$180,000 by age 30, $500,000 by age 40, $1 million by age 50, and $2 million by age 60. These are the rough estimates for what I think everybody needs to have in their 401Ks to have a reasonable attempt at a comfortable retirement. If you read the comments from my “401K amount by age” article, you will notice that those in their mid-30s and below tend to disagree with these amounts, while those older generally agree, verify, and accept.

I don’t know why younger folks aren’t willing to follow along. It’s often times just rebel and justify why they aren’t saving.  ”Live life!“, they say.  True, but who says you can’t live life while saving?  The easiest way to learn, is to listen to an older person who has gone through what you will go through. Perhaps it’s immaturity, or the way things are where every generation needs to question the next generation and the status quo.

There’s really no mystery to money. The more you have, the more you can make.  It’s all about building the NUT large enough so that when you make a fortuitous 10% return, you’re pulling in an extra $50,000-$100,000 on your $500,000-$1 million portfolio.  Saying you doubled your returns from $10,000 to $20,000 due to contributions is fine, but it’s really chump change and misleading.  Build the nut, so that you can have real returns.

If you aren’t on retirement track based on my 401k age chart and disagree with my figures, just do the math YOURSELF and see whether you’ve saved enough to retire on. I don’t think you’re going to like the results.

There’s one question that kept coming up over and over again, and that’s, “How can I save so much, if I don’t make so much?” It’s a fair question that needs addressing. One commenter mentioned my table must be of “California Currency”, which made me chuckle. The problem of not making enough and therefore not being able to save enough is an honest problem which I’d like to address via a change in mindset and a chart.

HOW TO SAVE FOR RETIREMENT IF YOU DON’T MAKE MUCH

* If you don’t find it painful saving money, you’re not saving enough. If you’re not sweating at the gym and your muscles don’t feel sore the next day, you might as well go eat a double cheeseburger with a milkshake and fries because you’re just wasting your time. The same goes with saving. Since you’re in the lower income bracket, savings is not supposed to be easy. If you’re not feeling the disposable income pinch of putting away, 20%, 25%, 35%, 50% of your income into your 401K, IRA, or savings account, you simply are not saving enough. You need to feel the pain, so you are forced to change your spending habits.

* Recognize that you are not rich. For whatever reason, you do not make a lot of money. It could be by choice (messed up in school, less lucrative field) or misfortune (laid off, accident, starting over). Once you recognize you are of lower income, you’ve got to come to grips with the fact that retirement is not going to be filled with milk and cookies.  Think tasty water and crackers instead.  You’re going to be working longer and harder than others. You’ve got to save more than your wealthier friends simply because you have less.  If you only make $50,000 a year, what on earth are you doing driving a $25,000 car? That’s 50% of your gross income, and around 65% of your net income! If you guys only earn a combined $70,000 a year and have a child, what are you doing living in a 3 bedroom apartment that costs $2,500+ a month? Downsize to a two bedroom apartment and save the difference. A family of four in Tokyo live in 600 square foot, 2 bedroom apartments!  Don’t act rich, because you are not.

* Do the math. One commenter asked how he can put away $17,000 a year in his 401K and then another $5,000 in his traditional IRA if he “only” makes $70,000 a year. I told him to do the math. He did the math, and he did it all wrong!  This is what he calculated:

70k – 17k (401K) = 53k —> Fine. 
53k * 0.4 (taxes)= 31.8k —> 40% tax rate on a $53,000 income?
31.8k * 0.2 (after tax) =25.4k —> What’s this extra 20% tax?
25.4k-5k (Roth) = 20.4k —> Why contribute to a Roth after tax, when you can contribute to a traditional IRA pre-tax?
20.4k/12 = 1.7k per month. —-> Wrong.  Should be around $35,500 net = $2,960/month, 74% more than what is stated.

The effective tax rate on a $53,000 income is around 17%.  Add on 9% state tax, and at most he’s around 26%.  His Roth deduction is fine, if he doesn’t want to contribute $5,000 in a traditional pre-tax.  However, I always recommend paying less taxes than more.  I am shocked how little people understand what their effective tax rates are, and the difference between pre-tax and post-tax contribution. Do the math people. You have more than you think!

* The new normal is a lower rate of return.  Anybody telling you to input more than a 5% constant rate of return on your investments is being too aggressive.  The days of 8%+ portfolio returns are gone in an environment of 2% long-term treasury yields.  There is an inextricable link to fixed income and equities, and baking in more than a 2.5X return over the risk-free rate is a stretch.  We can increase our assumptions once we see an uptick in inflation, corporate earnings, and risk appetite, but not now.

* Realize that making more money is a choice, especially if you live in a developed country.  According to one researcher, it only takes around $34,000 to be in the top 1% of world income earners. Meanwhile, $33,000 so happens to be the middle line between the top 50% and bottom 50% of US income earners. You have a choice to work more than 40 hours a week to get ahead. You have a choice to have as many or as little kids as you wish. You have a choice to start a business and make extra income on the side. You have a choice to get in before everyone and leave last, while proposing new profitable ideas for your company.  You don’t have to be a top income earner, you just have to make enough to be happy and save.  We live in a free country, not North Korea.

