Come with me on a journey where taxes no longer apply.
Fifteen to twenty years ago I made it a mission to get people out of paying state taxes. Income taxes are the most obvious, but there are litanies of other taxes states levy against the people. Over the last few decades I estimate I cost the State of Wisconsin approximately $43 million in tax revenues. The richer you are the easier it is to avoid.
First I will tell a true story before I move to a tax strategy many of you early retirees will find very interesting.
Sometimes wealthy people wander into my office to pick my brain. This always amazes me because the pickings are rather slim at times. Still, it happens. On the particular day I have in mind one of the top people at a major financial firm stopped in. They were using a high powered firm in Chicago at the time so they thought an ‘ol farm boy from the sticks in Wisconsin could do better. And I did.
The issue revolved around retirement. They wanted to move to Wisconsin. When I reviewed their finances I explained why they did NOT want to move to Wisconsin. I showed them a number and they agreed. There was a solution, however.
They enjoyed summer weather in the Northwoods of Wisconsin. The problem was with their domicile. They only wanted to spend a few months of the summer here and the remainder of their time vacationing somewhere south. Making Wisconsin their domicile would be a very expensive move. My solution was simple: buy a home in Texas or Florida and make that their domicile.
Your domicile is your permanent residence or the place you intend to return to after an absence. My client wanted to spend some time in Wisconsin. Okay. They wanted to own a home here. Fine. But your domicile better be somewhere else. Take a look at the questionnaire Wisconsin requires residents to fill out when they leave. You have a better shot at escaping the Hotel California! No voting in Wisconsin. Get your driver’s license and auto license plates somewhere else. Thank god they didn’t like to fish or hunt. Once you are in the cult, I mean Wisconsin, you are not allowed to leave. They need your money. When a state works that hard to pick your pocket you know there is a reason.
My recommendation was simple. They wanted to spend eight to ten months a year elsewhere. Why not buy a home in a warm, low tax state like Texas and make that their domicile. Hell. Our governor takes more political contributions from Texas folks than Wisconsin folks. If it’s good enough for him; it’s good enough for my clients.
The result: They spent most of their time in Texas for years before moving to Florida. They summered in Wisconsin and visited their favorite accountant. The tax savings: The first year they saved enough in Wisconsin taxes to pay for the Texas home in cash. Not a bad deal. They eventually sold their Wisconsin home; property taxes here are out of this world too. They visit now and again and I have the honor of preparing their tax return each year. I did my job well serving my client and helped Madison lower taxes like they always say they want to.
Now for a road trip.
On the Road Again
Taxes are more about thought process than deductions. I am going to outline an idea that absolutely works for the right kind of person. Early retirees looking to travel more should find ample ways to tweak this program to benefit them.
It all boils down to your domicile again. Where do you call home? You want to think about that for a minute. If you want to spend time on the road, why have your legal residence in a high tax state. Even if you love Wisconsin (it is my home), there is no reason to make it your legal residence. Without ties to any state, ties mostly due to a job, you can choose what works best for you considering taxes.
States levy all sorts of fees and taxes. Taxes and fees to consider: income tax, sales and use tax, property tax, driver’s license and auto/RV license, personal property tax. There are other taxes and fees, but they tend to be minor compared to those listed.
Suppose you could pick which state you pay each tax in. You want your legal residence in a state without an income tax: Alaska, Nevada, Florida, South Dakota, Texas, Washington, and Wyoming. You want to buy stuff in states without a sales tax: Delaware, Montana, Oregon, and New Hampshire. You want to own a home in a state with low property taxes: Hawaii, Alabama, Louisiana, Delaware, D.C., South Carolina, West Virginia, Wyoming, Colorado, and Arkansas. There is little crossover (only Wyoming has low property taxes and no income tax) and not on all three taxes.
Once you reach retirement (or retirement at any age for that matter) you can pick and choose where you want to go. People who are on the road a lot traveling want a legal residence in a state with no income taxes and low sales taxes. The problem is each state picks and chooses which tax to hit residents with and which to lighten up on. No state is income and sales tax free. Alaska is close with no state wide sales tax, but local sales taxes make the state sales tax average 1.69% at the time of this writing.
Let me make a suggestion. Your mailing address does not have to be your legal residence. You also do not need to own or rent your domicile. Since you are retired you can buy an RV as your home. You could also use hotels and a car as your lifestyle (not my choice and it could get expensive). Over the years I have had clients buy an RV and travel the country, staying with friends and family for extended periods of time. You can use a drop box for your mailing address or a family member. Some people even use their accountant as their mailing address.
Replacing a $400,000 home (I know home prices vary greatly around the nation) with a $200,000 RV (guess you’ll be living well) could be a smart money move. Buy the RV in a state without a sales tax and register it in a state with low license fees; make an income tax free state your domicile/legal residence (where you return); and when you buy stuff do so in a state without a sales tax.
I know I am oversimplifying this, but you should get the idea of where I am going. Properly structured you will pay no income or sales taxes. Other than federal income tax, what is left? A few minor fees apply. A bottle of whisky probably has state taxes added to the price. Many parks have fees to visit. These fees are minor compared income and sales tax.
If you have purchases of $20,000 in a year of sales taxable items, you save $1,000 in sales tax at 5%. Income taxes vary greatly between states, but $5,000 or more in state tax savings are almost a minimum unless your income is super low.
Mrs. Accountant cleaned the home of an elderly couple many years ago. Their daughter and her husband traveled the U.S. by RV. During the summer they would visit family in Wisconsin. (RVs are not ideal for living in during cold weather so they spent winters in warmer climates. They get nippy as the heaters only do so much.) After decades of living on the road they decided to settle down. They chose Texas. Go figure. Texas has high property taxes! Their high income made Texas a good choice, however, because they bought a small home to keep property taxes low and still traveled a bit with the RV.
Life on the road can be relaxing for some. After a while it might grow old. Travel becomes a job when you have no real place to call home. Nomadic living is not for everyone. That doesn’t mean you can’t take advantage of some of the differences in taxes between states.
