Respect is the most important wealth there is. Respect is earned, not given. Live your life in a way everyone around you will admire how you live and act. Be the person everyone else aspires to be. #wealthyaccountant #respect #winners #success #successful #admiration #aspiration #succeed #money #financialindependence #FIRE #mrmoneymustacheThe mid-eighteenth century was a difficult time for people living on the North American continent. Before the United States there was a list of British colonies on the American east coast. The French occupied the great wilderness of the north while the British controlled the mid-latitudes and Caribbean.

Native Americans suffered greatly. Disease and war took a devastating toll on the Indian tribes. Itinerant preachers (lay and ordained) provided respite for Native Americans in the church services where they could feel like equals for a short period of time. Still, racism was rampant even in the Christian circles. White evangelicals pointed out lapses in the faith of natives quicker than of fellow whites. Out of this world was born Samson Occom.

Occom was from the Mohegan tribe. He converted at the tender age of 16 when James Davenport preached on his reservation. Samson Occom was eager to learn more. He became the first student of an academy set up by Eleazar Wheelock, the brother-in-law of Davenport. Later, Occom taught for a missionary society. White missionaries received £100 for their services; Occom received £15 and was required to perform double duties. This left a bitter taste in Occom’s mouth.

An opportunity for a better life beckoned when Wheelock sent Samson Occom to England to preach so money could be raised to pay for educating Indians back home. English crowds were eager to hear a native from the American continent preach the gospel. Occom was so eloquent in his oratory he raised an astounding £11,000!

Samson Occom returned to his homeland and to disappointment. The money was raised for educating Indians. Instead, Wheelock diverted all the money to found a new college that educated mostly whites and only a token number of Indians. The college Wheelock founded is Dartmouth.


Benjamin Franklin in his youth would fill a wheelbarrow with papers and wheel it up and down Main Street of his town when business was slow. He wanted to give the community the impression he was industrious.

As history records, he was well rewarded for his efforts. The list of Franklin’s accomplishments is long, including a very successful print shop.

By allowing people to see his non-stop efforts to get work done, Franklin sent a subliminal message to all who saw him push that wheelbarrow up and down the street as if he were busy delivering and picking up print jobs.

The secret to wealth. money and riches is leadership. Acquire the traits all successful people have. Lead by example and learn from the best. Winners learn to be winners from other winners. #wealthyaccountant #winners #secret #wealth #success #leadership #money #business #richesBen Franklin had character. So did Samson Occom.

At first blush it might seem Franklin benefited from his quality characteristics and Occom did not. True, Franklin did achieve significant financial wealth in his lifetime. But money wasn’t the most important or overriding factor; character was. Yes, Benjamin Franklin enjoyed wealth, but always knew his true and only wealth lay with his character. This is why Samson Occom, despite white prejudice and racism, still was wealthy beyond human understanding. Occom had character; Wheelock did not.

It can be disheartening when you work your tail off and get abused for the effort. All the time and effort to build a quality business can be destroyed in an instant no fault of your own. An angry or jealous individual can tear you down with a lie that sticks with you a lifetime. It is totally out of your control.

You don’t control external events. The actions of others can damage you, but you are powerless to stop a determined individual bent on spreading lies. A competitor may want to tear you down and destroy you so they have easy access to your assets and clients. Sometimes it works for the better as in Franklin’s case. Sometimes you spend a lifetime of abuse due to your race or gender as Occom did.

It is doubtful Occom would have experienced a better life if he succumbed to temptation and attacked his attackers. The eighteenth century was not a kind time for Native Americans. (It’s not always that kind now!) Occom wasn’t the only Indian to suffer racism. What hurt the deepest was how hard he worked helping white man and getting no respect for his efforts. Wheelock must have known from the beginning he was using Occom to raise money on false pretenses.

Who Do You Want to Be?

The YouTube video in this post is preset to start at a point in the presentation important to today’s lesson. You can listen to the whole video, but just listen to the part pertinent to this post by clicking the video. It’ll start almost at the end.

