When Mrs. Accountant and I got married we had a bucket list. Most items on the list are private and irrelevant to the story at hand. The one item on the list I will share is our desire to have foster kids early in our marriage.
The goal was to help foster kids at a higher level than the average foster home. We also wanted to have foster children early in our marriage out of concern for having foster children after we had our own children.
Mrs. Accountant and I realized our goal. Several foster kids were placed in our home over three years. Rather than collect a stipend (the county paid us $1,000 per child per month tax free!) and ram as many kids through as possible for some quick squid, we planned on helping these kids get the start they deserved in life.
After they settled into their temporary home I started a daily routine with them. Back then Tony Robbins had recently released his first version of his Personal Power program. This 30 day course took you from where you were at to accelerated growth in areas of personal development and even issues relating to money.
Monday through Friday I would sit with the foster child (we only took one child at a time) as we listened to another episode of Tony. The program strongly recommended keeping a success journal and completing each day’s tasks to move a step closer to your goals.
The kids were all reluctant at first, but the enthusiasm and promises Tony made on those tapes quickly drew them in. Some kept a journal, many only scribbled a few notes or had no journal at all. Most gave at least minimal effort to the assignments given at the end of each tape.
Foster care in an unforgiving environment even in a loving home. Too many of these young people (we took the hardest cases of junior high and high school kids) struggled and then it was time to leave for a group home or a new foster home. Some of these kids went back home to live with a parent. In at least one instance the parent got her child hooked on drugs shortly after leaving our home. It was heartbreaking.
Twenty years later one of our foster kids stopped by the office. It was such a long time I didn’t recognize him. He introduced me to his girlfriend and was so excited about his job. He grew up and was doing well. He told me about his many trials after he left our home. He mentioned our time together listening to Tony was the only thing that prevented him from taking his own life. He knew if he fought hard enough long enough things would work out.
Then he reminded me of one lesson Tony taught that shaped his life. And he came this close to getting into the NFL.
Turn Up the Heat
The concept our foster child clung to so tenaciously involved an internal thermometer which determines success and failure. According to Tony, when things go south your subconscious turns up this internal thermostat to get you back to where you used to be.
Your mind has powerful beliefs on where you should be in life based upon your values and experiences. If you view yourself as a married woman and find yourself widowed, the mental heater is turned on to remedy the situation. Once back in a relationship the heater is turned down as normalcy is returned, according to your subconscious.
The internal thermometer doesn’t always serve you well. The above example explains why everyone is familiar with the rebound relationship. This thermometer doesn’t guarantee you a nurturing and fulfilling relationship. The heater likes to force the issue to get back to the comfort zone as soon as possible. Sometimes faster isn’t better. (Usually faster is NOT better!) When you are below a perceived value in any area of your life the heater comes on. If you are seriously below the expected range the heater roars!
The opposite is true too. When things start going great your subconscious turns on the air conditioner to slow things down and even caused bad luck to knock you back into your subconscious normal zone.
This happens with money all the time. The plight of lottery winners is legend. Sports stars and successful entertainers also have a disproportionate number of bankruptcies. When things go too good too fast or for too long the air conditioner comes on. This internal AC has caused more fortunes to be lost than any other entity.
In my office an employee has been enjoying a good bit of luck. A difficult childhood followed by adulthood filled with more pain than anyone should endure has broken into vast opportunities. She is doing awesome at work and her income is rising fast. She is good and I let her know it. I want my talented team to also possess a positive attitude.
She recently said one sentence which brings the whole mental thermometer into clear focus. She said, “When thing go this good something happens that causes me to lose my job.” Oh, my God, woman! Things are going great for you and all you can think of is how you self sabotaged in the past? Tony might have been wrong! This isn’t always a subconscious thermometer going into action; it can also be front brain.
That kind of self talk will butcher anyone. I sat my employee down and explained to her why this time WILL be different. She had to change her thinking from ‘here we go again’ to ‘I deserve this’. The crux of the problem is just that. She did not believe she deserved things so good. A lifetime of pain and regrets all too often gives us the BS we need to continue the same destructive patterns.
Breaking the Thermometer
The heater and the AC exist in all of us. Both are equally destructive.
Breaking the thermometer is difficult, but necessary before you can move forward. Breaking up with someone you love isn’t fixed with a rebound relationship. Losing money in a market decline might encourage you to regain lost ground by taking unwarranted risks that destroy your remaining wealth.
The AC is worse than the heater. Over the years I have watched employees with massive talent self destruct after getting a raise or praise. I see it more often when a new employee comes from the poor side of town. Opportunity for them is lost because they can’t accept the gift of an improving life.
Regular readers know I come from a poor farming family. Life wasn’t easy and the AC was running full tilt more often than the heater. Since the family financial position was so low from a young age there was less need for the internal thermometer to trigger the heater to bring things back up to where they were expected to be.
I struggled those early years. I always thought I’d shovel manure for a living only to watch the family farm lost to bankruptcy less than six month after I graduated high school. My expectations were low and my brain was determined to keep me there.
Over the next four years I managed to add to my small stack I saved in high school. Excessive frugality and a kind stock market jacked my net worth into the six figures. This wasn’t enough to retire even in the mid 1980s, but it was enough to allow me a chance to slide for a while.
For a year I immersed myself in books, learning everything I could. Then the best thing ever happened to me; I met Mrs. Accountant. We talked a lot and built a dream we soon put into action.
I kept reading, but fewer novels were in the mix as I devoured anything that would help me grow internally. I didn’t know it back then, but I was resetting my internal thermometer. Good thing, too. All I was to become is a result of this massive indoctrination.
Before long I met a real estate agent who sold me on investment property ownership. He also introduced me to Tony Robbins and invited me to see Zig Ziglar live. (I have a picture on my office wall shaking hands with Zig.) I bought the books, I bought the tapes, and listened and read and listened and read.
I was a poor kid from the wrong side of the hill (the rural version of the wrong side of town). There was no chance I would be anything. Ever! I saw myself as poor and I was going out of my way to screw up what was a darn good start to my financial success.
Well, you know how it turned out. I bought a cassette player (remember those) with ear buds and listened to those tapes whenever I was working. If I wasn’t reading I was listening. I changed the thermometer; I changed the functioning of the heater and AC. No longer was I a slave to some subconscious voice keeping me in my place.
After all these years I still read voraciously. I listen to tapes less often. But now and again I give Tony or Zig my attention as I drive to the office or work around the house or barn. More often I read Warren Buffett or books recommended by Bill Gates today.
If you think about where you are at today financially, emotionally, in your faith, in your relationships, I think you will find the heater and the AC has been treating you with disrespect. Deep down you know where you belong and that is exactly where you will stay, adjusted for inflation.
You must reprogram yourself if you are to break free of this harsh taskmaster destroying your dreams. It’s possible, but you have to do it. No one can do it for you. You have to change the picture of how you see yourself before you can break the thermometer forever.
An old country boy from the backwoods of Wisconsin with no training happened to chance across a real estate agent who admired Zig and Tony. If not for that chance encounter I probably would not be here. My brain, my subconscious, needed reprogramming, programming for success.
And now you met me.
Hatred is in the air and it’s costing the nation plenty and a whole lot more to those who harbor the hate. The President has now banned transgender people from the military and the alt-right is cheering. And it’s a stupid idea.
It is easy to see how dumb this policy is if you think about it for even a moment. If we exclude gays and transgender people from the military because it might hurt morale, why not exclude these people from all areas of society. Think about it. We can complain when they work and complain when they don’t. We can really mess with these people.
But let’s not stop there, my Aryan Judeo-Christian friends. As long as we are excluding those we consider undesirable we need to name the groups we want out. The gays and transgender people are only the beginning. We had a little thing called the Civil War that started 156 years ago. The discussion was slavery if memory serves me right, but it might be fake news. Women gained suffrage in 1920 in the U.S. with ratification of the 19th Amendment to the Constitution. White men haven’t heard the end of it ever since.
Let’s take a tally. We want gays, queers, transgenders, blacks, Mexicans, women, and let’s not forget the Jews (of which a tincture probably runs through the author’s veins) from serving in the military. Basically, we only want white men in the military.
