Archive for May 2018

The Best Speech Ever Given

Jordan Peterson is one of the greatest thinkers of our time.

When you think of the most powerful, motivating speeches ever given, Abraham Lincoln’s Gettysburg Address comes to mind. In less than three hundred words* Lincoln encompassed the issues facing the nation. As great as the speech was, it was backward looking (Four score and seven years ago) with hope to the future. Lincoln was able to clearly articulate his message in a few minutes. He struggled up to the moment of addressing the crowd as Gettysburg. It was the planning and preparation that lent to the quality of the message.

Closer to home we might consider the commencement address Steve Jobs gave at Stanford in 2005. At fifteen minutes, Jobs communicated a narrower message with significant reinforcement of his theme. Once again, serious planning took place prior to the presentation. Jobs was legendary in his drive toward excellence. He could speak before a crowd extemporaneously, but preferred formal presentations he could and did practice again and again until everything was choreographed to perfection. Errors were ironed out. He practiced so much that when he was live he could continue without missing a beat if technology failed while he was on stage. A Steve Jobs presentation was a show to behold.

Speeches that resonate come in many flavors. YouTube is filled with powerful speeches from movies and sports coaches. Speeches that cause a shiver to run down your spine include elements of life itself. “You can do it” is motivational, but when the words and emotions dig deeper we quickly realize the importance of what we are hearing.

Today I want to share a short speech (10 minutes from a longer interview) by Jordan Peterson. I’ve been reading and listening to his work for a while now. His recent rise to fame makes his plea more vital than ever.




A Typical Day at Harvard

The excerpt comes from a longer interview Peterson gave to a group at Harvard University. The video begins with Peterson asked what advice he would give students that want to make a difference in the world after they graduate. Peterson never missed a beat when he said, “Read great books!”

You can watch the video on your own and should several times to digest the entire message. What you should get on the first pass is that while Peterson was giving an interview, his responses are not completely extemporaneous. Over a long career he has developed a remarkable philosophy on how to live a good life. Does that sound familiar? It should. It’s been a while, but I’ve talked about Stoicism plenty enough in the past in this blog.

The overtones in this interview are dripping with stoic thought. Around halfway through the excerpt the interviewer even asks Peterson how to live a good life. What makes the responses so powerful is how Peterson opened the floodgate and released an articulate and passionate plea for listeners to accept how incredibly awesome our lives are today in the Western world.




A Game of Cards

Friday night is sheepshead (a card game with some (okay, few) similarities to bridge) night in the Accountant neighborhood. Since we are all a bunch of old duffers living in the backwoods of Nowhere, Wisconsin, the game starts at 7 and ends shortly after 9. (Did I mention us country folk prefer to hit the hay shortly after sundown?)

A few weeks ago one of our players, Pete, asked — as he always does — how our week was. I decided to return the favor and ask Pete how his week was. The rest of the night was shot. I don’t think we got more than three or four hands in before closing time.

My faith in the future is firmly intact. A recent sunset at the Accountant farmstead was a reminder and renewal of my faith in life, the future, the world around us and the beauty of life.

My polite interest in Pete’s prior week was all it took to open the gate and let it all out. Pete couldn’t stop talking about how awesome and great life was. Backwoods people live a frugal life due to environment. We can’t order pizza delivery. (There is no pizza delivery in our neck of the woods.) The closest shopping opportunity is 30 miles away and none of us miss the chance to be separated from our cash. (The card game is frequently brutal on the family budget. We play for dimes and a bad night could set a guy back a full dollar, dollar and a half. Like I said: brutal.)

Pete didn’t miss any of the highlights of our incredible modern world. We have internet (high speed!) here in the backwoods. Food is cheap and varied. The cost of living is cheaper than ever. We live longer and have medical technology to not only keep us alive, but to live better. A bum knee is a simple replacement today; in the past it was a permanent diminution to quality of life.

Debt is the only real problem messing up all the fun in our ultra-modern world, according to Pete and company. When things get tough (as if that is even possible today) you can reduce spending in all areas. You can cook more at home or turn down the heat/turn off the AC. You can walk or bike instead or burning gasoline. All budget items are easily reduced, expect debt payments. Those stay stubbornly locked in place regardless of events chipping away at family finances.

Pete retired fifteen or so years ago when he was about my age. He cut back even earlier, enjoying three day (or four) weekends. Now Pete is looking down the barrel of Social Security. Any day now he can pull the trigger and enjoy the influx of even more income. In Pete’s own words, he can’t spend what he already has! He has lived off an amount less than his Social Security check promises to be for years.




What Everyone Must Learn in College, But Rarely Does

Back to Jordan Peterson.

Peterson made it clear what college and a college education is all about. Most people think college is about learning a skill you can use to get a job. It’s not! College is where you must learn to think; a place where you must learn to articulate. That’s why he places such emphasis on reading good books.

Books have been a massive part of my life from an early age. I took a super early mini retirement in my young 20s to sit at home and read all day. There is no doubt the three or four years I bowed out of life to immerse myself in quality literature determined the success in all areas of my life.

My thirty year marriage has been the highlight of my life and still going strong. I learned from people who spent a lifetime together how to have that very thing. I read about raising good children, running a business, investing, personal finance, budgeting and taxes. I also took time to read novels with a powerful message.

So, if you go to college to learn how to articulate, think and speak, what are you to do with this superpower? “Stop unnecessary suffering,” according to Peterson.




Personal Mission

Money is only a tool. This is a personal finance blog firmly in the categories of tax, financial independence, early retirement and wealth building. But none of that is the underlying theme. I need to learn to articulate better, as Peterson suggests, to communicate this message. You don’t want money; you want to be useful!

The wisdom Peterson shares in a ten minute interview segment is a lifetime worth of knowledge. He shares another secret society is struggling with currently. He talks about how the 1% are not greedy bastards. He explains why you are not richer than you are. It’s because you are young! If you are a good steward of your money it will grow. Given time it will grow rather large. Your favorite accountant is a prime example. I’m currently on the top of the net worth list over at Rockstar Finance. I’m also a bit old to be telling people I’m considering early retirement. Give it another decade and I’ll be looking over the edge of late retirement (grow up, man!).  The truth is I had more time than folks in their 20s to accumulate my wealth. And as Peterson said, I’m not a greedy miser hoarding my money. I’m looking for new opportunities to reduce suffering in the world so to speak.

Life is so good today! When people whine and complain over how oppressed they are, I, like Peterson, am so disappointed. We can make a difference, but it will never happen complaining about everyone else!

The Accountant girls enjoying Frogg’s ice cream in Sherwood, Wisconsin.

My card-playing buddy, Pete, shares some traits with your favorite accountant. He doesn’t like to travel and has managed to live a life with far less traveling than yours truly has done. His wife likes to travel and does so with her friends. Pete happily drives his old truck (he recently bought a new one since the old one gave up the ghost) around the neighborhood playing with his solo rental property. He milked cows for a farmer just south of my farm for many years to pass time. If he gets bored and something pops up (it always does) he will do that for a while. Oh, and he stops at Frogg’s Ice Cream a lot in the summer.