Warren Buffett has given us countless stories on life, investing, economics, money and happiness. In the video Warren outlines how to become the person you want to be. He mentions Ben Franklin and his mentor, Ben Graham, used the same method to discover the person they wanted to be.

Reinventing the wheel is too slow. Learning from people around us and those who have come before is the best way to shortcut to the desired result. According to Buffett, we should look around for people we admire. Then we need to examine why we admire them and why others admire this person.

Once you know what you and others admire in an individual, you can nurture those traits in yourself. By building those traits internally it increases the odd people will admire you too.

Money is important. So is admiration and other forms of wealth. Building a reputation takes work and there are no guarantees. #wealthyaccountant #wealth #admiration #success #money #fame #riches #wealthySome people may consider this selling out. Nothing is further from the truth. Searching for traits in people you admire is the only way to discover what you really want! To guess correctly by chance is a helluva gamble. The odds of you finding the right formula without outside information are slim.

Each person has a different dream, but many of us have a shared dream, or at least portions of dreams. Most people want some level of affluence. Money makes a big difference in life. Most people want at least a few close and dedicated friends. We want a loving family; a loving significant other; good children who are respected and respectful.

This is why you can’t just focus on one individual! Some readers may find my long-term marriage and business success traits they’d like to emulate. Some may envy my writing skills. Or, you might find my rural lifestyle intriguing. There are also things not as endearing. I tend to work too hard and get grumpy when tired. My disdain for travel is legendary. It is okay to pick and choose the traits you find most appealing.

Most people seem to have wanderlust. They want the opportunity to travel more and further. That’s okay! You can pick my traits you want to incorporate and leave the rest. You DON’T want to be a mini-me running around. As Riddick said, “They don’t know what to do with one of me.”

Equal Opportunity

It might not be fair, but outcome with be unequal. Samson Occom had it better than most other Indians because of his efforts. He still suffered racism. Nothing was going to stop that. The same effort by Ben Franklin has left Franklin’s name as a household word. When you think of Ben Franklin you think of industriousness. When you think of Samson Occom (if you ever thought of him at all) you should think of resilience. Occom isn’t a household name, but he is remembered. A footnote in the history books is more than most get.

Warren Buffett studied Ben Graham and then was a student under him. I think you’ll agree Buffett went further than Graham. Graham did just fine in life, but Warren became the richest man on the planet for a number of years. He is also loved and adored by many. Graham is mostly remembered due to Buffett.

Occom was admired, too. When he preached Christianity people quieted and listened. Life could be cruel out there, but in here he was at the front of the room spreading the Good News to his fellow Indians and even white settlers.

Samson Occom was bitter over his treatment; he was beside himself when he discovered the money he raised to help educate Indians was diverted to a new college mostly for whites; the knife cut deep. But he never stopped preaching! He held firm to his faith. He always remembered the words of Davenport that fateful day when he was not much more than a child. Occom found the traits he found most endearing and incorporated them all the way down to his soul.

Show Me the Money

No one, not even your favorite accountant, can guarantee you the outcome of your efforts. You can follow in my footsteps exactly and get a different final outcome. That’s life. Not everyone who followed the industrious example of Franklin in the eighteenth century became famous and wealthy. What I can tell you is that everyone who practiced those qualities did tremendously better than if they had not.

The early retirement and financial independence community have an endless variety of characters. Some traits are admired, others not so much.

You have to do what the rich do if you want to be rich. Find the traits that make people fabulously wealthy with all the money they could ever want. #wealthyaccountant #wealth #rich #money #respect #traits #successThink of it this way. Tim Ferris has a massive following. He has many positive qualities (traits) we should all consider. There are also things you may not like about the guy. The same can be said for the super-bloggers and super-podcasters. I think it’s insane when people want to consult with me so they can learn to be more like Mr. Money Mustache, another blogger or me.

I write a blog and publish a lot more than Pete (Mr. Money Mustache). But my statistics are nowhere near his. If you see a beach spread to the horizon, this blog is a grain on said beach compared to MMM. That said, there are many traits you might want to acquire from Pete. I hope not every trait because one Pete is also enough. Maybe you can pick up a few traits from numerous people.