* Vote for Obama.  With a ~$2 trillion dollar deficit generated under the Obama administration, the incumbent is your best bet for ensuring that social welfare programs, unemployment insurance, affordable healthcare, and low taxes continue for the middle class.  By raising taxes on “the rich”, the Obama administration is effectively redistributing wealth to lower income individuals through government programs.  Republicans are more focused on cutting spending to balance the budget, and not raising taxes given our system already has a progressive structure already.  Both systems have its merits and flaws, but if you are making under $200,000 and your retirement accounts are light, from a financial point of view, you’re better off voting Democrat at the margin.

A SYSTEM TO GRADUALLY INCREASE YOUR SAVINGS

Now that you’ve changed your mental outlook, here’s a proposed savings chart I developed to slowly turn the screws so that you get to your retirement goals.  Here are some following assumptions:

FINANCIAL SAMURAI RECOMMENDED SAVINGS RATE CHART

Assumptions for the chart:

* No matter what your income level, you are saving some money.  Develop the savings habit early and always.

* As your income level increases, so does your savings percentage rate.  Challenge yourself to save more as you make more.

* It’s important to keep your rate of spending slower than your income and savings growth.  Don’t let lifestyle inflation derail your plans.

* After you have maxed out your 401K at $17,000, the after-tax savings is simply the difference in your income X savings rate – $17,000. The after-tax savings amount is higher than reality, because you have to pay taxes on the gross income. Hence, multiply your after-tax savings by your Federal + State marginal income tax rate to get your true after-tax savings amount.

* At around $65,000-$85,000, I am assuming you should be able to maximize your 401K contribution, and save more money. In other words, try and target $65,000-$85,000 in annual income as soon as possible.

* I stop at a 35% savings rate to allow one to enjoy their income.  Furthermore, at a 35% savings rate at $100,000-$200,000, you will have more than $5,000,000 in retirement savings if you consistently save for 43 years assuming a 5% constant rate of return.

* If you can save more than 35% of your gross income, go for it! After you earn $200,000, you should gradually aim to save 40-50% of your after tax income.  We stop at $200,000, because this is the level President Obama deems rich, although plenty of people who make more have difficulty saving a well.

FINANCIAL SAMURAI 401K RETIREMENT SAVINGS GUIDELINE RECAP

CONCLUSION

The good thing about not making much money, is that you are used to living on not much money, and therefore you don’t need much money to retire on!  With the above assumptions and chart, I hope I’ve provided a guide for those who have wondered how they can save so much if they don’t earn much at all.  Savings should be an automatic way of life.  Always save money before you pay yourself.  That way, you will always operate in the confines of your disposable income.

Another good thing about retirement is that when you are retired, you do not have to save for retirement.  That 5-35% savings rate I discuss in my charts disappears, making you suddenly that much richer.  Meanwhile, you’ve hopefully paid off all your debts, and can live in your home mortgage-free for the rest of your life.  But, even if you still have a mortgage, or are renter, with the above system, you should still have enough money to support you until the end.

Please try not to make excuses for why you cannot save even just 5-10% of your pre-tax income in your 401K.  I lived in super expensive Manhattan on $40,000 a year and managed to put away $15,000 into my 401K.  $40,000 in Manhattan is like $35,000 in San Francisco, and only $25,000 in the MidWest.  You just have to make a choice whether you want to build a safety net for your retirement or not.  Hopefully you will continue to make more money the longer you work, making saving more money easier and easier.  You’ll wake up 10 years from now and amaze at how much money you’ve managed to accumulate.

It’s really up to you.  See you at the beach!

Readers, do you think my savings chart is reasonable?  What percentage of your income are you saving?  

Photo: Oahu Sunset, 2010. Sam.

Regards,

Sam

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The 401K is one of the most woefully light retirement instruments ever invented.  The worst is the pathetic IRA which limits you to only $5,000 if you make under $58,000 a year for a traditional IRA to completely participate.  Meanwhile, you have to make less than $110,000 a year for the privilege of contributing after tax dollars in a a Roth IRA.

Give me a pension that pays 80% of my last year’s salary for the rest of my life over a 401K any time!  With the government only allowing individuals to contribute $17,000 a year in pre-tax income into their 401Ks in 2012, once again, our politicians fail us with their regulations.

You know from a previous post that the average 401K balance is around $70,000-$80,000, which is incredibly low given the median age of an American is 36.5.

As an educated reader who is logical and believes saving for retirement is a must, I’ve proposed a table that shows how much each person should have saved in their 401Ks at age 25, 30, 35, 40, 45, 50, 55, 60, and 65.  We stop at 65 because you are allowed to start withdrawing penalty free from your 401K at age 59 1/2.  Meanwhile, I pray to goodness you don’t have to work much past 65 because you’ve had 40 years to save and investment already!

HOW MUCH YOU SHOULD HAVE IN YOUR 401K AT DIFFERENT AGES

The assumptions for the below chart are as follows:

* For the first fully year out of school, you only contribute $8,000 to your 401K.

* After the first year, one maximizes their contribution every year to their 401K plan without failure.  We already agree that $17,000 a year in contribution is much too little, therefore contributing less is illogical.

* Average starting working age is 22.  But you can follow the number of years working as a different guideline if you graduate later or earlier.

* $17,000 is used as the conservative base case maximum contribution amount for one’s entire working life.  Hopefully the government will increase the max contribution amount over time.

