CASH FLOW CRISIS

From the R.M. Dolin novel, “An Unsustainable Life – The Book of Isaac“

Chapter 2: Cash Flow Crisis

The waiter arrives with dignified elegance escorting two servers. The first server takes up position behind Gabriella who’s dressed in a stunning light blue dress with thigh-high slits and waits as the second server circles around Isaac appropriately outfitted in his favorite camel hair sport coat. No one moves until the waiter’s signal, then with synchronized smoothness, the first server reaches around Gabriella setting a blueberry tort with cinnamon caramel cream and two fresh mint sprigs gently on the table in front of her while the second server delicately drops Isaac’s double espresso cappuccino in front of him. “Bon appétit,” the waiter proudly invites before motioning his servers back to their station.

Gabriella tastes her tort before coming back to her theme. “Have you thought any more about our month in Paris?”

“Not really.” Isaac states unconcerned about the ramifications even as he surveys the table for possible projectiles.

“Why not?” Gabriella counters building steam for what appears to be a repeat of last month’s petty argument at the Navy Pier.

Isaac ponders the question from multiple perspectives, none of which are particularly poignant. “Have you ever met anyone interesting in Paris?” he asks. “I haven’t. You’re way more likely to encounter an interesting someone beneath the L than anywhere on the Metro. I don’t find the French interesting. I mean once you figure out their fatalism and the fact it takes forever to get a cup of café coffee, what have they really got to offer?”

“Romance.” Gabriella counters. “There’s a lot that’s cliché for sure, but so is Chicago. At least there you can be inspired.”

“To what?”

“To breathe. To be filled with joy and happiness.”

“Wow,” Isaac laughs. “I don’t know if you’re plagiarizing Hallmark or regurgitating French propaganda. Have you ever actually met a happy Frenchman? They mope around like skid row zombies waiting for death. I’ve been to brises that are more joyful and it’s pretty damn hard to find joy in a bris. I say we go to Kraków. Drink Polish wódka and learn to polka.”

“If they’ve got a Montaigne district in Kraków, with Dior, Chanel, Louis Vuitton, and Cartier, I can be persuaded. Of course, there must be a Four Seasons, I can’t stay in some medieval hovel lacking indoor plumbing.”

Isaac sets his cappuccino down and scowls at his date. “That’s a bit insulting and uncalled for. You forget I’m Polish. Just so you know, indoor plumbing’s been part of Polish architecture since before your daddy’s country club crowd learned how to wipe their own asses.”

Gabriella quietly stews. “Did you not learn from the last time you insulted my daddy.”

Isaac grins, “I did. That’s why I know your champagne glass is empty, the ice in your water is melted, and your hot tea’s cooled. There are no weapons on your side of the table.”

“Perhaps,” Gabriella laughs. “But blueberry tort stains forever.” She considers staying mad but it’s hard when Isaac flashes his gregarious smile. The way he flops back in his chair says even he could make Parisians joyous. “I salute your ability to not only learn but to plan. It’ll serve you well in Paris as you faithfully following me around the fashion district.”

Isaac’s about to counter when interrupted. “Pardon me sir,” the waiter says on his return. “Sorry to interrupt but the chef wishes to have a word regarding the canard you ordered. If you could be so kind as to follow me to the kitchen.”

Normally Isaac isn’t interested in providing feedback on food, even when invited to the kitchen of Chicago’s only Michelin three-star restaurant. Given the mysteriously coded way the waiter asks, he needs to find out what’s really going on. He follows the waiter around an alcove out of sight from other diners. “I’m sorry to call you away Mr. Olinski,” the waiter begins. “There seems to be a problem with the credit card you have on file.”

“Really?” Isaac asks without worry.

“The charge for your dinner has been denied. Perhaps you have another card?”

“That’s odd,” Isaac says while digging out his wallet. “Here, try this one. In fact, try them all.” He hands the waiter all his credit and ATM cards.

The waiter takes the assorted deck of colorful cards and motions for his server. “Bring Mr. Olinski a double espresso café.” With the server dispatched, the waiter walks to the front of the restaurant and returns just as Isaac’s coffee arrives accompanied by the maître d’.

“Good evening Mr. Olinski,” The maître d’ greets. “I trust tonight’s accommodations have been satisfactory?” Before Isaac can respond the maître d’ continues. “I’m afraid a difficulty exists with your cards, none of them presently appear to be working. Perhaps you have cash?”

“Who the hell carries that kind of cash?” Isaac bluntly replies.

“Perhaps Ms. Cummings can assist?”

