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Archive for June 2019

Recovering from Burnout

End burnout. Review the symptoms and remedies to work related stress. #burnout #work #job #retirement #life #happinessIt can happen to anyone: burnout. 

Long hours conducting a repetitive task increases the risk. Not enjoying the work also increases the risk (though it could be more to do with drudgery than burnout). Not controlling your environment on any level is sure to increase stress and the likelihood of burnout.

Burnout is not about working a lot of hours. Rather, it involves stresses on the nervous system similar to PTSD. While a soldier in the field can suffer massive stresses to his nervous system, the same can happen to anyone who feels trapped in a dangerous (even perceived) situation. 

Elon Musk is a perfect example of a person who can handle significant stress without feeling burnout or worse, Musk loves his work and believes he is making a difference that will outlive him. He handles stress differently as a result.

However, when stress built in areas he could not control he showed classical signs of burnout. Shareholders demanded profits and more production or they would sell the stock, adding stress to an already full plate for Musk. 

Normally Musk is a pretty happy guy living his dream. But when market conditions outside his control pressured him hard he started to crack as everyone does when they struggle with a situation they are in. Tweets and other outbursts were counter-productive. Smoking weed on a podcast didn’t help either. (We may have assumed he smoked weed, but doing so publicly in his position put his business at risk.)

Musk survived in large part because he retained a massive amount of control. He made changes to Tesla and worked relentlessly until a resolution presented itself. 

Not everyone is as lucky as Musk. Stuck in a job you hate will sap the life out of you. If the job has high demands and stress it will start you down a path that doesn’t end pretty.

 

Symptoms of Burnout

Burnout is only one step on a road to hell. Left unchecked it can cause serious damage to your health. 

If you experience burnout and take no remedial actions you can start to exhibit symptoms of something much worse. 

The first step toward a nervous breakdown is burnout. Fatigue lowers your mental defenses. When the situation continues to pound, feelings of desperation can set in. Helplessness is a large factor of burnout.

When you really love what you are doing fatigue and stress are handled in a manageable way as long as you have some control over the situation. (You can take a break when needed.)

Exhaustion is natural when you work hard at a task. A short break, a nap, a good night’s sleep, are all rejuvenating. When time off doesn’t reinvigorate you something is wrong.

End stress and burnout. No more feelings of hopelessness and helplessness. Get your life back #stress #burnout #nervousbreakdown #problems #helpBusiness owners can experience burnout from long hours coupled with the demands of running a business. Even if you love the work you can feel trapped inside the demands you don’t care to handle inside your business. It is this trapped feeling that stresses the nervous system without a release.

In a world where financial independence is possible at a young age for many and dreams of early retirement coat the internet it is easy to think burnout should be a thing of the past.

But burnout can affect you in retirement, too! You might feel trapped living the dream of a significant other. A goal of world travel can turn into drudgery when travel doesn’t give you what you hoped. Eventually you can feel trapped and then the nervous system feels the accumulating stress.

It can even affect pleasant pass times. Golf might have been a great joy every weekend and holiday when you had a traditional job. You might have longed for vacation time so you could enjoy the links. 

Then you reach your financial goals and retired. Now you spend all day knocking the ball around the greens and it is no longer an escape. Golf was what you did to get away from a situation (work) you didn’t want to do at the same level as golf. Now golf drags on day after day after day after . . . 

Any task can stress the system. Work is a common stressor. Unemployment is too!

Burnout, since it is a close cousin to PTSD, doesn’t require an unpleasant task to experience it. A soldier gets trapped in a situation and his nervous system begins to struggle. The same can happen sitting alone in a room. If you don’t believe it, ask a prisoner locked in solitary confinement for an extended period how much stress he feels and see if it doesn’t sound a lot like burnout, a nervous breakdown or PTSD. He is feeling burnout from being locked in a small room without any control over his environment.

Burnout symptoms can make the situation worse. Depression and anxiety increase. Irritability can cause outbursts. Sleeplessness hastens the descent. Violence, as you struggle to gain some control of your environment, directed inward or outward, is likely to get an unwanted societal response. Rarely does situation improve without professional help.

There is also a tendency to self medicate. Drugs/alcohol  might seem like a solution while struggling with burnout. Unfortunately, it only makes it worse.

A common work tendency when burnout surfaces is procrastination. You want to avoid the stressor at all costs and all costs it could be.

Left unchecked, burnout can leave lasting wounds even after the stress is released.  Damage to those around you may never heal. You may never heal as burnout can progress to a nervous breakdown which can take years to recover from. Post traumatic stress is common at this point. Your nervous system eventually starts to rewire as a coping mechanism. And when the rewiring is no longer needed the nervous system is permanently damaged.

 

Recovering from Burnout

A soldier in the trenches easily can feel trapped with bullets flying and bombs exploding. There is very limited control over the situation which is why so many military personnel suffer from PTSD.

Thankfully most people reading this will ever experience such a situation. We might get trapped in a job we hate or find ourselves in an uncomfortable situation. In most cases the walls, feelings of being trapped, are more self-imposed than real.

Recovering from burnout requires removal from the stressor. A vacation (extended, if necessary) frequently does the trick. 

