Blogging is a business. Sometimes it’s hard to believe, but it is true. Along with podcasting, speaking and every other form of training and education, blogging is a business. Sometimes a really big business. And businesses take work to manage and grow.
It is easy to forget that those friendly bloggers you communicate with work some serious hours to bring you information and perhaps a laugh or two. Most people don’t realize bloggers are sweating it out at the keyboard in the wee hours of the morning to get a post out on schedule.
And then there is the invisible work. It seems like blogging is about the cheapest hobby going until you realize that every part of the platform demands a fee and usually loads of time. And that is where this blogger enters.
I originally planned a detailed post of the coming collapse of China when the IRS released another 249 pages of regulations on Section 199A. The ink wasn’t dry before the calls flooded in for a brief post on the IRS release. The good news is we finally have a definition for a trade or business as it applies to 199A. The bad news is those 249 pages contained a lot of material and one simple post wasn’t going to cut it. A series was in process before the next hammer fell.
Time to Get Social
If I’m going to put in all this work I may as well bust tail to acquire a few readers. You see, people don’t magically find my glistening prose. (Yeah, I know. Surprises the heck outta me too.) I’ve done all the obligatory stuff: auto-posting, email list, attend conferences, remind everyone I see I have a blog. And traffic has been good for a tax blog with heavy doses of personal finance mixed in.
But more is always better, I heard, so I purchased a few courses to hone my skills. First I attended a course on Pinterest and saw my Pinterest traffic go from nothing to several hundred page views per day and still climbing.
Then I cracked open my wallet for a very in depth Facebook marketing course called Moolah. (Hint: Rachel is one awesome lady when it comes to Facebook. She knows her stuff.) Here is an example of some of the free stuff she offers from her course, banned words on Facebook, for example. The free Facebook group alone will send your traffic higher.
The Moolah course is an intense 10 week program. (You have access to the videos and other materials for at least a year afterwards and there is a special Facebook group for graduates to keep pushing their traffic and sales to the moon.) While in the course I was informed I wasn’t handling ads correctly. I used Google ads, of course, and another platform called IMS. It was a small, yet steady stream of income to cover blog costs. With my traffic levels I was informed I needed to move to a more robust platform like Mediavine. So I took the plunge.
As this was happening another serious request came into the Facebook private group. (Y’all are invited to join our august group and The Wealthy Accountant business page. It is a great place to meet like-minded people and learn how to cut your taxes and manage your money for greater returns.) A reader asked about stock options, the kind granted by an employer, and that wasn’t a simple answer.
So, the China post was on hold even though this reporter has inside information about China that will shock most readers. I will post on this soon due to the serious financial consequences. The 199A post is also delayed due to the imminent incentive stock option issue.
And now all those posts are on hold as I just spent 30 hours of my weekend before the approaching tax season ripping code from this blog. Why? It seems Mediavine is a vibrant platform requiring all old code removed before they go live. Well, once the process was started my other ad revenue was reduced to zero as the transfer took place. What was supposed to be a quick flick of the switch turned into a detailed review of all 454 published posts to pull out rouge ad code and other issues from the early days of the blog. This became priority if I wanted this blog to stay viable.
The good news is I did it. It is Sunday night as I type and I think I got all the problems fixed. I’ll find out tomorrow morning (probably as you read this). If you don’t see an ad anywhere on the blog you will know I’m still toast. Now I have to sweat it out as Mediavine is an automated system; I have no idea how they will display ads. I demand it is tasteful and useful to my readers. Time will tell.
The best news is that publishing posts from now on will be faster and easier. This weekend opened more of my time in the future with the improvements. (As long as I live long enough to reach the time break point.)
But publishing a post is not the most time sensitive part of the process: research is. Tax issues take time to unravel. Answering a client question is faster because I only deal with one facet of the issue facing the client. When writing I must take into consideration all other possibilities a reader might encounter. This is more challenging than it sounds.
The China post requires a modest amount of research. I already have the links built. However, I need to pull from multiple sources, including a source inside China, to complete the post. Still, there wasn’t enough time to do it justice.
The 199A issues are so massive and time consuming I don’t know when I’ll be able to tackle the issue for the blog, but I am committed to a short series before tax season gets too far along. This is important for readers! The weekend workload just didn’t offer anywhere near the time I needed to get a quality post out on 199A.
The same applies to the incentive stock option post.
So, if time didn’t cooperate, offering me the chance to write a detailed financial or tax post, what was I to do? Well, you’re reading it. A post outlining some of the back office headaches of running a blog is easy to write because I can just tell the story of my weekend. Other bloggers should find value in this post while non-bloggers will gain a greater understanding of what it takes to keep a web page up and vibrant.