Certain characteristics tend to show up again and again. If you admire people with money you might notice they tend towards frugality and index fund investing or own a business. You can emulate that easy enough. You might notice many travel and want to do the same. By following their example you increase the odds you will accumulate more resources to travel.

There is no guarantee you will get the same results. A person in prison will have limitations from the rest of the population. Nelson Mandela is a perfect example. He gained the respect of the guards and the people of a nation while imprisoned. He was fortunate that he was released and led South Africa for many years. Other people doing the same thing will almost certainly get a different result.

This blog is about wealth. It might depress you when I say you can search the traits of those you admire and incorporate those traits only to find less admiration than those you worked to emulate. That misses the whole point. Successful integration of quality traits do not guarantee anything and shouldn’t even be the goal! It is the daily effort to improve yourself with the traits you acquired that makes you wealthy.

The daily journey is the reward, the riches you seek. You can examine the admired of your community and work to integrate those positive traits into your persona. But please, kind readers, make plenty of room for you. Explore the qualities already inside you.

Then you will be the person admired.


More Wealth Building Resources

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 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 save $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!


Ever since I disclosed my net worth broke eight figures strange emails have been coming in. Another milestone was passed without fanfare. Past experience had me used to the lack of excitement financial milestones caused.

A theme among many emails revolved around my rate of return. I never really thought of it that way. It was just a thing that happened because I saved a large percentage of my income and invested the bulk of my excess money in index funds. One commenter said he was impressed because my rate of return over the last 20 years was 11% while the S&P rose only 8.5% per year on average. I don’t know if it’s true; I never broke the numbers down that way. All I care is that it grew to a lot.

What the emails and comments forget when they calculate my rate of return is that I added funds over the last 20 years. If I reached my million dollar goal when I was 32 and never dropped another dime in the kitty my internal rate of return would be impressive. Instead, I added excess funds every year. If I analyzed my real return including the additional invested fund my internal rate of return would be less impressive.

There is something else strange about my net worth everyone forgets. I own a business and business ownership has a strange way of building net worth fast. The first million arrived a lot sooner for this broke farm boy than expected. Sure, liquid equity investments were a large part of the seven figure net worth 20 years ago. But I owned real estate and a business too.

Real estate had subpar returns for me. The money was okay, but not great, especially when you consider risks and the time and work involved. The mutual funds did well, as expected. The late 90s were great years for the market and I don’t need to remind you the market has been running higher for eight or so years now. The real surprise, the real sleeper, was the business. It wasn’t planned at first, but once I understood how powerful a business can be at increasing net worth I used all my accounting skills to make good use of the advantage.

Warren Buffett Enters the Room . . . Again

I have followed Mr. Buffett for a long time. One thing that always amused me was his knowledge of the tax code. His stellar growth at Berkshire Hathaway is only amazing because people don’t see how he did it. His stock picks have been solid, no doubt. But it doesn’t completely explain his massive outperformance.

Early in Buffett’s career there were many significantly undervalued stocks. That environment does not exist today. Try to find a listed stock with more cash and equivalents than the price of the common stock itself. Doesn’t exist today.

When the market rallied and kept rallying the awesome deals disappeared. Guys like Buffett don’t sit back and sip Mai Tais all day when the well runs dry; they look for more opportunities. Buffett’s massive knowledge of investing and accounting allowed him to do something few are capable of.

Here is Buffett’s secret. When a corporation, Berkshire Hathaway perhaps, buys enough shares (a large enough percentage) of another corporation, the buying corporation includes their percentage ownership of the profits into their own reported profits. The thought is if the buying corporation owns that much of an interest they will effectively gain their portion of the profits even if the profits are not distributed as dividends.

When Buffett buys a stock he buys a lot of it. Now you know why. He wants to hit a magical percentage of ownership so he can include those profits into his own even if there is no current distribution. Later he gets to claim the capital gain, too. The companies he wants to buy must be good deals. He must also consider the ramification on the book value of Berkshire Hathaway.

