Plenty has been written about income and wealth inequality over the last decade. There is another inequality gap expanding even faster than that of income and wealth. The gap between the top 1% and the rest is growing rapidly in this area and it had a direct effect on income and wealth.
I call it intelligentsia. These people are the most educated or learned (there is a difference) and therefore control their ability to grow income and wealth at will. These hyper intelligent people also have greater political influence.
The intelligentsia are the other 1%. Nobody is complaining about their growing gap of knowledge. The reason for this is clear. Anybody who wants to grow their level of knowledge can with few barriers. Because personal responsibility is involved we will never see a rally or protest claiming people are not allowed to learn.
Do not confuse this with formal education. Formal education is expensive which is a serious barrier many people cannot overcome. The intelligentsia know a formal education is only a small part of knowledge and the influence it brings. Most colleges teach nothing about sound investing. As the owner of a tax practice I can assure you colleges are not churning out highly qualified tax professionals. These and other forms of knowledge require a personal commitment to learning.
Time to Get Schooled
The newsfeeds are filled with the plight of getting a college education. Costs are rocketing higher and student loan debt is blasting further into record territory daily. But formal education isn’t the problem, you are.
Sorry to be so blunt, but there is no other way to put it. The whining and complaining about college costs are unacceptable and do nothing to improve the situation.
College is important. Learning is even more important. If you can’t motivate yourself to learn without the stick of a professor threatening, you will never be part of the intelligentsia. Ever.
What you learn in college or technical school is only a fraction of what you need. Formalized education is more about the experience, the contacts, than about learning. Learning comes from outside the institution.
I know this is hard to grasp, but can you imagine Newton going to school to learn the things he discovered? Who taught Einstein about relativity? Who taught the Wealthy Accountant about taxes? It was the same person in each case. We taught ourselves.
Newton and Einstein had to learn and then build new knowledge and understanding from the base they had. Your favorite accountant took one tax class before going full-time. Of course, I read massive amounts of material in addition to that single class.
I have a secret. When I started my business I took the H&R Block tax course. That was the one course. It was something like 10 or 15 weeks where we met one night a week (maybe it was twice a week; it was a long time ago) for a few hours. That’s it. From there I kept growing. I read IRS publications. I attended continuing education classes before I had my enrolled agent license and was required to. I read every tax book in the library and bought more.
I went from dumbest to the intelligentsia of the tax community in a handful of years due to my massive indoctrination.
What about Contacts
The biggest benefit of formal education is the contacts you make. The classroom learning is available outside the institution in most cases. In some disciplines the professor requires you step off the campus to experience real world activities. It’s kind of hard to experience an archeology dig at a desk.
The cost of college is the textbooks. Having a professor preach to you from the book she probably wrote herself and requires for her class to drive sales is a waste of time. The professor then tests you to see if you have been paying attention and reading the additional material. If you are part of the intelligentsia you don’t need a professor prodding you; you can learn faster and better on your own. The classroom is slowing you down.
Formal education has one huge benefit only available from a group.
The intelligentsia is a small group of people, the 1% of knowledge holders, who stick together. College brings people together allowing these unique souls the opportunity to identify each other and share ideas. Is it any wonder managers of the largest businesses and political leaders draw their teams from people they met in college?
Contacts are more important than knowledge. (It hurts to say that.) It’s true. Who you know is more important than what you know. If you know the right people you are better off than knowing everything there is to know.
Without a formal education, without the advantage of a college campus, how can a budding intelligentsia acquire the contacts she needs to excel? The answer is simple: conferences.
Once formal education is completed the intelligentsia needs a way to stay in touch. If they are not part of your team you need a way to contact these people when the need arises.
One of the most common questions I get in my office is: Do you know anyone who . . . ? In many cases I do. Why is that?
I meet many highly advanced performers during the course of my day. Some I met during my short tenure attending college. (I have no degrees.) Many I met personally at a conference.
Conferences are like mini college courses. The training is intense; the learning environment ripe. I learned more at conferences than college ever taught me. Things never taught in the classroom are discussed over a cold one as the evening wears on at a conference.
How to Be Part of the Intelligentsia
The intelligentsia is an unassuming group. Rarely do you find someone excluded. Admission is simple; be an intellectual or highly educated.
How do you get this way? By standing on the outside drinking in all the knowledge until you qualify. It doesn’t take long either. When knowledge is flowing fast and furious your learning curve is steep. Soon you have something to add to the discussion. It is at this point you are a member of the intelligentsia whether you know it or not.
The next question is: Where do I find these conferences?
Before I tell you that I remind you a college education starts before you attend your first conference. You can buy or rent textbooks from Amazon. Books are the dues paid to become a member of the intelligentsia. Rare is the intelligensa (yes, I know I made up a word; would you prefer intelligencer?) who has no personal library.
Read. Read every day. Read stuff that nourishes the mind. Novels are fine for entertainment, but you are an intelligentsia neophyte. Your mind is fertile ground waiting for the seeds. Never allow such a fertile field to lay fallow!
Once your mind has been planted with vast tracts of knowledge it is time to meet your people. You could read the textbooks and wander the local college campus discussing the issues with those you find. Some colleges allow this; other might ask you to leave. It is an idea.
As your level of knowledge increases you want focused increases of knowledge. This requires a venue specific to your needs; you need to start attending conferences.
Conferences cost money. This is where your real education takes place. Conferences have classroom training coupled with massive socializing. What you learn in the classroom is only the conversation starter.
What is taught in the classroom continues afterwards. The presenter is frequently part of the discussion. The same thing can happen in college, but getting the professor to be one of the guys is unusual. At a conference the people you meet are people you can contact when the need arises. When you need a team member you have a pool of intelligent and experienced people to draw from.
Conferences are everywhere! I have never met a conference I didn’t like. It’s hard in the beginning for the newbie. Don’t worry. Walk right up and join the group. You’ll be one of the cult members in about thirty seconds flat. Don’t be shy. Do NOT waste the opportunity. To this day I have never witnessed anyone getting shot because they joined the conversation. (A few should have been.)
It is impossible for me to list every conference in every genre so let me give you an example you can extrapolate from.
Let’s use my profession, taxes/accounting, as a discussion point. If you want to attend a tax conference/seminar there are thousands to choose from. The AICPA is a good place to start. An internet search of your state CPA organization will have additional offerings. The National Association of Tax Professionals (NATP) has many basic tax courses to pick from too.
Once you attend a conference or a few seminars you will end up on a list. Then the opportunities will come to you. The difficult part is choosing which conferences and seminars to attend with your limited time resources.
The internet has made finding conferences matching your interests easier than ever. By joining the intelligentsia you are joining an elite group. The intelligentsia earn more and have more. For some reason the 1% of income earners and 1% of wealthiest people in our society also happen to be in the other 1% too: the intelligentsia.
By focusing on income inequality you miss the point. Focus on learning and knowledge and you will be a card carrying member of the intelligentsia. Your income will go up automatically as a result.
