Skip to content

Archive for July 2019

Unique High Interest Savings Accounts Few Know About

Interest rates continue at historically low levels. These savings accounts offer high returns with low or no risk. #interest #bank #rates #savings #moneymarket #savingsrate #interestrate #earningsInterest rates have barely lifted from ground level and are already headed lower. In the U.S. short-term interest rates are at least positive. My EU and Japanese readers are not so lucky, facing negative rates.

Low interest rates are bad enough, but watching your bank balance decline is a downright nightmare for savers. If you are close to or in retirement this can cause great financial harm.

Because rates are likely to stay at these low level for the foreseeable future and there are many safe alternatives paying more, I will publish a special report each month highlighting one of these short-term, money market-like investments. Every effort will be made to address opportunities available to as many readers across the planet as possible.

Because these special reports will be in addition to regular publications you will want to subscribe using the button at the beginning of this post so you get the reports as soon as they are published. I will also discuss short-term interest investment options on The Wealthy Accountant Facebook page as well. 

Today I will share over a dozen options to earn more interest on your short-term savings. I will link to posts where I discussed some of these in detail in the past and will indicate if I am an affiliate of the program. The remaining options will get a short bio. If necessary, I will publish a complete report on the investment later.

Many investments are in U.S. dollars. Some investments allow investors from outside the U.S., but require the investment be made in dollars. This adds currency risk to mix and is something you need to consider before investing.

Finally, before we begin, many short-term investments are not guaranteed. Money market accounts are almost never a guaranteed investment. However, they are considered extremely safe. As always, research the choices I list before committing funds. No one investment is right for everyone. My goal is to provide as many choices as possible so the most readers benefit.

 

Alternative Short-term Investment Options

 

First Class Demand Notes

There is a unique investment too few people consider offered by Mercedes-Benz Financial Services called first class demand notes. For qualified investors this can be a powerful financial management tool. There are no minimums and you can withdraw funds at any time.

However, you must be an accredited investor which means you need either a $1 million net worth excluding your primary residence or a $200,000 income the past two years and expect to earn over $200,000 again this year.

Pros: Easy access to funds without waiting and a relatively high interest rate, currently 3%. I could not find anything limiting the investment to Americans only and since Mercedes-Benz is a German company it is possibly available in the eurozone as well. Highly liquid.

Cons: The program might be available outside the U.S with different terms. Only qualified investors can invest and all investors are verified to assure they are qualified before the account is opened.

 

P2P

Many peer-to-peer options exist. Once upon a time I was a big fan of these investment options. My personal experience and several issues in the news involving some P2P companies has raised concerns.

Here is a list of the highest interest rate savings accounts few are aware of. Earn high interest on your short-term savings. Some have high yields and are FDIC insured. #bank #savings #interest #rates #savingsaccount #bankaccount #interestratesI still mention P2P because it is a viable option for some willing to take the added risk. I have personally invested in Peer Street, Prosper and Lending Club. My Prosper and Lending Club accounts are nearly wound down to zero and I made a reasonable return. I don’t think future investors will fare as well as it appears returns have fallen sharply. My Peer Street investment is still in limbo. Fingers crossed I turn a respectable profit.

I am in the affiliate programs of some of these companies, but no longer use the links. If I missed an affiliate link to a P2P investment, please do not use the link as I can not in good conscious recommend any of these investments. I list them here as a warning only and for the most risk tolerant readers.

Pros: Very high interest rates. Many promise 10% returns and higher.

Cons: Liquidity. Once invested, getting out quickly is difficult until the loan your money is placed in makes payment or pays off the loan. There are too many P2P companies cropping up for me to vet them all. Since the P2P company profits by making loans and servicing them while you take the risk of default, my concern (and a well-founded concern at that) is the quality of underwriting.  

 

YieldStreet

This is the riskiest investment on the list and is NOT guaranteed by any means. YieldStreet is unique enough with potential promise for certain investors I felt it needed a mention. 

This is similar to P2P investments above with the exception these are very illiquid with 5-7 year minimum time horizons. But the returns are juicy in the low double digits.

YieldStreet invests in some unique projects. Commercial real estate is about the most normal thing in their portfolio. Other investments include art, lawsuits, large ships and more. You get to choose which projects your money is invested in. Serious due diligence is required before investing with YieldStreet.

Pros: Very high returns. 

Cons: Extremely illiquid. Very high risk. Only for investors with a high risk tolerance. 

 

Vanguard Prime Money Market Fund

Vanguard has always run a solid investment house. Money market accounts might be boring, but they offer liquidity and are very low risk (about as low risk as you can get without saying guaranteed). I used Discover Savings and Capital One 360 for many years before moving to Vanguard Prime MM Fund. I switched when Prime paid a higher rate.

Pros: Low risk of a money market fund with a relatively high interest rate currently. Very liquid.

Cons: The interest rate in Prime follows market rates and has been falling recently due to lower rates in the broader market. If rates continue falling other alternatives may perform better. It is a good idea to bookmark this page to reference back as interest rates change and different investments provide superior returns.

 

Treasury Direct

I used Treasury Direct to hold the working capital of my tax practice for many years. When Treasury securities dropped to near zero other investments were a better choice. 

While Treasury Direct might not be the best option now, it is worth noting for future reference. 

Safe, high yield savings accounts are available. Here is a list of secret accounts you want to consider. #secret #investments #bankrate #bank #interest #interestrate #savings #savingsaccounts #savingsratesTreasury Direct is the portal for investing in U.S. government securities. You can buy bills, notes and bonds along with savings bonds and TIPS. Securities are held in the account.

T-bills have maturities as short as a few days up to a year. You can set your account on automatic, rolling over maturing securities until you need the funds. Cash is usually direct deposited back into your bank account. (Treasury Direct has a tool to hold funds awaiting investment in certain instances that I don’t like and therefore don’t recommend. Money awaiting investment is best in your regular bank account.)

Pros: Guaranteed by the U.S. government. Reasonably liquid. You can sell securities prior to maturity, but it is somewhat difficult to do. By laddering your short-term investments you can maintain reasonable liquidity.

Cons: Mildly illiquid in some cases. Rates tend to be fairly low except when the Fed is trying to slow the economy. Historically Treasury Direct was the best investment in town until ultra-low interest rates became the norm. You will want to review Treasury Direct for future use should the interest rate environment change.

 

Wealthfront

Wealthfront is one of many similar investment options for short-term money cropping up and worth considering. Their rate as I write (July 29, 2019) is 2.57% and is FDIC insured up to $1 million. 

The rate is relatively high for a short-term vehicle that is guaranteed (FDIC insured). There are no minimums (okay, they require at least $1) and you can get your money out at any time. Best of all, there are no income or net worth requirements. 

Pros: Liquid, low minimum, reasonable good rate. Easy to open an account.

Cons: Rate lower than Mercedes program above, but still reasonable in today’s interest rate environment. Rate likely to decline if the Fed lowers rates.

