A couple of weeks ago the police started calling. It started with my cell phone which is unusual. Anyone who knows me knows I never answer my cell phone; I actually keep it on mute most of the time. Calls from my phone generally are from my youngest daughter, Mrs. Accountant, or Tabatha at the office. The best way to reach me for business matters is by calling the office and speaking with Karen; for personal matters call Mrs. Accountant. By calling me directly you will not get through. Yes, I write a blog, but I have also weaned myself from most modern instant communication stuff. I think it is unhealthy to be tuned in and turned on non-stop.
The police are a persistent bunch. The officer calling left several messages. It was important. He had to speak with me and only me, but would not indicate what it was about. I ignored the calls; I knew what it was about. Then he moved on to the office and started leaving messages there. I’ve been down this road before. When a police officer calls outside his jurisdiction something is up and it is less than honest. The police from a small town in a different county do not call for “official” business with only a vague “important” message.
The front desk at my office is handled by an employee only a few weeks on the job. She was nervous the police were calling. Like most people, she thinks when the police call you drop everything and prepare your nose for Brownian motion (Google it). I am not most people. She took the message and was concerned. I explained what it was really about and that it was not important.
Finally, the police officer decided to play his only quasi threat card he had. Since he failed to get past my gatekeeper and I refused to play along and return the call, he asked when I got in each morning. He then said he would show up the next day. Now even the newbie got it; police do not travel outside their jurisdiction unless it is for a crime committed in their jurisdiction and if a real crime were committed they would not spend two weeks leaving vague messages.
Blue Cons Matter
At this point you might think I have no respect for the police. Not true. The police are a vital part of the community and the community must support the police in their efforts to keep people safe. Several employees were nervous because this police officer was so insistent and I was not taking him seriously. Now the officer was going to show up on our doorstep! Except, it never happened. He never showed up. It was an empty threat just like I said it was.
So what really happened? Why all the calls without mentioning what the calls were about? Why the threat to show up at a business, implying a disruptive atmosphere? There is a small chance it was not even a police officer. Scam artists love to bilk business owners by pretending to be someone important, like a police officer.
The odds are high it was a real police officer and I knew it. One thing you learn when you are in business for decades is that not every call from the police (or any government employee) is important even if they think it is. He kept leaving messages it was important, yet refused to indicate what the important issue was. In poker we call this a tell. When the police have a ‘real’ important matter they show up unannounced or at least say what they are dealing with.
Here is what really happened. The police periodically raise money for their benevolent fund and for special projects dealing with kids or the community. I don’t return the call or respond in any way because I know they want my money and they will say some really heavy-handed shit to get it. It goes in cycles. Once the calls start they pick up for a while until it burns itself out. I ignore them all. Police should never take a heavy-handed approach to get money, regardless how good the cause; it destroys trust with the business community. When I am put into a position where I feel forced or even slightly coerced into donating to a cause I take a pass. I do not trust strong-arm tactics used to raise money.
“Yes” Will Cost You
Back in the early days of my career I was an easy mark, as many business owners are, for police fund-raising projects. What I did not know was the consequences of saying ‘yes’. Here is what would happen if I returned the call and contributed to the cause the officer was sponsoring. As an inducement I am promised a business card sized ad in a flyer handed out at the event. Don’t worry; you will get zero business from such a chintzy promotion. What will happen is every fund-raising police department in a 200 mile radius will get a copy and you are first on the list to call. They will bleed you dry if you let them.
Once you get on “the list” you are in a world of hurt. Getting off takes time. The only way to get off “the list” is to stop supporting ALL such requests. Twenty years ago I had to get very rude to back the piranhas, I mean the police, off. They do not take “no” for an answer. It always gets down to implied threats and an attitude if I don’t kiss their ass. Since I don’t care for the taste of shit sandwich I am turned off by their approach.
I knew it was coming. The recent well publicized police shootings were a guarantee “the list” needed to be expanded and I would be a prime target again. I do feel sorry for the officers harmed or killed and their families. Need I remind you they signed up for the job, I didn’t. It is dangerous work. Taxpayers spend plenty helping law enforcement. I would be open to helping financially if I was not made to feel inferior if I didn’t donate. And I do NOT want to be on “the list”! If I give it is because I want to. I do not want a recurring bill I feel obligated to support and harming my personal financial independence.
Not All Cons are Illegal
The original con, or confidence game, had the mark handing over their money, watch, or other item of value, of their own free will. Crime is easier to identify when force is used to take something. But if you just handed it over to the police, who will you call to file a complaint? It is the perfect con. The police are in a position of authority and can easily abuse that authority without much effort. In the back of a business owner’s mind they are thinking if they don’t hand over their money the police may not protect their business in a time of need or could retaliate by issuing a speeding ticket when one is unwarranted.
I think these are empty fears. Most police officers are professional. Even when they ask for money they are under pressure by their department to raise money. They might be using strong-arm tactics so they can just get it over with. I have no inside knowledge on this so take my opinion with a grain of salt.
Bad for Your Financial Health
Business owners are not the only ones under pressure to part with their hard-earned money. Employees get constant requests at their job. Girl Scout cookies make their round each year; United Way has a wonderful payroll deduction plan just for you. The causes to contribute to are endless. Once you say “yes” it makes it easier for others to ask you to do the same for their preferred cause. You did give to Joe over there; you have to give to me, too. Pressure is applied and it becomes nearly impossible to say “no”.
You better learn to say ‘no’ if you want financial independence. I donate a significant portion of my income each year to charitable organizations I think do a good job helping people in need because I have significant financial resources to do so. If they send me a request for money I generally ignore it. My generosity is above average; my tolerance for manipulation well below average. I give what I want, when I want, and only if it fits comfortably within my financial framework and personal worldview of a worthy cause.
