Happy New Year! Time always moves faster the older we get. One day I’ll lose my mind and hopefully these journal entries will jog my memory. Although less than 20% of my life is discussed in my writing, I hope it’ll be enough to jolt the other 80% alive if I forget. If not, the thousands of pictures I take every year will.
2013 started full of promise and ended way better than expected. I was looking for a conservative 9% increase in the S&P 500 to 1,551 after a 13% year in 2012 and we closed up 30%! I became more bullish after my target was achieved in the first four months of the year and positioned more aggressively, but not enough unfortunately. It’s fun to keep predictions set all year so we can look back and see how we were feeling back then.
One of my biggest challenges all year was maintaining focus. It’s way too easy to sleep in every day, binge watch shows on Netflix, stuff my face with donuts, travel for weeks on end, and have days blur together with so much free time now that I no longer have a day job. As a result, I set one year, three year, and five year business revenue goals to minimize the amount of meandering. So far, so good. But to be quite frank I’m losing my desire to make more money. I just don’t care anymore, which is part of the reason why I left Wall St. I just want to feel useful.
POSITIVES FOR THE YEAR
1) Survival. It might be slightly comical to list “survival” as the #1 positive for the year when you’ve got a livable passive income stream and deferred compensation, but survival is really what it’s all about in the first three years of entrepreneurship. It’s not easy making money from nothing and 2013 was my second year, but first full year of trying to make it happen.
One of my biggest fears leaving Corporate America was the possibility that my efforts would not correlate with reward. I thought to myself, perhaps the only reason why I was getting paid was due to my firm’s reputation. That said, I didn’t feel I was getting rewarded commensurately with what I was bringing in so I left instead of complain. Complaining is the worst thing someone can do if they are unhappy about their situation. Do something or shut up. If I failed to grow revenue and profits, I would feel like an enormous failure.
Giving up way too soon is something I fear as well. When all you’ve got is yourself to figure everything out, entrepreneurship can get quite difficult at times. I’ve also had this very heightened temptation since 2007 to just kick back and move back to a fully paid off house in Oahu. This would be the complete easy way out thanks to my grandparents who are no longer here. Hawaii is good living, but it will trap you into complacency. I give mad props to anybody who’s ever tried to make it on their own, when temptation is all around for them to do nothing.
2) Business Profitability. The internet business is the best business in the world due to scalability. I will never run a bricks and mortars company after experiencing running an online business. Costs are largely fixed after server, domain, maintenance, and design costs. Revenue is practically infinite given the enormous number of English reading people on the internet.
Growing revenue in 2013 was daunting because 2012 saw a triple digit jump over 2011, albeit from a smaller base. Fortunately, revenue grew by over 60% and operating income grew even more due to operational leverage. If I can maintain flat revenue growth in 2014 I’ll be happy because there are so many exogenous factors that go into an internet business that is out of my control. Site traffic was rocketing to the moon in 1H13 only to normalize in 2H13.
The level of revenue is enough to take care of a family of four in San Francisco based off my own standards. Before that family comes, I will aggressively save as much as I can. All I can do is stay consistent, find the best products, grow awareness, ask for your support, and hope for the best.
3) Personal Finance. Hopefully everybody had a great year in personal finance thanks to a raging bull market! My net worth increased by roughly 32% – 42% according to my Personal Capital net worth dashboard. Anybody else kind of addicted to tinkering around with their net worth online? Playing with all the variables and doing the calculations is fun when you’re making money.
The range depends on what value I want to assign to my properties. This is the largest net worth growth since 2007 and much larger than I expected because I’m not in the growth phase of my life anymore. My bogey is for a lower risk, 10% net worth annual increase so I’m very skeptical about the sustainability of this increase.
The net worth growth consists of:
* 60% revenue growth in my online business which is valued at 2.7X annual revenue for the past three years. The valuation multiple is subjective, but I personally would not sell my revenue streams for anything less than a 3X multiple because I’m having a ton of fun, cash flow is steady, and operating margins are high. If I sold all my online properties, I don’t know what I would do with all my free time. The business is where I spent most of my time and the valuation is now a meaningful part of my net worth which I’ll discuss a little more of from now on.