Increase Your Net Worth $2 for Every $1 You Earn

The little trick Warren Buffett uses to increase the book value of his company is educational. There is a magnifying effect in play. You get extra zing if you do it right. The small guy has it easier if he knows what he is doing.

Going back to my disclosed net worth, the real question or comment should not have been about growing my net worth from ~$1.2 million to ~$12.6 million in 20 years. The real questions should have involved issues of getting to the first $1.2 million. How did a broke farm boy from the backwater of nowhere tuck away a million dollar net worth in 14 years? Since nobody asked, I’ll answer the question.

To start, the family farm finalized the bankruptcy a few months after I graduated from high school. I didn’t go bankrupt. My life savings was meager, but there were a few dollars rolling around my bank account. Remember, in 1982 bank deposits paid double digit interest rates (and a free toaster if you opened an account with $100, or was it $1,000; I always forget).

Even so, I did not have a head start on my way to a seven figure net worth. I started working in my dad’s business for peanuts. Spending was as close to zero as you can get without being zero. (You in the back, sit down! I know that comes to one cent.)

Saving all my income and investing it in bank deposits paying 12% and dropping some in growth & income mutual funds for the rest started the nest egg growing. A side gig preparing taxes which paid more than my real job sparked the early growth stages of my stash.

Things still weren’t awesome. I took a few years off to read nonstop. Then I met Mrs. Accountant and my hyper frugal ways (did someone say dumpster diving? —we called them McDonald’s runs back then) would no longer work. I had a one-year stint as a custodian at a parochial school before my real big break. I didn’t know it at the time, but quitting my day job after a full career of somewhere around 14 months was the best thing that ever happened to me. And my net worth.

Skyrocketing Net Worth

Do you like games? I do. Let’s play.

Thought experiment: Assume you start your own business, a season tax preparation business, perhaps. You visit the local apartment association and speak a time or two to build your client list. Just for argument’s sake let’s say you bring in 200 clients (don’t want to work too hard) and each client on average pays you $500. (They have rentals so the returns are not the cheapest.) Your revenue for the year is $100,000.

Tax preparation firms have 40% – 50% net margins if they manage properly. Just to make our game easy enough to figure in our head we will say our business owner has a 50% net profit margin. As a result $50,000 ends up in his pocket as profit.

First question: What is the net worth of our hero if she has nothing else to her name? $50,000? Hold that thought.

Our business owner is frugal, but wants to supercharge her net worth so she adds another 200 clients at an average fee of $500. She now has $200,000 in revenue and because she manages her company so well 50% of revenues end up in her pocket. Her income increased $50,000.

Next question: How much is she worth now?

Most people would say if she spent absolutely nothing on herself she would have a $150,000 net worth—a $50,000 profit from year one and $100,000 profit from year two. If you said that you are wrong. Her net worth is $350,000 to $450,000!

The Numbers Game

Okay WA, you lost your mind now. She has a business for two years, earns a combined profit of $150,000, spent absolutely zero of the profit investing it all and has a net worth of $350,000 or more? That doesn’t make sense! What’s the punch line? Stock market tripled in a year? She played options? Won the lottery?

None of the above. She played the safest game in town.

I’ll give you a hint. The first year her net worth was already $150,000! Still blows your mind our business owner starts a business, does a hundred grand in sales and has a net worth more than her revenue!

[Stop teasing me! There are other blogs I can read you know.

Okay, okay. I’ll spill the beans.]

Every business is worth something on the open market. In this case we have a tax preparation firm. Tax firms generally sell for 1 – 1.5 times revenue. Therefore, our business owner generated $100,000 of new revenues in year one. The value of the new revenues is 1 – 1.5 if sold on the open market, plus the profit she got to keep from owning the company the first year.

In year two she doubled sales, hence the value of the firm. Of course I am assuming a conservative value by using the lower end of the range.

When I was 32 my small tax prep business did around $300,000 in revenues. Real estate added ~ another $200,000. Without the business and real estate investment values added to my net worth I would have had to wait a bit longer to hit the seven figure mark. Maybe I would have enjoyed it more if only the cash was counted. Doubtfully.

