How long does it take to crawl out a hole you dug? How long to formulate a plan? Execute it? Reach your goal? Financial independence (FI) is a goal most people have. Some want it bad at a young age and work toward that goal. Others wait until Father Time ticks closer to the traditional retirement age. Still others get a wakeup call when their body fails in some way.
Before this blog I was a tax Endorsed Local Provider (ELP) for the Dave Ramsey organization. His story resonated with me. I agreed with Ramsey that debt is the acid which destroys the vessel that holds it. Ramsey is fanatical against any kind of debt; I am a bit more moderate in the faith. Still, debt is a problem for many people.
Before FI can be achieved debt first needs to either be eliminated or seriously curtailed for most people. The Ramsey plan is to eliminate all debt and invest in actively managed mutual funds offered by a financial advisor. If you read that last sentence carefully you will begin to understand why I could no longer in good conscious be a Dave Ramsey ELP. Ramsey’s philosophy is right on so many levels and wrong on so many more.
Debt in and of itself is not bad. It’s just a thing. Too much debt is the real issue. Credit card and similar high interest debt is caustic, no doubt. A home mortgage can make all the sense in the world. Even a small, short-term business loan is a positive in many instances. A blanket faith in no debt is something I don’t subscribe to. When very wealthy people borrow for a home or investment it is frequently the right choice. Borrowing $10,000 for working capital in your business instead of selling a profitable income producing investment I will argue is a good call, especially when you consider the tax consequences.
Here is where I will get into trouble. I am NOT a fan of investment advisors. Most are broke or at least have a smaller net worth than their income level would suggest. It’s matter of physician, heal thyself syndrome. Investment advisors are broke because their advice is not worth as much as they claim or they refuse to save at the required level to have an expected level of financial wealth compared to their income. In other words, they don’t take their own advice. Over the last three decades it was a rare occurrence to prepare a tax return for one of these professionals where they had a high net worth. They had high income, but not much to show for it.
A Wise Man Once Said
At Camp Mustache a few weeks ago, Doug Nordman, a retired military guy, gave a presentation on the stock market over his adult life. Once again he dropped one of those golden nuggets I am only too happy to pick up. He said financial independence, your net worth, was a product of your savings rate and the fees you pay on your investments. If I were so wise I would have come up with something so simple and elegant.
Armed with the simple knowledge of FI as offered by Nordman, we return to my days as a Ramsey ELP. Understand I agree with Ramsey on many levels and recommend his program. What he has produced is powerful and effective. The reason people following Ramsey need a financial advisor is because they have shown no talent to do the basic steps necessary to turn debt into a tool or eliminate it and invest intelligently on their own. My hope is you can eventually do it on your own if you are a Ramsey follower. Ramsey is not cheap and neither are investment fees in the broker’s office. It all hurts your FI goals. Ramsey and the broker are necessary only until you can walk on your own. And no, I don’t have an emergency fund. Long before you reach FI an emergency fund is not needed. You have plenty of money accessible for nearly any possible emergency.
Plan! Ain’t Got No Plan
Ramsey convinces people they need a plan. He even provides the skeleton of your plan in the form of his financial Baby Steps. I like it! But here Ramsey and I disagree again. Ramsey says you should pay off low balance debt to start the snowball rolling. His goal is based on psychology. By eliminating debt sources quickly it will give you a psychological boost to remain faithful to the program. All this might be true, but you are an adult. Right? If you are dug in deeper than a tick on a hound you need to pay off the highest interest rate debt first! If you have psychological problems might I suggest a lobotomy? You can either dilly dally around in poverty of you can subscribe to the Wealthy Accountant method and get your tail to FI as fast as you can. That’ll do wonders for your psychology too.
Goals. The thing people love to hate. Don’t worry, I will not put you through a goal setting program. . . today. I want to get to the premise of this post first. Goals are well thought out things you want to accomplish; plans are what you create to get there. We will focus on plans.
The first goal most Ramsey clients had when they walked through my door was to eliminate debt. FI wasn’t even in the cards. These people couldn’t even fathom a serious positive net worth having lived in financial Armageddon for so long.
It was time consuming, but it had to be done. I had to get these new clients to think ahead to the next step. Paying off debt is not unilateral. After crisis debt levels are reduced it is better to institute saving/investing while continuing the debt reduction process. After crisis mode you want, for example, to invest in your work 401(k) at least to the level of the employer match. This is free money! It is a small start, but all journeys begin with the first small step, a Baby Step.
As people worked through the game plan to reduce debt and build a serious net worth, they became disheartened. They visualized in a linear fashion the reduction of their debt load. It actually works exponentially. (Before you math geniuses tell me I am wrong, read on.)
