Nick H recently emailed me a question about how much money he should invest in tax-advantaged accounts before adding to non-qualified accounts. Due to the large number of emails I receive I am unable to provide individualized tax advice unless you are a client. Nick’s question had a familiar ring. Several times per week I get a variation of the same question. Rather than ignore the request, I decided to put it into a post so all readers can benefit from my suggestions.
Here is Nick’s complete email:
Dear Wealth Accountant,
I have been a reader of yours for a few months now, and enjoy it very much. I was introduced to your site via a MMM post.
I have a question for you regarding investing in tax-advantaged accounts vs. normal accounts. Standard advice is that I should max out tax advantaged accounts before saving in normal accounts. However, with financial independence/early retirement in mind, if I do not make enough to max out tax advantaged accounts and save enough in a normal account for early retirement, I think that it makes more sense to put just enough into a 401k to get my match, then save everything else I can in a normal investment account.
I reach this conclusion because the goal of early retirement is to build up an income stream, unlike standard retirement in which you just achieve the largest possible pile of cash. Since there are significant limitations on access to the funds in taxed advantaged accounts, this seems like an inefficient method of saving. Again, assuming that I have to choose between the two.
PS. I also posed this question to MMM. I am very curious to get both of your perspectives on it. Thanks & hope to hear from you!
Nick makes a narrow assumption of either/or. He indicates he either has to max out his retirement accounts before funding non-qualified accounts or he will not have an income stream to fund his early retirement.
Nick also turns the tables on the standard advice by saying standard advice says to max out retirement accounts. I guess it depends on whose standard advice we are looking at. Most standard advice is geared toward generating larger fees for the investment house. Standard advice says you should save 10% of your income. It makes me nauseous thinking about it.
Filling the Kettle
From the email it seems to me Nick wants me to justify his conclusions. I cannot. Investing in a work 401(k) up to the matching level only because it is hard to get the money out in early retirement is narrow thinking.
My opinion, and the opinion of most bloggers in the FIRE (financial independence, retire early) community, teaches you should invest as much as possible in tax-advantaged accounts before filling non-qualified accounts. My standard advice is to save half your gross income. Money invested in your 401(k) is tax deferred. Each dollar invested in a qualified account that is deductible reduces your taxes making it easier to save more.
If you are saving 50% of your gross income the 401(k) will not be your only saving/investing vehicle. You will probably use a Roth IRA in combination with your 401(k). The beauty of a Roth IRA is you can take your basis out at any age without affecting your taxes.
Early retirement requires distribution planning. Once you retire you will probably transfer your 401(k)/457 plan/403(b) or other retirement plan from work to a traditional IRA where you can take distributions under Section 72(t) or 72(q) if you have an annuity. There is a wide range of options available when beginning distributions from an IRA. The biggest issue involves how long you MUST keep taking distributions if you retire early. The rule is simple: once you start distributions under 72(t) you must continue until age 59 ½ or five years, whichever is longer. The distribution amount is generally fixed, but can go up in certain instances for inflation.
Distributions are calculated by one of three methods: Minimum Distributions Method, Amortization Method, or Annuitization Method. So we can stay focused on the topic at hand—how much should go into a retirement account before other accounts—we will avoid a lengthy discussion on the different methods. Each method does yield a different result. For example: a 40 year old with $750,000 in his IRA can take an annual distribution of $17,202 to as high as $27,729 assuming her spouse is the beneficiary, also 40 years old, with a hypothetical before-tax return on the investment of 6% and a distribution interest rate of 2.36%.
The $27,729 distribution brings us very close to the 4% rule rate of $30,000. But if you have been saving half your gross income, the 401(k) was not the only act in town. You should have some Roth IRA investments too. Maybe your income was too high so you used a backdoor Roth or made nondeductible traditional IRA contributions. A small side hustle would be more than enough with the 72(t) distribution to cover living expenses.
Even if 90% of your liquid investments were inside qualified accounts, you would still have non-qualified monies to meet additional expenses not covered by the 72(t) distribution. The higher distribution amount, $27,729, uses the amortization method of calculating the distribution amount. Under this method the distribution must remain unchanged. As time goes on the amount will be reduced by inflation. However, any Roth investments and non-qualified accounts can handle the small increase needed each year. And, since you will not retire with a remote in one hand and a beer in the other, you will certainly bring in token amounts of income just doing stuff you enjoy doing.
Problems with Regular Accounts
Non-qualified accounts have their own set of issues. If we follow Nick’s suggestion we will have a growing problem which will delay retirement. Money inside a retirement account grows tax deferred or even tax free. Index funds (the only thing we recommend around here) in a regular account will throw off ever increasing amounts of dividends and capital gains. Index funds generally are tax efficient, but as dividends grow each year, you will have a larger and larger tax burden to fund. Money paid in taxes reduces the funds available to invest, decreasing the size of your portfolio, hence, delaying early retirement plans.
Another issue with non-qualified accounts is that you will need a larger portfolio in retirement. Remember, once you retire, the index fund distributions are taxable whether you take them out or reinvest. Depending on your financial situation, this could increase your annual cash needs to fund retirement. If the dividend and capital gains distributions remain below your spending level the tax issue is moot. However, if you reinvest some of the index fund distribution you will have a higher tax bill than necessary, requiring more money to manage your annual financial needs.
Tax Loss Harvesting
There are ways to mitigate some of the tax issues surrounding investments with non qualified monies. Tax loss harvesting with programs from companies like Betterment should reduce taxes modestly early on. I like the idea of tax loss harvesting, but it is an imperfect solution to a problem. I recommend Betterment often enough and I am not an affiliate either.
GoCurryCracker! has a great article on why Betterment is not always the right answer. The maximum loss allowed after all other capital gains have been reduced is $3,000 per year. Yes, this deduction is against ordinary income and comes off your highest tax rate. Yes, when you later have a long-term capital gain it is taxed at LTCG rates which are lower.
There are serious considerations when using Betterment, as the GoCurryCracker! article makes clear. As much as I recommend tax loss harvesting, I also recommend tax gain harvesting! When your income is low it pays to realize LTCGs and pay the tax to get a higher basis. Many times your tax is zero on the gain when you plan accordingly!
The more money you have in regular accounts, the harder it is to manage the tax issues. Several million in non-qualified accounts will throw off significant amounts of taxable dividends and capital gains. Inside a qualified account you can keep deferring the money without tax consequences for a long time.
Roth IRAs have a delayed required distribution rules.* Traditional IRAs require a distribution once you reach 70 ½.
I have a list of the order you should invest your money. It starts with paying off debt and moves to investing in various accounts and assets. Your circumstances may require you to deviate slightly from my outline.
- Retirement plan at work up to the matching level.
- Debt reduction.
- High interest loans first
- Credit cards, payday loans
- Car loan
- Student loans
- Only pay required mortgage payment
- Non-qualified account for emergency needs (roof, car issues, medical, et cetera). Two months living expenses
- Health Savings Account (I might want to fill this first due to the significant tax advantages.)
