Monthly Archives: December 2017

Investing Lessons From A Surreal 2017

Financial Samurai investment tracker full yearAt the beginning of the year, I decided to track my investments with a detailed spreadsheet because my cash flow was increasing and I wanted to make sure the money was being properly deployed based on my risk tolerance. If I force myself to think for hours about how to invest my money, hopefully I won’t rashly spend it on completely wasteful things such as a sports car that can’t fit a baby seat or a vacation property I’ll hardly ever use.

On the flip side, ever since the housing crash I’ve had a heightened fear of losing money, especially since I haven’t had a job since 2012. It takes around three years as an entrepreneur to feel confident you won’t starve on the streets, especially if you become a parent during the process. As a result, I tended to hoard cash, which is suboptimal in a bull market.

This post will go over my investment thought process by category for 4Q2017 and conclude with some investing lessons learned about the year. The goal of tracking our investments is to try and take full advantage of a bull market in a risk appropriate way. 

Financial Samurai 4Q2017 Investment Review

In summary, I mobilized a total of $2,263,319 into various investments in 2017. $750,000 of the $2,263,319 was invested in conservative investments (bonds, mortgage pay down, and home improvement) that should return 4% or more gross a year. The remaining $1,510,000 was invested in riskier assets with a target return of between 8% – 18%. My goal is to achieve a 10% total annual return, but will gladly settle for 8%.

The $2,263,319 invested was largely helped by a rental home sale in June 2017, which gave me ~$1,788,000 in proceeds ($2,740,000 sale price). Due to declining rents, expensive valuations, potentially rising mortgage rates, higher property taxes, potentially negative tax policy changes, PITA tenants, better investment opportunities, and less time due to a newborn, I thought it best to sell one of three properties in CA.

Overall, I reduced my risk exposure by $476,681 and increased my cash position by $450,000. Despite the decrease in exposure and increased balance sheet, I still have synthetic full exposure to risk assets due to $1,092,000 of remaining mortgage debt from my primary residence and vacation property rental.

Financial Samurai investment tracker

Real Estate

Because I wanted to see if I could find a winter property deal, I held onto a lot of cash. I found two homes that I liked, but the sellers wouldn’t entertain my low ball offers. I wasn’t even sure I’d be happy with the purchase even if they did accept my offer because of all the maintenance and tenant issues I’d have to deal with again. For example, one home had a serious leak in the garage that kind of gave me a little PTSD from all the leaks I experienced at my old rental house.

By Dec 1, I realized I was never going to buy another property in San Francisco again, so I decided to invest another $300,000 in the RealtyShares domestic equity fund after meeting up with the team again for dinner. Since the summer, the fund invested in a flex-industrial deal in Chicago MSA, a multi-family in Phoenix, a strip mall in Orlando MSA, and a multi-family in Canyon Lake, TX.

Although a total of $800,000 in real estate crowdfunding sounds like a lot, I view it as buying a $800,000 portfolio of 12+ different properties across the country at much lower valuations and much higher net rental yields compared to having $2,740,000 in one very expensive rental property in San Francisco that is now at risk of depreciating due to declining rents and new tax legislation that limits mortgage interest deduction and SALT deduction.

The next physical property I will buy will be a primary residence in Oahu. The plan is to move back to Oahu within the next five years before my son starts kindergarten. I really like the idea of buying physical property to personally enjoy, and then renting it out years down the road if you have the funds and the desire to move. If the rental experience goes well, I’ll keep the property. If not, I’ll sell it and follow my BURL real estate investing strategy.

Stocks: Bought The Dips

In October, I started getting excited about the potential passage of a tax plan that would lower taxes for large corporations and businesses like mine with pass-through income.

As a result, I invested more aggressively into stocks because I felt the market would respond favorably if the plan passed. Further, my desire to buy another property kept going down. Corporate earnings are estimated to get a 8% – 10% boost and small business with pass-through income might see an even larger gain.

The timing of this tax plan is fortuitous given I’ve spent 8.5 years building a lifestyle business that has now reached a level where it will benefit from tax changes. Nothing has made me more bullish than business tax reform, which is why I need to keep my emotions in check through this investment review process.

Finally, I superfunded my son’s 529 plan with $70,000 while his mom and grandma contributed $14,000 each. We figured this would be a good method to diversify contributions since once you superfund, you can’t contribute for four years. It’s good 529 plan owners have the flexibility to use the proceeds for grade school education now.

See: How The New Tax Plan Will Ruin Your Life If You’re Not Careful 

Bonds: A Positive Surprise

Bonds performed well in 2017 with the the long-bond index fund TLT up ~10%. My California muni bond positions are up ~3.5% + ~4.5% gross adjusted yield for a total gross gain of about 9%. Not bad given I was just looking for around a 4% gross gain.

US Long bond performance 2017

Once the 10-year bond yield gets back to its 12-month high of 2.6%, I’ll be looking to buy more bonds again. I see a 3% cap on the 10-year bond yield for 2018.

Related: The Case For Bonds: Living For Free And Other Great Benefits

Mortgage Pay Down

If you add on the $815,000 of mortgage debt I paid off by selling my rental house, I’ll have paid off a total of $921,000 of mortgage debt in 2017. It feels fantastic to have almost a million dollars less in debt, even if the interest rate was low. By consistently paying off random chunks of extra principal throughout the year, it was easy to pay down an additional $106,646 in principal.

I’ve still got about $1,092,000 in mortgage debt to pay down between my vacation property and my primary residence. I certainly don’t need so much cash, but I want to continue legging into risk assets just in case there’s some type of downturn or a change in my lifestyle.