The linear debt reduction approach might mean it take three years and two months to eliminate debt. That is a really long time for most people to wrap their mind around. I always tell them not to worry; it will go faster. But the numbers? The math says three years and a bit! Don’t worry, I assure, it will take two years and a bit, plus you will have a modest amount invested as well by the time your debt is gone.
Why does it happen faster than planned in 90% of the cases? There are two reasons. First, when you pay off high interest debt it makes a larger difference than simple math dictates. (It also illustrates how caustic high interest debt is.) When you make an extra $100 payment to an 18% interest credit card you just cut your spending $18 per year, every year from then on unless you are dumb enough to re-dig the hole. (Note: reduced spending (interest is spending) is tax-free. The extra cash flow to your budget from reduced spending is never taxed!)
The second reason is the coups de grace. Your debt load dies faster than planned because you have a plan! For example: you allocate $100 a month for the light bill. Now, aware of a light bill ceiling you do things to keep the bill below $100. Dining out is even easier to reduce as you learn to cook more meals at home and brown bag lunch at work. Your budget, your plan, assumed a $100 light bill. When you reduce the bill to $92.75 you have more free cash flow in the budget to illuminate debt. And additional reduced debt on an 18% credit card snowballs fast. Living a mere $100 below your original budget per month used for additional payments on high interest debt does not reduce your debt only $1,200; the additional reduced debt no longer accumulates interest! The first additional payment reduces your interest expense by $18 the first year. But the second payment goes even further because more goes to principle because there is less interest to cover due to the prior month’s extra payment.
Time for FI
Eliminating debt is only the first step. The second step is FI. Once debt is adequately reduced it is time to start growing your wealth.
A few years back I ran across a blog called 1500 Days to Freedom. Here was a guy, Carl, who planned on building a million dollar debt free portfolio in 1,500 days. I showed the blog to clients and staff periodically with my sage wisdom, “He will get there sooner than planned. Just watch and see.” Little did I know Mrs. Accountant and I would spend a weekend with the guy years later.
Carl’s investment portfolio broke the $1 million mark in under 3 years, but he still had a small mortgage. Not all debt is bad so he kept the mortgage (for now) and upped his investment goal by an equivalent amount. Goals/plans are like that. You can change the rules when it serves your needs and the police rarely get involved. He reached the new goal in three and a half years. Go figure!
So why did Carl do so well on his wealth accumulating phase? The same principle applies to wealth accumulation as applies to debt reduction. Your basic plan assumes you meet a minimum amount of investing, but you usually beat your goal, if only by a bit. Those extra bits compound fast! Also, most people take a ruler and strike a line from the lower left of their goal chart to the upper right. But you forget the first month’s investment also earns money so you have more in month two. It compounds and keeps compounding!
Smart readers will notice I said month two is more than month one as if investments always go up. Good catch guys, but there is one last mystery to solve in the rapid wealth building industry. I learned this trick from Nick Murray. When I was in the investment industry back in the 90s, my broker/dealer brought in Murray to speak at our annual conference. Murray was retired from mutual fund sales, but had a long career starting in the 60s.
What Murray introduced was the concept of owning shares rather than account value. Murray said it was more important how many shares you owned than account value. If the market declined your dividends and new investments bought more shares. The more shares you owned equaled more money when the market went up.
You many notice this is a different way of looking at dollar cost averaging. People freak out when their plan is delayed due to a market decline. Market declines happen a lot, but it always goes back up and more! Always!
When you focus on how many shares you own you are less likely to freak out. Regardless the severity of a market decline, you still own the same number of shares. Nothing really went down if the value is still in the companies the market is comprised of. Get it?
It messes with the mind how fast money can work in your favor. You’ve experienced how fast, and bad, it can work against you. It works even faster when you put the power of wealth building on your side.
You may have a plan to retire your debt. You may have a plan on reaching FI or a million dollar net worth. Don’t sweat it.
You will get there before you arrive.
Every so often I say something that starts a firestorm or causes my inbox to overflow. Since the laws of nature state I am one human being and have a limited amount of time to read and answer emails, most emails go unanswered unless from a current client.
It may have been something I said in a podcast or new readers enjoying a deep drink of my lovely prose triggering the question in question. (Yes, I wrote that intentionally.) The latest question storm revolves around retirement plans. The questions are all the same with slight nuances. As a human being with limited time to dedicate to cold call questions, I left most unanswered and the few I did respond to were given quick and to the point answers. And as I fired off these quick answers it occurred to me I misinterpreted the question asked in some cases. A fresh blog post on the subject should clear that up. If not, some ointment might also do the job.
