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wealth building

Early Retirement, Lifestyle, Taxes and Investing

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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Stay the Course with Your Investments




dollarrThere 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!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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Supercharge Your Net Worth

img_20161009_152000Business ownership is the fastest way to significant net worth and financial independence (FI). It is possible to grow your net worth $2 or more for every dollar you increase your revenue. This is before investment gains! By understanding the accounting behind business valuation, anyone can accumulate a seven figure net worth in as few as five years which can be turned liquid and invested in income producing assets allowing for early retirement.

Building a massive net worth is more difficult, if not impossible, with earned income only. Mega-wealthy people like Warren Buffett and Bill Gates know wealth is created from multiplier effects. Buffett grew Berkshire Hathaway by investing in other successful companies and insurance. Bill Gates grew Microsoft into a world leading software company. In each case the majority of the wealth created, around twenty times the profit level, came from multipliers. Only about 5% of their wealth came from actual profits!

Average people can use the same methods as the uber-wealthy to supercharge their net worth. Business owners have the advantage. Wage earners have no multipliers to help them accelerate their net worth growth, whereas a business owner can increase her net worth by $2 or more for every dollar of increased revenue the business has even if she saves and invests none of the profits.


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My Daughter Retired at 22 — Here is How She Did It

img_20161018_075051For five years I played treasurer at the Wisconsin Writers Association (WWA). The annual conference is their big event. Every year great minds gathered to share ideas writers could use to write better and promote their work. I always tried to snag a spot for a presentation on promotion for writers.

WWA is a small writers association. Only a small portion of the members are actually published, not including self-published books. I had tons of ideas for those few who did have a book in print and in bookstores. When it comes to promoting a small business — and writing is a small business (which can get really big for some) — I have a massive arsenal.

Three years ago I presented at the WWA annual conference in Wisconsin Rapids. My idea for writers was simple. Stop doing book signings at bookstores and focus on libraries. A gasp rose from the crowd. Sacrilege! I had to explain when you are at a bookstore you have thousands of competitors an arm’s length away. It is common for an author at a bookstore signing to have fewer than five people buy their book; many times they sell none!

Libraries are different. Your competitors are available for checkout, but a signed copy is available only with purchase. Libraries are hungry for authors willing to speak to their patrons. Not only will you sell books, you will also get paid for the speaking engagement in most cases. Libraries are the unsung heroes for people looking to supercharge their writing career.

I went into more detail at the conference than I will here. I will chase to the end. During the 50 minute presentation I outlined how an author can earn six figures annually working ten or fewer hours per week. I was soundly admonished. Authors disagreed vehemently that this would work. I stood my ground. As the presentation came to an end a man in the back of the room raised his hand and said, “I am with the Door County Library system and what Keith has said is 100% true. We can’t get authors to show up even when we pay them. And when authors work with us they sell books and get paid for that too. We also sell the author’s book at wholesale price to patrons so the author sells even more books and gets more royalties.” I rest my case.

My oldest daughter, Heather, was in the audience that day. She is also the only one who took notes and followed through.

Play all Day

Heather is not a normal kid; she is a lot like her dad. She does not want to run a business like I do, but she isn’t excited about working for the man. She struggled with her true dream: art. The kid is talented, for sure, but so are another couple million people, too. Heather wanted to attend art schools around the planet and I refused to pay her way. I told her she doesn’t want to produce the same art everyone else is producing. Be different if you want to survive with art.


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Early Retirement versus Laziness




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Look at all those crazy retired people. They are so lazy as they sit there on top of a mountain they climbed.

Pete over at Mr. Money Mustache does not publish as often as he once did. I still check in now and again to see what Pete is up to. Even when there are no new posts people still comment on previous posts. A few days ago a comment grabbed my attention. In short, the commenter stated she thought Pete was anything but lazy. This got me thinking.

The post in question was actually written by Mrs. Money Mustache. (I’ve been in the mustache house. She really does have a mustache. Damndest thing I ever saw.) She said she felt like a “Lazy Log” compared to Pete who is “extremely self-motivated”. As their accountant I can attest neither are lazy. On a fairly consistent basis Pete contacts me on a tax related topic he is working on.

As most of you are aware, MMM retired at 30 and is living the good life. The argument over the years has revolved around ‘Is Pete really retired?’ The answer, of course, is yes. Mr. and Mrs. MM are retired and living the life they want. The next question then is “Are all these early retire people lazy asses?’ That is the topic of today’s discussion.

Busier Retired than when Working

I have noticed in my office that when many people retire they end up busier than when they were punching a clock. For some reason a job screws up your personal life so there is no time for major projects that sooth the soul. Once you put ‘organized labor’ behind you (don’t confuse with union labor) you are now free to pursue the things you want. Most people are like me, brimming with thoughts and ideas racing through their mind. Once the floodgate is opened it is unstoppable.Continue reading

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Is a College Education Worth It?




imag0319The cost of a college education has risen faster than inflation for so long the discussion can no longer center on what your major is in college, but whether you should even go at all. We have all heard the statistics on how much more you earn with a college degree which begs the question: How much do you need?

Outside medical, education has seen prices skyrocket more than any other category of spending. According to the College Board, tuition and fees for the 2015-16 school year for state residents of public colleges is $9,410. Out-of-state and private colleges are significantly higher. Add room and board and the cost for the school year is $19,548. Now toss in the cost of textbooks and living expenses and the cost of a college education is a major investment.

There are ways to decrease the cost of an education. Starting at a two-year college and living at home or renting your own apartment versus living on campus can lower the total cost. The one nonnegotiable item is the tuition fee. Scholarships and grants can reduce or even eliminate the cost of higher education except for the time investment.Continue reading

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Screw the Rich

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In the market for a freezer? Have I got a deal for you.

The rich are sanctimonious pricks that deserve every insult thrown at them.  Who do they think they are? Just because they didn’t spend every penny they earned and invested their money wisely does not give them the right to be treated like everyone else. Just because they never wasted their money on fancy SUVs, luxury vacations, or kept up with the Jones’s does not give them the right. It does not give them the right! Who are these rich I speak of? Well, anyone with a net worth above zero.

About half of Americans are below the waterline in net worth. These normal people who succumbed to the mass media brainwashing of spend everything you got are the normal people. You, my friend, saved and invested. You are an idiot. If you were poor, like a normal person, you would be treated like a normal person. But, no. You and your almighty attitude of spend less than you earn is as annoying as it is ignorant.

I Can’t Take Anymore

The opening to this post was darn hard to write. It goes against every fiber of my being, yet is the attitude of the majority of people. When you get to see the world from my side of the desk you have the opportunity to see large numbers of people and how they handle their finances up close. You also hear disturbing stories.Continue reading

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