Here is an important interview with Warren Buffett everyone needs to listen to as we face significant tax code changes from the new administration. Warren’s views are not always mine, but his fundamental understanding of taxes and how they work requires all intelligent people to listen and learn as we grade our representatives on how well they are leading.
Things have been looking up at The Wealthy Accountant. Traffic is increasing and the audience is expanding. Even better, the original demographic attracted to the site has expanded, bringing in more people to benefit from the information provided.
The newfound success also causes problems. People unfamiliar with the FI (financial independence) community are frequently shocked at the way I present information. It’s an easy thing to do. Right up there in the title is the word accountant. The blog ought to be about taxes and similar stuff found in a CPAs office. Then you open the cover and find me standing there. Don’t worry! It would scare me too.
There is a major misunderstanding on what this blog is about. Yes, the word “accountant” is in the title. There are a few reasons for that. First, it’s getting hard to find an unused url in the dot com universe anymore. Second, I don’t want you to be an accountant (unless you want to be), but I want you to THINK like an accountant. There is a difference.
Thinking like an accountant allows you to make better decisions in all areas of your life: working, investments, taxes, even relationships and raising the kiddos. Accountants think in a logical fashion. They plan. They also look before they jump.
That doesn’t mean all the fun is squeezed out of life either. Readers around here discover real quick there is something mentally wrong with this accountant. I love having fun, kidding around, laughing and turning life into one big joke. And a drink now and again never hurt my feelings.
Accountants have a reputation for being boring. Nothing could be further from the truth. When no one is looking we break loose and riot across town. Then, when the cameras are turned back on, we don our wire rim glasses and pocket protectors. And if you are unaware, we are a darn sexy group, too.
Can We Talk about Something Other Than Taxes?
Approximately 15% or so of this blog is deep tax stuff. This is by design! Taxes can be boring because it requires the use of large portions of gray matter. It gets old after a while, even for people who love this stuff, like me.
My first goal is to entertain. This had better be fun or my readers will jump ship faster than a cat from a tub filled with water. (All paws and tails coupled with an unusual meowing wail.) And this stuff is fun. Most of what I tell you guys is true. The rest is modified to fit the story to the page and not burden you with massive back story or an info dump; not to mislead you, kind reader.
After I get you to chuckle I know you let your guard down. With your force field dismantled I can share serious stories with a moral; we can call them parables.
Entertainment is the most effective form of education. Learning is easiest when it doesn’t feel like learning. Never will you hear me say, “I’m going to teach you a lesson.” (Unless you make me really, really mad.)
Now we get back to the thinking part. I want to help you improve the way you think. Granted, I am no genius when it comes to the answer to life, the universe, and everything. (The answer is 42, if you must know.) Instead, my unique experience of working with people on the intimate details of their financial and personal life gives me an advantage only someone in my position has.
I’ve seen a lot over the years: divorces I never saw coming and could not understand, couples married for decades succumb to drugs or gambling, and worst of all, the number of young people who have died. If there is anything that causes me to pause in life, it is the number of young adults and children I saw to their grave. What can I possibly say to a bereaved surviving spouse or distraught parent? Answer: There are no words. All I can do is hold my client and reassure them they must be strong in honor of the lost loved one. Some days at the office are harder than others.
Most of all, I want you to have a seat on my side of the desk. My hope is you will take a chair behind me and silently watch me work my trade, to see the things I see. I’ve seen a lot. Most of it is hilarious, other times it amazes me how I keep from taking my own life. (How many young people have to die of disease, violence, or accidents before enough is enough?)
I hear your hopes, dreams and fears. I laugh (and cry) with you. You are my people. I joke because it hurts so much in here. When you hurt, I hurt. It is not an over-exaggeration when I say I love my clients. There has never been a better group of people to ever walk this green earth.
From your life I learn lessons, lessons I want to pay forward by sharing to the world at large. After entertainment, The Wealthy Accountant is about living life well, living life right. We can do this only if we do it together.
I am not your guru. All I have is a massive repertoire of stories and a modest memory and ability to share them.
It’s not about money. Money gets a lot of play around here, but it is not about money. Money gives you freedom and few other fun things. In the end money is not the issue. Your family, friends and community are. All the money in the world will not replace those things. Without these things we are miserable.
Finding meaning in life as you view life is what counts. I can’t tell you what to do or what will work for you. My stories only provide prompts to jog your memory and thinking capacity into action discovering those things which make your life worth living.
Can I Say a Word or Two about Taxes?
Tax posts get the most push-back around here. Explaining taxes is a risky business. Heck, even the Tax Courts don’t always agree on the correct way to interpret sections of tax code. If the Tax Court has problems getting their arms around it, what chance do I have a winning the crowd with a tax idea or concept?
Most of my tax posts are built around concepts versus hard tax law or application. This is by design. I want this to be a tool for the common man. Tax professionals will find value, but will need additional research above what I share here. The reason is simple. Once you peal open a complex tax issue there are so many variables, I could easily sink into the quagmire of boring tax blog rather quickly. Then no one wins. Especially my ego. I like traffic! Makes me feel wanted.
I seem to get a lot of comments poking and prodding around the edges of my tax concepts. It’s a good thing because it means people are thinking about what I am presenting. It is also a bad thing because it means at some level the same people are missing the point.
If fewer than one in five posts focus on tax, where does the accountant come in? Well, accountants do a lot more than taxes. We do payroll, bookkeeping, consulting, retirement planning, auditing, and more. Tax is one small part of the equation. You think accountant are tax guys (or gals) only because that is a big part of their public image.
The most difficult task any accountant faces is taking the complex tax code and making it understandable to non-tax pros. And we have to do it without making the client feel inferior. Trust me, I am not up here and you down there. I have to find a way to bridge the gap.
So I am left with concepts when I write here. I have written plenty in the past about serious tax issues for tax professionals. The people who read that stuff is a fraction of 1% of the people who read this blog and I don’t blame them a bit. It is dry reading. You only read that stuff when researching a tax issue for personal needs.
The Wealthy Accountant is not meant as a stale tax guide used for reference only. When I share tax ideas I know I am leaving out the 3,083 other possibilities. The ideas I present are different from anything else you read on the subject or hear from your tax pro. If it wasn’t different, why bother?