Financial independence and early retirement make it easier to do. A job holds you down to one location usually. Some businesses can be run from anywhere. Bloggers and consultants can set up shop just about any place they want to. An RV is as good an office as any. They can keep more of their hard-earned money by planning where their legal residence is. Young children complicate the situation unless you home school. But think of the education the kids would get exploring the world on the road.
Owning a home has become prohibitively expensive in certain markets. Living out of a vehicle (van, RV, or other vehicle with some space) is cheaper than owning a home in parts of California and New York. Uber eliminates the need to bring a car along with the RV. By owning less stuff you automatically have fewer expenses and pay less in tax. Living on the road with a minimalist lifestyle, taxes become nothing more than background noise. While taxes may never be eliminated, those willing to live a different lifestyle can reduce their cost of living more by cutting the one expense that frequently takes more than all the other bills combined. Taxes.
The holiday season is fast approaching and the best laid plans of financial independence and early retirement are left for discussion another day. Normally frugal people can lose their senses when the holidays roll around. One day they are giving thanks and the next they are trampling their neighbor to get a deal on a flat screen over at Wally World. And this is supposed to make us happy?
Wants are a harsh mistress. Once you satiate your wants, new wants fill the void. It is a forever hungry beast. Wants satisfied are not the end; they are the beginning of a long slog through financial hell. Once you buy something you need to take care of it. You need a place to store you newly owned junk, ah, I mean, stuff. You now must spend more to protect your pile of garbage. A home or car needs insurance lest something happen which could cause you to lose your slavery, sorry, belongings. Room is made in the home or stuff is put into storage to make way for the new round of crap purchased on the credit card so you can keep wasting your hard earned money on interest. Once you own stuff, stuff owns you. It becomes an obligation and obligations cost money.
In the end you are less happy than before. If buying stuff gave you happiness you would not require a constant new supply of junk to satiate the lust. Instead, the wants filled turn into ever greater wants. Having stuff starts a vicious cycle of keeping up with the neighbors. They might have more stuff and what would your kid’s friends at school then think? Best to avoid such embarrassments.
Your soul is purchased one credit card transaction at a time. I remember Christmases past where a youngster would end up in tears because they did not get the gift they wanted or felt they should have been given more. What a great lesson to teach our kids! Nothing is ever enough! If you hate your children, this is the way to fuck’em up for a lifetime. Teach them to spend unchecked and make the holidays nothing more than a spendfest.
The Accountant Household
Let me introduce you to Fronds, our year round Christmas tree. Mrs. Accountant won Fronds when Fronds was just a two inch twig at a seminar in Lake Geneva presented by the Fox Cities Apartment Association. The rentals are long gone but Fronds is still with us, a 15 foot fern. She also serves as our Christmas tree. We decorate the girl with a few free and homemade decorations we gathered over the years and a string of lights. She is as cute as a button. Nothing fancy. Fronds reminds us the basic can be more than enough to celebrate the holidays.
Gifting is out, but visiting is in! The girls and I spend plenty of time with family and friends this time of year. It is a real gift to catch up and tell stories. We laugh and sing to the craziest stuff. The best part is no one can sue away the memories. Stuff ages and deteriorates. Sometimes it gets lost or, as usual, ends up in the landfill. Imagine! All the way from China just to end up buried in a pile of dirt a year or so later. You did keep the stuff for a year or two before sending it to the landfill, right?
Memories are what you hold dear on your deathbed. I never heard (though I suppose someone has done it) anyone asking for material things on their deathbed. They ask for family and friends. Grandpa always got the most joy telling us stories of things that happened in 1932. If an object was part of the joy it was because it was a reminder of a story that made his life worth living.
The holidays around the Accountant household are very similar to any other time of the year. We decorate some, but the traditional Christmas tree was out long ago to my parent’s chagrin. My argument is why buy something you must throw away in a month! Crazy! Fronds has always done an awesome jobs, she loved the work, and grows another foot each year.
The lights. The Accountant farm has no additional lights outside the house this time of year. I could blame it on laziness (too much work to put the lights up) or my cheapness (electricity to run the light ain’t free), but that is not why I do it. The extra lights are just another way to spend like a Wildman and I want no part of it. It sends the wrong message. There are plenty enough lights around town to enjoy the season any way I want. The truth is I prefer a Spartan and simple holiday season where I can focus on how lucky I am to be a live and have such an awesome family, friends, and life. I don’t need expensive props to remind me of my wealth. In fact it does the opposite. The lights and decorations distract from the true meaning of the holidays. It is about love and giving thanks. It requires a quiet moment of solitude to drink it all in. No commercialism required. All commercialism does is ruin the effect so we eventually forget the true meaning of the season.
We are not the First to Notice
Before you call me an old prude or holiday shame me (as if it would make a difference), let me remind you what Seneca wrote nearly 2,000 years ago: But perhaps this is the very season when we should be keeping the soul under strict control, making it unique in abstaining from pleasure just when the crowd are all on pleasure bent. So the Wealthy Accountant isn’t nuts after all. And neither are you for checking out of the “normal” way people conduct their holiday activities.
An old man from the First Century had more sense than many of us do today. Seneca showed his wisdom when he wrote: For a holiday can be celebrated without extravagant festivity. Wow! Before Christmas was Saturnalia, starting on December 17th and going for several days. The depths of winter are always a traditional time for festivals. We now have the twelve days of Christmas. Crazy spending and self-enforced poverty are not new to our generation. The ignorance has been going on for very a long time.
Participation is our choice. People might point, laugh, and ridicule us for our lack of participation in their madness. But we still participate in our own way. The religious can read the Bible with their family, retelling the story of Jesus’ birth. You can have fun with family and friends without getting shit-faced drunk New Year’s Eve (or any of the other seasonal holidays) and taking the risk of an auto accident of rape or unwanted pregnancy. A nice game of cards or a board game with a refreshing beverage in moderation is a great way to build fond memories.
In my neck of the woods I see Christmas trees are running $40 and up. Add the decorations, parties, and unending gifting demands and it is no wonder people are broke. If it takes a gift to have friends, better to have fewer or no friends. Besides, with all the money you save you will have plenty of friends. They will be frugal friends, but they are the best kind.
