Costa Rican gold in a museum vault.

Thirty plus years in the tax field has exposed me to the good, bad and downright vulgar. In the early 1990s I was a top producer at a broker/dealer for several years before refocusing on the accounting end of my practice. Before I left the industry changes were underway. Fee-based asset management was gaining adherents.

The old model of commissions was experiencing the first crack in its armor. Leaving the industry didn’t leave a void in my knowledge as clients consulted with me when considering investments and reviewing their investment advisor.

Fee-based is all the rage today. Many of the original selling points from the 90s are still used today with the exception most reporting is now done digitally online. In a nutshell, people are doing all the fee-based work while still paying a fee.

Rather than call out firms selling fee-based products, I want to focus on how wealthy clients work with their fee-based advisor or firm if they handle investments themselves.

Less wealthy clients seek my advice, too. This allows me an inside look on how wealthy and pre-wealthy (is that politically correct enough?) deal with their investments and the people advising them.

There are remarkable differences. Readers will probably see some of these actions in their own behavior. The wealthy already know this stuff; they have people who have helped them accumulate wealth. The less than wealthy will see where they can change to improve their odds of achieving significant wealth.

Before we start we need to review what I mean by wealthy and non-wealthy. For this study I consider wealthy someone with $10 million or more in liquid net worth. The non-wealthy have a net worth of $500,000 or less in liquid assets.

The examples I use are from my office. I have many more examples of people working with advisors from the lower end of the spectrum. Still, with decades at my post I’ve noticed the speed at which people increase their net worth. Those who act like the wealthy tend to get there faster; those who don’t usually never get there or barely break into the seven figures.

One caveat: The market has been on a tear for nearly a decade now without as much as a meaningful pause. Everybody is smart right now! It’s easy to be smart when you’re winning. Mistakes are easily glossed over in a rabid bull market. Too many people will fail when they are challenged for the first time. Good habits and appropriate demands on your financial professionals will be your anchor in the storm.

5.) No churning! This goes without saying, except it needs to be said. Investment advisors are not immune to the pipe dream of trading your way out of a problem or to success.

You would be surprised how many investment professionals churn an account legally. Churning can be illegal, but my definition of churning is far broader and includes legal activities.

What I’m talking about here is not the typical churning of mutual funds or stocks to generate additional commissions. I’m talking about all the new fangled computer algorithms trading to generate tax-loss harvesting or asset allocation models.

Clients bring me these beautiful folders of color graphs and charts they received from their advisor. It’s junk! Yes, the folder has great information, but swaddled in plenty of BS. I think it’s done that way intentionally to cover for the times results are subpar. You can see the same thing online.

Wealthy people are less impressed with color charts and tax-loss harvesting. Tax-loss harvesting is a zero sum game most of the time with the only value deferred taxes. If you don’t have a large capital gains to offset you are limited to a $3,000 deduction against other income. The rest gets carried over. Tax-loss harvesting has its place, but is overused with several (we will leave unnamed) companies hawking these services.

What impresses the wealthy is intelligent asset allocation. Intelligent asset allocation needs rebalancing once per year. That’s it! No more playing with the money! Leave your fingers off it.

Instead of churning the wealthy avoid investment gains all together with the host of retirement and quasi-retirement options available. Another neat trick to not pay capital gains tax is to not sell a stock with a gain or, in some cases, gifting it to charity and getting massive tax breaks while avoiding capital gains taxes to boot.

Rebalancing your portfolio quarterly only gives the illusion the investment advisor is doing something to earn his keep. With rare exception, rebalancing the account is needed once per year max!

The wealthy know you can’t beat the market with a simple computer program. Moving money around causes tax issues, trading costs and potential missteps in handling the portfolio, leading to loss.

4.) Matching the market is not a bad outcome. When the stock market was crushing it back in the mid and late 1990s I had a client who was considering moving his portfolio to me. I interviewed him (Yes, I interviewed him! Every warm body walking through the door is not client material.) to find his objectives and to see if we had a similar philosophy. Early in the conversation he said he expected me to do better than 20% per year since anybody could produce those types of returns. I showed him the door.

Good times (like today) give people a false understanding of long-term gains in the broader market. If a potential client has an unrealistic expectation it didn’t pay to begin a relationship; he would be unhappy in a short period of time anyway.

I’ve never had a wealthy client ever spew such garbage. Wealthy people think matching the market is a good baseline to start from. If you drop everything into index funds you should expect to have index results minus fees.

Non-wealthy people always want to take a flyer with the next greatest thing, currently bitcoin. Wealthy people also realize some hot investments today could really be a long-term quality investment. Amazon and Apple are two examples proving their worth and Tesla and Netflix are felt by many to have promise.

Hot stocks are not intrinsically bad! Wealthy people know this. Less wealthy people over-weight the risk of their portfolio. For a few it means immense wealth and encourages other less wealthy people to try to emulate the lucky.

The wealthy allocate a small percentage of their funds to non-traditional investments or high flyers. A typical wealthy client will have the bulk, say 80%, in investments expected to match the underlying market*. The remaining 20% in invested in increasingly risky investments.

A typical example is the wealthy client with most of her money in broad-based market index funds with the remainder in quality individual stocks and a few speculative issues.

Non-wealthy investors complain to their investment advisor of market matching performance. Over the long run this is an enviable track record and the wealthy know it and hence, don’t complain about their good fortune. Even a small outperformance over long periods of time is a cause to celebrate. The difficulty in beating the market before fees is long.

3.) Consider taxes when presenting investment ideas. Taxes can take an awesome investment down to mediocre in three seconds flat! Non-wealthy investors are impressed by before tax results. Wealthy investors want to know what they keep after taxes.

Many times a great performing asset can find a home in a retirement fund to preserve before tax gains. Of course, the investment needs to be made from inside the retirement account.

Buying an investment with a long time horizon is better than short-term results! Non-wealthy people love the quick score, but lose when the tax man begs his share. Wealthy people know a long-term investment with years of upside means taxes will not be due for a decade or longer, allowing for more growth without taxes slicing out a major portion of the gain.

Taxes are not #1 on this list, but are the most talked about issue wealthy clients have once a new investment is introduced. I can count on one hand with fingers left over how many non-wealthy clients asked me about their expected returns after taxes. The non-wealthy who do ask are not non-wealthy for long.

Time for a break from the serious discussion with a cat picture.

2.) Research. Pretty booklets and brochures don’t cut it with the wealthy! The wealthy don’t like short cuts. They want detailed research with solid numbers and ratios. When is the last time a non-wealthy client asked me about an investment’s cash flow? I can’t remember it ever happening. The wealthy ask EVERY time. Cash flow is how investors are paid and how a company generates capital to invest. The wealthy are nervous when capital requirements are met with borrowed funds. It’s also why Warren Buffett likes Apple now, but didn’t bite twenty years ago.

Research comes in many forms. The most obvious is the lack of research. Investment professionals working with the wealthy know better than to bring an idea to the client without adequately vetting the investment. Wealthy clients ask a lot of questions before investing!

Less wealthy clients are more likely to say, “Cool!” at pretty baubles and trinkets. An S&P index funds doesn’t need a lot of research. Individual stocks and bonds do. Less broad asset classes also need extra research to verify it meets investment objectives. Alternative investments need continual research, even after the investment is made.

1.) Straight talk. If anything drives wealthy people crazy it is double talk. Wealthy people are wealthy for a reason! Most are self-made and don’t appreciate a condescending attitude. Technical jargon will nix a deal faster with the wealthy than anything else. Less wealthy are frequently impressed by such 47 letter words. The wealthy are not!

I’ve noticed wealthy people can sniff out BS from a mile away. That’s why they are wealthy! Investment advisors looking to pocket a quick commission of generate some easy fees are advised to seek out the less wealthy. The relationship between advisor and wealthy client will wither fast when the technical jargon and BS flies.

Honest answers, even bad news, are expected by the wealthy. They don’t have time dancing around an uncomfortable situation. They want straight answers now.

The less wealthy cling to every ounce of hope the losing investment will turn around. It never does. The wealthy lick their wounds and move one; the non-wealthy cling to hope when all hope is gone.

The wealthy are wealthy because they know when to move on. Honesty up front is the only way the wealthy want it.


The wealthy are a big mystery to non-wealthy people. It shouldn’t be that way. There is no big secret the wealthy possess! In a nutshell, the wealthy hate games: talk straight, do your research before contacting them and consuming their time, consider taxes when researching an investment, matching the market is not a crime and most of all, don’t churn their money for a quick fee or to hopefully score big.

When handling your own money expect the same! It’s what the wealthy do.

And that is why you read to the end of this post.


* Each investment has an underlying market. Some wealthy investors keep a lot of their net worth in bonds. Some like equities. The goal of the wealthy is for their investment objectives to match broad market returns they’re invested in. Example: a wealthy client with a risk tolerance for bonds only might have 80% of her funds in Treasuries or high rated corporate and municipal bonds, with the remainder in lower rated bonds and a few percent in junk bonds or junk bond mutual funds/ETFs.