Here is why this is soooooo stupid. When the military is called to duty only white men will be on the line fighting for the nation. Inevitably some of these fine young “white” men will die. That will leave a disproportionate number of gays, transgender, black, Hispanic and other undesirables to spend time with, shall we say, white women.
It’s hard being a racist when you really start to think about it. Now we get to think about how it is killing your pocketbook.
Into the Foxhole
The argument for keeping gay and transgender people out of the military is still a powerful debate. Nothing drives more fear in a white man’s heart than being hunkered down in a foxhole with bullets whizzing overhead only to be interrupted by the sound of his buddy unzipping his fly. I get it. (Bad choice of words.)
You see, gay guys have to have sex with every guy they get within 10 feet of. Guys understand this. “Normal” guys have sex with any woman within arm’s reach. Right? No! Let me get this straight (another interesting word considering the conversation). A guy can be around a female and act like an adult, having an intelligent conversation with said woman without any possibility of coitus? Really? If this is true then it might be possible for a gay guy to not be in the mood while in the foxhole. And guys, you are not required to date the guy in the skirt. It’s optional!
To recap: Gay people don’t jump every human of the same gender!
Now listen close my tiki torch carrying friends. The problem isn’t with them; it’s with you! This is a personal finance blog and the United States prides itself as an economic leader. Therefore, we can state the facts and then correlate how it affects your wealth.
Some costs to your income and net worth are obvious. Getting your mug on the front page news spewing hate and engaging in violence can cost plenty in legal fees and losing your job doesn’t necessarily help the family budget. At least your hate for social programs like food stamps and welfare reduced to painfully low levels will be no safety net for you either. More important to keep taxes low. AND GET A JOB!
When did it become a battle cry to complain when people don’t work and to whine like a two year old when they do? If a guy wants to wear a mini skirt and high heels, who am I to argue. Klinger was in the military and things turned out okay. Of course with a doctor named BJ. . . (What? M.A.S.H was a television show. Really? It’s wasn’t real? Get outta here!) It has come to my attention you should disregard this paragraph. —The Editor
My Favorite Color
The logic surrounding the recent increased violence in the United States is lost on this backwoods accountant. Business owners actually deny service to clients based on religious beliefs, the color of their skin or who they boink when the lights go out.
What really blows my mind is we want to keep certain groups out of the military while we need more hard working (I said hard working!) people to serve the nation in the military. Does this mean the tiki torch carrying crowd is marching to the recruiter’s office to sign up? Are they indicating their support for the draft? I’m confused.
Several years ago I had Lasik surgery on both my eyes. In my community there are several choices for this surgery. After careful research I concluded Dr. Alexander was the best doctor in the field locally. Eyes are important so I wanted the best. I paid above average to have my precious eyes see 20/20.
Dr. Alexander did an awesome job on my eyes. And he is black. I didn’t care; it didn’t bother me. And isn’t it like a white guy. As soon as the chips are down the black guy is good enough to bail my tail out. And if the good doctor happened to be transgender it would not have bothered me either. I wasn’t looking for a date; I wanted my eyes fixed!
I have gay clients, transgender clients, black clients, female clients, Hispanic clients and even Jewish clients. The one thing I can tell you about every one of them is this: They came to me for help and they showed me something green. Money green always grabs my attention.
In all my years of practice I never once asked a client (or employee) about their sexual orientation. They need tax work or business planning done and I’m the guy to do it. I don’t offer sexual services in my office.
My office manager is Puerto Rican. You should be glad she works for me! She keeps my tail moving in the right direction. My business would be less profitable if Karen were not there. Skin color never once entered the equation. It’s like my eyes; I hired the best and the best just happened to not be white. Who cares? I wasn’t there for a skin graft! I wanted my eyes fixed without incident. Dr. Alexander delivered.
When I see the rallies and violence over immigration I am appalled. We need immigration reform in the U.S. I agree with that. But the concept of ‘kick’em all out’ is butt stupid. They want to work! When has that become a problem?
We have real issues in our modern world. Income and wealth inequality are caustic problems begging for solutions. Nuclear weapons are aimed at our cities and territories and the best we can come up with is a wall? Our infrastructure is crumbling and the best our supreme leader can come up with is “ban transgender people from the military”. Our tax code is in desperate need of revision and instead of working on the problem we waste time pardoning an ex-sheriff who treated Hispanics reprehensibly.
Perhaps the reason we have anemic economic growth and a declining labor participation rate isn’t about some minority group we want to beat up on this week. Maybe the problem is white men. If white men have so much time on their hands maybe they should get a job or two so there are none left for the Mexicans. All I hear is “Kick them out”, but I see no white protestors lining up to fill the vacancies.
I am a white male and feel disgusted at the legacy my race is leaving. We seem to hate all who are not white and even hate anyone white who dares show kindness to anyone not white and male.
History is clear on this. It never ends well for the racists. It isn’t all that good for the rest of the crowd either. If you don’t believe me, research the late 1930’s to 1945. Hate only knows how to destroy. Hate is the acid which destroys the vessel which contains it. And it’s bad for business, jobs and personal wealth.
I do not care if my eye doctor is getting rich. I actually hope he is. He provided an incredible service to me and I fully expect he will enjoy the rewards of his talents.
I cheer on my clients. Many Hispanic business owners utilize my services. The biggest issue I have is communication. Sometimes I cannot understand what they are saying as their English is still spotty. Then Karen steps in and speaks Hispanic fluently. There is great respect between my non-white business owners and me. I want them to do well; I want them to win. When they thrive, so do I!
Over the years I have had a small number of transgender clients. There were probably more than I was aware of. In the 1970s and 80s the world’s leading sex change doctor worked at a hospital less than five miles from my office. A few of his clients wandered through my doors.
The hate has to stop. Yes, it can be uncomfortable when a transgender, gay, black, Hispanic, woman, et cetera is in the room under certain circumstances. You are an adult. You can deal with it. Uncomfortable usually means unfamiliar. Get familiar and the discomfort will go away.
A Final Story
Many years ago Mrs. Accountant and I were in Dallas attending a seminar. In our free time we enjoy visiting museums. We found ourselves at a museum with an IMAX theatre near the Cotton Bowl. Time got away from us and so did our ride. We were stranded late at night as the museum was closing. We had to leave.
This had all the hallmarks of a very bad outcome. This was before the days of cell phones and Uber. There was a pay phone inside the building, but no phonebook to find the number of a taxi service. I had money for the phone if only I had the number of a cab company.
I asked every person there if they could help. Each walked past annoyed at my interrupting their life until a black woman wandered near. She was tired and cranky after a long day of work. Still, she helped Mrs. Accountant and me find a taxi phone number. At that moment she was the most awesome woman on earth.
In the end it worked out. We got our cab ride back to the hotel without incident.
That is why I will never rally against any group of people. You never know when someone from a certain group will be your only salvation. A guy in a hot pink mini skirt helping Mrs. Accountant and me out of the bad situation would have been just as welcome.
Don’t hate, kind readers. Hate always ends in pain for all parties involved. My youngest daughter was born cisgender, a genetic defect where her gender was assigned at birth because her gender wasn’t apparent at birth. I love my daughter. God created her as she is. Who am I to argue with God? No one should hate her because of a gender issue.
If our nation faces a crisis I will not spend a second thinking if the people protecting my country, me , my family, friends and clients, are gay, straight, transgender, the color of their skin, ethnicity or religious faith.
When that day comes, and it always does, they will be the most awesome people to me no matter what their personal life is.
Note September 20, 2017: When I wrote this post I had been introduced to a new word about my daughter’s condition: cisgender. At first I thought this was the new “politically correct” way to speak about intersex children. It isn’t. I was using the term wrong as a comment below mentions. There are so many terms bandied around today to deal with gender and sexuality it is confusing even to a dad with a daughter born intersex. So, to clarify, the article above is correct as long as you replace cisgender with intersex. No matter what name society uses to identify my daughter’s condition, I still love her to death. She is my sweetheart along with her sister and mom.