If you get the chance to cure cancer, then do it! The suffering your will reduce in the world will be incredible! Most of us will make a smaller mark in the world. I’m here to tell you it’s okay to make a small difference. Just make a difference!  Daily incremental improvement compounds into massive results.

Pete provides shelter for a family and helps neighbors in need of fill-in help. He reduces suffering in his small way while living the life of his dreams. Maybe you prefer travel and grander endeavors. Awesome! We each need to play the role our personality allows.

I’m a lowly tax accountant. Yes, I reduce suffering by solving tax issues for businesses and individuals. I also contribute by sharing my experience and knowledge on this and other blogs.

Jordan Peterson makes it clear we need to learn to articulate because the world is in desperate need of people who can communicate a message, knowledge and information in an articulate way. I still have room to grow.

And good thing because I’m not ready to hang up my cleats yet.

 

* There are at least five versions of the Gettysburg Address, each with slight variations from the others, including word count. The Bliss copy is the most famous.



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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

Create Your Own Basic Income

The universal basic income doesn’t solve all inequality problems. It might even make the problem worse.

I don’t know who first came up with the idea of a universal basic income. My earliest exposure to the concept was from Sinclair Lewis’ 1935 novel It can’t Happen Here. There is no doubt the idea was around much longer.

It’s an age old story. Mechanization and technology will destroy all the jobs. Computers and machines will do everything so people will be left with nothing to do but wander around the cities and countryside with dazed stares.

The solution is to provide a basic income to everyone so income inequality is reduced. The cause is noble; the solution fraught with problems. If you have freedom, you have inequality; if you have equality, you have no freedom. The real question is: how much inequality will society tolerate?

In the United States we have a modest solution in our tax code called the Earned Income Credit. People with a low income qualify for a refundable credit to compensate for their poverty level earning. It also happens to be the area of the tax return with the most fraud.

Around the world experiments with a universal basic income are in the planning stages, ready for implementation on an experimental scale or recently concluded, as we saw in Finland.

What is certain is that more people than ever are ready to try a universal basic income. The Finland experiment was concluded early without plans for a wider roll-out. I take this to mean the results were less than hoped for. If anything, it probably exacerbated inequality problems as it encouraged more people to work less.

This isn’t a debate about the merits of a universal income. The video below is one of many discussions on the issues. I don’t agree with all the comments in the video, but they do provide ample starter fuel for an argument discussion. We will focus our attention on something more important today: creating your own personal basic income.




Back to Basics

At times I will sound like a rabid liberal when discussing universal basic income and an unrepentant conservative at other times. I am neither. Rather, the issues are complex and it is nearly impossible to stand firmly on one side of the aisle at all times.

The FIRE (financial independence, early retirement) community is a perfect example. These people (most people if we are honest) look forward to the day when they can either retire or live a semi-retired lifestyle. There is nothing wrong with such an attitude. I even argue it’s a healthy one. A universal basic income will only make it easier for people to achieve their magical goal. An extra thousand dollars a month can do wonders for those determined to build a nest egg large enough to retire early.

Unfortunately, it also encourages disengagement. If a basic income doesn’t work as planned in a place like Finland (where many feel it was a failed experiment) then it is unlikely to work anywhere at all. Higher taxes to pay people not to work will not bring the best out of a society. Social safety nets are necessary for a moral society, but there is a difference between feeding hungry people and providing unemployment benefits and giving everyone a handout.

All that said I still love the idea of a basic income. Notice I didn’t say “universal”. Don’t take this to mean I think people should be left out. Quite the contrary. Anyone who really “wants” a basic income should be allowed to have one! And I’m going to show you exactly how you can get your very own basic income.




Perception

In its broadest terms a universal basic income provides everyone in the community with a minimal amount of money every month just for being above ground. The cost is prohibitive, but if machines do all the work due to increases in technology and automation, there is nothing left for people to do to earn the money needed to buy the stuff automation is producing. The idea is to tax the crap out of the automation processes and spread it around.

Since this story has been around in one form or another since mankind decided to move from manpower to draft animals, we have plenty of reference points to learn from. The most import thing learned is that people over blow the consequences. In 2008 the world was coming to an end and now we are at full employment and then some. The next economic slowdown will bring the basic income idea front and center again. Don’t fall for it.

But if you are anything like me you wouldn’t mind a juicy check showing up every month like clockwork as a base line to the household budget. The universal basic income is always some modest payment sure to bankrupt the government while providing modest improvements (if any) to families. What I propose is far more draconian. Rather than few hundred or a thousand dollar per month, I suggest something a bit north of there.

A universal basic income is small thinking. It doesn’t do enough to really solve the problem. But if $3,000 or more shows up each month early retirement is in the cards! So how do we get the government, anyone, to send us $3,000 or more each month?




A Multitude of Basic Incomes

The small thinking mindset requires the government to tax and redistribute massive amounts of money. Worst of all, the beneficiaries of the basic income are reliant on one source for their bonus. This is just plain stupid.

What you need is multiple sources of basic income flowing into your bank account on a regular basis. The source of your basic income should also be more secure than the next vote in Congress!

Here is the secret. The wealthier you are the more likely you are to be receiving the multiple payments of basic income. In fact, the total of all these streams of income aren’t so small. Now I, as a wealthy accountant, will share the secret to the crowds. If you read my body has been found in a ditch somewhere you’ll know the bourgeoisie got to me. Too bad the word will already be out.

By now I’m certain you figured out what I’m talking about. Multiple streams of income are the hallmark of wealthy people. There is nothing preventing you from engaging in the same activity regardless your economic status. A lower income means you start slower, but you can still start.




Sources of Basic Income

Sources of basic income are everywhere. Index funds provide an income stream in the form of dividends. A side hustle can line the household budget nicely.

Passive income is where it is really at. Dividends and interest are nice. Rental income can be much larger than dividend income with a smaller investment. Income property can provide a steady passive income stream without hardly any net worth! (I recommend you pay down the mortgages as fast as possible for a margin of safety.) The trick is buying the right properties.

Free money! Woo-hoo!

I’ve provided plenty of ideas in this blog for generating additional income. A side hustle as a forensic accountant is a fun part-time job that pays like a full-time job. Selling tradelines on the side is another way to feather your personal basic income program. No tax increases required. Here is one last link to an article on a dozen high income part-time seasonal jobs.

The ways to produce passive income is nearly endless. You should always maximize retirement plans for maximum tax benefits. Even in a nonqualified index fund dividends and capital gains are taxed at a lower rate than ordinary income. Income properties generally have higher cash flow than reportable profits on a tax return.

The universal basic income is a grand idea whose time will never come. When machines and automation destroy jobs, new opportunities arise. People in the vinyl record business lost their job in the 1980s. More jobs were created than lost in the CD business. Digital is doing the same today. Yes, the horse industry died when the automobile showed up, but the automotive industry is the largest employer in the U.S. today. And it’s not just the manufacturers. Repair shops, gas stations and the oil industry have more than made up for the lost jobs raising, training and feeding horses.

Technology and automation increases efficiency which means we have a better quality of life and standard of living. This is a good thing and not to be feared! I know it seems scary out there, but remember all the Chicken Littles frantic the sky is falling. The sky is fine. And brighter than ever, I might add.