Burnout finds roots in helplessness which means it is loss of control over the situation you find yourself in causing the problems. The first step to recovery, therefore, requires you to gain some semblance on control over the outcome.

Bring joy back to your life. End stress and burnout; embrace happiness. Learn to do the things that make you strong. #stress #burnout #fatigue #helplessness #hope #happiness #joyBusiness owners can find business overwhelming. Reduced hours, fewer client or more staffing can bring life back into balance. Just knowing, acknowledging,  you have these controls over the situation can alleviate symptoms of burnout. 

A job is worse than owning your own business. In business you can adjust the size of the company and still put bread on the table. A job is an all-or-none financial situation. If you lose your job you take a serious income hit. This lack of control could be a leading reason people hate their jobs so much. It’s not that they hate the work or the people they are working with, but that their life can be turned inside out at the snap of the fingers and you may never see it coming.

The FIRE (financial independence, retire early) movement focuses on this very issue. The goal is to get out of the traditional work environment as soon as possible.

However, it isn’t about hedonism. The happiest people in the FIRE community continue doing meaningful activities. Some write blogs, others take up side hustles, others start a business. It wasn’t work that was the problem, it was “meaningful” work and control over your destiny that was the issue. 

Burnout has serious long-term consequences if left unchecked. You can change your job, pay down debt (another area where it is easy to feel loss of control), design the life you enjoy most. Refusing to acknowledge you can change your situation can cost you your health, family, happiness or worse.

Regain control. A side hustle can be started while working in a traditional employment environment. Traditional work can also be rewarding. Many enjoy the traditional framework. If you are one of these people and feel the stress, you want to be more, not less, involved. Your involvement is a level of control that helps you engage while lowering stress and the risks of burnout.

And if you are retired and feeling burnout you need to take a long, hard look. It is likely you are living some else’s dream of retirement. Don’t emulate a blogger just because it looks like they have a cool lifestyle. (It is for them, probably not for you.) Travel if you want; don’t is you don’t want.

Live your life on your terms. It is hard to experience burnout, regardless the workload, in these situations.

Diet and exercise play a large role in avoiding burnout. Take time to exercise and make good food a priority.

Once anxiety, depression or suicidal thoughts start it is time for professional intervention. Seeking help is not a weakness; it is a strength.

 

Dealing with Burnout

I had a different post planned for this week. However, I was feeling the pressure from tax returns on extension and blog traffic.

A tax return in my office was causing me no end of grief. Every time I made progress another problem arose. I was feeling the loss of control bad. Six interconnected tax returns were occupying my life for months and I couldn’t break through. I spent long hours at the office doing avoidance work. Procrastination was killing my productivity. 

Add to that the  normal summer traffic slowdown on this blog and burnout started running wild. Why bother writing if nobody is going to read it, I surmised. Except people are reading it and interacting. It was a pity party doing me no good. 

Finally I decided I had enough. I came in on weekends and evenings to find a way to break the problem. I was taking control! 

This post is slightly delayed because I just couldn’t get the energy to write Sunday night. The good news is I made massive progress on the problem tax return Saturday. Yes, another wall showed up, but this time I have a head of steam. I’m taking control. I should finish Monday. (Whew!)

No matter how dire the situation you have some level of control. And since loss of control is the first step to burnout and worse afflictions, control is where you need to focus.

The soldier in the field can focus on what he can control. Elon Musk took control like a boss and broke through the problems and ended many of his burnout symptoms. Musk never eased up a step on his workload. He loves what he does and made sure it stayed that way. 

You can also take control. There is always some aspect of your work or business situation you can manipulate to your advantage. (Don’t think of this as bad manipulation. Manipulation of a situation for the good of all is more than acceptable.) 

In the end you might choose early retirement or a different job or a side hustle. I’m here to tell you, it’s okay.

Keeping yourself locked in mental solitary confinement is not good for you, your family, friends or community. If you need professional help, seek it. Or, you might find you just need to acknowledge what you can control and then use that to move forward. 

Nothing is worse than the helplessness of burnout; the feeling of quitting and running away. You can do better than that.

 

 

More Wealth Building Resources

Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.

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

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

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

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Investing in a Retirement Account is Like Taking Out a Loan

Traditional retirement plan contributions come with a loan attached to it with a variable rate of interest, to be determined at a later date by the tax code and your income level. #interestrate #interest #loan #IRS #taxesEver since the FIRE (financial independence/early retirement) movement hit the scene I started to question conventional financial wisdom. 

Most of the advice preached was re-purposed from generations past. A penny saved is a penny earned turned into a variety of frugal anecdotes. You can’t read Proverbs (from the Bible) and not recognize the many similarities in advice. Sound money principles have ancient roots.

For a time the FIRE community welcomed me as one of their own before I stepped back a bit to cut my own path. (No sense in another voice calling out the same message.) I’m still part of the community, but gave myself permission to question the dictums of said community. The hope was to build a bridge from where we are to a higher level.

It also became clear my net worth was near the top of the demographic. This bothered me and caused me to conclude something was wrong.  How could a backwoods farm boy with nothing more than a high school education, a few college courses and a full personal library do better than virtually all within a community so dedicated to wealth?

