Search Results for: 1/10th rule for car buying

Would You Return A Lost 12 Carat, $200,000+ Diamond Ring?

Updated: 02/15/2020 by Financial Samurai 31 Comments

You might have heard recently that an unemployed architect by the name of Mark Epple found a whopping 12 carat, yellow diamond ring when he and his family was skiing in Vail.

The first thing that came to mind was who wears a 12 carat diamond ring? That must be so gaudy! My second thought was what is an unemployed guy doing spending thousands of dollars flying his family to Vail to go skiing? Each lift ticket costs $100, not to mention lodging and food for the family. Finally, I wondered whether I would return the 12 carat diamond ring if I was unemployed.

It’s easy to argue not to return the ring. Anybody who can afford a 12 carat diamond ring probably isn’t hurting for money. It turns out the original owners have a vacation home near Vail, so that sort of proves the point. Based on the new rule of engagement ring buying, a husband can get away with spending up to the value of his car for his bride to be. Cheap car, cheap ring!

And based on my 1/10th rule of car buying, one doesn’t spend no more than 1/10th their annual gross income on a car. In other words, this couple is earning at least $2,000,000 a year. Furthermore, they probably have personal property insurance coverage like so many do with expensive jewelry.

It’s also easy to argue for why one should return the ring. If you lose something of value, you certainly hope someone will have the decency to return what doesn’t belong to them.

I’ve lost everything under the sun before and am so grateful when someone returns my lost item. Furthermore, it’s not like you can easily sell a 12 carat diamond ring without bringing any attention to yourself.

The largest engagement ring I’ve ever seen is 6 carats, and that was just ridiculous. Finally, if you do happen to return something of great value, more often than not the person will likely reward you for your good deeds.

My First Car Was A Heap Of Junk How About Yours?

Updated: 01/14/2021 by Financial Samurai 52 Comments

Joining Uber As A Driver With $50 Gas Promo — Rhino Joins Uber

My first car was pretty crappy. How about yours?

After getting my driver’s license at 17, I talked to my parents about finally getting a car. I don’t remember why I didn’t get my license at 16, but perhaps it was because I had such a spiffy bicycle the ladies loved. *Ring a ding a ling * was the sound of my bell every time I rode by a hot girl.

It always felt odd that I had to walk or ride my bike to school when other kids got to drive their new Ford Explorer SUVs, and VW Jettas. Even my parents drove an 8 year old car at the time. Oh well, I thought to myself. Perhaps one day.

THE HIDDEN GEM THAT WAS NOT A GEM

The day I got my driver’s license was one of the most memorable days. One, because I failed the written test the first time, and my mom wasn’t too happy. Two, because my parents took me to “Fresh Choice”, an all you can eat buffet restaurant to celebrate. I had dreams of rumbling in a 5.0 liter Mustang for my first car. Nothing sounds so beautiful. In fact, I actually test drove one of my classmates because he was selling it to buy an Acura NSX! “$9,000 and it’s yours Sam!” Yeah right. All I have is like $900 bucks, but I sure am glad I got to test drive!

My parents gave me a $2,000 budget, so I searched the Auto For Sale section of the papers gleefully to find my dream vehicle. Damn, even in those days $2,000 wasn’t too much money. There was no internet at the time mind you so all I could do was base my impression on some text in a paper. I finally stumbled upon one ad that just sung to me, “Excellent condition 1987 Nissan Sentra with only 135,000! Seller is running for District Supervisor. Only $1,699!” $1,699 was $500 cheaper than all the other comparables and I thought I had a deal.

We drove out to the aspiring District Supervisor’s shoddy apartment and took a look. What a junker! The car had a faded yellowish color, with a newly painted driver’s door, because obviously someone bashed into it. Even still, we took it for a ride, and I just loved it. We paid cash on the spot and drove it home.

With all the scrubbers and cleaning chemicals I bought from the auto store, I got to work detailing every single inch of my new baby. I even got one of those scented pine cone car fresheners to hang from my rear view mirror. It was a dream come true. My very first car to drive to school in!

