The Best Of Financial Samurai eBook: Invest In Your Future And Give Back!

The Best Of Financial Samurai eBookAfter six years of writing over 1,000 personal finance articles, I’ve compiled 35 of the best Financial Samurai articles into one eBook to help you achieve financial independence sooner, rather than later. Financial Samurai is one of the largest personal finance sites with roughly one million organic pageviews a month. I write from experience as someone who received his MBA from UC Berkeley, spent 13 years in the financial world as an Executive Director at a couple major investment banks, and retired from Corporate America at the age of 34 with a very healthy financial nut to focus on living life on my own terms.

For some reason, there is a dearth of personal finance education in our school system. Yet, what is more important than securing our financial future? The goal of the book is to empower you with the knowledge to make better financial decisions. I’ve learned from my money mistakes (e.g. 401k, job, real estate mistakes) to help you avoid the same land mines. Money can be intimidating, but it shouldn’t be so complicated as to cause paralysis.

For long-time readers, the book acts as a terrific reference guide to review some of the most important personal finance topics in one place. You can even purchase the book for a friend or loved one as a gift. For new readers, The Best Of Financial Samurai will teach you new financial concepts and new ways of thinking to solidify your financial future. Many of the articles have been featured in major publications such as The LA Times, Kiplinger, The Wall Street Journal, The Chicago Tribune, and more.

The Top 1% Net Worth Amounts By Age

Mega Mansion - What Is Considered Rich?

Tom and Gisele’s mansion

People like to throw around random net worth figures all the time when asked how much is considered rich or how much they would need to never work again. Often, the figures just sound nice, like saying “one meeeeleon dollars” without any mathematical justification.

This post puts some numbers behind ascertaining how much wealth one needs to be in the top 1%. Remember, having a large net worth is better than having a high income. The government goes after income more than it goes after wealth. For example, you can live in a $8 million mansion and get Universal Healthcare subsidies if you make less than ~$94,000 a year with a family of four.

So what do we know?

Based on my Top 1% Income Earners post, we know that in order to be in the top 1%, you’ve got to earn at least $380,000 in gross income a year. The data comes from the all-knowing IRS.

Based on my Net Worth For The Upper Middle Class post, we learn that the net worth range for the top 15% of all Americans between the ages of 45 – 74 is around $700,000 – $830,000.

Finally, I’ve shown numerous examples as to why earning roughly $200,000 – $250,000 gross a year per person and $300,000 a year per couple is the ideal income for maximum happiness. Being rich is sometimes a state of mind, and I’ll use these income figures in my analysis as well.

Given these data points, I’d like to construct two simple models to demonstrate what I think should be considered top 1% rich. All wealth and no income is not ideal. Similarly, all income and no wealth is not ideal either. There needs to be a balance.

The Average Net Worth By Age For The Upper Middle Class

Upper Middle Class LifestyleThe upper middle class, aka the mass affluent, are loosely defined as individuals with a net worth or investable assets between $100,000 to $2 million. Some also define upper middle class as those who are college educated with incomes in the top 15% – roughly $100,000 or greater for households or $63,000 or greater for individuals.

The upper middle class is different from the rich because there’s a good chance everybody can achieve mass affluent status if they work and save for a long enough period of time. The mass affluent didn’t inherit their money, they earned it through hard work. On the other hand, getting rich often takes a tremendous amount of luck.

Ranking The Best Passive Income Investments

Passive Income Streams Allows You To Be Free

In order to relax, you must first work very, very hard!

After about the 30th day in a row of working 12+ hour days and eating rubber chicken dinners at the free cafeteria down at 85 Broad Street, I decided I had enough. There was no way I could last for more than five years working in a pressure cooker environment like Wall Street. I became obsessed with generating passive income starting in 1999.

We’ve discussed how to get started building passive income for financial freedom in a previous post. Now I’d like to rank the various passive income streams based on risk, return, and feasibility. The rankings are somewhat subjective, but they are born from my own real life experiences attempting to generate multiple types of passive income sources over the past 16 years.

The passive income journey is a long one. But thanks to innovation and technology, the ability to generate meaningful passive income is accelerating!

How To Measure Fiscal Responsibility: Calculate Your FS-FR Score

FS-FR Score For Fiscal Responsibility

FS-FR Score Of 50

We’ve got the Financial Samurai Debt And Investment Ratio (FS-DAIR), which provides a logical framework for deciding how much to invest and how much debt to pay down every time you have some disposable income. The acronym smartly “dares” people to take action with their finances.

I now announce the Financial Samurai Fiscal Responsibility Score (FS-FR) for measuring each individual’s fiscal responsibility level in a fun and easy way. I expect some of you who have a low FS-FR Score will probably not be very happy with the concept and bash the crap out of it. But, that’s part of the fun!

Financial concepts are usually quite dull and hard to comprehend. As a result, they are never followed. But if you come up with something simple like the 1/10th Rule For Car Buying, it might just catch on and save thousands of people from spending more than they should on a depreciating asset.

Before publishing this post, I researched the internet and found nothing similar to the FS-FR Score. Therefore, I’m pleased to report that once again, a new concept is born that may revolutionize our finances! 

How To Make Six Figures A Year And Still Not Feel Rich – $200,000 Income Edition

Luxury home on the water

Earning Six Figures Is Not Enough To Buy This Home

One of the great things about America is freedom. Tired of feeling like death living in Chicago or Boston during the winter? Why hello San Diego, Miami, and Honolulu! Not feeling there are enough job opportunities for advancement in Detroit? Then come on down to New York City! Tired of eating healthy food in San Francisco that costs an arm and a leg? No city can beat the wonderful soul food of New Orleans.

Geo-arbitrage is a term where one can earn and save money in one place and move to a cheaper location to maximize their money. I highly recommend it. If you happen to own an internet business, then your ability to geo-arbitrage is greatest. I’ve often thought about just relocating to Thailand for several months at a time given friends say they live extremely well off $2,000 a month for two. Given one of my goals is to take 100 hours of intensive Mandarin lessons, I may very well be writing to you from some lower cost country in the future.

75% of the audience comes to Financial Samurai through a search engine like Google. They have a financial problem they are trying to solve. This is huge because it takes initiative to come to grips with one’s finances. But what I’ve noticed over time is that besides the middle class getting pissed off about the widening wealth gap, upper-income earners are also feeling some angst as well.

Over 50% of singles readers and 74% of household readers make over $100,000 a year based on my Financial Samurai income poll. As a result, I’d like to delve into analyzing how a “typical” $200,000 a year household spends their income. A six figure salary can range from $100,000 to $999,999, so I figure I’d start on the low end for two people. $200,000 is a comfortable household income, but I don’t think it can qualify as rich.

Should I Buy Bonds? Wealthy People Don’t

Stocks and James Bond 007 by Marc Tavenier

Stocks and James Bond

Wealthier people in America do not follow the conventional asset allocation model of buying bonds, i.e. age equals your bond percentage allocation or a 60/40 equities/fixed income split. How do I know this? Personal Capital has over 800,000 users of their free financial dashboard to help manage your money and I’m a consultant who is privy to some of their data to share with all of you. Data geeks, rejoice!

Out of 800,000+ Personal Capital financial dashboard users, roughly 165,000 of them have linked investable assets of between $100,000 to $2 million. We call this the mass affluent class, or upper middle class if you’re so inclined. The mass affluent are generally regular folks with mainly W2 income. They save and invest in order to provide for their family, pay for expensive tuition bills, take a couple nice vacations a year, and hopefully achieve a comfortable retirement when all is said and done.

Let’s do a quick review of my proposed stocks and bonds asset allocation model before moving on to the big data.