Over the years I have retired many times. So have you.
The demographic of this blog leans heavily toward early retirement. This has always bothered me. I always feel like I have to be an apologist for all the folks enjoying their work. Life would be less bright for me and my brethren if we were forced to do what we enjoy most, less. Why is this? What is the hang-up with this retirement thing?
Zig Ziglar, God rest his soul, pointed out to me 30 years ago what retirement really means. I only met Zig once and it was enough. We talked and shook hands. In that short meeting I confessed to Zig I was going to cash it in and sit around reading all day. Now Zig is a good guy. He didn’t say nasty things to me, but for the smallest fraction of a second his face had a tell. I knew Zig was going to tell me something profound.
He told me to go home and verify what he was about to say. He said, “Look up the definition of retirement in the dictionary. It means used up, worthless, ready for replacement.” Worthless! I am not used up or worthless!
I did go home and check the dictionary and Zig was right. This whole retirement thing was a BS story. Years later, when it was cool to retire early, I came across the FIRE (financial independence, retire early) crowd. I love the concept of simple living and frugality. It was frugality that led me to the community, not the early retirement thing. Now CNBC and the Yahoo newsfeed have a story of somebody who retired at 12 while working through middle school on a regular basis. I’m still not buying it.
Retirement is a stupid goal. Sorry. But it really is. Who works hard, saves and invests, only to reach a goal of worthlessness? An idiot, that’s who. I’m NOT used up! And neither are you. You retire (or is that expire) when you take your last breath. We need a different meaning for retirement.
We need a word—don’t wait for me to provide one because I don’t have one that will sell as good as “retire”—which will convey what we mean better. I’d sue CNBC if they ran an article saying I was retired, used up, worthless, ready for the landfill. (Okay, I wouldn’t sue. The additional traffic to this blog would allow me to swallow my pride.) Those smiling faces in pictures in the articles saying these people retired at 32 are really grimaces. To imagine the world looking at me with a headline over my face saying I’m retired, useless, past my prime, would irritate me to no end.
New World Order
If we can’t find a better word, we need a better definition for the word we are using. I recommend we lobby the dictionary industry until they add one more definition to the word retire. Here is my recommendation: Definition #38) A change in career path.
It is simple, easy to understand and captures what is really meant.
I see so many people now in this community doing the retirement thing and with rare exception they are only doing something different. It was only a career change! I met husband and wife teachers a few years back at Camp Mustache as they were in the last throes of gainful employment. Their goal was to travel the world and travel the world they have.
But they still earn money while traveling! She writes romance novels and is making money doing it. Last I checked writing took work. It might be easy pushing nouns up against verbs; the real problem is knowing which nouns and which verbs. Another retirement foiled and I am happy to share it with the world these, ahem, retired teaches are not used up or worthless.
Pete over at Mr. Money Mustache catches hell on a regular basis for being a hypocrite. You call somebody a hypocrite and you’re asking to get your beak busted. The argument against Pete is simple. Hey, buddy, you’re not retired. You write a blog. Pete is a gentleman. Me, I’d send a return message with the international sign language of my middle finger. Christ, people! If anybody embodies the FIRE community it is Pete! He gives us Definition #39 to the word retire: Doing whatever the heck you want with your day.
Pete is not used up, people! He walks a different path, a path where he spends inordinate amounts of time with his wife and son. That is not retirement by the dictionary definition. It’s the exact opposite. A dad raising his own kid? What has the world come to? This is what we call worthless now?
The Real Retirement
There is only one real retirement and it is six feet under. Nobody I know of has a goal to reach the finish line in life. (Okay, there was a nut job over in Tupelo back in 38, but I digress.) Life is a journey and we need to stop getting hung up (nice choice of word, huh) on quitting our jobs. Seth Godin wrote a short book on the subject: The Dip: A Little Book That Teaches You When to Quit (and When to Stick). It’s a good book. You should read it.
Life is grainy. We do things for a while until we get sick of it and then go do something else for a couple years. There are been so many phases to our lives.