My last post was on saving half your gross income and how it reduces your tax liability. My argument was: Saving half your gross income doesn’t cost half your income because the government has a coterie of deductions and credits attached to saving and investing. Several readers were concerned I skipped, missed, or potentially mislead readers by leaving out certain possibilities. I made a conscious choice in my presentation. I fully understand what I skipped and with good reason. To add too many possibilities or circumstances starts to bog down the post. Boredom is the greatest risk I face when sharing an idea.
My worst fear is that some readers might miss the message. My motivation is to make a difference in the life of every reader who wanders this way without turning it into drudgery. It is a difficult road. Please, keep questioning my work when it doesn’t make sense. I could have made a mistake and it is easy to correct before too many people read the error. But don’t get lost in the forest for want of a good shade tree. I will never intentionally mislead you. To the best of my ability I will take a complex issue and reword it in a way that is understandable to people not active in the legal community. Always seek the concept I am offering.
The reason I am here, kind reader, is for you. If I save you a bit of money: awesome; if I cut your taxes a tad: excellent; if I get a smile while I do it: priceless.
People frequently look to their accountant for sound financial advice. Good accountants are up to the task; other, not so much. Finding a good one is easy; they tell you what you don’t want to hear even if you threaten to leave.
Advice sought from accountants runs the gamut. Selling or buying a business requires in-depth analysis and most people trust their accountant’s judgment regarding this matter.
Then the bizarre requests come. Over the years I have been pulled to the side by clients wanting advice on how to raise their children, gambling problems, infidelity, and divorce issues. Some of the requests have a hint of tax built into them. Gambling problems are also tax problems. I’m never comfortable helping anyone decide if they should end their marriage. It’s not my place or at least shouldn’t be. And even if it was I want nothing to do with that kind of conflict.
My favorite requests are about personal finance, intelligent tax reduction and retirement. These are the moments when I can shine. It is also an area of massive risk. My mantra, oft repeated, is simple, yet rarely followed. First the client is in denial (which is a river in Egypt last I checked). Quickly the client moves to tell me my advice is impossible to follow and nobody does it. (Oh, yes they do.) Finally, the client starts to bargain her way into a deeper hole. They think they can change the rules and make it easier. Don’t they know I already thought of every twist and shortcut possible? Clients usually bargain themselves into a deeper hole without even knowing it.
Half for You and Half for Me
Clint Eastwood fans are well aware of the scam Blondie and Tuco had in the 1966 movie, The Good, The Bad and the Ugly. In the movie, Blondie, played by Eastwood, captures Tuco, a wanted bandit with a price on his head. Blondie turns Tuco in for the reward. As Tuco is about to be hanged Blondie shoots the rope from a safe distance and rescues Tuco only to do it again in another town.
After each escape, Blondie shares the gold with Tuco 50/50. (“Two for you and two for me.”) Of course things go south fast when Blondie decides it is time to end the business relationship. Every movie needs to keep the plot moving.
There is a lesson in finance in the business deal of sharing the spoils 50/50. It also happens to be the first part of my most common mantra: save half your gross income. I finish the mantra with: invest it in low-cost, broad-based index funds. It’s a simple concept and easy to remember. Save half or more each time income enters the household Cash Flow Statement before taxes.
As simple as the advice is, I always get push-back. As mentioned above, clients deny it is possible as if they are starting the stages of grief. Quick as a shot they get angry when I refuse to relent: save half. Then comes the bargaining and the reason for this post.
I Have a Better Idea
Imagine a client sitting across my desk dumbfounded by such a stupid suggestion. For easy calculation we will assume said client has exactly $100,000 of income (earned and/or rental or similar types of income) with exactly a 30% tax bracket. (My advice is straight-forward; taxes are never this simple.)
The “impossible” retort is quickly shot down by your favorite accountant as a straw man argument. I have plenty of clients earning half what you do and living within their means (probably saving half their income too). I also doubt you never had a day of your adult life where your income was less than it is now. So you have plenty of practice and examples of people (even an older version of you) who have or are doing it (living on half your current income).
The argument that bills are more now doesn’t work with me either. Things have not gone up that much in price! The problem is you have three SUV payments, a cottage, second home up north (it’s a Wisconsin thing), a Jet Ski and four-wheeler to make payments on and insure. That is the real reason why you are broke so stop arguing with me.
There is a simple solution: Start selling the excess baggage until your expenses allow you to save half your income. Pay off debt! You may not agree with me, but you know I’m right.
Time to get Serious
Quicker than a bolt of lightning you start the bargaining process. Before you waste your breath, I already know what you are going to ask and you are wrong. But why, you plead? Because saving half your gross income IS easier than saving half your net. Here’s why.
Take your $100,000 minus $30,000 taxes and you have $70,000 to spend. If you save half your gross, $50,000, you only have $20,000 left to live on! Not possible, you say.
If, on the other hand, you continue, I agree you should save half your net income ($35,000) it would be easier for you to make it really happen.
What happens when you save $50,000? Well, a good portion probably goes into retirement accounts. A husband and wife can plow $18,000 each into their 401(k) plan, assuming both are working, earn enough and the employers’ plans allows the maximum contribution allowed by the tax code. (Those 50 and older can add another $6,000 each to this total. In our example we will stick with young whipper-snappers.)
Each spouse can contribute another $5,500 into a traditional IRA. Added to the $36,000 contributed to the 401(k)s (not including the employer’s match), you now have $47,000 saved out of your 50% goal of saving half your gross income. $3,000 invested in a non-qualified account (non-retirement account) rounds out the $50,000 annual investment. If a Health Savings Account or other tax deferred/tax-free vehicle is available, all the better.
The above example is very simple and few will have the same exact situation. The basic example does allow us a quick look at the final results to the family budget. First, with all the money going into tax deferred accounts you probably now qualify for the Saver’s Credit and Earned Income Credit if you have kids. Add in any Child Tax Credits or other deductions and we don’t need to work any harder to reduce your tax liability because it is zero or close to it.
So how much money do you have available to spend now? Well, your taxes dropped $30,000 when you include credits. You have $50,000 invested, plus the employer’s match, and $50,000 available to spend. (FICA taxes will reduce numbers a bit, but we want to keep it simple so we can see why it is better to save half your gross income.)
