Financial Samurai » hmmm

Should I Refinance Now? Does A Bear Poop In The Woods?

admin — Mon, 19 Jul 2010 09:00:40 +0000

You guys know that the one and only data point I track religiously is the 10-year yield right? Well, after the 10 year yield dipped below 3%, I went to the bank with a buddy of mine to go see how much money we could borrow. The wiry banker sat us down like a loving couple and asked us to go through our finances at which point I kindly stepped out of the room and let him go first. Five minutes later, he came out with a grin on his face, so I curiously went in.

I proceeded to disclose some of my finances, and he proceeded to tell me some curious news. “Look here Sam, you can borrow up to $1.5 million dollars at a 5 year fixed rate at 3.75%!”

Holy moly really? You mean little old me, just like that can borrow that much money at that low of a rate? “So what’s the catch?”, I ask.

“Zero points, and $2,500 in closing costs. But don’t worry, we are giving you a $500 credit for being a preferred member, and frankly, if you guys both take out loans, I’ll throw in another $500 credit,” said the banker.

“Done! Where do I sign?, I ask as I think about the new Audi R8 I plan to buy with just $150,000 of the $1.5 million. Or maybe I should be more conservative and spend $100,000 on the new 2011 Porsche 911. Or actually, I heard the 2011 BMW 335i coupe is coming out for only $55,000 this fall. With all the money “saved”, time for a bachelor’s trip somewhere fun! (I’m still thinking to myself here).

NOT SO FAST FOOLIO!

Unfortunately, things aren’t that easy. I’m not eligible to borrow $1.5 million to buy anything. I’m only eligible to borrow up to $1.5 million if I want to buy another piece of property or refinance my home. Good thing I’ve got a mortgage at 4.625% to refinance, and that’s exactly what I’m going to do.

An interesting thing to note for those who have variable rate mortgages is that if it starts floating today your interest rate will be only 3.5%. But, if you can lock in for another 5 years at 3.75%, might as well do so now.

The amazing thing about this year vs. last year when the 10-yr yield was also below 3% is that banks weren’t lending. The 10 year treasury rate actually dropped to 2.25% in October 2008 but nobody could get a loan, and if they did, spreads were egregiously wide (6% for same loan), it didn’t matter! My how things have changed.

A QUICK EXAMPLE

Let’s say my mortgage is $1.5 million at 4.625% for illustrative purposes. My monthly payments would be around $7,712 a month in principal and interest. Just by having a 10 minute conversation, and filling out some paper work with minimal cash out of my pocket, I’m able to refinance a jumbo loan of $1.5 million down to 3.75%. The result is a $812 a month increase in cash flow as the payment drops to $6,940!

Now lets take a look at the principal and interest breakdown of $7,712 a month at 4.75%. About $5,781 goes to interest and $1,931 goes to principal. At a 3.75% interest rate, your monthly payment drops to $6,940 with just $4,680 in interest and a healthier $2,260 in principal! In other words, not only do you pay less overall for better cash flow management, you pay less interest a month and more principal.

In percentage terms, even though your overall monthly payment just drops by just 10% ($7,712 a month down to $6,940) your monthly interest payment goes down 21%, and your principal payment goes up 20%. Funny how math works.

AMERICANS FLUSH WITH CASH

10 Year Treasury Yield Historical Chart

The refinance wave is coming again and that means more money in consumer’s pockets. In my example above, one has $812 extra cash to buy a new iPad every month for the next 5 years if so desired. One could also use the money to buy two round trip tickets to Hawaii, eat 15 steak dinners, lease a $60,000 automobile for no money down, or pay down more debt every month as well. Oh the possibilities are endless!

Of course one shouldn’t start spending frivolously, but the point is there will be a consumption boom as hundreds of thousands of people across America see a nice uptick in their monthly cash flow. Given ~68% of Americans own homes, and consumption accounts for over 60% of GDP one should feel encouraged that our economy is not going to fall off a cliff again!

Readers, anybody still on the fence about refinancing after reading this article? Do you need a hard kick in the pants? Do you think a refinance wave is going to sweep the nation again? How’s the property market in your neighborhood?

Note: It’s advised to match the fixed rate portion of your loan with your intended length of ownership. In other words, if you plan on moving in 5 years, get a 5/1 ARM. If you plan on holding your property forever, a 30-year fixed mortgage might be the way to go.

