A few years ago, I did an exercise that completely changed how I see money.
I pulled my tax data for the last decade and summarized three numbers from each tax return:
- Total income (line 150)
- Taxable income (line 260)
- Income taxes paid (line 435)
Then I added an estimate of every other tax I paid over that period: payroll tax, sales tax, property tax, and so on. I calculated my tax rate by dividing total income tax by total income.
With that data in front of me, I asked myself:
- Of all the income that flowed through my life in the last decade, how much did I actually keep?
- How did I manage what I kept? How did I invest it, and how much did it grow?
- What do I have to show for that income today? What impact did I create for myself, my family, and my community?
The result was sobering. It wasn’t a disaster, but it was mediocre. That made sense: for many years I lacked financial awareness and made costly mistakes. The difference now is that I’m more aware, I course-correct faster, and I see my finances as a lifelong learning journey.
I strongly encourage you to do this same exercise. It will likely surprise you—and it will give you clarity.
The power of the “GAP”
That exercise exposed one of the biggest financial mistakes I made for years: I ignored my “GAP”.
Here’s the simple equation:
[EARNED INCOME] – [EXPENSES] – [TAXES] = “GAP”
For a long time, I obsessed over increasing my income and paid almost no attention to the rest of the equation. I see the same pattern every day with clients.
Household debt is exploding because most people either have a tiny GAP or a negative one. This is also a common ingredient in high-profile bankruptcies, both personal and business.
Here are a few reasons why people struggle with their GAP:
- You think income is king: You probably know someone who earns $100,000 per year and lives a $100,000 lifestyle. But $20,000–$30,000 of that is going to taxes. So if you spend all $100,000, you’re in debt. That’s a negative GAP. This is how people earning millions still end up bankrupt—they spend everything and forget the taxman is coming.
- You’re under constant consumption pressure: In countries like Canada, we’re bombarded with messages to buy more, upgrade more, consume more. New instead of used. Latest fashion. Latest phone. We don’t just acquire what we need; we acquire what we’re told to want. That pressure quietly inflates expenses and shrinks (or erases) the GAP.
- You ignore taxes: For many people, taxes are their single largest lifetime expense. Yet most don’t treat tax planning as a controllable variable. They assume, “It is what it is.” That isn’t true. With better knowledge and planning, you can legally and significantly reduce your tax bill—and grow your GAP.
- You’re keeping up with the Joneses: Because we are social creatures, money often becomes a way to “show up” in society. We compare houses, cars, vacations, schools, gadgets—often trying to keep pace with people whose financial reality we don’t even know (and maybe don’t even like). This mindset pushes expenses up and turns a positive GAP into a negative one.
A better path to financial well-being is to obsess—not over income—but over your GAP.
When you do that, you naturally start paying attention to each variable: income, expenses, and taxes. From my own life and from working with many clients, I can tell you: if you don’t protect and grow your GAP, you will struggle financially. If you want to build wealth in a tax-efficient way, you must aggressively grow your GAP.
Practical ways to grow your GAP
Here are a few practical ideas that work in the real world.
1. Get clear on what you actually want
Start by defining what you want your life to look like—financially, emotionally, relationally, and professionally. Clarity gives you a filter: you stop spending money to impress people and start using money to build a life that matters to you.
I like William Damon’s definition of purpose:
“A stable and generalized intention to accomplish something that is at the same time meaningful to the self and consequential for the world beyond the self.”
When you have that kind of purpose, money becomes a tool, not a master. It becomes easier to say “no” to empty spending and “yes” to the things that truly move you forward.
2. Start with the easy wins: expenses
The fastest way to grow your GAP is usually to reduce expenses. Income growth and tax planning take time; expense changes can be immediate.
A simple approach:
- Do a 30–60 day “reset” where you cut everything non-essential.
- Notice what you don’t miss at all. Those expenses can stay gone.
- For the things you truly value, bring them back in—but look for cheaper, smarter ways to enjoy them.
Accountability helps. Share your plan with someone who will ask you how it’s going and keep you honest.
3. Invest in yourself
If you don’t consistently invest in yourself, it’s very hard to grow your income or your GAP.
Most people read a few books a year and spend hours every day on social media, news, or TV. Then they wonder why nothing in their life—thinking, income, relationships—looks different 10 years later.
Instead:
- Read books by people who already live the kind of life you want.
- Listen to podcasts and watch content that teach you skills that increase your value.
- Spend time with people who are ahead of you financially and professionally and learn from them.
- Implement what you learn quickly, even in small steps.
Your income is a reflection of the value you bring to the marketplace. Growing that value is one of the most reliable ways to grow your GAP.
Put your existing assets to work
Many people say, “I don’t have money,” while surrounded by idle assets.
Those assets can include:
- Your knowledge and skills
- Your professional experience
- Things you own but don’t use
- Space in your home
- Equity tied up in property
Get creative. Can you consult, tutor, coach, rent a room, rent equipment, or sell unused items? Often, there’s hidden income potential sitting right in front of you that can flow directly into your GAP.
Invest in real, understandable things
Once you build a GAP, what you do with it matters.
Many people chase shiny objects—crypto today, FX tomorrow, a hot IPO next week—without really understanding what they’re doing. That isn’t investing; it’s usually speculation or gambling.
To grow your GAP wisely:
- Focus on assets you understand and can explain simply.
- Favour real, productive assets like real estate, solid businesses, and, for some people, precious metals like gold and silver.
- If you invest in stocks, consider Warren Buffett’s approach: buy understandable businesses with durable advantages at reasonable prices.
I love this quote from Jim Paul and Brendan Moynihan in What I Learned Losing a Million Dollars:
“Most people don’t know whether they are investing, speculating or gambling, and to the untrained eye the activities are very similar.”
Know which one you’re doing.
The equation you can’t ignore
At the end of the day, financial well-being comes down to one simple equation:
[EARNED INCOME] – [EXPENSES] – [TAXES] = “GAP”
If you understand and intentionally manage each part of that equation, you can manage your GAP. If you grow your GAP, you build margin, resilience, and long-term wealth.
If you ignore it, the world will happily consume your income through lifestyle creep, taxes, and debt.
Hey, my name is Ken Green, CPA, CA, MBA. If your goal is to minimize taxes and grow your GAP, I can help. Book a call with me here and let’s talk about how to make your finances more tax-efficient and intentional.