Your bargaining to save less will leave you with less to spend in the end! Saving half your net, $35,000, means your taxable income is higher and you lose several powerful tax credits. Your tax liability will be lower, but probably not zero. You also lose the Earned Income Credit and Saver’s Credit, though the Child Tax Credit should still be allowed. If your taxes are lowered by $10,000 you are left with less overall money due to higher taxes!
$100,000 income – $20,000 tax – $35,000 saved/invested leaves $45,000 to spend, or,
if you’re are lucky and your taxes are reduced more without the full savings rate
$100,000 income – $10,000 tax – $35,000 saved/invested leaves $55,000 to spend
Just because you have more available to spend in some instances by saving half your net income you are really worse off. Your net worth is down $15,000 the first year alone without consideration for the employer’s match or investment gains. You bargained your way into working a decade or longer to make up the difference needed to get your nest egg large enough to fund retirement. Is it really worth years of additional required work just to have $5,000 more to waste on a gas-guzzling SUV today? I hope not. You wouldn’t be reading this blog if you really believed that.
Give Me the Facts
When I train a group of accountants I use the phrase “facts and circumstances” a lot. The IRS tax publications do too. Your facts and circumstances will change the outcome of our example. More moving parts usually means more opportunity to reduce tax and increase investments without harming disposable income.
It’s hard saving serious amounts of money. Unfortunately it is the only way to reach a reasonable retirement in a reasonable amount of time. Forty years is not a reasonable amount of time REQUIRED to work just to have enough liquid assets to retire with the same lifestyle as when you were working.
In The Good, The Bad and the Ugly things turned out well in the end. Blondie and Tuco teamed up again to cash in on the biggest payday ever. For folks familiar with the movie, Eastwood shares the spoils 50/50 one last time. He cuts the rope when he is safely out of Tuco’s reach. A funny scene to end a classic movie.
Fun movie! Entertaining. Serious lesson few grasped. Don’t make the same mistake. Half for you and half for me. The best part, you get to keep both halves.
Tax season is over. The long days and endless weeks are finally at an end. It’s time for a nap.
In my younger days I also ran long stretches with limited sleep. Farming is intense during spring planting and autumn harvesting; college was late night studying or visiting with friends; and now taxes provide me with twelve weeks of unrelenting work each year.
Society idolizes people who run with limited amounts of sleep. It is a badge of honor to pound your mind and body mercilessly and do it with lack of sleep.
As tax season clawed toward the finish line my performance was no longer acceptable. The amount of work I completed was down and concerns over accuracy started to pop up. Nobody can perform at peak while fighting fatigue and lack of sleep. Nobody.
I call these bursts of hyper activity “marathon runs”. Tax season is my current annual marathon run. It appeals to me because I have manic depression and I learned a long time ago autumn is a bad time and springtime is power time. It was a natural fit. The disease doesn’t always cooperate, but I have learned to control it enough to use it to my benefit.
Yet, the risks of long hours without sleep are a real problem. Lack of sleep is a leading cause of transportation accidents. Even if you read the news poorly you have heard stories of airline pilots, ship captains, train conductors and barges in catastrophic disasters due to lack of sleep. Doctors frequently perform surgery in the morning for a reason. Only emergency surgery is performed later in the day.
The Evidence is In
You don’t have to look any further than this blog to see first-hand the effects of sleep deprivation. With tax season over I can finally get some sleep. One eight-hour night of sleep does not make up for all the lost hours over the preceding months.
I am always tired this last week, even more so than when I was working. I get up and then take a morning nap. Once you reach that deep and are that over-tired it has consequences. Slowly my body returns to normal.
In 2011 I published a short piece on a content farm about living on 4 hours of sleep per day. I had convinced myself I was one of those special people who could live on almost no sleep and still function at a high level. While it is true each individual needs a specific amount of sleep—some more, some less—most people require 7 to 9 hours per day. It doesn’t have to come at one time or all at night either. An afternoon nap can be a powerful part of your sleep pattern.
Then there is the delusion. You need look no further than this blog for a prime example of how sleep deprivation affects cognitive thinking. A few weeks back I allowed a guest post which turned out to be a scam. The warning signs of sleep deprivation were in full flower. Still, I trudged on to the tax due date. Now, with tax season over and a few more hours sleep, you would think my mental capacity would quickly return to normal. It’s not that simple.
Friday’s blog post had all the hallmarks of a sleep deprived person struggling to recover from a marathon run. The story was solid and the information valuable, but I wrote a shorter piece with too much profanity. I was puffing up the story. Worse, over the weekend I edited some of the profanity out and tightened the story and noticed multiple glaring grammar and spelling errors. My editing skills were affected more than the writing process itself. I couldn’t even see my own mistakes!
Sleep deprivation allows you to think everything is okay when it is not. “I’m good,” you say when it is painfully apparent you are impaired.
Clients get upset when I refuse to set appointments the week after tax season ends. What they don’t understand is how badly I need rest.
Everybody want me, and only me, because they think I have some magic when it comes to taxes because I write a blog and speak around the country on the subject. Well, I am good at what I do, but no matter how good I am, there is a limit to what one human being can do before serious health consequences arise.
I need sleep and I bet you do too. You are no good to anyone, much less yourself, when you are running on fumes. Peak performance never comes after a marathon run.
But who hasn’t had an all-nighter? Me, for one. As much as I reduce sleep at times, I still don’t engage the legendary all-nighter. Been close a few times.
We all reduce sleep occasionally when we are doing something we really like. The late night party or a good book you can’t put down until 3:30 in the morning are examples of short-term sleep deprivation that works. The fatigue isn’t too bad the next day. It doesn’t take much of a leap to start deceiving yourself you can handle living with less sleep.
Trouble starts as soon as you do. Health.com recently ran an article on the benefits of adequate sleep. Several struck close to home for me. Better memory, longer life, more creativity, less stress and a healthy weight were all connected to appropriate sleep levels. These are important things to me and I bet they are to you too.
Yahoo Beauty recently discussed the same issues as they relate to appearance. Ladies, if you want to look younger, more alive, vibrant, get eight hours of sleep each day! You know this is true. You can point out a sleep deprived waitress from a mile away without knowing anything about the person. It shows on her face. Given enough years of sleep deprivation and you will show additional years of wear and tear on your face too. Is there a better argument for more sleep?
Okay, I understand I am preaching to the choir. I have sleeping issues, admittedly. When I try to sleep sometimes I can’t. It come and goes.
