Navigating Unchartered Waters
Face it: If you chose to leave the rat race for a “back to the earth” lifestyle, you will be in the minority, albeit a growing minority. While everyone’s journey from conventional to alternative living differs depending on your starting point—in terms of career, finances, assets, and relationships—getting meaningful guidance from friends and relatives or even professionals can be tricky, if not frustrating.
In our particular case, a meeting with a professional financial planner ended in a polite, “This is out of my area of expertise.” Our CPA was willing to help us run through some numbers regarding the sale of assets to pay off debt, and was able to give us some very general guidance regarding tax implications of such liquidation efforts to start life anew
But, in the end, our accountant was unable to provide the level of assistance that we hoped for given his certifications and his hourly fee. In fact, at one point he made a comment about our desire for a “subsistence living” while referring to the rest of his clientele as “high end,” which should have been a clue regarding his qualifications to really guide us through this unique financial, tax and life change.
Encountering Some Positive Response
You likely already know that your own mindset is not common, either. Do not expect people to fully understand, let alone provide useful input.
“This is madness!” is likely what most will think. That said, foreign immigrants who have literally given up their lives to establish something new and, in their vision “better” in the Land of Plenty, have tended to have a greater measure of sympathy with our reasons for the change and the drastic nature of this life shift. (This said, we encountered numerous executives in our previous place of employment who voiced not only understanding, but a desire to have the same “courage” that would allow them to leave their secure government careers, some even noting they would have left years prior if they only could muster, again, the courage to walk away from the predictable pay, cheap health care, etc.)
Consider Taxes and Tax Law for Homesteading
Be aware that, depending on the particulars of your individual circumstances, Uncle Sam may not be sympathetic to your desire to “give it all up” in order to become debt- free, self-sufficient, and a more active and productive member of your local community. The tax man’s sting can be particularly acute.
Tax laws, for example, are just not set up for people who are willing to do crazy things like sell their possessions to pay off debt (you get dinged for that in the form of capital gains tax). God forbid you dip into your retirement savings to splurge on the purchase—rather than financing—of a property or residence (there is a 10-percent penalty for early withdrawals plus capital gains taxes at the rate determined not by your joblessness, but by how much of your hard-earned and stashed-away money you are tapping to make your life transition, to settle your debts).
On the flip side, if you are already living on modest income with few assets, you may actually get some government help, depending on your state’s attitude toward public assistance. Here in Hawaii, for instance, you can own property and even have your own profitable business and still qualify for some types of welfare aid.
Consider Healthcare for Homesteaders
In the same vein, our nation’s healthcare laws may not recognize the fact that you no longer have a steady job, leaving you paying insurance premiums that calculate your income by looking at your asset liquidations and tapping of your retirement funds, even if you shifted that wealth into a piece of property and home in which to live or used it to settle other outstanding financial obligations so you can, literally, go scratch a living from the land.
In our case, though we left our careers more than one year ago to begin building the homestead, we were forced to secure an entirely new income stream (a paper route) just to cover the cost of the new mandatory health insurance, which considers our asset sales (to buy our land), and not our actual job-related cash inflow, as our annual income when calculating our rate.
Again, depending on your individual circumstances, you may find that the state you live in will step in and help defray this particular cost.
Click here to read Part 2of “Sacrifices and Challenges.”
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