I don’t trust luck to carry me that far. It had to be something else.

Then I started reading what was published in the tax field and felt a great disturbance in the force. While the advice was fundamentally sound, it also lacked in effectiveness if brought to task. All too often blogs were using IRS publications as their authority. (The IRS is NOT a tax authority; they are a bill collector.) If people followed this advice and the IRS ever challenged (likely with so many people tempting fate) there was a real risk of loss. (If you go to Tax Court and say you used an IRS publication as your substantial authority you lose automatically even of you a right! IRS publications have zero authority in Tax Court.)

Sometimes the math was fuzzy. A blogger might claim a certain level of frugality when it didn’t add up. Some claimed a level of wealth that also didn’t add up. Either the rules of mathematics were suspended or someone was trying to pull the wool over their reader’s eyes.

The biggest area of concern involved retirement accounts. The mantra of filling retirement accounts to the hilt for long periods of time has some obvious issues

Some retirement account problems are less apparent. Everyone keeps saying this is the best thing since sliced bread. But is it? 

So I started running some numbers and it wasn’t as clear as most are led to believe. There was something fundamentally wrong with the advice.

 

Numbers Game

The issue is with traditional retirement accounts (IRA, 401(k), 457, 403(b), Keogh, profit-sharing and cash balance plans); Roth type retirement plans don’t have this issue.

Don't lose your retirement account to hidden taxes. Current tax savings are dwarfed by future taxes on all the gains at the highest rate allowed by law. It's your money! Don't give it to the IRS. #retirement #account #hidden #taxesRoth style retirement plans don’t get an up-front deduction, but grow tax-free. Most financial blogs consider this the best animal in the yard. I agree.

A close cousin — if you qualify for it — is the health savings account where you get a deduction and tax-free growth, to be used for qualified medical expenses. The biggest drawback of the HSA is the amount you can invest annually is relatively small. 

Roth retirement plans are limited in many cases based on income on if the employer has the option in their 401(k) . The maximum Roth IRA contribution is also relatively small. (Exact limits are excluded from this post so changes in the limit don’t distract from the evergreen content.)

The mega-backdoor Roth (a favorite of the FIRE community) allows for sizable Roth contributions with one caveat: it’s probably illegal (according to the IRS). The IRS hasn’t attacked the mega-backdoor Roth because there is no current revenue to be raised by taking such action; Roth investments are not deductible.

However, once these accounts grow in size the IRS could come back and disallow the tax-free advantage, plus interest and penalties. If the IRS has a kind heart (ahem) they could forgo the excess contribution issues which would certainly mean penalties several hundred percent of the entire investment. You decide what course you wish to take. 

The safest retirement plan route means traditional retirement plan investments after you maximized your Roth contributions. Or is it?

 

Loan Document

Traditional retirement plan contributions come with a loan attached to it with a variable rate of interest, to be determined at a later date by the tax code and your income level.

All you debt-free warriors should feel a bit nervous at this point. Just as a mortgage-free home still has loan-like obligations (property taxes, insurance, maintenance), a traditional retirement account has an unannounced interest-like expense and it is a big one.

And this is what disturbed me so much that I had to publish a post on it. 

We all know that traditional retirement accounts get a tax deduction at your ordinary tax rate up to the retirement plan contribution limits. We should also know that these accounts grow tax-deferred and that all distributions are taxed at ordinary rates.

This is a real problem if your goal is to maximize your net worth. In the early years the tax benefit makes it seem like it is the best deal on the planet. But as time passes the math tells a darker tale.

Let’s start with a simple example to get a fundamental understanding of this matter:

Joe contributes $10,000 to his t401(k). This is subtracted from his income on the W-2 and never reaches his tax return. His tax bracket is 30%.

We will disregard actual tax brackets as they change over time and we are more interested in a workable formula for determining the best course currently and for future readers as well.

The good news is Joe saved $3,000 on his taxes this year. However, in 40 years, when Joe retires, he discovers his investment in a broad-based index fund performed as index funds have over long periods in the past: around 7% per year on average. Joe is a very happy man! He now has $149,744.58. 

If Joe were to take the entire amount in one year it would be a fairly large tax. However, Joe decides to take the money out over a number of years. As a result his ordinary tax rate is only 15%. (We will disregard taxes on Social Security benefits and other similar issues to make calculations easier.)

Joe now has a tax bill of $22,462. (Numbers are rounded.) That is $19,462 more in additional tax! Call the 19 grand a tax or anything else you want, but it looks like interest on the $3,000 to this accountant.

Even though Joe saw his tax rate decline by half in retirement he still saw his tax bill increase over 700%. His interest rate would be slightly less than 5.2% annualized in this situation assuming Joe never saw his account value increase after he started taking distributions, an unlikely event.

 

Early Payments

If I approached you and said I would borrow you $20,000 at 5.2% would you take it? Unless you have bad credit that is a high interest rate, especially since it in not deductible. Worse, you can’t make early payments to get out of the deal! You can’t jump ship until you are at least 59 1/2 years old. And if you are stubborn I’ll kick you overboard at 70 1/2. 

