Tue, 30 December 2014
My guest today is Paul Merriman. I was introduced to Paul by a couple of listeners who requested I bring him on the show. I'm glad they did!
Paul is an experienced financial advisor. But, he did that as a retirement hobby rather than as a wealth-building strategy.
To build his wealth, Paul took over, built, and then sold a manufacturing company. After retiring in 1982, he proceeded to build Merriman, a Seattle-based investment advisory firm.
He grew the firm from nothing to $1.6B of assets under management and then sold it and retired to run his financial education site: www.paulmerriman.com.
Topics on this interview include:
- The role of goals and affirmations on Paul's journey
- What it was like to build an advisory firm in the 1980s
- What Paul's retirement schedule looks like
Enjoy the show!
Direct download: RPF0128-Paul_Merriman_Interview.mp3
-- posted at: 5:51am MDT
Mon, 29 December 2014
Today, I bring you an interview with a dynamo: Eva from TeensGotCents.com.
I met Eva in New Orleans at the FinCon conference. She was attending with her mother and I was incredibly impressed with her.
Eva writes about about personal finance for a teen audience. She began at the age of 15 and she shares her own journey and also gives advice for other young people.
In the interview, we weave two themes:
- Eva's advice for teens
- Eva's own experience/example as a financial blogger
Both of these themes are valuable. Frankly, I'm a bit jealous of Eva's early start in writing about the topics of personal finance. I wish I'd had the foresight to begin at her age.
Listen carefully to the story of her site and consider how you can help your children--or yourself--to start something similar. It's a really neat story.
Other topics include:
- Budgeting basics for teens
- The envelope system
- The value of attending professional conferences--especially for young people
- How to teach teens to get jobs
Direct download: RPF0127-Eva_Teens_Got_Cents.mp3
-- posted at: 4:59am MDT
Fri, 26 December 2014
Personal finance touches every aspect of life by definition. Every aspect of our life involves finance in some way.
As we make the decisions of life, we're constantly faced with cost and opportunity cost:
- Is it wise of me to allocate this $100 to a memorable evening's entertainment with my family or to set it aside toward a larger vacation fund?
- Should I use some extra money to upgrade the look and style of my wardrobe or purchase some extra books or classes to advance my knowledge?
- Am I better served by investing my money into ownership of publicly traded securities through my 401(k) account or will I get a higher return on my investment by improving the insulation of my house and upgrading my windows to an energy efficient version.
These are ultimately the decisions we face. Culturally, we usually separate these areas of life into different decisions. But we shouldn't. Each of them (and many thousands of additional options) impacts the other.
We're far better off if we view our life as a web of integrated decisions and we should be able to flow seamlessly among our different options.
My guest today does just that.
Jeff and his wife are raising a young family and are working toward financial independence together. Their personal interest in sustainability and green living has naturaly integrated with their financial planning. DIY activities and home improvement have had benefits in both areas.
Enjoy today's show!
Direct download: RPF0126-Jeff_Sustainable_Life_Interview.mp3
-- posted at: 5:59am MDT
Tue, 23 December 2014
My guest today is Dr. Vern Poythress. Dr. Poythress is a mathematician and a theologian. Most important for this discussion, he and his wife, Diane, are parents to two children, both boys.
Dr. Poythress authored an article entitled "How I Helped My Boys to Become Christian Men," in which he outlined his family's approach to establishing a formal rite of passage for his sons to become men at 12 or 13 years old.
His formal test and qualifications for them included religious training, knowledge, and behavior, specific acts of service to others, and specific areas of wisdom needed in an adult life.
Much of this conversation is built on the Judeo-Christian tradition and Dr. Poythress outlines much of his curriculum from a religious perspective.
It's key to recognize, however, that most cultures have a rite of passage for young men and women; these ceremonies vary and many are cultural, not religious. For example, toward the end of the interview we discuss the tradition of the debutante ball, a "coming-out" party for young women.
If this concept interests you, consider designing your own curriculum based on your family's vision and values. Certainly, anything you intentionally design will be better than the negative rites of passage we currently promulgate in our culture.
Direct download: RPF0125-Vern_Poythress_Interview.mp3
-- posted at: 5:31am MDT
Mon, 22 December 2014
My guest today is Ben Falk. Ben is a really incredible permaculture designer with a comprehensive focus.
Ben runs a planning firm called Whole Systems Design. Through this firm, he "identifies, designs, and develops human habitats - landscape and infrastructure systems - that yield perennial abundance and enduring value. These are adaptive, resilient and secure places in a future of peak oil, climate instability, and deepening economic insolvency."
They also "plan, develop, and manage land-based wealth preservation and security projects for those with the forethought to invest an abundance of present day resources to reduce their familly's vulnerability to future food, energy and other supply-chain disturbances, as well as peak-oil, climatic, economic and other events."
