Financial Samurai » daydreaming

Feeling Like A Burden Is A Terrible, Terrible Thing

admin — Wed, 07 Jul 2010 09:00:49 +0000

"Carried By The Wind" by Veronika Nagy

My nose plugs up and I can hardly breathe when I’m around cats too long. I don’t know why I’m allergic, I just am. One time I stayed over a friend’s place with three cats, and I woke up with red hives. It was a surprise that I was able to fall asleep at all, because I could have sworn I sneezed over 100 times until the underside of my nose bled.

One of my best friends invited me over to visit her childhood home this fall. Her mother lives near Boston, and unlucky for me another downside of East Coast living is the enormous pollen count. I remember countless days when I couldn’t go to work because my allergies were so bad. Ever since moving out West, my reactions have been much tamer. The San Francisco Bay acts as a natural filter, sucking out stagnant air to sea.

In addition to being out East, my friend’s mother also has a couple of dogs and cats! She sees this trip as a fun homecoming to introduce me to where she grew up. To me, I have no attachment there and it’s like going to a gas chamber for vacation. Imagine only being able to breathe through your two front teeth. That’s how I feel sometimes when allergies attack. You can’t get enough oxygen, so you aren’t able to speak. You lose energy and let sleep take over even though it’s in the middle of the day.

THE QUIET PLEA

When I asked my friend if it was OK to ask her mother if she could put the two cats in the basement during our visit, she paused. Sensing her objection, I offered up a solution of putting the two cats in the basement only at night, and let them out during the day when we go out and explore. Another pause. Fine, at which point I felt thoroughly disappointed. I’ll just go get a hotel room for $100 bucks a night I tell her, which is absolutely silly because there are two perfectly empty bedrooms at her mother’s house.

There was no compromise with my friend. She mentioned that one of the cats would object and start meowing and clawing at the door if she was left down in the basement. Oh really? That’s too bad. It’s not like a dungeon down there. I’m well aware of East Coast homes where many of them have fantastic basements filled with TVs, furniture, beds, and wet bars. A thousand square feet of living space for a cat is like 10,000 square feet of living space for a human. Nope, she doesn’t think it’s a good idea and is hesitant to ask her mom, who so happens to be very nice.

I’m sad, because when she comes over to my parent’s house, there’s nothing we won’t do to accommodate. For example, my parent’s house has a crazy neighbor on one side. The neighbor often talks out loud to herself and busts out in song. Her dog barks incessantly, and we are forced to hang out on the other side of the house sometimes. One visit, I found my friend sleeping on the sofa in the living room due to the noise, and that bothered me. It bothered me so much that I went with my father to see if we could get some airtight, double paned windows so she wouldn’t have to wake up in the middle of the night. Isn’t that a thoughtful gesture? I’m thinking of the future. We’re going to get those installed, I promise.

I’LL TRY HARDER

If I was mega rich, I wouldn’t feel so bad about my friend choosing her cats over me. I would say “no problem” to $100/night motel rooms, and would probably want to stay at $300 a night resorts where I could be pampered with room service, a spa, fine dining and other amenities. But, no, I’m not mega rich. I work on a loose budget and like to save money where I can.

So here is another reminder as to why I seek financial freedom. I don’t want to get my feelings hurt if I have to be compared against someone or a fuzzy animal. I gave her a couple chances to see if she could accommodate, and she just stayed silent. I don’t want to be sad or angry at my friend for putting her in a tough decision. I know she loves her cats dearly, but some would say that we are in love too.

Send me to the Four Seasons and let me spend large sums of money for a hotel room even if a cozy room is available for free. I’m sorry for being a burden to you and your cats dear friend. It’d be nice to discover medication and fancy, non Darth Vader-like contraptions that can help alleviate my allergies, but nothing seems to work. For now I’m no better than a cat, which is enough motivation to write this post and work harder at achieving my financial goals.

Readers, what are some of the things that frustrates you or makes you sad, which could be alleviated by having lots of money?

What would you do in my situation? Would you still bother going?

Maybe I’ll just go up to Tahoe and do some soul searching. She’s a lovely person and perhaps I have to just change my expectations.

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Personal Finance Bloggers Cause US Retail Sales To Plunge!

admin — Fri, 11 Jun 2010 14:00:16 +0000

May retail sales drop 1.2% or the most in 8 months as more and more people turn to personal finance bloggers for frugality advice! I’m pretty certain nobody has ever come up with this statement, but think about it for a little bit. Why is it that the public should take personal finance advice from BusinessWeek, for example? The articles are written by relatively well-paid writers who are on a mission to report the news. They do a fine job at that, but perhaps not as fine a job making things visceral like the personal finance community. What’s more personal than a real person like Jeff delivering pizzas to get out of debt? Not much!

It’s very hard for the mass media to compete against a team of personal finance bloggers such as the Yakezie. We’re real life people responding to comments and putting ourselves out there. There’s a two-way street with us. If I were Editor in Chief of any mass media publication, I’d go out and hire an bunch of influential personal finance bloggers and put them on my payroll. $75,000 a year will do or perhaps $150,000 a year if you want us to write an article a month exclusively for you. By doing so, the Editor will inject new life, new readers, and therefore a wealth of new advertising dollars to the publication.

As evidenced by May’s retail sales figures, we are creating the news with our frugal ways instead of just reporting the news. There’s a movement underway, can you feel it? Maybe we’ll band together and talk about how we should never buy new cars again, causing June’s new car sales to dip. Or maybe we’ll discover how amazing one person’s unsung journey is to fight poverty in Uganda and direct millions of dollars their way. That counts for something. Let’s make a palatable difference with the words we write. Someone is out there listening.

Have a great weekend everyone!

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Is Becoming A Millionaire The Rule Rather Than The Exception?

admin — Tue, 01 Jun 2010 09:00:02 +0000

Dr. Thomas J. Stanley wrote a great book called “The Millionaire Next Door” where he surveyed a bunch of folks and discovered millionaires for the most part are pretty simple, everyday people. The next door millionaires drove second hand cars, shopped at Walmart, and lived in sub $500,000 houses which were of course, all paid off. Part of the reason why Dr. Stanley’s book is such a big hit is because he appeals to a mass audience and shows us we can all be millionaires because there’s nothing really special about them!

Hence, like getting your college degree, is becoming a millionaire by the time you retire fast becoming a rule rather than the exception? The answer is “yes” if you ask Dr. Stanley and all the next door millionaires. In fact, they are probably all shaking their heads at those who can’t get there because it’s so easy for them. Success skews reality proclaims Roger at The Amateur Financier. So true. If you’re rich, you think everybody is rich or should be rich.

SO EASY, EVEN A KNUCKLEHEAD CAN DO IT!

People are fooling themselves if they think only 6%-9% of all households have a net worth of more than $1 million in America. The data only tracks what is reported and plenty of wealthy people do not report the full extent of their assets. As such, I’d venture to guess the percentage of households with at least a net worth of $1 million is more than double the stated levels.