 

Betterment Everyday

Betterment is an investment company with some interesting new products to consider. The minimum is a mere $10 and is FDIC insured. There are two levels. The first level is a simple savings account paying 2.43% as of this writing. However, if you sign up for their wait list for their fee-free checking account your savings earns 2.69%.

Pros: Liquid, FDIC insured, excellent rate if on the Betterment Checking wait list.

Cons: Not much to dislike. The rate is likely to change over time so keep an eye on it. If another investment vehicle become superior you can easily move.

 

Ally

Ally is a favorite among readers of this blog. The rate is about what the Vanguard Prime MM fund pays (2.1% currently for Ally’s online savings account). Brand recognition provides comfort. Ally has more features than many other short-term investments listed here, allowing you to structure your account as it serves you best. 

Pros: Liquid, recognizable brand, numerous features to manage your account.

Cons: Lower rate than other options listed in this post. Only available to U.S. legal permanent residents or citizens.

 

Worthy Financial

Worthy is a unique investment I fleshed out a few months back. The main selling point is the 5% interest rate paid on Worthy bonds. 

Before you rush to invest, a few disclosures first. The link in the resources section after this post for Worthy and the link in my previous post on Worthy is an affiliate link. You and I both can get an extra $10 for using the link, just follow the rules.

Also, Worthy bonds are NOT FDIC insured or guaranteed and is not similar to money market accounts. They invest in business inventory. This could work well, but there is no guarantee of success. Worthy is a new company so you need to consider this before investing. Regardless, I would only put a portion of your short-term funds into Worthy due to the heightened risk.

I currently have $2,000 of my own money invested, plus all interest earned to date and all $10 affiliate payments received to date. That does not mean it is safe. I like to test things. A couple thousand is a nice way to test a product of this nature. Review the Worthy site and your temperament before investing.

Pros: It pays 5% with a $10 minimum. Liquid.

Cons: Higher risk compared to other savings vehicles on this page paying 2 1/2 to 3%. 

 

Cit Bank

We finish with the Cit Bank Savings Builder. Cit Bank pays up to 2.3%. Notice I said “up to”. You only need $100 to open an account and there is a introductory rate, however, you need a higher balance to receive the top rate. 

There are a lot of moving parts to this one. If you add $100 or more each month you get a better rate if you have a low account balance. Read the details to see if it fits your needs.

Pros: A basic savings account with reasonable interest rate.

Cons: Too many moving parts considering the rate offered as of this writing.

 

Final Notes

The facts and circumstances are sure to change over time so you must be willing to move your funds periodically to earn the best rate on your short-term  money. As interest rates decline again it will be more important than ever to stay vigilant. 

The list above is by no means exhaustive. I intentionally left many products I researched off the list. Some were outlandishly risky (as if YieldStreet isn’t risky enough). Some I left off to keep this post brief. 

I will address some of these investments in greater detail in the future and add to the list. In time I will publish a post for each geographic region of the world (eurozone, Japan, et cetera). The goal is to offer all readers at least one option that pays well for their location.

Short-term money was never meant to yield large returns. But it should at least grow some and safely.

Be sure to share investment vehicles you like but not listed here in the comments. We all benefit when we work as a team.

Thank you.

 

Bonus

I no more than hit the publish button when an article from CNBC on Green Dot crossed my desk. It is important enough to add this bonus after-the-fact.

It seems Green Dot is currently offering 3% on their savings account to encourage new customers, plus 3% cash back on their debit card! That is so massive it makes this accountant’s eyes water. There are limits, of course, so be sure to do your due diligence.

 

 

 

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. 

A Critical Review of the FIRE Community

Is the FIRE movement too good to be true? Are dreams of financial independence and early retirement a fool's errand? Discover where FIRE is destroying your wealth for their own benefit. #FIRE #wealth #earlyretirement #financialindependence #bloggers #personalfinanceThe first time I encountered the FIRE (financial independence/retire early) community I had an uneasy feeling. Sure, the people were friendly and nice, but their message sounded familiar, like I had heard this all before and it ran a shiver down my spine.

The original goal was to start a business partnership with a popular blogger where the income would be shared on an affiliate program unavailable to most bloggers. I had access to this program. Now I needed to find a blogger willing to work with me.

I discovered what is probably the most popular blog in the demographic and found his frugality appealing. 

I attended one of the now numerous camps in the FIRE community to meet the populist blogger. He took to my message and passion quickly, but didn’t want to participate in the affiliate program, a DIY online tax preparation alternative to TurboTax. 

Instead, he wanted me to be his tax professional. In a few moments this new offer would change my life in two fundamental ways. First, my small tax practice was swamped beyond human understanding by people wanting the same tax guy this blogger had, and second, I was thrust into the center of the FIRE movement, a movement never my own.

As an insider I saw things differently than Suze Orman. I didn’t hate the FIRE community for frugality and dreams of financial independence; I hated the FIRE community for what they planned to do with their new-found freedom and power.

 

Everything Wrong with the FIRE Community

Suze Orman felt the FIRE philosophy promised the good life with too small an investment account to enter retirement, especially the early kind. 

That isn’t even a problem with FIRE. Depending on your temperament and lifestyle, you can retire on almost anything, even nothing if you so choose. Nobody has the right to tell you your preferred level of expressed affluence is wrong. If you want to live life large, do so; if you want to live a Spartan existence, you have my blessing.

The real problem of FIRE is arrogance; the all-consuming desire to let the world know you are right and everyone else is wrong. There is no room allowing people to live life on their terms if it doesn’t fit the FIRE canon.

Perhaps the most egregious sin is the desire to turn the movement into a cult. Yes, one of the leading bloggers in the demographic brags he has started a cult!

This is a serious allegation and requires proof. Without calling anyone out, it doesn’t take long to figure out who I’m speaking of. A quick Google search should assuage your curiosity.  

The term cult does not imply good things. A dictionary definition begins with the religious connotations. Since a large percentage of FIRE members claim no religious faith these explanations can not be the ones implied.

The only explanation remaining is the “misplaced or excessive admiration for a particular person.” 

Cults are never a good thing. Don't drink the Kool-Aid! Cults destroy your wealth for their own benefit. You do not need a cult to have a good life. #cult #money #wealth #finance #income #retirementCults are not pretty things. I thought it was cute or at least worth pursuing to grow this blog. The instant I crossed that line a reader explained to me what his family went through when caught up in a cult. I could never be something so evil. That was the last I desired to have a cult or cult-like following. I care about my readers more than that.

And cults tend to end badly. Think Jonestown, Heaven’s Gate and the Branch Davidians. Sane people do not want to belong to a cult.

I’m not picking on only one blogger, either. This illusion of helping people while helping yourself to an over-sized helping is not endearing, it’s sanctimonious. Another word with less than a honorable meaning. 

The fake-ness and hero worship bothered me from the beginning. Most in the community are wonderful people, yet too many acted in a manner I found disturbing.

There is a level of entitlement in the FIRE movement. There are bloggers who use their position to get as many goods and services for “free” as they possibly can, justifying the behavior as deserved due to their position. Sounds abusive to me. Sounds like a cult, all right.