Social safety nets are the moral thing for a society to provide. A constant struggle for the “right” amount of safety net will drag on until the end of time. What you need to understand is a basic income is yours to have. You decide the amount.

Your personal basic income will start small with one rent check, one dividend payment, one tradeline sale. Reinvesting your great fortune only grows your basic income larger each month. Soon, you can have a basic income greater than your financial needs. Then you can step back and let the next person enjoy your old job while you live on the multiple streams of income. In the new basic income world, fewer people will need a traditional job. But you will still provide value to society without working yourself to death.



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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

Financial Independence is Getting Easier Every Year

Build the life you want. Control money rather than having money control you. #goals #financialgoals Early retirement. #success #wealthIt’s hard to see when watching at the speed of life, but there is no doubt it keeps getting easier to reach financial independence. Some in the crowd might disagree with me. The statistics are clear, however. As the hand of time ticks by the human race is finding greater and greater opportunity at every turn until now when it is laughably easy to reach virtually any financial goal.

But we need to start at the beginning.

In the Beginning

Depending on whom you ask, humans (Homo sapiens) have been around for around 300,000 years. For most of this time we were limited in our conversion of energy into useful tasks. Men, women and children all contributed to their subsistence lifestyle.

Because energy input determines so much of quality of life (as will soon become clear) we need to use a consistent measure of power. Energy is best describes in joules and power by watts (W). This allows a better understanding of inputs by humans over time.

A human can sustain around 100 W of labor. From the beginning when modern humans started its own branch of the family tree until the third millennium BCE, the most power mankind could muster was limited by the backs of the very same people. It took several hundred thousand years before mankind figured out a way to utilize more than the limited 100 W of power available from an average adult male.

Sometime during the third millennium BCE people learned to harness draft animals and their sustained 300 – 400 W of sustained labor. Not satisfied with the several fold increase, humans experimented with different ways of harnessing draft animals and even breed animals for greater labor.

Over thousands of years the maximum prime movers (draft animals in this instance) slowly increased until around 1000 of the Common Era when horizontal waterwheels came into wider use, providing up to 5,000 W of power. (The waterwheel was employed earlier, but not widely or in a modern sense.)

What took over a hundred thousand years to move from 100 W of manpower to draft animals and their approximate 350 W of power only took four millennium to reach the technology of the waterwheel. As slow as it moved it was still an improvement. Progress was slow because people needed to expend all their resources to survive. Draft animals allowed more land to be tilled which meant more people could be fed and better.

By 1800 steam engines surpassed 100,000 W (100 KW) of power. The late 19th Century brought water turbines, driving the maximum power of one unit to as much as 10 megawatts (MW).

The pace of energy use expanded rapidly. Life was still harsh for many people, but the goods and services available grew as more prime movers grew more and more powerful. Subsistence living was declining. Life was still hard, yet more people than ever had a better diet. Also, more people than ever before were able to live an upper class lifestyle. As power use increased due to technological advancement, fewer people had to work to cover the basics of living for the entire community.

The rate of increase accelerated until 1960 when the largest steam turbine reached 1 GW of power.




Modern World

The more technology increased the power of a single prime mover, progress advanced in efficiency.  The first draft animals could replace three or four men max. By the 19th Century better harnesses and certain horse breeds could do the work seven or more men.

Waterwheels increased in size and efficiency until steam turbines were invented, catapulting the power available in one unit (prime mover) to unheard of levels.

Start living your dreams today. Financial independence is easy if you follow a few simple rules. #easystreet #personalfinance #financialindependence #FIRE #earlyretirementThermodynamics places a limit on the maximum power that can be extracted per unit of coal or other energy source. Steam turbines also have theoretical maximums. The first steam engines were extremely inefficient. Advances in efficiency were slow at first, increasing faster until the gap between best performance and the maxima narrowed.

The first steam driven machines operated at less than 1% efficiency to over 40% today! While 40% seems like there is lot of efficiency left to wring out, there is only modest possible improvements available.

Home heating has come even further. Heating a hut with grass or dung has serious disadvantages. Wood was a major improvement once tools were invented to cut trees versus the limited supply of branches available on the ground. Early gas furnaces enjoyed 40% or less efficiency; today homes have gas furnaces up to 97% efficient.

Lighting has an even greater efficiency improvement. Candles convert between 0.01% to as much as 0.04% into light. Edison’s first light bulbs were 0.02% efficient. The first fluorescent bulbs in 1939 were 7% efficient. In the year 2000 a lumen of light in Britain cost 0.01% of what it did in 1500 and 1% of what it did in 1900 (see reference at the end of this post).




The Ease of Wealth

We will now switch from the historical use of power to how the above information yields increased ease in acquiring financial independence.

It seems like wages have been stagnant forever while prices continue to climb. The data tells a different story.

Overall Adjusted Average Salaries, Five Year Increments

Adjusted for inflation, wages have been flat for at least 50 years (see chart)! Before anyone become alarmed, know that wages are what drive inflation. When wages increase it eventually is reflected in the prices of goods and services, kind of.

Natural gas and gasoline prices have been steady to lower over long periods of time, adjusted for inflation (see charts). Natural gas has been up and down, but is basically unchanged since the mid-1990s even before considering inflation or the unadjusted growth in wages. All this while vehicles are larger than ever with more gizmos and home gas furnaces are the most efficient than they’ve ever been.

Historical gasoline prices in today’s dollars.

Inflation causes the most angst. In 1913, when statistics were first kept in the U.S., the CPI-U started at 9.8. The latest CPI-U (April 2018) stood at 250.546. What cost a dime is now 25 times more expensive. The average worker earned around $300 per year in 1910! (A competent accountant could earn $2,000! I would like to think I’m competent so, adjusted for inflation, I should make around $50,000. Looks like this competent accountant is doing a bit better than expected. Bet you are too.) In 1918, after the inflation of WWI, the average household earned $1,518, which is, adjusting for inflation, less than the average household income today.

Inflation is real and affecting household budgets. But while prices are increasing, wages are oscillating around the baseline, adjusted for inflation. At first glance we might be depressed to learn we’ve made no progress. However, wages and inflation only tell part of the story.

A hundred years ago many homes lacked indoor plumbing. We’ve rectified that problem since. Electric appliances have been added to the daily luxuries of life. Over the last 30 or so years we have added computers, internet and smart phones to our list of luxuries. You’re probably reading this on a smart phone.

Natural gas prices haven’t moved at all while wages and efficiency have continued to climb.

Increased efficiencies are where most of our increase in living standard comes from. Wages mimic prices as efficiency keeps rolling along. Energy costs have gone nowhere fast over the last century. But what we do with that energy has changed radically. Heating our home takes less than half the natural gas of 50 years ago. Of course, our homes are twice as big so we’re still broke. The electricity needed to light our homes has decreased to such a level that it is an insignificant part of our budget.




Money for Nothing: FI for Free

Frugal today is nowhere near what frugal was a century ago! What we consider austerity would get us laughed back into our time machine if we had such a machine to transport us back in time. Most households spend less than 10% of household income feeding the family. There was a time not that long ago when 50% or more of the budget went to feeding hungry mouths. Back then the house didn’t glow at night the way our cities do today.

