Who Is The Middle Class? We Are All Middle Class Citizens!

Something very interesting happened the other night at around 6pm PST. The traffic on Financial Samurai more than doubled for one hour between 6pm and 7pm PST. See the chart below.

State Of The Union Online Traffic Chart

I took a look to see whether some major media publication had highlighted one of my ~1,000 previously written articles. Nope. I searched over social media to see whether any of my publications were trending. Double nope. And then I finally went to see which keywords people were searching for, and what article they were landing on to provide this 100% organic bump in traffic.

Keyword search: Middle Class Income

Article stumble: Definitions Of A Middle Class Income: Do You Consider Yourself Middle Class?

Bingo! Traffic began surging after President Obama began giving his State Of The Union Address at 6pm on January 20, 2015. I never knew Financial Samurai attracted more Liberal readers given a strong focus on making an income that Conservatives like to promote. Or maybe traffic just rises when a SOTU address is made, regardless of political side. We shall see if a Republican ever becomes president again.

The coolest thing about having a a personal finance site that has a reasonably significant amount of traffic is that I can play political scientist with real-time proprietary data in my boxer briefs while watching the Aussie Tennis Open at 5am. Over 40,000 visitors in one day is statistically significant, especially when compared to Gallup polls who often survey just 1,000 people to extrapolate a conclusion.

What Is An Accredited Investor And Is The Definition Fair?

Accredited Investor, Wall St. Bull In The United States, an accredited investor is someone who has a net worth of at least one million dollars, excluding the value of their primary residence, or has income of at least $200,000 a year for the last two years or $300,000 together with a spouse, with the expectation to make at least as much every year going forward.

Once you become an accredited investor, you’re now allowed to invest in certain types of private investments, which are usually less liquid, potentially more risky, and sometimes more complex than public equities and bonds. These investments include: private equity, venture capital, angel investing, limited partnerships, and hedge funds.

I’ve written consistently about how I think an adjusted gross income of roughly $200,000 – $250,000 is the ideal income for maximum happiness due to the maximum you can put away in a SEP-IRA or Solo 401k, a more agreeable federal tax level, less persecution by the government, a more digestible AMT, and enough income per individual to survive happily anywhere in the world. Now we can include being an accredited investor as yet another reason to shoot for $200,000 – $250,000 in income.

Should I Get A Divorce? Weighing The Pros And Cons Of Separating

Mending a broken heart by Nicolas RaymondAfter reading Sam’s How To Prevent Your Wealthy Man From Straying, I’ve been thinking a lot about my own situation. You see, I’m the mother of three boys, and I’m the wealthy one in the relationship. As a government employee, I make about $78,000 a year, but my wealth really comes from my parents, who left me about $2 million dollars in real estate and investments when they passed away last year.

My husband is a finance professional who has floundered around in the finance industry for the past 15 years. He’s never worked for the larger, more prestigious banks, but always the lower tier financial institutions that never got any respect from clients. My husband isn’t the most handsome or the smartest man in finance, but he is very gregarious and sociable. Clients like him, they just don’t take anything he has to say seriously, if you know what I mean.

Let’s call my husband Jim. Part of Jim’s job is to travel around the country to wine and dine clients and make sure they are receiving the service they need. He usually goes for a couple days. One trip, I noticed his clothes smelled like female perfume. I’ve got a keen nose and knew it was Eternity for Women.

When I asked Jim why he smelled like CK’s Eternity, he shrugged. He said that the perfume probably rubbed off on his clothes after hugging his female client goodbye. He explained they all went to a bar after dinner. Fine, whatever.

Is Company Loyalty Costing You A Fortune? Here’s How I Lost $500,000 In Three Years

loyalty

Loyal dog. Woof

One of my regrets between 2007-2012 was not aggressively entertaining other job offers. By 2007, I had been with my previous company for six years and felt tremendous loyalty to the firm. How could I hop to a competitor for more money when my company first gave me a chance here in San Francisco? I now wonder whether the reason why I stayed at my firm for 11 consecutive years is because of my predisposition to feel guilty whenever something good happens.

Instead of leaving for another firm, I simply asked my boss in a nice way what I should do if they were me when I was getting aggressively courted. They always told me to stay and simply offered me a raise between what I was getting paid and what I was being offered by a competing firm. I never pushed them to match because I didn’t want to create a hostage scenario of resentment. Wall Street income is relatively absurd compared to practically every other industry, so I found it always distasteful when people complained about their bonuses.

But if I managed my career perfectly, I could have made $400,000 more after tax if I had accepted a juicy, two-year guaranteed income offer at another firm in NYC from 2010-2011. I left Wall Street in 2012 anyway, so it didn’t matter that I was going from a bulge bracket firm to a lower tier firm because I was never going back to finance.

Even after a four-hour interview with the interested company’s CEO in NYC, who so happened to be the eldest son of China’s former Premier, I still couldn’t take the leap out of loyalty to my firm. If you were a fly on the wall during our interview, you would have thought that I was some type of superstar based on the praise he gave. I stood stubbornly strong like a patriotic soldier and politely declined multiple times after.

NYC is a great place to visit, but pretty much sucks in terms of cost and work/life balance. Besides entering a much more stressful lifestyle for two years if I took the job, I was also hesitant to sell my house in 2010 given the real estate market was still depressed. Another concern was whether or not the courting firm would actually pay the second year guarantee if the first year performance results were not up to expectations. I heard stories of companies luring employees in with great promises only to welch during the second year. What was the new employee supposed to do after getting screwed in the second year but suck it up, sue his employer, or find another job. It’s not as easy finding another job if you’re coming from a small shop.