Good fortune has struck the Accountant household again. Cash has piled up while the retirement accounts are maxed out. Significant funds were added to the non-qualified index funds and there is still cash waiting for investment.

I’m generally uncomfortable with too much uninvested cash. Never one to time the market (not that I haven’t tried, but my results were as expected) I like to get my army, called capital, into battle as quickly as possible.

In the last few weeks I added selectively to my portfolio, even adding a new name to the mix. Since I preach index fund investing so heavily it requires some explaining why I did what I did.

First let me introduce you to my new soldiers. I added to the ranks of Altria (MO) and Philip Morris International (PM). The name of the new platoon — wait for it — is Apple. Yeah, I know. Back in September I warned of the risks of owning index funds and individual stocks. My argument was simple. Buying certain big name stocks (companies actually; remember you are buying a fractional share of ownership in an ongoing enterprise) can overweight your portfolio. Since Apple comprises a whopping 3%+ of the S&P 500 weighting, buying more Apple stock on the side starts to make the ship feel a bit top-heavy.

Sometimes it’s best if you do as I say and not as I do. I have the luxury of a larger net worth so I can have a larger mad money account to play with. The only thing is these new purchases are in what I call a serious money account. The purchases are planned as very long-term holdings.

I have some explaining to do, kind readers. I’ll outline why I like Apple enough to buy even after a massive run-up this year and a market looking frothy. My reasoning for adding to my large amount of MO and PM follows the Apple discussion with my thoughts on two stocks I own but have concerns with: Netflix and Tesla.

The Case for Apple

Some people recommend diversification as a way to mitigate risk. I recommend diversification (index funds) because most people don’t know how to value a potential investment or don’t have time to do the evaluation.

My investing history has included a small number of companies with most of my money in mutual funds (index funds the last decade or so). Instead of diversifying to mitigate risk I research to mitigate risk. As long as I’m going to research I may as well do an in-depth analysis. If I do a good job and the investment is solid with an adequate margin of safety it makes sense to buy a lot of that investment.

Apple is a company I’ve watched for a long time. I made excuses as to why I shouldn’t buy it, but the story is too compelling to pass anymore.

Apple is a massive company. Normally companies so dominant tend to stagnate as competitors eventually pass them buy. The biggest market capitalization stock changes each decade. Today’s big names eventually wither and die. Anyone remember Eastman Kodak or Xerox? They’re both still around and publically traded. They were also darlings of another age. In 1973-4 they were part of the Nifty Fifty. Time has not been kind.

So why Apple? It’s a huge company; the biggest on the planet by many measures.  Only a few enterprises have ever been bigger when adjusting for inflation. The Dutch East India Company was worth north of $7 trillion in today’s dollars so Apple has a ways to go to reach the milestone. The real reasons to consider Apple are margin of safety (they have a lot of cash), growing profits and a cult-like following.

A cult following is not a reason to own a company, but if the fundamentals are there with an adequate margin of safety a cult following becomes icing on the cake. As long as the veneer shines you can enjoy profits.

Apple’s long term investments September 30, 2017.

The main reason I bough Apple is the margin of safety. Take a glance at the chart of Apple’s cash position. The cash position is over $250 billion. After total debt is subtracted you still have over $150 billion as of September 30, 2017. This, by the way is the wrong way to look at Apple’s cash situation. When other liquid and short-term assets are included, Apple could retire 100% of its debt.

Therefore, a better way to view Apple’s cash position is to subtract the short-term investments to cover long-term debt and other liabilities. Inventory and receivables are enough to retire all liabilities, including long-term debt.

This leaves us with long-term investments and cash in the checkbook, revealing the true cash holdings of Apple: $201.3 billion. That is a massive pile of money!

Apple’s cash position.

The next step in valuing Apple is to check the price of the stock (what I can buy it for) against reported earnings per share of $9.21, the so-called P/E ratio. Apple’s P/E ratio as I write is 18.58. This means if earnings remained unchanged it would take a bit longer than 18 ½ years for Apple to earn enough profit to buy 100% of its outstanding stock as long as the stock price didn’t change.

An 18 P/E ratio for such a dominant and growing company is rather reasonable. Apple spends a pile of money buying back its own stock and in dividends to shareholders. But the pile keeps growing. These are good times in the world of Apple.

The dividend yield is 1.47%. This is slightly lower than the S&P 500 as a whole where the dividend yield is currently 1.86%. The earnings yield is 5.4% as I write. This means if Apple distributed all its profits as a dividend the yield to shareholders at the current stock price would be 5.4%. Also a good indicator.

So far we have an interesting scenario, but not enough to buy the stock! Before I open my checkbook I want a margin of safety. And that is where the cash hoard comes in.

The market cap of Apple is $878.5 billion with 5.1 billion outstanding shares.

The $201.3 billion in cash represents $39.47 of cash per share! At today’s closing price on November 16, 2017 of $171.10, cash represents 23% of the stock price!

Look at it another way. Suppose you buy a wallet or purse for $171.10 and when you get home you find $39.47 tucked inside the wallet. If the original price was good, it just got better!

Apple key stats November 16, 2017.

Two hundred billion is a lot of safety margin and makes an Apple investment worth considering. However, I’m digging deeper. If 23% of the stock price represents cash in the bank, then the P/E ratio is less than indicated. If the cash portion of the stock price is removed from the listed price (remember you buy the stock and find a bonus $39.47 per share in cash) the stock price is really $39.47 lower. (If you think Apple is worth $171.10 per share as an ongoing enterprise and get $39.47 in cash along with the stock purchase, you really only paid $131.63 per share for Apple the company.)

This drives the P/E ratio lower by 23% to 14.29. Now the P/E is below the market average for a company with tremendous market power, growing earnings, a dominant market position and a cult following. With the safety of margin firmly in place I am ready to buy. So I did.

Of course my valuation research went much deeper than what I outlined here. To keep this post sane I abridged the content.

The Case for Altria and Philip Morris International

Tobacco seems a bad investment idea as more people quit smoking each year. However, investors forget the real fact the percentage of people who smoke is declining, but the increasing population keeps sales declines more muted.

MO and PM are dominant in their markets. PM was spun off from MO many years ago. MO has the U.S cigarette market and PM has the non U.S. markets.

I will skip the heavy analysis of these two companies. It takes a lot to get me to buy a new investment, but I’ll add to existing stock holdings when opportunity is ripe and as long as the story still resonates.

The margin of safety is smaller for MO and PM than Apple. However, virtually every company has a smaller margin of safety compared to Apple!

Alyria key stats November 16, 2017.

Let me sum up my reasoning for owning these two companies in the words of Warren Buffett. Buffett once said about MO, the product costs a penny to make and is addicting, what’s not to like? I think the reason Buffett doesn’t own MO is because he wants to protect his reputation. Your favorite accountant has no reputation to protect so I loaded the boat with MO and later PM.

Tobacco use as a percentage of the population has been declining since around 1964! MO and PM know how to navigate in this environment and have done so successfully for 50 years. Profits keep growing and the board of directors keeps paying out the majority of profits in dividends. Life is good for the owners of these two companies; not so much for the users of their products.

My buying trigger for adding to my large pile of MO and PM is the dividend yield on periodic market scares about the world ending for tobacco companies. When the dividend yield is over 4% I review the company prospects. If nothing has changes I add more shares. (In reality all I’m doing is reinvesting a portion of the accumulated dividends.)

There is also another interesting development at MO and PM. PM developed a smokeless tobacco product called iQOS. PM developed the product and recently licensed it to MO for sale in the U.S. Demand has been so high there are shortages of the product. And the profits are a lot higher than traditional cigarettes!

Revenues and profits look ready to accelerate over the next years and decade. Decades of stock accumulation in these two companies has been good for my wealth. And when their stocks go on sale I have a tendency to buy more.

The Problems with Netflix

As a disclaimer, I own Netflix and have made a lot of money on the stock. However, I am uncomfortable with my position.

I love the company and their product. Who doesn’t like commercial-free programming?

Netflix has a leadership position in their space, but lacks a margin of safety. When I bought Netflix years ago it was under the assumption they would turn a profit on their business model. I am beginning to doubt that is possible. And don’t believe their reported earning!

This year Netflix added a large number of new subscribers as in past years. However, their increased spending on new programming will increase so much as to consume the entire revenue from over a half million new subscribers! Yikes!

Netflix Stats

The increasing programming costs never seem to end and competition keeps popping up. Disney is pulling their titles from Netflix in 2019 to start their own streaming service at a “significantly lower price” than Netflix.

The worst problem for me is their accounting! Netflix amortizes their content programming costs over four years. This is insane! This one simple accounting gimmick allows Netflix to report a profit while cash-flow negative. Like I said, insane!

Here is how egregious their accounting method is. Take House of Cards as an example. They amortize the production costs from the first season over four years. Does this make sense? Not a chance! Most of the value from Season One of House of Cards ends shortly after the season went live. Considering the problems surrounding the main actor, Kevin Spacey, the value of those titles is impaired even further and faster.

A damning statistic reveals amortization of content expense is increasing faster than revenues. Past sins are catching up and it’s only going to get worse.

