Financial Samurai

“Every battle is won before it is ever fought.”

This was the infamous line said by Gordon Gekko in the popular 1987 film Wall Street. Derived from Sun Tzu’s Art of War, a 2400-year-old Chinese text on military strategy, the teachings of this tactical mastermind have proven useful in various aspects of present-day life besides warfare.

Although Sun Tzu’s Art of War is studied most religiously by military commanders, political leaders, and corporate executives, the concepts are scalable to conflicts as minuscule as your struggle with debt. Like in war, where the objective is to overcome the enemy resistance, it is everyone’s goal to conquer their personal debt.

Debt is the bad guy. We are the good guys. The road to financial independence is a righteous path where we’ll have multiple encounters with debt – a merciless obstacle that seeks to consume us. Luckily, an old man from many many years ago jotted down some powerful advice that may serve the purpose of securing a victory against debt.

Universal Debt Teachings Read more…

I was reading some posts around the web discussing how it’s common place to live at home with mom and dad.  Is it really that common?  Have I lost touch with reality, yet again?  After four years of college, where there are just ridiculous amounts of parties and unspoken amounts of fun, who on earth goes home and lives back with mom and dad?

Even if I was unemployed, I’d pay several hundred bucks and rent the sofa in my buddy’s living room or something.  Is there no shame in living at home with parents as a grown adult?  Perhaps not.  Right on my street, live three 26-27 year old young bucks with grandma.  Come on, how can these guys live with themselves living with grandma?  After 25 years old, that’s 3 years after college to find independence.  So I got to thinking, perhaps it is feasible to live at home with mom and dad, or grandma and still get girls!

STRATEGIES FOR GETTING GIRLS WHILE LIVING WITH MOM & DAD Read more…

As a recovering car fanatic who has literally bought and sold 8 different cars in the past 10 years I’ve come to appreciate the intricacies of getting a good deal.  One of the most important things people don’t think about when they are about to buy that fancy European automobile is how much car insurance will cost.

On an absolute dollar level, driving a $50,000 car could cost anywhere between $2,000-$3,000 a year, depending on your record.  At 4-6% of the annual cost of your car, car insurance is a big deal!  The irony is, the cheaper the car you buy, generally the higher car insurance is as a percentage of your total cost. Read more…

One of the best things about running your own blog is that you can write whatever you want, whenever you want.  There’s really no pressure to do anything really, and I don’t understand why some would feel otherwise.  Several blogging buddies have gone straight up cold turkey, not writing anything for months.  They tell me they can’t keep up with the schedule of writing great content.  Who says content has to be great?  They say new jobs lead them to not have the time.  Are you working 100 hours a week?  I’m sad because I miss their posts and our interactions. Read more…

The Bay Area is full of entrepreneurs.  There’s something in the air that creates an almost godly electric spirit that causes people to work hard and innovate.  As 2011 nears, more and more I hear about how small business owners are clamping down in preparation for next year’s tax hikes.  Clamping down is generally not a good term to use if you are a politician who wants to create job growth.

Let’s say you make roughly $3 million in annual gross revenue from your internet business like my friend Zach does.  Not bad, but not exactly big money if you take into account his cost structure.  If his pre-tax operating profit margin is 25% after he pays the salaries of all his employees, the rent, and so on, Zach is left with roughly $750,000 subject to taxes.  If his tax rate goes up from 36% to 39.6%, for every dollar he makes over $375,000, he will pay roughly $25,000 more in taxes a year in 2011.

Well guess what?  My friend is letting go of one of his junior programmers who makes roughly $85,000 to pay for next year’s $25,000-$35,000 tax increase!  My friend feels bad letting his 2006 college graduate employee go, but he has no choice since revenue has declined since 2007, and the government is tightening the screws.  Zach believes that 2011 revenue will be worse next year than this year, and is budgeting a decline.  Thank goodness for 99 weeks of unemployment insurance!  And no, it’s not reasonable for the junior programmer to just go work in fast food after only several weeks of looking.

DON’T LISTEN TO THEIR LIES.  THEY AREN’T IN IT FOR YOU. Read more…

Are you a lazy shopper?  I gotta say that I’m an extremely lazy shopper because I’m trying to pair down the things I own.  When I do go shopping the experience is sometimes so cumbersome I often just give up and don’t buy anything.  That said, when there’s a deal, oh how great the temptation it is to buy.

Whenever I think about coupons, I think of old folks sitting around their round breakfast tables on a Sunday morning going Edward Scissorhands on the paper.  With their stacks of nicely cutout coupons in hand, they go to the local grocery store and bargain hunt away.  If only there were an easier way, which bring us to a guest post by Kyle, the Director of Marketing at CouponCactus.com. Read more…

Well, well, well.  Not everyday does a $300 million dollar mega yacht stop by the San Francisco Bay Area!  The creatively named “A” yacht is owned by 38 year old Russian billionaire Andrey Melnichenko and his lovely supermodel wife Aleksandra!  Andrey made his money in fertilizer, banking, and energy and is worth a reported $4.4 billion dollars.  Interest alone on $4.4 billion at 4% is over $178 million a year!