The interview covers a variety of topics, including:
- Ben's path from architecture to comprehensive design.
- How to approach personal lifestyle design from a systems mindset.
- How to prioritize needs and investment.
- How he heats his house, heats his water, cooks his food, and dries his clothes in Vermont with a very small amount of wood.
- How he grows 80 to 90% of his food intake.
My favorite quote from the interview: "Don't fight something that's wrong. Make a new system that makes the old system obsolete."
Direct download: RPF0124-Ben_Falk_Interview.mp3
-- posted at: 4:54am MDT
Sat, 20 December 2014
On Fridays, I answer your questions! I decided I didn't want to handle any of the in-depth, math-related questions today so I chose these three questions to handle.
- 1:41 - What can I do to prepare for being the executor of someone's estate?
- 16:49 - How can I reconcile the idea of being a specialist in my field with the advantages of being a generalist?
- 48:09 - What can I do to ensure a smoothe transition to a single-income household?
I hope you enjoy the show!
Direct download: RPF0123-Friday_QandA.mp3
-- posted at: 12:55pm MDT
Thu, 18 December 2014
Today, we welcome Jim Rawles, Founder and Editor of SurvivalBlog.com back on the show to discuss improving your lifestyle and personal resilience by moving.
We talk about optimizing your lifestyle within the United States by carefully selecting your location as well as the pros and cons of international expatriation.
- Ideas for playing the "State Line Jumping Game" (living in a no-income-tax state and shopping next door in no-sales-tax state).
- Brief mention of the "Five Flags Theory." In essence, the idea is that you can arrange your affairs over five different countries:
- Flag 1: Business Base-These are places where you make your money. They must be different from your personal fiscal domicile, the place where you legally reside.
- Flag 2: Passport & Citizenship-These should be from a country unconcerned about offshore citizens and what they do outside its borders.
- Flag 3: Domicile-This should be a tax haven with good communications. A place where wealthy, productive people can be creative, live, relax, prosper and enjoy themselves. Such a place should not be threatened by war or revolution and preferably should enjoy good levels of banking secrecy.
- Flag 4: Asset Repository-This should be a place from which assets, securities and business affairs can be managed anonymously by proxy.
- Flag 5: Playgrounds-These are places where you would actually physically spend your time.
- Jim's idea for "The American Redoubt"
- The Free State Project and Free State Wyoming
- Estimate your own tax savings with SaveTaxesByMoving.com
- Considerations for international expatriation:
- taxation, language skills, friendly to foreigners, strength of the economy, crime rate, climate and lifestyle, gun laws, homeschooling laws. etc/
- Discussion of Finland, the Philippines, Swizerland, New Zealand, Belize, Costa Rica, Panama, Chile, Argentina, Paraguay, Uraguay
- For more information check out the Sovereign Society and International Living
- For a Second Passport opportunity, consider St. Kitts and Nevitts
- Check out Jim's novel: Expatriates
Direct download: RPF0122-Rawles_on_GeoArbitrage.mp3
-- posted at: 1:57pm MDT
Wed, 17 December 2014
Today on the show, I've got some last-minute tax planning ideas for you. These are all ideas and tactics that you can use in the last two weeks of 2014 to lower your income tax bill.
I hope you don't defer your tax planning to the end of December. The end of the year is far too late to start talking about the really good stuff. Good tax planning should begin before January 1.
But, these types of ideas can still be useful for you. It's possible that you've simply been too busy to do effective planning.
It's also possible you had an unexpected windfall and you need to wipe out some tax liability.
I'm here to help! :)
Let's start with the easy ones and move to the harder ones:
- Last-minute retirement account contributions.
- 401(k)s and 403(b)s are tough becausec you have to have made your contributions as you go. Consider talking to HR about diverting a bonus check into the account if you can.
- IRAs are simple. You can contribute any time until you file your return. You can contribute up to $5,500 in 2014. Don't forget about the $1,000 catch up if you're older than 50.
- Almost everyone I've ever worked with is confused by the contribution limits. Read them for Roth IRAs and Traditional IRAs.
- Little tricks for IRAs: You can make a separate payment for custodian fees, brokerage commissions, etc. in excess of the contribution limit. That will allow you to get the maximum value from the account.
- Consider establishing a an HR10/Keogh Plan or a SEP IRA.
- Keogh plans were very popular for self-employed people prior to 2001. There was a tax law change in 2001 and now they're largely replaced by SEP IRAs.
- They have the same contribution limits but the SEP paperwork is much simpler.
- A Keogh plan has to be established by the end of the year but it can be funded prior to filing your return.
- A SEP IRA can be established after the end of the year and funded after the end of the year.
- The maximum contribution is the lesser of 20 percent of earned income, less your deduction for half your self-employed payroll tax, before the deduction, or $52,000. (This winds up being 25% of net earned income after the deduction.)
