Archive for January 2018

The Lost Art of Small Talk or Dealing with Fair Weather Friends

How many friends do you have? Thirty? More? Ten or less? It’s an interesting question because it determines a great deal of our happiness.

Loneliness is feared as much as the night. Losing a spouse or loved one cuts deep as we know how much we’ll miss the dearly departed.

Age can bring on acute loneliness. I wrote a Christmas post a few years back about a client who died shortly after I visited her Christmas Eve. Her name was Sophie. She died many years ago. I visited her because I understood how alone she was. Sophie was a client for many years and she spent the last years of her life in unrelenting isolation. Every time I think of her it brings tears to my eyes. I can still feel her weak hand squeeze mine all those years ago.

“One is the loneliest number that you’ll ever know . . .” is a familiar ballad that resonates because we all know how easy we could find ourselves alone. Deep down we all fear the emptiness.

The worst punishment in prison is solitary confinement. Cutting a human being from the stimulation of other humans is considered punishment. It’s really torture and any human forcing another into isolation deserves the death penalty. Isolation destroys the mind; destroys the human and any intelligent person undertaking such activity is the lowest form of life.




Personal Finance and Friends

It might seem strange for a personal finance blog to cover isolation as a topic. However, there are several correlatives between avoidance of isolation, the types of friends you have and wealth.

Some people like a certain kind of isolation. Personally, I like quiet time walking my farm and working with my animals. This is radically different from the kind of isolation Sophie lived through.

Isolation in a confined space is maddening. Sophie couldn’t get around those last years of her life and needed people to visit her. To the best of my knowledge she only had one friend who visited on a regular basis.

People are so desperate to avoid being alone they start to consider acquaintances as friends.

I have a lot of acquaintances, but very few real friends. I bet you’re the same.

Business owners tend to have a larger list of acquaintances. I meet people from all walks of life and learn very intimate and personal things about them. It’s my job! I have to know my client to advise wisely and prepare an accurate return. Even digging into a client’s life doesn’t guarantee I will not miss something. As I write, a client of many years emailed to ask why he didn’t get certain credits. He never answered the questions in the organizer so it was missed until he said something that triggered me to ask the question verbally. Good thing the returns are still able to be amended.

In my life I also have employees. They are acquaintances, not friends! Employers who are friends with employees are asking for trouble!

Then we have this blog. I meet loads of people due to this abstract. Some people I meet at conferences and many more via email, phone or the comments section.

You are probably different. Your acquaintances might be a group of people you socialize with at the bar. You might consider these people friends, but they are almost certainly only acquaintances.

Who constitutes a real friend then? Mrs. Accountant is top of the list for me. Deep down she is my only true friends. My daughters and extended family are friends in a way, but family is family. I get along well with my blood relatives. We don’t chum around, but make no mistake, we will defend our own vigorously. At best I maybe have two real friends outside my bride.

Life is like that. Our true friends are limited while our circle of acquaintances is vast. This is an important understanding to have if you value living a debt-free lifestyle with ample helpings of wealth.




The Lost Art of Small Talk

Valuable time is wasted on small talk. A typical greeting goes something like this:

“Hey, how’s it going?”

“Great. Haven’t been better. You?”

“Happier than a whore on her day off!”

We say it with incredible choreography. We say these things so often we don’t even know we are saying it. We even think we’re a comedian with our witty repertoire.

But nobody is listening.

If you answered a “How’ya doin’” with a “Worst day of my life” you’d probably here the same rehearsed reply of “Good to hear it.”

Small talk is wasted breath! Small talk is something acquaintances engage in. Friends are much deeper.

A simple greeting can waste irreplaceable minutes of your finite life. Added together over a lifetime and you might be surprised to know the average person wastes 4 years and three months uttering and replying to meaningless greetings (I made up that statistic).

Unchecked, you can waste massive parts of each day in empty banter with people you are only acquainted with.

There is a way to tell if you are dealing with a real friend or a fair weather friend. Think for a moment what would happen if you left the group. Would these people stay in touch at a significant level or would it dwindle in a hurry?

My experience tells me most people will evaporate like the morning mist. Staying in touch via social media doesn’t count either! When I meet people at conferences we sometimes end up connected on social media platforms. But once time passes the “likes” decrease and the interaction stops. Sure, you can keep an eye on what your acquaintance is up to, but that’s nothing more than satisfying your curiosity about how things have evolved for a prior acquaintance.




 Dealing with Fair Weather Friends

Fair weather friends can suck the life out of you. As long as you’re buying they are willing to lift a glass with a cheer.

In a manner of speaking clients are the ultimate fair weather friends. They are good people, don’t get me wrong. I love the people I serve. I also have no illusion we are not close buds.

Clients are similar to an employer/employee relationship. As long as you do good work and they keep paying for said work the relationship is golden. Do crappy work for a week and see how long the friendship lasts? Don’t get paid and see how long you feel friendly?

Fair weather friends are not bad people! Few people have what it takes to be a true friend. Most people wander through life focusing on the minutia and looking for drama. People who gossip are a perfect example of who will not make a real friend for anyone. They’ll cut you lose in heartbeat for their own petty dramas. And don’t worry. There is always something to feel righteous indignation about.

Before we deal with fair weather friends further we should discuss the interpersonal relationships between real friends.

It can be hard to look in from the outside and tell if the friendship is real or a friendship of convenience. Greetings between real friends happen all the time. Every night when I return home I inquire into Mrs. Accountant’s day. She asks about my day. Some days are only mildly informative. Some days we sit and talk for hours.

You can share a beer with a true friend as easily as with an acquaintance. You probably mix acquaintances and true friends at the same time.

True friends stick around when the going gets tough even if you are in the wrong. Real friends hold each other accountable but never dismiss the relationship over a disagreement.

Real friends have deep and meaningful talks. Talk is 99% superficial with acquaintances.

For people who enjoy traveling, tell me your stories. How deep are the relationships when you’re passing through? Your spouse or significant other is the only real friend you have in the room.

Even when people meet with common interests the friendships are superficial. How many people have you met at personal finance conferences? How many do you stay in touch with? How many are a deep and meaningful relationship? I understand.




Meaningful Relationships

Jim Rohn said you are like the five people you spend the most time with. I think this excludes to a minor extent people you work with and might include people you read and follow.

Deep, intimate relationships are built on more than casual nights to the movies or tavern. Real relationships have emotional attachments. If the relationship were to end you would feel pain.

Conversations in deep relationships are far more personal. Two guys (they don’t have to be gay and if they are, they are) can have a deep relationship built on trust, sharing and understanding. Think of the depth between soldiers in the foxhole. It gets real mighty fast or everyone is dead. There is no doubt when I see retired military guys meeting several decades later on a regular schedule to catch up they are real friends, even if the friendship was created by circumstances. When trust is that great it can’t die!