I was fortunate to reach financial independence at an early age. If I worked for someone else I would surely have checked out and retired. As a business owner, I love what I do. I am lucky; I know it. Business owners that survive learn to push back on all the things looking to clean out their checkbook. It means being tough and sometimes rude. Fuck’em! It is my money, I earned it, and I will do with it as I please. Whether you are a business owner or not you had better learn the same skills. As your retirement funds grow more and more people will want a piece of that action. Those who reach financial independence and stay there are the ones who guard their wealth against all enemies, domestic or foreign.
And if Officer Sanderwood or Sanderfoot, or whatever the hell his name is, keeps calling, tell him I gave at the office.
I have noticed a trend involving wealth building that is all wrong. I see it in comments on other personal finance blogs a lot lately. I am sure it has been there all the while and it only jumped out at me recently for whatever reason. The misinformation is so important it needs clarification.
The comment goes something like this: I am not saving right now because I am paying off student loans/credit cards/car loans/making extra mortgage payments. When you pay down debt you ARE saving and also building your net worth. The real question is: How can you balance debt reduction with retirement savings for maximum net worth building?
Paying down debt removes the most caustic item on your balance sheet holding back wealth creation. Debt interest is an expense you can only slay by destroying the debt (paying it off). Debt is not a bad thing in and of itself when used as a tool, but most consumer debt is bad. Mortgages are the exception if used properly.
Let’s take some time to explore the best way to reduce debt and maximize return and net worth.
Pecking Order of Debt Reduction
We will address retirement savings in a moment; for now we will focus on debt only. My opinion is built on maximum return for each action you take which is different from other personal finance gurus like Dave Ramsey. Ramsey teaches you should pay the smallest debt balances first (snowball effect) so you reduce the number of bills quickly, giving you a mental boost. I was a Dave Ramsey Endorsed Local Provider (ELP) for years; I am very familiar with his teachings. My advice is slightly different.
I assume we are all adults and understand LESS debt (especially consumer debt) is better. You don’t need hand-holding or mental tricks to act like a responsible adult. You are here because you want to grow your financial understanding and increase your net worth.
The debt with the highest interest rate should be paid down first! Eliminating the highest interest debt does give a psychological boost as interest is reduced at the fastest rate. It also allows for faster net worth accumulation.
Debt payoff IS saving! Think of it this way. Example: You have several loans and a mortgage with payments of $2,000 per month of which $1,600 is interest. Making the minimum payment will increase your net worth $400. Do you get it? You made $2,000 in payments which included $1,600 of interest and $400 loan principle. The $400 reduces your balance, thereby increasing your net worth. Any extra payment will all go to paying down the debt eliminating interest on that part of the liability forever.
Debt Reduction Master Plan
There are a few steps (Ramsey calls them baby steps) to maximize debt reduction.
- Emergency fund: I don’t have an emergency fund. Most people with any amount of net worth generally don’t either. If you are saddled with debt you will need a small emergency fund of $1,000 to $5,000 until you have the resources to handle small emergencies. I don’t want you reducing debt and have a setback that causes more harm than good. A furnace or roof forcing you to take out high interest loans undoes all the hard work you have done reducing debt. Most people can get by with a $1,000 emergency fund. Once you have the financial ability to raise $1,000 or so quickly to handle emergencies the emergency fund is no longer a requirement.
- Order of Debt Reduction: The only way to guide a boat is with a plan. Gather all your bills and debt together and assess the situation. Now you can find ways to reduce spending and funnel the money toward extra payments on debt. Start with the highest interest rate consumer debt and apply the extra payments there. Large balances should be reviewed for refinancing. Eighteen percent credit cards and high interest auto loans and student loans require special attention.
The process is simple in theory, hard in practice. Debt builds easy for too many people. Living within your means and funneling the extra money first to debt reduction and later to investments is a radical shift requiring new habits. Cut spending to the bone. Every extra dollar reduces debt faster.
Track your debt reduction on a spreadsheet. Each month you should see the interest expense declining. From our example above, if your interest is $1,600 this month, the $400 principle payment and any additional payment applied to the balance will reduce the interest expense going forward. Next month your interest will be less, let’s say $1,580. Now you reduce your debt this month $420 just with the minimum payment. Staying on course does not mean paying small credit card balances first to get a psychological boost. The mental boost comes from seeing the interest assessed each month drop like a rock.
Debt is a crisis as serious as a heart attack. The trick is to eliminate debt as fast as possible without making the problem worse. The balancing act comes from taxes and retirement plans.
I know the desire is to fund a 401(k) up to the matching level regardless your debt level. I feel the same, but also know if your debt is high, funding anything other than debt reduction risks toppling the house of cards. When debt is maxed out you need to regain control of your finances first to bring you back from the edge. Once you have a small emergency fund and the most egregious debt well on its way to debt Hades you can consider balancing debt reduction with investing.
Just like paying off the highest interest rate debt first is a priority, you now need to bring investment returns into the equation. In this instance we only consider guaranteed rates of return. The stock market has excellent long-term returns, but they are not guaranteed. Employer retirement plan matching is one area of guaranteed high return. Investing into your employer’s retirement plan to the matching level provides two benefits: a high instant return on your investment (100% if funds are matched dollar for dollar) and a tax break. (In this post I will assume retirement investments are the deductible kind. The discussion between traditional and Roth retirement plans are left for another day.)
In the United States the tax code is stacked against spenders. The government taxes the shit out of you when you spend (income tax, sales tax, excise tax, gas tax, et cetera). What Congress has a hard time doing is taxing savers. To appease the masses Congress created several tax advantages for savers. The cost is minimal to government collections because most people are stupid and spend all their money and then borrow some more. You are not one of those people.
Savers pay a significantly reduced tax bill. We will focus on two benefits today: the Savers Credit and deductions. The Savers Credit applies to the first $2,000 net investment to retirement plans. Distributions from retirement plans affect the Savers Credit negatively so leave your fingers off the retirement stash. The Savers Credit is up to $1,000 per year. You never pay it back. The extra tax savings can be used to increase retirement investments. Unfortunately the Savers Credit is limited to relatively low income taxpayers. For example, the credit for joint filers phases out at $61,000. The Savers Credit is generally smaller for most people, around $200. Still, $200 is a nice additional benefit for investing in your future.