Mrs. Accountant, the girls and I took a hard turn right as we headed home from the eclipse. Gas low, we stopped at a gas station to fill up when I noticed a massive sign announcing the Powerball lottery was somewhere around a gazillion dollars and change. My frugal nature prevented me from buying a ticket, but Mrs. Accountant couldn’t resist. And now we are the proud owners of a massive nest egg.
Don’t worry! I will remember all the little people who helped me over the years. Now and again I’ll publish another post on this blog to rub your noses in the good life I am living. Suckers!
To be honest, Mrs. Accountant didn’t actually buy a lottery ticket and truth be told, we headed straight home after watching the moon slowly cover the sun.
There is a strong temptation when the lottery hits nosebleed territory. What people forget is that the odds are still 292.2 million to 1. For all practical purposes the odds are impossible. But, the argument goes, somebody eventually wins. True, but it won’t be you.
If enough people play the odds are someone will win at some point. The odds are so long no one in their right mind—I said right mind—would waste a nickel on state run lotteries. It’s the worst racket in town and in the end it will ruin your life if the impossible happens.
And after all this I still claim I won the lottery and I have. If you listen close you can win the same lottery I did as long as you don’t buy a lottery ticket.
Stacking the Odds
Over the years I have had several lottery winners walk through my office doors. In preparation I have a large legal firm in Milwaukee to help protect the client.
The lottery isn’t the only issue people face. Large monetary windfalls show up in unexpected ways. More common is a large inheritance. For some reason nobody knew dad was loaded. He lived so frugally the whole town just figured he was poor. However, dad has been investing religiously in a broad range of equities since 1938. Who knew?
The law firm I have on speed dial is the result of my greatest failure as an accountant. It was a long time ago and I was inexperienced. It cost a client dearly and it still haunts my dreams.
A young man walked into my office after winning the lottery. It wasn’t a gazillion dollars like some mega jackpots today are, but still a tidy multi-million dollar push.
He worked at a local mill and promptly quit his job. I never recommended legal counsel. I just did his tax return, provided modest advice and sent him on his way.
He bought a home cash, quit his job and started a business. After all these years I cannot remember what his business was. What I remember is how he became addicted to gambling. He needed another big fix. He thought if he could win the lottery once he could do it again. What he really needed was a doctor and I didn’t have one on speed dial back then either.
The first year he received a huge refund because they withheld a good portion of his winnings and he bought a lot, and I mean a lot, of lottery tickets after that. Since he had a large win he could deduct most of the gambling losses.
In year two he had a massive loss in his business and more gambling expenses. Unfortunately, you can only deduct gambling expenses up to gambling winnings. Since there were no withholding taxes paid he really had no tax issues, but no refund either.
Year three continued the spiral down. The business defaulted, gambling was out of control and the money nearly gone. And I did nothing.
He mortgaged the house and gambled it away. Then the house was gone. Year four was the last year I prepared his tax return. Another client who knew I was handling the lottery winner’s taxes informed me he was living out of his car: no job and no money.
Oh, I forgot to mention one salient point. He has a child, a daughter. He was living out of his car with his daughter. The nightmare returns every time the lottery makes the news.
My client couldn’t get a job. The whole town knew he was a lottery winner. Half the people hit him up for a loan and stiffed him. I never heard what happened afterwards. I’m not sure I want to know.
I promised myself I would never let this happen again on my watch. Over a few years I built a dedicated team of professionals to move in on a moment’s notice to help people with a large financial influx. A qualified attorney (not all are) is a must. The accountant bears a massive responsibility, too. I dropped the ball all those years ago. Never again.
Plenty of wealthy people have walked through my doors since. Whether it was a lottery win, a large inheritance, the sale of a business or investment, I have a program to steer my client to calm waters. In effect I become the buffer zone between them and the leaches and their persistent efforts to drain my client dry.
Mrs. Accountant and even my office manager frequently don’t know what is happening under their roof. Usually the client shows up wanting to speak to me about a personal matter. When the door is closed they tell me their plight. Privacy is the most important element.
Winning without Pain
You can win the lottery without all the pitfalls and pain. In my lottery you can’t take the lump sum option; only the annuity option is available.
There is one rule: you can never buy an actual lottery ticket! Instead, the money you are tempted to spend on lottery tickets must be invested in your retirement account for maximum prize money.
I know, I know. When the lottery crossed a half billion you thought it would sure be nice to have enough money to tell the world to eff off. So you dropped a hundred on tickets. With millions of players nobody still won! And you were still too stupid to see how evil the odds were. Statistically impossible.
So you crack your wallet again for a chance at three-quarters of a billion. Same result. Some folks are slow learners.
For some the temptation doesn’t end there! The casino has better odds on each throw of the dice, but the edge goes to the house and the more you play the more you lose. Never mind that your favorite accountant used to play blackjack and win. It’s called card counting and gave me the edge. Until the casino turned into a sore loser and booted my sorry tail from the premises as they read me the trespass notice: come back on our property and go to jail. (As if that ever stopped me.)
Lottery fever goes beyond the mega jackpots. I see it in my office on a regular basis. It afflicts the middle class and poor with devastating results. Call it a stupid tax, but it is really state sponsored gambling addiction to extract a regressive tax from the vulnerable.
The amount gambled away by many people is a small fortune.
Did I hear someone say fortune?
Yes. Yes, you did.
Let me show you how I win the lottery every time the jackpot turns hot. This is your favorite accountant’s guaranteed method to win the lottery every time you play! I said guaranteed!!!
Remember the $100 you burned on lottery tickets? (Please tell me it was only $100, for Christ’s sake!) Well, invested in your retirement fund you would have been a guaranteed winner. Let’s review all your lottery winnings by using Keith’s School of Investment logic to count our score.
First, since poor people generally play financial Russian roulette, the lottery money diverted into your investment account will provide a whole host of tax benefits, the least of which is the Saver’s Credit. The tax benefits of loading an extra $100 every week into your account over the lottery’s could generate a tax benefit equal to or greater than your investment.
Now remember, the lump sum option isn’t available. The $100 invested will do two things: it will grow about 7% per year, plus the inflation rate and throw off a dividend that also grows around 7% per year.
Think of it this way. The $100 you pissed away, ah, invested in lottery tickets is gone with no return forever and always. Amen.
The very same $100 in an S&P index or total market index fund (or EFT) will throw off around a 2% dividend to start. This year your income will grow $2 without any additional work on your part. Next year you get $2.14 (on average); the year after $2.29, and so on. Each year your income increases faster and faster as it compounds.
But. . .
You have been blowing $100 every week on cheap booze and wild women, oops, that was me, on lottery tickets and the casino. Stupid stuff. (Not the wild women. Some would consider that lucky stuff. I beg indulgence from my female readers at this point.)
This little habit of yours is bigger than a 10 ton pickup truck with a hemi. $5,200 going down the drain annually and only empty pockets to show for it.
Of course you understand the odds are against you! You are NOT stupid. You get caught up in the hype. Casinos and lottery officials know how to play you (literally). You need to turn off the caveman part of your brain and do what is right for you!
If $100 generates $2 of growing dividends, what will 52 weeks of this craziness generate? Simple math says 52 weeks times a hundred bucks per week times two dollars of dividends each week you invest instead brings us to $104 after the first year. The next year you’ll book up against $114 of dividends even if you don’t invest another penny. And it climbs from there!
Now I know you guys are quick on your feet, but let me put this into perspective. That’s enough to play the lottery for over a week for free.
Had ya for a second, didn’t I? You know the truth. Your periodic gambling itch due to mega sized lottery jackpots is ruining your retirement plan (early or otherwise).
It is time to stop the madness. Play The Wealthy Accountant lottery instead. Everyone’s a winner! Yee haa!!!
And with only the annuity option available you get a raise every year for your trouble.
Nobody sees your puss on the news feeds and nobody asks for a loan or charitable contribution. All they do is walk into my office and tell me they had no idea dad was so loaded when they inherit your legacy.
I have a confession. I was jealous of Mr. Money Mustache. Well, not exactly of Pete himself, but of something he has been able to do for a long time that has eluded me.
