Personal finance is wonderful because it allows us the opportunity to dream of possibilities. When I was a freshman battling for a spot on the varsity team, I fantasized about being a professional tennis player signing balls after sliding on the red clay of Roland Garros. Every time I attend a tournament now, I feel like a kid again.

As a poor college student, I dreamed of making big bucks on Wall Street every time I passed the overly diligent business school students huddled around a TV showing CNBC. I imagined whipping around hundred million dollar positions on the prop desk as traders on the other side wondered what the hell I was up to. After a profitable day’s work, it would be off to Peter Luger’s Steak House in a black car with some clients, some friends and a corporate card of course.

After a couple years of marathon workdays in New York City, I dreamed of being free to set my own schedule. My health was fading and I didn’t know how much longer I could last getting in before sunrise and leaving after sunset. As a poker fan, I always imagined winning the WSOP multi-million dollar first prize. Some would hand in their resignation the next day while giving their boss the bird. I would continue working because work becomes incredibly more fun when you don’t need the money. Besides, I’m the WSOP champ, baby!

Now that I’ve retired from the corporate world, I continue to dream about all the possibilities. A dream within a dream if you will as I never imagined the ability to break free so soon. Why not run different financial scenarios and imagine what type of opportunities might arise in 25 years?

A reader commented in the 2013 Goals post how surprised they were to find “Live Free” as a goal. Paradoxically, it’s hard to live free when you’ve got to make all your own choices. But, I’d rather have choices than have no choice at all.

I dream of progress. I dream of adventure. The best part of dreaming? Anybody can do it because it’s free.

What do you dream about?

Financial Samurai 2012 predictions recap is a Financial Samurai original. I’ve been writing my predictions and recaps since 2009.

Another year has come and gone. Hopefully, all of you have made strides with your finances and your personal lives. Financial Samurai would be a failure after writing ~250 articles in 2012 if I wasn’t able to help you save more money, invest better, take more calculated risks, and take one step closer to achieving financial freedom.

2012 will go down as one of my most defining years because I managed to break free from the corporate world. There’s no doubt I would still be taking a 7:15am bus to work if it wasn’t for launching this site. It feels exhilarating to start anew!

It’s going to be tough to match the accuracy of my 2011 predictions because I was off by only 0.5% with my Dow Jones Index target (+5.5% instead of +5%). North Korea’s Kim Jung Il passed away as predicted as well. No, I do not work for the CIA. But, maybe I do. You don’t want to know.

I have not revisited my predictions for 2012 until the writing of this post so I’m curious to see what was on my mind one year ago. December 2011 was still a time of disarray, with 8.5% unemployment, tremendous uncertainty in Europe, the Occupy Everything movement, and a US President whose hopes of re-election loomed on a improving economy.

Here’s to looking like a Big Donkey or a Small Donkey!

Financial Samurai 2012 Predictions Recap

* Black is from one year ago. Blue is now.

1) President Obama wins a second term.

Political pundits and online betting sites are completely clueless and gutless in their 50/50 predictions. They talk about how the stock market and unemployment needs to do well for Obama to get re-elected. Nothing matter folks!  Republicans have nobody worthy of beating President. Barring an Obama illness, nothing really matters. The economy is improving, unemployment is going lower, and personal balance sheets are strong. If you know anybody who is delusional enough to think a Republican will win in 2012, bet them as much money as you can afford to lose. When Obama wins, you’ll get a nice little year-end extra bonus. If anybody would like to bet me that Obama does not win, I’m open for business!

Analysis: It seems like a slam dunk now that Obama received more than 300 electoral college votes for his re-election. But, back in December 2011 unemployment was close to 9% and I received a lot of flak for this call. In fact, I followed up this prediction with a good natured post on a grassroots way to get Republicans to donate more to charity and got several takers to the tune of over $2,500. All proceeds are going to charity. I really enjoy putting my money where my mouth is. It helps me think things through more thoroughly. If you don’t put your money where your mouth is, then it’s like an entrepreneur coming up with a dozen ideas and never executing. 

2) The unemployment rate drops below 8%.

Just like that, the unemployment level breached 9% to 8.6% in the latest reading. And just like that, at some point in the 2nd half of 2012, unemployment flirts with 8% and then busts on through. Have you seen the holiday spending figures yet? En fuego! Nobody spends money on stuff they don’t need if they don’t have money and aren’t confident about their job prospects. Simple logic folks.