Some handouts are okay. Getting free travel by working the credit card system is acceptable as long as you acknowledge you are not frugal when doing so; you are just shifting your spending to someone else. 

Many bloggers advocating frugality are far from it when you consider all the spending they do by getting other to pay their way. 

It is even worse when the attempt is to shift spending to someone who doesn’t want to make your payments. Banks trying to get your business want to issue rewards as an enticement for patronage. Individuals and small businesses are less inclines because it hurts more when forced to give in this manner. And if you act entitled to special treatment . . . 

Every expenses should be included when you review your budget. You are spending even when someone else pays! Acting self-righteous by claiming frugality when your carbon footprint is higher than the average of the highest polluting nation on the planet is not frugal; it’s vulgar. 

But all this is background noise to the greatest crime of the FIRE movement:

People in FIRE want to retire as soon as possible so they can demand others do a job they refuse to do themselves. They become the boss they would never work for. They lack humility, demanding respect because they learned to game the system better than most.

My mind is numb watching these people retire as young as possible to travel the world, sending a steady stream of photos to Instagram so friends and family — but mostly strangers — can have their faces rubbed in it. The news feeds are filled with these stories, encouraging the unhealthy hero worship.

Back in my day (I walked to school uphill both ways in snow) the equivalent was when grandpa brought out the slides and projector at a family gathering.

Slides are an old technology where pictures are imposed on a plastic slide, used in a projector to show the photos on a large screen.

Everyone dreaded the slides. Grandpa would go through a long line of pictures of their last vacation. Nobody cared and if they did it wasn’t to celebrate with grandpa, but to loath him. It was boring! 

Instagram is the modern version of the slide. The only reason people show up is because they want the opportunity to flaunt their pictures, too. It really is about bragging and jealousy. Life is too short for that.

I suggest people enjoy their round-the-world adventure. Keep the updates for close family and friends so they don’t worry about your well-being. If the rest of us wanted to go we would have. Write a nice article later, fleshing out the details (with photos), for people planning a trip to where you have been.

There is a hedonism in FIRE. I’ve enjoyed working with many people in the demographic. It amazes me the level of incredible people I’ve had the pleasure to meet and work with. I am equally amazed at the level of solipsism. No humility whatsoever. Can this really be setting a good example for the world at large?

Let us not be desirous of vain glory. Provoking one another, envying one another.

 

Phalanstery

Pointing out the emperor has no clothes is a sure way to lose your card-carrying status within a community. The alternative is to deny the truth and be part of the problem. If I’m out, I’m out. At least I was honest.

This brings us to the scariest part of the movement no one wants to talk about: phalanstery. 

At the turn of the 19th century the French utopian socialist thinker, Charles Fourier, created the term phalanstry to illustrate the arrangements for living in a future communal society. Dostoevsky alludes to this in Crime and Punishment*

Discover financial freedom where you can live your dreams. Cut your own path. Live life on your terms. #freedom #life #live #faith # discoverYou would think 200 years would lay such foolishness to rest. It hasn’t. 

There is a group within FIRE that wants to create small communities without roads, only  bike paths. The language and terminology of these plans is what finally triggered my memory. A quick search of my bookshelves verified my fears.

The FIRE community is made up of the most intelligent and educated people in our society. The same can be said by contemporaries of Fourier and Marx.

Need I remind you the utopia promised by these intellectuals gave us a 100+ million body count in Stalin’s Russia and perhaps as many as 130 million dead in Mao’s China. 

These utopian bike cities** could be the new Gulag Archipelago in the not so distant future. 

Before you protest this would never happen, remember that is exactly what was said in the 19th century. This new world order was supposed to bring in a worker’s paradise. FIRE promises a similar paradise of world travel, ecology, environmentalism and early retirement paid for by the backs of those outside the movement. It never turns out as planned when everyone wants to play and no one wants to work. Hedonism is a bad ingredient in any recipe.

FIRE saw its reflection in the water and fell in love with itself. Remember, this was a curse placed on Narcissus by Nemesis, the god of revenge. 

We must always be cognizant of Solzhenitsyn’s warning.

 

 

Hope and a Bright Spot

Everything wrong with FIRE still does not make it a deal-breaker. Spending less than you earn and investing for the future is the best financial advice you can receive. If it stopped there it would be a helluva movement. 

But it never stops where it should. Yet, in all the debauchery and self-aggrandizement there are beacons of hope.

Before J. Money sold Rockstar Finance he had a charitable arm to that blog. Even thought the funds were small they made a big difference. Best of all, they were given to people who had no chance of ever paying it back (the only real charity). 

J. Money isn’t the only one walking the talk. Several bloggers are paying-it-forward in heroic fashion without fanfare or chest thumping. It gives me hope in humanity.

Utopian bike cities will not solve the world’s ills if you hop on a plane and travel the world on someone else’s dime. The carbon footprint is still outsized. 

We need more J. Moneys. Giving without expectation (or possibility) of repayment is the only real giving. I wish a blogger with massive traffic would spearhead this. It would show real leadership. This blog manages an average 70,000 page views per month. If nobody wants to pick up where J. left off I will take the lead. It would be truly sad if the jet setters sending us constant Instagram updates didn’t make this a priority.

Of whom much is given, much is expected.

 

Membership Revoked

I imagine my membership in the FIRE community is revoked after this rant. I didn’t expect anything different.

My choices were to remain silent and allow the insanity to continue or to say what I think (and know) without calling anyone specifically out. 

We are all guilty of hedonism now and again. It’s natural. When it becomes your whole lifestyle and you flaunt it as “the only correct way” to live life you have crossed the line.

Believe it or not, I like most people in the FIRE community. Many are clients. My guess is I will not be welcome around the FIRE anymore. I’m okay with that. It was never my tribe anyway. I’m more of a country boy who enjoys a good card game Friday night with neighbors and family. None of them care a lick about FIRE and what it stands for, yet they are financial set. And it is a short 1 1/4 mile bike ride.

I’m not alone in pointing out issues with FIRE. No one has mysteriously disappeared for calling the FIRE community out on its cult-like behavior and utopian bike cities.

Yet.

 

Coda 

I’m serious about the benevolent fund built in a similar style J. Money used on Rockstar Finance. If we are so rich we need to show more gratitude by paying-it-forward to those who have no ability to pay back. That makes the world a better place than any self-serving bike city ever can.

If a big-name blogger doesn’t take this project I will quietly (no self-aggrandizement allowed) start the program myself. 

Jordan Peterson said the meaning of life is to end “needless suffering.” Viktor Frankl ended his book Man’s Search for Meaning with: the meaning of life is to help others find meaning in theirs. 

I could not have said it better.

 

 

* Note 7 of Part Three of the Pevear and Volokhonsky translation gives a short description of Fourier’s phalanstry in action, something that got Dostoevsky in trouble with the law.

** Of course bike friendly cities are a good idea. A city built with the environment in mind would also have retail and office space within walking/biking distance as well. If you want to see a city designed around sound environmental ideas and bike friendly go to your library and check out the April 2019 issue of National Geographic. Best of all, Nat Geo will not try to sell you something. Just good reporting.