Several years ago before I met Pete I read how he periodically traveled the country and rarely paid for a hotel room. There was always someone willing to put him up. One summer he spent in Hawaii at a guy’s house and he helped him with some remodeling as payment. There were several other incidents where he mentioned couch surfing.
My first attempts at this fell flat. You can’t just bed down in anyone’s home. What if your host is a serial killer (notice the empty corn flakes boxes behind the house)? What if the host thinks you’re a serial killer?
It really wasn’t Pete’s fault. I just hadn’t learned the fine art of securing accommodations outside the hospitality industry. I didn’t know enough people from around the country where this would work on a regular basis and couch surfing at a stranger’s home seemed to me fraught with risks.
Then I got an email.
Meet My Hero
Somewhere around the early 2000s Mrs. Accountant and I loved attending science fiction conventions. One of my favorite authors was going to be the guest of honor at a small SF convention in Schenectady, NY. The missus and I loaded the car and off to New York we went.
The convention was very homey and of course my favorite writer at the time was there. Except there was a problem. The conference was cliquey. The author stuck tight to his close group of friends. I never had a chance to introduce myself or chat for a few moments. I was hurt.
It was really my fault. The author did stick with his acquaintances, but he did so to pass the time. It was a very small gathering and I doubt he would have felt comfortable standing around with his hands in his pockets. Sure, he could have made a move towards me when he saw me constantly looking on, but it had to have felt weird for him also. I never made the move and never got to meet my favorite author. . .
. . . until years later at WorldCon, the largest annual science fiction convention on the planet. This time I matured enough to speak with the author. There was also a small round table with said author that I attended as well.
I promised myself to never do what that author did to me: to leave a fan standing there, hands in pockets. I know how hard it is to introduce yourself to someone you only know by their published work. It’s hard on the author too. Engaging every guest at an event is impossible and exhausting. The talk is always light because there is no commonality.
Dealing with the Problem
The same problem I had taking advantage of an opening to speak with an author I admired was the same problem I has securing opportunities to visit with people anywhere in the country I was traveling.
In the beginning it was all about knowing how to do it. There isn’t an author on God’s green Earth I couldn’t walk up to and chat with today. I evolved. As easy as it is to work with clients locally, I was out of my league when the net was cast wider. In a few minutes I will share how I recommend you avoid my pitfalls and move right to the fun stuff of building relationships.
Remember the email? Well, at some point a month or so ago I must have mentioned publicly I was going to see the eclipse with my family. I kept it hush-hush for the most part so I could focus on the event. Seeing my first eclipse was important to me!
The hotel was booked and travel plans set. Then the email.
A reader, Bernie Keene, emailed offering shelter during my stay for the eclipse. My response was so quiet you could hear crickets. Which brings up a good point. If you contact me and I don’t respond it doesn’t mean I haven’t seen your email. Sometimes I think about it and want to think about it more later. Frequently it is forwarded to my office manager. Some I delete; it doesn’t work for me at this time. And other contacts are saved in a digital filing cabinet for review in the future. The worst part is you don’t know what I am doing or thinking. Due to time restrictions I am unable to personally respond to every request. It sucks and I know it.
Bernie had no idea what I was thinking or if I even read his offer. What I was really doing was checking the weather in my original location and Bernie’s for the day of the eclipse. Finally, the Friday before the big day I responded to Bernie and said I would be happy to show up the next day with the crew for several days. It was a happy acceptance.
To be fair, I did email Bernie around Wednesday to let him know what I was thinking. But his email was in my inbox for quite some time as I played with the idea.
When considering spending the night at the home of someone I don’t know requires a minimal amount of research. If it was only me I would not be as concerned. With Mrs. Accountant and the girls involved I decided to check Bernie out. He has a Facebook and LinkedIn page which made him look like a normal guy. I can attest he is a very normal guy after enjoying three nights in his home.
This brings up a good point. If you want to do something like this you should have at least a minimal social media presence available to the general public. No accounts make me wonder if it is who they say they are and all hidden accounts means potential drama.
A hotel is easier, but you never get to enjoy the local community the way you do when living with a local. For example, one of the things that impressed me most about Bernie was his pride in the accomplishments of his family. He showed me pictures of his parents (mom died in 2005 and dad is in a nursing home where Bernie visits frequently) and siblings. He told stories about each.
The home where we stayed belonged to his parents. It was converted into a bed and breakfast years ago where mom and dad Keene entertained guests for a decade. More stories were told. And you know how I love telling and hearing good stories. It is arguably the only real reason to live and is what makes life worth living.
We talked every evening until about 10:00 solving the entire world’s problems. Bernie had more than a few questions and I was happy to share my knowledge or at least my viewpoint. Which is yet another interesting point. When you open your home or visit another’s home you will have such an awesome experience. You learn so much and can share so many ideas. It is hard to sleep from the excitement.
I included several pictures of the weekend. It’s impossible to share all the things that happened and some was private. What I can tell you is how awesome a time my whole family and I had. And it all started from a simple email offering us a place to stay during the eclipse.
Now I knew why Pete did it. If I would have known how special these Conclaves are I would have been more jealous still.
Now It’s Your Turn
How can you have your special weekend at Bernie’s? It takes a special kind of person to feel comfortable couch surfing in a stranger’s home. Reaching out to a blogger you enjoy reading can work, but until a connection is made might not.
It’s easier for me now because of my position with this blog’s growing readership. I also attend plenty of personal finance conferences now and know many of my readers personally as a result.
That is the best starting place for you as well. If you want the opportunity to visit for several days with a blogger or other people of like mind in your home or theirs, consider attending a few conferences first. Talk with people. Don’t make my mistake and stand in the corner afraid to talk because you don’t know anyone. My inactions didn’t fix that problem!
I know I can travel to virtually any area of the country and find a place to bed down. This blog might be the reason, but without attendance at conferences I would not have made the personal connection most people need to feel comfortable opening their home to what amounts to a total stranger.
There have been a few instances when someone was traveling to the backwoods of Wisconsin and asked for shelter. I agreed. Understand this isn’t a daily or even monthly occurrence. It happens now and again which makes it special.
By meeting people you have alternatives if you desire saving hotel costs with couch surfing. Schedules frequently don’t mesh so you end up speaking with several people before finding accommodations. Sometimes you end up in a hotel.
Each time a connection is made is special. You learn more about people than anywhere else when sharing an apartment. When all parties share the same values the gathering is always special.
Now it’s your turn. There is a world of friends out there waiting for you.
This is one of the few blog posts on The Wealthy Accountant where reading the captioned photos add to the story. Please, enjoy.
Finally, there has never been an instance when I stayed at someone’s home where they did not become a friend. Sure, there is geographical distance. The friendship is long-distance, but in our modern world that is not a problem when you decide to stay in touch. You don’t have to be connected at the hip and it’s best if your weren’t anyway.
We live a brave new world where we no longer need to cry out into the night alone. We have friends everywhere we turn. I have friends.
You have friends.
Winter seems like a lifetime away. A quick check of the calendar and a shiver will run down your spine as only a few months remain before the heating season begins in the northern latitudes and creeps south.
Saving money is my favorite pass-time. What other hobby provides so many tax-free financial benefits?
If you are reading this at its regularly scheduled publication date, Mrs. Accountant, the girls and I are heading to or are enjoying the eclipse. Trevor McDonald contacted me a few months back asking to write a guest post. We worked together (he wrote, I edited and provided guidance and recommendations) until he had a solid piece you will enjoy reading.
I’ll let Trevor take the driver’s seat and explain.
How to Save Money with a Do-It-Yourself Home Energy Audit
A professional home energy audit costs $600 or more while saving up to $1,000 annually. Smaller homes can run less, but larger homes often cost more. The bigger the home, the bigger the potential savings.
If you could skip the $600 fee you’d only have to pay for energy-efficient home improvements.
So if you want to save money from the start, forget professional home energy audits and opt to DIY.
Here’s how to conduct your own home energy audit.
Locate the Air Leaks
You may already know where your home is leaking air. Make a list of these areas. You may cut your home energy bill anywhere between 10% and 20% each year by reducing these drafts. You’ll also be more comfortable (no one likes to sit near a drafty window).