I’m not selling yet, but Netflix is on the watch list. I watch Netflix close for signs subscriber growth is slowing. If they can’t reach a cash flow positive situation before subscriber growth slows Netflix is in big trouble.

The Story of Tesla

Tesla is different from Netflix. Netflix is a one-horse show while Tesla makes cars, batteries, solar panels and solar storage. The finances for Tesla are stretched, as with Netflix, but with many more options for success.

I own Tesla and if the wheels don’t fall off — pun intended — the company will be wildly profitable. There are a lot of ifs right now. The Model 3 has production issues and the main man, Elon Musk, spreads himself thin at times running so many disparate companies.

Tesla key stats November 16, 2017.

I consider Tesla a mad money holding right now. Tesla is burning through cash and looks to do so for several more years. Musk doesn’t have much in the way of accounting gimmicks I disagree with, but he does use plenty of financing gimmicks to fund the company’s burn rate.

My Tesla investment is small. If the stock came down in price $100 or more I might add to my position. Might.

A lot of issues need resolution before I jump into Tesla deeper. Tesla is one of those companies which will either crash and burn leaving investors licking their wounds or they’ll end up bigger than Amazon. Musk is the right man with the right dream coupled with the right work ethic to get the job done.

Tesla is not for the faint of heart or to be purchased with the rent money. Just warning you.

One More Thing

Most people buy stock by placing a purchase order. So do I, most of the time.

However, there is a trick you can use to buy listed stock at a price less than the price quoted. But that is a story for our next post.

I had to do something to get you to come back. Besides, I talked enough for one post.

Camp Accountant: The Happiest Place on Earth.

Over the last few weeks and months I’ve added secret messages in plain view on this blog. The easiest cipher (I thought) was on the Where Am I page. Over the last few months nobody said a word. When I finally added the easier cipher on the Where Am I page only one person contacted me shrieking, “Is it true? Is it true?” I’ll let you hunt for other clues. Hint: They are buried within posts.

To answer the question, “Is it true?” the answer is a firm “Maybe.”

For a year or longer I’ve been asked if a Camp Accountant was in the works. I generally shrugged my shoulders because I didn’t think enough people would be interested and I wasn’t sure I needed more commitments in my life.

As time went by it became more obvious people were hungry for material I offered. The guy on the street wanted more personalized service and my days can only service so many people before I exhaust. Tax and accounting professionals visit often looking for my latest method to game the tax system. (Yes, I am working on more posts leveraging the Tax Code. Those posts take more time and I can only publish so many if I want to maintain quality.)

A podcast I was on earlier this year led one of the podcasters to call later with an idea. His thought was to create a whole program for accountants to massively promote my work and experience. His idea was one I already had. The biggest problem was time.

But if there is a Camp Accountant it would be easy for me to give presentations he could record for a full-fledged program worthy of the time invested.

Problems with All the Camps

Four or five years ago a Camp Mustache was started in Seattle in honor of Mr. Money Mustache. It was a phenomenal success!

Success breeds copycats and Camp Mustache was no different. Last year a Camp Mustache was started in Gainesville, Florida and this year they seem to be sprouting like weeds.

Time to stop hiding and get wealthy!

Success also breeds jealousy. Earlier this year we needed a pow wow at Camp Mustache in Seattle to discuss how those terrible people in Florida might turn a profit from their camp. Egads!

If there is one thing I abhor it’s drama and this was pure drama. It was a waste of time whining about somebody else’s behavior which affected nobody adversely. It was thinly disguised jealousy. In my office I would fire an employee for such a wanton waste of time.

The same person who started the drama in Seattle pulled the same stunt at FinCon, paying me a late night visit with reinforcements to put me in my place as I stood to win a high honor for this blog. Nothing breeds jealousy better than success.

I was uninvited to the newly named Camp FI in Gainesville this January. Some people will be upset as several emailed over the last months saying they saved hard to afford Camp FI to meet with me and review their tax and financial issues. I was thanked when I supported Camp FI after the drama unfolded in Seattle and the Camp needed to rename to satisfy demands. Once the new drama unfolded I was out.

To be honest I was deeply hurt by the attack from the small number of people I respected. My initial response will not be my final response. Stress and lack of sleep make for poor decision making. Regardless, the deed is done and you, kind readers, are the winners.

It Starts with a Plan

I will endorse any Camp Accountant (as long as there is no drama) which holds true to my philosophy. There is room for plenty of other opinions. If somebody likes spending like a Wildman or prefers actively managed mutual funds over index funds; no worries. If someone doesn’t like a certain tax strategy; I’m okay with that. Preach or encourage bank fraud or tax evasion and we will not need a pow wow as I’ll lay down the law. This friendly accountant is very easy going, but do not confuse that with not having a backbone. I’ve survived a lot of challenges in a difficult industry. I survived for a reason.

What we need now is someone, or someones, to organize and facilitate the program. I will share my vision of what the first and branch Camp Accountant’s should look like. These are only suggestions. I don’t have a corner on good ideas so you must be willing to put something of “you” into the program. Each Camp should have its own flavor so people who attend more than one always get their money’s worth.

Many of the other Camps are on the U.S. coasts. There is heavy demand, gauging by me inbox, for gatherings in the center of the nation. I’ve been begged to do something in Wisconsin or northern Illinois. Many people are familiar with my hatred of travel. A Camp Accountant in Wisconsin is tolerable even for an old guy from the backwoods of nowhere to travel to.

Though not a demand, I have several suggestions on itinerary and venue.

Several years ago (2014) I attended a Novel in Progress BookCamp in West Bend, Wisconsin. There is an outside chance you may know this guy. Don’t worry about Renee, our transgender student, sitting next to me. I behaved myself. She is now a published author.

Dave Rank runs the BookCamp. It was his brainchild when he was president of the Wisconsin Writer’s Association. I was treasurer at the same time. I haven’t seen Dave in a while; it would sure be nice catching up. I left WWA several years ago with plans of moving to Colorado. Dave left his position as president of WWA a few years later. WWA didn’t want to be involved with the BookCamp so Dave set it us as a separate non-profit. (BTW, Dave can spin a helluva yarn.)

I attended as a student the first year the BookCamp opened. The second year I taught one day before racing to Seattle for Camp Mustache. (I do run a bit hot at times and it’s hard on this old man’s body.)

My recommendation for someone willing to facilitate a Camp Accountant is to plan the Camp either the week before or after the BookCamp. The Cedar Valley Retreat Center is a beautiful venue. The grounds are gorgeous and the meeting center and rooms are equivalent to the Camp Mustache facilities in Seattle.

Time to come out and see the light at Camp Accountant.

An annual Camp Accountant in West Bend would be awesome. Other camps around the Midwest would also be nice. I am willing to attend one and only one Camp Accountant in Alaska and/or Hawaii. As much as I will love the setting it is a long trip and once I do it once; I’m done.

Other appropriate venues would include Ohio, Colorado, Texas, or anyplace central. The coastal cities already have plenty of camps and the center of the country is underserved. A camp on the coast is okay if someone wants to facilitate. The center of the country keeps the travel time shorter for many people, however.

Another consideration is distance. The further from my home, the less I will look forward to the travel.

I have zero interest in international travel. A few years ago Mrs. Accountant and I enjoyed out trip to Costa Rica. My parents invited us. (They almost had a coronary when I said yes. My opinion of travel is well-ingrained within my family and neighborhood.) I’ve been to Canada many times and don’t want to go back. Mrs. Accountant and I took our honeymoon in Jamaica. Once is enough. You get my drift.

My life is busy and I’m okay with it as long as it doesn’t turn hectic. I will attend a maximum of three Camp Accountants per year with a near certainty I would attend a Wisconsin Camp. FinCon, for now, is probably an annual event as long as this blog breathes new material. That leaves me with one floater for the year to keep my traveling to five times per year. World Domination Summit is a possibility. (That amount of travel will cause me to bleed from the eyes and break out with boils.) I make no guarantees how long I will keep such a massive (for me) travel schedule. I think people should take advantage of my offer before my sanity returns.


Setting up a Camp Accountant is work. The one area I will be involved in (if wanted) is the itinerary. Camp Accountant is NOT just about taxes. Like this blog, it is to get people to think like an accountant without actually being an accountant.

There should be one or two classes for advanced tax issues suitable for tax professionals and knowledgeable non-accountants.

There should be (as a suggestion only) one class about an hour and half long strictly for tax and accounting professionals looking to build their practice or add services similar to what I do in my practice. In essence, create a bunch of mini-mes. (The world doesn’t know what to do with one of me.) Other attendees are welcome to listen in.

Plenty of time should be kept free for socializing, sport and hiking the venue grounds. Exercise is healthy and good.

Regular classes should be short, preferably 30 minutes. Most topics are easily covered in that time if the presenter is prepared. A few classes —maybe two —could be 45 minutes or an hour. The goal is fast and to the point.

I am willing to present more than one class. The presentation to tax/accounting professionals is something I will do if in attendance. I would love the opportunity to flesh out one or two ideas besides. If I speak once per day that’s enough. Other people have important information to share, too. People enjoy listening to the guest of honor speak so I’m willing to prepare more material if needed.