Traditional retirement plans (IRAs, 401(k), and similar employer plans) are tax deferred. Your contributions to the plan are not included in income until distribution. If your tax bracket is 25% and your employer matches dollar for dollar, your first year return prior to any investment gain is 125%. (I am aware I am playing fast and loose with the math. The goal is to show the return is large.) While you are in debt reduction mode you still want to take advantage of such generous opportunities whenever possible.
Putting It All Together
Let’s take a look at what we learned and put it into order for easier use:
- Assess Your Situation: Create an honest personal balance sheet, including all assets and debts. Now you have your net worth and all debts owed on one understandable page. Next, create an income statement from the household income and expenses. The income statement should help in determining where expenses can be reduced and applied to debt reduction.
- Assess the Debt: Debt should have a separate page to assess debt balances and a payoff strategy. List the debt with the balance and interest rate. Start with the highest interest rate debt and apply additional payments to this liability until it is laid to rest. Then move on to the next victim.
- Emergency Fund: Build a small emergency fund if your debt situation is excessive. You don’t want a flat tire to sink you right back into high interest debt.
- Prioritize Debt Reduction and Retirement Planning: Once you are away from the precipice it is time to maximize net worth building. Employer retirement plans with matching will provide a greater return on investment than the interest you are paying in most cases. Participating in an employer’s retirement plan to the matching level is an intelligent financial move. Don’t lose sight of debt reduction. The goal is to reach the highest net worth without risk. Debt reduction is a guaranteed return. Debt paid off does not accrue additional interest expenses. Once debt is eliminated you will max out all retirement accounts for the largest tax savings.
- Good Debt, Bad Debt: In my opinion consumer debt is bad. Car loans and credit card balances are caustic to financial health. (We leave credit card bonuses for another post.) Mortgages are different. We never get a loan because the interest is deductible, ever! Mortgages, however, are generally lower interest loans and will be one of the last things you pay off. Mortgages can be a powerful financial planning tool when used correctly.
- Mortgages: When consumer loans (auto, credit cards, et cetera) are eliminated it is now time to plan the assassination of the mortgage. I have a small mortgage and plan on killing it over the next two years even though it is not a net worth maximizing strategy. I started with a $300,000 death pledge and decided to plan its murder. I chopped it to under $130,000 this year with the final assault killing the darn thing over the next year or two. It hurts when I do this. The interest rate on my mortgage is 2.375%. Any other investment would have a better return than the mortgage cost. However, there is something to be said about living debt-free. Once your net worth is well on its way it is not always about maximizing the results. Debt spikes returns when things are increasing in price, but also causes downward spikes when things are not all roses. Debt-free is good even when it is not the best financial move. It is the best ‘sleep at night’ move.
- Time for Rocket Man: Once debt is history in your life you will have massive amounts of money to invest in retirement plans and index funds. Your skills acquired while reducing debt are still in play. While you reduced debt you learned how to cut costs, increase income, live within your means, and still remain happy with life. Without debt it takes almost nothing to live. Debt is what makes it so hard to make ends meet; the ends are rather close without debt payments. Now, interest is turned on its head. Instead of paying interest you are earning a return on your investments. What a concept!
There is no better feeling than waking in the morning, taking a deep sniff, and knowing you already made $722, more than you will spend in a week. A modest nest egg with no debt will generate a nice income stream to cover your lifestyle. Interest income, dividends, rents, and business profits all add to the mix. Like I said, the plan is simple in theory, difficult in practice. The sooner you start, the sooner you reach your goal, regain your sanity, and start living life the way you were meant to.
Millennials, loosely defined as young adults age 18 to 35 as I write this, are everywhere and messing up the machinery. Like a plague of locusts or alien invasion, Millennials are taking over the world with their opinions, ideology, work ethic, worldview, and their value systems. The old school is taking notice and whining about it plenty. Darn kids!
I disagree with my generation when it comes to bitching about Millennials. These young people do things different in some ways, but generally do a great job, even better than my generation in many instances. The slightly older (ahem) crowd needs to remember a few years back when we were the recipients of complaints from The Greatest Generation. We were asked why we were not so great. Pissed us off then, pisses us off now. So why do we pass the same BS to the Millennials?
The Millennial generation has the same issues previous generations had when cutting their teeth. Moving out and starting life is hard. Figuring out what to do when so many options are available is daunting. Times change, but people remain the same. More Millennials live at home with parent/s or rent than prior generations even if they earn enough to afford home ownership. It is too easy to paint Millennials as lacking commitment when seeing these statistics. Instead, look deeper. Our world is more decentralized than ever before. Mobile communications allow us to work and play almost anywhere on the planet without losing touch. Home ownership ties a person down who plans on traveling a lot. Working from home or on the road is easy and common in our modern world. Lucky us.
Millennials are not afraid to learn from older people. This is apparent in their massive following of Bernie Sanders. Young adults are not the problem. Their worldview is molded by technology. It is normal to respond as they have. Auto ownership, for example, is unnecessary in many communities as Uber and ride-sharing replace the need to own a car; it is cheaper too. Even desk top computers are making way for mobile devices. Millennials adopt modern technology, and the frequent changes in the technology, without angst; it is normal for them because it was that way all their life; they don’t know the old worldview because they never lived it. Yet they still follow an experienced old guy like Bernie and learn from him.
The rest of society can learn from Millennials, a valuable and diverse group of intelligent and talented young people. I offer this advice to my young friends:
- Your Opinion Matters: You do not need 30 years of experience before taking a leadership role. Remember, past generations had young people lead into the future, too. Think Bill Gates and Steve Jobs. Old people get stuck in their ways. It takes a fresh set of eyes to lead boldly into the brave new world. Leadership is a skill partially learned, partially inbred. Young people can and should lead, even people older than they are. As an employer I have had plenty of older people under my command. You need to lead when the opportunity arises. If the old guy has a problem with the chain of command that is their problem, not yours.