The question stuffing my email is this: Can I have more than one retirement account? My accountant told me I can’t contribute to an IRA if I have a retirement plan at work. Is she right? We will address this line of questioning in a bit. There is a small twist to the question from some readers. Can I have two retirement plans in my business or side gig? I sent many a quick answer as follows: In most cases there is nothing in the Code disallowing such action, but it would be impractical to do so. My answer is wrong! I should have left questions unanswered if I didn’t have time for an adequate response.
The Skinny on Retirement Plans in Your Business
My answer wasn’t completely wrong, just wrong in many cases when you include the facts and circumstances of the questioner’s situation.
A small business can have two retirement plans, just not at the same time! Your side gig may have a solo 401(k), what Fidelity calls a Self Employed 401(k). The side gig may take on a life of its own and employees enter the scene. The solo 401(k) is no longer allowed. You have many options. For example, you might replace the solo 401(k) with a traditional 401(k) or a Simple 401(k) or a SIMPLE IRA. We will leave the characteristics of each retirement plan for another day. Today we will focus on when you can have more than one retirement plan at a time.
What is NOT allowed is a SIMPLE IRA plan and a 401(k) at the same time. Other restrictions exist. For example, a SIMPLE IRA cannot be shut down during the year. You must inform employees the SIMPLE plan will terminate at the end of the year before November 2nd of the current year.
Each retirement plan has its own limitations. The real question I am getting in emails is: Can I stack retirement plans to increase my retirement plan contributions? The answer is yes in most cases, but not within your business.
If you have two employers you can participate in both employers’ retirement plan as long as you don’t exceed the contribution limits. The 401(k) annual contribution limit is $18,000 per year with an additional $6,000 per year allowed for taxpayers age 50 or older.
Another limit facing all taxpayers in the ultimate retirement plan contribution limits of $54,000 annually, $60,000 for taxpayers age 50 and older. This $54,000/$60,000 limit includes the employer’s match! If you plan on maximizing your retirement plan contributions you need to track the employer match as well to avoid exceeding the limit.
If you have a 401(k) at your job you are allowed a solo 401(k) in your side gig or a SIMPLE IRA or other retirement plan that fits your needs as long as contribution limits are not exceeded. There are some limitations if you have ownership in your employer.
Some government employees have a 457 plan. The 457 contributions are not considered salary deferrals so you can load up the 457 plan while simultaneously filling a 403(b) or 401(k) in a side business or separate employer. The $18,000 ($24,000 age 50 and older) applies to the 457 plan and a 401(k)/403(b) plan at a separate employer. In effect, you can drop $18,000 into each retirement account.
The 457(b) plan also has a unique feature for taxpayers age 50 and over and within three years of retirement. Readers in this situation can reader more about the catch-up features of their retirement plan here.
Personal Retirement Plans
The questions that perplexed me the most claimed their accountant said they can’t contribute to an IRA if they have a retirement plan at work. It did not make sense to me at first. Unless limited by the $54,000/$60,000 limit, you can contribute to an IRA even if you have a retirement plan at work. What I think happened was readers misinterpreted what their tax professional said. IRA contributions are allowed, but may not be deductible.
Traditional and Roth IRA contributions allowed begin to phase out as your income increases until no contribution is allowed. However, a spousal IRA may be allowed if only one spouse has employment.
Too Many Choices
I included multiple links in this post rather than muddy this discussion with too many sidebars on separate types of retirement plan rules. The real problem is the number of choices. The reason so many ask about their retirement plan options is because the choices are endless. There are a limited number of plans, but the way the plans can be used produces a mind-boggling amount of choices and restrictions. My office is filled with books on this stuff. The answer is not always as simple as we would like it to be. (If you want to get serious about how retirement plans work, here is one book to start with.)
I think it is a mistake to answer these kinds of questions in a quick fashion as a favor to the reader. A quick, short answer means I didn’t crack open the books and verify what was being asked. This means I probably gave a half answer or worse, an incorrect one.
If I don’t answer an email question, do not be offended. I am not a free tax service so when I answer a quick question it is out of weakness. As this blog grows that weakness is getting crushed and that is a good thing.
There is a better chance I will respond to a comment. Answering the same email 68 times is a poor use of time when I can answer it once for all to benefit from.
It is with heavy heart I must inform you I will no longer answer personal tax questions unless you engage my services. I accept a small number of new clients per year. If you are looking for consulting I have more time available for that. Tax season is already stuffed to the rafters. There is a fee for my time. Rather than try to answer a bunch of questions halfway, I will serve paying clients with a complete answer. Many times I need to do research. I know a lot, but not everything. I open the book often.
Some things to consider: If you want to hire me I require a detailed outline of your questions in advance, plus a copy of your two most current tax returns. I disclose my fee when I offer engagement. It changes from time to time so I stopped publishing my regular fees. Be aware I am not cheap. It’s just a matter of economics. Too many people want me so fees are part of the filtering process.