 

Final Note: After finishing the rough draft of this post I sent out a trial balloon on Facebook to see the reaction to a post on Everything Wrong with FIRE. To my surprise the leading suggestion involved health insurance. Many felt FIRE doesn’t deal with the health insurance issue appropriately. 

I solved this problem some time ago for my family. I use health sharing. It does require faith, but shouldn’t we have faith in something?

In the Resources section below I have a link for Medi-share. It is an affiliate link.

After careful review, my family signed up with Liberty Healthshare. For $399 per month we get 100% coverage after a $1,750 deductible. That alone is enough to build faith in God. If you mention this blog I might (not certain how their referral program works) get a referral fee.

 

 

 

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. 

Motivational Goals

Build goals that motivate you, allowing you to live your dreams. Dream big, but follow these steps to keep balance in life. #Life #work/lifebalance #success #goals #motivationWhen I was a child I wanted to be President of the United States and an astronaut. At the same time, if possible.

My uncle, Kev, wanted to be the first person to farm on the moon. 

Growing up poor in the backwoods of Wisconsin caused us to dream of a life like that on our old black and white console television. The world looked so much more exciting on the glass teat (a term from the days when the television screen was a protruding bulb) than in our settled rural lifestyle. 

Such are the dreams of youth when our imagination knew no limits.

Many children dream of growing up to be a doctor, policeman or fireman. The visible (and exciting) occupations all make the list.

Some keep the extraordinary dreams. Elon Musk, Bill Gates and Steve Jobs are modern examples of people who created a whole new world we all live in. 

A hundred years ago it was Henry Ford, Thomas Edison, George Westinghouse and Nicola Tesla creating the world people lived in. Amazing how a century can turn incredible technologies into mundane necessities of life we only acknowledge when the electricity goes out or the car refuses to start.

 

Big Dreams

Dreaming big is what made our modern world. It is hard to believe electric vehicles would be where they are currently without Elon Musk.

In the past few days Richard Branson is reported to be floating the idea of the first publicly traded space tourism company. 

A hundred years ago industrialists gave us the airplane, automobile and a host of household conveniences. In one century we went from horses and wood stoves to space travel and computers. Space launches are becoming so common few get excited anymore when a rocket lights up unless Elon Musk has something exciting for us.

But you, like me, probably don’t have dreams quite as big as Jeff Bezos (Blue Origin). And even if you did you probably don’t have the resources, or access to the resources, to have any chance of realizing the goal.

Branson, Musk and Bezos are in a unique position of possessing the resources to realize the space dream. 

For the rest of us with fewer resources, we find goals that large the equivalent to Don Quixote chasing windmills.

 

Appropriate Goals

Goals of space travel are good to have. The space cowboys in the private sector must have had these dreams long before they could reasonably undertake their projects. Their dream of space travel, and more to the point, people living in space and permanent colonies on the moon and Mars, evolved from dream to goal. And once a dream reaches goal status it takes on a life of its own.

Most of us understand large goals are a step-by-step process. In other words, smaller goals are needed to attain the significant. 

You might not get a star if you reach for one, but you sure will not come up with a fistful of dirt. Dream big! Create goals that motivate. Create goals that make your life better. Create goals you will use to better your life. #life #goals #stars #goalsettingStarting a business and planning for retirement are large goals. The business doesn’t have to be a S&P 500 company to be significant. A local company is just as important as the big guys. Communities are more vibrant if there are more local businesses. A one-company town lives only as long as the board of directors thousands of miles away don’t decide to downsize or outsource. Small business does provide stability.

Retirement planning is something we can all understand. If your ultimate goal is to build a $1 million nest egg you don’t start by investing $100,000 per week until it’s done 2 1/2 months later! No, you plan. Each paycheck half goes to the retirement account. This allows tax advantages over several years so you can save even more.

A decade of investing in low-cost index funds leads to serious sized retirement accounts. Each pay period is a goal. Increasing contributions annually is a goal. 

Big goals require consistent smaller goals. Early retirement is a process you start at an early age. If you decide to retire at 45 you better have taken steps before you turned 44. Unless you are already loaded or a trust baby, one year is not enough for that large a goal.

We see the same practices in massive firms attempting the near impossible. Elon Musk has a goal of putting humans on Mars. But first he needs a reliable rocket! Musk has pushed the envelope with interesting reusable rockets that land themselves. It is a sight to behold. Then he needs to figure out. . . 

Ultimate endgame goals often require more time than anticipated. Musk may not get humans to Mars as soon as he wants. (He has a hard time keeping to his delivery promises at Tesla.) He will get a lot closer if he focuses on the task (goal) at hand.

 

Shooting for the Stars

We used to call lofty goals “shooting for the stars”. Today we are actually shooting for the stars. For real!

The advantages to society will be even greater than those provided by the Apollo program. In the 1960s the government (NASA) ran the program for the U.S. The only competition was the Soviet Union. Today many private firms are vying for a piece of the space market. More enter every year.

One of these new space ventures will succeed. Probably more than one. More competition will keep coming assuring humans will call more than Earth home. 

If you share the space dream it can be disheartening. Most people reading this will not lead a company blazing a trail into space. Most will not even be lucky enough to work for such a company.

But there are lessons we can all learn from these modern pioneers. Life on earth has never been so grand. Steven Pinker has done the research. We live longer and better than at any time in history. There is even less war. Check the data. Fewer of us die of violence than ever in history! And by all accounts it looks to be getting even better!

Small goals can motivate for a short time. A goal to visit Spain next spring is a good goal. If you had to plan for 30 years for that one trip and everything else was sacrificed, you might not hold interest in said goal for long.

Large goals hold our imagination. Financial freedom and retirement occupies the majority of adult thinking. It never gets old dreaming of retirement, or planning accordingly once retired, so we can continue enjoying the life of luxury. 

 

Goals that Motivate

Like my uncle, Kev, you might have extreme goals like farming on the moon. These massive goals will change mankind forever (when achieved) and have the ability to motivate, especially if you can take steps (smaller goals) toward achieving the large goal today.

However, life is a series of smaller goals. We want to pay off the mortgage, building a plan (goal) to do so. Starting a business is a serious undertaking many want to explore. And retirement is always looming (time keeps counting). 

Yet, before we can pay off the mortgage we must save a down payment and buy the house! 

This illustrates today’s message. People waste time thinking about paying off the mortgage when they should be thinking about saving as large a down payment as possible. You need a mortgage (or will have one soon) before you can plan to pay it off. Or as we say on the farm: putting the cart before the horse.

Retirement is the same. Too many spend time thinking of all the awesome things they will do in retirement and forget to actually plan to have a retirement. (Saving and investing.)

As an accountant I have several examples of clients who died shortly after retiring. In the last year a business-owner client died three days after retiring. He wasn’t that much older than your dearly, not yet departed, friendly accountant. My staff has reminded me of this with my recent personal health scare (not yet resolved). 

