If you believe, as I do, that the U. S. is in a long-term trend toward wealth redistribution, it will be wise to pay attention to that trend as you manage your finances and your career. There are three primary areas to consider: protecting whatever wealth you already have, finding new ways to achieve success and build financial security, and doing what you can to influence government policies.
Protecting what you have. If you want a good lifestyle for yourself and your children (a universal desire), the time to pay attention is now.
1. If you have wealth (defined by many as a net worth above $500,000), use existing laws to help shield your assets from frivolous lawsuits, taxes, and publicity. Consider placing liquid funds in an LLC or a domestic asset protection trust and putting real estate in those same vehicles or in land trusts.
2. Lower your public profile as much as possible. You don’t want to be perceived as rich. Many people have not figured out that 85% of the rich got that way by hard work and frugal spending. Most of the wealthy people I know don’t have lavish lifestyles.
3. Diversify your holdings among many asset classes. To protect against global wealth redistribution (the decline of the dollar), hold a significant portion of your net worth in assets invested outside of the United States.
4. Structure your assets to minimize your tax liability. Consider vehicles that defer taxes. Pay attention to the tax rates on capital gains and dividends. If you can, decrease salary that is subject to FICA taxes and increase income, like rent or dividends, that doesn’t incur FICA taxes.
1. If you want to start your own business, do it now, before regulations become even more burdensome. The opportunity to create first-generation wealth won’t vanish, it will just become harder. More and more people who are “rich” will be inheritors, rather than entrepreneurs who were rewarded for working hard, taking risks, and managing well.
2. Business owners need to become more politically active. Relationships and connections will become even more important in a government-dominated economy.
3. Good jobs and opportunities to build wealth will become increasingly tied to the public sector. Having a “government job” will take on a whole new meaning of high pay, good benefits, and security. This includes direct government employment as well as increasing demand for contractors in a variety of fields. Consider getting an education in a growing field that will benefit from wealth redistribution in either the private or public sector.
Influencing government policies. It is important to realize that government policies do make a difference in your day-to-day finances, even if you are not a business owner and don’t consider yourself wealthy. As one example, the expiration of the Bush administration tax cuts this year will mean significant tax increases next year for middle-class tax payers.
Keep in mind that lawmakers, whether local, state, or national, do respond to public opinion. As citizens in a representative democracy, it’s our responsibility, as well as our privilege to educate ourselves on important issues and make our ideas known.