FIZZLE POP

Too bad only a month had past when * boom * my clutch broke down and my car no longer could shift gears and move. No wonder it was $500 cheaper than all the other cars in the paper.

I had to replace all of the CV boots as well. $1,100 later, the car was as good as new. Curses to you District Supervisor! Now I remember why I don’t trust politicians. It all started at age 17. I’m glad I started with a piece of crap, because nothing could have been worse!

RECOMMENDATION

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Updated for 2021 and beyond

Your Umbrella Policy Needs To Be Updated Thanks To A Bull Market

Updated: 10/02/2021 by Financial Samurai 73 Comments

Making money hand over fist in this bull market is nice. However, the more money you make, the more money you have to lose. Therefore, it’s important to update your umbrella policy coverage to account for greater wealth.

Compounding wealth has a funny way of sneaking up on us. What may have taken you 10 years to accumulate your first million might only take three years to accumulate your second million.

If you regularly invest, then I suspect your net worth has grown to all-time highs since the pandemic began. Therefore, your current umbrella policy is likely no longer enough to fully protect your assets.

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The Average Household Budget Is Huge In America

America is one of the richest countries in the world. We have huge household budgets to prove it. Let’s look at the average household budget in America to explain how good of a life we are living.

According to the latest data by the Bureau of Labor Statistics, the average household budget is $60,060 for 2017, a 4.8% increase from 2016 levels. Surely the average household budget in 2021-2022 is even larger once the data comes out.

We can estimate the average household budget is even higher in 2021 due to inflation and our insatiable appetite for consumer. After all, it takes $3 million to be a real millionaire today. We are making more and spending more as we come out of the global pandemic.

Eight of the 10 largest components of household spending increased during 2017. The 12.2% rise in education spending was the largest percentage increase among all major components, followed by a 10% rise in entertainment.

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The Average Net Worth And Income For Asian Americans

Asian Americans make up roughly 5.6 percent of the total American population as of 2021. Despite the small population of Asian Americans in America, Asian Americans have the highest average net worth and highest average income. Let’s look at the average net worth and income for Asian Americans today.

The largest Asian ethnic groups represented in the census were Chinese (3.79 million), Filipino (3.41 million), Indian (3.18 million), Vietnamese (1.73 million), Korean (1.7 million), and Japanese (1.3 million).

Below is a more detailed racial breakdown by the Census Bureau. It’s important to understand that Asian Americans is not a monolith if we are to determine the average net worth and income for Asian Americans.

Racial Makeup Of America - The Average Net Worth And Income For Asian Americans

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The Average Net Worth And Income For Hispanic Americans

As of 2021, the Hispanic population of the United States is roughly 60 million, making people of Hispanic origin the nation’s largest ethnic or racial minority. Let’s look at the average net worth and income for Hispanic Americans. Hispanic Americans are the fastest growing minority.

Hispanics constitute 18 percent of the nation’s total population. As you can see from the chart below, the Hispanic American race has grown by roughly 1.8% since 2010.

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The Fundamentals Of FIRE (Financial Independence Retire Early)

FIRE stands for Financial Independence Retire Early. Financial Samurai helped start the modern day FIRE movement when this site began in 2009. This post will explain the main fundamentals of FIRE so you can decide if it’s a lifestyle worth exploring further for your future.

With now over 1.5 million organic pageviews a month, Financial Samurai has grown to be one of the leading FIRE blogs today.

Fundamentals Of FIRE

Let’s look into the fundamentals of FIRE. Some of the key items you will learn about are listed below.

What is the FIRE movement,
The definition of FIRE,
Various type of FIRE,
Who is FIRE for,
Criticisms of the FIRE movement, and
The framework behind FIRE.

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How Much Of A Vehicle Expense Can You Deduct?

If you own a business or are a sole proprietor, a vehicle expense can be deducted from your income to lower your tax bill. This article discusses how much of a vehicle expense you can deduct and not get in trouble with the IRS.