* No after tax income contribution, although more power to you if you have the disposable income to do so.

* The low end column assumes $17,000 X the number of years worked.

* The higher end column will assume $17,000 X the number of years worked X a 5% constant rate of return which is aggressive in this environment.

* Excludes any company match or profit sharing completely.  The idea is that by excluding company match and profit sharing, that will more or less make up for the years in which one loses money in the stock or bond market.  Furthermore, each company’s 401k match program is different.

* The Lower and Higher Amounts encapsulate at least 60% of all 401K levels for those who contribute the maximum amounts.  There will be those with less, and those which much, MUCH greater balances thanks to higher returns.

* You are logical and not a knucklehead.  Just by searching this topic, you are taking ownership of your retirement and are thinking ahead with an action plan.

FINANCIAL SAMURAI 401K RETIREMENT SAVINGS GUIDELINE

From the results, we can conclude that even after 43 years of consistent saving, you only have around $723,000 to $2,618000 in your 401K.  Let’s say you live for 20 years after retirement, you only get to live on $36,000 – $131,000.  If goodness forbid you live to age 95, then you can only live off of $24,000 – $87,000 a year!

We know from simple economics that thanks to inflation, a dollar today will not go as far as a dollar 40 years from now.  Private school tuition will probably cost over $100,000 a year in 20 years, so who knows what medical, food, shelter and energy costs will cost then.  One thing is for sure, prices will be much higher.

To play around with various compound growth and contribution assumptions, you can use this compound interest calculator.

TRUST NOBODY BUT YOURSELF

Contribute the maximum pre-tax income you can to your 401K for as long as you work.  This is the absolute MINIMUM you can do to help ensure a comfortable retirement.  After you have contributed a maximum to your 401K every year, contribute at least 20% of your after tax income after 401K contribution to your savings or retirement portfolio accounts.  That way, you will have potentially DOUBLE the amount in total retirement saving if your household income is $100,000 or more.  If your household income is closer to $50,000, you should still see a nice 30% boost to your retirement savings if you consistently save 20% of your after tax income.

Treat your 401K just like Social Security and write it off completely from your mind.  Do not expect either accounts to be there for you when you retire, just like how you should never expect the government to ever help you when you’re in need.  Just imagine 30 years from now, the government deciding to raise penalty free 401K withdrawal to age 80 from 59.5?  Unfortunately, you need the money at age 60, and because you withdraw, the government imposes a 30% penalty on top of the taxes you have to pay.  Don’t think it can’t happen.  Expect it to happen!

The only thing you can count on is after tax money you’ve invested or saved.  Consider raising your real savings percent after 401K contribution to 50% as soon as comfortably possible.  The easiest thing to do is make 401K maximum contribution automatic, and save every other paycheck for the rest of your working life.  Once you maximize your 401K and save over 50% of your after-tax income for at least 10 years in a row, you will be financially free to do whatever you want!

Readers, care to share your thoughts on your age and how much you have in your 401K?  If not, do you agree with the estimates above based on age or years of experience?  What are some of the things you notice from the chart?

If you want to blast holes at the Ideal 401K Chart, ask yourself why you are blasting holes.  Could it be that you are actually just making excuses for your own lack of saving discipline?

How much of your after-tax, after 401K/IRA contribution are you saving?

Note: For those who think this type of savings is hard, Grace Goldoni saved $300,000 by 18.  And for those of you who think I believe in just hoarding cash, I don’t.  There’s no point making money if you don’t spend your money!

Follow Up: For those asking “How Do I Save So Much For Retirement, If I Don’t Make Much?“, I’ve written a 1,500+ word post on how to get there, with a chart guideline as well.

Photo: Occupy SF Tent, by Sam.  Might be your home if you don’t max out your 401K and save more.

Regards,

Sam

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Feel like losing weight?  What a surprise, me too!  Like every other knucklehead, I went to workout on New Year’s day to lose some weight I gained during the holidays.  I got a sweaty two hour tennis match in and then hit again with my buddy for another 1.5 hours the very next day.  I’m not delusional to think that after two days I would lose any amount of weight, but I stubbornly got on the scale before and after anyway.

Hoping to see a loss of a at least a pound due to less water weight, the damn scale betrayed me.  In two days, I had gained 5 pounds from 164 lbs to 169 lbs!  How the hell does someone gain 3% more body weight in just 48 hours.  I didn’t gorge myself during this period, so I’m at a loss for words.  I could blame the flashing “battery” signal on the scale, but that’s just an excuse.  I suck.

At slightly over 5 feet 10 inches tall, 169 lbs is a lot to carry on the tennis court.  Allen Iverson of the 76ers was my height (listed as 6 feet), but could easily dunk and weighed only 155 pounds for example.  Ever since that trip to India 11 years ago, my weight hasn’t fluctuated more than 4-7 pounds (162-169lbs).  But, now I’m dangerously close to breaking this 11 year record with all the crap I’ve been eating.  I feel guilty because in high school, I was a trim 150-155 lbs.  I also feel guilty because I’m disrespecting the poverty I witnessed in India and all around me.

I don’t accept mediocrity in my work, so why the hell do I accept being overweight and mediocre in my health?  Makes no sense at all.

