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Lifestyle

Early Retirement, Estate Planning, Lifestyle

Leaving a Legacy Without Destroying Your Children

Reaching financial independence requires a consistent set of skills and persistence. The habits that allowed you to amass a sizable nest egg don’t die just because you pass some arbitrary border. Education, job, and family life consume all your time in the beginning.

After college it is time to earn a living. After finding a job it is time to climb the ladder, all the while saving a massive percent of your income to reach your financial goals.

Family is a priority. A significant other and children take time and money. You increase your saving and investing skills. Raising a family is expensive only if you don’t know how to shop. You hit the rummage sales and thrift shops for kid’s clothing, toys, height chair, car seat and other stuff the youngsters will grow out of quickly. Later you sell the kid’s stuff for about what you paid for it at a rummage sale of your own, passing the same opportunity you had to another young couple.

And then it happens. Your hard work, intelligent spending and diligent saving pay off. You reached financial independence earlier than planned. Now you have another problem you never gave much thought to before: your legacy. If you reach financial independence early, how large will your net worth grow before you leave this world?

Thinking about your legacy when you are still in the building stages is hard. It requires looking into the eyes of the possible: early death. What happens if you die while the kiddos are still minors? A plan is needed. Even if the kids are grown, a plan of succession is necessary. And what if kids are not part of the picture? Then what happens to your legacy? Let’s explore the possibilities.

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Early Retirement, Lifestyle, Small Business

The Clock is Ticking

When my accounting practice went from a part-time seasonal pastime to a full-time firm I needed to bring in talented employees. Bev, a close friend of the family, had many years of experience working for other tax firms so I asked her to work for me. She accepted the offer.

Decades started to pile up. The joke around the office was Bev worked for my firm longer than I had. It wasn’t far from the truth. Bev was always a talented and faithful employee. She did good work and I could trust her.

But time counts, and keeps counting. Bev had something few people ever possess: talent and personality. Clients loved Bev and for good reason. She knew her stuff and made people around her feel comfortable. In my darkest hours she was there to hold the firm together. When my youngest daughter was born with birth defects she kept the office open while my mental wounds healed.

I have fond memories of those days. I also remember how it ended. Bev comes from a farming background; solid German stock. What I mean to say is she isn’t a petite girl. Wisconsin winters can be brutal. Arctic blasts made it difficult for her to breathe outside. I was worried about her. It was the excuse used to force her to retire.

But that was a lie. The truth is something was changing in Bev. It started slow and steadily advanced. She wasn’t as good at taxes as she once had been. Once she was great at taxes, now she was merely good and rapidly approaching mediocre. It is a terrible thing to say about someone with such an honorable and distinguished career.

I noticed the changes in Bev when she reached her mid-60s. It was small at first. Little things were missed. Sometimes the tax return was correct, but little things around the tax return were forgotten. A note was not updated; a basis statement not completed. And clients still loved Bev.

Each year got progressively worse until the work was unacceptable. I had to review all her work at a much higher level. Bev had to go. It was not an easy choice. She accepted her retirement and took to it like a pig takes to shit, but she was hurt at the time. She still brings her personal tax work in for us to prepare.

Is that Footsteps I Here?
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Early Retirement, Frugal Living, Lifestyle

Medical Tourism: Save 90% on Healthcare and Get a Free Vacation

Even if you read the news poorly you know healthcare costs in the U.S. are astronomical. The U.S. healthcare system is more than double the cost of the world’s second costliest health care system in the U.K. And what do we get for all this extra money we pay for healthcare? Subpar performance. The U.S. currently ranks 37 according to the World Health Organization, right behind Costa Rica and ahead of Slovenia. Pathetic.

Medical issues are the one area of life that can destroy early retirement plans or any illusion of financial independence. To make it worse, health insurance is now required in the United States and it isn’t cheap. For American citizens, you are forced to participate in this inadequate health care system by financially supporting it to your maximum potential.

To add salt to the wound, many medical procedures are not covered. Weight-loss programs, cosmetic surgery, teeth whitening and hair transplants are not deductible expenses on U.S. tax returns, nor is it covered by most insurance. If your insurance does not pay for it, it comes out of your pocket. Many deductible medical expenses are not routinely covered by insurance. Eyeglasses and Lasik surgery come to mind.

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Lifestyle

The Subtle Art of Not Giving a F*ck

Three books I read since the beginning of the year stand out as books readers of The Wealthy Accountant should find interesting and useful. Two books I recommend for purchase, the other can be borrowed from the library; I’ll indicate my recommendation as I introduce each book. The dividing line between borrowing from the library and purchase is the desire to mark the book with a highlighter as you read. Highlighted books are easy to use as future reference. All books I recommend in this blog are books I highlight and own.

A strong theme on The Wealthy Accountant is frugality. So why do I recommend the purchase of so many book? First, I have a weakness when it comes to books. I buy a third to half of all books I read. The percentage changes with time. Many times I start reading a library book and instantly know I want to mark the important passages for future research and use. Your need for research material may not be as high as mine if you don’t own a business or publish a blog.

Second, if a book is important I will find a way to own it. Knowledge is power; knowledge is freedom. My mind is my most precious asset. I feed my mind every day and reference back to previously read books often. A well-read person is almost always wealthier in financial terms, but is always wealthier in quality of life. I have never met a successful person who is not well-read.

