Scraping By On $500,000 A Year: Why It’s So Hard For High Income Earners To Escape The Rat Race

Living Paycheck To Paycheck On $500,000 A Year

Help! I’m drowning from all my money!

I’ve highlighted in a previous article how living off $200,000 a year in an expensive city is really just an average lifestyle. In this article, I’ll discuss how one couple is living paycheck to paycheck while making a combined $500,000 a year.

$500,000 a year is a level which I think is considered rich. Anybody who thinks otherwise has no concept of financial reality. Even the government almost agrees after compromising by raising the income level for when the highest marginal tax bracket kicks in to ~$400,000 from $200,000.

Although making $500,000 a year may sound like a Herculean task, you’ll be surprised to know there are plenty of regular folks who hit the half million mark every year. This article will discuss how many folks who earn a large income won’t be retiring any time soon. It’s quite a juxtaposition from digital nomads who move to low cost areas of the world.

The Digital Nomad Lifestyle Is Worth Living

Digital Nomad Lifestyle, Pulau Redang, Malaysia

Taaras Resort, Pulau Redang, Malaysia

When the world seemed to be ending between 2008-2010, the digital nomad movement took off. Without strong job prospects, people took to the internet to earn a living half way around the world in cheaper locations like Thailand, The Philippines, Malaysia, and Vietnam. For $1,500 a month, you can live like a King or Queen!

So what can digital nomads do to make money online? They can work as a freelance writer, designer, or techie. They can run a drop shipping business that doesn’t hold inventory. They can run an online course or come up with a product to sell. Or they can run an online media company that generates advertising revenue. In short, there are endless ways to make money online. And if your target revenue is only $1,500 a month to live a great lifestyle, then the possibility to live such a life style is higher than you think!

For almost four weeks, I pretended to live the digital nomad lifestyle while traveling to South Korea, Malaysia, Cambodia, and Taiwan. All I needed was internet, and thank goodness internet was everywhere to be found. Over some scrumptious mangoes, I hosted our semi-annual board meeting in Kuala Lumpur, and got to discussing all the takeaways about running a business abroad.

Can Financial Samurai Be The Next Billion Dollar Financial Technology Company?

Financial Samurai LogoDo you know what’s fun and free? Dreaming BIG! As kids, we use to daydream all the time. I fantasized about being a professional tennis player who’d compete in tournaments around the world via a private jet until I realized I couldn’t even make it to All-State, just All-District. It was only until the age of 32 did I start dreaming again.

When Ariana Huffington sold The Huffington Post to AOL for $315 million in 2013, The Smoking Gun, and several other sites reported that Ariana only received $21 million, or ~6.6% from the sale. $21 million isn’t chump change, but that’s a far cry from the original sale price.

Meanwhile, Michael Arrington, founder of TechCrunch sold his site to AOL in 2010 for only $40 million (includes incentives). 2010 was a bad time to sell anything – stocks, real estate, businesses, you name it. But because he owned an estimated ~80% of the site, Mike walked away with around $32 million, or 50% more than Ariana even though TechCrunch sold for 85% less than HuffPo!

It’s amazing how two vastly different sales prices can result in two surprisingly different windfalls due to company ownership structures. It often takes an army of employees and capital to build something massive. I’m not looking for fame, but I’m starting to wonder whether it’s time to once again rekindle the dreams of great fortune.

Whether you know it or not, you the FS community, is instrumental in the continued content production here. I struggled for years not wanting to do anything but travel and play because years ago I finally found “enough.” But thanks to your continued support and encouragement, I’ve kept on going. People keep asking whether I will ever run out of material to write. The answer is always “never,” because there’s an endless amount of things to talk about. If you can speak forever, you can write forever.

A new adventure on Financial Samurai may begin by the end of 2015, and I’d love to get your input once more. I’ve been seriously thinking about this topic since the beginning of the year. In fact, I’ve been sitting on this post since January, going through things in my head.

Living In An Expensive City Can Make You Richer, Happier, And More Diplomatic

Chrysler Building, NYCWhen asked about career advice, I always recommend people just follow the money. New York City has all the financial firms. San Francisco has all the tech, internet, and venture capital money. While Washington DC and the surrounding suburbs have all of our tax money to spend on massive government contracts!