MAN ON A MISSION

I don’t want to be another big blogger.  My field has a disproportionate amount of folks who can’t run 3 consecutive miles even if an angry three-legged bear was roaring after them.  As a result, I am swearing to myself and to all of you today that I will get in ideal shape in 2012.

So what is the ideal body weight for someone of my height with a mid-sized frame?  There are numerous amounts of calculators which determine what you should weigh.  Based on an average of four sites I checked out (healthstatus.com, halls.md, healthcentral.com, healthdiscovery.net), Healthdiscovery.net’s estimates look to be the most accurate and reasonable.  One site had a lower range of 129 lbs as a healthy weight for someone my height.  Maybe the starvation look is in?

As you can tell from the chart, at 169 lbs I’m about 6-18 lbs overweight for my medium size frame.  I’d like to think that because I have large quads due to tennis, I’m not that much overweight.  However, that’s just another stupid excuse!  It annoys me that for 11 years I thought that weighing 162-169 was a good weight.

After checking out all these sites, I now realize I’m just wrong and my doctor lied to me when he said I’m fine.  15% body fat is double where I was 20 years ago and is also at the high-end of the 8%-18% “acceptable” range.  Don’t coddle me like a western parent, doc!  I can handle the truth.

IDEAL BODY WEIGHT FOR MEN

IDEAL BODY WEIGHT FOR WOMEN

Definition of medium-frame: Your middle finger and thumb just touch when you hold your wrist.  You are large-framed if your fingers do not touch.  You are small-framed if your fingers overlap.

MY GOAL AND HOW I’M GOING TO GET THERE

From today forward, my mission for 2012 is to get under 160 lbs and be firmly in the band of “ideal weight”.  I was ideal weight in high school, and almost 20 years later, I plan to be back there again.  For 11 years, I’ve been complacent in staying the same weight.  Well I am stupid and lazy for being so complacent.

Why the hell should I be proud of staying overweight for the past 11 years?  That is not an accomplishment at all!  That’s 11 years of mediocrity!  I haven’t pushed myself, except for being mindful of the starvation of others.  I need to do better and here’s how:

* For every two hours I spend online writing, I will spend 30 minutes exercising.  So long as I keep this 4:1 mental-to-physical ratio, I will at least not blow out.  I regularly am online 20 hours a week, therefore I will exercise 5 hours a week.  Simple as apple pie with vanilla ice cream on top.

* I will do 60 push-ups and 150 sit-ups for every basketball and football game I watch.  Watching sports is the worst for an athlete, because it’s a double negative.  Instead of playing sports ourselves, we’re rotting away our bodies and our minds.  It’s bad that I’m a college sports fanatic.

* I will eat more slowly to give my body time to know that I have eaten.  It takes 15-20 minutes for the body to know one is full.  Hence, that 15-20 minutes is a crucial period where one can overeat and gain a lot of weight.  The solution is to eat slowly and be mindful of everything I put in my mouth.

* I will eat vegetarian 40% of the time.  The system will either be 2 out of 5 meals a day vegetarian, or eat vegetarian 3 days a week.    With this mindset, I hope to then average 40% of the time eating vegetarian and more raw foods.  Eating vegetarian feels great, is good for digestion, and could very well be cheaper.  I will also consciously reduce dairy and sugar from my diet.

* I will stop gorging myself when I go out with clients for lunch and dinner!  When things are “free”, it’s easy to order the most expensive and highest caloric item on the menu!  This is partly why you don’t want to pay more taxes to the government, because they will spend your money unwisely.  Instead of thinking about the most delicious thing on the menu, I’ll consider the most delicious and healthiest items.  Perhaps items such as beet salad, mussels in white wine sauce, skinless chicken breasts, lamb chops instead of massive prime ribs, and so forth.

* I will play tennis 3 times a week on average for 2 hours each session.  This is automatic, as I’ve had this routine for 3 years.  I would play more, but I injured my elbow and shoulder.  Hence, a solution is to fix my injury so I can play 4 times a week.

NO MORE FOOLING

I used to tell myself that I have more muscles now.  Bullshit.  I used to blame a slower metabolism on being heavier than normal.  Another lame excuse.  I used to tell myself that I’m healthier now.  Do do brown.  I am no longer delusional and am saying NO to weight creep.

157 pounds by 12/1/12 here I come.  That’s 11-12 pounds and roughly 7% of my current body weight I plan to lose this year.  The ideal body weight pisses me off because it’s so low.  In actuality, I’m just pissed off at myself for letting myself go.  Being overweight puts a burden on society, who ultimately pays for my extra health care costs through longer wait times and more expensive premiums.  But then again, maybe I will die earlier since I’m less healthy, thereby paying less in medical bills!  Optimist for life!

Who’s with me in no longer making excuses and getting down to the middle of the ideal body weight for 2012?

Readers, how is your current body weight vs the ideal body weight in the charts above?  If you were ever overweight and got down to the middle of the ideal weight, what did you do, and what was the trigger which pissed you off enough to get there?  Any other tips you have for losing weight that can be easily implemented? 

If you are a 25 year old fit young buck, I don’t want to hear from you.  Come back to me in 10 years.

Photo: Me at 167.8 lbs after finishing up this post and eating lunch after tennis.  Lost 1.2 lbs, thanks to ferocious finger exercises, go figure!  But of course, am 170 lbs after coming home last night.  Stupid scale.

