Money Can’t Tell Where It Comes From

Retired people and a few others make a fundamental strategic error.  They fail to notice that income (especially income for tax purposes) and cash flow are not the same thing.  Your financial plan should be careful to make the distinction.

You can spend cash but you cannot spend income.  People who try to manage income to meet their spending needs frequently pay to much tax or pay tax too soon.

All to no advantage.  When you go to the grocery store, the money you pay with cannot tell if it is an income dollar or a cash dollar.  You should develop the same way of thinking.

Disconnect your thinking so that income replenishes capital and capital supplies cash to meet your lifestyle needs.  As soon as you do this you will begin to enhance your estate and thus your security.

 Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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