Goals should help you live better. Yes, grand goals of jet-setting around the galaxy with Captain Kirk is fine as long as you don’t forget to live while still walking God’s green earth. 

Musk and all the others are working to make space quotidian. They are also making the world a better place now in our everyday life with electric cars and with new ways to buy and sell goods and services.

 

Goal is a Four-Letter Word

The word goal has taken on dreaded status. Over the decades I’ve attended several informational and motivational seminars. Whenever the topic of goals comes up, heads duck. It shouldn’t be that way.

I think people dread goals because they feel obligated once they are on paper. There is also some fear of stating your goals because they entail your deepest desires. 

Sometimes the best thing that can happen is for someone to throe sand into the gears. Learn how to properly set goals for business, financial independence and retirement. #retirement #goals #financial goalsThe thing is, goals should change. Not every goal deserves consideration. It would be nice to skydive. Sure it would. But after careful consideration other goals might interest you more. More family time might be the goal you wish to pursue instead and the rewards (in your mind) might be better than falling from 10,000 feet.

Goals can take on a life of their own, taking you where you don’t want to go. A wise person will notice the subtle course change and review their direction to ascertain they are heading where they want to go.

For a decade now I’ve worked hard on a course change for my tax practice. I dived head first into the DIY tax preparation opportunity. The first foray was a disaster costing me nearly $80,000 in loses. (Tax deductible, I should add.)

My second attempt was rebuffed and fundamentally changed the normal part of my practice. What was a quiet tax office turning a reasonable profit erupted into a madhouse ending with burnout and health issues. 

My goal took a different direction and I felt obligated to more people than I really was.  The goal turned into a four-letter word. And a goal should never be treated as such.

Goals are guidelines you set up so you stay focused. When the telescope is moved you need to reevaluate. 

Sometimes the best thing that can happen is for someone to throw sand in the gears. You can get comfortable (I got comfortable). Then things can go really wrong which causes bitterness and loss of direction.

Yeah, you might have fewer clients and less income, but you will have a more satisfying life; you might have to work one year longer before retirement , but you can slow to a reasonable pace instead of trying to beat the record earliest retirement among your friends. Always, quality over quantity.

When used properly, goals are the most powerful force on earth. They can take us to the moon and make electric cars mainstream. 

Goals should help you manage dreams and help you live a better life. Maybe all the way to the stars.

And sometimes a quality goal is to quietly read a good book (or blog). To slowly absorb the story.

Take the time to live, kind readers. We only get one go at this. May as well enjoy the journey.

Remember, I’m pulling for you. We’re all in this together. (Red Green)

 

 

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. 

The Wealthy Accountant World Headquarters and Camp Accountant

Today I want to think out loud within earshot of readers. The benefit to readers is they get a better understanding of how I think about business, investments and life/work balance. It also allows me to crowdsource my thoughts  where readers can provide advice I can use to make a better decision. And, of course, readers have skin in the game as will soon become apparent.

Before we begin we need to know how we got where we are before we can move forward. 

 

How We Got Here

This blog is very important to me and I want to continue growing and improving the venue. I also own a tax practice since 1982 part-time and from 1989 full-time. There is a lot of history and memories.

When this blog started a piece of my childhood was still with me. Growing up on a farm in the boondocks of Wisconsin is like no other childhood. While running my practice I enjoyed raising beef and chickens. . . until a few years ago. 

Saving your business when illness strikes. Build and grow your business in the toughest of times. Guarantee your business lives on long after you do. #business #illness My first writing started in high school, but it took until the early 1980s for anyone to bother publishing what I wrote. Publication was rare, yet enough to encourage me to keep honing my craft.

Before The Wealthy Accountant (TWA) I wrote in a variety on genres. The last gig was flash fiction. The contract required 4 flash fiction stories per day, seven days a week. It sounds like a lot, but flash fiction is a few hundred words at best so it wasn’t a heavy load. And no research was ever required.

Once this blog started it was time to phase out the flash fiction work.

TWA was more demanding than any prior writing. Much more response from readers kept the workload heavy. Things that I loved doing had to go to keep up. With heavy heart I bid my boys (the steers) goodbye. The price was heavy for this country boy.

Still, I wanted a successful writing career along with my tax practice. Writing in my preferred field was a huge bonus. Unfortunately, the demands are more than most of my kind readers understand. Reaching a decision to stop farming illustrates the seriousness of my commitment.

While TWA enjoys a modest readership, a massive percentage of those readers need more than a short post. They have unmet tax and financial needs. So I accepted more clients; too many, in fact. To help those I couldn’t take on as clients I consulted with. And still I was only serving a tiny fraction of those crying out for help.

Tax season no longer ends on April 15th for me. Extensions stretch well into summer with clients not always understanding the toll this was taking. In between I consulted and wrote more blog posts. The goal was always to elevate my work higher and higher so readers enjoyed the greatest value.

And then life stepped in.

 

Boy, Interrupted

As the weight started taking its toll I adjusted as best I could. First the other blogs were cancelled. Then my farm was sacrificed. The weight of my choices extracted a serious penalty.

I have always been healthy. I did have a heart operation in junior high, but outside that I’m like a machine. I enjoy life and take the largest bite I can chew. If life is worth living it is worth living to the max.

It was easy to brush off the first warning signs. Yes, I was working long hours, but I enjoyed the work so why not.

To compensate for fatigue I started devising ways to increase my productivity. Two years ago I started building daily goals, especially when I worked weekends and holidays, to complete a certain amount of work. 

Surviving tragedy in business. Survive flood, fire and natural disasters. Keep your business alive when things are darkest. #business #tragedy #disaster #flood #fire #health #medicalVisualizing my goal allowed me to increase my production a fair amount. But every action has a opposite, yet equal, reaction.

Last summer I never snapped back from the prior tax season. The growing workload even from current client’s expanding (blog clients do that a lot) real estate holdings, investments and businesses gave me no time to rest. 

Spin down had begun and there was nothing left to give up. 

When the last returns were filed last year I tried to take time to relax. It didn’t matter. My system couldn’t recover. And then another tax season arrived.

My entire office reached burnout trying to keep my pace and eventually left. I picked up the slack because I gave my word to my clients. I couldn’t let them down.

Even without accepting new clients (and a few clients leaving) the workload increased. Clients from the blog always had significant issues. I never anticipated that accepting a 4-hour tax return client might end up taking 40 or more hours, as sometimes happens. 

The new tax law (TCJA) added to the tax season workload. It was my goal to speak with every client so they knew how the changes affected them. I was exhausted, but motivated and excited to serve clients.

Then the inevitable happened. Around the middle of February a nasty cough returned and refused to relent. Within a few weeks I could barely speak. Working with clients expended more energy than ever due to my health.

By the end of tax season the well was dry. My voice completely collapsed. Employees were concerned I might die I looked so bad. Nothing seemed to help. There were no options left to force more out of this country boy.

I blamed it on the long and cold winter followed by a cold spring. When the weather improved so did my health. . . temporarily.