For more health & fitness articles click the link.  I’ve got a ton.

Regards,

Sam

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Americans are rich by world standards.  With an average per capita income of ~$47,500, America ranks in the Top 10 in the world.  The other nine include Qatar ($88,300), Luxembourg ($80,000), Singapore ($57,230), Norway ($52,230), Brunei (~$47,500), Hong Kong ($45,000), Switzerland ($41,800), Netherlands ($40,800), Australia ($39,632), and Austria ($39,100).  The data comes from the IMF (2010), and the World Bank and CIA World Factbook collect and corroborate similar data.

If at birth, you had the mental capacity to choose where you’d like to live for most of your life, one of these 10 countries should be on your list.  Even if you end up being the most mediocre income producer, you are still miles ahead of much of the world.  Too bad many of us can’t pick and choose where we want to grow up and earn a living.  As such, it’s nice to understand how we compare against the rest of the world to give us some perspective.  However, the wages of the rest of the world don’t impact us significantly, unless we are solely focused on trade and competitive advantage.

What we should be curious about is how we stack up against the rest of our countries’ citizens.  If everybody earns $1 million a year, being a millionaire isn’t very special anymore.  Everything is relative.  Let’s learn about each others’ incomes shall we?

WHAT THE TOP 1%, 5%, 10%, 25% and 50% MAKE IN AMERICA

Based on the Internal Revenue Service’s 2010 database below, here’s how much the top Americans make:

Top 1%: $380,354

Top 5%: $159,619

Top 10%: $113,799

Top 25%: $67,280

Top 50%: >$33,048

SUMMARY OF FEDERAL INDIVIDUAL INCOME TAX DATA, 2010

Based on a previous 500+ survey study on Financial Samurai in 2009, about 80% of readers are in the Top 25%.  Good to know that many of you are doing well.  The table also tells us a number of things about equality or inequality, namely that the Top 1% of tax payers pay 38% of all income taxes.  You can also see that the Top 50% of tax payers pay practically all of the nation’s federal taxes (97.30%), which once again shows that roughly 47% of American income earners pay zero federal taxes.

If you do another little exercise and compare your Top 25% of American income to the Top 10 per capita income countries in the world, you can once again see further how lucky most of us are. If only we can get all American wage earns to pay some taxes, it would go a long way to help shoring up our budget.  Congress bickered over cutting $40 billion to $60 billion a year.  All we have to do is make the bottom 50% who pay no taxes pay just $43 a month in taxes and we’d raise $60 billion a year right there!  Let’s have everyone contribute to the welfare of our country. 

NO REASON TO EVER COMPLAIN

If you work in America, you can see from a top down and bottoms up perspective you’re doing fantastic.  If you are in the bottom 50% of Americans who earn less than $33,048 a year, know that you can earn more if you want to.  Half the battle is just moving to a vibrant location such as the San Francisco Bay Area where billions of dollars are flowing in due to the Social Media craze.

I remember making $550 a month just working at McDonald’s for $3.50/hour, 20 years ago. With wages 3X higher now, I’d be raking in a nice $$1,650 a month or $20,000 a year!  Tack on another side job that pays $1,200 a month and I’m in the Top 50%.  If you are only working 40 hours a week or less and are complaining why you can’t get ahead, you need to seriously re-evaluate your work ethic and expectations.  Anybody can do it, you just can’t be delusional enough to think that you’ll be able to compete working 40 hours a week, when everybody in the world who wants to get ahead is working 60+ hours a week!

Back to my point where if everybody earns a million dollars a year, nobody is rich.  Living in San Francisco, it really feels like most are in the top 5% of income earners ($159,619), if not top 1% ($380,354).  I’m sure many who live and work in Manhattan, and potentially LA and Chicago feel the same way.  The cost of living is expensive out here, and that’s predominantly driven by high wages.  Combine two income earners with these amounts, and you can really start understanding why surpassing what the government deems as wealthy ($200,000) is so easy.

THE RICH WILL ALWAYS PAY MORE THAN THEIR FAIR SHARE

As the economy continues to recover, it’s likely that the top 1% of income earners will likely pay an even higher percentage share of overall income taxes than 38%.  If things were fair, they would only have to pay 20% of total income taxes since 20% is their share of total income.  Alas, the rich pay almost double what they owe.

On the flip side, the bottom 50% who earn 12.75% of total earnings only pays a paltry 2.7% in total taxes.  Inequality is wrong and we should treat everybody equally.  The government should try to fix the imbalance by increasing the breadth of working Americans who pay taxes to 100% so that everybody pitches in.  If all working Americans in the bottom 50% paid taxes, the 10% gap in what they should be paying should narrow.

It doesn’t makes sense if you are in the bottom 50% who isn’t paying their fair share of taxes to go after the top 50%, let alone the top 1% who are paying way more than their share of income.  Trying to squeeze people even more when you’re not paying any taxes, or paying very little is a throwback to tyranny.

Always fight for equality.  It will set us free!

Readers, after looking at these statistics, what jumps out most at you?  Do you feel more lucky or less lucky to be an American and make what you do?  Do you think you’ll ever be able to move into the Top 5% or Top 1% of income earners in America?