Research has shown if a skinny person has all obese friends the skinny person will put on weight instead of the obese group trimming down.

Heading to the shopping mall with crazy people friends who like to spend and you are more likely to overspend as well. I’ve even noticed this in the frugal FIRE (financial independence, retire early) community. The same people keep attending every conference as fast as they are organized. At some point you have to say enough.

Meeting with people of like mind is a wonderful thing to do in moderation. Time spent with people sharing similar thought patterns can be invigorating and FUN! But it is superficial! Most of these people are acquaintances only. You can learn a lot from them and teach a bit, too. But friends are what matter in life.

Everything in moderation. It’s not healthy for your favorite accountant to whine about traveling because I prefer to cocoon. Stowing away on my ten acres isn’t healthy either! I still need to get out. It’s a work in progess.

My preferred method of communication is writing. In the office plenty of verbal communication takes place too. But can you imagine if I only wrote letters to Mrs. Accountant and never verbally told her the depth of my love? Letters are special because most people don’t take the time to write them. I, on the other hand, need to assure I nurture the relationships that matter in my life with verbal confirmation. (I actually framed love poetry I wrote to Mrs. Accountant twenty years ago. It was my best attempt at a sonnet. She stayed so it must have worked.)




Fear

The things you read and study, the people you hang with, family and true friends play an outsized role in your success in life. Reading powerful leaders is important. Also read the classics.

The time you spend with people will influence your thinking more than you anticipate. Take the challenge. If you are deep in debt start reading debt-free blogs and books. Ask to hang out with people who save and invest a lot. Before long you’ll brown bag lunch because in your worldview people no longer have huge debts or spend like drunken sailors.

The opposite applies, too. Have too many people around you, even mere acquaintances, who are spendthrifts and within no time you’ll have some serious credit card debt to contend with. At least you’ll have an 8-mile to the gallon Hummer as a wasting asset in your driveway.

Don’t settle for friends or acquaintances who don’t share your values to avoid loneliness. Work hard to be a real friend and you will find true friends of your own.

Choose your friends wisely. The kind of life you live will depend on it.



How to Deduct Unreimbursed Business Expenses Without Itemizing

Recent tax law changes have gutted many itemized deductions. State and local taxes are limited starting with tax year 2018. What many people are forgetting is that certain miscellaneous deductions and job expenses are also no longer deductible.

Schedule A has suffered many changes. Miscellaneous deductions, subject to 2%, are eliminated. Common deductions in this area include tax preparation fees, safe deposit box fee, legal expenses to protect income, certain job related expenses and unreimbursed employee business expenses.

Most people paid no attention to this area of their tax return because most of these deductions are small even when added together. Since these deductions only count when the total exceeds 2% of AGI, most people received no deduction.

Certain taxpayers made heavy use of these deductions. It’s common for sales people to have large out-of-pocket expenses. Mileage and other travel expenses can add up fast. The only option for these taxpayers is to have the employer reimburse the expenses. The income received from the employer for reimbursed expenses is not reportable income if paid under an accountable plan where the taxpayer provides the employer with evidence of the expense (mileage logs, receipts, et cetera).




Exceptions to the Rule

Unreimbursed business expenses aren’t always claimed on Schedule A. Sometimes the deduction can be reported on page two of Schedule E.

Whereas, the only option remaining for regular employees is to have the expenses reimbursed (or the deduction is lost), small business owners have unique opportunities to claim (and benefit from) all business related expenses.

One-owner firms can easily deduct expenses on the business return since the single owner will want to have a policy of reimbursing all expenses paid for the business.

The problems begin when there are multiple owners.

Partnerships (or LLCs treated as partnerships for tax purposes) can have partners with an office in the home, phone expenses and mileage. These expenses are probably disproportionate among partners. One partner may work on the road in sales while another works from a home office and the remainder working at the company office building.

Partners can disagree as to the amount of deduction that should be reimbursed. One partner may feel the mileage rate is an added benefit to one particular partner since it could contain a non-cash deduction portion. The office in the home might cause friction between partners because the partner with the home office has a more expensive home.

In such situations the partner (if she is a general partner) can deduct unreimbursed expenses on page two of Schedule E. The deduction is reported and listed as “UPE”. Do NOT adjust the K-1. Report the K-1 information from the partner exactly as received. The UPE adjustment listed separately will reduce self-employment tax on Schedule SE automatically.

One final point. To deduct general partner unreimbursed expenses the partnership agreement MUST require these expenses be covered by the partner.




Confusion Accountant’s Sometimes Have with This

This summer a client came in off the street from another tax firm. They deducted expenses exactly as I outlined above with exception of the company reporting as an S corporation.

This does NOT work for regular or S corporations. Unreimbursed expenses, even from shareholders, are considered an unreimbursed “employee” business expense. This means no deduction for 2018 and after or until the tax code is changed allowing the deduction again.

The only way to solve this is to have the company reimburse the expense. The UPE adjustment outlined above is for partnerships ONLY!

For the new client the fix was easy since it was a sole-owner business.

What happened at the previous tax firm was the S corporation filed by the due date which is March 15th. The individual return was filed later, a normal occurrence since the business return has to filed first to file an accurate personal return. Additional expenses for the business were discovered after the S corporation was filed, but before the personal return was.

Rather than amend the S corporation return (the correct answer), the tax preparer took the deductions on page two of Schedule E. The IRS promptly disallowed the deduction. This brought the taxpayer to my office.

Since the company really reimbursed the expenses it was easily resolved with an amended return. If the error were discovered prior to the due date, plus valid extensions, a superseding return could have been filed. (I’ll have an article on superseding returns this tax season.)

My new client was lucky. He was able to deduct the entire amount through amended returns. However, it could have ended poorly if the circumstances were different.




Planning Tip

Over the years I’ve acquired several rock bands as clients. Once a reasonable level of profitability is reached it usually makes sense for the band to organize as an S corporation, replacing the self-employment tax with FICA taxes on only the reasonable compensation of the owners with the rest of the profits avoiding FICA and SE taxes.

Band members frequently have unreimbursed out-of-pocket expenses, such as: mileage, meal per diems, hotels and repairs and maintenance of their instruments. Guitar players need strings periodically and drummers need new sticks.

Each player is usually responsible for their own instrument purchases. Musical instruments aren’t cheap! And now they can’t deduct the expense on Schedule A as they have in the past.

For bands and similar types of businesses the S corporation may no longer be the preferred method of organization.

Regular corporations pay a flat 21% tax now, while S corporations pass all the profits through to the shareholders where income taxes can rape the shareholder of as much as 29.6%! With the loss of unreimbursed expenses, the S corporation structure may prove, ah, taxing.

The partnership has its place among business structures. The big issue with partnerships is general partners pay SE tax on all their proration of profits, plus guaranteed payments to the partner.