My plan is to pay off my vacation property mortgage by 2023. I probably won’t pay off my primary residence within five years because I need as much cash as possible to buy our future dream residence in Hawaii.

Related: Pay Down Debt Or Invest? Follow The FS-DAIR Framework

Everything Else

I’ve committed $200,000 to my friend’s second venture debt fund. They’ve called $96,219 within one year. I expect them to call the remaining $103,781 by the end of 2018. The fund’s objective is to earn a 15% – 20% IRR. Based on the performance of his first fund, a more likely return of 10% – 13% should be expected.

It felt great not having to do any home improvement projects since 1Q because we now have a baby who requires precious sleep. Any disruption of sleep would have been infuriating for all of us since my wife and I were like zombies for the first three months.

Finally, out of the $611,000 in stock investments, $50,000 of that was in highly speculative investments that have surprisingly done well.

Related: How To Make Speculative Investments Without Losing Your Shirt

Main Lessons Learned From Investing in 2017

My biggest mistake was not being more aggressive investing in the stock market at the beginning of the year. I didn’t have as much liquid cash because I hadn’t sold my rental house yet, but it was the Trump presidency and high valuations that gave me hesitation. I wasn’t too hopeful about tax reform either.

My best move was selling a rental house for 30X gross annual rent before the SALT deduction got limited to only $10,000 and redeploying the capital in properties around the country trading at just 10-14X gross annual rent. Life feels so much better not having to deal with housing issues anymore. It’s also nice to worry less about natural disasters.

Here are several lessons from 2017 that may help you become a better investor.

1) Try to look beyond the politics and focus on fundamentals. Given I live in San Francisco, I know plenty of people who decided to pull much of their money out of the stock market at the end of 2016. They were so blinded by their hatred of Donald Trump that they missed out on huge gains.Generally speaking, deregulation and lower taxes are good for business, which is good for business investors. Further, in my mind employment was already on the upswing and interest rates would remain accommodative.

Unless our politicians actually reform laws, there is often a disconnect between how much investors believe our politicians can do and how much they can actually do. Reduce risk if you wish. But don’t get out of risk assets completely.

Kurt Eichenwald sold all his stock announcement on twitter

2) Real estate is an easier investment over stocks. How can this be when stocks just went up ~19%? Having to reinvest my home sale proceeds was exhausting. If I didn’t have weekly reminders to invest, I wouldn’t have because of the uncertainty of what to invest in, the timing of the investment, and the actual act of deploying capital. Every investment I make gives me a little bit of anxiety due to my fear of losing money and looking like a buffoon.

With real estate, despite the leverage, all you’re doing is enjoying your home or collecting rent checks (if you’re lucky). When you’re just living, you aren’t questioning every single investment you make. Therefore, for most people who are too busy to track the market, owning real estate over the long run is an easier path to wealth. Despite my terrible tenants, the $1 million of equity gain from 2012 – 2017 was the easiest investment money I’ve ever made.

If you don’t have enough money to buy real estate, then owning an S&P 500 index fund over the long term is fine too. Just know that the longer you rent, because of inflation, the longer you will regret your decision. Inflation is an unstoppable beast that will eat you alive.

3) Think in percentages over absolute dollars. Because I had never invested more than $500,000 a year in my life, having nearly $1.8M to re-invest was intimidating. But as soon as I started breaking the investment amount into percentages, deploying capital became easier.

Find out what each asset class is as a percentage of your net worth and calculate what each new invest is as a percentage of your investable assets and net worth. This exercise is particularly helpful for frugal people whose wealth has far outstripped their spending habits.

4) Stick to an investment framework no matter what. Once you’ve decided how much you can comfortably invest each month and what type of asset allocation is best for you, execute your plan without fail. It is almost always the case you will be surprised by how much you end up accumulating or how much debt you end up paying down over time.

Wrapping Things Up

Financial Samurai 2017 performance

Overall, according to the final weekly personal investment performance e-mail I get from Personal Capital, my public investments returned ~15% in 2017. I’m happy with the results because my total capital exposure is significant for how much we spend. Further, my goal after leaving work was to earn a 4% – 6% tailwind a year while I build a lifestyle business.

It’s really hard for me to take on more risk because of my fear of having either one of us go back to work during the crucial first five years of our son’s life. At the same time, I can’t help but want to take full advantage of the bull market while it lasts. The further I can run up the score, the bigger the buffer during the inevitable recession.

Finally, one positive surprise I experienced this year was that once I elongated my investment time horizon to 20+ years due to the birth of my son, I became much more at peace with my risk exposure. Surely by 2037, asset prices will be higher. To invest for someone’s future feels wonderful.

Investors, how did your public investments treat you in 2017? For those of you who have retired or reached financial independence, how have you structured your investments so that you can sleep well at night while also benefitting from the bull market? Graphic by

The post Investing Lessons From A Surreal 2017 appeared first on Financial Samurai.

The Top Financial Samurai Posts Of 2017

Best Financial Samurai posts for 2017Merry Christmas and Happy Holidays Everyone!

The best thing about hard work is when it’s over. Once finished, you can basically sit back and enjoy all of the rewards if you wish. And if you hustle long enough, you might positively change your life forever.

In 2017 I wrote 175 posts, averaging 3.3 posts a week. In addition I also published 173 pages, consisting of product reviews, random thoughts, and different spins on existing topics. Pages are public, they just don’t hit the homepage or got out in my feeds. Finally, I’ve got 36 pending posts in the queue waiting to be unleashed. All in, I averaged 7.3 posts a week.

