Newsletter for January 12, 2025: A Terrible Start To The Year

Dear Financial Samurais,

What a tough start to the year. From the devastating Southern California fires to the bond and stock market sell-off, 2025 is shaping up to be a big down from 2024.

To help navigate this rocky beginning, here are two key ways to regain some balance:

  1. Appreciate what you have, especially your friends and family.
  2. Focus on the present, avoiding excessive worry about the past or future.

For many, 2024 was an exceptionally good year, and anything less might feel disappointing. If you had excess investment gains, consider celebrating your wins—you deserve it. I initially planned to publish this post last Friday but decided to delay out of respect for those affected by the fires.

Please contact your insurance company and review your home insurance policy. Make sure you fully understand your coverage and aren’t underinsured. The last thing you want is to face a disaster unprepared.

For your mental well-being, it’s also wise to limit time on social media. The fires have sparked intense political debates and blame games, which can weigh heavily on your mood, especially when so many are suffering.

Finally, take some time to read this important post: Understand Your Home Insurance Policy Before Something Happens. It could make all the difference when you need it most.

Your Primary Home As A Percentage Of Net Worth

The primary reason I developed the 30/30/3 home-buying guide was to help people avoid overextending themselves and jeopardizing their finances in the event of a layoff, bear market, or recession. I started Financial Samurai in July 2009, making me a “son of financial trauma.”

During the global financial crisis, countless families were wiped out because the typical homeowner had more than 80% of their net worth tied up in their primary residence. This overconcentration is what I wanted to help others avoid.

Recent events have reminded me of another critical guide: aiming to keep your home's total value at 50% or less of your net worth. While I know this goal may be unrealistic for first-time buyers or younger homeowners, working toward it is vital for proper diversification and financial safety.

And if you want true peace of mind, I recommend getting your home's share of your net worth down to 30% or less. Below is a handy chart from Buy This Not That that combines my 30/30/3 guide with the home-as-a-percentage-of-net-worth guide. It will help you make more responsible home-buying decisions or set income and net worth goals if you already own a home.

Income and Net worth recommendations to buy a home at various price points

Just before the SoCal fires broke out, I also published a new article about whether to go with a top-tier agent and pay a higher commission or go with a mid-tier agent and pay a lower commission.

I'm definitely seeing more flexibility by agents to charge less. However, the top agents are rationally all holding onto charging 5%. If you're considering selling your house, this article is definitely a must read.

With my 2025 theme of returning to simple retirement living, one of my goals is to sell an investment property and reinvest the proceeds into fully passive investments.

Protecting Yourself And Your Children From AI

If natural disasters and a slumping stock and bond market weren’t challenging enough, we now have artificial intelligence to contend with. I believe most people are vastly underestimating how disruptive AI will be to jobs and livelihoods.

I recently attended a “meet the school board members” event for parents at my kid’s school, where much of the discussion focused on AI’s impact on our children’s futures. One key takeaway for me is that being super-smart is no longer the priority it once was—after all, no one can outsmart AI. The emphasis on straight-As, top ACT scores, and SAT perfection is becoming less relevant.

Instead, we need to focus on being more likable, reliable, creative, and charismatic communicators. These are the skills schools should prioritize teaching, as they will be critical for standing out in a world increasingly shaped by AI. Build your personal brand.

Ultimately, opportunities tend to go to those who are well-liked or who share similarities with the decision-makers. The wealthiest and most powerful people are no different—they invest in and work with those they trust and connect with the most.

Check out: Safeguarding Your Future From AI: An Existential Crisis Playbook

Let's hope next week is better than the last!

To Your Financial Freedom,

Sam

Diversify Into AI

If you want to hedge against AI taking away your livelihood and the jobs of your children, consider investing in AI. I’ve been dollar-cost averaging into Fundrise's venture product, which invests in top private AI companies and other private growth companies. 

My goal is to build a $500,000 position in new private AI-related investments and by December 31, 2027. So far, I'm a little over $160,000 of the way there. Fundrise is a long-time sponsor of Financial Samurai.

Financial Samurai Fundrise Innovation Fund Investment 2025

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