Many tax extensions are still on my desk and it seemed every return I touched I couldn’t finish it. It was mentally draining. Something always came up. Information was missing and/or extra work required. Without any reserves I struggled to have any productivity.

The 4th of July holiday was a chance to catch up some without interruption. It was the final straw. An all-nighter is not what my body would allow anymore. 

The cough which never really went away reinforced and worse than ever. My voice collapsed again and this time it really hurt (as if it didn’t the first time around). 

The extra hours were for naught. Monday I left the office at noon barely able to drive home. The level of burn out I was experiencing caused a high fever. Tuesday I left early and again today. 

After tax season I went to the doctor to see if there was anything for the cough. There was nothing physically wrong with me. 

I was pushing past burn out toward a nervous breakdown; the doctor made that clear and warned me I needed to slow down. I was working at an unsustainable level and had been doing so for so long there was a real risk of permanent damage. 

With a desk still piled with extension I am back in the pit. 

No matter what it takes I will finish the work I promised. But one thing is certain; I will never survive another tax season business as usual. Changes must be made or it will all crumble to dust.

And this is where you come in, kind readers.

 

New World Order

I know my body will not allow another year or tax season the way I’ve been doing things. At the same time this blog is something special, helping countless people.

Once again something has to go. The blog is more important because it helps more people than working one-on-one in the tax practice.

Transitioning your business. Take your business to the next level. You worked hard growing your business. Make sure it lives on after you leave. #business #transitioning #growth #sale #sellingBut I can’t let go of my baby. I have run my practice for so long it is like a body part. This is what I am. Letting go is as impossible as cutting off my right arm with a dull butter knife. It just can’t be done.

And if I push one more time I may not live long enough to see the long days of next summer. 

My options have narrowed. The current breakdown after the 4th of July weekend scared even me. My throat swelled so much from the cough I had a hard time breathing. I might be slow, but I eventually get the message.

This is an existential threat to the tax practice and employees would like for me to change while I still can.

The office started throwing around ideas to deal with my health. Everything was on the table. And I mean everything.

You, kind readers, need to help us with this. Consider it crowdsourcing TWA’s tax practice. You actually get to help decide the future of the practice and this blog.

My practice is unique in many ways due to this blog. Over half the clients have multiple state returns. Almost all returns are complex requiring research. This isn’t the easy way to run a firm, for sure.

Now I will run down the ideas we had in the office with the pros and cons. Please add new ideas we haven’t thought of in the comments and give your opinion on the ideas we did have.

Remember, everything is on the table.

 

Complete Sale

My first reaction was to just throw in the towel and quit. With over 30 years in the field and my 55th birthday only a few weeks history, it might be time to finally do what the FIRE community always recommends: retire. 

It is not something I want to do. To walk away completely is alien to me. Once I recover from the stress I know where I will want to return and it will be gone. So much has been sacrificed already. Not this, too.

Pros: The biggest benefit is it would be over. I could return to health reasonable fast if the damage isn’t permanent. 

Cons: Do you kill the patient to kill the disease? What about my clients? Employees? Community? These people count on me. People don’t hire a tax pro 3,000 miles away because there is an equal choice two blocks away. My work is not done! Walking away would be such a waste after all the progress made.

 

Partial Sale

I checked around my community and found it will be hard to sell my practice. My clients require special accountants and if they were available locally I would have hired them by now. I also placed an ad on Indeed with a starting wage for a tax preparer of $26 – $32 per hour, plus benefits. So far not a single candidate. (A few accountants working A/P or A/R applied, but they didn’t read the listing requiring letters after their name and at least 5 years tax experience. My clients are not for the faint of heart.)

There is the possibility another firm may want to buy or merge with mine. However, most tax offices are working long hours already and don’t need an influx of extraordinarily difficult tax returns.

That leaves the option of a partial sale where I either sell part of the practice, keeping maybe 125 clients for myself, or just letting all but 125 clients go if a partial sale isn’t possible.

Pros: This half measure brings the headcount low enough where I still can enjoy plenty of tax work, still write this blog and have a life. (Oh, and remain healthy.) I would also keep two write-up (bookkeeping and payroll) clients, too. Consulting and the blog added to these 125 returns and two write-up clients would give me a very good income. I am seriously considering this option.

Cons: The biggest drawback is the office will be a very lonely place. Most clients live far away so very few will walk through the door. Every day I’d work alone in silence. Summer will be eerie, indeed. I will miss the tax office I once had and might end up with more solitude than I’m able to bear.

And how do I let go of so many clients? It would break my heart.

 

Hire Remote Employees

This is an appealing idea to me. It works like this:

I would hire people from various Facebook accounting and tax groups I belong to. I’ve noticed many tax professionals willing to work remotely in these private groups. Most have experience and I can vet them by just watching how they ask and answer questions within the group. 

There will still be work finding qualified employees, of course, but the gene pool will be much larger and I’m casting were the fish are swimming. 

The best part is I can hire more tax professionals than I ever could locally. Some semi-retired, very experienced, tax pro might want to take on maybe 25 returns a year. Another might want to handle 80; another maybe 50. No one employee will do so many that if one gets sick or quits the house of cards collapses.

Pros: Hiring tax professionals from around the country allows me to send tax returns local to the remote employee. Office space in not an issue. Many can be hired so there are plenty of skilled tax people on the team. This is my favorite idea to date and will be pursued regardless just to understand how it will work. It is also the best solution allowing all my clients to stay and get better service going forward and even add new clients.

My office is set up for remote employees already. I work from home often and it’s just like sitting at my desk. New remote employees will work the same with full security, like having their own desk in my office.

Cons: Herding employees around the country (they must all live within the US) could be like herding cats. Only time will tell. Secure remote setup costs money. Adding 10 or 15 new remote users could get expensive. Not prohibitive, however.

Another risk is taking on too many client because I think I have people to handle the work. Future growth must be controlled to avoid a repeat of what I’m going through now.

 

Selling Chairs

One of my accountants came up with this idea. It would work similar to beauty salons where the owner leases out a workstation to people owning their own hair care business.

I have never seen this done in a tax office before. There will be some technical hurdles. Each room would need new doors with security locks as each tax professional is their own business. They could piggyback my EFIN with some updates and modification on my part with the IRS. 

The front desk could be a shared expense. I could keep my 125 clients as listed above under Partial Sale and shift remaining clients to employees now running their own practice. Clients will have the exact same environment they are used to with the same support structure. No client would be let go under this plan!

One current accountant and a CPA employed by me years ago might be interested if the terms can be worked out. (I will make the terms work out for them.) 

Pros: I like this idea as it cleans my desk and allows me the freedom to explore other business ideas while serving all my clients in a respectful manner. My income goes down, but it’s like selling my business and renting my office without selling my business. Each tax pro can work with others in the building, helping each other (at their regular rate) wherever needed.

I don’t want to do bookkeeping or payroll so I can keep some clients that require such services by hiring another tax business in my building to handle that facet. 

My current employees will earn more and own their own business so they should be happier.