- Max out retirement plan at work.
- Max out Roth IRA and any other qualified accounts outside work plan.
- Any additional fund go half to paying down mortgage faster and half to non-qualified accounts invested in index funds. Emergency fund no longer needed as you have ample funds to handle any emergency.
- Alternative investments
- Investment properties
- Residential rental real estate
- Commercial real estate
- Lending Club
- Other alternative investments.
- Investment properties
The above list is similar to the way I handle my investment order. Since my only debt is my farm and the interest rate is under 2 ½%, I am in no rush to pay the mortgage off. I max out all retirement plans and the HSA before investing in non-qualified accounts. In reality, I invest in my non-qualified each month automatically. I do know all other qualified accounts will be fully funded.
I am not a big fan of emergency funds, but if you are starting out they can provide a buffer against financial setbacks. Alternative investments like Lending Club are passive is nature. Real estate is called passive for tax purposes, but requires more involvement in the investment than most other passive sources of income, even if you have a property manager.
And stay away from the crazy stuff. You can’t time the market any better than any other human to have ever lived. No day trading! Avoid commodities (unless you are hedging for your business or farm) and currencies. This includes Bitcoin.
I know, I know! Your uncle Fred made a killing in soybean futures and Bitcoin and you want in on some of that easy money. But remember, your uncle Fred is 78 and still can’t retire. Tells you something.
* Roth IRAs can delay required distributions for a long time. Under current law Roth IRAs do not require distribution until the death of the owner.
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.
For the last eight years I have had a small number of clients who would come in with only one mission on their mind: obstructing Obama. I found this to be shallow at best. These same people generally were broke, too. Their happiness was predicated upon who occupied a white building on the east coast. Insane!
The refrain has now changed. People either yell or scream, ‘Yeah, Trump!” or seethe in anger at the news they are reading, saying, “Somebody ought to kick that idiot in the ass!” If you are in either camp you are consuming news wrong, and, dare I say, might be consuming biased opinion rather than news.
News is meant to inform, not illicit strong opinion or emotion. For Americans, how do you feel when you read about George Washington and the winter at Valley Forge? You might think about the men suffering in the elements; you might think they were brave; you might ponder on the skills Washington had keeping his men together through the difficult time so they could fight another day. The emotions might be there, but they are different. What Washington did had a greater impact on the future than what most of the stuff today’s politicians are doing. The political biases mean absolutely nothing. They are not facts; only opinions. And you know what they say about opinions. Right? Today’s news should illicit no more emotion or anger than a reading of Washington at Valley Forge.
News is important. However, we consume too much news. Most of what the 7 billion plus people on the planet do in a day is not worth noting. Twenty-four news has no choice but to devolve into opinion sludge. There is NOT 24 hours of news to report each day. People are not that interesting. It’s like watching paint dry.
There are important pieces of news we should consider. Weather, especially when it is extreme, is important to know about. School might be closed and parents need to know before venturing out into the elements. Health news is important. We need to know if a bug is going around and how to prevent it. Some news is informative and fun. For example, I enjoy reading about a NASA spacecraft reaching a new world or other destination.
Even political news can inform. I could care less about anyone’s politics, but I am interested in tax law changes and how the changes will affect my clients and me. Business news is important for a reason you might not think of. Business news means nothing when it comes to investing. I use index funds and then focus my time on things I have control over, like my business (which they never report on for some strange reason). I glean the business news in search of information on how to run a successful business. Since I have a business I want to know how I can improve my results. Pieces on where a certain stock or the stock market in general is going do not interest me. It is only opinion.
Not all useful news (I guess that would make it old news) is current. If it is new to me it is news. Information from traditional news usually is a waste. Reading news about tax changes is important; it is more important to study the tax code currently in effect.
Weekly news journals, like The Economist, provide plenty of information in a timely enough manner for our needs. The exception might be weather reports, depending on your plans for the day.
Watching television news consistently destroys happiness. You cannot fill your mind with the endless negative messages and remain mentally balanced. It is a form of hypnosis you need to break away from. No one political party is that great and the opposition is not all that bad. The world is not so black and white. The constant message bashing one group over another is the perfect formula to feel depressed all the time.
Books can be news. Reading Adam Smith’s The Wealth of Nations, published in 1776, can provide new understanding of our capitalist economic system. It is old, but it is new to you. The library is filled with great books. You can learn all day for the cost of walking to the library! Unlike newscasts or internet news feeds, books dig deeper into the subject matter. News, by its very design, is a glossing over of the facts. News gives you a quick glimpse while books allow a satisfying deep gulp.
News must inform to be of any value. Opinions have zero value and are why most television news is worthless. If news is presented right it should cause you to want to dig deeper into the subject. Proper news directs you with a few salient facts to get a book that fleshes out the subject matter.
Can you imagine your tax professional getting all his tax knowledge from a newscast? Insane! Your favorite account reads news pieces on tax law changes. Then he reads the tax code, tax journals, attends continuing education tax seminars, and more. If your tax guy doesn’t read tax court rulings you might need a different tax guy. The news only gives us a brief glimpse of a few select facts (if it is not opinion disguised as news) so we can get the whole story later if it has an impact on our life.
Danger, Will Robinson!
The worst part about modern news is the amount of it we consume. Sitting around listening to the same opinions, I mean news, regurgitated is unhealthy. Either the news is important and you take note or it is not and you should move on. Most news is not important. It might be important to someone else; it is not important to you. School closings are only important to the people living in and around the snowstorm.
Watching endless mind control robs you of your individuality. Watched long enough, news will manipulate who you are and what you think. There is no worse kind of death. What you give up to watch and read the same drivel about the President is too much. Love him or hate him, he is the President. I am not so stupid as to believe there will not be problems. What I do know is most things I have absolutely no control over. No amount of digested news will change that.
There are things I do have control over. I can turn off the TV or news feeds. Things that apply to my life get read. If they are really important I might get a book on the subject. Tax issues will encourage me to open the tax code for further review. But then it is time to stop. Time to get off my derrière and do something important.
Health declines when we sit too much. (Look who is talking. I run a business where sitting on the tail all day is part of the culture.) Spending anymore than a token amount of time watching or reading news is too much. Less news and more walking and outdoor activities have multiple benefits. By reducing the amount of mind numbing manipulation you will enjoy better mental health. The extra time outdoors will improve physical health. Time with friends and family brings greater levels of well-being.
News is killing us. Opinion disguised as news is designed to pull us in and keep us glued when nothing of value is being added. We must stop spending so much time consuming things of no value!
It is so easy to get sucked in. Readers of this blog tend to be wealthier. Financial independence also has risks. The extra time afforded us allows us to partake in addictions with fewer consequences—at first. With more time to do what we want, it is important to not get sucked into the afternoon soaps or the opinion dramas of Fox News.