I think it would be valuable for attendees to have one round table each full day of the conference (probably Saturday and Sunday if you use the Friday to Monday schedule). This is an opportunity to share ideas and ask questions.

Final Thoughts

About 30,000 unique visitors grace this blog monthly. For this to be viable other bloggers in the FIRE community will need to be asked to spread the word.

If you want to facilitate a Camp Accountant, contact me. I am willing to share ideas and endorse, but I never facilitated anything like this myself so I don’t have either the experience or the time. You also want to contact me before setting a date so it doesn’t interfere with other responsibilities. Tax season is out. A winter Camp Accountant is something the other guys aren’t doing and could be a lot of fun as long as it is before February 1st. (Many people enjoy winter sports, you know.)

I will not attend other camps for other bloggers in the future. At this stage of the game it doesn’t make sense for me to promote somebody else’s brand. For my vision to see the light of day requires events dedicated to the Wealthy Accountant’s brand. I have a broad vision on how you can take what I teach back to your community and make a difference. I’ll talk more about some of the things I do and plan on doing if you contact me for running a Camp Accountant.

I hope you are excited. I sure am. Other camps are fun and light. I joke around in my writing and real life. But I’m as serious as a heart attack, dear readers. I joke to entertain in a difficult subject. Money and taxes can be fun while remaining serious. The laughing stops when the file opens and it’s time to super charge your tax and financial life. We are talking real money here. Every person who attends a Camp Accountant should walk out wealthier than when they arrived. That’s how important I want the weekend at Camp Accountant to be.

You might have noticed the next Novel in Progress BookCamp is May 20 -26, 2018.

It would sure be nice to see Dave again.


Note: A reader left a comment asking if CPE for tax and accounting pros will be offered. I haven’t applied for that yet, but will do so once I have a program to submit to the respective organizations. I would like CPE of enrolled agents, CPAs and, fingers crossed, attorneys.

As you work toward financial independence the question pops into your head: Which investment is best to get me there?  Index funds usually, or at least should, top the list. Real estate is not far behind. People wrongly believe real estate is a better investment vehicle than a broad basket of stocks.

The first fallacy I hear when I inform clients of this misnomer is a list of all the people who made it big in real estate. The current U.S. President, they argue, made his money in real estate. Except he didn’t. He made most of his money licensing his name to real estate others own. When the President was in the real estate business big he also went through a wrenching bankruptcy.

Then, of course, I hear about the Carlton Sheets, the late night infomercial guy selling courses on how to make it big in real estate without any money down or work! If you bought one of those courses I have a beautiful tower in Paris I’d like to offer you for an unbelievable price if you act now. (By the way, Carlton makes his real money selling courses, not in real estate.)

Real estate isn’t as bad as I’m making it, but the numbers tell a story you should understand when adding real estate to your portfolio. There are decided differences between an investment property and an index fund. We will explore those differences and the historical returns on each.

The stock market has real returns of around 7% consistently over long periods of time. Source: Stocks for the Long Run by: Jeremy J. Siegel.

Index Funds

Jeremy J. Siegel’s work on the historical performance of the stock market over the last 200 years is available in numerous editions of his bestselling book, Stocks for the Long Run. As much work as Siegel put into his research, the evidence is clear and simple to understand. Over long periods of time the stock market has a real return of around 7%, plus the inflation rate. The only time the market went for any meaningful period outside this norm is from 1966 to 1981 when interest rates and inflations were high. When inflation waned the market reverted back to the mean.

The story is an easy one to tell. Invest when money is available, don’t try to outguess the market by trading and wait a while.

Dividends tend to climb at a steadier rate than the overall market. Whereas the broad market can race ahead at times, it can also experience a temporary hissy fit. Dividends for the whole market rarely decline, but periodically do before resuming their upward march.

Index fund investing is also highly diversified. A total market or S&P 500 index fund spreads your investment over a vast range of industries. Index investing gives you exposure to large and small companies, including growth and value stocks.

The value of the broad market follows the growth of the economy, plus increases in productivity. Interest rates play a large role in determining the discounted value of future earnings.

The automatic advantages of index investing are absent in real estate unless you invest via a real estate investment trust (REIT).

Real estate struggles to keep up with the stock market. The more time that elapses the greater advantage equities have. Source: Russell Investments

 Real Estate Investing

Dividends tend to be smaller than the cash flow from a real estate investment if it is an income property.

Your personal residence will not produce a rental income stream, but you avoid paying rent so there is an implied value.

Real estate values tend to track personal income. If prices get ahead of themselves buyers don’t have the income to support the payments, thus containing real estate gains.

Unlike index funds, real estate is local. Prices accelerating on the coast have nothing to do with prices of homes in the Midwest. Even the section of town a property is located in has an effect on the value and potential for future gains.

Buying a stock or mutual fund is the end of the work. Periodic review of the investment is the maximum extent of effort required to maintain the investment. Real estate holdings require continuous management.

Real estate has serious holding costs! Property taxes, insurance and maintenance are the obvious costs. If the property is used as a rental you have the cost of finding a tenant. If the tenant damages the property legal costs will be added to the mix.

Investment properties are considered passive income for tax purposes, but as any seasoned landlord can attest, it takes work to turn a profit on a real estate investment. Even with a property manager you need to remain active with your investment or serious losses can occur.

Real estate has one major advantage: rents. Rent income can spike the investment’s return.

Real estate also has a double edged sword: leverage. For a real estate investment to achieve close to stock market returns leverage must be used. And with leverage comes risk. The longer you maintain a high level of leverage (borrowed money compared to the value of the asset) the greater your investment return as long as prices are increasing. If prices stagnate or decline the real risk of bankruptcy rears its ugly head.


I’ve included two charts in this post. The first chart comes from Siegel’s work and shows the relatively stable rate of return of the stock market over long periods of time. Inflation affects results, but the market returns about 7% per year after inflation (real return). The inflation of the 70s smacked the stock market around while rallying smartly in the 80s when inflation and interest rates declined.

The second chart compares real estate to the S&P 500 from 1977 to 2014. This chart unfairly gives real estate an advantage. Real estate prices were moving higher fast in the late 1970s and early 1980s while the stock market was getting crushed until August of 1982.

Real estate was given a head start and still lost the race by a massive margin! In the 34 years covered the broad stock market returned nearly 2 ½ times what real estate did without the risk of leverage or the work real estate investments require. Even if you used no leverage, you needed to fund the property from other investments (lost opportunity cost) and if a roof or furnace died you would also need to use leverage or cash from other investments to cover the cost.

What the second chart doesn’t show is individual markets. Averages work wonderful for index funds, but are terrible for real estate. Real estate has more opportunities to find a hidden gem than individual stocks.


Tax laws have changed radically over the years as it applies to real estate.

Until a few years ago, dividends were taxed as ordinary income, but now are treated as long-term capital gains in most cases.

Tax laws favored real estate holdings in the 1970s and early 1980s. The 1981 and 1987 tax overhaul changed all that.

Recent changes to the tangible property rules and the repair regs have made real estate more desirable than a decade ago.

Real estate sometimes has other serious tax issues such as depreciation recapture.

Both real estate and index funds tax income currently (unless held inside a retirement account (easier for an index fund than real estate)). Both investments enjoy long-term capital gains treatment if held for a year or longer.

Rent profits are treated as ordinary income and taxed higher than most index fund profits/dividends. Losses are limited to each: real estate is limited to $25,000 under passive activity rules if you are not a real estate professional and capital losses on index funds are limited to $3,000 per year against other income.

REITs are taxed as ordinary income and are required to distribute 90% of gains each year. The REIT itself does not pay taxes; they pass the bill on to investors.

The Best Investment

It might sound strange coming from a man who owned millions in real estate over the years, but real estate is frequently a poor performing asset compared to equities (stocks; business ownership). That said I still own my home and farm, office building and paper on some real estate.

Real estate has a home in many portfolios. I always cringe when I see people overloaded with real estate compared to other more liquid investments. I understand the risks of leverage and the capital requirements real estate frequently demands.

Investing in the stock market can be made automatic. Real estate is less forgiving.

Buying in a down market or distressed properties has its adherents. If the right property shows up I’m always happy to buy it and sometimes do.

My experience also gives me an advantage when it comes to determining which investments are best. As the owner of a tax practice for over 30 years I know who is winning who is and losing. Landlords have the distinction of having more bankruptcies of any client class in my office. They also are among the richest.

Leverage determines the winners. Property investors who pay down and eliminate leverage fast have less risk. Those who manage their properties as a business also do well. Those who buy a program thinking real estate is easy money go broke.

Real estate has one final advantage and it’s a big one: forced saving. The increase in property value is hard to access and it doesn’t always feel like value unless the property is sold. Mortgage payments applied to principle is another form of forced savings. “Good” investment property owners keep a cushion of cash for emergency property expenses which is another form of forced savings.

My successful investors don’t spend every penny of profit from their properties. There is a compounding effect with income properties harder to calculate than with equities (stocks).