I strongly believe a car is the #1 personal finance killer because people spend too much of their income on a depreciating asset. Follow the 1/10th rule for car buying if you want to grow your net worth.

With cars being so expensive, it’s logical to want to try and deduct some of its expense, especially if you are a freelancer (1099 income) or a small business owner (S-Corp or LLC). Here are some common questions you might have.

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Average Income For Asian Americans By Different Asian Subtypes

The average income for Asian Americans is among the highest in America. For 2021, the median Asian American household income is roughly $80,000 compared the the median overall U.S. household in America of roughly $64,000.

Asian Americans make up roughly 5.6 percent of the total American population as of 2021.

The largest ethnic groups represented in the census were Chinese (3.79 million), Filipino (3.41 million), Indian (3.18 million), Vietnamese (1.73 million), Korean (1.7 million), and Japanese (1.3 million).

The Many Different Types Of Asians

Below is a more detailed racial breakdown by the Census Bureau.

Asian American Population Growth

The U.S. Asian population grew 72% between 2000 and 2015 (from 11.9 million to 20.4 million), the fastest growth rate of any major racial or ethnic group. As a result, more and more corporations, universities, think tanks, and politicians are trying to figure out how to best address the growing needs and tastes of Asian Americans.

Average Wealth For Asian Americans

Despite being one of the smallest minorities in America, Asian Americans are on pace with White Americans in terms of wealth per the Federal Reserve.

Average Income For Asian Americans

According to the Census Bureau, Asian median household income leads the way at roughly $80,000, or 30% higher than White median household income at $64,000.

Hispanic American income is roughly $45,000, while African American income is lowest at roughly $38,000. A 100% spread between Asian American income and African American income begs the question: why such a massive difference?

Before answering the household income difference question, it’s important to realize “Asian American” consists of dozens of different types of Asian people. Let’s take a look at Pew Research’s study on Asian income by Asian type below. It helps us ascertain the true average income for Asian Americans.

Their overall annual household income corresponds with the Census Burea, but within the matrix, you can see a wide variation with Indian income at $100,000, or 3X higher than Burmese income and 35% higher than the overall Asian American income.

This fact may be due to a higher proportion of Indian workers in the high tech and medical industries. The other surprising income datapoint is Filipino income second highest at $80,000. This may be attributed to better communication skills given English is widely spoken in Filipino culture, as well as a propensity for self-employment.

Different types of Asian income - Average Income For Asian Americans

Racial Makeup Of Personal Finance Readers

To understand the racial income difference, let’s look at the makeup between personal finance readers and the overall racial population. The hypothesis is: those who read more about personal finance will have higher income and net worth overall.

Based on my survey of roughly 3,000 readers of Financial Samurai, one of the largest personal finance sites in the world with over 1.5 million pageviews a month and a nine year running history, here are some interesting statistics:

There is roughly a 30% overrepresentation of Asian readers (35% FS readers vs. 5% of US population)
There is a 5.3% underrepresentation of African American readers (7% FS readers vs. 12.3% of US population)
There is a 11.3% underrepresentation of Hispanic readers (5% FS readers vs. 16.3% of US population),
There is a 15.7% underepresentation of White readers (48% FS readers vs. 63.7% of US population).

Racial Makeup of Personal Finance Readers — Click to fill out the survey at the bottom

Overrepresentation Of Asian Americans Who Care About Money

A 30% overrepresentation of Asian readers on Financial Samurai is startling. Perhaps some of this can be explained by my site’s name and the fact that I’m Taiwanese/Polynesian American. Everybody tends to gravitate towards people most similar to themselves.

Just look around at all your friends, everybody in senior management at your firm, the people Presidents choose as their cabinet members and so forth. Homogeneity reigns supreme because we’re all biased for those who look and talk like us.