For a counter argument to this article, please read “Socialism As A Means To A Brighter Future” where I discuss how we were all socialists once, and will be socialists again.  In bad times, Socialism really could be the better way to go.  You decide!

If you want to become a top income earner, you must SAVE.  Here’s my savings guide based on various income levels which will get you to millions.  ”How To Save More For Retirement If You Don’t Make Much“.

Finally, if you are still against the rich and top 1%, please read, “Who Are The Top 1% Income Earners?”.  You might just change your mind about how you feel since they are the ones who make you laugh, give you courage, and heal your wounds.

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Photo: President Obama and His Dog, Public Domain.

Best,

Sam

“Slicing Through Money’s Mysteries” – The Yakezie Personal Finance Network

Yesterday was one of those perfect gastronomic days.  For breakfast, there was all you can eat fruit and pastries.  For lunch, some deliciously “low calorie” Greek baked spaghetti with garlic bread you see to the left.  To top off the evening, a bone-in filet mignon, with baked potato with the works, blue cheese wedge salad, and a couple glasses of pinot noir from Napa Valley.

All told, I probably consumed some 5,500 calories worth of food!  I didn’t feel incredibly sick to my stomach (OK, maybe a little bit!) because I made sure I played an hour and a half of tennis before dinner.  It was actually a wonderful experience since I normally eat half as much.  When I was in the cab ride home, I had an epiphany.

Perhaps the reason why there are so many large folks in America is because people purposefully gorge themselves in order to lose weight!  Eating great food is such a wonderful pleasure that it’s irrational not to.  It trumps any negative feels about packing on weight otherwise we wouldn’t let ourselves go.  Furthermore, the reason why there are so many people in debt is because it’s just so rocking fun to spend money you don’t have!  Finally, it feels great once you pay back that debt!  Double pleasure going both ways is why there is such a correlation.

GAINING WEIGHT IS THE PERFECT SOLUTION

Let’s say you are mildly obese at 5 feet 11 inches and 230 lbs.  You enter into a weight loss competition with your fellow 5 foot 11 inch pal who is also slightly overweight, but weighs in at 180 lbs instead.  Back in college, both of you were lean 160 pound fighting machines.

The goal is to lose 10% of your body weights in 3 months i.e. 23lbs for contestant #1 and 18lbs for contestant #2.  Going from 230lbs to 207lbs is clearly MUCH easier than going from 180lbs to 161lbs.  Yet, 10% is 10% and contestant #1 is calling contestant #2 a chicken for trying to bend the rules.

Hence, if I were a betting man, I’d bet on the contestant #1 (230 lbs) all day long!  The mildly obese person not only will have an easier time losing weight, he’ll get to brag to his opponent and all his friends that he lost a whopping 23 pounds!  He’ll gain a renewed sense of self esteem even though at 207 pounds, he’s still a little hefty.

Meanwhile, the 2nd contestant, despite getting down to the 160-170 level is a loser even though he looks fitter than contestant #1 at 200-210.  The next time there is a weight loss competition, you bet your big buns that contestant #2 is going to gain a massive amount of weight so he can win!

THE BIG DOWNER

Here’s the real kick in the nuts for the contestant #2.  Not only does he lose the weight loss challenge, he also misses out on all those years he could have gorged himself on tasty food!  Eating is such a wonderful experience as I was kindly reminded of last week.  To be able to eat to your heart’s content is a luxury unlike no other.

Contestant #1 was able to overindulge for years after college and gain 70 pounds.  He enjoyed all of his meals, never felt guilty enough to do anything, and seldom ever had to work out.  Now, contestant #1 can also capture the glory of losing weight, because it’s so much easier to do so when you are so much heavier.

IT ALL COMES TOGETHER WITH DEBT REDUCTION

You may be wondering what this weight loss shenanigan has to do with personal finance and I’ll tell you.  The parallels to gaining weight to lose weight is the exact same reason why people go into debt to get out of debt! Think about it for a bit.

How awesome is it to spend all this money which isn’t yours to go on vacations, drive fancy cars, and have fine things?  You’ll spend years enjoying the good life with other people’s money until your natural instincts kick in that you perhaps need to stop.  It’s exactly why most people don’t keep gaining weight forever.

The day you decide that living the high life is over, you challenge yourself to get out of debt.  You start a journal, a blog, a budget.  Whatever it is, you start something that will get you out of debt.  The more in debt you are, the greater the feeling once you finally do get out of debt. You are rewarded both ways for irresponsible financial habits and as a result, you may very well gain some weight and get into debt again!

Readers, do you think people gain weight to lose weight?  Do you think people go in debt to get out of debt?

It’s a wonderful experience going both ways.  People wouldn’t do it otherwise! Pizza.  Yum!

Note: Please read, “A Weight Loss Tip To Die For“.  If you are able to digest this message, you will probably never over eat and let yourself go again.

Regards,

Sam

Sometimes I feel like a genius.  Sometimes I feel like a financial dumb ass.  Today is not one of those days of stupidity.  It hit me during bath time the other evening that the secret to early retirement isn’t spending less than you earn, saving at least 30%+ of your after tax income, buying only what you need and living a frugal lifestyle.  Nope.  That’s just status quo where one should be living that lifestyle anyway.

