Are You Smart Enough To Act Dumb Enough To Get Ahead?

Are You Smart Enough To Be Dumb Enough To Get Ahead?The smartest people in the world are listeners, not speakers. If all you’re doing is speaking, how do you learn anything new?

There was once this portfolio manager I covered who had this uncanny ability to make you feel uncomfortable without saying anything at all. He had a poker face when you spoke to him, and when he felt like changing expressions, he’d go from solemn to smiles in a millisecond. We nicknamed him Crazy Eyes. It turns out that he was literally a genius with an IQ over 160. He also consistently beat his index benchmark for eight years in a row and made millions because of it.

The earliest examples of acting dumb to get ahead starts in grade school. You know what I’m talking about. Those kids who were too cool to study and too cool to sit still in class as they flicked spitballs from the back of the room. These kids weren’t just acting dumb, they really were dumb.

When you purposefully waste your opportunities growing up, you’re not only disrespecting your parents, but also the millions of other kids around the world who will never have the same opportunities.

This post will do the following:

1) Argue why acting dumb is a smart move to get ahead.

2) Provide some tips to help you look and seem a little dumber than you are.

3) Share three personal examples of how acting duhhh, has helped in work, stress management, and relationships.

The Top Financial Samurai Articles Of 2013


I’m always curious to figure out which are the most read and most commented on articles of the year. The determinants are based on search engines, social media, and what you the community decides to share. With over three million page views for the year, the results are a partial reflection of society.

One of my biggest goals as a writer is to entertain and educate at the same time – no easy task when it comes to a subject as dry as personal finance! Each article takes anywhere from one hour to 10 hours to create. So if you like an article please help share them over social media or e-mail them to your friends.

I’ve gone a little overboard with the number of articles highlighted because each one is like my baby. There are a lot of subtleties scattered throughout my articles that are easy to miss. They are like out of place stones in a garden acting as markers for remembrance when I’m old.

Out of the roughly 180 articles published in 2013, I’ve curated 35 of the most viewed and discussed. Please enjoy!


1) Explaining Why The Median 401(k) Balance Is So Low – People really want to figure out what’s wrong with America’s favorite retirement savings plan. It would make sense if you don’t want to work forever you should be saving a ton more money, but that’s not happening. The article shares case studies from various economic groups on what derails people off of my recommended 401(k) amount by age chart.

2) How Much Should My Net Worth Or Savings Be By Income –  There’s a handy dandy chart based on an income multiplier to determine your net worth or savings. The chart should serve as a good guide no matter how much you make, what your work experience, or your age.

3) The Average Net Worth For The Above Average Married Couple – The article provides three main guidelines to determine the average net worth for financially conscious married couples. There’s an interesting discussing on spousal relationships for each of the three scenarios that got readers going. Everybody thinks they’re above average, but we know that’s statistically impossible.

4) Recommended Net Worth Allocation By Age Or Work Experience – It’s not enough to just save money. You’ve got to also invest your money to hopefully provide a positive real return. This article breaks down my thoughts on stocks, bonds, real estate, risk free assets, and your X Factor. See also: The Proper Asset Allocation Of Stocks And Bonds By Age.

5) The First Million Might Be The Easiest: How To Be A Millionaire By Age 30 – This article talks about champagne dreams and caviar wishes for those who want to strike it big in their 20s. I make an argument that it might be easier to get rich when you’re younger because you have more energy, more enthusiasm, less cynicism and are less scared of taking risks.

6) Which Is A Better Investment: Real Estate Or Stocks? – A candid comparison between the two most commonly invested asset classes. My personal preference is for real estate because it’s less emotional. I like the tangibility of real estate, the tax benefits, and the ability to make improvements.

7) How To Better Management Your 401(k) For Retirement Success – Despite the 401(k) being a woefully light retirement instrument, it’s still one of the largest retirement assets for the middle class. I show readers how to create different retirement scenarios in order to plan better.

8) How To Pay Little Or No Taxes For The Rest Of Your Life – After paying six figures in taxes every year for a decade, I decided to go John Galt and protest government waste. If you’re sick of paying taxes and getting very little in return, then this should be one of your favorite articles.