Someone who makes $60,000 a year on average for 30 years earns $1.8 million in gross income in his or her lifetime. Save just 20% of $1.8 million, or $360,000, and let that money compound at 4% leads to well over a million dollars. Look at the lower right hand side of this site and you can see the income breakdown of 400 submissions. It’s clear more than 6-9% make over $85,000/year. In fact, over 40% of the participants make over $85,000 a year, which means after 30 years, the individual has raked in at least $2,550,000! It would take a big time knucklehead to not be able to accumulate over a million dollars by age 60.

CONCLUSION

There is more wealth out there than you can ever imagine. Right here in San Francisco, 450 workers make over $100,000 a year just from their pensions! That’s just the public sector. If you look at those working at Apple, Google, Yahoo, Facebook, eBay, you can pretty much guarantee that a large majority of them will retire millionaires if they aren’t millionaires already. Let’s not even mention all the doctors, lawyers, venture capitalists, bankers, consultants, firefighters, policemen, and trust fund babies who make tremendous sums of money. There is plenty of money running around so why shouldn’t we all have at least a million bucks by the time we are 50, 60, 65 or whenever we want to retire? We all should!

As someone once said, “Don’t share the wealth. Go out and get your own!”

Readers, what do you think? Is becoming a millionaire the default setting for all of us? Should we scratch our heads and scoff at those who do not achieve this once lofty goal? Are people who make over $85,000 a year knuckleheads for thinking a $1 million net worth is unachievable?

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

The Katana: 200th Post And A Thank You To All Readers!

admin — Mon, 24 May 2010 09:00:00 +0000

Dear Readers,

It’s been a wonderful journey so far and I want to thank you for visiting my tiny slice of the matrix. We may not always agree, but that’s the beauty of it all. Through differences of opinion, we’re allowed to learn from each other and flourish mentally, and hopefully financially as well. Besides, it’s not like I’m going to hold your puppy hostage or something if you challenge my opinion! Hope you feel the same.

Sometimes it’s hard to to respond to all of your wonderful comments (7,100+ so far), yet I will always try. I wish there was an easy way to tag all of the most interesting comments and show case them. Perhaps I still will! It’s so fun to visit other sites, comment, and interact, I want you to experience the same here.

Each blog has a different personality and tone to it. I’d like to think that Financial Samurai is unique with a flavor that challenges conventional thinking. We can go back to basics regarding budgeting, savings, and retirement planning. Or, we can continue blazing new trails. It’s really up to you frankly. What would you like to read more of going forward? Generally we should enjoy writing what we’d enjoy reading.

Finally, I thought it would be fun to dedicate this song to all the female readers who helped share their viewpoints. Five String Serenade was composed by Mazzy Star in her 1993 album, So Tonight That I Might See. The original plan when I learned Five String Serenade 12 years ago was to sing to a girl after an evening picnic on a beach somewhere. I never got the chance until recently, and now it’s been recorded, in my own version for you. Funny how things never turn out quite like you plan.

Here’s to another 200 posts! Thank you again!

5 POSTS THAT COME TO MIND

Diamond Engagement Rings Bling Bling! - A comprehensive guide to getting the right stone and understanding what women really want. Furthermore, you’ll find a new rule on how much to spend. It makes perfect sense!

Everything Is Rational – The Answer To All Things Irrational – There’s no need to question anybody for their choices ever again. It’s good to mind our own business and not force our will on others.

The Curse Of Making Too Much Money And Not Pursuing Your Dreams – A story about someone who makes multiple six figures, but is thinking about giving it all up for his hobby.

If A Panda Didn’t Look Like A Panda, Would The World Still Care? – A look into how we’re fooled by attraction, and why it’s necessary to floss and brush your teeth.

Don’t Have Children If You Can’t Take Care Of Yourself - A discussion about the cost of kids and why we have so many when there are so many orphans who need our help.

SOME MEMORABLE POSTS FROM AROUND THE WEB THIS MONTH

Thank You To The Militant Who Stole My Car by Wandering Earl. One of the best personal adventures I’ve read in a long time. Furthermore, it’s personal finance related!

Living On One Income by Centsible Life. A nice story about going from multiple jobs to just one, and making more than all combined. Hope you can show us more on the how for your next post!

Low Interest Rate Savings: Beating The Odds By Investing In Your Mortgage by Money Funk. A logical solution in this low interest rate environment. Great mortgage calculator widget find!

How I Survived Two Armed Robberies And So Can You by Len Penzo. Another great story. Don’t be a hero and look away while keeping your hands visible!

Keigu,

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

The List of Jobs I’d Do For Free Baby!

admin — Wed, 12 May 2010 09:15:48 +0000

If you feel like debating, head over to “The Dark Side Of Early Retirement” and get your fix. I stand by my main thesis that nobody quits a job they love to do. Someone who is able to find a fulfilling job is one of the luckiest people on Earth. We shouldn’t make fun of them for being a “loser” as one commenter put it. Instead, we should figure out what makes them tick!

Everybody gets bored at something after enough repetition. That’s why it’s key to have many different interests which straddle both the mental and the physical aspects of your life. No surprise that interesting people have a plethora of interests. These people also probably have a higher than normal level of commitment to their activities which make them that much more intriguing.

THE TOP 5 “I CAN’T BELIEVE THEY’RE PAYING ME TO DO THIS!” JOBS

1) Tennis instructor at the 4 Seasons in Bora Bora. Crystal blue waters and sunshine, two of the best things, which also so happen to be free in life! You can be dirt poor, but if you’re living in a place like Bora Bora, I venture to guess you can compete with any rich person in a downtrodden, polluted land. I think it’d be great to meet new travelers through tennis and keep in touch online.

2) Snowboard instructor for The Lodge at the base of Vail, Colorado. Nothing beats the back bowls of Vail! We’re talking 10 minute wide open, steep, tree-less, and massive powder runs! The Lodge is a quaint resort, and every time I go to Vail I meet some very interesting people.

3) TV sportscaster for college football and basketball. I literally could watch college football and basketball all day and night long, to the dismay of some! That said, I don’t and pick and choose so as to not over indulge. When college football and basketball season start, my excitement literally goes up a notch.

4) Food critic for Michelin. Yes, for starters I would like the Black Truffle Salad and Yellow-fin Tuna Carpaccio. Please pair with a bottle of 1974 Chateau Montelena Chardonnay. For the main course, I’ll have the Butter Poached Maine Lobster with a cup of extra melted butter on the side. I’ll pass on your selection of caviar and artisan cheeses and go straight for the Mandarin Souffle. Oh, and here’s my business card.

5) President of The United States. There’s no amount of money in the world enough to match the stress of being the Commander in Chief. Hence, I’d rather not take a salary and serve my country for free. One of the first steps as President? Institute a flat tax so we no longer have to discriminate against hard working American citizens who’ve struggled to get to where they are! I’d also reduce military spending to fund education. It’d be awesome to take Airforce I and a bunch of family and friends to Hawaii like the President does every December. Meanwhile, winning the Noble Peace Prize for being in office after one year ain’t too shabby either!

THE NEXT TOP 5 JOBS THAT COME TO MIND

6) Masseuse guinea pig. Rub me baby!