A smart person will consider all traditional investments. Index funds should be a part of most portfolios. Real estate, for those who are interested in such investments, is a great way to round out a portfolio with a larger cash flow.

You can retire on real estate faster than index funds due to the extra cash flow investment properties provide. But you don’t want your eggs all in one real estate basket in case we end up back in 2008 again.

In Detroit.

Wealth Building Resources

Personal Finance 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 Finance is free?

Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to skyrocket, 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 good way to control costs and comparison shop. 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.

There are times thinking like an accountant determines how much of your hard-earned money you get to keep and how well your investments perform. Money isn’t the only thing accountants think about either. Time is more important than money by a long shot and plays into the equation every time.

This past week my oldest daughter asked if I would be helping with her tuition for next semester. I lollygagged as I didn’t want to think about it at the time. My daughter persisted, finally mentioning she wanted me to know about her tuition if I wanted to use a credit card to accumulate bonus miles or cash back.

Every year I generate cash and miles equivalents of around $10,000 per year. The whole family knows my love of these bonuses since they are tax-free and nothing motivates a tax guy like a five figure tax-free benefit.

I shrugged at the suggestion of getting another credit card for a bonus. Yes, tuition is nice spend to generate lots of cash back or miles. I did just that earlier this year.  But I didn’t feel like it anymore.

Another credit card with a required spend would be a nice added bonus. However, I only undertake the process when I feel like it. Some days I am in full hack mode and other times I could care less. Since I don’t need more miles and the kitty is full, my desire is based solely on thrill.

It comes down to time. Tracking spending on a certain card takes a small amount of time. The rate of return is high, but I don’t want to do it! Call me a spoiled child (in the comments, please), but there are times my time is worth more than another $400 tax-free.

Earlier this year I went crazy on the system. I used several new cards to generate thousands in cash, free hotels rooms and miles. I hate traveling and business travel will take years to consume all the benefits I amassed this year. Like I said, I went ape.

I also discovered selling tradelines a year or so ago and decided that looked like fun (if not tax-free). After mild research (and a few hiccups) the ride started producing a revenue stream. The numbers were nice, even if taxable income.

Selling tradelines requires more time tracking each card involved and assuring you have at least something on each card involved. It started becoming a pain in the tail real fast. The money wasn’t worth it after a while. (My attitude changes over time. When I stop enjoying the process I go do something else; when my deviant nature bubbles to the surface I am all in. Until it grows old again.)

Danger Zone

There is a danger in the FIRE (financial independence, retire early) community. We tend to research to the nth degree as we seek to maximize results with minimal risk.

But minimal risk may not be acceptable risk! As I went crazy on selling tradelines I ended up with one credit card cancelled. (Don’t cry for me. Plenty more where that came from.)

The danger part of tradelines was wasted time. Owning a business means I have plenty to spend on. Putting a few transactions on a dozen cards started being a real time consumer, however. If I didn’t have a tax practice and blog to manage I might find the time expenditure acceptable.

With tradelines you need to track when an authorized user is added to the card and when to remove them. More time is needed to track your payment so you get paid for the hassle  investment of time.

The money is good, no doubt. Selling tradelines on a few cards can add a few hundred to the mad money account. A dozen cards can reap up to a thousand every month; sometimes more.

A good accountant would milk this thing for all it’s worth. I’m not every accountant.

A bird in the hand is worth two in the bush they say. And they are wrong! Free money from credit cards is a lot of fun, but your time is more precious! I will still harvest tradelines and credit card bonuses when I feel like it, but this is the boy in me playing. It isn’t maximizing results.

Or maybe it is! Picking every bone clean that happens in your path is insanity! Not only is time precious, but what you could do with that time can easily make more. Life is too short to waste on every hack. You must be careful which hacks you pick and choose.

Blood Letting

Harvesting credit card rewards and selling tradelines at least makes you money as long as you don’t increase spending. The real danger comes when you only consider maximizing rewards in other areas of life.

Drugs might provide lots of utility as long as you realize it costs money and a piece of your soul with every purchase/use. An alcoholic drink now and again is fine for most people. But if you get confused with mild stimulants you can get in deep quickly. The jails are full of people who maximized pleasure without concern for long-term consequences.

Not to mess with your head, kind readers, but sex is good a few times a week, too. Seven times a day might sound funny, but you can do real damage. You don’t want to milk every last ounce of utility before you end the activity. (Bad choice of words.)

And now we get to the real risk of maximizing results applicable to everyone in the FIRE community. Every accountant knows (or should know) leverage is the best way to spike results. Public corporations do it all the time. XYZ, Inc. adds a pile of debt, buys back stock and watches earnings per share skyrocket.

Until it doesn’t.

Leverage is a double edged sword with the edge cutting you enjoying the advantage. You see, leverage has a built in cost. Interest is owed on each leveraged dollar, win or lose. Break even is a loss with leverage.

Investors figure this out early on. A thousand dollars can buy $2,000 of most listed stocks. If the stock increases 10%, your return is 20%, minus interest owed on the borrowed money.

Here is where it gets bad. If the investment declines the loss is also magnified! A 10% decline is a 20% loss on your original money, plus interest owed on the borrowed funds.

The worst part is staying power. Everyone knows broad market declines happen. Everyone should know the market always comes back given enough time. When you use leverage you don’t have unlimited time. Interest is accruing every day you have an outstanding balance on the loan. The market can outlast you when you use leverage.

Without leverage, all you need to do is wait. An individual stock might go down for the count. It happens. But the overall market is a reflection of the long-term growth trends of the whole economy. In time the market will reflect the continuing growth in technology, productivity and economic growth.

And only the unleveraged can outlast Mr. Market.

Hidden Leverage

Most people use leverage at a far greater level than what is allowed to buy stocks, bonds and mutual funds.

I can hear your screams of innocents. You don’t buy stocks or mutual funds on margin* (good to hear), sell your tradelines (maybe you should) or use credit cards with or without rewards and bonuses (why not?).

However, I bet you borrowed money at least once in life on an investment virtually guaranteed to lose money: a vehicle loan. Ah, but that’s different, you say. No it’s not, says your favorite accountant.

Leverage is leverage. And leverage accentuates gains and losses. An auto loan creates the same leverage a stock investment does. The only difference is the size of the loan and the guarantee the asset will decline in value.

There is another leverage I bet most readers have used: the mortgage. But how can you afford a home without a mortgage, you protest? You might not. I’m not even asking you to buy your first (or any) home without a mortgage. What I want you to think about is the amount of leverage you are taking on and the potential consequences.

Real estate tends to be a good investment, except for 2008. As bad as the housing market was in 2008 and thereabouts, the only people who lost their home to the bank had a mortgage. Usually leveraged to 100% or more.

Some leverage can be a smart move, but leveraging any asset or investment to 100% or more is begging to have your head handed to you.

Think of it this way. You buy a $100,000 home with $3,000 down. (We will ignore closing costs and other items that muddy the water.) If the value of your new home goes up 3% the first year you doubled your equity in the home. A mere 3% decline and your home has no equity. None. Zero.

In most cases you are okay as long as you are current on your payments. That is a whole different issue. What does happen when you have no equity in your home is it requires you to come to closing with cash to sell the darn place. It removes the selling option for many people.

Massive leverage is common historically in real estate. In my office landlords are the number one group to declare bankruptcy. They are also the same group who has the highest net worth. What’s up with the dichotomy?

It all comes back to leverage. Those who abuse or overuse leverage find themselves in too deep to wiggle. When you lose the ability to move financially you are in death spiral. Even if you survive there will be significant damage done.

The Efficient Frontier

I hear business owners and those willing to cheat on their way to FI brag about a method they discovered to generate massive income and net worth growth. Before the words are out of their mouth I know they read a news article on using leverage to spike returns. The article probably highlighted a major corporation using leverage to maintain and grow returns.

With rare exception it ends badly and our victims need to start over or at least re-walk part of the path toward FI.

Accountants love to talk about efficiency and maximizing returns. And it is true I want you to think like an accountant. But just because thinking like an accountant is a good thing doesn’t mean accountants never have stupid ideas. Abusing leverage is one of these ideas.

I would never, repeat, never recommend a client to borrow funds to invest in the stock market. This includes option strategies to spike investment returns.

(Side bar on options: Options are not bad in and of themselves, but most people use them wrong. I have no problem using an option to buy a stock a lower price and collecting premiums or replacing a sell order with a covered call. However, if you use an option to buy stock you must have all the cash on hand. Otherwise you are only disguising massive leverage. The bad kind.

If you don’t understand options you have no idea what I just said. That’s okay. Someday I’ll write a post on options and the incredible risks to the foolish as well as using options as a hedging tool for your own investments. Stay tuned.)

Back to our show. A car loan is leverage and not the good kind either. I understand a loan is sometimes necessary. When this is the case you must make your leverage a DEBT EMERGENCY! When you have debt on a wasting asset all nonessential spending stops until the debt is gone.

The home mortgage is a bit different. I make exceptions to the rules for mortgaging a property, but only after careful consideration. Once again, remember 2008. It never happens until it does.

