Archive for August 2018

How to be Admired and Have the Wealth You Want

Respect is the most important wealth there is. Respect is earned, not given. Live your life in a way everyone around you will admire how you live and act. Be the person everyone else aspires to be. #wealthyaccountant #respect #winners #success #successful #admiration #aspiration #succeed #money #financialindependence #FIRE #mrmoneymustacheThe mid-eighteenth century was a difficult time for people living on the North American continent. Before the United States there was a list of British colonies on the American east coast. The French occupied the great wilderness of the north while the British controlled the mid-latitudes and Caribbean.

Native Americans suffered greatly. Disease and war took a devastating toll on the Indian tribes. Itinerant preachers (lay and ordained) provided respite for Native Americans in the church services where they could feel like equals for a short period of time. Still, racism was rampant even in the Christian circles. White evangelicals pointed out lapses in the faith of natives quicker than of fellow whites. Out of this world was born Samson Occom.

Occom was from the Mohegan tribe. He converted at the tender age of 16 when James Davenport preached on his reservation. Samson Occom was eager to learn more. He became the first student of an academy set up by Eleazar Wheelock, the brother-in-law of Davenport. Later, Occom taught for a missionary society. White missionaries received £100 for their services; Occom received £15 and was required to perform double duties. This left a bitter taste in Occom’s mouth.

An opportunity for a better life beckoned when Wheelock sent Samson Occom to England to preach so money could be raised to pay for educating Indians back home. English crowds were eager to hear a native from the American continent preach the gospel. Occom was so eloquent in his oratory he raised an astounding £11,000!

Samson Occom returned to his homeland and to disappointment. The money was raised for educating Indians. Instead, Wheelock diverted all the money to found a new college that educated mostly whites and only a token number of Indians. The college Wheelock founded is Dartmouth.




Character

Benjamin Franklin in his youth would fill a wheelbarrow with papers and wheel it up and down Main Street of his town when business was slow. He wanted to give the community the impression he was industrious.

As history records, he was well rewarded for his efforts. The list of Franklin’s accomplishments is long, including a very successful print shop.

By allowing people to see his non-stop efforts to get work done, Franklin sent a subliminal message to all who saw him push that wheelbarrow up and down the street as if he were busy delivering and picking up print jobs.

The secret to wealth. money and riches is leadership. Acquire the traits all successful people have. Lead by example and learn from the best. Winners learn to be winners from other winners. #wealthyaccountant #winners #secret #wealth #success #leadership #money #business #richesBen Franklin had character. So did Samson Occom.

At first blush it might seem Franklin benefited from his quality characteristics and Occom did not. True, Franklin did achieve significant financial wealth in his lifetime. But money wasn’t the most important or overriding factor; character was. Yes, Benjamin Franklin enjoyed wealth, but always knew his true and only wealth lay with his character. This is why Samson Occom, despite white prejudice and racism, still was wealthy beyond human understanding. Occom had character; Wheelock did not.

It can be disheartening when you work your tail off and get abused for the effort. All the time and effort to build a quality business can be destroyed in an instant no fault of your own. An angry or jealous individual can tear you down with a lie that sticks with you a lifetime. It is totally out of your control.

You don’t control external events. The actions of others can damage you, but you are powerless to stop a determined individual bent on spreading lies. A competitor may want to tear you down and destroy you so they have easy access to your assets and clients. Sometimes it works for the better as in Franklin’s case. Sometimes you spend a lifetime of abuse due to your race or gender as Occom did.

It is doubtful Occom would have experienced a better life if he succumbed to temptation and attacked his attackers. The eighteenth century was not a kind time for Native Americans. (It’s not always that kind now!) Occom wasn’t the only Indian to suffer racism. What hurt the deepest was how hard he worked helping white man and getting no respect for his efforts. Wheelock must have known from the beginning he was using Occom to raise money on false pretenses.

Who Do You Want to Be?

The YouTube video in this post is preset to start at a point in the presentation important to today’s lesson. You can listen to the whole video, but just listen to the part pertinent to this post by clicking the video. It’ll start almost at the end.

Warren Buffett has given us countless stories on life, investing, economics, money and happiness. In the video Warren outlines how to become the person you want to be. He mentions Ben Franklin and his mentor, Ben Graham, used the same method to discover the person they wanted to be.

Reinventing the wheel is too slow. Learning from people around us and those who have come before is the best way to shortcut to the desired result. According to Buffett, we should look around for people we admire. Then we need to examine why we admire them and why others admire this person.

Once you know what you and others admire in an individual, you can nurture those traits in yourself. By building those traits internally it increases the odd people will admire you too.

Money is important. So is admiration and other forms of wealth. Building a reputation takes work and there are no guarantees. #wealthyaccountant #wealth #admiration #success #money #fame #riches #wealthySome people may consider this selling out. Nothing is further from the truth. Searching for traits in people you admire is the only way to discover what you really want! To guess correctly by chance is a helluva gamble. The odds of you finding the right formula without outside information are slim.

Each person has a different dream, but many of us have a shared dream, or at least portions of dreams. Most people want some level of affluence. Money makes a big difference in life. Most people want at least a few close and dedicated friends. We want a loving family; a loving significant other; good children who are respected and respectful.

This is why you can’t just focus on one individual! Some readers may find my long-term marriage and business success traits they’d like to emulate. Some may envy my writing skills. Or, you might find my rural lifestyle intriguing. There are also things not as endearing. I tend to work too hard and get grumpy when tired. My disdain for travel is legendary. It is okay to pick and choose the traits you find most appealing.

Most people seem to have wanderlust. They want the opportunity to travel more and further. That’s okay! You can pick my traits you want to incorporate and leave the rest. You DON’T want to be a mini-me running around. As Riddick said, “They don’t know what to do with one of me.”




Equal Opportunity

It might not be fair, but outcome with be unequal. Samson Occom had it better than most other Indians because of his efforts. He still suffered racism. Nothing was going to stop that. The same effort by Ben Franklin has left Franklin’s name as a household word. When you think of Ben Franklin you think of industriousness. When you think of Samson Occom (if you ever thought of him at all) you should think of resilience. Occom isn’t a household name, but he is remembered. A footnote in the history books is more than most get.

Warren Buffett studied Ben Graham and then was a student under him. I think you’ll agree Buffett went further than Graham. Graham did just fine in life, but Warren became the richest man on the planet for a number of years. He is also loved and adored by many. Graham is mostly remembered due to Buffett.

Occom was admired, too. When he preached Christianity people quieted and listened. Life could be cruel out there, but in here he was at the front of the room spreading the Good News to his fellow Indians and even white settlers.

Samson Occom was bitter over his treatment; he was beside himself when he discovered the money he raised to help educate Indians was diverted to a new college mostly for whites; the knife cut deep. But he never stopped preaching! He held firm to his faith. He always remembered the words of Davenport that fateful day when he was not much more than a child. Occom found the traits he found most endearing and incorporated them all the way down to his soul.




Show Me the Money

No one, not even your favorite accountant, can guarantee you the outcome of your efforts. You can follow in my footsteps exactly and get a different final outcome. That’s life. Not everyone who followed the industrious example of Franklin in the eighteenth century became famous and wealthy. What I can tell you is that everyone who practiced those qualities did tremendously better than if they had not.

The early retirement and financial independence community have an endless variety of characters. Some traits are admired, others not so much.

You have to do what the rich do if you want to be rich. Find the traits that make people fabulously wealthy with all the money they could ever want. #wealthyaccountant #wealth #rich #money #respect #traits #successThink of it this way. Tim Ferris has a massive following. He has many positive qualities (traits) we should all consider. There are also things you may not like about the guy. The same can be said for the super-bloggers and super-podcasters. I think it’s insane when people want to consult with me so they can learn to be more like Mr. Money Mustache, another blogger or me.

I write a blog and publish a lot more than Pete (Mr. Money Mustache). But my statistics are nowhere near his. If you see a beach spread to the horizon, this blog is a grain on said beach compared to MMM. That said, there are many traits you might want to acquire from Pete. I hope not every trait because one Pete is also enough. Maybe you can pick up a few traits from numerous people.

Certain characteristics tend to show up again and again. If you admire people with money you might notice they tend towards frugality and index fund investing or own a business. You can emulate that easy enough. You might notice many travel and want to do the same. By following their example you increase the odds you will accumulate more resources to travel.

There is no guarantee you will get the same results. A person in prison will have limitations from the rest of the population. Nelson Mandela is a perfect example. He gained the respect of the guards and the people of a nation while imprisoned. He was fortunate that he was released and led South Africa for many years. Other people doing the same thing will almost certainly get a different result.

This blog is about wealth. It might depress you when I say you can search the traits of those you admire and incorporate those traits only to find less admiration than those you worked to emulate. That misses the whole point. Successful integration of quality traits do not guarantee anything and shouldn’t even be the goal! It is the daily effort to improve yourself with the traits you acquired that makes you wealthy.

The daily journey is the reward, the riches you seek. You can examine the admired of your community and work to integrate those positive traits into your persona. But please, kind readers, make plenty of room for you. Explore the qualities already inside you.

Then you will be the person admired.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!

 



Marriage and Money: Finding the Perfect Mate

Marriage and money. End money problems in your marriage forever. Turn his and her money into his and her spending. Build love by ending money issues. #wealthyaccountant #money #love #infidelity #spending #divorce #marriage #marriageproblemsFrom the outside it can look easy. Watching a couple together for 30 years and still madly in love is something everyone can enjoy and learn from. We forget the ride from when they met to this very day where they are still together wasn’t a smooth one. Life intervened. Money problems arose, fights broke out, angry words were uttered and myriad other problems interjected into the relationship.

Mrs. Accountant and I are such a couple. We celebrated our 30th wedding anniversary earlier this year. Some people like to throw a party as they reach anniversary milestones. Mrs. A and I prefer a more solitude ceremony of two. We share stories and wondered what we did that was so special we would beat the odds.

Both of us came from poor, lower middle-class backgrounds. Mrs. A had a small car loan when we met and a modest balance in the bank. I was starting to make headway, but money was tight. I say this with a brave face. It’s easy to forget how hard we had to work to build our wealth and maintain a stable relationship.

Readers object when I talk about frugal living because some think I have a duty to spend more because I amassed a certain level of affluence. When I proudly proclaim my love for Mrs. A after 30 years of marriage she squeezes my arm tight in delight. Congratulations come from those very same readers. Then they ask how we did it.

