Financial Samurai

The reason why Warren Buffet is so great is because he’s able to distill the most complicated financial topics into very simple terms.  Lucky for us, there is someone like Warren in the economics world.  Regular reader, Investor Junkie who disagrees with the government’s unemployment insurance extension, but agrees with the cessation of rising taxes, highlights a fantastic video by the great economist Milton Friedman about four different ways of spending money.

Professor Friedman’s examples are simple and perfectly to the point.  In an environment where we are spending other people’s money on someone else (deciding how other people’s tax dollars are spent), we don’t maximize the value of the dollar because we simply don’t have much at stake.

Professor Friedman highlights that people spending someone else’s money on others is a “distributor of welfare funds.”  Strong words with a certain amount of truth wouldn’t you agree?  In “The Ultimate Solution To A Fair Tax Policy In America”, I discuss the concept of limiting the voting ability of the 47% of non tax paying Americans on raising taxes for the other 53%.   Don’t worry, voting rights for everything else is status quo.  The reason why I suggest this rational solution is because it makes sure the country isn’t overrun by those who have their cake (don’t pay taxes) and get to eat it too (enjoy the benefits).

One can easily see an America where 90%+ of citizens don’t pay taxes and stick it to the 10% rich because it’s rational to look out for your own interests.  It’s up to balanced people who believe in equity to continue fighting for those who perpetually get unfairly blamed for our economy’s problems.  It really is ironic, because if everybody studied hard in school, volunteered their time to help others, and were self-sufficient (doesn’t have to be wealthy), America wouldn’t have nearly the amount of problems we have now!

The 4 Ways Of Spending

1) Spend your own money on yourself.

2) Spend your own money on somebody else.

3) Spend somebody else’s money on yourself.

4) Spend somebody else’s money on somebody else.

Readers, do you agree or disagree with Professor Friedman’s thesis that the 4th way of spending is the worst way of spending?  If you do agree, why do you think people feel it’s OK to spend other people’s money as they wish?

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our E-mail or RSS feed.

With the Bush tax cuts set to expire next year, there’s going to be a big debate during the mid-term elections this November!  But, should there really even be a tax debate?  It’s obvious that we should NOT raise taxes on small business owners and higher income, hard working Americans in a nascent economic recovery!

Everybody knows roughly 47% of Americans pay no federal income taxes.  Hence, the ultimate solution for tax legislation is to strip away tax voting rights for the 47% of Americans who pay no tax, but who still get to enjoy the benefits of other people’s contributions.  If you’re one of the 100+ million Americans who pay no income tax, isn’t it good enough to enjoy free public schooling, nice roads, friendly firemen and police officers protecting your neighborhood?  Being thankful is a great disposition to have.  Being greedy is not.

An Example Of A Family Making $120,000 Paying No Taxes: Read more…

Hear that?  That is the sound of another self-righteous employed person complaining about the unemployed sucking up resources and driving the government deficit further into the red.  Who cares employed people??  You guys aren’t the ones who are struggling to find a job in this economy!

There are several tautologies here:

1) Few can live a comfortable lifestyle off of unemployment benefits which average $200-3oo a week

2) The vast majority of people who are unemployed want to make more money, find jobs, and do something meaningful with their lives.

3) Our budget is headed towards a $1.8 trillion+ deficit, so who cares if we’re going to spend another $50 billion to help millions of unemployed people survive for up to 99 weeks?

THE BUDGET DEFICIT DOES NOT MATTER WHEN YOU HAVE NO JOB Read more…

Bloomberg highlighted an interesting chart stating that for the first time ever, working seniors outnumber teens in the labor force.  Currently 6.6 million people over the age of 65 are working or are looking for work compared to 5.9 million 16 to 19-year-olds.  Back in 1948, the numbers were only 2.9 million people over age 65 and 4.4 million teens, respectively.

This chart has enormous implications for the American workforce as people live longer and longer.  Let’s go into the reasons why there’s been a decline in teenage workers and such a rapid increase in older workers shall we?

TREND ANALYSIS Read more…

This is a guest post written by Mike, a financial planner / web entrepreneur who is pursuing his dream of running his online business. You can follow his progress at The Financial Blogger (RSS Feed).

3 years ago, I was told by many bloggers: “You will never make money blogging. And if you do, $200/month will be your highest peak ever”.

Three year ago, The Financial Blogger was averaging 500 visits per month and I was ecstatic when I made my first deal of $10 for a link.