The good news is I’m a nice guy and will not do that to you. On the other hand, Congress has passed laws the IRS carries out doing just that.

And we haven’t seen the worst part yet! Retirement plan distribution included in income can cause more of your Social Security benefits to be taxed and can also increase the premium you pay for Medicare once you reach age 65.

A small tax deduction today can do real damage in the future. This is why I say I want multiple tax benefits before I get excited about a tax deduction

All this assumes your tax bracket drops when you retire. Considering the massive government fiscal deficits during a strong economy, it seems to this accountant taxes will go up in the future. And if your income remains high in retirement your tax bracket will also be higher.

Consider this: If Joe had a 30% ordinary tax rate on his retirement plan distributions his taxes would have climbed to $44,923, a full 7% annualized rate. For people with good credit this is a massive interest rate and almost nobody is thinking about this.

 

The Cold Equations

Joe’s example is unfair. First, Joe will put a lot more into his retirement plan over his lifetime, therefore, the damage will be much larger.

Second, retirement plan distributions happen over a number of years. While this might sound like a solution to the problem, it actually makes it worse as the investments continue to grow over time.

Third, smaller account balances experience the same issue only with smaller numbers and that tax rates might be lower due to the lower income level.

Fourth, early retirement does not solve the problem. Yes, you can take a limited amount of money from a traditional retirement account before age 59 1/2 without penalty under Section 72(t). This only reduces the amount of time the money has to grow; it doesn’t resolve the issue.

No matter how you cut it, traditional retirement accounts are best viewed as loans from the government, due in retirement. If you don’t pay the piper, your beneficiaries will.

 

 

Alternatives

Your experience will differ from that of others. You can use the simple example above to determine your implied interest rate assessed as tax in the future. You may discover this isn’t an issue for you. Or, you might need a moment for reflective prayer.

We saw that greed for a current tax deduction produces a 5%+ interest rate loan from the government, payable in retirement. So, what alternatives are there?

The best comparison is doing nothing at all (investing in a non-qualified account). You still invest in the same index fund. Dividends and capital gains are taxed at the lower long-term capital gains (LTCG) tax rate (15% or less for most taxpayers) instead of ordinary rates later (up to 37% federal, plus state income taxes). 

Since the money is outside a traditional retirement account you don’t have to worry about early distributions or required minimum distributions. And if you die your beneficiaries get a step-up in basis the retirement accounts don’t get. Gains on these investments are also taxed at the lower LTCG rate. 

 

Matching

I can hear the complaint already: What if my employer matches?

A valid argument. We’ll go back to Joe again and assume his employer matched his contribution 100%.

Joe invested $10,000 of his own money and his employer matched his retirement plan contribution with another $10,000. 

Joe still gets a deduction worth $3,000 for his contribution. The employer’s match is free money and not taxed until Joe takes the money out.

In total, Joe has $20,000 invested in his retirement account. His account grows to $299,489 in 40 years. The tax on this at a 15% tax rate is: $44,923. 

The initial tax benefit to Joe is $3,000, plus $10,000 from his employer, for a total of $13,000. The implied interest rate in this situation is around 3.15%.

The lesson of this part of the story is that using your employer’s retirement plan up to the match maximum is still a good idea for most. After hitting the matching maximum you might be better served putting the rest into a non-qualified account, however.

 

Smart readers will also be quick to point out the extra tax savings means you have more to invest which mitigates any of the extra taxes owed in the future. This would be true if people actually did that.

When was the last time you invested your tax savings from a traditional retirement account investment? Where did you invest it? Uh-huh. Thought so. You spend the tax savings as most do.

(If you are one of the few who actually pull the tax savings from the family budget and invest it in a non-qualified account my hat comes off to you. You still need to run the numbers to verify the best course of action.)

 

Facts and Circumstances

You can’t read tax law for more than a few minutes before running across the words “facts and circumstances”. And this situation is no different.

The IRS has hidden interest-like charges on retirement accounts. Here is how to avoid them. #avoidtaxes #taxes #retirement #IRS #interestI gave you the tools to build a working plan based on your facts and circumstances. Use a future value calculator to determine the interest rate the tax code is forcing you to pay if you use traditional retirement accounts. 

Employer matching is a real benefit that is diminished by the tax code after very long periods of time. (I would focus on the employer match closely as real value can be found there.)

After the employer match and available Roth retirement plan contributions allowed are exhausted you might find non-qualified accounts the best course of action, for you

The important thing is that you are reading this. That means you are more likely to run your numbers for the best options, for you

There are a lot of factors at play. Index funds still kick out dividends and some capital gains which are currently taxed. This slightly reduced the implied interest rate of the traditional retirement plan if you are prone to investing tax savings. It also assumes you keep your fingers off the pile until retirement. 

The one thing to remember is that deferred taxes frequently come with an implied interest rate paid as a higher future tax.

This is the kind of stuff I think about in the dark of the night. It might also be the prime reason I top the net worth list at Rockstar Finance.

 

 

More Wealth Building Resources

Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.