Cons: The building will need some remodeling and updating. The parking lot is too small and will need to be expanded. Upgrade costs will top $50,000 easily. I have the benefit of the partial sale as listed above with a steady stream of rent income. However, income will be less than managing it all myself.

The same issues exist as with remote employees. The entire office can rent usage of my server and the software. Printers can be shared. Real effort will be needed to structure this properly and there may be regulatory issues.

 

TWA World Headquarters

The choices listed above are what I have. If you have a better idea I’m all ears. 

If I sell 100% of my practice I will keep the office building and use it as TWA World Headquarters. Classes, training and other activities will be offered to the community. 

If I decide on a partial sale the building will still be re-purposed as TWA world headquarters. 

There are advantages to focusing on the blog. Financially, focus should allow the blog to equal and exceed what the blog and practice combined produce now within a year or two. 

If the tax practice fills the whole building I may decide to restructure the businesses. The tax practice would not have a sign out front anymore as TWA takes a more public image. Local clients will understand the name change. 

The future is this blog. Still, I always want to spend time in the trenches so I continue growing experience in tax application as well as theory.

I will share with you, kind readers, as this evolves.

 

Camp Accountant

As you may have guessed, Camp Accountant is on hold until my health improves. Sorry.

 

Decision Time

Realistically I need to make a decision on my practice before the extension deadline (October 15th). I will explore each idea to see what might work as some ideas might not be what I expect. 

The unique nature of my firm makes it hard to sell or merge. Someone willing to manage my firm would allow me to expand (another option). Unfortunately, I can’t do it all. 

What my experience shows is that there is a massive need for good tax professionals around the country.

I don’t want it to end here. Before I do something I regret for the remainder of my life, I need to make good decisions for the future. 

In our brave new world we can crowdsource ideas like never before. I don’t have to solve every problem. One of you readers might actually have the solution to my problem.

Don’t be afraid to share your ideas in the comments. The future of this entire dreams depends on you.

 

Update: A lot of you are commenting. I am reading all the comments, but lack the energy to thank and answer each comment separately. Thank you, everyone. You have no idea how much you motivate me. You are the best.

 

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. 

Mr Money Mustache Fired His Accountant for not Retiring Early

Mr. Money Mustache fired his accountant for refusing to retire early. Humor. #FIRE #FIREcommunity #earlyretirement #retirement #financialindependence #humor #funny #comedy #MMM #mrmoneymustache #firedIn a breaking news story sure to rock the FIRE (financial independence/retire early) community, Mr. Money Mustache (MMM) has fired his accountant for refusing to take early retirement.

You may recall Mr. Mustache is the leader of this massive FIRE movement sweeping the planet. Suze Orman has never been the same since she said she “hates, hates, hates” the FIRE movement. Now it has come to light the leader of the New World Order has ordered the hit on his now former accountant for refusing to take a knee prior to normal retirement age for a public official (age 55). 

His former accountant, aka The Wealthy Accountant (TWA), kept a stiff upper lip when he broke the news earlier this year. However, the paparazzi knew something was afoot when Mr. Accountant had a tear at the corner of his eye. 

A secret recording — actually, an illegal wiretap — revealed MMM putting the thumbscrews to TWA. That poor (relatively speaking) accountant cried out like a stuck pig. (He does come from a farming background so what else would you expect.)

The wiretap revealed MMM demanding his accountant take an early retirement while it could still be considered “early”. You can hear the accountant’s refusal through racking sobs. God help us if the recording is ever released.

After TWA regained his composure he tried to reason with MMM. He said, “If I retire who will do your tax return?”

MMM never missed a beat. “Once you retire I start work on the IRS auditors. Once they retire early then I’ll get every government official to retire early. Then . . . ”

“. . . we’ll have anarchy,” I finished the sentence.

And that is where we stand. One unemployed accountant (not technically retired) is trying to pull the pieces together. He stands hunched over most of the time now until he notices someone watching. Then he straightens up with his shoulders back, facing up slightly, staring into the distance. It would be a thing of beauty if it wasn’t so sad.

 

If anyone thinks this is a serious post come over here so I can slap you. The idea was for a humorous post with the FIRE community center stage in the flavor of The Onion. We can call our production The Turnip: Just like The Onion, only tastes better.

Now it is your turn. Share a funny news headline about our demographic in the comments. Add a short story if you want. (Keep it clean. This is a family restaurant.) 

Finally, I hope your summer is going great! Let’s have some wonderful midsummer fun (at our own expense). 

 

 

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. 

Finding a Good Accountant for Your Income Properties

Vetting a tax pro before you hire her is the most important task you have. The right choice will save you thousands while reducing stress and problems. Here are the steps and questions you need to ask when vetting an accountant. #questions #taxpro #CPA #EA #enrolledagent #IRS The Tax Code has gown in complexity the last few years. Finding a qualified tax professional who understands the nuances of taxes is harder than ever. Without proper vetting you can overpay for service and end up with subpar results.

The growing complexity of the Tax Code has more tax professionals specializing. This is a good news/bad news situation. The good news is that when you find the best tax professional for your situation you should achieve maximum results. The bad news is that prep fees reflect the higher competence level.

And if you are going to pay more you want to make sure you are getting the best value. 

All tax professionals are required to work outside their area of specialty. An accountant focusing on investment properties still has to complete the remainder of the tax return. You need a tax professional who understands how decisions made with investments affects the remainder of the return.

The meat of the value when hiring a tax pro is finding one specializing in the most difficult or complex area of your return or the portion causing the most tax. 

For example, income properties are a part of many tax returns. Those looking to retire early may use rentals to supplement their income. Income properties can also supplement part-time income. The tax professional you need should understand the basics of an individual tax return. The accountant should also understand the fundamentals of the various retirement accounts and the implications of using each for your situation. But most important of all, you need a tax pro focused on the rules surrounding income property.

Desperation is a bad guide. Just because an accountant accepts you as a client doesn’t mean it’s a good fit. You need to vet your choice before signing the engagement letter and committing to her services.

Today we will focus on how you can vet a tax professional (enrolled agent, CPA, attorney or other tax professionals) to handle your investment properties. Asking the right questions is vital. Knowing what answer you should get is even more important. 

 

Vetting a Tax Professional

Each situation requires a different set of questions. We will focus on a individual with income properties. Small business owners will have different questions. You will need to do some research to prepare a list of questions specific to your needs before visiting the accountant.

The answers the accountant gives is less important than how they handle the questions. First, you probably don’t know all the details of taxes surrounding your situation. Therefore, you may not know the accuracy of the answers given. 

You don’t want a know-it-all tax professional. It is okay for her to say she doesn’t know the answer and will need to look it up. This is normal! If the candidate never needs to research they are either a prodigy or an idiot and I’m not betting on prodigy.

You also want the accountant to add something to the mix. Your questions and situation should jar some additional ideas from the tax professional you didn’t think of. That is why you are hiring her!

The accountant should care and be interested. Smart isn’t good enough. This is a long-term (we should hope) relationship. As the accountant knows you better she can provide better and better service. Her value should grow each year.