* A 30% – 60% increase in home equity due to a 15% – 30% increase in property prices depending on what type and where. I’ve chosen to use a 15% increase in my calculations and have also taken a 15% discount to Zillow estimates. The nation as a whole showed a 13.6% YoY increase in property prices, so I think using a 15% figure is conservative since things are nuts here in the SF Bay Area. One report has Palo Alto home prices 40% HIGHER than 2006 peak levels. I’ll be posting a dedicated article on the repercussions of aggressive housing price increases in the city. Facebook, Twitter, Google are at all-time highs and I’m pretty sure rents and house prices will continue to rise by at least 5% in 2014.
* A blended 25% increase in equities. I operate my IRA like a hedge fund, taking big bets, going in and out of positions, and also hedging which is not the best in a bull market. My IRA is up about 16%, which is good compared to the overall hedge fund index (HDG +5%), but bad compared to the S&P 500 +30%. The rest of my equity exposure is in structured notes linked to indices with downside protection. If there is ever a downturn again, I want to still be making money.
* Risk free assets are up about 7% due to a 3.8% rise in CD income and some excess savings that has yet to be invested. I haven’t bought a single CD in the past two years and have invested as much as I can into the stock market, P2P, or alternative investments during this time period.
My net worth grew roughly 7X greater than my income, which is kind of scary and awesome at the same time. Part of the reason for such a large multiple is because my income isn’t as large as it once was, but it is still better than a poke in the eye. Please build your financial nut so your money works for you so you don’t have to. Real estate continues to be my favorite asset class.
4) Balance. I readily admit I’ve got workaholic tendencies that are driven by the fear of being broke due to my upbringing overseas. Images of poverty growing up in Malaysia in the late 80s and my dozen visits to China and India in the 90s and 00s are often on my mind. I feel a constant guilt of being able to grow up in America after middle school. Why was I raised by two parents who saved enough to allow me to go to college while millions of other kids don’t even have a chance of finishing high school? Why did the recruiter pick me out of the many equally or better qualified candidates for my first job? How the hell did I last for 13 years in finance when there were more than 25 rounds of layoffs during this time? And so on…
Guilt makes me work harder than perhaps I need to because I never feel like I deserve anything. I was just lucky and lucky is not an admirable trait. Entrepreneurship has given me balance because I finally feel full pride in my efforts. I know Financial Samurai would not be where it is today if I didn’t spend the hours writing three to four articles a week for the past 4.5 years. I know the Yakezie Network has helped other bloggers stick with their sites for longer than they would have. I know that YakezieNetwork.com, the finance ad network is completely up to me to get going. So far I’m not doing a great job at promoting because I think it’s an absolute no-brainer (case study). Who wouldn’t want to make hundreds or thousands of dollars extra online? If it fails, then I’m OK with it because it was all my own failure.
Entrepreneurship has curiously allowed me to work less hours a day, feel less guilt, and see more congruency in my efforts. All three equal more happiness. There’s still a lot of luck involved, but so far luck is in the minority camp. My stressometer has fluctuated between a 1-3 out of 10 all year compared to a 7 out of 10 while I was working. The only thing that stresses me out now is when my site won’t load properly because I’m thinking about your user experience.
5) Family. I was able to spend more time with my family in 2013, a consistent top priority every year. One of my fondest memories was having a nice two hour conversation with my sister about life over breakfast. I don’t remember the last time we ever talked for more than one hour at a time.
Another great moment was being able to go with my father to Warriors basketball games. He came to visit to see two games one month with my mom, and then came back the very next month because the Warriors made it to the playoffs! We got to see all three games against the Spurs and it was the best! My parents, my sister, and I never lived in the same state since I left NYC in 2000 so it’s good to connect more often now that I’m free.
Spending seven weeks in Oahu and three weeks in NYC this year to partly see my family really helped give me an idea of what living in either place would really be like after San Francisco. I was also able to travel for 12 weeks in 2013, the first time since college.
