Always be grinding! Happy New Year Everyone!
Hopefully all of you survived and are ready to rock it in 2017! I spent a lot of time over the holidays thinking about why I failed at so many things, and the consistent answer I came up with was that I wasn’t grinding hard enough.
Why did I gain 5 lbs instead of lose 5 lbs? Answer: Because I didn’t grind hard enough at the gym and give a crap about the way I looked. I worked out maybe twice a month on average and didn’t watch the quality of food I ingested.
Why did I lose all my tennis league matches? Answer: Because I didn’t grind hard enough on the court. I wasn’t practicing my serve and volleys as much as I should. Instead, I was just playing fun matches that did nothing to improve my skills.
Why was my online traffic only marginally up in 2016? Answer: Because I didn’t grind my mind hard enough. Instead of writing more posts, introducing new mediums of communication, addressing new topics, and publishing a new ebook, I left things status quo. I told myself in my 2016 review post I was most proud of not quitting. Come on. That’s weak! Writing is like a full body massage compared to digging for coal or constructing a house in the middle of a Texas summer.
It’s so easy to get soft in America, especially as you get older. As a result, my theme for 2017 is: Always Be Grinding. ABG baby!
Things Feel Different Now
I haven’t been this excited since I first got a job out of college when the sky was the limit. For the past 10 years or so, I’ve been questioning what’s the point of working so hard if the government is just going to take more from us than what we’re able to keep. To finally get some potential tax relief is thrilling!
Everybody should strive to have a higher savings rate than their effective tax rate. Can you imagine saving just 10% of your gross income while paying a 20% effective tax rate? What a joke. Politicians are laughing all the way to the bank for being able to keep the masses enslaved so they can remain in power.
The upside to a corrupt and inefficient government with trillions in unaccounted for tax dollars (see the Dept. of Defense) is that it pushed me towards a life of leisure. I would never have engineered my layoff in 2012 had the correlation between effort and reward stayed intact. I never would have started a lifestyle business either. Since my departure, it’s been fantastic paying less in taxes and not having to work for anybody. My stress level has gone way down as well.
But now that the correlation between effort and reward is tightening up, it’s time to grind until the window shuts again! Without further ado, here are my goals for 2017. They are divided into three categories: Business, Personal and Personal Financial.
1) Focus on growth by broadening the audience. I’ve received plenty of feedback that I need to write more for the mass market. Even though my advice holds true whether you have $1,000,000 to invest or $1,000 to invest, readers have told me they can’t get their heads around larger numbers. As a result, some readers will tune out and that’s bad for growth.
It’s not my fault the median home price in San Francisco is ~$1.1M. I just write about my first-hand experiences to keep things authentic. Personal finance is too important to be left up to pontification. But I acutely realize the way to mega millions is to relate to as many people as possible. Further, I don’t want to write about things I’m not interested in or am not going through.
Therefore, going forward, I’ve decided to add my best friend, Sydney from Untemplater, on as a regular contributor. She’ll focus on broader personal finance topics, family finances, women’s finances and be my podcast partner in our little Dojo Talk podcasts. I’m confident there is a great need for expansion in these categories on Financial Samurai.
Sydney is great because she’s living the dream as a business owner and freelancer ever since she engineered her layoff with a severance package back in January 2015. I was her coach. Here’s her severance negotiation story, which I’m so proud of! Sydney also grew up in a low income household and will draw from her experiences to bring a new flavor to FS.
2) Publish a new ebook by July 18, 2017. Despite the rise in interest rates, it still takes a gargantuan amount of money to generate $1,000 a month in passive income – we’re talking $300,000 in capital at a 4% gross yield. I was so focused on building a large municipal bond portfolio after the sell-off in November and December that I forgot I could easily write a new ebook and earn $1,000 a month with no downside!
Therefore, I’ve decided to publish a unique book on real estate investing. It’s going to be one of the most entertaining and thorough books about real estate on the market. It’ll be an actionable book that anyone from beginning investors to experienced investors can use to help create wealth, build passive income and avoid extremely bad mistakes. I promise to write in my usual no BS style.
3) Focus on three business partnerships. I’ve got about 10 business partnerships with Financial Samurai right now. It’s very easy to get spread too thin as the main writer and business development guy. Instead, I need to identify three things I’m most passionate about and tilt my writing towards these three topics to build a deeper portfolio of articles. Then I need to identify the three best products that match these topics to create incredible business synergies.
I’m currently most excited about entrepreneurship, real estate crowdsourcing and family finances.