Now, if you will excuse me. I have a book with my name on it.
When Donald Trump won the Presidency many people were elated. Many more were depressed. Others felt scorn, concern, nervousness, helplessness and betrayal. How could this happen? A man with no political experience and a fire brand built on controversy win the election?
Shortly after the election Warren Buffett was quoted as saying America would be just fine with Trump as President even though Buffett supported Hillary Clinton. He said America has the “secret sauce” to keep the nation strong and growing. It did little to sooth the nerves of people fearful what damage a political unknown could do to the country or the world.
Warren Buffett made a career out of optimism. From an early age he always felt America would keep growing and the standard of living would keep rising. Recently in a Berkshire (a public company he runs) annual report he espoused how good things were. (This was before the election season started.) Buffett outlined how even 2% GDP growth coupled with the low population growth of the U.S. would add 34.4% to real growth over the next generation. This is on top of our already high standard of living.
Where does such optimism originate? Better still, can we have some? Buffett’s optimism has made him one of the richest people to have ever lived. He sees brighter days no matter what the economic conditions.
Today we will discover how and why optimism is the source of all wealth and a virtual fountain of youth. We can have more and live longer. Warren Buffett is pushing against 90 years of age and is spry as ever. He drinks soda and eats junk food every day. If anyone has a secret sauce to happiness, financial independence and long life Buffett is the guy.
The Numbers are so Depressing
There is so much to be depressed about. Income inequality means the rising standard of living will leave many behind. The economy is stuck in low gear. And, OMG!, what if it starts growing faster now. Trump will get the credit, or worse, a second term.
Finding optimistic people to spend time with is difficult because so few are optimistic. Instead they are broke and for good reason.
Reading is even harder. You need to read to learn, but news reports as practically assisted suicide. I’m waiting for a prosecutor looking to make a name for himself to cash in on this bonanza.
Normally the books I read are uplifting. Two recent books I read are testing my resolve. I finished The Great Leveler by Walter Scheidel. The book was good, packed full of useful information and backed by solid research about income and wealth inequality throughout history.
Unfortunately history doesn’t have many sample of income/wealth inequality leveling out unless enforced by mass military mobilization (especially for the loser of the war), plague/famine, revolution or societal collapse. The record is clear and not reassuring. History is clear inequality continues to grow in starts and spurts until it finally is released by a violent event forcing a leveling between the top 1% and the lower or average income/wealth levels.
Scheidel tried hard to be upbeat in the face of such information. At the end he put on a brave face and provided the best examples of leveling that was not accompanied by devastation. He was grasping at straws. History is clear, but not without hope.
I am currently reading The World as it Is by Chris Hedges. Hedges could turn a lottery win into an opportunity to slit your wrists. He doesn’t even try to put on a happy face. The World as it Is is comprised of 66 short essays on world events. So you understand what I am talking about, here are a few essay titles: It’s Not Going to be OK, So Much for the Promised Land, Liberals are Useless (don’t feel bad conservative, he gave you the same treatment), Man is a Cruel Animal, Confronting the Terrorist Within, The American Empire is Bankrupt and No One Cares.
Forget about any attempt for a happy ending. It is endless whining and complaining. All is bad, all is hopeless, why even bother to try. Ich!
I bought Hedges’s book after hearing him speak. (I don’t remember where. It was on TV or a video or something.) Hedges is an intelligent and articulate man with a compelling story. His voice resonates and draws you in. I enjoy the reading while I disagree with the message.
I bring up these two negative books for a reason. Before we can delve into optimism we have to define the enemy of optimism so we can avoid it.
I recommend both books above. The Great Leveler is powerful information we can use to avoid the pitfalls of history. The World as it Is provides an alternative look at the difficulties facing America and the world. Rather than part with hard-earned coin I would visit the library for both books. If you need a research tool The Great Leveler might be worth the purchase.
I’m Feeling Much Better Now
You, as I, will face negative messages daily as we travel through life. Warren Buffett faces the same headwinds you and I do while remaining as unflinching in his optimistic determination the world is getting better.
The facts support Buffett. Crime is down in virtually every category in most Western nations and even most non-Western nations around the planet. As I write we are approaching a decade of steady economic expansion. Growth is slow, yet steady. No overheating to destabilize the economic growth pattern. Interest rates are low, inflation too. In America taxes are among the lowest of the developed nations.
Our standard of living is continually rising. Even the poorest are significantly better off than a mere 50 years ago. We live longer and have more opportunity than ever.
Health care might be exorbitant in the U.S., but we have more therapies to live longer. Cancer and heart disease are no longer a guaranteed death sentence. We can even abuse our bodies smoking, overeating and neglecting proper exercise and still enjoy a longer life expectancy than our parents. God, we are lucky to be living in such an awesome time and place.
Work is easier too. I grew up milking cows. The number of cows one man (or woman) can milk at a time is astounding compared to how I did it back in the late 1970s.
Tax preparation is radically different! The amount of work we get done would have taken double the employees five years ago. My clients will be happy to hear I upgraded several new pieces of technology in the office. Tax returns will be finished faster this year due to this new technology. We tested the system on a live return earlier this week with impressive results.
Traveling in modern times is a pleasure (unless you plan on flying). We can get anywhere on the planet in a day or less if we had to. Travel across country is started and finished all while the sun shines for one single day.
Travel is also safer than ever. We can visit Aunt Edna in Tupelo as a day trip if we desire; we can visit Uncle Fred in Adelaide, Australia with no real inconvenience at all.
When I graduated from high school 35 years ago gasoline was $2 a gallon. It’s not much more now than back then. And the percentage of our income needed to feed ourselves is lower than ever.
We have more and it goes further. We are always connected (not always a good thing) if we want to be. We can visit grandma on the other side of the globe at zero cost. Just dial in your Facebook or Twitter account.
Not all is good news, I understand. Education costs are exploding. However, the cost of learning is cheaper than ever. Books are free from the library or at your doorstep in hours or the next day from Amazon. Training courses are cheap and available in nearly every city of any size. Blogs and other online resources have more information than you can possibly consume.
Medical costs are an issue in the U.S. However, Americans can hop on a plane and get better and cheaper health care for procedures with any significant costs attached. Emergency care is still an issue, but we are optimists. We will find a way.
Life is good. It has always been good. We choose to be miserable.
Optimism does something to us. Optimism allows us to feel satiated and happy, content. Knowing tomorrow will be better than today is a powerful mental tool for appreciating every moment of precious life we have.
Why is Warren Buffett still working at his age? Because he is happy doing what he does. He sees the world as a glass completely full and overflowing with wealth. He picks some up for himself and his shareholders, leaving plenty for you and me to enjoy as well.
Wealth is between the ears. Wealth is not about money, but optimists generally have more of that too.
Optimists also found a fountain of youth. Have you ever notice guys like Buffett look so darn young for their age? It’s not money either. I know plenty of rich people who look like something the cat dragged in at a young age. Optimism takes years off. Buffett skips to work every day not to get more money (that is just the game he plays and the scorecard) but to see up close and personal the constant improvement of the human condition each and every day.