Also be aware that you need a loan-to-value of 80% or less, and likely a 710+ credit score to take advantage of current low rates. This irony of monetary policy is that it may very well benefit those who need help the least. Another post will touch upon this topic.

Please follow the 30/30/3 rule for home buying and don’t blow yourself up, so you don’t blow us up. Thanks!

Regards,

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

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

Am I Living In A Parallel Universe?

admin — Mon, 12 Jul 2010 09:00:32 +0000

As far as I’m concerned, the US economy is recovering handsomely. How could it not with packed restaurants, and traffic that makes me want to pull your hair out? The most anticipated IPO of the year is Facebook, which may very well go public for $20 billion plus dollars. Meanwhile, the whole world is hooked on Apple products with iPads ($500-800) and iPhones ($200-300) selling like hotcakes. Who needs yet another computing device? I guess millions do!

There is so much money flowing into the Bay Area, it’s hard to imagine another financial crisis on the wing. Yet, I’ve read plenty of posts on “steps to take when the next financial crisis comes” and I’m scratching my head. Am I living in a parallel universe where every other car I see is a fancy German vehicle, and I can never get a reservation at my favorite sushi joint? I feel like I’m living in a little optimistic bubble where the world isn’t falling off a cliff and is actually doing well. Tell me if I am, because bubble living is delusional living at its finest.

The stock markets, although highly volatile have recovered some 50% from the bottom and generally serve as as a leading indicator for the economy. Yet people are still talking about a double dip recession. Yes, the biggest worry is stubbornly high unemployment, but you’ll never be able to tell if you walk the streets of San Francisco.

LOTS OF POSITIVE ANECDOTES

* Commute time from the city to the airport has increased from 25 minutes to 35 minutes on average due to traffic.

* The House Of Prime Rib is always packed and calling two days before gets one a reservation for two at 10pm.

* The BMW dealer says they are moving cars at the fastest pace since 2007. The new 5 series is in, with a price tag of $72,000 for the 550i version.

* Venture Capital and Private Equity firms are flush with cash and are looking to find a home before they have to return money to investors. Foursquare, Pandora, Zynga are getting funded for ridiculously high multiples.

* Banks are cashed up and lending again based off my conversation with three mortgage brokers.

* Headhunters (recruiters) are calling incessantly and it’s already past the halfway mark.

* You can never get a tennis reservation at 3:45pm, 5:15pm, or 6:30pm at my club because people make so much money they get to leave work early or don’t have to work at all. Membership has increased by over 30% in one year.

* A house down the street received multiple offers and was in contract within 10 days.

* Advertisers have been filling my inbox seeking to do business.

* Landscaper had to delay a job for one week after already starting at my house because there was a bigger job to do elsewhere.

* Went to go buy a pair of retro Air Jordan Infrared VI shoes for $340 (package set of two) 20 minutes after Nike Town opened and they were sold out. Went to two other stores, sold out! Typical buyer? High school kid.

* I can never get on the bus after 5:30pm because the bus gets completely full in the first 3 stops of a 7 stop pick up route.

CONCLUSION

The newspapers and TV stations constantly tell us how rocky things are. Even fellow bloggers are urging caution. Yet our fearless leaders in Washington are telling us we’re recovering quite well. I’m generally wary about government prognostications, but with the amount of activity in the Bay Area, gosh darn it, I think they might be right! How else can the government raise taxes for the rich to 60% (Federal, State, City, FICA, Medicare) next year without torpedoing the economy? The government must know something, and it seems as if people are also catching wind that the good times are back again. Even if the markets drop 10% further this summer, it still doesn’t take away the fact that activity is back, and in a big way.

Readers, do you believe the economy is solidly recovering? How is your neck of the woods doing? Any anecdotes you’d like to share indicating a weak or strong economy?

Regards,

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

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

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.

The Katana: Switching Gears For The Summer

admin — Fri, 02 Jul 2010 09:01:34 +0000

Thanks to the invention of blogs and social media, you can intimately feel the summer malaise upon us. To participate in the change in moods, I’ll be lightening things up a little bit. I’ve always been kind of a joker and all this structured writing with beginning, middle and end is oh so well….. structured! Also, to invoke Ralph Ellison’s Invisible Man from AP English class is going to the extreme of stiffness, right? I’m not sure many really connected with the reference at all.