After eight years, I’ve got so much to share about being an entrepreneur and earning side income. The upside is unlimited when you work for yourself. So many people believe they can’t do anything because they don’t have an idea or don’t believe in their abilities. The truth is that nobody has everything figured out in the beginning. They just start, learn and pivot as they go.
Real estate crowdsourcing is the perfect solution for real estate enthusiasts like me who don’t want to buy another physical property for a while. Dealing with tenants and maintenance issues as I get older is very counterproductive to living a good retirement life. However, real estate has been instrumental in achieving financial freedom (~50% of my passive non-online income) and I want to continue investing wisely in various projects around America for hopefully higher returns.
Finally, talking about important family financial issues will be topic du jour for 2017 now that I’m hitting middle age. I’ve already tested the waters with posts such as, Is Private Grade School Worth It? and Scraping By On $200,000 A Year to a warm reception. Now I plan to go deeper. Sydney is really going to be of great help in this endeavor.
4) Send two to four e-mails a month. I’ve been paying $150 a month to send out only one newsletter a month for the past couple of years. What an underutilization of resources. What’s held me back from sending more e-mails is believing I have to write meaty e-mails to add value. Instead, I plan to write shorter, punchier e-mails to connect with all my newsletter subscribers. There’s like 30,000 or so of you. All I’ve got to do is get into a routine, come up with a consistent topic, and not worry too much about trying to impress.
Personal Financial Goals
1) Create a million bucks of wealth. Last year my goal was to growth my net worth by $500,000 because I had a neutral-to-bearish outlook. Given I’m now bullish on my business, it’s only logical to shoot higher. In a strong business environment, valuations for businesses start expanding like magic. If I can grow earnings and expand valuation multiples, then growing wealth becomes much easier.
The equity you own in your business is one of the biggest reasons why everybody should start their own business. Not only can you make money every month from your business, you might also have the option to sell your business based on a multiple of revenue or earnings one day. As an employee, you can only sell your talents to the highest bidder. As a result, you’ll always be stuck having to trade your time for money.
I already spoke to the CFO and CMO of one publicly traded company and one private company about a potential acquisition. As a result, I’ve got an idea of the valuation of my company. Now all I need to do is grow my brand, traffic numbers, search rankings, and revenue and I’ll be set!
Value Creation Scenario
Potential acquirer: We’ll offer you $6,000,000 for Financial Samurai based on a 8X operating profit plus a $500,000 earn out if you stay for two years.
Me: Given my operating profit is growing by 25% a year for the next two years at least, and the S&P 500 is trading at a 18X operating profit multiple, let’s split the difference. I’ll sell for $9,750,000, based on a 13X operating profit multiple, and will stay on for two years at $200,000 a year to make sure everything transitions smoothly.
Potential acquirer: You’ve got yourself a deal.
See how easy it is to create some wealth? All you’ve got to do is create something of value. I don’t plan to ever sell my company, but for the right price, I will and then I’ll start a new company. That’s the American dream.
2) Invest at least $20,000 a month without fail. The $20,000 a month doesn’t have to be in the stock market. It can be in bonds, real estate crowdsourcing, private equity, private debt, or paying down a mortgage. I actually did a deep dive analysis of my investing habits for 2016, which I’ll share with you guys in an upcoming post. It’s pretty eye-opening how much we think we invest versus how much we actually invest. By investing $20,000 a month minimum, I should be able to grow my net worth by at least $240,000 this year.
3) Start earning $20,000 a month in passive/semi-passive income by year end. My passive income is currently averaging about $17,600 a month over the past six months. To increase my passive income by $2,400 a month, I’ve got to publish my real estate book by year end, market it well and update my severance negotiation book for 2017. My products will be my main passive income growth driver once again.
The other growth driver will hopefully be the redeployment of roughly $400,000 into higher returning investments compared to the ~4% return that money was getting in a CD and a LIBOR+ private investment. Instead of earning $16,000 a year from the $400,000 investment, I could feasibly earn $32,000 a year, or $2,667 a month total ($1,333 extra) via an 8% returning investment. Hence, my focus on higher income producing investments for this year. Thank you bond sell-off!
4) Spend like I’ll be dead within 10 years. I’ve been frugal my whole life. It’s one of the main reasons why I was able to hit the eject button at 34. But, I’ll be 40 in 2017 so it’s time to live it up for the second half of my life. You don’t have to be as stealth in middle age because people are more accepting of those who’ve spent 20+ years working. If they aren’t, then they’re just being jealous idiots who weren’t willing to work hard for a long enough time themselves.