Elon Musk, another mentor I admire, warns of A.I. and other catastrophes humans are certain to eventually face. But Musk is an optimist! He doesn’t cry about the risk or inevitability; he defines the problem and then rolls up his sleeves to solve it. Musk knows you need to identify problems before taking actions to resolve them.
America, China, the West and humanity are not dead! These are the best of times and better still are coming. There will be bumps along the way, of course. A meaningful optimism needs periodic excitement.
You and I are lucky. The first step toward wealth is to recognize this fact. All I had all those years ago on the family farm was optimism. I knew I could do it. Had no idea how, but I knew it would happen. From that moment forward I was wealthy. It wasn’t long before it revealed itself in my investment portfolio.
Or, you can be a sad Gus complaining about every minor inconvenience, endlessly calling for the next market crash, Great Depression or the end of time. All we ask is you sit over there in the corner where we don’t have to see you. It’s such a bummer when you are around.
Previously our discussion started with a review of Ryan Holiday’s book Perennial Seller. We covered most of the book and I provided enough information for you decide if purchasing the book was worth your hard earned money.
We skipped lightly over the marketing section of the book for a reason. I wanted to share an observation from the book I’ve been making to my clients for years and to encourage you to steal my work. You read that right. Before this post is over I’ll have you feeling good about plagiarizing me into infinity and beyond.
In Perennial Seller Holiday covers marketing well. One area stuck out for me however. Holiday states almost everyone overestimates the value of traditional PR. Not only is it expensive, it doesn’t work. I agree.
For years I have advised business owners about advertising opportunities that come their way. It is rare for these offers to have any real value and in many cases drive zero clients your way while emptying your wallet.
It is so bad that I blanket state all promotions that walk in your door are worthless while promotional idea you personally have enjoy a fighting chance of generating at least a modest profit. The stuff walking in the door comes via a salesperson. Of course they have the best deal ever. I have been warned numerous times over the last three decades I would soon be out of business if I didn’t use their offer. After all these years I am starting to hope they are right. Man’s gotta retire sometime.
What has worked? Well, a lot of my promotional ideas have worked well while costing nothing or nearly so. I walked flyers I printed in my office in the early years of my firm. Gained a large number of individual tax returns in the process and became profitable too.
Two other promotional methods I used successfully are radio talk shows and public speaking. Radio talk shows I did over the phone, rarely showing up at the studio unless it was local and convenient. Many organizations were happy to have me talk about taxes and finance. All this was free and gave me credibility and exposure. And more clients.
This blog is carrying on the tradition. I haven’t done radio talk shows for this blog . . . yet. The public speaking part is going strong, however, in a slightly different manner. I speak at conferences and provide free help (or if money is charges all the funds go to charity). Once again credibility increases and readers keep coming.
Marketing in my mind is simple. Most effective marketing is low cost and your own idea. Most people can’t market so they are glad to charge you to have them market your stuff. Oooookaaaay.
Marketing is getting in front of people so they know you exist. The rest happens by word of mouth, which happens to be the most effective marketing of all.
Steal My Stuff!
Here is where the tire meets the payment. I want you to steal my blog posts. That’s right! Steal them. Simply copy and paste to your blog when you need a filler. My gift. Don’t worry. I will not sue you or defend my copyright.
Why would I do such a sick thing; encouraging people to steal my hard hours of work? The answer is simple. Sometimes you get tight for time and need material to meet a deadline. I understand. My hope is you lift the post verbatim and do me a solid by telling your readers where the material came from. If not, no worries.
You might lift the post and leave the links in place so I generate some revenue. Once again, if you change the Amazon links to your affiliate I will understand.
As insane as this sounds it is actually a marketing ploy and a way to build my platform. Your readers will see the different writing style and ask what gives. Eventually you will tell them you got it from me. In the end it all works out fine.
It also saves time. I can write a guest post for you, but you might like something I already published. Authors have republished their work since the beginning of time. It works. Hungry writers can increase their income and create a quasi pension for themselves. In the modern world you get to republish for me! Isn’t that nice?
Once your readers know I wrote it they will be glad you published it. You have happy readers. They then read you and me. Now I have happy readers too. (Have you ever seen a wealthy accountant dance?)
Cory Doctorow is a master at this. He is a science fiction writer who also happens to run Boing Boing, one of the most successful websites on the planet. Cory is a smart cookie! He demands his publisher allow him to share his work for free online. People get to steal his stuff! And he is more successful for it.
You see, the risk any blogger faces isn’t piracy, its obscurity. People stealing my stuff spread my work around. I want people to see my stuff. A lot. So please steal my stuff. It does us both good.
When my stuff is worth pirating it means I am getting good enough to pirate. Many brand names today actually pirated their own work to get the free marketing they needed to lift from unknown to significant. Some even pirated their work under a well known brand name hoping the dupe would stick around and like what they hear when they discover the ruse.
Maybe I should try that.
Did it work? Dang!
Last weekend CNBC had two interesting weekend reports. The reports had some significant similarities to things I’ve recently published here. Unfortunately they did not give me a plug. I accept that.
You can be the judge if CNBC lifted some of my work for their site.
Wealthy Accountant: https://wealthyaccountant.com/2016/11/08/credit-card-secrets/
Wealthy Accountant: https://wealthyaccountant.com/2017/07/10/change-nothing/
The Change Nothing post had a comment suggesting I incorporate my program with the Defy organization. It seems CNBC took their article a bit further than mine. Least they could have done was invited me to be a talking head for a 30 second spot. Such is life.
You might think I’m offended by this. You might be offended if it happened to you. Don’t! I get my ideas from reading and the writers over at CNBC may have discovered a story they wanted to tell based on my work.
One thing CNBC didn’t do was lift the post word for word. I wouldn’t expect them to.
There is one final piece to the marketing puzzle: word of mouth. Nothing works better than word of mouth. People respect an unsolicited endorsement of a blog, book, song, et cetera.
Please steal my stuff. Okay? But also spread the word. I love what I do, but traffic builds relevance. Reprint a post; let your readers know where you got it from. It’s also the professional thing to do.
Tell your friends, share on social media, spread the word. I have some control over where I speak or which conferences I attend. Only you control who you tell about me.
If I make you smile or brighten your day, let a friend know. If I save you some money or help you reach your financial goals don’t keep it a secret. Share the love.
Pay it forward.
And don’t forget my platform. Subscribe. Thank you.
Have you ever wondered why Gone with the Wind and The Wizard of Oz continue to thrill audiences nearly a century later while the box office leader three years ago over Christmas weekend can’t be sold by Wal-Mart for less than a dollar from the remainder bin? Why does The Shawshank Redemption still perform well after more than two decades?
