Lifestyle, Small Business, Taxes and Investing

Organize Your Life to Maximize Net Worth and Minimize Taxes

JD Roth

I had the awesome opportunity of meeting JD Roth! While not fast buddies, I look forward to meeting JD in the future. He is even better in real life than I imagined.

The following post is based on a presentation I gave at Camp Mustache SE in Gainesville, Florida on January 15, 2017.

There are several ways to convince someone to speak at your event. Stephen Baughier used the most sure-fire method ever. Stephen noticed I wrote a blog post back in August listing some people I would like to meet someday. He checked two people on the list and found JD Roth open to attending. He then called me and said, “Hey, Keith. I saw on your blog you wanted to meet JD Roth. Well, he is speaking at Camp Mustache SE in January. We would love to have you speak as well and you can meet a man you admire.” How could I say no?

Picking a topic of discussion is something I allow the event organizer to decide. If they have no preference I choose something currently exciting to me. In this instance Stephen thought something about organizing your stuff in preparation for meeting your accountant/tax guy would be a good choice.

I grimaced. My organizational skills are not legend. However, I do keep a tight fist on in financial organization.

Bookkeeping is not a topic which lends to filling an hour presentation. My first thought was to stand in front of the group and yell, “Shut up, and sit down!” while I stabbed my finger at them. “Enter your paperwork once a week and stop bitching about it.” Then I would grab a beer from the fridge and sit down. My first inclination had a slight flaw I thought might turn off the crowd and upset Stephen so I moved to plan B.Continue reading

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The Worldview of the Financially Independent

IMG_20170112_134557What started as a grand idea has morphed into a changed worldview. For decades I focused on the local community in my practice. I would speak for various organizations around the area, rarely traveling more than 50 miles. And I was happy with that.

My speaking engagements and traveling expanded during the 1990s when I entered the securities field. As memory serves, every presentation I have given outside the State of Wisconsin was for something related to securities. Until two year ago.

Two years ago I had this brainstorm to expand an area of my practice that had been an itch I had to scratch. It went horribly wrong and changed my life in ways I never expected. It was a simple idea. Swoop in on a personal finance conference, dazzle them with my usual charm, and sell an idea. It didn’t go according to plan.

My idea was accepted in a modified form. The problem arrived when I was offered an opportunity to expand my worldview like never before. Remember, I am an old farm boy from the backwoods of Wisconsin. This shit doesn’t happen around here. I was totally unprepared.

The result was this blog and a shout out by Mr. Money Mustache. I had to write this blog; I had no choice. The idea was on the back burner for years. Now I had to push forward with the project. People wanted to hear what I had to say.

And then there was the growing demand for my services and requests to speak to more groups. As I started to attend these events and communicating with many people in the FIRE (financial independence, retire early) community, I started to build friendships. I missed these people when they were not around.


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If I Were an IRS Auditor

17142377126_48d2650b0cThe IRS has a complex formula in determining who to audit so secret even the government doesn’t know what it is. This secret is the subject of much debate and some even claim to know the formula. (They also have the secret formula to Coca Cola.)

In my neighborhood if you have an S corporation and get audited, I apologize. The lady who handles S corporation audits at the IRS around here was once an employee of mine. I take full responsibility for my limited role in training her. I am ashamed of my behavior.

But an IRS audit is not really an issue for most people. IRS audits are at all-time lows and do not look to be expanded much in the future. Most audits are not the dreaded visit to the IRS office or the auditor showing up at your place. Most audits are of the correspondence type, where they send you a letter. Correspondence audits are generally narrow in focus and are the result of a misplaced number or a mismatch on the tax return with information the IRS has.

Since so few people get audited nowadays, there should be no worry among taxpayers of a visit from your friendly government revenue agent. Still, I audit proof every tax return I prepare and train my employees to do the same. This isn’t cheating either. I am talking about preparing a tax return in a manner that doesn’t encourage scrutiny.


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Financial Independence for Normal People

51efot8iakl-_sx324_bo1204203200_Discussions around here have focused on early retirement and financial independence with a few assumptions: either you own income properties, own a business, or have a side hustle. But what about the other 95% of the people working their tail off, day in and day out, looking for a retirement plan? For those fine folks I have a treat today. We will focus on normal people and wealth accumulation. We will avoid tax talk because income level and type of income create too many variables muddying the conversation.

You would think it should be simple if you are a wage earner only, but it’s not. There are several choices you need to make to maximize your wealthy building. Accelerating to the early retirement line is straight forward if you know where to start. Without passive income like rental properties you only have your earned income (wages) to rely on. Your passive income will be limited to dividends, interest and capital gains.

