Monday Night Finance- Volume 63

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Sweet, Sweet, Debt

Debt is usually a dirty word in personal finance. (It’s definitely a four-letter word no matter how you mutter it.) Any finance website will have numerous articles with personal success stories from someone who has paid off 6-figures of debt. It’s not just finance. Discussions about student debt and the national debt dominate our political discourse as well. Any discussion of debt is not complete without mentioning Dave Ramsey who built a hundred-million dollar brand telling people that all debt is bad and that if so much as have a credit card you need to destroy it immediately. But is debt always a bad thing?

The core idea is that borrowing is the most cost efficient option to access spending money, and then of course you still have complete control of the underlying asset.

Since you don’t sell any assets, you don’t pay taxes. And when you eventually get around to dying, the government will pass all of those asset to your heirs with stepped-up basis and no tax whatsoever. (Hmm, I wonder who wrote those tax laws.) ~Go Curry Cracker

In this article, early retirement bloggers Go Curry Cracker talk about how they plan to use debt to finance their lifestyle over the next few years. The Cracker family has plenty of assets. They’re not using debt to finance a lifestyle that they cannot afford. Instead, they’re using debt as a pathway to avoid paying taxes on their assets. They were able to get a loan at 2.75% interest rate. They compared this 2.75% tax against the tax on an early withdrawal from their IRA (39%), self employment (44%), and long term capital gains (17%) and concluded that this debt allowed them to live the most tax efficient way possible. Sound too good to be true? Check out their math in the article.

3 Lessons I Learned from a 900 Page Tax Book

Welcome to tax season! Are you busy collecting W2’s and 1099’s? Are you looking forward to a refund? Or perhaps you are dreading filing taxes to see just exactly how much money you paid the government this past year. Whatever your situation is, it’s likely that you don’t really think that much about taxes 11 months out of the year. But perhaps you should.

By this point, I’d already undergone my personal finance awakening, and was on a 15 year timeline to financial independence. It was a plan based on brute-force savings into index funds in both my taxable and retirement accounts.

But as I looked for ways to accelerate this timeline and looked over my expenses, one really stood out to me. It was the hundreds of thousands of dollars I was paying every year in income taxes. ~Darwinian Doctor

The Darwinian Doctor is in a unique tax situation. He pays hundreds of thousands of dollars in taxes ever year. Since he pays more in taxes each year than most people make, it is perhaps not surprising that he wanted to find a way to minimize his tax burden. Instead of talking to a tax professional, the Darwinian Doctor decided to read a very large (900 page) tax book to find out how to minimize his taxes. Despite the length of the book, the Darwinian Doctor was able to summarize the major findings into 3 points.

  • High income individuals lose out on many tax deductions
  • Employees have many fewer ways to minimize taxable income than employers
  • The tax code favors businesses and real estate investors

If you’re interested in minimizing taxes but not interested in reading a 900 page book, Darwinian Doctor’s post is definitely worth a read.

The 10 Best Countries To Live In that Won’t Break Your Budget

Wanna get away? Being an expat can be a great experience. You can blend the excitement of travel while living in a low cost of living area. With many jobs being completely virtual, you may have the opportunity to live and work in a completely different country. The expat lifestyle can also be great for retirees who can live a life of slow leisure travel. If you’re considering living the expat life, you may want to check out this list of best countries for expats compiled by the Frugal Expat.

These countries bring about what makes people happy. It may be the high-level salaries. It could be the education for children. Some of these countries have various activities that you can partake in, like hiking, cycling, the city experience, and traveling to other places. ~The Frugal Expat

Any “best of” list depends upon the selection criteria. This article focuses on quality of living, happiness, and salary among other criteria. Therefore, it is important to note that these countries may not be optimal for retirees or other people who are trying to move to another country to save on living expenses. This is certainly clear after looking at the top country on t he list, Switzerland. Switzerland is an amazing country with a very high standard of living. However, it is also incredibly expensive and has extremely restrictive immigration and visa policies. If you can afford it and can get a residency permit, Switzerland could be a dream location. Outside of the top spot, the article combines low cost of living countries along with higher cost countries in Europe and Australasia.