9) Benefits Of Converting A 401(k) Into A Rollover IRA – After leaving my job in 2012, I converted my 401(k) into an IRA. It was one of the best moves because a rollover IRA provides more flexibility and tons more investing choices. The risk is that you become hooked on trading.

10) What Does Early Retirement Feel Like? The Positives And Negatives – Here’s a candid assessment of early retirement life the first year in. Not everything is great. I may do a follow up article every year or two to see if my feelings change over time.

11) How To Build Passive Income For Financial Independence – An update 1.5 years after writing, Achieving Financial Independence One Income Slice At A Time. The new article starts to incorporate the X Factor into the passive income equation. I really try to get into the nitty gritty of passive income with a discussion on mindset, action items, and charts. The next update will probably be in a year and show how I’ve reallocated my CD assets.

12) How Do People Live On Less Than Six Figures In Expensive Cities Like NYC? – To live comfortably (not luxuriously) in places like Manhattan, San Francisco, Hong Kong, London, Paris, and Tokyo, you’ve got to make at least $100,000 a year. I spent a week with my buddy who makes a little over $100,000, and after maxing out his 401(k) which equals ~17% of his salary, he’s left with little to no disposable income every month. I’m still waiting for people who live on less to highlight their budget in a guest post if anybody is interested.

13) CD Investment Alternatives: Why I No Longer Invest In CDs – My 10+ year run in methodically allocating ~30% of my savings into long term CDs is coming to an end because rates are pathetically low. The 10-year bond yield is at roughly 3% while a 10-year CD is only at around 2.5%. This makes absolutely no sense, and I don’t recommend CDs anymore. I’d much rather keep my money in a 1% online money market account that is fully liquid and invest in a muni fund or P2P.

14) Horrible Jobs That Can Eventually Make You Rich – Bad jobs builds character. The worse the jobs, the more you’ll appreciate your future work. The more you appreciate your work, the better you’ll do, the happier you’ll be, and the more money you’ll make until you eventually burn out and contemplate the meaning of life.

15) Subsidy Amounts By Income Limits For The Affordable Care Act – There are four charts to highlight subsidy amounts for Obamacare for singles, couples, a family of three, and a family of four. The charts clearly show how much the government will help you out on a sample Silver Plan. Obamacare is still going through massive growing pains, but it’s a gift for entrepreneurs, people who work at jobs they hate just for their health care, and early retirees.

** The most viewed articles of the year tend to be the ones that get published earliest in the year because they have more time to be viewed.

How To Build Passive Income For Financial Independence

Yellow Leaf MacroCreating genuine passive income is the holy grail of personal finance. Not all passive income is created equal mind you. Some streams take much more initial effort to start, such as saving enough to buy your first rental property. But once you start it’s very difficult not to gain momentum.

Everything passive first takes active energy. The time to put in the effort is when we are young and not ravaged by disease or burdened by family obligations. I remember being able to snowboard from 9am until 4pm every day for a year. Now, I’m lucky to last from 11am until 2pm without wanting to go to the hot tub and drink a bucket full of beer! If we can appreciate how lucky we are when we are young, we’ll be able to maximize our vitality and live financially freer when we are older.

With sustainable passive income you can do the following:

* Retire early and travel the world.

* Start a business in a field you are passionate about.

* Find a job that pays less, but is more interesting.

* Stay at home to take care of your family without having to worry about money.

* Volunteer for causes you truly care about.

* Be a big brother or big sister.

* Spend more time with your parents.

* Sit in a coffee shop on a 80 degree day in Paris for hours on a Wednesday afternoon.

* Write the next great novel on the balcony of a cruise in the Mediterranean.

* Eat tapas and drink sangria until 1am on a Monday evening.

* Potentially live longer due to much less stress.

* Experience perfect endless summers over and over again.

There is so much you can do once you generate enough passive income to pay for all your living expenses. I highly encourage everyone to at least try. This post will provide you the framework for passive income success. I’ll also provide an update on my estimated 2013-2014 passive income streams which have grown since retiring in 2012.