7) Blogger. Financial Samurai is so fun, thinking about monetizing just isn’t on my mind for this site. It’s just a blast learning from y’all meeting new people and gaining perspective. If someone wants to pay to advertise, great! Someone else who needs the money more will receive it. If not, that’s OK too. The next project will come out by mid August, and I’m working hard behind the scenes to make sure it gets executed.

8} Late Stage Film Critic (Academy Awards). I say late stage because I’m specifying the desire to critique only the best movies that have already passed the gauntlet! You know, movies such as Shawshank Redemption, The Matrix, The Usual Suspects, Hot Tub Time Machine and many more, which only a late stage film critic would get to review. What joy!

9) Travel writer and photographer. I don’t know how to take wonderful photographs like our friend Lyndon, but I do love to travel and write on occasion. Send me to Barcelona or Rio de Janeiro to write about their favorite foods and secret gems I’m there! Put me on a train towards Amsterdam to write about whether locals really eat special brownies after lunch, no problem!

10) English teacher in a non English speaking country. If we can’t communicate properly, we’re wasting our potential. Given English continues to become the global language standard, teaching English to those who wish to speak English is very important. Let me go see if the Maldives or somewhere in the South Pacific needs an instructor.

CONCLUSION

So there you have it. I love travel, sports, eating, and writing. Many of these jobs provide free lodging (White House anybody?) and food (4 Seasons) can literally be done for free. When it comes time to retire at 45, I’m prepared to incorporate these elements into the next stage of my life. Perhaps I can be a travel writer in Bora Bora in the morning while teaching tennis in the afternoon? Perhaps I can be a traveling food and luxury resort critic on my site, while letting the new spa staff give me full body massages before they work on paying customers. At any rate, I look forward to early retirement by 45, because I’ve got a full docket of things planned!

Readers, what are some of the jobs you’d be willing to do for free?

Keigu,

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

Where Did All The Time Go?

admin — Mon, 03 May 2010 09:45:20 +0000

Looking back at history brings mixed emotions of happiness and fear. How can it be that 20 years have passed since Pearl Jam was huge and mullets were still in? It can’t be, can it? The 90′s don’t seem too long ago, yet so much has happened since.

People say that we’ve just experienced the lost decade, given the lack of returns in the stock market. I disagree completely. What’s more important here is ironically nominal increases not “real”. If you compare what you have now to what you had 10 years ago, I’m pretty sure you have lots more. Heck, some of you may have still been in school or had absolutely nothing but a tit to suckle. You may have developed a business, or found someone over the past 10 years. Rest assured you’ve made a lot of progress.

The one thing we have less of is time. 10 years past means 10 years less of life to go. I think about what I’ve done and what I’m doing in 5 to 10 year blocks all the time. If I plant the seed now, will the project be worth something in 5 years? If I slave away at business school part-time, will I be able to leverage the degree and the relationships 10 years down the road? If I master one guitar song a month, will I be able to play 6 albums worth of songs in 5 years? The idea is to just start now and stay consistent. You ignore the short-term tribulations and just focus long term.

The problem is that eventually, we all run out of rope. That’s when we can only look back and hopefully smile at all the things we’ve accomplished.

A SONG THAT CAPTURES THE QUESTION IN THE TITLE

“Name” by The Goo Goo Dolls

And even though the moment passed me by
I still can’t turn away
Cause all the dreams you never thought you’d lose
Got tossed along the way
And letters that you never meant to send
Get lost or thrown away

And now we’re grown up orphans
That never knew their names
We don’t belong to no one
That’s a shame
But if you could hide beside me
Maybe for a while
And I won’t tell no one your name

Scars are souvenirs you never lose
The past is never far
Did you lose yourself somewhere out there
Did you get to be a star
And don’t it make you sad to know that life
Is more than who we are

You grew up way too fast
And now there’s nothing to believe
And reruns all become our history
A tired song keeps playing on a tired radio
And I won’t tell no one your name
And I won’t tell em your name

I think about you all the time
But I don’t need the same
It’s lonely where you are come back down
And I won’t tell em your name

If “Name” was introduced today, I’m sure it would be a smash hit. Perhaps that’s the idea, to create something that’ll be great, no matter what time period it’s introduced.

Click the below link if you dare hear my attempt to sing “Name” with Mags, my acoustic guitar. Part of my new year’s resolutions is to play, sing, and record 10 favorite songs. I’m not quitting my day job don’t worry, but here’s #1! Thanks Shane Mac for suggesting what mic to buy, and inspiring me to go practice. Mad respect for those trying to make it as musicians.

“Name” by The Goo Goo Dolls sung by Sam

Readers, what’s your song? Any acoustic guitar players out there?

For those who are singers, musicians, and visual artists, how do you get over your fear of performance and display?

Any clever ways to make time seem like its slowing down?

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

The Dark Side Of Early Retirement

admin — Fri, 30 Apr 2010 09:08:45 +0000

If you look carefully around the web, you’ll read scores of articles about the desire to retire early. Yours truly wishes to finish up no later than 45, as I believe working for 20 or so years is a long enough time. I’ve done the math with various living and return scenarios and it can be done. But the question is whether it’s a good idea? Perhaps not.

Now that the economy is in recovery mode, it’ll be interesting to see how attitudes change towards early retirement. Will those who’ve short circuited their careers feel the pull to return to full time work and maximize their earnings potential again? I believe so. What about all our “lifestyle design” and “digital nomad” friends who had a rough time landing something stable they truly love? Possibly they’ll come back too.

Those who are able to retire early are often cherished. I certainly admire those who are able to cut down their desires to the bare bones and live a very frugal lifestyle. I also admire those who’ve been able to strike it rich very early! That said, perhaps early retirement isn’t a good idea for the large majority of people. Let’s explore several reasons as to why people want to retire early, why they exist, as well as understand why it may not be a good idea. Someone has to argue the other side, so it might as well be me.

WHY PEOPLE WANT TO RETIRE EARLY (IT ISN’T THAT OBVIOUS!)

1) Haven’t found the right job. The number one reason why people want to retire early is because people haven’t found a job that gives them enough fulfillment to do for the rest of their lives. Nobody quits a job they like. If there was a job paying $80,000 a year to hike in the mornings and get massages in the afternoon, I’d do that forever!

2) Easier way out. People give up or are sub-optimal performers at what they are doing now. Let’s say you are a research scientist who after 10 years never produces any relevant research, and finds no cures. Instead of going on with your failure, you decide to give up, and get out of the game. Early retirement is kind of like the cowards way of not having to be the best any more. Some even liken it to suicide.

3) People are lazy and want things now. Society has shifted our ideals from hard work and thinking long term, to instant gratification. Nobody has the patience to work for decades before being eligible for a pension. We all think we know more than we do, and deserve to be the rich boss now. When we don’t get our way, we quit, rather than letting people know we couldn’t reach our potential.

4) A feeling of hopelessness. During the downturn, a tremendous amount of people began writing about a location independent lifestyle, and breaking free from the 9-5 and really doing what you want. It’s because of this downturn, that many people were displaced, and had nowhere to go. If they did, perhaps they’d think differently. In an economy where everybody is losing money left and right, what’s the point of working?

