Working the System
The following is advice I posted on Ruck’s blog post “I am Going Back to College”, which after a little bit of thought, decided to post here too. Take everything with a grain of salt, since I am at best a talented amateur, not an accountant.
When it comes to education, the best advice I could give anyone is to get somebody else to pay for it. Have the businesses you own set up an employee tuition reimbursement plan. That way you can get a tax credit for paying the out of pocket tuition (Lifetime Learning Credit), then as the business owner you get credit for paying for tuition.
Something I’ve been planning for when my endeavors actually amount to something is to set up an employer sponsored 401K with a match program, then plug the maximum amount in. Once again, tax benefits on both sides of the equation. I think the maximum you can kick in is $15,000, and with a dollar for dollar match, you can put away $30,000 in your account. I think that your business can also contribute directly to your account. Set some arbitrary savings goal, say $1000 a month, and then every time the employee (you) hits that the employer (you) can reward the employee (you) with a bonus directly deposited to your account. Same idea with sales bonuses and the like.
Unless tax laws have changed once a year you can gift your wife, children, and parents $10K tax free. That’s something I plan to do when I’m rollin’ with the big boys. Gifting my wife and kids the whole amount (for the kids it’ll go in their college funds), gift my parents, then have them turn around and gift me back $9000 or something, and do the same with my brothers. It’s all a big shell game, but legal, I think.
Years ago I came across a concept that really struck home with me. It’s called ‘F*** You’ money. Basically it’s the amount of money you need to be able to tell everybody in the world to F*** themselves and still be able to survive comfortably. For me, that’s basically in the 2 to 3 million dollar range. Once my mortgage is paid for, newer vehicles bought, and childrens’ college funds are secured, I don’t really need much to survive on.
Basically I plan on banking as much as possible, then just living off of the interest. 5% interest on 1 million dollars is $50,000 a year. That’s $20,000 more than my base salary currently. So, extrapolating outwards, the yearly interest on 3 million dollars is $150,000 a year. I can be comfortable on that. I don’t need flashy cars, and my wife doesn’t like jewelry. All I want is to be able to buy the books I want and actually have time to read them. To buy the DVD’s I want and watch them. To just have time to enjoy life.
My wife and I don’t like to travel. GenCon is the only roadtrip we ever make, and now that the kid is here, it may be a while until we go again. When we go out to eat it’s just the Texas Roadhouse. I’ve eaten at a 5 star restaraunt that my ex-brother in law cooked at. For three shared appetizers and drinks for 6, it was around $100, even with his discount. I’d rather drop $35 with the tip and come home with leftovers.
My one concession to wealth will be a re-creation of a medieval castle somewhere here in Iowa. Towers, parapets, the whole shebang. The great hall will feature a full sized movie theater with seating for 20 and a THX sound system. Movies are my number two passion. Books are my number one. And with that in mind, I plan on having a giant library full of books.
Although it sounds expensive, I plan on doing it responsibly. I don’t want a drafty fieldstone castle. The whole thing is going to be poured concrete with a thin veneer of rock plastered on over the foam forms. Sub-floor radiant heat, as much solar power as is feasible, proper window alignment so that I can open a window on one side and have the breeze blow straight through the house.
Sure, it’s a stupid dream, but nobody ever got anywhere by thinking small.
I appreciate the information you posted on my blog. Interesting what you say about the gifts. I have jotted that down to discuss with my CPA later this week.
Best,
Ruck
Not a problem. I’ve spent a lot of time thinking about how to work the system.
A really interesting way to do it, is to declare yourself a corporation. I’m not sure of the details, but I remember being told in my high school economics class that the great Bobby Knight had himself declared a corporation, so that all of his paychecks, endorsement deals, etc were made out to Bobby Knight Inc.
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