Why Do The Rich Hoard So Much Cash?

Cash And Net Worth Charts

The rich are bullish on the economy just like the investing middle class. The difference I’ve noticed from surveys and speaking to people of both classes is that the rich hold much more cash (risk free assets) as part of their net worth as compared to the average person. Citi Private Bank came out with a survey of 50 representatives who manage high net-worth families that nearly two-thirds of their clients think it’s more likely the stock market will go up at least 10% in the coming year than lose value. I can get behind this bet.

Yet these same wealthy investors have, on average, almost 40% of their portfolio in cash with stocks averaging only 25% of their portfolios! The rest are in bonds, commodities, and real estate. 40% is a shockingly high number that completely goes against the wealthy class’s beliefs about the future. I get prodded by young investors who’ve never seen a bear market all the time on why I have 25% of my net worth in 3.5-4.2% yielding CDs. Usually I just smile and move on because there’s no use arguing when times are good because everybody thinks they’re a genius.

This post attempts to understand why those with financial means stay conservative even in a raging bull market. I’ve spoken to dozens of multi-millionaires about their net worth asset allocation and have found similar, but not as extreme high cash allocations. These findings run very counter to the young bucks I encounter with $150,000 stock portfolios that make up 90%+ of their net worths.

Filling The Void In Early Retirement With Part-Time Work

Hawaiian Sunset With Sailboat In Retirement

Over the past one and a half years since leaving Corporate America I’ve done some deep thinking about early retirement through posts such as:

* How Does It Feel To Retire Early?

* Should I Go Back To Work Now That The Good Times Are Back?

* Do You Work Harder Or Relax More During Good Times?

* The Startup Riches Myth: Sell For Millions And Still Not Be A Millionaire

When you’re used to working 12 hour days every day for 13 years it’s very hard to suddenly downshift from sixth to first. You’ll blow up your engine if you do. There needs to be a gradual progression whenever large life changes are made.

The first six months of retirement I was second guessing myself on whether I made the right move. I had just turned 35 years old and short-circuited my career in finance so I could spend more time traveling and doing this new thing online. I worked my ass off to finish writing my book on “How To Engineer Your Layoff” so I could at least say that I produced something meaningful if all went to hell.

My doubts began to calm down during my second six months of retirement because I was able to take a 2.5 week long business trip to Europe to research the happiest people in the worldTraveling while writing and maintaing my online business helped crystallize why I decided to leave Corporate America in the first place – more freedom!

The final six months have been an absolute blast, with six weeks this summer in NYC, Mallorca, and Switzerland (links to FOMO, finding perfect summers, and eradicating apathy) and four weeks this winter in Hawaii all the while working of course. There’s absolutely no law against having fun while traveling to understand different cultures to share them with all of you in my writing. The key is moderation.


What’s In Your Big Juicy Wallet? – Sponsored Video

Financial Samurai's WalletEverybody has heard of Capital One’s catchy slogan, “What’s In Your Wallet?” so I decided to have a look for myself and hopefully do some comparison with all of you. Capital One was kind enough to sponsor this video post about their new Spark business credit card. Check out their seven second claymation Vine videos that highlight the peculiarities of work/enterpreneurial life.

I hate thick wallets because they are uncomfortable to sit on. If I could have a copy of my driver’s license that has the ability to act as a debt card, credit card, insurance card and identification card for multiple establishments that would be ideal. Too bad we’re still a long ways a way so I do what I can to simplify.

Here’s what’s in my wallet today:

What Doesn’t Affect Your Credit Score? Dispelling Common Misconceptions

Average Credit Score ChartIn “How To Improve Your Credit Score to 800+” I shared with you five steps to take in order to enter the exclusive 800 Credit Score Club filled with beautiful people, gummy bears, and free massages. It’s good enough to get the most amount of credit at the cheapest rate, but to be elevated to “Tier 1 Datable Status” is just amazing!

Following instructions is probably the easiest path to financial success. Sign your name at the end of the exam. Don’t buy depreciating assets. Listen to your elders. Wait for enough time to pass. Sometimes we do things we think are right, but are actually wrong. Other times we worry about things we’ve done which we think are wrong, but are actually irrelevant. This post is about irrelevancy as it relates to your credit score.

After doing some digging online, I found a site called Totally Money highlighting various misconceptions about what can negatively affect a credit score. I’d like to comment on each misconception, share some of my own, and perhaps get your thoughts as well.


Confession: Active Income Is Much More Enjoyable Than Passive Income

Sleeping Baby TigerMaking money while not doing anything is the ideal scenario, or so I thought until recently. For years I’ve been diligently saving and investing so I could never be told what to do for money again. 5am conference call with the East Coast? No thanks! Fly to Chicago in the middle of winter to see clients? Have fun! Come in before sunrise and leave after sunset? Yeah, you do that.

One of the most important tips I’ve shared about building sustainable passive income is treating the whole process like a game with multiple levels. Because interest rates have been coming down for the past 30+ years, generating low risk passive income is becoming that much harder every year. Earning $28,000 a year in dividends on a $1 million dollar portfolio is not exactly living it up! The investing world is counting much more on capital appreciation instead.

The problem with building passive income my way is that you start becoming completely oblivious to the income production because you aren’t utilizing the money. You have to follow the rules remember? I haven’t touched any principal or interest/dividend income since I started the passive income journey in 1999. I’ve become an over saver during retirement, which is not bringing me joy any longer.

The problem with over savers is that there’s this irrational fear that Doom is right around the corner. What if Google’s latest search algorithm changes cuts this site’s traffic in half? Less traffic means less income. What if eventual Woman Of The Year, Janet Yellen recants on her promise to keep interest rates low forever? We’re all depending on the bull run in real estate and stocks to continue. The “what ifs” never stop, so we continue to save for a rainy day that never comes.

When Is The Best Time To Sell Rental Property? Three Targets To Consider For Maximum Profits

Rental Property On Santorini CliffShould I Sell My Rental Property And Simplify Life?” was written in frustration due to unnecessary conflict between my tenants and their downstairs neighbor. I’ve had some time to think more objectively about the incident as well as talk to a couple older landlords to come to a more rational decision which I will share in this post.

When I had no online income, real estate income was by far my favorite income stream. Now that my online income has grown, I’m becoming obsessed with the idea of being as unencumbered as possible to make money. Early retirees become totally spoiled with our time because we never have answer to anybody. So when we have to do something that’s unpleasant, such as play peace keeper, we get very bummed out. (Read: “What Does Early Retirement Feel Like? The Positives And Negatives“)

As you know from previous articles, I spend an exorbitant amount of time doing research on anything that has large financial consequences. I calculate various scenarios, talk to friends and family, and speak to as many industry veterans as I can find. After consulting with several 55+ year old rental property owners who’ve owned their properties for over 25 years and comparing notes, I’ve come up with three tangible targets to determine the best time to sell rental property.

Math not emotion is what’s going to help make the best financial choices!