I will buy my mid-life crisis car that costs $60,000 – $80,000. I will pay an extra $100 for Economy Plus seats to Hawaii each way (still can’t afford first class comfortably). I will buy the latest version TV instead of buying the previous version to save $300. I will pony up $400 more for 1 TB of hard drive space for my new laptop. I will pay $6.25/hour for parking after driving around the block once. I will turn the heat on full blast when it gets to below 60 degrees. I will always pay up for convenience gosh darn it!
Every time I buy something, I feel guilty for not using that money to invest because I’ve been an investing addict since sophomore year in college. I also grew up middle class working summer jobs at McDonald’s and moving furniture. My upbringing is probably the reason why I felt so comfortable giving over 500 Uber rides so far as a financially independent adult. I’m not too proud to do whatever it takes to support my family.
Therefore, to counteract my spending guilt, I plan to always invest the $20,000+ a month first before splurging on anything.
5) Don’t chase the stock market. Although I’m bullish on my business, I’m lukewarm on the stock market and the economy. The higher rates go, the more consumers get squeezed. The period between 2009 – 2016 was a great time to focus on growth stocks. For 2017, now that equity valuations are stretch and the bond market has finally sold off some, I think it’s a great time to focus on income.
Instead of having a majority of my public investments in stocks in 2016 (~70%), I’m rebalancing to 40% stocks and 60% bonds (80% municipal bonds). Besides stretched valuations and more attractive income yields, I think there will be roadblocks on Capital Hill to pass what everything Trump has promised.
With 40% exposure to stocks, I’ll still be able to participate reasonably well in any further exuberance. Further, I’m already highly leveraged to the tech industry through my SF real estate holdings and corporate consulting business.
I just feel way too lucky with my investments now after a +10% unexpected return in 2016. To now be able to get a ~4.5% gross yield on the fixed income portion to cover two mortgages that cost 2.5% and 2.375% is nuts!
“When you’re coasting, you’re going downhill.” – Unknown
1) Scare myself out of my comfort zone. I haven’t been personally challenged in a long time. With a portfolio of over 1,300 posts on Financial Samurai, I know with decent confidence that if I write 152 new posts a year, I should be able to grow traffic and revenue by ~10% a year if I do nothing else. But writing 2-4X a week is an easy goal to achieve.
Once I turn 40 this summer, I think it’ll be fun to challenge myself with more live events. I’ll first start with my Dojo Talk podcasts with Sydney to improve my speaking skills. Then I’ll move onto bigger audiences if I have the opportunity. I’ll be the moderator for a panel of crowdsource company CEOs in San Francisco with an audience of ~100 – 200 people sometime in February. That should be fun. I’ll post the details here once I know more.
The other thing I’m considering is being a more public figure starting in 2H2017. By July 1, I’ll have collected the final severance payment from five years ago. Further, I’ll have hit my five-year goal of seeing whether my writing can stand on its own without my promotion. Now that it has, to be able to combine a public persona with my writing could be a very powerful combination.
2) Really make a difference in 12 people’s lives. At the end of the day, the best feeling in the world is when a reader sends a private e-mail or writes a comment that says how much a particular article or the site in general has helped them achieve their dreams. Being online for almost eight years has enabled me to read people’s stories on how they’ve changed over time.
Without positive reader feedback, it’s harder to keep going at my pace long term because I also occasionally get haterade from random folks who are upset with their lives. Instead of choosing to see what’s possible, they adopt a welfare mentality and lash out.
If enough haterade piles up, it makes me want to just take a break and relax since I’m not getting paid by readers to write anything. With most of my traffic coming from organic search, and most of my online income passive as a result, there’s no need to write much of anything anymore.
Here’s a comment a newish reader left that gave me a power up.
3) Start a family. It’s about time we start a family. My wife and I feel we’ve done everything we’ve wanted to do as adults. We’ve both engineered our layoffs. We don’t have the itch to travel too much anymore after visiting over 60 countries. We have no desire to climb anybody else’s corporate ladder, but our own. After two years, our house is finally remodeled to the way we want. We have a digital business that allows us to be present for our child. Finally, we’ve developed a steady stream of passive income that should support a family of up to four comfortably in expensive San Francisco or Honolulu.
With so much responsibility in raising a child, it’s only natural to plan as thoroughly as possible before becoming parents. I commend those of you who had the courage to have children earlier on and make things work. I’ve seen so many things go wrong with a relationship after having children, it’s made me nervous.
If we do successfully start a family, my number one goal will shift towards not dying before 69. I’d like to live until my child officially becomes an adult. Now where are my veggies and vitamins?