I’m putting a lot of weight on the accountant. I fully expect the tax professional to charge accordingly. No one should work for less than the value they provide. You should be willing to pay more if you expect more.

Expect more. It’s a better deal.

Let’s run down the vetting process and questions you should ask a tax professional if you own or plan on owning income property.

 

Should I have an LLC?

LLCs are organized on the state level. I can’t think of a state where have income properties in an LLC would cause an issue. The accountant’s answer is important here. You may need an attorney to set up the LLC if their are issues.

Under no circumstances should you hold real estate in a regular or S corporation or LLC electing as such! There is no added benefit to doing so and many, many problems associated with it. 

The accountant should point out that the income properties held by the LLC will have no tax effect as you will be treated as a “disregarded entity” for tax purposes. This means if you own the property/s solely you will report on Schedule E of your personal tax return and if there are two or more owners the LLC defaults to a partnership. For income properties, the LLC value is for legal purposes only.

If the accountant wants to deviate from my answers they had better have a really good reason. There are not many and I have never seen a qualified tax professional or attorney recommend putting real estate inside an S corporation. 

This is a warning to all the DIYers setting up their LLC. Too many think they save money by putting the properties in an S corporation and it really only causes problems.

 

Recordkeeping

Next you should ask how the accountant want your records. This is a personal preference. As long as your are comfortable presenting your data in the format asked for the relationship should run smooth.

This is also the time to discuss bookkeeping services if you need help in this area. If you know you’ll struggle with the recommended bookkeeping process requested by the accountant consider spending a few extra dollars for a quality bookkeeper. As hard as it is to believe, good books save you money, reduce audit risk and lower your taxes.

 

Deductions and Other Tax Advantages.

Now we turn to a variety of unique tax deductions and benefits owners of income property enjoy. The normal deductions should be obvious: property taxes, mortgage interest, depreciation, supplies, repairs, advertising . . . 

I want you to ask difficult questions on unique issues when vetting a tax pro candidate. The accountant should understand these issues or be willing to research them. 

This list is not exhaustive. The issues I want you to ask about I see constantly so you want an accountant versed in these issues. It is where the tax savings reside.

 

Travel

Ask about mileage. The accountant should explain what is allowed. She should also explain if the standard mileage rate or actual expense is better.

 

Other non-cash deductions

I consider the mileage deduction a non-cash deduction. There are a few others worth noting. 

Before taxes become a problem you need to ask your accountant these questions. #accountant #CPA #EA #enrolledagent #taxpro #tax First, you can use a per diem when you travel. If you attend a real estate investing seminar you can deduct the hotel, airfare (or miles if driving), the cost of the seminar and a meal and incidental expense allowance (M&IE). 

Hotels and other travel expenses require a receipt for substantiation (in case you get audited). However, meals are a different story.

You can deduct actual meal expenses if you want or you can use the M&IE per diem rate. You can use a chart to deduct based on the city you are visiting or the hi-low rate. You must use the same method within each business trip. However, you can switch between different business trips, using actual expense on one and the per diem on another within the same tax year.

Second, if you use actual expense when traveling you do NOT need to keep a receipt for meals under $75, including tip. Your accounting records of the meal expense along with the business purpose of the meal and who you were with is sufficient for a tax deduction.

You can not use the per diem for non-travel business meals. However, the $75 receipt rule still applies.

 

Tangible property rules

Some things are deducted and some need to be capitalized (depreciated over a period of time). Not long ago this was a real pain for income property owners because asset expensing (Section 179) is not allowed on income real estate and its components (appliances, for example). 

Under the new tangible property rules all items $2,500 or less can be deducted regardless. That means most appliances are now deducted versus depreciating over 5 years. Curtains, carpet and other minor items are also currently deducted. 

An election is required so ask to assure the accountant you are vetting understands this.

 

Repair regs

Improvements have always been a serious issue. Improvements are depreciated over 27.5 years for residential property and 39 years for commercial. You still pay the expense up front.

Improvements are defined as increasing the value of the property. Many improvements therefore are really deductible repairs under regulations. 

Find the best tax accountant possible by asking the right questions. As long as you are paying the bill your deserve the absolute top level of service. #CPA #EA #enrolledagent #taxpro #investments #realestate #incomepropertiesFor example, flooring is usually not an improvement since it only restores the property to its original value. Roof replacement can also be considered a repair, even if it is really expensive. Cost does not automatically cause a deductible repair to become a capitalized improvement! 

Generally (and this is why a detailed conversation with your tax pro candidate is so important), if flooring is replaced with the same type it is a repair as long as floor boards are not replaced or reworked. The same applies to roofing. If the same roofing material is used to replace an old roof it probably qualifies as a deductible repair as long as roof board are not replaced. 

However, the previous paragraph (flooring/roofing/other repairs) only qualifies for a deduction if you own the property as an income property for 5 or more years. It is assumed by the IRS that if you owned the property for a shorter time period the property didn’t have enough time to deteriorate so the repairs are actually improvements. Planning with your accountant is vital.

However!

There is still one more really big out. If you have an improvement of $10,000 or less you can elect to deduct the improvement as a repair expense. 

There is some gray area here. The $10,000 repair reg rule is per building, kind of. If you remodel a kitchen and bathroom in the same apartment it must be $10,000 or less combined to use the repair reg election.

The same probably applies in multi-unit buildings. Tax professionals differ here. Many tax professionals consider all improvements in a duplex. This means all improvements in both apartments must be $10,000 or less to qualify under the repair regs. 

But in larger multi-unit buildings it gets more complicated. Do you count all bathroom remodels , et cetera in a 20 unit complex? This accountant looks at each situation before making a judgement call. (I also research this a lot based on facts and circumstances when it comes up.) 

You need a serious discussion on this issue when vetting an accountant because it is only a matter of time before it comes up in real life.

 

Cost segregation studies

Sometimes you can super-charge your depreciation with income properties. Cost segregation studies can generate ~ $400,000 in extra deductions the first year on a $1 million property, depending on the facts and circumstances. Costs segregation studies work on properties as low as $300,000.

You can read more about this powerful tax strategy here. 

 

Grouping

Sometimes it is advantageous to group certain properties/activities together to maximize tax benefits. Grouping is less common so many tax professionals need to review the facts and circumstances before committing to an answer.

 

Qualified Business Income Deduction (199A)

This new deduction created by the Tax Cuts and Jobs Act of late 2017 is complicated. To make matters worse the IRS has issued several batches of regulations as it relates to income property and several issues remain unresolved. 

You can read more about the QBID and how it relates to income properties here. 

Be sure to discuss any recent changes with your tax professional. Again, they can pass the vetting process with less than perfect answers because perfect answers don’t exist. But they need to understand what has been clarified and have good reasons to take the position they do in unclarified areas.

 

There are other questions you will want to ask.

Finding a qualified tax professional takes time and work. It is all worth it in the end. The best tax professionals are selective in who they take on as clients so you will be vetted at the same time you are vetting. This is a good thing as you want a good fit for all parties involved because it is your investment and money is on the line.

 

 

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.