When Saving Money Is No Longer Worth Your Time But You Do It Anyway

Cash MoneyAfter drinking a couple beers with a buddy a couple months ago, I dragged myself across the street to get a flu shot at Walgreens. Supposedly this season was one of the worst, and I had no desire to get swine flu. I hate needles. The insertion isn’t what bothers me. What irks me is the uncomfortable feeling of liquid getting pushed into my veins as the injector tries to hold the needle still. I don’t know how heroine users do it!

I actually didn’t feel a thing this time around because I was a little tipsy. Perhaps you too should give needle injecting a go after a couple drinks (see doctor for professional medical advice). When I went to pay the bill the pharmacist said, “That’ll be $34.95.

Over the past 11 years I don’t recall ever paying for a flu shot. The first nine years was because my old firm was awesome enough to bring a pharmacist in to our office and inject us all for free. And the last two years my insurance provider paid in full. But this pharmacist was adamant that Cigna, my insurance company, wouldn’t pay for the particular strain I was about to get. Odd.

Normally I would have told the pharmacist to hold up so I could give my insurance company a call and ask them what’s up. But this time, I just couldn’t be bothered. “OK, no problemo! Charge away.” I didn’t want to have to spend 30 minutes on the phone for the chance of sending in my receipt to get reimbursed $35. Maybe if I was absolutely bored out of my mind with a lot of time to kill I’d go through the entire discovery process, but I just didn’t have the patience.

Use The Jeans Strategy To Save More For Retirement And Stay In Better Shape

The Jeans StrategyWho doesn’t like a pair of nice fitting jeans? For the first time in 14 years I bought myself a new pair. My old boot cut jeans were purchased back at the Diesel flagship store in Manhattan a month after I got my first bonus in 1999. I’m surprised they’ve lasted this long. There’s nothing wrong with them, it’s just that the bottoms have started to fray and the color has faded.

I’m a pretty minimalistic guy when it comes to clothing. I enjoy wearing the same outfits over and over again probably because I’m lazy when it comes to fashion. Jeans and a t-shirt or jeans with a long sleeve collared shirt and a blazer are the cleanest looks in my opinion. I also enjoy using things until the max. My 2000 Land Rover is a perfect example of “if it works, no need to change” attitude. Shopping for clothes on a constant basis brings little joy. I’d much rather spend my money traveling. 

Financial Disconnect Or Financial Awareness?

Picanha - Best Brazilian Meat

Just order picanha and skip everything else!

One of my new favorite restaurants in San Francisco is Espestus Churrascaria. The restaurant serves good old fashion Brazilian meat that is more tasty than some of the finest dry-aged rib-eyes. Ever since visiting Rio de Janeiro in 2006 during business school, I’ve been craving to eat some Picanha (rump cap) until finally my best friend took me to Espestus last month.

After going without picanha for eight years, I wanted to return just a month later. Perhaps one of the main reasons why I never went was because of the cost. At $74 a person after tax and tip for food alone, Espestus costs a pretty penny! Instead of just going with my friend the second time around, I asked her if she’d like to invite another couple friend of ours to make it four.

Here’s her text response: Too expensive for them.

Espetus is surely an expensive place to eat, but our friends are in their late 30s, rent a $3,700 a month apartment and drive a 2010 Porsche Cayenne. The husband also has a $10,000 motorbike.

Here’s my text response to my friend: Ask them anyway. They drive a Porsche that costs literally 15X more than Moose!

She texts back: OK, I’ll see. 

Maybe It’s Your Fault Why Wealth Inequality Continues To Worsen

wealth-inquality-chart

After publishing The Best Of Financial Samurai 2013, I went back to several of the articles to respond to comments I missed. As I was reading some of the comments across various topics, I started getting this sinking feeling that perhaps there’s nobody to blame but ourselves for our current financial situation.

The biggest problem I see in society is the widening gap between the rich and the poor. When CEOs make 300X their average worker’s salary and the top 5% own roughly 74% of all the assets, we’ve got some serious wealth inequality here! I was just at this political fund raiser party which consisted of a couple hedge fund partners, a pre-IPO Chairman (host), and a CEO of a major food company and I realized then and there equality for our children is but a pipe dream. It’s vexing to read about a 55 year old distraught over losing her job when she’s had 30 years to save and invest. She should be close to millionaire status by now and ecstatic with a going away severance!

I’m doing my best to help empower people to build their own wealth and narrow this ridiculously wide gap. But I think I’m failing miserably, despite the millions of visitors a year on Financial Samurai. Some days I feel it might be better to just kick back on the beach all day long instead of spend over a hundred hours a year writing content for five years in a row now. Collectively, I think we all have a responsibility to help others if we have the capability to do so. So the question is: What are you doing to help reduce the wealth gap?

The other side of the equation is people who are purposefully widening the wealth gap through financial self-destruction. We know we need to work harder and later than the average person to make more money. We know we need to spend within our means and invest in order to build our wealth. Unfortunately, we often don’t do the logical, even if a logical proposal is laid out right before our eyes.