As technology allows us to utilize energy resources like never before, we have a lifestyle never before enjoyed by any species in history. And it gets easier to reach financial goals!

Once upon a time all but a few worked till the day they died. A select few, very few, enjoyed a life of luxury supported by the backs of the masses. Then draft animals were put to work, allowing for a larger population and a better diet. Later coal, oil and gas powered the turbines of industry and heated our homes. More work horses (steam turbines, et cetera) meant we could delegate the most back-breaking labor to machines. We went from nearly 100% of the population working in the fields to under 2%. The freed labor did other things. Many spent more time in educational pursuits; some did nothing at all, choosing to live longer with mom and dad.

Some lived frugally for a few years and retired early.

In the U.S. 49% of the population works a traditional job. That percent has probably crept up in the last year so we might be over 50% as of this writing. Young children and the old are understandably unemployed. Still, of working age adults, we are near the multi-decade low labor participation rate. What gives!

The answer is rather simple. Our use of energy resources continues to become more efficient while wages remain stable and prices are moving in tandem with wages over time. Productivity slowly grinds higher. After centuries of progress, the cumulative gains have made it possible for large numbers of society to pursue other interests. Food is plentiful thanks efficient use of energy. Even with half the population not engaged in traditional employment, we still have abundant food, shelter and clothing.

Financial independence keeps getting easier and the trend will remain intact! There is no excuse to not have financial wealth. None. We are so rich today with abundant resources and technology we can throw away massive amounts of money on interest to support debt. This is unheard of in history. Debt was always considered bad, if not an outright sin. Governments had debt, but regular people who knew better followed the adage: neither a lender nor borrower be.

Mass media has brainwashed us into thinking things are hard. The 2008 financial crisis was not that bad compared to reality of 100 years ago. The Great Depression was bad. The Irish potato famine was bad! When was the last time you heard of a famine in a developed country? It’s been a long time and for good reason. The only reason less developed countries starve is because they have not implemented the prime movers the way developed countries have. Once you use the energy resources efficiently you can move food from any part of the planet to wherever a drought or blight is affecting crops.

We live in an age of abundance like never before. We need to start acting like it. We need to feel grateful for our largess. It’s easier than ever to save a massive percentage of our income and invest it safely into index funds. You can retire early with plenty of financial wealth because you live in the most awesome time in history. All thanks to the never ending increase in energy utilization and increasing efficiency of its use.

Reference

Smil, Vaclav 2017. Energy and Civilization: A History: Cambridge, MA: The MIT Press (Pages 397 – 407 were used in the writing of this post.)

 



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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

Increasing Profits and Efficiency in a Tax Office

The most valuable resource of any company is its people. Train them well.

Running a business is similar to conducting a science experiment. Unsuccessful proprietors use trial and error hoping to find a winning strategy. Gamblers do something similar. Successful business owners do things a bit differently; examine where need exists and then search out a plausible solution.

Success is similar across all industries and business sizes. Whether you are managing a massive international corporation, a regional firm, a small local business or running a side gig to pay the bills while you enjoy all life has to offer, the rules of success are similar from top to bottom.

Today we will focus on the side hustle and small local businesses. The conversation will also focus on the tax preparation industry.

I own and run my own accounting practice which is centered on tax and have been doing so for over three decades. What worked in the 1980s and 1990s would bring you ridicule if you tried the same thing today. For example, I offered free electronic filing in my community before any other tax firm. Offer free electronic filing as you shtick today and you’d get a plethora or dead stares.




Transformations

My tax office morphed into something different on a regular business since the beginning. Of interest to you, kind readers, is the current transformation.

There are a variety of tools underutilized by most tax offices that would increase productivity, reduce stress and increase profits.

Why these tools are so underutilized is a mystery to me. It shouldn’t be such a personal mystery since I had to be dragged into the room kicking and screaming. What forced the current transformation of my business was an unusual event a few years back.

A series of events led to this blog and a national footprint for my very small firm. All the technology I pooh-poohed in the past now was desperately needed. I was so unprepared the first year from the influx of work I almost lost my practice. It was a disaster.

I’m not the kind of guy who quits! It was time to open my mind and transform my practice once again. Now with several strategies implemented I want to share how I increased my business footprint, reduced headcount, reduced stress and sent profits higher than ever before.

Profit Power Plays

The old model of tax preparation required an army of tax professionals plugging numbers into the software. Since tax preparation is nothing more than glorified data entry (sorry peers) it was easy to automate virtually every aspect of the preparation process. (So a rabid mob of tax professionals don’t lynch me, the tax profession is more than data processing. Yes, tax preparation IS data entry. As long as you know where to plug the numbers you are golden. However, it is still rote, mind numbing work. Where a tax preparer turns professional is when she consults with clients helping them get different numbers before the fact to plug into said computer. Better?)

There are three things I implemented in the last year or two which made all the difference and a few things which didn’t work.

The three things which worked well are Gruntworx, outsourcing and cloud services. What didn’t work was outsourcing. Yes, some outsourcing worked like a charm and one attempt was a disaster. I’ll elaborate on each winning attempt and the one thing I wish I wouldn’t have wasted my time on.




Gruntworx

Gruntworx was the best thing I added to my practice in the last decade.  For a couple thousand dollars Gruntworx eliminated the need for several data entry staff. Most returns cost less than $10 to send to Gruntworx in my office.

The trick of turning Gruntworx into a profit engine requires some explanation. First, simple returns are virtually completed, requiring only your review. At first I resisted sending small returns with a few W-2s, interest income, dividends and mortgage interest. Then I realized Gruntwork practically finished the return for a buck seventy-five, or thereabouts. There is no way I can get the work done in-house for close to that cost. A quick review, adding any items Gruntworx doesn’t handle, and the return is ready to present to the client.

Larger returns still require an experienced tax professional. Gruntworx handles a variety of traditional tax reporting forms (W-2s, a variety of 1099s and other similar type forms), but can’t input most Schedule C, E and F expenses. Gruntworx will enter 1099-MISC income to Schedule C. But, since expenses are beyond the capabilities of Gruntworx my office quickly elected to handle those entries internally.

Brokerage statements are a snap with Gruntworx and probably the biggest time saver of all the forms except W-2s, and W-2s only take more time because there are so many of them on almost all returns.

There are a few caveats. Gruntworx is really fast, but is slower to get data entry back to you as the April due date approaches. My office had a response to most files sent within 24 hours, sometimes only a few hours. By mid-March to the finish line it became a few days.

Gruntworx pricing.

Another caveat involves brokerage statements. Clients with massive trades will send the Gruntworx bill for that client quite high. One client had a thick stack of trades which would have wasted a day entering the data. Gruntworx charged $78.50. Still a deal, but my policy is to scan and attach pertinent pages of the brokerage statement and enter only the consolidated numbers in the software. This is fast AND cheap and you know how cheap this accountant is. (Some accountants disagree with my policy. I’m good with that. Just send it to Gruntworx and get the workload out of your office.)