Three years later, I now run three financial websites, bought 2 of them and flipped a blog within a year. I am now able to work 1 full day per week on my online business (while I still have to keep my “day job” in the meantime). I really like buying and managing finance blogs as I think it is currently one of the best investing opportunities we can find.

When I asked Sam if I could write a guest post for Financial Samurai, he asked me to include more details on how I appraised blogs and how do I decide or not to send $10K over the wire (or more!) simply to buy a “.com”.

Look at Blogs as a Real Estate Investing Opportunity Read more…

You guys know that the one and only data point I track religiously is the 10-year yield right?  Well, after the 10 year yield dipped below 3%, I went to the bank with a buddy of mine to go see how much money we could borrow.  The wiry banker sat us down like a loving couple and asked us to go through our finances at which point I kindly stepped out of the room and let him go first.  Five minutes later, he came out with a grin on his face, so I curiously went in.

He proceeded to tell me some curious news.  “Look here Sam, you can borrow up to $1.5 million dollars at a 5 year fixed rate at 3.625%!”

Holy moly really?  You mean little old me, just like that can borrow that much money at that low of a rate?  “So what’s the catch?”, I ask.

“Zero points, and $2,500 in closing costs.  But don’t worry, we are giving you a $500 credit for being a preferred member, and frankly, if you guys both take out loans, I’ll throw in another $500 credit,” said the banker.

“Done!  Where do I sign?, I ask as I think about the new Audi R8 I plan to buy with just $150,000 of the $1.5 million.  Or maybe I should be more conservative and spend $100,000 on the new 2011 Porsche 911.  Or actually, I heard the 2011 BMW  335i coupe is coming out for only $55,000 this fall.  With all the money “saved”, time for a bachelor’s trip somewhere fun!  (I’m still thinking to myself here).

NOT SO FAST FOOLIO! Read more…

Well, here we are!  It’s been six month since the original challenge was announced and I want to congratulate all of you for making it this far!  The network has grown to be a powerful one and now it’s up to us to harness it for the greater good  This is where the 2nd challenge comes in, which officially starts on August 16th when Yakezie.com is launched.

The 2nd challenge is simply to use the power of the Yakezie network to help others through monetary means or donations of our expertise, while at the same time grow our online revenue by various rates (i.e. 25%, 50%, 100%).  The good thing about percentage increase targets is that we can all challenge ourselves whether we have a $100/month site or a $10,000/month site.  More will be explained once Yakezie.com is launched.  The first challenge of getting our Alexa rankings below 200,000, and now below 100,000 still stands.  As long as we are part of the network, we should strive for progress or at least a steady state of satisfaction.

Some of the most interesting types of posts around the web are voyeuristic posts about what goes on inside the mind of the blogger.  Part of the reason why DVDs are such a hit is because of the “special features” section where you can watch outtakes and behind the scenes featurettes.  Many have asked whether I had a grand plan all along for this group, and the simple answer is no.  It was because all of you that the group flourished.  I’d like to share with you some of my thoughts as The Yakezie grew.  Perhaps you’ll do the same and post your own write-up as well!

DECEMBER, 2009 – BEFORE THE YAKEZIE.  Alexa Ranking 94,000. Read more…

As far as I’m concerned, the US economy is recovering handsomely.  How could it not with packed restaurants, and traffic that makes me want to pull your hair out?  Facebook is worth well over $20 billion now in just a few short years.  Meanwhile, the whole world is hooked on Apple products with iPads ($500-800) and iPhones ($200-300) selling like hotcakes.  Who needs yet another computing device?  I guess millions do!

There is so much money flowing into the Bay Area, it’s hard to imagine another financial crisis on the wing.  Yet, I’ve read plenty of posts on “steps to take when the next financial crisis comes” and I’m scratching my head.  Am I living in a parallel universe where every other car I see is a fancy German vehicle, and I can never get a reservation at my favorite sushi joint?  I feel like I’m living in a little optimistic bubble where the world isn’t falling off a cliff and is actually doing well.  Tell me if I am, because bubble living is delusional living at its finest.

The stock markets, although highly volatile have recovered some 50% from the bottom and generally serve as as a leading indicator for the economy.  Yet people are still talking about a double dip recession.  Yes, the biggest worry is stubbornly high unemployment, but you’ll never be able to tell if you walk the streets of San Francisco.

LOTS OF POSITIVE ANECDOTES Read more…