Whether You Believe it or Not
And if all the stuff above isn’t enough, we get some wonderful Wisconsin weather. The forecast has a foot of snow in it for this evening with plenty of blowing to make it as miserable as possible. Then temperatures will dip colder than -20 F. Wednesday’s high is forecast at -12 F. Yes, that is the high for the day. Welcome to the backwoods of Wisconsin.
None of this is meant as whining. I should have known better things wouldn’t transfer to Mediavine as smoothly as predicted. It’s still an excellent learning experience which should increase ad revenue by a significant margin and save time posting from now on.
As for the weather, there was a hint the weekend would end with snow so I brought plenty of work home with me Friday. Technology today allows me to work from home and it’s as if I’m sitting at my desk. The bad news is I don’t know if any employee will make it in tomorrow. Everything is closed tomorrow: every school, program and every business I checked.
And good thing. I can’t get the tractor running tonight so I need to get up early if I’m going to get snow moved so I can get out my driveway. Ah, when it rains, but it pours. Snows, I mean
Actually, I had a great and productive time last week and this weekend I killed it. Things were looking ugly for a while when I found some crazy code from the legacy platform when this blog was set up. But I broke through to the other side. It looks like the code is clean now.
Technology also bails me out. Twenty years ago a snowstorm would devastate my schedule. Today I log in from the living room couch and get more work done than if I was at work because there are no interruptions.
By noon or so things should be clearing out as the plows get the roads open. I’ll break down and wander into the office if possible.
I just wanted you, kind readers, to understand why I didn’t provide a tax post as tax season bares down on us. There is plenty of powerful stuff in the queue, but those golden nuggets take work to produce. Frequently it is required I call experts to dig deeper into issues these days. It’s almost like journalism for advanced tax strategies.
Before I sign out I want to whet your appetite with a few more items from the queue: investing in conservation easements for massive tax deductions (special handling required to avoid problems), Medicare complaint annuities (the one annuity members of the community I run in will want to own), the wealth gap, income inequality, Form 3115 (for cost segregation studies), and more. My guess is I’ll need to live to 135 to get all these things published.
One thing is certain; I enjoy tackling the difficult issues. And for good reason. The stuff regurgitated ad nauseam in the traditional press doesn’t really help you. I want to provide the power tools you need to control your taxes and financial life. It’s a lot of work and worth every bit of effort.
Before I sign out, can I ask a favor? I busted tail this weekend (and a lot more) working on this blog. The upgrades make it easier and more user friendly to share posts on social media. Would you be so kind as to help out an old wayward accountant by sharing a post or three on Facebook, Twitter, Pinterest and other social media. I need the ego boost. Thanks.
Now I need to get back to the tractor. The snow isn’t going to move itself.
More Wealth Building Resources
Credit Cards can be a powerful money management tool when used correctly. Use this link to find a listing of the best credit card offers. You can expand your search to maximize cash and travel rewards.
Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?
Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.
Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.
QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.
A cost segregation study can reduce taxes $100,000 for income property owners. Here is my review of how cost segregation studies work and how to get one yourself.
Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you very much!
Recently I discussed my net worth and how I went from a poor farm boy to an eight figure net worth. To keep the discussion moving I glossed over a few issues, most notably some of the vehicles I use to invest and protect my net worth from taxation. My sole mention of using trust instruments to protect net worth and save taxes caused several requests to hit my email inbox. People wanted to know more about trusts and how they can be used to super-charge net worth, provide guaranteed income, reduce taxes and protect against lawsuits stealing your hard earned money.
To which I mentally replied, “Is that all?”
A tax discussion on trusts turns into hard core tax planning quickly. Discussing all trusts is beyond the scope of a simple blog post and even beyond the scope of an entire blog. Too many variables are involved. What we can do in a single blog post is cover one trust topic enough to help you decide if it is right for you and get you to the right people to facilitate the process.
Today we will discuss an animal called the net income makeup charitable remainder unitrust, or NIMCRUT. It sounds like a derogatory name you would call someone in the heat of battle. Instead, the NIMCRUT, or even her sister the CRUT, is the perfect tool to get a massive tax break now, avoid paying capital gains on highly appreciated assets, help the charity of your choice and get a nice income stream—some of which might be tax free—for your entire life or a set number of years. Sound like fun? Then read on.
Highly appreciated assets face a large capital gains tax rate, currently topping out at 20% for federal, plus more in many states. To make matters worse, the alternative minimum tax is calculated using a 22 ½% capital gains rate.
