Several years ago my office building was burglarized. Two young men used a tire iron to break a window and enter the building. Tax offices do not have a lot of stuff worth stealing so they settled on two monitors and an old safe with an empty coffee can in it. People pay their bill by credit card or ACH in the majority of cases; a few still pay by check and cash comes in during tax season and is removed each day.
The young men caused thousands of dollars in damage for the massive haul of two monitors worth maybe $20 each. (New monitors are under $100.) So what were they geniuses looking for? Well, it seems they remembered I had a soda machine outside my building a decade ago and they assumed I moved the machine inside the building. Yes, they burglarized my building for some of that lucrative soda machine money.
They did not find the soda machine. I retired the machine years ago. The police were so excited to gather evidence. A few days later the young men were in custody. The police and district attorney informed me I was a victim. I replied ‘I am not the victim. My building is the victim; they kicked the shit out of it.’ For some reason I did not feel violated; I can’t speak for my building since I was not the one sodomized.
Back when I was in high school I started down the road to OCD, I mean toward being a wealthy accountant, by recording everything I did. Every penny that came in and every penny that went out went into the columnar pad. Tracking my progress was so important to me I refused to go to bed at night unless the “books balanced”.
Once I reached adulthood I continued recording my financial progress and expanded it to other areas of life. For decades I have recorded my daily electrical usage. No fancy devices are used because that would cost money and you know how we feel about spending money around here. Except for vacations, I can tell you how much electricity I used on any particular day for the last twenty years or more. (In the near future I will share how my electricity usage obsession helped me reduce my utility bill 80% for the farm and 65% for the office.)
Such anal obsessions may sound like a sickness. When running a business the obsession frequently is the difference between survival, failure or massive success. I keep two sets of books in my accounting firm. Before you scream to the IRS that I am cheating on my taxes I ask you sit down and listen first.
There are some things QuickBooks does not do. I track my income and expenses in QuickBooks and on an Excel spreadsheet. The Excel allows me to also track non-financial items, too. Like my electricity usage, I can tell you how many tax returns I e-filed back to 1990. (Yes, they had federal e-filing way back then. I was an early adopter.) The Excel worksheet also allows me to review my business over long periods (decades) in a different way from QuickBooks or any other accounting software.
Several years ago while surfing the web I ran across a guy called Mr. Money Mustache, written by some crazy guy out in Colorado*. His claim to fame was that he retired at age 30, to which the Internet Retirement Police took him to task, claiming he did not ‘really’ retire at age 30. Not me. I sat back in my chair and wondered: What took him so long?
Fast forward to last weekend where my 21 year old daughter, Heather, complained about issues with her supervisor at work. It was the perfect opportunity for me, dear ‘ol dad, the Wealthy Accountant, to share some golden nuggets of truth.
The people living with me, sometimes known as family, are quite accustomed to my rants on how to live life, sometimes known as ‘dad’s little psychotic episodes’. The good father that I am, I share my lifetime of experiences liberally and sometimes even add a modest amount of BS. Let me be 100% clear here; I never lie. Ever!
People serious about early retirement turn to rental real estate to turbo-charge the process. Saving and investing can get you to retirement fast. With real estate you can go from zero to retired in a few years. It does require careful planning to make it work.
There are three steps in successful income property ownership: buying right, management and taxes. Over the years I have seen many people lose money, even go broke, due to rental properties. I have also seen ordinary people make more money than doctors or lawyers with real estate.
From the late 1980s to the late 1990s I owned well over 100 pieces of property in a partnership with dad and brother. Real estate is a passive activity according to the IRS. In reality it is planning and work. The number of rental properties required for a comfortable retirement is not all that large. I currently own two properties (other than my homestead) generating over $36,000 of passive income a year. This is profit, not gross rents.
I grew up on a small farm in rural northeast Wisconsin. We lived in a shotgun shack which is more familiar to the U.S. South. If you don’t know what a shotgun shack is, it is a home with so many holes you could shoot at it with a shotgun and the pellets would pass right through without hitting the building.
