In 1984, Apple rocked the establishment with the introduction of the Macintosh computer. It changed the entire PC industry and in my opinion, marked the fall of IBM.
In the Super Bowl commercial, Big Brother (from George Orwell’s dystopian novel) is IBM and Apple is the agent of change that finally frees the people from the shackles of tyranny.
Check out the video and picture yourself as one of those drones shackled to your paycheck from Big Brother.
Each day you get in line to commute to work.
Next, you line up with your key fob and enter your office tower.
At the end of the day you file back out of the gray office tower and line up at the freeway ramp for the commute home.
The worst part about the paycheck is the government treats your paycheck as earned income.
Technically, the IRS defines this as active income.
Here’s the definition from www.irs.gov
“Active income?”
“What’s the problem with that?”
“That’s how everybody makes money!”
Well, let’s analyze a real paycheck and see why you might want to pick up a sledge hammer and break free from the active income trap.
Take a lot at your current pay stub.
C’mon, log in to your payroll provider right now and glance at the numbers.
Got it?
Good.
I’m going to use live numbers from a two week paycheck with zero withholdings for a Minnesota resident. Hat tip to ADP iPhone Ap!
You know why they call it gross pay?
Because it’s disgusting how much money is left over after deductions.
The net earnings (note how it is called “earnings” as in you are actively working in your career) was $1,107.88 for 80 hours of work.
Thus, the gross pay was $18.75/hour while the after tax pay was $13.85 per hour.
Have you ever heard someone brag about their hourly wage?
If they are making $75.00 an hour, the net amount would be even worse since they would be in a higher Federal and State income tax bracket.
The next time someone brags about their gross wage, ask them what’s their net?
Ahh… but I digress.
Here’s the sad part about active income.
In this example, 26% was lost to taxes.
In other words, this person is stuck living on 74% of their paycheck. No wonder people are struggling!
Almost one quarter of their work day goes to their silent partner-Rich Uncle Sam.
Sure, this person will get some of their money back in the form of a tax refund from good ‘ole Uncle Sam, but that refund will most likely be gone in a nano second come tax refund time.
In my experience, most people spend their refund on paying down debt, vacation or some shiny objects.
So lets not even bother counting the tax refund when it comes to what you actually need to support your lifestyle.
What’s your actual percentage?
Go ahead and calculate it now so you can actually see how much you really earn.
Feel free to add back any contributions you make to your 401k or HSA savings.
Don’t add back health insurance or life insurance since they are expenses, and not savings.
In my next post, we will look at better way to structure your earnings.
It’s called passive income.
If you want to truly get ahead in life and free yourself from the tyranny of Big Brother, you need to structure your life around passive income.
It will totally rock your world once you see and EXPERIENCE the difference like I did.
Passive income….doesn’t that sound better than active income?
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