Financial security expert Pamela Yellen, author of Bank On Yourself: The Life-Changing Secret to Growing and Protecting Your Financial Future, believes that business owners are prone to making financial mistakes that undermine their efforts to build wealth. Here is the first of the top five mistakes (#1 of 5) she sees and strategies on how to avoid them...
1. Deferring Taxes:
Business owners love the idea of deferring taxes. That's a big part of the appeal of tax-deferred retirement plans, such as 401(k)'s.
But what direction do you think tax rates will be going over the long term?
If, like many people, you believe taxes are going up, consider that if you're successful in growing your nest-egg, you'll only end up paying higher taxes on a bigger number.
Even if tax rates stay the same, I estimate that by deferring your taxes, you'll ultimately pay 10 to 20 times more in taxes over a 30-year period.
Consider paying your taxes up front - at least you know what they are.
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