Posts Tagged ‘goals’

Losing Touch with Reality

Just when you find someone really good word gets out and they get busy/popular/semi-famous or some other bullshit. A great tax guy stops taking new clients and is slow as hell because he has too much work to do. An awesome blogger is discovered by the world at large and is inundated with requests until she burns out. The story is repeated again and again. They get good, then discovered and then wore out.

The worst part is what fame and fortune does to these people. They lose touch with reality as the world builds a wall around them, built with bricks made from the flesh of living and breathing human beings. They get callous because it becomes impossible to respond to every request, none the less, honor the request.

Or maybe it isn’t them. It could be you! Maybe these people are seeing the world for what it really is for the first time. Maybe they have always had a firm grasp of reality. It might explain why they are where they are and why you are where you are. Think about it.

Everybody Wants Some

Ah, fame! The stuff we dreamed of as a child. If people would only know my name. Only the unlucky few who realize (notice the choice of word) this dream understand how fucked up it is. Fame and fortune are not fun. That is the reality of it! Of course, fame is sometimes required to reach fortune.

If you are good enough you soon accumulate a fortune. It doesn’t take folks long to know what you have. True story. Reality, writ large!

Then the gold-diggers show up. They want what you have without the work or the headaches. You do the bull work; they hitch a ride.

Nice people turn into asses once they get popular. A sociable blogger once had time for all her followers now says “No” more than “Yes”. How dare they? They owe society (read: you). It’s people like you who made them what they are!

You promise to turn away, but you keep looking back. They are famous, successful, for a reason and you can’t figure out why. You can’t look away for long. What do they have that you don’t?

I Can See Clearly Now

The clarity of thinking, the clear view of reality, starts before you achieve important things. The important local business person had a vision when no one was watching. Only after she has reached the top do people finally notice. And they can’t figure out how she did it. Luck? A massive inheritance? What! What does she have that I don’t?

A clear view of reality, perhaps.

Steve Jobs was famous for his reality distortion field. Jobs had a clear view of the real world other people could not see. He forced these seemingly normal people to do things science fiction writers couldn’t dream up. A thousand songs on a device smaller than a credit card? Get the fuck outta here! A phone where you could touch a screen to do things Mr. Spock would have had wet dreams over? Get outta here again.

Now we have Elon Musk telling us cars will drive themselves. What is the matter with these morons? Do they have a name for what afflicts them? Yeah, they do. It’s called: Reality. Only lesser folks call it a reality distortion field. There is no distortion if it really can be done. Somebody could see reality better than you or me.

The list is endless. Seemingly normal people are doing extraordinary things. Geeks like Bill Gates create the products that now run our lives; geeks like Warren Buffett make normal people salivate over his investing prowess; ordinary Pete’s (Joe didn’t do it) write blogs that change an entire demographic in our society.

They seem so normal (except for that crazy accountant guy from Wisconsin pretending he knows what he is doing). Actually, they don’t seem normal. They all tend to be a bit geeky. They are unassuming. The well dressed man with a fancy car earning a boatload of money is broke because he spent it on the frigging boat! Idiot!

There is no way to tell these people apart from normal folks, unless you consider they are generally weird and tend to keep to themselves. Like the serial killers before they snap. (You have to watch out for the quiet ones.)

The quiet ones. Hmmm. There might be a reason why they are quiet. (Except for that accountant guy, once again.) They might know something you don’t.

Enter the Accountant

Success does not cloud reality; poverty does.

Periodically I am accused of writing a business-centric blog. Guilty as charged. The reason is simple. This blog is about You, Inc. You have income and expenses like any business. Good investments help the company grow and to realize certain goals. Without a business mindset you will spin your wheels.

But personal life is not a business, you demand! It isn’t? Really? What have you been smokin’?

Working a job is a business, just not yours. You invest excess capital (savings) into either bank deposits (stupid) or investments like index funds (smart). Just like a business invests in its future!

When you retire, whether early or late, you find you need to do something with your time. Enter the side gig. Looks an awful lot like a business.

The truth is I have to find a way to get you to think like an accountant. All your decisions count on it. If your accountant skills are weak, so will your decisions be. Buying a car? Think like an accountant to get a quality deal on a terrible expenditure. Looking into a home? Might I suggest accounting skills would do you some good? Kids going to college. Marriage. Divorce! Death of a parent, spouse, child. Estate planning. Legacy planning! Very few things in life are better without “accountant” thinking. And don’t get me started on taxes. That is what accountants do; reduce tax burdens legally.

Or you can throw “accountant” thinking out the window and see what happens. (I bet you already know what happens from personal experience.)