I’ve lived in all three areas for extended periods of time, and I’ve seen massive fortunes made in multiple ways. If you want to “get lucky,” then you might as well go where there’s opportunity. Because twiddling your thumbs in a dying town, complaining why you can’t get ahead doesn’t make sense when you live in a free country with no state border controls.

The biggest push back I get for my “follow the money” advice is that such places are just so damn expensive. It is absurd that the median rent in San Francisco is now around $4,000 a month. But the only reason why rent is $4,000 a month is because incomes are high enough to afford such levels! If there weren’t, rent would fall.

The market is efficient. Capital is fluid. Everything is rational. Only an idiot with an online business would NOT try and geo-arbitrage his way to a lower cost area of the world. Oh wait, that’s me. 

The Financial Benefits Of Joining The Military: Free Education, Great Retirement, And More!

Raising The Flag in Iwo Jima 1945

Raising The Flag in Iwo Jima 1945

The following is a terrific guest post from Spencer, a captain in the US Air Force, who gives a complete overview of the financial benefits of joining the military. Spencer has been publishing on Military Money Manual for the past three years, helping military folks achieve financial independence.

There are many different paths you can take in life. Blue collar, white collar, no collar – the jobs you do often reflect your upbringing. If you come from an affluent community or family, one path you might not have considered is joining the military. Military service has many rewards, some of which can be a free college education, an exciting non-standard job, travel opportunities, and the chance to do some amazing things around the world.

A college degree is a necessity to achieve substantial financial goals, unless you’re the next Mark Zuckerberg or Bill Gates. But college is getting more and more expensive every year, way outpacing inflation. Student loan debt only gets you a negative start on your journey to financial freedom. Alternatively, military service can enable you to get a free college degree, have a job lined up when you graduate, and make money while you go to school.

A Way To Level The Playing Field: Create A Wealth Identification System

dog-tag-hidden-war

Wealth Identification Program

A long time ago, one of my tenants who drove a Range Rover told me, “I need an extra day to pay rent in order to withdraw money from my trust fund. Can you wait?

I thought to myself, you knew today was move-in day when rent would be due, couldn’t you have planned ahead? This is not how a new tenant / landlord relationship should start.

OK, please send in your portion of the rent the following day,” I responded, trying to hide my annoyance. This was the first time anybody ever admitted to having a trust fund. Why was I taking the credit risk when his roommates could have covered for him? Did he really not have an extra couple thousand dollars in his bank to honor our agreement given he drives a $50,000+ car? Was he lying on the rental application when he said he has $20,000 – $30,000 in liquid savings? What the F is going on?

The next morning, his father’s assistant e-mailed me asking how she could deliver the rent for my tenant: Fed Ex or wire? Wow, talk about having everything done for you. At least I got paid by the Bank of Mom & Dad.

This little episode reminded me the world is never going to be fair. There will be people who work their asses off, say all the right things, and still won’t get ahead because they don’t have the finances or connections like the rich.

The rental situation for my place was highly competitive. Had I known my tardy tenant had a trust fund, perhaps I would have rented out the place to someone else who wanted the place just as much, but whose financials were all her own. In the past, I’ve rented an apartment out for way below market because the tenant was a middle school teacher. They get paid way too little for what they do.

As a way to help make the world more equal, I’d like to introduce The Trust Fund And Inheritance Identification Program.

Strengthen Your Brand By Registering Your Name Online

Strengthen your brand online by registering your name

Strengthen your brand!

Do you know what one of the first things an employer does before interviewing a prospective employee? They Google your name to learn all about you. If they happen to forget searching your name beforehand, if you’ve made a good impression, they’ll certainly search afterwards.

Sites like LinkedIn and Facebook flourish because people have decided to provide these sites massive amounts of content for free. Unlike Financial Samurai, where I’m the main creator of content. 

If you don’t have a LinkedIn account and are interested in employment opportunities, you best open one up ASAP. LinkedIn has become the defacto source for all employers today. You can look for jobs, login to various applications with your LinkedIn profile, and so forth.

A good resume is still standard to go along with any employment application. But I’m going to argue that in addition to a LinkedIn profile, you should also register your own domain name and create a dynamic site.