I wish it were a simple elevator pitch answer I could give. It’s a lot more. We always communicated and were honest with each other. We accepted each other’s faults and worked hard to improve ourselves and encouraged each other as well. The number one reason people divorce is they fall out of love or are incompatible. If compatibility is the issue, inadequate preparation before the wedding took place. If falling out of love is the issue, spending time together daily planning a future was absent or limited.

If you are honest in your relationship with your significant other there should be a very limited chance you fall out of love. Love is in the mind, not to be confused with lust. Compatibility, if it once existed, can be cultured and grown.

Over a fifth of divorces are due to money issues. That is where this accountant comes in. Incompatibility and even infidelity frequently begins with underlying financial issues. A year ago I published a brutal post on the consequences of poor spending habits and money problems. Back then I decided to take the proverbial 2×4 and plant it right beside the reader’s head. People cringed and walked away. How many readers divorced over money issues since publication of that post is unknown. The answer should have been zero. I made an emotional appeal. In case you need a refresher in lifelong happiness, I will now appeal to the intellectual and planning side of your brain. You can have love and harmony. My 30 years of marriage has taught me a few things about relationships and money I will now share.




His and Her Money

A common practice is to separate family financial resources to keep peace in the household. I’ve never subscribed to that theory and neither does Dave Ramsey.

As I look back over my 30 year marriage I noticed the “his & her” money concept wasn’t exactly ignored. Except for the first few years of our marriage, I am the only income earner in the house. (Mrs. A keeps the home fort intact and brings in some money doing surveys or other side gigs. She keeps household expenses low due to her hard work feeding the herd with healthy home cooked meals with many ingredients from our garden.)

Every couple argues now and again. Mrs. A and I are not exempt! When we disagreed we found ways to climb to common ground. Sometimes I needed to walk away for a bit and really think through the issue from Mrs. A’s perspective. She did the same. We had an agreement to never make it personal or resort to personal attacks; it’s the idea or situation we didn’t like. We always found common ground or agreed to accept our differences in opinions. It worked.

Money issues are the third leading cause of divorce at 22%, according to the Institute for Divorce Financial Analysis. Nearly a quarter of marriages are terminated (I use that work precisely) due to money problems! There must have been residual compatibility. The loss of love or falling out of love is common when the relationship is a never-ending pressure cooker of stress. Money problems can lead to infidelity, the second leading cause of divorce. Money problems might claim 22% of the causalities, but never forget the other issues causing divorce are frequently instigated by financial problems. Considering these factors, money almost certainly is the true leading cause of the destruction of interpersonal relationships (marriages and people cohabiting).

A variety of methods have been devised to smooth money problems before they happen. His and her money is a common solution. Mrs. A and I never kept separate accounts. We combined our finances the day we married and never looked back. Sometimes assets get titled in one name only so both of us don’t have to be there. Buying a car is a good example. But Mrs. A knows before the purchase is actually made.




His and Her Spending

While we don’t keep separate accounts, we do have separate spending.

The idea of his and her money is to give both parties involved an opportunity to spend on something they want without judgment from the other party. Mrs. A and I never found the need to keep spending hidden.

Everyone has their own special pleasures. I love books and spend a lot on them. Mrs. A loves books, but gets most of hers from the library. I use the library, too, but not as much as Mrs. A.

Finding the perfect mate is only the first step in building a life-long relationship. Money issues will happen Planning financial issues in advance will keep love alive and the fire burning. #wealthyaccountant #love #mate #dating #relationships #marriage #financial #goodmen #goodwomenA few weeks ago my mother asked Mrs. A and my daughters to a girl’s day out. I knew money would be spent. The girls bought some tea cups as a souvenir. I raised an eyebrow when I saw this. Tea cups are not of interest to me. I politely asked, “How much?” “Eight fifty.”

Some married couples would get mad over a hedonistic purchase. I didn’t. I laughed it off and enjoyed the tea cup purchase with the females of the house. Mrs. A knows she can spend without consulting me first, especially for minor purchases. I can do the same. A car and other large purchases we discuss and plan beforehand.

Even investments are more a discussion to bounce ideas. If I want to invest in a project, Mrs. A listens as I outline my plan. She points out things that don’t add up to her, but always lets me make the final call. The same goes for major business decisions. I want Mrs. A’s feedback so I lay out the details for her. Regardless the outcome, Mrs. A never complains over an investment or business decision I make. No disgusted glances if it doesn’t work out either.

His and her spending doesn’t require separate accounts. Mrs. A and I keep a small amount of cash for purchases and use the credit card (paid in full each month religiously) for most purchases. If we don’t want to share what we bought we just keep the credit card receipt. It doesn’t take long before we admit to the purchase for one really good reason.

Mrs. A and I share what we spend on so we can both enjoy the purchase! Yes, if Mrs. A finds a neat outfit or shoes; I’m not excited about the purchase. Clothes are more a girl’s thing (is it a guy thing too?). What I mean by enjoying a purchase is the time I get watching Mrs. A talk about her shopping stalking skills as she hunted her prey and got the best deal possible on something she wanted. There is a gleam in her eye and that is what I enjoy. Even more than Mrs. A enjoyed her purchase.

Mrs. A extends the same courtesy. When I buy yet another economics, business or money book, Mrs. A just gently smiles. (I am so far behind in my reading.) But she gets the same pleasure I do when I share the purchase. I walk around the house paging through the book, even if I intend to read it much later. I share my feelings about the purchase. I can tell she isn’t any more intrigued over an economics text than prior to the purchase. But she is delighted with my excitement.

Then there are times his and her money gets in the way and his and her spending is superior.  We don’t allot a special spending limit. We always respect each other and keep spending low. But we are much more willing to spend larger amounts when together! Even if I want something Mrs. A isn’t excited about she instantly does what she really enjoys: hunting for the bargain. I return the favor whenever it arises.

Yes, there are some things we want just for us. Individuality is important even in a committed relationship. Of course major purchases are decided together. But small indulgences do not require permission or disclosure.

Many years ago Mrs. A and I decided not to buy each other Christmas gifts. We do buy ourselves something whenever the situation is right and call it our Christmas gift. One year we decided our 25 year old bikes needed updating. We spent what I consider serious money on new bikes for the whole clan. It was June. Merry Christmas, honey!

You see, we don’t trap ourselves in societal spending requirements. If nothing shows up we really want we don’t get a Christmas present that year. (We still have each other, but I can’t tell you what Mrs. A has for me under the tree.) Sometimes we get several Christmas presents in a year. Several years back when Bess (our 1987 Oldsmobile) died we bought a bank repo to replace her. Merry Christmas! We decided to tag along with my parent to Cost Rica that year, too. Merry Christmas! Mrs. A wanted to upgrade some appliances. Merry Christmas! And a happy New Year, too!

Mrs. A and I are wedded to each other, not a limiting game plan dictated by societal norms or previous discussions. We can, and do, change our mind as we go.




Honesty and Budgeting

What makes his and her spending work is honesty and budgeting. The honesty part is my bid. I tend to have my fingers in all facets of household finances. If things are tight (income is low because I’m horsing around instead of working) and I don’t want to take money from investments to pay for purchases, I let Mrs. A know in advance. I might manage the money, but I discuss finances a lot with Mrs. A and invite the girls to listen in, too, so they can learn how I think when planning spending and investing. My finances are an open book in my home.

Budgeting is a different story. The idea of setting up categories with limits on spending in each is foreign to me. I hated the process when working with non-profit organizations and I hate it in my business and personal life.

In business my budgeting is super easy. I compare this year to last year and work hard to have higher income and lower spending over the prior year. To increase the fun and challenge, I break certain categories into segments to monitor performance. Call it a sickness.

His and her money is bad advice too many use and lose. His and her spending can eliminate money problems while keeping love alive and growing. #wealthyaccountant  #money#moneyproblems #love #relationships #dating #compatibility #lover #spendingAt home it’s even less formal. We only spend on what we need unless we plan additional spending. Unspecified room is allotted for unscheduled spending. If a client wants to go out to lunch I don’t need Mrs. A.s approval. Nor do I have to tell her about the expense. I probably tell her anyway as I share my day, but the unscheduled expense is perfectly within our spending agreement.

Mrs. A has more unplanned spending than I. Once per week she gets groceries. She loves a bargain so she shops hard for the best deal. She might find shirts in clearance. She buys several even if we don’t need them now. Mrs. A has more fashion sense than me so I let her buy all the clothes. She also tells me when I need to divest of a t-shirt or other article of clothing. (But homey, there aren’t that many holes in it yet. Besides, it’s comfortable.)

Honesty is the most important part of finances in a relationship. Hiding spending is different than unscheduled spending. If we get an urge to buy a lottery ticket we can talk the other down. If I have a mid-life crisis, Mrs. A can sooth my nerves as I let the sweet Z-28 slip through my fingers.

Spending desires happen to even frugal people. Our marriage is teamwork and we treat it as such. There is no predetermined spending limit. If Mrs. A wants something, she can dip into my stash. Without his and her money we can spend “our” mad money with limited restrictions. Remember, we’re frugal, not deprived!

Money is so important in life. It can make life a breeze or an unmitigated disaster. If his and her money works for you, great! I suggest the “his and her spending method” instead.

It is vital to keep communication open with your significant other. Be honest. Allow room for personal spending without accountability. If necessary, set a spending limit so finances are not stretched. Too frugal can be just as damaging to a relationship as over-spending. Honest discussion allows you to find your common ground or lack thereof. It is okay to be the frugal one in the household. Don’t require the wife (or husband) to be a carbon copy of you.

And don’t forget to spend together sometimes. That’s more fun than something only for you.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!

 



Beat Procrastination and Get Rich by Taking a Break

Productivity hack. The right kind of break or vacation or mini-retirement can increase your income and efficiency. #wealthyaccountant #productivity #hack #productivityhack #miniretirement #vacation #sidegig #hustles It happens to all of us. A project gets on our desk and we stall out; a credit card bill needs to be challenged with the bank and we can’t get the energy to get it done; a book we really want to read sits on the night stand waiting for the day you actually crack the cover. Like I said, it happens to all of us.

As an accountant I feel overwhelm often. People don’t bring me the easy ones and the IRS doesn’t care about your schedule. They pay me for things that make mere mortals head’s explode. Generally I’m booked out 6-8 weeks, and any time I say yes to something or set an appointment within 6 weeks it means I subtract it from personal time. Then I stall out!

