John Galt is a fictional character in Ayn Rand’s novel Atlas Shrugged (1957). The phrase, “Going John Galt ” or “Going Galt” is used to describe “productive” members of society cutting back on work in response to the projected increase in U.S. marginal tax rates, increased limits on tax deductions, and the immoral or inefficient use of tax revenues.
I’m not sure if I was a more productive member of society when I was working. I just got into the office regularly around 5:30am-6am to try and learn and do as much as possible before my superiors got in. The result of working more was simply earning more than the median pay. Not a big deal nor a surprise that working more gets you paid more.
As someone who has now forsaken his day job for more freedom, in a large way, I’m “Going Galt.” I’ve been a big opponent of Big Government for a long time because politicians have a history of lying, pandering only to their supporters, saying one thing and doing another, abusing power, and wasting money. You can spend your money much more efficiently than the government.
If you’ve paid a couple hundred thousand in taxes one year, and the City is unwilling to fix the broken water main pipe underneath the sidewalk outside your house, you will be pissed! If it takes 11 months to finally get the City to fix a clanking manhole cover after you’ve called 38 times, you will be agitated beyond belief. If the Federal Government uses your tax dollars to fund a war you don’t believe in, and kill thousands of innocent civilians, you will be despondent. When your property’s value goes up $280,000 during the worst economic recession just so the State can collect more property taxes, you are going to riot!
The only way you can cut off the head of the beast is by sharpening your samurai sword with knowledge and never feeding the beast another morsel of food again. The more money the government gets from you and me, the more they are going to abuse its power.
MAKING LESS FEELS SURPRISINGLY GOOD
Many people have asked whether I’ll feel bad no longer earning a steady paycheck. I told them I wouldn’t be sure until I experienced the lack of income. Now that I no longer have the income, I feel surprisingly good! It’s been over four years since I left my day job in 2012.
The ideal adjusted gross income (AGI) for maximum happiness is $200,000 per individual and $250,000 per couple. Why? Because $200,000-$250,000 is a healthy amount of money to live a good life, save, and take advantage of the deductions the government provides. Earn any more and your deductions begin to phase out and you will be assaulted by the government through income profiling and tax increases such as the 3.8% medicare tax for 2013 and beyond.
Believe it or not, it takes a lot of effort to make a lot of money. I regularly had to put in 12 hour work days, travel constantly, and entertain clients. Now I’m just a starving writer trying to support his tennis habit and survive off ramen noodles. I “work” on average two to four hours a day and that’s it. I guess writing posts, connecting over social media, responding to comments, and responding to e-mails is work. But boy, I’ve got to tell you that my work doesn’t feel like work at all!
Any income over $200,000 is seriously just gravy for most individuals. I would say 99% of the world out there can live happily on $200,000 a year. I also believe most people who earn $200,000 a year save most of their money beyond this income level. Wouldn’t you agree?
Saving money feels good, but it’s not that rewarding in the near term. Only when you get to spend your saved money when you’re free does savings provide you the most return. In the medium term, savings just keeps you comfortable, which is not a bad feeling at all.
THE BENEFITS OF MAKING LESS AND WORKING LESS
* Less taxes. Assuming no itemized deductions, your effective Federal tax rate is only about 18% at $200K. The effective Federal tax rate obviously goes down the less you make.
* Less agitated by the Government. Your ears no longer burn when you hear the President talk about class warfare when all you’ve been doing is working hard, paying taxes, and minding your own business in a peaceful way. You might even start chanting, “Let’s get the rich!” in your head for fun!
* More deductions. Alternative Minimum Tax and income phaseouts aren’t as aggressive at $200,000 or below. Therefore, you get more deductions and pay less taxes. If you want to start a family, you will finally be treated equally and also receive a Child Tax Credit if your household income is below ~$110,000.
* Less contempt by others. It’s human nature to attack those who have more than you, whether it be money, fame, power, health, looks, and so forth. We like to blame others for our short comings because it’s easier than improving ourselves. The less income you make, the less people will come and hunt you down.
* More aligned with your consumption habits. If you are single person earning $200,000, are you really consuming $40,000 a year of taxes from public works? Perhaps if you were a single parent with 15 children in public school and spent much of your family’s time at the wonderful parks and libraries then yes. For most individuals, this is not the case.