Analysis: As of Dec, 2012 the current US unemployment rates is 7.7% as opposed to 8.6% a year ago. The Fed came out and said they will do everything possible to provide liquidity into the system until the unemployment rate drops below 6.5%. Don’t fight the Fed. Take advantage of all its artificial manipulation as much as possible e.g. refinance your mortgage and ask for interest rate decreases. Holiday spending was strong then, and it is super strong now. 

3) There is no inflation. 

Despite tuition, food, and energy costs all going up, the government says we have no inflation, therefore the 10 year yield stays handsomely below 3%. We have become a nation of blindly following our leaders and letting them get away with whatever they want. One blogger friend in a previous post highlighted an Obama scandal he’s pissed about, and when I asked him to write about it on his site, he said “he doesn’t talk politics on his blog”!If that’s not government omnipotence, I don’t know what is! Our leaders would not be here if we did not believe in them. Hence, there is no inflation because they say so.

Analysis: The 10-year yield is at 1.7% vs. 2% a year ago, signifying tremendous slack in the system and demand for US dollar denominated assets. I really think people are wasting their money getting 30-year fixed mortgages. Interest rates have been going down for over 25 years in a row folks. Get a 5-year ARM or maybe even shorter instead. Just make sure you have a cash reserve. The inflation prediction was another bet I was trying to get others to take since investment bloggers to  fixed income strategists were all calling for higher inflation. Those silly geese.

Related: Are You A Real Millionaire?

4) The US markets have a banner year. 

Everything is relative. Given the 10-year yields no more than 3%, any return more than triple the 10-year yield is an amazing return. As of now, we’re talking about a 6% return, however, may I be so bold to forecast a greater than 10% return on the S&P500 in 2012. That’s right, we’re talking S&P 1,400. Because the consumer is fine and spending again, corporate earnings continue to grow at a healthy clip.

The S&P 500 dividend yield is equal to the 10-year yield at 2%, and investors start asset allocating back into equities. Buy underlying shares of gold and oil as I believe they have an even better chance of being up 10% in 2012. International equities catch a bid as well and outperform the US, especially Brazil and the larger Asian markets. If I am up 10% in my overall portfolio at any point this year again, I will sell almost all my holdings just like in 2011.

Analysis: I’ve been waiting to publish this post until the last day given there’s been no resolution on the budget talks. The S&P 500 ended 2011 at 1,257 and has indeed risen by more than 10% to currently 1,402 pre-open. The S&P 500 closed the last day of the year up 1.7% (23.76 points) to 1,426.19 as hope for a budget deal pushed the markets higher. During the year, we’ve done some asset allocation shifts by selling in May, getting back in July, selling after QE3 in September, and now full back in after the 7.5% dip.

The net result? Outperformance of the broader index for those of you following along all year. Meanwhile, Asian markets ended the year up around 17%, outperforming the US as predicted by more than 5%. Eventually, I’ll get the directional prediction and the magnitude change wrong, but so far, it’s been correct every year since this blog’s inception.

5) Online advertisement spending surges, therefore blogging becomes that much more lucrative.

Some people worry blogging is a unsustainable stream of income. Clearly, they see the world through dark lenses.  With the continued improvement of the economy, the Olympics in the summer, and the Presidential elections, advertisement spending and industries that rise and fall with who gets elected are a boon to anybody with media property. There’s no better time than right now to own a blog as more and more advertisement dollars get spent online. If you have a chance to buy a blog for less than 2X yearly revenue, do so with abandon. In the same token, there will be richer valuation acquisitions of personal blogs by big corporations due to the increased value of media properties.

Analysis: According to Forrester Research, online advertising spend in the US increased by more than 17% in 2012 to $12.7 billion. That’s just the US folks and the web is global! Online ad spending is predicted by Forrester to grow by over 15% compounded annually and reach $27 billion by 2017. The trend is your friend. If you want to make money online, perhaps you should have a web presence? I’m so bullish on online media, maybe I will be able to achieve my 20 hours a week / $200,000 a year goal sooner than within three years. I sure as hell am going to try!

6) Five more Members of the Yakezie Network give it a go as full-time bloggers leading to a flood of followers. 

The longer you have your blog, the more valuable it becomes. With one more year under each Member’s belt, coupled with the increase in advertisement spending all year, each Member sees their income rise by another 30-50% on average. Earning $50,000+ a year through their sites becomes common place, as Members know how to leverage the Yakezie Network and brand to their own advantage. We’ve launched our Yakezie Blogger Services for those interested in starting a blog as well. All are great people who provide competitive pricing and do solid work. The problem with these financial success stories is that many more will fail because they think it’s so easy, enriching the “how to make money online” marketers even more.

