Understanding and improving your tax efficiency can significantly enhance your wealth-building efforts and contribute to financial freedom.
Tax efficiency is the strategy of managing investments and income in a way that minimizes tax liability while maximizing after-tax returns. This involves understanding the types of taxes that apply to various income streams, such as capital gains tax, income tax, and dividend tax, and employing strategies like tax-deferred accounts (e.g., IRAs, 401(k)s), tax-loss harvesting, and strategic asset allocation. By prioritizing tax efficiency, individuals can retain more of their earnings, allowing for a greater compounding effect over time, which is essential for wealth preservation and growth.
It's not how much you earn, but how much you keep that counts.