Getting family, especially younger children, on board is a challenge. A challenge worth pursuing. Teaching your kids that life is not an endless litany of gifting obligations is the greatest gift you can bestow on them. Money issues are a great cause of anxiety and relationship distress. When the demands for money disappear, the greatest obstacle to happiness in life is eliminated and you can enjoy life for what it is.
I will not even joke that you should buy gifts using Amazon links from this blog. If there is a need for something, by all means think of your favorite accountant. But I will be fine either way. The holidays are a time of year when our normally low spending is even lower. There are so many free things to do together as a family that we cannot see them all. Enjoy watching the snow this holiday or a warm cup of apple cider with the family. Read a book together, tell stories, remind each other of how wonderful it is to know them.
Life is really great in this era. We have so much and the cost is so small. We can enjoy the greatest gift of all: family and friends. What a shame it would be to waste that gift in exchange for a trinket from China.
Each of us have a worldview built on our personal experiences. There is no right or wrong in anyone’s worldview. The differences are what make life worth living. It is why we communicate. Life is interesting because we have endless opportunities to grow as we travel through each day.
Some of my favorite comments are: You write different. You run a tax office different than any other I’ve seen. Working for you is different from previous jobs. Your ideas on growing a business are so different. The key word is different. When people say I am different it means I am doing something outside the mainstream. Perhaps I am blazing new roads. Doubtfully. What I am really doing is practicing a task in a manner that makes sense to me based on my worldview.
Anyone haunting these posts knows my disdain for formal traveling. That makes me different again. I am getting better. By writing out my thoughts and communicating with people I respect I am discovering ways I might enjoy time away from home. And good thing. Mrs. Accountant would enjoy traveling more. What she sacrifices to be with me is beyond comprehension. The plan for a long road trip is still on. Mrs. Accountant wants to see Hawaii so bad it hurts. I think next summer or autumn will be the time we take the leap.
Before I start that part of my life I want to invite you into my home. It is autumn here in NE Wisconsin. It is the prettiest time of year. Instead of showing you the building where I eat and sleep, I will give you a tour of my farm. It should help you understand why I like home so much. There are lots of pictures. Enjoy.
There are plenty more photos. I am not the kind of man to sit still long. Here, on the farm, I find peace and tranquility. It is here where I can relax. Now you know why all I want to do is go home.
Enjoy your weekend, kind readers. May this photo journey help you relax and enjoy the world around you.
The debate rages on over renting versus buying a home. Location determines the correct course of action; buying in one city might be a wise financial move, whereas, renting could be better two states over or even across town. Within the same city the best financial course can be different over time.
The debate of buy versus rent is heavily discussed with home buying because of the huge investment. At the end of each discussion someone always says they prefer owning (or renting) so the “best” financial move is not always the course chosen.
What surprises me is how the discussion never moves to other major purchases. Automobiles, for example, are a major investment and are significantly worse expenditures because the car will go down in value, whereas, real estate tends to rise in value, following inflation trends.
Buying a new car might be a good idea with all the current incentives and, in some cases, massive tax credits for electric vehicles. In the cases involving vehicles with tax credits you need to consider your personal tax situation. Generally, tax credits of this kind are non-refundable, meaning you need a tax liability to reduce before the tax credit has value. State credits also play strongly into the decision. For the rest of us, purchasing a car should not be a simple “yes, I need one” decision.
A Tale of Two Employees
Let me introduce you to two employees in my office who saved thousands of dollars and untold grief due to a minor consultation with The Wealthy Accountant, aka, the boss. We will start with Tabatha. (She recently was married so give her a shout-out next time you see her.) Earlier this summer she had a road trip vacation planned with her fiancé and family. She owns an old Jeep perfect for getting around town, but not reliable for long trips. The mileage sucks and the vehicle is old. The limited miles driven locally make a newer vehicle a poor financial decision unless the Jeep dies.
The scramble was on to find a vehicle for their vacation. At first she considered upgrading to a newer vehicle with the higher insurance and depreciation costs involved. For a 21 year old woman, the goal is to keep expenses low and pack as much away into investments as possible. A newer vehicle would be contrary to her plan.
The conversation around the office did not include your favorite accountant until I overheard my team discussing the issue during a break. With my usual finesse I interjected my opinion.
My argument: Buying a newer car will cost $200 or more per month in payments or lost opportunity cost, and insurance will be more expensive. You only need the newer car for two weeks.
My suggestion: Rent a vehicle for two weeks and pay for it with your credit card.
My reasoning: Since Tabatha will need a loan on a newer vehicle she will be required to carry more insurance than necessary. By renting, the car will be delivered to her home and if the car breaks down along the way, you call the rental company and have them bring you a new car. No repair costs, no depreciating vehicle, no oil changes. Only fill it with gas and you are ready to go. I had two additional recommendations. Check with you regular car insurance to verify your car insurance extends to the rented vehicle and check with the credit card company to learn how much auto coverage is automatically included if you pay for the rental with the card. This negates the need for insurance at the rental company.
Tabatha rented the car for just over $200 per week and had no problems. She was able to get a larger vehicle so they could travel with fewer cars (her fiancé’s parents also drove their car) and carry more supplies (food, so they did not eat out as often). Insurance was covered at no additional cost by the credit card company.
Dawn of a New Day
Last month another employee, Dawn, had a similar situation. Her car was fine for around town, but the transmission is touchy and a long trip could leave her stranded. Around town a car issue means a quick call to a friend or family member. On the road it is a major problem! Dawn recalled the Tabatha situation and asked my opinion. It was the same. Her one-week vacation included a $200 car rental fee without the risk of her personal car dying. She doesn’t need another bill and a forced vehicle purchase is not in the cards.
Why Own a Car?
The story of Tabatha and Dawn started me thinking about auto ownership. When does it make sense to own a car? I live in a rural area. A car is a necessity to get anywhere. The same applies to the open areas of the American West. But living in town is a different story. Living close to work is ideal and should be a goal. By living close to work, most of your driving needs disappear; a bike or walking handle that.
