Day 9 of The 14-day Passive Income Challenge - Tax efficiency vs non-Tax efficiency - Chaim Ekstein

welcome welcome welcome today is number 9 of the  14 day passive income challenge and i'm happy to   be here with you today we're going to discuss  another element in the Leverage part of the ALM   model which is Attract Leveraged and Manage  we've covered all the elements of attract   now we're in the middle of leverage and we're  going to discuss today about the difference   between investing your money saving your  money in a tax efficient strategy versus   doing it in a non-tax efficient strategy for  most people in my experience they would say   big deal i only pay taxes when i earn money  i don't have to pay taxes when i don't earn   money while they might be right that it's  better to make money in a taxable environment   and still pay it than not to make any money but  let's see the difference between making it in a   tax efficient environment versus earning it in a  fully taxed environment let's jump right in let's   assume for now that you have an account with one  hundred thousand dollars in it let's assume for   this situation just for simplicity reasons that we  are taxed in a fifty percent tax environment just   for simplicity reasons so we have easy numbers  easy calculations i love easy and let's assume for   this situation that you're going to earn 10% on  your money a year 10% that means if you earn 10%   that shouldn't be red if you earn 10  percent a year that means that your account   will double in value by when when will the one  hundred thousand dollar be double and for that   i'm going to use the rule of 72 in case you  don't know what the rule of 72 is we take 72   divided by 10 equals 7.2 which tells me that  in 7.2 years this fund will be worth 200 000   you're with me so far so basically we know one  thing in 7.2 years instead of a hundred thousand   dollars here we have two hundred thousand dollars  here the question is how much of that is yours   and what i will tell you is that if we're talking  about a fifty percent tax bracket that means half   of that is yours and half of that belongs to our  rich uncle sam so hundred thousand dollars goes   for uncle sam and one hundred thousand dollars  goes for you beautiful partnership 50 50 a hundred   thousand for me a hundred thousand dollars for  them now you will tell me of course yeah that all   this could be true but i'm not getting this money  in one lump sum every year it grows a little bit   and you might be right depending on the investment  strategy but if it grows every year that means   that you pay your portion every year fifty percent  of the profit goes for uncle sam fifty percent of   the profit goes for you it's no big difference  versus if you have that in a tax free or a text   efficient environment most of it or all of  it or some of it could be erased and could be reinvested for you so it's very very important  that anything you do when it comes to your   passive income plan should be in a tax efficient  environment as much as possible real estate could   be a good example sometimes it has a lot of  tax efficiencies but there are many many other   examples that we're not going to go into too much  details in this day 9 but at least we know that we   should focus on tax efficient vehicles as much as  possible hope you enjoyed today's lecture today's   challenge we talked about tax efficiency let me  know in the comment section below if you have   any thoughts if you agree with me or you have any  disagreement you have any better strategies and   examples of strategies that you use or you know  others use to improve the tax efficiency of their   passive income plan and let's all benefit from it  and as i told you before i'm reading every comment   and i'm replying to every comment so let's have  a conversation down below in the comment section   as well as if you want to get updates on the  passive income strategy videos that we do please   subscribe underneath this video and i'm looking  forward being with you on this exciting journey