Who wants to read about the struggles of an African American man in the oppressive 1950s when everything is so hunky dory and harmonious nowadays. I do, but I think most others don’t. Does anybody even read the classics anymore? A little Slaughterhouse V by Kurt Vonnegut or Crime & Punishment Fyodor Dostoevsky anybody? Yeah, maybe 20 years ago, but not now. Now, all we read are gossip magazines and blogs with bad punctuation (yours truly) that tickle our guts with spurts of information.

Hence, from now until the end of August I’ll be throwing a little wasabi on the teriyaki as they say in Japan. I just made that up, but thought it sounded good. You might read a little more rambling and a lot less structure as I attempt to change writing styles. The Yakezie.com project is well underway and now is my time to goof around a little bit.

HIGHLIGHT POSTS OF THE WEEK

* “Mountain West Is The Best” by Jeff and “Forget Disneyland! The South Is The Happiest Place On Earth!” by Red. Great to see fellow bloggers challenge my assumption that there really is no comparison to West Coast living! I’m just stating my unequivocal, unbiased opinion why everybody should live and work out West for a better lifestyle. All I really want to see are those who object to my truth and stand up for themselves! Be proud of where you come from and where you’ve established roots! Don’t let some guy who undeniably loves where he lives pollute your mind with sunshine! Well done Jeff & Red!

* “Job Hurdles With Potential Holes Behind Them” by Don-san highlights something I failed to highlight in “Overcoming The Wall” with regards to progressing in the workplace. It’s important to have a manager who is secure with his or herself! If the manager is fearful of what his subordinates can do, then he’s going to oppress you! In this type of situation, I’d look for another job fast.

* “Find Out When You’ll Make A Million Calculator” by Monevator is a quick and easy plug and push tool. It’s important that people don’t get overly caught up with how inflation will erode your assets. Having a million dollars is a million dollars! Don’t let investment gurus and yada yada push you into investing in riskier assets so you can keep up and beat inflation. You’re letting them fear monger you to investing in something you wouldn’t otherwise invest in! Low inflation is here to stay, as I’ve indicated time and time again on this site. If you are happy with a 3-5% 5-7 year CD, then by all means use the “DVD Method To CD Investing!“ Know thyself and think thrice before investing in something you aren’t comfortable with.

* “How To Sell Your Home In 30 Days For $3,000 Or Less” from Neal reminds us of some essential things to do to sell your house and save you some money. The 5-6% real estate commission rate is absolutely ridiculous, especially with the industry turned on its head. You’d think that with home prices rising so much over the decades, that commission rates would fall, but nope, they aren’t. 5% on a $100,000 for $5,000 bucks, fine. 5% on a $1,000,000 for $50,000 bucks, forget it! Wake up industry! Part of the reason why you guys aren’t making more money is because you guys are making transaction costs prohibitively high!

* “You’re Still Young, Do It While You Can” from Wandering Earl highlights some fallacies in this statement. When we’re 20 we think 30 is old. When we’re 30 we think 20 is young. The point is, we’re always going to be young if we think young, and it’s not like once we are over 50 we are shackled down and unable to be free. It’s OK to get old! But, it’s not OK to have debilitating beliefs about yourself!

* “A Discussion With Carrie Schwab-Pomerantz, President of the Charles Schwab Foundation” on Consumerism Commentary. Carrie conducted a very interesting study on the Sandwich Generation and provides her survey findings. Did you know that Charles Schwab was a failing businessman when Carrie was 20 years old. She didn’t haven’t an allowance, and everything wasn’t a charmed life like some may believe. Her father taught her two things: 1) Importance of having a strong work ethic and 2) Savings.

Regards,

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

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

The Carrot That Makes You Jump Through Hoops

admin — Wed, 16 Jun 2010 12:52:26 +0000

One of my best friends is blessed with skinny genes. At 5′ 3″ tall, she weighs all of 105 pounds. When we go out to eat, she doesn’t just order a glass of iced tea and salad with dressing on the side. She goes all out with mash potatoes, creamed spinach, BBQ oysters and then a nice juicy ribeye for a main course! I gawk in amazement at her appetite while secretly groaning at trying to keep up towards the end. After all, shouldn’t she eat 40% less than me if she weighs 40% less? Guess not!