But since 70%+ of Financial Samurai’s traffic is from search engines like Google with traffic coming from all over the country and the world, and only 5 out of 1,397 of my article’s have titles with “Asia,” “Asian,” or “Chinese,” one can assume a smaller percentage of the 30% overrepresentation is due to the site’s name and my race.

If my site had less than 10,000 pageviews a month, my site’s name and my background will have a bigger impact. But my site generates over 100X that and is therefore, statistically significant.

Feel free to peruse my most popular articles and see for yourself. The most popular articles relate to retirement savings, investing, and earning more money. These topics are relevant to all races.

Underrepresentation Of Black And Hispanic Readers

As Black and Hispanic Financial Samurai personal finance readers appear underrepresented and correspond with Census Bureau-provided lower income and wealth figures, and as Asian readers appear overrepresented and correspond with higher income and wealth figures, it seems clear there’s a correlation between higher income/wealth and reading personal finance articles.

Savings survey of personal finance readers with a median age of 34-39 are much higher than the median American household savings of ~$17,000 – $50,000 depending on survey

The Solution To Improving The Financial Health Of Our Country

Read more personal finance sites to improve your financial health. It’s that simple. Reading a personal finance site like Financial Samurai keeps you abreast of all the topics. This site will also challenge you to build more wealth.

Anybody who started reading Financial Samurai since its 2009 beginning has probably crushed the average American in terms of wealth creation. We’ve been talking about investing in the stock market, bond market, and real estate market all this time.

Even as the stock market marched to new record highs, you could read articles talking about investment ideas at the top of the market to let you make even more money. You would have likely also started building your passive income portfolio to give yourself more options versus others who just rely on a day job income.

If you bought property in SF, NYC, Denver, Vancouver, Toronto or most big cities in 2012 with a 20% downpayment, your equity is up over 300%. Meanwhile, the S&P 500 is up over 120% during the same time period. You could have also learned to save a lot on mortgage interest expense by not taking out a 30-year fixed mortgage as we enjoy a permanently low interest rate environment.

The same cannot be said for everyone who disagreed with my 1/10th rule for car buying. You can literally read hundreds of comments from people who missed out on investing in this massive bull run because they had to drive a $50,000 truck that equaled 100% of their annual gross income.

Yes, we can hypothesize that those who are already financially savvy care more about financial information than those who aren’t. But we should also conclude that over time, those who read personal finance websites tend to get richer than those who do not.

Education Will Improve Financial Health

Educational attainment by race — A strong correlation with education and wealth

You don’t have to be rich to get a great education because access to information is now free. Soak up as much information as you can and share your favorite articles with as many people as possible. I’m absolutely positive we’ll see a tremendous improvement in our finances over the next generation.

Once you have your finances sorted out, you can focus your attention on more important things such as family, health, and happiness. And when your finances are really good, you can even spend your time and money helping other people.

Achieve Financial Freedom Through Real Estate

As an Asian American, you may be naturally drawn to real estate. Real estate has always been a favorite asset class to build wealth among Asians because it is a tangible asset. Further, real estate is less volatile, provides utility, and generates income.

By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate roughly $150,000 in annual passive income. As an Asian American, I wanted to invest as much as possible so I no longer had to deal with gatekeepers.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.

Take a look at my two favorite real estate crowdfunding platforms.

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.

Manage Your Money For Free

The best way to build wealth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard so you can see where you can optimize.

Before Personal Capital, I had to log into eight different systems to track 33 different accounts to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing. I can check how my net worth is progressing and where my spending is going. You also get your net worth amount sent to your inbox weekly.

One of their best tools is the 401K Fee Analyzer which has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. You just click on the Investment Tab and run your portfolio through their fee analyzer.

They’ve also come out with their incredible Retirement Planning Calculator. It uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes. Definitely check to see how your finances are shaping up as it’s free.

Personal Capital Retirement Planner Tool — Are you on track? Sign up for free to plan for your retirement future

About the Author

Sam began investing his own money ever since he opened an online brokerage account in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at two of the leading financial service firms in the world. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.