One final caveat involving Gruntworx. Review is necessary! As every tax professional’s eyes will attest, tax documents can be hard to read at times. We found two errors this tax season from Gruntworx. The computer entered a smudged number wrong. There is still room for the tax professional in the Gruntworx world.

Gruntworx works with Drake Software, which I use in my office. It also works with some Intuit, Thomson and CCH software. If your tax software isn’t on the list still check with Gruntworx as it still might work. If not, similar products are available for all the larger commercial software packages.

You can estimate the cost of Gruntworx for your office here.

Gruntworx and Drake are used by my office, but are not affiliates. Regardless, I highly recommend both for large and small tax offices. These companies will supercharge your tax prep side gig run out of the home or store front firm. Gruntworx makes you look like a larger and more professional firm




Outsourcing

Outsourcing is admitting you don’t have to do everything yourself. In the past we handled payroll, bookkeeping, tax, audit and consulting all under one roof. This is a lot for a small one-location firm.

There are different levels of outsourcing. The level which worked for me involved payroll. Payroll requires dedicated staff and I didn’t handle enough payrolls to keep payroll dedicated staff. Also, payroll is a commodity business with national firms sucking all the profit out of it for small and local firms.

Virtually all payrolls are now handled by someone else. You can read about it hear, including who I use. (Reminder: the payroll service I use is an affiliate.)

My firm earns more profit not preparing payroll than we did doing all the work. Outsourcing freed valuable resources for other important tasks.

Where payroll was a success story, tax preparation was not. I knew there were serious issues to manage if it was going to work, but in the end it was a complete failure.

I will keep business names out of it. My goal is not to defame, but to inform.

First, I asked several local clients if they’d be willing to allow me to outsource their tax return to a U.S. source. A small number agreed to help with my experiment.

A VPN was set up with security locked tight to protect data. To make a long story short, the outsourcing firm made so many mistakes it took more time to fix the returns they worked on than if we just did the whole thing ourselves. We did not run the outsourced returns through Gruntworx.

VPNs are slow and clunky which might have been a very small part of the problem. Unfortunately, the real problem was quality. The outsourcing company failed on many levels. Their preparers were very green. If we would have rolled out the program the cost per return would have been favorable, but not nearly as generous as Gruntworx.

Due to lower profitability, security issues, time constraints, quality of work and incessant errors, I do not recommend outsourcing tax returns at this time unless you consider cloud services, which we will cover next.




Cloud Services

Cloud services come in a variety of flavors, just like outsourcing.

I’m a big fan of cloud computing. I can work anywhere I have an internet connection without logging into the office system with a VPN.

Cloud computing can get expensive, but compared to the cost of IT services and servers it is a steal.

Never touch an accountant’s coffee cup! Here you see my mug protected at my gym. Like I said, I can work from anywhere. (Sure beats another round of power reps.)

My office is undergoing its largest cloud build-out ever. Drake Software allows us to host their software on the cloud. (Don’t quote me, but I think the cost is $600 per year for the first user and $300 for each additional user. I’ll update when I get to the office or discover a different price.)

There are several benefits to hosting Drake on their cloud. The biggest benefit is working from home is easier. No more driving to the office on weekends.

Another benefit with hosting the tax software in the cloud includes outsourcing again. Some outsourcing firms are outside the U.S and that opens a host of problems. My experience shows how U.S. based outsourcing firms can also fail big-time. But with the tax software hosted in the cloud I can hire qualified employees from anywhere and train and supervise them on my terms!

This blog brings in complex tax returns most tax offices only see periodically. Finding qualifies tax professionals has been my greatest challenge and it’s wearing me out. Cloud computing will open the frontier. I can hire awesome tax people from around the country. There is no reason to house the entire team under one roof!

I sound optimistic because I haven’t had my head slammed in the door yet with cloud. It is a work in progress with lots of opportunity. Best of all, no VPNs!

Finding team members who I can vet and train is a powerful advantage only cloud services allows me to do. Training my team is the only way to assure the best accountants serve my clients.

Final Notes

Business is always an on-going work in progress. What worked a decade ago doesn’t today. Successful business owners are constantly reinvesting their company.

The ideas I shared today are the ones I felt were the most important. I’ll publish more on this in the future as my firm evolves. If you are considering tax preparation as a seasonal side gig consider the information above. It makes a difference.

Tax services is a profitable industry, but has its risks. Current tax professionals can glean what they need from the proffered information. At minimum it can get you thinking about your business and the various ways you can increase the bottom line while keeping your sanity.

Stay tuned.



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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

Price’s Law and Why the Early Retirement Community Will Not Harm the Economy

Square root employee?

The FIRE community has been educating the public in attaining financial independence and early retirement for a decade or so now. Whenever the topic arises it is sure to be followed by the exasperated rebuke, “We can’t all do this! Who will do the work if we all retire at 30? The economy will fail.”

The argument has a sort of logic on the surface. If everyone retired by their 30th birthday there could be a problem. A 50% savings rate could crush the economy! Right?

Or maybe not. A high national savings rate doesn’t harm the economy! The United States had a double digit savings rate in the 1950s and the economy roared. China and many other nations with vibrant economies have high savings rates. A low savings rate seems to be the real problem. In the U.S. we struggled more as our savings rate declined to its current low single digit home.

High savings rates don’t kill the economy; it provides a massive pool of ready capital to invest in infrastructure and future economic growth. No wonder our road, bridges, water and sewer works are subpar. The government decided it was good for the economy short-term to spike growth by encouraging excess consumption. As the savings rate kept declining less money was available for high speed rail and advanced internet services. And don’t even think of fully funding roads and upgrading the electric grid.




Price to the Rescue

Derek J. de Solla Price discovered an inverse relationship between how many people actually do most of the work in a given setting. Price discovered the square root of a group did half the work and the remaining members of the group did the other half. If you have a business with 10 employees, then 3 were doing half the work.

Here is where it gets scary. If you have 100 employees, 10 are doing half the work and 90 the other half! As an organization grows, incompetence grows exponentially while competence grows linearly! As the organization grows to 1000, thirty-two are doing half the work with 968 doing the remaining half! This is why it is so hard to grow a very large organization and keep it large.

Price’s law is visible in corporate America. In 1928 the Dow Jones Industrial Average expanded to 30 stocks. Of all the stocks on the original list, only one is still there: General Electric. The other 29 companies are either merged, bankrupt, dissolved or significantly smaller firms. Current financial difficulties at General Electric could soon remove the remaining holdout from the original Dow-Jones stocks. In less than 100 years every single one is off the list!

You don’t need as long a timescale to see Price’s law in action on the S&P 500. Of the ten largest stocks in the S&P 500, most were not on top a decade ago. Companies like Kodak, Sears, and Xerox are nowhere to be found at the top of the list, yet they were the crème de la crème at the height of the Nifty Fifty days of the early 1970s. A damning fact is the average stock in the S&P 500 spends an average of 30 years there. That’s it. Some make it longer, other less. But 30 years is all the leaders can manage on average to stay on top. This is why we buy index funds instead of individual stocks. Individual companies come and go, but as the economy keeps climbing, so does the size of the index.




Faulty Thinking

A quick reader might be thinking of how to game this information to her advantage. A few ground rules are in order before we get cute.