What I discovered is so much deeper, and so much more powerful than anything ANY of us personal finance “gurus” have discussed.  The secret to early retirement and leisurely living is so amazing that I don’t know if I should even share with you guys since I could probably write a book, do a video, and make tons of money in the process.

Alas, I’m a nice guy, and am down with helping my fellow brothers and sisters get ahead so I’ll share with you the secret.  There aren’t any gimmicks, just the straight up truth.  Before you click the “read more” button, see if you can guess what exactly it is I’m talking about.  Think long and hard.  Now that you have, know that you could have just clicked “read more” anyway because you’ll never figure it out!

THE SECRET TO GREAT RICHES AND KICKING BACK

The secret to early retirement is having a working spouse!  It’s as plain as day!  Anybody who tells you they retired at an early age has that strong working man or woman by their side.  Don’t believe me?  Read around and inquire.

It’s so funny that I never thought about this light bulb moment before.  I’ve been so busy working to accumulate my nut that I lost site of the fact that all I need is a spouse to continue working, put me on her health insurance plan, provide shared income and voila!  I can retire by 40 without even trying!  What’s also equally important is that your working spouse gives you the confidence to retire early since she or he is your safety net.

The problem with this type of thinking for a man is that more times than not, your spouse is going to think you are a lazy dirt bag for not earning a steady paycheck every month.  Women will be able to sense if a guy has no ambition, which would probably mean she won’t be with you in the first place!

Guys have it tough.  Remember the post, “How To Get Your Super Motivated Boyfriend To Marry You“?  Well, the whole concept of that article was to inform the ladies that you can’t rush a man until he achieves his financial and career goals.  Guys are highly pressured by society to do something and be somebody.  When a guy doesn’t live up to his potential, life can get tough!

I’m not saying that society doesn’t put pressures on a woman to create something amazing as well.  I’m just saying how many guys can find women who are happy to just have them stay at home all day while she works?  Not many!  The best case, and frankly the only case scenario I think about is that when one retires early, so will the other to go explore the world together.  There is simply no other way around it.

CONCLUSION

Life is so much better being with someone you love.  Life is even better being with someone you love who works and lets you do nothing all day long!  So for all you single folks out there who wish to retire early, think long and hard before settling down with someone.  Ask yourself whether he or she will be unperturbed by your desire to kick back and live the good life while they work.  If the answer is better than 50%, lock it down and don’t look back!

Readers, do you agree that the secret to early retirement is to simply find a spouse to take care of you?  What about “The Dark Side of Early Retirement“?

Is it “cheating” if you proclaim you are retired, but have a working spouse who pays the insurance and provides for the majority of expenses?

Why hasn’t anybody come up with this concept yet, or have they?

Photo: The Rays Of A Child, Sam.

Regards,

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

It’s apparently very common to live at home with mom and dad after college.  Some statistics have the figure at 80% of newly grads move back home.  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 feeling of guilt 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?  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

1) Declare That You Own The Place. That’s right, say it with me now, “I own this joint babay!“  It’s likely that your parents have a much nicer house than you could ever afford on your own. Tell the girl YOU bought the place, and mention you are taking care of your parents in their advanced age.  A grandma is even better.  Girls will go crazy for your sensitivity!  Schwing!

2) Good Old Home Cooking. Ask your mom or dad to make your favorite meatloaf when you invite your girly friend over.  Since you can’t find a place to live on your own, it’s doubtful that you can cook for yourself either.  Make sure your parents cook the meatloaf right, or else send it back!  Say, “Momma, I want this meatloaf medium rare gosh diggidy!  Try again and bring me some side of peas!” Girls say a way to a man’s heart is through his stomach.  The reality is, the way to a woman’s heart is also through her stomach, so feed her well!

3) Free Laundry Baby. When your girl stays over while you’re sporting your favorite Star Trek PJs, tell her to not worry about her laundry.  You’re going to ask your mom to hook you guys up with some fresh undies!  In fact, ask her to bring her entire two weeks worth of laundry for your parents to wash.  You can talk about all the eco-friendly detergent that “you” bought and how you no longer use static cling products because they pollute the drinking water for baby pandas.  You will get extra brownie points for your thoughtfulness for sure!

4) Frugal Is Sexy. When you finally reveal to the girl you’re living with mom and dad – don’t kid yourself as the truth will ultimately come out – just tell her that it’s only temporary.  Rationalize to her how it’s wasteful to not utilize the 3rd and 4th bedrooms, or your mom’s basement.  If she ain’t buying it, start sniffling, and then start balling your eyes out that all you want to do is be at home to take care of your father given his bladder problems.  Tell her it’s hard for you to share your soft side because society puts so much pressure on men to be the provider.  She will absolutely melt in your arms and likely start crying with you!  In the meantime, you are busy building a blogging empire, putting on a few pounds while you’re at it, and forsaking sunshine in your mom’s basement.  Tell her you’re also busy saving money so you can buy a phat pad of your own.  Bloggers are sexy beings!

5) Invite Her To Stay With You. She might still think you are a loser for living at home (in which case you should kick her to your parent’s curb), but don’t fret.  Just declare your love for her and invite her to live at home with your parents as well!  If you’re going to take advantage of your parents in your 20s, you might as well invite your friends and prospective lovers to share in the spoils as well!  It could be one big love shack of intermittent shouts of “Where’s my food?”, “Turn up the heat it’s freezing mama!” and “Quiet down, the game is on!” If your girl does say yes, always try and ask for the top bunk bed, unless you’re too old and have knee problems like me.