Good books, time with friends, and reading well written blogs are a better use of time. You can reach your financial and other personal goals faster if you spend less time consuming commercial news.
You can also use the extra time to read awesome blogs like this one, where I never interject any opinion, and always stick to the facts.
It’s that time of year again where we need to reconcile the previous year’s income for the government. The task can be daunting, but with armies of tax professionals and online software, many people can tackle their tax return with few issues.
The trick is finding the right tax software when you plan on preparing your own tax return. The most popular online packages are dummied down versions of better tax software programs. The Q&A required by most online programs can become daunting (and time consuming) if you have any tax knowledge at all. The biggest problem is finding tax software that is professional grade that offers just enough help to not be invasive.
I want to introduce you to an online tax program I think is superior to other online software: Drake Software. The banner below is a direct link to the software for individual users. It was featured last year on Mr. Money Mustache. It also happens to be the same tax software I use in my office.
Over 50,000 tax professionals use Drake software to file over 26 million tax returns. My office was one of the earliest adopters of the Drake interface (one of the first 200 if my ID number is any indication).
Back in the late 1980s I sought out a professional software package that was not only robust, but offered economical e-filing. Back in those days it was common for software to charge $35 or more just to e-file. Drake was an industry leader, charging only $1 per e-filed return. My office could offer free e-filing before anyone else due to Drake and their powerful software platform.
Time has only made this software better. Of course, my office still e-files for free, but it is so much more. Drake branched out into other areas of the accounting office. They also offered accounting firms like mine an opportunity to provide an alternative in the DIY tax preparation segment.
What I liked from the start was that Drake incorporated the entire professional grade platform in their online version for people preparing their own return. No other online software offers such a robust program to the general public, in my opinion. They market the program under the 1040.com name.
There are two major advantages to this software in my opinion.
- Drake Software has the familiar Q&A of other online tax software, but is not nearly as burdensome as the other DIY programs. You can bypass most of the Q&A to enter information directly on the tax return, saving time. Plus, when the return is calculated, the software gives you two types of diagnostics. The first addresses issues which must be corrected on the return before filing. The second is a list of reminders and suggestions based on the information you entered on your return. These two powerful tools allow you to prepare your tax return faster and without error. You see what tax professionals see.
- The cost of the 1040 preparation is among the lowest in the industry. Couple that with the professional grade software provided and I feel it is the best value in the market today.
There is one disadvantage you should be aware of. The only way Drake can make it easier for you to prepare your return in less time is to waste less time is mindless Q&A. The Drake platform has to assume you have at least a basic understanding of tax preparation and filing rules. Drake helps a lot with their Q&A, but falls short if you have no understanding of the tax preparation process. In my opinion, you need to hire a tax professional if you can’t use the online Drake program, but if you want to DIY, Drake will make it easy to prepare the return faster.
I think most people understand what a W-2 is and want to plug the numbers in as fast as they can along with their other numbers so they can finish as quickly as possible. Entering data quickly and using the software generated diagnostic pages makes it easy to handle most tax situations with only basic tax knowledge.
It’s easy to brag, “We are cheaper.” Here is the fee structure for Drake.
|1040EZ||Free||($9.95 per State)|
|1040A||$19.95||($14.95 per State)|
|1040||$39.95||($19.95 per State)|
There is no fee until you either print or e-file the return.
Also, Drake offers all the bank products stuff, too. I don’t have that pricing available and never recommend spending money on tax bank products when direct deposit is so fast.
I am biased for a couple of reasons. First, I use the software in my office and like the way it works. Second, I get paid a percentage of the fee you pay to Drake Software. The DIY online tax program is the largest source of income for this blog. It pays the bills, keeps the lights on, and gives me a reason to keep writing. I think it is only fair to let you know up front my relationship with Drake Software. I would not recommend the program if I did not believe in it; I wouldn’t use it in my office either.
If you want to support this blog, be sure to start with the link on this page. If you don’t I will not receive any income. Once you have opened the file there is no problem. You might also want to bookmark this page for future years when you file. For some reason I keep getting hungry every year so I really appreciate return customers.
Now that I got the obligatory promotional piece out of the way I can get back to writing stuff I prefer writing. I have quite a few ideas in the queue. I also received an email a few days ago with a question I think many people have on their mind. It will probably be a long post, but necessary with all the information I need to provide. Fingers crossed I can get it done over the upcoming weekend. So no one hurts themselves wondering what this grand topic is, I will whet your appetite.
Nick H asked my opinion on tax-advantaged accounts versus regular accounts (non-qualified or non-tax-advantaged accounts.) Specifically, he wanted to know if it is always a good idea to max out tax advantaged accounts before investing in regular accounts. You would think the answer is simple, but it isn’t. The answer changes depending on your situation. The answer also requires digging into tax loss harvesting issues—Betterment, for example. Sometimes you want to tax loss harvest; sometimes you want to increase your basis instead. I am so excited I am salivating just thinking about writing that darn post. There are so many powerful ideas I want to share that I know you will find valuable—and profitable—in your journey to financial independence and beyond.
Thank you for supporting this blog and my work. It is appreciated more than you can imagine.
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.”
Then I finished the consultation with her. It was late so I went to bed after the consultation. I had been working since 6 a.m. and it was now after 11 at night.
The Ruckus I Caused
At Camp Mustache the attendees stay up late socializing. My fatigue caused me to pass on one night of discussion and I missed a good one. The next morning people started asking if I heard about the heated debate the previous night. I hadn’t. It also shocked me since this group tends to be low key. Then I was told the debate was on prenuptial agreements. I knew what had happened. What you tell me in a consultation is confidential; what I tell you is not.
The young lady took her new found knowledge and started the debate with the group. The debate was not as heated as I was first led to believe, but there was plenty of disagreement. In the end they all greed I was right. As if there was any doubt.
Why You Need a Prenup
Before you tie the knot you must have a prenuptial agreement. Readers of this blog have more money than average because they save and invest a majority of their income. Gold diggers are everywhere waiting to dig their paws into your stash. What takes you a decade or longer to accumulate can be squandered in a few month or at most a few years.
Men understand women are willing to marry them for money, regardless of love or attractiveness. Judas sold his soul for 30 pieces of silver; gold diggers will unload your index fund for a hell of a lot more.
Women frequently think men are like them and so they want love in a marriage. It never dawns on the ladies a man might play them solely for money. Men might need reminding about gold diggers, but get it as soon as it is mentioned. Women need to be sold on the prenup because too often they believe men are not gold diggers. Wrong! Women need a prenup as much as men.
Gold diggers are everywhere. If I could legally let you stand behind me as I work with clients you would be shocked at how people act. A surviving spouse has plenty of opportunities when money is involved. It breaks my heart to see a man or woman lose their spouse, only to have gold diggers show up at their weakest moment and take advantage of them. If only they listened to their favorite accountant more in their weakest hour it would eliminate this additional pain.
