Your Net Worth Is An Illusion, Sorry To Spoil Your Delusion!

Unless your house is fully paid for, and unless you can access your retirement accounts today, your net worth is an illusion.  Although we’ve recovered quite a long way over the past 18 months, I don’t think we can really count on property, stocks, and private equity investments to be there when we need them.  The recent market volatility reminds us to get realistic!

The only thing we can really count on is cold, hard cash.  I find it very misleading, as well as a little disingenuous that some say they are millionaires, when 70% of their net worth is tied up in an illiquid asset called “home equity.” Your home is only worth as much as someone is willing to pay for it.  Even your 401K and IRA are suspect because those accounts can easily collapse.

A TYPICAL ASSET SIDE OF A NET WORTH CALCULATION:

Why Do People Spend More Than They Earn?

Why is it that the #1 re-occurring theme in the personal finance community is addressing how to eradicate debt due to overspending?  What is it that makes a rational person spend more than their income allows?

If you have $5 bucks in your hand for a Subway sandwich, how do you go to Morton’s Steakhouse and borrow $35 to buy a $40 rib-eye?  If you make $50,000 a year, why would you buy a $50,000 BMW with a $45,000 loan?  After overhearing what a father told his daughter at the Porsche dealer this weekend (it was on the way home), I have a feeling spending irrationally starts when we are kids.

The Mortgage Dance of Money: Should I Pay Off My Mortgage Or Not?

“Should I pay off my mortgage as soon as possible or not?” is a common question which warrants more attention now that mortgage rates are back down to record lows as of June 29, 2010.

The answer is pretty simple actually.  You should pay off your mortgage sooner if you have the money. By the way, the sky is blue.  Thanks for nothing, you’re thinking.   However, if you really think about it, that’s the right answer!

It’s all about balancing your debt/cash ratio.  Build up too much home equity (prepaying) based off of your own principal payments, and you run the risk of blowing yourself up when there’s a cash crunch due to unforeseen circumstances.

Your conservativeness of paying down your mortgage ironically INCREASES your chance of financial doom.   Not paying down your debt sooner, on the other hand, inhibits you from maximizing your returns.  Dance with your mortgage without stepping on its toes!


THREE VARIABLES TO CONSIDER BEFORE PAYING DOWN YOUR MORTGAGE:

Serena Williams Is NOT A Nerd. We’re Sorry!

Apparently someone sent over last week’s article, “Revenge of The Nerds: Golf and Tennis Are #1″ to Serena Williams, and it just pissed her off!  Serena’s anger built up so much, she finally blew her top  against a lines official after calling a foot fault.  Serena screamed, “I swear to God, I’m going to take this ball and shove it down your f*cking throat!”  We then noticed her mumble something like, “Can’t believe some stupid website called me a nerd” and went after the lines judge some more!

Serena, we just wanted to make a public announcement that the staff over here at Financial Samurai didn’t mean to call you a nerd specifically.  In fact, our point of the article was to highlight you are the #1 most popular female athlete in America, and provided inspiration for all us “nerds” growing up!  With your glistening guns, aggressive baseline attacks, and $30 million a year in earnings, we were impressed!  However, after last night’s outburst, and you not willing to apologize afterwards, we’re not your fans anymore.

Every minute you wait is literally dollars out the window, Serena.  In fact, we hear Puma executives are on a conference call right now discussing the fate of your endorsement contract.  What’s compounding the problem is that Kim Clijisters is one of the most beloved players on the circuit.  She just had a baby a year and a half ago for goodness sakes, and is now the US Open champion!  Way to go Kim!  Serena, hurry up and apologize to the world!

Financial Samurai’s,  besides Ohio State University blowing their 5 point lead to USC with several minutes to go in the 4th quarter, Serena’s outburst is topic du jour!  If you haven’t hit the public courts and found a tennis partner since “Revenge of The Nerds: Golf and Tennis Are #1″ was published, make sure you have an opinion on these two events come work time tomorrow.  Seek out your sports crazed senior colleagues and banter!

Keigu,

Financial Samurai“Slicing Through Money’s Mysteries”

Why I Can’t Bank At Wells Fargo

A Wells Fargo Senior VP, Cheronda Guyton moved into a foreclosed $12 million mansion with her family and hosted extravagant house parties.  Meanwhile, her job is to figure out how to profit from foreclosures (well done!), but she didn’t allow brokers to show the Wells Fargo-owned place because her family was squatting!

I knew there was something funny a couple years ago, when I was talking to one of their mortgage brokers and the rates he was quoting were 50-100bps higher than everyone else.  Bank of America got my business instead.  Too bad Ken Lewis was so empire-building driven and panic bought Merrill at the market open, instead of after the close.  What’s $25 billion more between between shareholders?

Given we live in bizarro world, don’t be surprised if Wells Fargo goes ahead and promotes her to lead up a different department.  After all, Wells Fargo does technically own the foreclosed home, and can do what they will.  Their $60,000/month vacation rental asking price might sound excessive, but not as excessive as Cheronda Guyton not letting anybody rent it out because she wanted to pump up the base herself!

Great to see our $25 billion in tax payer bailout money be put to good use.  Thanks for everything Cheronda.  Tell you what guys, since we are PR experts here at Financial Samurai, why don’t you Cheronda donate the $240,000 in lost rental income to the LA firefighter’s fund, and ask your employer to match it.  Here’s your article with further details.

Keigu,

Financial Samurai – “Slicing Through Money’s Mysteries”