The Power of Knowledge

In my life business ideas revolve around my firm. Over the years I have sold off pieces of my company only to engage a new idea, expanding the business in a different direction. I never failed to attract at least 1.0 times the revenue of the piece sold.

Armed with this knowledge I am able to increase my net worth with a multiplier effect. I never consider a client worth only what they pay me or the profit on the account. If a new client comes in with $10,000 of work I know I will generate $4,000 to $5,000 of profit for my favorite human AND increase the value of my company by $10,000 or more. In my mind I have a massive annuity and a nice check at the end if I sell.

This why my net worth grew so fast and why I said real estate underperformed. This doesn’t happen with investment properties. If you raise rent $10 a month the value of the property may increase, but it will be negligible. Real estate is worth what the market says it is. Businesses are worth a multiple of revenues, profits, assets or a combination.

This is why it is not that hard to be wealthy. This is why it is not hard to build a million dollar net worth. Starting from zero today and knowing what I know I could reach seven figures in five years tops. That isn’t bragging either; it’s a simple fact.

And now that you know the facts you can do the same.

The only serious accountant around here.

Things have been looking up at The Wealthy Accountant. Traffic is increasing and the audience is expanding. Even better, the original demographic attracted to the site has expanded, bringing in more people to benefit from the information provided.

The newfound success also causes problems. People unfamiliar with the FI (financial independence) community are frequently shocked at the way I present information. It’s an easy thing to do. Right up there in the title is the word accountant. The blog ought to be about taxes and similar stuff found in a CPAs office. Then you open the cover and find me standing there. Don’t worry! It would scare me too.

There is a major misunderstanding on what this blog is about. Yes, the word “accountant” is in the title. There are a few reasons for that. First, it’s getting hard to find an unused url in the dot com universe anymore. Second, I don’t want you to be an accountant (unless you want to be), but I want you to THINK like an accountant. There is a difference.

Thinking like an accountant allows you to make better decisions in all areas of your life: working, investments, taxes, even relationships and raising the kiddos. Accountants think in a logical fashion. They plan. They also look before they jump.

That doesn’t mean all the fun is squeezed out of life either. Readers around here discover real quick there is something mentally wrong with this accountant. I love having fun, kidding around, laughing and turning life into one big joke. And a drink now and again never hurt my feelings.

Accountants have a reputation for being boring. Nothing could be further from the truth. When no one is looking we break loose and riot across town. Then, when the cameras are turned back on, we don our wire rim glasses and pocket protectors. And if you are unaware, we are a darn sexy group, too.

Can We Talk about Something Other Than Taxes?

Approximately 15% or so of this blog is deep tax stuff. This is by design! Taxes can be boring because it requires the use of large portions of gray matter. It gets old after a while, even for people who love this stuff, like me.

My first goal is to entertain. This had better be fun or my readers will jump ship faster than a cat from a tub filled with water. (All paws and tails coupled with an unusual meowing wail.) And this stuff is fun. Most of what I tell you guys is true. The rest is modified to fit the story to the page and not burden you with massive back story or an info dump; not to mislead you, kind reader.

After I get you to chuckle I know you let your guard down. With your force field dismantled I can share serious stories with a moral; we can call them parables.

Entertainment is the most effective form of education. Learning is easiest when it doesn’t feel like learning. Never will you hear me say, “I’m going to teach you a lesson.” (Unless you make me really, really mad.)

Now we get back to the thinking part. I want to help you improve the way you think. Granted, I am no genius when it comes to the answer to life, the universe, and everything. (The answer is 42, if you must know.) Instead, my unique experience of working with people on the intimate details of their financial and personal life gives me an advantage only someone in my position has.

I’ve seen a lot over the years: divorces I never saw coming and could not understand, couples married for decades succumb to drugs or gambling, and worst of all, the number of young people who have died. If there is anything that causes me to pause in life, it is the number of young adults and children I saw to their grave. What can I possibly say to a bereaved surviving spouse or distraught parent? Answer: There are no words. All I can do is hold my client and reassure them they must be strong in honor of the lost loved one. Some days at the office are harder than others.