I grew up on a farm and after a short stint in town returned to where I felt most at home, the countryside. Before long my 10 acres of the world had chickens and steers. The work was hard, yet satisfying. I did it for more than 15 years. Then one day it ended. I had a blog to write and other things I wanted to try in life. I fought back tears as the last of my boys were loaded on the cattle truck. I promised myself I could have steers again someday. We both know the odds of that are long. I retired from farming for good. (Unless you count the 25 chickens running around the place.)
My tax practice evolved over the years. In a way you could say I retired several times from the tax/accounting business. I retired from doing taxes by hand back around 1988. Didn’t fight tears when that one hit the trash can. Go figure. All my verbiage about loving my work and nary a tear for a tried and true method of tax preparation used successfully for millennia. (It worked for the Sumerians it should be good enough for me.)
I played janitor for a year and retired from that one mighty quick. Okay, I guess a guy can get used up in certain cases.
The whole point of this discussion is to convince you, no, impress upon you it is okay to change course in life. Experiencing new things is NOT retirement. Ms. Olson enjoys traveling with her husband and writing novels. Not used up! Pete loves telling his story and spreading the gospel of frugality and responsible resource utilization. Not used up! I found my calling early in life and kept doing it. Not used up!
And you, my good friend, are not used up. You are not retired; just tired. You need a nap. Go take one. You need a change of venue. So change it. You want to experience something else, something new. By all means, experience it.
Stop worrying about retiring young or at any age, for that matter. It’s not about getting used up, or whatever definition you want to apply to the word retire. It’s about living life right, with meaning, with purpose. The truly retired disappear, never to be seen again. You are not retired and never will be until your dying breath. And that is a good thing.
It’s about living the life you choose. And if that is what you meant by retire, then you keep smiling from the news feed. I’ll smile with you.
What started as a grand idea has morphed into a changed worldview. For decades I focused on the local community in my practice. I would speak for various organizations around the area, rarely traveling more than 50 miles. And I was happy with that.
My speaking engagements and traveling expanded during the 1990s when I entered the securities field. As memory serves, every presentation I have given outside the State of Wisconsin was for something related to securities. Until two year ago.
Two years ago I had this brainstorm to expand an area of my practice that had been an itch I had to scratch. It went horribly wrong and changed my life in ways I never expected. It was a simple idea. Swoop in on a personal finance conference, dazzle them with my usual charm, and sell an idea. It didn’t go according to plan.
My idea was accepted in a modified form. The problem arrived when I was offered an opportunity to expand my worldview like never before. Remember, I am an old farm boy from the backwoods of Wisconsin. This shit doesn’t happen around here. I was totally unprepared.
The result was this blog and a shout out by Mr. Money Mustache. I had to write this blog; I had no choice. The idea was on the back burner for years. Now I had to push forward with the project. People wanted to hear what I had to say.
And then there was the growing demand for my services and requests to speak to more groups. As I started to attend these events and communicating with many people in the FIRE (financial independence, retire early) community, I started to build friendships. I missed these people when they were not around.
My world two years ago existed in a twenty mile radius between my home and family and my office. This was my home and I spent 99% of my time in this bubble. Sure, I had clients from around the country. But my clients always came to me. A few sent their stuff in electronically, but by and large these people showed back up in NE Wisconsin now and again for a sit down.
I knew all my clients personally then. If I couldn’t place the name I knew their face. These were my people and I knew them all, especially their situation.
That is no longer true. Over a third of my clients have never seen the inside of my office. I don’t know what half my clients look like; I never saw them. Everything has changed. My brainstorm of two years ago changed how I conducted business and it is a continuing learning process.
Changing the way the business operates is nothing new to me. I completely realigned my firm three times before. The fourth, and largest, reorganization of the company is in full swing currently. I think it is a fitting way to complete my career. I may never really quit; I love what I do, but I don’t know how many more times I will have the heart to fundamentally reorganize my firm as the market forces dictate. Truth is I will change with whatever life throws at me until one day I forget how to breathe. It is in my blood.