- Understand Complaints and Criticism are Part of the Process: Authority from the elderly feels more natural to many people. Authority is earned from experience. Older people do not always possess this experience. When it comes to my cell phone (or whatever we call the darn thing now) I defer to the younger generation. Since I have a tenuous relationship with my cell phone it is common for me to seek out a young person to help me when I am on the road. I would only ask an older person to help with my phone if no young people were around. Younger people, in my mind, have more experience and authority with newer technology. It might be untrue or unfair, but it is my worldview. The same applies to Millennials. Don’t take it personal when not credited for your work or face complaints. It is not about you; it is about them. Remember, it is difficult passing the reins to the next generation when they have been running the show for so long.
- Abolish Fear: The future is built by people with vision. Your worldview will create tomorrow’s world you and your children will live in. What I think is awesome will seem a bit dated by most Millennials. Progress is required to handle the problems facing society; you are the solution. Previous generations can and will help in your goals. Your dreams and vision will be the world you live in. As older generations diminish by death, you will remain to live in what you created. Move boldly into your new world without fear.
- Listen: You have so much to learn from the world around you and your elders. Let us tell our corny stories. The lessons we learned about life have served us well. Take what applies to you and entertain us with a laugh on the rest. Our experience is valuable. People do not change all that much. Relationships, work ethic, and beliefs are the only things changing; human nature is not. Who am I to condemn you for living together versus marriage? Who am I to spit angry retort over your work ethic when you have learned better balance in your personal life than my generation and accomplish more? Who am I to tell you which god to pray to or if you should pray at all? Listen to our bitching with an ear towards understanding what we really are saying, a tough act for sure. Allow us to help even when it seems counter-productive.
- Teach: You have so much to offer. Take your knowledge, skills, and understanding to the generation behind you. Also know you will soon move to the front of the line as the new generation asserts itself. Do it gracefully. Complain, if you want. Teach your experience to the young and step back as they show how awesome they can be. Most of all, look back. Remember the Baby Boomers (I was born in the last year of this generation) and Generation X. We want to hear your stories, experience your joys and successes. We live for that stuff.
Life can take over. It is easy to forget where you are with so many demands starting a career, saving for retirement, and growing a family. Society has many unwritten demands for you to follow. Break the rules. Only follow the mores you choose. It is your life to live.
Society can act concerned as a new generation begins to make itself felt. I lack such concern. I have seen Millennials and am impressed. Never before in the history of mankind has such an intelligent group of people moved into the leadership positions. If The Greatest Generation built great things, Millennials will create the most awesome and futuristic world ever, where all people will be treated with dignity and respect. I am excited every day to watch this exciting world unfold.
Gone are the days of lifetime careers. Today we think of multiple income streams as our safety net. Job security is an illusion. Accountants become farmers or bloggers on the side; plumbers become landlords; police officers offer fitness training on the weekend. Today we live in the world of slash careers.
Empowerment comes from educating ourselves in multiple disciplines. The accountant/blogger brings experience from the slash career back to her office providing clients with a better understanding of their personal tax and accounting needs.
So what is a slash? A slash is a professional person with mixed identity. Therefore, the professional can be an accountant slash blogger. People cannot settle on a single career path as safety nets disappear. Families cannot count on the government as their sole source of survival when things head south. The new paradigm has created mixed professionals with skills and experience crossing professional fields. Sometimes there is a correlation between the professions, but it is not necessary.
Slash careers are a beneficial advancement to society. A lawyer working weekends as an Uber driver learns different ways to interact with people. The unique additional skills are valuable in the court room and in negotiations. Each step of the way the slash professional increases her skill sets in ways never before imagined. By crossing disciplines, individuals bring new understanding and creative growth prospects to their future endeavors.
My personal life has including a lot of slash careers: accountant/landlord/hedge fund manager/farmer/blogger. Each slash gave me more experience in fields outside taxes and accounting. Every slash made me better than my competitors. Imagine this blog without my massive reservoir of experiences to share. Without a good story to illustrate a point the message becomes dull info dump. The smartest woman in the room is not always the most successful. Knowledge, skill, and talent only take you so far. To excel you need to integrate your abilities into a team effort. This is true of employers and employees. It is also true for bloggers. You do understand I receive a lot of help with this blog? If I lacked the ability to communicate great ideas to influential people you would not be reading this.
The slash, or hybrid, career creates enthusiasm for new opportunities. Golfing is great fun until you do it fifteen hours a day every day without a break. Then it turns into drudgery. A game of basketball might improve the golfer’s game due to the break in monotony of doing only one thing, the increased exercise of different muscles, and a new and greater understanding of how the body works in different situations. The golfer/basketball player is better at both professions. Coaching is another complementary slash profession for a golfer.
Once upon a time I was a martial artist. I spend several years perfecting the art. I needed a break from my normal exercise routine. It made all the difference. I lost some weight I wanted gone and discovered a better way to build muscle mass. Today I am proud of my physical improvements. The midsection could use some work, but I will blame that on age. (I see you rolling your eyes.) The benefits did not stop at health. I am an accountant, a tax guy; that is what I tell people when they ask what I do. My martial arts training allowed me to have productive conversations with clients, new and existing, who owned a gym, ran a studio (Zumba, martial arts, yoga, et cetera), or planned on doing so. My martial arts training produced over $400,000 of revenue over the last twenty years for my accounting practice. I had a skill and experience my clients wanted because they knew I understood their business and could help them grow into a successful business.
Slash careers are not always formal. My martial arts class was in no way a profession. Running a hedge fund was. The hedge fund fit nicely with accounting. Accountant/hedge fund manager. See how nice it rolls off the tongue. Accountant/farmer. A bit harder to wrap the mind around that one until a rancher walks in the door. Accountant/landlord is understandable when you consider how many landlords I have as clients. It becomes clear income properties provided much more than rental income for me.