* More confidence. Given you’re closer to middle class, you will have more confidence in doing business and living life in general because politicians can’t afford to assail the middle class. The middle class is the majority, and politicians will now pander to you! You don’t have to worry about being denied XYZ benefits because you make too much.
* Feel more patriotic. Earning $200,000 is a great income, no matter which way you slice it. Paying $40,000 in Federal taxes as an individual is a lot, but it will make you feel proud that you are supporting your country. Pay much more than $40,000 a year in Federal taxes starts reversing that good feeling inside.
* Increased happiness. Given making over $200,000 doesn’t bring more happiness, you will become more happy because of all of the things mentioned above! $200,000 is plenty enough for a single person to have a great life.
* Less stress. Our tax system is one of the most complicated tax systems on the planet. Thanks to 70,000+ pages of tax code, I’ve made my fair share of errors. With less income, the penalties are much less. The extreme penalty of incarceration is also much less as the government isn’t going to lock up someone for misfiling $1,000 in taxes.
EVERYTHING IS RELATIVE
It’s important to understand that everybody’s definition of Going Galt is different since everybody makes a different amount and derives a different level of return from the government. My definition so happens to be making $200,000 or less to protest government waste and not pay more than $40,000 a year in Federal income taxes. If I had 10 kids who benefitted from public school and always hung out at the public library for several hours everyday, and were eligible for the $1,000 per year per kid child tax credit, I wouldn’t mind pay more than $40,000 in Federal taxes.
Another good definition of Going Galt is matching your income exactly to the amount of itemized deductions you have to pay no taxes. For example, if you have $50,000 in mortgage interest and property taxes, just make $50,000 a year and use your savings to make up the difference tof und your lifestyle.
GOING GALT IS JUST ONE WAY OF LOOKING AT RETIREMENT
Many have suggested I retire abroad to more socialistic countries like Canada, Australia, France, Norway, Belgium or much of Europe. After all, healthcare, housing, and unemployment benefits are so much greater than here in the US. Australia offers the highest inheritance at $501,000 too. It’s a good idea in theory. However, I love America and after paying seven figures in Federal taxes alone, I would like to enjoy some of the benefits!
It’s the same idea with engineering your layoff after so many years of working for a corporate. After 11 years of dedicating my working life to my company, I sure as heck wasn’t going to quit with nothing!
I didn’t retire at the age of 35 to protest the government. I retired early so I can relax and focus on the things I truly want to do. I want to travel to more rugged places before my knees go out. I’d like to play more tennis tournaments for the same reason. I want to spend more time with my parents. There’s just so much one can do during the working day that we forget because we are working so much!
After overcoming the initial shock of not having to report to anyone, I’ve become much less stressed. I no longer grind my teeth or have tennis elbow. People who are persistently late don’t bother me anymore. I’m now always smelling the roses and just hanging out with friends because I’ve got an abundant more time.
What about no longer contributing as much to society you ask? Well, if the side affect of Going Galt is starving the Government and preventing him from harming more people, then wonderful! The Beast has been overeating for way too long. Every month, over a ~175,000 unique readers are learning about real estate, taxes, career advice, budgeting tips, investments, and general wealth building on Financial Samurai. I say that’s contributing a lot, because knowledge equals wealth, power, and happiness!
RECOMMENDATION TO BUILD WEALTH
* Manage Your Money In One Place: Sign up for Personal Capital, the web’s #1 free wealth management tool to get a better handle on your finances. You can use Personal Capital to help monitor illegal use of your credit cards and other accounts with their tracking software. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.
After you link all your accounts, use their brand new Retirement Planning Calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.
START YOUR OWN BUSINESS
It’s been over seven years since I started Financial Samurai and I’m actually earning a good passive and active income stream online now. I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai now makes more than $200,000 a year relatively passively. If you enjoy creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes like mine. Everybody needs to establish a platform online to at least brand themselves and take advantage of opportunity.
You never know where the journey will take you. I was able to travel to Cambodia, Malaysia, Taiwan, Korea, and Vietnam for four weeks while running my online business. Starting a website is the best lifestyle move I’ve ever made, and it could be for you too! Once you start your own site/business, you’ll have much more flexibility in terms of making money and lowering your taxable income.
Updated for 2017 and beyond. Make right now the time you seize control of your future.