Since general partners are NOT employees, they don’t get a deduction for unreimbursed employee business expenses. And good thing! That avenue evaporated faster than morning mist.

But they do get to deduct unreimbursed partner expenses in full on page two of Schedule E!

Tax professionals have a perfect opportunity this year to earn their keep. More than ever the tax professional must review business client’s data for restructuring of their businesses.

The default for many years was to encourage our business clients to become S corporations (or LLCs treated as such) when profits reached a level where the savings would justify the additional cost.

This is no longer the case. The choice is more than sole proprietor or S corporation. Partnerships and regular corporations are real possibilities for our clients.

My office prepared fewer than 25 regular corporation and partnership returns combined in recent years.  There is no doubt that will change this year!

An honest tax professional will review all the options and present them to her clients. We will prepare more partnership and C corporation returns in the next years than ever in my career.

To do any different would be malpractice.

It’s been a long time since we’ve seen such draconian tax changes. Tax professionals have become complacent in recent years with fewer new opportunities available to save clients money.

This all changed with the TAX CUTS AND JOBS ACT of 2017. This is our moment to shine, tax professionals. We can’t let the public down. We can, and must, do this.

Right, the first time.



Stalking the Accountant: Tax Planner for the New Tax Laws

 

Tax season is here with concerns about tax law changes effective this year while we still use the old rules for preparing the 2017 return. Several new tools are available to help you determine how the tax code changes will affect you.

Drake Software, the program I use in my office, has developed a Tax Planner incorporating the changes in the TAX CUTS AND JOBS ACT. If we prepare your return you will get a copy of this diagnostic automatically at no additional cost showing what your taxes would have been if the changes applied to 2017. No more guessing.

I am also officially opening my doors for additional tax clients! This is important. This summer will be busy as serious planning is needed for all taxpayers with rental properties or business income. Past advice is out the window as new rules mean new advice! Some people will need to consider different entity structures to take advantage of the new rules. Regular clients will have first pick of consulting sessions. If slots are available after serving clients I will open the doors for non-clients. I’ll keep you informed.

If you prepare your own return you should consider Drake’s DIY program with the link below and in the right column. You will receive the same diagnostic tax professionals using Drake provide.

 

If your tax professional uses software without an effective planner or you prepare your own return outside this blog you might consider the Tax Proposal Calculator offered by the Tax Policy Center. I’ve played with the calculator and find it helpful.

[After I published, Jeff from Maximum Cents (a blog you should consider reading) left a comment with a link to an even better tax calculator than I provided above.

https://www.maximumcents.com/tax-reform-calculator-much-will-save-pay/

This is what I love about the blogging community. Our group intelligence blows away anything I can do on my own. Thanks for sharing, Jeff.]

 

The stock market has been on a tear. Now is the time to consider monitoring your wealth building with Personal Capital. The easy money has been made with the massive market run-up. Having a plan and clear visual of where you stand financially is a powerful resource. Clicking the image below takes you to Personal Capital. Remember, you can’t manage what you don’t know.

 

Concerns over the market also have people thinking about different places to invest their money. Lending Club and Prosper were a great alternative until issues arose a year or so ago. I’m currently withdrawing all my funds from Lending Club and Prosper due to the high level of risk compared to the declining returns. This is a slow process, but nearing the end.

A similar investing model backed by real estate is offered by Peer Street with comparable returns. Lending Club and Prosper are unsecured loans with a higher level of risk. Peer Street isn’t a perfect answer, but certainly a consideration for a limited percentage of your portfolio. Clicking the image below takes you to Peer Street. Kick the tires and let us know what you think in the comments.
Diversify Your Portfolio with PeerStreet Investments

 

Student loans came up in the comments this week. Debt is the number one enemy of wealth and student loans are structured with serious risks to the borrower. I’ve pasted a link below to SoFi. At the very minimum kick the tires. Before interest rates climb higher you want to get your loans under control.

 

Before we get to the fun stuff, remember next week is our drawing for $100! The drawing is open to all subscribers. Check the Where Am I page calendar for more drawing dates and details.

 

Now for the fun stuff to enjoy the rest of your weekend!

 

What I’m Reading

Richard Branson has made a name for himself doing business differently and having fun in the process. I bought several of his books a few weeks ago and cracked open The Virgin Way: If It’s Not Fun, It’s Not Worth Doing.

Richard’s style is different and it resonates with me. I fell in love with the FIRE community for their frugal ways. Early retirement always sounds nice, but retirement in its traditional form isn’t for me. Enter Sir Branson.

Branson convinced with his words and lifestyle you can have the best of both worlds: free time with family and doing the things you enjoy, plus keeping the business. He also provided me with ample evidence I need to listen more and better. I tend to talk too much. (If you’re reading this dad do not comment. We, ah, you can laugh about this at the card table.)

Branson has a refreshing style I enjoyed more than I originally thought. If you want a fun, entertaining and informative read, I recommend The Virgin Way.

 

What I’m Watching

Natural history and science are common threads in my viewing habits. My guess is you’ll enjoy as much as I did this YouTube video on how the Earth’s landmasses moved over millions of years. [240 million years ago to 250 million years in the future]

 

Professor Brian Cox is a favorite. In the video embedded below Cox explains The Biggest Threat to our Civilization.

 

All that serious talk requires balance with a humor piece. Jim Jefferies is a riot. His humor reminds me of George Carlin with an Australian accent. Here Jefferies explains the situation between North Korea and the U.S. Enjoy.

 

What I’m Listening to

Talking about Australia, here’s a song from Midnight Oil I listened to this week. [Beds are Burning]

 

Finally, I rarely listen to recent music releases. The following video of Somebody That I Used to Know played at the gym ad nauseam a while back and YouTube must have heard about it. Now I can’t get the darn tune outta my head. I’m passing the blessing on to you.

 

Enjoy your weekend, kind readers! Can’t wait to get back with you again Monday.



Crying Over Spilled Milk or What to Do if You Missed the Stock Market Rally

Crying over spilled milk is an adage most of us first heard at a young age. Minor inconveniences are blown out of proportion when they happen. Eventually someone says you should stop crying over spilled milk

We’re living a spilled milk event as I write. The stock market and the economy have been growing steadily for about eight years now. Constant media covered convinced a large percentage of the population things were dire. We were scared shi+less and tucked our hard-earned money in the mattress. There was no way you would be tricked into investing in a bad economy.

The years kept rolling by as the economy ticked ever higher with the stock market in tow. You not only kept your powder dry, you spent a large portion of it (a 100% loss) and kept the rest in a 0%, or nearly so, bank deposit.

Now the media says everything is good news. The economy and stock market have bent heavy to the left as it heads for the stars.

Tax cuts will stimulate an economy at or near full employment. Things have got to be good. They have to be!

You missed the bitcoin craze, but you refuse to be left behind again. This is it! You’re going to do it. You’re going to jump into this high flying market for your share of the bounty even if you have to borrow to do it.