The “A” looks like something out of a James Bond movie.  Can you imagine all the crazy parties on this bad boy?  Wow!  I rode my bike to the very north end of San Francisco to take a look and boy oh boy is it big.

Some nice mouth watering yacht stats for all you billionaire wannabes out there! Read more…

Recently, I’ve been on a mission to tell anybody who will listen to refinance their mortgage.  I get nothing in return, just the satisfaction of knowing that someone who isn’t a rate hawk like me can get a nice kick in the pants to save some money every month for the next 5-to-30 years of their lives.  Nobody gave me a kick in the pants when I locked in my refi, which is why I had to pay 0.125% higher than I should have because I was unsure and waited a little too long.

Banks have promotions all the time, and your duty as a borrower and saver is to identify which banks are offering the most attractive terms at any given moment.  That bank is Citibank, with mortgage rates often 50 basis points (0.5%) cheaper than any competitor out there for 5/1 and 30-year mortgage products.  Citibank is on a rampage to build up their loan book again.  As patriots, it’s our duty to spread the word and make sure we don’t fall off a cliff again!

THE BIGGEST HURDLE IN REFINANCE LAND Read more…

There’s a whole world out there of financial products I have very little understanding about.  Apparently, there’s a market for buying and selling “structured settlements” for cash after you win big money after a court case.  The following is a guest post by Jason from JG Wentworth which pays people cash now for settlements which are paid over time.  Interesting concept and something which is worth learning about.

When a plaintiff settles a court case and is awarded a large amount of money, it may be decided that the settlement will be paid over time in installments rather than a single lump sum payment.  This type of arrangement is called a “structured settlement”.

The advantage to having a structured settlement is that the money is tax-free if set up properly.  Structured settlements can also be beneficial because they provide a source of income for the recipient well into the future, where as lump sum payments will more likely be spent if the recipient does not manage their money responsibly.

Structured settlement payments can also be a disadvantage, trapping the recipient into periodic payments when they may want cash now.  Many settlement recipients choose to sell their settlement payments for a lump sum of cash to start a business, pay for college tuition, purchase a home or other various financial reasons.

Handling a large lump sum of cash can be exhilarating.  And it can be a little unsettling, too.  Money causes people to worry, and worry spins half-truths or unfounded myths about financial issues at hand. Selling your structured settlement into a lump-sum payment is an opportunity to increase your net worth — not limit it.  All it takes is a little guidance from a reputable structured settlement buyer and a plan of action for your cash to breakthrough any doubts.

Apparently there must be some controversy about structured settlements and Jason is here to help clear the air.

MYTHS ABOUT SELLING A STRUCTURED SETTLEMENT FOR CASH Read more…

Are you afraid of hard work?  I’m not.  You can lock me in a room, tell me to demolish it down to the studs and build it back up again.  I’ll do it even if there’s only a sliver of hope of something good waiting at the end.  As many of you may or may not know, Yakezie.com will launch this Monday, August 16th.  A tremendous amount of hours have been spent formulating the game plan, working with Chris the web guru to implement features, and create content.

Everything always seems so calm on the outside, but behind the scenes there is nonstop debugging, planning, and trial and error.  Major respect to anybody who has ever tried to start any collaborative project!  Our Google Groups is alive with discussion, and the ideas are endless.  Yet, ideas are useless without implementation.  I often wonder how on earth we’re supposed to coordinate the talents and ideas of so many.  I’m worried that great ideas will fall by the wayside because we’re too focused on narrow objectives.  As a result, we’re going to do our best to capture them all.

With the August 16 deadline, I feel like I’m back in school, working on a project that will determine my final course grade.  Yet in reality, there’s simply no fear of failure except for the fear of not doing.  What a pity it would be to never launch Yakezie.com with so many diverse and passionate members, each of whom have something special to offer.  After all, the Yakezie.com is not for me, but for all the members who participated in the challenge, as well as all the potential new readers out there who are looking for unique insights.

Weekends are meant for relaxation, but not this weekend.  It’s crunch time and I’m going to kick my ass to ensure that everything goes according to plan.  See y’all over at Yakezie.com this Monday!

Readers, for those of you who run multiple sites any tips on how to manage?  

For those who only have one site, have you ever thought of starting another site and implement what you’ve learned from your first site?

When was the last time you kicked your own ass at something? Haiiiii yah!

UPDATE: Yakezie.com is up and we are currently working out all the kinks.  Please feel free to share your feedback!Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS feed.

Every month I contribute $1,375 to my 401K so that by the end of the year, the 401K is maxed out at $16,500.  Unfortunately, $16,500 a year is a ridiculously low amount of money to save for retirement if you really do the math.  After 10 years, you might have $200,000, and after 30 years you might have $600,000 to $1 million depending on the markets and your employer’s match.  Whatever the case may be, the 401K is simply not enough money to retire on, especially since you need to pay tax upon distribution.