6) Health. I’ve got this mild obsession with weight and fitness even though I’m not overweight at 5’10”, 162 lbs because I grew up as an athlete who was once a very fit 150-155 lbs and could bench 215 lbs. I’ve written in the past how the ideal weight pisses me off, and I’m happy to have hovered all year in the 161-164 lbs range with relative ease. When I was working my weight would fluctuate in the 166-170 lbs range. It’s much easier to stay in shape when you can play tennis or go for a hike in the afternoons everyday and not have to take clients out for some juicy rib-eye steaks several nights a week! Oh how I miss the corporate card and client entertainment.
2013 is the 12th year I’ve been back pain/sciatica free thanks to Dr. Sarno’s book, Healing Back Pain. I no longer grind my teeth, suffer from TMJ, or have painful tennis/golf elbow anywhere. Going through life pain free really makes me wonder how much stress kills us! If we don’t have our health, we might as well have nothing. Perhaps being healthier is the greatest reward of financial independence after all.
MISSES OF THE YEAR
1) Book Sales. I think I have a goldmine with the book, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.” Studies have consistently shown a vast majority of people don’t like their jobs but don’t leave due to pay, healthcare, and fear of long term unemployment. I felt golden handcuffed as well because who leaves a six figure job to be a starving writer? But I did leave because I was able to negotiate a severance package and had a very clear plan. The severance provides for roughly six years of living expenses at my current rate.
Despite the freedom to do more of what you want as a value proposition to buy my book, my book sales continue to be uninspiring with roughly 30 sales a month on average. Perhaps the $48 price tag is too high? But what is $48 when you can empower yourself to negotiate potentially thousands of dollars in a severance and get your life back? One client was able to manage a $180,000 severance in 2013!
If I didn’t leave in the spring of 2012 I would have felt like I wasted two years of my life being a chicken shit for not pursuing my entrepreneurial endeavors. I need to do a much better job marketing the book, getting affiliates who write about career, entrepreneurship, and lifestyle. The feedback I’ve received from readers has been really positive so far.
2) Surgeries. I’ve had my face operated on twice this year! Once was because I bashed my lip from too much partying. I got a hotel staffer to rush me to the ER and stitch me up. Seeing the anesthesia needle get injected into a gaping hole while the liquid squirted into my mouth because there was no wall was disgusting. I have pics but I don’t want to make you vomit.
The second operation happened just last month. I’ve had this hard lump in my right cheek for the past year that finally began to grow. Fearing cancer I YouTubed it and discovered it was a sebaceous cyst. The dermatologist cut open a 3/4 inch hole and began digging into my cheek to cut the thing out. He said it wasn’t carcinogenic, but better safe than sorry to take it out especially since it was uncomfortable. I’ve now got this puckering at both ends where he stitched me up which will last for four months. If I was a male model, I’d be pissed! Good thing I’m only a writer.
I have to admit something weird. With each trip to the doctor I kind of reveled in the pain. I haven’t felt a lot of pain in so long that I was beginning to dread something massively bad would happen. These small knocks are like little earthquakes relieving pressure to prevent the big one from happening. Thank you sir may I have another!
3) Too Financially Conservative. Although I sleep well at night knowing that if all goes to hell, at least 25% of my net worth will still be intact, I was too conservative in my asset allocation for 2013. My mindset was for a realistic 9-10% increase in the stock market so my rollover IRA positions reflected this view. Perhaps from a “value at risk” perspective, my IRA performance was fine since I run the portfolio like a hedge fund, but from an absolute point of view it was quite an underperformance compared to the S&P 500 index. What I should have done was buy triple levered ETFs!
When I wrote “Don’t Stop Fortune Hunting,” the post was a challenge for me to take more stock risk. Instead of taking the normal $50,000 – $100,000 stock positions, I was secretly challenging myself to take $200,000+ positions to go for broke! If I followed through on my challenge, I would have made $200,000+ in BIDU and SINA alone instead of just ~$40,000. The bull market just amplifies my fear of being too conservative. The only asset that saved me was real estate, where I’m levered 2:1. But even 2:1 is relatively low leverage compared to the average. For 2014 I need to be more greedy, which is probably where I’ll really start blowing myself up!