It isn’t the worst or most difficult tasks that cause my tires to spin. I eventually reach a point where fatigue sets in and if your file is in the wrong place at the wrong time (or I made too many commitments), it ends up on the hellish side of my desk where things don’t get done. I keep putting it off because opening the file creates visions of pain in my skull. When fate (a disgruntled client) pushes me to engage the task it usually is something much less involved than I thought.

Tax season is the worst. As sleep deprivation takes its toll certain files just seem to be too much to handle. I put it off and put it off until weeks have passed and I have some explaining to do to a client. It might not even be my fault. A regular client has a crisis and it sets me back. Something had to give!

Even during the off tax season I get into a bind. Some jobs just stall me out. Do I really want to that now? Of course the answer is “No.” That’s why I’ve been putting it off.

In every case when things start piling up on my desk there a pattern. Before my energy wanes too much I roll up my sleeves and demand I take responsibility. I sit at my desk and get it done! The attitude works for a while until several clients with urgent demands crush my schedule and put me into a deeper bind. The forced labor never lasts for long. Productivity declines until I’m at my desk all day and less and less gets done.

There is a solution, however. When I’ve exhausted all methods to prod me forward I do what I should have done from the beginning: take a break.

Yes, take a break. And I don’t mean 15 minutes either. Once I get that far behind and clients are calling non-stop I step away. At this point I will either burnout completely or make serious errors. Probably both. The only solution is to take a few days off. I’m in no condition to do good work until I recharge.




The Highway to Hell is Littered with People of Good Intentions

IRS letters might be urgent, but unscheduled work when my calendar is booked tight is problematic. Enough unscheduled work takes away from family and then I get grumpy faster than you think. I NEED me time and family time. I work for pleasure. When it stops being pleasurable I need to reevaluate.

Before this blog my schedule was more manageable. Now I get frequent requests. Daily! I’m still adjusting to the ever changing environment. Before Blog (BB) I enjoyed long periods of time off outside tax season. I work harder now than ever because I really, really, really love writing and I have an audience I love communicating with. Still, those months of quiet leisure are necessary. The pause that refreshes prepares me for another marathon run in the spring.

BB I worked well into the evening during tax season. My batteries were that well charged. Now I work until 5 or so at best. Unfortunately weekend work has appeared. (People do that?) Tax season would wear me out, but by June the office was quiet and I had plenty of family and me time. No more.

Adjusting to the new schedule has proven difficult. I always thought I’d handle stress better. I don’t. The constant demands of people wanting a piece of me is something I don’t handle well. It wears me down.

My intentions are good. I know I can help these people as long as I have adequate time to do so. Taking time off when demands are so great is problematic. Then the proverbial wall fast approaches.

The choice has been eliminated. Begrudgingly I step away for several days. I go home and unplug. I read good books, talk with Mrs. Accountant and my girls and walk around the farm. When I return I am magnitudes of order more productive. I needed time away from the computer screen and the multiple day break did the trick. In a week or less I’m further ahead than I would have been if I attempted to plow through. Sure, plenty of angry emails and phone messages await me. I attack them in the proper order. When allowed to recharge I make better choices, get more work done, which leads to happy clients now that I finish their projects.

And I’m not alone.




Titans

Before we continue, I want you to understand this isn’t about me. You see, I know you face the same challenges in your life. An unpleasant task, or at least a perceived one, stalls you out. You procrastinate. In some cases it can cost you big time! It saps the pleasure from life and can even hurt relationships. You need to hear my story to learn the lessons you can apply to your own life.

Your favorite accountant’s story might resonate, but there is an even more visible example: Elon Musk. Musk, you might recall, is the top dog at Tesla, the all-electric car company. He also runs The Boring Company and SpaceX. Solar City is under the Tesla umbrella. Tesla has one of the largest buildings in the world in Nevada producing more batteries than the human race had built throughout all of history. In other words, Musk has his hands full.

For years Musk managed the mine field of tasks. Stress must have been intense often, but Musk seemed to weather well.

Getting more done doesn't mean working harder or longer hours. A vacation or extended break can beat procrastination. Enjoy life more. Enjoy family and friend. Have plenty of me time. #wealthyaccountant #metime #me #procrastination #family #work #freedom #travel #wealthThen the endless years of sleep deprivation and incredible demands started to show the world how human Musk really is. A few months ago he called an analyst on the Tesla earnings call a “bonehead”. The stock quickly tanked. Rumors started to appear over working conditions at Tesla. The high investment costs of an auto company kept Musk busy dealing with Tesla’s financial situation while production issues plagued the company and investors were getting antsy over missed production targets and goals.

Musk kept falling. He called one of the rescuers of the kids trapped in a Thailand cave “pedo guy”. That didn’t go over well. In a brief moment of clarity Musk apologized for his “bonehead” remark on the previous earning call. Then the bottom fell out.

In a momentary lapse of sanity Musk tweeted he was considering taking Tesla private and that financing might actually be secured for such an event. This wasn’t exactly true or at least didn’t seem obvious. This set off a firestorm. Tesla stock first rocketed and then collapsed, losing nearly a quarter of its value. Musk now has even more issues and stress to manage.

I personally believe Musk did many of the foolish things he did due to fatigue. He has proven he can handle stress. It was the lack of sleep that probably contributed to many of his recent woes. I read a report that Arianna Huffington encouraged Musk to take a break and get more sleep. Musk’s response: I don’t have time for that right now.

As much as I love Musk, his drive and creativity, he is racing toward potential disaster. He is stressed to the max and it is clear to me he isn’t at his best game anymore. Even under such stress he is still a genius, for sure. But if he keeps pushing he takes the risk his body can’t cash a check his mind has written. That could cost him his life or worse. The world—and his dreams—will not be realized in the way he wants.

Huffington is right. Elon, you need to recharge. You must take a break or it will kill you. The world can live a week without you, but will suffer greatly if we lose you permanently.

And there is one more thing to discuss. You might need a break to beat procrastination. This in turn will increase your wealth as you will make better decisions and move forward at a steady pace without fighting fatigue. My story you’ve read before. Musk is a giant and not like you or me. Now I want to share is a story of a man in this demographic; a man who has managed multiple projects and suffered the same things I have and found solutions. I talked with this man earlier this week. Now I want to share the story of a man known as J Money.




Growing to Significance

J Money, aka J$, is a unique individual. I’m not talking about all the incredible projects he has undertaken over the years and successfully completed. I’m actually talking about his appearance. He has this, ah, haircut. You see, there is only a strip down the middle with the path of hair set up in spikes. If you meet J you’ll also hear his distinctive voice. And, you’ll instantly know you are in the presence of a man who cares deeply for his family and the people consuming his work.

J is a normal guy. Not an Uberman like Musk or a crazy accountant like yours truly. J has three sons and a wife he loves dearly. J could take a knee and live the sweet life of nihilistic decadence if he wanted, but instead he choose to change the world (something Steve Jobs would have appreciated).

Procrastination can cost you money and sap the joy from life. Beat procrastination, enjoy free time and have more money to show for it. #wealthyaccountant #procrastination #vaction #travel #respite #relax #vacationmoneyJ’s accomplishments and legion. His largest contribution to the financial field is Rockstar Finance (recently sold). Rockstar touched every corner of the financial world. But J does so much more. He still publishes Budgets are Sexy, one of the best blogs to grace our demographic. And here is a list of his massive accomplishments. Take a moment and check that last link. Even if you know J, you should review his incredible successes.

Okay, are you back? Excellent.

Have you seen the number of Plutus Awards he’s won? The Lifetime Achievement award is most impressive. You only get that if you’ve dedicated a minimum of 10 years toward serving the financial needs of a hungry public. And he does it with humor as several Plutus awards attest.

Once again I’m going to ask you to take a short break and follow this link so we can seriously discuss the issues. Here is a list of J’s projects, past and present.

Did you check it out? No, it’s okay. I can wait.

Guys like Elon Musk, J and me, are insatiably curious and driven. This is our greatest strength and greatest weakness. Our curiosity and drive allows us to scale new heights and accomplish incredible things. The same drive pushes us past acceptable limits. Before we know it we’ve crossed a line where we are less productive and making poor decisions. I outlined above my weaknesses and Musk’s are very public. But what about J?

As much good as J has done, he still felt the strain of all the responsibilities. Burnout was once again knocking at the door. Then he got some great news. Mrs. J had some good news for our hero.  Let’s just say it meant J now has three sons. Three young children is a handful even for a guy as talented as J. Rockstar got sold and effort was made to refocus. Workload had to decrease. It was time to live more.

When you really love a task it’s easy to be consumed. As Musk and me, J’s strong drive needed some adjustment.

As I prepared to write this post I remembered something I heard about J. I thought it best if I confirmed my memory by contacting him. He responded almost instantly.

What I remembered was either reading or hearing J came close to burnout a time or two. What he calls hustles I call a Full-time Job Plus. J confirmed burnout was approaching. With his third child on the way he had to make serious changes.

First, he “. . . forced myself to cram it all in during the week no matter what it takes.” Parkinson’s Law tells us work expands to fill the time allotted. J discovered he could organize his day to get it all done. Weekend work was out! And rare has been the evening when he opens the laptop to work a project. (Note to self: channel J.)

Triad of Hustling

Just cutting the available hours for work isn’t enough. There has to be a process of elimination so certain projects and tasks are discarded permanently. J had a Jordan Peterson moment where he sat down and really thought it through. He came up with his Triad of Hustling.

J discovered there were three variables to any project:

1.) How much time did the activity consume?

2.) How much money did it make (or did it make any)?

3.) Was he having fun?

J felt if he could answer yes to at least two of the variables it was an endeavor worth keeping.

I encourage you to read J’s article fleshing out his Triad of Hustling. I think the variables should apply to everything in life. Many things don’t make money. Fine. Then it better be enjoyable and not consuming all available time. For business ventures money plays a larger role. If it doesn’t it better be as entertaining as hell and take all of three point seven seconds!




More Wisdom from J

I asked J to confirm his weekend rule and if he could provide something I could quote. He was generous in doing so.

Elon Musk could learn a thing of three (triad) from J. J informed me he is approaching his one year anniversary of not working a single weekend and he has held true to his goal. I think you’ll agree his work hasn’t suffered either.

Here are a few highlights of the email J and I shared.

J: All you have to do is not open up your laptop haha… well, that and actually DOING YOUR WORK during the work week and cut out all the distractions (italics mine; note to self: paste to computer screen). Amazingly time opens up for it when you commit to it!

He also lists pros and cons. (Yes, there are cons. If you are honest with yourself you will acknowledge the cons, as well as, the pros.)