The Road Well Traveled

You might not believe it, but I’ve seen this storyline play out before. The last time we saw tax cuts of this size the DJIA was under 800 (that is NOT a typo). The year was 1981. Inflation and unemployment were both double digits and draconian measures were needed as the economy was heading into the back leg of a double recession.

By 1987 the party was in full swing before a sunny day in October refocused attention on reality. In a few years the market was at new highs again and all was good.

The dotcom bubble — like the Nifty Fifty of the early 1970s — promised a brave new world of ever increasing profits. Then the century turned and so did the market.

The beginning of the current run started in 2009 with people screaming the world was coming to an end and the sky was falling. The ugliness started a year or so earlier.

In each case the market found a bottom, the world went along just fine and the market eventually made new highs.

We had the Nifty Fifty of the 70s, the tax cuts of the 80s, the dotcom world of the late 90s, and the housing bust of 2008. Now we are back to tax cuts, low inflation, low unemployment and a market promising to rise every day as if the Lord promised it himself.

So now you’re ready to invest.




Reality Check

I’m the last guy to tell you to time the market. This thing could rock for longer than anyone expects. What is certain is the day will come when it will stop going up temporarily. That is the day greed turns to fear. And fear is a far more powerful emotion than greed.

If you stayed out the stock market the last ten years I have a suggestion. Don’t invest now! This is not a market timing call either!

The market direction or conditions should have a relatively small bearing on your decision to consistently invest.

After all these years of economic and market growth and only now you think it’s the right time to invest? If this is true you don’t have the temperament to invest in equities (stocks, mutual funds, index funds or ETFs). Buying because everyone is talking about it is insanity!

My granddad was a farmer who saved at an insane rate. The guy tucked away in the neighborhood of 70% of his income. When he hit retirement age his saved half or more of his Social Security check! (You read that right.) He even took a part-time job to fill his days when he was in his 70s and 80s and saved the entire take-home pay!

I always called granddad Doc because he always studied natural healing. Doc is a value lesson in today’s market.

Doc invested about 10% of his money at AAL, now Thrivent, the Lutheran investment house. The rest of his money sat in several banks. He had CDs, money markets, savings accounts and some land.

The 1929 stock market crash was etched into his young mind. He was born in 1922. The Great Depression colored his opinions on money.

Doc understood guaranteed money. Banks offered guarantees up to the FDIC limits. My dad convinced Doc to put at least something in the broad market. Only the investment house connected to the church could be trusted.




Better Safe than Sorry

Putting money in the bank is not a good way to build your net worth fast. Regardless, he managed a sizable (seven figures) of liquid net worth before the farming world collapsed and he lost most of his money trying to save the family farm.

Undeterred, Doc went back to what he knew worked. He started filling bank accounts again and had another seven figures liquid by the time he died.

To recap, Doc spent a lifetime building a seven figure liquid net worth, lost it in the farming crisis of the early 1980s, kept saving all he earned, put maybe 10% in a rip-roaring market, put the rest into bank deposits and had seven figures liquid again when he died ~ 10 years ago.

Not Cowardice

People are passionate about the market as I write. Netflix in the last month alone went from 187 to 272. From top to bottom this is a 45% gain. This is rare for any company to accomplish, but even more significant from a company slated to burn up to $4 billion in negative free cash flow this year!

Coupled with the recent bitcoin craze and people are primed for action. It has the feel of a casino! (As a reminder, the house always wins.)

There are only two mistakes that will kill you in the market. The first is getting enticed into buying when everything looks perfect and the market is parabolic. And second, getting scared out of the market when the market is suffering a gut wrenching decline.

Most people fail at investing because they trade the market. Emotions WILL get the best of you if you PLAY the market. Doc knew his emotional readiness and did what any smart man would: put his money in guaranteed bank deposits.

If you’ve been investing a portion of your income every month you have the emotional stability to weather the inevitable storm. (Or the intelligence not to look at your retirement account balance.)

Now is not the time to get brave and jump into the stock market. Even if you use index funds or ETFs. Odds are there will come a day soon when painful reality sets in temporarily. The last thing you want to do is buy now and find yourself waiting a few years for a new market high. Or worse, selling at the low due to fear.

Borrowing money to invest in stocks is the worst! You could find yourself forced to sell as the market declines if you buy with debt. DON’T DO IT!




Dos and Don’ts

Missing the current market rally is spilled milk. Chasing the market is a crazy idea. Here are a few dos and don’ts to consider in today’s investing environment:

DO —

  • Use index funds or ETFs
  • Keep investing in your work retirement plan at least to the matching level and to the maximum if you have the mental and financial will to do so
  • Keep calm
  • Stay the course. Stay invested and keep automated investing active. You and I both don’t know where the market will be over the short term so stay the course. The long game is higher

DON’T —

  • Panic
  • Borrow money to invest
  • Try to time the market by selling
  • Listen to the media hype. Wall Street loves the hype so they can sell to the greenhorns as the market weakens
  • Get too excited about your account balance. Those just hitting their FI (financial independence) goal might want to consider sticking around a while long as the FI number is built on a market spike higher with a real possibility these numbers could temporarily decline
  • Listen to your hairdresser, taxi driver, Uber driver, buddy at the bar, mailman, or even your accountant on hot stock tips
  • Look at your account daily

 

Young investors have it worst. They haven’t experienced one of these cycles before. The last real market decline was a decade ago!

This isn’t new either. Every 10 -15 years we rinse and repeat. Each cycle is slightly different while humming the same tune.

Investing, even in a hot market, isn’t necessarily a bad idea. Doing crazy stuff and getting greedy is!

No borrowed money for investments in the market! If you have a regular investment plan, keep it. Your investments will ride out the storm when it comes along. If you haven’t invested yet, now is not the time to be brave. Bravery is easy now because the feeling you have is really FEAR you’ll miss out.

The steady hand will always win in the end. Warren Buffett tells us to be fearful when other are greedy and greedy when others are fearful. Greed is rampant now so a healthy dose of fear is warranted.

Steady, kind readers. Steady.

 



Tax Cuts Don’t Create Value, This Does

The latest tax cuts have sent the eight year old stock market rally on a steeper trajectory after 300% gains to date. Tax cuts and interest rate reductions have a habit of sparking market rallies, but only one has anything to do with value.

To understand why the market is rallying so hard you have to understand what people expect the corporate tax cuts to do. You also need to understand if these gains are based on real increases in value or only a mirage.

Tax Heaven

The corporate tax rate for regular corporations dropped from a top rate of 35% to a flat rate of 21%. For most corporations this means a 40% reduction in federal income taxes.

With all this extra money sticking around the corporate coffers there is ample reason to think this is really something to behold. The extra money can be used to retire debt, buy back stock, pay out dividends or invest for future growth.

