Lessons From The Train Wreck
The dominant topic in the news is the extremely divisive presidential election. Each of the major party candidates is deeply flawed and wildly unpopular for reasons we have all heard way too many times. So instead of rehashing things that could be read a million other places around the internet, I would like to employ what those in the political arena would call a little “positive spin” on the candidates. Let’s take a look at a key lesson that we can take from each of the candidates that we can apply to our own paths to financial independence and early retirement (FIRE).
Donald Trump and Taxes
One of the attacks against Donald Trump is that he has paid no income tax for over a decade. There are certainly many valid criticisms of Trump. However, assuming he has broken no laws, this one is just plain dumb. Legal tax avoidance is key to building wealth quickly. This wealth is a prerequisite to FI. Examples are everywhere in the FIRE community.
I originally was enlightened on the impact of tax avoidance by FIRE blogger “The Mad Fientist” who writes extensively on the topic as found in his archives. Other great sources of information on the topic are this classic article from GoCurryCracker, or this one from Justin at the blog “Root of Good”. Just this past week, Mrs. ONL described their excellent strategy to keep recognized income low in retirement to limit taxes and keep their health insurance affordable. We shared in this post “How We Increased Our Net Worth by $8,750 This Year Without Earning More or Spending Less” simply by taking the time to understand just one simple aspect of the tax code.
Getting even more specific to Trump, he has avoided taxes by building a massive real estate empire. There are ridiculously generous tax benefits available to those who invest in real estate and/or own businesses that are simply not available to those who earn income working jobs. An excellent resource to explain this concept is the Robert Kiyosaki book “Cash Flow Quadrants”.
If you want to build wealth quickly, there are few if any things that can have more impact with less effort than figuring out how to structure your income, spending, and investments to limit your tax burden. Therefore, rather than wasting time and effort worrying about whether other people are paying their “fair share”, start planning to reduce your tax burden to build wealth faster.
Hillary Clinton and Influence
Hillary Clinton has spent the past few years traveling the country campaigning to become the first female president. She flies around on her own private jet. She has a team of personal assistants and body guards. She attends parties thrown in her honor by Jon Bon Jovi. Whether or not any of this lifestyle and the immense scrutiny that goes with it is desirable to you, it is remarkable. After all, Clinton kicked off her run to the presidency with an interview with ABC’s Diane Sawyer in which she revealed just over a decade ago she was “not only dead broke, but in debt”.
Many people get caught up in the mentality that they “can’t afford” this or that. The fact is that many things are not affordable and many experiences impossible when you get trapped in the mentality of having to go to work for 8+ hours each day, earn $X/hour, pay taxes on the money you earn, and then buy things retail.
How many attorneys, even high-powered attorneys with Yale law degrees as Clinton earned, can simply go to work, bill clients by the hour, pay income taxes on wages, and come out on the other side with enough money to afford a private jet and hire Jon Bon Jovi to come sing at their party? My guess is somewhere around zero.
However, when you learn to eliminate the words “I can’t afford that” from your vocabulary, your world changes. Clinton is able to live her lifestyle because she is a person of great influence. She uses influence and translates it into the lifestyle and opportunities that she desires. Even if you have no interest in politics or find this method of trading influence unethical, there are many other ways of using influence and creativity that we can apply to our own lives.
Recently, Tim Ferris interviewed Shay Carl on his podcast. Carl, whose profession was installing kitchen counter tops, shared how he used his hobby of making YouTube videos to become a person of influence. He has had over 2 billion viewers to his channel and eventually sold his production company for nearly one billion dollars! More close to home in the personal finance blogging world, both Mr Money Mustache and the White Coat Investor each report earning six figures annually through their blogs. They also freely share how they have turned their blogs into business entities which give them further tax perks, provide them with opportunities to meet new interesting people, and allow them to do more good for the world through charitable giving. They do this simply by sharing compelling stories and useful information to influence many people, including me.
There are many ways to get what you want out of life when you stop seeing things as impossible or unaffordable. Virtually nothing is impossible if you want it bad enough to find a way to get it. One fast track to success is to use the economy of scale by becoming a person who influences many others. With the internet and the world of blogs, YouTube, and social media, traditional gate keepers have been removed. It is easier now than ever to become a person of influence.
What I’ve learned
Be like Trump, start getting proactive and figure out how to use the tax code to legally reduce your taxes. You can dramatically accelerate your wealth building process and reduce the time it takes to reach FI.
Be like Clinton, make your dreams reality. Become a person of influence and use your influence to create the life you desire.
Have you learned anything positive from watching the all out brawl that has been our presidential election? Share your thoughts below.