Successfully Managing Finances & Debt

Here I talk about how manage finances how to use debt properly. As well as ways to legally avoid paying taxes on your earnings.

When I do financial coaching with anyone. This is the program I recommend following for all clients. It takes about a year to get through the whole thing with one session per month.

Proper financial organisation:

As a baseline starting point for financial management I would encourage the following principles:

  1. Pay yourself first.
    • This principle gives you a baseline understanding how money works. If you do as your parents told you as follows:
      • Pay your rent.
      • Pay your bills.
      • Then buy food.
      • Then put something aside for a rainy day.
    • If you follow the above guidelines, you will never have any money. This is because you are working for the people you are paying first. So in the above case, you are working for your landlord. Then the billing companies. Then the shops you buy your food in.
    • Another reason is because needs always expand to fill both money and time allocated to them. So if you have €200 per week. You’ll pay your rent, bills, and food. Then you will find somewhere to spend anything you have left. If your money grows, so will your needs expand and you will find somewhere to spend it.
    • For this reason you must use the pay yourself first principle as follows:
      • Pay yourself first.
      • Pay your rent.
      • Pay your bills.
      • Then buy food.
      • What’s left is for spending or savings as you wish.
    • Using the above list you can start by always paying yourself first and you will see as the rest of your needs reduce or expand to fit the money available.
      • A minimum starting point for paying yourself first is to allocate 10% of your income to paying yourself first. So in the above example of €200 per week income, you would pay yourself (save), €20 per week minimum.
      • Then the rest is allocated to the other items. When you get to the end. I always recommend for the first 3 months. Spending everything that is left. Just for the fun of it.
    • If you have debts of any kind the list changes slightly. After the Pay yourself first principle. You pay your debts next. So you allocate a further 10% to paying off your debts, before paying rent, bills and food.
      • Once again, you will notice your needs reducing to fit the budget.
      • Again I always recommend if you reach the end, to always spend what is left. It is not about being tight. It’s about watching how your needs expand and contract to fit your time and budget.
    • Once you learn how your needs expand and contract to fit your budget. Things get really exciting. Then you don’t want to spend the money at the end. Instead it motivates you to put as much as you can into paying your debts. In this way, when your debts are gone, you reallocate this money, to paying yourself first instead. So now you are paying yourself 20% instead of 10%. This happens without any additional effort on your part as you have got used to being without that 20% already.
      • Once this happens, you start to see your savings really growing.
      • Then you actually get excited about paying yourself first and it automatically leads you to reallocating what is left to paying yourself and watching your savings growing even faster.
    • With time, as you see your funds growing and your needs contracting to fit your budget. You automatically start looking for places to reduce your expenses and increase your income.
      • This is where you really begin to see your money growing. With a bit of time, you’ll soon notice that 30%, 40%, even 50% or more of your income is going into the pay yourself first part of the budget. Thats when you know you have really made a breakthrough.
  2. Pay your debts second.
    • I’ve already covered this above so wont labour the point.
    • But this also teaches you how to know how much debt you can afford to get into.
    • So if you have €200 per week income. You cannot afford to get into debts that will cause you to exceed €20 repayments each week.
    • So when you want something that you need to borrow for. You will know how long it will take you to repay it. In many cases, because you are now adding a time element to the repayment. It will make you think twice before using debt to purchase things. This now shows you the true value of your money and so are less likely to incur debt unless it’s opening opportunities to reduce expenses or increase your income.
  3. Learn the correct profit equation.
    • In any enterprise (and in personal finances too). The equation you are told for profit is as follows:
      • Income – Expenses = Profit.
    • This equation is fundamentally flawed. You must decide, before you do anything what your profit is going to be. So the correct profit equation is as follows:
      • Income – Profit = Expenses.
    • Using this equation, and continuing with the above figures as an example. It looks like this:
      • €200 – 10% (€20) = Expenses (€180)
    • This shows you that you have €180 to spend on rent, bills, food, and whatever else you need. Your profit has already been factored into the budget.
    • Expenses always grow to fit the time and money available. So as you change your %Profit. Your expenses will automatically shrink or expand to fit your budget. Which is how it should be.
  4. Set savings goals as follows:
    • Try to get yourself to a point where you have your first €1,000 as an emergency fund.
    • Next try to get it in stages to €5,000. Giving yourself spending rewards for each milestone you reach in between.
    • Next, try to get yourself in stages to saving up to 3 months income.
    • Next, expand that to 6 months income.
    • Finally, after trying the next steps, gradually expand that to 1 year of income.
  5. Stop living off your current pay check.
    • As early in the above process as possible. Stop living from your current pay check for following the guidelines below.
      • Continuing with the example above. You get paid €200 per week. Once you have saved your first €200. Allow your full pay check to go into your bank account. Then withdraw only the difference from your bank. So in this case, you need €180. So only withdraw this much each week.
      • When your savings reach €400. Again allow your entire pay check to go into your bank. Then draw down 2 weeks of money. €180+€180 = €360. Pay your expenses bi-weekly instead of weekly.
      • Your next goal is to get your savings to a monthly income, then quarterly, eventually even to yearly. You want as many of your expenses being paid as early as possible. Instead of paying them often. This leaves your remaining money free to work for you.
      • You will soon start noticing opportunities for expense reduction and income increases. The wider that gap, the faster your money grows.
  6. Invest only in things you have knowledge of.
    • If you invest in things or people of which you have little knowledge, you will lose your money. So only invest in things you know about. Or in people who have expertise in their area. In this way your money is far less likely to be lost, and far more likely to grow substantially.
  7. Only use debt for investments.
    • An investment is anything that will reduce your expenses, or increase your income enough to repay the debt in a reasonably short timeframe.

