Buying a car is like marriage to me; it is until death do us part. So far she has been the one dying and I remain to keep the memories alive. In 2009 I bought a 2007 Toyota Camry from the local credit union to help them clean up a bad loan. I have never had serious problems, but periodically I have to invest a bit into the vehicle so the ‘ol girl makes it to 20. The Camry had one of those days.
The exhaust pipe broke near the head next to the catalytic. The metal was too thin to weld so replacement was the only option. My neighbor across the road (how convenient living out in the country), Roger, has a lift in his garage and handles most minor repairs for me. I still change the oil so I can brag this accountant gets his hands dirty now and again.
The replacement part had the cat in it so it wasn’t going to be cheap. I went over the O’Reilly Auto Parts for the replacement. It set me back $184. Roger charged me $25 to change it. I knew it was going to be a bit more than a simple muffler repair. When I picked up the section of exhaust pipe the kindly clerk asked me if I was a member of their rewards club. I said I was now. It works like this: for every $150 you spend they send you a $5 coupon for a future purchase.
Life in the accounting business can be difficult at times. Clients are as close to friends as you can get without actually being friends. You know all the details of their private lives. I know a divorce is imminent many times before the spouse does. I get details on illnesses in the family. I have to. Part of the tax preparation process is to know your client. When you ask about medical expenses you get the details too. In Wisconsin we have a deduction for certain private school tuition. When I ask about the kids I get the low-down on little Billy. And I don’t mind one bit. I care about my clients so I listen and interact. The line between client and friend is thin indeed.
That is why it bothers me when I can’t communicate a message to a client. Try as I may, some clients could care less about their taxes. They are willing to overpay their taxes to get out of all the reporting. They don’t understand the amount of money left on the table.
A few weeks ago I emailed a client reminding them to verify their retirement contributions and to provide a log for business miles and business overnight stays. To be honest, I didn’t expect a response. They are awesome clients and I love’em to death, but they just don’t engage at the level I would like and it bothers me because it is costing them dearly.
The day after Thanksgiving in the States is called Black Friday, as if anyone doesn’t already know that. What you might not know is that it is also Buy Nothing Day. Buy Nothing Day started in Canada (how un-American) in 1992 and has grown into an international movement against overconsumption. The idea is one day of no spending should lead to a lifetime of responsible personal finance which should ease pressure on natural resource demand and pollution. It has been a slow start.
If you print it they will spend. The non-stop growth of fiat money, created by central banks at the click of a button (I know it involves more than that, but a longer description would interrupt the flow of my story) gets spent. The money supply growth of the last decade has not generated a massive wave to new consumption and inflation because most of the newly created money is sitting bank vaults and central banks around the world to prop up balance sheets. Siphoning off the excess cash once it is unleashed has a high likelihood of being very painful. Before this happens you must hone your financial muscles to protect yourself.
Self control is the only tool you have in self protection. Just because you have money doesn’t mean you have to spend it. If you hold a hammer in your hand do you automatically hit something? Okay, bad example.
Buy Nothing Day is a great idea to get us thinking, but it is a stupid idea in practice. Staying home and not spending on one day of the year is meaningless. It’s like those “Don’t Buy Gas on Friday” slogans, as if not buying gas on Friday will stick it to OPEC and Exxon. It doesn’t. You just fill up on Thursday and drive all the more. You want to stick it to OPEC and Exxon? Ride a fucking bike. Want to send a message on overconsumption? Then spend less all year round.
We live in strange times. One day—and for most of us only one day—we take time to give thanks as we gather with family, enjoy an awesome meal, and watch football (in America; I don’t know what the rest of the world does on their Thanksgiving festival). Then the next day we kick the shit out of our neighbor so we can save a hundred dollars on a flat screen. I‘m beginning to wonder how thankful we really are.
Feelings of gratitude and expressions of thanksgiving should not be relegated to one day per year. We live in the best of times where we should feel thankful non-stop. People in times past found the expression of gratitude an admirable trait. People actually worked hard to remember to feel thankful for the gifts life has bestowed upon them. And we have it so much better today!