The First Million Might Be The Easiest: How To Become A Millionaire By Age 30

Balandra Bay, Mexico VacationGrowing up in a middle class household made me strong. My parents always drove beaters and frowned upon ordering anything other than water when we went out to eat. I knew my parents were not rich because their incomes were in the public domain as foreign service officers. As a result, I made a conscience choice in high school not to attend one of the two private colleges that had accepted me in order to save us money.

We were by no means poor. We just pulled up to parties in a paintless 1976 Nissan Datsun alongside Audis, Mercedes, and BMWs for the four years we lived in Kuala Lumpur, Malaysia between 1986-1990. I was quite mortified as a kid I’ve got to admit. I knew nothing of expensive shoes because I had none except for my wealthier friend’s hand-me-down Jordans that were two sizes too large. I couldn’t even afford a camera or a Nintendo game system. We led comfortable lives, but didn’t have more than we needed.

I was always curious about my wealthier friends. Many of their parents were business owners so one day I told my father, I too wanted to be a businessman. By the time I was 13 I was hooked on every single episode of “The Lifestyles Of The Rich & Famous,” narrated by Robin Leech. A million dollar house and a $40,000 sports car. What a life! I thought to myself in the 8th grade. Might as well give it a go. That’s when I started really hitting the books.

How Much Should I Have Saved In My IRA At Various Ages?

Pool overlooking the ocean. Retirement villa.The IRA is a pre-tax retirement vehicle available to most people who work for an employer and make less than $69,000 a year. If your modified adjusted gross income is $59,000 or less and you do have a retirement plan offered at work, you can take the full deduction of currently $5,500. If you are married, you get to contribute the full pre-tax IRA contribution if your AGI is under $95,000. Deductions are gradually phased out once you reach incomes of $69,000 for individuals and $115,000 for married couples.

If you do not have a retirement plan offered at work (rarer case), the rules are a little different. There is no income limit for individuals, and a full deduction of up to $178,000 in joint income, partial deduction from $178,000-$188,000, and no deduction if joint income is above $188,000. The best thing you can do is ask your benefits department to see if you qualify because the laws are changing all the time.

From 1974 until 1980, the IRA contribution limit for investors was $1500. From 1981 until 2001 the contribution limit improved to $2000. In 2002 the limit was raised to $3,000, again to $4000 in 2005, one more time to $5,000 in 2008 and now to $5,500 in 2013. I don’t know about you, but such low limits are hardly anything to get excited about.

When I graduated from college in 1999, my base income was $40,000 living in NYC. I was considering contributing to an IRA until I learned more about the contribution restrictions. Adding $2,000 to my IRA at the time felt stupid when I was busy trying to max out my 401(k) which had a more reasonable contribution limit of $10,000. Besides, I didn’t want to not be able to contribute pre-tax money to an IRA the very next year just in case I made more than their arbitrarily low income limit.

You’ll discover in this article that even small contributions add up over time. So don’t be stupid like me and not contribute while you still have the opportunity. Make deferring taxes a key tenet in your efforts to achieve financial independence. Taxes are our biggest expense and you want to save more than the government taketh away!


How Do People Live A Comfortable Life Making Less Than Six Figures In Expensive Cities?

central-parkNew York would be the greatest city in North America if it weren’t for three things: 1) Tough weather for half the year, 2) Never ending crowds, and 3) outrageous prices! I’m currently spending the first week of my four week vacation/blogging research tour in Manhattan and I’m blown away by how much more expensive Manhattan is than San Francisco.

I used to live downtown when I worked in finance from 1999-2001 as a fresh college grad. My base salary for the first half of the year (started in July) was $40,000. Even then I thought $40,000 was pretty low as I could only afford to share a $1,800/month studio with a buddy of mine from high school after contributing to my 401(k). Thankfully our salaries were raised in the second year to $65,000 after Wall St. decided to pay new first year analysts $55,000 instead of $40,000. Still, a base salary of $65,000 wasn’t much to write home about when one bedroom condos were selling for 5X.

