Financial Samurai

Well, well, well.  Not everyday does a $300 million dollar mega yacht stop by the San Francisco Bay Area!  The creatively named “A” yacht is owned by 38 year old Russian billionaire Andrey Melnichenko and his lovely supermodel wife Aleksandra!  Andrey made his money in fertilizer, banking, and energy and is worth a reported $4.4 billion dollars.  Interest alone on $4.4 billion at 4% is over $178 million a year!

The “A” looks like something out of a James Bond movie.  Can you imagine all the crazy parties on this bad boy?  Wow!  I rode my bike to the very north end of San Francisco to take a look and boy oh boy is it big.

Some nice mouth watering yacht stats for all you billionaire wannabes out there! Read more…

Every month I contribute $1,375 to my 401K so that by the end of the year, the 401K is maxed out at $16,500.  Unfortunately, $16,500 a year is a ridiculously low amount of money to save for retirement if you really do the math.  After 10 years, you might have $200,000, and after 30 years you might have $600,000 to $1 million depending on the markets and your employer’s match.  Whatever the case may be, the 401K is simply not enough money to retire on, especially since you need to pay tax upon distribution.

The government needs to get it together and raise the amount of 401K contribution for those in the later part of their lives.  How is it that a 40 year old executive who makes $165,000 can only max out the same amount in his 401K has a 23 year old kid out of school making $35,000?  It just doesn’t make sense.  Instead, the government should allow pre-tax contributions to increase by $5,000 every 5 years so that by the time one has served 20 years in the work force for example, s/he can contribute $35,000+ a year to their 401Ks until retirement.

Let’s talk about the pencil geek IRA retirement plan for example.  If you’re one of the fortunate who are allowed to contribute, you can only fund $5,000 a year!  Whoopdeedoo!  $5,000 X 30 years later, assuming you don’t lose it in the market yields $150,000-$300,000 maybe!  Great, just enough to buy me a Honda Accord sedan when I’m grey.  Get it together government and raise that $5,000 contribution amount higher with better tax incentives.  Furthermore, let hard working Americans who make over $120,000 the opportunity to contribute regularly, and not just through odd year loop holes.  Empower people to want to save for their future!

DIFFERENT STROKES Read more…

Hear that?  That is the sound of another self righteous employed person complaining about the unemployed sucking up resources and driving the government deficit further into the red.  Who cares employed people??  You guys aren’t the ones who are struggling to find a job in this economy!

There are several tautologies here:

1) Few can live a comfortable lifestyle off of unemployment benefits which average $200-3oo a week

2) The vast majority of people who are unemployed want to make more money, find jobs, and do something meaningful with their lives.

3) Our budget is headed towards a $1.4 trillion+ deficit, so who cares if we’re going to spend another $50 billion to help millions of unemployed people survive for up to 99 weeks?

THE BUDGET DEFICIT DOES NOT MATTER WHEN YOU HAVE NO JOB Read more…

Bloomberg highlighted an interesting chart stating that for the first time ever, working seniors outnumber teens in the labor force.  Currently 6.6 million people over the age of 65 are working or are looking for work compared to 5.9 million 16 to 19-year-olds.  Back in 1948, the numbers were only 2.9 million people over age 65 and 4.4 million teens, respectively.

This chart has enormous implications for the American workforce as people live longer and longer.  Let’s go into the reasons why there’s been a decline in teenage workers and such a rapid increase in older workers shall we?

TREND ANALYSIS Read more…

You guys know that the one and only data point I track religiously is the 10-year yield right?  Well, after the 10 year yield dipped below 3%, I went to the bank with a buddy of mine to go see how much money we could borrow.  The wiry banker sat us down like a loving couple and asked us to go through our finances at which point I kindly stepped out of the room and let him go first.  Five minutes later, he came out with a grin on his face, so I curiously went in.

I proceeded to disclose some of my finances, and he proceeded to tell me some curious news.  “Look here Sam, you can borrow up to $1.5 million dollars at a 5 year fixed rate at 3.75%!”

Holy moly really?  You mean little old me, just like that can borrow that much money at that low of a rate?  “So what’s the catch?”, I ask.