Here are several of the pros: More quality reading time, better napping (yes, naps are important!), more alert when with his wife and kids, no need to rush to get back to work, much more excited to get back to work Monday fully recharged and feels like he is living more. That is a pretty darn good list to strive for!

These are the cons to address. Monday morning starts with a backlog of material that piled up over the weekend. Emails and comments need attention if you’re a blogger. Another potential issue is if something blows up over the weekend. Since the computer stays off all weekend J will not know about the issue until Monday.

Overall, J said, it is one of his best habits and highly recommends it to everyone.

Then J ended his letter with what I consider most profound statement:

And even if something does explode, it’s not the end of the world… People don’t revolve around us as much as we seem to think!

Yeah, something like that.




How Taking a Break Destroys Procrastination and Increases Wealth

J pointed the way. Elon Musk is showing us how badly things can go when you don’t use moderation. My experiences show how you can stall out and reach epic levels of procrastination when adequate free time is not scheduled in. Call is Keith’s roller coaster.

More hours working a task, even an enjoyable one, doesn’t automatically equate better results. After a point it starts to become, what economists would call, negative utility: more work actually add no additional value and even destroys work you’ve already done!

When you follow J’s lead and open weekends, or whatever time you choose to recharge, you increase your total output compared to not taking any time off at all! Procrastination is born of futility and fatigue. When your head hurts from lack of sleep it is hard to start a difficult task. Putting it off is bad; refusing to take a break and making poor decisions is worse. Worst of all is stalling out and never getting the task completed, the ultimate procrastination penalty.

The pause that refreshes increases quality of life. It also increases financial wealth! Think of it. When you struggle because you never step away you get less done and therefore earn less income. Breaking through procrastination sometimes means taking a break.

Or you can keep pushing and face the health risks of Elon Musk with no quality of life to show for it.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!

 



If You Love Spending Money This Will Make You Rich

5 spending habits that can make you wealthy. How you spend your money determines how rich you will be. Right spending habits increase your wealth. #wealthyaccountant #spending #spendinghabits #investing #debt ##indexfunds #incomeproperties #rentalproperty #guilty #guiltyfeelings #buyersremorse“Should I feel guilty when spending money?” It’s a common question when I consult with clients. They are so tuned into frugality they sometimes start associating negative feelings with money. It’s a bad thing to start feeling.

Spending money is NOT an evil activity! In modern society we have it so easy that we tend to either overspend (the vast majority) or become hyper-frugal (a significant percentage of the demographic reading this blog). Both lifestyles are unhealthy. Overspending leads to serious problems when the bills come due and income might not keep up. Debt is a serious issue I ask clients (and readers) to consider purging. The opposite of overspending is the hyper-frugal drive. This can suck the pleasure out of life as fast as a heavy debt burden.

I tend toward the frugal side of the equation and get called out on it periodically, too. Sometimes I do things just because it’s the cheaper choice. If I were as smart as I think I am I would reconsider such decision-making. Frugal isn’t always the best answer.

Frugality for me is more about my hate for shopping. When I spend I know exactly what I want and side purchases are never a distraction.

Buying a good or service feels good even for a frugal accountant like me. I needed a longer breaker bar (torque bar) to get the lug nuts off a tractor tire so I can take it in for repair. The breaker bar I have is only 14 inches; the one I bought is 30. By the time you read this I might have that tire off with my new piece of equipment. Yes, I’ll save money on a service call by getting the tire to the shop, but it still feels kind of good knowing I have a shiny new tool in the garage.

But spending is a problem for many people. Frugality is a forced habit at best for the majority. Economically enforced austerity gives way to bad spending habits when normalcy returns. The cycle is familiar and we know it while we do it. If only we could stop.

Since most people enjoy spending money I thought I’d share 5 ways you should spend because this kind of spending makes you richer. In fact, if you don’t adopt these spending habits I outline below you will suffer serious personal finance issues. Those who have money will realize they were already spending this way. For the rest of you, please come along. I’m going to show how you will want to spend that money burning a hole in your pocket.




Maintenance

This may sound like common sense, but too many people defer spending to their detriment. Every so often you should change the oil in the car. It runs better and lasts longer when you do. When the roof needs replacement frugality is not your friend. The structural damage follows shortly after and gets very expensive. Then you get to spend a lot of money for no additional value. That is not a good spending habit.

5 ways spending can make you rich. Spending habits can lead to debt or wealth. Here are the secret spending habits of the wealthy.. #wealthyaccountant #secrets #wealthy #spending #spendinghabits #habits #debt #moneyDo-it-yourself (DIY) projects are a good opportunity to spend. One of the cables broke on my garage door recently. I bought new cables and discovered I didn’t have tools or the recommended bars to loosen and tighten the spring. I broke down a bought a pair (you need two) to finish the job. Now I need to keep them safe for a distant future event when I need to work on a garage door again. The cost was only $15, but it is spending. The spending saved me the cost of a service call which would have been significantly more. Some spending is good spending and increases your wealth.

The same situation occurred at the office this summer when I wanted to do some light landscaping. The place really needed it. Clients have a better opinion of an establishment with appealing décor. I acquired several quotes which all came in over $10,000. (And it wasn’t that big of a job!) I decided to do the job in-house. The cost of dirt and river rock and some seed money for some extra helping hands was under $2,000. I have several huge rolls of felt in the barn I used and unused treated fence posts from a previous farm project so that cost nothing extra. In the end I spent a couple thousand, assuaging my spending itch, and created over $10,000 in value; more if you count the added business an attractive building can bring in.

Maintenance and DIY projects are a perfect way to spend money in a way that creates value. If I would have written a check for $10,000 to landscape the office it wouldn’t have felt as good. I got the satisfaction of a job well done and the opportunity to order 10 yards of top soil and two orders of river rock. There were multiple spending opportunities for the same job. For people with an itch to spend, this might be a good way to kill two birds with one stone.

Pay Down Debt

I’ve preached this line often before. Loan payments are not completely new spending. The interest is, but it doesn’t feel like fun spending. You get nothing for the interest spending: no pretty baubles or service or vacation. Nothing. Your wealth just disappears.

The act of spending is addicting to many. Rather than spend on more stuff and putting it on the credit card at 18%, consider tricking your brain into spending the right way. Here is what I propose. Spending is about wanting something. Some people enjoy the shopping experience. Either way, turn these desires into a wealth creating machine. For the shopping addict, lay out all your debt and obsessively review your balances. Create an aggressive spending payoff habit. Set your payments up on automatic, but also send in extra whenever an extra nickel crosses your path. Turn it into a game! Have fun with this. Instead of building debt, turn debt elimination into an exciting adventure.

If shopping doesn’t trip your trigger then you probably spend just to have something new. I have something shiny and new you’re going to want: a debt free balance sheet! I mean it. Instead of a new boat, roll up your sleeves and butcher those bills. Remember, it is easier to enjoy a new toy when you don’t have to work to pay off the toy, plus interest.




Investing

Once you pay down debt you might be tempted to return to old habits which caused the financial problems. I say, “Nyet!”

The newfound habit you used to eliminate debt is a good behavior for proper future spending habits. Turn investing into an automatic wealth creating machine. Automating investing doesn’t always satisfy the itch to spend. There is a solution.

It may be hard to believe, but there was a time when I enjoyed spending a bit more than I tend to nowadays. Money was rolling in and times were good in the 1990s. I was smart enough to know good times don’t last forever so I devised a plan to satiate my spending desires with intelligent cash allocation.

These are the 5 things you need to spend on if you want to be rich. The 5 secret spending habits wealthy people use are available to anyone. Frugality isn't the entire game. The wealthy spend. They spend right. #wealthyaccountant #frugality #frugalliving #wealth #money #passiveincome #spending #spendinghabitsTax season was always a good time of year. My mutual funds were automated, but I needed a home for my excess cash so I wouldn’t be tempted to spend it. My solution: dividend re-investment plans (DRIPs). I wrote checks to all my DRIPs. It gave me great pleasure to finish my day with a spending splurge. I’d write a check to JNJ, Aflac, Phillip Morris, Wrigley (damn you, Warren) and more. As fast as it came in I sent it out. I don’t know what you spend your money on, but I have a nasty habit of buying as much stock as I can get my hands on. For the record, it’s a good habit to have.

DRIPs aren’t what they used to be. Brokerage accounts generally automate re-investment of dividends and many DRIPs now have fees. There is still a solution. Set a minimum amount you can easily invest every month. Automate the process. Then either write a check every time money comes in or log in and set up a transfer. Trust me, you’ll have so much fun spending on your index fund. The best part? Instead of paying interest on your purchase you’ll be paid dividends instead. Oh, the joy!

Turn investing into a game. Real wealth creation is built on the proper allocation of capital. The bank is fine for short-term and emergency funds. But your serious money needs to be working hard building a better world and the only way to do that is to own a piece of great businesses.

Another spending game to consider is investing funds you planned on spending foolishly. Excessive dining out or drinking in bars can be swapped out for an index fund investment. I’m not telling you to forgo a pleasurable life. God forbid! All I’m suggesting is that you switch some consumer spending for investment spending. And besides, you know as well as I you will enjoy those dividend checks more than interest payments.

Income Properties

If you have an itch to spend, income properties are for you. Many moons ago I owned a city of real estate in my portfolio. From personal experience I can attest you get plenty of spending opportunities when you own real estate.

Your primary residence is different from income property. Money you spend on your primary residence (or second home) comes from another source and can run dry. Income properties have—wait for it—their own income stream to fund expenses. If you have a serious spending itch, real estate done properly can scratch that itch raw.

You still need to buy properties right! Stupid income property purchases will force really bad spending even when you discover how bad the spending is and want to stop. Sometimes you can’t. But a small portfolio of investment property can give you plenty of opportunity to shop and buy. Researching the right property should be a priority. Once you own the property there are always things that need to be paid for: property taxes, utilities, insurance, repairs and maintenance. A property manager can do all this for you, but you can write the check yourself if you insist. Even still, you can review your monthly statement from the manger which will show all the spending. It should serve as a powerful ointment for your spending itch.




Small Business/Side Hustle

Okay, hustlers! Nothing beats spending opportunities than a small business or side gig. Even a frugal guy like me still manages many hundreds of thousands of dollars in annual spending just by owning a small accounting practice. Every two weeks payday comes around and I get ample reminders on how to spend my money.