A shotgun home in NE Wisconsin has problems in the winter months. The small furnace kept the pipes from freezing and not much more when the temperatures dipped below 0 F. My upstairs bedroom had no heat. As luck would have it, I had an electric blanket. There was one more advantage: I kept ice cream under my bed for two or three months a year and it would not melt. Those are wonderful memories.
The first week of tax season is in the books as I write this. Most tax seasons bring the same problems with a few notable new ways to mess up a tax return. New employees frequently bring bad habits from previous jobs we work hard to break. A new CPA in my office has reminded me how important it is to address problems quickly.
Communication between accountants in the office and with clients can either make or break the client relationship. Clients will ask for things that will really harm them in the end. Today I want to address two areas of concern: injured spouse and deductions (business and personal).
All too often a client wants an immediate benefit without regard for the future. The most difficult task in training new employees is to get them to think about the effects on all tax returns affected. Clients generally get it when I explain it to them. For some reason the tax pros want to tenaciously hang onto the old destructive habits.
A quick definition: An injured spouse is where one spouse owes back taxes or child support and the other does not. As a result the refund will be seized by the IRS to satisfy the child support arrears or the state or federal back taxes owed. To protect the spouse not responsible for the payments, the injured spouse can file for relief (receive their portion of the refund on a joint tax return). You can even marry into such a situation.
Out in the boondocks where I live the garbage is picked up every two weeks; recycling once per month. Until a few months ago this arrangement worked well. Garbage was placed in a large barrel the garbage truck could automatically empty into the truck hopper. Recycling was placed in blue plastic bags with paper and cardboard placed in either a box or tied in a bundle. A few months ago the system was changed for recycling. Bags were replaced with a blue barrel the same size as the garbage barrel. I understand why the change took place. Under the new system the recycling company could run the route with only one employee. The truck has a lift (like the garbage truck) to grab the barrel and empty the contents.
The problem comes from the amount of recycling I have. All the recycling from my office, farm and home went into the barrel and it was not big enough. It was hard to believe I had so much crap every month. The garbage barrel was almost empty; we have one small kitchen garbage bag for disposal every two weeks. But the recycling did not fit. At first I wanted to blame all the stuff (a technical term used by hard-core wealthy accountants) on the office and farm. Certainly, they played a roll, but personal recyclables still would fill the barrel monthly.
Whenever I see stuff going to the landfill or recycling center I start thinking. Why am I buying all this stuff only to throw it away? The only way to understand a problem is to research it. I had to know where all the recyclables (waste) were coming from.
To make for fair research, I excluded the loads of junk mail and other paper from the office and feed bags from the farm. My goal was to understand my personal waste. My garbage waste is so small I don’t think it pays to spend much time reducing the small kitchen bag of garbage. Mostly, we change the kitchen garbage every two weeks whether it needs it or not to prevent odor. But how in the heck do we fill a recycling barrel to overflowing monthly?
First off, I notice we have a lot of plastic jugs. I mean lots! We could mention the whisky bottle, but we will not go there to protect the reputations of the not so innocent. (Mrs. Accountant does not drink whisky… that I know of.) The real mass of plastic is dominated by juice bottles and milk jugs.
I prefer drinking fresh, home-grown juice. Sometimes I buy apple juice at a local orchard in the fall. I drink milk, but not often. So I can place all the blame on Mrs. Accountant and my two Jr. Accountant daughters. Except it would not be fair.
Milk containers collapse down and don’t take a lot of space, but we guzzle three gallons a week. Juice containers are more rigid and collapse to a point. The barrel would fill slowly each day. There was also one other bulky item that consumed a lot of space other than office paper, feed bags and plastics.
Before I tell you the criminal in the recycling barrel I want to defend the Accountant household. The item causing all the problems came mostly from the office with only a few coming from the household. The culprit: packaging (cardboard boxes).