Principles 1, 2 and 6 above come from a well known little book which is available for free both in .PDF and on YouTube as an audio book. It’s called:

The richest man in Babylon

This book is around 100 years old, and it’s advice has been regurgated in many financial success books ever since. Each one giving it’s own spin, without giving it any credit. I mention it above, because it is simply the single best book on basic financial management. I cannot recommend it highly enough for a read. It will change your financial life.

Principles 3, 4, 5 and 7 are a little more advanced. But put principles 1, 2 and 6 on steroids. Combined your financial life, along with your understanding of money and debt, will begin to have significant changes well within 12 months.

Once you have these basics down. You can and should begin the following steps when you are ready.

Tax avoidance vs. Tax evasion:

Tax avoidance is using the system to avoid paying tax which is both legal and even encouraged. The system spells out various ways to do it as I outline below.

Tax evasion is finding ways to not pay tax at all, or refusing to pay tax. If you have to sneak around and worry, then you need to start talking to people who know the system. There is little, if any need, for tax evasion when there are so many options available to legally avoid taxes as outlined below.

Step 1: Using gifts and cash as a way to avoid tax.

One of the first steps you should take before starting any venture is to see if you can get paid in cash or gifts. You must do this before registering any kind of business.

If your services sell for less than €3,000 annually. You can legally ask the person to give you a donation instead of a payment. If you know 10 people willing to give you up to €3,000 per year for your services or products. You can earn €30,000 completely tax free by each of them giving you a gift. If you know 100, then congrats, that’s €300,000.

For example. I provide various types of coaching and consulting services. However, presently none of my clients are paying me €3,000 per year for coaching. This is because I generally only meet with a client for coaching once or twice per month. If monthly, at the above rate, they would be paying me €250 per 45 minute session. I charge less than half this per session in most cases. So no client will presently be paying me over €3,000 per year at my current rates. This means I can safely and legally ask them to donate or gift me the cost of the session. So I will never pay tax on the income nor do I have to register any business or pay any accounting fees etc.

Many other businesses can do likewise. As long as you have any client paying you less than €3,000 per year. You should be taking that income as a gift or donation instead of putting it through a registered business, even if you have one. This is completely legal to do.

