Help, I'm Rich!. Stoute Kees

      From this figure, we can draw an interesting conclusion: Even though Mr. Jones enjoys 2 percent interest income on his bank deposit, he will have outlived all his money within 30 years. This is mainly due to inflation, which forces Mr. Jones to increase his spending from US$150,000 in the first year to US$304,000 in the twenty-fifth year, necessary to just maintain his lifestyle.

      In 30 years, when Mr. Jones turns 65, all the cash will be gone. Mr. Jones, however, is an optimist: He wants to plan till age 85 as he is confident that with his lifestyle it is reasonable to expect to live until that age.

       Taxes

      But that’s not all Mr. Jones has to consider. He will most likely be subject to taxes. Governments impose taxes to enable them to finance all governmental activities and subsidies. Generally speaking, governments are held responsible for the infrastructure in a country, for schooling, for health care, for (Social) security, for pensions, and so forth. The list of responsibilities would not fit on this page (or even in this book, for that matter). The more responsibilities a government has, the more money it will require to perform all its duties according to the expectations of the public. And that is where all the taxes come in.

      To what extent taxes affect one’s wealth varies by jurisdiction. Every country has totally different views on and ways of imposing taxes and earning revenues. A few examples of personal taxes (we don’t consider corporate taxes here) are:

      It is virtually impossible to avoid taxes in life.

      Let us assume Mr. Jones lives in a jurisdiction where wealth tax is 0.5 percent and any income – also interest income from cash and deposits – is subject to 17 percent income tax. For his house (fully paid-up and worth US$1 million) there is a property tax of 20 percent on the assumed rental value of the property, which in this case is set by the government at US$2,700 per month or US$32,400 per annum.