Food packaging is the worst. The ladies at the office love to ship in lunch on a regular basis. Example: one of my employees had a birthday recently so it was decided the boss would pay for lunch. (We have a petty cash account for special treats for the staff.) I had no say in the purchase. They decided on Subway. The plastic container holding all the sandwiches was huge! I had no doubt more cost went into the plastic packaging than the amount of food purchased. Two lessons here: 1.) the plastic package did not collapse down well so it took a lot of space, and 2.) the cost of the food was probably less than the cost of the packaging which was purchased for no other reason than to throw it away.
Since we know packaging is not free, we have an opportunity to reduce costs in our life without sacrificing lifestyle. I am on a mission at home and at the office to reduce recycling waste. Stuff tossed in recycling is still waste! And you paid for it; just as much as you paid for all your regular garbage. If we can find ways to reduce all waste, including recycling waste, it would do wonders for our personal bottom line. Call it frugality without giving anything up.
A Few Solutions
When you have a farm, office building and a large home you need a fair number of light bulbs. I use LEDs in all my buildings. Some LEDs are packaged with so much plastic I have to visit the shop to pry open the packaging. I discovered some LEDs use less packaging, especially when multi-packs are involved. I visited a few local stores to see if I could do better when buying stuff, LEDs in this case. Using my trusty pocket calculator I determined multipacks were a much better deal and used a significant amount less packaging. Lesson: More packaging equals either a higher cost or a lower quality to cover the packaging cost.
Packaged food is bad for your health and pocketbook. All the boxed foods my kids love (and I eat right along with them) are hurting my body while wasting a lot of money on packaging. Fresh fruits and vegetables can be somewhat more expensive, but after considering health they are a bargain. I have a plan to buy more in bulk to reduce packaging costs and to reduce prepackaged foods like cereals. In my defense, I eat eggs every morning and I get them from my barn. When I say ‘Farm Fresh’ I mean it. My breakfast: laid this morning. (BTW: you can buy my eggs (brown eggs) if you stop in the office. First come, first serve.)
On the farm I buy egg mash in 50 pound bags. I will move to bulk delivery without any bags and store the mash in a spare gravity box. I use about a ton of mash a month and when I checked it is cheaper for the same exact product. Savings: $40 per month. Farmers are noted for their frugality. I still cannot explain what took me so long to figure out I could save $500 a year with this simple change.
The accounting office will be a tougher nut to crack. I don’t always have control over the waste flow. Junk mail will keep coming no matter what I do. Boxes from Amazon for supplies or paper take a lot of space and cannot be easily replaced.
I reuse many plastic containers and cardboard. The cardboard works on the farm around trees or in the garden to control weeds and protect soil moisture. Juice contains store homemade wine well (ahem). In the end it will end up as either garbage or recycling, but used many times before discarded.
I saved food waste for last. We don’t have food waste in our house. What the chickens, steers and barn cats don’t eat goes into the mulch bin. It is estimated 50% of all food grown is discarded from farm to the table. We certainly have waste in the Accountant household. Garden waste is common during the summer and fall. Not all things grown should be eaten. Unfortunately, there is waste from the kitchen as well. Wasted food is going to happen. Things sitting in the fridge too long have to be tossed. Unless you have a farm you will have more food waste going to the landfill than my household.
Make a Difference
Every household has different waste/recycling issues. Any waste bothers me; it goes against my upbringing. My paternal grandmother used to remind us kids that during the Great Depression they ate lard sandwiches “and liked it”. We joked back that today we have Butter Flavored Crisco. Truth is it is not funny. Waste delays retirement plans as money funneled to retirement investments get a ride to the landfill or recycling center. Waste reduces quality of lifestyle. It also feels really good knowing you are acting as a responsible steward of the gifts life has granted you when reducing waste. Be vigilant. Whenever spending hard earned money (or easily gotten money, too), pay attention to the waste products you are buying with the stuff you want. It’s how wealthy accountants roll.
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. 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!