The Western word is being destroyed by a select group of people determined to live within their means. From artist Ted Dave and his Buy Nothing Day movement to Daniel Suelo who decided to live without money to Jeff Yeager and his spending fast to Mr. Money Mustache and his grand scheme to keep spending low, even when income rises, we face the greatest economic crisis of our generation. Or are we?
All too often we act as if the economy were an actual living being. It is not. The economy is only a construct of the human imagination. Can you image any animal living in crisis because their local economy collapsed? Even humans, thousands of years ago, did not worry about this crazy thing we call the economy. Somewhere between there and here we convinced the vast majority of people they are duty bound to feed this imaginary beast.
Spending lubricates the beast. It does not matter if the spending is on stupid stuff. Buy a Hummer and save the economy, they say. That was the mantra a decade ago. Remember the government’s response the 9/11 attacks? We were encouraged to keep spending to show the terrorists we would not be affected by their actions. But the terrorists did win! They got us, as a group, to engage in insane spending habits sure to destroy the one thing we worship above all others: the economy.
In the course of my work I am frequently asked to place a value on a business a client wants to sell or acquire. There are several ways to determine value in such situations. Today we are going to focus on the value of listed companies (stocks). Warren Buffett has stated most people should drop their money into an index fund and let it ride. If you are like me you follow Warren’s advice, but invest a portion of your money in individual stocks anyway.
There are numerous books on Warren Buffett and his style of investing. These books glance over the process Warren uses, focusing on tidbits of advice Warren has given over the years. Reading Graham and Dodd’s Security Analysis exposes how difficult it can be to value a company. Since Graham and Dodd, our understanding of value creation has grown and Warren Buffett uses the new analysis tools in his investing style.
Another tax season is in the books as I write this. After thirty years in the business I am always surprised by how much my business grows and the industry changes. This year I received a major push from Mr. Money Mustache. His blog introduced a larger world to the crazy and wacky accountant from Wisconsin resulting in over 12,000 requests for help. Sure, I know the industry is understaffed and the level of super tax professionals is low and declining. But this was insane!
Another crazy tax season required your favorite wealthy accountant to work more hours than he cares to admit. It also requires a serious question: Why? Isn’t “work” a four-letter word to be avoided at all cost? It all depends. Do you like to golf? Golfing is work for me; for you, golf might be loads of fun. Tiger Woods plays golf for a living. Fishing also falls in this category. Fishing can be a lot of fun or work.
As the tax deadline approaches we will discuss two problems preventing you from filing your taxes: missing or inaccurate tax documents. Some small employers forget to send W-2s preventing you from filing your taxes; other businesses may send incorrect forms. K-1s are even worse. With a K-1 you may not even know what the numbers should be and they always come late in the tax season.
There is a process in finalizing your tax return when information reported to you (and hence the IRS) is wrong. The IRS knows some tax reporting documents have errors. Unfortunately, the IRS computer only believes what it sees. Once information is reported to the IRS you need to make sure you tell the IRS computer what it wants to hear or you will end up in IRS hell getting letter after letter while the IRS employee working your case is never available. The best course of action is to avoid the IRS letter or audit in the first place. There is a process to fix wrong information at the IRS.
Today’s post is for my U.S. readers only. Sorry.
Extension to File
The tax due date is fast approaching. This year your tax return or extension is due by Monday, April 18th. If all your paperwork has not arrived or you are unable to file your return by April 18th, file an automatic extension with Form 4868. Here are some tips about an extension to file:
The DIY movement is alive and well. Taking the bull by the horns and getting a job done can save massive amounts of money. Early retirees get to their exalted status because they kept costs low. Frugal people are drawn to DIY projects like flies to honey. With so many people undertaking projects on their own it is time to ask an obvious question: Should you be doing that project on your own.
I have seen some really bad DIY jobs over the years. Buying a large number of rental properties over the years revealed some doozies. Still, I handle a large percentage of jobs around the office, home and farm on my own. There are times I do need to take a knee and bring in somebody with experience.