Moving money from a long-term, highly appreciated asset to a higher income producing asset requires a serious tax haircut. The reason for the transfer of investments frequently revolves around income. The old asset has appreciated several fold, but has a low or no current income distribution. To access your net worth requires sale of a portion of or the entire asset, triggering a taxable event.
Basics of a NIMCRUT
A NIMCRUT is really a charitable remainder trust with a unique income makeup feature.
Once a NIMCRUT is established, assets are transferred into the trust. The trust sells the asset/s and since it is a charitable trust pays no tax on the gain. You personally did not sell the asset so you also pay no tax on the gain, nor is there anything to report on your personal tax return.
Because you donated to a charitable trust (a qualified nonprofit organization (the beneficiary) gets the remainder at some point in the future) you also get a tax deduction on your personal tax return. The tax deduction has to be discounted for the present value of the future gift. In the old days we used tables provided by the IRS to calculate our deduction; today we have handy online calculators linked at the end of this post.
Example: A 53 year old donating $1 million of stock to a NIMCRUT with a basis of $100,000 would avoid paying capital gains tax on $900,000, plus get a current tax deduction on Schedule A (subject to limitations) of $239,894. Any unused charitable deduction is carried forward up to five years.
The tax avoided and the additional deduction is a great start. BUT, you also get an income stream from the trust. Remember, this is not a straight forward donation to a charity. The charity gets the remainder at some point in the future. You choose how much income per year you want before the charity takes possession of the gift. The Tax Code requires at least a 5% rate with higher amounts allowed (up to 50%). A common rate is 7% and is used for our example above.
You also choose the term, either life or up to 20 years. The longer the term the lower the tax deduction on Schedule A.
CRUT or NIMCRUT
There is a difference between the two. Generally, a NIMCRUT only pays you from income, excluding capital gains. A CRUT can dip into the corpus to fund payments. The NIM part of a NIMCRUT means you can catch up, if you will, the missed portion of past payments.
Since many investments do not throw off a 7% income available for distribution, two investments rise to the surface: real estate and annuities. The rent is available to distribute to the annuitant (you).
An annuity inside the NIMCRUT can control the flow of funds. Income must be distributed up to the rate listed in the trust document. Previously missed payments are “made up” in years when the income supports the payment.
Since tax is due on all or most distributions, your personal tax situation might require more control over when you get paid and hence pay tax. The annuity inside the NIMCRUT can delay paying out; therefore, no income is available for distribution. When you need the money you can take your distribution by having the annuity pay out income to the NIMCRUT. (Special thanks to Putnam Investments for presenting the annuity strategy at a H.D. Vest Financial Services conference during the mid 1990s.)
Assessing the Benefits
Let’s add up all the benefits of a NIMCRUT before disclosing a few negatives.
First, you avoid capital gains on a highly appreciated asset. Most taxpayers will avoid 15% to 20% long-term capital gains tax with a NIMCRUT, plus state capital gains taxes. In our example, $900,000 of avoided LTCG adds to a $180,000 tax reduction at the 20% LTCG rate.
Next, you get a present value charitable deduction on Schedule A subject to normal limitations for the future charitable contribution. Our example shows a $239,894 deduction.
Assuming a 7% rate and no increases in value of the NIMCRUT investments, you will receive 140% of the original investment over 20 years. If the investments inside the NIMCRUT increase, your payment will too. Our example should generate $1.4 million over 20 years.
Normally you are the trustee so you determine the investments inside the NIMCRUT.
You control in a limited fashion when and how much you get paid. Most income from a CRUT or NIMCRUT is taxable. A portion of a CRUT might be exempt.
At the end of the term your named charity receives the remainder.
To keep the kiddos happy you can purchase a single premium term life insurance policy for the amount of the charitable gift with the tax savings from avoiding the LTCG tax. This is done with an irrevocable life insurance trust (ILIT).
If you die while the NIMCRUT is in effect the remainder goes to the charity, is added to your estate, but your estate takes an equal amount as a charitable deduction.
In sum, you avoid LTCG taxes on unrealized asset appreciation, get a deduction up front, receive income over your lifetime (single or joint) or a set number of years up to twenty, support your preferred charitable causes and give the kiddos a healthy legacy to boot.
Every strategy has pros and cons. A NIMCRUT is irrevocable. This means you can’t later change your mind. Well, you can change your mind, but there is nothing you can do about it. You must plan in advance for a NIMCRUT. The issues and process is complex and set in stone once in effect.
There are annual reporting requirements. At minimum a Form 5227 is required. Sometimes a Form 1041 or other tax forms are required. Few tax professionals are versed or experienced in preparing complex trust tax returns. You will need to find one who is.