Look Into My Eyes

I always thought I saw reality clearly. I achieved financial (seven-figure net worth at age 32), business (very profitable accounting firm with several employees) and family (married 29 years and going strong) success at an early age. Then I discovered there are various levels to reality. Mine was the lowest level.

I was lucky. I was born lucky. My parents loved me and cared for me. I was born in an age and time where people live with tremendous opportunity. The heart defect I was born with was an easy fix for modern medicine. If I were born twenty years sooner I would be dead before the age I have reached. And I was born in a nation leading economically. Success was easy. I was lucky. How can anyone fail in such a land and time of opportunity? But many do.

People fail because they either can’t or refuse to see reality. Steve Jobs says, “Yes, it can be done and in short order.” Everyone moans. Then Jobs extends his vision, the bubble of reality, to encompass those around him. Then, and only then, can they climb to the top of the mountain for a clear view of reality, a reality Jobs introduced them to.

I was not voted “Most Likely to Succeed” in high school. If you asked my teachers or parents what they expected me to accomplish back then I doubt they would have expected much of anything out of me. What can you say about a lazy farm boy who wants to sit around all day reading? To top it off the schnook wants to be a tax preparer. Not an accountant (CPA). No! He wants a seasonal part-time job before he ever works a real, full-time, year round job. Not much was expected at all, kind readers. Not much at all.

So who saw reality clearer? The blogger accused of focusing too much on business issues or the normal people? Do celebrities see the world as it is? Sports stars? Uber successful business people?

What about the guy writing this blog? As my traffic grows, so does my reach. The aura begins to shine around me like it does for those who went before. Each step of the way I see reality as it really is. The view is from a higher level and clearer as a result.

People want to be like me now. Are you nuts! You can learn from me. You can open your eyes and see reality as I and other successful people do. But you do NOT want to be me. The world has a hard enough time with one of me the way it is!

There is no reality distortion field. There never was. It was part of your illusion and yours only. You created it. A few of us have opened our eyes and work frantically to help others do the same.

Or you can keep doing what you always have. Me? I’m just going to sit here admiring myself in the mirror and counting my money.

Why Saving Half Your Gross Income is Better and Easier Than Saving Half Your Net Income

People frequently look to their accountant for sound financial advice. Good accountants are up to the task; other, not so much. Finding a good one is easy; they tell you what you don’t want to hear even if you threaten to leave.

Advice sought from accountants runs the gamut. Selling or buying a business requires in-depth analysis and most people trust their accountant’s judgment regarding this matter.

Then the bizarre requests come. Over the years I have been pulled to the side by clients wanting advice on how to raise their children, gambling problems, infidelity, and divorce issues. Some of the requests have a hint of tax built into them. Gambling problems are also tax problems. I’m never comfortable helping anyone decide if they should end their marriage. It’s not my place or at least shouldn’t be. And even if it was I want nothing to do with that kind of conflict.

My favorite requests are about personal finance, intelligent tax reduction and retirement. These are the moments when I can shine. It is also an area of massive risk. My mantra, oft repeated, is simple, yet rarely followed. First the client is in denial (which is a river in Egypt last I checked). Quickly the client moves to tell me my advice is impossible to follow and nobody does it. (Oh, yes they do.) Finally, the client starts to bargain her way into a deeper hole. They think they can change the rules and make it easier. Don’t they know I already thought of every twist and shortcut possible? Clients usually bargain themselves into a deeper hole without even knowing it.

Half for You and Half for Me

Clint Eastwood fans are well aware of the scam Blondie and Tuco had in the 1966 movie, The Good, The Bad and the Ugly. In the movie, Blondie, played by Eastwood, captures Tuco, a wanted bandit with a price on his head. Blondie turns Tuco in for the reward. As Tuco is about to be hanged Blondie shoots the rope from a safe distance and rescues Tuco only to do it again in another town.

After each escape, Blondie shares the gold with Tuco 50/50. (“Two for you and two for me.”) Of course things go south fast when Blondie decides it is time to end the business relationship. Every movie needs to keep the plot moving.

There is a lesson in finance in the business deal of sharing the spoils 50/50. It also happens to be the first part of my most common mantra: save half your gross income. I finish the mantra with: invest it in low-cost, broad-based index funds. It’s a simple concept and easy to remember. Save half or more each time income enters the household Cash Flow Statement before taxes.

As simple as the advice is, I always get push-back. As mentioned above, clients deny it is possible as if they are starting the stages of grief. Quick as a shot they get angry when I refuse to relent: save half. Then comes the bargaining and the reason for this post.