If your accountant tells you to leverage your business or investments, take caution. When he (a woman would never recommend such a stupid strategy) explains how leverage maximizes your gains, grab your wallet and run like the wind. Your accountant didn’t lie, but the risk assumed to take such a strategy is insane.

If your accountant, or anyone else, encourages excessive leverage on real estate or business, or any leverage on an equity (stocks, mutual funds, et cetera) position, remember the words of the dearly departed George Carlin:

“Do you know how you can tell if you have a stupid kid? Take him to the curb in front of your house and stand him there. If you come back in two weeks and he is still there you have a stupid kid.”

And a stupid accountant.


* borrowed money

1978: It was hot and dry the summer of 1978 in northeast Wisconsin and I hated it. My fourteenth birthday was around the corner and I was recently out of the hospital from heart surgery. The doctor said I needed to sit still as I healed over the next six months and my grandmother did her best to enforce the rule. I was having none of it. I wanted to run, bike and play.

It was the best of times as long as you ignored the building storm clouds on the horizon. Inflation was a problem, but interest rates hadn’t risen enough yet to reflect the new reality. The government encouraged borrowing by farmers through Land Banks.

We were dumb farmers and dumb farmers were soon to learn they had no place in the new world order. Yes, farm prices were high due to inflation while interest rates were lower. Unfortunately, these situations don’t last for long.

Ground was broke on the new milking parlor within an hour of the moment I went under the knife. I was young and innocent and full of faith. As I recovered in the hospital those two weeks I decided to fill my time reading the Bible to other patients less fortunate than me. God had plans for the Bible-thumper.

1980: The hot wind from the storm clouds began to blow. Interest rates climbed as the first recession of the 1980s was about to begin. It was only a warning shot.

Healed from heart surgery, it was learned my surgeon was deathly ill from AIDS, except it wasn’t called AIDS back then and blood wasn’t screened either. The surgeon may have nicked his finger from an infected patient or he may have been gay. I never found out. All I know is I survived without infection. A few years later the man who saved my life was dead.

The World’s Luckiest Man went about life as if nothing were wrong. But plenty was wrong. The family farm tilled by our blood for five generations was in deep trouble and we were all in denial. The debt burden had continued growing and rising interest rates coupled with the first crack in agricultural prices brought us to the edge.

Deep down I knew the farm was in trouble. Some family members started gambling in futures looking for the big score to solve the farm’s money problems. Too young to really understand and enjoying my first real girlfriend distracted me from the truth. These were the last good days of my childhood. A nightmare was about to begin that would scar me so deep I would never again forget the fear.

High school wasn’t a high priority for me. I assumed my life would be filled as a farmer, as my father, grandfather and great-grandfather before me. Excluding my senior year, the only thing that stuck with me is a lesson from Social Studies: the 1929 stock market crash. We spent one day only on the event, but I was completely hooked. I had to understand why things happened the way they did back then. The lust to understand the crash follows me to this day. This is the very moment I decided my career if farming didn’t turn out: stock broker.

1982: The winter of 1981/82 was the cruelest. The farm’s coffers were depleted and heavy snow caused the free stall barn roof holding the milk cows to collapse. The insurance was delayed and there was no money to fix the problem. The barn cleaner froze tight and manure piled up. Those animals suffered like nothing I’ve seen before or since. I shiver from the memory now 35 years old. Another scar was created.

The family farm was gone. The collapsed barn roof hastened the inevitable. Maybe God was merciful to me after all. But those beautiful animals paid a dear price.

Spring came and the clean-up began. Lawsuits flew as a last desperate hope was cast to cling to a past no longer possible for our future.

It was only four years ago I left the hospital excited to see our new milking parlor. Gone were the grand emotions of seeing our farm grow with cutting edge modern technology. The cows were now gone. My uncle and I were the last to clean up the mess. My dad started an agricultural repair business he runs to this day and is very successful. You can’t keep a good man down. My mother sold Tupperware to pay the bills as my dad’s business struggled for traction during those early days. My mother sold a lot of burping bowls; so many in fact she earned a company car.

The second recession of the early 1980s was biting deep as I graduated from high school with the barest of margins between passing and failing. I still held hope I would be a farmer as illogical as that looks in hindsight.

Some young stock remained and the fields still required planting and later harvesting. Still, most days that summer I spent playing a card game called Rummy  with my uncle and throwing darts at a dartboard with a picture of the Ayatollah Khomeini.  (Remember the American hostages in Iran?) The summer went on forever.

I discovered a love for reading my senior year in high school. The summer of 1982 was my first opportunity to dig deep into the knowledge books had to offer.

Back then they had something called Value Line in the library. They’re still around, but nothing like it was back then. Value Line was a treasure trove of information on publicly listed companies. I reached the age of majority in June with no real future before me while I invested heavily into myself without even knowing it.

The family was broke, the farm damaged beyond repair. I was broke, too, in a manner of speaking. The first 18 years of life I spent as close to nothing as you can without saying nothing. Money from my birth went into a passbook savings account. Money from birthdays, confirmation (church) and high school graduation added to the stack.

Passbooks actually had a reasonable return back then and I loved watching that puppy grow. The passbook wasn’t computerized. They stamped the numbers in a real, honest-to-God, passbook! I was thrilled each quarter when I could hitch a ride to town to the State Bank and have them stamp the accumulated interest since the recording of last quarter’s interest.

Added to my passbook was income from working on the farm. My wage for seven day work weeks of fourteen hour days was $40. Yup, ten bucks a week. I didn’t complain much; I now realized how bad things were. I was more concerned what I would do when the bankruptcy of the farm was finalized.

In November the farm was gone. The homesteads were preserved, but most of the land and all the cattle and machinery were part of history. It was cold that winter. We had no money to heat the rickety farmhouse. At least we had a place to stay.

1983: I went to work for my dad’s agricultural repair business once the farm was wrapped up. The pay wasn’t any better, though I was earning $400 a month by the time I quit. We struggled to survive.

My passbook was a beacon of hope for me. Nearly $10,000 had accumulated over my years of youth.

I hated every moment working for my dad. The work was hard and did not thrill me. I wanted a different life. There were no other options in the deep recession of 1982. There were no jobs available in my community. None. It was work for dad or starve. I worked.

My investing research brought me to my stock first purchases. Philip Morris was one of my first buys and has clung to me like smoke in a bar. I played with other ideas to learn more about investing. Most of my passbook money was cashed in shortly after my 18th birthday and placed in growth and income mutual funds. The timing couldn’t have been better. August of 1982 was the launch of one of the biggest bull markets in history.

I still own my FFA jacket. Those were fond days.

By the time the farm was gone and I was turning a wrench in my dad’s company I knew I needed another source of income. In high school I was in the Future Farmers of America (FFA). To raise money for our group we sold light bulbs. This is when I learned I could sell an Eskimo an ice cube.

Every year I was in FFA I sold more light bulbs than anyone else by a large margin. When the group decided to sell seeds, I topped that list as well. I could sell anything!

By the time 1983 arrived I found a company called Specialty Merchandising Corporation (SMC). I think they’re still around, but they have a lot of complaints online.

SMC was different in 1982-85. I was able to buy junk, ah, I mean stuff through them mostly made in China (yes, it’s my fault China ever got a foothold in our economy (sorry)) at wholesale. My selling skills from high school did not work as well as an adult. People will waste money on stuff sold by the school without question. (Did I say that?) When an adult goober like me showed up they questioned.

My advantage was persistence. Okay, stubbornness. I didn’t give up not because I was smart or energetic; I was desperate. The profits were thin, but added up as time went by.

One more side gig appeared at this time in my life. In 1982 I prepared my first tax return. (Later, a client with several unfiled tax returns, would give me the chance to prepare tax returns back to tax year 1978.) Let me be clear; I prepared a tax return. I consider it my start date. (Laugh all you want; it’s my story.)

1984: The economy was improving in the Rust Belt, but it did a certain neophyte accountant no good.

The good news was my mutual funds and individual stocks were tucked in for the ride to the moon with the stock market. Profits from tax returns and SMC added to my meager wages working for the family business. In 1984 I was a poor farmer with no debt, no bills (living at home with my folks) and over $50,000 invested.

The spring of 1984 I made more money preparing tax returns than I did working all year, 90 hours a week, swinging a hammer. Thank God, business in the ag repair industry was slow during tax season. Thank God the repair business was slow over the holidays so I could sell like a Wildman for the Christmas holiday. It made a difference.

1986: My investments reached $200,000; it was time for vacation. I quit working for dad (it was a minor family crisis), bought a mobile home in Forest Junction and read books all day and drank coffee. The amount of information I consumed during this gap year was immense.

I was starting to grow up, but there was a bit more to go.

1987: The most fantastic thing to ever happen to me happened in 1987; I met Mrs. Accountant! (You thought I was going to say I made a pile of money in the stock market crash of ’87, didn’t you?)

A respectable man I am, but finding an awesome woman like Mrs. Accountant only made me consider getting a “real” job.

That would all change one year and six days from the day I met her.. Mrs. Accountant forced me to marry her and she wasn’t even knocked up!