You must have an attorney to draft the trust documents. No shortcuts here. An experienced estate attorney will smooth the process and inform you of issues pertinent to you while avoiding IRS scrutiny.
Large investments are required and large unrealized LTCG increase the tax benefits of the NIMCRUT. Realistically, anything less than $100,000 of asset value or $50,000 of unrealized gain to transfer to the NIMCRUT is inadvisable. $1 million of highly appreciated assets and greater put into a NIMCRUT yield excellent advantages to many high net worth taxpayers.
A CRUT usually allows corpus to be used to pay the annuitant, but yields fewer tax benefits. A NIMCRUT must have income from which to pay the annuitant (you). Many NIMCRUTs exclude capital gains from income in the trust documents.
The Next Step
It’s not all roses when planning a trust. Trusts are nor for everyone. They are powerful estate planning tools to carry out your wishes and serve your needs. It takes time and there are legal fees.
I intentionally left out a massive amount of information to keep to this post’s story line brief. Additional research is required even before you contact your estate attorney.
Here is an interesting article on NIMCRUTs you might find valuable.
Here is a NIMCRUT calculator. You can play with the numbers to get an idea of the tax benefits available. The same site has excellent calculators for a variety of CRUTs and CRATs as well.
You can read a bit more from the IRS on the issues discussed.
Finding a qualified attorney is an issue for many readers. Here is an article by a company that helps people set up charitable trusts. (Not an affiliate.)
Finally, if you want to read extensively before committing to a discussion with an attorney, here is a good book on the subject from Amazon.
How long does it take to crawl out a hole you dug? How long to formulate a plan? Execute it? Reach your goal? Financial independence (FI) is a goal most people have. Some want it bad at a young age and work toward that goal. Others wait until Father Time ticks closer to the traditional retirement age. Still others get a wakeup call when their body fails in some way.
Before this blog I was a tax Endorsed Local Provider (ELP) for the Dave Ramsey organization. His story resonated with me. I agreed with Ramsey that debt is the acid which destroys the vessel that holds it. Ramsey is fanatical against any kind of debt; I am a bit more moderate in the faith. Still, debt is a problem for many people.
Before FI can be achieved debt first needs to either be eliminated or seriously curtailed for most people. The Ramsey plan is to eliminate all debt and invest in actively managed mutual funds offered by a financial advisor. If you read that last sentence carefully you will begin to understand why I could no longer in good conscious be a Dave Ramsey ELP. Ramsey’s philosophy is right on so many levels and wrong on so many more.
Debt in and of itself is not bad. It’s just a thing. Too much debt is the real issue. Credit card and similar high interest debt is caustic, no doubt. A home mortgage can make all the sense in the world. Even a small, short-term business loan is a positive in many instances. A blanket faith in no debt is something I don’t subscribe to. When very wealthy people borrow for a home or investment it is frequently the right choice. Borrowing $10,000 for working capital in your business instead of selling a profitable income producing investment I will argue is a good call, especially when you consider the tax consequences.
Here is where I will get into trouble. I am NOT a fan of investment advisors. Most are broke or at least have a smaller net worth than their income level would suggest. It’s matter of physician, heal thyself syndrome. Investment advisors are broke because their advice is not worth as much as they claim or they refuse to save at the required level to have an expected level of financial wealth compared to their income. In other words, they don’t take their own advice. Over the last three decades it was a rare occurrence to prepare a tax return for one of these professionals where they had a high net worth. They had high income, but not much to show for it.
A Wise Man Once Said
At Camp Mustache a few weeks ago, Doug Nordman, a retired military guy, gave a presentation on the stock market over his adult life. Once again he dropped one of those golden nuggets I am only too happy to pick up. He said financial independence, your net worth, was a product of your savings rate and the fees you pay on your investments. If I were so wise I would have come up with something so simple and elegant.
Armed with the simple knowledge of FI as offered by Nordman, we return to my days as a Ramsey ELP. Understand I agree with Ramsey on many levels and recommend his program. What he has produced is powerful and effective. The reason people following Ramsey need a financial advisor is because they have shown no talent to do the basic steps necessary to turn debt into a tool or eliminate it and invest intelligently on their own. My hope is you can eventually do it on your own if you are a Ramsey follower. Ramsey is not cheap and neither are investment fees in the broker’s office. It all hurts your FI goals. Ramsey and the broker are necessary only until you can walk on your own. And no, I don’t have an emergency fund. Long before you reach FI an emergency fund is not needed. You have plenty of money accessible for nearly any possible emergency.