The few times you need a car in town are handled cheaper in two ways: Uber and a rental car. One-time, across town trips are relatively cheap using Uber. Longer trips should utilize a rental car. Now the decision is when do you own a car versus renting.
Is there ever a time when renting a car full-time is cheaper than owning a car? I am talking about never owning a car, but having a rental car in your driveway every day. Let’s run an example to find the breakpoint.
To find the breakpoint where renting a car every day is cheaper than owning, we need to figure the full cost of car ownership. I tend to buy used vehicles and run them for forever and a day. I like to buy cars a few years old when a large part of the depreciation is off, but the car still has plenty of life in her. To keep this simple I will use a $20,000 vehicle for our example. I understand you can get a used car for a lot less, even a two year old one. The math is for illustration purposes only.
Car: We need to make some assumptions when we consider the cost of the car. For our example we will assume you paid $20,000 for the car and in five years you want to upgrade to a newer car. The value of the car in five years is $7,000. Monthly cost of depreciation: ($20,000 – $7,000)/60 = $216 (I rounded down.)
Insurance: Insurance costs are all over the map and depend on where you live. I am going to use $100 per month.
Repair/Maintenance: This includes brakes ($400), oil changes ($750), and tires ($850). We will include some miscellaneous maintenance (light bulbs, windshield wipers, et cetera) of ($500). The costs listed in parentheses are the five year cost. Monthly miscellaneous auto costs are: ($400+$750+$850+$500)/60 months = $41 rounded down again.
Our example considers no bank loan on the car. We also will assume your rental car is paid by a credit card that includes insurance and pays 2% cash back.
The breakeven point for renting a car over owning in the above example is: $216+$100+$41 = $357 per month.
Renting the same car for $400 per month covers all repair issues, upfront cash or a bank loan, insurance from the credit card company, and $8 cash back from the credit card. The rental company can swap out cars every so often to handle oil changes, regular maintenance, and car washes. If there is ever a problem you call the rental company.
Renting is still more expensive and renting a car for $400 per month might not work, but the example illustrates the thought process before we move forward.
Where It Will Work
There are two situations where the above example will work. If you are buying a new car every few years the depreciation costs are higher. Also, in certain areas insurance costs can be very high and could change the formula radically. Loan interest is also a consideration if you don’t pay cash for the auto purchase.
Swapping full-time auto ownership with a rental car probably does not work. But, what if you are retired or semi-retired? If you drive only a few times a month, Uber probably is cheaper and you get the driver for free. Renting a car (or truck if you have a project) for periodic travel needs makes renting a viable option.
My goal is not to convince you to rent a car over owning. I want you to consider additional options that are better financial choices when spending your hard earned money. Today’s discussion covered cars, but you can easily use the template offered on any major purchase. Building a deck requires tools you may only use once. Borrowing or renting is a lot smarter than buying in those cases. My final recommendation: Always bring a calculator. Your phone already has one built in.
The rich are sanctimonious pricks that deserve every insult thrown at them. Who do they think they are? Just because they didn’t spend every penny they earned and invested their money wisely does not give them the right to be treated like everyone else. Just because they never wasted their money on fancy SUVs, luxury vacations, or kept up with the Jones’s does not give them the right. It does not give them the right! Who are these rich I speak of? Well, anyone with a net worth above zero.
About half of Americans are below the waterline in net worth. These normal people who succumbed to the mass media brainwashing of spend everything you got are the normal people. You, my friend, saved and invested. You are an idiot. If you were poor, like a normal person, you would be treated like a normal person. But, no. You and your almighty attitude of spend less than you earn is as annoying as it is ignorant.
I Can’t Take Anymore
The opening to this post was darn hard to write. It goes against every fiber of my being, yet is the attitude of the majority of people. When you get to see the world from my side of the desk you have the opportunity to see large numbers of people and how they handle their finances up close. You also hear disturbing stories.
The pressure to spend is endless. Mass media had gone out of its way to program people into spending zombies. The zombies are also trained to ferret out those few who avoid most of mainstream media and pressure these poor souls into service of the zombie army.
And don’t think you are exempt. They are watching you. You know what I am talking about. You can feel their shifty eyes looking out at you, accusing, condescending. They loath you because you had the audacity to save. To invest. To build a nest egg and a positive net worth. Like me, you need to disguise yourself when you venture out to make the rare purchase. It takes great care because the zombies can smell you. It is the smell of growing money and they want it so they can spend it.
Ah, I Am a Farmer
Mrs. Accountant and I needed a freezer to store our ample garden produce and for beef from a recently butchered steer. We dress up in our Sunday go to meetin’ clothes for our adventure to the appliance store. This is an event that only happens once in a blue moon!
Since this purchase was years ago when the internet was not what it is today, we needed to do some research by hand. Our goal was to check a few stores and then decide on the best freezer at the best price. We wanted value. When we walked into the second appliance store the salesman happened to be a tax client. It was a bad omen. Since he was my client his attitude was I would buy the most expensive freezer at full price, no questions asked. I owed him!
Needless to say, I did not buy a freezer from that store. The client never returned, not that I cared. When I am in the market to buy a larger ticket item I must take precautions. I buy my cars used from the bank. At retail outlets I wear those glasses with the big nose and mustache attached. Not conspicuous at all. When asked what I do for a living I say I am a farmer. A poor, broke farmer with no money to spend so please give me your best offer. Then I will go home and check the couch and see if enough change has accumulated there to cover the purchase.
It’s not a lie! I am a farmer! Sure, farming isn’t my first line occupation, accounting is. But if I tell someone what I really do I may as well start reaching for my ankles as I say it because they will service the account from behind. Business owners are all overpaid rich people who deserve to be soaked, or so the theory goes. Many products where the price can be negotiated down requires the salesperson to believe you are a poor schmuck or they are resistant to offer their best deal.
Oh, You’re a Doctor
Now we turn to a client I have had the great pleasure to serve for nearly two decades. He is a doctor with heart. He loves helping people and he can’t find a way to stop doing what he loves. He now works out of his home helping pharmaceutical companies develop promising therapies. He is one of the good ones.