- Remember that you can have one of these plans in addition to a 401(k) and an IRA.
- Don't forget about the HSA. If you're covered by a HDHP, you can make your HSA contributions any time up till you file your return. Your contribution limits are $3,300 for an individual and $6,550 for a family. Remember also that there's a $1,000 catch-up contribution for 55+. This won't save you on your employment taxes but it will save you on your income taxes.
- One final little trick on IRAs. Look to see if you'll be eligible for a saver's credit. If you're at a low income level, this might help you...even if you can't afford to save for retirement. If you need to and you want to be aggressive, you can contribute to your Roth in December, take the savers credit on your return, and then take the distribution in January. (You'll owe tax on any gain but not on the contributions/basis.)
- Consider deferring your income in other ways.
- You can enter into a binding agreement until January to defer the grant of a bonus that you would otherwise receive in December. You need to enter into the agreement before the bonus is "constructively received."
- The easy way to defer your income is if you are in business for yourself is to simply delay billing your clients until late December. You won't receive payment until the following year. Thus, no taxes in this year.
- Remember that this only works if you are a cash basis tax payer. If you are an accrual basis taxpayer in your business, you have to report the income when it is earned, not when it is received.
- If you have income from the sale of property, consider using an installment sale to defer income to a different tax year.
- Consider accelerating your expenses to lower your net income.
- In business, you can think through any end-of-year transactions you need to pay: accounts payable, conference fees, insurance premiums, marketing and advertising expenses, etc.
- Remember that you have to follow the 12-month rule.
- Consider buying equipment. In general, equipment will primarily be depreciated rather than expensed. But remember that you can make a Section 179 elect to expense up to $500,000 and then take your depreciation after that.
- Consider bunching certain expenses such as medical expenses. If you've had a lot of medical expenses this year, consider going ahead and getting your dental expenses and eye expenses taken care of and pay forward the annual premium on your LTC insurance. That may result in enough deductions to take advantage of the medical expense deduction.
- Consider accelerating your tax payments: real estate taxes, personal property taxes, and state and local income taxes. Pay them now to take the deduction. (Be careful of AMT.)
- Consider making your charitable contributions and make sure to bunch them in years that you can fully use them.
- If you're making charitable contributions, be smart about how you do it, especially with regard to your taxes. Don't only think in terms of cash.
- If you have appreciated property that you've held over 12 months, contribute it to the charity and take a deduction for the FMV. (Avoids the tax on the gain.)
- If you have loss property, sell it, take the tax loss and give the cash.
- You can take deductions for items paid by check in the current year even if you mail the check on New Year's Eve, as long as there is no reason why the check can't be cashed in January.
- Credit card charges can be taken this year even if you don't pay the bill until next year.
- Think through the tax ramifications of your relationships.
- If you're planning an end of the year or New Year's day wedding, calculate your taxes and see when you should actually schedule the marriage. Doesn't have to be the same day necessarily as the wedding itself.
- In general, marriage will only cut your taxes if one spouse works or earns almost all the income. Marriage will actually boost your taxes if both spouses work and earn good income.
- Dependents: Most people think purely about kids. There might be a planning scenario involving them. For example, if you're having a planned C-section and the safe zone covers new years, have it on 12/31. Or, if you're adopting, try to get it finalized before the end of the year.
- But, the major benefit for some of you might be if you're caring for parents. There are a bunch of detailed rules. The one I want you to focus on is if you're providing more than half of a dependent's support. Doesn't mean income...it means support. Might be worth it to bunch some of your support here at the end of the year so that you can claim them as a dependent.
- Make sure you harvest your tax losses but also that you harvest some gains. Ratcheting up your basis in your investment portfolio over time can really save money in the long run.
Direct download: RPF0121-Last_Minute_Tax_Planning.mp3
-- posted at: 3:33pm MDT
Tue, 16 December 2014
Is education something that we buy or something that we work for? Ever thought about that?
My guest today is Scott Young. I first heard of Scott when I watched his TEDx talk on "How to Get an MIT education for $2,000."
This interview is filled with tidbits that will be useful to you whether you're designing your own education or whether you're helping someone else with their educational plan.
Direct download: RPF0120-Scott_Young_Interview.mp3
-- posted at: 6:44pm MDT
Mon, 15 December 2014
I love real estate investing. I think it's one of the most accessible, realistic ways for people to grow their long-term wealth at an excellent rate of return.
Today, I'm thrilled to bring you an interview with John Schaub. John is widely renowned as one of the good guys.
John has been investing in real estate for decades. He's also been teaching the subject for decades.
He has a wealth of ideas and knowledge to share with us today.
Direct download: RPF0119-Schaub_Interview.mp3
-- posted at: 8:10pm MDT