Despite my friend’s envious genetics, she isn’t exactly iron woman when it comes to sports and outdoor activities. After three miles on a 10 mile bike ride, she’s pooped and waves at me to take a break. Meanwhile, I’m going “lah, lah, lah” in my head, not even breaking a sweat as I soak in the glorious views of the Bay. I let her catch up and we take a five minute pit-stop where she catches her breath as I go do some stretches and sit-ups.

THE GIMMICK

One day my friend tells me about a great incentive program at our local gym. I kid her often because despite her $100/month membership, she never goes. She comes up to show me a gleaming new card which says, “BURN TO EARN!” Hmmm, what’s that I ask her? She tells me that if she goes to the gym 20X in the next two months, she will be entered for a chance to win a free t-shirt, socks, swimming goggles, a weekend in Napa, or two rounds of golf which she does not play at some country club somewhere.

Suddenly, I notice a transformation. From going maybe once a month, my friend starts going 3-4X a week! All for what? A chance to win a simple T-shirt? Needless to say, after two months, she was absolutely ripped. We’re talking Madonna-like abs, and thankfully not Modonna-like arms, because that’s just scary. When the time for the drawing came, she gleefully whipped out her BURN TO EARN card and gave it one good luck kiss.

As fortune would have it she won absolutely diddily squat in the first round. Luckily, there was a consolidation round and there she heard, “And the winner of a brand new pair of tubular socks is….. Lisa!“ A shrill of joy belched out of her little frame as she jumped up and down “I won! I won! Wheeee!“ I think I rolled my eyes because I didn’t win anything and couldn’t believe her luck. New tubular socks. Sweet!

CONCLUSION

By just administering a small rewards program, our health club was able to get a notoriously great client (one who pays on time and never goes) the motivation to go 15X more than normal. I go 10X+ a month anyway, so it wasn’t a big deal. But for Lisa, it was like watching a new person altogether. The lesson learned is that the next time you want to get someone to do anything, tempt them with cotton that warms the feet!

Regards,

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

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

Being Overly Content Can Be Detrimental To Your Career

admin — Mon, 14 Jun 2010 09:00:12 +0000

Every year, there’s inevitably a headhunter or a competitor who gives me a ring to ask whether I’m interested in leaving my current firm for a hefty salary increase. And every year I turn them down because I respect the people I work with, like the camaraderie, and believe in my firm’s management and future. My 10th year anniversary is coming up, and just like how I freaked out for a couple days before turning 30, I’m starting to wonder whether I’ve become too content and also too comfortable with what I have.

Dodging bullets is a myth, but I can safely proclaim that I dodged at least one bullet by not taking an offer from a firm that inevitably went bankrupt. Phew, I sometimes remind myself. But, what about the other firms I wonder. If I joined them, would I be making more money and doing more in my career than ever before? Maybe, I don’t know. What I do know is that many who have job hopped have indeed made an incredible amount more and rocketed their careers than if they had stayed.

LOYALTY CAN BE OVERRATED

It’s sad that loyalty is often rewarded with below market pay. We call this the “loyalty discount”. The late, great John Wooden of UCLA basketball fame never made more than $36,000 a year despite winning an unprecedented 10 NCAA championships in a 12-year period because he never entertained other offers. Nick Saban on the other hand, played LSU like a fiddle. He bolted to the Miami Dolphins after winning a championship at LSU, and then bolted again to Alabama for a mega 8-year, $32 million contract! With Nick proceeding to win another championship at Alabama, it’s safe to safe Nick maximized his income and his career.

Gone are the days where people work for 30 or even 20 years at a single firm simply because people have more options, and the competitive environment is that much greater. Firms have proven in this volatile environment that they will fire at will to cut costs and appease shareholders. Being a 15 year veteran used to mean something, now it just means maybe you’re too expensive.

With the track that I’m on, if I don’t change soon, I’m pretty sure I’m going to end up being one of those 20 year-to-lifer type employees. I do think loyalty is admirable, but at what cost? If people are banging down your door, at the very least open it and let them in.

WONDERING “WHAT IF”

One of my worst fears is wondering “what if.” 10 years from now, I don’t want to obsess about wondering how my life would be different if I took this job or made this decision. It’s too bad we can’t live parallel lives. All we can do is weigh the pros and cons, ask our loved ones for their opinions, and make a decision.

