Financial Samurai

Priceless Crowns At Rosenborg Castle, Copenhagen

We all know that it takes money to make money. If you want $10,000 a year in passive interest income at a rate of 2%, you’ll need $500,000 in capital to get there. If you’ve only got $25,000 in capital, well then here’s $500 a year, just enough to buy yourself a round-trip ticket to Hawaii. Wait a minute, that doesn’t sound too bad!

I’ve been highly anticipating the response to my introductory $980 Get On The Map (GOTM) service where I help bloggers and small businesses get noticed on the web. There’s a lot of art behind the science of pricing. Price too low, and you might be signaling an inferior product or fend off too much demand. Price too high, and you might not get any clients. Finding the intersection between marginal utility and marginal cost is a journey that changes over time.

Going about pricing a product out of the necessity of money vs. the necessity for fulfillment is quite different. I get fulfillment out of helping others by providing more value than the price I charge. That’s what keeps me excited. If I had to sell something to put nutritious McDouble cheeseburgers on the table for five children everyday, I’d feel the heat, underprice and likely provide poor value.

THE VALUE OF TIME IS DIFFERENT FOR EVERYONE Read more…

Our tour guide in Stockholm was not Swedish, but Albanian. She stood 5 feet 1 inch tall thanks to three inch heels. As we walked towards Old Town to see the Royal Palace, I often wondered whether she had ever twisted her ankles traversing the uneven cobble stone roads.

Bianca told us she’s a full-time lawyer who enjoys playing tour guide on the weekends as a part-time job. She’s been studying for six years and is getting a second Masters degree in international law. When I asked her how much tuition costs in Sweden, she surprisingly mentioned, “Free!”

“All citizens and EU residents have free tuition if they want to study university here in Stockholm, Sweden,” Bianca went on to say.

I can’t verify the veracity of her statement, however, with law school tuition commonly over $35,000 a year in the US, Bianca clearly has a good deal!

“I love everything about Stockholm! We have 1/3rd parks, 1/3rd water, and 1/3rd land. The government cares about us and you don’t have to work very hard to live a good life. Back home in Albania, the average person only makes 300-350 Euros a month ($390-$450 dollars),” Bianca explained.

I asked Bianca about the local tax rates. She didn’t know for sure, but said she pays about a 32% income tax through the Pay-As-You-Earn (PAYE) employer witholding system. She also pays a 25% VAT tax (consumption tax) on all goods. I was expecting Bianca to highlight a much higher income tax rate since 32% is similar to my effective tax rate, so I was surprised. But then again, our income levels are drastically different as you will discover below.

DIGGING A LITTLE DEEPER Read more…

Over the past 30 years, only the top 20% of household incomes have shown any relative progress according to the charts below. You will know from my top income earners chart that the income level for the top 20% is roughly $80,000 a year and higher.

What’s most apparent is how well the top 1% have done. The chart below has the top 1% of income earners at roughly $1.8 million in 2007. This gels differently with the IRS study that puts the top 1% income level closer to $380,000. However, the point is that the top 1% has seen a doubling of their incomes in the past 20 years, while the rest have barely budged.

DOES INCOME INEQUALITY REALLY MATTER NOWADAYS? Read more…

Middle Class Homes In Holland

I have a theory the majority of us, no matter how little or how much we make, consider ourselves part of the middle class. When I worked at McDonald’s for $3.25 an hour, I was dirt poor, but considered myself middle class because both my parents had jobs and I had a bicycle and a cozy home to come home to.

When I finally graduated from college and started making more money, I felt poor because all I did was work in expensive New York City! For example, I shared a studio with a high school classmate for $2,100 a month and that was in 1999! It was only until I moved to San Francisco did I feel I was part of the middle class again. Money was more plentiful, a starter home “only” cost about $1,500,000, and I had more free time to explore.

I’ve experienced all three classes to varying degrees and I believe there are wonderful merits to each of them. From the poor Haitian immigrant who goes to college and becomes the first black female mayor in Utah, to the billionaire investor who gives 99% of his net worth to charity, everyone tends to come to center. My favorite class is the middle class. But first, we must define what middle class means.

DEFINITIONS OF A MIDDLE CLASS INCOME Read more…

I can take two spots because I’m rich

I took my beloved Moose to the local sports store to get one of those foam rollers for my legs and back. If you haven’t tried a foam roller, you don’t know what you’re missing! Anyway, for some reason, the free parking lot was packed and a number of us had to sit idle in order to wait for a space to open up.

When I finally parked Moose, I noticed something annoying. A $125,000 Fisker KARMA electric car was hogging up two spaces! A 45 year old man came out of the car, blissfully ignoring the rest of us as he headed towards the elevator.

You can could tell he didn’t give a poop he took up two spaces with his overpriced car. I wonder if he would start giving a crap if he returned to a six foot long key mark? It seriously would not surprise me if this guy got carjacked one day. Hmmm, so that’s how class warfare starts!

UNDERSTANDING HOW RICH PEOPLE THINK Read more…

My buddy, Craig has disappeared.  We used to keep in touch a couple times a week and play some tennis, but not anymore.  After a match at the club yesterday, I saw him walk by with some girl to the hot tub.  Interesting, I thought to myself.  So he’s got a new flame!

After my match, I curiously hopped on back like any good nosy friend would to see what was up.  Unfortunately, she was already gone.  Drats!  But there he was, with a big smile on his face, sipping some sangria he brought from home.  “Wassssssup?” I asked Craig.

“Yo, Sam!  Good seeing you man.  Not much.  I was just on a 3 hour date with a girl I met online!  We chilled in the back, watched the Blue Angels, and enjoyed the bubbles.”, Craig explained.

“Oh really?  Tell me more about this online dating stuff!” I inquired curiously.

Craig proceeded to tell me how he had recently signed up for this free online dating site called OKCupid, and how he was getting all these dates.  “Two a week, at least!”, he mentioned.  “There are so many women online, it’s ridiculous!  I feel like a rockstar!”

After an hour of conversation and some further research on my own (6 months undercover), I’ve come up with Sam’s guide to understanding online dating.

PROS OF DATING ONLINE Read more…

By San Francisco standards, I’m just another regular fella who loves to travel and write from everywhere in the world.  Even though there are supposedly half a billion blogs out there, I actually don’t know many people in the off-line world who have a blog let alone make any money from their online endeavors.  So perhaps I’m not so average.

My friend invited me to a party to support our city’s mayor, Ed Lee.  The cost was $500 per person, which is the limit for political contributions per person, per event.  Usually, I would just pass because of my disdain for politicians in general.  However, Ed Lee was the incumbent, and was willing to provide tax breaks for firms like Twitter and Zynga to stay in San Francisco, and therefore keep jobs in San Francisco.

I deliberated for a while and decided, what the hell.  My friend was college classmates with the host, who so happened to be named Marissa Mayer, 37, the first female engineer at Google, and now the CEO of Yahoo.

POWER PLAYERS  Read more…