Plan! Ain’t Got No Plan
Ramsey convinces people they need a plan. He even provides the skeleton of your plan in the form of his financial Baby Steps. I like it! But here Ramsey and I disagree again. Ramsey says you should pay off low balance debt to start the snowball rolling. His goal is based on psychology. By eliminating debt sources quickly it will give you a psychological boost to remain faithful to the program. All this might be true, but you are an adult. Right? If you are dug in deeper than a tick on a hound you need to pay off the highest interest rate debt first! If you have psychological problems might I suggest a lobotomy? You can either dilly dally around in poverty of you can subscribe to the Wealthy Accountant method and get your tail to FI as fast as you can. That’ll do wonders for your psychology too.
Goals. The thing people love to hate. Don’t worry, I will not put you through a goal setting program. . . today. I want to get to the premise of this post first. Goals are well thought out things you want to accomplish; plans are what you create to get there. We will focus on plans.
The first goal most Ramsey clients had when they walked through my door was to eliminate debt. FI wasn’t even in the cards. These people couldn’t even fathom a serious positive net worth having lived in financial Armageddon for so long.
It was time consuming, but it had to be done. I had to get these new clients to think ahead to the next step. Paying off debt is not unilateral. After crisis debt levels are reduced it is better to institute saving/investing while continuing the debt reduction process. After crisis mode you want, for example, to invest in your work 401(k) at least to the level of the employer match. This is free money! It is a small start, but all journeys begin with the first small step, a Baby Step.
As people worked through the game plan to reduce debt and build a serious net worth, they became disheartened. They visualized in a linear fashion the reduction of their debt load. It actually works exponentially. (Before you math geniuses tell me I am wrong, read on.)
The linear debt reduction approach might mean it take three years and two months to eliminate debt. That is a really long time for most people to wrap their mind around. I always tell them not to worry; it will go faster. But the numbers? The math says three years and a bit! Don’t worry, I assure, it will take two years and a bit, plus you will have a modest amount invested as well by the time your debt is gone.
Why does it happen faster than planned in 90% of the cases? There are two reasons. First, when you pay off high interest debt it makes a larger difference than simple math dictates. (It also illustrates how caustic high interest debt is.) When you make an extra $100 payment to an 18% interest credit card you just cut your spending $18 per year, every year from then on unless you are dumb enough to re-dig the hole. (Note: reduced spending (interest is spending) is tax-free. The extra cash flow to your budget from reduced spending is never taxed!)
The second reason is the coups de grace. Your debt load dies faster than planned because you have a plan! For example: you allocate $100 a month for the light bill. Now, aware of a light bill ceiling you do things to keep the bill below $100. Dining out is even easier to reduce as you learn to cook more meals at home and brown bag lunch at work. Your budget, your plan, assumed a $100 light bill. When you reduce the bill to $92.75 you have more free cash flow in the budget to illuminate debt. And additional reduced debt on an 18% credit card snowballs fast. Living a mere $100 below your original budget per month used for additional payments on high interest debt does not reduce your debt only $1,200; the additional reduced debt no longer accumulates interest! The first additional payment reduces your interest expense by $18 the first year. But the second payment goes even further because more goes to principle because there is less interest to cover due to the prior month’s extra payment.
Time for FI
Eliminating debt is only the first step. The second step is FI. Once debt is adequately reduced it is time to start growing your wealth.
A few years back I ran across a blog called 1500 Days to Freedom. Here was a guy, Carl, who planned on building a million dollar debt free portfolio in 1,500 days. I showed the blog to clients and staff periodically with my sage wisdom, “He will get there sooner than planned. Just watch and see.” Little did I know Mrs. Accountant and I would spend a weekend with the guy years later.
Carl’s investment portfolio broke the $1 million mark in under 3 years, but he still had a small mortgage. Not all debt is bad so he kept the mortgage (for now) and upped his investment goal by an equivalent amount. Goals/plans are like that. You can change the rules when it serves your needs and the police rarely get involved. He reached the new goal in three and a half years. Go figure!
So why did Carl do so well on his wealth accumulating phase? The same principle applies to wealth accumulation as applies to debt reduction. Your basic plan assumes you meet a minimum amount of investing, but you usually beat your goal, if only by a bit. Those extra bits compound fast! Also, most people take a ruler and strike a line from the lower left of their goal chart to the upper right. But you forget the first month’s investment also earns money so you have more in month two. It compounds and keeps compounding!
Smart readers will notice I said month two is more than month one as if investments always go up. Good catch guys, but there is one last mystery to solve in the rapid wealth building industry. I learned this trick from Nick Murray. When I was in the investment industry back in the 90s, my broker/dealer brought in Murray to speak at our annual conference. Murray was retired from mutual fund sales, but had a long career starting in the 60s.
