Financial Samurai

Back in 2001 the economy was imploding much like it was in 2008-2009.  I was worried about losing my job and I asked my mentor for advice.  He told me something so important that it has guided my approach to doing everything ever since.

David took me to a conference room and sat me down and said, “If you become the best at what you do, you will NEVER have to worry about getting fired.”

He went on to say, “The bottom 10% of people always get fired even during good times.  Look at Jack Welch from General Electric.  Even in the brightest of good times, he canned the bottom 10% .  There’s no room for underperformers, underachievers, and people who blame the world for their own failures.  You are in control of your career and your finances.  Stop worrying and start being invaluable.”

THE CHANGE IN MINDSET Read more…

16.8%.  That’s how much the current Greek 10-year bond yield is producing thanks to their debt mess.  16.8% is a juicy 13.9% higher than the current US 10-year yield to put things in perspective.  The question on everybody’s mind is will lawmakers pass a new 5-year, 28 billion Euro austerity plan in order to tap a 5th installment of the bail out money available to repay almost US$10 billion worth of maturing bonds this August? We shall see come Thursday, June 30 whether the Greek Parliament implements the package if it passes on June 29 in the first place!

More than a year has passed for the market to digest the European debt crisis, but after a year of hand wrangling, pretentious pronouncements by aggravated government officials, and raucous rioting in the streets of Athens, nothing much has changed. The economic recovery that was to produce the growth and tax revenues to bail out the sinking ship of “PIIGS” has never materialized, and patience is running thin as potential defaults creep into the not too distant horizon.

The European version of Wall Street’s “CDO” meltdown has gradually unfolded over the past two years, beginning with leaks in the press that something was askew in Greece near the end of 2009. As the truth of the financial depth of deficits finally surfaced, the crisis hit front-page news headlines in May 2010, when it became apparent that the financial malaise was not confined to Greece alone. A new anagram, namely the “PIIGS”, entered our daily lexicon. Portugal, Ireland, Spain, and possibly Italy had similar, but different, according to finance officials, debt and deficit problems.

The crisis was met with proposed bail out packages from the stronger banks in the region that claimed that capital stress tests would prove their stability to meet most any contingency. Each proposal and subsequent approval was accompanied by pompous protestations from each government that debt payment schedules and bloated deficits were no longer issues to be concerned about, at least until the next revealing story in the press negated everything that was previously said. This bumbling scenario has been repeated countless times to the point that confidence in the respective governments has all but disappeared.

18 STRIKES AND YOU’RE OUT! Read more…

It’s good to be frugal by nature.  You will likely never get into financial trouble as a result.  You will always be able to appreciate things since you’re never buying the best and most expensive stuff.  Sometimes, however, it’s good to splurge.

You’ve already read “‘No Point Making Money If You Don’t Spend Your Money“, and I’m sure many of you agree.  We work so hard every day for our money, and to just hoard all of it in a bank account is such a crying shame.  There is no dearth of ways to make money, so we are actually much more afraid of running out of money than reality.

Time and time again, I see people who’ve been let go find jobs and security again.  I’ve seen people invest their life savings in a project, only to lose it all.  But, they are still alive and finding ways to live fulfilling lives again.

I get a sense we’re now too cautious with our money.  We’ve been permanently scarred by the multiple evaporations of wealth over the past 15 years that we’d rather not spend on some of the most important things that give us happiness and comfort.  Look at wealth indicators now vs. 2008.  It’s taken 3 years, but on average, we’ve all breached our 2007 highs and some of us, by a lot.  This is important since I can’t imagine us going through such a massive downturn like that again, at least for the next 10 years.  In the meantime, don’t be afraid to spend your money on things you cherish, like a $1,000 doggie stroller for your beloved Chow Chow named “Bear”!

THINGS TO  SPLURGE ON THAT WILL IMPROVE YOUR LIFE Read more…

From a financial standpoint, rental property is at the top of the list of assets to own.  It can soon become the biggest headache if you don’t screen properly for the right tenants or buy in a location which consistently attracts poor tenants.  Good thing you scre eRb402HI en like the CIA and only buy in prime locations.

Rental property is the ultimate hedge against inflation as well as the ultimate asset to make money during inflation from a cash flow and real asset appreciation perspective.  With the US Dollar going into the crapper, your goal should be to borrow as much USD as your personal balance sheet allows and buy a real asset in an appreciating foreign currency!  If you can’t do that, you just have to do the next best thing and buy American.  The foreigners are coming!

MAKING MONEY EVERY WHICH WAY AND SIDEWAYS Read more…

It’s been two weeks since I found out I was being scammed by my insurance company. I sent in my 8 month old house appraisal to Tricky Dick, who is trying to raise my home insurance premium by 45% since their inspection 7 months ago.  Their shady inspector made my house 50% larger than it really is, so they could raise my premiums by a similar magnitude.  It’s so easy to prove what my house’s square footage is, it’s not even funny.  It’s like saying Lebron James is 10 feet 5 inches instead of just 6 feet 8 inches tall.  Utterly ludicrous.

The recent appraisal I sent in contains perfectly drawn outlines of my house’s layout and square footage.  It matches up to within 50 square feet of what the SF County Assessor’s has on record.  I’ve had two other appraisals in the past 7 years, and both are also within 50 square feet of the real size.  Clearly, this case is as slam dunk as convicting Elliot Spitzer for messing around!  Not so!

