Invest In Money Saving Equipment Or Services

I think it was Ben Franklin who said, "A penny saved is a penny earned." That was back when a penny was worth something - and before income taxes. If taxes are taking up to half your income, a penny saved is equal to two pennies earned.

Some of the things we buy are a substitute for recurring expenses. Thus, they represent a form of "investment" that generates the equivalent of tax free income. For example, owning a car is a substitute for renting one or for some other forms of transportation. Owning a home is a substitute for paying rent. Owning a freezer offers savings in the form of lower food prices by being able to buy in larger quantities at lower prices. Some energy conserving appliances may result in lower electrical costs. An assortment of do-it-yourself tools may result in savings to the extent that you can avoid paying someone else to do the work.

This is not to say that such purchases are always profitable, but there are usually hidden tax benefits that are often ignored. If you save $100 a year with the purchase of an appliance that costs $500, it's like making 20% a year - tax free. Of course, it's necessary to factor in the cost of eventually having to replace the appliance, but if that were $50 a year, the purchase would still produce a return of 10% a year after taxes.