What Murray introduced was the concept of owning shares rather than account value. Murray said it was more important how many shares you owned than account value. If the market declined your dividends and new investments bought more shares. The more shares you owned equaled more money when the market went up.
You many notice this is a different way of looking at dollar cost averaging. People freak out when their plan is delayed due to a market decline. Market declines happen a lot, but it always goes back up and more! Always!
When you focus on how many shares you own you are less likely to freak out. Regardless the severity of a market decline, you still own the same number of shares. Nothing really went down if the value is still in the companies the market is comprised of. Get it?
It messes with the mind how fast money can work in your favor. You’ve experienced how fast, and bad, it can work against you. It works even faster when you put the power of wealth building on your side.
You may have a plan to retire your debt. You may have a plan on reaching FI or a million dollar net worth. Don’t sweat it.
You will get there before you arrive.
Old dogs can learn new tricks. Preconceived notions are not reality or facts.
Several years ago life was going fine for me. Business was good, the sky was sunny and I thought I had a firm grasp on how the world worked. An avid reader, I chanced across a blog that pulled me in deeper than any before. Normally I read several blogs with no blog standing out from the crowd. I digest what I can and move on. Then along came Mr. Money Mustache.
Some blogs are better than others. Quality is frequently an issue, but personal taste is too. To make matters worse, this Mustache guy had a serious following. High quality suited to my tastes with a massive audience started me questioning some of those preconceived notions.
Most issues I was in complete agreement with. There was one stand-out: retirement and what the word meant. At first I had an identity crisis. Was I really retired all along and didn’t know it? Is it wrong to have gainful employment?
The only way to figure this thing out was to attend personal finance conferences with like-minded people. That was two years ago. In the beginning it made the confusion worse and the crisis more acute. Then I developed my own definition of retirement to suit my needs. Finally, last weekend, I made what I feel is the final leap in my evolution toward a retirement definition I can use in my personal life.
Four Letter Words
First impressions are everything. Work is a four-letter word and certain demographics are quick to point this fact out. If you enjoy your work, too bad! The goal always seemed to be about quitting your current gainful employment as soon as possible. But I like my job!
Work is a four letter word, but not a four-letter word if you get my meaning. There is nothing wrong with work! Work, force times distance as defined by scientists, is good for the body. Sitting all day is the bane of good health and happiness. An oxymoron of life is most people sit on their tail all day doing work. And we are overweight and unhealthy. Might I suggest a walk? Walking is “real” work.
There is an animal called the FIRE community. It stands for Financial Independence/Retire Early, as if they two go hand in hand. They don’t. It’s a misnomer.
Financial Independence means you have enough money to pursue your dreams and still pay the bills. FI means your investments throw off enough income to cover your lifestyle. Your spending level determines your investments needs to reach FI.
Retire Early is complete BS! Anybody can retire at any age. Sometimes people are forced to retire early due to corporate downsizing. Amazing how these people yearning for early retirement lament the fact when it is forced upon them. Do they discover something you and I don’t know about this retirement thing?
According to the dictionary retirement is defined as something that is used up or worthless. Use the correct terminology (Hey, buddy! Can’t wait to see you become worthless so you get the hell outta here!) and you’re liable to get your beak busted. The only explanation for the heavy use of the word retire without a proportionate level of busted beaks must have something to do with terminology.
Early retirement is possible without financial independence! There is no connection between the two situations. None. Having enough money to do what you want is totally unrelated to being “used up, worthless”. In fact, early retirement has more to do with laziness than FI.
When in Rome, they say. So I joined this FIRE community totally aware I was a fraud. The FI part was nailed down decades ago, but the RE part wasn’t even in my vocabulary. Retire, I asked? Retire from what?
It took a while to find a reference in my life. Waaaaay back in the beginning (when God was creating the heavens and the Earth (not that far back)) I had a job working for someone else. It was the only time in my life I worked for someone not a family member or in my own business. When I met Mrs. Accountant things got steamy fast. What can I say? She’s hot! Well, a year after we met we were headed down the aisle. Before the preacher would marry us we needed to attend some classes with the preacher. During this process it was noted I was living the early retirement lifestyle sitting at home and reading all day. This would not do. The church needed a custodian (read, janitor) for the attached school and I was available. So I was a janitor. For a year.
The people at the parochial school were awesome! It was a pleasure to work with them daily. Except I felt empty. My temperament didn’t allow me a life swilling toilets and mopping floors. A year after I started I quit. Call it retired, if you will. I was used up, all right! It was the only time in my life I felt what many people seem to feel about their job. I was FI and now I exerted my RE part of the equation.