Alone in a Room
This post is coming to life in a hotel room in Gainesville, Florida. I was asked to speak at the very first Camp Mustache SE. It is an honor. Many of the folks attending have communicated with me their excitement to meet me. I find this strange. You want to see me? Hear what I have to say? Two thousand miles away from home?
Writing a blog is different. In my mind I never really connect the dots where a live human is reading what I say. I sit in a dark room and share my perspective, experience and knowledge. It is all unreal. Even emails and comments seem distant and unreal. Where I get a lump in the throat is when somebody I never met before comments on something I wrote months ago. I only vaguely remember writing it. I put so many words on paper I tend to forget what I wrote unless I go back and refresh my memory.
So here I am, alone in a hotel room (Mrs. Accountant is sleeping in the bed next to me), writing a rough draft I will edit in the morning and publish. A few hours later a group of people I have never met before in the real world will pick the Missus and me up, enjoy lunch and then head to Camp. These people are honored to see me and I can’t comprehend that. My world never allowed for such an event.
I am still early in this new phase of my career. The number of people I meet is overwhelming. I want to know (and help) each of them personally. Slowly I realize that is not possible.
There are people I only see at these events. I hear about them, and others, online or they may email me, sometimes even call. Many leave a deep impression. I am still a 10 year old boy inside, filled with the awe and wonder of the world around me. I drink in as much as I can without choking.
But this new world is so much larger than the one I came from. The bubble I lived in was cozy and comforting. I knew everyone in the bubble. The new, bigger bubble works different. The number of people I admire grows. There are so many I admire and respect.
In the past I could walk around my bubble and visit with anyone in my world any time I wanted. Now I sometimes look to the east and wonder what the Mad Fientist is doing. He lives in the UK. I don’t use his real name because he prefers privacy. I get it. I met the Mad Fientist a few times and respect him highly. He did what I never could. He retired when he was able. He knows how to let go and relax. Something you guys probably have figured out is not in my toolbox of skills. I hope I get to see him again someday.
There are two young ladies who impressed the hell out of me when I was in Seattle last year. Gwen writes Fiery Millennials. She will be here at Camp. It will be good to see her again. For some reason she sticks in my mind. She is a character and reads this blog so don’t let it get to your head, young lady. She is kind of like a daughter in my mind.
Another young lady is Elizabeth. She plays harp and has an awesome heart. I doubt we’ll ever meet again. She is talented and will go far. In the modern world of technology I can watch from a distance and smile. It will have to be enough.
I gaze to the southwest a lot too. There are a few folks in Colorado who changed my life and I admire them. When my eyes refocus further, I see Hawaii. There lives a retired military guy. He is one of the wisest men I ever met. In a sort of weird way he is like a surrogate father. His praise is important to me. He could not attend Camp Mustache SE. Maybe next time.
I could go on listing person after person. I would miss someone no matter how hard I tried to be all inclusive so don’t feel bad if I did not mention you.
In a Small World
Months ago I wrote a post on working with me and my firm. I really thought if I said I would charge for my time people would flip me off and walk away. Remember, I am some guy from Wisconsin they never meet in the real world and I asked them to pay just to talk to me. That does not happen in my bubble.
True to form, I am a slow learner. As Camp Mustache SE approaches I have my hands full. I was asked to do at least one podcast (my fading memory from old age prevents me from recalling if I have one or two podcasts I am supposed to do) and two of the four other speakers want to pay for a consultation with me. All the proceeds go to charity.
Once again I had this great idea. My idea was to offer 10 one-hour consultations for $100, all money going to a charity chosen by those paying the fee. I didn’t expect the 10 slots to fill. They did. At least nine I am aware of.
This excites and scares me. I am excited to raise money for charity doing something I enjoy doing. It scares me because of the people who want the consultation. Remember Gwen from Fiery Millennials? She is in. A few more I also know from previous conferences. Then there is the real mind-blower? Two of the four other speakers have asked for a consultation. I don’t know them personally and they are important people. They must be. They are speaking at the Camp and they have blogs that blow this one away.
