Financial Samurai

In celebration of tax time, I surveyed five of my married friends to answer two questions: 1) Did you pay more or less in taxes after you got married, and 2) How much more or less did you pay?  The answers I got were concerning.  They all responded they paid more and by a magnitude of $3,000 to $25,000!

It’s just not true that the “marriage penalty tax” no longer exists.  The IRS just renamed it the “love me long time tax.”

I’m by no means a personal income tax expert.  All I’m doing is highlighting facts from people around me, and proposing the likely reasons as to why their taxes went up.  Our income tax system is so darn confusing, hopefully someone can shed some light on the situation!

TWO QUESTIONS TO THINK ABOUT AND UNDERSTAND Read more…

Charles Farrell

As I wrote in my review of “Your Money Ratios”, Charles’ book sings to me. Charles has the ability to simplify complicated financial topics for the average reader to understand. His book is seriously one of the best books I’ve read on personal finance in a long while.

One of the keys to progress is learning from experts in their various fields.  Charles is gracious enough to answer some follow up questions I’ve been burning to ask after reading his book.  This will be a two part post due to the 2,800 word length of the interview.  In part I, we discover Charles’ motivation for writing his book, strategies for early retirement, and his conservative and debatable 50%/50% investment split between stocks and bonds.  In part II, we discuss the much maligned 401K, personal income taxes, why Social Security will survive, and why the flat tax is the right way to go!  Please enjoy!

WRITING “YOUR MONEY RATIOS”

Question: Was there a particular lightning bolt reason why you decided to write this book? For aspiring authors, what suggestions do you have to get your worked published in this ultra competitive field of business?

Answer: I wanted to write a book that would help average readers understand the most fundamental and critical relationships among one’s income, capital and debt, and how those things must be managed throughout your working career to build financial independence. So I took what are often quite complicated topics and figured out a way to present them in a very simple format that anyone can follow. I would like more people to enjoy the benefits of financial independence, and I hope this book does that.

As far as writing, all I can say is write about what you believe in. Hopefully, if you believe in it strongly enough, you’ll develop some expertise and then seek out ways to spread your ideas. Try to develop some niche that is reflective of your expertise. So I developed the ratios and they came out of my background in tax, finance and also working with individuals.

Think about what you do that is a little different and try to focus on that unique nature of what you do. It is a tough slog because the field is very crowded and often the least valuable information gets the most press. But you have to accept that reality and still push ahead. And then you need a little luck. Your message has to somehow get into the hands of people who appreciate and understand it. And that is hard to predict, which means you need a little luck to get it out there. So if you are going to pursue that path, I think you need to accept those realities of the marketplace.

EARLY RETIREMENT Read more…

Well folks, the weekend of love has arrived!  Some are going to eat by candle light, while others will walk the beach during sunset here in California or Hawaii.  For my friends out in Snowmageddonville, perhaps marshmellows in front of the fire place while playing a fun game of Scrabble.  Amazingly, there are some who believe their significant other when they say, “don’t get me anything.“ If you actually believe this line, you also mistakenly believe taxes aren’t going up next year!

I’m absolutely sure there are those against the Valentine movement, how it’s one big marketing gimmick for guys to spend more money than they should.  Unfortunately, you’re right, but there’s no stopping the movement. If you end up doing nothing, not even a small gesture like a back massage, you’re screwed, and not in a good way!

The one thing I caution ladies not to do is push.  The more you push about what you want or want to do on Sunday, the more your guy won’t want to do anything.  If you keep hinting about chocolate covered strawberries, you’re going to get one big fat biscuit of nothing!  So shhh, let the man figure something out and get creative.  Of course, ladies can always do something for us men too yeah?  Nah, it’s always on us men.

WHAT AN OPPORTUNITY FOR SINGLES EVERYWHERE! Read more…

Back in the 9th grade, I remember goofing off quite a bit with my buddies.  We skipped class, stayed out late, and essentially did a lot of stuff that was detrimental to our grades.  Despite working with plenty of Spanish speaking colleagues during my part-time job, I still only got a “C” in Spanish because I didn’t care.   All I wanted to do was have fun, and fun is what I had!

My parents spoke to me one evening and asked, “How are you ever going to be a great business man if you can’t even get an “A” in math?  Do you think award-winning scientists get “C’s” in high school chemistry?  Do you think Andre Agassi doesn’t practice hard every single day?”