Somewhat less legal (if you are caught), is getting paid cash in hand. There is still a lot of work available for cash in hand. Most businesses can hide a lot of the cash they get. This however, is getting into the area of tax evasion. But you are not evading tax if they are giving you a gift.

Step 2: Using a limited company as your bank account.

One of the next things you should do. Assuming you are employed. Is to leave your employment and become a contractor. This gives you multiple benefits. Not least of which is that you only pay tax on the money you draw down as a wage. There are a variety of ways to draw down a respectable sum of money annually and pay limited, if any taxes.

You get your employer to rehire you as a contractor. Then to pay you in full, all the monies he would have paid, including your various taxes (PAYE, PRSI, USC). All these monies are then held in your business. Effectively using your business as a bank account. You then draw down only what you need. If you do this correctly, you can strike a balance between having access to debt vehicles (credit cards, overdrafts etc), and paying minimal if any taxes.

The advantage to your employer is that your services are now written off against the profits of the their company. Reducing their overall tax exposure too. Most employers will jump at the opportunity to do this.

The only tax you will have to worry about is VAT. Within certain limits, it will be an individual decision as to weather you will register for it or not. There are pros and cons either way.

Step 3: Using self directed pensions for investment.

Pensions are a complete scam. If you were paying into any pension when you were employed. Find someone who can redirect those pension funds into a self directed pension.

When self employed in a limited company. You will have access to a special type of pension known as a self directed pension. You can personally direct (use) the funds within this pension, with limited minor restrictions. To make investments of a variety of different types. The income from which is tax deferred until your retirement.

This is an absolute gold mine if done properly, and it is not difficult.

Step 4: Using whole life insurance with cash value access.

Life insurance policies are also a complete scam. If you have any consider cancelling them and opening a whole life policy, but only one with cash value access. You do not need to be self employed to open one of these policies. So the sooner you do it the better for you.

This opens another option to you for additional access to debt. What this allows you to do is make life insurance payments. Then after the first year or so, you will have built up a cash value within it. You can then borrow against this cash value and use the borrowings to invest. In most cases you can borrow in excess of 90% of the cash value.

You will still earn interest on the full amount of the cash value even though you have borrowed against it. Often this interest is in excess of 5% per year. There is also no pressure to repay the borrowings, as when you die, they will be repaid from the insurance. Along with all the other benefits. This is the place you should park your money while you are waiting for investment opportunities. Especially given the relatively high interest.

By comparison, what bank is giving any kind of interest nowadays on savings accounts? For further comparison, when you take into account commissions, other fees, and taxes associated with stock market investment. You will have to be a very good stock market investor to get much more than this. But I am not against investing in the markets if done properly. I would be against the use of debt to invest in the stock market however. Because you are also adding the high interest of credit cards to the commissions, fees and taxes. So you will never beat the markets no matter how good you are using debt for this kind of investment.

Step 5: Learn to use debt properly:

If you use credit cards, overdrafts and other debt vehicles to purchase consumable goods. TV’s, washing machines, weekly shopping, or other general items. You will never have any significant amounts of money. You’ll also find yourself in a constant roller coaster of debt cycle management. The main sign of this is that you live pay check to pay check. With most of your income going into paying off your debts. This is not good debt management. This is the core reason many freeman invent things like acceptance for value. In most cases this is a desperate attempt to get away with paying for the things they want but cannot afford.

Debt should only be used to fund opportunities that reduce your expenses or grow your income. Thereby giving you additional income that you can use to later settle your debt. Properly managed debt will open up opportunities that you would not otherwise have access to.

If you look around your life. You should see many opportunities where you can use debt to reduce your expenses and increase your income. This starts with simply investing in yourself. If you cannot see yourself as a good investment, then you definitely should not start a business or any kind. You also should not be using debt. Your best option in this case, is to clear all debts and stay clear of them. Debt will only serve to get you into trouble unless you intend to manage it properly.

