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Frugal Living

Frugal Living, Lifestyle, Small Business, Taxes and Investing

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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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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Black Pride Meets White Privilege

text-1442218_960_720There is something wrong with this community. I couldn’t put my finger on it at first. My experiences and worldview didn’t allow me to see the problem. Then it hit me. The personal finance conferences I attend and even the readers of this blog are predominantly white. I felt the issue was so huge I had to write about encouraging minorities, especially the black community, to join our group. Fearful I might come across as a dick, I delayed and delayed. I started writing this post and then threw it away. It was all wrong. How can a white guy from a very white community reach out to the black community?

Then I got the wake up call. I published Overreacting Solves Nothing, where I attempt to calm the crowd after Trump won the election. A few days ago I was called out by a reader. SKG writes, “Easy for you to say not to overreact, you’re white. It’s a whole different story for people of color.” The gauntlet has been tossed and at the risk of coming across as a dick I have to reach out to this massive group of people filled with great pride in their heritage.

As white as the community I live in is, I still have a few black clients. I don’t call them black either; I call them clients. There are more Hispanic people in my community and, as a result, I have more Hispanic clients. Minorities never bothered me. My biggest problem with non-white clients is that sometimes I can’t understand them. Most Hispanics speak English just fine, but some have a strong dialect which I have to concentrate on to understand. When they see me struggle they revert to using Hispanic words because it is clearer for them.


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Celebrate ‘Buy Nothing Day’




bnd1-friday-25nov2016The 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.Continue reading

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Wants Become Obligations




This is not the meaning of Christmas.

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.Continue reading

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Reality Check: Calm in the Face of Panic




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Pinky could care less who won the election. She is happy with a clean litter box, a bowl of fresh food , and a scratch behind the ears.

It is 3:30 in the morning and I just discovered who our next president will be. I had a nice nap earlier, but tend to sleep in fits and starts which is great for quiet writing time in the middle of the night. I’ll probably take another nap later this morning so I will be awake and alert. Back to the election.

The news reports say the Canadian immigration website collapsed from the deluge of visitors. Stock markets are down around the planet, but from what I read it is better than what it was earlier. One newsfeed had pictures of crying Hillary Clinton fans. It seems like the world is ending for people who worked so hard for their candidate.

There will be pain in the weeks and months ahead. There would be pain in the weeks and months ahead regardless who won the election. This is reality. America is undertaking a grand experiment. It isn’t the first time we walked the road less traveled. My political position is unimportant, but I will share my vote so you understand I am not writing this from the victor’s side. I voted for Hillary and had my reasons. None of that matters now. Trump will be the next President of the United States.

The Root of Panic

There is plenty to be concerned with. An untested politician jumps straight to the top. What could go wrong? Well, lots can go wrong. But a lot is always going wrong. We lived through a Civil War, two world wars, victories and defeats. And life kept chugging along. Now is not the time to panic. (There is never a good time to panic.)Continue reading

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Credit Card Secrets






We think of credit cards as those things which allow us to manage our financial lives without carrying money around. Bills are easy to automate with credit cards and paying the card at the end of the month is a simple, one-time, setup online and it is paid in full on the due date without any further action on your part. Even if you don’t record your spending, a credit card has a nice list of all your spending in one neat, compact location for future review.

Those crisp pieces of plastic come with a dark side also. Without constraint, you can dig a financial hole difficult to crawl out of. Make no mistake; credit cards are debt, even if you pay them in full monthly. Debit cards serve the same purpose and are not debt because it comes out of your bank account; when the money runs out, the purchases are declined.*

Previous posts discussed bonuses, cash-back credit cards, and interest free/fee free loans. I consider those the easy benefit of credit cards. Debit cards offer limited bonuses and cash back, but credit cards take it to a whole new level.

There are a lot more benefits to credit cards most people either don’t know about or never take advantage of. I seek to end that problem now. These benefits are worth anywhere from a few hundred dollars a year to thousands, depending on your level of spending and the items/services purchased with the card.Continue reading

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Hidden Value in Homeowners Insurance

img_20161031_201350Insurance is for the mathematically challenged. Insurance companies have the largest buildings in town for a reason. What other company do you write a check to for a thousand dollars and get nothing more than a promise to cover some bills in the event of certain losses? Commissions to the salesperson can reach or exceed 100% of premiums in the early years of some life insurance policies. Many credit card companies offer free extended warranty insurance at no additional cost when you buy with their card. You can guess the real value of the extended warrantee offered at Wal-Mart on $88 headphones.

Warren Buffett built an empire funded by insurance premiums at Geico. Some insurance is required by law. In the U.S., auto insurance is required for liability. Health insurance is also required since the Affordable Care Act passed.

Insurance is about risk management. Insurance companies are masters at it. The goal for the insurance company is to bring in as much as possible in premiums and pay out as little as possible in claims. Insurance always has a built-in profit for the insurance company. This is the house advantage.

Most insurance claims are for stupid small stuff. The cost of insurance to cover claims under $10,000 is massive. The processing of a claim is expensive. That is why higher deductible can save so much. But even better is not buying insurance at all and pocketing the cash.


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