The questions stuck with me because ever since I was 12, I wanted to be a “business man.”  I remember getting picked up in a sweet Mercedes 300 SEL by one of my father’s friends to take us to their mansion party.  The whole experience with the infinity pool, car, food, and servants made me want to do what they did, whatever that was!

After the pep talk, I began caring about my grades through college.  I didn’t want a silly thing like grades to get in the way of my dreams.

THE QUESTION TO ASK ALL PEOPLE Read more…

The Rock Of Gibraltar, Only Backwards

Anybody want to guess what happened on Wed, January 19th right before the market fell off a cliff?  If you guessed Obama delivered a politically charged speech to rally for his own support and crucify others, you’re right!  On Wed, January 19th, Obama went on national TV to tell the world, “we want our money back” and “if they want a fight, a fight is what they’ll get.” The “they” of course, are “greedy rich” people.  The markets immediately started to sell-off and the S&P 500 is now down about 6% since.

Good old fashion class warfare is never good for the economy, neither is continuous political jibber jabber.  Do you ever remember a president being on TV as much as our current president?  The risk of overexposure is very real, and the record low approval rating for any president at this point in his term shows this.  The State of The Union address is supposed to be an opportunity to unify the people.  Besides the typical feel-good rhetoric, what I heard was a continued attack on others, protecting personal interest groups, and maintaining giant silos.

YOU SO CRAFTY NEBRASKA Read more…

The government introduced new legislation to tax all “big banks” 0.15% of their assets to recoup about $120 billion in TARP money.  What’s interesting is that the government is also taxing banks who did not receive TARP money, while conveniently leaving out AIG and the auto industry!

Three Takeaways From Asymmetric Regulation:

1) Because the government is imposing a tax on assets for all big banks, they are encouraging all banks to take excessive risk and accept hand outs in the future.  If a non-bailed out bank is getting punished, why not join in on the fun too?  Friends at government-owned Citibank all went down to the Rose Bowl using free $500 face value company tickets ($1,000+ in the after market) with tax payer’s blessings.  Meanwhile another friend who works at a non-TARP bank can’t spend more than $100 for a client dinner total, without having to get approval.  Message to friend: tell your bosses to party it up if Citibank is having a great time!

2) AIG is exempt from new taxation because AIG is 80% owned by the government.  If the government punishes AIG, they are punishing themselves.  Federal government employees are raking it in, and I’ve spent about one hour so far learning how be a $170,000 a year Department of Transportation employee if my blogging career doesn’t make it in three years.  So exciting to have such a lucrative back up!  Back off people, the job is mine!

3) The auto industry, which has paid back absolutely nothing, and is the biggest contributor of the $120 billion in tax payer losses is protected because the rank and file auto worker is deemed more precious than the rank and file finance worker.  I’m all for helping out hard working people who had nothing to do with the collapse.  But, what did your local TARP bank teller do? Nothing, just like the factory man at GM had nothing to do with the latest horrible design and corporate strategy of the 2010 Buick LaCrosse.  Remember when GM executives flew in their private jets to the Congressional hearings?  We need to support private jets for auto execs like we need to support higher taxes for more pork spending.

CONCLUSION Read more…

So far over $7 million has been raised to help Haiti by just texting the word “HAITI” to 90999.  You’ll get a confirm receipt from your mobile carrier once sent.  Please consider donating!

This week on Financial Samurai, we’ll share our thoughts on the latest government rhetoric, highlight a guest post by Flexo, introduce a new fun challenge, and perhaps discuss one of the key things to consider for job seekers.

THE SAMURAI FUND UPDATE: +3.85% vs. S&P 500 +1.88% as of Friday, Jan 15th. 203 basis points of outperform puts us in the Top Tier of all funds.

Stars: Lenar +25%, Toyota +8%, GE 9%, Harmon +7.4%,, Calgon +7%, Big Lots +7%.

Dog Poops: Lumber Liquidators -7%, Berkshire -1.6%, Steris -1.25%, ABM -1%, Monsanto -1%.

Looks like there’s some good demand from new entrants, and investors who want to give us several hundred million more to build new positions!  Contributors, please provide an update on your name in the TSF page above, especially if your name is sucking wind.  Will be making room for new names in February.