Success is important to me. I enjoy running my tax practice, serving my clients and sharing ideas here on this blog and with audiences wherever they will have me. Successful people sleep.
Contrary to my 2011 article chronicling important people who live/lived with only modest amounts of sleep, successful people sleep. A lot.
Jeff Bezos turned Amazon into the massive company it is while making eight hours of sleep a day a priority. Many business owners feel it is a badge of honor to run and keep running non-stop day in and day out. The relentless drive is all they know about success. It ends poorly. Heart attacks and questionable business decisions blanket business news. A few years back investments banking firms got in trouble when an intern died from lack of sleep working the job without rest or time off. Clue people: that is NOT success; that is torture! Stop torturing yourself.
Back in July of 2015 Ryan Holiday, a writer I admire and enjoy reading, wrote a piece on sleep. It’s short and to the point. I recommend you read it.
Holiday talked about how he found time to read so much and quickly made it clear it wasn’t sitting up all night. He went a step further and said ample sleep is what allows him to be a prolific writer and reader.
You can imagine how this sat with your favorite accountant. My love of reading was front and center. I could read more and enjoy it better if I had a good night’s sleep. As Kurt Vonnegut wrote: So it goes.
Secrets to a Good Night of Sleep
My mind races. Ideas are always pouring out of me. It never stops.
Over-the-counter and even prescription sleep medications carry the risk of dependence. Worse, if you are like me, they don’t work well or for an extended period of time. The only way to sleep is to turn off the kaleidoscope of voices demanding to get out.
Melatonin might be the sole exception to the medication rule. This naturally occurring substance is produced by the brain to facilitate sleep. Many people find blissful rest using melatonin. I am not one.
An active mind is not a bad thing. The ability to turn it off is important, however, if you plan on keeping your level of creativity and performance high.
If you haven’t heard before, I’ll briefly say now: stay away from bright lights, TV, computer screens! smartphone screens! (yes, those exclamation points were intentional) and similar activities prior to nap time. You don’t need the phone by the bed. The President is not calling you. And if someone has died and you are not known for performing resurrections, voice mail can handle it. The body will still be there in the morning.
Reading a book can help you relax. But if you are like me and become engrossed in books easily, this can backfire. Regardless, reading is a great way to unwind the body, preparing your mind for slumber.
Meditation is the most powerful tool to encourage sleep. The last half-hour prior to retiring to bed it is a good idea to sit comfortably, close your eyes and focus on your breathing. This practice will help clear the mind of racing thoughts. When thoughts try to break in, let them. And then quietly ask them to take a seat to the side where you will deal with them the next day. Return your focus to each breath.
God knows I have put a lot on my plate at times and sometimes others have had a hand in it too. Each night before bed and each morning before starting my day are reserved for quiet meditation. Sometimes I reflect on the previous day or plan out my thoughts. Always return to focus on your breathing.
Thinking about issues important to you or upsetting you are best handled in the quiet contemplation of meditation. Ten minutes should be enough most days. Sometimes, when the world crashes in, you need more time to order your thoughts and prepare for sleep. Take as much time as you need.
We are not gods, people, as much as we sometimes like to think we are. In the three major monotheistic religions of the planet God created the world in six days and rested on the seventh. You are not better than God. You need your sleep if you want a long, happy life filled with meaningful activities.
You are only truly awake when you first have adequate, deep, nourishing sleep.
Now, if you’ll excuse me, I need to take a nap.
Over the years I have retired many times. So have you.
The demographic of this blog leans heavily toward early retirement. This has always bothered me. I always feel like I have to be an apologist for all the folks enjoying their work. Life would be less bright for me and my brethren if we were forced to do what we enjoy most, less. Why is this? What is the hang-up with this retirement thing?
Zig Ziglar, God rest his soul, pointed out to me 30 years ago what retirement really means. I only met Zig once and it was enough. We talked and shook hands. In that short meeting I confessed to Zig I was going to cash it in and sit around reading all day. Now Zig is a good guy. He didn’t say nasty things to me, but for the smallest fraction of a second his face had a tell. I knew Zig was going to tell me something profound.
He told me to go home and verify what he was about to say. He said, “Look up the definition of retirement in the dictionary. It means used up, worthless, ready for replacement.” Worthless! I am not used up or worthless!
I did go home and check the dictionary and Zig was right. This whole retirement thing was a BS story. Years later, when it was cool to retire early, I came across the FIRE (financial independence, retire early) crowd. I love the concept of simple living and frugality. It was frugality that led me to the community, not the early retirement thing. Now CNBC and the Yahoo newsfeed have a story of somebody who retired at 12 while working through middle school on a regular basis. I’m still not buying it.
Retirement is a stupid goal. Sorry. But it really is. Who works hard, saves and invests, only to reach a goal of worthlessness? An idiot, that’s who. I’m NOT used up! And neither are you. You retire (or is that expire) when you take your last breath. We need a different meaning for retirement.
We need a word—don’t wait for me to provide one because I don’t have one that will sell as good as “retire”—which will convey what we mean better. I’d sue CNBC if they ran an article saying I was retired, used up, worthless, ready for the landfill. (Okay, I wouldn’t sue. The additional traffic to this blog would allow me to swallow my pride.) Those smiling faces in pictures in the articles saying these people retired at 32 are really grimaces. To imagine the world looking at me with a headline over my face saying I’m retired, useless, past my prime, would irritate me to no end.
New World Order
If we can’t find a better word, we need a better definition for the word we are using. I recommend we lobby the dictionary industry until they add one more definition to the word retire. Here is my recommendation: Definition #38) A change in career path.
It is simple, easy to understand and captures what is really meant.
I see so many people now in this community doing the retirement thing and with rare exception they are only doing something different. It was only a career change! I met husband and wife teachers a few years back at Camp Mustache as they were in the last throes of gainful employment. Their goal was to travel the world and travel the world they have.
But they still earn money while traveling! She writes romance novels and is making money doing it. Last I checked writing took work. It might be easy pushing nouns up against verbs; the real problem is knowing which nouns and which verbs. Another retirement foiled and I am happy to share it with the world these, ahem, retired teaches are not used up or worthless.