Not knowing the proper protocol for such a predicament, Isaac falls back on charm. “This is rather embarrassing.” He smiles more from a position of manipulation than appropriate embarrassment. “I’m sure you can appreciate I’d rather not involve Gabriella.”

“I understand completely and as you’ve been a frequent guest, we do intend to work with you to resolve this matter. Perhaps you can provide your accountant’s information and we’ll bill him? Would that be satisfactory?”

“Yes,” Isaac says while pulling out his phone, grateful a solution to his potential dilemma has been found. “That works.” He scrolls through his contact list for Anthony’s number. “Let me airdrop the information.”

The maître d’ watches his phone to confirm the drop. “Thank you very much Mr. Olinski and I do apologize for the inconvenience. We hope to see you back soon.” The maître d’ pauses waiting for Isaac to express his appreciation. When it’s not forthcoming, he continues. “When you make your next reservation, we can update the card on file, and everything will be good to go. Please enjoy the rest of your evening.” As the maître d’ retreats to his station, Isaac’s waiter motions for his servers to follow him into the kitchen leaving Isaac alone in the alcove unsure what to make of what just happened. Rather than return to his table or inform Gabriella of things, he calls his accountant.

“Anthony, this is Isaac Olinski. Look, I’m at the Blythe and there seems to be an issue with my card; actually, with all my cards.” Isaac listens as Anthony talks. “What do you mean you know. You knew and didn’t warm me?” He listens as Anthony explains. “I understand.” Isaac continues to listen. “Yes, tomorrow at ten. Yes, I’ll be there this time.” He again listens as Anthony talks. “I gave them your information, and they said they’ll bill you. Yes, we’re all good here and I’ll see you first thing in the morning. Yes, I’ll be there this time.”

After awkwardly excusing himself from joining friends at their usual Tuesday club for late night cocktails, Isaac uses his remaining cash to pay for Gabriella’s taxi ride downtown and his L-ticket home. He sets his alarm for nine to make sure he’s up in time for his appointment and finds enough spare cash in the apartment for an Uber downtown but opts instead for the L. He nervously jokes with the guy sitting next to him on the train that it’s something he probably needs to get used to doing.

Anthony Gallo’s office is on the seventeenth floor of the old Sears Tower. Officially the building’s been renamed Willis Tower but no one in Chicago’s getting behind that. If you’re in the Windy City and need directions to Anthony’s office, you best be asking for the Sears Tower or no one’s going to know what the hell you’re talking about. As prestigious as it is to have an office on the seventeenth floor of the Sears Tower in downtown Chicago, Anthony’s layout is remarkably unimpressive. There’s a pressed wood reception desk when you first enter with a small waiting area on the side furnished by Ikea but there’s neither a receptionist nor a need to wait as Anthony doesn’t have many in-person clients these days. Most accounting is now online and impersonal, creating an exciting buzz within the accountant community. Past the reception area are two small offices on one side of a short hallway and a modest conference room on the other side. The conference room has a large oval table with six chairs and view out the floor to ceiling windows of Lake Shore Drive. One end of the conference table has multiple piles of neatly stacked papers prearranged by order of importance but other than that the room is rather spartan.

As soon as Isaac enters the reception area, Anthony pops out of his office. “I’m impressed!” he shouts while racing happily toward Isaac with his hand extended. “You’ve never been on time for a meeting. Hell, I’m happy when you even show up. How ya doing with everything? Bit of shock I imagine. Can’t say your call last night was a surprise but we’ll get to that in a moment. Before we start, you need anything; coffee, soda, shot of whiskey to stiffen you up?” He pauses to reassess his fiduciary obligations. “FYI, the whiskey part was just an accountant’s joke, you know, to put clients at ease.”

“I’m good,” Isaac tentatively answers. He’s unsure what to expect from this meeting and Anthony’s exuberance isn’t doing much to calm his anxieties.

Anthony ushers Isaac into the conference room. “Rebbecca, my daughter and soon to be partner, may join us. She’s been helping all morning with printouts and downloads and could use the experience of navigating meetings like this.” Anthony guides Isaac to the chair in front of the multiple stacks of paper. “Have a seat.” He takes the chair next to Isaac. “You sure you don’t need anything?”

“No, I’m good,” Isaac nervously answers, suddenly feeling like he’s being offered his last supper.

