become part of “Grand-dad’s crazy stories” in years to come. i.e. They remain important to us once we work out where the truth is.

    Well, something I read on this website recently had me scratching my head – my knee-jerk reaction was to think “That CAN’T be right, surely?” And, just to prove how wrong it was, I opened a blank Excel page and set up the calculations so I could PROVE it wrong.

    Result? It proved ME wrong – and proved the initial comment RIGHT !!

    :o

    Let’s try it on you:-

    Re: taxes, I heard a really interesting anecdote at a Tony Robbins event I attended in Dallas last year. If you take $1 and double it 20 times you get a little over $1MM. If you repeat that same process but this time take out 30% tax at each stage- instead of ending up with $1MM+ you end up with just over $30k. A staggering difference!

    Taken from this post – https://www.propertyinvesting.com/topic/5031845-back-from-livinginvesting-in-usa-for-past-7-years-ask-me-anything/#post-5034599

    What was your immediate reaction? Was it like mine?

    BTW, in my calcs, the figure came to $40k, not $30k – but hey, even now, having worked it out myself, I still find this astounding. In essence, doesn’t this show how important it is to “look after every cent?” Like, what if our expenses are 30% higher than they should/could be? Isn’t that cruelling our futures in much the same way as a 30% Tax would?

    And my BIG question – was Steve McKnight aware of this way back in 2001 when he was getting “Ten cups of tea out of each teabag?” ;)

    Benny

    PS Try working out what effect a tiny 5% tax would have had on that same calculation. What would your brain tell you, even now that you know it could have an unexpectedly large impact?

    Happy head-scratching – and mind-broadening !!

    ;)

    • This topic was modified 2 years, 2 months ago by Profile photo of Benny Benny.
    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,110

    Very interesting Benny.

    This is the first time that I had heard of this so I just made a spreadsheet to test it out and I got similar results. Very interesting.

    My results were
    $1 double 20 times becomes $1,048,576.

    $1 doubles 20 times with 30% tax on the income component becomes $40,642

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    I agree totally with your results Terry. It made me sit up and take notice !!

    Did you try doing the 5% one? Even that tiny amount made a HUGE difference to the take-home amount. It took 40% off that $1m figure !! When expenses compound, they have a massive effect too.

    Benny

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