Debt can be seen as a type of leverage. Leverage is a way to increase your power. So debt managed improperly will increase your disadvantages substantially. But debt managed properly will also increase you advantages dramatically.

Simple examples of how to use debt properly follow.

Using unsecured debt to reduce expenses:

A simple example of good use of debt is to purchase items that will reduce your expenses. For example, purchasing food processing equipment. Then later purchasing food that is on sale in large quantities. These foods are then processed and stored for later usage. Doing this on a regular basis, means that when food prices increase, and items are not on sale or available. You will have the low cost items that you previously processed to use. As a result, you’ll have reduced your expenses. The money saved can then be used to pay the debts. Then you can reinvest and reuse the debt again for additional cycles.

Using unsecured debt to pay off secured debt:

If you have a mortgage (a secured debt), as well as back taxes, bills, an overdraft, or credit cards (unsecured debts). Then you could use these unsecured debts in various ways to make large repayments off your mortgage. In this example, you will significantly reduce the time it takes to repay your mortgage. This can save you potentially tens of thousands in interest. To do it successfully and live a reasonable quality of life. You would use your income solely to pay off these unsecured debts. So the cycle looks like this:

  • Use your unsecured debts to make large repayments off your mortgage.
  • Then use your income to pay off your debts instead of just spending it.
  • If one of your unsecured debts are a set of credit cards. You cycle your cards along with your other unsecured debts, from month to month, using one card to pay off another. Doing this you pay minimal interest due to not carrying a balance.
    • You have 56 days to pay a credit card balance before incurring interest and charges.
    • If you do it on a regular cycle shorter than the 56 day period, you’ll never pay interest and very minimal charges.
    • You’ll also be increasing your credit score. Which opens up other lines of credit. More banks will want to offer you credit cards. A very good thing. It means you can take advantage of opportunities for investment that would otherwise be unavailable to you. Most notably you will be able to pay your mortgage even faster in this example.

Doing this means it’s a very good idea to have multiple credit cards and lines of credit. Once the mortgage is repaid, you then obtain another mortgage. This is called releasing equity (money), and you invest this into another property which generates more income. Once you have done this 2 or 3 times. The amount of time it will take to repay each mortgage will decrease significantly. Along with having an increased income from the rents of the properties. Which will open up other opportunities to obtain additional debt vehicles you can use to repeat the cycle even faster.

Because you are operating from a debt basis, you will pay little or no tax. If you do it correctly. Thereby keeping yet more of your income in your own hands. This again is leaving further opportunities available to you that would just otherwise be unavailable.

Combining these various methods:

While these methods can all be used in isolation. The real power comes from combining them. So for example:

  • The cash options.
    • Gifts.
      • By far the best way to start any venture is to get paid in cash gifts instead of actual salary payment. This will tell you before you even go through the minor expense of setting up a business. If you are going to be successful or not.
    • Gift cards.
      • After you have started up a business. You can pay yourself a gift too. As well as giving yourself gift cards and vouchers.
    • Directors dividends.
      • As a director of a limited company you can pay yourself a dividend. This is at a very reduced rate of tax. It’s the first option after you have exhausted the above cash options for payment.
    • So many other cash options.
      • You can creatively combine with the below options as needed. Minor tax evasion might be ok. But if it starts to get into the tens of thousands in cash. Then you really need to begin the options below.
  • You become a self employed contractor.
    • This gives both your employer and yourself many tax advantages as previously described.
  • Then obtain a self directed pension.
    • Most of your future business investments can be made through this. Giving you the ability to grow your income virtually tax free until retirement. This is a gold mine.
  • Then a whole life insurance policy.
    • While you will pay tax on the income you put into this policy. You will not pay tax on any of the benefits. But then, you wont be around to collect on them anyway as it only pays out after you die. However, the main benefit is that you can utilise the cash value in this policy as a line of credit. Again tax free. While earning interest and also being a very low interest loan. Which technically does not have to be repaid (but should be). This opens up yet more opportunities.
    • This concept is known as the infinite banking concept. Where you become the bank.
    • You can open many such policies as needed as your money grows.
  • As a business, and as an individual, you will obtain access to credit cards, overdrafts, and other methods of debt.
    • All of these you can further utilise to your advantage.
    • As a business, all loans are written off against your profits reducing your tax exposure.
    • As an individual. You can use your lines of credit for further loans to your business. Which again will be repaid and written off as expenses.