My goal was to do as much as possible before our baby was born to buy time in the future to take care of him. Even though I don’t have a day job, writing a comprehensive article is easier said than done. And if you think it’s easy, I’d love for you to write me one that’s fully edited and ready to go. Further, the average stay at home parent spends 97 hours a week taking care of their little one!

Here are the most popular posts written in 2017 by traffic and some of the the most popular posts by traffic regardless of when they were written. My #1 goal is to help readers reach financial independence sooner, rather than later. Every single post was written based on first-hand experience because money is too important to be left up to pontification.

Overall, Financial Samurai received about 12 million unique visitors in 2017, which is better than a poke in the eye. 25 more years of this and I should be able to reach the entire population of America!

Most Popular Posts Written In 2017


The FS Investment Tracker Spreadsheet

Just Say No To Angel Investing

The Main Types Of Investment Risk Exposure To Be Aware Of

It Feels A Lot Like 2007 Again: Reflecting On The Previous Peak

Real Estate

Focus On Trends: Why I’m Investing In The Heartland of America

The Real Estate Investing Rule To Follow: BURL

Why Is US Property So Cheap Compared To The Rest Of The World?

Being A Landlord Tests My Faith In Humanity


Retirement Savings By Age Show Why We’re So Screwed

Reflections Of Early Retirement Life Five Years Later

How To Calculate The Value Of Your Pension

How To Achieve The Two Spouse Early Retirement Dream

Maximum 401k Contribution Limit Finally Increases

Financial Independence

Your Chance Of Becoming A Millionaire By Age, Race, Or Education

The One Ingredient Necessary For Achieving Financial Independence

Financial DEpendence Is The Worst: Why Each Spouse Needs Their Own Bank Account

Debt Optimization Framework For Financial Independence

Housing Expense Guideline For Financial Independence


How Much Can You Actually Make Blogging

The 10 Best Reasons To Start An Online Business

How To Create Next Level Wealth: When A Million Won’t Cut It

Career Grind

Abolish Welfare Mentality: A Janitor Makes Over $250,000 A Year

A $500,000 Redo: How One Couple Got Their Mojo Back

What If You Go To Harvard And End Up A Nobody?

A Severance Negotiation Success Story: The Inside Scoop On How One Man Negotiated His Freedom


Don’t Let Frugality Lead To Lifestyle Deflation

For A Better Life, Be The 1% In Something, Anything

The Safest Cars To Survive A Crash

What’s The Best Age To Have A Baby? A Biological And Economical Analysis

10 Most Popular Posts In 2017 Written At Any Time

Scraping By On $500,000 A Year: Why It’s So Hard For High Income Earners To Escape The Rat Race

How Much Savings Should I Have Accumulated By Age?

How Much Should I Have In My 401k By Age?

The Average Net Worth For The Above Average Person

How Much Income Do You Consider To Be Rich?

Examples Of Good Resumes That Get Jobs

How To Earn Six Figures At Almost Any Age

The Top 1% Net Worth Amounts By Age Group

The 1/10th Rule For Car Buying Everyone Should Follow

How To Get A Rich Man To Be Your Boyfriend Or Husband

A Slingshot Into The Future

I’m proud of the quantity, quality, and variety of posts published in 2017. My goal as always is to keep things fresh and interesting. I would die of boredom if I had to focus only on one subject. Life is full of different challenges, and my goal was to address as many of them as possible.

Who knows how long my creativity will last. I’m well aware that like the body, the mind will slow down. But in the meantime, I will continue writing about meaningful topics that affect all our lives. Feel free to mention any particular topics you’d like me to address in the future and any particular posts that stood out.

Up next will be my 4Q2017 investment review and my year in review post highlighting what went well and all the areas for improvement.

Thanks for reading and sharing my work. Besides bookmarking, you can keep in touch by subscribing to my posts via e-mail, my private newsletter, and my iTunes channel.

The post The Top Financial Samurai Posts Of 2017 appeared first on Financial Samurai.

How The New Tax Plan May Ruin Your Life If You’re Not Careful

How the new republican tax plan will ruin your lifeI firmly believe tax policy changes behavior. The higher your taxes go, the BETTER your life becomes! Why? Because at the margin, the less money you keep, the less motivated you’ll be to work. Since money is the root of all evil, the less time you spend accumulating evil, the happier you will be.

One of my catalysts for leaving work in 2012 was because the finance industry was in a structural decline. We were working longer hours for less pay. At the same time, we faced a progressive tax system where we had to pay a 39.6% Federal tax rate plus a 3.8% Net Investment Income tax plus a 0.9% Medicare tax plus an Alternative Minimum tax plus a 13% State tax plus Social Security tax plus Sales tax plus retroactive State taxes to pay for government overspending. Instead of complaining about paying a 60%+ marginal tax rate, I just negotiated a severance to make no money as a writer.

My life since leaving work has never been better, all because I decided to focus on maximizing freedom instead of maximizing net worth. When you’re in the grind, it’s hard to fathom the benefits of giving up a steady paycheck. But the benefits truly are incredible.

For those of you who naturally like to work more when you can keep more of your money, here are some items from the new tax plan that will ruin your life or your family if you are not careful.

Surprise Items In The Tax Plan That May Ruin Your Life

1) Your 529 plan can now be used for secondary education. Before, you could only use the proceeds of your 529 plan for tuition at an accredited four-year university. Under the new tax plan, you can now use $10,000 a year towards private grade school tuition.

I’m one of many parents who is still undecided about the wisdom of spending a fortune on private school instead of just having my son go the public school route. With the internet making education and meet-ups free, the value of a private school education has declined. Therefore, it makes little sense to spend record high levels on tuition just because you can afford to.

