The Less You Have, The Less You Lose

In October of 2008, Warren Buffet lost about $9.6 billion on paper. Put it another way, that’s a freaking a lot of money! To also put it another way, in my chase to match Warren’s wealth, I caught up to him by about $9.599 billion dollars.

Many of us have lost a lot of money in this market, but we could have lost more if we were already very wealthy. I am absolutely positive that it hurts much more for some poor rich CEO losing $50million of his net wealth, vs us losing $50,000 of our own.

Now is absolutely the best time to be relatively young and buy all the assets we can. And since we have such a wonderful opportunity, it makes wasteful spending that much more expensive because of the potential returns down the road.

Who knows whether we are going to double dip in the 2nd half as unemployment marches to 11%+. What I do feel strongly about is that if we don’t buy some distressed asset now, we are going to be kicking ourselves in 20 years. Personally, my site is set on a vacation property in Nevada, Lake Tahoe. I hope to pick up a foreclosure that is 50% off of peak values, and that can provide a 8% rental yield vs. the current government risk free 10 year treasure of 3.54%. In 8-10 years, i plan to move there and pay 0% state income tax, vs. 9.6% here in California.

Readers, what do you plan to pick up for cheap in this recession?



To MBA or Not To MBA

I remember the moment I got my college diploma, I swore I’d never go to school again. At the end of the day, we forget the majority of things we learn and who wants to do homework anyway? All this changed when the Dotcom bubble exploded and I was left wondering whether I’d be the first person let go given I had recently joined my current job in 2001. Last in First Out, or LIFO as they say.

We had gone through 5 rounds of layoffs in 1.5 years, and I heard the 6th one was just right around the corner. As long as the firm would have me, I’d keep on working, but just in case, I needed a backup plan. I decided that surfing back home in Hawaii was not the proper backup plan so I came to a compromise and applied to the nearest part-time MBA program, which so happens to be ranked Top 10 in US News & World Report and the WSJ. The program promised the rigors of the full-time program, with the same professors and international opportunities all within 3 years. Upon looking further into my company’s policies, they offered to pay for my MBA so long as I was in good standings. The MBA program was a hedge, just in case I was one of the casualties, as one could potentially transfer to the full time program once accepted.

The 6th round came and went, and I was still left standing. Unfortunately, the company tuition reimbursement policy was canceled just two weeks before my acceptance. I decided to join anyway b/c at the end of the day, the economy was still shaky, and I didn’t want my application time spent go to waste. What the heck I thought. Be grateful for the opportunity.

Make 10% More Per Annum Forever – Move to Nevada.

With California heading towards the abyss, and taxes rocketing to the moon, I’ve toyed with the idea of leaving the state. Here’s an article in the San Francisco Chronicle highlighting homeless 24 year olds and rising unemployment even in a rich suburb such as Marin County.

From this other article, we learn that from the first stimulus package alone, the gov’t has borrowed $10,000 from each individual so far, and it is doubtful that the majority of people have felt a return on their $10,000 loan yet.  At any rate, it’s clear that taxes are going up in California and perhaps NYC, and we residents in troubled states should think long and hard about whether to stay or go.

Did you know that seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming? Two others, New Hampshire and Tennessee, tax only dividend and interest income. Alaskan residents even get an annual oil credit for goodness sakes.

If you’re earning $100,000 a year, you’ll automatically save $10,000 bucks just by setting up shop in another state. Multiply this by 20 years, and bake in a 4% annual return, you’ll come out with $310,000 more in the bank! Even 10 years provides you with about $125,000. Hey, who wouldn’t want an extra $125,000 laying around. I could finally buy that Porsche 911 Turbo I’ve always wanted! Must resist temptation.

Obviously relocating is easier said than done. Hence, another strategy should be to simply set up residency in one of the 7 states after one retires. This is one of the key benefits of retiring early. Amass the nut, and save 10%/annum on your interest income every year for the rest of your life. Setting up residency is easy. Just buy a place, or rent some cheap studio… maybe even a habitable closet and call it home. The more money you make, the more you should consider moving.

Seattle, Incline Village in Lake Tahoe would be my top two choices. I’ll just get in trouble in Vegas!

Recommendation: I’ve been doing my own taxes with H&R Block At Home for the past ten years. H&R Block is so easy to use, anybody can do their own taxes with their step by step guide with audit protection plan. The program has consistently found thousands of extra dollars in tax savings I did not realize I could have. Why bother paying an account hundreds of dollars when you can learn more about your financials, find extra tax savings, and do it all from the comfort of your own home? Get the H&R Block At Home Online Free Edition!


Sam, Financial Samurai – “Slicing Through Money’s Mysteries”

Bank of Mom & Dad – Should We Spoil Our Children?

Do you remember that colleague who always seemed to have the latest and most fancy clothes? She’s your same age with your similar salary and you’re slumming it with Old Navy and 5 dolla foot long subs (half of which you save for lunch tomorrow!) while she carries a Gucci bag and eats sashimi for lunch. What about that guy who drives a $50,000 BMW 335i coupe one year out of school while you still chugalug with your 10 year old Civic, or better yet, your shiny bus pass? What’s up with that you wonder.

I used to think these young folks just had nice high paying jobs and made home run investments in college, but maybe not so much anymore given the absolute armageddon we’ve seen. The older you get, the more you realize there’s a lot of smoke and mirrors. I remember going to at least 25 open houses one summer in 2004, and I swear to you that 80% of the lookers had parents looking to buy their adult child a place. “But mom, I want a view of the city from my bathroom,” said one young buck. “Oh honey, what what do you think of this nice Brazilian cherry wood?” Bleh. Go to a car dealership, and you’ll find the same scenarios. It’s not unheard of that parents will subsidize or pay completely for their children’s rent, as well as provide an allowance. “Dad, I just have to have that Rolex Yacht Master II watch!”