Where Slash Careers Began
The concept of slash careers started as an accident of our evolving society. An article by Kate Hamill introduced me to the idea and codified it for me. I realized a significant percentage of the workforce engages in some form of slash career. Clients rarely have only one income anymore. More common on a tax return is several W-2s mixed with a small side business and a rental property.
Changing careers is no longer taboo, either. Once upon a time you were expected to get a job out of high school or college and stick with it until retirement age. It was the era of the company man. The company man died for a good reason. Good riddance, too. The company man was never as valuable as he was rumored to be. Varied skills and experience are what is needed to run a profitable company today.
Even retirement is a slash experience. Gone are the days when you reached a certain age and were put out to pasture where you sat on the couch waiting for a visit from the grim reaper, your usefulness expired. Retirement is now an enriching growth experience of travel, volunteering, socializing, and sharing with younger people.
Slash is good for all involved. Slash allows us to reach our potential and feel useful and productive from day-one-to-day-end. Formalized work is frequently missing from the routine. The unstructured form of productivity is better for the soul and mind. You can explore ideas like never before, even when it is totally unrelated to your prime line of employment or retirement.
Too many people feel embarrassed when they mumble their extra professional careers. Stop it! Retirement is also different. We don’t really stop for retirement anymore; we switch gears and grow. And why not? Who wants to be put out to pasture waiting for the reaper? Exactly! When you grasp the slash culture you start to realize you get to do many of the things you want to do. It kind of turns your whole life into a retirement lifestyle. I don’t know about you, but I like that thought.
The world looks different from my side of the desk. Three decades working with clients dreaming of retirement and the good life has revealed things you can’t fully understand unless you see it with your own eyes. We hear crazy talk like 70 is the new 50, indicating people at age 70 are as active as people once were at 50. Bullshit! I would be happy as hell if I could pry some people’s asses off the couch for more than a trip to the fridge at age 20. The noises they make is a tell; they are ready for the nursing home by 30. But I digress.
There is good news, however. Twenty is the new 50. It goes like this: the same people return to my office year after year as broke as they were in prior years. This goes on for decades. Then one day they hit 50 and realize, “Holy shit! I only have 15 years until retirement.” Spending slows and investing increases. Now they are open to the Wealthy Accountant’s advice. Fifteen years later my happy client reaches retirement with a nice nest egg. Now image how soon they could have retired if they had their “Holy shit!” moment a bit earlier in life.
The New Age Paradigm
Make no mistake; the pattern is still firmly in place. Convincing a client to slow spending and max out retirement accounts is an uphill battle. The excuses have remained consistent over the years: I earned a Hummer, SUV, 4-wheeler, boat, and on ad nauseam; I deserve a vacation; I work hard so I deserve an over-sized home; after a long week of work I need to party all weekend to unwind. Giving up bowling would be a cold day in hell until age 50 arrives.
However, I see more light at the end of the tunnel than ever before. I started saving in high school because I was greedy and wanted to be rich. Later, when I discovered I crossed the seven figure mark without noticing around age 32 I knew money was no longer the goal, only a tool. The goal in high school was to sock enough money away so I never had to work. It made sense back then. I grew up on a farm and milked cows every morning at 4 a.m., went to school, came home and milked cows for another four hours. I hated the work, I hated farming, and I hated the long hours. I wanted a life.
Only when the farm was gone and I was away from it for a few years did I realize how much I loved the farming lifestyle. I made almost nothing working all those hours in high school, but I saved every dime. Back then banks paid 10% interest. Even savings accounts paid 6-7%. In 1979 I discovered the stock market. I was only a sophomore in high school, but I understood the value of business ownership. Interest rates were high back then. I understood interest rates could change, as in “go down”. Dividends change too. They sometimes go down, but the market as a whole sees dividends chug higher almost every year. I was not allowed to invest my money until I reached 18; all I had was bank deposits.
I was ready on my 18th birthday. All my money was moved from the bank to the MFS MIT fund. The sales guy said it was the oldest mutual fund in existence. I liked that. He also said the fund still held the original shares of GE purchased in 1924. I was impressed. The Dow Jones was around 800 at the time. Then I experienced the luck only youth can bring. The stock market began its 5-year mega-run in August. By 1987 the broad U.S. stock market had rallied over 300%. The bank deposits would never have competed.
Better To Be Lucky Than Good
Working on the farm only paid $50 a month. I saved every penny and earned a great interest rate at the bank compared to today, but a 300% return on a small amount brings me only part-way to retirement. I was 23 and full of anxiety. I discovered the ever beautiful Mrs. Accountant and wanted to settle down. It seems like I have always been in the right place at the right time my whole life. Sometimes I think if I ever fell into a vat of shit I would come out smelling like roses.
There is no doubt I was born at the right time. I reached the age of maturity when stocks were primed to rock ’n roll. So, with all the market timing luck of being born at the right time, how have my classmates done financially? Not good. Of course, they had fancy cars, clothes, expensive weddings (yes, plural; they also had expensive divorces), exotic vacation, and enjoyed the best restaurants.
Kids today do not have it so good. Back then the S&P 500 had a PE ratio under 10 and a dividend yield of 6-7%. (I am running off memory so feel free to fact check me in the comments.) Today, as I write, the PE ratio of the S&P is a tad over 25 with a dividend yield of 2.02%. I doubt we have a 300% bull market starting here and running for five years. No such timing luck for 18 year olds today.
There is a difference though. Those damn kids today think they are 50! Not all, mind you, but enough for me to notice. For some reason there is a growing group of 20 year olds who act like they just turned 50 and had a “Holy shit!” moment. Think of it. Pete over at Mr. Money Mustache retired at 30. Gwen over at Fiery Millennials is 25 and well on her way to financial independence. I have no doubt she will reach financial independence by age 30. Even Brandon, the Mad Fientist, is retiring later this year. I met the guy twice. Don’t know his age, but he is a young feller. Pretty soon I’ll have no choice but to retire just to keep these young whippersnappers in line, dammit! There goes my promising bridge career in accounting.