We have a responsibility to be loyal to the firm that provides for us. But, we have a bigger responsibility to be loyal to ourselves and our family. If a firm is underpaying you or mistreating you, you need to speak up because they are literally taking away opportunities. Maybe you want to send your daughter to private school, but because your firm isn’t paying you a market rate for the past 10 years, you’re literally $100,000 poorer in your bank account.

The point is that loyalty goes both ways. Your firm has to be loyal to you as much as you are loyal to them. If you are too content in your career, your managers are going to sense your complacency and potentially take advantage of you. Make sure they don’t by having a heart-to-heart talk at least once a year or two, and preferably during your year end reviews. It really is great to be happy with what you have, just don’t let them take you for granted.

Readers, do you ever find yourself wondering whether you are too content with your career?

What are your experiences with head hunters and competitors who tantalize you with fantastic opportunities?

Isn’t being content the end game? If so, why do we continue to wonder?

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.

East Coast Living – Is It Really That Bad?

admin — Wed, 09 Jun 2010 09:00:09 +0000

Any rational person would agree that living on the West Coast is better than living on the East Coast. Anybody who tells you otherwise probably has never experienced West Coast living long enough to understand the difference. I’m rational, and I’ve lived on both sides for many years and I don’t believe there’s really much of a debate. Who doesn’t want to live in more moderate temperatures where the sun is always shining? Unless you like super cold winters and uncomfortably muggy summers, the East Coast isn’t for you.

When your family and friends are on the East Coast, it’s hard to leave I understand. We’re afraid of change. I know I am. But, this is not a post to bash the East Coast. This is a post to understand what truly makes the East Coast and other uncomfortable climate zones special.

You see, a friend of mine is thinking about relocating to New York City or Washington DC for a little bit of adventure. I think she’s a little nuts leaving our California sunshine behind and I’m trying to understand why, and maybe even a why not.

EAST COAST POSITIVES

1) Richer history. Since the Europeans first invaded the East Coast of America, there is a much richer heritage as evidenced by more developed infrastructure and building architecture. Museums are more prevalent, and attractions are more interesting.

2) Closer to Europe. It’s easy to get a direct flight to Europe that’s also cheaper and quicker. Who doesn’t love to visit the bright lights of Paris, and the bustle of London every once in a while?

3) Time Zone Dominance. American TV and major broadcasts still revolves around eastern standard time. The stock market market opening at 9:30am, the French Open finals at 9am, and World Cup matches at 7am are all examples of major events serving the eastern time zone.

4) Food. Certain foods such as hot pastrami sandwiches, pizza, and cheese-steaks always seem tastier on the east coast for some reason. Perhaps there’s no real difference, other than the fact that when you eat a hot pastrami sandwich at Katz’s deli in NYC, it’s just more authentic given the history.

5) Less Earthquakes. Earthquake danger is overrated in California given the infrequency of large shakes. That said, the danger still exists. I’d much rather have a big earthquake every 30 years than tornadoes and hurricanes every year.

6) There’s Only Upside. Imagine if you were born and raised in Kauai. What a drag to leave! Once you live on the east coast, anywhere else you go will be so much better!

CONCLUSION

I really am trying to see the positives of living on the East Coast with my six examples. However, I have to admit I’m struggling to find more reasons. The weather is atrocious for half the year, and it would take quite a premium to leave California. Won’t you help share some of your reasons as to why the East Coast is so wonderful?

Follow up: West Coast Living – Yes It Really Is That Much Better!

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.

Oops! The World Is Coming To An End!

admin — Wed, 26 May 2010 09:00:58 +0000

Like clockwork, I top-ticked the markets when I wrote “The Good Times Are Back Again” this past April. The markets have since fallen about 9% as the Euro Zone goes bonkers over debt problems. But, at least the message from the post is that it’s exactly during the good times where we need to be more disciplined in our finances, because we never know when the bad times will return. Now that the bad times are back, is now the time to party like it’s 1999 and spend counter-cyclically? Nope, because with the amount of volatility, by the time you finish reading this post, the markets might be surging again!

With this market correction, it’s pretty clear that everything isn’t peaches and cream. US leading indicators have turned downwards, unemployment figures have stopped improving, and people are wondering whether Europe will be like the US, but much worse. If you’re American living in America, look at the bright side of things: the US dollar is strengthening, and the 10-year yield has declined to 3.1%, which is leading to lower rates yet again! The 10 year yield and all its glory really is the most beautiful figure to watch. It can tell the story of everything and anything.