My goal has always been to grow my net worth at the same pace of growth as the S&P 500. I guess I was able to do this in 2013, but equities was a drag not a boost to the overall 30% growth benchmark. Equities will always be less than 40% of my net worth just because of my property and risk free assets. With the online business growing to a relative significant size, equities will probably never be more than 30% again if all else continues to grow.
4) Self Promotion & Outreach. I’m pretty pathetic when it comes to self promotion. Unlike some of my peers, I don’t like to constantly write about myself. I’d much rather write about scenarios and have us analyze the situation together as a team. I’m always impressed with people who can Tweet their posts multiple times a day, show long video monologues, and constantly post pictures of themselves over social media. I never knew what a “selfie” was until this summer!
But if I am to grow, I’ve got to adopt a more “look at me” approach. The first act is to study my friends on Facebook. One guy posts a picture of himself every week sitting in a different sports car and he gets tons of likes and comments. There’s never a girl in the picture, but who cares? Another person changes her profile picture every single week, which seems to work in getting lots of attention. Another friend checks into every single restaurant and bar to display her fabulous life. Once I’ve gotten more comfortable in self-promoting, perhaps I can go the more mature route by doing TV and radio interviews with established media outlets.
I also do nothing to get readers to subscribe via RSS or RSS e-mail. There’s no pop up box reminding you to subscribe, nor is there an easy to check subscribe button in the comments section or at the end of each post. I’ve also done a piss poor job at promoting my private “quarterly” newsletter. These are two different things mind you. One feeds my posts to you via RSS or e-mail. My private newsletter is content not published publicly that is supposedly once a quarter. All this lack of action stems from my lazy attitude of, “If you want to keep in touch subscribe. If not, no big deal because the choice is up to you.” Sometimes there just needs to be a slight push. For 2014, I plan to write more about investment ideas in my private quarterly newsletter.
I haven’t done as much online outreach in 2013 as I did in 2012. I missed the financial bloggers conference in St. Louis and I didn’t go to any other conference. Conferences are a blast, but I was too busy doing research in Europe and NYC this summer and doing my own thing in Oahu and Tahoe this winter.
The community is very helpful in providing motivation and support when you’re down or have a new product to launch. I need to do a better job getting involved.
5) Home Maintenance. I’d be remiss not to include some home maintenance issues this year. The beautiful 30 year old Yoshino Cherry tree with pink flowers outside of my house caused a lot of damage this summer. Her roots broke my main water line and caused massive leakage on the sidewalk, resulting in no water to the house for three days. I had to hire a guy to break up the sidewalk, shave the root, install a snake pipe, and repave the sidewalk for $1,600 (picture)! I might have to spend another $1,000-$2,000 to redo more cement blocks because I can see more uneven blocks due to the roots.
I’m a tree lover and have planted three trees this year – a pumelo tree and a himmayudin mango tree back in Oahu (top picture) and a mandarin orange tree in SF. I also planted my Strawberry Tree in front of my house 8.5 years ago when I first moved in. For those city dwellers who plant trees in front of their houses, bake in thousands of dollars of future cement repair!
Besides repairing the main water line, I had to buy a new washer for $640 (Black Friday Sale $200 off baby!) because mine broke after 8 years. I’m also considering biting the bullet and buying a new $4,000+ Thermador Professional single oven to match my range because the LCD panel doesn’t turn on anymore. I can’t believe Thermador Professional ovens are so expensive, but I’d like to match my other appliances.
2013 was a year where all the hard work to improve our personal finances paid off. We should be proud of our accomplishments and always look to protect what we’ve made. If you build your financial nut past the cross over point, you seriously never have to work again so long as the economy doesn’t implode.
The theme for 2014 and 2015 continues to be of congruency. I like to think we are exactly where we want to be due to our own efforts. Nothing can really push us to change unless we are sufficiently agitated to take necessary steps.
START AN ONLINE BUSINESS
It’s been over six years since I started Financial Samurai and I’m actually earning a good passive and active income stream online now. The top 1% of all posts on Financial Samurai generates 31% of all traffic and revenue.
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 actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, creating, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes with my step-by-step tutorial.
Updated for 2017 and beyond.