None of This is Real
There was a time I understood the world I lived in. It has grown so huge I can no longer say that. I sit here writing in the dark to an unreal world I know doesn’t exist. Do I exist? Stephen Hawking and Elon Musk seem to think not. Hawking discovered the event horizon of a black hole contains the inverse square of information as contained inside the black hole itself. This means there is a high likelihood our universe in a holographic projection. There is no other reason for the event horizon, a point in space that does not exist, to contain this exact amount of information unless it is a holograph. The event horizon is just a place where light cannot break free of the black hole’s gravity. There is no object there! Just an invisible line where a holograph of the black hole’s information is projected.
Elon Musk thinks we are a computer simulation. This jives nicely with the holograph theory. Musk believes the only way any of this can be real is if we are the first intelligent species ever to reach this point in technology because soon we will create just such computer simulations. It is unlikely we are the first.
I don’t know the answer. This holographic projection and computer simulation is feeling mighty small lately. Life was so much easier to understand in a bubble of a twenty mile radius.
Tomorrow I will meet old friends and make new friends. I am eager to meet with Pete again and look forward to meeting J.D. Roth for the first time. The world is expanding. None of it will seem real. It is all a dream, I tell myself. I would have noticed sooner if this were all real. And some of these people want what I have to offer. Yes, I am a 10 year old boy trying to understand a world around him bigger than life.
I had it all figured out two years ago. I really did. Money filled the index funds, the business kept adding to the pile and my team did most of the work. I read and studied most days when I came in if I came in at all. It was awesome! Then I ventured outside my bubble and learned a valuable lesson or three. They put an airport just outside my old bubble, waiting for the day when I wandered a bit too far for my health. The kind lady at the counter told me the airport was for traveling. Traveling? I said. I don’t want to go anywhere. Where would I travel to?
Mrs. Accountant and I recently went on a business trip. Like most business trips we invested time, but no money. The trip was better than free; we came home with more money than we started with and did nothing crazy like house-sitting or couch surfing. We enjoyed meals at excellent restaurants and slept in 3 and 4 star hotels every night. We drove in this instance because we like seeing the sites as we go. In all it took three weeks to complete the business trip. It was a great time for Mrs. Accountant and me to spend quality time together without interruption.
There are a million ways to travel for free. Many people in early retirement dream of doing so. But what about the rest of us? You might not be retired. And then there is the unique breed of animal called the business owner. I fall into the last group.
Traveling is something I avoid. Life on the road is not something I look forward to. As I get older I find myself on the road more and more for longer periods of time for business. Now you know why Mrs. Accountant works for my company.
The reason for the trip is not important. What is important is how I accomplished the feat of three weeks of travel and got paid to do so. Actually, three entities paid for our trip: the organization I was asked to speak for, the bank, and the government. The government paid the largest portion of the bill and it was all legal.
Speaking engagements are the biggest reason for time away from home now. Training conferences are second. Many conferences extend over a long weekend, four days in this instance. The four days at the conference were covered: meals and lodging. Personal entertainment and travel were my own.
Owning a business has multiple opportunities for travel. Even folks in early retirement can benefit from a side gig. The tax rules surrounding business travel offer multiple ways to reduce reportable income legally.
To understand how I accomplished a free trip at taxpayer’s expense, you need to understand my personal situation. I own an accounting practice. Mrs. Accountant works for me as a personal assistant. To date she is the only employee I am allowed to sleep with (if I know what’s good for me). The business trip needs to satisfy a few IRS rules. The travel needs to serve a business purpose. And, as with all allowed business expenses, it also needs to be regular and ordinary.
To deduct the expense of a spouse going on a business trip there needs to be a business purpose. Whenever I speak to a group I always have a crowd wanting to speak to me personally. (I’m lovable that way.) Mrs. Accountant handles the scheduling so I can see more people during and after the conference. The goal is not always to acquire new clients, but to build relationships. So we have determined Mrs. Accountant is a part of the business purpose for this trip.
The nice thing about business travel is that the biggest expense is frequently getting there. Once there the cost is relatively low, especially if you cozy up with locals. They know where all the good stuff is and at a reasonable price.