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

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

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

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

Profiting From Climate Change

Global warming and climate change offers many investing opportunities while doing good. #climate #globalwarming #investing #climatechange #profitIt is unfortunate that climate change is such a political hot button when it is such a good tool to build wealth. Much of what I say will cause righteous indignation from both sides of the political isle. Good thing we will have a full wallet to sooth our nerves.

Too much focus is on “if” there is climate change and how much is “human” caused. These are the wrong questions to ask and the reason why so little is being done to remedy problems climate change can bring.

Since we are discussing a difficult issue I will start by outlining where I stand on climate change (no throwing tomatoes). Then I will show some reports of fear mongering that are really exciting economic reports we should all want if that is as bad as it gets. We will finish with an actionable plan to deal with climate change on a personal level and investments.

 

Biases

Everyone has biases and I’m no different. My education, background, experiences and research all color my opinion, and how I interpret facts as it relates to our subject. So the reader understands where my biases are I will list where I stand on climate change. Be aware my opinion changes as time passes and as more facts present themselves. Like climate, my position changes. 

Here are some facts the author tends to believe are correct:

  1. Climate change has always been happening and always will be. 
  2. The planet is warming as whole, but some areas — the Upper Midwest of the US, for example — are seeing a cooling trend. 
  3. Some of the current warming is from natural (non-human) causes; most is the result of human activities. 
  4. Humans are modifying their environments around the world and it does affect the planet.
  5. Human caused climate change is happening. The two real questions to ask are: How much? And, is this really as bad as we fear it is?
  6. Climate change is not all bad.
  7. We are currently in a warm period of the 2.6 million year Quaternary glaciation. We are still in an Ice Age! We are spoiled because we are enjoying a rare interglacial warm period called the Holocene. Many of these climate changes are caused by the Earth’s slight variations of its orbit around the sun called Milankovitch cycles.
  8. The current warm period in this ice age is probably the longest and we are also probably at the warmest point of this ice age.
  9. Climate change (people are actually worried about global warming) is unpredictable.
  10.  Could humans — a natural part of Earth’s ecosystem — be nature’s way of ending this very long ice age?
  11. Fear mongering isn’t helping.
  12. Denial isn’t either.
  13. Some life will lose and some will win. That is the nature of life.
  14. You will not save the planet. The planet will do just fine. “People, on the other hand,” as George Carlin once said, “are {beeped}.” 
  15. It has been warmer in the past.
  16. Colder, too.
  17. We can all contribute to mitigation of human caused climate change without breaking the bank. In fact, we can make the world a better place for all life, including humans, with intelligent planning. Better still, we can profit from doing the right things.
  18. We need to be careful our remedies for climate change are not worse than the disease.

I’m sure I have other biases that will be clear to some readers as they read on. The only alternative is to say nothing and that seems to be a bit of denial I don’t accept (Bias #12). 

Both sides of the argument have valid points. What I find unproductive (and unprofitable) is the all or nothing philosophy. Denial is not accurate; it’s just denial. But claiming the Earth has 10 years max before it is too late for the last 30 years isn’t helping either. When extraordinary claims of doom are made that don’t come true and the date keeps getting pushed for doomsday, it causes more people to just not care about the issue. We want people to care about changes in the world. We also want as many people to benefit, along with other life. 

 

Fear Mongering

Climate change doesn't have to be a problem, but rather, an opportunity to make a difference without suffering or losing money. Global warming could be the investment opportunity of a lifetime. #climatechange #globalwarming #profits #investments #alternativeinvestmentsThe biggest two problems with climate change is fear mongering and denial; fear mongering is the worst of the two. Denial seems silly and most deniers acknowledge climate change once politics is removed because they understand climate is always changing. How fast the change is happening is the real concern. 

Fear mongering is a different issue. Rather than using common sense we get claims so outlandish they boggle the reasonable mind. 

Take David Wallace-Wells’s book, The Uninhabitable Earth: Life After Warming

Wallace-Wells’s book is a fear-fest from beginning to end. Almost all facts provided came from the most outlandish claims of other researchers who want us to believe climate change is real and terrible. Before I had 50 pages turned I came to the conclusion there is no reason to even try solving the problem because it is too late anyway.

But then Wallace-Wells turns to my arena: economics. He repeated a whopper several times that if he would have thought about it before he published he would have realized his fear mongering was actually one of the most powerful reason to pump as much greenhouse gas into the atmosphere as possible. 

Here is a quote from page 61 of the book:

If no significant action is taken to curb emissions, one estimate of global damages is as high as $100 trillion per year [italics his] by 2100. That is more than global GDP today. 

This scary statistic is repeated several times in the book in some fashion. He does add after this: “Most estimates are a bit lower: $14 trillion a year. . . ” But the damage is done with such an incredible claim! Worse, his whole book is filed with these zingers. If it was a novel it wouldn’t be believable and considered a terrible story as a result. But passed as fact it doesn’t scare, it cause people to stop trying and that is too bad since we should always work hard to improve the human condition where ever we can and for that of other life, too. Even if climate change is not a problem it doesn’t mean that we shouldn’t try to keep our environment as “clean” as possible.

On page 122 he says:

Should the planet warm 3.7 degrees, one assessment suggests, climate change damages could total $551 trillion — nearly twice the wealth as exists in world today.