Our doctor friend has a very high income, as you might expect. The high income does not mean he wants to waste his money. He handles money with respect. He expects to leave a legacy and provide for charities.
He also has a major problem. His work requires him to speak frequently and he is on the road a lot. He needs a reliable auto and that is where the problems begin. When our friend, the good doctor, walks into an auto dealership the sales team is already counting their commission. It is the same wherever he goes. As soon as it is discovered he is a doctor the offer changes. If you are a doctor, you pay full price; no negotiating. There have been instances where the doctor called me after breaking down and making a purchase where I had to go in and raise hell to get his money back. The good doctor is a nice man; on the other hand, I am not. I am a class A asshole when I have to be. Boning my client because he was so stupid as to have a positive net worth boils my blood.
I could go on with story after story. The end game is always the same. People with money, the so-called rich, get screwed when they decide to part with their hard-earned money. It’s as if they have no right to act responsibly with money.
A Dying Breed
You are a dying breed, my friends. So many people spend more than they earn on wasting assets and other assorted junk. They then complain how bad the economy is when the reality is things have never been better. Half the stuff we use is free on the internet, food is cheap, the library provides all our entertainment for free, and energy prices are low. About the only things we need to spend money on is housing and utilities. It does not take much to live anymore; technology has made life so easy we have time to sit around all day and whine about it.
The worst part about a living species on the verge of extinction is that so many want to bag one of the remaining beasts as a trophy. You are the beast, the trophy. If only they can find a way to pry the money from your fist of investments.
The biggest mistake in life is to let people know you have two nickels to rub together. Oh, you are in for it then. The price of that car or freezer just went up. A lot! Somebody deserves a commission and it is your duty to provide it. I lost a client because I refused to be screwed when buying a freezer. The truth is it was cheaper to lose the client than to overpay for the freezer.
There is a way to deal with these morons, however. It took me a long time to figure it out. As far as I know it is the only way to get the job done. It requires psychology. You can easily mess with the minds of people who need a constant money fix because they are broke. I am not suggesting hurting anyone in any way. What I propose is getting the best value for your money without getting abused because you have a job people perceive as too high paying or because they think you can afford to overpay.
It is best to explain by example. A successful business owner asked me to help him buy a service truck for his business. Only a few dealerships in town had what he needed for his business and they were firm on the list price. The truck listed at around $52,000 and the dealership was willing to drop the price to $48,000, no lower. We knew this was not the best price as I saw invoices from other clients paying in the low 40s.
I was ticked so I rolled up my sleeves. Treating a potential client with disdain is a no-no in my book. I asked the business owner to bring $40,000 cash with him when we visited the dealership. Well, the dealership was going to show this wealthy accountant a thing or two. The price is $48,000, firm. Bullshit!
I explained to the salesman he would need to do better. He said the dealership would lose money if they went lower. I explained they must be going out of business because I saw several similar trucks on tax returns selling for less. The guy swallowed hard as he was caught in a lie. Time for the manger.
I shook his hand with my best smile. I swear no teeth were showing. I got a similar song and dance along with faux issues that required a higher price for this particular truck. Then I played my trump card.
I took the briefcase with $40,000 from my client, placed it on the table, and opened it in front of the manager. “This is my final offer,” I said. A lot of people are defenseless when they see cold, hard cash in front of them. The manager hee-hawed around a bit. I said, “If we do not close this deal right now today we are going to a different city far away and buying the truck there. The cost of a small amount of driving will easily be covered by the $8,000 in savings.
The manger went through the typical theatrics in the back room and finally agreed to the terms. Then he was nervous about taxes and title. We put that on the credit card after a thirty second cry session.
Dirty pool? Probably. But they were selling the exact same vehicle for $40,000 to $42,000. I know. I depreciate those things for clients. The dealer made money or they would not have sold.
You work hard for your money. You save and you invest. People will try to rob you of your frugal stash. The best I can offer is these parting words: Hi, my name is Keith Schroeder. Do you have a freezer a poor farmer can afford?
Accountants are reluctant to tell people what they do for a living. When I’m asked I sometimes say I’m a farmer. And whatever you do don’t say you are an accountant with plenty of free time on your hands; if you do, you are screwed. In a weak moment I mentioned my occupation at a writer’s conference and seven year of my life evaporated as the treasurer. In my younger days I ended up an elder in my church for the better part of two decades. Age has helped me weigh my words more carefully.
Working in a non-profit requires budgeting. It is the only budgeting I have ever done in my life. Budgets personally annoy me. Budgeted expenses are always spent while budgeted revenue is iffier. Hence, the organization is always broke and they look at the treasurer for answers. How do you tell the church council to stop spending so fucking much money? At the writer’s group I could say just that, but it never sunk in. Budgeting is a waste of time in its familiar format. I have a better idea.
Do as I Do and As I Say
Before we start I need to define the difference between goals and budgets. Generally goals are things you want to accomplish. You might have an income or a net worth goal, but I doubt anyone would have a spending goal, as in I want to spend at least this much this year. Budgets create a financial framework for a group to work within, including a family or even an individual.
My money management method is a blending of the two disciplines: goals and budgets. Even though I don’t have a budget, I track my income and expenses like a hawk. The accountant in me wants to record everything. Rather than a budget telling me what I can and can’t do, I am more interested in watching the trend of my income and spending.
I set goals sometimes when I want to accomplish a certain task. I am not as good at keeping a written list of goals at all times. Usually I become laser focused on a task when I am interested, like this blog. This month I published every day and twice two days. At some point I will burnout and reduce my publishing schedule, especially over tax season. But don’t worry. I love writing and write nearly every day ever since high school. I will be here spreading manure, I mean the Gospel of Keith for a very, very, very long time. As long as someone is listening, I’ll keep talking.