But are these companies really worth more? Is there more value just because one expense will decrease for one year?

If a company is earning :

  • $10.00 per share

before the tax reduction and if everything remains exactly the same will see a:

  • $2.00 per share

increase in profits due to lower taxes, what value has been created?*

The company has $2 more per share in cash lying around and that does have value in a manner of speaking, but it’s not repeatable.

The corporation earns $10 per share in year one, $12 per share in year two and again $12 in year three even if the company is bloated and slow. Worse, incompetent management could spend the money on stupid stuff!

Our corporate illustration shows a company with 20% growth over a three year period, but only treaded water in reality. The tax cut makes it easier to hide problems for longer before it becomes apparent to shareholders they are getting screwed.

The Value of a Dollar

Shareholders might not care one iota as long as the money keeps rolling their way. The extra money the corporation enjoys from the tax cut can prop up the stock price if they buy back shares. Additional dividends also put a mischievous grin on the faces of shareholders.

Now think about this for a moment. How much is that $2 per share extra from tax savings worth?

TWO DOLLARS!

The value of the cash is $2. Period. How much will you pay for the $2 of cash? No more than $2, I hope.

By looking at the stock market it appears as if investors are paying more than $2 for the $2 per share tax benefit!

The tax cut isn’t repeatable either! People wrongly think the tax cuts help the next year. It doesn’t! Earnings are now stuck at $12 per share instead of $10 unless there is real growth. There is no growth in our example. How much would you pay for $12 per share if there is no growth with the risk management screws it up and ruins a bad game to start with?

The value of those earnings is based on interest rates. If the risk-free interest rate (U.S. Treasuries) is 3%, then the value of the $12 of stagnant earnings is no more than $396 per share ($396 x 3% = ~$12). If the risk-free rate rises then the value of the future earnings declines.

So why is the market rallying so hard? Because the extra $2 times the risk-free rate translates into $60 or so!




The Bad News

Unfortunately interest rates are not static. They are currently rising at a slow rate. It can only be guessed what inflation (the ultimate factor driving interest rates) and interest rates will do in the foreseeable future.

With an economy near full employment and stimulated with massive tax cuts, my guess is rates will go higher. This means those earning are worth less. And that assumes the extra $2 goes to the owners (investors)!

In the early 1980s the top brass in corporate America earned about 30 times the wage of an average worker. That number now stands well into the 200s. With more cash than ever, corporate America might be seduced into skimming a bit for themselves. I’m not suggesting anything, only making an observation.

Dividends are real cash you can count in your paw. Stock buy-backs are a bit more elusive. Stock buy-backs can mask stock grants and options to insiders.

It is safe to say only a portion of the extra $2 per share in profits due to the tax cuts will actually find its way into shareholders’ pockets. Depending on how you look at it, that could be a blessing.




Creating Real Value

If tax cuts don’t create real value, what does?

As stated before, the quality of future earnings is based on the risk-free interest rate. If you can’t earn more than that, why bother. Just drop your money into the risk-free asset and enjoy a few Mai Ties on the beach.

We discussed in April 2016 how companies create true value. Now is a good time to revisit the issue before your money gets a value lesson of its own.

Tax cuts provide the opportunity to create value; they don’t in and of themselves create anything! If tax cuts are not fully spent and the government lowers spending to offset the lost revenue, the economy will actually decline. If the government keeps spending while reducing taxes they do so with borrowed money. Knowing this, tax cuts have the same stimulus as the government just spending extra money themselves.

And tax cuts have historically not been 100% spent by those receiving the cut. Some people reduce debt or invest some of the newfound wealth. And since tax cuts are only good for one cycle their benefits are fleeting unless you keep cutting taxes every year.

This doesn’t mean we shouldn’t have tax cuts. Heck, no! I love keeping more of my money!

What I’m getting at is this: your income hasn’t increased solely because your tax bracket declined! And once you digest the reduced taxes into your budget you’re going to look for a pay increase to keep feeling warm and fuzzy inside.

So how do you get a raise? Well, inflation can mask any “real” wage increase if it doesn’t exceed the inflation rate. Or, you can increase your productivity so the company has more profits for your labor from which to pay you. (Now you need the corporation to part with a percentage of those additional gains you generated. That hasn’t happened much over the last 30 years.)

If tax cuts don’t create real value, what does?

Simple. Your return on invested capital (ROIC) in excess of the cost of capital (COC) is the textbook definition of value creation.

If the stock market rally is going to have real legs corporations will need to invest the tax savings in a productive way!

Corporate America has experienced record levels of profitability for some time now so the question begs to be asked: If they didn’t invest the extraordinary profits before, why will they be encouraged to do so now?

Good question. Wish I had an answer.

Personally, I don’t think corporations will increase investing anywhere near the levels of the tax break. We see headlines listing a token few major corporations granting a small 2% or so bonus to the rank and file for one year while announcing layoffs a few days later. (Kimberly-Clark announced 5,000 layoffs in their diaper division as I write. Tax cuts will not increase demand for things people don’t want. But automation, which the new tax bill encourages, will make human capital less necessary.)

Only businesses that invest the tax savings wisely will create real lasting value. By investing in increased production which yields more than the cost of capital, value is only realized.

The ROIC must exceed the COC or value is destroyed. Automation and technology make it easier than ever to do more with fewer people. This increases quality of life. But if the process is too quick it becomes a painful transition.

Now that most assets can be deducted currently versus being depreciating over a number of years or the life of the asset, businesses are incentivized more than ever to increase their use of technology and automation.

If these investments return more than the cost of capital, even capital derived from tax savings, real and lasting value is created.

And that will keep the stock market riding high, providing us with the warm and fuzzy feeling inside.

 

* I took liberty with the math for easier reading. A company at the top tax bracket of 35% under the old tax law would pay about $3.50 per share on $10 of profits before tax.  Cutting their tax by 40% would not be $2 per share. (40% of $3.50 is $1.40.) In reality it would take ~ $16.67 of profits to pay ~ $6.67 in tax to arrive at $10 of reportable gains to shareholders. Rather than get bogged down in the math I kept it clean, as a family-oriented blog should be.



How Recent Tax Law Changes Will Destroy Your Wealth (Unless You’re Already Rich)

It started with a simple request for an update to my personal net worth.

Over the years I’ve been mum about the subject, only exposing myself due to the Rockstar Finance Net Worth Tracker. I’m still undecided about discussing my *exact* net worth publically. It’s really nobody’s business and is only public because I write a personal finance blog.

(As an example: Recently I was told point-blank if this blog failed it would be no big deal since I could always do something else and I’m already rich enough. This remark was a jab at the hopeful opportunity to watch something I enjoy crumble. If I really felt that way I would never have started the project.)

The reader kept the emails coming fast and furious when I dodged the net worth question. I had a duty, I was informed, to share my personal life — details and all — since I was a business owner and have a semi-successful blog.