These are the many perfectly legal ways to avoid paying almost any kind of tax. There will be some minimal taxes that you have to pay. However even these can be delayed for several years and the money reinvested. In doing so, you again open up opportunities to invest. If those investment turn good. You can repay the very minimal taxes at that point, even delaying repayment further once you establish a payment plan. If they don’t, you’ll have the funds elsewhere to pay as needed.

None of this is tax evasion. So you will never have to worry about ever facing courts or jail time for any of this. Tax evasion is the complete refusal to pay taxes. Which you are never doing.

Financial Brainwave #2:

In a previous article I explained how to obtain cash in a way that would destroy your credit rating. As long as you are willing to wait 5 to 7 years, your credit rating will be reset. That does not mean it will be good. It just means financial institutions will not be able to see the mess you made of your credit.

This option is a good option for people:

  • Who are young (under 30) as they have the time to allow for this to reset.
  • Who are past their mid 60’s as their life is less likely to be productive after this age. So they might as well use these options.
  • Who have no credit score to speak of yet and want some free cash. As long as you can take the hassle that comes with it. However, I am directly in the middle of the above 2 age groups. But even I would still not consider brainwave #1 as an option in most cases.

If you have spent any more than 2 or 3 years building your income, at any age. While in the process trying to obtain a good credit score. Then the financial brainwave #1 is definitely not a good option for you. It’s far better to use the ideas on this page to build and use debt and your credit rating properly. Simply because it opens so many other doors for you.

This is financial brainwave #2. This is the right way to do things.

Your freeman right not to pay tax:

We can go into various freeman, sovereignty, and constitutional ideas about the fact that you are not legally obligated to pay tax. They are right, you literally do not have to pay tax. But when you try to implement them, you will likely find yourself in court. Serving jail time. Complete with your very own criminal record for tax evasion and fraud.

A criminal record will prevent you from becoming a director of a company. In turn closing down most, if not all the opportunities above. Unless you get creative and get other people you can trust, or pay, to act as directors on your behalf. Indeed there are even companies out there that specialise in providing this exact service. It is completely legal. You could even start one in another country that has no treaty with Ireland, of which there are many. Something else you will likely do in time if your finances grow enough anyway. So there are always options.

I am not here to feed you lies and nonsense, nor do I have an agenda. So always remember, no matter how right you are, and how many rights and entitlements you have. In reality, you actually only have the rights and entitlements you know about and can protect. If a revenue officer wants to bring you to court. You’re going to court. If a judge wants to throw you in jail. You’re going to jail. If the system wants to give you a criminal record and prevent you from doing certain things. You are getting a criminal record, and likely will not be doing those things. Especially if it requires the consent of the system.

When people talk to me about these kinds of financial freeman ideals. I immediately know that in most of these cases. Its not the system that is broken, but their limited knowledge of it. You must take responsibility for your financial and legal wellbeing. Nobody else will do it for you. These are not difficult skills to master. So why go up against the system, when you can make the system work for you instead. And indeed, by doing so actually do more damage to it without being hurt at all yourself.

This is the concept of peaceful resistance. Using the system to beat itself. Anyone who has an education past 6th class, is better educated than anyone was 100 years ago. Back then the only option was to pick up a gun and use violence. That will not work today. Back then most people could not even read and write. If you can read this article, you are better educated than almost anyone 100 years ago. You need to start using that education and stop seeing violence as an option except in self defence.