These smart spending habits can put serious money in your pocket. Spending on the right things can increase your wealth rather than build debt. Spend your way to riches! #wealthyaccountant #smart #spending #happiness #dreams #frugality #frugalA side gig or business is an easy way to alleviate the desire to spend. Maybe too easy. While I can brag I spend $250,000 in my business, it needs to be brought into perspective. I’ve seen too many people over the years start a business, spending like mad to get it up and running. It soon becomes apparent my client isn’t ever going to make a sale. He’s going to keep spending until he’s broke without ever actually starting the business. Then he asks if it’s deductible. (Not if it was a hobby or you treated it as such.)

Still, business owners are spending daily. At home my wallet has moths. At the office money is moving constantly. Office supplies are replenished, utilities are paid, property taxes come due, employees get paid, IT needs money. The list goes on and on. A frugal habit goes a long way toward profitability in a business. It’s easy to spend; not so easy to bring it in.

Spending/shopping addiction is a serious problem with many consequences. Shopping is a waste of time compared to time spent with family and friends. Shopping has its place as long as it doesn’t rise to addiction. Business has a natural built-in need to allocate money. If you can run a “real” business or side hustle you have my blessing. Before long you will lose that desire to spend. Take it from a three decade business owner. Spending gets old real fast when it becomes a job. (You know; a job. That thing you want to take early retirement from.)




Coda

Spending in and of itself is not wrong! Overspending is a bad habit and even a sickness. Excessive frugality is a bit of a sickness too. Careful readers may have noticed that from a certain unnamed accountant over the past few years.

I’m not here to tell you to never spend. What I want for you, kind readers, is a healthy relationship with money and spending. Reducing debt to background noise is important. Investing for your future and that of your family is imperative.

Spending easily becomes a job! Money is a powerful tool to help you live a quality life. Too much or too little is a problem. Using the 5 ways to spend listed above will make you wealthier. That is what we are about around here: quality of life which is the true meaning of wealth.

Finally, can you do me a favor? If you think this is as important as I do, go back to the top of this post and use the buttons to share on social media. You can pin the placards to Pinterest, as well. Help me spread the word. Let’s make the world a better place where people control their spending and build powerful, nurturing money habits.

Thank you.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!



The IRS Issues Proposed Regulations on the Qualified Business Income (QBI) Deduction

The IRS is true to their word when they said they’d issue regulations on the Qualified Business Income Deduction, otherwise known as QBI, by the end of summer. In the past week proposed regulations were published, coming in at 184 pages. Remember these are “proposed” regulations. Final regulations come after guys like me pick it apart. Most of what you see probably survives so it is a good time to start the planning process.

Accountants who wanted to get a jump-start advising clients on ways to maximize the deduction are in for a rude surprise. Most schemes are out. At the end of this post I will outline what can be done to maximize the deduction.

The 184 pages of proposed regs cover more than just QBI. We will discuss the most relevant here. Consider consulting with a tax professional to review how your personal situation is affected by these proposed regulations.

If I find any other juicy tidbits, I’ll publish. If not, I’ll wait until the final regs are issued.




Who Qualifies?

First, let’s clarify what the QBI deduction is. The QBI deduction is a 20% non-cash deduction for qualified business income (generally profits) for small businesses (sole proprietors, LLCs, S corporations, partnerships and some trusts) and income property investors.

The IRS confirmed what I suspected when they said QBI applies to self-employed persons, along with pass-through entities (S corps, partnerships, LLCs) and certain trusts. I think there is room for debate of the sole proprietor issues, but if the IRS gives the green light I’m happy to oblige. QBI is also available for income property owners with somewhat different rules.

Some issues the IRS clarified are pretty straight forward from H.R. 1. Phase out of the deduction starts at $315,000 for joint returns and $157,500 for the rest of the crowd if the business is in a listed field. The deduction is reduced to zero for that business once income exceeds $415,000 for joint returns; $207,500 for other returns.

The fields restricted by the above phase out are:

  • Health
  • Law
  • Accounting
  • Consulting
  • Performing Arts
  • Actuarial Science
  • Athletics
  • Financial/Brokerage/Investment Management/Securities Trading/Securities Dealers

One issue worth pointing out is the phase out is applied per business! This opens a potential planning opportunity where you break a larger company into parts to fall under the limits. Except the IRS knows this trick already and nixed it.

You deserve every legal deduction allowed. Pat the lowest amount of taxes legally, including the new tax bill. Investment property owners and small businesses have more deductions than ever, included non-cash deductions. #cash #deduction #taxes #taxdeductions #legaldeductionsThis doesn’t mean you can’t have multiple businesses. QBI is calculated separately for each business, but if the same owner/s has two or more similar businesses they are combined in many cases! The “bust the company into a bunch of littler companies” idea doesn’t work.

Small businesses are still punished in a way for raising employee wagesItems I published previously are correct.

And talking about wages: enterprising tax professionals may have advised you to fire employees and hire them back as independent contractors. This way the old employees are really business owners and get a 20% deduction on their wages. The IRS has made clear this will NOT be allowed. This and similar schemes will be pursued and denied by Revenue. Penalties and interest will apply. You’ve been warned.

Investors in Real Estate Investment Trusts (REITs) have clarity with the proposed regs when claiming QBI. I’ll discuss this in a future post closer to tax season as the planning opportunities are limited for most taxpayers.

S corporations exclude reasonable compensation to owners when calculating QBI. The same applies to guaranteed payments to partners. Every idea I’ve seen to game the system involving owner’s compensation is clarified in the proposed regs and not allowed. But there are legal ways to maximize QBI.




Legal Ways to Increase QBI

Fancy footwork may seem the way to go when dealing with the new tax rules, but the old reliable methods of reducing income have a better chance having stood the test of time.

Lowering your income if you are already below the phase out has less benefit than in the past as business deductions are technically only worth 80 cents on the dollar. (You get a 20% deduction anyway if you don’t invest in the expense.) Below the phase out you need to consider the long-term effects on your tax situation. Additional equipment purchases or promotional expenses may not be the best choice when you consider the reduced profits mean a reduced QBI deduction. Example: You elect to spend an additional $10,000 on advertising. The additional deduction is only $8,000 since you would have received a $2,000 QBI deduction anyway.

The phase out is where things really get interesting. If you’re reasonably close to the phase out threshold, a modest amount of planning could make the difference between the full QBI deduction and no deduction at all. Remember, you can’t just increase your paycheck (assuming you are an owner receiving reasonable compensation) to reduce the company profits since reasonable compensation isn’t considered when calculating QBI. Let’s start with some small things and work up to large deductions you can take to qualify for the QBI deduction.

Office in the home: Sole proprietors can deduction a regular and exclusive office in the home using actual expenses or the safe harbor of $5 per square foot, up to 300 square feet. This is more valuable than in the part with the standard deduction much higher and state and local taxes (SALT) deductions limited on Schedule A.

The qualified business income deduction is complicated. Guarantee you get the maximum value for your tax deduction. Tax planning can save more than ever. Maximize your QBI deduction here. #QBI #qualifiedbusinessincomededuction #tax #taxes #taxdeductions #business #businessdeductionsMissing deductions: It might sound strange, but many business owners forget to take all their deductions. Business miles are deductible. Keep a log book in your vehicle so every mile is counted. Small cash payments for business expenses add up. Track them all.  Any expense related to the business should be included. The IRS used “ordinary and necessary” as their term for what is allowed as a business expense. This is a wide road.

Section 1.263(a)-1(f) de minimis election: The de minimis election allows you to deduct all items that would normally be depreciated under $2,500. This is per item! For businesses this doesn’t mean much as bonus depreciation (more on this later) allows much larger deductions. But income property owners benefit mightily! Most stoves and refrigerators are under $2,500. Expensing anything connected to real estate under Section 179 isn’t allowed, even stoves and refrigerators. For most taxpayers this is a moot point as bonus depreciation counts for all assets with a class life of 20 years or less. But, many states limit Section 179 depreciation or don’t exactly follow federal tax rules for bonus depreciation. To my knowledge, all states follow this de minimis election, thereby bypassing Section 179 and bonus depreciation issues. Note: you can clean your depreciation schedule, too. Previous items under $2,500 can be currently expensed if the election is made. This could be a sizable deduction if you have a lot of small items on your depreciation schedule from prior years.

Repair Regs: Section 1.263(a)-3(h) election: This election allows for a deduction of up to $10,000 for an improvement as a repair. Property improvements do not fall under the bonus depreciation rules. Example: a bathroom or kitchen in an office or income property is probably an improvement by most measures and therefore depreciated over 27.5 or 39 years. If the remodel is $10,000 or less (per remodel or improvement) you can elect to treat the improvement as a repair and expense the entire amount. This is important. You might have a deck on a property replaced for $3,000, a roof for $9,000 and a minor bathroom remodel for $6,000. Each is a separate event. Each is under $10,000. You can elect for each improvement (you make multiple elections for multiple improvements) to deduct the amount as a repair expense. In this case the total repair expense deducted is $18,000.

Bonus depreciation: Bonus depreciation is back at 100% for assets with a class life of 20 years or less. This is by far the easiest way to chew huge chunks of reportable profit from a business. The decision for a machine shop to purchase a new piece of equipment this year or next for $200,000 will require a review of the current circumstances. If this year’s profits are too high for the QBI deduction, it might be advantageous to purchase the equipment this year. If not, you can save the purchase for next year. Facts and circumstances will prevail. If there is one area to get creative, it’s here. One caveat: restaurant, retail and leasehold improvements (qualified improvement property) acquired and placed in service between September 28, 2017 and December 31, 2017 get the 100% bonus depreciation, but not afterwards unless the tax law glitch is fixed. Don’t hold your breath.

 

I don’t want to get any longer on such a technical post. I just want you to understand there are many ways to take advantage of the current tax environment. The proposed regulations cover a wide variety of material. When the regs finalize I’ll publish more.

Until then, feel free to leave questions in the comments. I’ll answer the best I can with the limited information you provide me and as time permits. As previously noted, the proposed regs run 184 pages. I focused on the issues affecting my clients most. There are lesser issues that also affect clients I didn’t touch on. For example, I didn’t touch on the “reputation or skill” clause as it relates to QBI.

To keep this blog readable I’ll break up the technical tax posts with plenty of entertaining and useful wealth building, early retirement, side hustle and frugal living posts. It’s always good to have a family friendly blog.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!



The Day Jordan Peterson Schooled the FIRE Community

The day Jordan Peterson schooled the early retirement community. Follow your dreams, but beware the world's advice to check out. Life isn't travel and sleeping on the beach. #FIRE #jordanpeterson #planning #changing #livingright #dreamjobMost people familiar with Jordan Peterson and his work comes from the litany of YouTube videos. From college classroom lectures to podcasts to interviews, Peterson has covered a wide variety of topics. Sometimes he is controversial in his stance, bringing him viral traffic. Most of the time his presentations are extraordinarily deep probes of the human psyche.

