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It Doesn’t Take A Genius To Be Rich Or Run A Country

Published: 02/20/2016 | Updated: 09/13/2017 by Financial Samurai 49 Comments

Wealth And IntelligenceLet’s say you are 44 years old and over the past 10 years earned over $2.3 million in gross income. For someone who averaged $230,000 a year in annual income, what should your net worth be? If you follow my Net Worth By Income guide, your net worth should equal roughly 8X your average annual income.

Instead of having a ~$1,800,000 net worth, Marco Rubio (R) has an estimated $50,000 – $100,000 net worth. Are you kidding me? Where on Earth did the rest of the money go? I guess it’s understandable why Senator Rubio raided his $68,000 IRA retirement account and paid penalties given he owns an $80,000 boat and a $50,000 Audi Q7 if he’s starving for cash. But if he can’t control his spending impulses, he’s NOT someone I want running America. Thankfully, he came to his senses and dropped out!

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The Net Worths Of American Presidential Candidates

Published: 02/10/2016 | Updated: 06/10/2020 by Financial Samurai 81 Comments

Update 6/10/2020: We all know that Donald Trump won the presidency. During this time, Donald Trump’s net worth has tanked given the contentiousness of his presidency so far. This was a guest post that highlights the net worth of the various candidates.

The following is a guest post from FS reader, Kameron Snow. He is a professional copywriter specializing in the art of the political. Businesses with a taste for victory come to him to hone their messaging, strategy, and copy. He can be found at kameronsnow.com, blogging about the nexus of marketing, politics, and copywriting. If he’s not there, he’s at a brewery. Just leave a note.

Battleground States For Presidential Election
Battleground States In Beige

This election cycle is particularly interesting because we have a diverse crop of candidates with even more diverse financial backgrounds. It’s not just Trump that makes a dive into each candidate’s income streams attractive, although he’s the obvious starting point. Some of the other candidates, both Republican and Democrat, challenge our notions of what a president’s personal finances should look like.

Let’s look at five leading candidates and analyze their net worth, where their income originates, how much passive income they have and any other business or financial ventures they’re involved in. We will use the Real Clear Politics’ (RCP) average of current poll numbers to come up with our list of candidates in order of popularity. Starting with Republicans, first up is…



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When Did Being Rich Become So Evil?

Published: 06/26/2015 | Updated: 05/08/2019 by Financial Samurai 37 Comments

Evil eyes. When did wealth become so evilWith good intention, I proposed one way to help level the playing field through a Wealth Identification Program run by our all-powerful government. By identifying wealthy people who got wealthy through 100% luck (born into wealth), we could empower decision makers to make more informed choices when deciding between equally qualified candidates. Whether a decision maker chooses to help the less lucky is entirely up to their discretion.

The Wealth Identification Program could also put pressure on life’s lucky winners to use their finances to give back to those who need help the most, while pushing themselves to see what they can achieve on their own. Imagine being born with the gift of Mozart, but never realizing your full potential because you didn’t have to. Having money from the start can limit motivation!

With a public wealth ID program, the fortunate will tend to give more and try harder to maximize their potential. After all, when the the boss is not around, why do anything at all?

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How To Maximize An Umbrella Policy Like A Champ

Published: 03/30/2015 | Updated: 04/14/2019 by Financial Samurai 38 Comments

Large umbrella policyIf you have assets that amount to more than what your car insurance and home insurance coverage provides, then you should probably get an umbrella policy for protection. The amount of umbrella policy coverage you should have is an individual choice. If you want to be safe, get an umbrella policy equal to your estimated net worth.

I’ve personally taken a “riskier” approach by getting an umbrella policy less than my net worth. I figure, I’m not doing anything particularly offensive or risky in day-to-day life, nor is my business putting anybody in physical danger. If I was running a roller coaster amusement park on the other hand, you bet your buns of steel I’m getting maximum coverage!

The point of this article is remind people to protect their assets, have a talk with your insurance company since you’re paying for coverage, and make sure the insurance coverage is aligned to expectations. Spending a lifetime of work only to see it get wiped away by some random act would be unfortunate. 

