Grant Cardone is a popular investor, speaker and author who is most famous for his “10X Rule.” The real estate investor and equity fund manager with $4 billion in assets under management — along with an estimated net worth of $600 million — is very outspoken about steps investors need to take tobuild wealth.
Find Out: Warren Buffett’s Berkshire Hathaway Bought Over $73 Million in Shares of This Tech Company — Here’s Why
For You: 5 Types of Vehicles Retirees Should Stay Away From Buying
Part of Cardone’s popularity comes from his emphasis that even everyday Americans can take pages out of the playbook of the wealthy and invest in a similar fashion. Cardone has famously stated, “the goal of the wealthy — earn no income.”
Keep reading to find out what he means by that.
When it comes to generating long-term wealth, what’s most important is what you keep in your pocket, not necessarily how much you earn. This is because regular earnings are fully taxable, at thefederal, state and sometimes local levels.
Top earners (those who make $609,351 and up according to the IRS) face a federal income tax rate of 37%, and they can end up forking over more than 50% of their total income when state and local taxes in high-tax locales are considered. This is what Cardone means when he said that your goal should be to “earn no income.”
His point is not that you shouldn’t make any money, but that you should keep a close eye on how your money is taxed and how much you’ll end up with in your pocket.
Check Out: Warren Buffett: 10 Things Poor People Waste Money On
Famous Billionaires With Relatively Low Incomes
Cardone emphasized his point by referencing how many famous billionaires actually have very low incomes. Warren Buffett, for example, has maintained the same $100,000 salary since the 1980s, while the salary for Jeff Bezos has remained more or less the same $81,840 since 1998. Mark Zuckerberg earns a salary of just $1 annually.
So, where do these billionaires — and many others who take a $1 salary — get their wealth? Primarily, from their stock and investments. By minimizing the amount they earn in taxable salary, they limit the amount of tax they have to pay.
Imagine if Jeff Bezos, for example, took a $10 million salary. He’d likely lose roughly half of that to taxes. But by having the bulk of their wealth in stocks, they not only avoid immediate taxation, they pay a lower tax rate when they sell their stocks and they participate in the long-term growth of their companies.
If you’re not familiar with how taxation in America works, you might not understand that there’s a big difference in how much you’ll pay on various types of income. While wages and salaries are always taxed as “ordinary income” — which generally triggers the highest rates — many other forms carry lower tax rates. In some cases, these can be as low as 0%. Read on to learn more.
