Newsletter For September 1, 2024: Quitting The Money

This is a free Financial Samurai newsletter that was published on May 26, 2024. Every week, I come out with a free weekly newsletter to help readers achieve financial freedom sooner rather than later. Join 65,000 other readers and subscribe here. This way, you'll never miss a thing.

Financial Samurai began in July 2009 and is the leading personal finance website today with over 1 million organic pageviews a month. Everything is written based off firsthand experience because money is too important to be left up to pontification.

Sam is the pioneer of the modern-day FIRE movement. He attended The College of William & Mary for undergrad, got his MBA from UC Berkeley, and worked at Goldman Sachs and Credit Suisse for 13 years until he retired in 2012 at age 34. Sam is one of the rare personal finance writers who actually has the background and experience in finance.

You can learn more about Sam Dogen by clicking his About page. You can also visit his Top Financial Products page to help you save, invest, and organize your finances better.

Is The Bank of Mom & Dad Propping Up the Economy?

Last Friday’s July consumer spending report showed a 0.5% increase, easing recession fears once again. As a result, it's unlikely the Fed will cut rates by more than 25 basis points this month.

With the national personal savings rate down to a mere 2.9%, sustained spending growth seems tough without a boost in hiring. So, where’s all this spending coming from?

Personal saving rate in the U.S. - only 2.9% - Financial Samurai newsletter

My hunch is the Bank of Mom & Dad. This wealthy institution is likely fueling their adult children’s purchases of cars, homes, clothes, and vacations.

Since buying a house in San Francisco’s Marina district in 2005, I’ve noticed the Bank of Mom & Dad in full force. Many of my neighbors live in homes purchased by their parents, rent-free, and drive luxury vehicles like Audi S4s and Toyota 4Runners. One neighbor, now 38, still lives at home since 24, but managed to buy a $120,000 Land Cruiser! Sweet!

As long as this wealth transfer continues, I suspect U.S. consumer spending will remain strong. With trillions set to be passed down, who’s going to stop us?

Beyond The Top 1%

This week, I dive into what it’s like to have a solidly top 1% net worth. In a previous article, I discussed how Knight Frank’s estimate of $5.6 million is now the threshold to join the top 1%. The Federal Reserve’s data, however, puts that figure at $13.6 million.

In my latest article, I explore households with a $20 million net worth—undoubtedly in the top 1%. I share how these eight households amassed such wealth, what their future plans are, and whether they’re truly happy.

I find each profile fascinating because I felt content with $3 million and left the workforce at age 34. But I’m always curious about what drives people to keep pushing well beyond what I consider “enough.” Is it greed? Fear? Addiction? Love? Or something else?

You decide when you read the article, A $20 Million Net Worth Should Be Enough To Live Happy And Free.

Found A Man Who Quit Making $2 Million A Year

In my latest podcast episode, I chat with my online buddy Khe Hy, who spent 15 years on Wall Street before walking away. Unlike me, Khe reached Managing Director status and was earning $1–$2 million annually when he decided to leave.

Can you imagine leaving such a lucrative job? I doubt I could have quit with that kind of money on the table—the “one more year” syndrome would’ve hooked me for sure.

If Khe had stayed until age 50, he likely would have amassed a $20 million net worth. But at what cost?

Listen to the episode, Making $2 Million A Year And Then Quitting, and see if you can sense the childhood demons Khe is still battling.

A lot of people think making big money in a high-stress job must be great, but there’s a toll it takes. It’s similar to NFL players who retire at 28, leaving millions on the table. It’s hard to fathom, but the grind can become too much to bear.

The Broke Mindset

Speaking of childhood experiences, I recently watched some videos by Dr. Gabor Maté, a specialist in childhood development. His research suggests that many adult problems stem from childhood traumas.

Why do some people get addicted to drugs? Why can’t your father be more loving? Why do we self-sabotage? And how can someone quit a lucrative job millions would kill for?

This got me thinking about my own childhood and how it’s shaped my financial behavior.

Since October 2023, when I bought my house, I’ve been punishing myself financially, like Silas whipping himself in The DaVinci Code. I funnel any money that comes into my checking account straight into my brokerage or private real estate accounts, creating a constant sense of scarcity. Sometimes, I even run negative balances, scrambling to cover bills—forcing myself to feel financial stress each month.

So, why create this unnecessary stress? It likely ties back to my childhood in Kuala Lumpur, where I witnessed extreme poverty alongside extreme wealth.

If you’re curious about what drives you, reflect on your upbringing. I think you’ll find some answers. Meanwhile, check out my article, The Broke Mindset: Your Contrarian Advantage In Building Wealth.

Have a great Labor Day Weekend!

Sam

You can get my posts in your inbox as soon as they are published by signing up here. If you'd like to join 65,000 others, sign up for my free weekly newsletter here.