Once you start spending $10,000 – $60,000 a year on private grade school education, expectations for your kids go way up. When your expectations go way up, a pressure cooker environment may develop that suffocates the joy out of everyone. If your kid is especially sensitive to the plight of others, by going to such an expensive institution, he or she may feel tremendous guilt or pressure to perform. As a consequence, they might logically choose to work in a soul-sucking industry that’s focused on making as much money as possible to pay you back, instead of choosing an industry that’s focused on helping those most in need.

The new usage rules for the 529 plan may tip the scale in favor of sending your child to a private grade school. It’s one of those 20% off coupons that can end up costing you a fortune. What the new tax plan should have done was provide a tax credit or a deduction if you send your child to public school. The more parents focus on the public school system, the stronger it will become given there will be more involvement and more funding.

Doesn’t having your child learn the same material at public school, while saving $300,000 – $500,000 in private grade school fees and avoiding the stress of high expectations, sound wonderful? Not if the new 529 plan rules can help it.

Related: What If You Go To Harvard And End Up A Nobody

2) Miserable high income earners in expensive cities become even more miserable. I know I’ve done a poor job of highlighting the plight of HENRYs (high earners, not rich yet) living in expensive cities like San Francisco or New York, but that doesn’t change the fact that so many of these well-educated, 50+ hour a week, stressed out of their mind individuals are miserable. They see no end in sight to their grind because they don’t don’t build passive income and don’t work on a side business to give them an eventual escape outlet.

By capping state income and proper tax deductions at $10,000, residents living in high state tax and high property price cities are getting an uppercut to the chin. The annual property tax bill for a $1.5M median priced home in San Francisco is ~$19,300 a year. Add on $16,000 a year in average state and local income taxes paid, and you’re at $35,300. Your tax bill could easily be $5,000 more as a result.

Meanwhile the capping of mortgage interest deduction on a new mortgage amount of $750,000 means about $10,000 less in mortgage interest deductions in the first year of amortization. You can now add on another $2,000 to your tax bill.

One of the reasons why I sold my rental house, which I’d owned since 2005, is because of its onerous $23,000 annual property tax liability. I anticipated some type of detrimental tax law to pass given San Francisco is a sanctuary city in a blue state. But I just expected some type of reduction in the mortgage interest tax deductibility. To add the $10,000 SALT cap is a huge negative surprise.

New income tax rates for 2018

This new tax law may be the tipping point that causes a consistent net migration out of expensive coastal cities and into no state tax states or states that have a much lower cost of living. Coastal cities have turned into one big grind. Traffic is horrendous. Home prices are unaffordable. The cities are turning economically homogeneous. Even moving to the western part of San Francisco has not allowed me to escape the tentacles of the tech industry. My only next step is to move to Hawaii and deploying my BURL real estate strategy of investing in the heartland.

Related: Scraping By On $500,000 A Year

3) Estate tax threshold rises to $11 million for individuals and $22 million for couples. The easiest lifetime net worth target to shoot for is the estate tax threshold because nobody in their right mind would keep anymore due to the 40% death tax. When it was $5.49M per individual, it provided a high enough goal for most people to shoot for without feeling too discouraged that it was an impossible dream. While most people never accumulate $5.49M, they do get to a level where they can comfortable leave all their assets to their heirs tax free.

Now imagine you are one of those people who believes they’ll reach that $5.49M threshold before the age of 100 thanks to inflation, investment returns, diligent savings, and good financial planning. You are on cruise control gliding towards your goal of leaving a significant tax free estate to your heirs. Now, suddenly, you’ve been incentivized to figure out a way to work longer, harder, and take more investment risk to save $2.2 million in estate taxes ($5.51M X 40%) and get to the $11M target.

Of course any reasonably motivated person can’t help but gravitate towards killing themselves for more money. Further, there’s a good chance the estate tax threshold might change again in the future, thereby wasting all your time trying to get to a $11M net worth!

What many of you will now logically do is input some figures in a compound interest calculator and see what it will take to get to $11 million. Below is a realistic assumption I’ve provided where your $100,000 grows to $11,467,826 in 50 years if you earn a 6.5% annual rate of return and save $25,000 a year. Time to get to work, forever!

Estate tax calculator


The Benefits Of A Revocable Living Trust

Net Worth Targets By Age, Income Or Work Experience

The Only People Who Won’t Be Miserable

The only people who won’t be miserable under the new tax plan are those who are already rich. These are the people who are getting the most money back for just existing, even though they need the money the least.

As a result, the tax plan will make millions of regular income earners miserable due to the envy they have for those who already have the most. Even though the tax plan provides tax savings to the middle class and lower middle class, it just doesn’t feel right when some others get so much more.

I feel sorry for those people who decide they are now going to ruin their lives to earn more money they don’t need due to lower taxes. I wish everybody does start earning over $500K per year and accumulates over $11M per person in assets just to see that money doesn’t improve happiness. Once you earn enough money to comfortably provide for your family (~$100K a year in non-coastal cities, ~$250K a year in coastal cities), happiness is dictated more by health, family, and friends.


Do You Want To Be Rich Or Do You Want To Be Free?

How To Win Under The New Tax Plan

Readers, do you forecast your behavior changing under the new tax plan? Are you more motivated than ever to chance money that doesn’t do anything for your well-being? What are some other surprises in the new tax plan that may affect behavior?

The post How The New Tax Plan May Ruin Your Life If You’re Not Careful appeared first on Financial Samurai.

The Biggest Financial Concerns Of Affluent Investors

Main concerns for affluent investorsPersonal Capital, a digital wealth advisor with over 1.5 million users of its free financial tools, released its 2017 Affluent Investor report with some interesting data. I used to consult with them between 2013 – 2015 and have been using their tools to track my net worth since 2012.

