This post is part of a series:
Part I Part II Part III Part IV Part V Part VI Part VII Part VIII Part IX
When we left off yesterday, we were pondering a conundrum. What do you do when you have large investment gains on paper, but you know that you’ll have to pay a massive tax on them if you sell?
After all, the whole point of investing is to become financially independent. But if you constantly lose 15-30% of everything you make to taxes, it’s very hard to break out. You lose the power of uninterrupted compounding.
In my case, I had some large gains in Bitcoin. And as I watched my Bitcoin holdings appreciate in value, I started to realize that we had been going about it all wrong.
We have been conditioned to think that the key to getting out of the rat race lies in building a big “nest egg”. That’s been financial planning 101 for decades now.
As such, we are taught to chase capital gains. That’s why investors obsess over portfolio returns.
It’s dated now, but I remember Dave Ramsey telling people to slog their money away in mutual funds that would grow their wealth 7-8% a year. That’s the nest egg mindset.
Then you get things like the “Rule of 72” and other slogans that further pushed the capital gains approach. It’s all been a scam. I’m not mincing my words on that.
Continue reading “How I Came to Love Debt and Taxes: Part III”