This particular business trip had three days of travel on each side of the conference, plus the four day conference. After the conference I spent several days with attendees of the conference. My travel home was glacial. Traveling to the conference, the conference, and time with peers after the conference consumed 10 days. It took 11 days to travel from the conference to home.
Those were 11 very productive days. The drive home was far from straight. At the conference I scheduled meetings with people somewhere between the conference and home. I visited several tax offices and provided input.
The entire trip was business so I get a deduction for all expenses. Time to break out the calculator.
This whole process so far is based upon owning a business, even a side gig, and enjoying the work you do. None of this felt like work ever! If it started to feel like work I would have drove straight home to spend more time with my junior accountants.
Before I spill the beans on making money on such a straight forward business trip, I will outline the deductions and out of pocket (OOP) expenses.
The four days of the conference were completely free because I stood in front of a bunch of people and shared information. Funny how that works. I still had to get there and there were another 17 days to account for.
I keep gas receipts; blame it on the accountant in me. I use the mileage rate on my tax return, however. I consider the operating expense of the car to equal the IRS mileage rate even though I drive an older car that is far lower in cost to operate: around 30 cents a miles versus the 54 cents IRS rate. I love non-cash deductions.
Then we have hotels for 16 days (the 17th day we slept in our own bed). The total hotel expense was $2,112 and change. (We will round numbers here.)
Meals are the last expense we will consider. At the conference meals were provided, but there were no snacks later in the day. I love my evening munchies so much so you might think I smoke weed. I don’t. You just might think it. Actual OOP for meals was $862. Mrs. Accountant is a cheap date. We rarely dine out, but when traveling do so more often. We also hit the grocery store when on the road for snacks, drinks and many of our meals. Most hotels now offer a complimentary breakfast which is more than enough for the missus and me.
Let’s add it up. Mileage is a wash (gas receipts added to $266 for those interested); hotels $2,112; and meals $862.
So how did I make money? Merchants asked me for $3,240 over the course of the trip. (There were also a few stops for museums and a zoo. Entertainment was less than $200 and not deductible in this instance and also disregarded for our math.)
On the business tax return I will deduct something different. The mileage deduction is $1,750 (3,241 miles @ .54). Gas was only $266, but there is wear and tear on the vehicle and insurance to consider. Actual meal expenses totaled $862. Using the hi-low method per diem rates we were allowed to deduct $68 for eight days and $57 for 12 days for meals and incidentals. The tax deduction for meals came to $1,228.
We already listed hotels at actual cost: $2,112.
There is still no profit involved, WA! You pullin’ a fast one? Nope.
Cash out was $3,240 while deductions added to $5,090. We want to toss out mileage as a wash because estimating auto expenses after fuel costs is a pain in the ass. So, cash out is $2,974 and deductions totaled $3,340.
Let’s assume I am in the 32% tax bracket, federal and state (25% federal; 7% state). I’m not. Just play with me here. If I am going to claim the IRS turned this venture into a profit merely by traveling, I am wrong. My non-cash deductions over actual expenses add to $366 ($3,340 – $2,974). $366 * 32% is $117 in tax savings. Not enough to cover all the OOP expenses.
At first glance it looks like the above business trip set me back a bit. But I have a secret. I paid nothing, zero, nada for hotels and meals! I have an American Express card for the business and the points were accumulating.
The problem with using credit card reward for business travel is that you can’t deduct the cost because the amount to deduct is undetermined. Using points to buy an airline ticket means you get no deduction (except for add-on costs such as baggage fees and taxes). I also have an IHG card which has at least 11 hotel stays ready for use. I save those for personal travel.
I did not use these points for free travel because they would limit my tax deductions. American Express, on the other hand, hands out gift cards for restaurants and hotels. See where I am going? I used points to get gift cards and these are now like cash in my pocket and cash in my pocket used for a business expense is deductible.
