Frugality is the animal that must be bred to achieve financial goals. There is no amount of income that can’t be spent, and then some. If you don’t believe that, take a long look at the U.S. government to get a view of an amount of money that can be spent with ideas to spend more.
The seed of wealth is the money you didn’t spend and instead invested. That is the only course in building a steady stream of income to enjoy the life you want.
The investment isn’t the problem; the seed is. You can generate a generous income stream from real estate, index funds or a business. In each case it is the excess cash you didn’t spend that is the seed that grows to satisfy your dreams.
The more frugal the lifestyle, the less you need to retire.
Image a man with a million dollars invested. Is he rich? Could he retire? Well, the questions are impossible to answer. If he spends $300,000 per year the million isn’t so much. If he spends under $40,000, he qualifies under the 4% rule to retire because he is unlikely to ever deplete his nest egg.Read More
This past week an old story was refreshed for me. A tax office that handles mostly simple tax returns for a very low price and gets paid mostly cash might not be claiming all that income. A previous employee of that firm informed me over $300,000 in cash was kept in a safe in the money cage.
The final response (and I was thinking the same thing) was, “And I’m sure all that cash was reported.
Cheating on your taxes is as American as apple pie, but a whole lot dumber. If this other tax firm really has that much cash on hand and does not report all their income they lose a lot more than most people expect.Read More
How much are you really paying for tax preparation?
What if I told you there was a hidden fee in your tax preparation bill. This hidden fee costs you serious money every time you file your taxes. This hidden fee shows up even when you prepare your own tax return. And it is totally avoidable. They sneak the fee in because you never see it and therefore never complain about it.
The hidden fee is hard to identify. It doesn’t show up as a line item on your accountant’s invoice or the online software payment page. Yet the fee digs hard into your wealth.
This same hidden fee looks different when you prepare your own tax return than from a professionally prepared return. The best way to expose this usurious fee is to handle it separately from how it is applied to DIY tax preparation and professionally prepared return.Read More
People pay me a lot of money for advice. It’s called consulting. Questions on taxes and money are what start the conversation. But once we get under the hood it becomes clear there is another motive. The real questions involve medical issues, raising children, starting a business and retirement.
It would be easy for me to give a short pat answer. It wouldn’t do much good, but I could do it. Instead, I ask a series of questions helping the client to come to her own conclusions. Some crazy tax guy from the backwoods of northeast Wisconsin will never have clever enough words to convey the right message. I have to help the client find there way there on their own. If I say “Yes” to the best business idea ever and the client is not ready or in the right mindset, they will fail.
And it always comes around to the finish line, aka, retirement. When can I retire? Should I retire?
I could give you a simple formula if you want. Better yet, skip the whole post and scroll to the bottom for the quick and easy answer, for all the good it will do you.
However, it might be better if I share a story and ask a few questions first.Read More
Here is what I said to Brooke, “Do you know what unconditional love is?” She nodded. “Well, mom, Heather and I love you unconditionally. We love you and will never stop loving you. Ever! I know we work hard to be frugal and save and invest. But this is why. Times like this! If we don’t spend whatever it takes to get you better, what good is having money? I don’t care what it costs. We will not be frugal when it comes to getting you better. I would give every dime I have just to have you.”Read More
The books the most successful people alive today recommend might surprise you. Elon Musk mentions The Lord of the Rings and Douglas Adams’s Hitchhikers Guide to the Galaxy more than once when listing must-read books.
These books might seem like strange choices, but when you think about it these and similar books start the engine of creative thinking. The technology Tesla uses to manufacture electric vehicles is not new technology. Some of the technology used is 18th century knowledge, even more from the 19th century and early 20th Century. The magic of Elon Musk is applying this knowledge in novel ways. Remember, electric cars came before the internal combustion engine (ICE). The ICE won until Musk built electric vehicles with existing technology that really worked. Then he revolutionized batteries.Read More
The timing could not have been worse for remote workers. The Tax Cuts and Jobs Act of 2017 nixed the deduction for work from home expenses and other unreimbursed employee business expenses.
Prior to the TCJA it wasn’t the best deduction in the world either. You had to itemize to get the deduction and it was combined with several other deductions and then reduced by 2% of your adjusted gross income. But it was at least available and with some planning could provide modest tax relief.
Self-employed people can still deduct these expenses on their or Schedule C. Same for farmers (Schedule F) and income property owners (Schedule E).
For employees, the deduction is now gone, unless you know the rules. With proper planning you can benefit by working from home, getting a tax benefit for work related expenses. The home office, the pro-rata share of utilities, insurance, property taxes and/or rent and mortgage interest can get tax-free treatment. Same for office supplies and equipment. And don’t forget business travel expenses.
Working from home has plenty of benefits: no office politics, no fighting traffic and every day is casual day. The downside is you have expenses at home that can’t be deducted on your tax return. We are going to fix that right now.Read More
When it comes to the blogs and other tracts providing information on building wealth, frugality carries most of the weight. And it makes sense. The greater the difference of income over spending is a strong determinant of the level of wealth an individual will achieve during their lifetime as compared to their income level.
As important as frugality is, spending is even more important, even if it doesn’t garner the required column inches the matter deserves. Spending less than you earn is the seed money for investments and without investments it is impossible to build significant wealth.
As an accountant I see people from all spectrums of income. Frugality, even hyper-frugality, is the hallmark of those with modest levels of wealth. Even the lowest income earners can amass a half million or more in a working career when frugality is taken to religious levels, with the excess invested in equities like index funds.
Mid-levels of income also do well with only the single tool of frugality. As their wealth grows they sometimes seek out professionals to help them. These clients tend to want short consulting sessions once a year with a review at tax time.
Then come the serious achievers. These people sometimes have modest incomes, sometimes large incomes. Regardless their income level, these people smack it out of the park. Their level of wealth is well beyond what would be expected for their income level or level of frugality (the excess of income above spending).
Super-achievers in wealth building focus on spending more than frugality. They know spending is more important. And they know most spending drains their energy and wealth while proper spending can actually make them richer!Read More