The USD will always be a global safe haven currency, no matter how hard we try and mess things up. It’s good to see that we aren’t the only basket cases as investors sell the Euro faster than they can say tapas! What’s going on now is that money is shifting towards US assets, namely the property market. Combine an asset shift with cheap debt, and rental yields above the current risk-free rate of return (3.1%), you realize why smart money is moving into the US property market again. Only a minority will agree with the attractiveness of the US property market, and therein lies the opportunity.

During bad times, it’s always good to re-evaluate your finances. I’m not convinced the bad times are back and am actually quite sanguine about the economy. All the same, here are some suggestions just in case things get ugly for longer.

TOP 5 THINGS TO DO WHEN THE BAD TIMES ARE BACK AGAIN

1) Know where your money is. It’s important to have an idea of where every single dollar of your wealth is allocated. In a bull market, perhaps suddenly you find yourself with 50% of your net worth in the stock market vs. a 35% comfortable allocation. The best way to get a snapshot of your assets is to list everything out in an excel spreadsheet manually. Re-evaluate, re-balance, re-consider.

2) Consider being contrarian and don’t confuse brains with a bull market. Was there a reason you’ve been holding 30% cash in the stock portion of your portfolio? Perhaps the reason was exactly for times like this? It’s generally never good to panic in either direction. Imagine capitulating the morning of Tues, May 25th when the Dow was down 290 points only for the market to be up 110 points the next day? Oopsie! You will immediately notice the mass media start talking about double-dips, recessions, and Armageddon scenarios when markets fall. Meanwhile, just last month the media was talking roses. Frankly, nobody knows where the markets are going in the short-run, but in the long run, the bias is generally up.

3) Get in earlier and leave later. In other words, work harder at your job and show that you are an indispensable team player. I can promise you that every manager thinks about cost cutting as soon as we have 10% downward movements in the markets. The manager’s goal is run a profitable business units and layoffs are always on the back of their minds. Your manager thinks about a future of “what ifs”, and so should you. Buckle down, be outstanding. You can’t control the markets, but you can control how great you are.

4) Prepare for the worst, but keep faith things will be OK. Preparing for the worst means ratcheting down your expenses and getting rid of inventory. Inventory can include your mountain of books, clothes and your 3rd TV with accompanying 3rd cable box. Expenses can be that $200/month gym membership you never go to or else you’d be thin. Preparing for the worst also means looking for a new job and developing side incomes just in case your main source gets expunged. If the worst comes, you’re ready, and if things are just business as usual, you’re pumped! When you prepare for the worst, there’s only upside!

5) Look around and realize today is just like yesterday, which will be just like tomorrow. If you didn’t have a media stream telling you the world is ending, you’d never let financial losses affect your well-being. Your happiness is all in your mind. You have the power to choose to be happy. It doesn’t cost much to touch base with family and friends or go for a walk in the park. Too often, we close inwards and worry about how we’re going to retire comfortably during market turmoil. Things come back. They always do.

CONCLUSION

Remember to focus on things you can control and let go of things that wiggle and squirm. If you choose to let fear enter your mind, you might as well use it to fuel new creation. Downturns are exactly the time to start something or do something better. Cherish meltdowns and embrace the challenge!

Readers, what do you do when market turmoil hits? How do you adjust, if at all? Why do you think people capitulated on May 25th and do you really think there will be a double-dip recession

Keigu,

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.

How To Dramatically Increase Your Job Security For Life!

admin — Fri, 16 Apr 2010 09:00:34 +0000

A fantastic topic came up over dinner one day regarding how to increase job security in today’s highly volatile economy. The usual tips came up, such as: be invaluable, develop strong internal relationships, and never call in sick on a Friday (slacker). All tips were logical, but the more we drank, the more out of the box we thought until we reached the best employment insurance strategy of them all: Make babies and start a family!

Starting a family could be the #1 way to ensure long term employment. With a family, your employer must not only consider your situation, but the situation of every single person you support. The more kids you have, the more bullet proof you become! Imagine a scenario where your boss is faced with firing 10 employees out of 100, or 10%. How do you think she chooses?