Closer to home, why do some personal finance blogs find a massive and growing audience while others languish? Mr. Money Mustache publishes a few times a month and still generates 5 million page views or more per month. What characteristics do perennial sellers have? More important, can we replicate their success?
Last week one of my all-time favorite authors, Ryan Holiday, published Perennial Seller: The Art of Making and Marketing Work that Lasts answering the above questions. Holiday has ample experience to draw from in his work with companies such as Google and cultural icons like Tim Ferris.
You can reinvent the wheel or you can learn from the best. Perennial Seller breaks the process of creating long-term success into four parts: The Creative Process, Positioning, Marketing and Platform. We will touch on each of these before we end with a real world example from our personal finance (PF) community.
The Creative Process
Before something becomes a long-term successful seller it has to be created. Too many people want to jump ahead to marketing. They want money and they want it now. Unfortunately they will not like what the marketing section has to say if they do.
Creating a blog with a growing audience and dedicated fans willing to support the blogger, you first need to create the product. Books need to be written before they show up at the bookstore.
Holiday spends most of the book talking about creating a perennial seller in the arts: books, movies, music. He does expand the discussion to his days working for American Apparel before the CEO went off the rails. His advice can easily encompass business models for goods and services, too. The PF community will find the process valuable for their side gigs.
Creating a product, writing a book, composing a song is all hard work. The tendency is to follow a hot trend or create a knockoff of another successful product. It rarely works. You might get some success, but it never lasts. The original has the advantage when it comes to standing the test of time.
When I started this blog I wanted to follow in the footsteps of Mr. Money Mustache. And why not? His readers would be my readers. Working with an icon of the early retirement community meant people would find me by reading MMM. At first.
I knew I would be different, but I always found myself apologizing for the differences, especially the idea of retiring early. Read my early work here. It drips with desperation. Slowly I moved into the open prairie where I felt most comfortable. I started writing my stuff my way. No apologies.
I always told storing which is my hallmark. But the idea I’d be a successful follow-on of the MMM crowd gave me a momentary boost the first few weeks before curling up in submission. My traffic has since exceeded anything I managed those early days.
I stopped apologizing and started doing what I needed to do. I was different and knew it. When I allowed the differences to show through I found my audience. And good thing.
A recent reader emailed to let me know he reads over a thousand PF blogs and never saw one with a picture of Hitler on the front page above the fold. Yeah, I knew it was different.
Readers beg me to publish a book (it’s in the works) of blog posts. More on that in a bit.
The creative process is hard work. You need more than one idea, one book, one blog post. No matter how brilliant you are you need to create more.
As you think about your product, service, book, blog, or song, you need to know who it will appeal to.
Ryan Holiday has provided excellent guides to determining what your work is about and whom it is for. Positioning within a genre is vital if you want to produce a perennial seller.
Success of any kind, long- or short-term, almost always is classified in a category or genre. Nothing appeals to everyone! Too many bloggers, writers, singers think they are serving everyone. Bull!
You can make a comfortable living with a mere 1,000 dedicated fans who buy everything you produce. (Holiday said it in the book and shows how.) Imagine a humble blog, like, ah, this one. Selling t-shirts, ad revenue, third-party affiliates, and Amazon can provide a nice income stream. A thousand dedicated fans buying your book or program can add up. A simple $100 from a thousand dedicated fans gets you to a six figure income.
The trick is getting to a thousand “dedicated” fans. Part II of Perennial Seller is dripping with information on how to position your brand, You, Inc., to acquire those thousand dedicated fans. In all likelihood you will end up with many more as your cult grows.
Now we get to the section everyone wants to talk about. Well, forget about it.
Ryan Holiday is a smart young man and he knows he can’t tell you to do this and do that and you will sell a million copies of your book or get a million page views.
I’ll talk about marketing more in Part 2 of this post to be published on Wednesday.
So no one ruptures an internal organ I will share a taste before moving on.
You do not need a publicist, Google or Facebook advertising, or any other expensive promotional activities to sell well. Most money spend on advertising is useless.
You know what might work? Giving away free copies of your book to the right person. A certain tax guy might want to provide free tax preparation or advisory services to a mustachioed gentleman from Colorado. Or the same tax guy might speak for free at conferences and help attendees gratis as a goodwill gesture.
Doing these things and a few similar gestures will give you more work than you can handle. Then you need to go back to the creative process and create more and develop the brand You Inc. further. It is also time to move toward building your
You can (and should) start building your platform even as you begin the creative process. Gathering followers is how you will generate buzz and early adopters of your book, blog, song or product. I’ll share an idea Ryan Holiday used (mentioned in the book) and that caught me early in his career.
Before Holiday had a product he knew he needed a platform from which to sell his books. He tried blogs/web pages, but eventually settled with the idea of building a mailing list of his monthly book recommendations. By the time his first book came out he had 5,000 people on his email list he could recommend “his” book to. The list has since grown to over 80,000.
As you can imagine, the mailing list is a powerful tool Holiday used to sell his books. And it worked. His books continue to sell better and to a wider audience as the mailing list grows.
Before I include a personal story not in the book I want to share a special gift Holiday gives to his readers. At the end of the book he includes a web address for additional case studies and interviews not in the book. The web address is: perennialseller.com/gift. Or you can email Holiday at firstname.lastname@example.org. He will email back the bonus information.
Before you consider me a lout for sharing this information before you even buy the book or borrow it from the library, know that Ryan Holiday is building his email list as you take him up on the offer. He is building his platform while you get additional free information. A bit of quid pro quo.
In the Real World
Well, who in the heck is this Ryan guy anyway? You may have never heard of him until now. How about we use a live example from our own community: Jim Collins. (If you are reading this Jim, sorry. I needed a guinea pig and you were an available victim. Should sell a couple of books for you though if it is any consolation.)
Last year Jim published The Simple Path to Wealth. You probably heard me extol the virtues of the book. It is pulled from the Stock Series of his blog.
When talking to Jim you will hear him say there is nothing new in his book; it’s all in the blog. It’s a lie. (Sorry to rat you out like that, buddy. Somebody had to expose you.)
Jim’s book is all in his blog, of course. What he doesn’t tell you is he reworked the entire set of blog posts, fixing grammar errors and tightening up the text.
Then he sent the finished product to qualified first readers who promptly pulled the whole thing apart, exposing massive (several hundred) problems. Jim fixed them all. Then he sent it out to another qualified first reader confident he fixed all the boo-boos only to learn a few hundred more were missed the first round.
This went on for a while until the book was as clean and tight as any professionally published book from a major publishing house. As an end user I can assure you The Simple Path to Wealth is better edited than 95% of the stuff from the professional houses. That is saying a lot.
And it’s a self published book! It was the reason I delayed reading the thing. I know how self published books can be. Then I made the mistake of reading a few pages. I was hooked.
My good friend, Mister Collins, has had excellent sales figures on his book. A high quality work, well edited, well created, is a masterpiece. Here is how he did it using Ryan Holiday’s formula.
