The first and biggest “wealth drain” is taxes.

Our tax system is designed to penalize salaried and hourly workers, while rewarding employers and business owners. Salaried workers pay taxes based on what they earn, while business owners pay taxes based on what they earn. To that end, most people think that Fortune 500 companies are gaining something from the little ones. Keep in mind that you don’t have to be a big company to get big tax advantages. Even startups get huge tax benefits. So instead of complaining, maybe you should run a business from your kitchen table.

To qualify for tax deductions on that business, the IRS says you must have the intention of making a profit. When that standard is met, you automatically qualify for dozens of tax deductions that you don’t get as an individual. Most start-up expenses and losses can be written off with other income from your job (limits apply, so get a good business CPA to work with you). Keep in mind that no one else (not even your CPA or tax preparer) cares how much you pay in taxes, so it is your job to understand how the system works and how to use it effectively.

Missing the compound growth opportunity

Another set of huge wealth losses is market losses in the investment capital that you control. When a stock or real estate falls significantly in value, it can take years for it to equalize again. And of course, there are no guarantees that you will pay back over the life of your investment. The less capital you have invested, the less you can benefit from the power of compound growth.

If your money’s capitalization curve is broken by market losses or premature withdrawals, it has a massive effect on your ultimate pool of wealth. For example, if you were offered a job that lasted only 36 days and you had two options on the pay plan, which would you choose? (A) You could be paid $ 5,000 per day at the end of each day, for a total of $ 180,000. (2) Your second option is to be paid a hundred from day one, but your salary would double every day (it would be aggravated to 100 percent) and it would be paid at the end of those 36 days.

If you jumped to $ 180,000, you lost the power of the true composition of money. If your co-worker who does the same job chose the compound penny, you wouldn’t be a millionaire. After 36 days … he would be a filthy rich billionaire with a final check of $ 343,597,384. Obviously, your investments won’t experience as fast (or consistent) compound growth, but do the math: the power of the cap curve is strong over time, if you don’t break it with big losses (which you can’t always control) or withdrawals. (which can).

Money lost in commissions and interest to banks and financial companies

The next massive wealth losses we face are the interest and fees paid to banks or finance companies. Money loans have been around for thousands of years, and any business model that has lasted that long is a winner, for the business. But when it’s on the loan side of the transaction, it’s a loss of wealth, especially if most of the borrowed money is spent on asset depreciation.

Now people will tell you that if you can borrow money cheaply and invest it in something that has a higher rate of return than the interest rate you are paying, then you are using leverage correctly. That may be true, but those attempting such a move should be aware of the caveats. Try this simple exercise: Add up all the money you have paid during your life in monthly payments. Then compare that total to the amount of money you’ve saved for retirement and see which is greater. (If you’re up for it, we’d love to hear about your results in the comment section below.) Then think about how to be a lender and not a borrower.

Depreciation of vehicles and other large assets

Another massive loss of wealth comes from the depreciation of cars, boats, equipment, appliances, and most of the other major assets we buy. Most people will lose more money on cars in their lifetime than they will save for retirement, much less all the other depreciated assets they will buy. But there is a way to earn money from these items.

Think of your financial life as one big cake. Don’t fall for the old magic trick and focus only on what’s happening to your only slice of the pie (i.e. your investment profit or loss). Instead, pay attention to the whole pie and put an end to your massive drains of wealth.