My goal is to educate and improve our lot because our education and religious system do not teach us that.   The rich understand the rules of the game.  The saying goes “the rich get richer and the poor get poorer”. 

As many of you already know, if you want to learn how to play a musical instrument like a guitar, you must learn how to count the beat of each song.  This is because every song has a different beat and most are four.  Then comes the different type of rhythm and notes.  As you advanced, you will become more skillful by mixing different beats and rhythms, notes, and then comes the plucking and classical.  The underlining foundation is all about the number of beats. 

In life, there are two things that we will experience other than life and death.  They are "interest" and "tax".  Interest from paying the mortgage, credit cards, personal loan, car loan, leasing, retail payday loan, and least but not last, interest by the tax authority for late tax payment.  The world cannot live without loans because people in the modern economy cannot afford the necessities of life without getting into debt.  Necessities like shelter, motor vehicle, food, and essentials.   The world economy is built on debts.  To keep the world moving, the Government of the world, businesses, institutions, and people get into debt.  What is tax?  Tax is what you owe to your Government.  Tax can be break-down into sales and income tax.  Income tax can go up to 52% depending on your tax bracket. Historically, billionaires and special interest groups influence how the Government structures taxes.   

Interest and taxes are like masses of spider webs.  Those who understand the rules of the game can see the potential opportunities and pitfalls.  The lucky ones break free, walk on them, and became stronger every year.    Thus, they can fend off the spider.  Unfortunately, the unlucky ones walk blindly or miscalculated, got entangled and some eventually got eaten.  

So, how do you escape the spider web of interest and taxes?  The answer is not by making more money, work longer hours, and increase your paycheques.  If the solution is that simple, we will not see the dwindling number of middle-class in the advanced countries from the start of the twenty-first century.  Many middle-class are well educated who are now in their middle age.   The spread between the top 1% and middle-class is drifting further and further away as time passes.  Unlike in the past, today the middle-class is struggling to meet end meet and has little or no savings.  Or does the answer come from the old wisdom of living within your means?  It is a pearl of good wisdom to follow by keeping you on the right track and the rich follow this principle.    

The golden answer lies in making "interest" and "tax" work in your favour instead of working against you.  You should see them as your friend and not your enemy.   It is by taking advantage of the structure of the tax rules in your favour based on your individual situation.  The tax rules apply differently to different people in different life situations.  For example; if you work from home during a pandemic, you want your employer to issue form T2200.   With this form, you are permitted to deduct maximum allowable employment expenses.   However, if you work from home and do not have form T2200, the maximum tax deduction allowed is a mere $400.  Yes, just that!  The T2200 allowable employment expenses deduction is 90% as good as the business owners with a home office.   In Canada and the US (I am sure the rest of the world), the business owners and investors have the best tax advantages.  For those who do not fit into one of the two groups, there are still ways to let interest and tax work in your favour.  Using the beat of tax rules, skillfully applied will improve your lot in life.  You will go further and faster.    

As I explore financial literacy, I plan to touch further on interest and tax; accounting concepts - revenue & expense and asset & liability; principle of paying yourself first; and building equity.    I hope to touch further on the different types of loans aiming at the purpose of line of credit, preferred credit card, retail credit card, and payday loans.   And if the situation permits, I will touch on how to understand the financial value of motor vehicles.    

Please come back for financial literacy part 2...