Recordkeeping of past performance is where I like to handle my financial planning. My goals (budget) are simple: beat last year or last week or last month, et cetera. For example, on this blog I watch traffic like a nice boy with OCD. I want to see an uptrend in traffic. The goal is to beat last week’s numbers. Revenue generated by the site is treated the same. I want to see a trend of increasing revenue. It is all a big game to me. Money and traffic is the scorecard and the only competition is me. Expenses are handled like revenue. How much did I spend this month compared to last year at this time? By comparing revenue and expenses year-to-date I have a moving budget as each day passes.
Of course I have only limited control over many issues. Sometimes revenue does not show up no matter what steps I take. Surprise expenses mess with the plan too, but I can back these numbers out to see if core spending is still on pace or in need of some cost-cutting.
My method is better for me and I bet you could benefit too. By competing against you there are no negative feelings attached or a sense of loss. Every year you improve yourself, even if only by a fraction of a percent. In the office I track revenue and expenses on a year-to-date basis and want to always be better than last year. I may be crazy, but I’m not insane. I understand with all the expense items in a business there will be a few with increasing numbers. Then I compare the expense increase to the revenue increase to see if the expense is still in line. Payroll is a biggie here. More revenue means more employees and for some darn reason they want a raise each year as if working for me isn’t enough, therefore, payroll expense trends higher.
Powerful NumbersThe numbers you record grow stronger with time. I can tell you more than daily revenue and expenses going back decades, I can tell you how many tax returns I e-filed on any particular day going back to my first professionally filed return. The whole thing is on an Excel worksheet now, but in the early days I used a spiral notebook to record where I was.
All this sounds like craziness to mere mortals. It isn’t. I enjoy messing with the minds of new employees by telling them how many people will walk through the door on any given day in the middle of tax season and will be within one or two. How can I know that? they ask, perplexed. With all the years of data I have I noticed trends on when people visit the tax office. More than a mind game, I now have a planning tool that helps me manage my company more efficiently and profitably. A simple algorithm lets me know how many clients will visit on any particular day.
I don’t need a budget to tell me to not spend over a certain amount on a certain type of item. If I budget a certain amount for utilities and we get a blockbuster cold winter, my budget is useless. The budget might also give me permission to keep the house warmer in winter if it is a more seasonable winter because the budget can handle it. No siree! I need no excuses to spend more. A warmer winter means I spend less on utilities. Period. I want to see my utility bill drop adjusted for weather.
Accountants and people with serious OCD (I am both) love watching their numbers. It is real easy to get carried away. A new idea might cut costs significantly, but once electric usage is under 10 kilowatts per day there is only so much more saving you can do. There is a fine line between the insane asylum and the game of “gotta beat last year’s numbers”. They have a special bed waiting for me when I finally crack and we all know how close I am to that line, don’t we?
As nuts as I am, I do have a method to keep things in perspective. Back in the mid-90s I moved from my home to an office building. My numbers exploded. In a few years I was cooking over 2,000 tax returns and driving myself insane, the real insane. I made a concerted effort to change the structure of my business. I reduced the headcount from over 2,000 tax returns to 700 while increasing the number of employees because I focused more on business clients who needed work all year rather than individuals, which were only seen once per year in spring. Soon my sanity returned. (Well, it’s considered sane for me!)
The same applies to you, kind reader. Financial independence means changes to your personal income and spending. Travel may grow as a part of your quasi-budget while vehicle expense may decline. Investments generally have predictable cash flows, but an economic downturn may cause dividends to decrease for a year or two before resuming an upward trend.
Budgets always seem to make people anxious as they approach spending limits or revenue/income appears to fall short. I hate it with a passion. Under my method I don’t feel anxiety. A miss this month compared to last year is nothing more than a game I get to play again next month. It turns a taskmaster into fun and playtime. And let’s face it; I am a big kid who never grew up.
Now, please, share this post because I noticed my numbers are down and it’s Friday.
Back when Doc* was alive he played cards with us every Friday night. One night we got a call the police were at his house. It seems someone had broken into his home and may have started a fire. We thought the card game was over as Doc would head home to assess the damage. Instead he stayed tight in his chair and demanded the cards be dealt.
That night at cards I discovered the real priorities in life. The card game with family and neighbors was more important than stuff accumulated over a lifetime. Of course Doc never tossed anything out, but if someone wanted to steal his stuff, have at it.
My grandfather (Doc) was a Stoic without knowing it. He knew there was nothing he could do if his house was on fire or he was burglarized. He wasn’t going to grab a bucket and start tossing water on the flame; he was 88 years old. It seems it takes a lot of years for the wisdom to develop on what has real value, like a card game with people you care about. You can act like a chipmunk standing guard around your stash or you can value stuff at zero and relationships as priceless. Your choice will determine the level of happiness in your life.
How Much Is Enough?
The goal is earn more money so you can buy more stuff, also known as the moronathon. Before long you have a house filled to the rafters and a storage unit to hold all the stuff that does not fit in your home/apartment. You are living the dream. Now you add security to your home (don’t forget the storage unit) and bump your insurance coverage. People go to crazy lengths to dispose of money while complicating their lives. Worse, it costs money to have lots of stuff. And the work! All the work moving, cleaning, storing, and protecting the growing hoard of things in your fortress is an exercise in madness.
I have a distant relative who doesn’t lock his home, ever. His windows and doors don’t even have locks on them. “Why have’em,” he says. “What they gon’na steal?” He has a point. His home is Spartan to say the least. When you buy stuff you tend to want to protect your investment. “That is mine,” you say. Ownership. You own the stuff you buy and nobody can use it without your permission. So you swing the metaphorical rifle over your shoulder and pace back and forth in front of your fortress guarding your hoard. Crazy!
At what point do you say “enough”? How happy can guarding all the junk you acquired over the years be? You can downsize and declutter, but I am talking about something much more intense here. What I suggest is a commitment to living with very few items in your possession. Each person has different circumstances. Children will require having a few more things than a single person. But look around your home. How many things could go? Most belongings haven’t been touched in ages! Can you live with only 100 possessions? Until recent history, people did just that.
What Is Minimalism?
Minimalism is different than downsizing or decluttering. A minimalist will have an uncluttered life and can easily live in a smaller place than most, but a minimalist also works to have the least amount of possessions possible.