5) Realization that time is precious. With the median lifespan hovering around 80 years old, you only have 15 years of retirement to enjoy your life if you retire at 65. People in this camp have a heightened awareness of time, and therefore do everything possible to make sure they are financially stable sooner, rather than later. I’m a strong believer in this thought process, but at the same time, I don’t want to cut short my potential.

THE DANGERS OF EARLY RETIREMENT

1) Oops, you change your mind. Imagine retiring at 37 after 15 years of work after undergrad. You spend the next 3 years traveling the world, living a leisure lifestyle and experiencing new things. At age 40, you realize the reason why travel and play is so fun is because of work! You have the urge to get back into the game, but who’s going to risk hiring a 40 year old with a 3 year employment gap? The employer will suspect you are rusty, and may just bolt after a year.

2) You run out of money. No matter how conservative we are in our retirement money needs, something unforeseen may happen. Maybe you have a medical disaster, or your house blows down. Maybe your investments tank due to a massive economic downturn. Who knows what the future holds. But if you partake in “normal” early retirement, without the mega-millions windfall, you may find yourself needing more one day. Again, a large employment gap is perceived as riskier by the employer and you may be un-hireable.

3) You lose touch with friends and family. It’s nice to have all the time in the world to do whatever you want. But, if your friends and loved ones are busy working all day, they can’t join you on your midday hike or adventure to Bora Bora. They may also have a family to attend to during the evenings and on weekends.

4) You may find it difficult to start your own family. Unless you have a tremendous amount of money, raising a child may be too expensive an endeavor to undertake as early retirees. If you never wanted to start a family, chances are you haven’t been saving for a family. Let’s say you’re a woman who turns 35 and suddenly realizes the safety window for having a baby is closing rapidly. May be tough to even get pregnant, let alone support a new born without the right support network.

5) You lose your own self-respect, and the respect of others. Unless you’re out there saving the world, you might start getting depressed you are contributing very little to society. Others will stop respecting you because you aren’t doing anything productive either. A great many rich early retiree friends from the Dotcom bubble have mentioned they wish they didn’t get rich so quicky work a little harder for their money.

CAREFUL WHO YOU LISTEN TO

Early retirees will croon about how great their lifestyles are. I’m sure, in some ways they are spot on. But notice how they seldom write about the hardships they face. They can’t, because it’s important they continue highlighting how awesome everything is, to justify their decision to no longer work. Can you imagine spending 16 years going to school (grade school + four years of college) only to work for 10 years? Some would surely say that’s a waste, would they not?

The worst that could happen is some aspiring scientist, musician, lawyer, or teacher decides to give up their careers because they believe traveling around the world on a shoe-string budget is so glamorous. Years later, they realize their fingers don’t remember the notes anymore and the chemical formulas are one big haze. Maybe they would have made it as a concert pianist, or helped discover the cure for seasonal allergies, ACHOO! What a shame they never reach their full potential.

EARLY RETIREMENT IS SELFISH

As I strive to fulfill my goal of retiring by 45, I’ve come to the realization there’s an unhealthy focus on self. “What do I need to amass to be comfortable?” should be replaced with “How much do I need to be comfortable while helping others?”

It’s absolutely selfish for me to even consider working less than the number of years I went to school. I think back upon my childhood years and how much effort my parents put into raising me. My mother would spend hours a week sitting down with me after dinner to explain mathematical equations. My father would read all my essays and fix all the punctuations and grammatical mistakes. I would feel like a disgrace not to at least try and do great things.

45 is just an age goal. If I haven’t achieved my potential by then, I don’t plan on retiring even if I have the money to do so. The point of having an earlier-than-normal retirement goal is to help keep someone focused to achieve whatever it is they set out to achieve. Like an exam that’s 3 months away, we don’t study until the week before. Hence, better to believe the exam is only a week away so that we are better prepared.

CONCLUSION

Early retirees sometimes like to pity those who have to work. Yet perhaps we should empathize with those who are lost and haven’t found something they truly love to do (point #1). It’s impossible to all be great humanitarians working tirelessly until the age of 65. It’s easier just to give up and tell the world how fabulous your life is, and how you’ve retired on your “own” terms.

As the economy recovers, perhaps we’ll be able to bring back our lifestyle design friends to their home countries to work again. Our early retiree friends will stop fearing failure as employers open their arms wide open and allow them to succeed. Entrepreneurial ideas flourish once again due to an abundance of capital. The more the wealth gap widens, the more the early retiree crowd will want to get back to work, and realize their full potential.

There comes a point when working isn’t about money anymore since we have enough. If we all reach this point, we’ll no longer be focusing just on ourselves, but on helping others as well. We’ll be doing something we love, that provides a sense of purpose. Here’s hoping we all get there!

Readers, do you agree or disagree that early retirement is a selfish proposition? Are we all just inherently selfish to begin with?

What is your ideal age of retirement and how do you know when is the right time?

Do you think once we’re back to a raging bull market, there will be less people who want to retire early?

Keigu,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Searching For Love And A Little More Money

admin — Mon, 26 Apr 2010 09:00:35 +0000

Oh, the monotony of it all! Imagine clocking in, day in and day out with really no change to your job. You’ve got little risk of getting fired, and in 10 years you’ll retire with several million to last you a lifetime. In the back of your mind, you wish you didn’t have job security because you despise boredom. At the same time, you realize you’ve got it made and shouldn’t be so spoiled in your thinking.

One day a headhunter gives you a ring asking if you want an opportunity to make 50% more money a year guaranteed for two years. The catch? You’ll be working for a start up with no such promises of job security after year two. You’ll also have to move to a different city where the cost of living is also 25% higher. The hours and stress will most certainly more as well. Welcome to Kathy’s world.

10 YEARS COMPLETED, 10 YEARS LEFT TO GO

Kathy is a brilliant woman with an equally brilliant resume. She graduated #8 in her class of 6,000 from Berkeley and did a stint at Oxford as a Rhodes Scholar. What drove her during her twenties was her unquenchable thirst for knowledge. Everything she did was to answer a why or a how. How can we increase inventory turnover to improve revenue? Why are competitors expanding in the northern region while reducing capacity in the south?

A week before she turned 30 something happened. She stopped wishing to learn how to do things better. Instead, she began thinking about starting a family. Despite all the progress women have made, she still feels that no matter how far she climbs, there’s a void without a man to share her life with. This was 3 years ago.

At 33, she’s alone because her boyfriend broke up with her largely because she spends too much time at work. He would tell her that working more than 60 hours a week isn’t healthy. She realizes it’s unhealthy, but as a Senior Vice President, she has responsibilities that cannot be shirked. What really irks the ex-boyfriend is Kathy’s workplace seniority and far superior earnings. Men are petty this way.

Kathy makes up her mind that she will be retired in 10 years at 43. She hopes that within a couple years she can find someone to start a family with, but she’s not forcing the issue. She strongly believes in destiny. If it’s meant to be, it’s meant to be she often tells herself. Her insecure boyfriend can go jump off a bridge for all she cares because she won’t settle.

THE OPPORTUNITY

The firm loves Kathy. She’s hard working, praises her employees openly, and generates a tremendous amount of revenue. Her revenue generation is so impressive that her competitors secretly call her “Killer Kathy.”