Jim wrote (the creative process) the blog and later edited part of that into the book, polishing to a bright shine. He positioned his blog and book right down the middle of his genres: personal finance, early retirement and financial independence.
Jim marketed his book through his blog and asked Mr. Money Mustache to write the forward, which he did. Jim already had an awesome platform with his blog and mailing list. People were buying Jim’s book to give as gifts! Camp Mustache SE in January 2017 gave a free copy to every attendee. Nothing beats word of mouth as a marketing tool (also in Holiday’s book).
One Last Thing
Normally I tell people they can either buy the book or pick it up at the library. This book is different. If you write a blog (many readers do), run a business (many readers do) or have a side gig (many readers do) then you want to own Perennial Seller. If you do not fall into one of these categories feel free to visit the library on this one.
If you are a writer, blogger, musician, artist, business owner or have a side gig you will want to hold this one in your hand and keep it within arm’s reach in your personal library. Better bring your highlighter too. You’re going to need it.
Recently a post card came in the mail inviting me to attend my 35-year class reunion. The years certainly got behind me fast. My only excuse is that I am having too much fun.
Between the office and home is my gym. Three days a week I lift weights (normally Monday, Wednesday and Friday). Outside the gym I hike, jog, work on the farm, et cetera to keep myself in shape.
A few months ago a high school classmate, Doug Zastrow, joined my gym. It has been a long time since we saw each other and talk fairly regular now, catching up on life in our humble community.
Doug mentioned receiving the class reunion postcard, stating he had no intention of going. I nodded agreement. My argument was I didn’t want to pay $60 for a meal and a few drinks at a country tavern. Doug had a different reason.
Doug named two classmates he chummed with over the years. Both are dead now. We both started counting the number of classmates who had already died. The first victim was a girl who died from a genetic disease followed by a guy from my clique. He died spear fishing on Lake Winnebago with his son. He didn’t vent his ice shanty correctly and died of CO^2 asphyxiation. We kept tallying the numbers. Another died of a genetic disorder, one from cancer, a few accidents, a few heart attacks and even one suicide.
By the time we added all the classmates we know were dead we had reached 20 souls out of a class of 120. There is no doubt we missed a few. People move and word of a death doesn’t always reach my ears. It’s not what I focus on in life.
My classmates excel at dying. According to the Social Security Administration we should expect fewer than 10% of our class to have left this world by our age. I am 53. You would expect this number of deaths somewhere around the late 60s.
Figures don’t lie, but liars figure, or so the adage goes. Accountant or not, you can’t manipulate these numbers to your advantage: you are either dead or alive. The twilight zone in between is only a place you pass through; no setting up camp for any period of time.
I beat the odds so far; so have you. We also suffer from survivor’s bias. We only come to terms with death when we start adding up the numbers or face our own demise.
We are also lucky. There are no guarantees we live another day. Next week I am in a continuing education class on S corporations in Wisconsin Dells. I could die in a car accident on the way there or of a heart attack before the weekend is out. I could also live another 50 years. You never really know.
Part of thinking like an accountant is to understand the best laid plans often go awry. Plans can, and should, change. Sometimes the plans outlive the patient.
I get a large number of emails daily from readers. Many get the impression I chum around all day with guys like Pete (Mr. Money Mustache), Jim (jlcollinsnh) or Carl (1500 Days) or other personal finance bloggers. While it is true I communicate with these people periodically, we never really chum together consistently.
Pete is a client and has been for several years. I don’t think we ever tipped a beer outside of Camp Mustache. We talk (usually email) a few times a year discussing his tax situation. Once in a very great while he may ask my advice on a financial topic as it relates to tax. I consider Pete a friend, but I bet you would consider our relationship differently from what you consider a friendship.
Jim and Carl enjoyed more personal time with me as we spent a long weekend at Conclave. We email off and on since. More so with Jim as he is also now a client. I owe Carl a guest post. You would think I would get the darn thing written considering how many words I plaster to paper.
There are other bloggers I communicate with: Doug Nordman and the Fiery Millennial come to mind. Even climbed a mountain with the Fiery young lady. I consider them friends too, but you might have a different definition of friendship.
Each and every one of these people I admire and respect. I trust their council and look forward to meeting them again at the next personal finance conference. Social media means I have a vague idea what their life is up to. Anyone who sees my social media knows I share nothing online outside this blog of my personal life. I am an open book, but I have no desire to share with the world at large every detail of my life.
Life is a gift. I have been amply blessed with plenty of it. Throughout human history living to age 50 was rare. Infant mortality snuffed out more life before it ever got started. Slowly walk an old graveyard and experience the reality of human life—and suffering—over the course of history. No guarantees, kind readers. No guarantees.
I don’t have any friends, yet I am not lonely or alone. Outside family, employees and clients, I don’t see anyone on a regular basis unless you count the meet-ups at conferences with peers.
I rarely dine out and the number of times I haunt a tavern (remember I live in Wisconsin!) in a year is in the very low single digits. Travel is reserved for business with the exception of the family trip planned to view the eclipse in August. I dine with clients and readers more often than with Mrs. Accountant. Many times Mrs. Accountant tags along when I dine with a client.
It’s the life we choose to live; the life I choose to live. My life is filled with joy, not to be confused with happiness. The two are different. I am happy most of the time unless the steers get out and I have to chase them down. Those buggers can run a long time before they give up.
Every moment of precious life is a gift. Every moment of every day you must feel and express gratitude for being alive. Your actions, attitude and words mark this gratitude.
But there is one more thing we need to talk about today. One more thing to put life into perspective.
Last Man Standing
So many of my classmates are dead. What I failed to mention is a classmate who died when he was in grade school. I chummed with him because no one else would. He was sick. Very sick. Everyone knew he was going to die. He would show me his arm where the doctors put the needle in. They inserted some kind of device to make it easier to administer medication. The bulge on his arm pulsed. He wanted me to feel it. I was reluctant, but finally did. I could feel his pulse, his life.
I’m glad I did. It made him happy to share his life experience. He always seemed happy, well adjusted. Dying was part of his worldview. I had decades ahead of me; he had only months. One days he stopped showing up for school. I never cried. I can’t remember his name. Why are my eyes blurry now?
Doug and I never discussed the true first fatality of our class. I don’t think anyone even remembers he ever lived except me and his family. I was his only friend, such as it was.
There is something special about the first and the last to die. The young girl who died shortly after graduation is known by all. She was the first survivor to go.
Have you ever wondered what it is like for a group of men who served together in a theater of war? Have you seen their stories of how they held each other’s lived in their hands? Have you ever seen stories of how they gather each year to share memories? Have you ever seen when everyone of the group is gone save one? I can think of no sadder place to stand in life, alone with no one to share your stories or your memories with.
One of us will live that eventuality. Only a survivor can walk that last mile alone. I wonder who will be the last one standing of my classmates. Could it be me?
I will not attend my class reunion. I wonder how I will feel if I discover they are all gone someday; only I survive. Will I regret my choice?