HOW MANAGERS THINK BEFORE FIRING YOU

The first exercise a manager will conduct is comparing the cost of each employee with the benefits (revenue) generated by the employee. The second stage of evaluation is figuring out who are the manager’s friends (aka cronyism). The friend of the manager can truly be a friend, or someone who makes the manager look so good, it’s impossible to let that person go. The third step a manager must think about is what will happen if business revives and she needs to rehire the person let go. The more difficult he or she is to replace, the lower the chance he or she will be let go. Finally, given most people are not heartless robots, the manager will consider the firing repercussions of not only the at risk employee, but all who depend on him or her.

If there are two equally mediocre candidates, one who is a single woman with no family to feed, and another who is a widowed mother of three children in day care, who do you think the manager will let go? There’s very little doubt in my mind that if you have a family to take care of, you are at a tremendous advantage in terms of employment security compared to your single or non-married peers. With a family, your boss tests her soul, and goes with the decision that provides the least amount of guilt.

CONCLUSION

So how about it folks? If you’re petrified about losing your job, you might want to tell your boss you’re pregnant, or are working on starting one big happy family of your own. Once your boss knows, unless she’s the Devil herself, you’ll never be considered a candidate for the chopping block ever again!

Readers, what are your thoughts about employees with families and whether or not they are less fire-able than those without?

Should we try and start a family to protect our careers?

Do you think it’s fair if companies discriminate against single people when it comes to pay and employment?

Follow up post: “Don’t Have Kids If You Can’t Take Care Of Yourself”

Regards,

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

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

Over The Hill At 40 – Age Discrimination In The Workplace

admin — Wed, 14 Apr 2010 09:00:21 +0000

Every large corporation has some type of annual “Diversity Training” course where we learn not to harass colleagues, send out crude jokes over e-mail, and discriminate against those unlike ourselves. Everything generally makes sense except for one rule that I once read: “One shall not discriminate against someone over 40.” I thought about this for a second, and I began to wonder if they had made a typo.

At age 40, one will have worked for 18 years out of college or 15 years out of graduate school on average. If the accepted age of retirement is 65, or 25 years away from 40, then the rule is implying that age discrimination starts before you are even half way through your average 40 year long career!

The other interesting fact is that most people are living longer nowadays. Forties are the new thirties as they say. People are looking younger and younger at various age milestones. Hence the question, why 40? Let’s explore the various reasons.

NEGATIVE PERCEPTIONS ABOUT OLDER WORKERS

Older workers are…….

1) Slower and less adaptable to change. In the age of the internet, if you don’t know how to write html code, or work your way around a Powerpoint or Excel spreadsheet, you might as well be a dinosaur.

2) Less loyal to the job due to family. Families result in more vacation time and sick days, and less desire to work weekends and put in the extra effort.

3) Less malleable for a mentor to mold. Instilling work culture is more difficult, and therefore older workers will have a harder time fitting in.

4) More expensive and therefore squeezes margins more intensely during downturns. Due to the lack of flexibility in pay, there is less maneuverability.

5) Uncomfortable working for someone younger than them. Younger managers feel their discomfort and therefore naturally tend to shy away.

POSITIVE PERCEPTIONS ABOUT OLDER WORKERS

Older workers are….

1) More knowledgeable and experienced where no amount of smarts can match.

2) More patient and mature. They bring different insights to solve difficult problems.

3) More dedicated to their jobs because they are not just providing for themselves, but for their own family and perhaps even their parents.

4) Have more savings and therefore are more flexible to take pay cuts during downturns.

5) Work well with younger co-workers because there is a natural tendency for older people to help mentor younger workers even if they are more senior.

AGE IS JUST AN EXCUSE

If you let yourself feel discriminated against due to age, it’s your fault for letting it get to you. We start blaming exogenous variables that should have very little to do with whether we succeed or fail. Yes, if you are working at a company where the average age is 30 and you’re 50, maybe you will feel the young guns are out to get you. Or rather, since you’re the minority, you’ll feel special due to your valuable insights. It’s really what you make of the situation.

You can argue either way whether older workers are better or worse employees. It doesn’t really matter because you’ll never convince the world conclusively that you are right. One can always find the positives and negatives in any type of person because our perceptions are all different. We just need to focus on what we can control, which is our attitude, presentation, and work skills.