There was a hint of humor beneath the requests so I delayed blocking said intruder. Eventually we started a civil dialog with some serious questions about the current tax law and how it might ripple through the economy.

A week ago I was working in the barn and began formulating a post using many of the questions my intruder asked. I worked myself into a frenzy until it started coming out as a rant. I went to the house and took notes on all the topics I wanted to cover.

So this is it. I promised my intruder a nice post covering a large portion of his questions he had surrounding the TAX CUT AND JOBS ACT. Some of this is tongue in cheek so don’t take this post as hard and fast predictions of the near future.

Then again, I do have a point.

 




Doubling the estate tax exemption is industrial strength stupid. All this worry about farmers and small businesses losing a lifetime of work due to estate taxes is the dumbest thing ever thrust upon the people.

With the old tax law only a few thousand estates were subject to the estate tax in any given year. Now even fewer will pay the tax.

You can count the farmers subject to the estate tax on your fingers with fingers left over! Some small businesses pay an estate tax, but even that is rare.

What the adjustment to the estate tax did was line the pockets of the uber-rich!  Even this blog with a very wealthy readership will not have much to worry about when it comes to estate taxes!

It’s time to stop calling the estate tax a death tax. It’s not a death tax; it’s a welfare tax!!! We keep hearing politicians complain about welfare draining the public coffers. Well, the estate tax is the biggest welfare tax there is.

I see some raised eyebrows. Let me explain. The estate tax is not a death tax; it’s a welfare payment to all the people getting a free ride due to the genetic lottery.

I don’t care what they do to the estate tax personally, but stop calling it what it’s not!

 

No amount of tax cuts will offset the accelerating wealth accumulation at the top. As the top keeps more due to lower taxes there is less available to spread around to the middle class. The middle class pie gets smaller and smaller as the middle class gets squeezed like never before.

Tax cuts don’t trickle down. And stop with the politics. If trickle down worked it should have leveled some of the income inequality by now. Remember, President Reagan came up with the idea back in 1981.

Tax cuts can stimulate the economy, however, and have been used as a tool to spur the economic growth on a regular basis in the past.

The latest tax cut is a bit weird. Normally the government lowers taxes to encourage economic growth when the economy is sputtering or in recession. This time we spiked the Kool-Aid after six or seven years of modest economic growth.

Cutting taxes with unemployment at a 4-handle (unemployment is 4 point something percent) could actually harm the economy as interest rates and inflation could accelerate destroying any gains from the tax cuts.

Time will tell.





The labor participation rate will collapse if a technical corrections bill doesn’t fix the myriad problems with the latest tax bill. Savers will be able to exit the workforce faster and the FIRE (financial independence/retire early) movement will make it easier than ever for people to check out early, further exacerbating the labor shortage.

Also, the tax code now punishes added payroll expenses significantly since if you didn’t spend on payroll the extra profits are barely taxed (big corps) or you get 20% of profits as a deduction without spending a penny (small business and landlords).

There is no doubt in my mind any increase in the labor participation rate will be short-lived. Also, businesses are more incentivized than ever to lay off workers at the first hint of slower demand.

 

Automation is cheaper than ever with bonus depreciation increases. Include the 20% business income deduction and I foresee plenty of staff reductions.

The automation was coming regardless. Now we don’t have time to adjust as the changes will come faster. Once installed the jobs are gone forever.

Major corporations will benefit most as the cost benefit calculations will favor more automation up front. Wal-Mart is a perfect example recently announcing a few bonuses and a higher internal minimum wage while experimenting with over 200 of their stores by replacing all cashiers with automation. Total payroll expenses to Wal-Mart will probably fall. So much for their altruism.

Don’t be fooled by the token pay bonuses either. Many companies are giving a one-time $1,000 bonus to select staff. This is less than a 2% temporary pay increase. If you paid attention, many of these companies announced a few days later layoffs which will reduce payroll by more than the bonuses.

Big business and the very wealthy know exactly what they’re doing (to you).





Now we get to my net worth. Know this, your favorite accountant will do rather well in this environment. Complex tax laws are always good for people with tax knowledge and a pulse.

We came into this story talking about a certain someone’s net worth. Here I confess I might have adlibbed a bit. The issue was net worth, but more to the point, how much was I going to haul home with all the tobacco company shares I own?

It’s true I own a lot of shares in tobacco companies. Unfortunately only my Altria shares will benefit from the tax cuts. Foreign tobacco companies — Phillip Morris International in my case — will not see a benefit from U.S. tax rate reductions for corporations since they derive all their profits outside the U.S.

This led to a discussion on how many shares of Altria I own. Ah, a lot.

Let’s look at what Altria might do to my net worth. The tax reduction could increase their reported earnings by about $2 per share from the tax reduction alone. Assuming a 10 P/E ratio this will eventually be reflected in the stock price increasing $20 per share. Bad news, kind readers. A twenty dollar increase in MO’s share price will get me a bit more than two-thirds of a million only.

Altria also likes to distribute about 80% of profits to shareholders. Currently MO pays 66 cents per share per quarter or $2.64 annually. Eighty percent of an additional $2 profit increase due solely to tax reductions is $1.60 extra per share per year for me (my favorite person) in dividends.

Your favorite accountant expects the tax reduction for Altria to add a bit north of $50,000 per year to his pocket on top of the current dividend. Not bad for a broke farmer in 1982.


On December 26th my net worth crossed the $14 million mark. Here, less than a month later, I reached $15 million. It took 14 years to amass the first million (age 18 to 32). Now I’m bumping off a million in less than a month. I can’t wait for the day I can brag I lost a million between sunup and sundown!

I am sooooo smart! I doubt anyone has seen their net worth climb in the current environment.

(Okay, the last part is total BS. I didn’t add my stuff up the day after Christmas. A back of the envelope calculation says I’m getting close to $15 million, however. Yes, even your favorite accountant can’t resist looking as his stash when it’s growing so fast. I keep reminding myself, “This too shall end.”)

 

This tax cut is different than the 1981 cut. Inflation and unemployment were double digits back then; now we have inflation and interest rates near zero with a 4 and change unemployment rate. Dropping a line of crack will not solve a meth heads issues! Stimulating an economy after 7 – 8 years of modest growth with the labor force fully or nearly fully employed is asking for problems.

At least I’ll be okay. I’m not so sure about you.

I could offer solutions, but there are none I can think of. There will be pain a head. You might want to keep that job for a while and eliminate debt. (Always eliminate debt.) For a few years (as long as the economy holds) it will be easier than ever to build a significant net worth and retire early (if that’s your goal).

Don’t worry. The government will print and borrow enough money to fund the upcoming inflation tax.





This entire post is opinion, of course. Many of these questions have come up again and again so I feel it is easier addressing them here for everybody to enjoy, ahem.