On page 117 he tells us there is a 51% chance (according to research) climate change will reduce economic output 20% or more and a 12% chance we get nixed by 50% per capita. The numbers boggle the mind and the fear mongering keeps coming. 

For those of you wondering why the claim is so outlandish, here are the facts derived from Wallace-Wells’s numbers. First, Wallace-Wells claims that GDP will be reduced by as much as 50%. Seems scary until you realize how big the economy has to be for it to fall $100 trillion “per year”.

According to the World Bank, the global economy was $80.7 trillion in 2017. Now if the economy will lose about half its value ($100 trillion per year, as Wallace-Wells reports from his research) it looks like this:

$200 trillion global economy in the year 2100, minus

$100 trillion in losses due to climate change. (Remember, if we lose half of economic output of $100 trillion per year it means the economy would have been $200 trillion to start with, or should have been.

This means climate change, according to the reports Wallace-Wells cites, will cause the economy to continue growing at a healthy pace for a planet already with the highest standard of living in the history of humanity. Except for the rapid economic growth after World War II, this predicts an economic growth rate in excess of growth rates during most of human history! 

And to experience $551 trillion in damages is such a large number it indicates a total economic value several orders of magnitude beyond what we have today. According to Wallace-Wells, life for humans will be really, really good if we can just keep pumping greenhouse gases into the atmosphere. But I don’t think that was the message he wanted to send.

And if the economic numbers are not big enough, we still need to consider demographics. Darrell Bricker and John Ibbitson in their book, Empty Planet, give clear evidence the human population will decline globally later in this century. Japan, South Korea, Russia, and many European countries are already suffering from population decline. The US would have a declining population if not for immigration and current trends are not encouraging if you prefer population growth.

With the fertility rate around the planet falling below replacement value, the only thing holding population up is increasing longevity. Eventually people will die and when fertility rates are below 2.1 (the replacement level for steady population) the population will fall and fast. According to Bricker and Ibbitson, China’s population will fall to near the level of the US by 2100. (They get much of their data from the United Nations.)

This means the standard of living for individual people will continue to climb at a fantastic rate under the fear mongering model of climate change. It’s a terrible argument Wallace-Wells makes because his worst case scenario actually sounds like an enviable goal!

 

Truth from Fiction

Before we dive into profit-making we need to clear one more thing: not all change is bad!

Another excellent book you should read is: The Ends of the World: Volcanic Apocalypses, Lethal Oceans, and Our Quest to Understand Earth’s Past Mass Extinctions, by Peter Brannen. Brannen’s work provides examples of past mass extinctions on Earth and possible reasons for the mass extinction event. 

On page 21 Brannen writes:

The Cambrian Explosion — though it might have been devastating for the strange Ediacaran creatures that came before — was an unambiguously good thing for life on earth.

Later Brannen tells us trees were the biggest challenge to life on the planet early on and there was no reason to believe it would work out. The point is, not all change is bad. For some reason trees are consider good nowadays. (Read the book for more of this fascinating story.)

As we discuss ways to profit from climate change, we need to understand profiting from climate change isn’t a crime or even a sin! We can make money, build wealth and do good all at the same time. We can have a win-win situation, even involving environmental issues.

The books the short excerpts come from are only a taste. These books are required reading if you really want to understand the situation. Yes, climate change is happening and it is a problem. But, it doesn’t have to be the end of the world! There will be winners and losers as long a man lives. The same can be said if man is removed from the planet. It’ll just be a different set of winners and losers. 

This is not a bad thing! Homo sapiens are a very successful species. This is the only time in Earth history when the top of the pecking order felt bad about their success as a species. To say all human caused climate change is bad is to hate humanity and to act as if humans are not a natural part of Earth life. This is unacceptable nihilism.

 

Profiting from Climate Change

And so we have finally arrived at our destination. We better understand where this accountant stands on climate change issues and that all climate change is not bad. 

Handled properly, we can benefit from the solutions to problems caused by climate change.

My suggestions will not single-handedly solve all the problems cause by the changing climate. Even is every person on the planet stopped emitting all greenhouse gasses there would still be other natural forcers on the climate. 

What I provide now is opportunities to profit financially while taking a course best suited to dealing with climate change in your personal life. 

 

Personal Lifestyle

Nothing we do as individuals will make a difference. It is a depressing thought, but true. However, our concerted efforts will make a difference. As Zig Ziglar once said, “No raindrop blames itself for the flood, but they all play a role.”

Worried about climate change? Think it isn't an issue? Maybe everyone can win in the new economy. Be frugal, profit and do good things for the environment. #environment #profit #climatechange Climate deniers.When we understand our personal decisions will not solve the entire problem we can let go of the anxiety and make good decisions that “play a role.” 

Waste: Frugality will not save the world, but it will do wonders for your net worth. Since the problem isn’t one person wasting, but billions of people wasting every day, each of us plays a powerful role. Less packaging and less consumption is the best way to lower your carbon footprint. 

Some people say biking is the solution, but long distance travel is not always conducive to biking. And biking isn’t a free ride either. The more energy you burn biking, the more you need to eat which means the activity has at least a modest carbon footprint. This isn’t a reason to avoid exercise or to bike whenever possible. 