Consulting conversations are on Wednesday only. I research and run my practice the rest of the week. I dedicate Wednesday to the phone or in person consultations. Be aware I am always scheduled out two months or more for consultations. If you need something this afternoon there is no way I can fit it in.
I love my work and want to serve as many people as possible. To do that I must firm-up my processes. I send all emails to my office manager, Karen, after I give them a quick review. I love compliments, suggestions and concerns I may have said something wrong in a post. I read them all. Karen decides which clients we can take on before contacting them. I accept 3-5 new consulting jobs per week max while I receive over 80 requests per week and growing. Please understand my time constraints.
Finally, I want to let you in on a little secret about tax professionals. When a tax pro prepares a tax return they get paid for the service. Many of these pros feel obligated to answer questions and consult for free because they prepared the return. This is unfair to the tax pro and leads to poor consulting. Tax pros frequently require research. This takes time and time is money. I am not the only good tax guy out there. You become a priority when the work involved includes some income with it. Demand your tax pro invoice you for consulting and demand adequate research connected to the fee-based consulting. This will divert questions from me to highly qualified tax pros in your local community.
Hopefully I whet your appetite on maximizing your retirement contributions today. Use the links to further your education. Use the comments for tax questions and if time permits I will answer your question. You can also contact me if you wish to hire my services. The best news of all: I have no problem working with your accountant to carry out a tax strategy. Once your tax pro knows how to use a tax saving strategy they can spread the good news to all their clients. We need to grow this thing so all middle class Americans get the same high quality tax advice the wealthy do at a price they can afford.
On a recent ChooseFI podcast where I was the guest speaker I mentioned the possibility the backdoor Roth and her sister tax strategy, the laddered Roth, could be going away. Many people heard me say it WAS going away. That is false. It is only a proposal at this time.
Because so many potential tax law changes now whispered in the halls of Congress have the potential to cause great damage to those in retirement or working an accelerated program toward financial independence (FI), now is the perfect time to review those with the highest possibility of happening. A word of caution before we begin. These are only ideas floating around Congress. They are NOT current tax law! Not all ideas whispered in the halls of Congress become law, but all laws start as a whisper in the halls of Congress. There is a difference.
Most ideas for tax law changes never see the light of day or are significantly modified before becoming a law. Some ideas become law in a few years, other may take a decade or longer before working through both houses of Congress and signed into law by the President. As we review the ideas now floating around Congress I will give my opinion on the likelihood the change will take place and how soon.
Remember, this is one guy’s opinion. My opinion carries weight because I have decades of experience. I also rely upon sources outside my own viewpoint, such as continuing education courses I’ve attended, The Kiplinger Tax Letter, and calls to several Congressmen. (It should be noted I rarely get to speak with an actual lawmaker. Usually I speak with a staff member. They can still be very helpful with potential tax law changes working through the system.)
What’s All the Hubbub, Bub?
The Republicans control both houses of Congress and the White House. There is a strong desire to cut taxes on businesses massively while not raising taxes on individuals. This is easier said than done. Cutting the top tax bracket for most businesses to 15% – 20%, while leaving individual rates unchanged, would blast a multi-trillion dollar hole in the federal budget. This is a serious problem.
The only way to make it work is to reduce or eliminate deductions and tax strategies. Congress can pass a tax bill without a tax bracket increase and claim they didn’t raise taxes even if what you owe goes up. But if you pay more in taxes it is a tax increase! So you can get a tax increase while the politicians smile big claiming they didn’t raise anyone’s taxes. Taxes make liars out of everyone, especially politicians.
Some changes make sense even if they hurt the demographic reading this blog. I don’t like the idea many powerful tax strategies might go away, but I understand why Congress may plug certain tax loopholes. Always remember I am on your side.
The original premise of this post started from my statement the backdoor Roth and laddered Roth would go away. I love the backdoor Roth, but it is really an end around of what Congress intended. The current law says you can contribute into a Roth IRA until your income reaches a certain level and then the Roth option is phased out until it is completely unavailable to high income taxpayers. The backdoor Roth is just a sneaky way to do an end around regardless of income. The laddered Roth the same.
Since the backdoor Roth raises very little tax revenue it is an easy target. Money not invested in a Roth IRA might be spent, increasing economic growth, leading to modest increases in tax collections by the government. The real advantage is down the road when the tax-free growth is taxed instead.
Once again, now is not the time to panic. This is NOT tax law yet. It may never happen. It could be effective January 1st of 2018, which is the earliest I think it could happen. A more likely outcome is a January 1st, 2019 effective date. Time will tell.