“Zero points, and $2,500 in closing costs.  But don’t worry, we are giving you a $500 credit for being a preferred member, and frankly, if you guys both take out loans, I’ll throw in another $500 credit,” said the banker.

“Done!  Where do I sign?, I ask as I think about the new Audi R8 I plan to buy with just $150,000 of the $1.5 million.  Or maybe I should be more conservative and spend $100,000 on the new 2011 Porsche 911.  Or actually, I heard the 2011 BMW  335i coupe is coming out for only $55,000 this fall.  With all the money “saved”, time for a bachelor’s trip somewhere fun!  (I’m still thinking to myself here).

NOT SO FAST FOOLIO! Read more…

"Carried By The Wind" by Veronika Nagy

My nose plugs up and I can hardly breathe when I’m around cats too long.  I don’t know why I’m allergic, I just am.  One time I stayed over a friend’s place with three cats, and I woke up with red hives.  It was a surprise that I was able to fall asleep at all, because I could have sworn I sneezed over 100 times until the underside of my nose bled.

One of my best friends invited me over to visit her childhood home this fall.  Her mother lives near Boston, and unlucky for me another downside of East Coast living is the enormous pollen count.  I remember countless days when I couldn’t go to work because my allergies were so bad.  Ever since moving out West, my reactions have been much tamer.  The San Francisco Bay acts as a natural filter, sucking out stagnant air to sea.

In addition to being out East, my friend’s mother also has a couple of dogs and cats!  She sees this trip as a fun homecoming to introduce me to where she grew up.  To me, I have no attachment there and it’s like going to a gas chamber for vacation.  Imagine only being able to breathe through your two front teeth.  That’s how I feel sometimes when allergies attack.  You can’t get enough oxygen, so you aren’t able to speak.  You lose energy and let sleep take over even though it’s in the middle of the day.

THE QUIET PLEA Read more…

As a tennis fanatic, it would be remiss of me not to mention the greatest match in tennis history when American John Isner beat Frenchman Nicolas Mahut 70 to 68 in the 5th set last week.  That’s right 70 games to 68 games in the fifth set because one must win by two in the fifth set at Wimbledon.  The 11 hour, 5 minute match spanned over 3 days and finished when John Isner hit a solid down the line two-handed backhand to seal the deal.

The previous record for longest match was at the 2004 French open, lasting now just a paltry 6 hours and 33 minutes.  It is completely unfathomable that a match could last so long, simply because it is unconscionable how Nicolas Mahut could hold serve over 60 games in a row to survive!  The physical endurance is one thing, but what’s most impressive is the mental fortitude both players had to never give up.

LESSONS LEARNED Read more…

Despite an honest attempt to seek out more great things about the East Coast, several readers actually proceeded to bash the West Coast instead!  What’s up with that?  Some curiously mentioned that the East Coast is fantastic because the horrendous weather for half the year makes the other six months so wonderful.  Ummm, that’s like saying you appreciate your right hand more because you chopped off your left hand!  Wouldn’t you rather have both hands?

The only positive takeaway from the comments I agree with is the cluster of historically significant cities within a several hours drive.  Other than that, nobody came up with any stand out reasons other than the six I provided as to why East Coast living is great.  Given that the West Coast was attacked, I feel it’s important to stand up and defend our honor!

WEST COAST > EAST COAST Read more…

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…

Like clockwork, I top-ticked the markets when I wrote “The Good Times Are Back Again” this past April.  The markets have since fallen about 9% as the Euro Zone goes bonkers over debt problems.  But, at least the message from the post is that it’s exactly during the good times where we need to be more disciplined in our finances, because we never know when the bad times will return.  Now that the bad times are back, is now the time to party like it’s 1999 and spend counter-cyclically?  Nope, because with the amount of volatility, by the time you finish reading this post, the markets might be surging again!

With this market correction, it’s pretty clear that everything isn’t peaches and cream.  US leading indicators have turned downwards, unemployment figures have stopped improving, and people are wondering whether Europe will be like the US, but much worse.  If you’re American living in America, look at the bright side of things: the US dollar is strengthening, and the 10-year yield has declined to 3.1%, which is leading to lower rates yet again!  The 10 year yield and all its glory really is the most beautiful figure to watch.  It can tell the story of everything and anything.