Gold diggers work in one of two ways: they marry and then divorce as soon as they can to get half the money; or, they marry and start spending their newfound wealth while married. Most gold diggers use both methods with great skill. Before long the money is gone and so is the marriage.
Who Will Marry Me if I Demand a Prenup?
When I bring up prenuptial agreements with clients I get the same question every time: What if my fiancé refuses to sign the prenup?
People are afraid to talk about a prenup with a loved one. They are afraid it will end the relationship. The truth is if there is real love they will understand why the prenuptial agreement is necessary. The only reason to refuse to sign a prenuptial agreement is because of sinister plans. If you never divorce the prenup never comes into play!
Regardless, the subject is still a touchy one. Your fiancé may feel the prenup means you do not trust or completely love him. The best way to bring up the subject is to talk about money honestly. During the money talk is the perfect time to discuss a prenuptial agreement. Instead of forcing it upon the person you love most, it become part of a serious discussion about your life together. A prenup not only protects you, it protects them.
What is in a Prenup?
Confusion surrounds prenuptial agreements because their content varies widely and the rules are different in each country and even among states in the U.S. Prenuptial agreements generally contain provisions for division of property and spousal support in the event of divorce. The more assets you bring into a marriage the more important the prenup becomes.
The prenuptial agreement can also contain provisions for handling a divorce in the event of infidelity.
The laws surrounding prenuptial agreements are complex and an attorney is required by both parties. In the U.S. the prenup is sometimes difficult to enforce if certain rules are not followed and might not be the final word in a divorce. Full disclosure is required of both parties and coercion nullifies a prenup. You can’t spring the prenup on your fiancé as he walks down the aisle. Well, you can, but the courts would probably rule the agreement wasn’t entered into voluntarily, nullifying the agreement.
One notable item prenups can’t address is children. The best interest of the children must be considered and a prenup cannot address this issue.
In certain instances a prenup is not enforced by the court. Except in unusual circumstances (i.e. coercion) the courts do enforce the agreement.
Where You Live Matters
Adding to the complication in the U.S. are the different rules between states. As I write, 41 states follow equitable distribution laws and 9 states use community property laws. When multiple states are involved, legal council must consider the laws of each state involved. If you move to a different state during your marriage it can affect the legal standing of your prenup.
Of the 9 community property states, all are in the south or western part of the country, except Wisconsin. Other than Wisconsin, California, Nevada, Arizona, Idaho, Texas, Washington, New Mexico and Louisiana are community property states. You can elect into community property laws in Alaska and Tennessee. Two U.S. territories also follow community property laws: Guam and Puerto Rico.
I mention community property rules because it makes a difference in taxes, too. Tax laws are sometimes handled differently in community property states from equitable distribution states. The tax discussion is beyond the scope of this single post. In the future I will address tax issues unique to community property states.
When Should the Topic of a Prenup be brought up?
My personal opinion is the prenup discussion should begin as soon as talk starts about marriage. Older couples and when children from outside the marriage are involved the prenup can address the division of assets to include the children. Again, the more assets you bring into the marriage, the more important the prenup becomes.
Open, honest talk about a prenuptial agreement early in the relationship makes for an easier development of a sound document outlining what each party feels is fair. It also allows time for either party to digest the idea a prenup is necessary. It feels awkward to lawyer up when you are ready to propose, but it is important to deal with wealth brought to your union in advance.
Refusing to Sign the Prenup
What if your significant other refuses to sign a prenup? If you have no children with anyone else and your net worth is zero or lower, it probably does not make sense to worry about a prenup. However, if you are working in a field where significant income is likely in a few years you may wish to hold firm on a prenup anyway.
If you have assets, then a prenup is mandatory in my opinion. Without a prenup in place you need to reconsider marriage. The risks to the party with assets are too large to overlook the prenuptial agreement.
What about a Postnup?
If you are reading this and you are already married without a prenup, you can also prepare a postnup, which does the same thing.
Mrs. Accountant and I do not have a prenup. I was young and dumb when I got married. The smart move was marrying Mrs. Accountant. The dumb part was I knew nothing about prenups. Neither of us has children with anyone else and we have been married nearly 29 years now. It is doubtful we will draft a postnup.
However, you are not Mrs. Accountant and me. If you are early in your marriage, have children from outside the marriage—or one party brought significantly more assets to the marriage—I encourage you to seek legal advice on drafting a postnup. Unlike the prenup, if a party refuses to sign you can’t walk away without consequences. The best time to form a postnup is when things are going great and all parties involved are eager to solidify a fair dissolution of assets in certain instances.
Divorce is not always the result of infidelity or lack of love. There are times divorce is the only option in our weird society to protect your family. A lawsuit, injury, or mental incapacity could make divorce the proper action to protect all parties involved. A pre or postnup can help smooth the transition. It isn’t always about keeping money from one party or another. It is also a tool to protect all parties involved in the event of tragedy. Once disaster strikes it is too late to begin creating an agreement.
All is Fair in Love and War
And then there is the obvious reason for a prenup. Nothing causes a wound to fester more than losing half the assets you brought into the marriage while the other party is sleeping with someone else. When nerves are most raw, the prenuptial agreement, drafted when cooler heads prevailed, should provide protection. It also moves the process along quicker so the healing can begin sooner.
You May Never Need It
The goal is to never need the prenup. Life happens, so it is necessary. My client base has above average assets. The prenup is not an elective for them; they must have a prenup in my opinion.
The prenuptial agreement is not negative thinking or planning for failure of the marriage. An agreement made in advance (drafted by an attorney so it is enforceable) when love, logic and common sense rule the day is far superior to fighting it out in court for years when love, logic and common sense are nowhere to be found.
It might not be your fault. Maybe it is. The prenup provides a level of protection no matter who is to blame. In my line of work I see all kinds. It always blows my mind when people just fall out of love and divorce. Working on my marriage is priority one for me, but not everyone is as lucky as I am. It takes two to tango.
Even in cordial divorces it is nice to have a document drafted in advance to handle the dissolution of assets and outlining spousal support. Now all you need to do is work on your marriage every day. That is the fun part all parties can agree upon.
Update: I was introduced to a book on the subject of gold diggers, listed below. You can also review Valerie’ blog on the same subject here.
It does not take long when you wander the blogs of the ‘retire early’ community before you hear the common refrain: If everybody did this stuff it would kill the economy. To which I promptly call bullshit.
Bill Gates and Warren Buffett managed to not spend over $100 billion of their money over the last few decades and the economy has done fine. In the 1950s the savings rate was much higher and the economy more vibrant. When the research is reviewed there is no doubt excessive debt, a low savings rate and excessive spending have more to do with an anemic economy than any responsible spending will do.