What all this talk of reducing the advantages of retirement plans you need to kick it in the tail and max out those retirement accounts now while you have the full advantage available. If ever there was a motivation to supercharge your FI goals, now is the time. The backdoor Roth and the following ideas to change the tax code makes waiting to up your savings rate a dangerous, expensive and wealth endangering exercise.
The Bad News Bears
Many of the ideas being toyed with by Congressmen are vague. What is coming out of Congress in whispers are not complete tax code changes. Some of what is reaching my ears requires some background tax knowledge to understand what is probably being proposed. Some of these ideas are so vague I am only making an educated guess as to how the change would be accomplished. Regardless, you need a basic understanding of what lawmakers are anticipating changing in the tax code. It is essential in your tax planning process.
Many of these proposals come from a 2014 tax reform plan that never got traction. As mentioned above, these things frequently take time before they start moving forward. Variations of some of these proposals are likely to be enacted.
Now it’s time to scare the bejesus out of you.
Have a seat, kind readers, there are lawmakers serious about a proposal to reduce the amount of pretax contributions to your 401(k) by up to half! The current annual contribution limit is $18,000 with an additional $6,000 allowed for those 50 and older. This means you could only deduct up to $9,000 per year or $12,000 for older taxpayers if this proposal is enacted. The key word here is pretax. The contribution level would still be $18,000, but any amount over $9,000 would automatically go into a Roth 401(k). On its surface this may not seem like a serious issue. However, it takes away a massive planning tool. Many credits are calculated off total income or adjusted gross income. Your mix of retirement investments between traditional and Roth plans can be modified each year to maximize your tax savings. If this controversial proposal becomes law it will seriously curtail your ability to reduce your tax burden by adjusting your retirement investment mix.
The above proposal also means if you are in a higher tax bracket while you are working—a common occurrence—you will be limited in your deduction at today’s higher tax rate and will be unable to take advantage of your lower tax rate in retirement.
Another idea floating around is to eliminate all traditional (deductible) IRA contributions, limiting IRA contributions to Roth IRAs only. As much as I love the Roth IRA, this accountant is horrified over the loss of flexibility from the loss of deductible retirement contributions. People do not save enough already in the U.S. These proposals will take away a massive incentive to get people to start or continue to save and invest.
Short-sighted goals to raise tax revenues for the government will end badly. The low savings rate of the U.S. would be forced lower to raise a small amount of revenue to offset massive tax cuts for businesses. The small added gain to economic growth would be temporary. With fewer savings, hence a smaller personal safety net, would exacerbate future recessions and strain the system more as people age; forget about early retirement.
Another bone-headed idea is to eliminate the Simple 401(k) and SEP plans. Existing plans would be grandfathered. This idea has been bounced around for several years now. If you are able to open a Simple 401(k) or SEP, now might be the time to preserve the option. (Note: Simple 401(k) plans look and act a lot like SIMPLE IRA plans.)
If all this isn’t damage enough, there are some lawmakers who favor cutting the cap on retirement contribution by employers and employees or freezing the contribution limits so they are not inflation adjusted. The Republican proposals are built on a foundation of discouraging savings and investments. Your favorite accountant does not favor short-term solutions to solve long-term federal budget problems. It seems to me if more Americans had a higher liquid net worth it would be better for the country, not worse.
According to Kiplinger (not an affiliate link), the White House claims retirement plan incentives are safe. Considering the current environment, I take no comfort, nor do I trust, what comes out of Congress or the White House. This could be a fight for the ages. Stay tuned.
Some (Modest) Good News
There are several proposals to improve S corporations. The most notable is allowing IRAs to be eligible shareholders. This could open powerful possibilities if it becomes law. There are additional S corporation changes proposed, but they will affect a much smaller group. Due to their complexities and time I will leave that discussion for another day when it appears the changes are imminent.
The one piece of good news seems unlikely to become law unless it is part of a larger tax reform bill.
Sorry for the downer this morning. It was too important to leave unsaid. You, kind readers, need this information to plan accordingly. Now more than ever it is imperative you increase your savings rate now. Eliminate debt, save and invest. A solid plan can reduce the damage the government inflicts. Those who wait will take the full blunt force of the assault.
As readers of this blog there is no need for you to be the victim.
Show me a successful person and I’ll show you someone with deep seated pain. Pain is a powerful motivator. Few can reach lofty heights and keep pushing without underlying pain driving them forward.
Steve Jobs said you have to be “. . . insane to do this. . . ” when he discussed why he worked so hard to achieve so much because “. . . it hurts so much.” He expanded the insanity to include all successful people. It doesn’t matter what it is you are the best in. Being the best and marching forward after attaining the top is an exercise in pain regardless the field.