Should we encourage parents to support their kids after college? Why not, if their child doesn’t have a job or much money. But, how do college graduates learn about personal finance, if all they are doing is receiving hand outs from parents and splurging on wasteful crap? They don’t, because they don’t need to, and that’s fine by me because we need them to consume like mad to help get this economy moving again! At the end of the day, it’s really none of our business what other people’s parents choose to do for their kids. Heck, if you were rich, and could donate a lot of money to get your kid into Harvard, wouldn’t you? It’s just the ostentatious righteousness that may get to us.

The real question is, should we pay back our parents, and if so, when? I say yes, and whenever we have the means to do so. They put the investment in us and many have paid for our education. Why not pay our parents back at least in real terms the money they spent on us from ages 18-22? Many of us in our 30′s have parents who are retired and rely on a fixed income. How nice it would be if their kids started sending them a check for a couple hundred bucks a month for the rest of their lives. I’d sure like that little Social Security bonus when I’m retired!

The issue of Bank of Mom & Dad is that of jealousy. Instead of letting it eat you up inside, use it as motivation to get ahead.  Readers, feel free to share your thoughts on the subject!


Financial Samurai

“Slicing Through Money’s Mysteries”

Do Rich People Try Harder?

After 10 years in the hyper competitive world of finance, when Type A personalities dominate, and Type Z personalities fade, the one constant observation is that the most successful people all work harder than the rest.

Take Bob for example. He’s probably worth at least $10 million bucks at age 50, but he still gets into work at 7am (vs. the norm of 8am) and is the last to leave at 8:30pm! Nancy, is the mother of two kids and she comes in at 7am everyday as well and almost always stays till 6:30pm. Is it a coincidence that both are the two most senior and successful people in the office? I say no.

Contrast Bob and Nancy with Tim. Tim was a 24 year old who could never come in on time (8:15am), and would always try and leave by 5pm on the dot. He had no heart, and he felt entitled to reap the rewards without putting in the hard work. Does each generation always feel that the next generation is somewhat lazy? It seems that way. I think it’s because the older generation feels that if the younger generation does not treat them like them like the older generation treated their seniors, then it’s a slap in their faces. Tim wasn’t satisfied making six figures the first year and a half out of school, and was let go.

Sure, some people are more efficient, lucky, and are naturally gifted at their jobs. However, in the long run, there’s one variable you can control in your career, and that’s how hard you work. Remember that nerd in High School who just studied every night and got straight A’s? Well, it’s not a coincidence that he went to some top school afterwards and is a doctor at age 30 ready to make multiple six figures a year until forever.

Give me a hard worker and a team player over a lazy star any day! Readers, would you agree?


1) Get in first, and leave last for at least the first year of employment. There is NOTHING a manager hates more than a staff which comes in after him/her. Seriously, the manager will start thinking rightly or wrongly how lazy you are, and how so many other candidates would die to have your job. He’ll reminice about when s/he was younger and would always come in first and leave last, a tremendous amount of bitterness will build up before s/he blows you up in your review and ultimately puts you on the Reduction in Force (RIF) list. If you are going to come in after your manager, you better also leave after your manager. Needless to say, don’t come in last and leave first! Don’t be lazy!

2) Identify who are the rising stars at your firm and latch on. The rising stars are apparent. The star is the one who gets a long with everybody senior or junior. The star could be the youngest VP promotion in the office. The star is going places, and you want that star to pull you along. Just look within the senior management of your organization. You will notice that many of them started in the same departments together and have known each other for years. They take care of each other b/c they have trust in one another. They promote each other all along the way. You need to get into that circle.

3) Don’t ever whine and don’t be a prick. The second most annoying thing a manager or co-worker hates is a whiner. When all one does is complain, it just starts to sound like “blah blah blah blah blah blah, i am the greatest and deserve more.” And after a while, your manager will just think to herself, “if you don’t like it here, then cya later!” Whining is for losers. Just suck it up, accept your perceived misgivings, and find solutions to move forward. Good managers are actually more aware than you think. They know when there is injustice at times and they hope their employees won’t complain. When that employee doesn’t complain and sucks it up, the manager is going to make it up to you one way or another.

4) Manage up! Managing up is complicated. The Harvard Business Review has a great case study on this. Managing up is an art, that must be carefully painted. The goal is to simply gain your managers trust, provide your manager with information on productive work you are doing, and mostly to make your manager look good! If you can make your manager look good to his or her bosses, then you will look good. Treat your manager as your client, and always look to him/her for guidance. If you confide in your manager, you will gain his/her trust. NEVER go around your manager to his boss. That is another sure way to get put on the RIF list.

5) Create your support web. Finally, sometimes being tight with your manager is not enough. Many organizations are consensus driven when it comes to promotions and pay raises. I do strongly believe that 50% of your effort should be to sell yourself internally, and 50% is to sell yourself well to your clients. You can be the star sales person, but if you have no backing internally cya later! Conversely, you can be loved by everyone, but eventually when the downturn hits, you will be at risk if you suck at your job. Getting put on the RIF List is as simple as one senior manager asking his junior manager “Hey Junior Manager, who do you think should be on the list?” “Well Bigger Boss, Trina has been a pain in my ass for the past 6 months.” “Ok, Junior Manager, put her on the list”. In downturns, those who have the smallest support network get fired first, even if they are solid performers. It’s human nature to keep your friends. And when things get really bad, the bottom tier with great support will then follow due to the inevitable need to drive profits.

At the end of the day, if you can do nothing else, just buy a money alarm clock and execute option #1 flawlessly! The best quote of all is simply “The harder I work, the luckier I get.”

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Financial Samurai – “Slicing Through Money’s Mysteries”