Anthony takes a moment to collect himself. “I usually start these meetings with small talk; you know, “how ya been?” “what’s new in your life?” We already know the answers to those questions by the fact you’re here, so I say we dispense with small talk and get right to business. I mean, you really don’t care about my grandkids or the latest tax code loopholes.” Anthony smiles at his young client in the non-comforting kind of way doctors do when they’re about to give the grim results of the latest biopsy. “There’s really no simple way to say this but you my friend, have what we in the accounting community call a cash flow crisis.”

“Which means what exactly?” Isaac cautiously asks. Between not wanting to be here and not wanting to hear what he assumes he’s here for, he just wants this to be over.

With the subtle lack of empathy accountants are known for, Anthony delivers the diagnoses in brutally blatant terms. “It means your broke.” He waits for the news to sink in. “I’ve been trying to warn you for months, but you don’t return my calls and I’m certain you don’t read my emails. Nonetheless, I have a fiduciary duty to inform you whether you heed my warnings or not. “So yes, you’re broke. Not in the “you’re out of money,” kind of broke but in a “you don’t have access to your money,” kind of broke. This’s why I call your condition a cash flow crisis, but we’ll get into that soon enough.

“I don’t know how much you remember from the last time I explained everything, but your dad set up a trust for you when you were born. Your Uncle Darwin contributed most of the initial funds. It had something to do with a Sammy Sosa bet that I never fully understood but your uncle had just sold his software company in Californian for beaucoup bucks. I’m not sure why but it was a difficult time for him. He even referred to his wealth as blood money, but I think he was just joking.

“For the next ten years, until your dad’s death, both he and Darwin contributed to the fund. Each was limited to how much they could contribute by tax laws, but the fund grew at a steady rate. Keep in mind those were the early days of the dot-com boom and Darwin knew the right companies to get in and out of at the right time, so the account grew way faster than any other trust I’ve ever managed. Obviously once your dad died, he stopped contributing, but did you know Darwin never did? Even now, every year he contributes as much as the IRS allows and he still lets me know which tech stocks to move in and out of with surgical precision. Next time you see him, you ought to give him a huge hug and a thank-you.”

Isaac’s shocked to learn about his uncle’s contributions given that he hasn’t seen or spoken to him in years. “I didn’t know. Seems odd to find that out and to be honest, I’m not sure what to make of it. Mom would say he’s buying down guilt but I’m less certain.”

Anthony laughs, “I never got their deal, but it certainly was something. He pauses to reflect. “I first met your dad and uncle at adventure camp. I was the same age as Vincent and Darwin looked after us. There were times he took some lumps on our behalf but before long everyone got the message not to mess with Darwin’s boys. Vincent and Darwin attended Saint Stan’s while I was at Saint Ignatius. I never knew why but they called Saint Stan’s a school for wayward boys. They’d tell stories about the Polish nuns from the old country being mean as hell and I assumed they were the ones calling the boys wayward. Things weren’t much different over at Saint Ignatius, only we were run by Jesuits prepping us for college and let me tell you, one does not want to fail a test because those damn Jesuits have zero tolerance for slackers.

“But I digress. I don’t know if you’re aware, but you have three trusts, well, technically, two trusts and a tax deferred account. Actually, it’s a tax deferred portfolio, but we’ll get to that later. The first trust, as I mentioned, was set up by your dad and has mostly been funded by Darwin on account of your dad dying. The second trust was set up by Ilene. As she neared the end of her journey, it became her singular focus. One tax deferred account was set up by Darwin when you were born and another by your dad while he was working. Your dad’s IRA transferred to Ilene when he died but she left it to grow until her passing and now it belongs to you.”

Anthony points to the first row of stacked papers on the table. “I’ve labeled these three piles the Vincent, Ilene, and Tax Deferred Accounts. Each are governed by their own set of rules. If you look at the Vincent printouts, you see that both the balance and growth performance over the years are quite strong. The primary rule governing this trust is you don’t get unfettered access until your thirty-ninth birthday. However, you are allowed to withdraw five percent per year to do with as you please. Historically this account returns twelve percent annually, so it continues to grow even as you take your annual allocation. Column F shows the projected five percent allocation each year between now and thirty-nine and its certainly no small potatoes. In fact, it would easily sustain normal people. For you, unfortunately, it only funds just over a month of current spending.

Anthony points to the next pile of papers. “The Ilene Trust is funded by money she inherited from her parents along with the money she acquired during her life, including the large insurance payout from when your dad died. This trust has similar rules; you still get to withdraw five percent per year, only you don’t get unfettered access until fifty-five. I don’t want to speak for Ilene, but she was concerned about you running through the funds with bad investments and reckless behavior. She wanted to ensure you had enough to bridge yourself until you could access your tax deferred accounts. Looking at these printouts, you see that the five percent allocation is nearly double what the Vincent Trust provides. This means at current spending, you’re funded for around four months each year.