My real OOP expense was only gas: $266. I paid for hotels and meals with gift cards from Amex. I wanted tax deductions, but wanted to keep my money tucked safely away. I get a $3,340 deduction with only $266 OOP (without considering mileage rates and other expenses of the auto). $3,340 * 32% is $1,069. I left home with a credit card and gift cards. The gas expense on the credit card earned additional cash rewards we did not include. And the government gave me $1,069 in tax benefits, cash. Plus I gained new clients and consulting fees. Where ya going ta get a better deal than that?
The goal behind this thought experiment is to get you thinking about the tax code in creative ways. None of what I illustrated is illegal in any way. Non-cash deductions can rise to significant amounts over the course of a year.
Your situation is probably different than mine. Following my path each step of the way is the wrong way to think about this. A business or side hustle makes it easier to game the tax code. Major corporations have been doing it from the beginning of time. Normal people can do the same. Whether you are retired and traveling or looking for some time away from the shop, there are ways to utilize the tax code to your advantage. We discussed one way to do so. Use this as a starting point to turn travel into a money-producing activity.
Now that you have virtually unlimited amounts of money for travel, you need to find some time. We’ll talk later.
Note: Check the TWA Recommends page for all the latest best credit card rewards programs.
Come with me on a journey where taxes no longer apply.
Fifteen to twenty years ago I made it a mission to get people out of paying state taxes. Income taxes are the most obvious, but there are litanies of other taxes states levy against the people. Over the last few decades I estimate I cost the State of Wisconsin approximately $43 million in tax revenues. The richer you are the easier it is to avoid.
First I will tell a true story before I move to a tax strategy many of you early retirees will find very interesting.
Sometimes wealthy people wander into my office to pick my brain. This always amazes me because the pickings are rather slim at times. Still, it happens. On the particular day I have in mind one of the top people at a major financial firm stopped in. They were using a high powered firm in Chicago at the time so they thought an ‘ol farm boy from the sticks in Wisconsin could do better. And I did.
The issue revolved around retirement. They wanted to move to Wisconsin. When I reviewed their finances I explained why they did NOT want to move to Wisconsin. I showed them a number and they agreed. There was a solution, however.
They enjoyed summer weather in the Northwoods of Wisconsin. The problem was with their domicile. They only wanted to spend a few months of the summer here and the remainder of their time vacationing somewhere south. Making Wisconsin their domicile would be a very expensive move. My solution was simple: buy a home in Texas or Florida and make that their domicile.
Your domicile is your permanent residence or the place you intend to return to after an absence. My client wanted to spend some time in Wisconsin. Okay. They wanted to own a home here. Fine. But your domicile better be somewhere else. Take a look at the questionnaire Wisconsin requires residents to fill out when they leave. You have a better shot at escaping the Hotel California! No voting in Wisconsin. Get your driver’s license and auto license plates somewhere else. Thank god they didn’t like to fish or hunt. Once you are in the cult, I mean Wisconsin, you are not allowed to leave. They need your money. When a state works that hard to pick your pocket you know there is a reason.
My recommendation was simple. They wanted to spend eight to ten months a year elsewhere. Why not buy a home in a warm, low tax state like Texas and make that their domicile. Hell. Our governor takes more political contributions from Texas folks than Wisconsin folks. If it’s good enough for him; it’s good enough for my clients.
The result: They spent most of their time in Texas for years before moving to Florida. They summered in Wisconsin and visited their favorite accountant. The tax savings: The first year they saved enough in Wisconsin taxes to pay for the Texas home in cash. Not a bad deal. They eventually sold their Wisconsin home; property taxes here are out of this world too. They visit now and again and I have the honor of preparing their tax return each year. I did my job well serving my client and helped Madison lower taxes like they always say they want to.
Now for a road trip.
On the Road Again
Taxes are more about thought process than deductions. I am going to outline an idea that absolutely works for the right kind of person. Early retirees looking to travel more should find ample ways to tweak this program to benefit them.
It all boils down to your domicile again. Where do you call home? You want to think about that for a minute. If you want to spend time on the road, why have your legal residence in a high tax state. Even if you love Wisconsin (it is my home), there is no reason to make it your legal residence. Without ties to any state, ties mostly due to a job, you can choose what works best for you considering taxes.