A New Life Lesson
Fast forward thirty years and life was ready to smack me up beside the puss again. I adopted my new family in the FIRE community and started using their language as I felt they were using it. As soon as you were FI and quit your job you were also RE, even if you started your own business.
This confused me. I had my own business and enjoy the work. Why are they FI/RE and not me? It wasn’t them; it was me!
Last weekend I attended Camp Mustache in Seattle. You can read about it here. I attended all but the first Camp. A husband/wife team there retired a year or so ago to travel the world. They are young whippersnappers, barely tipping the scale past age 30. They did this all on teacher’s salaries! I was lucky to be there the last years to see this whole thing unfold. Social media allowed me to see the world through their eyes as they traveled.
This year at Camp they were back home, so to speak. Instead of the world, they now traveled North America in an RV. The husband also started a business.
I kept indicating he was still retired. It took my thick skull two days to understand he is NOT retired anymore! (He must have discovered he wasn’t as “used up” as he thought he was.) His words, “As of three weeks ago I am no longer retired.”
Hallelujah!!! Finally, I found someone who worked his own business and still fit in with the FIRE crowd. I felt a tear welling. I am normal after all!
Of course, reality wiped the tear from my eye quickly. Joe, the husband of our husband/wife team, ran his business a bit different than mine. Soon the advice was flowing on how other uber-successful people ran their business. Yours truly didn’t do it that way.
As a business owner I am very hands on. I meet with clients, review practically all tax returns before they leave the office and spend serious time plying my trade. The worst part is I am an integral part of the firm. If something happens to me it could kill the company. How stupid is that?
Multiple stories were told of business owners who found the right balance between work and personal life. This post isn’t long enough to dig into those individual stories.
Once again this highly intelligent group of successful people educated this country accountant. My desire to “do it all” limited my reach and puts the company (and the employees and clients) at risk should my health give way or I meet my demise.
Life is a series of unending lessons and I just picked up a big one. The new information is now getting pressed into action. Changes are happening at the Wealthy Accountant headquarters to protect the company should I not be available. And it all started with a couple of 30 year old kids living the dream of early retirement to see the light.
They say the teacher will appear when the student is ready. This is wrong. The teacher was there all time. It took the student all this time to open her eyes and see the teacher next to her waiting to teach. That is the life lesson learned by your favorite accountant this past week.
Teachers are usually disguised. Thirty year old kids (teachers in a past life, I might add) taught me a lesson I wasn’t ready to hear a year or so ago. I never thought much about military personnel in the past, but a retired military guy has plowed an endless stream of wisdom my way since we met. I now call him friend.
I am not retired and I am proud of it. My index fund is bursting at the seams so I proudly proclaim financial independence. None of that matters. What matters are the friends I have gained and the teachers I have found. My eyes are opening for the first time. Like a newborn child, my vision is blurry. But I can see. I can see! And teachers are everywhere, willing to take my hand into the brave new world I have discovered.
Old dogs can learn new tricks.
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.
There are two kinds of stories people like to read in the personal finance community: personal finance reports and “What am I doing” stories. Pete over at Mr. Money Mustache released his spending report for 2016 this past week and Jim at jlcollinsnh provided us with a report on life in the comfortable Wisconsin south woods.
Spending reports/progress reports toward financial independence interest me, too, even though my financial situation has been solid for a few decades. Spending reports motivate me, giving me ideas to cut consumption without sacrificing quality of life. Progress reports are always interesting. The writers of such reports usually express an emotion with where they are at on the scale of financial independence. From my viewpoint it seems so obvious they are in much better financial shape than they imagine. It is intoxicating watching these good people make their way to the Promised Land.
It’s been a while since I offered my own spending report. Sorry. Spending is so boring to me. God willing, I will get my 2016 report out before the end of 2017.
Kevin has started the redesign of this blog (I’ll pay him a soon as my new bonus credit card arrives).
Collins shared his life these past few weeks on his blog. I enjoyed his story and I was there part of the time! Such are the simple pleasures of life.
Your favorite accountant has a few interesting tidbits in his life you might find of value, too. Whereas, a lot of people in this community talk about their sedentary or retired life or world travels, I am busy acting like a mini Elon Musk. Call it a sickness.
Brain Storm and the Plaque on the Wall
I was invited to attend an online training class Saturday. A vendor paid my way. A large part of the course was tax related (there is so much to learn about cost segregation) with markets and finance rounding out the day. And I could do it all from my couch.
It was my whole day. The online class was 8 hours. Continuing education credits were offered for CPAs and attorneys, of which I am neither. As an enrolled agent I received no credit for participating in the course. So why did I spend a whole day of my life listening to deep tax issues?