20 Will Get You 15
Starting at 20 is so smart. It is refreshing to see more people jumping on the FIRE (financial independence, retire early) lifestyle. Some people retire as soon as they can. Others, like me, tried backing away from our businesses and found we prefer our business lifestyle. To each their own. All I can say is the FIRE people have me thinking like never before. After all these years I have a lot of people around the country, around the globe, I could visit. If I would not miss the clients so friggin much I would go all-in.
Many moons ago there was a commercial (yes, I have allergic reactions to commercials) by a financial services firm. The commercial showed an archeological dig with several college kids working the site and complaining about the hard work. An older guy, about 35 was also working the site. One of the college kids said he could not wait to retire so he could leave all the hard work behind. He then turned to the 35 year old and said arrogantly, “When you get to retire?” Which the older guy replied, “I already did.” That shut the kid up. Think about it and you will get the message. Like I said, to each their own. Real retirement allows you the ability to choose your daily course.
The great thing about starting early and getting the retirement issue out of the way early is that it allows you to explore avenues unavailable any other way. You can bitch like the college kid or you can retire to the very same archeological site to explore a world never seen before. Once you no longer have to do something is when you discover if you really liked it or not. I hated milking cows with a passion when I was in high school; never went back to milking as an adult. I did love animals so I spent 20 years of my life raising steers. The work is hard and my body has scars to show the bad days. I would not change it for anything. I miss my boys (the steers), but that part of my life is over now. I toy with going back, but I know deep down I never will. Sometimes when I am on the road travelling and I see a herd of bovines a tear comes to my eyes. The memories are fond ones.
Choices, Or Just Really Important Decisions
Successful people know winners decide to win. I ran a profitable farm because I decided to do it and then worked my tail off making it happen. The same is true for my tax office, hedge funds, rentals, and other minor businesses I ran over the years.
My current itch is writing. I always thought writing would be a ticket out of the poverty of farming. Little did I know writing is the only job that pays worse than farming! I only jest a bit. I have written a lot of material over the years. I assume I have found my voice. I hope it sounds better than fingernails on a chalkboard. (You young whippersnappers can Google it.) The writing projects I have in mind are varied. This blog is one of those dreams. There are certain goals to reach for me to feel content. I may never check it off my bucket list. I love putting words on paper (if you young bucks can’t handle my terminology you can leave the room). I enjoy telling stories. I have a few more novels in me. I’m not sure I want to put my real name on them, however.
If a farm boy like me pulling teats eight hours a day can decide with absolute conviction, so can you. With no money—it was all tied up in mutual funds—I still managed to invest almost all my earnings. I bought a home and a car when I left home at 22. The choice was simple and still is. You can start right now, today, investing the bulk of your earnings, or, you can wait until your 50th birthday and walk into my office and say, “Holy shit!” Either way, it takes about fifteen years.
You did everything right. You found a job you enjoyed, saved half your income, maxed out your retirement plans, and built a nice nest egg. You are well on your way to financial independence. Then the inevitable happens. The economy slows or the boss retires or the company downsizes and you are unemployed. The nest egg you built is now providing a cushion to live, but you are no longer running towards financial independence. Your day of early retirement is slowly slipping into the future.
The great news is that you are better off than over 95% of the people. Most people suffer severe financial hardship when life throws a curve. Today I will show you how to reduce the chances of unemployment and stay firmly on the path to financial independence and early retirement.
Life Hack: Employees
At a recent company meeting I decided to ask a few questions. If you want answers you first need to ask questions. I wanted to know if my employees, my team, understood why I hired them. If they could understand my reasons for bringing them into the fold they would be in a better position to help clients understand the same.
Does anyone here know why I hired any of you? I asked. The question was simple. My team looked back and forth to each other wondering where I was going with this. Then a litany of answers came. “To get work done.” “To make clients happy.” I shook my head with each answer. My office manager finally hit on one of the correct answers when she said, “To make you money.”
I nodded. I explained there are really only two reasons any employer hires you. They think you will:
- Make them money, and
- Make their life easier.
If you don’t satisfy one or both of the above answers your days are numbered. Fulfill both requirements and you are set for life; fulfill one and you might be okay.
All the other answers are correct in a manner of speaking, but it all boils down to producing a profit and reducing the problems the boss has. If you fail at either of these answers it will only be a matter of time before you are replaced by someone who can fill the employer’s needs.
You can also reverse the question. Why do you work for your employer? Is it to make you money? How about making your life easier? Hmm. The goals are similar. Your job may not make your life easier now, but all that saving and investing will certainly be nice really soon so in the end your job is about making money and making your life easier at some point, too.
Now take the next step. If you don’t get paid when payday comes around how long you sticking around? What if your boss makes life at work a living hell? Just like the employer, if the dollars stop flowing or work becomes unbearable drama somebody has to go.
I know what some of you are thinking. You did all the right things. You made your employer money and made the boss’s life easier and he still let you go. Unemployment will be a very short-term situation for you regardless the economic environment when you possess the skills listed above. Imagine an individual who makes her employer money and simplifies her boss’s life in the job market. How many job interviews will you need to attend if you say, “Ms. Employer, I know my job is to make your life a bit less hectic and make this company money. Here is how I can do that for you.” Yeah. Your early retirement fund will be rocketing to the moon in zero time. Good employees are needed in all phases of the business cycle.
You work hard saving and investing. Don’t piss it away because of a short-term setback. Losing a job should not be a crisis; it should be an opportunity. Now you have a life hack to stay on course to a life of financial stability.
Life Hack: Business Owners
Business owners and landlords also want the secret to financial security. Similar questions need to be asked. Why do your clients come to you? Each business has different answers. Clients/customers need a problem solved. You hire a plumber to fix a sink. There are plenty of plumbers out there. Do you choose the cheapest? Maybe. But not always. The reason you get the order is because the customer thinks you will get the job done best for the lowest price. The customer does not want to over spend. She also does not want to repeat the project in two weeks either. It is another form of save me money and eliminate the stressful situation (make my life easier).
