Introduction
Getting to Point X

Every kid over the age of five knows this expression. It can refer to many things, but the strongest image for most of us is an ancient, moldy pirate's map showing precisely where a long‐lost treasure is buried. This book was written to help you discover your own “buried treasure.” Of course, this is not a child's game. It is a guide to the necessary knowledge (with a special focus on Tax Alpha to the 2nd Power℠ facts and strategies) to help you accumulate the wealth you need to lead the life you desire.

I have been a certified public accountant (CPA) and a Certified Financial Planner™ (CFP®) for many years. I started my career working for KPMG (one of the Big Four accounting firms) and then established my own practice in 1987. I have worked one‐on‐one with literally thousands of individuals, assisting them in their pursuit of a secure financial future. I have helped these people pursue their financial goals, and this has given them and me tremendous pleasure. However, I have also seen people who, for many reasons, have been unable to achieve financial security. Needless to say, this is unfortunate.

With this book, my hope is to help everyone find financial security and financial independence: from the eager teenager who just received his first paycheck; to the dual‐income couple in mid‐life who are paying their mortgage, putting their kids through college, and perhaps helping aging parents; to the retired grandmother who wants to make sure her estate is in good order for the benefit of her loved ones. By combining financial planning with tax strategies, this book may help readers increase their personal wealth and pursue their financial independence, a position I refer to as point X.

Financial Literacy and the Move Away from Capitalism

Before I explain in detail how to reach point X – financial independence – I want to talk a bit about how and why I came to write this book. The term financial literacy is not new, but it appears in our general lexicon more and more frequently these days, especially since the worldwide financial crisis of 2008. For the first part of the decade that preceded this crisis, the unsettled economy had been described by the Wall Street Journal and other sources as “the New Norm.” Experts believed that this recession unleashed a “new normal,” where the spendthrift ways indulged in by many before the 2008 crisis had been substituted with an increasing interest in saving, general frugality, and the need to develop a stronger sense of financial literacy.

As a result of the 2008 economic meltdown, it became stunningly obvious that many people have not managed their finances in such a way as to provide financial freedom for themselves and their families at any stage of their lives – much less after they retire. In fact, many financial organizations report that most (yes, most!) Americans currently reaching retirement age – the infamous baby boomers – have not planned or saved adequately for retirement.

Somehow over the past several decades – I believe since the end of World War II – many people in our society have come to believe incorrect notions about money. These financial myths include such ideas as:

• “Owning your own home is everyone's right.”
• “The real estate market will always rise.”
• “You can live ‘large’ on credit and never pay any consequences.”
• “If you need to work, you can always find a job.”

These myths – a warped conception of the American Dream – exploded in a puff of smoke in 2008. (In fact, they were eroding for many years, but most people failed to heed the warnings.) As a result, many people have suffered financially, some tragically. Many of us were disenchanted by this new norm in our society, as can be seen by the move towards socialism in the United States and abroad. The lessons in frugality learned by earlier generations – people who lived through the Great Depression of the 1930s and World War II – had been lost. Many Americans were living way beyond their means, and they now had to pay up.

As a result of the 2008 Great Recession and its aftermath, we all must now relearn some essential financial truths, become financially responsible, and prepare for the financial realities of life. In other words, we must become financially literate. We must learn all we can about our money so that we can make the most informed financial decisions in all facets of our lives.

In my opinion, the millennials were the generation that was most significantly affected by the financial crisis of 2008 and experienced first‐hand the consequences of the financial blunders of the baby boomers, their parents. This younger generation has come to realize the importance of being financially responsible. Many of them were caught up in the financial hardships experienced by their parents and neighbors. They saw foreclosures on homes in their neighborhoods, families being torn apart because of lost jobs, and the inability to meet the most essential living expenses. Many millennials have been unable to afford to rent their own apartments, let alone to own their own homes, which has caused many young adults to move back in with their parents. The promises made to them that working hard and going to college would result in a terrific paying job simply were not true. Some have lost all hope of ever being able to pay off their burden of student loan debt. This feeling of hopelessness has left many of them disenchanted by capitalism, which has resulted in an increasing number of millennials openly admitting that they would prefer a socialist society.

According to a new YouGov study commissioned by the Victims of Communism Memorial Foundation, 44% of millennials would prefer to live in a socialist country, with another 7% saying the same about communism. Only 42% said they would choose to live in a capitalistic country like the United States, according to the survey of 2,000 millennials. There is definitely a generational divide between the baby boomers and the millennials on this matter.

I am hopeful that the major improvements in the US economy over the past several years will turn around this attitude against capitalism. With the declining unemployment rate, increase in economic growth, and hope for prosperity, I am confident that this generation will begin to believe in the true American Dream once again; this country is in fact the land of opportunity and not the land of entitlements. The baby boomer generation must take responsibility that they, and not the younger generation, created this socialist mentality. It may take decades to reverse this perception of what being an American should represent, but I am hopeful that it will happen sooner rather than later.

In many ways, the millennials are similar to the generation that lived through the Great Depression. I believe that this generation will not only survive, but will prosper from the lessons learned through their life experiences. The millennials will not repeat the same mistakes made by their parents' generation. I am very optimistic about their future, as well as the future of all Americans. For this reason, this book and the guidance it provides will be essential in teaching all generations of Americans that there is hope in achieving their own financial independence, point X. The first step we must take as a society is to educate ourselves in becoming financially literate.

Financial literacy means having a firm understanding of fundamental financial concepts and strategies, and the ability to manage money responsibly in order to work towards financial security. Financial literacy is essential to the financial stability of individuals and families, as well as the overall economic health of society as a whole.

Point X: Our Fundamental Financial Goal

Point X is literally and fundamentally the point at which we can stop working for our money and our money starts working for us. It is the spot at which our savings and investments alone generate enough income to support our chosen lifestyle, and allow us to continue to live that lifestyle without having to work for a paycheck. It is the place where we have achieved true financial independence.

For most of us, getting to point X is our most fundamental financial goal. It is the position we hope to achieve so that we can retire. Even if we do not wish to retire from productive and enjoyable work, we all still yearn to arrive at point X – often sooner rather than later – to feel financially secure and financially free.

What that number may be in terms of dollars is different for each of us. Some people can manage rich full lives on a modest income, and seem to be able to find their point X with ease and clarity. Others have multimillion‐dollar annual incomes, yet still find themselves living way beyond their means and view getting to point X as an arduous and perhaps an impossible journey. How you determine your personal point X depends on several variables, including:

• Understanding your present standard of living
• Projecting how you want to live after you retire (or after you stop receiving a paycheck)
• Figuring out how many years of saving it will take for you to reach point X
• Figuring out how many years of financial independence you hope...