Killer Kathy’s phone rings one afternoon with a headhunter asking if she’s willing to move to New York City from San Francisco for a new start-up firm. A long with her transfer is a two year guaranteed pay raise that’s 50% higher than what she’s currently making. We’re talking more than a couple hundred thousand a year more guaranteed.

If you include school, 14 years is a long time in the Bay Area, and perhaps it’s time for a change. Despite generating large amounts of revenue for the firm, she’s basically flat-lined over the past three years because she’s already at the top of her game. Instead of progress, she’s just maintaining, trying to keep her competitors at bay. It’s no fun being the senior player at an established firm. When she slips from #2 to #3, she feels the pressure.

Instead, the idea of starting over at a new shop where she can create a new business model and watch her company grow sounds intriguing. She longs to build something from nothing, and hear the praise of going from nowhere to Top 10! With the headhunter’s phone call, Kathy is given a rare opportunity to build something new, with the security of a guaranteed income.

What’s equally interesting is the thrill of being in a bigger city with the opportunity of meeting that someone to share her life with. She’s been to New York City plenty of times before, and each time she’s tickled by the amount of available bachelors. If finding someone is a numbers game, perhaps she should be there!

CONCLUSION

There’s something to be said about security and comfort. To know that you’ll likely never be unemployed must be a wonderful feeling. Furthermore, San Francisco is a beautiful place! It’s not like Kathy is just surviving either. As a department Vice President, she’s making good money and will undoubtedly retire in 10 years if she stays with her firm.

Despite Kathy’s security, she can’t stop thinking about the opportunity in New York City. Even if things implode after two years, she’ll have a hefty savings cushion due to the increased compensation. Mathematically, working for 50% more for 2 years is like working for 3 years at her existing place. Deep inside though, Kathy knows that if she found someone here in San Francisco, she’d most certainly never leave.

Readers, if you were Kathy what would you do? Should Kathy leave her cushy job to find new adventure, or be satisfied with what she has?

Is it reasonable for her to feel that a life is not worth living if she doesn’t have a man to share it with?

As a woman, would you choose career or family if you had only one choice?

Keigu,

Sam @ Financial Samurai – “Slice Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

The Good Times Are Back Again – The Indulgent List Of Things

admin — Wed, 21 Apr 2010 09:00:04 +0000

Look around. What do you see? I see packed buses, traffic jams, busy open houses, expensive restaurants with only 9pm seatings, and friends finding new jobs again. Double dip recession? I don’t think so. With the Dow over 11,000 and the S&P 500 over 1,200, it’s as if last year was just a bad dream.

Yet, it is exactly during good times, when we must be more diligent about our finances. It’s so easy to forget how bad things were and stray. Rather than spend more money, save more money during upswings so that we can spend more money during downturns.

When times are good, it’s not necessary to spend more money to create any sort of additional fulfillment or pleasure. We’re getting paid more, the opportunities for promotions are greater, and the demand for our services surpass our supply.

In essence, we feel good because we feel wanted again. It’s when a downturn hits when money can help balance the mood out a little with some retail or food therapy, or maybe even a vacation. In essence, spend money counter-cyclically for better returns.

DAY DREAMING TO RELIEVE DESIRE

There’s an exercise I like to do every now and again, and it’s called “Indulgent Reminding.“ In one minute and not a second longer, type out all your material wants within reason if you didn’t have to worry about money.

My Indulgent List Of Things:

* Two Tennis Racquets ($400)

* 5 tailored three-ply dress shirts ($300-500)

* Sports jacket (blazer) ($500-$800)

* A couple tailor made suits ($1,000-2,000)

* Brown loafers & dress shoes ($200-1,000)

* Digital SLR Camera ($1,000)

* Macbook Pro 13″ ($1,200)

* 42″ LED TV ($1,200-$1500)

* Panerai Submersible Stainless Steel Watch ($8,000)

* Audi S5 Coupe in Silver or Black ($60,000)

* A vacation for two to Greece ($10,000)

* A weekend getaway to Napa’s Auberge Du Soleil with full spa experience for two ($2,000)

In one minute, I’ve been able to come up with $85,000 worth of stuff to spend on! It gets me giddy thinking about all the goodies I must admit. The feeling of splurging without having to actually spend money is what financial daydreaming is all about!

After you’ve written your list, try to come up with several conclusions as to what these things reflect. My list says I like action and appreciate expensive adventures. Pretty standard guy stuff frankly, not to mention pretty shallow stuff too! $8,000 watch? Come on!

Now see if you can come up with a new list with a much cheaper set of things. See how many of the items you can also happily do without. Looking over my list again, all I really need are a new pair of brown loafers since my current ones have holes. Ahhhh, saving $84,700 sure feels great!

CONCLUSION

I don’t know what it is, but I get the greatest satisfaction out of using things I already have, over and over again until they die. Take my car Moose, for example. He’s 10.5 years old now, with a finicky CD player, and a broken electrical passenger seat. With 130,000 miles, it brings me greater satisfaction that he can still bring me from point A to point B just as well as a car 10X the price.

Once you start buying things out of pure desire it’s hard to stop. Marketers are brilliant at getting you to buy more than you really need. From shoes, to sporting equipment, to clothes, it’s a never ending list of things you can buy. You’ll never be satisfied. Hence, best to just use what you have, and do a little day dreaming to keep your desires at bay!

Readers, when times are good do you feel you tend to spend more or save more?

What are the things you like to do to keep your wants and desires in check?

Anybody else have the condition of really loving the stuff they already have?

Keigu,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Riding Rocketships For Greater Success

admin — Fri, 02 Apr 2010 09:00:07 +0000

Young or old, amateur or veteran, know there are rocketships in your midst ready to be ridden. The rocketship is someone who is going places, and hopefully, through his or her shear power, you can hop aboard and increase your own success as well.

Look around the office and see if you can identify the rocketship. The person is likely a hard worker who is respected by almost everyone on the floor. If you were to view each person like a stock, you would buy the rocketship because there’s just something about them that tells you they’re going places. The higher they fly, the more likely they will promote you along the way.

The same thing goes with social media and the blogosphere community. Don’t count out the little guys. Instead interact with those with an unusual amount of dedication and creativity. Sincerely get to know them and help them out. One day they might be the next Pete Cashmore from Mashable, you never know. Expect nothing in return because if your relationship is sincere, things will just come.

A lot of folks talk a big game. Beware. The more one needs to talk about their successes, the less likely they are the rocketship. It’s likely they are insecure, craving constant reassurance to justify their own relevance. Remember to watch what they do, rather than what they say. There are too many empty promises that never get delivered.

Everybody likes to win. But first, you must identify the likely winners. Once you do, it’s only a matter of time before you’re surrounded and soaring towards the moon!

Readers, do you have enough fuel to be a rocketship? Have you benefited from others through their own success and initiatives?

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Wealth Is An Illusion Of Happiness

admin — Mon, 29 Mar 2010 09:00:50 +0000

My name is Lyndon and I’m overwhelmed by all the feedback from “The Curse Of Making Too Much Money And Not Pursuing Your Dreams.“ Thank you guys for sharing your thoughts, and thank you Sam for presenting my dilemma in a tasteful manner. It’s only right for me to provide some feedback and give everyone a little more insight.