First off, it never felt like a waste of time to me. It was a productive use of a day! I expanded my understanding of cost segregation and the Research & Development Credit, an area I am interested in helping clients with.
Learning is never a waste of time. I have a cute piece of paper on the wall that says I am Smarticus when it comes to taxes. You can wipe your ass with it. It’s just a piece of paper. The only time that piece of paper means anything is when I represent you before the IRS. That’s it! No more.
What clients are interested in is if I can help them. They do not care if I have a fancy piece of paper hanging on the wall. They want to know if I can help. Most people don’t even know what an EA is. (BTW, a CPA is an accounting professional who may or may not focus on tax issues; an attorney is a legal professional who may or may not focus on tax issues; an enrolled agent is a tax professional who may or may not engage in light accounting or bookkeeping issues.)
Learning is the most powerful thing any human being can engage in. Much learning is gained from reading; more from experience. Conferences are places where people can apprentice for a day or three with people with massive experience they are willing to share.
Not all gain is geared toward helping others. Learning helps me in all cases. Sometimes I can share that knowledge in my practice or with readers here; sometimes it is for personal consumption only.
Tuesday I am at it again, except this time it is all for me, me, me. I like me! Google has a one-hour online seminar focusing on improving results and traffic on this blog. No credits offered. The focus is on Google Analytics. In an hour or so Google will help me understand my traffic better so I can get more. Since traffic is a major stroke to my ego it is worth an hour of my life. It also educates me; worth much more than an hour of life.
Well, when somebody wants to help me grow and succeed I am all ears. I’ll find time to attend. It’s that important.
All this learning is neither selfish nor altruistic. Learning is about improving self, but also about sharing skills and experiences. Clients need my experience and skills to serve them. (And yes, serving can be fun. It’s not servitude or slavery. I serve of my own free will. There is a difference.)
After spending Saturday and part of Tuesday in formalized education, I hop on a plane Wednesday for Seattle, where I will share stories at Camp Mustache IV. My newfound knowledge, decades of experience, and finely honed skills will come into play as I serve the attendees of the Camp. It all goes round.
A Valuable Life
Why do so many people who reach financial independence early have a burning desire to write a blog on the subject? The answer is simple. Learning something is worthless until it is shared.
People like to give Mr. Money Mustache BS from time to time. The argument is he is not retired if he does a construction job on the side or writes a blog. The whiny pants don’t get it. Pete writes his blog to share his story and his experiences so others can join him. There is no value in creating a world where you are then locked in solitary confinement because you refuse to share information and experience so others of like mind can join you. None!
Most bloggers make peanuts. If you are doing it for the money I have a surprise for you. Don’t get me wrong, some make large amounts of money. Most do not earn enough to cover their costs, none the less compensation for their time. I wouldn’t be here if it was only money. I expect to do well (don’t we all), but money is not the motivator. Sharing is.
GoCurryCracker has one of the best—if not the best—personal finance/early retirement/financial independence blogs on the net. Here he shares his tax return for 2016. He’s not doing it for the money! And he is at the top of the pile. Sure, MMM earns more, but plenty earn less.
You can trust me when I say this. (Nothing good happens when somebody tells you those words.) I am one of the few tax guys in the genre writing like a Wildman. As a result I get to see (and prepare) a lot of tax returns for said bloggers. I know what they make! And it ain’t pretty. If you don’t love writing, blogging is not a place to earn some easy money.
Life is only worth something when you share it. Dick Proenneke lived alone in the wilderness of Alaska for 30 years. Yet his life only had value when he shared his story by recording his life for Public Television. Millions of people have heard Proenneke’s story and gained powerful insights on how to live life better all because he shared his story. This accountant’s life has been improved immeasurably by his story and life.
What a Waste
Learning can improve your life; teaching improves your life more. The teacher always gets more than the student. You owe it to your family, friends, community, the species, and yourself to learn every day. You are also required by an unwritten code to share this knowledge far and wide. It does not create competition; it creates a vibrant community.
Read widely every day. It is as important and eating, sleeping and breathing. Share. I write a lot on this blog. You are not required to go to such extremes.
You must share to increase your own learning! Never be selfish with your knowledge and experiences. Life is wasted by never engaging; you can also waste your life by learning everything and sharing none of it.
Smart people take every opportunity to learn. True leaders learn at every opportunity. If you want financial independence, if you want early retirement (any retirement at any age for that matter) you must focus your life around learning. And sharing.
Wednesday I get on a plane and head to Seattle and return the favor by teaching some of the most intelligent people walking the Earth. No credit; only lots of learning and fun. Sharing my story with friends new and old. I am Smarticus.