People look for any excuse they can to remain married to their poor habits and lack of self-control. It is easier to complain about successful people than it is to take responsibility for your own actions. Somehow these people have been bullshitted for so long they actually think poverty is the only way to keep the economy going. Really? They think the only way to survive is to spend every nickel they have. They think living on the financial edge of ruin from the first light breeze is what makes the economy purr and provides job security. Where does this nonsense come from?
No Help from People
In my office most payments are made automatically. Services are handled without much human intervention. Billing/invoicing is on automatic, payments are made by automatic transfer, personal and business bills are set up for automatic payment by either credit card (for the rewards) or from the checking account and the credit card is set to pay the balance in full on the due date from the checking account. The process keeps flowing without any human intervention in one big circle. All parties can focus on their tasks instead of wasting time playing around with financial transfers.
Think about what this really means. If the rapture were to happen this very second and God thought we were all worthy of the instant removal from earth to heaven and no one had a chance to turn off the electric generators, the economy would keep humming along fine. The automatic transfers would keep going round and round. In fact, the economy might actually start growing at a faster rate without people around to fuck it up!
Now, if the economy will do fine without a living human on the planet, how bad will saving and investing half your income harm the economy? The arrogance it takes to even assume responsible spending behavior will destroy jobs and the economy blows the minds of intelligent people everywhere.
The economy will be fine if you save/invest a significant portion of your income. Look back at the most stable and productive times in human history. These times are marked by large levels of saving and investment. Without an ample pool of ready money there is no opportunity to move from concept to reality. Money for investment comes from savings—money people earned, but decided not to spend.
The Economy is Bloated
The economy is too big as it is. Most of the economy, the sales of goods and services, is mostly wasted material. If you don’t believe that statement, I invite you to join me on a short trip to your local landfill. That enormous pile is a testament to all the stuff people wanted and then threw away. If it was so important to spend money on, why are landfills so goddamn huge? All the resources wasted to produce junk we didn’t want in the first place end up as a credit card payment for the next 28 years at 17% interest. And you want me to believe this is good for the economy?
The stuff that really makes us happy and fulfills our lives is about a third of the economy. Yes, I mean two-thirds of the economy is nothing but fluff, waste. We keep buying shit until our homes are so full we can’t move. Then we buy bigger homes to store the stuff. The basement and attic are loaded. Don’t worry. In the name of ‘keeping the economy going’ and jobs we can always rent a storage unit. Let me ask you this. When was the last time you looked at your stuff in the storage unit? Thought so.
All that stuff and the debt from buying it harms the economy! A ‘healthy’ economy does not have so much waste. You, me and everyone else in town can easily live on a third to half our income without any problems. The economy will keep humming along. Debt loads will be modest. Stress will be low.
There are a few losers. The government is fucked without all the tax revenue they need to service the massive pile of debt. The world governments have over $63 trillion in debt as I write this and it is growing at a rapid pace. The United States has nearly $19 trillion of government debt alone! World government debt interest is accruing at over $500,000 every seven seconds! At least it is good for the economy. Right?
Another loser in a world of modest spending is landfills. These tremendous piles of dirt covering the junk we bought on credit and decided we did not like after all would be mere molehills. Other than governments straddled with debt and landfill companies, there are few losers if the FIRE community ran the place.
A quick look around the internet gives a few different answers to the total worldwide government debt load. The numbers are all large and the differences are semantics at best. Debt in and of itself is not bad. What is bad is the level of leverage and what the money was wasted on to create the debt. Governments can print their way out of debt crises if they are willing to risk economic dislocation and/or inflation. You on the other hand need to glace toward your ankles and start reaching.
The current world environment would seem to indicate high levels of debt are NOT healthy for the economy. More debt does not automatically translate into a larger economy, dollar for dollar. As more debt is added it has less affect on economic growth.
More is not Better
The sickness affecting Western societies and spreading to other cultures around the world is that more equals better. But does more make you happier? Research tends to indicate it does not. Having more stuff is a responsibility increasing stress levels protecting, insuring, maintaining, and using said stuff.
Modern technology has made stuff cheap compared to our earning level. The more we have the more we want when it makes no sense to add more to the heap of crap already in the stable. Happiness declines instead of increasing after we reach a certain level of saturation. More things then start to eat into our happiness and overall satisfaction with life. You can have more, but does it matter?
The FIRE community is on to something and it boggles my mind more people have not climbed aboard. Where people got the idea financial independence and early retirement are a scourge on our society is beyond me. I am only a country accountant; I don’t have the answer for such an ignorant mindset.
Problems will not magically disappear if people start saving and living more financially responsible lives. The problems will change, however. The problems will also be less critical. Money is the leading cause of divorce so reduced money issues will lead to better family life. Children will have more nurturing formative years which translates into lower levels of crime and higher levels of overall life satisfaction.
Issues of resource usage will be reduced, but still an issue to apply our efforts toward solving. Moving from a carbon economy to a more green, renewable framework will increase further the quality of life. Technology will still be a vital part of a smaller, more efficient economy.
The real question to ask is: If we are happier spending at a much lower level, why do we waste so much of our most precious resource, time, so we can have stuff which ends up making life less pleasurable? Sure, we will still work, especially for things that interest us. I can’t imagine myself sitting around all day and there is no doubt I will find something constructive to do. But this idea of working ourselves to death for just a little bit more needs to stop.
With most of our time freed from required work to meet our basic needs and a modest amount of wants we can explore what truly drives our passions. It is easy to say what we really like, what we really want. But until we are in a position to really have the opportunity to live that dream we cannot be certain of our choices here.
Happiness dust is not fantasy. Happiness is possible. Living on $20,000 or so a year is easy. All the rest is play money. And we have enough toys. The Earth can’t take anymore waste. The place is starting to look like a dump. Even the oceans are filled with waste from garbage and stuff spilled from ships headed for markets around the world.
It is time for less trade and more living. And the economy will be fine without us.
Each edition of Camp Mustache gets better than the one before. Camp Mustache SE in Gainesville, Florida (January 13 –January 16, 2017) is the fourth in a series of camps, this being the first outside the Seattle area. I have had the honor of attending and speaking at all but the first Camp Mustache.
Stephen Baughier organized the event with guidance, advice and a helping hand from Emma Pattee. Emma’s experience organizing Camp Mustache in Seattle allowed Stephen to move up the learning curve faster. The added experience and hard work made Camp Mustache SE awesome on every level. For the record, I have already accepted the offer to attend Camp Mustache IV in Seattle over Memorial Day weekend in the states this May. There is no doubt the gathering will be an incredible place to learn and meet like-minded people in the FIRE community.
Several notable names were in attendance. Pete, the guest of honor, was, of course, there. J.D. Roth (Money Boss), Joshua Sheats (Radical Personal Finance), Brad Barrett (Travel Miles 101), Gwen (Fiery Millennials), Jonathon Mendonsa (Chosefi), Zeona McIntyre (ZeonaMcIntyre.com), Brooks Nelson (Gainesville Cohousing) and more were available for questions. (Hope I did not miss anyone.)
