Frugal Living

Tom Godwin’s short story, The Cold Equations, was published in the August 1954 issue of Astounding Magazine. Many consider it to be the best science …

Success risked destroying everything they stood for since many fans in the genre considered the message more important than the music and expected band members to live a certain lifestyle. It is hard to be true to yourself when so many want to mold you in their image.

Idolizing people we admire is the wrong approach. The best compliment is to learn what role models share and to apply it in your situation. By being the best you.

Wealth is often defined as having to do with money or finances. Such a narrow definition limits us to income, spending, investing, retirement and taxes. While these are important issues, this narrow definition is wrong.

Wealth involves mental, physical, spiritual, health and financial aspects. Money is the least important on the list as we will shortly see.

How do you invest during times of war? Do you change investing strategy during periods of heightened geopolitical tensions? These and similar questions need to be asked by wealthy people and those wishing to become wealthy.

It has been a long time since developed nations have tasted serious inflation. Unless you are near 60 or older you will not have experienced the last time inflation was a serious issue in the 1970s into the early 1980s. 

Coupled with low inflation is low interest rates. It is hard to miss the pattern of interest rates since 1982. Each increase in interest rates was followed by a new low in interest rates until we bumped against zero and stayed there for much of the past decade. 

The stock market loves low interest rates. The constantly declining interest rates gave us a stock market that has relentlessly climbed. In the early 1980s the price/earnings (p/e) ratio for large capitalization stocks was in the single digits and the dividend yield was in the 6% vicinity. Now the p/e multiple is closer to 30 and the dividend yield is below 2%. 

A government would be considered intolerable if it taxed people 10% of their time in service of the government. Yet idleness taxes many of us much more if we consider all the time spent checking email, our phone, social media and news feeds. All these activities add nothing of value to our lives or to those around us and is no worse than the government taxing you a percent of your time.

Not all income is treated equal. Ordinary income is treated the worst by the tax code. Long-term capital gains are granted preferential tax treatment. And some income is excluded from income entirely. 

When planning for retirement or any financial goal, taxes play a vital role in how quickly the goal is reached. The more tax-free income you acquire the better.

The tax code in the U.S. taxes all income unless specifically excluded by the code. Many sources of tax-free income is limited in scope, applying to very unique and special situations.

The list below contains 18 sources of federal tax-free income. States usually follow federal, but may have more or fewer items of tax-free income. Every reader should find several types of non-taxable income available to them from the list.