President Obama considers single people making over $200,000 to be rich.  He has specifically called for raising taxes on singles making over $200,000 and couples making $250,000 every year he’s been office.  Yet, he’s been unable to pass any tax increases because I don’t believe most people agree with him that $200,000 for singles and $250,000 for couples is rich.  If most people agreed, higher taxes would pass!

There are two aspects of monetary wealth we can focus on: Income and Capital.  Some make a lot of income, but have only a little amount of capital since they are either starting off in their careers, or haven’t saved and invested an appropriate amount.  That’s not going to happen to you because you read Financial Samurai and will follow my savings guide to ensure capital accumulation.

Meanwhile, there are those with a tremendous amount of Capital, with little income given they may have inherited their wealth but have no income generating skills.  Capital heavy people may have invested skillfully over the years, built great companies, or were incredibly disciplined in their savings.  There are many different types of folks in the Capital heavy category.  It’s not a bad place to be at all.

Ideally, it’s best to have both high income and a large capital base.  This is my goal, and therefore my goal for all of you as well.  In this post, we’ll focus on the income side of the equation and what to strive for just in case we don’t have a trust fund from mom and dad.

HOW MUCH INCOME DO YOU NEED TO BE CONSIDERED RICH? Read more…

The wooden bar shimmers with beer stains as I stubbornly try to wipe them away.  Each jab of the napkin gets stuck, like a fly to Venus.  Eventually I give up as my friend returns from the Thomas Crapper smiling.

“Sam, when I get my bonus this February, I will have hit my goal of saving $1,000,000 in the bank!” said my 38 year-old friend Paul over his Guinness.  He went on to explain, “I’ve been saving my bonus every year for the past 16 years so that I can one day quit my job and do something more relaxing and fun.”

“Well done Paul!” I respond as I pat him on the back.  “But what else are you going to do?  Not many jobs in the world pay your type of income.  Are you sure you’re willing to give it all up for a life of leisure?”

“Hmm, I don’t know Sam.  I guess all I have to do is work another year, and I’ll get another $100,000 or so in bonus after tax.  Maybe I should just continue to work?” questioned Paul.

“I think a lot of people would give up their left nut to receive a $100,000+ after tax bonus every year.  Maybe you should think about taking a sabbatical instead to rejuvenate?” I replied.

“A sabbatical would be great!  But, I think my company just demotes, underpays, or ultimately lays off people who take them,” explained Paul.

“Well isn’t getting let go exactly what you want?  That way, you can get all your deferred compensation without a hitch!” I said.

“Good point!  Time to kick back and get faded baby!” Paul cheered as we chugged our beers in unison.

MORE MONEY, MORE QUESTIONS Read more…

December is generally a higher expenditure month given the holidays and tempting sales galore.  I would ideally like to keep my personal credit card bill in the $1,000-$1,500 range, with $2,000 as the upper limit.  After $2,000, I feel like I’m wasting money because that just seems like an awful lot to spend on things beyond housing costs.

I decided to start tracking my monthly credit card expenses to mainly make sure there aren’t any egregious fees that I know nothing about.  For the past 10 years, all I’ve been doing is eyeballing the total amount, and if it was below a certain threshold, I would pay the bill and move on.

As my desire to save more money grows, it’s good to be a hawk-eye when it comes to my second biggest monthly expenditure.  Furthermore, as a personal finance blogger, why not make some content out of the figures and learn something in the process!  Those who seek early retirement might want to give this exercise a go as well.

DECEMBER 2011 CREDIT CARD STATEMENT Read more…

On Wednesday, January 18th large internet companies such as Wikipedia blacked out their sites in protest of the Stop Piracy Act Bill (SOPA).  The nice-sounding bill threatens to destroy creativity and freedom of speech on the Internet by allowing the US Department of Justice and copyright holders authority to attack sites who enable or facilitate copyright infringement.

Imagine Financial Samurai sharing a piece of useful information on how to prevent credit card theft online, and the original creator is from some giant corporation who has a propensity to sue despite linking back and giving credit.  I will probably never bother to share this useful content in fear of having some overly paranoid lawyer sue me for SOPA infringement if this bill passes.  Our society is already litigious enough!

I’m proud of the Internet community for speaking out against SOPA.  The government, despite all its “good intentions” should not be in the business of regulating what we can share and say online.  Sure, there is a limit to what we can and should do, especially if someone is being untruthful, but for the government to get involved with what I can and cannot say on my own site is wrong and I am fiercely against SOPA and more government regulation!

You would think that those who are against big government would also be against big government who discriminates based on income, gender, and sexual preference, but you’d be mistaken.  To many, discrimination is OK, so long as they aren’t being discriminated against.

THE HYPOCRISY OF INCONSISTENCY Read more…

If you haven’t done so already, calculate your net worth to assess how you did this past year.  Hopefully, you’ve grown your net worth, despite the stagnant stock markets through aggressive savings, retirement company matches, a diversified investment portfolio, rental property cash-flow, and an increase in your start-up’s value.