If any of these predictions comes true I take full credit.

If I’m off, let it be known I was only predicting the future and we all know the best we can do is guess at the future.

 

(Note: The light-hearted nature of this post is due to the flu epidemic affecting the nation. Some people are down and out. Your favorite accountant has been only modestly lucky so far. Some days I feel great only to spend several days so tired and exhausted I can barely think. Since I’m writing at a down point I felt it best to leave the serious discussions for a day when my head doesn’t feel like a balloon. There are actually people who follow my advice! Best to assure the advice has a reasonable chance of being right.)



Stalking the Accountant 20 Jan 2018

As tax season approaches I start to fall into a familiar pattern I’ve developed over the years to help focus my attention.

Some people like listening to music while they read; I don’t. I prefer absolute quite, huddled in a dimly lit corner while I devour pages of knowledge or embark on an adventure through space and time.

Preparing taxes is different. Plugging numbers as an elegant return is formed requires background noise. I find certain long pieces (frequently an entire album) and repeat the material again and again all day long. It drives the office crazy because sometimes my choices are really out there.

Life requires balance so I try to distract my mind with something intellectually stimulating for at least a few hours per week as well.

With these thoughts in mind, here are some of the things I was doing over the last week:

 




What I’ve Been Reading

The Ends of the World: Volcanic Apocalypses, Lethal Oceans, and Our Quest to Understand Earth’s Past Mass Extinctions by Peter Brannen

Climate change and the extinction of species is a hot topic sure to fire up the political agenda. Strip away the politics and your IQ jumps better than 40 points. The Ends of the World is a longer-term look at life and extinction events on Earth. If you think man is causing the sixth great extinction you might want to think again. You should see what trees did to early life on the planet. If man wants to get serious about creating a mass extinction we will need to up our game.

Before the politically minded become smug, know climate change is real and man is a large part of the current changes. There will be consequences! As George Carlin said, “The planet will be fine. The planet isn’t going anywhere. We are!”

The Ends of the World is must-read material for people interested in how climate change in the past affected Earth along with the evidence from prior mass extinctions. Stripped of political dialog, you might find this a powerful education helpful in your daily life as you choose how to live.

 




What I’m Watching

This week I want to share two YouTube videos I found mentally stimulating.

The Unbelievable Powers of Electricity shocked me. (Sorry, I couldn’t resist.) My understanding of electricity isn’t vast, but still notable. This documentary added to my knowledge base.

 

How can a documentary about the oldest living thing on the planet be interesting? Well, I’m glad I took a chance. Oldest Tree on Earth: The Curse of the Methuselah Tree proved far more interesting than I ever imagined.  Highly recommended.

 




What I’m Listening To

I tend toward long play music to fill in the background when I’m working numbers. The sounds can get really strange as tax season rambles on. So far I’m on this side of the line of normal with Pink Floyd echoing from my office.

The Wall is the best concept album (double album, actually) ever produced, IMHO. It also qualifies for long play at nearly an hour and a half before the sound ends.

 

Updates and Reminders

Tax season is here and I want to grow the DIY tax preparation part of this blog. Please consider using the same tax software my office uses online when doing your own return. I published on preparing your own tax return recently. It might be worth another read before filing.

 

As a reminder, the forum is a great place to interact with other like-minded people. The more people who use the forum the more vibrant the platform becomes.

 

I’ve added two affiliate programs recently. SoFi is a great program to reduce your student loan interest so you can build your net worth faster. They also offer personal loans and mortgages.

This said, I encourage you to use SoFi (or any lending) in a responsible way. Debt is caustic to wealth! SoFi could reduce your interest rate allowing you faster retirement of the debt. If I find out you added to your debt burden I will find you and give you a very stern look.

 

Personal Capital is a growing platform for managing your net worth. It’s hard to manage what you don’t know and Personal Capital is a good way to visualize and manage your financial empire

 

Finally, don’t forget we have a number of cash giveaways coming up. The first is only a week and a half away from the date of this post’s publication. The drawing dates are reported on the Where Am I page. Click the notice for the rules.

Have a great weekend, kind readers. See y’all Monday.



If You Don’t Like What You See in the Mirror . . .

The greatest people on earth.

Back in 1982 Wisconsin a young man could legally belly up to the bar on his 18th birthday. That didn’t stop me from getting a jump start on adulthood.

In my later years of high school there were several rural bars where the owners could care less how old I was. The police rarely showed up (they never showed up when I was there, but I heard stories) and the penalties were light if caught selling to minors.

So I unwound after a long week of farm labor and sloughing off at school with a cold one in Brothertown. I drove the distance to tip a brew with my buddy, Ken.

Ken turned 18 our senior year and he promptly dropped out of school. My grades improved immediately. Ken and I were as thick as ticks on a hound, but I was starting to grow up while Ken was dropping out.

Our friendship faded with distance. Alcohol still played a large role in my life.

I met a young lady in a place called Quinney. It’s not really a town. More like a curve in the highway with a turnoff to the shore of Lake Winnebago.

The part about Quinney was it was on the way to Brothertown. Now with Ken fading into the distance I sometimes took a right turn toward Lake Winnebago and a bar called Chuck and Sue’s.

The name (Chuck and Sue’s) has meaning since my engagement to my high school sweetheart ended when she settled into another man’s arms and I eventually met Mrs. Accountant who happens to be named Sue.

(HEY, EVERYBODY! The accountant guy let slip his wife’s name. Y’all gotta see this.)

Sorry about that. Nobody remember Mrs. Accountant’s name so she can keep some privacy. I promise to never say it again (here).




Drunken Stupor

My consumption of alcohol was getting out of control as I clawed toward the age of majority. There were nights I don’t remember driving home. And then there was the night I decorated the side of my dad’s van. And the night I came walking through the house in my BVDs when my parents had company. And then . . .

I think you get the picture.

I was drinking. I was drinking a lot. I was doing things I’m luck someone didn’t get killed from.

My high school sweetheart was gone so I headed back to Brothertown and my old friends. I was still part of the crowd, but everyone knew I wasn’t “like them”.

It became abundantly clear one Friday when a group of guys planned on running to Fond du Lac to catch a movie. They left without me.

I was numb. My fiancé left me and I was walking in a drunken stupor more than I was sober.

The final straw came when I headed to Brothertown in the middle of the week when the bar we frequented was mostly empty. I shot some stick and drank.

I ran out of cash so I wrote a $20 check. It bounced.

The bar owner called me and Ipromised to run over and satisfy the debt.

True to my word I made the run to Brothertown, paid the bar owner the $20 (plus bank fee) and ordered my last drink. Halfway finished, I pushed the beer back and left Brothertown, a way of life and alcohol forever.

Or so I thought.

Then I turned 18.




Growing Up

The reflection in the mirror was hard to look at. I failed in so many ways. I had no idea what I wanted.