Run your hand around windows, doors, plumbing fixtures, electrical outlets and baseboard gaps. If you feel a draft, add the drafty spots to your list. Perform this step on a cold day or during the evening when it’s cooler.
Note: You may also use a lit candle to find small air leaks in your home. Turn off your central air or heating system and place the candle near any areas that could be leaking. If the light of the candle dances, you have a small air leak.
Check Your Attic
Depending on your home’s age its insulation may not be energy efficient. If you have an exposed area, such as a spot in the attic, assess the insulation by checking its R-value. The higher the R-value, the greater the insulation. Check the Department of Energy’s website for R-value recommendations in your area.
Check under the insulation to see if there is a vapor barrier. This may be some type of paper attached to fiberglass batting or it may be a plastic sheet. If there’s nothing, consider painting your ceiling with a vapor barrier paint. This paint helps maintain the above insulation’s integrity by keeping water vapor out.
Look around to see if there are any unsealed pipe or duct openings. Seal any electrical boxes with flexible caulk.
Finally, check your attic’s hatch. Its insulation should be at least as thick as the rest of your home and the edges should have weather stripping. Before you leave, make sure there’s a tight seal when you close the hatch.
Check Wall Insulation
Turn off the circuit breaker and choose an outlet on an exterior wall. Test the outlets to ensure they have no juice running to them before you take the next step.
Next, remove the cover plate from the outlet and carefully probe into the wall with a screwdriver. If you encounter some resistance, your wall is likely insulated. You should notice resistance right away. This means the entire cavity is likely insulated.
Insulating a finished wall requires some handy work, but the energy savings should be worth the effort. Blow-in fiberglass, closed-cell foam or cellulose insulation works best in these cases. You’ll need to make a small hole between each pair of studs for the machine’s nozzle. These holes are typically placed halfway up the wall to adequately regulate density from top to bottom. Save the cutout you’ve made and use it to patch the wall after it has been re-insulated.
Check the Basement
If you have an unfinished basement or crawlspace that is open to the exterior, look for insulation under the home’s flooring. If there’s no insulation, insulate with an R-value of 19 or greater.
If you have an enclosed basement or crawlspace with heating or cooling elements, insulate the space’s perimeter instead of the flooring.
Also insulate the water heater, hot water pipes and furnace ducts.
Inspect Heating and Cooling Equipment
If you have a forced-air furnace, check and replace filters about once every month or two (more often during cold spells). Have the equipment cleaned by a professional each year.
Consider replacing your heating or cooling equipment if it is more than 15 years old. Newer units are more energy efficient so you should save money in the long run.
Look around for streaks of dirt on your ducting. This may signal an air leak. Seal any air leaks with duct tape. If your ducting travels through an unheated space, insulate those areas well. This is a simple step that will help ensure your unit is working at its highest efficiency.
Save money by changing out old light bulbs with energy-saving incandescent, light-emitting diodes (LEDs) or compact fluorescent lamps (CFLs). Shop for new bulbs based on lumens instead of watts to ensure you get the right amount of lighting in each room. Lumens are a measure of a bulb’s brightness. This measure is a predictor of a bulb’s performance whereas watts are a measure of energy.
Assess Appliances and Electronics
We worry about keeping light bulbs on, but appliances cost more to run and can stay running for up to 24 hours.
A 46-inch LCD TV alone can waste about $11 per month in electricity when plugged in but turned off. Consider using a smart energy strip to conserve power on “sleeping” appliances and electronics.
Most repairs will cost a small amount of money to perform, but they will help reduce your energy bill every year. And remember, you’re already saving money by performing the energy audit yourself, so kudos to you!
Trevor is a freelance writer who focuses on health and wellness, energy, and finance. He enjoys using his talent for words to help educate others. In his free time you can find him writing for different publications or outside enjoying about any type of fitness activity imaginable.
The past week has been an interesting one around the Wealthy Accountant world and all I can think of to explain it is. . .
Put up or shut up.
The best way to tell this story is to go back to the beginning.
Long time readers know I opened shop without knowing I opened shop in 1982. I prepared my first tax returns that year because I wanted the money and it seemed like easy work. It took until the 1989 tax season to realize this is something I could do for a living and still appear as a hard working, up standing (that illusion wore off fast) young man supporting his new wife.
The world was a different place back then. The local newspaper had two and a half pages of business card sized ads during tax season for tax preparation services. I was one of those ads. There hasn’t been an ad in that newspaper offering tax services in 15 years.
Leader of the Pack
To succeed in business you need to differentiate from your competitors. The stunt I pulled was free electronic filing. I heard through the grapevine there was a tax software firm only changing their accountants $1 per return to e-file. Back then everyone was charging $25-$35 for e-filing.
I called the IRS to find out who this firm was. Internet was still in the future. A search of the industry journals didn’t reveal what I wanted. And the IRS wasn’t willing to cooperate either. The IRS support member I reached explained they couldn’t help me because the IRS doesn’t endorse any tax software package. I get it.
So I kept calling rapid fire with the same question: Who is the tax software firm offering e-filing for a single dollar? After close to a dozen calls a service rep said, “Drake.” Click.
That was all I needed. I grabbed the industry journals and found Drake Software and called them. A short conversation revealed they were my mark.
The next tax season—my second as a full-time tax firm—I was utilizing cutting edge technology to crush the competition. In my office e-filing was free for all customers from then on. It doesn’t sound like much, but back then it was a big deal.
And the free e-filing offer was a profit center for my firm. It cost me a dollar, but I didn’t have to print a copy of the return to mail to federal. I estimated the cost of printing was at least a dollar so I reduced my costs more than what Drake charged me to e-file.
Wisconsin, my home state, was still a pain in the tail because they didn’t offer electronic filing. Not only do you print a copy of the state return to mail in, but attach a copy of the federal return too.
Then a miracle of miracles happened. Wisconsin tested e-filing. The state selected a small number of firms to test their system (I heard it was three) the first year and my firm was one of them because I offered free e-filing and had zero fraud cases.
My competitors were facing a punishing assault. The next year Wisconsin opened e-filing to virtually all tax firms with a limit on how many they could file this way, except for the original test firms which could file as many as they wanted.
By the time competitors caught on it was too late; I was well entrenched and not going away.
This was the first time in my career where I needed to put up or shut up. You’re going to be disappointed in me. I shut up.
My practice was growing like wildfire! I went from a bedroom in year one to remodeling my entire basement for the next few years to an office building by year five. Growth was out of control! I went from zero to the 2,000 client range by the sixth year in business with growth rates still in the neighborhood of 30%. The only reason it wasn’t higher is because management skills were needed.
I am reasonable good at taxes and personal finance. I like to brag how you don’t need a college education to succeed, but my lack of a formal business education started to show. Managing a rapidly growing business was causing problems.
This was the point where I had to make a choice. The accounting/tax industry has been consolidating for a long time. The choices were clear: sell out to another firm and enjoy a normal retirement at a very young age, open additional locations to expand the company’s geographical footprint or buy out competitors to expand the business. I did none of these.
Retirement is something I’m also not good at. You learn too much owning a business like mine and I love that part of the profession. I knew my limitations and understood my talents were woefully short when it came to running an expansive accounting firm. And I never considered buying a competitor. Finding clients has always been easy for me; getting the work done has sometimes been the challenge.
Stubbornness made me do what I did. I actually shrunk the business from 2,000 returns to 700 over a number of years and added more consulting, bookkeeping, payroll and tax audit services. I was more profitable than ever and happy as a clam.
Competitors became violent in their attempt to purchase my firm. It got so bad that for a few years attorneys would show up in my office and demand to speak with me, a lucrative contract in hand. I could sell for a lot of money and focus on the things I’m best at working for the acquiring firm. Unfortunately I make a poor employee so I sent the guys in suits packing.
A Short Time Ago
By shrinking the firm to a manageable size I was able to regain my sanity. The workload was reasonable until I met Mr. Money Mustache. As Kurt Vonnegut would say: And so it goes.
Rapid growth was back and all the weaknesses reappeared. All I want to do is talk with people to help them solve their money problems. It’s something I like and am good at.