Whether you love or hate him, the one thing we should all agree on is that he makes us think. His latest book (12 Rules for Life: An Antidote to Chaos) is must-read material. Unlike most books, this one you must own. A library copy will not be enough. You will read and re-read this material again. The message is so deep that one reading only scratches the surface. As I read Peterson’s book I could rarely finish a page without stopping to think about what I just read. Sometime I had to walk away and make sense of what I was just presented. By far, this is the slowest reading of a book for me in over a decade.

For over 730,000 words I’ve been trying to convey a message with this blog. While reading 12 Rules I discovered Peterson said more clearly what I intended in only 500 words. (Yeah, I feel exactly how you would expect.)

For home-gamers following along, we will be discussing pages 210 and 211 of the hardcover edition. Jordan Peterson put into perfect format the essence of the early retirement and financial independence movement (FIRE). In effect, he schooled all of us and if we are smart we would listen.

When I read the two pages listed I was so moved by it I had to take a walk around the block to work it off. It was 11:30 at night and here in the boondocks of Wisconsin a walk around the block is 4.85 miles. When I finished my walk I wasn’t’ done talking it trough with myself so I turned around and walked back. By the time I stopped walking around the block and around the back acres of the farm the eastern horizon was beginning to brighten.




Do You Really Want That?

The issues at hand come under Rule #8: Tell the Truth—Or at Least Don’t Lie. Of all the lessons in the book this was the hardest to internalize. I consider myself an honest person, but Peterson quickly pointed out how I might be deluding myself. Then it got personal. Peterson writes:

I have seen people define their utopia and then bend their lives into knots trying to make it reality.

The yellow highlighter came out. This was important and I knew it. Not only am I guilty of this periodically, but I see it abundantly within the FIRE community. Bloggers and readers alike build this mental idea of what life should be like. Financial independence isn’t enough. Early retirement is the only badge of respect.

Time to stop crying and complaining about all the things wrong with your life. Reach financial independence,. Live your life on your terms. #stepforward #jordanpeterson #earlyretirement #retirement #newjob #sidegig #sidehustleI’ve preached a different story from the first day of this blog. Retirement is a trap! This idea of you are a failure if you haven’t retired by age 30 is insane. Yes, Mr. Money Mustache did it. As much as it hurts to say it, he isn’t the gold standard. Early retirement isn’t for everyone! I’ve toyed with quitting for decades and every time I think of it I changed my mind. I’m doing what I want to do and gain tremendous pleasure from my work. I might change gears, but formal retirement isn’t in the cards. (Disclaimer: Mr. Money Mustache is my client.)

This whole concept of retiring as early as possible and traveling the world seems silly to me. I tend to avoid travel whenever possible. Business will get me on a plane. I’ve also been known to travel for pleasure. But in the end it feels best when I’m in familiar surroundings doing what I do best: working with clients and writing.

Here are Peterson’s words that hit me between the eyes:

An eighteen-year–old decides, arbitrarily, that she wants to retire at fifty-two. She works for three decades to make that happen, failing to notice that she made that decision when she was little more than a child. (Emphasis mine.) What did she know about her fifty-two-year-old self, when still a teenager? Even now, many years later, she has only the vaguest, low-resolution idea of her post-work Eden. She refuses to notice. What did her life mean, if that initial goal was wrong?

This encapsulates a lot of what I see in the FIRE community. People setting immutable goals at an early age and feeling disappointed when things don’t work exactly as planned. The real goal seems to be retirement. For some reason the community I firmly reside in has a central tenant of not working. But then what? If the goal is to not work, what will you fill your days with? Idle chit-chat with friends and neighbors?




Reality Check

I’ve been preaching the gospel for some time now. The goal of financial independence is something I understand. Having the financial resources to pursue the path in life that most enlightens you is a worthy goal. Travel is fine. Time off to recharge is also part of a responsible lifestyle. Peterson again:

A naively formulated goal transmutes, with time, into the sinister form of the life-lie.

And this is where I felt the stab of truth pierce deep. How often have we subverted our own desires to satisfy the demands of family or a friend? I was lucky in breaking away from the family business to follow my dream. But I didn’t avoid the entire life-lie! Sometimes I took a path in my business that went against my personal agenda. I did what I thought others wanted me to do. Every time I took such a path I was disappointed. Worse, my performance was subpar and I wasted a portion of my life, a portion I can never get back.

It would be easy to tell you how easy it was for me to follow my path. It wasn’t. I fought hard to find my true meaning in life. I experimented often. People accused me of changing my mind a lot. Well, I did! I evolved and quickly. If I examined a course and discovered it to be wanting I moved on. Even today I am still growing and evolving. What tickles my fancy as we speak might be drudgery in the future. I have the right, no, actually, the obligation to change when reason dictates. More money can’t be the driving force once a reasonable level of wealth is accumulated. Afterwards, my work better do more than add to an already bloated pile of financial largess.

Peterson continues:

One forty-something client told me his vision, formulated by his younger self: “I see myself retired, sitting on a tropical beach, drinking margaritas in the sunshine.” That’s not a plan. That’s a travel poster.

If you are honest you see this attitude writ large in the FIRE community. The desire to check out is high. The idea is to travel to exotic places while sharing on social media so anyone you have ever known is jealous able to enjoy your good fortune. It also serves to pay forward to delusion life is only an ass planted in the beach sucking down sweet drinks.

But Peterson gets more brutal:

After eight margaritas, you’re fit only to await the hangover. After three weeks of margarita-filled days, if you have any sense, you’re bored stiff and self-disgusted. In a year, or less, you’re pathetic. It’s just not a sustainable approach to later life. This kind of oversimplification and falsification is particularly typical of ideologues.

Can Peterson be more graphic? His point is clear and dead-on. The goal to checking out is not conducive to a fulfilling life. Travel is wonderful in moderate doses. Some people travel better than others. Forcing yourself to travel to satisfy a group is over the line into the realm of insanity.




Sustainable Approach to Life

Peterson’s words probably hit you as hard as they smacked me. If the general goals of the FIRE community are short-sighted, then what should we do? This is what I had to think about as I walked around the long rural block and back. Financial independence is an honorable goal and Peterson did nothing to dissuade my opinion in that matter.

You're not married to decisions you made in youth. You can change, evolve, into something better. Live the life you want, not the life others expect of you. Jordan Peterson teaches you how to live your life. #jordanpeterson #millennials #goals #financialplansI already knew there was something wrong with this early retirement idea, but didn’t know out to clearly communicate the message. Peterson put it into focus. It took hours of self-debate to reach a coherent meaning on the issue.

Checking out as soon as you can is a meaningless life. If you don’t do something productive and constructive on a regular basis you will lose meaning in your life. Human beings are social creatures. We need to interact and create. When we work, as much as some jobs are drudgery, we produce something of value. Nothing is worse than a dead-end job with days filled with meaningless activities, or worse, no activity at all.

Financial independence gives you additional options. Jumping ship the first chance you get seems foolish to this country accountant. Quitting your job should only happen after you have seriously reviewed why you want to quit. If you hate your job, you need to ask: What would make my job more nurturing? If you have valid reasons for quitting (bad boss, not the kind of work you want to do, only took the job for money), then quit. But don’t bow out. Instead, move up. Find the job that will cause you to jump out of bed each morning excited to be alive. Or, start the business you always wanted to.

Remember, your dreams are not immutable. If you don’t change, evolve, you will decay. Once upon a time I thought it a good idea to own lots of real estate. It was somebody else’s idea of what I should do. I did it for money and hated every step. You may love investment properties. Excellent! Somebody has to do it so it may as well be you. If I ever dip my toe back into investment properties it will be as a buyer only. All the management will be performed by managers.

What you thought was a good idea yesterday can change today. Changing your career path is the right thing to do when you discover you're no longer interested in your current path. #jordanpeterson #college #career #quitjobYour work should have meaning for you. Growing up on a farm I hated cleaning the barn. Pushing manure around for hours wasn’t the highlight of my life. After the family farm dissolved I moved away and started my practice. They say you can take the boy from the country, but you can’t take the country from the boy. Truer words were never spoken. Years later I bought a small farm and raised beef. Then, after a couple decades of cow punching, it was time to evolve. I miss my boys and loved the work. But it was time to move on.

I will always have the memories of each step of my evolution. Plenty of mistakes were made along the way. The mistakes taught me valuable lessons I could apply as I evolved to the next level. (Notice I didn’t say higher level. The next level isn’t always higher. Sometimes a step down is needed to grow to new heights.)

In conclusion, I strongly encourage purchase of Jordan Peterson’s book. It really is that good. Don’t get hung up on dreams you had as a child. Not every dream should be realized. Not every dream will deliver the pleasure you think when you walk the steps in real life.

Find meaningful activities to you. Don’t let anyone dictate how you should live your life. As long as you pursue a legal, moral and ethical path you have my blessing. Meaningful work, meaningful activities, lead to a productive, happy and joyful life. And I think that’s a rule even Jordan Peterson would appreciate.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!



How Debt Spurs Economic Growth

Debt is harsh taskmaster. End the stress of student loans, credit card debt and mortgages. Break the chains of debt. Live debt-free. #daveramsey #debtproblems #stress #studentloans #creditcarddebtAs mankind evolved they needed a way to store value that wasn’t cumbersome. Sure, trading a cow for supplies seems like a good idea, but what about wages? Do you get a cow or a peck of barley for a good day of labor? Well actually, yes. That is exactly what happened. It held back commerce because you needed an immediate need between two or more parties to have an equitable exchange of value. And God forbid you were really good at mass-producing something. The oversupply of that item would make it worthless.

Even before mankind invented money as a store of wealth, people were able to borrow. Rather than make an equitable trade now, you would promise to provide a good or service later. And you better keep up your end of the bargain. The punishment for reneging on a debt was severe. You could lose a hand, be imprisoned, forced into servitude (slavery) or outright killed. No, in the early days of money and prior, it was best to honor your commitments. The alternative was unthinkable.

Slavery was a common result for nonpayment of debts. Debt was not entered into lightly as it put your freedom at risk. The Old Testament of the Bible has several passages which show how ancient man dealt with debt absconders. They were merciless.