Some are satisfied with “good enough”. They are the lucky ones. Normal people attain a certain level of success and sit back and enjoy it. You see these people everywhere. They are the upper middle class people lucky enough to have reached the level of “having it” or “made it” without the grinding pain from earlier in life driving them on.
Then there are the people we see in the news on a regular basis. These are the business leaders and entertainers who never are satisfied with their performance even when they have reached so high they have cut new ground. They climbed to the top of the mountain and started building the mountain higher. What drives these people? And are you one of them?
The Pain Train
You don’t choose where you are born or the family you are born into. Throughout life, things out of your control mold who you are. Some people cower and hide. Others leave the safety of the nest and go on a mission of discovery, driven by the pain, looking for the control they so desperately need to understand their own life.
One doesn’t need to look far to hear the pain these super-performers deal with daily. It is no surprise to learn the Loony Tunes artists who gave us the classic Bugs Bunny, Daffy Duck and Elmer Fudd cartoons frequently came from a painful past filled with abuse. Abusive fathers warped these young boys who later grew up and made us laugh so hard. They made us laugh, and laughed themselves, because the alternative was even worse. They worked hard and never stopped working once they had enough to step back. The pain cut too deep. They ran and kept running to keep the pain at bay.
Today we see the same thing with modern performers. The popular music group Imagine Dragons has numerous hits to their name and still they keep performing. Why? Maybe the words of their songs can give us a clue. Listen to the words of their hit: Shots:
Oh, I’m going to mess this up
Oh, this is just my luck
Over and over and over again
And later in the song:
I’m sorry for everything
Oh, everything I’ve done
From the second that I was born it seems I had a loaded gun
And then I shot, shot, shot a hole through everything I loved
Of course this could be a one-off song written in moment of depression. Perhaps we should listen to the words of their massive hit single: I Bet My Life:
Remember when I broke you down to tears
I know I took the path that you would never want for me
I gave you hell through all the years
The words drip with pain and anguish. We can even imagine what it is they are suffering from as they struggled to perfect their art and gain recognition for their work.
We could go on about entertainers who sing, act or write about the painful loss of a child or loved one. We could talk about the super successful business owner with millions to her name, fame and respect within her community, enjoying parties with the in-crowd, running from the demons that just will not die. Running from the memory of a drunken father hitting her again and again or raping her repeatedly. Running from a brutal date rape. Running from the betrayal of a friend that took advantage of her.
The key word is running.
Now we will hit closer to home. We will talk about me as an example. Don’t worry. We will talk about you and your pain next.
Can I Do Anything Right?
Recently I gave my first ever comedy skit. It went over well. People were practically on the floor (except for the sourpusses) laughing. They even chanted my name at the beginning. I’d say it was a rush, but it wasn’t. I kept thinking about what wasn’t working. It has been a week and I am still playing the scene over and over in my head working the entire skit for areas I could improve. Good is never good enough for me.
Of course that is a symptom. This pattern in me did not magically appear in the last week. I have a successful business and plenty to retire on, yet I never rest. As Jobs said, You have to be insane because it hurts so much. Am I insane? (Don’t answer that.)
The way I act today is a direct result of the events in earlier times of my life, most notably when I was most impressionable as a child. There are stories to tell, just not today. Some wounds never really heal and some stories need time to see the light of day and some have to wait.
From an early age I was driven. My family joked about all the crazy business ideas I had growing up. I was an entrepreneur before I knew the word existed. I still need to look up how to spell entrepreneur.
Self deprecation is a powerful speaking device to gain acceptance. Rarely do I make someone else the butt of my jokes. I expose my failures frequently as a learning tool for me, but also as a learning tool for you. Success is a poor teacher. Showing someone else’s failures never has the punch of exposing your own. It also allows people a peek inside my life to see it isn’t all glory as it sometimes appears to people who don’t know me well.
Frequently I refer to my writing as “hack”. I guess it is a matter of opinion. This blog has received accolades for the writing and editors and agents have requested to the point of demanding I turn over a recently written work for consideration for publication. Rare is the instance when I do. Publishing here is easier because I don’t have much time to think about what I wrote before hitting the “Publish” button. I love writing fiction, but what if my fiction sold well? I’d have to keep writing more! I have it in me; the stories that is, but the time necessary to do it right is another story. (Doing it “right” by my definition.)
So I run like all those before me. It is a natural response. A human response. To run from pain. To run from the devils haunting my mind.
And Now We Talk about You
I see you cowering in the corner, kind reader. Yes, I know what you are going through. I have felt your pain, your anguish. I see the worn soles of your shoes, worn from all the running. I see you struggle and fight for acceptance. I see you struggle and fight to achieve your goals.