Early retirement comes faster when you have a plan. A frugal lifestyle is the first step; the second step is a high paying part-time seasonal job allowing you a retirement lifestyle with a modest amount of work to cover living expenses. Regardless your net worth, you can semi-retire at any time with the game plan outlined here. Below I highlight twelve high paying jobs you can use to start your retirement today. I have clients in each job earning $30,000 or more per year working part-time. Since $30,000 is more than enough to live a phenomenal lifestyle, the jobs below are a great way to live the good life starting now.
The great news is that you can earn even more than $30,000 per year with the jobs below. No matter where you are on your road to financial independence you can step off the treadmill of traditional work and start spending more time with family and friends. Modern technology has made it not only possible, but easy, to live off a small number of work hours. The basics are covered by a few hundred hours of work per year. Everything else is extra wants. The same technology handles so many of our daily tasks freeing more time for personal development.
The day is April 2nd, a Thursday. A small bar attached to a bowling alley next to the college has Happy Hour until 7 p.m. A young man who would someday be known as the Wealthy Accountant attended Macro-Economics at the college across the way. Class was held on Tuesday and Thursday from 5 p.m. to 7 p.m. A group of students, led by the junior wealthy accountant, ambushed the professor, convincing him to cut breaks short and end class at 6:50 so the group could race to the bar called The Image before Happy Hour ended. It was important to the students to make Happy Hour. The Image had free tacos if you bought a drink and a full meal for the price of one soda was one heck of a deal.
Our junior wealthy accountant had his own home at this time and spent his days reading library books. Years before he was engaged to be married and found his fiancé in bed with another man. He withdrew from life knowing how important it was to find the right woman to share his life with. He wanted someone in his life, but had given up hope there was “the right” woman out there for him. So he kept reading all day, attended a few college classes and enjoying life as it was.
* * *
A demure young woman ran a daycare out her parent’s home. Her fiancé attended college at a campus on the other side of the state. He informed our demure young woman he found someone else; the wedding was off. She withdrew from life, spending her days taking care of children. By now she was working for a larger daycare center so her parents could have their home back.
Our demure young woman had a sister-in-law that felt it was unhealthy for our heroine to spend so much time at home alone. After adequate harassing she agreed to go out for a drink at The Image. The day was April 2nd. It was 29 years ago.
* * *
Our junior wealthy accountant was not demure. After washing down a plate of free tacos with a glass of Sprite he noticed a quiet young woman sitting with a friend next to the dance floor. It was a Thursday night so the crowd was thin. He approached the young woman and asked for a dance. She accepted. After the dance he asked the young woman her name; she refused to answer. The accountant was unable to secure the young woman’s name, address or phone number. There was only one chance. “Can I see you here next Friday?” All she did was nod.
The next Friday our hero waited anxiously at The Image praying the young woman would return. When she walked in his heart stopped. They danced and then left the bar for a table in the bowling alley where you could hear a person talk. It did not take long for our couple to discover they had a lot in common. One year and six days after their first meeting they were married. They are celebrating 28 years of marriage this week; they have been married to each other longer than they have not been.
* * *
What makes a person happy? What traits do wealthy people have in common? Is there commonality between happy people, wealthy people and early retirees? The answers are so simple most people miss them.
Bill Gates recently revealed in an interview, marrying his wife, Melinda, is the single greatest decision he made in his life. I understand what he means one-hundred percent. Marrying Sue has been the single greatest thing I ever did. No amount of money could ever replace what my relationship to that demure young woman has brought me.
Happy people, early retirees and wealthy people do have a common thread running through them. Millionaires, according to The Millionaire Mind, by Thomas J. Stanley , tend to be married for a long period of time, tend to live in the same house forever (see Warren Buffet) and are frugal even after they achieve massive amounts of financial wealth. It seems wealthy people are happy for reasons other than money.
Keith’s Rule # 9: Money cannot make you happy, but it can make you miserable.