Fast forward 14 years later and the 600 square foot one bedroom condos in decent areas of Manhattan are now trading for $750,000+! I’m pretty familiar with these prices because my studio roommate actually bought a $325,000 one bedroom condo near the United Nations in 2000. He’s been looking to upgrade to a two bedroom condo with his future wife, but he’s taken aback by the ~$1.5 million price tag. They just might move out of the city instead. If a condo owner who saw his property’s value grow by 130% can’t even afford to comfortably upgrade to a two bedroom, can you imagine what a renter during this same time period is thinking?


How To Correctly Value And Analyze Investment Property

SF Property BackyardUnlike stocks, there’s no easy way to ascertain the exact value of your current property or the property you plan to purchase. As a multi-property owner I’m glad there aren’t any ticker symbols jumping around every weekday because they are just a distraction. It’s all about buying, maintaining, and holding for as long as possible to build wealth when it comes to real estate.

Real estate currently makes up around 35-40% of my net worth where it will stay for the foreseeable future as I focus on entrepreneurial endeavors. The earnings that came from focusing on my career instead of chasing unicorns in the stock market was largely reinvested in real estate for diversification purposes.

In this article I’ll approach valuing property from an investor’s stand point. We’ll go through some big picture concepts as well as use a real life example to see whether we are making a good or bad investment. I think you’ll love this particular property I’ve picked. If you are already a homeowner, you’ll get to approach valuing your own property with as realistic an eye as possible.


Why It’s Better To Invest In Growth Stocks Over Dividend Stocks For Younger Investors

Growth stocksDividend stock investing is a great source of passive income. The problem is, with dividend yields relatively low at 2-3% you need a lot of capital to generate any sort of meaningful income. Even if you have a $500,000 dividend stock portfolio yielding 3% that’s only $15,000 a year. Remember, the safest withdrawal rate in retirement does not touch principal. Furthermore you must ask yourself whether such yields are worth the investment risk.

If you’re relatively young, say under 40 years old, investing the majority of your equity exposure in dividend yielding stocks is a suboptimal investment strategy in my humble opinion. You’ll be hoping for filet mignon for decades while you eat Hamburger Helper in the meantime. When you reach your desired age for retirement, you might just be asking yourself, “Where the hell is the feast?

Out of the few multi-bagger return stocks I’ve had over the past 16 years, none of them have been dividend stocks. I’m sure dividend stocks will provide over 100% returns if you give them a long enough amount of time. But if you are like me, you’d rather build your fortune sooner rather than later. If I’m going to bother taking risk in the stock markets, I’m not playing for crumbs. When things turn south, everything turns south so there had better be more than a 3% dividend yield and some underperforming appreciation to compensate.

The following article will attempt to argue why younger investors should focus on growth stocks over dividend stocks in a bull market with potentially rising interest rates. In a bear market, everything gets crushed but dividend stocks should theoretically outperform.


Welcome To The Financial Samurai Forum (FSF)!

beach-north-shoreDear Readers,

Due to popular request I’ve launched the Financial Samurai Forum where the community can come and share their thoughts in five main categories:

* Investing

* Real Estate

* Career / Entrepreneurship

* Retirement Life / Wealth Management

* General

Financial Samurai has been up for four years now and I’m proud to say we’ve got some of the most interactive personal finance enthusiasts around. Just look at the Most Commented Posts on the right sidebar. We’ve got eager readers who are just coming out of school with so much opportunity ahead of them as well as multi-millionaire readers who are looking to change things up a bit. All of us have something to contribute so don’t be shy.

Since 2009 I know many of you have taken great strides to achieving financial independence which is absolutely fantastic. The core motto on Financial Samurai after all is to “achieve financial independence sooner rather than later.” I’ve learned a tremendous amount from all of you and I hope you have done the same from my writing. Financial freedom seekers this forum is for you!


The Financial Samurai Value Proposition

Early Retirement Financial SamuraiEvery now and again, it’s good to reflect on things in order to improve. You’ve likely read my updated About page already and have a decent sense of what this site is about after going through some of the posts.

There are thousands of personal finance blogs on the web and certainly millions more blogs across all categories you can potentially visit. It’s just impossible to do and you’ve got to pick and choose. I’d like to formalize Financial Samurai’s value proposition to help you understand why you want to keep coming back for more.

We are going to build more wealth, slice through more money bullshit, and be happier because of it!