Anthony points to the last pile of papers in the first row of stacks in front of Isaac. “That brings us to what I call the Tax Deferred Account, or TDA, which is really an umbrella term for a portfolio of tax deferred holdings. You can see from the summary printouts that the most basic TDA is the Darwin account. Darwin set this up such that you can’t access funds until you’re fifty-five, but you don’t have the conversion requirements of the other TDAs. You still must pay the income taxes on whatever you withdraw, so you wouldn’t want to do it all at once or you’ll foolishly gift half to the IRS and the greedy bastards in Springfield. My advice is to move to a tax-free state when you start drawing down TDA funds. It’ll save you the state’s cut of your action. Unfortunately, there’s no getting around your federal tax obligation.

“Bottom line is you can just set the Darwin TDA to the side and let it grow. As you see from the column K summation, I estimate the balance if you wait until sixty-five to start drawing down will be eleven times the current balance, so you can look forward to a nice retirement. That is of course if you ever have a job you retire from.

“Vincent started an IRA that Ilene inherited but couldn’t access without penalty until she was fifty-five. Fortunately, she never needed the funds, so you inherited it when she passed. You have mandated IRS rules requiring you to convert the fund to taxable income within ten years. Ilene set things up so that your conversion is spread out over the entire ten years to minimize tax consequences. Here’s where it gets weird, but in a good way and since you were once a budding engineer, you’ll get the math.” Anthony looks at Isaac to make sure he’s paying attention. “You ready?”

“Yeah,” Isaac answers doing his best to brace up for what’s about to hit him.

“As I said, this gets weird; if you have ten years to convert the funds to income you should convert ten percent per year right, which is what we did in year one. The portfolio, however, grew by fourteen percent that year, which means you ended the year with a higher balance than you started. So, in year two, instead of taking another ten percent, we took twenty-two percent of the current balance to keep you on track, only the portfolio grew at twelve percent. So now this year, you’ll be making an eighteen percent withdraw to be on track for having thirty percent of the initial balance converted by year three. You follow the math, right?”

Isaac nods while studying the spreadsheet. “Yeah, I see what you’re doing. What I want to know is what happened to the money? You called it income, but I don’t recall seeing any income.”

“That’s because you sign your taxes documents without reviewing them. It’s also why you have a cash flow crisis rather than a wealth asset crisis. Based on your current rate of spending, if you could access the converted funds, then after taxes you’d have enough to fund the additional eight months of your life, which means in theory you’d be solvent. However, Ilene has rules about what happens to the converted funds. First, obviously, you must pay your taxes. Then, with the remaining sixty-five to eighty percent depending on how good a job I do, you’re required to max out contributions to both your IRA and Roth accounts. As you can see from the printouts, isn’t much, but still, it’s something. Of the remaining balance, you’re allowed to keep ten percent for frivolous endeavors – Ilene’s words, not mine. Whatever remains must be deposited into the Ilene Trust.”

Anthony pauses to gauge Isaac’s reaction, but his bewildered client is too lost in accounting complexity to offer anything, so he continues. “The good news is that because of the additional contribution you make each year to the Ilene Trust fund from your required TDA conversion, the five percent you’re allowed to withdraw increases substantially. The bad news is even that’s not keeping pace with the rate your frivolous lifestyle increases – again, Ilene’s words not mine.

“Bottom line is on paper you’re no pauper. Unfortunately, the funds you have access to are insufficient to cover current costs, which is why you’re in a cash flow crisis. The good news is your apartment’s paid off and the trust handles your property taxes, insurance, utilities, and a modest amount for maintenance. It’s what bankers call an escrow account that’s funded out of the Ilene Trust. This means there’s no risk of you becoming homeless. Ownership of the apartment is held by the Ilene Trust so there’s also no opportunity for you to liquidate property to enhance cash flow.

“A trick other cash-flow clients try is leveraging their trust. By that, I mean borrowing money using the trust as collateral. Problem for you is that your trusts are structured such that it’s not allowed, which is a good thing long-term, but doesn’t help your crisis. You only have two options, neither of which is probably appealing. You either get a job that supports your lifestyle or reduce spending to a level the trusts support – mine words not Ilene’s.