Pete over at Mr. Money Mustache catches hell on a regular basis for being a hypocrite. You call somebody a hypocrite and you’re asking to get your beak busted. The argument against Pete is simple. Hey, buddy, you’re not retired. You write a blog. Pete is a gentleman. Me, I’d send a return message with the international sign language of my middle finger. Christ, people! If anybody embodies the FIRE community it is Pete! He gives us Definition #39 to the word retire: Doing whatever the heck you want with your day.
Pete is not used up, people! He walks a different path, a path where he spends inordinate amounts of time with his wife and son. That is not retirement by the dictionary definition. It’s the exact opposite. A dad raising his own kid? What has the world come to? This is what we call worthless now?
The Real Retirement
There is only one real retirement and it is six feet under. Nobody I know of has a goal to reach the finish line in life. (Okay, there was a nut job over in Tupelo back in 38, but I digress.) Life is a journey and we need to stop getting hung up (nice choice of word, huh) on quitting our jobs. Seth Godin wrote a short book on the subject: The Dip: A Little Book That Teaches You When to Quit (and When to Stick). It’s a good book. You should read it.
Life is grainy. We do things for a while until we get sick of it and then go do something else for a couple years. There are been so many phases to our lives.
I grew up on a farm and after a short stint in town returned to where I felt most at home, the countryside. Before long my 10 acres of the world had chickens and steers. The work was hard, yet satisfying. I did it for more than 15 years. Then one day it ended. I had a blog to write and other things I wanted to try in life. I fought back tears as the last of my boys were loaded on the cattle truck. I promised myself I could have steers again someday. We both know the odds of that are long. I retired from farming for good. (Unless you count the 25 chickens running around the place.)
My tax practice evolved over the years. In a way you could say I retired several times from the tax/accounting business. I retired from doing taxes by hand back around 1988. Didn’t fight tears when that one hit the trash can. Go figure. All my verbiage about loving my work and nary a tear for a tried and true method of tax preparation used successfully for millennia. (It worked for the Sumerians it should be good enough for me.)
I played janitor for a year and retired from that one mighty quick. Okay, I guess a guy can get used up in certain cases.
The whole point of this discussion is to convince you, no, impress upon you it is okay to change course in life. Experiencing new things is NOT retirement. Ms. Olson enjoys traveling with her husband and writing novels. Not used up! Pete loves telling his story and spreading the gospel of frugality and responsible resource utilization. Not used up! I found my calling early in life and kept doing it. Not used up!
And you, my good friend, are not used up. You are not retired; just tired. You need a nap. Go take one. You need a change of venue. So change it. You want to experience something else, something new. By all means, experience it.
Stop worrying about retiring young or at any age, for that matter. It’s not about getting used up, or whatever definition you want to apply to the word retire. It’s about living life right, with meaning, with purpose. The truly retired disappear, never to be seen again. You are not retired and never will be until your dying breath. And that is a good thing.
It’s about living the life you choose. And if that is what you meant by retire, then you keep smiling from the news feed. I’ll smile with you.
Tax season is officially over and not a moment too soon. As much as I love the work, when months go by without a day off it begins to wear on me. The worst part is the sitting. Too many hours planted in a chair coupled with sleep deprivation and health is not getting the attention it needs.
Loving something as much as I love tax work is also a challenge for people around me. Mrs. Accountant is an angel, allowing me the opportunity every year to disappear for months to help complete strangers and semi-strangers with their tax, accounting and financial problems. My daughters have learned from an early age dad is a very intense man when it comes to his work.
Work has never been a four letter word for me. (Considering my profession you would think I could count to four better.) Growing up on a farm meant everything was work, but not work. Running to the creek to fish was something you did. Planting in spring was fun, not really work. Harvesting was an addiction; sleep was hard to achieve until the crops were off the field. I know of no greater pleasure than watching a barn filled with bales of hay, placed there by my own hands. There is no greater thrill than to see the milk cooler fill each day to the rim. A full bulk tank meant money, and therefore, life. It was a good life and I had no idea what the real world was like outside my vision horizon.
Formalized work is another story. Working on a farm is just doing stuff you feel like doing. Calling the cows for milking was more pleasure than work. Even the farm dog knew when it was time to sic’em. Our worldview was narrow, yet innocent. And there is something to be said for ignorant innocence.
But I was smarter than the rest of them. And restless. Never satisfied, I had to know what was on the other side of the hill. “Greener”, you say? Well, I gotta see that for myself.
The family farm was reaching the end of its lifecycle and the world would open before my eyes. With an optimism only the ignorant can feel, I headed out into the world as the family farm took its last gasp in bankruptcy court. The cows were gone and some of the land. The homestead and most of the land (the core holdings, for sure) were preserved in the family name. I had different ideas.
On one hand I say work doesn’t bother me, but you may have noticed I have yet another hand. Neat, huh? With this extra hand I’m lazier than shit. I wanted nothing to do with the daily grind and obligations of milking cows. Working for the man would never cut it.
Well, of course, those lazy-ass business owners have it made. Hire a bunch of slaves, ah, I mean employees, aka team members, to do all the work while I did the one thing I really enjoyed: counting the money.
This whole early retirement thing is an alien concept to me. Retire early? From what? My plan was to never start! Take that Mr. Money Mustache. Work until you’re 30. Pftt!
Unfortunately the world is not always kind to idiots, ah, innocence. I had a plan and life had a few plans of her own for me.
The Best-Laid Plans of Mice and Men
The best part of living in the middle of nowhere is that you never develop the bad habits of the world at large. As a kid, my biggest expense in life was dropping money into the plate Sunday morning. My senior year of high school I think my entire spending for the year never broke $200 and most of that was enforced school spending which pissed me off to no end. Come to think of it, I still have a burr in my shorts over it.
By nature I was fiscally tighter than a rusted ring shank nail. Working at saving was like saying I have to work to keep my heart beating. The darn thing does what it does without any conscious input by me. Money, saving and investing worked on the same rules for me. And good thing. If the world had taught me the bad money habits most people have you would not be enjoying this wonderful story this very moment. (I am not conceited. But I am right.) It was thrift which gave me a fighting chance to pull the stunt I was planning.
I needed to find a business where I could work very part-time and screw around whenever I wanted. My preferred screwing around was books. I loved to read and still do. I read every day. That is one better than eating because I periodically fast.
Out of high school I was still working on the family farm. A few months later it was gone. With few options available in the Rust Belt during the early 1980s recession I went to work for my dad’s agricultural repair business. Talk about work. This was nothing like farming! Hundred hour work weeks for minimum wage or less (I worked for family) educated me about the “real” world damn fast.