CONCLUSION

Perhaps the reason why so many of us, including Lyndon and I would like to have the option of retiring by our early 40s is because we unconsciously don’t want to face age discrimination. We’re given subtle, hard-to-notice messages telling us that we have at most 20 years in our careers to be someone before others start taking our place.

We all have latent biases that cannot be clearly proven. Rather than dwell on exogenous variables which cannot be helped, let’s work on making ourselves invaluable so that even when we’re 80, we’ll be able to make a difference if we want to.

Readers, are you convinced age discrimination in the workplace starts at 40?

At what age do you think age discrimination starts?

What about reverse age discrimination against younger employees?

What pros and cons am I missing about older workers?

Regards,

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

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

Why Isn’t President Obama Considered White to The World?

admin — Mon, 12 Apr 2010 09:00:24 +0000

Insensitive statements by Senate Majority Leader Harry Reid (D) not only infuriates many, but also raises one titillating question: Why isn’t President Obama considered white? Obama’s mother is white, and his father is black. He relates more to his white side of the family given his father left him as a child. Hence, isn’t it logical to think Obama is more white than black? Let’s see if we can change Obama’s default setting to the world.

THREE SUGGESTIONS AS TO WHY

1) “He doesn’t look white.”

Well, what does “white” look like? Yes, Obama doesn’t look like a Norwegian Viking, but you can still tell he’s mixed. Since when does being half black mean that he’s full black? If a white person is only supposed to look like Tiger Wood’s wife Elin, then we need to revise what the definition of white is.

2) The media needs something unique to sell.

Saying the first black man wins the Presidency is more eye-catching than saying another rich white man wins. Mitt Romney, with his hundreds of millions would fit right in with the Clintons, Bushes, and Cheneys. However, since we’ve already had 43 Presidents who all look the same, it’s more exciting to have someone new. Everybody loves an underdog story, and Obama’s story is no different.

3) We’re all racist and we don’t even know it.

Senator Harry Reed is unable to see Obama as a white man because he doesn’t fit the stereotype of what a white man should look like. Harry can’t help his racist condition because he was born in 1939. Segregation didn’t end until 1954, so Harry had a good 15+ years of brainwashing to think he’s unjustly superior due to his skin color. Try as Harry may, he’s been influenced far too long to change. Obama, watch out what Harry says about you behind closed doors!

CONCLUSION – WE SEE WHAT WE WANT TO SEE

The definition of the word majority, is simply more than the minority. Since the majority of Americans are white, we can conclude that white America has the majority say in shaping our perceptions, especially in the past.

But, what about tomorrow? Ethnic cultures are mixing at a rapid pace. Are white folks endangered of stereotyping themselves out of existence? That answer depends on whether we can abolish thinking between just white and black. What about Asians, Latinos, and Mixed? If we can include other races, and multi-cultural groups into the main stream, we have a chance of being more balanced.

The better Obama does, the more he will be embraced by his two ethnicities. If it so happens Obama becomes the greatest President in history and finds a cure for cancer while he’s at it, how do you think perceptions will change? In essence, we see what we want to see, and hear what we want to hear. Our biases are so deeply rooted that it takes a mental nuclear bomb to go off before we realize our prejudices.

Just like politicians, the mass media will eventually be influenced by big business. Once the target demographic with the most amount of money is identified, news and opinions will cater towards their cause. Your mission if you choose to accept, is to open your mind and start embracing diversity! Don’t become another Harry Reid decades from now!

****

Famous People Who Aren’t Considered Asian Even Though They’re Half Asian: Dean Cain, Rob Schneider, Vanessa Hudgens, Tiger Woods, Keanu Reeves, Carmen Elektra, Phoebe Cates, and Lou Diamond Philips.

Famous Folks Who Aren’t Considered White Even Though They’re Half White: Booker T. Washington, Bob Marley, Mariah Carey, Thandie Newton, Alicia Keys, Derek Jeter, and Lenny Kravitz.

Readers, why do you think Obama isn’t considered white?

If Obama does a phenomenal job for the next 7 years (very debatable currently), will the media change Obama’s ethnicity to suit their business constituents?

Why is there not a bigger uproar against Senator Harry Reid (D) and his remarks? If a Republican said his words, he’d be booted out of the country!

If you’re not white or black, do you feel left out?

Keigu,

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

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