The Invention of Money and How It Works

Debt has lost much of its fearsomeness nowadays. I promise not to get religious on y’all, but need I remind you around half of the parables of Jesus dealt with money and wealth. Money is important. People knew it two thousand years ago and they know it today. Unfortunately, people don’t understand it much better than the Classical Greeks did as they tried to come to terms with the new way to store and transfer value.

Free yourself from the slavery of debt. End the burden and interest expense adding stress to your life. End debt. #enddebt #debtfree #nomoredebt #studentloans #paydayloansMankind has gone from, “Neither a borrower, nor a lender be”, to, “You need a good credit score to live in modern society.” The dividing line happened somewhere between the Shakespearean play Hamlet—where the above phrase comes from—and today. Lending was always considered risky business for all parties involved.

Money makes it easier to borrow (and cheat). Governments have been debasing money since its invention. Don’t worry. The proletariat figured out how to shave coins before the first day was out. A deal between two people needed to be honored and violence could result if one party felt the other party cut corners on their end of the deal if both ends of the transaction happened at different times. The horse you promised in six months for the purchase of twenty acres of land might have developed a lame hoof. Negotiations took a decidedly more hostile approach afterwards.

The more people started to understand money the worse it got. Money requires a level of trust. If most people refused to accept the item used as money at a set rate of value it becomes useless. That’s why precious metals and other small valuable items were the first forms of money. Government debasement and coin shaving was a serious issue. Debasement destroyed trust in government issued coins and coin shaving was a crime because it was honing in on the government’s debasement turf.

Then somebody got the idea to create fiat money. Fiat money is declared valuable by the government by decree. I sometimes call cryptocurrencies fiat money when in fact they are not. My argument is cryptocurrencies are declared by decree of the blockchain rather than the government. Both declare value for something that has none and gets us all to agree the fantasy is real. That is why money has value today; because we all agree to pretend it does. Fiat money in not backed by anything of value, just faith in the issuing government. Good luck with that.




The Problem with Debt

In modern times debt seems a reasonably risk-free way to transact business. In my office we frequently bypass even fiat money for a check which we trust the bank will honor with fiat money or we allow the client to take a loan from their credit card company which once again pays us in fiat money. It’s all based on trust.

But risk-free (or nearly so) transactions are relatively modern. Reneging on a debt was a serious matter for good reason. The lender would have a hard time replacing the lost value promised. Powerful banking families and governments were also the ones doing the lending so they were inspired to formulate laws with serious consequences for not upholding your end of the obligation. And as bad as people knew debt was, they could still get in trouble. The landlord wanted rent, the church wanted a tithe and the government wanted taxes. You were a serf or risked your eternal soul. And your taxes were an implied debt forced upon you.

And still the government loves debt!

Why the Government Wants You to be a Slave Go into Debt

Economists falsely believe that more debt lubricates an economy. It doesn’t. It sucks interest from productive labor and gives nothing in return. Think about it for a second. Human beings dreamed up a store of wealth based on trust and that had only pretend value. Then, we convinced people if we let them use the fantasy value for a short while they would have to go into slavery get a job and earn imaginary value to repay the pretend money. The only “real” thing in this whole process is the part where you trade part of your life to satisfy your obligation based on fiat money. (Bet you feel kinda foolish right now, don’tcha?)

Well, if debt doesn’t lubricate economic growth as the government and economists all tell us, why is it so darn important for the Federal Reserve to encourage people to borrow more? The answer is in the above lecture! Slavery!

Yes, borrowed money is generally spent instantly, causing the short-term illusion of economic growth. Heck, when you put a vacation on the credit card it’s all fun and games. PARTY TIME! When you get back from vacation it still feels good. Then the payments come due. Still okay, but not as much fun. Then you have a serious need for funds and you are saddled with debt. The car breaks down or medical bills arrive and Katy bar the door. Debt now has you firmly in its grip. A serious matter is made worse because the other side of party time just came home to roost.

The root of the word mortgage is “death pledge”. Is that a graphic enough term for you? People knew from early times a mortgage wasn’t a home loan—the soft language we use today for a death pledge. It was something a lot more serious.




A World without Debt

It sounds melodramatic when you echo the warning over debt. Most people today either have debt or once upon a time did. Bankruptcy laws are generous these days. And why not? If the banks get in trouble the government bails them out by creating more money out of thin air, or as we say on the farm, by fiat.

My family has always been business owners. My dad has an agricultural repair business. While it pains me to admit my dear ol’ dad might be right, he did make an observation decades ago I never forgot. He noticed employees loaded with debt were a double edged sword. First, the debt kept’em coming to work. They had no other choice. In short, their debt made them a slave to my dad’s business. Self inflicted slavery, for sure. But slavery all the same. But second, the debt load made for high drama employees. It takes time and massive energy to juggle a debt burden. Paying the boat and car loan, mortgage or rent, Jet Ski payment, cottage payment and credit card bills are exhausting work. These people were under severe stress and it showed. They got sick more often and tended to have other bad habits (smoking, drinking and/or drugs) to relieve the stress. The stress drove them to the unhealthy lifestyle.

People walk free-willing, eyes open, into debt. Then reality strikes. You’ve been enslaved by your own doing!

Break free from debt today! The stress of debt is killing you. Get the plan and motivation to end debt in your life today. Regain your financial freedom. #financialfreedom #debtfree #studentloans #creditcarddebt #debt #stressThe economic imprint the borrowed money caused is long gone. Only the pain remains. And the pain lasts a lot longer than the pleasure did!

The government knows all this. They know your debt fueled spending is ointment that quickly wears off. The government also knows you are now left with two unpleasant options: sell a large part of your life and freedom to satisfy those debts, plus interest, or declare bankruptcy where they restrict you financially for a time. Bankruptcy doesn’t solve the problem; it only eases the pressure a bit so it’s possible to claw your way back. Part of your life is getting sold, slave. Get used to it.

And there’s your answer to how debt spurs economic growth. It forces you to work more than you have to. It wasn’t the debt fueled spending; it was your forced servitude to satisfy your obligation. In debt, they (government and employers) own you. You have to work. And you only keep a portion of the benefit! You are forced to work for a lower wage because you need money now! Debt comes first, eating second. That is why we have homeless and starving people in the richest nation in the history of mankind.

Interest sucks a portion of your hard-earned labor, too. Not only are you forced to work and accept a lower wage, you give up some of the remainder to the lender in interest. Remember interest? The stuff created out of thin air—fiat money—now requires you to repay a fantasy debt you agreed to with flesh and blood.




Coda

When I write these kinds of posts I get a lot of complaints I sound like Dave Ramsey. Well, for the record, I was a Dave Ramsey Endorsed Local Provider for many years. And I consider it a compliment when compared to Dave and his simple, yet powerful message. A lot to like in the guy.

I’ll make a deal with you. When the you guys stop telling me how smart and responsible with debt you are, I’ll stop taking the sledgehammer to your skull on this issue. Debt can be a powerful tool, no doubt. But debt is enslavement, as we illustrated above. Stop telling Dave and me we’re wrong.

Get your life back. Live your dream. The bank is the largest expense in most households. Big income and nothing left to live on. Insane! I beg you, kind readers. In these awesome economic times it isn’t the place to become complacent. Debt feels good now because it mentally feels like tax-free money. Paying it back means you have to make more money to repay the debt and pay tax on that money, too. You don’t need much to live a good life, but a boatload of income to pay all your debt obligations. More required income to cover debt and living means more taxes for the government.

And that is why the government tells us debt fuels economic growth. By the way, only a fool believes what the government tells him.

 

More Wealth Building Resources

Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?

Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.

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 very much!



The Minimum Wage and Inflation

Does minimum wage cause job loss, inflation? Income inequality is an issue important to everyone. The benefits of increasing the minimum wage are greater than first thought. #minimumwage #incomeinequality #fairwage #workingwageEconomic growth is pushing towards 10 years as of this writing. The 2008-09 recession was deep and slow in recovery. Fewer jobs at lower wages coupled with the long time frame unemployed people had to wait to even get a job at any wage caused tempers to flare. The minimum wage was raised in 2007, 2008 and 2009 to the current federal rate we have today.

Jobs available as the recession eased were not of the same quality as jobs lost. More workers were among the working poor, earning minimum wage or close to it. Eventually a vocal crowd demanded a $15 an hour minimum wage. It all sounded good. And fair to workers making less. Business owners also made powerful points. In the end nothing of consequence came of the movement. The expanding economy lifted wages, nullifying the demands of the activists. Better jobs with higher wages started appearing, too. People used to a higher income had greater opportunity to explore a pay increase at a new employer if their current employer refused..

The issues never went away; they’re just hibernating until the next opportune moment. Many myths cropped up during the debate. Does a modestly higher minimum wage cost jobs? Does it increase automation, eliminating the job completely? Do worker deserve a fair wage? A higher wage than $10 or so?

I did some research to see if the minimum wage causes inflation, another of the complaints against increasing the minimum wage. Of course, most people agree workers should be paid fairly. We all want to earn more for our efforts. Even business owners understand employees need a living wage.

We will explore some of these myths and how they affect your personal finance decisions. As with most issues, the answers aren’t as clear as activists claim; businesses, either. The debate gets steeped in politics when economic matters are considered. This article will explain the truth behind the myths and what government and you can do about it.

First we address the myths.




Myth #1: The Minimum Wage would be $22.50 an Hour if it kept Up With Inflation

At first I accepted this claim at face value. After thinking about it for a while I began to doubt the claim. Protesters claimed the minimum wage would be somewhere in the neighborhood of $22.50 an hour if the minimum wage had kept up with inflation from a certain date. Extraordinary claims require extraordinary proof! Fortunately we have actual data to determine if the minimum wage now is lower than in the past, adjusting for inflation.

I will do the heavy lifting for you. I’ve included links if you wish to dig deeper into how the minimum wage has fared against inflation. We will test this claim by looking back to 2009, 1990 (a date protesters sometimes used in their claim), 1978 (another date used by protesters) and all the way back to the beginning on October 24th, 1938 when the first federal minimum wage was instituted in the U.S.

Disclaimer: Several states have their own higher minimum wage. We are discussing the federal minimum wage only. Minimum wage data was used from the U.S Department of Labor and the Consumer Price Index-U (all urban areas) was used in calculating the inflation adjusted minimum wage.  We will not address salaried workers, restaurant workers or individuals under age 20 first starting a job, all of which have a different minimum wage.