Bookkeeping, taxes and payroll all looked mighty good. Sure beat crawling into another dirty silo. (My brother, on the other hand—remember, most of us have two hands—enjoyed the silo work and still does. To each their own.) My dad hated paperwork so the task fell to me. For a few years I had my side gig while busting tail another 80 hours a week turning a wrench. Don’t feel sorry for me though. The lessons learned from hard work are never lost.
I learned I needed to get that side gig going and going fast. Sick of the ag industry, I left the family business and moved into my own home. I was 22. For the first time in my life I could indulge my reading habits with reckless abandon. Lucky me. My side gig was 50 or so tax returns each spring. Investments rounded out the rest of my financial needs.
My first home wasn’t much to look at. Houses are cheap in the boondocks. I paid $12,000 and change. Don’t quote me; I don’t recall the exact number, but I am close. I had money; I had books; I was happy as a pig in shit.
Then I met Mrs. Accountant.
From the FIRE to the Frying Pan
I would never have amounted to anything if Mrs. Accountant hadn’t found me and shown me the way. A year after we met we were married. Now some folks would say I went from the frying pan to the fire, but it ain’t so. I was in the FIRE (financial independence, retire early) and Mrs. Accountant kicked me back to the frying pan. And good thing.
Frugality allows for some serious laziness. When needs are small and desires nonexistent, so are money needs. Without debt, the required money needs are rather small. Any side gig would do. But the one thing I love was unfulfilled.
As Mrs. Accountant and I prepared for married life, the minister marrying us required we take marriage counseling. Innocent enough. As the counseling reached its end the minister commented on my lack of employment. He offered me a job as janitor (that’s custodian to you!) for the parochial school attached to the church. What could I say? I accepted. As memory served, I fought back tears at the time. Once again I was working a dreaded job by the clock. I thought nasty things about God. In his house, of all places.
Don’t let the whelming tears in my eyes cause you any emotional trauma. The work of a janitor is honest work and I took to it like a duck to water. The main reason it took so well is I discovered a janitor can get his work done in a fraction of the time needed. This allowed plenty of time for reading on the clock. God was coughing up a hairball for your favorite accountant!
Regardless how honest the work and wonderful the people at the church and school, I had other plans. It was during this one year swilling toilets, picking up puke and mopping floors that I decided on my official side gig: tax preparation.
I had it all figured out. I’m a smart guy and I’ll tell ya about it if you ask. If you don’t ask I’ll tell ya anyway and wonder what the hell is the matter with you. Tax preparation was the perfect job for a guy that really wanted to spend all day reading. For two and a half months I worked reasonably hard (don’t take on too many clients now) and for nine and a half months I do . . . nothing! Ye-Haaaaa!!!
Back Into the FIRE
Remember how I told you I was a smart guy? Well, I lied!
The first few years in my retired side gig life were peachy. Mrs. Accountant and I had a new home and my office was in the remodeled basement. Life could not have been better. This is where a medical condition I have affected my so-called intelligence.
I record everything in business. I knew how many returns I did every single day. I still have the handwritten pages next to my desk going back decades. I can tell you how much money came in on any given day and how many returns I prepared that day. It was a sickness. Now the records are computerized in QuickBooks and Excel worksheets so I can micro-analyze the data even better.
There was only one goal I ever had in life: beat last year’s numbers. At first this was a noble endeavor. The numbers were small and tacking a few onto last year’s performance was no big deal. But compounding, as we all know around here, takes on a life of its own.
No longer satisfied with my performance, it was time my side gig went viral. (This is before there was such a thing as “going” viral. Back then viral meant you needed to see a doctor for that little indiscretion you had while traveling overseas.)
I wanted back on the farm so I bought my current office building and farmstead. The year was 1995. A mere five years after starting my serious phase of the tax side gig I was going all-in. The side gig was now a full-fledged business. I had employees working in my basement, but now we were putting on our big girl panties. (This is a family blog so there will be no pictures of people in big girl panties.)
I was back in the fucking rat race. (So much for a family blog.) An office building and more employees meant . . . WORK! You may not know this, but I have a life threatening allergic reaction to work. I break out in hives and need plenty of rest to recover from any such incident.
Truth is, I was happy. The business had plenty of room to grow. And grow it did. A storefront sent a bulging client list into obesity. It worked for a few years.
Payroll and bookkeeping were minor parts of the company. A one-man (or woman) summer staff was all that was needed. Seasonal help made the office hum like a beehive. I lived for the thrill of tax season.
But I still had the sickness; beat last year. And beat it, I did. Within a few years I blew past 2,000 tax returns and was turning people away. Stress showed up about the same time. It was too much. My disposition was not conducive to this kind of business. I was never going to be a Bill Gates or anyone who would take a small tax practice to a multi-location regional or national firm. I knew what the price would be and refused to play. It was time to stop beating “last year’s numbers”.
I honed the client list down to 700 over the next few years. I was happy again. I was doing what I loved most: reading a lot, preparing taxes and researching tax issues. I was a pig back in the schmoo.
But . . .
Do we see a pattern here?
All that reading and knowledge really should be put to work. Right? Well, smart as I am, I started thinking. I pay property tax for the full year for the full building. I pay for building upkeep. I pay for computers. On ad nauseam. My thinking was simple. Computers cost exactly the same whether I use them for three months a year or if they are used all year long. What a concept!
So I started adding more payroll and bookkeeping clients. I felt I could hire and retain better employees if I could give them full-time work instead of seasonal jobs.
For several years I turned my practice into a job. Bookkeeping and payroll burst through the seams. Since my focus was tax, the payroll and bookkeeping never turned a profit of any size. Toward the end it even lost money. I’m a tax guy and know it.
I built strategic alliances for bookkeeping and payroll (yes, I know I still owe you guys a post on this outsourcing program). Most payrolls are handled outside my firm and bookkeeping is headed in the same direction. Yes, computers don’t cost more if they are used all year, but if there is no profit, why bother? Now the strategic alliances turn a profit, so feel free to contact my office for payroll and bookkeeping. We do it better and cheaper now. No stress for me; better service and price for you. And I make money. And last I checked that is the reason I am in business; side gig or no.
Danger, Will Robinson!
