Financial Samurai

Dr. Thomas J. Stanley wrote a great book called “The Millionaire Next Door” where he surveyed a bunch of folks and discovered millionaires for the most part are pretty simple, everyday people.  The next door millionaires drove second hand cars, shopped at Walmart, and lived in sub $500,000 houses which were of course, all paid off.  Part of the reason why Dr. Stanley’s book is such a big hit is because he appeals to a mass audience and shows us we can all be millionaires because there’s nothing really special about them!

Hence, like getting your college degree, is becoming a millionaire by the time you retire fast becoming a rule rather than the exception?  The answer is “yes” if you ask Dr. Stanley and all the next door millionaires.  In fact, they are probably all shaking their heads at those who can’t get there because it’s so easy for them.  Success skews reality proclaims Roger at The Amateur Financier.  So true.  If you’re rich, you think everybody is rich or should be rich.

SO EASY, EVEN A KNUCKLEHEAD CAN DO IT! Read more…

It continues to perplex me why there should be a distinction between an emergency fund and your general savings.  If you have $100,000 in the bank, what is the difference between calling it $100,000 in savings, and splicing the funds into $10,000 emergency money and $90,000 savings?  The answer lies in the fact that people who need to create an emergency fund likely always have “emergencies” and are weak with their spending and savings!

Let’s say your name is Mr. Benjamin aka a $100 dollar bill.  You’re relaxing with your fellow Benjamins in the bank, hopefully earning at least a 4% interest rate using the “DVD Method To CD Investing” and having a grand old yield maximizing time.  A Benjamin’s purpose is to provide a solid source of liquidity and risk free interest income for the owner upon his or her retirement.

Some Benjamins are lucky.  Their owners don’t discriminate between one bill or another.  They treat each bill with vital respect i.e. they don’t touch it!  Some owners are just nutty, always disturbing their party and separating one Benjamin from another.  “Listen up Benjamins!  100 of you are to relocate to this side of the tracks, and the other 900 Benjamins get to kick back and relax!”

YOUR CRUTCH WHEN YOU CAN WALK JUST FINE Read more…

The following is a guest post by long time reader and entrepreneur, Investor Junkie!  IJ writes about how we should stop our complaining, and realize we are wealthier than the large majority of the world.

If you live in the United States, you are wealthy beyond what most others dream of. Your salary is 99% higher than of the world population.  Visit areas like India, and Africa, and you’ll see what real poverty looks like. If you moved there, you could live like a king! Don’t believe me?  Visit Global Rich List and plug in your yearly salary.

So what exactly does it mean to be wealthy anyways?  It’s all relative to the environment you live in. What might be considered below the poverty level in the USA ($22,050 for a family of four), might be considered well off when living in say Uganda.  According to the Global Rich List even at the US poverty level, you still make more money than 89% of the world.

If you look at the Wikipedia chart, you will see the USA has the most wealth compared to any other country (including Japan). No other country comes close to the USA.  So while you may not feel wealthy comparative to what you see in the media, you still are better off than 99% of the world population.  In terms of average income,  the USA is only 13^th in the world, but we still have more stored wealth than any other country.

Stop complaining that you can’t afford that new Lexus you lust for. Many people around the world don’t even own a car! They get from place to place by bicycle. It’s true you may not live like a rock star, famous actor, or business titan, but you live better than most.

Most people in the United States have: Read more…

Primary Residence Zestimate

To prove our point regarding “Your Net Worth Is An Illusion” I took a look at Zillow’s latest zestimates of my primary residence and rental property.  Apparently, in a span of 3 months, my primary residence gained a whopping $300,000! I’m popping open a bottle of  Crystal, buying a rose gold Patek Philippe Calatrava at Tiffany’s, and ordering the Audi R8 on as we speak.  Just kidding, especially since September is frugality month. Besides, Zillow isn’t writing me a check for $300,000!

The dollar sign shows the purchase price after a 4 month escrow that began in late 2004.  In other words, the purchase price was $250,000 below what the zestimate measured as fair value in the middle of winter.  You’d think that after 4+ years of existence, Zillow’s price algorithms would be more refined.  Perhaps the data is legit, but I’m not buying it. Since net worth calculations don’t include one’s primary residence, let’s strike this example and look at a rental property. Read more…

Young or Old?

Unless your house is fully paid for, and unless you can access your retirement accounts today, your net worth is an illusion.  Although we’ve recovered quite a long way over the past 18 months, I don’t think we can really count on property, stocks, and private equity investments to be there when we need them.  The recent 14% decline in the stock markets from 2010 peak levels reminds us to get realistic!

The only thing we can really count on is cold, hard cash.  I find it very misleading, as well as a little disingenuous that some say they are millionaires, when 70% of their net worth is tied up in an illiquid asset called “home equity.” Your home is only worth as much as someone is willing to pay for it.  Even your 401K and IRA are suspect because those accounts can easily collapse.

A TYPICAL ASSET SIDE OF A NET WORTH CALCULATION: Read more…