I Have a Better Idea

Imagine a client sitting across my desk dumbfounded by such a stupid suggestion. For easy calculation we will assume said client has exactly $100,000 of income (earned and/or rental or similar types of income) with exactly a 30% tax bracket. (My advice is straight-forward; taxes are never this simple.)

The “impossible” retort is quickly shot down by your favorite accountant as a straw man argument. I have plenty of clients earning half what you do and living within their means (probably saving half their income too). I also doubt you never had a day of your adult life where your income was less than it is now. So you have plenty of practice and examples of people (even an older version of you) who have or are doing it (living on half your current income).

The argument that bills are more now doesn’t work with me either. Things have not gone up that much in price! The problem is you have three SUV payments, a cottage, second home up north (it’s a Wisconsin thing), a Jet Ski and four-wheeler to make payments on and insure. That is the real reason why you are broke so stop arguing with me.

There is a simple solution: Start selling the excess baggage until your expenses allow you to save half your income. Pay off debt! You may not agree with me, but you know I’m right.

Time to get Serious

Quicker than a bolt of lightning you start the bargaining process. Before you waste your breath, I already know what you are going to ask and you are wrong. But why, you plead? Because saving half your gross income IS easier than saving half your net. Here’s why.

Take your $100,000 minus $30,000 taxes and you have $70,000 to spend. If you save half your gross, $50,000, you only have $20,000 left to live on! Not possible, you say.

If, on the other hand, you continue, I agree you should save half your net income ($35,000) it would be easier for you to make it really happen.

Wrong!

What happens when you save $50,000? Well, a good portion probably goes into retirement accounts. A husband and wife can plow $18,000 each into their 401(k) plan, assuming both are working, earn enough and the employers’ plans allows the maximum contribution allowed by the tax code. (Those 50 and older can add another $6,000 each to this total. In our example we will stick with young whipper-snappers.)

Each spouse can contribute another $5,500 into a traditional IRA. Added to the $36,000 contributed to the 401(k)s (not including the employer’s match), you now have $47,000 saved out of your 50% goal of saving half your gross income. $3,000 invested in a non-qualified account (non-retirement account) rounds out the $50,000 annual investment. If a Health Savings Account or other tax deferred/tax-free vehicle is available, all the better.

The above example is very simple and few will have the same exact situation. The basic example does allow us a quick look at the final results to the family budget. First, with all the money going into tax deferred accounts you probably now qualify for the Saver’s Credit and Earned Income Credit if you have kids. Add in any Child Tax Credits or other deductions and we don’t need to work any harder to reduce your tax liability because it is zero or close to it.

So how much money do you have available to spend now? Well, your taxes dropped $30,000 when you include credits. You have $50,000 invested, plus the employer’s match, and $50,000 available to spend. (FICA taxes will reduce numbers a bit, but we want to keep it simple so we can see why it is better to save half your gross income.)

Your bargaining to save less will leave you with less to spend in the end! Saving half your net, $35,000, means your taxable income is higher and you lose several powerful tax credits. Your tax liability will be lower, but probably not zero. You also lose the Earned Income Credit and Saver’s Credit, though the Child Tax Credit should still be allowed. If your taxes are lowered by $10,000 you are left with less overall money due to higher taxes!

$100,000 income – $20,000 tax – $35,000 saved/invested leaves $45,000 to spend, or,

if you’re are lucky and your taxes are reduced more without the full savings rate

$100,000 income – $10,000 tax – $35,000 saved/invested leaves $55,000 to spend

Just because you have more available to spend in some instances by saving half your net income you are really worse off. Your net worth is down $15,000 the first year alone without consideration for the employer’s match or investment gains. You bargained your way into working a decade or longer to make up the difference needed to get your nest egg large enough to fund retirement. Is it really worth years of additional required work just to have $5,000 more to waste on a gas-guzzling SUV today? I hope not. You wouldn’t be reading this blog if you really believed that.

Give Me the Facts

When I train a group of accountants I use the phrase “facts and circumstances” a lot. The IRS tax publications do too. Your facts and circumstances will change the outcome of our example. More moving parts usually means more opportunity to reduce tax and increase investments without harming disposable income.

It’s hard saving serious amounts of money. Unfortunately it is the only way to reach a reasonable retirement in a reasonable amount of time. Forty years is not a reasonable amount of time REQUIRED to work just to have enough liquid assets to retire with the same lifestyle as when you were working.

In The Good, The Bad and the Ugly things turned out well in the end. Blondie and Tuco teamed up again to cash in on the biggest payday ever. For folks familiar with the movie, Eastwood shares the spoils 50/50 one last time. He cuts the rope when he is safely out of Tuco’s reach. A funny scene to end a classic movie.