Here are some things minimalists have other don’t:
- Freedom to move where and when they want without a pile of stuff to pack or protect.
- Easier travel. No worries about someone taking care of your stuff when you are gone. You don’t have that much stuff.
- Less anxiety. All the effort and mental work to protect your belongings is driving you insane (and broke).
- Need almost no money to live. Stuff takes money to buy, store, use, protect, and later dispose of. No wonder people work until their bodies wear out.
- Peace of mind. Hey, who is going to rob you if you don’t have anything of value to steal? Minimalists find value in friends, family, and relationships. You can’t steal those.
- Follow their dreams. Nothing is holding you down. You can plant roots for a while or pull up stakes and head across country at will.
- Retirement is sooner and more fun. When you are spending less managing clutter retirement is possible a lot sooner. Retirement is also a lot more enjoyable when you don’t have to worry about the home fort when traveling.
There are more benefits to minimalism. It takes time to get there if you are the typical Westerner. Don’t worry. Help is on the way.
The Minimalist Lifestyle
All of humanity’s problems stem from man’s inability to sit quietly in a room alone.
Minimalism is easier than ever. The library has all the books, movies, and music you could ever want. The internet replaces so much stuff today it is mind boggling. Music, movies, books, newspapers, and magazines are all online. Cloud computing means you can access important papers and family photos from any computer anywhere in the world.
Western culture causes us to yearn for the simple, uncomplicated minimalist lifestyle. Deep down we know our stuff is turning us into slaves. Where do you start when you have so many things to deal with? Decluttering is a start, but we want to get some minimalism in our life today. I have a suggestion.
Start with one room. Clean the entire room of all belongings, wall hangings, and any other distractions. This is your room of solitude. You can meditate here or sit against a wall reading a good book. Try adding a table and one chair or a sofa. You can sit comfortably thinking about your day, reading, or talking with family. There are no pictures allowed on the walls nor any ornaments on the table. A lamp for light might be needed, but make it a basic lamp with no frills.
It is hard adjusting to the Spartan nature of your new room. We are so used to distraction in our modern world we forget how to turn it off. Cell phones and computers are off limits in your room of solitude; they only replace the clutter we are so familiar with in our daily lives with disruptions. One book and a cup of tea while you sit quietly in your minimalist room with only a chair is a disturbing experience for many until they learn to accept the simplicity minimalism brings and the calm your mind feels when the clutter and constant distractions are removed.
Once minimalism starts growing on you it is time to start minimalizing another room. Before long your entire home will turn minimalist. As the disorganized, over-stuffed life is replaced by sanity you can consider taking the 100 item challenge. You might find you have too much home. The minimalist décor will help sell your home faster and for more. The extra money added to your investment account allows you the freedom to choose where you want to go. Stuff no longer holds you down. You can take the wife and kids out camping for a week without worrying about your belongings back home. Preparing for a trip takes about four minutes for a minimalist. (Just toss a few pieces of clothes in a bag and you are ready to go. No need to call your neighbor Charlie to watch the house, feed the cat, mow the lawn, on ad nauseam.)
Physician, Heal Thyself
A few days ago I enlightened you with my deluttering manifesto. As you know I am far from living the minimalist lifestyle. What you don’t know is I do have a room where I can go to think. The room is empty. I sit of the floor or lean against a wall. A small window is the only light in the room. I go there to think and to calm my mind. It is more empty than solitary confinement in prison, the only difference is I can leave whenever I want and I don’t stay locked in the room from years at a time.
There are some things I do to minimalize my personal life. My cell phone has the volume off 99% of the time. I refuse to allow unfettered distraction into my life 24/7. My tenuous mental stability is unable to handle such an assault. Parts of my life have turned minimalist, but I still have way too many things to truly be a minimalist.
Decluttering and minimalism are things I always have aspired too. It is now a mantra. I have taken steps over the last few months to declutter and even minimalize my life. The feeling of freedom is strong as each weight is lifted from my neck. There is no doubt my life will change radically over the next year or two. I have dreams I want to live while I am still young. There are so many things to learn and explore. The best part is I always kept the awe a child feels when they see something awesome.
My world is changing; so is yours. It is time we walk that road with only the shirt on our back. We will meet wonderful people along the way. We will grow old; we will die. There will be nothing to clean up after we are gone. A minimalist is a traveler who leaves no trace when he leaves. But it was an awesome moment when we were there.
* Doc is the fond nickname we gave my grandfather because he read everything on natural remedies.
There is a genetic defect in The Wealthy Accountant’s family. It is so serious it threatens to overrun everything we value, costing us money and health. No one doubts grandpa accountant possessed the genetic mutation back in the farming days. Dad accountant followed in grandpa’s footsteps and a brief look around my home will erase any question in your mind the acorn does not fall far from the tree.
When I was a wee tyke my grandfather had a special job for us on rainy days. Rather than take a day off he sent us kids to the old shed where all the nails and screws from assorted jobs were thrown into a wooden bin. Our job was to separate them. Lest you think I am pulling your leg I have a sworn affidavit in my drawer, god forbid I would throw that away.
Nothing was wasted on the farm. The Great Depression left an indelible mark on my grandparents as they saved everything “just in case”. When we talk frugal today we have nothing on my granddad. Nothing. We worked hard for the sake of working. The fear in the back of our minds was the hardship of the Great Depression would return. It did in 1982, the year I graduated from high school. The late 1970s put the family farm in debt and the inflation and interest rates of the early 1980s ended several generations of farming.
I live in a county with a current population under 50,000. I live more toward the center of the county. If you exclude the heavy population in the northwest corner, the county is very rural. I grew up in one of the ruralist (is that a word) parts of the state. We never spent money on anything unless absolutely necessary. The milkman would deliver dairy products when he picked up our milk. Grocery shopping was a major event. I was a senior in high school when I left the county for the first time. My uncle did not leave the state until he was in his 40s and it was to cross the Illinois border by ten miles to pick up his oldest daughter when her car broke down. He left the state one other time in his life for his honeymoon several years later (he enjoyed a cruise).