Cutting costs is easy. Unnecessary spending is tossed out the window. But books are as vital as food. Some books, especially novels, are a one-time read so the library is a perfect way to consume these books without any financial outlay. Some nonfiction books fall in the same category. Then there are books which touch us deeply. A few works of fiction rise to this level. Flowers for Algernon comes to mind. Many nonfiction books are significant enough to own. If you are like me, you will find yourself returning to these treasures often.

On to our list of must read books to finish off the winter.




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Early Retirement, Lifestyle

Living Between Mr Money Mustache and Tim Ferriss

Modern technology and automation is making our lives easier every day. Virtually every task humans do is also done faster, cheaper, better by some automatic process with a silicon chip inside it. These automation processes started showing up a few centuries ago and started changing human life in fundamental ways in the last 100 years. The pace started slow with a steepening incline of progress. Today, we face a challenge never faced by humans before: what to do.

Free time was always a part of human living. It took the Industrial Revolution to transform human stock into expendable machines. In hunter and gatherer days, man would spend large amounts of time idle, pursuing whatever created interest. We can still see a few remaining fragments of art at historical sites. Hunting parties might extend for days or even weeks. Once game was slaughtered and the meats cured, the pantry was full for an extended period of time. Weeks, even month were free to build monuments, create art, and tell stories around the fire.

Then the Agricultural Revolution arrived. Man had his first taste of what was yet to come. Humans were now slave to the ox and land. Working the land and domesticating animals kept man busier than hunter/gatherer days. Hunched over the plow all day brought the first lower back pain for the species. Humans worked more hours than ever. But once the crops were planted there was free time, followed by a flurry of activity harvesting the crops. Then, man settled in for a long winter season of leisure.




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Early Retirement, Lifestyle

The Right Way to Own Investment Properties




During the 1980s and 90s I owned a lot of real estate. It started slow and exploded into a 176 building pain in the ass. To be fair, most of the investment properties we owned were either single family homes or duplexes. A few multi-family buildings, a boarding house and a storage facility rounded out the mix.

With so many properties running through my personal accounts and a partnership with dad and brother, I learned a few things along the way. One hundred seventy six buildings is a lot of buildings. Good thing I didn’t own all of them at the same time. Mistakes were sure to happen.

By the early 2000s the real estate empire was gone. I was burnt out and sick of working with tenants. Countless property managers helped us over the years, but it was not enough. Managing over a hundred units much of the time over a footprint covering most of NE Wisconsin took its toll. To complicate matters, I also ran my accounting practice with double the employees I have today (during tax season).

Starting slow was my greatest idea. It felt good to see the passive income filling the checkbook. Our teams of contractors allowed us to buy fixer-uppers and increase the property values significantly. Our best deal was the purchase of an upper-lower duplex in my hometown for $8,000. Hard not to make a profit on those.Continue reading

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Lifestyle

Watch the News Right or Turn it Off




News over the years has deteriorated into biased reporting, slanted by political opinion. Finding quality news to form your own opinion is nearly impossible to find. Yet, without good information you can’t make informed decisions in your investing, business or personal life.

As bad as it is, there are ways to still get quality news reports. It requires effort to sift through the garbage to find facts you can use to improve your business and personal life. The BBC, The Economist, and National Public Radio still provide solid reporting with a minimal of political bias. Fox News is not news, except for those rare occasions when they report an event they have not had time to work a political angle on yet. CNN is somewhat better, but still contains plenty of bias.

Before you blame to broadcasters and the internet news feeds, remember, we are the ones feeding the beast. By consuming meaningless opinion pieces we encourage more of the same production. Our own personal biases will determine if we love Fox News or hate it. I don’t care for Fox News for a completely different reason I will share shortly.

Polarization and populism has taken over. People only want to hear what they want to hear. News no longer informs with facts; it reinforces already existing personal biases. It caters to base emotions like anger and hate. And let’s not pick on Fox News alone. I don’t watch TV so unless I am visiting family or in an airport, I don’t get much TV news indoctrination. I prefer internet news feeds. CNBC provides business news, The Economist provides a wide variety of news from around the world, and gasp, I also tend to sift through the dung pile of Yahoo’s news feed.Continue reading

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Early Retirement, Estate Planning, Lifestyle

Avoiding the Gold Diggers

Community Property States

At a recent Camp Mustache where I gave a presentation I also offered one-hour personalized consultations. Most of the advice I give is identical among all people I consult with. Most themes come up again and again. About 20% of what I advise is unique to the individual.

This particular group was comprised of high net worth people. These people save a massive percentage of their annual income and are in a position to retire early; mid-30s is average. Incomes were all over the map. Some had high income; some had modest income. All invested heavily in index funds and/or real estate.

An attractive young woman was next in line for a consultation. She had amassed a reasonable amount of liquid funds and was planning her retirement strategy. I knew she wasn’t married by looking at her tax return. I asked if she had a special someone in her life. She said no. I then made the offhand comment, “If you ever decide to get married you will have a prenup.”

Prenuptial agreements are common so I felt the comment was just a reminder. She seemed surprised so I reiterated she will need a prenup if she gets married, especially since she has a sizable nest egg. She wasn’t so certain it was a good idea. I reminded her gold diggers don’t always have tits. It took a bit of convincing to get her to come around to my way of thinking. I told her if I ever found out she got married without a prenup I would be very unhappy with her. My final selling point was, “When you have money some people will lie to get you to marry them. Then when they screw around and leave, you will pay them half your net worth to screw another woman. It is a bitter pill you want to avoid.”Continue reading

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