CONCLUSION

Maybe mooching off mom and dad isn’t so bad after all.  Free rent, free laundry, free food, free mansion.  Even if you have a lot of pride and want to demonstrate that the four years of college was for something, it’s just too difficult to pass up sometimes.  Seriously, how else do you plan to come up with a 20% downpayment on a home living on your own?  Hence, I say go for it.  Live in your mom’s basement.  You can still get girls using the above tips, and save a ton of money while you’re at it.  In fact, you may even be doing your parents a favor because they missed you so much while you were away!  Smoochie, smoochie, mwwwwwa!

Readers, has living at home with your parents become more acceptable nowadays?

Is it more socially acceptable if adult women still live at home with their parents?  If so, why do you think that is?

Any other tips on getting girls if you live at home with your parents?

* For the record, I blame the economy for this phenomenon and realize if guys had a choice, they’d rather make big bucks and live on their own.  But then again, free meatloaf is just too hard to pass up sometimes.

Regards,

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

Whoever said, “money can’t buy happiness” is either poor or wealthy beyond their wildest dreams. The incessant amount of studies by researchers trying to prove money can’t buy happiness is simply a result of the researcher’s own poverty or unhappiness. Because they are financially mediocre, researchers are trying to console themselves that it’s OK not being wealthy.

Generally, researchers have a higher sense of self because they have more educational training. Hence, it tears them up when they see other “lesser beings” make more than them. Meanwhile, those who continue to highlight research stating that money can’t buy happiness are trying to justify their own financially unspectacular selves as well!

You see, the financially mediocre are all in cahoots with each other. They’ve banded together to proclaim that being middle class regular people is good enough. It probably is good enough for most people, but not for these unsatisfied folks who think they are smarter and better than everyone else!  If being middle class or poor was good enough, then they’d leave well enough alone and be happy with their financial mediocrity.  It’s a hard pill to swallow, but swallow they must.  Not everybody can make multiple six figures, live in million dollar houses, and pay cash for luxury automobiles. That’s just life and they are trying to bring you down.  Don’t let them!

THE TRICKY RICH

On the flip side, you have the super rich who also say, “money can’t buy happiness.”  They’ve got all the luxury in the world, with not an ounce of financial worry. It must be nice never having to budget during Christmas season. It must be nice going to $1,000/head charity galas and paying $200 for front row seats to watch the great Itzhak Perelman play violin.  These types of people need to fight for the poor because otherwise, they’ll be deemed as greedy bastards.

The guilt factor the super rich have is enough to say statements such as, “The rich aren’t paying their fair share of taxes!” Even if you slapped a 99% marginal income tax rate on Warren Buffet, he still will make more than 99% of the world.  Of course it’s OK to raise taxes when you have so much wealth! The super rich will lecture us to stop focusing so much on money and just following our dreams.  Don’t listen to them for one bit!  They’re just trying to win you over and pretend to be like one of you.

DEFINITELY HAPPIER

I don’t know about you, but I’m very happy making more than I did 10 years ago.  10 years ago, I was worried whether I could afford getting desert for two on a date.  Now, the cost of a seven layer chocolate cake for $8.99 doesn’t even cross my mind, only the 5 miles I’ll have to run tomorrow instead.

10 years ago, I used to stress more at work because if I ever got fired, my safety net was as think as sheets of wet Kleenex!  Now, I’m focused on all the good things at work and don’t worry about face time issues and work place politics.  10 years ago, I would never be able to consciously buy two round-trip tickets the day before to celebrate Valentines week in Hawaii.  Now, I’m excited to go on more last minute adventures because experiences are what matter most!

The reason why money does buy happiness is because once you have money, you don’t worry about money anymore. All the stress that comes with a lack of money melts away.  You’re not pissed at your friends for short-changing the pot during a group meal outing.  You don’t care if you get a flat tire and have to spend $200 to replace.  You’re just not worried anymore, and that feels fantastic!

Money also allows you to buy fantastic memories.  Most would agree that your happiest moments are spent with friends and loved ones.  If you have money to travel and be with those you care about, is that not happiness production?  It absolutely is.  What about all the fun times you had taking salsa lessons or playing tennis at the club?  Not a cheap endeavor, but so fun, and made possible by money.

CONCLUSION

When people start telling you money can’t buy happiness, take a good hard look at their finances.  They are likely telling you this because they don’t have much money themselves.  They haven’t tasted the freedom money buys.  And if they so happen to be research PhD’s, well you can forget about their advice right there.  If they are super rich, then you know they are just trying to blend in and not look selfish.

Money can buy happiness because money buys peace of mind and opportunities for great experiences.  Don’t be fooled by ego-consoling research and those who espouse!  They are just trying to keep you from achieving your financial goals so they can feel better about themselves.

Readers, why do you think researchers continue to try and prove that money can’t buy happiness?  Do you agree that those who believe money can’t buy happiness generally are poor or are stinking rich?  Would you not be giddy as a school girl if you inherited $100 million buckaroos?  If so, for how long?

Regards,

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

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