Six presentations provided more than enough information to build and maintain wealth. The first session, J.D. Roth outlined the steps towards building a personal mission statement so you can design the life of your dreams. Financial independence (FI) does not automatically make you happy or solve problems. The advice shared by J.D. provided us the building blocks to create the life we wanted where FI is only a milestone along the path toward your goals. (Update: J.D.’s presentation can be heard here.)
Brooks Nelson showed us a cohousing community currently being built in Gainesville. The development will focus on community. The community is designed to foster interaction with neighbors and outdoor activities. Autos and other vehicles play a role outside the development only and biking and walking are encouraged in the development. Cohousing started in Europe and projects are now starting all over the United States. If you want to see what society looks like in the future, look no further. Cohousing developments focused on personal tastes will continue to expand, consuming a greater and greater segment of the population.
Joshua Sheats recorded a podcast live for us Saturday night: Why Bother to Wait Until You’re FI to Live Like You’re FI. Joshua taught us how to live the good life no matter where we are on our journey to financial independence. Hear the podcast on Radical Personal Finance.
I kicked things off Sunday morning with a presentation on Organizing Your Life to Maximize Net Worth and Minimize Taxes. You can review my presentation here. The session was recorded and may be available to the general public at a future date.
Investment properties play a large role in building and maintaining wealth. Zeona McIntyre, with ample help from Emma Pattee, illustrated how we can increase cash flow, accelerating our personal wealth building process. Zeona showed us how she uses Airbnb to supercharge her real estate investments.
Before you get the wrong idea, it wasn’t work and no play. Our group enjoyed a team building course where we learned to work together to solve difficult problems. A massive amount of laughing was involved.
Sunday afternoon several attendees spent time at the archery range. Beginners to experts worked together improving their marksmanship.
Basketball, kickball and several hikes filled the remainder of our days. It was all about clean living.
Everyone came away with something powerful to improve their lives and that of those around them. People talked well into the evening. One night there was a fire pit; every night contained mild intoxicants. Sharing of stories, telling jokes and asking advice only ended when people were exhausted from the long day. The next morning it started all over again bright and early. You can’t keep a good group down.
The hardest part was Monday when we socialized and said our good-byes. In four short days we all felt like family. Even I met a friend of Pete’s trying to communicate a message to me. I understood. Together we are stronger; together we will transform the world into a better place. Speed bumps along the way are just that: speed bumps. I have a new client who will fly in from Maine to get his taxes done. It blows my mind. There is no doubt he has other issues to discuss. It will be an interesting conversation. We will both learn a lot.
Every Camp I am inundated with tax and financial questions. This Camp I asked Stephen if I could offer one-hour consultations for $100 each, all proceeds going to charity. It is my honor to inform you we raised $1,050! Once all the money is collected the funds will be sent to the Special Olympics. In the past I supported the Wisconsin Special Olympics. The only thing I can’t do is attend their events. I cannot control my emotions. So I do what I can to provide resources to those who can. One Camp attendee has a family member with Down’s. It was a special moment where we made a difference and it affected us personally. That was when I knew the journey was worth it.
An interesting side note on the consultations. I worked on the consults till late at night. One night I gave a tough talk in a consultation on prenuptial agreements. I did not think much of it at the time, but the next morning I discovered there was an excited debate on the subject. I was tired so I went to bed and missed the whole thing. I was provided the final result. The group agreed at the end my advice was the only way to go. I now have a post in the queue in need of writing titled: Avoiding the Gold-diggers. It should be good. And required reading for anyone with a positive net worth or looking to reach FI at any point in their life.
Connections are made fast at Camp Mustache. This is easily the least judgmental group I have ever been a part of. We shared contact information, hugged and cried. If the world were made up of people like this there would be no social issues to worry us.
I know I will meet many of these people again. I look forward to it. Camp is only over by a few days and I already long for the company of my new friends. Anywhere in the U.S. I want to travel I have a couch to bed down on and a friend to talk with. The same applies to many parts of the world.
Later this winter Gwen is skiing in Wisconsin and will visit Mrs. Accountant and me on the way through. She may be surprised at how I live. And my buddy from Maine will certainly be offer a comfortable bed while in town. It will be the first time I put a client up for the night.
A strange, and incredible, world we live in.
The following post is based on a presentation I gave at Camp Mustache SE in Gainesville, Florida on January 15, 2017.
There are several ways to convince someone to speak at your event. Stephen Baughier used the most sure-fire method ever. Stephen noticed I wrote a blog post back in August listing some people I would like to meet someday. He checked two people on the list and found JD Roth open to attending. He then called me and said, “Hey, Keith. I saw on your blog you wanted to meet JD Roth. Well, he is speaking at Camp Mustache SE in January. We would love to have you speak as well and you can meet a man you admire.” How could I say no?
Picking a topic of discussion is something I allow the event organizer to decide. If they have no preference I choose something currently exciting to me. In this instance Stephen thought something about organizing your stuff in preparation for meeting your accountant/tax guy would be a good choice.
I grimaced. My organizational skills are not legend. However, I do keep a tight fist on in financial organization.
Bookkeeping is not a topic which lends to filling an hour presentation. My first thought was to stand in front of the group and yell, “Shut up, and sit down!” while I stabbed my finger at them. “Enter your paperwork once a week and stop bitching about it.” Then I would grab a beer from the fridge and sit down. My first inclination had a slight flaw I thought might turn off the crowd and upset Stephen so I moved to plan B.
After considerable thought (somewhere in the neighborhood of three or four minutes while I was feeding the chickens one day) I decided to expand the idea from organizing your stuff for the accountant to organizing your life in a manner that reduces the workload, stress, and procrastination inducing part of record keeping to include maximizing net worth while reducing taxes. Who doesn’t like saving on taxes? I surmised. And who would argue with growing their net worth at the fastest clip possible? Since no one threw anything during or after the presentation I assume the audience was either kind or mildly receptive. My ego demands I tell you it was the later.
After a brief attempt as humor I discovered I was no George Carlin reincarnated so I moved on to the topic at hand. The best place to start is the ugly.
The worst thing you can do is drop a crate (happens more often than you think)/shoe box/envelope stuffed full of receipts on your accountant’s desk. From your viewpoint you watch a box disappear from your home/office and magically reappear as a neat tax return and a box of papers neatly stapled together in a few weeks. Here is what really happens.
We are so excited to have the extra work we take that box of papers and dump it on the conference table so the room is unavailable for normal use for a day or so. We bring a temp with a bad attitude to the room and, under threat, demand she take the mound of papers and separate it into piles: office expense, cost of goods sold, utilities, et cetera. When she is done she takes an adding machine and creates a z-tape of each pile. The z-tape is stapled to the top of the pile with an industrial strength stapler. The remaining pile of receipts she doesn’t know how to classify is neatly tucked on the bottom of the box and those deductions, if legitimate, are missed. The remaining piles stapled together are used to prepare the tax return.