1988: One year and six days from the day we met we were married. While going through orientation with the minister it was brought up I do not work. Good husbands work and the church had an open position for a janitor.

I took the job. It paid $7.65 an hour. Not much even in 1988, but honest labor.

1989: I hated swilling toilets for a living about as much as I enjoyed turning a wrench and swinging a hammer for dad. A year and bit later I quit. Good for nothing husband!

SMC was history by now, too. Tax work paid the real bills. And I found another profit engine: real estate. We bought our first home (mobile homes don’t count) and investment property.

My net worth was climbing slowly now. I estimate my net worth hovered around $300,000. The ’87 crash had recovered and I was still adding to the stack. However, a woman entered my life and for the first time did some spending as part of my mating ritual. Thank the powers that be it worked or I’d still be single!

We tend to remember the good times of our youth and forget the rest. As long as we learned the lessons we’ll be fine.

1996: The first years as a full-time tax practice were difficult. I made money when my costs were zero and I did returns by hand. As a “real” business I automated and computers and printers were ungodly expensive. It took three years before I turned a profit. My buffer of investments was my only comfort (and a friendly snuggle from a certain young lady nursing our first child).

To keep the finances in the black, Mrs. Accountant and I took in foster kids until our daughter was born. They paid $1,000 per month to take foster children back then because we took high schoolers. It was a challenge to say the least.

Real estate’s best days were in the 1970s. High inflation meant leverage amplified gains by several magnitudes of order. Tax law changes in 1981 and 1987 reduced some of the benefits of investment property ownership and real estate inflation was back to normal levels while interest rates remained historically high.

Real estate was still profitable for collecting rents in our locality. My dad, brother and I formed a partnership so we could by more properties. Without going into details, all I can say is we owed a lot. I mean a real lot!

Around this time the bank demanded a personal financial statement because we had a modest loan on our investment properties. When I added all the numbers and subtracted the small loan on our primary residence and my portion of the loan for the rentals, it tallied to $1.2 million. I was stunned.

The mutual funds and stocks were worth close to $850,000. Our personal residence had maybe $30,000 of equity (it was a small home worth maybe $70,000). LuK Enterprises, the family partnership for the rentals, was worth approximately $350,000 for my pro rata share of ownership; the original investment was $105,000. The business was still in the home so I valued it at zero. In reality, the tax practice was worth $200,000 to $250,000, I estimate.

The next year I bought the office building my tax practice currently runs out of and the farm I currently live at. We sold our home in town for a $40,000 profit.


And that is how a broke farmer became a millionaire He never quit trying; he never gave up.

As Dickens said: It was the best of times; it was the worst of times.

And I wouldn’t trade them for all the money in the world.

Remember all those credit cards you acquired to earn out those bonuses and eventually canceled? You’re going to wish you hadn’t done that.

Credit cards are one of the most powerful wealthy building tools in existence today when used properly. They get a bad rap because irresponsible people rack up massive quantities of high interest debt and spend decades digging out if they ever get out. Still, credit cards can put a lot of ka-ching in your pocket if you understand the rules and never run a balance on the card.

If you are in the accumulation phase of your wealth building cycle, looking for a high income compared to the time invested or love gaming the system (your favorite accountant is guilty as charged), then you need to learn about tradelines.

To play this game you need a credit card at least two years old. The longer you’ve held the card and the higher the credit limit the better. This game requires you use said credit card and pay it off in full each month. The more credit cards you have the better.

Setting the Table

So what is this tradelines thing anyway? A tradeline is what a bank calls a line of credit. Your credit card is a tradeline.

A “seasoned” tradeline is at least two years old meaning it has a history. If you have no late payments on a seasoned card there is an active market for selling your tradeline.

Still confused? Me, too. It works like this. A credit card is called a tradeline. You can add authorized users (AU) to most credit cards at any time. People with poor credit pay to be an authorized user of your credit card so the bank reports the high unused credit limit on their credit report. This increases their credit score fairly quickly.

You know who they are, but they haven’t a clue who you are! A big concern surrounds risk of having your card cancelled. What if someone buys your tradeline and runs off spending all your money? No worries mate. It’s impossible. When you use a company acting as clearinghouse the buyer never knows who you are and a credit card never gets sent to the AU.

There is no need for you to spend effort looking for people willing to buy one of your tradelines either. There are a multitude of companies out there doing all the heavy lifting for you. They find the buyers, background check them (to prevent fraud), collect the money and send you the information. You add the AU to the card they purchased a tradeline from and sit back enjoying a cold one. Several months later you remove them as an AU and a check is mailed to you (direct deposit actually).

People buy tradelines to increase their credit score to get better loan rates and to reduce their insurance costs. This isn’t repair credit! If you went through a bad patch, buying tradelines can give your credit score a lift as long as you are not adding more negative marks to your credit report. A medical disaster is no longer a lifelong financial death sentence.

Car and homeowner’s insurance can be higher when your credit score is poor. It’s like kicking someone in the face when they are down. A medical emergency can destroy a life without hope of financial recovery. Buying tradelines can lower the interest on a mortgage or car loan, but also lower insurance premiums. Some people enjoy major benefits investing in tradelines.


Time for a Walk

The best way to understand selling tradelines is to walk through the process. By the end of the walk through you will know how your credit cards can add $1,000 or more per month to your pocket for an hour or so of your time.

Step 1: You need a clean credit history. No delinquencies in the last year or so. Your credit score doesn’t matter. If you’re like me you collected more than a few credit cards over the years and only use certain ones.

Open an account for free at Credit Karma. Credit Karma should list all your open and closed accounts. Each credit card should list the account open date and credit limit.

Step 2: Research companies brokering tradelines. You will need to vet each company for quality; most will not make the cut. More time will focus on finding the right tradeline company for you than the actual process of earning money with tradelines. The most important questions involve account verification. The banks generally don’t like tradelines being sold. Their biggest concern is fraudsters increasing their FICO score, getting a credit card or other loan and defaulting. Without adequate fraud control criminals can cause losses for the banks and that ends the party. Ask before selling your tradelines with any company. Better yet, ask for proof they are collecting all required documents and running a LexisNexis background on each client.

Step 3: Once you sign up with a tradeline company, you choose which credit cards you wish to sell tradelines on. Your tradeline company will tell you what their firm pays for each tradeline per card. You should try to get your credit limit raised on all your cards to increase the potential income from each tradeline sold.

Step 4: Your tradelines are listed by the tradeline company. In short order you will get an email explaining you sold a tradeline! It’s not money time yet. Follow the instructions for adding the AU to the card listed.

The credit card company will send YOU a card for the new AU. You don’t have to activate the card.

Step 5: The tradeline company will send you another email in two to three months informing you to remove the authorized user. Follow the instructions on how to remove an AU from your credit card.

Step 6: Keep an Excel spreadsheet listing all AUs, when you added them, which card added to, when the AU is removed and when you get paid. Record-keeping is important! You need to know what you have and where.

Step 7: Collect a check.

Step 8: Repeat.


It is possible to have more than one AU per card. In fact, it is likely. This is good for you. The more AUs, the more income. There is a limit, of course. Each credit card has a limit on the number of AUs you can have at a time on their card. My opinion is no more than two AUs per card ever. If you already have numerous AUs on a card for your business you probably should keep that card separate and not use it for selling tradelines.

Is this legal? Another question people have is the legality of doing this. My research indicates it is legal, including remarks from a spokesman from the FTC. The illegal issues lay with tradeline companies not doing adequate background checks. This is why it is important to vet any tradeline company before signing up with them. My understanding is this cannot be listed as credit repair and money can’t be collected up front from the client. You get paid after the fact so reading FTC reports indicate there are no legal issues with selling tradelines. If you vet a tradeline company and later the company takes a shortcut there is liability risk to the tradeline company. Having your due diligence in order protects you.


A Few Rules

Tradeline companies will have some rules to follow. I want you to follow those rules and add my more restrictive rules to their list if necessary. The more restrictive rule applies to protect you from account closure.

When your tradeline company tells you to remove an AU from a card, DON’T DO IT, unless at least two months have passed, preferably three.  If you slap additional AUs on and off a card too fast the bank will cancel your card. Selling tradelines may not be illegal, but like counting cards in a casino, the bank will not like it if they know what you are doing, cancel your card and tell you to not come back.

All AUs stay on my cards for 90 days minimum!

The next issue is credit card usage. Your balance should be paid in full each month and should never exceed 10% of the credit limit.

You will be told to spend a token amount on the card. BS!!! Every card with an AU should have meaningful charges. You do the spending. The AU is not around to spend on your card. But meaningful spending on a card with AUs is a must. Don’t game the system with the card issuer getting a few pennies.

I’m lucky. With a business I can find plenty of things to put on the credit card. A typical paper order (in our paperless office) runs 250 reams. You may wish to consider previously published alternatives to spending, too.

If you are frugal (like me) without a business (unlike me) with few expenses to charge, there is a low limit to selling tradelines. Still, a couple hundred a month for less than an hour of time is a nice addition to the mad money account. One account handled properly can be worth $300 or so every couple months.