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The State Of The Union Address 2015 Cheat Sheet

Published: 01/25/2015 | Updated: 12/12/2019 by Financial Samurai 62 Comments

State Of The Union President Obama 2015When President Obama gave the State Of The Union Address at 6pm PST, I had just left the office to go eat some yummy butter chicken and garlic naan at Amber Restaurant in downtown San Francisco. I assume many other hard-working West Coasters missed the SOTU address as well. Alas, living through an East Coast centric TV schedule is something we’ve grown used to.

But as any true patriot would do, I DVRed the SOTU address, watched the one hour long speech, took notes like a good student, and spent several hours putting together this 2,000 word article to help others think about our nation’s issues.

It’s important we all know and have an opinion about the main topics our nation faces. We don’t have to all agree, but having the knowledge helps us make choices about how we want to live, what occupations we should pursue, the type of investments we should make, and how others might view Americans on a global stage. Oh, and after reading this article, I promise you’ll be able to hold your own at any stuffy cocktail party on the planet.

Knowledge is what will set us all free!

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Who Is The Middle Class? We Are All Middle Class Citizens!

Published: 01/21/2015 | Updated: 12/12/2019 by Financial Samurai 51 Comments

If you read my “Definitions Of A Middle Class Income” article, you’ll come across my theory that almost all of us identify as middle class, no matter how much we make. We do this because of the following reasons:

1) We want to blend in. Just like in high school, if you are the only jackass who drives a sports car to school that your parents bought you, you will likely get beaten to a pulp. You might get a lot of hot dates in the short-term, but that’s all the more reason for other kids to beat you up. As we grow older, we tend to have loved ones to provide for. Things get really real as adults because you don’t want to cross people with actual means who could destroy you.

Your career could get crushed if your boss, who has an inferiority complex about not having a graduate school degree, hears you bragging about your time at Harvard Business School. You could get stabbed walking home in the middle of the night by the bartender who is sick and tired of you talking about your amazing conquests, one of which could have been her ex-boyfriend. Envy lives strongly within us all! Please practice Stealth Wealth, unless you’re really insecure about yourself.

2) We don’t want to be perceived as inferior. Part of the reason why I’m writing this article at 6am before I have to drive 40 minutes south to a consulting job is because I don’t want to fail on Financial Samurai. As a result, I tend to get up early every morning to write and produce before making some shekels. I don’t want this site to scrape the bottom of the barrel after almost six years of hard mental labor. No ma’am. It feels like the world is watching in my little head.

Even if we are making below the median individual income of ~$28,500 or the median household income of ~$53,000, we will still believe we are middle class citizens. Even if we know we didn’t try hard in high school or ended up going to an unknown university that cost us a fortune, we will be hard-pressed to admit our mistakes as adults. The reality is, we all fail ALL THE TIME! In order to cope with our failure, we tell ourselves we’re part of the middle, or we try harder to make up for our deficiencies as adults when we finally realize that it’s now or never to get our crap together!

3) We never want to lose hope. President Obama initially campaigned on the word “Hope” and won. Who doesn’t love hope? Hope allows us to keep going when life starts breaking our toes and pokes our eyes out while we’re already feeling nauseous after eating some bad chicken curry. But when we’re soaking in our beds with curry sweat, we keep hope alive that one day we’ll feel like a million bucks again.

Every time I make an investment, or do something crazy like leave a lucrative job to make little money as a blogger, I hold onto the hope that everything will be OK. I know bad things happen all the time, and they always tend to happen to us when we least expect it. But my hope is that the good times will outweigh the bad, and we’ll die satisfied knowing that everything turned out alright in the end.

MIDDLE CLASS ECONOMICS

Although the chart below says that people who identify with the middle class has shrunk from 53% in 2008 to 44% today, the fact of the matter is that 99% of everyone surveyed in the chart still consider themselves middle class! Middle Class 44% + Lower Middle Class 40% + Upper Middle Class 15% = 99%. We are all the same shades of grey.