Tax season is over. I am writing from home. The office is quiet. My office manager and one tax preparer are all that remain. Friday’s are very short days. Only one full-time employee will haunt the halls of my practice until the next tax season. Even the office manager is on truncated hours. And me? I am writing, reading and speaking. My schedule is full. Too much traveling for my taste, but necessary for the life of a blogger who wants to turn it into a real business.
And now we get to the real issue of this blog post. I hope you read this far.
I share my story because I want you to understand the dangers of a side gig. There is one last thing I haven’t told you yet. It is the worst possible thing ever anyone is forced to do.
My practice is more a side gig than ever again for the first time in years. The long hours of tax season are over and my lusts have been satisfied. I accomplished a lot and missed a few things I really wanted to get done for clients. Now I look into the maw of a summer without payroll issues. Some tax work still comes in. It is easier to finish a couple hundred tax returns over nine months than a thousand in two and a half. Yet my heart is heavy.
It is not lack of work to fill my days weighing on my soul. It is the people. My employees. Summer work is done and what started as full-time opportunities turned into seasonal work. As this tax season progressed I knew what had to be done. Good people, people I enjoyed working with, would no longer have work to do in my practice.
I am a coward in these matters. My office manager broke the bad news. My front desk: gone. Tax professionals: gone. Karen, my office manager, keeps the place running smooth. Dawn, an undiscovered tax prodigy (Don’t let it get to your head. Dawn likes to read this blog so I need to keep it real for her.) who somehow wandered into my sphere of influence is the sole remaining full-time employee. There is enough work for her to do as long as I send her on research projects for upcoming blog posts and for extensions and wayward taxpayers seeing the light.
Two years ago Mr. Money Mustache gave me a great honor by pointing out my office and work. He meant well and we get along fine. I do his tax work and even advise MMM on tax matters. When I feel punchy I tell people I’m the financial consultant of MMM. It impressed the shit out of people. He is a fine man and I will always be grateful for what he did for me.
Two years ago it created a huge challenge in my business. The side gig became the worst job ever. MMM has a huge following and it is hard to control the flow. A blog is easy by those standards. More readers are relatively simple to manage. Not so a massive influx of tax clients. There are only so many hours in a day and they were then all consumed. I learned new skills from the challenge.
Two years ago some people got jealous of my success. Why did I get such an honor from MMM when they deserved it? Worse, I had two jealous employees sabotage the business. They couldn’t stand an ‘ol farm boy doing well on such a large stage. Those employees went and the ones they poisoned.
New employees arrived and were trained. Life moved on and my practice grew in the right ways. There is still room for improvement and you can expect that from me as we move forward. There was no doubt I was out of my league two years ago when things hit.
And that is the danger of a side gig. Loving something can quickly turn into an obsession. A seasonal or part-time side gig means you will let good people go. Make no mistake, I fully understand the consequence of my actions. Families are affected.
And I never realized how many times I would have to tell people “no.” There is only so much of little ‘ol me to go around.
That is the real danger of a side gig. You do it because you like doing it. Then it takes over. Learn from the experiences of an old accountant from the backwoods of Wisconsin. Love can be very painful. It is not a character flaw; it is life. Know this before going in.
The side gig is the greatest thing on Earth. It will take you further than you ever imagine. Whoever though my practice would do taxes for Americans on the other side of the planet? Not me. Not even a wet dream. (Not even a wet dream.)
It started when I had a great business proposition for MMM that went beyond anything I could imagine. If I would have known how my life changed the second MMM interrupted my presentation three years ago in Seattle, I would have run from the room and never returned. You can’t mentally handle what the world has in store for you. You just have to take it as it come.
I’m still a farm boy from the middle of nowhere. Things like this don’t happen to people like me.
It was just a side gig, for Christ’s sake. What the hell went wrong?
Sometimes accounting can be a downright boring subject. It is the job of your favorite accountant to spice it up a bit with stories and jokes so the message resonates and therefore gets through. No matter how brilliant my idea to increase wealth or lower taxes, it is worth nothing if I can’t keep you reading to the end.
Many people find blogs like this by accident. The people hunting for blogs like this already are open to the concepts. Not so the wayward traveler finding her way here from search engines. I write for the choir, but always consider the wayward, too.
I use stories to convey the message. Money is fun to read about and have. To keep readers engaged I impose secret formulas to keep them coming back. It’s almost like a sickness the reader can’t quite put her finger on. How come I am so draw to this blog about (egads!) accounting, saving money, investing and retirement? the wayward soul asks.
Let me be clear. The message is simple: Save half your gross income and invest in a broad based index fund. All done. Now you have another 23 hours and 58 minutes to fill today. Money stuff is done.
Easy as it is, I still need to make a living writing this blog. I enjoy the writing process and telling stories. Changing people’s lives for the better is a bonus.
Didn’t See It, Did You?
The opening to this post contains a hidden secret. Writing is generally done in solitude and this writer gets lonely sometimes. His mind also wanders. Telling an engaging tale is no longer enough. Your friendly accountant includes a special something in about 10% of posts on this blog and you probably missed all of them.
Writing time is playtime for me. Everything is choreographed with a purpose in mind. Sometimes I deliver better than others, but under the hood there is a structure holding the whole thing together.
During tax season there are fewer hidden secrets within my posts due to time constraints and because I am sleep deprived. Writing a quality post takes time. Then I have to edit the thing until secrets are interlaced within the text.
A few weeks back I received an email asking if I knew my writing creates words in unusual places. The reader discovered the secret. But even this reader had no idea how deep the hidden messages are buried.
Take a look at the opening section of this post. The first letter of each paragraph spells SMILE. A casual reader will miss it every time. Of course this is waaaaay too easy. I’m a numbers guy so using the numbers in pi (3.14159265359) or a Fibonacci sequence happens more than once. The first letter of certain words, paragraphs, or even certain letter spacing is part of the game. There are a few instances where I use the screen width (will not work on mobile devices) to get letters to line up to create passages at angles across the page. Think of it as The Wealthy Accountant’s Bible Code.
Writing (and reading) should be fun. Finding hidden passages is only one kind of Easter Egg hidden in my work. If you crack the code you will gain access to work of mine not widely disseminated. Over the years I set up simple blogs with personal musings. They are not meant for public consumption. But I love to hide the url or other clues to my hidden writings to see if anyone figures it out. Since search engines don’t include these blogs in their search results I know when an intent reader finds the clue because I see the one lonely traffic data point in Google Analytics.
