Low interest rates have raised concerns if it is proper to pay off debt early. The good news is there are ways to determine if you should pay down debt, including the home mortgage, or invest funds to accelerate net worth building. Low interest credit card teaser rates and equity lines of credit add another dimension to the ever evolving world of personal finance. There are two factors to consider when balancing between reducing debt or increasing investments: the return on the investments over the cost of capital and the risk factor.
Personal finance can learn a thing or two from corporate finance when it comes to debt and investment. Just like a business, when a household decides to pay down debt there is a tradeoff. Accelerating debt reduction takes money from other areas, mostly spending or investment, but also reduces risks associated with debt servicing. In this post I will assume you have reduced your spending to a reasonable level and the trade-offs are between debt retirement and investment only.Read More
There is a sickness spreading in the FIRE (financial independence, retire early) community. This sickness threatens to topple the best laid plans of intelligent young men and women everywhere. The mentality is that you must do everything yourself to save a dollar and reach your FI goal as soon as possible. Except this DIY mantra is the surest way to delay FI and early retirement by a substantial amount of time.
The worst disasters at my office and lowest times of profitability are when I, as the boss, either refuse to delegate or do not have qualified employees to delegate to. The same applies in personal life. When you do every possible job yourself you lose the economies of scale a professional can bring to the table at a lower cost, faster completion, and a better finished product. Your FIRE goal can be delayed because you refused to delegate.Read More
Years ago I started a book project called The Zero Percent Tax Bracket. The idea was to write a book with all the ways a person can bring in money and legally not report it as taxable income. As I started pulling information together it became clear marketing such a book would be difficult. Since I was not focusing on tax protesting or other such BS it would not attract the wing nut crowd nor was I interested in becoming the next Charles Givens. A book called The Zero Percent Tax Bracket would probably languish on the back shelf of a bookstore with only modest sales. The idea was sound but I did not like the marketing plan.
Today I am resurrecting the idea. As a book it would need a serious shove to turn a profit for the publisher; as a series of blog posts it is an excellent way to outline all the ways to line your pocket without owing a penny in tax. You will not find all of these tax-free methods listed in the tax code. It is the unusual interpretation of tax law that always appeals to me as long as jail time is not involved. (Jail time might be okay if it is a fairly short stint of three-hots-and-a-cot, plus free healthcare at the expense of the taxpayers. Taxes are no fun, but collecting benefits—even free jail lodging—does.)Read More
Getting rich in the Western world, especially the United States, is so easy it boggles the mind why so many are poor. There is no excuse why everyone should not have a tidy sum of wealth invested, producing a steady stream of passive income. It is so easy yet people keep searching for the answer to quick riches, which are not so easy.
The lottery keeps bringing in money when the odds a gazillion to one you hit the jackpot. The lottery is the ultimate stupid tax. The only time I gamble is when I have the advantage, as in card counting and I haven’t done that in a while either. If I’m not having fun doing it I do something else. (Casino smoke bothers me so I don’t card count anymore, but I love playing cards.)
Saving and investing is easier than at any time in history. And safer. The first modern mutual started in 1924; the first index fund on December 31, 1975. As unfair as many claim the system is, it is more regulated to protect investors from scams than ever before. Diversification reduces risks due to funny accounting and con men and diversification is so easy and automatic. (Think payroll retirement plan withholding/matching and auto investing available at all mutual fund houses.)Read More
Media continually warns of impending inflation due to all the money printing by central banks around the world. The concern is real. If inflation spikes bonds will suffer massive loses and stocks will also suffer a painful decline. It is past time we look at the facts about inflation, how fast it rises, and what causes prices to spike.
Planning for retirement and when reviewing investments, inflation is a consideration. A review of historical inflation data will help in the decision-making process. By reviewing the historical data also clearly shows why inflation accelerates, including solutions to protect yourself. We will focus on inflation data in the U.S. I have reviewed price data for other countries and further back than the U.S. data. The conclusions are the same.Read More
In the Star Trek: The Next Generation episode “Final Mission” Captain Picard speaks fondly of the groundskeeper from his days at the Academy. Boothby, the groundskeeper, left a lasting impression on the captain, teaching him what life is really about as he called Boothby one of the wisest men he ever knew. Captain Picard learned at an early age the greatest lessons in life are frequently taught by the most unassuming people outside the classroom. Boothby understood people better than anyone as he witnessed young men and women embark on their career and was willing to share his insights.Read More
The difference between wealthy people and non-wealthy people comes down to a small set of habits anyone can embrace themselves. There is no special trick or secret. Wealthy people do things the average person does not. Super wealthy people like Elon Musk, Bill Gates, and Steve Jobs share the same wealth-building habits with a bit of luck to give them a push. The great news is you can be rich, too! No promises on the super-rich thing, but you can be a millionaire if you choose.
There is an advantage for people like me working in accounting. I see people from all walks of life and their true level of wealth. Over time it becomes apparent how their habits reflect in the level of wealth and quality of lifestyle they have. We stand in awe and envy when we see people retiring at age 30 or 40, and rather than learn their habits, we seek to tear down their success. The only difference between people who retire early and those finding a comfortable retirement at 65 is how soon the wealth building habits are learned. Here are the five things I see rich clients do on a regular basis and non-wealthy clients frequently do not. Not only do the wealthy have these habits, they exercise them daily.Read More
Gone are the days of lifetime careers. Today we think of multiple income streams as our safety net. Job security is an illusion. Accountants become farmers or bloggers on the side; plumbers become landlords; police officers offer fitness training on the weekend. Today we live in the world of slash careers.
Empowerment comes from educating ourselves in multiple disciplines. The accountant/blogger brings experience from the slash career back to her office providing clients with a better understanding of their personal tax and accounting needs.
So what is a slash? A slash is a professional person with mixed identity. Therefore, the professional can be an accountant slash blogger. People cannot settle on a single career path as safety nets disappear. Families cannot count on the government as their sole source of survival when things head south. The new paradigm has created mixed professionals with skills and experience crossing professional fields. Sometimes there is a correlation between the professions, but it is not necessary.Read More