Most of all, I want you to have a seat on my side of the desk. My hope is you will take a chair behind me and silently watch me work my trade, to see the things I see. I’ve seen a lot. Most of it is hilarious, other times it amazes me how I keep from taking my own life. (How many young people have to die of disease, violence, or accidents before enough is enough?)

Boring accountants! Hit’em! Hit’em now!

I hear your hopes, dreams and fears. I laugh (and cry) with you. You are my people. I joke because it hurts so much in here. When you hurt, I hurt. It is not an over-exaggeration when I say I love my clients. There has never been a better group of people to ever walk this green earth.

From your life I learn lessons, lessons I want to pay forward by sharing to the world at large. After entertainment, The Wealthy Accountant is about living life well, living life right. We can do this only if we do it together.

I am not your guru. All I have is a massive repertoire of stories and a modest memory and ability to share them.

It’s not about money. Money gets a lot of play around here, but it is not about money. Money gives you freedom and few other fun things. In the end money is not the issue. Your family, friends and community are. All the money in the world will not replace those things. Without these things we are miserable.

Finding meaning in life as you view life is what counts. I can’t tell you what to do or what will work for you. My stories only provide prompts to jog your memory and thinking capacity into action discovering those things which make your life worth living.

Can I Say a Word or Two about Taxes?

Tax posts get the most push-back around here. Explaining taxes is a risky business. Heck, even the Tax Courts don’t always agree on the correct way to interpret sections of tax code. If the Tax Court has problems getting their arms around it, what chance do I have a winning the crowd with a tax idea or concept?

Most of my tax posts are built around concepts versus hard tax law or application. This is by design. I want this to be a tool for the common man. Tax professionals will find value, but will need additional research above what I share here. The reason is simple. Once you peal open a complex tax issue there are so many variables, I could easily sink into the quagmire of boring tax blog rather quickly. Then no one wins. Especially my ego. I like traffic! Makes me feel wanted.

Future accountant.

I seem to get a lot of comments poking and prodding around the edges of my tax concepts. It’s a good thing because it means people are thinking about what I am presenting. It is also a bad thing because it means at some level the same people are missing the point.

If fewer than one in five posts focus on tax, where does the accountant come in? Well, accountants do a lot more than taxes. We do payroll, bookkeeping, consulting, retirement planning, auditing, and more. Tax is one small part of the equation. You think accountant are tax guys (or gals) only because that is a big part of their public image.

The most difficult task any accountant faces is taking the complex tax code and making it understandable to non-tax pros. And we have to do it without making the client feel inferior. Trust me, I am not up here and you down there. I have to find a way to bridge the gap.

So I am left with concepts when I write here. I have written plenty in the past about serious tax issues for tax professionals. The people who read that stuff is a fraction of 1% of the people who read this blog and I don’t blame them a bit. It is dry reading. You only read that stuff when researching a tax issue for personal needs.

The Wealthy Accountant is not meant as a stale tax guide used for reference only. When I share tax ideas I know I am leaving out the 3,083 other possibilities. The ideas I present are different from anything else you read on the subject or hear from your tax pro. If it wasn’t different, why bother?

My last post was on saving half your gross income and how it reduces your tax liability. My argument was: Saving half your gross income doesn’t cost half your income because the government has a coterie of deductions and credits attached to saving and investing. Several readers were concerned I skipped, missed, or potentially mislead readers by leaving out certain possibilities. I made a conscious choice in my presentation. I fully understand what I skipped and with good reason. To add too many possibilities or circumstances starts to bog down the post. Boredom is the greatest risk I face when sharing an idea.

My worst fear is that some readers might miss the message. My motivation is to make a difference in the life of every reader who wanders this way without turning it into drudgery. It is a difficult road. Please, keep questioning my work when it doesn’t make sense. I could have made a mistake and it is easy to correct before too many people read the error. But don’t get lost in the forest for want of a good shade tree. I will never intentionally mislead you. To the best of my ability I will take a complex issue and reword it in a way that is understandable to people not active in the legal community. Always seek the concept I am offering.