One Last Caution: There are plenty of companies brokering tradelines. I spent serious time reviewing multiple companies to verify I am with a “seasoned” firm and still discovered it wasn’t as seasoned as I would have preferred. There are other good tradeline companies out there. The real work is in finding them.


Action Plan

Vet several tradeline companies before committing. I use a tradeline company and am aware of two more who run a tight ship. The additional two companies I know of are doing it right so they don’t have much supply. Still, slow and steady wins the race. The company I am using was originally listed in this post and I edited them out until I can verify further. I want happy readers. The last thing I want is a mob of angry people who had their credit card cancelled. A background check on all clients is an absolute MUST!

This is a process. Consider adding to your credit card portfolio to increase future income. Go to the TWA Recommends page and scroll down to the recommended credit cards. Pick a card that matches your needs. Travel miles or cash rewards, et cetera. A good plan might be to add one card every three to six months or so for you and a significant other. Max out the bonus rewards and keep the card until it is ready for use selling tradelines. Don’t cancel the card. Keep it for future personal use too. Of course you will have a favorite card, but I use different cards for different situations as I suspect you will.


While I don’t recommend any tradeline company, I use the below company for my personal tradeline sales.


Call:  888-844-8910

2534 State Street, Suite #433

San Diego, CA 92101


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?

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.

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.

Worthy Financial offers a flat 5% on their investment. You can read my review here. 

A year ago I started tracking the questions clients asked me. Clients were put into three categories: those with income below $50,000; those with income over $400,000; and everyone else in between in the final category.

Obsessive-compulsive disorder isn’t the reason for my behavior. I noticed questions frequently were based upon wealth. I needed to track data for a period of time to verify what I suspected was true.

Clients (and potential clients) with low income and or net worth almost always asked the same question: How much does it cost? That’s all they wanted to know. I hated the question too. It whores my professional service. Is price the only thing that matters to these people?

The lower income/net worth crowd focused questions around: How fast? How cheap? What’s my refund? and, When does my refund arrive? None of these questions helps clients one bit.

Tax preparation is glorified data processing. (Sorry, tax professionals. I have to call’em like I see’em.) Tax season isn’t the time to tax plan or to engage your accountant at a high level. His/her mind is preoccupied with a million things due yesterday. If the only issues with your accountant are cheap and fast, then you need to reconsider your relationship with your accountant!

The middle group was a mix. Some clients from this group asked the same questions as the poor. There were some who asked many questions similar to the wealthy. The lower end of the middle looked a lot like the low income/low net worth group. The upper end of the middle group had at least some questions similar to the high income/high net worth crowd.

What interested me the most was the wealthiest clients. How these people utilized my services was telling. Price was at most an afterthought; quality was demanded over speed; and the wealthy could care less about a refund. They were only interested in their actual tax liability.

Today I want to share the seven most common questions my wealthy clients have asked me over the last year. I think you will find the information valuable. You might also want to start asking better questions, questions the richest people are interested in hearing the answers to. Better questions lead to better answers and the possibility of more income and net worth.

1.) Is there anything I can do to optimize my tax return? This is by far the number one question my wealthy clients ask me. Wealthy people know an experienced tax professional can tell a lot from a tax return.

 A tax return can be accurate without resulting in the lowest tax. Wealthy clients want me to use this information to build tax reducing strategies that fund their goals. Some clients want ideas to improve the efficiency of their charitable giving. Others want to maximize the benefits of their business or investments. A completed tax return is a wealth of knowledge for an experienced tax professional. With the tax return as a starting point serious wealth can be created with a few simple actions.

2.) I want a consulting session? The richest people in my practice want to speak to me at least once or twice outside tax season. They know I am under the gun in spring as the deadline looms so they want a summer or autumn appointment where the stress level for me is lower. (Wealthy clients actually say it this way, too.)

 It is common for wealthy clients to remind me to charge them for the consulting session. (I always charge for consulting!) Rich people don’t want a barroom conversation. They want a deep analysis of their situation. They come armed with pages of handwritten notes they want covered. This is serious business. A thousand dollars of consulting can put $10,000 or more in the pocket of the client. That is a heck of a return on your investment and the wealthy are well aware of it.

3.) Can you review an investment for me? Of course, I can! A good accountant with decades of experience under the belt knows a few tricks when uncovering value. When wealthy clients want me to review an investment they want the bad news! They already convinced themselves it’s a good investment. Now they want me to punch holes in it. When they get my opinion, including the risks, they can make a better and more informed decision.

There are a variety of investments to review. Stocks and bonds are common. Real estate and businesses are also things I review on a regular basis. I run the numbers through the eyes of an accountant, looking for irregularities. In nearly every case I uncover something the client didn’t notice. Years of training will do that for you.

Seven or eight years ago a client working for the Wisconsin Department of Corrections came to me with an investment in concierge portals for hotels. The company selling the investment made a good story. It sounded good and early investors were getting paid. But! Something wasn’t right. The idea was these machines would make money from Google ads. Having websites and blogs on the internet I knew what profit potential these ads could bring. Quick math told me there was no way this worked. It was a Ponzi scheme.

I expressed my concern to the client and outlined why I felt the investment must be wrong. An internet search and background check of the business’s owner turned up nothing. I ventured a guess these machines were never produced or placed in hotels. I was part wrong. The schemer had a few machine made and placed in hotels to cover their tail if a crazy accountant asked to see one of their product in action.

Against my advice the client invested anyway. Over half of the officers in a local county sheriff’s department were invested in this thing and the thinking was nobody would scam a group of police officers. Think again! Who better to scam? It’s the perfect cover to keep the scam going.

A year and a half later the house of cards collapsed as the FBI came in and raided the company. As suspected, it was a complete fabrication. Tens of millions of investor’s money was lost. I help several people in law enforcement recover as much as possible on their tax return. It was still bad.

Wealthy clients want my advice and in situations like this defer to my judgment. Another opportunity is always around the next corner.

4.) What am I worth? At first this sounds like one of those stupid questions. It isn’t. Wealthy people own assets that are hard to value. Stocks and index funds are easy, but what about a coal mine? As I write I am busting tail on valuing a coal mine and it’s harder than you think. There is more than one way to value an asset. I must consider all valuation methods. Usually this question arises due to the death of a family member or a transfer of an asset as a gift within the family. A solid valuation keeps the IRS at bay.

5.) How much more can I tax defer? Wealthy people know taxes will take more than any other item in their budget if unchecked. Frugal people who say they don’t care about taxes are either lying or not as frugal as they want you to think. Overpaying taxes is still spending!

 Retirement accounts are a powerful first line of defense against taxes. The tax code offers multiple opportunities to tax shelter wealth. Not all of the best tax strategies are basic retirement accounts you hear about in the FIRE (financial independence, retire early) blogosphere. I am working with several retirement specialists in building several future blog posts to hyper-charge your tax efficiency using retirement plans within the tax code. (Something to whet your appetite: You never need a solo 401(k)! You can get the same deal as a solo 401(k) with a regular 401(k) if structured properly and at a very low cost. Now anyone can stash $100,000 or more every year into tax advantaged vehicles.)

6.) Is this a wise expense? Rich people have rich people problems and the only way to solve these problems is with a brutally honest accountant. I’ve had clients ask me if they could afford a yacht. I always tell them a story. The second happiest day of a rich person’s life is the day they buy their yacht. The happiest day is when they sell it.

Wealth sometimes puts stars in a young man’s heart. (The ladies are better at avoiding these kinds of rich-person spending pitfalls.) The veeeeery expensive car, boat, vacation home, et cetera, et cetera, et cetera, looks like such a good idea when you are loaded. A smart wealthy person—one who will remain rich—knows to ask the accountant before signing the check. Accountants are deal busters. Sorry. That great idea will evaporate like the morning dew when the accountant looks over the top of his glasses at you.

7.) Can you negotiate a deal for me? Yes, I can. Over the years I have negotiated tens of millions of dollars of deals. I’ve had clients tell me after they were in a room with me while I negotiated their deal they were biting their tongue so hard they drew blood. Negotiating can be that way at times. If it’s a BS deal I’ll say it and will walk whenever it suits me.

 Most people don’t negotiate often enough to be good at it. An accountant (attorneys are good at this too) with experience closing large deals can do things you can’t. I can say things in a negotiation a client cannot.

My understanding of how money works, limited legal knowledge and how much total money a certain agreement will yield is a massive advantage. I’ve gotten deals done everybody had already lost hope in. I can be brutal. But it’s a good brutal. There are clients out there more than a million dollars richer because I did one single deal for them. It makes a difference.

Seven questions. They aren’t the only ones rich people ask me, but they are the most common ones I heard over the last year. The difference between people who have money and those who don’t involves determining value. Wealthy people value my advice and work because it profits them. They know my work and trust my experience to solve difficult situations.

Of course, these questions take more time than: What’s it gonna cost? Good accountants are busy all year round. The best accountants are known within a community. They are known by other professionals: real estate agents, attorneys, doctors, title companies, et cetera. The best way to find an accountant who can answer these questions for you is to ask professionals in other fields. They work with these people all the time.

So, I heard you have a question for me?