Electric vehicles are a good option. Unfortunately, too much electricity is still produced with polluting sources, especially coal. 

Reducing your carbon footprint is not a sacrifice! Many good environmental choices are also healthy choices and save you money! Walking and biking are excellent choices for health and saves you money while reducing greenhouse gas emissions. 

Household: A home energy audit is an excellent way to save money by reducing your utility expenses, increasing your comfort and doing environmental good. 

Some tasks are painless. Switching to LED lighting has a fast payback and added insulation increases home comfort. Many steps you can take to reduce your contribution to climate change are not painful at all. Even if climate change were not an issue you should do these things to reduce costs and improve the household financial condition.

Geothermal heat pumps for heating and cooling are extremely energy efficient (to the tune of 500% or more as the extra energy gain comes from the heat of the earth).

If you are building a new home or remodeling, now is a good time to plan for low carbon emissions or a zero-energy home. South facing windows can reduce winter heating bills. Where possible, have some of the structure below grade (basement). This allows natural heating and cooling from the earth to regulate your home’s temperature. 

Energy production: We detailed several options for reducing waste and lowering energy consumption. Now we turn to something even better: producing energy. The best part is the IRS gives you a juicy tax credit of up to 30% when you install alternative energy equipment. (The credit is currently 30%, but not refundable. You need an income tax to reduce before you benefit.)

Wind and solar are the two best option for most households. These choices require an investment, but are partially offset by tax credits and have a reasonable payback period which is getting better all the time as technology advances. 

Where you live also determines the best course of action. Sunny locations are better served by solar, for example. Local zoning ordinances also play a role.

I’ve read reports on fuel cells as a good alternative without being convinced. You can do an internet search if you want to explore this option. It works better on a commercial scale from what I read. Small garage units are not there yet in this accountant’s opinion. Maybe, soon. 

 

Investing

Frugal living cuts costs and reduces greenhouse gases a bit. Solar and wind installations leverage your activities some. But if you want to make an outsized difference while filling your wallet, consider this . . . 

Companies want to save money and increase profits where ever they can. Many companies are pushing the envelope far and fast.

Consider Wal-Mart.  Wal-Mart has upgraded lighting in stores to reduce usage while installing solar on their store’s  and corporate headquarter’s roofs. The gains are massive and growing. You can review their website with the link to see more things Wal-Mart is doing to reduce their energy consumption and production. 

Businesses you never thought were changing the world for the better are doing so as a part of their standard business practice. Think of Amazon. Amazon requires fewer stores to sell a massive amount of stuff all over the country. Yes, all that stuff is shipped which consumes fuel. However, if you traveled to a local store you would also consume energy in the process. It is generally cheaper to buy online and have it shipped than to run around town looking for what you need. So Amazon, by design, is more environmentally friendly and it shows in their stock price.

We don’t have room to discuss a long list of companies doing environmental good deeds. The examples above are to help you see how companies you choose to invest in might also be good environmental citizens. 

There is even more you can do, however. As an owner (if you own shares) of a company you have some say. Write to the board of directors or CEO. People do read these letters and pass them on to the intended recipient when good suggestions are sent. 

Better yet, start your own business! Steve Jobs once asked if you wanted to change the world. Say yes! You can profit with a business that helps all your clients realize their goals of reducing costs and environmental impact. Lead by example! And get rich in the process. Maybe that was what Wallace-Wells was talking about.

 

Coda

This is a difficult discussion by nature (pun intended). This isn’t about politics or taking something away from people. I’m not a big fan of the carbon tax. There are better solutions.

The more advanced the society the less impact on the environment they tend to have. (Think deforestation in poor countries as an example.) Rich people can afford solar and wind energy systems. In the end, wealth is good!!!

There is no need to deny climate change, even human caused climate change. Life has always affected the environment. That isn’t a bad thing; it’s just a thing that happens. The alternative is a lifeless rock in space. 

Those who are very concerned over climate change need to understand we can make a difference without fear mongering. Yes, it is bad. It is always bad! Understand, humans have always risen to the challenge. That is why we as a species have done more than all species ever to exist on the planet have done combined. 

We are a miracle and can keep living the good life for a very long time.

Perhaps Winston Churchill was correct when he said:

Now this is not the end.

It is not even the beginning of the end.

But it is, perhaps, the end of the beginning.

 

 

More Wealth Building Resources

Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.

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

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

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

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

 

I’m 19 and Bought My First Car, Cash

19 year old buys her first car with cash. No loans or liens. Living the debt free lifestyle is a sure path to happiness and wealth. #happiness #debtfree #noloans

Nothing like buying your first car cash. Lien holders: NONE! Just the way it should be.

My daughters are very different from the typical young adult. Growing up in the Accountant household was never easy. I preached the Good Word of financial responsibility their entire life without any indication any of it sunk in.

As they grew older the firsts rays of hope appeared when I overheard my girls repeating my messages on frugality, saving and investing. Still, parents always worry about their children and I am no different.

My oldest daughter, Heather, cut a path I never saw coming. She travels a lot more than this accountant would ever want to and teaches English as a second language. She will be in teaching in China again this summer before returning home to teach special needs children. She uses art as a way to facilitate communication. You can see her backstory here. Things have changed a bit since that last article, but that is how life works. All I can say is she is living the dream.