Is the middle class shrinking?

Nobody is going to say they are “rich” because nobody wants to get shot. Nobody will say they are “poor” either because researchers will get labeled as elitists and nobody will admit they are poor. Manipulation of data and semantics comes from these social scientists with their PhDs who are looking for nuggets of interesting information. So many are beholden to the financiers who support them. Others may be the puppets of unknown or very well known puppet masters.

The real mathematical definition of middle class is if you earn plus or minus 25% of what the median earns in your area of residence. If we take the nation as a whole, then a middle class household earns anywhere between roughly $40,000 and $67,000. But as we all know, the cost of living is drastically different between places like dreary New York City to paradise San Francisco to frigid North Dakota. The good thing is that you can easily search online for what the median income earner makes in your respective town. The other good thing is that if you feel stuck in hell, you can easily get on a bus and go to economic heaven if you have the courage.

THE REAL WAY TO MORE WEALTH

Middle Class Definition

There’s one thing I’ve noticed from the more than 10 million visitors who’ve come to Financial Samurai since inception is that most people erroneously focus on income growth and not net worth growth. The reality is that people who get rich are the ones who focus on building permanent wealth through asset accumulation. The rich are the ones who make more money through the appreciation of their stocks, bonds, private investments, and real estate than from their income. This is called accumulating a financial nut that works hard for you so you don’t have to!

Trying to learn about investing in various asset classes is not particularly easy – especially not compared to buying the latest pair of shoes or luxury automobile. But the most amazing thing that has happened over the past 20 years is the democratized of knowledge thanks to the internet. So if you know of someone who is mortgaging their future on some fancy private school they can’t afford, slap them upside the head. If you’ve found a site that helps you save money, make more money, and grow your net worth, let others know.

Focus on building wealth through various types of investments. Just make sure you spend time reading advice written by someone who has actually done what she or he is writing about. The easiest way to learn is to learn from other people’s mistakes. You’ve just got to be willing to listen.

RECOMMENDATION TO BUILD WEALTH

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Retirement Planning Calculator

Personal Capital’s Retirement Planning Calculator. Click to see how you’re doing

Updated for 2017 and beyond.

Do The Rich And Powerful Want To Keep The Middle Class Down?

Published: 10/11/2014 | Updated: 12/13/2019 by Financial Samurai 55 Comments

poor-femaleThe one thing I wondered when reading that 100% of people who make over $500,000 are very happy is whether rich and powerful people WANT the middle class to stay poor. Popular media loves to report that money doesn’t buy happiness beyond a very average level of income. But it’s clear that the rich have successfully manipulated the gullible media into making us believe the rich are not safe and happy with their wealth, when they really are.

Part of the reason why I write is to highlight so many of the absurdities that go on in this crazy world. And for some reason, a lot of the absurdities have to deal with government-funded policies e.g. Have a $1,000 child tax credit per child if you make below a certain income level despite our reports saying that it costs $250,000+ to raise a child into adulthood. Thanks to conflicting signals, can we really blame some families for having five children and staying on welfare their entire lives?

The happiness and income survey is anonymous and provides no incentives for participants to vote differently from how they feel. Therefore, it’s highly likely that a large majority of people who do make over $500,000 a year are much happier than those who make less. The only people who say money doesn’t buy happiness are those with no money to make themselves feel better, and those who have a boatload of money and don’t care about money anymore.

In order to feel rich, you must make or have more than the average. Even if you earn only $30,000 a year, you’ll feel rich if the average person earns $20,000 a year. But if the middle class grows more wealthy, then the rich won’t feel as rich anymore.

Given the rich and powerful like to mingle within their own circles, it becomes extremely difficult for the rest of us to get ahead in society because everybody just takes care of each other. A middle class person has to be an exceptionally brilliant, hard working, or lucky to move into the rich class where hopefully they’ll stay for a couple generations until the third generation wastes it all because they don’t understand what it takes to get ahead.