I suspect most accounting firms around the world use a similar practice in such extreme instances. Time is tight and after a 687 hour workweek during tax season, we are in no mood for bullshit. If you want all your deductions, might I suggest bringing your books into my office in proper order? My job is not to guess what a receipt means; only you can answer that.
The Proper Way to Keep Records with Almost no Effort
The process of organizing your business and personal life should be simple and with modern technology it is fast, simple, effective and low cost.
Small business, a few income properties and personal life: When organizing only requires the documenting of a few items there is no need to go crazy buying software to manage the 17 items needing a place in the data fields. Old fashioned guys can use the old columnar pad or Excel. (Yes, I have a few clients with beautiful records brought in on a columnar pad.) Excel is an awesome tool for managing small amounts of data for personal finances, up to five or so income properties or a very small business without any employees. Fast and simple are the key words here.
The time required to keep your life in order is about one hour per month. In most cases once a month is enough to enter your data.
Medium sized company and more than five income properties: A medium sized company is defined as a business with bookkeeping requirements of between three and ten hours per month.
Once you have more than a token amount of data to manage it is time to open your wallet and invest in some form of accounting/recordkeeping software. QuickBooks is the largest. QB has a robust program with enough features to handle most businesses. The downside is that the payroll module is expensive and limited. (In a few weeks I will publish a post on how to get your payroll done fast and easy with low cost and no additional paperwork headaches for you.)
QB is not the only game in town. You might want to consider other software, including: Freshbooks, Xero, or Sage (the old Peachtree). Each program has its strengths and weaknesses. Space (and my time) requires I move on without reviewing each software package.
At this level you have some additional considerations. Doing your own recordkeeping is an unproductive expenditure of time. Hiring a bookkeeping/accounting firm is a low cost way of getting the rote process of bookkeeping done. Bookkeeping firms know how to optimize the process. What takes you a day takes the bookkeeper an hour or two. While the bookkeeper may charge $60 an hour, the time you take to get the same work done translates into your time valued at $20 or less per hour. And the bookkeeper will get it right.
Large businesses and large numbers of income properties: At this level hiring an accountant to handle your workflow no longer is efficient. You need an in-house bookkeeper/accountant to handle all the paperwork daily. Payroll can be handled internally if you have qualified staff or outsourced.
There is an animal in the tax world called the non-cash deduction. Things like mileage, per diems and depreciation fall into this category. Depreciation is a phantom non-cash deduction since it is related to actual expense. Mileage and per diems are either a hybrid or true non-cash deduction.
Mileage logs: If there is one area that drives accountants mad it is in the area of mileage logs for business owners and landlords. These people are notorious at keeping accurate records. The IRS requires a mileage log be contemporaneous, which means it needs to be recorded reasonably close to the time of the event. The day you get the IRS letter for an audit is not a contemporaneous record.
Contemporaneous records can be easy to keep if you follow my advice. Miles can add to a large deduction fast. The mileage rate for businesses and landlords is 53.5 cents per mile in 2017, down from 54 cents in 2016. Keeping an accurate record assures you take advantage of the entire deduction. You deduct the entire 53.5 cents per mile even if your actual cost is less! Using a low-cost vehicle is the perfect way to legally stick it to the IRS. I can see you are feeling better already.
The reason so many flub on the mileage log is the requirement you write it down. There are apps available to simplify the process. MilesIQ is a paid app which meets all the IRS requirements for your deduction. A free app from Google Play that provides the same service is TRIPLOG.
Let me clear up the requirement. Your records need to contain the beginning and ending odometer reading for each vehicle for the year. Each day you have business miles you need to record the business miles traveled, the date, where you went and the purpose of the trip. The above apps allow you to enter this data. The printout/record produced by the app is adequate substantiation for tax purposes. You simply enter the deduction into your accounting software and the tax return. No additional horsing around necessary.
Per diems: The per diem is an awesome tool in reducing taxes without a real world expense. Under the hi-low method the IRS allows you to deduct a per diem for meals and incidentals (M&IE) without any additional substantiation. You must record the number of overnights, the business purpose and the location only to qualify.
The hi-low method is easy to use. Most locations within the U.S. have a M&IE allowance of $52 for meals and $5 for incidentals. High-cost locals get $63 for the meal per diem. There is also a chart where you can pick the per diem rate per location instead of the hi-low rate. Rather than muddy this post with long charts you can use this link to determine the hi-low rate localities and the per location rates.
The hi-low rate is simplest and only a limited number of taxpayers will benefit enough to justify the additional time of breaking out all the travel locations separately. Only half the expense is allowed as a deduction and DOT (ie. truck drivers) get special rates and can include 80% as a deduction.
Let’s keep it super-simple. Keep track of how many overnights you have for business purposes and where you went and turn it in to your tax preparer. She will take care of the rest.
Note: business owners and landlords need actual expenses (receipts) for lodging.
New World Order
Modern technology has made it easier than ever to track your expenses/deductions. Your time is precious. So is your money!
Whether you do your own recordkeeping or hire it out, you can use apps to get the maximum deductions with almost no effort. These apps allow you to photograph your receipt and forget it. The receipt is automatically downloaded to your software and saved in the cloud should you need to review the expense later or for proof during an audit. No more lost receipts or sleepless nights over an audit. Your books are so clean it will bring a tear to the eye of your accountant. I’m getting misty just talking about it.
Clean, accurate records have two significant advantages. First, accurate records allow for an accurate tax return bulletproof in an audit. Second, accurate records allow you to manage your investments and company by visualizing progress or area of concern. Bookkeeping isn’t a crazy idea thought up by geeks to create gainful employment. Records show where you were, where you are and help project where you are going. You can’t fix what you are unaware of. Keeping accurate records is like driving with your eyes open. Or you might take a chance on the alternative.
Yeah, I thought so.
What started as a grand idea has morphed into a changed worldview. For decades I focused on the local community in my practice. I would speak for various organizations around the area, rarely traveling more than 50 miles. And I was happy with that.
My speaking engagements and traveling expanded during the 1990s when I entered the securities field. As memory serves, every presentation I have given outside the State of Wisconsin was for something related to securities. Until two year ago.
Two years ago I had this brainstorm to expand an area of my practice that had been an itch I had to scratch. It went horribly wrong and changed my life in ways I never expected. It was a simple idea. Swoop in on a personal finance conference, dazzle them with my usual charm, and sell an idea. It didn’t go according to plan.
My idea was accepted in a modified form. The problem arrived when I was offered an opportunity to expand my worldview like never before. Remember, I am an old farm boy from the backwoods of Wisconsin. This shit doesn’t happen around here. I was totally unprepared.
The result was this blog and a shout out by Mr. Money Mustache. I had to write this blog; I had no choice. The idea was on the back burner for years. Now I had to push forward with the project. People wanted to hear what I had to say.