The biggest surprise from one of its surveys is that folks with more than $500,000 in investable assets are most worried about a financially secure retirement. Think about that for a minute. With the median retirement savings for 56 – 61 year olds in America at only ~$20,000, Americans with 25X that amount cite financially security as their top worry!

With $500,000+ in investable assets alone, one can presume that most survey respondents have net worths in excess of $1,000,000. After all, about ~85% of the typical American’s net worth is tied up in their primary residence. Check out the survey results.

What the mass affluent worry about the most

I bet most people in the world would consider having $500,000 in investable assets plus a paid off home to be a financial life well done. Therefore, we can conclude that affluent investors have to be one of the most paranoid demographics around, especially since 38% said they are also worried about losing their wealth.

Why Are Affluent Investors So Paranoid?

Most of the people who’ve been able to amass over $500,000 in investable assets are probably older than 37, the median age in America. Therefore, one can postulate that these investors have lived through the housing crisis and maybe even the 2000 dotcom bubble with a significant amount of assets. They’ve seen their investments get slashed by a third within 12 months a couple of times. They know dozens of people who were let go from a job they needed and remained jobless or underemployed for years.

When you amass $500,000+ in investable assets, you naturally start getting paranoid about losing all your money that took years, if not decades to accumulate. That paranoia only tends to get worse the more money you have in risk assets. After all, it takes a 100% return to get back to even if you lose 50% of your money.

Once I accumulated over $1,000,000 in investable assets, it no longer seemed prudent to allocate all my money towards stocks. Instead, I began piling most of my money into real estate to diversify away from my 401k, my company stock, and my career in equities. Little did I truly realize my “diversification,” starting in 2003, was actually a 5X leverage concentrated bet on San Francisco real estate.

The irony with having very little to invest is that you simply don’t have much financial worry. Think back to how happy you were in high school, college, or the first few years after work. All you cared about was having a good time and maybe saving a little money on the side for a vacation or a new ride. Is it any wonder why so many of use were happier before the age of 35?

It was only until after I built some passive income and started this site did my investing paranoia begin to wane. Writing about your fears is a lot like speaking to a therapist who helps put things into perspective.

My Top Three Financial Concerns

1) Poor investment returns from my rental home proceeds. Although it’s been a relief to no longer manage a rental property that comes with a $23,000 a year annual tax bill, I know I’ll be disappointed with myself in 20 years when I revisit how cheap I sold it for. The only solution to minimizing disappointment is earning at least a 5% annual return on my proceeds that cause minimal worry. My hope is that RealtyShares, the stock market, and the municipal bond market will provide such an outcome, but I’ll never know for sure.

2) A large decline in my online business. My online business is the main reason why I’m not concerned about being financially secure in retirement . The income generated from the business is a buffer to the passive income that is currently enough to provide for my family. But as I look into the future, I’m thinking of taking things down a notch to spend more time with my son and minimize happiness downturns. Less effort generally means less reward unless I can increase productivity. The creation of the FS iTunes channel is one way for me to buy time during the weeks I no longer want to write. It’s potentially a new revenue generator as I’ve already been offered two sponsorship proposals.

3) The financial well-being of my in-laws. My parents are thankfully financially secure due to their long careers in the US Foreign Service. They lead frugal lives with no debt, minimal expenses and have healthcare and pensions. My in-laws, however, are not as lucky. They are surviving fine, but I want them to be thriving at their age. I want to find a way to financially help them without offending their honor. This is a tricky subject that deserves a dedicated post.

Try Not To Let Wealth Get In The Way Of Happiness

The amount of financial worry six figure income earners and high net worth individuals have is quite a paradox. But paranoia helps investors accumulate more capital in their lifetimes than those who couldn’t give two poops about financial freedom. However, investing FOMO never allows folks to ever be satisfied with how much they have.

The key to being financially happy when you’re already doing well is to compare your current self to your past self and not to other people. If you can focus on your own progress, dare I say your happiness meter might jump up a point or two!


The Fear Of Running Out Of Money In Retirement Is Overblown

Readers, what is your number one concern as an investor today? If you are an affluent investor, are you really concerned about financial security in retirement? If so, why when you have way more money than the average person?

The post The Biggest Financial Concerns Of Affluent Investors appeared first on Financial Samurai.

Happiness By Age: Stay Away From 35-60 Year Olds

Happiness by ageWould you rather be perpetually happy for the rest of your life with no guarantee of great fortune? Or would you rather have great fortune for the rest of your life with no guarantee of ever being perpetually happy? Choosing money is obviously the answer! Just kidding.

Today if I were to rate my happiness on a scale of 1 – 10, 10 being deliriously happy, I would give myself an 8. Historically, I’d say my happiness probably fluctuated between a 5-7 during my high school years, a 7-9 in my college years, and a 6-8 in my 20s and early 30s.

High school was stressful because I knew so much of my future was riding on getting good grades and SAT scores. Combine academic pressure with athletic demands and peer pressure to be “cool,” I wonder why more kids don’t fall into the deep end, especially with absentee parents working all the time.

College was pretty exhilarating due to all the sudden freedom. Food was plentiful and the parties outrageously fun. Being able to date so many people was a blast. Oh yeah, and learning new subjects was a nice benefit too. The only real pressure came from the expectation of finding a good job. Spending four years of time and lots of money only to end up with nothing would be a great disappointment.