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Solutions To The Fiscal Cliff: Time To Start Investing?

Published: 11/09/2013 | Updated: 12/16/2019 by Financial Samurai 29 Comments

Fiscal Cliff Of Santorini, GreeceEverybody is worried about a fiscal cliff, so what the hell is it? In a nut shell, Bernanke coined the term in Feb 2012 as a way to describe massive spending cuts and tax hikes in January 2013 if there is no budget deal in Washington DC. Because the House is still controlled by the Republicans, and the Senate is still controlled by the Democrats, there is worry no legislation will pass given what happened during the debt ceiling debacle.

If no budget resolution passes, here’s what happens: 1) Federal income tax rates increase for those in the 33% and 35% tax brackets as the Bush tax cuts expire, 2) the payroll tax holiday disappears, 3) federal unemployment benefits completely vanish, 4) reimbursements get reduced to Medicare doctors, and 5) the debt ceiling stays the same, which forces across-the-board government spending cuts, including slashes in defense spending.

The fiscal cliff could amount to some $7 trillion worth of tax increases and spending cuts over a decade. This would do wonders to balance the budget to the dismay of free-spending politicians everywhere. The problem with such budget balance awesomeness is the abruptness by which policies are implemented. Even though ALL of us have known about the fiscal cliff for years, no policitian is willing to do anything until the last moment…. or more importantly, until they win the November 2012 elections to ensure power for the next four years!

I know I sound cynical about politicians, but open your eyes already! We work for the politicians, not the other way around. It’s our job to work as much as possible to keep our politicians in power so they can live great lifestyles and make lots of money while telling people what to do. Every single politician has told me, “Screw pension reform, because that’s my money!” Sweet.

Let’s address some key bickering points.

POINTS OF FISCAL CONTENTION 

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When Will The Government Shutdown And Furlough End?

Published: 10/10/2013 | Updated: 01/12/2019 by Financial Samurai 35 Comments

Waiting for the storm to clear, Cabos For 2019, the US government is going through another shutdown because Trump wants a $5.6 billion for a wall and the Democratic controlled congress doesn’t want to pay for it.

After a 21 day shutdown, the cost to the American tax payer is now $6 billion, or more than the cost of the wall.

It’s my estimate the shutdown will end sometime in mid-February 2019, and cost the US over $10 billion. Meanwhile, Trump will declare a national emergency and start building a wall to protect our southern border.

***** Below are thoughts on the previous shutdown in 2013 where ~800,000 employees got retroactive pay, so all was well. Except, as of 2019, 25,000 federal workers still haven’t gotten paid.

As an investor, I’ve thought about this question a fair bit recently. It seemed clear in September that no agreement would be made in Washington DC, which is why I sold equities and raised my stake in bonds as indicated in my quarterly private newsletter. The 10-year yield at 2.8%-2.91% was relatively attractive in light of everything.

Now that the government has shutdown, the 10-year yield is at ~2.64%, and the broader markets have sold off by 3-4%. The question is what’s next? I think the simple focus has to be on making an assumption of when the government starts up again. By figuring out when, we can potentially make more profitable bets or at least save ourselves from blowing up.

THE GOVERNMENT REOPENS….

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Implications Of A US Government Shutdown

Published: 10/02/2013 | Updated: 12/16/2019 by Financial Samurai 69 Comments

Government Shutdown BoarFor the first time since 1995, the US Government has finally shut down thanks to no agreement between the Democratic controlled Senate and the Republican controlled House in passing any federal spending bills for 2014. The key point of contention was the Republican party’s desire to prevent the Affordable Care Act (Obamacare) from happening.

As a result of the 1995 shutdown, Republicans became public enemy #1 and President Bill Clinton got reelected in 1996. Newt Gingrich became a newt and America didn’t see a Republican president again until the Bush years. I’d like to share with everybody some brief thoughts about the implications of a partial US government shutdown that may be too sensitive to discuss elsewhere.

WHAT DOES THE US GOVERNMENT SHUTDOWN MEAN?

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