According to the U.S. Bureau of Labor Statistics, on January 1, 2016 the U.S population was 322,810,000 and 157,833,000 were in the Civilian Labor Force. You read that right. Forty-nine percent of the total population is in the labor force! As you can see, a very large number of people are not engaged in any kind of formalized labor. Children, the disabled, military personnel, incarcerated and the retired are not part of the labor force.

Running 157,833,000 through a square root calculator gives you around 12,500. At first blush we might be tempted to believe 12,500 people are doing half of all the formalized work in the U.S. with 157,820,500 doing the other half of all the work. Now you know why you’re so tired. You’re one of the 12,500!

Except it doesn’t work that way. As much as you may want to believe you’re carrying an unfair labor burden (and you might be), the truth is far more than 12,500 people are doing half the work of the country.

Price’s law works wherever there is creative productivity. It is certainly possible a mere 12,500 people are providing half the creative productivity as long as you narrowly define “creativity.” Elon Musk is a hyper productive individual. But you can’t discount the workers building the cars!

While Price’s law works wonderfully when applied to baskets scored or city sizes or a single business, it fails to adequately disclose who is productive nationally. If only 12,500 provide half the nation’s GDP there are not enough producers to have at least one productive employee per successful company.

No, the Civilian Labor Force is not “creative productivity” and therefore we should not apply Price’s law. Price’s law explains what happens within an organization. Again, if you have 10 employees, 3 are doing half the work. Thirty percent of employees are kicking out half of the company’s creative production. It could be tax returns or widgets. The percentage contributing to half the company’s production declines to 10% when staff increases to 100. The bigger the company grows the worse it gets.

The Pareto Principle appears more generous in stating 80% of results come from 20% of the inputs. In other words, 20% of employees are doing 80% of the work; 20% of clients are providing 80% of the profits; and so on. In the end Price’s law and the Pareto Principle are explaining a similar reality.

 

Price is Saving the FIRE Message

Back to where we started. The FIRE community message is you can save half or more of your gross income, invest in index funds and retire early, some as young as 30. And then the economy drops off a cliff and nobody is around to get the work done.

Except Price told us what we needed to know! If 30% of the people in a small business with 10 employees are doing half the work, 70% aren’t getting shit done! And business owners, tell me I didn’t just hit the nail on the head.

Square root kitty?

If so many people are unproductive it is easy to have fewer people in the work force and still get all the work done. What we need to do is train employees to be like the minority producers (the square root guys).

How can we do that? First we need to look back at our error in assuming you can apply the square root of the entire nation’s work force and conclude 12,500 people do half the work. A business can be just like the national work force. If you have one huge group within a company Price’s law is going to crush you.

But then explain companies that are large? How come some outperform for very long periods of time?

The solution is simple. By breaking a huge company into smaller groups you can increase the number of productive people. A major corporation can act and perform as nimbly as a smaller company by organizing human resources appropriately.

Of course another issue arises. If some schmuck in accounting can’t get off dead center, how will a smaller group make her more likely to increase productivity? And the answer is: it doesn’t. Merely cutting a larger group into smaller groups will not have a meaningful effect on overall productivity of the firm. Unless you organize the smaller groups to focus on specific tasks.

Large groups tend to get less done because they take on too much. By breaking tasks into smaller sizes handled by smaller groups you can unleash before unrealized creative powers. And there is an example that proves it.

The Richest Guy in the Room

Just as the largest companies don’t stay on top forever, neither do the wealthiest people stay on top of the Fortune 500 list of wealthiest people on the planet. The 1% churns. A lot!

Don’t get me wrong. Warren Buffett was the richest guy on the planet for a while. Now that Jeff Bezos jumped in front, Warren isn’t looking for gainful employment to put food on the table. Bill Gates was on top for a while. Back in the day Rockefeller was on top. What I’m saying is the list changes for people just like businesses.

The insight Price gave us and the understanding we have of the Pareto Principle allows us to better use our human capital. People are the most important resource. But an employee struggling in a large group is far more likely to excel in a smaller group.

You’ve experienced this yourself. You go to a conference and attend a breakout session where 10 people are in the audience. A significant percentage of the people participate by asking questions and adding additional information. If the room fills with 50 people a smaller percentage get involved. The bigger the group gets the more likely you are to keep quiet. A few step forward, but fewer than in smaller groups.

Also, productive people in one setting will be less productive in a different setting. Smaller groups only work if effort is applied into providing the right environment in the smaller group so more people become interactive producers. This is the solution to the problem presented by detractors of the FIRE community.




The FIRE Community was Right All Along

It is possible for people to save more and invest the difference without killing the economy. We can be just as productive as a nation, as a company, as an individual. Even more so if we apply only a small amount of effort.

Reaching financial independence at an early age does NOT harm the nation. Quite the opposite; it makes us tremendously stronger! A nation wallowing in debt loses vibrancy. So do companies and people!

Fewer people need to work when the ones who are working are more productive. The end of formalized work doesn’t mean the end of productivity. Early retirement frees times to explore new ideas. Some of those ideas are the Tesla’s of tomorrow.

Spending down household savings accounts for conspicuous consumption does provide short-term economic growth. Then again, snorting cocaine gives you a high that doesn’t last either.

FIRE is the only way.



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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

Investing Alternatives When Index Funds are Unavailable

Note: This post is not intended as personal or personalized advice. It is provided for informational reference only and is the opinion of the author.

Anyone who has been around the FIRE, leanfire, FI blogosphere, podcasts and book tours know the demographic is heavily invested in index funds and for good reason. Active management’s record tends to be unflattering compared to index peers and with a heavier expense ratio for opportunity to enjoy underperformance.

People serious about building wealth as quickly as possible learn the index fund trick early on. But there are times when index funds are not an option.

Back in the 1990s I was a securities broker with H.D. Vest Financial Services down in Dallas as my broker/dealer. Broker/dealers have an obligation to monitor their brokers so they require all investments of brokers placed though the broker/dealer. Back then it meant actively managed funds only and the expense ratios were a heck of a lot higher back then. There was only one redeeming grace in the deal: all mutual fund trades were commission free with the exception of 12(b)1 fees which generally were 25 basis points of the account’s value. In a way all mutual funds looked like no-load funds for me.

My net worth grew significantly slower during my tenure with Vest. Actively managed funds with heavy fees caused underperformance. My choices were also limited. The worst part is the rule extended to my other businesses and immediate family. Mrs. Accountant and the girls couldn’t invest elsewhere either. Vest even wanted to know where I had money in the bank and a list of all income properties and loans. It was a pain in the tail. Now you know another reason why the dream of schlepping securities wore off fast.




Normal People with Abnormal Choices

Stock brokers aren’t the only people with restricted investment choices. Work retirement plans hold a large percentage of all investable funds in most households. 401(k)s and other work retirement plans are notorious for limited choices. The choices are frequently laden with fees driving down performance.

Matching and the ease of regular investing make work retirement plans the best options even when the choices are bad. I’m asked to help clients make the best choice in their 401(k) more than any other request. Most people are clueless to the jargon used to help employees invest their contributions and employer matching wisely.