Below are some sharp comments from my 1/10th Rule For Car Buying post to give you some examples. The post’s goal is to help limit people’s spending on one of the most destructive expenditures to wealth around. If you are easily offended or feel bad that I receive such vitriol on a constant basis, you may want to skip to the conclusion instead. I love it, but I’m masochistic!

Top Financial Resolutions For The New Year

New Years ResolutionsHow many of you achieved last year’s resolutions? How many of you still remember what last years resolutions were? If you don’t write down your goals, you’re more than likely to forget.

Here’s a quick recap of my official five resolutions for 2013 written at the end of 2012. Only two are financial related.

1) Live Free. Although leaving Corporate America in 2012 allowed me to travel freely, I decided to take a moderate approach instead due to the unknown risk of no longer having a paycheck.

Result: Pass. 2013 was much more of how I thought a free life would be like compared to 2012 because all the building blocks were already set. The longer you go without an income, the more confident you are you don’t need a job to survive. 12 weeks of travel and setting my own schedule felt great. Now that I’ve experienced absolute freedom for over a year, I’m now considering going to work part-time for a start-up or even full-time if there’s a great fit.

2) Bring The Family Closer. My immediate family all live 5+ hour flights away. I plan to leverage my finances, the internet, and our shared interest for travel to keep our relationships healthy.

Result: Work in progress. I convinced my sister to invite our parents to go visit her during Thanksgiving last year, a win since they live 11 hours by flight away and her apartment doesn’t comfortably accommodate four people. She’s got a busy life and my parents don’t want to intrude. I’m very grateful to have crashed at my sister’s place for 10 days this summer. We had awesome life conversations that haven’t been discussed in over 10 years. Finally, several articles on FS helped open up some candid dialogue between my parents and I, which is always one of my intentions. 

3) Grow Net Worth Faster Than The S&P 500. It’s one thing to have the stock portion of your net worth outperform the S&P 500, it’s another thing to have your total net worth outperform the index. A 9% net worth increase should be feasible if my stocks and real estate equity grow faster than 11% (70% of net worth) to make up for my CDs and risk free assets which will only grow by about 4% (30% of net worth).

Result: Pass, but disappointed with 32% due to greed since everything went up huge in 2013. I understand why busy people appreciate leaving their money up for others to manage. It feels good knowing someone is looking out for your money manners as you go all out on your entrepreneurial goals. This is my main financial resolution I’ve had for 10 years. 

4)  Put My Finances On Autopilot. I’ve been using an Excel spreadsheet with over 50 line items to track all my expenses, assets, and liabilities manually for the past three years. I still enjoy keeping on top of my finances, but I want to spend less time focusing on the nitty gritty since my spending, saving, and investing patterns are pretty set. Instead, I’m leveraging technology to stay on the ball. To care less about your finances, you first have to care a great deal about your finances.

Result: Pass. After deciding on a savings goal, a monthly spending limit, a comfortable net worth allocation, and a travel budget for the year, that was it. I enjoy checking-in on how my boys are doing to make sure they’re behaving, but I don’t have an obsession anymore that takes away time from doing other enjoyable things thanks to technology. 

5) Smile Much More. When I was younger, a friend of mine nicknamed me, “Smiles” because I would always be smiling and not even know it. I’d walk by strangers on the street who would always weirdly smile back. As I entered into the real world of work, bills, graduate school, and financial responsibility, I think my smiles have faded. I’d like to regain this natural disposition and spread some cheer.

Result: Undecided. When I bashed my face that one night from too much partying, I may have thought to myself, there goes my smile due to the huge hole in my lip. But the doctor stitched me up good and supposedly the scar will fade over a year. But this goal really isn’t about physical appearance. It’s about being so happy you’re unaware about positive physical manifestations that occur that brings more joy to those around you. 

The Definition Of Cash Keeps On Expanding

Bar Chart Of Average Money Market ratesThe definition of cash used to simply be coins and paper currency. Then the definition of cash spread to checks, money orders, and even credit with the rise of financial institutions agreeing to hold your money for an agreed upon interest rate.

Banks and credit unions make money by making a spread on deposits. They take in your money and lend your money out at a higher rate. This is called the net interest margin, or NIM for short. The larger the spread on a larger deposit base the more money banks will make. Banking is one of the simplest businesses to understand in the world.

The main hurdle banks must overcome is that of trust. Banks need to be trusted in order to attract deposits given the definition of cash has now turned into simply numbers on a computer screen. We can all hope that banks will protect our hard earned money in good times and bad times. But when banks regularly lend out more than 5X their deposit base, sometimes bad things happen when panic strikes.

Since the financial crisis regulators have required a hike in bank’s tier 1 capital ratios, thereby lowering profitability as leverage is reduced. The side effects include lower compensation for financial services employees and much tougher lending standards for small business and homeowners.

ONE THING CASH IS NOT: CERTIFICATES OF DEPOSITS (CDs)