The USD will always be a global safe haven currency, no matter how hard we try and mess things up.  It’s good to see that we aren’t the only basket cases as investors sell the Euro faster than they can say tapas!  What’s going on now is that money is shifting towards US assets, namely the property market.  Combine an asset shift with cheap debt, and rental yields above the current risk-free rate of return (3.1%), you realize why smart money is moving into the US property market again.  Only a minority will agree with the attractiveness of the US property market, and therein lies the opportunity.

During bad times, it’s always good to re-evaluate your finances.  I’m not convinced the bad times are back and am actually quite sanguine about the economy.  All the same, here are some suggestions just in case things get ugly for longer.

TOP 5 THINGS TO DO WHEN THE BAD TIMES ARE BACK AGAIN 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 from @NealFrankle of Wealth Pilgrim.  Neal is a Certified Financial Planner, a fellow Yakezie member, and all around good guy.  Hope you guys enjoy!

During strong markets, anyone can make money. During weak markets, everyone gets hurt. For the most part, all ships rise and fall with the tide, financial adviser or not.

So what’s the point of having an adviser?

(I have my own answer to this question and it may surprise you.)

But before we get to my answer, let’s explore the wild and wonderful world of financial advisers and our clients.

1. Financial Advisers are Salespeople. Read more…

If you feel like debating, head over to “The Dark Side Of Early Retirement” and get your fix.  I stand by my main thesis that nobody quits a job they love to do.  Someone who is able to find a fulfilling job is one of the luckiest people on Earth.  We shouldn’t make fun of them for being a “loser” as one commenter put it.  Instead, we should figure out what makes them tick!

Everybody gets bored at something after enough repetition.  That’s why it’s key to have many different interests which straddle both the mental and the physical aspects of your life.  No surprise that interesting people have a plethora of interests.  These people also probably have a higher than normal level of commitment to their activities which make them that much more intriguing.

THE TOP 5 “I CAN’T BELIEVE THEY’RE PAYING ME TO DO THIS!” JOBS Read more…

If you look carefully around the web, you’ll read scores of articles about the desire to retire early.  Yours truly wishes to finish up no later than 45, as I believe working for 20 or so years is a long enough time.  I’ve done the math with various living and return scenarios and it can be done.  But the question is whether it’s a good idea?  Perhaps not.

Now that the economy is in recovery mode, it’ll be interesting to see how attitudes change towards early retirement.  Will those who’ve short circuited their careers feel the pull to return to full time work and maximize their earnings potential again?  I believe so.  What about all our “lifestyle design” and “digital nomad” friends who had a rough time landing something stable they truly love?  Possibly they’ll come back too.

Those who are able to retire early are often cherished.  I certainly admire those who are able to cut down their desires to the bare bones and live a very frugal lifestyle.  I also admire those who’ve been able to strike it rich very early!  That said, perhaps early retirement isn’t a good idea for the large majority of people.  Let’s explore several reasons as to why people want to retire early, why they exist, as well as understand why it may not be a good idea.  Someone has to argue the other side, so it might as well be me.

WHY PEOPLE WANT TO RETIRE EARLY (IT ISN’T THAT OBVIOUS!) Read more…

Oh, the monotony of it all!  Imagine clocking in, day in and day out with really no change to your job.  You’ve got little risk of getting fired, and in 10 years you’ll retire with several million to last you a lifetime.  In the back of your mind, you wish you didn’t have job security because you despise boredom.  At the same time, you realize you’ve got it made and shouldn’t be so spoiled in your thinking.

One day a headhunter gives you a ring asking if you want an opportunity to make 50% more money a year guaranteed for two years.  The catch?  You’ll be working for a start up with no such promises of job security after year two.  You’ll also have to move to a different city where the cost of living is also 25% higher.  The hours and stress will most certainly more as well.  Welcome to Kathy’s world.

10 YEARS COMPLETED, 10 YEARS LEFT TO GO Read more…