In my stock broker days my investments were exclusively growth & income funds. Before I knew about index funds front-brain I already knew a basket of successful growing companies throwing off an increasing dividend was a solid decision. The advantage I had was the large basket to choose from. I had my pick of thousands of funds so I had options, even if they were limited to actively managed funds.

Now we need to learn how to pick the best investment from a limited pool. The right choice in your 401(k) could shave years needed to retire and add tens of thousands of dollars to your account value.




Needle in a Haystack

Employers offer more retirement plan options than ever before to limit their liability. However, most employers aren’t licensed to give financial advice so they steer clear. Large employers may bring in an investment advisor, but these advisors may not have your best interest at heart and they may not have the time to know you well enough to give quality advice.

Your best defense is knowledge. Certain choices tend to better than others. Specialized funds are almost always the worst choice as they usually have higher fees and are not broadly diversified. Sector funds are a good example. I know of no reason anyone would want a gold fund in their 401(k) portfolio.

International and aggressive growth funds also tend to have higher fees. They can outperform, but they still have a higher mountain to climb to offset the higher fees. All else equal, the lower a fund’s fees the better the long-term results.

Realistically there are only a few acceptable choices for most 401(k) investments. Money markets are out because you have no chance of growing your nest egg. Bond funds are a poor choice in a low interest rate environment and only a small percentage of the portfolio should be in bonds if you are approaching retirement and rates justify a modest investment. Company stock is not diversified and if your employer does poorly your job and retirement are both at risk. Insurance products are almost always the worst of all choices. That leaves broad based funds.

Acceptable choices (in this accountant’s mind) include: growth & income, growth and international or world funds. It is my opinion the largest investment in most 401(k) portfolios should be a growth & income fund when an S&P 500 index or total market index fund isn’t available. Growth & income funds will be the closest choice to an S&P 500 index fund and G&I funds tend to have lower expense ratios than other actively managed funds.

I’m content with one investment in a 401(k). A G&I fund is a diversified choice, grabbing a large slice of large growing companies. But it looks too barren to be correct so people want more. More isn’t always better.

Growth funds are similar to G&I funds with the exception that they can hold non-dividend paying stocks. Amazon is a large growing company that doesn’t pay a dividend. A growth fund can own Amazon; a G&I fund generally cannot.

You may also wish to have international exposure. BP (British Petroleum) is more likely to be in a world or international fund. (Some G&I funds may hold BP.) Toyota is another example. International funds have higher fees due to higher trading costs and travel expenses for the active managers.

G&I funds have the lowest expense ratio of my group followed by growth funds. Fees play such a large role in long-term performance that I have an allergic reaction to more than 10% or so of a 401(k) in an international fund.

If you can’t stand a simple G&I fund in your 401(k) there are a few mixes I approve of:

70% G&I; 20% growth: 10% international, or

80% G&I; 10% growth; 10% international, or

60% G&I; 25% growth; 15% international

Of course you need to modify to your personal situation. (I have to say that for liability reasons. Personally, I can’t think of a better mix than the first choice I offered unless index funds are an option.)




A Plethora of Choices

Studies have shown more choices aren’t always better. If you have a dozen choices in your 401(k) you are more likely to take advantage of the 401(k) than if it had 20 choices. The more choices added might reduce employer liability, but it also discourages employees from taking advantage of the 401(k) due to the apparent overwhelming nature of setting up the account.

I’ve seen this first hand in my office. Some employer retirement plans offer a small number of choices, but some come to a rabbit hunt with a bazooka! A hundred choices aren’t needed to offer employees quality choices!

When the stack of papers to sign up for a 401(k) plan exceeds an inch employees are lost. Even I need to spend time digging through the papers before providing reasonable options. Here is what I look for when reviewing employer retirement plan options.

First, most choices are junk. I dump all the specialty funds and insurance products. I’ve yet to see an insurance company fund outperform. The gold and bitcoin funds are removed from the list, too.

Next I separate my choices by investment house. I like Vanguard and Fidelity. If I’m unfamiliar with the investment house, but like the fund option I need to dig deeper. I want to feel comfortable with the investment house as well as the mutual fund.

Then I separate further into categories. I pray for at least one reasonable growth & income fund in the lot. If not, I have to settle for a growth fund.

Last, I review expense ratios. Once again, the lower the fees the higher the chance the fund will perform better. The change in the total stock market value is reflected in all investor accounts, minus fees. Unless you can prove you can outsmart the market, fees are a good determinant of return comparable to the overall market (peers). (Don’t even start with me. Even the pros can’t beat the market consistently.)

From my list I usually pick the fund with the lowest expense ratio with attention paid toward which investment house runs the fund.




The Final Choice

Employer retirement plans are often the best tool a person has to accumulate significant wealth. Many employers match contributions at some level. The money is tied up so it is difficult to withdraw; this prevents impulse decisions from ruining your plans. Employers are providing more choices than ever. This is a double edged sword. Move past the psychological deer-in-the-headlights response to a large number of options and hone the list to a workable few choices and then make the choice! Employer retirement plans also make it super easy to invest on a consistent and regular basis, the true foundation of any retirement plan.

Lack of an index fund as an option is no excuse to not invest in an employer retirement plan. Many people face the same problem. I did back in the 1990s and made the best of it. My current net worth would be well into the seven figures lower if I took a pass when I sold securities because of restrictions. The bank would have been a much worse choice.

Of course, you need to modify my suggestions to your personal situation. I think you will find the best choice for you will be very similar to what I propose. No choice is the absolute worst choice! Without investing you will never reach your retirement goals or financial independence!

It’s your life. You can get serious with whatever choices you have or work forever.



 

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?

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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations 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.

SPECIAL SALES TAX REBATE ALERT! for Wisconsin Taxpayers

Wisconsin announced a special one-time $100 (per child) sales tax rebate. It seems the state treasury is overflowing so the legislature decided to get the money divested as soon as possible. This rebate applies to 2017 tax returns!

It is unlikely tax preparers will notify clients since the cost of doing so will exceed the income derived from the work brought in. This article will outline the simple steps necessary to claim your sales tax rebate.

If you have dependent children you probably qualify for the rebate. But, you can only claim the refund from May 15th through July 2nd! After July 2nd the rebate is lost if you haven’t applied by then. You can’t apply before May 15th either as the website only contains program details prior to May 15th.

Who Qualifies?

The sales tax rebate is for sales and use tax paid in 2017 for raising a dependent child. Only one person can claim the rebate! No recordkeeping of actual sales taxes paid is required.

If you claimed a dependent on your 2017 Wisconsin tax return, the dependent was under age 18 on December 31, 2017, is a Wisconsin resident and U.S. citizen, you meet the eligibility requirements for the rebate.

The rebate is $100 per qualified child.

There are two ways to claim your rebate from May 15th through July 2nd:

  • You can call 608-266-5437 Monday – Friday (excluding holidays) from 7:45 a.m. to 4:30 p.m. or,
  • Apply via the internet at https://childtaxrebate.wi.gov.

Note the website only has program details until May 15th when they go live. I’ll add screen shots and a step-by-step guide to this post if it looks like people are having problems claiming their rebate.

When applying for the rebate, have your 2017 tax return handy. Verify you claimed/are able to claim the child/children on your 2017 tax return.