There is a second kind of hidden message buried within the tomes of this blog. The best way to describe these Easter Eggs is to point one out, kind of. Last Christmas I wrote a post titled: Silent Night. The storyline is true, but underneath is a reference to a movie that has a depressing Silent Night. Your job is to figure out the movie I refer to.
Of course, none of this searching for clues is required to enjoy this blog. However, some people keep coming back again and again. I provided something extra for these people who want to pull apart my work for additional meaning.
Yeah, I know. I’m messed up in the head. (Wasn’t it good enough to just write an interesting post and move on? No.)
The Sick Bastard in the Room
Before you shoot me an email asking for the location of all the secret messages, know that I plant the messages, but don’t keep a record. Kind of fucked up for an accountant not to keep a record. What can I say? I am a sick bastard.
Imagine the thrill I have when accidentally running across one of my previous word games! After a year or two I forget (I forget a lot sooner) where I buried the cash box in the back yard. Me bad.
All I can tell you is have fun. If you don’t like puzzles, feel free to keep reading as always. If you like a challenge, pick at the carcass of a few posts and see if you can rip some flesh loose. Some stuff requires inside information. Don’t worry about those Easter Eggs. Maybe I said or did something at a conference and then include a subliminal reference to the event only those in the room at the time would catch.
There are still plenty of goodies for everyone. Most of all have fun.
The End of another Tax Season
As you may have noticed, I wrote a bit shorter the last week or two. I needed the time to get as many tax returns as humanly possible out the door. Think nice things about me. (Or not. I’m good either way.) I also leaned toward simple subjects to write about (for me). I am burnt out on taxes so another tax problem to work through could have sent me into a psychotic rage. My brain just not could take another tax return right now. Besides, you wouldn’t want me to lose it on page, would you? (You in the back. Yeah, you. Sit down and shut-up. One more attempt to get me to flip out and the police will be involved.) (SECURITY!)
Okay, I like to have fun. Tax season is winding down and I am getting most stuff out the door I wanted done. There are a few things I need to focus on after the due date, but it is manageable. Regardless, I will have my life back. Lack of sleep has me a bit punchy. As if anyone could tell.
So this post isn’t too short, here are the posts coming up later this week:
Wednesday: The Risks of a Side Gig. A side gig is the easy way to check out of the rat race early and fill time once retired. But watch out for the side gig that becomes you.
Friday: The Trauma of Retirement. People don’t understand how traumatizing retirement can be. If you think you can save a ton of money, tell the boss to “fuck off” and travel the world, “See you in the funny pages (yeah, people used to say that 60 years ago), you have another thing coming. It takes a plan if you are going to avoid the emotional pitfalls of early retirement (retirement at any age for that matter).
It’s the best I can give you, this last blog post of the 2017 tax season. I hope all your returns were pleasant. I love all you readers. Thank you for stopping by and being a friend. Hopefully we can share more ideas over the rest of the year to make our worlds a better place. (Yes, I meant to say worlds, as in, we each have our own world we live in. How our worlds intersect and interact is what we call reality. Now go on a word hunt.)
Tax season is racing toward the finish line. There are 5 days left, including today. I’ll work every day, even Easter Sunday to get as many returns out before the due date.
The stack of tax returns on my desk is taller than I hoped by this time. Incomplete files are put to the side until all documents are in. All too often clients piecemeal information. This forces me to put these accounts at the bottom of the stack so I can focus on files with all their documents. Every time I open a file I review all the prior work done to ensure nothing is missed. Dribbling in data wastes a lot of time.
The good news is that every return with complete data in the office by April 1st will be done by the due date. In fact, most returns in the office by April 10th will be done on time. There will be the rare exception due to required research.
The days are long and I am beyond exhausted. There is a place past the “second wind” where motivation is based on sheer willpower. That is where I am now. I live for this last week like an addict anticipating her fix. Each year as the New Year approaches the taste coats my mouth. I lick my lips in anticipation. The game is on.
The number of tax returns prepared some days sometimes boggles the mind. There have been a few days where the number claws close to 20. Complex returns slow the pace down to a crawl with some days only moving one, two or three returns from the stack. I hate those days. I want to serve as many clients as possible.
Preparing so many returns takes a team effort. Many returns have the bulk of the data already entered for me. I review most returns before they leave my office. You would not believe the shine a man with 30 plus years experience can put on a tax return.
I am too tired and exhausted to write a high quality blog post today. The well is empty. Monday another post is due and I am not sure what will be left to write. My mind is too focused on real tax returns to waste any speck of energy on a random idea in a blog post. Tuesday the race is over. I will take a day to relax and work around the farm. I’ll get a better post out later on Wednesday as I will have time to think and reflect.
After tax season I have a podcast to prepare for. Around May 1st I meet Jim Collins as he visits the fine State of Wisconsin. In late May I am in Seattle speaking at Camp Mustache 4. I might have two sessions I speak at: one on anti-Mustachiamism (I didn’t know so many people would be interested in that) and a second as a comedy skit. We’ll see how my preparations go before the final commitment is made. Standup comedy is a lot more work than you can imagine.
Rather than keep rambling, I encourage you to read a few posts appropriate for this time of year for those of you going through withdrawal symptoms. (Gawd, that Wealthy Accountant guy can sure spin a fine tale.) (Note: I am not conceited. Just tired as hell and getting a bit punchy.)
Knowing When Not to do it Yourself is a good start. Here is a post on filing an extension to pay and/or file your taxes. A word of warning: When tax season reached its conclusion last year and I wrote, egads, about tax stuff, I received a very nasty letter telling me how much I suck and that used to be such a great writer but now suck completely. I think the guy left a comment too. Go check it out.
For five days sleep will come in fits. The taste coats my dry mouth. The release when it is over is like nothing else you can experience.
Don’t cry for me, however. I am doing exactly what I love doing. This is what I want; this is what makes me feel alive. The numbers. The game. Some people desire retirement so they can travel, fish or golf. Except for that year I spent as a janitor, ah, custodian, I have never worked a day in my life. It isn’t work when you have this much fun.
Tired is a good feeling. Then the anticipation builds slowly all year until the holidays arrive. Then the sickness sets in hard again. The addict is ready for his next fix.