Analysis: Hmmm, besides me, who else in the Network has quit their jobs to work on their own online endeavors? Kevin from Invest It Wisely did to start Digipom, a Android mobile app device company. Joe from Retire by 40 quit at the age of 39 after 17+ years at his high tech company to spend more time with his family. Jeff at Money Spruce left New Haven and moved to Portland to try his hand at freelancing. Shoot, that’s only four! I know I’m missing someone else. Let me know! What makes me super pumped is that people are doing what they want to do. Folks are working their butts off, taking calculated risks, and going for things against conventional wisdom. Way to go guys!

7) Social Media is one of the worst performing sectors. 

You’ve already made a triple in Twitter in 2011, now it’s time to cash out. The amount of competition in every single space is obliterating returns quicker than a Congressman’s mistweet. Social Media fatigue sets in, and there’s no more desire to “check-in” at your favorite bar due to stalkers. You resist tweeting your delicious meal due to an unknown follower compiling a compendium of what you eat. And you no longer update your Facebook page due to story after story about someone not getting a job thanks to what they posted. Privacy becomes King. The company who maximizes privacy insurance, or enables privacy insurance wins big.

Analysis: The bubble burst. Zynga and Groupon are down well over 65% this year. The Facebook IPO went from $38 down to $18. Private social media companies are having to dilute existing shareholders at value down funding rounds. Social Media has indeed been one of the worst industries to invest in this year. At least billions of dollars of value has still been created with employee lockup expirations. Well, just don’t remind Zynga employees how senior executives were able to cashout at $13 in Spring while everybody else was left holding the bag.

8) US housing is one of the best performing investment classes. 

After five years of softness and pent up demand, US housing finds a strong footing. The US homebuyer shakes free from paralysis, and the international homebuyer takes the plunge given how incredibly more expensive housing is in Moscow, London, Hong Kong, Singapore, Beijing, Shanghai, Singapore, and even Canada now. A $25,000 rental income stream used to be valued at $500,000 on a cap rate of 5%. Now it’s worth $833,000 based on 3%, but prices have barely moved, yet.  People do the math and wisen up.

Analysis: US housing is coming back with a vengeance. San Francisco rents are up over 15% while property prices are up anywhere from 5%-12% in the Bay Area. You are hearing the same anecdotes from “superstar cities” such as New York City, Honolulu, and some of the best locations in LA and Chicago. These cities lead the charge, and the rest will follow. National home prices are up 6% in October year over year, the biggest jump since June 2006. If you don’t need to sell your house, please don’t. Refinance your mortgage, enjoy life, and wake up 10 years from now with a heck of a lot more net worth. 

See: Invest In Real Estate Crowdfunding

9) Mobile technology becomes the place to invest and work.  

The market for mobile software surges to some $20 billion dollars in 2012 from just $4 billion in 2011. Companies can’t find mobile designers and software engineers fast enough as there is no doubt mobile computing is here to dominate.  Starting salaries for 24 year old graduates with 2 years of experience easily surpasses $100,000 a year, which begs the question: If you want a job, and want to get paid, why wouldn’t you just get good grades and learn some programming skills? Venture capital pours into the mobile space like it did in the social media space and new mega fortunes are made. Google, Facebook, and Twitter is so 2011!

Analysis: Thanks to the Cloud, handset growth, technological innovation, and income growth in emerging markets with billions of consumers is driving mobile to new heights. If you want to make six figures, become a mobile engineer. If you’re thinking of starting a startup, consider doing something that tightly involves mobile. Pretty soon, we are going to do everything on our mobile devices, especially for those who have leveraged the internet to create new careers online.

10) You will find love, fortune, and a flatter stomach. 

2012 is a year to stop making excuses as to why you can’t find a suitable companion, why you still don’t have a road-map to financial freedom, and why you still aren’t as fit as you like. If you’ve seen the show The Biggest Loser, you know losing weight can be done if you want it. If you observe carefully, even the least attractive and poorest of people find great love. Meanwhile, people are getting rich every single day. I strongly believe that if you continue to read Financial Samurai and Yakezie all year, you will read informative articles that will help you get there. Writing about relationships, career, and fitness are favorite topics here.

Analysis: I hope you all did find love, a little bit of fortune, and a flatter stomach. I finally got below 160 lbs, after being 167-170 for 13 years after college. I gained half of it back after going to Europe for 2.5 weeks though! It feels good to feel lean again and I don’t plan to get up there again, although I cannot resist stuffing my face with all you can eat French Cruller donuts and lemon meringue pies, so don’t temp me! As for fortune, my income is lower since I no longer work.

However, my freedom is higher. I no longer have TMJ, grind my teeth, or chronic tennis elbow because my stress is much lower nowadays. As for love, I’ve always had love with my immediately family and friends. I hope you all have found new love, more fortunate, and a flatter stomach as well!