WEALTH IS AN ILLUSION OF HAPPINESS

One of my happiest memories was studying abroad in Chile for an entire semester. I lived off beans and rice, and slept on a wooden plank bed. At night, sweat would bead up on my forehead until it dripped down across my temple and into my ears. It was that hot. Yet, despite having no money, I was so happy. Life was simple and the greatest pleasure I got was learning from others.

At the time, I told myself that if I could just earn $1,000/month and have my trusty camera, I’d be happy. Well, I lost my way when McKinsey gave me a job offer. Nobody turns down McKinsey, partly because nobody gets into McKinsey. The curiosity of the job compelled me to take it rather than pursue my interests.

I recognize I’ve been blessed with the opportunity to work for a respectable company that may one day allow me to retire comfortably. Yet, I wonder about that semester abroad in Chile all the time. A couple years ago I went down to Chile and revisited the old AC-less dorm room where I used to live. It brought back so many good memories. Afterwards, my friend and I went back to our 4-star hotel, sipped on a Mojito and ate some ceviche.

It was then that I realized that despite living in a much nicer place on 100X the budget, my happiness compass pointed towards the dorm room of the past.

CAVORTING WITH THOSE WHO UNDERSTAND

One of Sam’s lines that hits me most is, “Ironically, it is the sympathy that Lyndon seeks, which makes him only hang out with people of his same socio-economic class. He understands that most of America won’t understand him so he shuns most people.”

It’s hard to read, but it’s true. I realize many won’t empathize with me, simply because only a minority of people in America make $300,000 a year. I expect people to throw mud and make fun of the situation while calling me a cry-baby. I realize it is equally ridiculous to try and garner sympathy, hence I don’t try. I keep quiet. I keep to myself because otherwise, you’ll think I’m arrogant when I discuss buying a European automobile, or discuss last night’s symphony.

Yes, most of my friends are all working stiffs who make six figures and lead relatively decent lives. We don’t expect anybody outside of our circle to understand the grueling hours required to make our income. We don’t expect people to understand that ever since we were kids, we were told we better succeed or else. Many of our parents are doctors and lawyers and politicians. Yet, how many people on earth can become successful doctors, lawyers, and politicians? Not many, and that is why the pressure is immense. We are not our parents nor do we live in our parents’ generation!

You’ll have to forgive me, and people like me for seeming callous and insensitive towards others. The truth is, we fear backlash and insensitivity by you, which is why we keep so closed off. In fact, perhaps this is why there are so many congregations of ethnic communities in big cities, the Chinatowns, the Little Italy’s and Harlems, etc. Maybe we all fear a certain type of backlash, and just want to feel safe.

IT JUST CAME

I didn’t ask to make the money I make. Income growth just comes with longevity. Longevity is due to performance, which ultimately means value creation for a company. A person makes $1 million a year because he probably generates $10 million a year in revenue for the firm. There’s nothing really fancy about income.

What I don’t quite understand is if people want to make more money, why not just join an industry that pays well? What not be a banker, lawyer, doctor, consultant, trader, engineer, Internet guru, Brittany Spears, professional athlete, or politician? OK, it’s hard to become successful at one of these professions, but that doesn’t mean you can’t try.

Photography is my passion, but I realize that I’d have a better chance at becoming the President of the United States than making a living doing what I love. Yet, I still long for it, and practice every chance I get. On weekends I scout locations for my next photo shoot. I’ve got a website where I’m actively selling my services. I’ve even planned out my next three vacations to remote locations so I can capture that rare brilliant shot. I won’t stop trying.

THE DECISION

The bonus check hit the bank account the other day and I’ve made up my mind. I cannot leave McKinsey to follow my dreams. Someone in the comments section wrote so aptly, “Once your hobby becomes your job, it stops becoming your hobby!“ I’m afraid that if I become a professional photographer, I’ll begin to hate the entire industry. I’ll start being overly critical about my own work, and scoff at others who’ve been accepted.

I love photography too much to risk not loving it anymore. When Sam wrote about my situation, I was at the darkest stage of the year where I worked for 11 months without knowing what my bonus would be. Now I’m in the brightest stage of the year where I’ve worked for only one month and have the year ahead of me. I’m under no illusion that come March next year, I’ll have a part of me that will wonder whether I made the right choice.

As of right now, I’m happy again because I know what I must do. It’s important I create a realistic exit strategy and live below my means. You’re right. A $4,000/month two bedroom apartment is fixable. I’ll be looking to get a more “reasonable” 1-bedroom $2,500-$3,000/month apartment in Manhattan instead. A spreadsheet is open right now pro-forming my financial life over the next 10 years. All I know is I want to be done by the time I’m 40. Knowing this, means figuring out a financial plan to get there.

THANK YOU ALL for your thoughts. I appreciate every single one of them. THANK YOU Sam for letting me gain more perspective and finding a solution! Wealth is an illusion of happiness, but don’t let me stop you from trying.

For happiness!

Sincerely,

Lyndon

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Samurai’s Alexa Ranking Challenge Update: Progress Through Adversity

admin — Wed, 24 Feb 2010 09:00:05 +0000

The Mon Oda (Crest)

Dear Yakezie Group,

It’s been just over a month since the Samurai Alexa Ranking Challenge was announced, and I’m pleased to report we’ve made tremendous progress! With 35+ members strong, we are actively helping each other achieve our respective goals. I’d like to use this opportunity to recognize several Yakezie members for their achievements and initiatives in helping the team.

* Daniel-San from Sweating The Big Stuff took the initiative to compile the list and keep track. His efforts have in turn created a home for us members to visit once a week and get pumped.

* @Elle_CM from Couple Money has been amazingly selfless in retweeting my posts and many other posts. She is exactly the type of member the Yakezie Group seeks. @FinEngr created a Yakezie Twitter Group to keep track of us and follow. Pls follow so the group can follow you back.

* Monevator, The Amateur Financier, Evolution Of Wealth created weekly wraps to specifically highlight posts from the Yakezie Group. Meanwhile, Money Funk wrote a derivative post on how to increase your Alexa ranking.

* Eliminate The Muda and Planting Dollars have busted through their 200,000 goal and should obviously now shoot for top 100,000!

THE RULES HAVE CHANGED AND WE WILL ADAPT

At some point over the past several weeks, all of us got dinged by 2 spots on Wise Bread’s Top 100 PF list because of the addition of two new blogs in the #1 and #2 spots. Congrats to those two blogs for being able to piggy back off their respective major platforms, the Atlanta Journal and The Star Tribune of Minneapolis and rocket straight to the top.

I liken the scenario to a situation at work where you struggle for a long period of time to get promoted, only to find out your manager hires someone laterally or from outside the firm to fill the spot! Others have mentioned it’s like some who get into prestigious schools simply due to their connections, while the rest of us just make due with what we have. Guess what team? Life isn’t fair, and Wise Bread can do whatever they want. We are not going to complain. We will simply try harder!

It’s important to realize that in 5 months, to get on Wise Bread’s first page, reaching 200,000 will no longer be enough. The 100th ranked blog will probably be ranked around 165,000 by then. Furthermore, Wise Bread might start adding other piggy back blogs from major publications which will impede our progress further. Once again, we must do as much as we can to help each other out. Never surrender!