Finding tax professionals at my level is like pulling hen’s teeth. (Any reader out there who has ever pulled hen’s teeth send me a note. There must be a story in that scenario somewhere.) Training one-on-one is not a strong suit either. I’m better in front of a crowd though I am getting better at training individuals in the office, however.
For someone who built his business on new technology and automation, I sure stuck my head up my, ah, head in the sand for several decades. New technology passed me by because I liked doing things the way I always have. You know the old story. Progress is made one death at a time.
I might be slow, but I ain’t dead! Circumstances forced me to grow up and start acting like a leader. Technology was introduced and I was so happy, wondering what took me so long to embrace the new world order. My employees rolled their eyes as they turned away.
New technology solved many problems and freed more of my time, except this blog keeps the flow of work consistent. More time meant I could handle more accounts. To be more accurate, I didn’t necessarily handle more accounts, just bigger ones. Now I need powerhouse tax pros to help me. A big problem.
Fortunately I made modest progress in this area. I found one, yes one, tax professional with the aptitude to be as good as me. She is good now and will exceed even me in as short a time as five years. She doesn’t believe it, but I made a living (and a fortune) reading people. Trust me, if you get Dawn in my office you are in good hands. She still needs my guiding hand periodically, but she gets it. Her intuitive instincts serve her clients well.
But one is not enough and my management skills are still stretched to the limit. I may lack the skills of a superstar manager, but I know how to fix these kinds of problems. But it means doing something that feels unnatural. What I planned would be almost impossible unless I found the right people.
A recent news article on CNBC (I wish I would have saved the page so I could link to it) told the story of a young man who started a business and had the same problem as me. He was smarter than me in one regard. He knew he was the problem as CEO of his fast growing company and did something about. He fired himself!
A qualified CEO was brought in to replace him and he was demoted (or promoted, depending on your perspective) to lead the creative team. It was what he was good at. Instead of wasting time and feeling miserable trying to manage a company he fired his tail and took the job he was best suited for. It is okay to be the owner and still have a boss!
If I were a true leader I would fire me too. I belong in the creative department consulting with clients, designing products, writing blog posts, researching tax issues, training future tax professionals and preparing taxes. All those things are what brought me into this field in the first place and all the detritus of management has been put on the back burner as much as possible and it shows. A firm any larger would fail due to my mismanagement as the CEO. Next time you envy my position, ponder my weaknesses. I’m great because you read my stories. When the lights go out I have tremendous flaws, many fatal in the business world.
Once again I wasn’t putting up; I was shutting up. And I convinced myself the world was flat because I kept it small enough for me to excel in. Fool!
Earlier this Week
Virtually every day I get requests due to this blog. A few weeks ago I was asked for permission to syndicate this blog by a firm with a mailing list north of 100,000. I said yes, of course, and referred them to my policy of encouraging people to steal my stuff.
A reader offered my family a place to stay near a prime eclipse viewing area. If weather permits I will take him up on the offer. It looks good. All he wants in return is to pick my mind. I’m good with that and informed him I will be bringing a few cases of Wisconsin’s finest Spotted Cow beer. He lives in the bourbon capital of the world and has a few samples for me to try. If you were a gambling man I’d place my money on me imbibing some of those samples.
So I can focus on the eclipse I have a guess post next Monday and another blogger has requested a guest post opportunity. I will say yes.
If all these things weren’t good enough, I continue to get several requests per day from potential clients. A publishing house asked to secure prime real estate on this blog for a banner ad early this week. I’ll probably say no. I don’t think their publications mesh well with my readers. I’ll review more before making a final decision, but the odds are not good. But I still received the offer! Opportunities, people. Opportunities.
Then I received the most important, and probably life altering, phone call of my career. Remember how I said I am not the best candidate for CEO? I think the solution walked in my front door.
In January of this year I met Jonathan from the ChooseFI podcast. They wanted me to be an early podcast in their program. I was okay with that. To date it is the only podcast I’ve ever done. (I’m open to do more if anyone cares to hear my voice.) Jonathan and Brad recorded the podcast shortly after tax season ended and it went live on Memorial Day (in the States) while I was attending Camp Mustache in Seattle. The podcast was well received. Thank God I didn’t end anyone’s career with my normal wit.
Jonathan forwarded a question from a listener this week and I was the appropriate choice to answer said question. Jonathan also emailed he needed to speak with me pronto on an important issue. The Wealthy Accountant felt like he was being called to the principal’s office (as if that never happened in high school).
I recorded an answer to the question and set a time for Jonathan to call me.
When he called he wanted to present me with an idea for expanding this blog and the services it could provide. I have mentioned in passing some of my ideas here and on social media. Jonathan, not one to let a great idea slip by, knew I was struggling with bringing my ideas to life. They are great ideas, but who will mange bringing these things to life? Me! I have a company to run and doing a piss poor job of it. Adding more to the pile of things to do in areas I’m not a good fit for is a BAD idea!
As Jonathan laid out his case, his elevator pitch if you will (it was a long elevator ride), he recommended a program I already had started to flesh out. We discussed several programs to serve you, kind readers, in a way a simple blog alone cannot. The problem for me was digital and Jonathan knows a thing or three about digital.
I never had a dream of running the world. My ego has no such needs. Finding and training more employees is a good idea, but the number of people who need what I have to offer is in the millions! The need for quality tax and personal finance advice is desperate. Jonathan’s idea similar to mine was to train other accountant’s already in place, building a network of qualified tax professionals to serve you, kind readers, one-on-one; the kind of personalized service you deserve.
This is all a good thing! I’m not going to live forever and the world has a hard time dealing with one of me so cloning is out. Without boring you with details I can say Jonathan and I have more discussions planned to make this a reality over the next few years.
There is one more point to make. Jonathan’s talents are different from mine. He is unlikely to be a good fit as the CEO of my accounting practice, but he will be the natural fit for the new entity that evolves from this coordination of efforts.
My job will be creative design. It’s what I’m good at. Jonathan will probably do more of the management and all the digital. I am always available to discuss management issues, but implementing them will probably be stripped from your favorite accountant. No need letting a man with mental challenges run with scissors.
I am excited for what the future hold.
You may have noticed I offered no solutions to the problem. Everyone, no matter how good they are, will have inflection points like I have had recently. Your issues will be different, but they are inflection points all the same.
Inflection points happen in all areas of life. A crisis of religious faith, the death of a family member, the decision to get married or (gulp) divorced are only a few. Personal finance has inflection points you have read plenty about in this neighborhood. And business is filled with inflection points.
You will not see me taking a lap. I struggle as much or more than anyone else. I’m not better so bragging is out.
So why do I bother bringing this topic up? I am proud of how far this blog has come. Now J$ from Rockstar Finance has asked me to guest post on his sister blog (also this past week) Budgets are Sexy. He thinks if I write the story he requested it will be picked up by national media. He plans on giving it a nudge to encourage the activity. I am both humbled and terrified at the same time. It is time to put up or shut up.
My goal here is to share my story so you can learn from it. You are not my competition and I have zero fear you will use my experience to harm me financially or any other way. I wish I could give a few step-by-step answers to make it all better, kind readers, but life isn’t like that and your favorite accountant can’t deliver those goods.
What value can some country boy provide? That was always my opinion so I made a habit of shutting up. Oh, you can build a remarkable net worth shutting up! I’m living proof of that. But the real value is growing up and putting up. And that is what I will now do for the first time in my life. It is all possible due to the remarkable people I have met in this demographic over the last few years.
All the rest is a waste of good talent.
Fifteen years ago a client who has since passed away had a complaint. He explained his uncle had died and the family was having a difficult time finding his money. The family knew his uncle had money, but he hid it everywhere, kept no records and refused to reveal his secrets to anyone.
The family decided to hire a forensic accountant who took six months to find around $280,000. My client’s complaint was they knew the uncle had a lot more than $280,000, but had no idea where to start looking.
This was during the my early days as a hedge fund manager. The hedge fund didn’t buy stocks or businesses; we bought charge-off receivables and collected on the debt.