I love the story of the wealthy businessman who loved his wife so much he transferred a significant amount of his wealth into his wife’s name. He had his attorneys write up all the paperwork. He wanted the love of his life taken care of no matter what happened to him. Once the transfer was complete he told his wife what he had done. His wife smiles and says, “That is nice, dear,” as she continues clipping coupons at the kitchen table. The money meant little to her; she had her wealth sitting across the table from her.
Okay, Bill Gates tells us his best decision in life was marrying his wife; Warren Buffet has lived in the same home for decades. So is that the secret? Marry the right person and live in one home forever? These things can make you happy, but it does not satisfy the wealthy part or early retiring part. Happiness is the most important of the three so I think we have a trait or two happy people seem to possess in higher levels than the population at large. Now we need to dig further to find the best kept secret of all three types of people: the happy, the wealthy and the early retiree.
Keith’s Rule # 10: Be happy with what you have; it could be a whole lot less.
Desire, lust, coveting and ego are acid to happiness and wealth. Wanting something is one thing, but to always want more, to never be satiated, is the perfect prescription for unhappiness and poverty. Well-adjusted happy people tend to put up a hand and say, “Enough for me.” Happiness comes from inside not from out there. No amount of stuff will ever fill the void. I know a demure young woman that filled a void I had. I was never foolish enough to think money or stuff would do it for me. Good thing. If I did I would not be celebrating 28 years this week.
The secret is frugality. Think of it. People get divorced because they fall out of love or some other crazy reason. There are valid reasons to divorce, but those reasons apply to a very small percent of marriages. Frugal people are happy with what they have, including their significant other. If you are never satisfied with what you have you will eventually want a new person in your bed, too.
Several years back I had a personal trainer help me rehabilitate a bicep I blew out while butchering chickens. After a while she started saying rude things about Mrs. Accountant and suggestive things to me. It did not take long to find a different personal trainer. It ended badly for her. Her fiancé (ring and wedding dress already purchased) found out she was playing the field (she was sleeping with the assistant manager of the gym) and promptly ended the engagement. Do you think she found happiness? Now she is marrying the boss, but deep down inside all parties know she is willing to exchange men in her life at the drop of a hat. Until she is happy with what she has she will always be miserable and in fear of being found out.
Happy people do not need more stuff; wealthy people are wealthy because they realize they already have enough; and early retirees achieved their goals by saving first and spending only a fraction of their income. I encourage my clients to save 50% of their gross income. They usually give me a look. I am more the Crazy Accountant to them than the Wealthy Accountant. It is a truism that frugality will get you through almost any challenge you face in life. Desire for stuff leads to debt and debt is a terrible taskmaster to have.
Here are a few guidelines for a life of happiness, wealth and even early retirement if that is your goal:
- Marry the right woman (or man). I understand some people do not want to be married or in a relationship. It is okay to live single. Instead, have good friends. Most of us want a significant other in our life. Choose well and make it last a lifetime.
- Keep the spark in your marriage. After 28 years I still chase Mrs. Accountant around the house. (Was that TMI? Sorry. I still find my wife the most desirable woman on the planet. I refuse to change or even entertain the idea. I have what I want.)
- Save first, spend later.
- Be happy with what you have.
- Don’t house hop. It is okay to move as long as there is a valid reason. Transaction costs on the transfer of any asset digs into your net worth so move only when it makes sense to do so.
- Always know you have “enough”.
- Meditate every day on how lucky you are. You are lucky!
- Read good books.
- Love the significant others in your life. Kiss and hug your wife (or husband) every day no matter what. Do the same with your kids; I kiss my girls on the cheek or forehead every day and tell them I love them; Mrs. Accountant gets a big sloppy smooch. Tells your parents how much you love them while you still can. Tell your friends how much you care while you have the chance.
- Take your loved ones on a walk and hold hands.
- Gaze into each other’s eyes.
- Accept the gift of life you already possess. You have already won.
More Wealth Building Resources
Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?
Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant for a bonus. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.
Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.
PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.
QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.
A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregations studies work and how to get one yourself.
Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you very much!