The Diagnosed Sickness
The genetic disease I speak of is clutter. My grandfather’s house took months to empty after he died. It boggles the mind the material a guy can collect over 90 years when nothing gets tossed. Of course, most of the garbage, I mean belongings, ended up in a dumpster. One of the items we struggled to part with was a vintage home-made jar of thistle wine from 1976. It was a good year for thistles.
When do we finally say enough is enough? My grandparents ran from a monster that never existed. Some things need to be discarded. Quality of life was sacrificed to satiate the demons. I am better than most in my family but the photos in this post attest to a few minor issues I need to deal with.
The first step is admitting you have a problem. Progress has been made over the last few years. There are tricks to reducing clutter in your life without the emotional response of parting with a loved one. (Okay, it’s junk. Junk! You bought it for twenty-five cents at a rummage sale fourteen years ago and it has been collecting dust for all those fourteen years. Junk.)
If you read this far you are all for decluttering your life and living a more minimalist lifestyle. I have seen all the different internet challenges to create a minimalist lifestyle. They don’t work for people who need an intervention. Taking a 100 item challenge (get rid of everything except for 100 things) is meaningless when you have 42,611 pieces of crap lying around the place. I have a farm. Do you know how much the local landfill would expand if I tossed all but 100 items in my life? Geesh!
Steps to Declutter Your Life and Take Back Control
Clutter destroys quality of life. Taking control of your life requires downsizing. If you have a storage unit to hold all the stuff you can’t fit in your home/apartment there is a great place to start downsizing and saving money. There are few reasons to have stuff in a storage unit. If it does not fit in your home then maybe you should have keep your money in your wallet.
Here are some ways I have reduced the stuff cluttering the house or office:
- For every item brought in the house one has to go. It’s a simple theory until you realize you need to choose something in your arsenal to sell/donate/junk if you want a new item. Want to make it a bigger challenge? If a family member brings in something and refuses to choose what goes, you choose one of your things. A month or two of that and you begin to realize you have the ability to preach.
- Start with one room and put everything in that room in boxes, you know, the boxes you can never throw away. Anytime you need something from the boxes feel free to take that item out. Stuff you did not use after a month goes to Goodwill. You might even get a deduction. Tell’em the Wealthy Accountant sent ya.
- Get honest. I love my books and as frugal as I am I have way too many books I could have borrowed from the library the one time I wanted to read them. Movies are worse. A decade or so ago I got the crazy idea I would buy movies since I did not waste money on cable. It did not take long to build a pile of shit, I mean movies. One day I got serious and donated over half to the library. (I can always check them out if I want to see them again. So far, never had the itch to check out one of my donated movies. Go figure.) It is time to get rid of half the remaining half this year. I call it ‘The Garbage Bag Declutter’. Get a garbage bag and fill it with stuff for Goodwill. You know who to them sent you. Right?
- Books are a different story. I have parted with few of my children, ah, books. Well they treat me better than my kids! Okay, I jest. But bibliophile knows exactly how I feel. Some day, when I am strong, I will part with two, maybe three of my cherished books. I may not post for a while as I go through the stages of grief, but no one can say I don’t walk the talk.
- Act like you are moving. Want to make decluttering easy? Simple. Act like you have to pay to move all your sh . . . junk by the pound. You will figure out real quick how important that rummage sale bargain beanbag chair is. I know. It was a good idea at the time.
- Paper party. One of the worst offenders of clutter is paper: newspapers, mail, letters, magazines, et cetera. Take time to sort the piles of paper. Tax documents should be saved in a filing cabinet and disposed of after the statuette of limitations runs out. Be sure to keep important paperwork like the deed to your properties. And the marriage license. Don’t throw that out. Yikes! Mrs. Accountant would have my neck if I tossed that. Paperwork that seemed important six months ago might be candidates for recycling or shredding. Old magazines have to go.
- Don’t forget the basement, attic, side rooms, and closets. If you have a big mess, start with one room at a time, tackling one per week, or one per month if you need more time to recover from the shock of the previous room. Yeah, you might find some moldy stuff back there. Good thing you finally cleaned that corner out after a decade.
- Don’t let people dump stuff on you. A portion of my clutter comes from well-intentioned people giving me something they thought I needed and now I feel obligated to keep. Christmas is a no-gift zone in my house. No Christmas tree either. We have a plant we call Fronds we decorate with whatever we can find. It looks strange, but then again look who is giving the advice.
- Set a date/have a plan. Packrats with genetic issues have a hard time starting the decluttering process. I find setting a date to free a room from bondage works for me. Trick yourself into doing it. The clean, decluttered, minimalist room is the one you will spend most time in afterwards because there is room to move.
- Don’t forget the bathroom either. Clean out all old medications and first-aid supplies. Bandages from 1974 might need a refresh. Brill cream after fifteen or so years is nasty.
- Uncluttered/minimalism is sexy. A room is inviting and alive when there are few items in it. Act like Steve Jobs. He never found the perfect furniture so he never bought any; he sat on the floor. Put off until tomorrow what you want to add to a room today. Most of the time on second thought you will take a pass.
- Don’t stop now! Your computer looks like a hurricane went through it. Pack stuff away in folders. Your computer desktop should be neat and clean with a slant toward efficiency.
- Personal life. Your cluttered personal life needs some cleaning too. All the demands and commitments are making a mess of your time. You only get so much of that time stuff so you better be careful or you will run out before you learn to enjoy life. Declutter your social life and you will appreciate what you have more.
- Learn the meaning of enough. I get offered stuff all the time. I say no a lot. It takes a while to learn how to say no without hurting feelings, but it is a valuable skill once learned. Many times my decision to pass on a beer or other stuff allows the other person to say no too. It empowers you and them!
I dream of living a minimalist lifestyle. Three seconds in my home, office, or barn and you will know I am nowhere near completing that goal. Reaching the perfect decluttered, minimalist life is not the goal; it is all about the journey. Freeing yourself from clutter a bit at a time extends the great feeling of freedom when you realize you have less stuff to take care of or worse, protect.
I gotta get going. The garage needs some work.