“You actually have a third option; you can go back to school. In that case the Ilene Trust increases your allocation to seven percent while you’re enrolled and the trust covers all expenses; you know, tuition, books, a new Ferrari to get to and from campus.” Anthony takes a moment to enjoy his accounting humor but once he realizes Isaac’s not laughing, he jumps back into fiduciary mode. “Just so know, that part about the Ferrari is what we call accounting humor. You don’t really get to buy a Ferrari; would be a nice incentive to return to college though huh?”

Isaac is so focused on the printouts, he’s only vaguely aware of what his accountant’s saying. Anthony rocks back in his chair glad to be done with the complex fiduciary part of their meeting. “Okay,” he restarts. “I think that makes us current, so about last night. I’ve been trying to have this conversation with you for months, but you keep blowing me off. Freezing your cards was the only way I could get your attention. Look at the spreadsheet called ‘SPENDING’. A year ago, you actually spent less than the trusts allocated and once I noticed your spending surpassed an unsustainable rate, I knew I had to rein you in. The Ilene Trust allows me to make a small additional allocation this year against next year’s allocation; that will unlock your credit cards, but it reduces next year’s allocations. You won’t starve or be homeless, but the party bus remains on vapors. So, either you get a job, go back to school, or find another income source.

“You see from the spreadsheet marked, EMERGENCY ALLOCATIONS, that the additional monthly increase I’m authorized to make as a short-term loan against next year’s allocation is all you got to live on for the rest of the year. The good news is for most men your age, it’s more than adequate. Relative to your current spending though, you’re destitute. Like I said, your only options are to reduce spending or get a job; neither of which is probably appealing.”

Anthony again pauses to allow Isaac time to digest all this information and make any comments he might wish to express. When none are forthcoming, he continues. “I have to say, I’m glad we’re finally having this conversation, it’s been taxing.” Anthony smiles at his joke. “Get it? Taxing? Just a little accountant humor.”

When Isaac doesn’t react, Anthony once again returns to fiduciary mode. “I know it’s a lot to take in and it likely seems very dark, but ninety-nine-point nine percent of the world would envy being in your situation. Plus, with the way your trusts have historically performed and with Darwin continuing to make contributions, there’s a very positive path out of the darkness. You just need to rein in spending or, like I said, get a job.

Isaac continues studying the handouts growing increasingly frustrated. “I follow your numbers,” he says without looking up. “It’s all plainly on your printouts but none of that tells me what I’m supposed to do. I mean it’s hell and gone between now and thirty-nine and by then I’ll be-”

“Wiser, better disciplined, and definitely more responsible,” Anthony interjects. “Ya know kid, being an accountant is a lot like being a priest; only people can’t keep secrets from their accountants. Money never lies, never forget that. You want to know what’s in a man’s heart, in his soul, just follow what he does with his money. Your dad set up a trust the moment you were born and contributed every year until he died because he loved you. Your uncle’s been contributing your entire life because he cares about your future. Ilene did what she did because she wants to ensure your long-term stability. Through these trusts, they each demonstrate their love for you and their desire to ensure your future. The interesting thing is they each knew at some point you and I would be having this conversation. They knew you’d stumbled, struggle to digest everything we just went over, and they each came to the same conclusion about what ought to be done.”

“Which is?” Isaac angrily asks.

Rather than answer directly, Anthony goes with an allegory, “Your dad planned to send you to adventure camp but died before you were ready. Darwin pleaded with Ilene to send you but by then their deal had devolved to the point of if he said “left,” she’d turn right. So, you never went to adventure camp and that’s a damn shame. The thing Ilene never appreciated is that you don’t go to adventure camp for fancy fun, you go to suffer, to endure, to prepare for life in the real world. She never understood that because she never had to survive in the real world, at least not the world men must navigate, and unfortunately, neither have you.

“We used to have a motto, not a camp motto, it was something Darwin, Vincent and I came up with. Adventure camp was about putting you in impossible lose-lose situations where you had to figure out what to do. A lot of guys quit. Just gave up. Called mommy and went home when things got hard. I can tell you I had my moments, as did Vincent and Darwin. Whenever one of us started talking about quitting, the others would say, “No quitting today dude, not when the rat bastards want you to. Quit tomorrow if want but today you have to figure things out.”

“I talked to Darwin when you started spending out of control asking what he thought I should do. He came back with exactly what I figured he’d say because he’s absolutely right; “no matter how much we want to help Isaac today,” your uncle said, “we can’t. If we do, he’ll be quitting on himself the rest of his life.” It sounds cold, even cruel, but Darwin instructed me to leave you to your suffering because he knew, and I quote, “Vincent and I are confident he’ll figure things out.”