SAMURAI WEEK IN REVIEW

* People now realize that converting to a ROTH IRA is pretty ridiculous as Kevin M reminds us that the first $18,700 (equivalent to $470,000 in pre-tax funds at 4%) you withdraw from your retirement funds is tax free.  Meanwhile, JoeTaxPayer highlights that if you retire with $2.17 million in today’s dollars, you only have to pay 15% tax!  You’ll have to retire with more than $5 million dollars to average a 25% tax rate, based off a 4% income return.  $5 million is only 50X your $100,000 “average” income.  Always good to dream big for those of you who’ve justified your ROTH IRA contributions.  Joe, you made my day!

* Family seems to be the number one reason why people choose to freeze during the winter, and melt during the summer.  FYI, it is possible to make friends in paradise folks.  It’s also possible for your family to fly out and visit you on the beach.  If you’re miserable, don’t limit yourself!  Just think about how much easier it is to travel now vs. 300 years ago.

* The “Get Financially Naked” book giveaway ends on Saturday, January 23rd.  It’s a great little book for couples who feel they need some help in improving their communication as it relates to finance.  With all our book giveaways, we’d like to share them with those who’d like and need them the most.

* Americans really shouldn’t complain about our finances since we’re wealthier than 99% of the rest of the world.  That said, it’s all relative, and if everybody is wealthy, then it’s really hard to feel special.  The key seems to be to amass your wealth, and move elsewhere!

Keigu,

Sam Samurai – “Slicing Through Money’s Mysteries”

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Samurai On Waialae Beach At Sunset

As one can guess, higher paying jobs leads to higher costs of living.  In fact, more than half of the 20 cities surveyed by the US Census Bureau are based in Caleeforneea, as Governor Arnold would say.

How is it that California is so dominant in the expensive category, when the mass of settlers first arrived on Plymouth Rock 300 years ago?  3,300 miles is a long way to travel, especially on horse and foot!  The main reason for the unfettered move out west is simply warmth and sunshine!

Every time I vacation in Hawaii, I always ask myself, why the heck ain’t I here for good.  Let’s face it, more sunshine equals happier people.  Sunshine is the classic zeitgeber to help us wake up and get us motoring in the morning.  No sunshine leads to no photosynthesis, which means no plant life, and therefore no ecosystem.

After 10 years of living on the east coast, I can still feel the grey skies weigh down my soul every winter.  Don’t get me wrong.  I love the winter snow during the holidays, but I just love being in a cheerful mood more.  Here are America’s most expensive places to live based off median monthly housing costs.

TOP CITIES WHERE AMERICANS PAY THE MOST TO LIVE Read more…

Author Bios: Manisha Thakor and Sharon Kedar have their MBA’s and CFA’s and are the coauthors of “On My Own Two Feet: A Modern Girl’s Guide To Personal Finance.”

Publisher / Physical Description: Adams Media.  Paper back.  148-pages of easy reading.

The Summary: With a tag-line of “how to talk money with your honey,” how can you not like a book with this kind of wit?  Personal finance books tend to be a little bit mundane and redundant, but not so with Manisha and Sharon’s latest offering.

The first point of interest simply lies on page two.  All page two says is “To All Women…”  As I am not a woman, I immediately began preparing myself for some male criticism.  Does ‘To All Women” really mean “Stay Away All Men”?  To my relief, the real meaning of page two is about empowering women to become financially independent on their own.

Getting financially naked really is about having as clear of an understanding of each partner’s finances as possible.  The authors don’t want women to one day wake up realizing all their money is gone after their husband invested their finances in some unscrupulous investment.  Women need to have a full grasp of each others finances so that there are no surprises.  Even before marriage, our authors go through steps to discover whether a couple is financially compatible.  Financial matter shouldn’t be taboo among serious couples. Read more…

If I read one more biased article pushing people to convert to a ROTH IRA I’m going to lose it!  Not to be melodramatic or anything, but the lack of unbiased analysis is like seeing a sea of zombies instructed to walk off a cliff. Wake up zombies, wake up!  Don’t make a decision without seeing what lies down below.

The ROTH IRA conversion idea is that those who have pre-tax funded retirement accounts such as a 401K or Traditional IRA pay taxes UPFRONT in 2010, so as to not pay taxes when you retire.  This is just absolute hogwash donkey dumb for a large majority of people out there.

Proponents of the ROTH IRA conversion argue:

1) Tax rates are low and are just going to go up in the future.

2) You will likely make more money in your retirement years, and hence pay more taxes.

3) Paying taxes now improves performance in the long run all else being equal.

THE SAMURAI REBUTTAL: Read more…