The reason I am here, kind reader, is for you. If I save you a bit of money: awesome; if I cut your taxes a tad: excellent; if I get a smile while I do it: priceless.

New israeli lottery ticketThe lottery is back in the news with promises of a rich reward for a very small number of people who randomly pick numbers matching the officially drawn numbers. The odds are hundreds of millions to one. But you can’t win if you don’t play. Just one ticket, one little ticket. A single dollar. Better buy two; make that three.

Lottery sales shy rocket when the jackpot rises to mega levels. The impossible odds are still just as bad when the jackpot is massive. The one question I don’t hear people asking is: If nobody won the last time they drew numbers and millions played, what chance do you have of winning?

Eventually someone will win the jackpot and the madness will recede until the next jackpot reaches nosebleed heights. I have been fortunate to have worked with a small number of lottery winners over the years. There are lessons buried in there all of us can benefit from.

Warnings from Winners

I will share parts of the stories of three winners. Their backgrounds are different only in the details. All had jobs and were solidly in the middle class. They had great lives until their dream of quick riches changed their lives forever.

1.) Our first victim came to my office after he had won the lottery. His prize is the smallest of our group: $250,000. Around these parts we have a fair number of manufacturing and mill jobs; he had one of these jobs. Unfortunately, the notoriety of his luck spread around the mill like wildfire. Soon it was impossible for him to do his job so the job was gone. He bought a home paying cash. I agreed with this decision. Then the stupid started. Well, he thought, if I can win the lottery once, I can do it again. And so it goes.

He started buying lottery tickets like mad. The year he won the $250,000 he had over $80,000 in lottery ticket purchases, a deduction on his federal return resulting in a large refund; Wisconsin said fuck you to any tax deduction. You see, in Wisconsin everyone who plays the lottery loses; it is kind of like donating to the governor. Back to our victim. The large federal deduction gave him a substantial refund that year. Determined to never work again he kept, ahem, investing in the lottery. His refund was very small the next year. You can only deduct gambling losses to the extent of gambling winning so all those lottery ticket purchases meant nothing on the tax return. He now had a mortgage on the home.

The following year the home was sold and he was living out of his car. This is where my client and I parted company; there is no need for a tax accountant once all the money is gone. It was another client who informed me our lottery winner was living out of his car. All I kept thinking back then was, Thank the gods he had no children.

Lottery-winner parking spots at the Atlantic Lottery Corporation (2009)

The rich and stupid play the lifestyle game differently with expected results.

2.) Our next lottery winner hit close to home. The parents of an employee struck gold in the lottery, winning several million dollars. They lived down in Iowa at the time. Dad worked as an Emergency Medical Technician and loved his job. As a lottery winner certain jobs are no longer available to you; an EMT is one of them. As an EMT, every call would have ended in a lawsuit, as a lottery winner would seem too easy a target to pass up. At least this story has a happier ending. The money was invested in quality stocks; they lived on dividends only. Over the years their portfolio has grown and most everyone has forgotten about their moment of extraordinary luck. They live in a modest home and are happy. For the most part, money did not change them, it only solved any money problems they would ever have. This is about the best outcome you can hope for if you win the lottery. It also highlights how important it is to have a team of professionals on your side.

3.) Our last winner won a massive jackpot, the largest in history at the time. Our young victim had everything going for him: a job and a beautiful fiancé he loved dearly. He decided to buy a ticket because the news was playing up the world-record jackpot. Little did he know that when he bought that ticket he was selling his future wife and life-long happiness. He bought his ticket at a gas station in Fond du Lac, Wisconsin. He was the first jackpot winner from a stretch of road nicknamed The Miracle Mile due to several jackpot winners buying tickets on the short avenue. For some reason the miracles stopped after the nickname was coined. Go figure.

He was overjoyed when his numbers hit. The joy ended soon enough. His fiancé sued him for half the money and won. Then she left him for another man. Now that I think about it, it was probably best she left now rather than later; a woman like that is a divorce waiting to happen. (Just my opinion.) Once he lost the love of his life things turned up. He hired a team of legal, tax, and investing experts. He did well, as far as I know. He now lives a few miles south of me. He bought and upgraded a horse farm. He spends his days of quiet with his animals (something I understand very well) and from what I hear, a quality wife.