Probably not. I have a hard time remembering their names. Someone younger and full of life will wander along and be willing to listen to the stories of an old man, worn and ragged.
When the day is late and the light is low I will sit alone (or maybe that is you in the empty room of shadows) reflecting on a life well lived, grateful for all the people who passed through my life. I loved them all even if I couldn’t get to know them better.
I raise my glass to you, the survivors. You are the luckiest sons-a-bitches I’ve ever seen.
It all went wrong before I ever started. Mrs. Accountant and the junior accountants (I have daughters so I guess they are junettes) carpooled with me to take care of a variety of errands in town. When the family gathers in a confined place the situation turns strange very fast as I start with crazy talk.
For the record I consider myself a bit of a comedian. Not in any professional sense, but I fashion myself as a funny guy. Give me an espresso or two, wait fifteen minutes and watch the fun begin. Once on a roll it is hard to stop the train.
The clan sees me writing a blog so a lot of blog writing is going on around the house. Before long I was coming up with what I considered powerhouse titles to posts when the title of this post popped into my head. Groans echoed around the cabin of the car. I stood my ground. It was funny and I knew it. (It was also clickbait and I knew that too!)
The girls of the household don’t always hold my level of humor in high esteem. It hurts. My feelings are tender. The lack of enthusiasm for my blog title only encouraged me to step up the game a level. I started to flesh out the details of the obvious humor piece. The jokes came fast and furious while I skirted around the implication of the title.
No matter how hard I milked the situation I was cowed. My udderly fantastic jokes fell on deaf ears! How could that be?
Later in the day we stopped at the office. I shared my humor with the team. My spirits found another hoof to stand on as the folks who haunt the halls of my practice found my humor enjoyable. Then it dawned on me I pay these people. They could be humoring me to preserve their paycheck or it could be I hire people as perverted as me. More research was required.
The last item on the agenda was a visit to the gym. I couldn’t wait to share my humor. But before I had the title out groans pulsed through the crowd. The ladies turned and left with twisted faces; the guys were stunned silent. As hard as it is, I had to put the idea out to pasture.
If you allow an idea to percolate in my head for a while I sometimes turn a sow’s ear into a coin purse. (My apologies to all the sows reading this blog.) The title is obviously clickbait and I am good with that. It also allows me to share stories from my farming background that help illustrate the issues surrounding financial independence and success. So here goes.
You can learn a lot about a farmer by looking at his cows. Cows are ladies and should be treated as such. They are as soft and tender as any human female. They will love you and trust you as long as it is earned. If you slap your significant other around you get the same response a cow gives when you beat and abuse her.
In the old days before milking parlors were the rage farmers milked cows while they stood in stalls with their heads secured (the cows, not the farmers) in a stanchion. Two rows of cows were secured along either side of a wide walkway.
Cows don’t always want to get milked. Some cows love it; other are a bit more reluctant to getting felt up by a human and have a machine suctioned to their teats. Women.
When a woman refuses to listen, a man has several ways to deal with the situation. You can grab a pipe or hit with the expected results of anger, push-back, animosity and fear. It doesn’t work guys! You can force all you want, but nothing beats voluntary compliance. (Stay with me ladies. Voluntary compliance through deceit is not nice either, but there is a point to this.)
There are other methods to getting a cow in a stanchion. An unruly cow can be pushed. Every farmer knows you can twist a cow’s tail in a loop and push. It causes serious pain for the cow and might be enough to get the cow to walk forward. Of course if you push even a bit too much you break the tail.
You can tell a lot about a farmer by walking into his barn. If his cows all have broken tails you know what’s going on. The farmer thinks he can force his girls into compliance. Hitting and the electric cattle prod are sure to be a part of the torture sessions.
This behavior is cruel and never works. Dumb farmers up the game by breaking the tail multiple times or getting a bigger lead pipe. Thankfully most of these types of farmers are long gone, out of business.
You never treat a lady like that. EVER! And cows are ladies. If you treat your ladies in the barn that way I can only imagine how you treat the lady of the house.
Busted tails are a bad sign! It doesn’t work either. Cows get stubborn and will take the pain before acquiescing. Hence the multiple tail breaks. It also lowers milk production. Happy cows make happy farmers; abused cows make broke farmers.
There is a way to get a cow to do what you want within reason. For that we need to talk numbers.
My Favorite Numbers
Years later we built a milking parlor (1978). (I started milking cows at a young age.) Our parlor was a herringbone style where twelve cows were milked in two rows, six on each side. The cows walked in and stood at a slight angle so the backside of the cow was slightly toward the middle.
The farmer stood in a pit between the rows of cows. The pit was a major improvement over stanchions. No more crouching and kneeling to milk cows. More knees were saved than any other time in history.
The udders were chest height to the farmer in the pit. The udder was washed with warm water and massaged to help the cow relax and drop her milk. A machine with teat cups with pulsing suction extracted the milk. Another tremendous improvement was the automatic takeoff. When the cow was done milking the machine sensed this and automatically stopped the suction and an arm pulled back the milking apparatus.
Once the cow was milked the farmer’s work was not done. The farmer would apply teat dip to each teat to prevent bacteria from entering the teat, protecting from disease.
The care and treatment of cows is of the highest importance to dairy farmers. Those girls are the entire business. An injured or sick cow meant hard times for the farmer. Treat your girls right and business was good.
Milking parlors increase the number of cows one person could milk. Our simple herringbone style parlor allowed me to milk a couple hundred cows in a few hours versus several people milking 60 cows in the same timeframe.
As the cows waited to be milked they stood in a holding area. As cows were milked and released the holding area needed to shrink to force the cows into the parlor. An electrified bar with chains hanging down were on a trolley controlled from the parlor pit. The farmer hit a button sending an alarm from the electrified chains as the trolley slowly moved forward. I hated the darn thing with a passion.
My favorite cow was Number 34. She was always the second cow in every milking on the south side of the parlor. Her daughter, Number 82, was the last cow milked every time. Both walked in of their own free will.
You see, Number 34 and I had a good working relationship. I would greet her every day with a smile and a hug around the neck. The way she turned her head to hug me back makes me believe she enjoyed our relationship. She was a good cow. I miss her.
Her daughter, Number 82, was just as friendly. Mother and daughter enjoyed more petting and brushing than any two cows I ever saw. Our cows were friendly, but these two were off the scale.
34 was nearly first every milking; 82 was last because she was cleanup crew. I hated the electric chains so I used them seldom. 82 would actually herd the last stragglers in before she stepped in herself to be milked. God, I miss those girls.
Remember I said some farmers try to force their cows into compliance? Well, it doesn’t work any better with cows than it does with humans. The preferred method to encourage compliance is bribery with food. To get cows in stanchions a farmer will place food in a bunk in front of the stanchions. It works wonders.
In the parlor there was a place for corn or haylage in each spot the cows stood. Corn is a powerful inducement to get cows to do what you want. I never bribed my girls. They always walked in because they wanted to be milked.