Building an Empire

There are two parts to living the Financial Independence (FI) lifestyle: the building phase and the maintaining phase. During the building phase you save like crazy. My recommendation is to save half of what you earn. It is more important than ever to have a high savings rate if you don’t own rental properties or have a side hustle. It will take 16-17 years to reach FI at a 50% savings rate assuming a 5% growth rate and a 4% withdrawal rate once retired.


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Dealing with Jealous People

4482714827_491d395f7e_bReaders of this blog are committed to financial discipline. They save a large portion of their money and invest it wisely in index funds and real estate. Whatever is left after investing they consider spending . . . maybe.

Before long the value of the index funds grow significantly and the investment properties gain more equity while throwing off a steady stream of passive income. People begin to notice. You, one of the mentioned readers, drive a less than fancy car and have a modest home or apartment. People also notice you brown bag lunch at work and rarely party with the crowd. Instead of the bar scene you invite friends over for a cookout and a few cold ones.

Everyone around you notices how much less stress you seem to have compared to them. You make it look easy. And you have money. Of course, you do. Because you don’t spend every penny you earn. It starts with one person feeling resentment and spreads like a bad rash. For the first time you feel the sting of jealousy. People you care about and admire now have turned against you because you are clearly no longer like them. You lack the fancy house, expensive car and endless nights of fine dining. And how dare you live without cable TV. Is there something wrong with you?


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Take a Selective Vacation to Maximize Productivity

vacation-149960_960_720The past year has been the most brutal of my career. What started out as a good idea has cascaded into a challenge I am still working the details out on. Challenges excite me, but this one showed up unannounced.

Back in the day when I was building my practice I didn’t work that many hours because it was a seasonal business and I saw no need to bust my tail for “a few more dollars”. (A good movie, by the way.) My strategy was simple; always do better than the year before. As the years accumulate, beating last year required more work. It wasn’t money; it was pride.

Eventually I was working way more than I wanted to, so I cut back dramatically and seriously considered selling my practice and living a “real” retirement. The reduced hours and the return to a normal lifestyle (for me) put the “selling the business” idea on the back burner.

It all changed a year ago. This blog and other media attention sent requests for my personal services through the roof. The process of digging out is still ongoing. I had no choice but to say “no” a lot more than I ever had before. That is a difficult pill to swallow because I love working with people and helping clients reach their goals.


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2016 Review; 2017 Plans for The Wealthy Accountant

statistics-706384_960_720Well, the first year is in the books. The Wealthy Accountant came to life on January 15th, 2016 in anticipation of a shout-out by Mr. Money Mustache. The project was on the drawing board for years, however, the workload caused me to drag my feet. But when I start I am all in.

This isn’t the first blog I’ve run, nor is it the only one I write at this time. Running a blog is work and something I held back on because I knew once I started writing this blog it would take over my life. But here I am and I am feeling good.

Other people writing a blog and curious readers are usually interested in statistics. The growth pattern of The Wealthy Accountant is taking a different path from other online venues I used. For example, the website of my tax practice has low traffic and no ad revenue. Just about every visitor of http://taxprepusa.net/ wants to be a client of my firm so we don’t want hundreds of thousands of visitors.

Then there is a content farm I wrote a hundred or so articles for years ago. After Google slapped the funny off the faces of content farm writers I moved my writing elsewhere. Still, HubPages sent me $439.93 in 2016 on 87,719 pageviews. Not bad for not doing a thing on HubPages in five years.


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The Tax Loophole You Never Thought Of

al_capone_in_floridaWhen someone in the local area makes the news for embezzlement it is not a matter of if they will show up at my office, it is when they show up. The same scenario plays out every time. Someone gets caught with her fingers in the cookie jar (usually for gambling) and charges are filed. The district attorney prosecutes the case. (Embezzlement cases make the news and the district attorney is a politician who can’t help getting on her knees to earn some votes.)

Most embezzlement cases end with a conviction, or more often, a plea agreement. The accused is eager to make a deal that keeps her out of prison. The DA and judge soil themselves with the familiar sentencing template. The defense attorney has no choice but to recommend her client goes along with the deal to stay out of jail.

I see the same agreements again and again. The prosecutor demands a brutal repayment plan to the victim, the judge rubber stamps the deals and the accused jumps up screaming, “I’ll take it!”

Then the IRS letter arrives three weeks later and the house of cards is ready to fall. Ill gotten gains, you see, are still required to be reported as income and the IRS watches these financial crimes cases very closely. When the defendant loses or takes a knee the IRS swoops in for their share of the pickings. All that unreported income is now taxed with penalty and interest added. And no money to pay for it.


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