It Does Not Have To Be This Way

We are all familiar with sports stars blowing tens, even hundreds, of millions of dollars in a short period of time, which leads to:

Keith’s Rule # 17: There is no amount of money you cannot spend.

Don’t believe me? Look at the government. Now tell me how much is enough if your spending knows no limits?

The problem is falling into a large amount of money without any experience, planning, or preparation for the windfall. Add to the challenging new experience, a world watching your every move and wanting a piece of what is yours, and disaster will be the default rather than the anomaly.

Keith’s Rule #18: It is easier to get money than it is to keep it.

Some people are better at keeping it than others. Sport heroes landing a massive contract are ill prepared for the demands they face. Our star player is great at playing ball, but has spent virtually no time thinking about handling a large amount of money. They think money is for spending. It’s not! Money is for investing! Money is a tool, a group of hard working employees who never taker a day off. Money reproduces so you don’t want to blow it as fast as it shows up. The average household will bring in several million dollars over a lifetime (easy to get). How much is left at the end? (Hard to keep. Hence Keith’s Rule #18.)

Business Owners

Business owners are a different class. I have the great fortune of working with a large number of business owners for long periods of time. Business owners frequently land accounts with windfall profits. Because the business owner manages his company and finances daily, he has an advantage over lottery winners: experience. And very few know of his new-found wealth. Our business owner socks the excess cash into management accounts for later business use or investments for later personal use (retirement).

One windfall most longtime business owners enjoy comes from the sale of the business. For some reason business owners do much better when they receive millions from the sale of a business. They pay the taxes first, talk with their legal and tax team to protect their liquid asset, and spend considerable time reviewing investment options. Successful business owners have a plan. That is why they have a business to sell. They carry the same habits that created the wealth into their personal lives. It works.

There is one risk area for successful business owners when they plan on selling. The windfall is sometimes traded for a succession plan involving the kids. Now, I don’t want to say it never works, but it is rare when it does. I can’t count the number of businesses dad built and the kids pissed away. Whether you sell the business to the kids on installments (and payments dry up soon after) or the kids get a loan (which you later feel obligated to bail out), family is frequently a poor choice when selling the family crown unless the kids have been heavily groomed to manage an ongoing operation. The worst part is dad has to watch his lifetime of work destroyed. My advice to most clients is: sell for cash to a stranger. Once the transaction clears, do not look back. It only hurts when you do


The chances of winning the lottery are long. The chances you keep it and are happy after you win are just as long. What chance does a lottery winner have of having a happy financial outcome when they are the kind of person to spend money foolishly on lottery tickets? You might want to hold off on that lottery investment for a while.

Personally, I win every time the lottery is played. I win because I don’t play. The money you spend on a lottery ticket, I put into the First National Bank of Wallet, also known as an index fund. My lottery ticket non-purchases have accumulated well over the years. Dividends keep going up and up. The reinvested soldiers of fortune also start pulling their weight. They don’t ask for holidays, paid vacation, health care, or any other fringe benefits; they just keep pounding out more of the same: money. I stand back in awe at their relentless productivity and exponential growth. If man lived to be a thousand years old the process would crumble. We would all be multi-billionaires due to the compounded returns. Now you understand why nature requires we die when we do; to keep the world in balance.

When a lottery ticket is purchased it is with the hopes a win will solve problems. The quick fix never works. If you are unhappy before winning the lottery, you will be even more unhappy after. Your money problems will disappear, at least for a while. The only people who do well when they come into money are those who are already well-adjusted, happy people. If you start happy, money can make you happier because it allows you to do more. But these people have no need for a lottery ticket

If you already bought that ticket, oh well. If by some stroke of luck you win, assemble a trusted team of professionals to help you. Understand these trusted professionals will have their life turned upside down, too. Lottery winners tend to throw a wide circle of misery. The pressure from society and the media is intense. It might be better if you did not win.