How many goals did you already conquer? What did you do once the goal was achieved? Made another goal! Financial independence is NOT enough. I get it. FI is so easy in our modern world it is almost a laughable joke. Ten to fifteen years is all it takes if you are serious. The newsfeeds are riddled with people retiring by age 30 or soon thereafter. It’s almost like you failed if you haven’t broken seven figures in your index fund by 35. What have you been doing with your life?
FI is not a goal! It’s a situation. Your savings rate drives your FI date. Period. FI is not something you do; it’s something you want; it’s something that is. No more. People say they are FI like it is a person. It isn’t anymore than poor is a person. It is a state of being.
You see, Steve Jobs, the guys at Imagine Dragons and your favorite accountant are not unique. We have pain just as you do. That thing you did as a child that ended up with someone hurt still haunts you. Nobody probably even remembers it anymore other than you.
Too many children are abused. Why does one child crumble under the weight of abuse and another climbs the highest mountain and keeps climbing to the sun? The answer is here (pointing to my temple).
Every faux pas is not a disaster. Your brain sometimes interprets it that way. Something you did 30 years ago still haunts and drives you. The driving part is okay if it isn’t excessive and harming your health. The haunting needs to go, however.
How you deal with your pain determines how healthy and well-adjusted you are. You made a mistake. So what! I have news for you. You will make more! Many more! I know it is cruel to say it, but it is true. You will, with the best of intentions, fail. The alternative is to crawl under a rock and wait for the Grim Reaper. Not much of a choice.
An Inside Look
This post started as a very, very dark listing, indeed. I started writing notes a few days ago and the notes extended longer than the actual post would be. And it was dark. It was so depressing I started walking to the barn with a rope it was so bad. It was the wrong message I wanted to send.
Many times I know where I want a post to end. In this case my dark post had a happy ending, but it was too short on happiness and hope compared to 1,500 words of dire. Even the ending dripped with pain.
After thinking about it for a few days I found a way to convey the message in the manner I wanted. I hope you agree it was worth the extra effort. The ending I have in my notes is too important to leave on the cutting floor. Here are the final words I had originally planned without edit. I hope they move you as they did me:
Your pain and failures will make you better if you allow them. But they must not consume you. At some point you must let go of the pain. It is okay to relax. The monster will take a break when you stop. When you are ready to run some more, the monsters will renew its pursuit.
I am so tired. So are you. It is time to stop running. To rest. You have already made it. There is nothing left to prove. And after your nap, when your energy is renewed you can RUUUUUN!!!
Here is to all the losers of the world. No matter how high we fly we will never reach the sun. So we fly harder and harder until death gives us the peace we always dreamed of.
Old dogs can learn new tricks. Preconceived notions are not reality or facts.
Several years ago life was going fine for me. Business was good, the sky was sunny and I thought I had a firm grasp on how the world worked. An avid reader, I chanced across a blog that pulled me in deeper than any before. Normally I read several blogs with no blog standing out from the crowd. I digest what I can and move on. Then along came Mr. Money Mustache.
Some blogs are better than others. Quality is frequently an issue, but personal taste is too. To make matters worse, this Mustache guy had a serious following. High quality suited to my tastes with a massive audience started me questioning some of those preconceived notions.
Most issues I was in complete agreement with. There was one stand-out: retirement and what the word meant. At first I had an identity crisis. Was I really retired all along and didn’t know it? Is it wrong to have gainful employment?
The only way to figure this thing out was to attend personal finance conferences with like-minded people. That was two years ago. In the beginning it made the confusion worse and the crisis more acute. Then I developed my own definition of retirement to suit my needs. Finally, last weekend, I made what I feel is the final leap in my evolution toward a retirement definition I can use in my personal life.
Four Letter Words
First impressions are everything. Work is a four-letter word and certain demographics are quick to point this fact out. If you enjoy your work, too bad! The goal always seemed to be about quitting your current gainful employment as soon as possible. But I like my job!
Work is a four letter word, but not a four-letter word if you get my meaning. There is nothing wrong with work! Work, force times distance as defined by scientists, is good for the body. Sitting all day is the bane of good health and happiness. An oxymoron of life is most people sit on their tail all day doing work. And we are overweight and unhealthy. Might I suggest a walk? Walking is “real” work.
There is an animal called the FIRE community. It stands for Financial Independence/Retire Early, as if they two go hand in hand. They don’t. It’s a misnomer.
Financial Independence means you have enough money to pursue your dreams and still pay the bills. FI means your investments throw off enough income to cover your lifestyle. Your spending level determines your investments needs to reach FI.