Although I missed out on some heavy dollars, at least I was able to negotiate a severance package from my firm of 11 years that lightened the blow. It would have been impossible to negotiate a severance if I quit after a two-year guarantee at the new firm. Manhattan is a wonderful playground if you have money. Alas, I’ll never know.

Increase Your Savings By Identifying Specific Reasons To Save

save money for freedom. Jamaica panorama

Save money so you can live a free life! Jamaican sunset

I was invited to join the TaxACT How I Save blog tour which shares ways to keep more money in your pocket. Last year, TaxACT saved America over $240 million on tax preparation. 

One of my main goals for 2015 is to save $100,000 in new liquid cash after spending too much money on remodeling in 2014. I got down to around $25,000 in liquid savings towards the end of the year and it just didn’t feel enough for me. Each person’s desire for liquidity is different given our living expenses and risk tolerance levels are all different.

The reasons why I want to have roughly $100,000 liquid at all times is as follows:

1) Minimum private equity investments generally are around $50,000, at least all the ones that have been presented to me. The last thing I want to do is only have $25,000 and not be able to invest in the next Uber.

2) It’s always good to have cash on hand when the stock market throws up. The general long-term trend is up and to the right. I want to implement my own advice on how to better dollar cost average with $5,000 – $10,000 investment increments at a time.

3) I have a goal to pay down my first rental property mortgage within 12 months. There is roughly $85,000 left in principal from this 11.5 year old mortgage (started at $464,000), which is starting to annoy me. I will be averaging roughly $7,000 a month towards paying down extra principal along with my usual monthly mortgage payment that pays down $1,100 in principal in order to achieve my pay down goal. Having $100,000 allows me the flexibility to pay it all off in one go, or give me the confidence to keep on my $7,000 a month plan.

Always Work On Improving Cash Flow For Financial Independence

Cash Flow For Financial Independence

Cash Flow by Jo Z-Sunny

The other day I asked a very wealthy entrepreneur about his main financial concern. He’s probably worth anywhere between $50 million to $75 million dollars. Given he has so much money, I thought his answer would be more philosphical, like “making sure my kids appreciate the value of money,” or “how to create a lasting legacy.”

Instead, the entrepreneur responded, “My biggest concern is making sure I have enough cash flow to maintain my lifestyle.”

I initially thought the answer was odd because why bother measuring cash flow given he can simply draw down principal to fund his lifestyle forever. $500,000 here, $1 million here, who cares? He’s still left with tens of millions of dollars left over! But maintaining a lifestyle that is meaningful to you is what having money is all about.

Many people with tremendously high net worth figures don’t have nearly as much LIQUID net worth as one would assume. People mistakenly think that just because someone has a $10 million net worth, that they can withdraw 10 million $1 dollar bills and make it rain. Instead, high net worth individuals likely have much of their net worth tied up in equity stakes that could disappear if a downturn like 2008-2009 ever happened again.

Just look at the guy who founded CNET, the technology online review site. He was worth $2 billion dollars, but after a divorce and leveraging up in 2007, he filed for bankruptcy. Every super wealthy person I know is well aware of how ephemeral wealth is. This is why buying real assets, like property or fine art is so attractive to many equity millionaires.

It’s Impossible To Stay Retired Once You Retire Early

Retired couple by Sebastian Flickr Creative CommonsIn the spring of 2012, I hung up my sword after working in finance since 1999. There was actually a hiccup the very last day of work, a Friday. When I was e-mailing some personal files from my work account to my personal account (pictures, tax docs, etc), I inadvertently e-mailed a five year old client file that was caught by compliance. I was warned this was a violation of company policy and that I would be hearing from them about any repercussions the next week. I apologized for the mistake and waited nervously about the fate of my severance check.

To allay my worries, I actually went to a free Hastings School Of Law community service event where law students and professors helped those with legal questions. They just so happened to host the event on what I thought was the first free weekend of the rest of my life. It was great to see the school give back to literally hundreds of people regarding questions about divorce, employment, accidents, theft, trusts, and more.

My question to a professor and to a law student was simply, “Can my firm take away the agreed upon severance contract due to a five year old company file that I inadvertently sent to myself?” Financial companies are notoriously strict about ex-employees transferring sensitive client documents that can be advantageously used against their old employer if they join a competitor. I told my company that I was retiring from the finance business altogether, but how could they know I was really telling the truth? In our business, few people voluntarily walk away from such paychecks.

After getting comforting council saying that I should be fine, I promised that day to NEVER go back to work in finance if I could still get my severance and deferred compensation. My new manager was in from New York City that day and was already busting my balls for the incident. I went a step further and promised to never go back to working for anybody. Hundreds of thousands of dollars were at stake and I was worried.

HR called me the following Tuesday and told me everything was fine in the end. They agreed the client file was irrelevant given it was five years old, and accepted my e-mail apology for the mistake. Once I got my severance check several weeks later I felt like I had sheepishly won the lottery. Instead of spending it all, I sat on it like I would any financial windfall. By the summer of 2012, the market had taken a little dive and I finally invested the entire amount in the stock market so as to make it disappear. I wanted to stay hungry and pretend I received nothing.