A cow with a full udder must feel uncomfortable. At least it seemed to me by their body language. The only reason a cow will not volunteer for the blessed relief of an empty udder is abuse or fear. Food can get a cow to respond even when afraid, but it is completely unnecessary if you treat the ladies with respect.
My voice was all I needed. “Milking time girls,” is all I needed to say and they came running. If they were out in the pasture I yelled out, “Here, CABAASSSSS!” The high pitched wail was all that was needed to bring the herd running, yes running, to the barn. There is something about a couple hundred cows running straight for you at full speed. A cow weights around 1,500 pounds (680 kilograms) each. Mutual respect is the only reason I felt safe standing my ground while exposed.
My cows knew me and I knew them. Each cow has her own personality. Daily I would walk among the cows as they grazed in the field or roamed the free stall barn, petting them as I went. I knew a cow was sick before she did. I could see it in her body and actions.
Communication was important. My ladies knew my voice and knew it meant safety. They ran to my voice any time of the day. If I walked among them they always gathered around.
There is no doubt my girls knew what I was saying. Sure, they didn’t know the actual words, but they knew the tone. They knew I was going to brush them before I did. The cows would rub against me, careful not to knock me over. I didn’t push them around and they didn’t push me around. Something I was always grateful for. My girls a big!
Milking cows taught me how to treat women (and money). You can’t force either. You might use intimidation or fear to get what you want but it is always a self-defeating activity. My cows wanted to come by me and be milked. Mrs. Accountant loves me and stays by me because she wants to. I can’t force her (or the junettes) to do anything they don’t want to. The relationship is symbiotic.
People try to force money all the time by playing the lottery of day trading. It rarely works. You can start breaking tails to force the issue or bribing with yummy corn. In the end it is the hard way to get anything done.
The only way to financial independence is the same way to treat cows. You spend time at it patiently. You invest daily and allow the investment to yield dividends. When done correctly the cows walk right in to be milked. When done correctly money comes to you without threat or intimidation or forcing of the issue.
Finally, all those years of experience massaging cow udders to please my cows have paid off with Mrs. Accountant. (Sorry. I couldn’t resist at least one joke from the original content.)
Sitting in a darkened room at 2 a.m. searching for words to type seems like an adventure for Don Quixote. Will anyone read the post? Will it matter? All questions, and doubts, every blogger faces daily.
Of course we can take solace in our traffic statistics. Numbers keep stair-stepping higher, salving our fragile egos. But each step higher is followed by a slight reduction in traffic before finding a floor, waiting for the next exposure sending traffic another notch higher creating more doubts.
Then we have revenue streams. Young blogs building traffic to acceptable levels see modest income. The heart flutters with delight when a batch of good news arrives. People are “buying” into my ideas. Readers become fans and start their Amazon shopping from the blog and consider affiliates listed or shared as part of a post. A surprise upswing causes the heart to sink when the follow-through is weak.
The comments offer consolation. Each comment reminds me a reader is engaged. Of all the things a reader can do to remind the blogger he is not alone in the darkened room at 2 a.m. is to comment. The message at least got through far enough to encourage an intelligent response.
Many more readers contact than comment. The contacts come to me via email. I read them all. Answering each is impossible. I send many to my office manager for further review. She then decides which ones to contact for possible consultation and which to consider offering our tax services.
I see everything from the contacts. Some are almost impossible to understand as the commenter is venting recent events. Some want to thank me for my efforts and to encourage my work. Many ask for advice or to be a client. Then a voice comes from the wilderness and I stop in my tracks. Someone, close to home, has had their life changed for the better because I was alive today.
The Blessed Voice
Like most bloggers I watch my traffic intensively. There are clusters of readers around the country and the world. The cluster surrounding my office is one of the smaller ones. Part of the reason is the smaller population of the area. Another reason is many people viewing this blog on mobile devices show up as traffic from a distant location. The local cluster is probably much larger than Google Analytics indicates.
Every so often I get an offer for lunch, coffee or a beer. I am open to this. Unless the request contains scary verbiage I am happy to meet readers and talk shop to just talk about life. (For the record very few people have ever contacted me with scary verbiage.) I enjoy meeting readers and sharing stories. Some things I share in real life I would never share on a public blog so there are some advantages to meeting me in the real world.
Last week I received an email from a young man who asked I keep his name private. I also made a slight change to the email to conceal his identity. Here is the email I received:
I’ve been reading your blog for some time now and finally felt compelled to reach out. While we’ve never met, you have had a great impact on my family’s path to financial independence. I am a CPA and after leaving a large public accounting firm (I was on the audit side but looking back I wish I chose tax!) two years ago, I started working in the finance department at an *redacted* in the Valley. Since that time I’ve driven by your business each day during my 15 minute commute. I think we even use the same library!
If memory serves me correctly, you once had “Mr Money Mustache” on your sign. I drove by each day wondering what the heck that meant. My first thought was some kind of a payday loan store, but boy was I way off. I gave in and Googled it and was instantly hooked. I devoured the archives and my wife and I officially began our path to FI. Discovering the early retirement community has truly changed my life philosophy. I’ve spent the last two years reading as many blogs and books (from the library) and listening to as many podcasts that I can fit into the day. Even though we didn’t know about FI, my wife and I are naturally debt averse and paid off $60k of her student loans and our car purchases the first few years after graduation. Two years into our financial independence journey the only debt we hold now is for our home, and we have a net worth north of $300k at ages 29 and 28.
Despite being immersed in this community for two years I have stayed behind the scenes. I like to learn, but feel that I don’t really have anything unique to contribute. Between you, Pete, the Mad Fientist and JL Collins, all necessary topics are covered in greater detail and more eloquently than I could ever aspire to. However, I’d like to pay you back in some small way for helping me fall down this rabbit hole that has changed my life. That could be buying you a beer or coffee someday and talking about personal finance, proofreading your posts before they come out (I read them all anyway!), or just sending you this email to express my gratitude and you don’t have time to respond.
Let me clarify a few items. My office is in Menasha, which is part of the Fox Cities, which is also sometimes called the Fox River Valley, or just the Valley. We are located about 40 minutes south of Green Bay.
What my friend has done is nothing short of incredible! He and his wife destroyed debt and have a $300,000 net worth before age 30. Folks, you do realize most Americans never reach this level. Ever! At any age!
Recently I discussed my net worth and how I went from a poor farm boy to an eight figure net worth. To keep the discussion moving I glossed over a few issues, most notably some of the vehicles I use to invest and protect my net worth from taxation. My sole mention of using trust instruments to protect net worth and save taxes caused several requests to hit my email inbox. People wanted to know more about trusts and how they can be used to super-charge net worth, provide guaranteed income, reduce taxes and protect against lawsuits stealing your hard earned money.
To which I mentally replied, “Is that all?”