Fun movie! Entertaining. Serious lesson few grasped. Don’t make the same mistake. Half for you and half for me. The best part, you get to keep both halves.

2016 Review; 2017 Plans for The Wealthy Accountant

statistics-706384_960_720Well, the first year is in the books. The Wealthy Accountant came to life on January 15th, 2016 in anticipation of a shout-out by Mr. Money Mustache. The project was on the drawing board for years, however, the workload caused me to drag my feet. But when I start I am all in.

This isn’t the first blog I’ve run, nor is it the only one I write at this time. Running a blog is work and something I held back on because I knew once I started writing this blog it would take over my life. But here I am and I am feeling good.

Other people writing a blog and curious readers are usually interested in statistics. The growth pattern of The Wealthy Accountant is taking a different path from other online venues I used. For example, the website of my tax practice has low traffic and no ad revenue. Just about every visitor of http://taxprepusa.net/ wants to be a client of my firm so we don’t want hundreds of thousands of visitors.

Then there is a content farm I wrote a hundred or so articles for years ago. After Google slapped the funny off the faces of content farm writers I moved my writing elsewhere. Still, HubPages sent me $439.93 in 2016 on 87,719 pageviews. Not bad for not doing a thing on HubPages in five years.

And then we have my flash fiction blogs to disclose before we discuss The Wealthy Accountant. I fancied myself a novelist in my youth and dreams die hard. I write two flash fiction blogs daily. Even with stories under 500 words, my output is still close to the equivalent of two full length novels. The names of the fiction blogs will remain a mystery to protect the innocent, namely me. What I will share are a few numbers:

Fiction Blog A: The best blog I have for traffic is the first fiction blog. 344,872 users viewed 1,643,664 pages in 2016. This is massive for online fiction where traffic of any kind is hard to find. The money writing fiction online is not so good. Google revenue was $2,075.09 and a third party totaled $120.40. The third party only has a few months under the belt so things should grow in 2017. Amazon made money, too, but I included the revenue under The Wealthy Accountant (TWA). I keyed a few trackers wrong early on so the numbers are not 100% so they all go to TWA.

Fiction Blog B: Revenue for the fiction blogs is combined. Traffic to fiction blog B consisted of 433,053 pageviews from 157,870 users in 2016.

statistics-754120_960_720The Wealthy Accountant by the Numbers

I published 174 posts in 2016 for a total of 248,646 words. This is the amount of material in three average sized novels. Coupled with my other writing I am pumping out the equivalent of over five novels a year. Throw in writing at the office and one begins to wonder why I haven’t mentioned carpel tunnel.

Here are some additional statistics:

Users: 32,729

Pageviews: 215,509; Pageviews climbed throughout the year at a slow pace. A few mentions by Mr. Money Mustache spiked my traffic in February and late October. Traffic moderated afterwards, but at a higher level each time.

First Post: January 15th, 2016; Tax season kept me busy so I published less into spring and early summer. In mid-summer I turned prolific and went crazy. Then burnout and the office took over. I settled for a three post a week schedule and it allows me to do a better job researching and writing.

Comments: 504; Some comments were my responses to readers.

Revenue: I think the numbers for the first year are acceptable. They certainly need to grow, but I am happy with the start TWA has. Here is where the money came in:

  • Google: $572.02; Google revenue started really slow and payouts did not start until late in the year. Remember my rules to writing a blog: first content, then traffic, then monetization.
  • Amazon: $1,638.96; some of this revenue comes from the fiction blogs as mentioned above.
  • Credit Cards: $480.00; I offered credit cards later in the year so I am starting to get a modest income from them.
  • Prepare Your Own Tax Return: $9,034.09; Here is where the tire meets the pavement. As a blog that focuses on taxes it is no surprise this would be a good area to generate revenue. I am unable to differentiate where the traffic comes from with this revenue stream. This income got a significant push from Mr. Money Mustache also.
  • New Clients: I added over 200 clients, plus consulting. The revenue from this area pushed well into the six figures. I will not give exact numbers because there are more expenses running a business preparing tax returns than running a blog. Yes, I do know the numbers, but after thinking about it felt uncomfortable sharing.

Failures

Starting a project of this size always has a few setbacks and even an outright failure or two. I was completely disillusioned when I stared the TWA. I had no idea what to expect. A major personal finance blogger (MMM) was going to give me a shout-out. I expected blog traffic, but never anticipated the level of demand for my services personally. I’m still digging out and apologizing more than I should have to. I need to learn the word “no” better. Answering every request is impossible. What the above numbers don’t reflect is over 12,000 emails from people interested in personalized tax/financial services. There is such a thing as too much of a good thing.