Wisconsin did not provide a timeline for release of funds, but in the past Wisconsin has issued refunds in 8 weeks or less.

Please share this with Wisconsin friends and family. If you have a blog, share with your readers if any are from Wisconsin. Share this page (or the information thereon) on your social media pages.




Final Note

My office will handle rebate requests for clients if they contact my office. Non-clients can also call my office to have us handle the request for rebate as time permits. Since the rebate amount is small I will only ask a donation amount of your choice. All proceeds will go to charity. I’ll update the charities supported on a future Saturday edition of “Stalking the Accountant”.

Stay tuned.

 

Wealth Building Resources

Personal Finance 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 Finance is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to skyrocket, 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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations studies work and how to get one yourself.

Amazon good way to control costs and comparison shop. 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.

 



Taking the Lottery Out of Scholarship Applications

Today we have a special feature. My daughter provided today’s post as promised last week. It is hard to capture the work she did in preparation to winning all those scholarships and the pitch contest. She practiced in front of anyone who would sit still long enough for her to get it out. She honed her presentation until it was as smooth as silk. I even tried to interrupt and distract her as she practiced so she would be prepared for anything.

A few notes are in order. When Heather says the pitch conext was organized by a local bank, local business owners and the college, know I was not involved in any way with the program and had zero influence over the results. I listened to Heather practice, but did not attend the event. I didn’t want to be a distraction.

I want to point out Heather mentioned hard work. Sorry to say you can achieve great things as long as you are willing to do the work necessary to succeed. Another point I hope people don’t miss is Heather’s encouragement to never give up. If one thing doesn’t work, research and study more and reapply. The prize frequently goes to the consistent and persistent.



Taking the Lottery Out of Scholarship Applications

by: Heather Schroeder

 

I’ve never been comfortable with bragging. I wouldn’t go around telling people I got the best grade on a math test or that I got accepted into one of the best colleges in the United States. This is something I just can’t get myself to do. So, when my dad asked me to write a blog post about a recent success I had, I had to tell myself that it’s OK to be excited about winning something.

I struggled when I was in primary school. I was in a special reading class as I couldn’t read at the level I needed to be at and I was equally horrible at comprehension and writing. My reading disorder continued throughout my middle school career and I thought, based on my experiences, that I would never be able to read. Once I entered high school and wasn’t forced to read, I willingly picked up a book at my high school library. In less than a year, I had read more than twenty books and suddenly I knew how to write. This was the starting point that has led me to where I am today—an entrepreneur, a mentor, and a teacher.

I’m currently a student at Fox Valley Technical College in Appleton, Wisconsin. Fox Valley Technical College has a 94% employment rate, the highest in the area. This was the first year that the college had a pitch contest for FVTC students. A local bank, several entrepreneurs in the area, and FVTC staff all supported and funded the pitch contest.

Naturally, I felt a need to sign up, but even though I signed up, there was no guarantee that I would be picked to be one of the eight finalists. Three months after I signed up, I got the email stating I was accepted as one of the finalists. I was rejoicing, and I felt like I was on top of the world. There was only one problem, though—I had a lot of work to do because my business was not what the judges were looking for. And if I wanted to win the grand prize, I needed to switch from being a solopreneur to an entrepreneur.

Think about it. I started a tutoring business with the intention of being the only employee and taking on as many clients as humanly possible. This worked great and was a nice way to have some extra cash coming in on the side; yet, I wasn’t making enough to survive. This is one of the reasons I decided to go back to college. I knew I needed an education, no matter how little or how much, to be taken seriously as an academic tutor.




I had one month to come up with a 90-second pitch for the Fox Trap Pitch Contest in hopes of winning the grand prize. First through third place were guaranteed a financial award. This is something I was bound and determined to win.

My adrenaline was pumping as I entered the room full of judges and FVTC staff. My entrepreneurship teacher was also running the show. I had to make him proud as my entrepreneurship teacher is the reason I’ve come so far. My pitch went great and the judges seemed interested in my teaching style I created and the opportunities for people in the valley and around the world to become employed by me. I’m an ambitious little thing that doesn’t let my size determine how big my dreams can be.

I won first place at the Fox Trap Pitch Contest. This was one of the first times I’ve seen myself succeed at something and then be told that I need to continue with my plan. I learned many things when I prepared and presented my 90-second pitch. The most important thing I learned was that writing a pitch is nearly identical in writing an essay for a scholarship.

When preparing my pitch for the contest, I had to identify a problem, identify the target market, identify the solution or solutions, and determine how my idea will make money. I also had to identify what I was going to do with the winnings. This outline is exactly how many scholarship essays should be written.

All scholarships follow the same general rules including determining the winners by how creative the applicant is, how well written the essay is, the quality of the information, and determining if the applicant is a right fit for the scholarship. When writing an essay for a scholarship, follow these simple rules.

  1. Identify the problem or identify the topic

When writing essays, research reports, and personal memoirs, the stories or the introduction introduces the audience to the situation. Research reports are the easiest when determining and solving a problem. With my pitch, I determined the problem by stating startling statistics and examples of why it’s important to help “at risk” students and students in special education succeed.

 

  1. Identify the target market or who you are trying to reach

Scholarship essays usually want applicants to write about issues that are affecting others in the United States. One scholarship I run across yearly is the drinking and driving scholarship that requires applicants to write about and videotape themselves on describing how they think they can help make people aware of the risks that come with drinking and driving. With my pitch, I determined my target market by identifying who I wanted to help. My target market is “at risk” students and students in special education. The target market for the drinking and driving essay could be people who drink often and take the risk of driving or college students. According to the college drinking prevention website, “1,825 college students between the ages of 18 and 24 die from alcohol-related unintentional injuries, including motor-vehicle crashes.”



  1. Identify the solution or what you think could be done in the future

When writing a scholarship essay, determine what you think could be done to solve the problem. My solution for my pitch was offering academic tutoring services for “at risk” students and students in special education and teaching these students by utilizing my teaching style, which has so far been a success.

 

  1. Identify what you will do with the winnings

Like with the pitch contest and writing scholarship essays, judges want to know what you will do with the winnings. I determined in my pitch that if I won I would use the winnings to go to China to determine if my business idea can work globally. With scholarships, determine how you will use the winnings. I usually state that I would use the winnings for housing, tuition, food, and supplies.

The last piece of information I can give is to research how to write scholarships outside of reading this blog post. I have given some valuable information, but there is so much more available online. I suggest looking on YouTube and searching for videos on pitch contests. These contests have great insight on how to reach your audience and make a difference in lives of others.

I wish you the best of luck.

May the odds be ever in your favor.

Endnote: Once again I encourage you to reach for your dreams. Heather is 23 years old and living her dreams. She is on her way to China for a month to teach in a few weeks. More opportunities are coming her way as a result. I don’t like to travel; she does. I never asked my kids to live the life I expected of them. I always encouraged they walk their own road. There will be bumps and even painful experiences. It’s part of life. But the journey is all worth it.



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?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to skyrocket, 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.

PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.

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 segregations studies work and how to get one yourself.

Amazon good way to control costs and comparison shop. 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.