The relief of actually getting a full-time job catapulted my happiness to a 9. But the happiness didn’t last due to the 70+ hour work weeks. Getting in before sunrise and leaving after sunset got depressing after a while. My happiness tumbled to a 6 when I realized all my work in college had led to one big endless grind.

Even a generous promotion at age 27 only made me a 9 level happy for a couple months. Then it was back to being a whipping boy for clients and playing corporate politics. By 2011, my happiness again dropped to a 6. The financial crisis had taken its toll and I was tired of doing the same crap.

It was in October 2011 while drinking an overpriced Mythos beer at the top of Santorini, Greece that my happiness rocketed to a 10. I was overlooking the crater on a sunny 78 degree day and had just earned $1,200 via Paypal from an advertising client in the span of 30 minutes. It wasn’t the money that made me happy, it was the realization that I found a way out of prison.

Then Happiness Came Tumbling Down

Ever since I engineered my layoff in 2012 at the age of 34, my happiness level has stayed between 7-8, with only brief moments of 9-10. I attribute my happiness to an incredible wife, the growth of Financial Samurai, good health, and a bull market. But one day my happiness took a tumble, and it stayed around a 5 for about three weeks.

What happened?

During these three weeks, I experienced tremendous lower back pain – pain I hadn’t suffered in over 15 years. Online, I was being judged by non-parents regarding my insurance plan for my son’s future. Offline, I was tired because I stubbornly kept a rigorous posting schedule despite now being a full-time dad between 8am – 10pm every day since birth. Heck, even in the United States working parents get 1-3 months of parental leave.

As any rational person would do, I began researching whether something was wrong with me. Here are some interesting charts on happiness and age I found. Can you see any patterns?

American Survey

Well what do you know. At the age of 40, I’m in the beginning stages of “the trough of unhappiness.” In America, we experience a dip in happiness between the ages of 35 – 60. Even in the European Union, where many of the happiest countries in the world are located, there’s a trough of happiness between 35 – 60. If you can live past 60, the good thing is that happiness generally improves until death.

The only country where you don’t want to live is Russia, where from birth happiness is on a continuous decline! No wonder why the Russians meddled with the election and now control American politics. They wanted out of the motherland after realizing how good we’ve got it.

What Happens Between The Age Of 35 – 60 To Cause Unhappiness?

You would think that being financially independent at 40, owning a sustainable lifestyle business, receiving regular positive feedback from readers, and having a family would give me maximum happiness. But it has not due to three main reasons:

1) Hedonic adaptation. The beautiful thing about the human spirit is that even in dire situations, we have the ability to keep hope alive. At the same time, even if you have every thing you want, the happiness boost never lasts long. We always revert back to our steady state of happiness over the long term.

Think about all the good things that have happened to you: getting into college, getting a job, getting a promotion, getting a raise, finding a partner, finally feeling rich, buying your dream home, having a baby, making a best friend etc. Each event might give you a 1 or 2 point boost, but sooner or later, the boost will fade as responsibility kicks in. It’s kind of sad really.

2) Sandwiched in the middle. As a new father, I feel the strains of taking care of my little one. His mom and I are his guardian, physical therapist, educator, and caretaker all-in-one. At the same time, our parents are over 70, and they can no longer walk, climb stairs, drive, remember, and think as they once did. Folks between the age of 35 – 60 are dealing with the responsibility of caring for two generations, while usually also managing their careers. Financial strain may come into play due to the cost of healthcare, day care, and assisted-living care.

Our stress comes from being 5+ hours away by plane from both sets of parents. We worry about basic things like whether they’ll be able to safely maneuver the stairs without falling. It would be amazing if they all came to the Bay Area so we can check in on them every week. But they are set in their ways, so it’s up to us to move as soon as our son can become a little more independent.

3) Health. After turning 40 I suffered back pain for the first time since my 20s, sprained my left ankle playing tennis, and tore muscles in both quadriceps playing softball. What the hell? The left ankle sprain happened even though I was wearing an ankle brace. We were 2 hours, 10 minutes into a match when I went the wrong way guessing for an overhead smash. Both quads were strained because I had not properly warmed up. I hadn’t gone from a standing position to a full sprint after hitting a ball in over a decade.

Our bodies rarely keep up with our minds because most of us are no longer manual laborers. My mind is strong because I exercise it every day thanks to this site. But my body is weak because I don’t work out, don’t stretch, and only play a sport at most three times a week. Nothing is worse than being injured or sick, especially when it rarely happens.

Money Is Just One Part Of Happiness

Definition of happiness

To be a truly holistic site that helps people, going forward, it’s important Financial Samurai focuses more on Relationships and Health instead of just wealth creation. After all, we can have all the money in the world and it will mean nothing if we don’t feel good and have nobody to share it with.

Let’s optimize for happiness by building incredible friendships, staying in great shape, and building passive income so we have the freedom to choose our lives.

The next time a 35 – 60 year old makes you feel bad, give them a pass, including myself. And if you want to really get a happiness boost, find some 70+ year olds to hang out with. They might even teach you a thing or two about living a wonderful life.

Readers, what is your happiness level between 1-10? When were you the happiest and least happiest in your life? For those over the age of 60, has your happiness level improved? Why do you think happiness levels improve the closer we come to death? Thanks to hedonic adaptation, I’ve recovered back to an 8. If you’re interested in audio versions, you can subscribe to my iTunes channel here. 

The post Happiness By Age: Stay Away From 35-60 Year Olds appeared first on Financial Samurai.

The Value Of A Property After Experiencing A Tragic Death

Value of property that experienced a tragic death

On one of my winter open house rounds I stumbled upon a beautifully renovated Edwardian with three bedrooms and two bathrooms on the top floor, a full bathroom on the first floor, and a bonus room on the bottom floor. It looked a lot like my rental house I sold this summer, but brand new.