NEW INITIATIVES

* Guest Posting UP: I ask that all those in the Top 100,000 allow others who are outside the Top 200,000 to guest post if they want to. There is a mutual benefit to guest posting where the guest writer gets to reach out to the host’s readers, while getting a link back to their own site. Meanwhile, the host blog receives content. The guest writer really benefits most, because many of the bigger sites already have a ton of content in the pipeline already. The host blog will actively promote the guest post on Twitter and elsewhere.

* A Playful Dance: One of the great ways to get to know each other better is to write a post in response to a post from one of your members. You see Ryan and Planting Dollars and Wojo at Fiscal Fizzle plays this out with the topic on “Is There Really Such Thing As Passive Income”. That exchange has created a fantastic amount of insight for the readers, and I’m sure Ryan and Wojo’s relationship is better because of it.

* Carnival: Another major initiative is to create an ongoing Samurai Alexa Challenge Carnival each week or two. We are small enough where we can highlight a post from each challenger, thereby helping promote their content, while promoting yourself since everybody will visit your site and read your content as well. You don’t have to highlight a post from every site, however, please do your best to highlight as many as possible. Just check out the comments at Evolution of Wealth’s Rodeo. We’ve already got three lined up!

* Ranking Host Rotation: Daniel-san has benefited by keeping track of the group’s progress, as he should. What we are proposing is to allow a new member to host and update the rankings for every month of the challenge. I think we should discuss this proposal below, and get an idea of whether people like this idea, and would want to host the ranking as well. With two things in motion (weekly wrap and ranking), we can share the wealth further. Or, we can keep the ranking at Daniel-San’s site since it’s already there. The host’s duty is to obviously update the rankings, check back on the original challenge post to see if new members would like to join, and add, while highlighting any big changes.

* A New Go To Ranking: Finally, at the end of the 5 month period, I plan to either bring the ranking back home to Financial Samurai or let the ranking float forever once a month. The plan is to morph Samurai’s Alexa Ranking Challenge into the go to personal finance ranking page which will purely consist of individually run personal finance blogs that do not piggy back off other major publications. We will create a entirely apples-to-apples comparison of the best PF sites in the world. If anybody has any programming skills to create a page where entries will be automatically updated, please let me know. When the rules change on us, we have the power to make our own rules!

THE CHALLENGE IS FOR EVERYONE

You may think this challenge is just dedicated to a community of bloggers. In reality, the Samurai Alexa Ranking Challenge is a case study on how to improve all our lives, readers and writers alike! Our personal real-life goals can range from finding love to early retirement. What we want to show is that through the selfless promotion of others, continuous teamwork, and an unwavering commitment, we will succeed despite setbacks. This is The Yakezie Way.

** Update Feb 25th: The Atlanta Journal and Star Tribune blogs which took up the top 2 spaces in WB’s rankings are no longer there. Maybe this post made a different, maybe not. Regardless, this is a positive for all of us, and should serve as a reminder that the rules can and will change. We need to continue being diligent in our efforts.

I have likely left out some solid initiatives by accident. Please feel free to remind me in the comments below, and paste any links so we can take a look! Feedback on our new initiatives welcome.

Keigu (Regards),

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Charles Farrell From “Your Money Ratios” Speaks! Part II

admin — Wed, 17 Feb 2010 09:52:43 +0000

Social Security Act FDR

The following is the second and last part of my interview with Charles Farrell, the author of “Your Money Ratios“. We discuss the much maligned 401k, whether Social Security will survive, and crowd favorite, how raising personal income tax levels further will ruin America!

The 401K AND ALL ITS GLORY

Question: Why do you think there are so many detractors of the 401k plan? Furthermore, do you think it is fair that the pre-tax limit contribution is only $16,500 for some 22 as well as someone who is 45? Presumably, the average 45 year old is making much more than the average 22 year old, so how come the government doesn’t propose an increased pre-tax contribution scale the older one gets?

Answer: Many people don’t like 401(k) plans because they believe the burden of funding retirements should fall on employers and not employees; thus they would like to see us go back to defined benefit plans that are funded by employers. Well, that is just not going to happen. Employers have no appetite for guaranteeing to pay their workers for 30 or 40 years after they stop working for them. And DB plans are not flexible enough to accommodate a globally competitive marketplace, plus they discriminate against individuals who change jobs or careers. Moreover, many DB plans (particularly government plans) are significantly underfunded and many who thought they had guaranteed retirements may be unpleasantly surprised at some point. So I think the “romance” with DB plans is misguided, but many people would like to see those types of plans again. I just don’t think it’s going to happen.

Then there is another set of individuals who don’t like 401(k) plans because of the limited investment choices and sometimes high expense structure of the plans. I agree with people on this front, and there are problems with some 401(k) providers, particularly those smaller plans that can’t drive better deals on their investment platforms.

But, most plans do offer competitive options and are low cost. It’s important for readers not to lose sight of the primary reason to use a 401(k) plan, which is the huge tax benefit provided to those who contribute; and if you get a match, that is just makes it more attractive. The tax deduction, the match and the tax deferral on growth are incredibly valuable tools to help build your capital. So even with some restrictions, the plans are basically the best place to build your retirement assets.

Regulators Are The Problem! (401K Con’t)

Now, the 401(k) plan itself is not the problem. 401(k) is just a reference to the tax code section that allows for pre-tax deferrals, which is a great idea and a great tax benefit. It’s the regulations and the heavy costs of ERISA that create the challenges. At some point, we may see the ERISA issues relaxed and allow for more open plans. Some big plans already are very flexible and allow employees to open their own brokerage accounts within the 401(k), but unfortunately many aren’t. As technology improves, I expect we will see more flexibility on the investment side.

I wrote an article on the prospects of eliminating or reducing the ERISA burden for Investment News last October that your readers might appreciate.

If you happen to work for a large employer, ask about a self directed brokerage option; you may have one and not even know it; or you might be able to get your other co-workers to help push for that option.

Plus, as mentioned in the book, a lot of this could be addressed by increasing the IRA limits to equal the 401(k) limits and then let employees choose how they want to save. If you like your employer plan, then use it. If not, use your own IRA with the same deduction limits.

With respect to the tax deduction, there is one limit for those under age 50, which is $16,500, and another limit for those 50 and over, which is $22,000. I personally don’t think it’s fair to have a disparity in contribution limits based on age. Everyone should get the same tax benefit opportunity, which at this time means everyone should be able to do $22,000 if they desire.

SOCIAL SECURITY

Question: Social Security’s existence is something you vigorously defend in your book. You highlight that even if nothing is done, people retiring 30-40 years from now will still receive at least 70% of their benefits. You also discuss how you are afraid that the government will over-shift the burden of social security onto those who need it the least. Why do you think the government doesn’t do a better job in aligning the costs of the program with the users?

Answer: Social Security is one of the most successful programs because it is pretty simple. We take in money as a contribution from wages and we pay out money to retirees. It is a good hedge because the assets are not invested in the markets and it’s not a bad idea to have a portion of your income guaranteed by a government pension that you paid for. Having a basic social security benefit actually allows you to take a little more risk with some of your other money.