States levy all sorts of fees and taxes. Taxes and fees to consider: income tax, sales and use tax, property tax, driver’s license and auto/RV license, personal property tax. There are other taxes and fees, but they tend to be minor compared to those listed.
Suppose you could pick which state you pay each tax in. You want your legal residence in a state without an income tax: Alaska, Nevada, Florida, South Dakota, Texas, Washington, and Wyoming. You want to buy stuff in states without a sales tax: Delaware, Montana, Oregon, and New Hampshire. You want to own a home in a state with low property taxes: Hawaii, Alabama, Louisiana, Delaware, D.C., South Carolina, West Virginia, Wyoming, Colorado, and Arkansas. There is little crossover (only Wyoming has low property taxes and no income tax) and not on all three taxes.
Once you reach retirement (or retirement at any age for that matter) you can pick and choose where you want to go. People who are on the road a lot traveling want a legal residence in a state with no income taxes and low sales taxes. The problem is each state picks and chooses which tax to hit residents with and which to lighten up on. No state is income and sales tax free. Alaska is close with no state wide sales tax, but local sales taxes make the state sales tax average 1.69% at the time of this writing.
Let me make a suggestion. Your mailing address does not have to be your legal residence. You also do not need to own or rent your domicile. Since you are retired you can buy an RV as your home. You could also use hotels and a car as your lifestyle (not my choice and it could get expensive). Over the years I have had clients buy an RV and travel the country, staying with friends and family for extended periods of time. You can use a drop box for your mailing address or a family member. Some people even use their accountant as their mailing address.
Replacing a $400,000 home (I know home prices vary greatly around the nation) with a $200,000 RV (guess you’ll be living well) could be a smart money move. Buy the RV in a state without a sales tax and register it in a state with low license fees; make an income tax free state your domicile/legal residence (where you return); and when you buy stuff do so in a state without a sales tax.
I know I am oversimplifying this, but you should get the idea of where I am going. Properly structured you will pay no income or sales taxes. Other than federal income tax, what is left? A few minor fees apply. A bottle of whisky probably has state taxes added to the price. Many parks have fees to visit. These fees are minor compared income and sales tax.
If you have purchases of $20,000 in a year of sales taxable items, you save $1,000 in sales tax at 5%. Income taxes vary greatly between states, but $5,000 or more in state tax savings are almost a minimum unless your income is super low.
Mrs. Accountant cleaned the home of an elderly couple many years ago. Their daughter and her husband traveled the U.S. by RV. During the summer they would visit family in Wisconsin. (RVs are not ideal for living in during cold weather so they spent winters in warmer climates. They get nippy as the heaters only do so much.) After decades of living on the road they decided to settle down. They chose Texas. Go figure. Texas has high property taxes! Their high income made Texas a good choice, however, because they bought a small home to keep property taxes low and still traveled a bit with the RV.
Life on the road can be relaxing for some. After a while it might grow old. Travel becomes a job when you have no real place to call home. Nomadic living is not for everyone. That doesn’t mean you can’t take advantage of some of the differences in taxes between states.
Financial independence and early retirement make it easier to do. A job holds you down to one location usually. Some businesses can be run from anywhere. Bloggers and consultants can set up shop just about any place they want to. An RV is as good an office as any. They can keep more of their hard-earned money by planning where their legal residence is. Young children complicate the situation unless you home school. But think of the education the kids would get exploring the world on the road.
Owning a home has become prohibitively expensive in certain markets. Living out of a vehicle (van, RV, or other vehicle with some space) is cheaper than owning a home in parts of California and New York. Uber eliminates the need to bring a car along with the RV. By owning less stuff you automatically have fewer expenses and pay less in tax. Living on the road with a minimalist lifestyle, taxes become nothing more than background noise. While taxes may never be eliminated, those willing to live a different lifestyle can reduce their cost of living more by cutting the one expense that frequently takes more than all the other bills combined. Taxes.