At 2,500 sqft, I thought the house would list for ~$1.8M and sell for closer to $2M. But instead, it was listed for $1.49M and had been on the market for several months already. I immediately wanted to buy the place given the ~$500,000 pricing discount.

Upon further investigation, however, I learned from the new listing agent there was a terrible fire back in September 2013, hence the gut remodel. That’s fine, so long as the new construction was done up to code. But then the listing agent went on to tell me there was not one, but three deaths as the result of the fire: a 33-year old father, his one year old daughter, and her grandfather.

As a new father, my heart sank to the deepest depths of the ocean. I could not imagine losing my son so early. My only wish for the Grim Reaper is that my son outlives both his mom and I, 25 years from now. 

Buying A Property That Experienced A Tragedy

Even with a 20%+ discount to fair market value, I would never buy a home that experienced such tragedy. Call it superstition, but I would always wonder whether their ghosts would haunt us because we had taken over their home. Maybe the house is cursed and would consume all of us in the future as well with a new fire.

When the firefighters got there at 1:30am, they said all the fire alarms were blaring. I’d like to think that if I smelled fire and heard the alarms, I would have the calmness to wake up my wife, pick up my baby, and walk 20 feet out the door. Even if a fire was blocking my way, I’d walk through the flames protecting my little one knowing that short-term burns would be better than death. But such disasters often happen too quickly to react.

The only way I would ever consider buying a property with such a tragedy, even at a steep discount is if it was for a rental. In San Francisco, you have to disclose if there has been a death on the property within the past three years. The owners waited until the fourth year to list, which may or may not have been on purpose. But as a landlord, you don’t have to disclose, but you probably should just in case.

In the end, I decided even if the property was free I wouldn’t be willing to own the home. It would be like owning a dog that mauled to death three children. The constant association with such a tragedy would be too difficult to bear.

Other Types Of Deaths In A Property

Based on my research, it seems like the average discount to market for a tragic death on the property is somewhere between 15% – 25% in America. Tragic deaths include: homicide, suicide, death by fire, death by electrocution, death by falling.

For nontragic deaths, the discount is anywhere from 0% – 10%. Nontragic death is considered death by a natural cause e.g. old age, organ failure, disease.

If you are a home buyer, let me offer up a guide to how much of a discount you should argue for during negotiations if you are OK with buying a property that experienced a death. It’s always good to anchor low in the beginning and move towards the middle.

Property price discount

Now that I think of it, perhaps there’s an arbitrage opportunity for buying new construction homes in places that are extremely superstitious about home deaths or areas with a much older demographic. Surely there are plenty of people willing to pay a premium knowing they are the first and only person to create new memories in a new home.

Let’s embrace everyday as if it were our last.

Note: There is a poll embedded within this post, please visit the site to participate in this post’s poll.


The Real Estate Investing Rule To Follow: BURL

Insurance For Natural Disasters: Fires, Earthquakes, Hurricanes Oh My

Is there a certain percentage discount that would entice you to purchase a property? The house that was listed for sale in this post didn’t receive an offer at their offer due deadline. 

Note: Thanks to reader feedback, I’ve created a Financial Samurai iTunes channel for those who enjoy listening. I’m still trying to figure out how to get the channel to list all the podcasts published. In the meantime, I’ve created a Financial Samurai Podcast page that has every single podcast I’ve published, including the links to the respective posts. Feels good to highlight a problem and take action. 

The post The Value Of A Property After Experiencing A Tragic Death appeared first on Financial Samurai.

To Get Better, Be Brutally Honest With Yourself

To get better, you must be brutally honest with yourselfOne of the downsides of putting yourself out there is that you open yourself up to misinterpretation or criticism. Fear of ridicule is one of the biggest reasons why 97% of people don’t do anything to change their life. It all starts with getting bullied at school or admonished by our teachers or parents for doing something different. Is it no wonder why we all get in line once we graduate?

For some reason, I was always the kid who fought back against bullies, no matter how big or how menacing they were. I figured, even if I got pounded to a pulp, before I did, I’d be able to at least get in one blow and it’d be worth defending my honor.

Because of my defiant behavior, I went to the principal’s office plenty of times. I was suspended from school twice for fighting and my parents were none too pleased. It didn’t matter who started the fight, if you fought back, you were equally punished. I thought this was a bullshit system, which gave me my first clues into a rigged society.

Despite the discomfort of doing something new, I’ll continue to experiment in order to grow. But sometimes, I’ve got to recognize failure by being honest. Here are a couple examples. I’d love for you to share some of your examples as well. 

Honesty Is The Only Way To Get Better

1) Developing an audio version of each post. When I’m too tired to sleep, I like to work to give insomnia the middle finger. One of the ideas that popped up was to make an audio version of each post. Not only would the audio version include some ad lib to give each post more color, it was also a good opportunity to practice my oral communication skills. Further, an audio version would make FS accessible to those who enjoy listening to podcasts during their commute.

After completing three audio versions, I asked for feedback in my private newsletter whether folks found it useful or useless. To my disappointment, I only got ten responses out of 20,000+ subscribers. Nine said audio versions were useful, one said it was useless. In my mind, I was thinking I’d get at least 50 responses, just like how I did when I asked for parenting tips. But I think people were too afraid to speak the truth.

So if I’m brutally honest, what does this mean? It means: 1) nobody cares about audio versions, 2) I haven’t made a strong enough connection with my newsletter readers, 3) I haven’t added enough value to my subscribers, 4) my voice hurts people’s ears, and 5) my newsletters are too long.