FinancialSamurai.com was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million organic pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.

The Average Net Worth And Income For White Americans

Let’s look at the average net worth and income for white Americans. Non-Hispanic whites account for roughly 61% of the United States population as of 2021. In other words, white people are still the majority race in America. However, by 2041, it is estimated that white people will no longer be a majority.

Below is a more detailed racial breakdown by the Census Bureau with estimates on racial makeup through the year 2060. Noticed the steady decline for white Americans.

Racial Makeup By Percentage In America for Whites, Blacks, Hispanics, Asians, And Other - The Average Net Worth And Income For White Americans

Average Net Worth For White Americans

According to the Urban Institute, white Americans have on average $130,472 in average family liquid retirement savings as of 2013 compared to $19,049 for African Americans, and $12,329 for Hispanics.

Average retirement savings by race - The Average Net Worth And Income For White Americans

Now let’s look at the Economic Policy Institute data for median and average wealth for Whites and Blacks. The average wealth for Whites is $678,737 and the median wealth for Whites is just $134,230.

Median And Average Wealth For African Americans and Caucasians

Average Income For White Americans

Now let’s look at the income by race data provided by the Census Bureau. The average income for white Americans is $76,057. However,Asian median household income leads the way at roughly $98,174.

Black American income is the lowest at roughly $45,000 and Hispanic income is at roughly $56,000 which correlates with the retirement savings by race chart and wealth charts above.

A 80% difference between the highest income ($78,000) and the lowest income ($45,000) is significant. What is going on? At least incomes for all races have been trending up

Income by race - The Average Net Worth And Income For White Americans

Racial Makeup Of Personal Finance Readers

White Americans make up 48% of all readers on Financial Samurai, a personal finance site with over 1 million visitors a month. 48% is below the estimated 61% White American population.

Black and Hispanic Financial Samurai readers appear underrepresented and correspond with Census Bureau-provided lower income and wealth figures. Asian readers appear overrepresented and correspond with higher income and wealth figures.

Therefore, it seems clear there’s a correlation between higher income/wealth and reading personal finance articles.

The Solution To Improving The Financial Health Of Our Country

If white Americans want to increase the net worth and income, they should read more personal finance websites like Financial Samurai. Same for all aces.

Anybody who started reading Financial Samurai since its 2009 beginning has probably crushed the average American in terms of wealth creation because we’ve been talking about investing in the stock market, bond market, and real estate market all this time.

Stocks On Fire

Real Estate On Fire

If you bought property in SF, NYC, Denver, Vancouver, Toronto or most big cities in 2012 with a 20% downpayment, your equity is up over 300%. Meanwhile, the S&P 500 is up over 70% during the same time period. You could have also learned to save a lot on mortgage interest expense by not taking out a 30-year fixed mortgage as we enjoy a permanently low interest rate environment.

Everybody Motivated To Improve Their Finances

You don’t have to be rich to get a great education because access to information is now free. Soak up as much information as you can and share your favorite articles with as many people as possible. If so, I’m absolutely positive we’ll see a tremendous improvement in our finances over the next generation.

Wealth Building Recommendation

Whether you are one of the millions of white Americans, everybody wants to build more wealth. The best way to do so is to up with Personal Capital. They are a free online platform which aggregates all your financial accounts on their Dashboard so you can see where you can optimize.

Before Personal Capital, I had to log into eight different systems to track 33 different accounts to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing. I can check how my net worth is progressing as well. You also get your net worth amount sent to your inbox weekly.

One of their best tools is the 401K Fee Analyzer. It has helped me save over $1,700 in annual portfolio fees I had no idea I was paying. You just click on the Investment Tab and run your portfolio through their fee analyzer.

About the Author:

In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $300,000 a year in passive income. He spends time playing tennis, hanging out with family, consulting for leading fintech companies and writing online to help others achieve financial freedom.

For more nuanced personal finance content, join 100,000+ others and sign up for the free Financial Samurai newsletter. Everything is written based off firsthand experience.

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