The government needs to get it together and raise the amount of 401K contribution for those in the later part of their lives.  How is it that a 40 year old executive who makes $165,000 can only max out the same amount in his 401K has a 23 year old kid out of school making $35,000?  It just doesn’t make sense.  Instead, the government should allow pre-tax contributions to increase by $5,000 every 5 years so that by the time one has served 20 years in the work force for example, s/he can contribute $35,000+ a year to their 401Ks until retirement.

Let’s talk about the pencil geek IRA retirement plan for example.  If you’re one of the fortunate who are allowed to contribute, you can only fund $5,000 a year!  Whoopdeedoo!  $5,000 X 30 years later, assuming you don’t lose it in the market yields $150,000-$300,000 maybe!  Great, just enough to buy me a Honda Accord sedan when I’m grey.  Get it together government and raise that $5,000 contribution amount higher with better tax incentives.  Furthermore, let hard working Americans who make over $120,000 the opportunity to contribute regularly, and not just through odd year loop holes.  Empower people to want to save for their future!

DIFFERENT STROKES Read more…

I ran into one of my golfing buddies the other day while waiting for a colleague.  Greg the golfer is an every day fella who so happens to be worth north of $20 million dollars.  I don’t know exactly how much he makes a year, but it’s likely at least $3 million during normal economic times.  He’s a powerful man who deserves everything he earns, but sometimes he’s just vexing.

We got to catching up about the latest gossip on tour when he asked me if I wanted to grab a coffee at Starbucks.  I told him I was good, largely because coffee hurts my stomach, not to mention I’m supposed to be waiting for my colleague at this exact spot and time to attend a meeting.  Greg responds, “Of course not, you are so cheap!” in a snide, but joking sort of way.  Unfortunately, every joke has a meaning, and being called cheap is one of the most annoying things to ever hear.

CAN’T COMPARE Read more…

I don’t talk much about my finances, but I will tell you that I’m in the process of refinancing a couple mortgage loans down by 1% each.  The interest savings is tremendous, making me very positive about consumption trends going forward as 10 other people I know are also refinancing.  It behooves you to at least call your local bank and check their latest rates.

It does make me wonder with the strength of the stock markets lately, how the bond market can still be so frothy to provide such record low interest rates.  Do remember that the higher treasury bond prices go, the more yields fall.  Could there really be deflation on the way?  I highly, highly doubt it but the bond market is telling us otherwise.

To humor our minds, lets say there is deflation on the horizon.  What would you do with your spending habits?  You’d probably stop consuming due to the assumption that whatever it is you want to buy will be cheaper in the future.  As a result, you’d hoard cash and de-leverage.  Bingo, that is exactly what plenty of folks are doing, including myself.  This self perpetuating mentality is very damaging to economic progress.  In addition to delaying consumption, you will probably seek ever higher yields.  With the 30 year treasury yielding 4% right now, it sure looks like a buy compared to only 2.85% on the 10 year.

When talking about deflation, keep in mind that money is simply a medium of exchange.  The more money currency you have, the better as the strength of your currency improves vis a vis the goods and services which it can buy.  Frugality really is en vogue again, and I just can’t wait until Samurai September when I spend the whole month buying nothing!

POSTS THAT CAUGHT MY EYE: Read more…

Rent to Olivia Munn or...

Last night I got a written notice in the mail informing me that my tenant of 2.5 years is moving back East!  Can you believe it?  How could he leave paradise to move back home to the sweltering heat of New Jersey?  I will never know.  Anyway,  I’m really sad to see him go because he was as close to the ideal tenant as possible.

Ned paid on time, was quiet, held no raging parties, and never bothered me to come fix anything.  OK, so there were several times when he needed an extra week or two to pay rent, but in the end he always delivered.

As a landlord for many years, here are the basics of what I’m looking for: Read more…

Elephant > Moon. Eh?

One of my graduate school friends recently found himself out of a job.  It was a tough slog, but at last, he and his co-founders decided to shutdown their startup and start something new.  Nobody is really going to feel sorry for Greg, as he joined Google the year they went public and cashed out on a couple million dollars in stock options over the next 4 years.

His $180,000 a year salary was nothing to sneeze at either, but also nothing too spectacular in the land of $1 million dollar starter homes.  In a nutshell, Greg is the typical Silicon Valley success story who busted his butt to get ahead, networked like no other, and fell victim to a downshift in the economy these past couple years.

There are literally thousands of millionaire 30-somethings in the San Francisco Bay Area who are underemployed or just not working because they haven’t found that great idea, or that premium company fit yet.  Why should they bother wasting a companies’ time and enlist only to quit 6 months to a year later when something better comes along?  That’s not fair to the company and so they do the right thing and wait.

When I asked millionaire Greg about his thoughts on the government extending unemployment insurance to 99 weeks he let out a big “YIHAW!“  You see, Greg has been collecting unemployment insurance for the past 16 weeks via the solvent state of California, and he is worried that Obama will crack down on people like him once Federal care starts kicking in.

A MILLIONAIRE’S TAKE ON COLLECTING UNEMPLOYMENT AS A MILLIONAIRE Read more…