The problem comes when you pay out more than what people contributed, which is what is happening. The reason this happens is because of a flaw in the structure of social security. It was structured as a social welfare program, not a personal property or ownership plan. Thus, Congress can change the rules whenever they want. And it is easy to grant benefits to get votes especially if you don’t require people to contribute more to fund those benefits. I mean who wouldn’t want a bigger retirement benefit without having to pay for it?

That is what needs to change. We each need a property right in our contributions, meaning it’s our money and in general our payment is based on what we put into the plan. This is critically important to ensuring its long term viability. People get frustrated when they pay in and then don’t receive a fair deal on the payout.

Readers should fight for a property right because they are contributing a huge amount of their pay into Social Security. It is about 12.4% of everything you make up to about $107,000 (you pay half and your employer pays half; or if you’re self employed you pay the full 12.4%). Then readers must save another 12% to 15% in their own plans, which takes us to a savings rate above 25% of pay which is more than sufficient to ensure a secure retirement. But if that 12.4% that goes into Social Security is primarily granted to someone else, then you’ve got a big problem.

The funding issues can be easily fixed at this time if voters insist on electing political leaders who promote a property right to Social Security. Politicians won’t do the right thing until they are convinced that voters want it, so let them know that’s what you want.

INCOME TAXES

Question: Taxes are set to go up for “the rich” who make $200,000 or more in 2011. How high do you think the marginal federal tax rate can go before Capitalism stops working? We’re strong proponents of a flat tax system on individuals above the poverty line given as a percentage of income as well as the absolute dollar amount of taxes paid is completely equal. What are your thoughts on the flat tax, and why people argue against its fairness?

Answer: I am also for a flat tax system for most taxpayers. To me, it makes the most sense. Far too much of our productive brain power and resources are going toward tax management and it’s quite honestly a waste of energy. The only reason we have to do it is because the tax code has become so complicated. I used to be a tax attorney, so I know this area pretty well. But the reason it is complicated is because so many taxpayers lobby for exemptions and want special treatment. They don’t want to compete on a level playing field. And since tax benefits are one of the main ways legislators can reward voters, we have a 10,000 page tax code that is basically incomprehensible.

As far as rates getting too high, we have been through multiple high and low tax cycles. So if rates rise too high, they will reduce economic growth and in the end hurt the average American, at which point people will eventually vote in leaders who want to reduce taxes. The key is to try to reduce your tax rate as much as possible during the high tax cycles by using every tax planning tool that applies to your situation.

As far as the actual tax rate, if you raise individual rates (combined federal and state) up into the 40% range, then I think it will have a detrimental effect on the economy. We are there in many states in the U.S., and I think it will hurt those states.

Readers, would love to hear your thoughts on whether you think Social Security will really be around in 30 years.

Do you think maxing out your 401K alone is enough to retire comfortably on, especially if you believe there’s no SS in your future? Is $16,500/yr max + any matching really enough to retire on?

Finally, if a smart fella like Charles believes in the flat tax, why don’t you?

Keiju,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

The Katana: A Week Long Celebration of Love

admin — Sat, 06 Feb 2010 17:15:00 +0000

A Sliced Heart

With Valentine’s Day coming up, I thought it’d be nice to dedicate some of this week’s posts to relationships. Few things are as rewarding as finding the one you want to grow old with. I can be stranded somewhere in Kabul, and so long as the one is beside me, I am happy.

That said, does true love have a price? If a genie gave you the option of having $100 million dollars but never finding the love of your life, or finding that special someone but always living just above the poverty line, which would you choose?

Before answering the question, think about all the fun times you had in your prior relationships, some that could have been. Not all bad right? Now think carefully whether after a certain point, more money can really bring you more happiness.

My theory is that “love” will be the landslide victor, however, at the margin men will have a greater tendency to choose money over love, while women will gravitate towards love over money.

The Samurai Fund: -3.13% YTD vs. the S&P 500 -4.4%. Lenar +15%, Berkshire +11%, GE +4% and STE +6.15% continue to be stars. While MWW -18% and Toyota -11.3% are the biggest dogs. If Toyoda-san didn’t apologize on Friday, I would have sold the stock in a heart beat.

Samurai’s Alexa Ranking Challenge: Is growing strong! I’m very happy to see so many people progress and support each other. Forget about all about SEO, link ratios, and yourself. Keep up the content and the promoting of others! If you would like to join, read the post, let us know in the comments section with your rank so Daniel-san and I can track.

HIGHLIGHT POSTS OF THE WEEK

* “Winners And Losers Of The Obama Tax Plan” over at Darwin’s. I feel bad for the losers, especially charities.

* “Deliver Away Debt Joins The Millionaire Club” by Jeff shows his “Who Wants To Be A Millionaire” creativity.

Winners of “Secrets of A Stingy Scoundrel“: Ernest S., and Charlie! Pls send over your mailing addresses for delivery.

Keiju,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

The Most Important Tip For Job Hoppers: Join People, Not Firms

admin — Wed, 03 Feb 2010 09:00:58 +0000

As the new year deepens, now is the most exciting time for job hoppers everywhere. I’m convinced we’ll see more employee turnover at various industries than over the past two years combined. We’ve got two years of itchy people waiting to leave their firms for better opportunities. Are you one of them?

If you are, remember one thing: join people, not firms. Isn’t that the same you ask? No, it is imperative you differentiate between the two. Joining great people means working with people you respect, and working for people who support you. Working with great people means not hitting the snooze button five times because you dread going to work. When you see people get promoted within the ranks, you cheer for them instead of secretly contain your jealously. Great people encourage each other to succeed.

A great firm, on the other hand, can be entirely different. Procter & Gamble, Apple, McKinsey, Genentech, and Google are great firms in their respective industries. Getting a job at one of these institutions is like winning the lottery to some, and as such, they are “braggable firms” to your friends and loved ones. Yet, I caution you to not blindly aspire to work for a place just for its prestige.

How often do we see people quit their dream jobs out of misery due to a bad boss or untenable work environment? They say that the average person changes jobs seven times in their careers. That can’t be pleasant and good for the nerves, can it? You can work for Google, but if you’re in one department that has a lazy, demoralizing manager whose already worth millions and doesn’t care one lick about you, why bother?

I encourage job hoppers to insist on interviewing their perspective new employers as much as they interview you. Yes, we have 10% unemployment, and 17% underemployment, which necessitates humility in your search. But, humility is a given no matter what the unemployment rate is.

You owe it to yourself to meet as many people you potentially will work with as possible. The prospective employer wants to make sure you are a good match as well. No amount of prestige is worth being in a miserable state. Join good people and you will never want to job hop again! That is of course, until a better opportunity comes a long……….

Readers, what are your thoughts on why people job hop so much? Is it the need to feel appreciated? Is it the lack of fit? What are the main reasons for so much movement?

Do you think it’s worth joining that prestigious firm in your industry despite disliking the people you’ll be working with?

What amount of money or percentage increase would it take for you to leave your job for a miserable opportunity?

Keiju (Regards),

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.