In my short 52 years of life the world has changed so much and for the better. One gift I still can’t get over is the one you are using right now: the internet. I have the largest library ever collected at my fingertips; I have the ultimate communication tool. Has it ever been easier to communicate with people with shared interests from around the world? Never! I think of all the people I would never have met or known all because of this awesome gift called the internet. And the World Wide Web didn’t exist 25 years ago.
The end of the year is fast approaching. Time is running out to modify your finances to optimize tax savings. I will run down the more common ideas to reduce taxes. Keep in mind this is not a comprehensive review. Your facts and circumstances will determine what is best for you. Use this review as a guide to reduce your tax liability.
Most readers here have significant investments so we will start there. All adjustments to investments should have an economic reason beyond taxes. Reducing taxes is the goal, but the increased costs of selling can offset a portion or all of the benefit.
If you are not using an automatic tax loss harvesting program such as Betterment, now is the time to review your non-qualified (non retirement) portfolio. Mutual funds and stocks with losses can reduce the capital gains distributions of other mutual funds or ETFs. You can also report up to a $3,000 loss against other income on your federal return. Your state taxes will differ. In Wisconsin, for example, the loss against other income is limited to $500.
The holiday season is fast approaching and the best laid plans of financial independence and early retirement are left for discussion another day. Normally frugal people can lose their senses when the holidays roll around. One day they are giving thanks and the next they are trampling their neighbor to get a deal on a flat screen over at Wally World. And this is supposed to make us happy?
Wants are a harsh mistress. Once you satiate your wants, new wants fill the void. It is a forever hungry beast. Wants satisfied are not the end; they are the beginning of a long slog through financial hell. Once you buy something you need to take care of it. You need a place to store you newly owned junk, ah, I mean, stuff. You now must spend more to protect your pile of garbage. A home or car needs insurance lest something happen which could cause you to lose your slavery, sorry, belongings. Room is made in the home or stuff is put into storage to make way for the new round of crap purchased on the credit card so you can keep wasting your hard earned money on interest. Once you own stuff, stuff owns you. It becomes an obligation and obligations cost money.
There are two dangerous times in a retirement plan: when things are going really bad and when things are going really good. We have been lucky the last seven and a half years. The market has marched higher at a steady pace with nary a pullback to be seen. There are people in their 20s who have only seen the mildest of market corrections (a decline of 10% or more) and have never seen a bear market (a decline of greater than 20%).
The steady beat higher for so long is unusual. Regular investments have only known one direction: up. Money invested last year is worth more this year, same for the year before that, and so on. It is easy to invest in such an accommodating environment. The goal of early retirement looks so easy when every year is an up year.
Now the election is over and we have seen a serious move higher in the stock market. Bonds have been down more than stocks are up. The rally is narrow. High dividend yielding stocks and growth companies are down significantly. Banks and other financials are drinking the Kool-Aid. For the first time in years I have clients calling and readers emailing me for my opinion on borrowing money to invest in the market. Ahhhhhhh!
Starting a business is an act of love and courage. Enjoying a task soon becomes a business. You might start working out of the home or buy a small store front. The previous hobby now commands more of your precious time. A business is about more than making money. Small business owners love the work they do and get paid to do it. Awesome! Then reality sets in.
When I was a sophomore in high school I fell in love with the stock market crash of 1929. The teacher said economists don’t know what really caused the crash. The Smoot-Hawley Tariff was probably the trigger but many other events also played a role. I could not let it go. Every book in the school and public library in my small town was in my paw, devoured for any tidbit of information on why things went so wrong in 1929. I never found a definitive answer, but I did learn a lot about economics.
And the stock market. From that point on I wanted to be a stockbroker. When I was in college I took a business class, accounting, and macro and micro economics. Though I never earned a degree I learned a lot that has helped me in my career. It gave me a start on where and what to study to get good at finance.