My biggest failure in 2016 on TWA is deciding to publish every day in late summer and autumn. I made a few mistakes when writing. Normally a blog post contains plenty of opinion and my personal worldview. When I dig deeper I need to do more research. Thinking of a client when writing means I leave out important facts some readers might face. Worst of all, I wrote a paragraph of tax advice that was 100% wrong. A reader called me on it and I made a tiny change, but stuck to my guns. I reread the post in the last week and rewrote the entire paragraph. Some of the information was completely wrong. I don’t know what I was thinking. That is why I slowed down the publishing pace. Tax articles take more research and time. It is different from dealing with one person only and their unique situation. When writing I need to consider other possible issues readers will face instead of a narrow view based on experience with a particular client I recently worked with. For this I apologize and promise to work hard to never let it happen again. I do learn from my mistakes.

The last failure of 2016 to mention is traffic. Traffic could easily be higher. I know how to get it, but focused on writing only and not much else. Deep down I would rather write than manage a blog. From now on it is man up and do the job. It’s not that bad. It’s just that I like telling stories too much. I like talking.

Goals:

The Wealthy Accountant: Tim Ferris always says you should set really big goals even if you don’t know how you are going to get there. So here are my 2017 goals for TWA:

  • 1,000,000 pageviews
  • 150 high quality posts
  • $25,000 revenue
  • Roll out the strategic alliances network readers and other accountants can use.
  • Attend more conferences (Camp Mustache, World Domination Summit, FinCon, et cetera)

Business: My tax practice is tied in too tight with this blog. My first goal is to separate the two at least a bit so TWA can act as a stand-alone company. Right now TWA is integrated into my tax practice. By year-end I plan on separating the two businesses with their own management.

I started a network of strategic alliances I will share over 2017 in blog posts. What I am building any reader can use and accounting firms should find it a powerful tool to increase efficiency in their firms. The payroll portion is done and once my clients are converted I will share so you can piggy-back what I built. Bookkeeping, taxes and other areas of the industry will follow once I have tested each program.

More employees have been hired and training is ongoing. The client base will increase, but I have no definite number goal because the size of the account makes a difference. I also don’t want to force the issue. If the workload is too large I have to say “no” to new clients to do a good job. Fewer is often times better. It is also important to separate from clients who do not fit the corporate culture. Now that my firm is growing fast again I need to stay vigilant in ending an engagement with a client who takes too much time.

Personal: Most of my personal goals are just that: personal. I save well over half my income and invest the majority in index funds. If opportunities arise I am willing to add a minor portion of my net worth into a new investment. My savings goals remain the same and income goals I wish to keep personal.

There are two goals I want to share publically. The first deals with investments. For many years my dad, brother and I owner a large number of investment properties around the state as a partnership. We sold the last property in 2001 and I had a few personally for a few years after that. I would like to add at least one rental property in 2017 to my investment mix as long as it returns an adequate rate of return, including property management expenses. I want a few rentals, but do not want the day-to-day management headache of owning investment properties. This goal is fluid. If I don’t find the right property at the right price I will take a pass.

My most important goal deals with health. Earlier this year there was a scare I passed away. It was a joke back in October to illustrate a point. But health is no joke. Quality of life is more important than quantity. An ample measure of both would not hurt my feelings.

Several years ago I pushed 220. For a farm boy this is still heavy as I carried a good portion around the waist. I decided to take up running and built my endurance to a level where I could run a marathon. My weight dropped to under 170 where I started to not feel well. When you run that heavy you eat a lot of everything.

My knees and lower back started to feel the stress of running so I cut back and don’t run often. I lift weights three times a week and get plenty of walking and other daily exercise. The problem stems from eating. I am still eating like I am running (too many carbs) and now push 210 on the scale. The weight is not as bad as before as I have a lot more muscle mass. Still, the midsection is showing off again. For 2017 I need to add at least a bit of running to my schedule and my diet has to change. Soda is out; alcohol (oh, it pains me to say this) needs to be curtailed; and a focused, healthy diet followed. My weight goal is 190. I’ll give updates.

Roundup

It was an awesome first year at TWA. I haven’t felt this alive running my business in a decade or more. Once you reach financial independence and have an established business it all becomes automatic. It feels good to step outside my comfort zone. As much as I loathe travel I will doing more of that too. I am speaking at Camp Mustache SE on organizing life for maximum profits and minimizing taxes in less than two weeks. You cannot imagine the anguish this Wisconsin boy feels being forced to spend nine days in Florida in January. 2017 will be the best year ever. I hope to meet many of you along the way. Keep reading. This is a cult you want to belong to.