My youngest daughter, Brooke, always caused me more concerns . Major medical issues have always been a part of her life so there is plenty to worry about. It’s the price of love. I published the deeply personal story here.

Brooke was never much for school. Heather loves school and books; Brooke reads after several hours of torture. . . sometimes. I jest a bit, but only a bit.

Brooke was paying attention, however. She heard about all the other personal finance bloggers and their methods of building wealth. I brought my financial wisdom home from the office to spread the message, too.  Then, just prior to graduation, she decided she wanted to publish her story on how she plans to retire the day she graduates from high school. Okay!

While Brooke may have taken a tad bit of literary license, she has the right mindset. 

 

What is Work?

Brooke may not enjoy cracking a book unless she is specifically looking for something, but she isn’t stupid either; she just enjoys different work. 

Brooke turned 19 a few months ago and has been working almost from the day she graduated high school. She — wait for it — does landscaping. Yes, Brooke, standing a full 4′ 10″, loves digging in the dirt and planting things. And she makes good money at it.

She has good teachers. My parents have a landscaping business so it was the natural place to go. (I could not interest any of my children to pursue a life in the accounting field.) For 19 she really is starting to know her stuff. And she is fussy. Do it right or get the heck outta the way so she can.

And she saves money like it’s lifeforce (which it probably is).  Every penny (and I do mean penny) is saved and invested. This has grown to a fairly nice nest egg. And now it comes time to spend some of that cash.

 

Major Life Purchase

In May of 2018 the Federal Reserve issued a report on the economic well-being of U.S households for the prior year. The most shocking statistic repeated in mass media is that nearly half of all households struggle to save a mere $400 for an emergency. 

Is she old enough to drive? Yes! At 4' 10" she needs a car she can reach the gas pedal on. And she paid for it with cash. Here is how she did it. #financialindependence #wealth #money #buyingacar #nodebt

Is she old enough to drive? Yes! At 4′ 10″ she needs a car she can reach the gas pedal on. And she paid for it with cash. Here is how she did it.

Think about that.  Almost half of all households have a financial crisis if they get a flat tire or have a minor medical bill!

What makes this more alarming is that Brooke did more than deal with a flat tire this past week, she bought the whole darn car! Along with all 4 tires. Honest! 

And she paid cash. Like I said,my girls are not typical.

Yes, Brooke, at 4’10” (on her tippy toes), with serious medical issues, bought her first car cash.

Now granted, it isn’t a “new” car. The kid is smarter than to buy a high priced wasting asset. Bad enough she had to part with $4,800 (plus licenses and sales tax), say, $5,300 when all added together) to purchase a vehicle with utility.

But it is better to want than to have. Sure, dad’s 2000 Honda Accord is almost undrivable so it was time to buy her own car. But cars cost money. Real money!

The car purchase wasn’t as bad as the insurance. A newer vehicle not part of dad’s policy is slightly — to put it politely — more than what she was paying. 

She was up earlier than ever the next day to get digging in the dirt and planting trees. The car isn’t going to pay for itself.

 

Lessons Learned

Brooke needed a car and we spent plenty of time looking for one fit for her needs. She still lives at home so her other bills are practically zero. She helps around our house, too, so mom and dad are open to her staying until she decides where (and with who) she wishes to move forward in her life.

The next day Heather confided in us that she caught Brooke in the bathroom fighting back tears. She might have paid cash, but this is the first time her account value declined because she spent it. It wasn’t a good feeling.

A valuable lesson was learned. Spending is okay to get things that benefit you as long as you realize the price for such luxury. She could have biked to work or hitched a ride. Winters would have been hard, but manageable. 

Brooke also figured out real quick what the real cost of a car is. After she added the purchase price with insurance, license, gas, oil, other maintenance and the eventual need to replace the car it became overwhelming. Then she used dad’s secret formula to determine how much that money would grow into by retirement age if you kept it invested in an index fund instead. Then the tears had to be held back.

She is one tough young lady. She bounced back and knows the car is a tool. The greatest news of all is she will never pay a penny in interest. And she still has quite a large nest egg for such a young adult. 

 

Growing Up

I share Brooke’s story because so much of my children’s lives are not traditional. Heather just graduated from college with no debt, including student loans. (Think about that for a while.) Brooke managed a cash cushion that allowed her to by a fairly cheap vehicle at the ripe age of 19 and she wrote a check. (And it cleared!)

When most people are borrowing to the hilt for an education, my daughter was getting an education and not amassing debt to achieve her goals. I mean, come on! Heather has traveled the world more at 24 than I have in nearly 55 years. And Brooke is living the dream her own way, yet on another path. The common denominator is they did it with fiscal responsibility.

And that is why I wrote this short post. To show you that anyone can do it. Even Brooke, with medical issues that may make her life very short, she is living her life on her terms. 

She is the kind of role model you want to follow.

 

 

More Wealth Building Resources

Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.

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

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

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

QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.

cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.

Worthy Financial offers a flat 5% on their investment. You can read my review here.