There is a raggedy band that gathers in the hills east of Seattle every year over the Memorial Day holiday in the States. From around the planet they gather, each with their own unique story. I was one of those stories.
Camp Mustache III was a resounding success again this year as Joe, Kristin, and Emma put together a hell of a program. Camp Mustache is a gathering of like minded people focused on financial independence and early retirement. Pete Adeney is the guest of honor as Mr. Money Mustache.
Attendees ranged from the young (two impressive young ladies, age 23 and 25 were there) to the less young. Each had a life story to tell on their journey to financial independence. Meal time allowed ample opportunity to catch up with old friends from previous Camps and make new friends. You had to work hard to have alone or quiet time. There was so much to do!
Our group stayed at the Rainbow Lodge in North Bend. The secluded retreat offers ample opportunity to reflect on life and unwind. Cedar wood added to the calming environment. The rooms were simple with twin beds; the restrooms communal. The design encourages spending time outdoors and meditating. The main resort building has several meeting areas. The landscaped grounds have a chapel, plus walking trails.
Okay, the food was awesome! I gained two pounds in a weekend even after climbing Mount Si and walking the facility all day. Every meal was home cooking at its best. The food alone was worth the trip.
It rained nonstop this year until Sunday morning, just in time to climb Mount Si. Temps were a bit chilly, but a t-shirt was fine most of the time. A long sleeved shirt did the trick for evenings.
There were too many breakout sessions to attend them all. Three tracks were running all the time. Yours truly presented on “Should You Do Your Own Taxes or Hire a Pro” and tax issues affecting the audience.
A few of the notable presentations I attended include: a retired NCIS investigator, Hunter Post, discussed gaining clarity while working for and living in financial independence; Doug Nordman shared ideas on early retirement for military personnel (his ideas work for non-military people too); Travel hacking (travel the world for free; it’s easy and fun). I missed sessions on Solar 101 (dang it), real estate investing (already have serious experience in this area), and books and blogs (good thing they wrote all the great blogs and books for us to read on an easel).
The greatest lesson I came away with this year is “One More Year” syndrome. As a business owner I love what I do and don’t want to quit. However, I discovered I can start the transitioning process now. No more “One More Year” thinking for me. I already have enough; it is time to step back. I will provide a post soon on how I am partnering with an employee to transition (sell) my firm to her while retaining the option to prepare some returns during tax season and consult. Clients will see no changes. Everybody wins!
Elevated Financial Independence
Climbing Mount Si is becoming a rite of passage for many attending Camp Mustache. The four mile hike takes you over 3100 feet higher in elevation. It also provides an opportunity to bond with fellow hikers. The climb was muddy this year with all the rain, but the rain stopped about a half hour prior to starting our climb. The temperature was perfect for climbing. The greatest part was the summit. The clouds broke for about ten minutes just as we reached the peak; something we did not get last year.
While climbing Mount Si other climbers noticed our Camp Mustache t-shirts. As a climber passed us going down he said to his friend, “There is another one of those mustache people again. And they don’t even have mustaches!” I could not resist. I replied, “We are a cult.” The man stopped and stared. “Don’t worry,” I said. “We don’t want your money. In fact we insist you keep and invest your money so you can retire early.” He turned away and said, “Sick.” You can’t win them all.
I made so many new friends from around the world at Camp Mustache III. It is hard to keep up with everyone. My mind wanders as I gaze over the fields at home now, wondering what our small group is enjoying today in their personal lives.
Best Said in Pictures
I started downloading pictures from our group and forgot to tag where they came from. Therefore, I am using photos unattributed. Some are mine; some belong to members of our group. Sorry. I’ll take any photo down if it is yours and you request the deletion.
Several people were disappointed they could not attend my session. I worked all weekend answering all the tax questions I could. Emma took a note to contact me in advance next year so I can guarantee attendance at Camp Mustache IV since it fills within a day or so. All the speakers are popular, but my unique message (taxes) is not covered by anyone else (Brandon covers taxes within retirement planning only) so I get to feel loved. Hope to see you at Camp Mustache IV.