When banks have bad loans on the books they sell them for a fraction of the face value. (Banks never really lose. It blows the mind how they every have financial trouble. It takes a new level of stupid to fail as a bank.) Once we took possession of the accounts we sent our legal teams around the country to locate and collect, even in court if necessary. (I authorized over 22,000 suits over the years. Yeah, I was one of those a-holes. But I was good at it. Stick with me here. This is all going to work to your advantage this time.)
Running the type of hedge fund I did (I eventually was hired to run two) provided me with the resources, connections and experience in finding people and their hidden stash. Finding money is something I got really good at.
My client was awed when I started to explain how I would have handled the case versus the forensic account they hired. In 30 seconds I gave them one piece of advice and found over $300,000 more than the forensic account they hired did in six months. Before I was done we collected seven figures of cash from around the United States and even found an account with serious cash tucked away in Ireland.
The family promptly hired me.
Finding Money as a Side Gig
This is a story of finding stuff no one else can. Most side gigs people pick up in retirement earn a modest income. A forensic accountant can earn six figures part-time without breaking a sweat. With the story above in hand we will walk through the simple process of finding old or lost accounts for people.
The resources in this short post will be enough to find the vast majority of assets. To get the fine edge in your performance I will share some resources at the end.
A forensic accountant doesn’t need to be a CPA, enrolled agent or attorney to do the job. In fact, the best people at this are as far away from these professional designations as you can get. This is a job you can do on your laptop in your BVDs without any problem. (I recommend putting on your shorts when meeting with the client.)
The pay is excellent. $300 an hour and up is common in this field. Some forensic accounts change a percentage of what they find while others charge by the hour. People are reluctant to go the percentage route because they all think you’ll find a gazillion dollars and they don’t want to share. Fine! That’ll be $300 per hour, plus expenses. Oh, and I need a $5,000 retainer. Are we having fun yet?
Who Are the Clients?
Over the years I hunted down lost treasures for estates on a regular basis. However, some of my best clients (repeat clients even) are insurance companies looking for answers on an embezzlement claim. Business owners have hired me to do the same. Attorneys sometimes hire my forensic services also. I never had to testify in court on one of these cases, but it wouldn’t bother me if I had to.
The fun cases revolve around helping a family find the belongings of a deceased loved one. For them it is like finding an unknown insurance policy. (I have found a few unknown life insurance policies as well though the insurance companies are much better today than two decades ago at knowing when one of their policy holders is pushing up daises.)
The ugly cases—the ones that also pay very well—involve businesses. Money goes missing or the business owner can’t figure out why business is so good and she is still losing her tail. Hint: The most valued and trusted employee, close friend or family member is the embezzler the majority of the time. I could tell stories.
For several years a local insurance company called me in on any case over a certain value. I reviewed a lot of books back then and it kept the doors open over the summer when tax work was slow. I also liked the work. The down side is you are not a loved visitor when you stop by the business. They know your job is to hang someone. (And I always kept a new rope in the truck for just such an occasion.)
Finding the Goodies
Back to our story. My client knew there was more money. I casually mentioned pulling a transcript from the IRS. This will show any 1099-DIVs and 1099-INTs issued to the person in question. Banks are required to issues 1099s when the amount is $10 or greater. For some crazy reason the forensic accountant they hired never took this step. My client was instantly $300,000 richer and I was hired with a generous retainer.
I now need to introduce you to skip tracing. Skip tracing is a process of finding the whereabouts of an individual. An impure use of the word also includes searching for all the assets, including income sources like a job, of a person or business.
Skip tracers generally hunt for debtors or fugitives. We are interested in debtors. In our example we are not looking for debts. But if you have someone who owes you money you want to find their assets and income sources. This is highly beneficial talent if you are searching for a deceased person’s stuff.
The best skip tracers come from the wrong side of the track. Some are clean cut, but in my experience the ones who are really good at it have tattoos and are rough around the edges. These people know how to find a body no matter how deeply dug in. Perhaps from personal experience.
You can learn skip tracing yourself, but there is a short cut. Go to your local debt collection agency and hire their best skip tracer and let’em loose. It’s your way of spreading the side gig economy around. (You are only hiring the skip tracer for the job, not full-time employment.)
Most attorneys already have resources to do this also. But we are not technically looking for the person; we are looking for the goods. Our skip tracer has another skill we need.
If you are serious about a side gig as a forensic accountant you will need LexisNexis. LexisNexis is a powerhouse of personal information. Once you see this thing you will be scared. They know things about you and everyone else you didn’t think anyone knew. In your search for lost accounts they will bring a deluge of results.
LexisNexis is expensive. If you are friendly with a collection agency you can usually hire them to do the LexisNexis search for you. There is so much information it is good to have someone familiar with the platform help you acquire and interpret all the information you get. A deep drill down will uncover just about anything the mark ever did since the first computerized records began and even a fair amount of stuff from before the Computer Age.
An IRS transcript and a LexisNexis search will be 99% of your job. If you suspect the client has money in another country (my client did) you use the same procedures in that country. Western Europe is as straight forward as the U.S. and Canada. Just find a debt collector in the target country and expand from there.
It doesn’t take long to uncover virtually every asset. There are some costs so you need to remind your client of this upfront.
The Problems with Embezzlement
Finding malfeasance can be trickier. In these instances you are not always looking for assets or hidden account (though that frequently is part of your job description later), you are looking for accounting irregularities. We are usually not talking about an accountant cooking the books. The issue is either money stolen (which could be the accountant) or stolen merchandise.
The issues tend to be complex here and if you don’t have an accounting background you will need to at least have a fundamental understanding of the accounting process.
Misappropriation of funds generally sticks out like a sore thumb in the accounting records. What you are looking for is a discrepancy between revenue and certain expenses. For example, a restaurant will have a cost of goods sold within a relatively narrow range depending on the type of restaurant compared to sales. Payroll also falls within a certain parameter or revenue, COGS and tips.
The issues become too complex for a short blog post. Here is the take-away. There is always a relationship between items in the financial statements. Deviation of these ratios (between sales and COGS or sales to wages as an example) is a telltale sign of something wrong.
The timing of the deviations frequently correlates with the hiring of the instigator. You will always review multiple years of records looking for inconsistencies, i.e. COGS changing significantly from one year to the next. Most of my work is done on an embezzlement case before I even get out of my chair and visit the establishment.
The easiest way to see this is with an example. This is a real client with a restaurant.
My office manger one day came to my office concerned about the client in question. She couldn’t understand why the client had growing sales but was going broke. A 30 second review of the financials and I knew an employee was embezzling. The cost of goods sold was waaaay out of whack for a restaurant of any kind and I could see the progression.
My first thought was a waitress was guilty. The client was brought in and I questioned her about the waitresses and how they handled money. It was quickly apparent a waitress wasn’t the culprit. Waitresses had few opportunities alone with the cash in this establishment.
I started to question the business owner about other employees. When we reached the cashier she said it couldn’t be her as it was her close friend of decades. The search was over. The friend did it.
It wasn’t a guarantee at this point, but I knew where this was headed. The business owner did not have cameras. I told her to inform the employees her accountant was concerned about embezzlement and demanded cameras be placed in the building. The cashier quit on the spot. Uh-huh.
We weren’t done. The ratios between COGS, sales, and waitress payroll and tips was still off even after accounting for the embezzled funds. I suspected more than few cases of steaks and seafood were wandering out the back door of the kitchen. Fed up, I had the client place cameras at the kitchen doorway leading to the parking lot without informing employees. A week later the entire kitchen staff was fired.
The sad end to this story is that the restaurant did not survive the assault. The damage was too great. We caught the malfeasance relatively early even though we weren’t hired to do that job. But the business owner stalled, certain her friends were innocent. The wound was too deep and the victim died. And all the jobs along with a great restaurant were gone. I still kick myself for not insisting more action be taken sooner.
In 2,000 words I actually gave you a good template for a basic forensic accounting side gig. You will find more than the average accountant for sure with these methods. If you want to hone your skills to a fine edge I recommend you continue your training. Your local technical college may have courses on the topic. There are also plenty of seminars and conferences, of course. Look for conferences specifically for collection agencies. They are the masters at finding assets. Or, you can start with some really good books on the subject. The books can get pricey, but these are the books used in colleges many times and the books are cheaper than college itself. One gig can pay for the whole thing and more.