And then there was the growing demand for my services and requests to speak to more groups. As I started to attend these events and communicating with many people in the FIRE (financial independence, retire early) community, I started to build friendships. I missed these people when they were not around.
My world two years ago existed in a twenty mile radius between my home and family and my office. This was my home and I spent 99% of my time in this bubble. Sure, I had clients from around the country. But my clients always came to me. A few sent their stuff in electronically, but by and large these people showed back up in NE Wisconsin now and again for a sit down.
I knew all my clients personally then. If I couldn’t place the name I knew their face. These were my people and I knew them all, especially their situation.
That is no longer true. Over a third of my clients have never seen the inside of my office. I don’t know what half my clients look like; I never saw them. Everything has changed. My brainstorm of two years ago changed how I conducted business and it is a continuing learning process.
Changing the way the business operates is nothing new to me. I completely realigned my firm three times before. The fourth, and largest, reorganization of the company is in full swing currently. I think it is a fitting way to complete my career. I may never really quit; I love what I do, but I don’t know how many more times I will have the heart to fundamentally reorganize my firm as the market forces dictate. Truth is I will change with whatever life throws at me until one day I forget how to breathe. It is in my blood.
Alone in a Room
This post is coming to life in a hotel room in Gainesville, Florida. I was asked to speak at the very first Camp Mustache SE. It is an honor. Many of the folks attending have communicated with me their excitement to meet me. I find this strange. You want to see me? Hear what I have to say? Two thousand miles away from home?
Writing a blog is different. In my mind I never really connect the dots where a live human is reading what I say. I sit in a dark room and share my perspective, experience and knowledge. It is all unreal. Even emails and comments seem distant and unreal. Where I get a lump in the throat is when somebody I never met before comments on something I wrote months ago. I only vaguely remember writing it. I put so many words on paper I tend to forget what I wrote unless I go back and refresh my memory.
So here I am, alone in a hotel room (Mrs. Accountant is sleeping in the bed next to me), writing a rough draft I will edit in the morning and publish. A few hours later a group of people I have never met before in the real world will pick the Missus and me up, enjoy lunch and then head to Camp. These people are honored to see me and I can’t comprehend that. My world never allowed for such an event.
I am still early in this new phase of my career. The number of people I meet is overwhelming. I want to know (and help) each of them personally. Slowly I realize that is not possible.
There are people I only see at these events. I hear about them, and others, online or they may email me, sometimes even call. Many leave a deep impression. I am still a 10 year old boy inside, filled with the awe and wonder of the world around me. I drink in as much as I can without choking.
But this new world is so much larger than the one I came from. The bubble I lived in was cozy and comforting. I knew everyone in the bubble. The new, bigger bubble works different. The number of people I admire grows. There are so many I admire and respect.
In the past I could walk around my bubble and visit with anyone in my world any time I wanted. Now I sometimes look to the east and wonder what the Mad Fientist is doing. He lives in the UK. I don’t use his real name because he prefers privacy. I get it. I met the Mad Fientist a few times and respect him highly. He did what I never could. He retired when he was able. He knows how to let go and relax. Something you guys probably have figured out is not in my toolbox of skills. I hope I get to see him again someday.
There are two young ladies who impressed the hell out of me when I was in Seattle last year. Gwen writes Fiery Millennials. She will be here at Camp. It will be good to see her again. For some reason she sticks in my mind. She is a character and reads this blog so don’t let it get to your head, young lady. She is kind of like a daughter in my mind.
Another young lady is Elizabeth. She plays harp and has an awesome heart. I doubt we’ll ever meet again. She is talented and will go far. In the modern world of technology I can watch from a distance and smile. It will have to be enough.
I gaze to the southwest a lot too. There are a few folks in Colorado who changed my life and I admire them. When my eyes refocus further, I see Hawaii. There lives a retired military guy. He is one of the wisest men I ever met. In a sort of weird way he is like a surrogate father. His praise is important to me. He could not attend Camp Mustache SE. Maybe next time.
I could go on listing person after person. I would miss someone no matter how hard I tried to be all inclusive so don’t feel bad if I did not mention you.
In a Small World
Months ago I wrote a post on working with me and my firm. I really thought if I said I would charge for my time people would flip me off and walk away. Remember, I am some guy from Wisconsin they never meet in the real world and I asked them to pay just to talk to me. That does not happen in my bubble.
True to form, I am a slow learner. As Camp Mustache SE approaches I have my hands full. I was asked to do at least one podcast (my fading memory from old age prevents me from recalling if I have one or two podcasts I am supposed to do) and two of the four other speakers want to pay for a consultation with me. All the proceeds go to charity.
Once again I had this great idea. My idea was to offer 10 one-hour consultations for $100, all money going to a charity chosen by those paying the fee. I didn’t expect the 10 slots to fill. They did. At least nine I am aware of.
This excites and scares me. I am excited to raise money for charity doing something I enjoy doing. It scares me because of the people who want the consultation. Remember Gwen from Fiery Millennials? She is in. A few more I also know from previous conferences. Then there is the real mind-blower? Two of the four other speakers have asked for a consultation. I don’t know them personally and they are important people. They must be. They are speaking at the Camp and they have blogs that blow this one away.
None of This is Real
There was a time I understood the world I lived in. It has grown so huge I can no longer say that. I sit here writing in the dark to an unreal world I know doesn’t exist. Do I exist? Stephen Hawking and Elon Musk seem to think not. Hawking discovered the event horizon of a black hole contains the inverse square of information as contained inside the black hole itself. This means there is a high likelihood our universe in a holographic projection. There is no other reason for the event horizon, a point in space that does not exist, to contain this exact amount of information unless it is a holograph. The event horizon is just a place where light cannot break free of the black hole’s gravity. There is no object there! Just an invisible line where a holograph of the black hole’s information is projected.
Elon Musk thinks we are a computer simulation. This jives nicely with the holograph theory. Musk believes the only way any of this can be real is if we are the first intelligent species ever to reach this point in technology because soon we will create just such computer simulations. It is unlikely we are the first.
I don’t know the answer. This holographic projection and computer simulation is feeling mighty small lately. Life was so much easier to understand in a bubble of a twenty mile radius.
Tomorrow I will meet old friends and make new friends. I am eager to meet with Pete again and look forward to meeting J.D. Roth for the first time. The world is expanding. None of it will seem real. It is all a dream, I tell myself. I would have noticed sooner if this were all real. And some of these people want what I have to offer. Yes, I am a 10 year old boy trying to understand a world around him bigger than life.
I had it all figured out two years ago. I really did. Money filled the index funds, the business kept adding to the pile and my team did most of the work. I read and studied most days when I came in if I came in at all. It was awesome! Then I ventured outside my bubble and learned a valuable lesson or three. They put an airport just outside my old bubble, waiting for the day when I wandered a bit too far for my health. The kind lady at the counter told me the airport was for traveling. Traveling? I said. I don’t want to go anywhere. Where would I travel to?