Farm life was something unappealing to me at the time. It was all I knew so I wanted something more. Working day and night for peanuts and popcorn had no hold on me. Deep down I wanted to be more than a poor farmer. I wanted to know what life was like for people with money.

1982 was a bad year for the economy. Living in the Rust Belt, the recession hit hard, harder than the 2008 debacle. Unemployment was 20%+ in the area. Businesses wouldn’t even give you an application. The answer was no so there was no need to waste a piece of paper.

I went from drunk to teetotaler in a heartbeat. Before my 19th birthday I put the bottle into my past and embarked on a journey of entrepreneurship and wealth.

It sounds easy, doesn’t it? Sounds like I had a blast, right?

It wasn’t! I had no clue what I was doing. I tried everything. I sold stuff door-to-door, to retail stores and got serious for the first time about my writing.

Money came in bits and spurts. I saved it all and invested in mutual funds and some individual stocks.

But this story isn’t about my journey to wealth. I’ve told that before. No, this story is about facing myself in the mirror.




Who Is that Man?

I no longer recognized the person I’d become. The drunk was a stranger and now even the drunk was gone. It would be over twenty years before I took another drink.

The ride wasn’t smooth, but I eventually found my confidence and calling in life. As a side gig I prepared taxes without a clue the role accounting and taxes would play in my life.

Successes started to accumulate like an index fund in a bull market. I was happy and started to map a course to the life I wanted.

No longer inebriated on a regular basis I started to like the guy in the mirror. He had promise, if not a little crusty around the edges.

I met Mrs. Accountant while taking a few college courses here and there. That was the greatest stroke of luck I ever had. I won the trillion dollar lottery!

She didn’t know she was Mrs. Accountant at the time; I did.

You would think life would be a pretty smooth ride of luxury for a guy in his young 50s with an eight figure net worth. It wasn’t.

Life seemed to throw one challenge after another. The genius thing I did was never give up. Each obstacle was a challenge to conquer. And conquer we did.




Old School

Building wealth and even running a business can become rote formality. Saving at an insane rate was an ingrained habit sending my net worth into the heavens.

Mrs. Accountant and I traveled a bit. I hated every minute. The destination and learning was fun, but I soon discovered I preferred the world of my backyard. Eventually travel turned into something we did because business demanded it. In a way, business is the only thing that kept me from being a dweeb or hermit.

In the 90s I had a securities license for a few years. That required two trips every year. Before long I was frantically searching for a way out and I took the first opportunity.

Routine set in again.

Then I met the FIRE (financial independence, retire early) community and felt like I found long lost friends!

The gloss would wear off.




The Best People in the World

Somewhere in the early 2000s I allowed myself a shot of whisky now and again. I drank a few times in the winter if I had a sore throat and rarely any other time.

When I choose to stop drinking and when I drank nil for many years I never had an arrogant attitude toward those who consumed alcohol. If somebody wanted to drink I didn’t care. I was happy as a clam with a frosty Coca-Cola Classic.

As the years went by my drinking increased for short periods and then went back to nothing.

I was happy and enjoying life. Travel was in my past (Thank God!) and I finally was back living on a farm.

The farming life I hated so much as a kid was actually in my blood. My 10 acres of the world are small in the scope of things, but it’s my 10 acres with hiking trails, animals and all.

The rote formality of business was growing old. I had one more dream to conquer before I cashed in my chips.

Several times I started a countdown clock to retirement only to find my anxiety became uncontrollable as the due date arrived. You would think I was facing an IRS audit or something.

The clock was sent to the landfill.

One day I happened across a blog by some strange character who called himself Mr. Money Mustache. This funky dude from Colorado had it figured out better than me. He even found a way to walk away from work and do whatever he wanted!

So we loaded by the truck and we moved to Beverly. Hills that is . . .

I could never give up work, but I was lucky enough to be doing what I wanted to so there was no hurry.

Regardless, I felt inadequate. MMM cashed his check at age 30 and here I was putzing along closing in on 50. How had I failed so badly?

Back to the Suds

I started attending conferences within the community because I felt obligated. My meeting with MMM (and becoming his accountant) forced me to finally start writing this blog.

This in turn led to more offers. I was traveling again. Drinking, too. The mirror started to bother me for the first time in decades.

The FIRE community knows how to drink. Beer mostly, but liquor, too. A shot of whisky (a shot) is something I don’t mind every once in a while. Beer is something I never acquired a taste for.

Well, my new-found buds drank suds and I was part of them now so I drank, to hell with the mirror. If you focus hard enough you can swallow anything and down the hatch went the beer.

Before we get too far, let it be known a local brew called Spotted Cow is palatable to me.

The social media feeds listed my new buds enjoying a cold one on a more than a regular basis. Not everybody imbibed, but by and large the group knew how to throw a party.




Breaking the Mirror

I’m not a traditional FIRE community member. I’m even surprised they let me in the door. (Some have started to close doors.)

The drinking thing returned home with me and the travel I whined about so incessantly caused people to comment on my new-found itinerary abroad. (Anywhere outside the county is abroad in my book.)

Many nights I would have a few shots of whisky and even drank beer. Before long the memory of Brothertown and the bounced check in the bar came flooding back. This is not who I am. This is not who I want to be.

I recently made it clear my attendance at conferences would be limited. Even one trip a year is a chore to me. I did promise Mrs. Accountant and the girls a trip to Iowa this year to see the Hoover Presidential Library. It’s a 4-hour drive; I’ll live.

Expect to see me at FinCon in Orlando later this year as well.

And if God loves me I’ll not travel another lick the remainder of the year.

Nor drink more than a few shots of Jack either.

Peer Pressure

I’m a big boy now; I can make adult decisions when required. There is no doubt I succumbed to peer pressure when not a single soul within the FIRE community forced me to drink anything. If I drank a soda there wasn’t a single sound of admonishment.

Peer pressure is like that! Most peer pressure comes from inside your head and not from out there. It’s all perceived.

More, I wanted to be like those people instead of living my life my way. I thought living their life would make me happy. It didn’t and it was starting to show.

So what if people think I’m a weaselly guy from Treefarm, Wisconsin. I’m happy. This blog has proven there are more like me out there (people who loathe travel and enjoy home life).

No longer do I feel obligated to attend more and more conferences. I can live the way I want to live.

Here is where you come in, kind readers.

A common refrain in my email involves people wanting to be like me. NO YOU DON’T! The planet has a hard time dealing with one of me.

You can learn from my experiences to build wealth and a happier lifestyle. But you don’t have to do the same things I do.

I like my small farm in the middle of nowhere. A serious percentage of readers here would become insane in the same environment. (First one to comment its already driven me insane gets one in the puss.)

All I’m saying is don’t drive to Brothertown. The only thing you’ll find there is a bounced check in a bar long out of business.