Wait, all you have is your savings?  Then you better start diversifying your income stream so you’re always moving forward, no matter how rough the economy.  Once you’ve calculated your net worth, make sure your life insurance levels equals this amount, especially if you have dependents, or a spouse who makes much less than you.  If you die, and want your loved ones to maintain a similar standard of living, consider matching your life insurance amount with your family’s net worth amount.

Some might not agree with this life insurance guideline and wonder whether it would be better to have insurance that equals a family’s debt level only.  Having enough life insurance to pay off all of your family’s debt is better than no life insurance at all.

If you’re single and have no dependents, do you really need life insurance?  Probably not.  If you die with a million bucks in debt, you’re living large!

Consider the Robinson family in San Francisco with two children ages 8 & 7: Read more…

Deru kugi wa utareru is a Japanese proverb that means, “The nail that sticks out gets hammered down.“  In other words, stand out too much and you become a marked person.  I wholeheartedly agree with this proverb, and live by it until it’s time to make a move.

Unless you are an egomaniac who just can’t get enough attention, in almost every scenario it’s good to be the underdog.  You can walk around freely and nobody will ever notice you.  As the underdog, you always have the chance of surprising on the upside as well.  Nobody expects you to do amazing things coming out of community college.  However, if you go to Yale University and spend your parent’s $250,000 to get that degree, you better do something great, or else!

Let’s go through some common scenarios and discuss why it’s great to be the underdog.

ON THE JOB

When you first start off at a new job, there is a tendency to show how knowledgeable and great you are.  Don’t.   It’s important to pay your dues and keep your special opinions to yourself until you have the complete trust of your colleagues.  If you’re a low level employee driving to work in a fancy car, don’t.  Why on earth would your boss ever promote and pay you if you seem to have all the money in the world?  Your colleagues are going to be jealous and push you down.  Instead, drive a beater or take public transportation.

You might know more than your senior colleagues, or at least think you know, but do not try and outshine them.  Instead, use your knowledge to help them shine. Read more…

$180,000 by age 30, $500,000 by age 40, $1 million by age 50, and $2 million by age 60. These are the rough estimates for what I think everybody needs to have in their 401Ks to have a reasonable attempt at a comfortable retirement. If you read the comments from my “401K amount by age” article, you will notice that those in their mid-30s and below tend to disagree with these amounts, while those older generally agree, verify, and accept.

I don’t know why younger folks aren’t willing to follow along. It’s often times just rebel and justify why they aren’t saving.  ”Live life!“, they say.  True, but who says you can’t live life while saving?  The easiest way to learn, is to listen to an older person who has gone through what you will go through. Perhaps it’s immaturity, or the way things are where every generation needs to question the next generation and the status quo.

There’s really no mystery to money. The more you have, the more you can make.  It’s all about building the NUT large enough so that when you make a fortuitous 10% return, you’re pulling in an extra $50,000-$100,000 on your $500,000-$1 million portfolio.  Saying you doubled your returns from $10,000 to $20,000 due to contributions is fine, but it’s really chump change and misleading.  Build the nut, so that you can have real returns.

If you aren’t on retirement track based on my 401k age chart and disagree with my figures, just do the math YOURSELF and see whether you’ve saved enough to retire on. I don’t think you’re going to like the results.

There’s one question that kept coming up over and over again, and that’s, “How can I save so much, if I don’t make so much?” It’s a fair question that needs addressing. One commenter mentioned my table must be of “California Currency”, which made me chuckle. The problem of not making enough and therefore not being able to save enough is an honest problem which I’d like to address via a change in mindset and a chart. Read more…

The 401K is one of the most woefully light retirement instruments ever invented.  The worst is the pathetic IRA which limits you to only $5,000 if you make under $58,000 a year for a traditional IRA to completely participate.  Meanwhile, you have to make less than $110,000 a year for the privilege of contributing after tax dollars in a a Roth IRA.

Give me a pension that pays 80% of my last year’s salary for the rest of my life over a 401K any time!  With the government only allowing individuals to contribute $17,000 a year in pre-tax income into their 401Ks in 2012, once again, our politicians fail us with their regulations.

You know from a previous post that the average 401K balance is around $70,000-$80,000, which is incredibly low given the median age of an American is 36.5.

As an educated reader who is logical and believes saving for retirement is a must, I’ve proposed a table that shows how much each person should have saved in their 401Ks at age 25, 30, 35, 40, 45, 50, 55, 60, and 65.  We stop at 65 because you are allowed to start withdrawing penalty free from your 401K at age 59 1/2.  Meanwhile, I pray to goodness you don’t have to work much past 65 because you’ve had 40 years to save and investment already!

HOW MUCH YOU SHOULD HAVE IN YOUR 401K AT DIFFERENT AGES Read more…