Most people are looking for value over cheap. Quality is important; so is a reasonable price compared to the quality offered. Even the frugal groups of people who frequent this blog are willing to spend money if they perceive value. If your goods and services save the client money and solve a problem in their life you make a sale.
Landlords also need to ask the questions, too. What do prospective tenants want? A clean, safe place to live at a reasonable rent rate maybe?
Life Hack: Personal Life
Once you ask the questions, you start getting answers. I have been accused of having a marriage too good to be true. People miss the whole story I am telling. The first three years of my marriage were tough. I was too young and too stupid to understand why I was so unhappy. Only through a stroke of dumb luck did I start asking myself questions. It was not intentional! I got lucky. I sat down and started thinking through the problems. This was something I had to do alone. I asked: Is this really what I want? Instantly I knew I wanted to spend my life with Mrs. Accountant. There was never any doubt. Remember, I lived alone for a few years before Mrs. Accountant and I met. I had to let go and accept my world would not be constant silent solitude anymore; I had a roommate. My world would have people in it: a wife and later children. It sounds petty to my ears now, but it caused me angst twenty-five years ago. The important thing I did was ask myself questions alone and sat until I answered them
A new crisis has entered my life. Over the last few years a new group of people entered my life who feel early retirement is a worthy goal. It is, just not for me. I understand the goal, talk about it here, and have no problem with people who do retire early. I subscribe more to the Zig Ziglar’s thought on retirement, “I thought about retirement once and decided against it.” Both courses through life are correct if it is correct for you. I have been asking serious questions I never asked myself before. I discovered why I have a farm. (The family farm went bankrupt the year I turned eighteen and I needed to prove farming could be done profitably.) That itch is now scratched. I no longer have steers, only chickens. Our nineteen gardens are down to seven this year. Questions allowed me to add balance to life.
The biggest question of all still remains: Do I retire? I have to ask often because I still don’t have an adequate answer. Therein lays another truth in life. Answers don’t always magically appear when the question is asked. Sometimes the question needs rephrasing and repeating to get the right answer. It also takes time. Your mind cannot start working on the problem until you first ask the question so now is a good time to ask the guy looking back from the mirror.
So, do I retire? I don’t think so. Not now at least. I love what I do so it would be crazy to walk away from my bliss just to prove I can. But I also know at some point I have to begin a transition to preserve the company. My talents and skills will be challenged as age takes its toll. It is also selfish to keep it all to myself. My team is capable of handling everything I can. I would miss my life’s work if I retired. So far my answers have been to keep going for now. It is an evolving answer. Such is true of so many things in life.
Life Hack: You
How many questions have you asked today? For me, I start each day with quiet meditation asking questions. By reflecting on the issues in my life I can develop answers to guide my day. The questions for getting and keeping a job are the same for all of us. The questions to a happy relationship are probably a bit different.
Questions need to be phrased in the positive to help. Why does my wife/husband never listen to me? is a terrible question. What can I do to help my wife/husband understand my feelings? is a much better question. Take time to think about the question as you ask. Open your mind to rephrasing the question so you can get a better answer. What if you really want to keep your job? Asking multiple questions can help you digest the possibilities. Sometimes the job is gone no matter what you do. By asking questions you prepare your mind for the next step. You avoid the deer in the headlights look when you ask quality questions and take the time to hear the answers. Ask questions until you get the answers you want. It will make your life easier.
Everything I am I owe to the world and people around me. Motivation and inspiration are the necessary ingredients to build the person you want to be. Reading good books every day is a must; listening to awesome people share their story is a must; learning every day is a must. Today I want to share part of my personal life. From a young age I started listening to Zig Ziglar; I have a picture on my wall at the office with Zig and I shaking hands. It was a highlight of my young life. Later I immersed myself in Tony Robbins. The internet, especially YouTube, allowed me to listen to massive numbers of happy, successful, achievers on a regular basis. Today I will share some of those videos I start and end my day with.
This blog owes its existence to Pete, the blogger at Mr. Money Mustache. My writing has been prolific for decades, but this is a blog with a far more consistent and serious undertone than what I have written before. My novels and short stories tend to be very dark. I mean, so dark you want to get a rope when you are done reading the story. I am not my fiction writing which is why I rarely share who I am as a fiction writer. In my personal life I am very optimistic and positive.
When I started reading Pete’s work I could not help thinking ‘I want to be like him.’ We are all like that. We want to be with and like the people we admire. Pete is a laid back, intelligent, funny guy. He is dedicated to family and friends. My opinion is that he likes working on his blog, but loves meeting with his readers as often as possible. He loves what he does!
Then I had a business plan to offer Pete! It turned out different than what I expected. It was better! I knew people would want me to write a blog to share stories and ideas, so here I am. I soon discovered I really did not want to be like Pete. I wanted to be like me! Only now, ‘me’ was going to write a serious blog on taxes, personal finance, and lifestyle. Good thing there is no competition in those fields.
My point is for you to learn to find who you want to be and then be that person. Pete is a great guy! Over the years several people wanted to be like me. They want to emulate my business style or skills. They want to have the money I have. They think business is all fun and games. It isn’t! Business is a lot of hard work, but I love it; love it all the way to my bones. I wake every morning excited to get to work. The days off are hardest for me.
This blog felt the breath of life from a blog focused on early retirement. I have tried. I really have. Retirement is not in my vocabulary. My world may change, the work I do may differ, but in the end I will work to the day I die. It is what I love. I can, and will, share with you how to achieve early retirement and financial independence. I will also encourage you to follow your bliss.
Of all the people you ever meet I am the least likely to have ever succeeded. I came from a poor family in a rural community. Hard work, dedication, and perseverance are what pulled me from the bottom and gave me wealth at a relatively young age. Once the light started to shine I was kicked down hard. Most people would have quit. I did not understand what this quitting thing was. Someday I’ll share the full story. It is a bit long, but worth the time. If someone like me can rise from the ground and climb against all odds, what is your excuse?