Retire Early is complete BS! Anybody can retire at any age. Sometimes people are forced to retire early due to corporate downsizing. Amazing how these people yearning for early retirement lament the fact when it is forced upon them. Do they discover something you and I don’t know about this retirement thing?
According to the dictionary retirement is defined as something that is used up or worthless. Use the correct terminology (Hey, buddy! Can’t wait to see you become worthless so you get the hell outta here!) and you’re liable to get your beak busted. The only explanation for the heavy use of the word retire without a proportionate level of busted beaks must have something to do with terminology.
Early retirement is possible without financial independence! There is no connection between the two situations. None. Having enough money to do what you want is totally unrelated to being “used up, worthless”. In fact, early retirement has more to do with laziness than FI.
When in Rome, they say. So I joined this FIRE community totally aware I was a fraud. The FI part was nailed down decades ago, but the RE part wasn’t even in my vocabulary. Retire, I asked? Retire from what?
It took a while to find a reference in my life. Waaaaay back in the beginning (when God was creating the heavens and the Earth (not that far back)) I had a job working for someone else. It was the only time in my life I worked for someone not a family member or in my own business. When I met Mrs. Accountant things got steamy fast. What can I say? She’s hot! Well, a year after we met we were headed down the aisle. Before the preacher would marry us we needed to attend some classes with the preacher. During this process it was noted I was living the early retirement lifestyle sitting at home and reading all day. This would not do. The church needed a custodian (read, janitor) for the attached school and I was available. So I was a janitor. For a year.
The people at the parochial school were awesome! It was a pleasure to work with them daily. Except I felt empty. My temperament didn’t allow me a life swilling toilets and mopping floors. A year after I started I quit. Call it retired, if you will. I was used up, all right! It was the only time in my life I felt what many people seem to feel about their job. I was FI and now I exerted my RE part of the equation.
A New Life Lesson
Fast forward thirty years and life was ready to smack me up beside the puss again. I adopted my new family in the FIRE community and started using their language as I felt they were using it. As soon as you were FI and quit your job you were also RE, even if you started your own business.
This confused me. I had my own business and enjoy the work. Why are they FI/RE and not me? It wasn’t them; it was me!
Last weekend I attended Camp Mustache in Seattle. You can read about it here. I attended all but the first Camp. A husband/wife team there retired a year or so ago to travel the world. They are young whippersnappers, barely tipping the scale past age 30. They did this all on teacher’s salaries! I was lucky to be there the last years to see this whole thing unfold. Social media allowed me to see the world through their eyes as they traveled.
This year at Camp they were back home, so to speak. Instead of the world, they now traveled North America in an RV. The husband also started a business.
I kept indicating he was still retired. It took my thick skull two days to understand he is NOT retired anymore! (He must have discovered he wasn’t as “used up” as he thought he was.) His words, “As of three weeks ago I am no longer retired.”
Hallelujah!!! Finally, I found someone who worked his own business and still fit in with the FIRE crowd. I felt a tear welling. I am normal after all!
Of course, reality wiped the tear from my eye quickly. Joe, the husband of our husband/wife team, ran his business a bit different than mine. Soon the advice was flowing on how other uber-successful people ran their business. Yours truly didn’t do it that way.
As a business owner I am very hands on. I meet with clients, review practically all tax returns before they leave the office and spend serious time plying my trade. The worst part is I am an integral part of the firm. If something happens to me it could kill the company. How stupid is that?
Multiple stories were told of business owners who found the right balance between work and personal life. This post isn’t long enough to dig into those individual stories.
Once again this highly intelligent group of successful people educated this country accountant. My desire to “do it all” limited my reach and puts the company (and the employees and clients) at risk should my health give way or I meet my demise.
Life is a series of unending lessons and I just picked up a big one. The new information is now getting pressed into action. Changes are happening at the Wealthy Accountant headquarters to protect the company should I not be available. And it all started with a couple of 30 year old kids living the dream of early retirement to see the light.
They say the teacher will appear when the student is ready. This is wrong. The teacher was there all time. It took the student all this time to open her eyes and see the teacher next to her waiting to teach. That is the life lesson learned by your favorite accountant this past week.
Teachers are usually disguised. Thirty year old kids (teachers in a past life, I might add) taught me a lesson I wasn’t ready to hear a year or so ago. I never thought much about military personnel in the past, but a retired military guy has plowed an endless stream of wisdom my way since we met. I now call him friend.
I am not retired and I am proud of it. My index fund is bursting at the seams so I proudly proclaim financial independence. None of that matters. What matters are the friends I have gained and the teachers I have found. My eyes are opening for the first time. Like a newborn child, my vision is blurry. But I can see. I can see! And teachers are everywhere, willing to take my hand into the brave new world I have discovered.
Old dogs can learn new tricks.