Has the minimum wage kept up with inflation? The answer might surprise you. And if the minimum wage is increased at the right time is sparks economic growth while crushing deflation. An honest day's pay for an honest day's work. #work #wages #minimumwageAdjusted Minimum Wage from 2009: The current federal minimum wage is $7.25 an hour. There are other rates based on age and occupation. To keep this post brief I will focus on 1938 Act until 1978 where I use the all nonexempt workers rate.

The federal minimum wage was last increased, effective July 24th, 2009. The CPI index stood at 215.351 in July of 2009. The latest reading for June 2018 is 251.989. The index has increased 36.638 points since the last minimum wage increase, or about 17%. If the minimum wage were indexed to inflation the minimum wage would now stand at $8.48 per hour. My guess is that in the near future the federal minimum wage will be increased to $8.50 – $9.00 per hour. This would accurately reflect the increase in average consumer prices over the time period.

So, the argument the minimum wage should be $22.50 doesn’t work calculating from 2009.

Adjusted Minimum Wage from 1990: The minimum wage was increased on April 1st, 1990 to $3.80 per hour. The CPI was 128.9. The CPI increased 123.089 points since April 1990, or a 95.49% increase. Adding 95.49% to the then minimum wage of $3.80 gives us $7.43 an hour, pretty close to the current minimum wage. Maybe we need to go back further.

Adjusted Minimum Wage from 1978: The minimum wage was increased at the beginning of 1978 to $2.65 an hour. The CPI stood at 62.5 in January, 1978. This is an increase of 189.489 points or 303%. Increase the then current minimum wage of $2.65 by 303% and we get $8.03 an hour. Hmmm. Maybe we need to go back all the way to the beginning.

Adjusted Minimum Wage from 1938: The first federal minimum wage in the U.S. began October 24, 1938 at $.25. Yes, that is 25 cents an hour. The next year they raised it to $.30 an hour. We will still use that original minimum wage starting point to determine if the minimum wage is worse today than it was in the past.

The CPI stood at 14 in October of 1938. The index has climbed an additional 237.989 points since. The CPI is a whopping 18 times what it was in October 1938! This means the original minimum wage, adjusted for inflation was {drum roll}: $4.50 an hour.

Oh-oh. The claim minimum wage should be over $20 an hour now doesn’t hold up. But this isn’t the only myth batted around.




Myth #2: Increasing the Minimum Wage Causes Job Loss

This scare tactic crops up every time a minimum wage increase is mentioned. As you can see from Myth #1 above, the minimum wage has been a minimum burden on business since the beginning. Since 1938 technology and productivity have increased massively. If business can’t keep up with the barely minimal minimum wage increasing at somewhere in the vicinity of the inflation rate, business needs to do something else.

Does increasing the minimum wage cost jobs? Well, business tells us if we increase the minimum wage business will automate the jobs away, eliminating the entire labor cost. McDonald’s and Wal-Mart gave us this song and dance. For the record, in the last 10 years Wal-Mart has replaced a large percentage of cashiers, requiring customers to check themselves out. McDonald’s is replacing workers fast with automated order taking (similar to Wal-Mart’s check-out kiosks) and cooking robots. The minimum wage remained static for a decade and automation happened anyway! The minimum wage had little to no bearing on that corporate decision; finding qualified workers willing to work at minimal wages was.

Of course, the economic professor in me says that when prices increase, demand drops. It’s Macro Economics 201 (or is it 202, it’s been a long time since my college course). A higher minimum wage does reduce jobs minimally! Wages tracking inflation is NOT a REAL wage increase. So what is business talking about? They’re talking about maximizing profits on the back of minimum wage workers. I get it, but it’s still a myth jobs are lost when wages increase. Higher wages increase inflation, not demand for labor. Demand for labor is based on economic conditions.

Myth #3: Workers Paid Minimum Wage Aren’t Getting a Working Wage

Even business owners agree a person should be paid a reasonable wage for their labor. The question revolves around “working wage”. Are workers paid near minimum or minimum wage paid a working wage? Well, I’ll be the first to admit $7.25 an hour isn’t a lot and lacks the motivational ability to move the crowds. For young people starting out its fine, but even then, what’s the motivation to perform maximum when the pay is minimum? Just asking.

But the minimum wage isn’t the only source of income for these workers. The tax code provides an Earned Income Credit for workers with low income. The EIC is a refundable credit and tax-free to the recipient. Many states also add to the federal Earned Income Credit.

All this combined is still hard time. Full-time (40 hours per week) at $7.25 an hour is only $290 per week. Ouch! Payroll taxes take 7.65% off the top. Good thing there is an Earned Income Credit! This equates to $15,080 a year without a pay increase in site.

I never said it was pretty. Then again, the minimum wage was never called a working wage (unless they said it back in 1938).




The Federal Reserve’s Money Printing Problem

Now we can put some of this knowledge to work.

Interest rates peaked well into the double digits in the early 1980’s. Rates have steadily declines, with only temporary increases, since. Anyone under age 35 has never lived through a serious increase in inflation and/or interest rates! This is nearly two generations who have never experienced how bad, bad can get.

We've been looking for income inequality in the wrong place. The minimum wage can level the playing field, even for those earning much more. Equal pay for equal work. The minimum wage and inflation are a correlation. #inflation #wages #minimumwage #equalpay #equalrights #equalopportunityFrom the early 1980s until the mid-2000s the Federal Reserve was able to nudge the economy along by lowering interest rates through a variety of lending facilities. The Great Recession which started in 2008 brought interest rates to zero and the economy still only limped along. The solution the Fed settled on was Quantitative Easing where the Fed bought up massive quantities of Treasuries and mortgage securities. The buying was in the trillions! The Fed balance sheet swelled from around $800 billion to the $4.5 trillion neighborhood. And they couldn’t get a pulse from inflation no matter how many smelling salts were used.

I’ve argued in the past on the reasons why all the money printing around the world didn’t cause runaway inflation. In short, much of the newly created money never entered the economy. Money center banks and central banks around the world stuffed their vaults with digital cash. It made the books look better so banks could lend if necessary. The result? The economy limped slowly out of the Great Recession in fits and starts, but finally grew to record length proportions. It’s been a long recovery and new heights have been reached.

But interest rates are still very low. If another recession arrives (some might say we are due), the Fed will not have much room to maneuver. If they try the old “print more money” strategy used last time it could compound the issues.

This is where the Fed and elected officials need to review the data for additional options. And I have a powerful one.




Getting Inflation (and Economic Growth) the Federal Reserve Wants without Printing More Money

The chart you see in this section I put together with data from the U.S. Department of Labor, the Bureau of Labor and Statistics and InflationData.com. When I asked the question: Does increasing the minimum wage cause inflation? I had to dig further than the available charts. It was necessary to determine if there was a correlation between inflation and the minimum wage. If there is a correlation the monetary and fiscal implications are significant. It also effects personal finance decisions in a serious way.

This exercise is more than a macro-economic research project. If a correlation exists, the Federal Reserve and Congress will want to act appropriately in the future. It also means everything we know about the rate of the minimum wage is wrong!

If you examine the chart closely there does appear to be a modest correlation between a minimum wage increase and the rate of inflation. However, the correlation isn’t clear. In the 1970’s, the increasing minimum wage supported inflation rather than lead to inflation. In the Great Recession it seems like the minimum wage increase had no effect at all.

In the same way astrophysicists glean the data for a slight wobble in a star to determine if a planet orbits said star, I had to push away all the noise and look for a wobble in the inflation data. Productivity, Fed policy and economic conditions provided plenty of background noise to distract for the data. But I did find a wobble.

Raising the minimum wage at the right time benefits workers and employers. A fair wage,a working wage is vital to a strong economy. The $15 minimum wage movement was right, even if their timing was wrong. #$15anhour #workingwage #inequality #wages #salary The minimum wage was instituted during the tail end of the Great Depression. Adjusted for inflation, the first federal minimum wage was around $4.50, but a year later it increased to an inflation adjusted $5.40 an hour. This new minimum wage was started in what many call the second Great Depression. From 1929 to 1932 the economy collapsed at a rapid pace. Recovery was incomplete by 1937 when the Fed started raising interest rates causing the economy to once again slow and the stock market to decline hard.

Then we get a new minimum wage in 1938 and prices start to climb. The data used in the chart only includes average inflation for each year. The data detail (found using the link above from InflationData.com) reveals a more immediate response. The chart makes it look like the minimum wage could have caused some inflation, but in reality World War II had a lot to do with the price levels at the time.

Deflation was a serious issue early in the Great Recession. Prices were actually declining! Inflation is bad, but deflation makes it incredibly hard to spur economic growth since waiting to purchase a good or service is likely to be cheaper tomorrow.

The Fed had its hands full with declining prices, high unemployment and the banking industry in ruins. Interest rates dropped to zero percent. Some countries experimented with negative interest rates to no avail. The economy was growing at an anemic pace (still declining in some countries) with virtually no inflation. Creating massive quantities of new money didn’t do the trick hoped for. It in the end did save the day, but at what cost. The next time we need help from monetary policy we are out of bullets. Do we keep creating more money? How far do we push the economic system out of balance? What if we can’t kick the can further down the road?

The wobble is in the data! Increasing the minimum wage does cause mild inflation very quickly. Unfortunately, the lift is short lived. But it is another planning tool for the government and a key point you, kind readers, need to understand.

The minimum wage was increased during the Great Recession and it kept prices stable. Only after the wage increase subsided into the past did prices start to fall. The printing press was all we had. Even in the second leg of the Great Depression the new minimum wage didn’t harm the economy. Few jobs, if any, were lost. Prices started to increase, encouraging demand and production, creating even more jobs.

Armed with this information the government should avoid raising the minimum wage during economic “good times”. Rather, when business says they can least afford it is when it needs to be done. Inflation is sparked by demand. Since the minimum wage is increased after long periods of flat lining, the increase tends to be a larger than average percentage. People earning minimum wage spend all their paycheck and quickly. The added demand encourages more production and helps reduce deflationary pressures.

How does this affect you? Well, the best time to increase the minimum wage is when the most people need it. Myth #2 is clear; increasing the minimum wage reduces very few jobs. Business can afford an increased minimum wage during an economic slowdown. It’s been done before without serious disruption. It also lays the foundation to renewed economic growth and increased business profits. It’s in business’s best interest to raise the minimum wage as the economy begins to cool. This encourages more demand while spurring mild price inflation; a catalyst encouraging continued growth.

You can use this information in your personal finance decisions as well. An increase in the minimum wage will increase business activity, a good sign for investors. If everyone digs in their heels and refuses to increase the minimum wage when this data suggests its value, get ready for a long economic war with no winner until somebody blinks.

 

 

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