STEP #1: Understand How Serious Your Tax Problem Is

Are you aware of just how much in taxes you are paying?

Here's how much average family spends on various consumer categories -- as a percentage of income.

You must realize that it's not how much you spend on taxes that is important, it's how much you spend on taxes as compared to all other major categories of spending!

Consumer Spending: How Do You Spend Your Hard-Earned Dollars?

Taxes ---------------------- 32.0% Housing -------------------- 16.7% Medical Care --------------- 11.5% Food ----------------------- 8.2% Transportation ------------- 7.9% Recreation ----------------- 5.7% Clothing ------------------- 4.1% Savings -------------------- 1.4% Other Miscellaneous -------- 12.5% TOTAL --------------------- 100.0%

So, if you think you are being "nailed" by government, you are absolutely right. You spend more on taxes than any other category of consumer spending.

In fact, you spend more on taxes than on food, clothing, and housing combined!

And it's not just federal income taxes we're talking about here. There's also state and local income tax, payroll tax (Social Security and Medicare), sales tax, excise tax and property tax.

Maybe you already knew "intuitively" that your tax bill is outrageously high. If not, picture I've just painted should thoroughly convince you that you pay too much tax, period.

STEP #2: Get The Right Attitude About Your Taxes

What do I mean by this? Well, you simply must have a certain "mental attitude" toward this whole idea of paying taxes. I'll get right to point -- you must have an attitude about taxes that says, "Enough is enough. I'm paying way too much tax and I don't like it! And it's about time I did something about it -- TODAY!"

After reading those numbers above, how do you feel? Doesn't that just make you furious? If so, great, then you are on your way to solving this problem. (Remember old cliche -- "You can't solve a problem until you admit you have one!")

If you saw those numbers above and said, "Big deal. So I pay 32% in taxes. So what? So does everybody else in this country" -- well, I'm sorry, but you might as well just stop reading this article right now. You will continue to pay too much tax because you really don't care about it.

To reduce your taxes, you must have a passion for paying less tax. You must get angry about it.

Before today is over, go get last year's personal income tax return (Form 1040) and look at how much tax you paid.

When you have Form 1040 in front of you, do you realize where most important number is on this form?

NO, it's not Line 67 -- which tells you how much of a refund you got (if any!).

NO, it's not Line 70 -- which tells you how much you still owed, balance due with return.

The most important number on Form 1040 is Line 58.

In recent years, when you are buying a house it is easy to get financing of first mortgage, so seller is not forced to finance whole sale. What I mean is seller doesn’t become your first mortgage holder, bank lends money and seller get cash. Moreover, he will most likely make some concessions if he doesn’t have to carry back a second trust deed.

Therefore giving seller all cash, will usually get you a better deal than asking seller to let you buy house with a very low down payment, with him carrying back a sizable trust deed. The big savings come when you are buying real estate that doesn’t have easy institutional financing available. The purchase of vacant land can be best example.

My father was interested in buying industrial lots in city of Montebello, just east of downtown Los Angeles. This was during 1960’s. In those days it was common for a buyer to put down 20% and seller to finance remaining 80% for 10 years at 8% interest. For example: a $10,000 lot would cost you $2,000 down with $97.06 payments every month. After 10 years total of principal and interest payments would be $13,647.45. If you wanted to build on property you had to pay off land loan, first. The sellers then would not have to wait whole 10 years before getting all their money.

Many property owners sold their property because they wanted money and getting $2,000 wasn’t much money to them. So, my father would offer $5,000 all cash to sellers. More than 1 out of 5 would take cash up front instead of waiting for payments over 10 years. By offering extra $3,000 cash down, my father saved $8,647.45 on sale ($5,000 on price reduction, plus interest on note). Now that is buying wholesale!!