If you’re curious, here’s the e-mail exchange I had with them with names, figures, and dollar amounts changed that mimic the same percentages.  All of this takes precious time.  In this post, you will learn what the tricky “Home Protector Insurance” product is.  You’ll also learn whether the rebuild cost premium you pay trumps the square footage size they have in their documents, and what you get to rebuild if your house blows up.

FIGHTING IT OUT WITH TRICKY DICK INSURANCE CO Read more…

Bonus Book Giveaway Box 1

I’ve been waiting for the right time to create a contest giveaway for many of my personal finance books I’ve amassed over the past year, and now is the time!

I’m participating in this massive online sale of some $1,087 worth of personal development products for just $97.  If you got personal issues, this sale is for you!  When you buy through Financial Samurai starting at 9amPST/12noonEST, you will be eligible to get a bonus box of personal finance and investment books you see in the two pictures to the right.  Additionally, $5 of each sale goes to the Kidney Foundation, whose goal is to educate and prevent the disease!

Contributing Personal Develop Authors: Leo Babauta, Charlie Gilkey, Pace & Kyeli, Jonathan Mead, Steve Kamb, Jules Clancy, Ev’Yan Nasman, Ali Luke, Benny Lewis, Adam Baker from Man Vs. Debt and Karol Gadja.  All these folks make their living online and specialize in developing eProducts that help you become a better person.  They depend on their online income to survive, which means there’s a minimum quality standard otherwise these guys won’t last for the long run.

Read more…

Once a quarter, I try and learn a new song on my trusty 12 year old Martin acoustic guitar.  I’m already behind.  Some are impossible to play, and others are impossible to sing.  This time around, I stumbled across a song that not only is easy to play, but also possible not to butcher.  The song is called “Elderly Woman Behind The Counter In A Small Town,” by Pearl Jam.

I’ve probably listened to this song a hundred times since it first came out in 1993, but I never really understood the meaning until now.  Isn’t it weird how one can be so oblivious to a great tune, even memorizing the lyrics without ever understanding the message?  Again, we don’t slow down and stop to consider, and as a result we go forward only scratching the surface of so many wonderful things.

“Small town,” is about a middle-aged woman stuck in a dinky, dusty old town.  When she was young, she struggled like hell to get out, but now she’s given up and has accepted her fate.  There’s no escaping anymore.  She’s working at a small store, and in comes a nice looking man in fancy clothes with a nice car parked outside.  He must be from a big town, she thinks to herself.  At first she doesn’t recognize him, but after a while she finally begins to recall that he was her old flame from long ago.  She’s too embarrassed to say “hello” because nothing about her has changed excepted her age, so she let’s him come and leave without saying a word.  On she goes with her business as she wonders where he’s off to.  She thinks about all the things she could have done.  She thinks about the life she could have had with him.

Really listen to the lyrics and think about the description above to soak in the meaning.  It took a couple hours of practicing and re-recording to understand every line.  I never want to look back and regret the things I didn’t do.  I want to go on a great adventure and keep pushing forward.  Don’t you?  It’s easy to get stuck in a rut, doing the same thing over and over again.  You wake up, check your e-mails, cut the grass, make some lunch, watch TV, take a nap.  Before you know it, life has passed you by.  I hope life doesn’t go by too quickly.  Happy Father’s weekend dad!  May you have many more!

Readers, do you feel that life speed is accelerating?  Are there things that you have longed to do, but have never gotten around to it?  What’s stopping you?  Do you ever try and understand some of your favorite songs?

Recording Notes: Two-track recording using Garage Band with simple Macbook built-in microphone.  Home office studio.

Regards,

Sam

I recently had a really long conversation with a reader who asked me for advice on what to do about his ailing father who is in debt.  I have some opinions here and really want to help, but I’m no lawyer or tax accountant. So perhaps the Financial Samurai community can come together and provide the best course of action.

If you are to read this post, please leave the judging to a minimum and open your hearts and intellectual minds instead.  I’ve written the post in a way that best reflects our conversation and the dilemma at hand.

The Situation

My father is 61 years and has been out of work for the past year and a half.  He hurt his back, and is currently on disability leave from his job as a construction worker.   He lives in rural Pennsylvania, where the cost of living is low, but so are the wages.  The most he’s ever made was $35,000, and that’s if he was fully employed all year, which often times, he was not.

My grandmother passed away three years ago, and as the good son, my father paid for the $6,000 funeral himself, even though he has an older sister who could have helped pitch in.  My grandma left my father her house, even though he has a small house of his own.  With the little remaining money he had post the funeral, he’s been fixing up the house to sell.  It’s been a rough road thanks to the economy, and his funds have run out.  That was last year.

We had a heart-to-heart last Thanksgiving, and I discovered that not only did my father have no savings, he was $13,000 in credit card debt.  His disability insurance of $1,200 provides him enough to scrape by every month, but without a healthy back, he can’t get back to work.  He wants to pay off his credit card debt, finish up everything in the house, and just lead a simple life.  I sent him some money then, and one more time again this year, but something just feels a little off.

He is eligible for Social Security next year, which I think will provide a boost to his income, but I’m not sure.  Are you allowed to receive disability insurance and social security at the same time?  I’ve also read that it’s better to wait a little longer to collect social security so that his monthly checks will be higher.  But, I’m stressed too, because he has other serious health issues which I’d prefer not to get into.

My father has a lot of pride and he doesn’t want to ask me for money.  I know it embarrasses him to ask, even though I am happy to help.  I’m not that wealthy myself, but I could afford giving him an extra $500 a month if I had to.  I’ll just save less for my own retirement.  He feels bad taking my money, but after helping raise me and pay for my tuition, I want to help. I need to help!

The Dilemma Read more…