Today I share one small piece of what I do daily. The videos I included here are some of my favorites. I surround myself with the messages I want to incorporate into my soul. My fierce loyalty to family, friends, employees, and clients comes from this training. I am equally fierce in protecting these important people in my life when they are betrayed.
Success is possible for anyone when the right message is instilled. I encourage you to view the videos here on a regular basis. They will inspire you to be who you want to be. No more dreaming of being someone else, be the person other dream to be like.
Here is a must see video of Bill Gates and Steve Jobs sharing the secrets of success.
Hope you enjoyed.
Grandpa told us stories of how they increased fuel economy during World War II rationing years. The technology has advanced over the years, but the goal is the same: increase the miles traveled on a gallon of gas. Today we call this behavior: hypermiling. Rationing is no longer the motivation. Saving money and reducing our personal impact on the planet are the two main drivers (pun intended) behind hypermiling today. I will share the best methods I use to achieve 46 miles per gallon in a 2007 Toyota Camry. If you are willing to work the technology harder your results will probably be even better.
The Toyota Camry is estimated to get 24 mpg city and 34 mpg highway. Moving the fuel efficiency from 24/34 to 46 mpg blended requires a few modifications to your driving and proper maintenance of your vehicle. Remember, hypermiling is a lot of fun, especially if you are competitive. Beating your best performance is addictive. Incremental progress is normal. Colder weather hurts performance as does winter gasoline blends in the northern U.S. Hot summer days without a breeze can really send your fuel efficiency through the roof. Awesome!
There are few things you need to do before you get behind the wheel.
- Make sure your tires are inflated to manufacturer’s specifications. Over inflating tires can improve your mileage rate by a very small amount. I tried it and found no difference in my tests.
- Change oil per manufacturer’s service guide. My Camry needs an oil change every 5000 miles. I change my own oil and use the lightest recommended oil, 0W-20 in my case.
- Older cars may need a tune up or spark plugs.
- Check the air filter for replacement.
- Next time you replace tires get a tire with the lowest rolling resistance. I made a mistake once and bought a cheaper tire. I lost the money several times over in added fuel costs. A small investment in a quality tire pays for itself. In my case I lost over 4 miles per gallon in performance with a cheaper, higher rolling resistance tire.
- Check tire alignment. Tires out of alignment create drag, harming fuel efficiency. Think of it as plowing versus coasting.
- Remove all unnecessary weight. Get rid of the junk for a free boost in fuel economy.
There are two ways to measure performance. The first method is simple and free, but limited on real-time feedback. Under this method you fill your fuel tank and record your odometer. The next time you fill the tank be sure to fill all the way. Divide the number of miles travelled by the number of gallons consumed.
Example: You drove 487 miles since the last fill-up and needed 10.45 gallons to fill the tank. Your miles per gallon are calculated by dividing 487 miles by 10.45 gallons. Our last tank of gas was 46.6 mpg. Not bad.
The problem with the first method is you don’t get instant feedback on performance. Colder or windier weather can affect numbers. Relatively inexpensive devices offer real-time vehicle performance. I use a ScanGauge in my car. The ScanGauge and similar devices are simple plug and play. You plug the ScanGauge into the diagnostic port located under the steering column in most cars and trucks. When the vehicle is running ScanGauge will provide real-time fuel economy. All the testing I mention here was done with a ScanGauge.
Driving for Maximum Fuel Economy
- Drive the speed limit. Speed kills fuel economy.
- Accelerate to your desired speed moderately. Accelerating too slow is as bad as too fast. Avoid the jack-rabbit starts, but don’t take all day to get up to speed. The ScanGauge can help you determine your vehicles best acceleration pace. It might help to imagine accelerating with an egg on the gas pedal. Push hard enough, but not so hard as to break the egg.
- Coast into stops whenever possible.
- Time traffic lights so you don’t have to come to a complete stop.
- Coast in neutral, especially with older vehicles to prevent engine drag. Avoid this strategy in hybrid cars.
- Driving without brakes. Braking is throwing gas away. Whenever safe, avoid using the brake. Watch traffic so you do not require braking or at least reduce the amount needed.
- Coast/decelerate up hills as much as possible; accelerate down hills.
- Keep a steady speed, if possible.
- Avoid idling. Idling gets zero miles to the gallon.
- Pulse and glide is an awesome technique in a hybrid car, but also can improve fuel economy in non-hybrid vehicles, too. I spend over half my driving time coasting. Pulse and glide is done by accelerating up to speed and coasting until your speed declines to a level where you accelerate again.
- Drive like you bike. Notice where you increase speed and coast when you bike. Use the same method when you drive since you bike more efficiently due to feeling your energy use.
- Turn off the AC. I know what other sites say about air conditioning compared to an open window. I’ve tested this extensively and I cannot find a way to run the AC over an open window and win. I am lucky living in Wisconsin where it never gets very hot. You may need to pass on this one if you live in the bowels of hell in the summer.
- Don’t drive. Miles never driven take no gas at all. Go figure! Bike all trips under 5 miles. Plan the shortest route to reduce miles driven.
There are several additional ideas to improve fuel economy floating around. Here are a few ideas I refuse to use or even try.
- Ridge riding is where you hug the side of the road so your tires are outside the normal grove of road traffic. During rain it might be an okay idea. Outside weather situations, ridge riding is a waste of time.
- Drafting is where you follow larger vehicles close so they reduce your air drag. This is just plain stupid. I want to save a few dollars, not get killed.
- Some have suggested turning off the vehicle while you are moving. By coasting with the car off you have no idling waste. I tried this for a short while and determined it is not worth the effort. Sure it saves some gas, but it is a stupid idea and risky due to loss of many vehicle functions.
The goal is to reduce gasoline consumption. I find hypermiling fun. That said safety is the primary concern. Driving too slow for traffic can cause an accident. Don’t be a dick in the name of thirty cents in gas savings. Coasting is not always possible, so only do it when it is. Watch your ScanGauge; also keep your eyes on the road. Focus on your driving and you will have fun and better fuel economy.