Financial Samurai

“If there’s a mile long track, and the first lap you travel 30 mph, how fast do you have to travel on the second lap to average 60 mph for both laps?” asks the stuffy man in the corner office.

I bumbled and stumbled around until I responded, “Hmmmm, obviously it’s not 90mph, but…… let’s walk…. it through!” My instincts told me it wasn’t a straightforward answer, but I really had no idea how to solve the problem. Instead, I got the first part right by addressing the trick question, and proceeded to stall long enough so that he couldn’t help but tell me.

FIGURE IT OUT YET?  NO CHEATING!

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Rock Balancing in San Francisco

After my parents pep talk in the 9th grade, I realized there were two things I had to do in order to survive high school: 1) use my brains and 2) develop some pythons.  In other words, getting good grades, joining student government, and being a history buff wasn’t enough.  Sure, I may have an easier time getting into some fancy college, but how was I supposed to get into girls?  “Hey pork chop, did you know that General Lee surrendered on April 9, 1865, marking the end of The Confederacy and the Civil War?  Lez go out tonight!”

“Girls, Girls, Girls” by Motley Crue played incessantly in my head at the time.  Frankly, I can’t imagine it being much different for a lot of other teenage boys.

I made it a rule to balance the mental with the physical by playing sports.  As a teenager,  I had a strong fear that I was going to be stuck in nerdom if I didn’t.  I was a study machine who needed balance.  The sports that attracted the most groupies were football and basketball, but I was too chicken sh*t to bang down low.  I chose tennis instead, which had decidedly less groupies.  Good thing all you really need is one!

In the 11th grade, this cute girl slipped a note in biology lab with a cut out from Teen Magazine entitled, “You Know Your Boyfriend Is A Keeper If..“.  To my surprise, #1 said: “Your man is the captain of his high school varsity tennis team!“  Shwing!  As captain of the HS varsity team, needless to say we had a frolicking good time….. studying for our biology lab final of course.

THE OLDER THE WISER, PERHAPS Read more…

Do you hit the snooze button multiple times in the morning because you just don’t want to work?  While at work, do you daydream of being somewhere else?  Well too bad!  You’ve won the lottery and you don’t even realize it!

Let’s say you make $50,000 a year.  Divide your income by the current 4% risk free rate of return and you get $1,250,000!  In other words, if you have $1,250,000 sitting in the bank right now earning a 4% rate of return, you’re making your current salary of $50,000 a year.  Not bad winning $1,250,000 huh?  Now take your income, and divide it by 4% (0.04) and let me know how much you’ve won!

It doesn’t matter what job you have now.  Just know that the job you do have is coveted by a tremendous amount of people.  This includes my first job mopping McDonald’s egg bits at 6am.  My manager told me I was lucky to wear the purple and black (colors of the uniform) because he turned down 8 other candidates over the past month.  I just felt lucky I could stuff my face with as many FREE apple pies when he wasn’t looking!

WHINE AND CHEESE Read more…

The beauty of an economic downturn is cheap credit.  It’s ironic, because cheap credit is one of the main causes of this collapse in the first place!  That said, for those of you with mortgage debt, now is a great time to call your local bank and check up on rates.  Refinancing can be a daunting process, but it shouldn’t be with the right representative and proper frame of mind.

As I’m currently thinking about refinancing one of my rental properties, now is a good time to share with you some key things to think about and assess.  Hopefully by the end of this article you will be able to make an informed decision and save lots of money as a result!

INFLATION Read more…

The luckiest people on earth are those who don’t make a lot of money.  They’ve got very little downside and can really pursue their childhood dreams.  Imagine if from the moment you graduated college, you landed a plum corporate job that paid just enough to keep you motivated, but not enough to enjoy your freedom.  The longer you work the more you realize there’s really no escape, because there’s simply too much at stake.  This is the problem that plagues my friend, Lyndon.

THE STRATEGY CONSULTANT WHO MAKES BANK Read more…

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 Read more…

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…

Imagine two similar investors, Leslie and Bob.

• They each retire with a $500,000 portfolio.
• They each withdraw 4% of their portfolio in the first year of retirement, then adjust that amount upward each year to account for inflation (as measured by the Consumer Price Index).
• Their portfolios are identical: 60% in Vanguard Total Stock Market Index Fund and 40% in Vanguard Total Bond Market Index Fund, rebalanced at the end of each year.
• The only difference is that Leslie retired at the end of 1994, and Bob retired at the end of 1999.

The Result? Read more…

This is a guest post by the Lean Life Coach who writes at Eliminate the Muda! [mooda] about how to improve life and personal finance through the application of proven business management techniques that originated with great Americans such as Henry Ford and Benjamin Franklin.

Fighting to Survive

Would you gargle with a floor cleaner?

Originally invented in 1879 as a surgical antiseptic, Listerine was later diluted and sold as a floor cleaner. The Lambert Pharmacal Company, maker of Listerine, was not a wild success, selling a little more than $100,000 per year of their concoction. In 1921 Jordan Wheat Lambert initiated a new marketing campaign advertising Listerine as a cure for “cronic halitosis.” In less than 7 years annual revenue exploded to $8 million.

Just as a small side note, “Cronic Halitosis” was a fake medical term! No doubt, a few of us have an occasional issue with bad breath, but it was not considered a major societal issue until this groundbreaking marketing plan. Not only did the Lambert Pharmacal Company create a new product they even created a new medical term that is commonly accepted to this day.

The objective of any business, big or small, is not only to make a profit but also grow. Doing so requires a focused approach towards obtaining and more importantly retaining a customer base. This of course requires marketing and advertising.

Years ago a company would develop a single marketing campaign and blast it to the world at large; “Buy our widgets.” A successful campaign might be profitable for decades while a failed effort could doom a company.

How Far Will They Go? Read more…

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) Read more…