A tax discussion on trusts turns into hard core tax planning quickly. Discussing all trusts is beyond the scope of a simple blog post and even beyond the scope of an entire blog. Too many variables are involved. What we can do in a single blog post is cover one trust topic enough to help you decide if it is right for you and get you to the right people to facilitate the process.
Today we will discuss an animal called the net income makeup charitable remainder unitrust, or NIMCRUT. It sounds like a derogatory name you would call someone in the heat of battle. Instead, the NIMCRUT, or even her sister the CRUT, is the perfect tool to get a massive tax break now, avoid paying capital gains on highly appreciated assets, help the charity of your choice and get a nice income stream—some of which might be tax free—for your entire life or a set number of years. Sound like fun? Then read on.
Highly appreciated assets face a large capital gains tax rate, currently topping out at 20% for federal, plus more in many states. To make matters worse, the alternative minimum tax is calculated using a 22 ½% capital gains rate.
Moving money from a long-term, highly appreciated asset to a higher income producing asset requires a serious tax haircut. The reason for the transfer of investments frequently revolves around income. The old asset has appreciated several fold, but has a low or no current income distribution. To access your net worth requires sale of a portion of or the entire asset, triggering a taxable event.
Basics of a NIMCRUT
A NIMCRUT is really a charitable remainder trust with a unique income makeup feature.
Once a NIMCRUT is established, assets are transferred into the trust. The trust sells the asset/s and since it is a charitable trust pays no tax on the gain. You personally did not sell the asset so you also pay no tax on the gain, nor is there anything to report on your personal tax return.
Because you donated to a charitable trust (a qualified nonprofit organization (the beneficiary) gets the remainder at some point in the future) you also get a tax deduction on your personal tax return. The tax deduction has to be discounted for the present value of the future gift. In the old days we used tables provided by the IRS to calculate our deduction; today we have handy online calculators linked at the end of this post.
Example: A 53 year old donating $1 million of stock to a NIMCRUT with a basis of $100,000 would avoid paying capital gains tax on $900,000, plus get a current tax deduction on Schedule A (subject to limitations) of $239,894. Any unused charitable deduction is carried forward up to five years.
The tax avoided and the additional deduction is a great start. BUT, you also get an income stream from the trust. Remember, this is not a straight forward donation to a charity. The charity gets the remainder at some point in the future. You choose how much income per year you want before the charity takes possession of the gift. The Tax Code requires at least a 5% rate with higher amounts allowed (up to 50%). A common rate is 7% and is used for our example above.
You also choose the term, either life or up to 20 years. The longer the term the lower the tax deduction on Schedule A.
CRUT or NIMCRUT
There is a difference between the two. Generally, a NIMCRUT only pays you from income, excluding capital gains. A CRUT can dip into the corpus to fund payments. The NIM part of a NIMCRUT means you can catch up, if you will, the missed portion of past payments.
Since many investments do not throw off a 7% income available for distribution, two investments rise to the surface: real estate and annuities. The rent is available to distribute to the annuitant (you).
An annuity inside the NIMCRUT can control the flow of funds. Income must be distributed up to the rate listed in the trust document. Previously missed payments are “made up” in years when the income supports the payment.
Since tax is due on all or most distributions, your personal tax situation might require more control over when you get paid and hence pay tax. The annuity inside the NIMCRUT can delay paying out; therefore, no income is available for distribution. When you need the money you can take your distribution by having the annuity pay out income to the NIMCRUT. (Special thanks to Putnam Investments for presenting the annuity strategy at a H.D. Vest Financial Services conference during the mid 1990s.)
Assessing the Benefits
Let’s add up all the benefits of a NIMCRUT before disclosing a few negatives.
First, you avoid capital gains on a highly appreciated asset. Most taxpayers will avoid 15% to 20% long-term capital gains tax with a NIMCRUT, plus state capital gains taxes. In our example, $900,000 of avoided LTCG adds to a $180,000 tax reduction at the 20% LTCG rate.
Next, you get a present value charitable deduction on Schedule A subject to normal limitations for the future charitable contribution. Our example shows a $239,894 deduction.
Assuming a 7% rate and no increases in value of the NIMCRUT investments, you will receive 140% of the original investment over 20 years. If the investments inside the NIMCRUT increase, your payment will too. Our example should generate $1.4 million over 20 years.
Normally you are the trustee so you determine the investments inside the NIMCRUT.
You control in a limited fashion when and how much you get paid. Most income from a CRUT or NIMCRUT is taxable. A portion of a CRUT might be exempt.
At the end of the term your named charity receives the remainder.
To keep the kiddos happy you can purchase a single premium term life insurance policy for the amount of the charitable gift with the tax savings from avoiding the LTCG tax. This is done with an irrevocable life insurance trust (ILIT).
If you die while the NIMCRUT is in effect the remainder goes to the charity, is added to your estate, but your estate takes an equal amount as a charitable deduction.
In sum, you avoid LTCG taxes on unrealized asset appreciation, get a deduction up front, receive income over your lifetime (single or joint) or a set number of years up to twenty, support your preferred charitable causes and give the kiddos a healthy legacy to boot.
Every strategy has pros and cons. A NIMCRUT is irrevocable. This means you can’t later change your mind. Well, you can change your mind, but there is nothing you can do about it. You must plan in advance for a NIMCRUT. The issues and process is complex and set in stone once in effect.
There are annual reporting requirements. At minimum a Form 5227 is required. Sometimes a Form 1041 or other tax forms are required. Few tax professionals are versed or experienced in preparing complex trust tax returns. You will need to find one who is.
You must have an attorney to draft the trust documents. No shortcuts here. An experienced estate attorney will smooth the process and inform you of issues pertinent to you while avoiding IRS scrutiny.
Large investments are required and large unrealized LTCG increase the tax benefits of the NIMCRUT. Realistically, anything less than $100,000 of asset value or $50,000 of unrealized gain to transfer to the NIMCRUT is inadvisable. $1 million of highly appreciated assets and greater put into a NIMCRUT yield excellent advantages to many high net worth taxpayers.
A CRUT usually allows corpus to be used to pay the annuitant, but yields fewer tax benefits. A NIMCRUT must have income from which to pay the annuitant (you). Many NIMCRUTs exclude capital gains from income in the trust documents.
The Next Step
It’s not all roses when planning a trust. Trusts are nor for everyone. They are powerful estate planning tools to carry out your wishes and serve your needs. It takes time and there are legal fees.
I intentionally left out a massive amount of information to keep to this post’s story line brief. Additional research is required even before you contact your estate attorney.
Here is an interesting article on NIMCRUTs you might find valuable.
Here is a NIMCRUT calculator. You can play with the numbers to get an idea of the tax benefits available. The same site has excellent calculators for a variety of CRUTs and CRATs as well.
You can read a bit more from the IRS on the issues discussed.
Finding a qualified attorney is an issue for many readers. Here is an article by a company that helps people set up charitable trusts. (Not an affiliate.)
Finally, if you want to read extensively before committing to a discussion with an attorney, here is a good book on the subject from Amazon.