Related: The Health Benefits Of Early Retirement Are Priceless

MY PERSONAL YEAR IN REVIEW 2012

* Retired from the corporate world after 13 years.

* Became poor by resetting to zero, but then positioned myself as middle class because being poor doesn’t feel too good.

* Wrote a 200-page book on how to profitably quit your job by teaching folks how to negotiate a severance package. Please never quit, always get laid off instead.

* More than tripled average daily traffic on Financial Samurai with the help of a 50% increase in total content.

* Travelled for 2.5 weeks to various parts of Scandinavia and St. Petersburg to research the happiest people in the world.

* Went undefeated in league tennis and our team won the City Championships. Getting back in shape helped a lot.

* Did not give up.

THINGS FEEL RIGHT

It’s always a little strange to review something you wrote one year ago. Wouldn’t it be amazing if we knew then what we know now? We’d rule the world! To bad we don’t have a Delorean.

I encourage every single one of you to write down your predictions for 2013. You will be forced to think in rational thought as you predict the future, in order to make profitable financial bets. Don’t just sit back and wait for my predictions for 2013. Make your own because all of us are in different financial stages with different needs and desires.

Hope is not a strategy for achieving financial freedom. You must meticulously plan. Don’t be intimidated by numbers. You can be wrong. Just make sure you know why! I hope you enjoyed my Financial Samurai 2012 predictions recap.

Passive Income X Factor – Starting Your Own Site

It’s been one 12 years since I started Financial Samurai and I’m actually earning a good passive income stream online. The top 1% of all posts on Financial Samurai generates 31% of all traffic. The average age of the top 1% posts is 2.3 years old. In other words, after putting in the hours to write some very meaty content over two years ago, 10 posts consistently generate a monthly recurring income stream that’s completely passive.

I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, connecting with people online, and enjoying more freedom, see how you can set up a WordPress blog in 15 minutes like mine with my step-by-step-tutorial.

Sign up for my free Financial Samurai newsletter here. Also, check out my top financial products page to find the best products for your finances.

To get rich, you need to adopt an abundance mindset. There is no monopoly on being rich!

I’d like to think most of you come here because you have a desire to improve your finances, hang out and connect with like-minded folks, and get entertained. Despite some rather highly opinionated posts, there’s not a lot of nasty comments at all.

I am a perennial optimist. Sprained ankle? Thank goodness it’s not broken! Ever since I was about 12 years old, I knew I did not want to be poor. Seeing ubiquitous poverty growing up in third world countries makes me appreciate how lucky we are to live in America.

It was in the 9th grade when a senior told me to stop messing around if I wanted to have a better life. And it was the first month of work that I told myself if I could just survive these brutal 5:30am-7:30pm+ workdays for the next 10 years, that I would be rich.

Thirteen years later, work is but an option. The biggest irony is that in order to stop caring about money, you first have to care a great deal about money. I could have worked for many more years and saved many more dollars, but money is no longer a driving force. I’d much rather have the freedom to do what I want.

It’s been three and a half years since I first started this blog and I’ve encountered a plethora of different attitudes about wealth. Some people believe it’s their destiny to remain poor while others have an unwavering desire to make it big beyond their wildest dreams. If you believe you will always be poor, then that is what you will be. If you believe you deserve to be wealthy, you have an infinitely higher chance of succeeding.

There is no monopoly on being rich. You don’t have to be angry at others who have more. You’ve just got to be confident that you belong and survive long enough to succeed.

“Everything will be alright in the end. If it’s not all right, then it is not yet the end.” – Unknown

Related Posts:

Abolish Welfare Mentality Today

A Day Job Is So Much Easier Than Entrepreneurship

I’m Not Supposed To Be Here… 

Photo: Bay Bridge Sunset, SD.

Just like that, 30 days have gone by and my sabbatical is over. I truly enjoyed my time off and have learned a number of things I’d like to share with those who are thinking of taking a sabbatical or are just curious in general.

I haven’t taken more than two consecutive weeks off since the summer after college and I highly encourage everyone to take a sabbatical if they’ve been working for at least five years.

What I Learned While On Sabbatical

* Free time is joy.  The best feeling of being on sabbatical is knowing that nobody is there to tell you what to do.  You don’t have to set an alarm clock and you are free to plan your day and week as you see fit.

* There are plenty of people wandering around during the day.  It didn’t matter when I went out to do errands, play tennis, go on a hike, or whatever between 7am-5pm, it was always crowded!  A bullish sign for the economy no doubt as you read on.