Forensic Accounting for Dummies (This is the lowest cost basic education on the subject you can get and also a good place to start if you are new to the game.)
Below is a selection of high quality books on forensic accounting. These books are high quality and cost a bit more. They are worth it if you are serious about forensic accounting as a side gig and tax deductible if you are in the business.
I hope this article and resources are an awesome opportunity for you to earn a nice income in a side gig or even as a career.
And remember, no matter where you are, no matter where you go, I will find you.
And you stuff, too. So pay your bill so you don’t end up a client of my hedge fund. (Hint: I sold out the two funds a few years back so you are probably safe. Probably.)
More Wealth Building Resources
Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?
Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.
Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.
QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.
A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.
Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you very much!
Living a frugal lifestyle sometimes lends to a false sense of security. We take all the financial precautions to increase our savings rate and invest in broad-based index funds. Before long the net worth starts reaching for the stars and we feel good about ourselves.
Now, we decide, might be a good time to get a second car or trade for a new one. Moving to a smaller home, across town or to another state or country, sounds tempting and easy to do with your nest egg growing faster than you are spending.
Your habit of caution is well defined. There will be no stupid tax in your future! Careful planning leads to good decisions. You look before you leap.
Then it happens and you never even saw it coming. You paid a stupid tax without even realizing it was there.
How the Government Robs Smart People
Smart people know how to avoid spending half their income on taxes. They fill their retirement accounts and use index funds for non-qualified accounts to keep the tax burden low. Using the tax code can really put a dent in your income tax liability. But the government has insidious ways to pry your hard-earned cash from your wallet.
Selling an old car and buying a new or newer vehicle has an obvious hidden cost: sales tax. When you sell your current vehicle the government collects some coin from the buyer; when you buy a replacement vehicle the government collects sales tax from you. In Wisconsin, where your favorite accountant lives, the sales tax is 5% with most counties tacking on a ½% or more. (I am aware a few counties have a 5.6% rate, but we are trying to keep this discussion clean.) If you buy a $10,000 car you are required to pay at least $500 in sales tax, more in most counties. The value of the car hasn’t changed, but your net worth took a 5% ding on the purchase price. New vehicles are even worse with the higher selling price and non-tax fees crammed down your throat by the dealership.
Buying a piece of real estate is the worst. We will use your favorite accountant’s state in our illustration.
Sales tax isn’t due on the purchase of a home, rental property, land or commercial property. (Can you imagine paying sales tax on a $400,000 home?) There are far worse things than sales tax when it comes to purchasing/selling real estate.
Local governments love when real estate changes hands. In Wisconsin there is a $3 per $1,000 transfer tax. Don’t forget title insurance and both the buyer and seller get a bill.
As a seller you pay realtor fees or pawn your property pro se. If you go it alone you will invest time and money advertising the property and running to show the property. You still need an attorney (and last I checked they still invoice for their time) to handle the legal documents when you have a buyer.
Rather than bore you with the myriad fees associated with real estate I will stop here. All you need to know is real estate, as the buyer or seller, has lots of fees/taxes connected to the transaction.
The transaction fee is the most voluntary tax of all. The more you spend the more you pay.
Reducing spending and saving/investing a majority of your income has many financial benefits. We hear plenty about reduced taxes based on retirement accounts. What none of this savings rate considers is the amount of money wasted on merely the transaction.
Taxes are not the only culprit! Sure, the government has its hand out whenever an asset transfers. But so do sales reps, attorneys, and (gulp) accountants. Everybody gets a piece of the action. You have no guarantee on how the new asset will perform for you. The rental property could sit vacant; the new car could be a lemon. But all the, ahem, professionals are getting paid. If you ask me to consult on a transaction know up front I am the only guy in the room guaranteed a profit.
Reducing the Tax Grind
Taxes will consume over half of everything you earn in a lifetime if you are not careful. Income and sales taxes are only the beginning. Payroll taxes take a bite and realized capital gains put a grin on Uncle Sam’s face. Before you blink, when is the last time you filled the tank on the car and thought, “Oh yeah, I just paid an excise tax.” Excise taxes are everywhere and hard to spot for a reason. It makes it easier for the government to get more of your wealth.
Property taxes are relentless. If you rent the landlord adds the property taxes to your rent; it’s built in. If the landlord didn’t include this major expense she would be broke quickly and the new landlord will not be so lax.
And did you forget you pay corporate taxes, too? You do. Corporations include their tax liability in their cost structure and pass it along to customers. The end user get stuck holding the bag.
Even when you die the government takes a slice in the form of the estate tax. It never ends even if you do!
You can fight back and regain control of your financial future. We have discussed visible (income, et cetera) taxes at length in the past. Now we want to gut the terror of the hidden tax: the transaction fees.
Fee’d to Death
When a simple phone bill has more individually listed fees than you actually make phone calls it is time to consider fees, transactions fees and how they affect your wealth.
We will focus on the two big ones: real estate and vehicles. Of course you already know if you increase your savings rate you will automatically reduce the transaction fees chewing into your life. Buy less stuff; pay less sales tax. You understand the concept.
Cars are a different story. Transportation is a necessary part of life. Even people who bike and walk everywhere they can frequently also own one or more vehicles. And each vehicle owned is a wasting asset.
The more often you buy a vehicle the more often you pay the stupid, ah, hidden tax. If you buy from anyone other than a “for sale by owner” there will be a profit built into the price. This doesn’t make the seller a bad person, just a business person who will survive.
No matter who you buy from you will pay a sales tax. Every sales tax paid is an instant reduction of your net worth. I have a powerful allergic reaction to any event that molests my net worth. There are times I come out swinging it is so bad.
There are two things you can do to massively reduce the transaction costs with vehicle ownership: buy as few vehicles as possible over a lifetime and pay less for the vehicles. Finding the lowest priced reliable vehicle to get the job done for the longest period of time creates the greatest savings. When I buy a car it will be in the family for a very long time. Most of my vehicles are purchased 2-5 years old and I run them for another 15-20 years. I don’t care what they look like! They only leave the family when they no longer can do their job.
A typical sale of an auto in my household is purchased by a local kid looking for a vehicle to enter into the local demolition derby. “Gi’me five hundred bucks kid and this beauty is all yours.” They buy it every time.
You may also consider forgoing vehicle ownership. Ride sharing and public transportation coupled with a good bike can keep transportation costs low. For those few times you need a vehicle for a longer trip I suggest renting. There are still transactions costs, but they tend to be minor in these situations compared to auto ownership.
The other big purchase that chomps a serious chunk out of your net worth is real estate. It drives me crazy when I see clients think they can trade houses like day-traders trade stocks. Of course you can make money flipping houses, but the transactions costs will kill you. Remember who is always guaranteed to turn a profit: the professionals (sales rep, et cetera). One bad deal and it all goes south quick.
Before someone points out I flipped a few houses over the years I want to point out I never went into an investment property with the intention of doing a quick sale for some easy greenbacks. We bought many properties and improved them all. If a rundown property cleaned up nice and we were offered a price we couldn’t refuse, we didn’t refuse.
I own homes like I own cars: for a very long time. I’ve lived on my current farm for 22 years. Before that I owned a home in town and before that I owned a mobile home because I didn’t want to live with my parents anymore. As far as I’m concerned, the mobile home was a vehicle (it has a license and everything) and is a wasting asset. The home in town was nice, but I always wanted to move back to the country where I could raise animals and till some land.
Warren Buffett still lives in the home he bought in 1958. Smart man. Bet he has money.
I’m not telling you you can’t buy a car or a property. If you want to own income property you have to buy it first. There is also nothing wrong with owning your residence. All I am pointing out is that you want to own as few of these big assets for personal use over your lifetime. Doing this one simple lazy thing (not buying/selling/trading your car/house on a regular basis) could increase your net worth by a million dollars or more over a lifetime if invested in an index fund.
Or, you can keep doing what you always do. My brethren in the legal and sales fields are happy to take you money.
So am I.