It’s hard to realize the truth, but the truth is the only way I can optimize my time and improve my verbal delivery. What’s the solution? Only do audio versions if I have the energy. If I do an audio version, try to speak more clearly and introduce new stories. But also realize that since nobody cares about the audio version, I should feel free to let loose and just have fun with the delivery.

2) Making people think in different ways. I enjoy reading material that leaves me thinking about a situation long after I’m done. It’s the same thing with movies like Inception or the season finale of The Sopranos. Whatever happens next is based on your interpretation.

Despite everybody saying they want the freedom to choose, I’ve found that most people simply like to be told what to do. Due to my personal preference for deeper thinking, I’ve ended up confusing many of my readers with unclear prose.

Here’s an example of one reader’s feedback from my post, How To Stop Worrying About Your Child’s Future In A Brutally Competitive World. The entire point of my post was to help parents stop worrying about their kids not getting straight A’s, not getting into a prestigious university, and not working at a coveted job that pays well.

I find it interesting that you state as fact the equivalency of a top rated University with a top rated job. Perhaps Silicon Valley is more merit based than your previous field, but after your first 3 year gig after graduating from any school your peers rate you on merit and the sky is the limit. 

I worked with very good people who trained a couple years in a local college and really bad people with PHD from top rated schools.

I also believe it’s somewhat telling of American ignorance to make a statement like that. Sort of like why Americans can’t get universal health care in place. The powers that be are working hard influencing the population that “socialist” health care is bad. 

It’s becoming ingrained into American Life practices that prevent upward mobility of the masses. I don’t have the legacy statistics handy but many college acceptances are handed to those who have not earned them.

I mean – Didn’t George W. go to Harvard? Doesn’t that provide an interesting data point on the quality of graduates from Top Rated schools?

My opinion is that your child needs a higher education as an pass to get into the workforce. If the industry is merit based, he needs work ethic, communication skills and a bunch of other attributes that are not taught in schools for success.

It sure sounds like he agrees with me, yet he doesn’t realize it. Getting a college education today doesn’t guarantee you squat anymore, and it certainly won’t guarantee you anything 18 years from now. I even link to the post: What If You Go To Harvard And End Up A Nobody, yet the reader still thinks I only believe people who go to top rated universities get top rated jobs.

If I’m brutally honest with myself, what does this conflict mean? It means: 1) I write too much fluff, 2) confuse people, 3) don’t understand the trend of shorter attention spans, and 4) stubbornly think people like multiple layers in a post just because I do.

So what’s the solution? Write shorter, simpler posts that tell it like it is. Just like USA Today, dumb down posts to make them easier to understand. For example, instead of sharing stories explaining why so many people have miserably low 401k balances, just write something simple like, “People don’t save because life happens.” Bam! Time saved. Message conveyed. If I can’t get my point across, I’m failing.

Seek Judgement

Look, I know it’s easier to do nothing. But I challenge you to open up yourself to judgement and ridicule if you want to grow. Some people will be nicer than others when it comes time to evaluating what you’ve put out in the world. Others will project their insecurities onto you. Embrace the feedback and be brutally honest with yourself! It’s the best way to get better.

Feedback from readers has given me the green light to introduce posts that are short and simple. Being honest made me realize I’ve been spending too much time doing things that don’t matter. As someone who needs more time, these discoveries are a blessing.

Other benefits of being honest with yourself:

* You’ll stop blaming others for your problems and focus on improving yourself. As soon as you wipe away your delusion, you will become happier.

* You can scale your business faster because you’re addressing the lowest common denominator. Personal finance sites that focus on saving and frugality are often much larger than sites that focus on different ways to earn more money.

* You will get paid and promoted faster at work because you’ll more clearly recognize your blind spots. It’s hard for your colleagues and friends to be brutally honest with your deficiencies because they don’t want to hurt your feelings, get sued, or get murdered when you decide to go postal.


Dunning-Krueger And Your Delusional Self

Be Unapologetically Fierce About Pursuing Your Dreams

Readers, what are some of the ways you’re putting yourself out there? What kinds of critical feedback have you received that helped make yourself a better person? Any more feedback for me to make FS better without spending more time? Thanks!

The post To Get Better, Be Brutally Honest With Yourself appeared first on Financial Samurai.

How To Invest In Speculative Investments Like Bitcoin Without Losing Your Shirt

How to invest in speculative investments like bitcoin without losing your shirtIn late 1999 I had my Bitcoin moment. I was a 22 year old first year analyst working on the international trading floor at a major investment bank. The internet boom was peaking and I had just gotten my year end stub bonus of $20,000. Although the $20,000 magically turned into $12,000 after paying New York City taxes, for the first time in my life I no longer felt poor.

I took $3,000 of my bonus proceeds and invested in a company called Vertical Computer Systems Inc (VCSY). I didn’t know much about it. All I remember was that it was a China internet play with a telephone dial pad as its home page. I was on the Emerging Markets team and spent all my time looking at Asian and Eastern European plays. Surely, VCSY was going to be the next Yahoo!

In a couple weeks, VCSY went from around $3 to $6, did an inexplicable 20-for-1 stock split and then went up to around $9. In other words, within six months it went from $3 to $180 pre-split and I had 1,000 shares.

The stock’s 6,000% move was ridiculous as everybody I knew on the Street started piling into the name. I eventually got out of the stock at around $156 a share, netting a cool $153,000.

Realizing VCSY was 95% luck and 5% being in the right place at the right time, I sat on the cash for a couple years, watching the NASDAQ implode before finally getting the guts to use all my after-tax proceeds to buy a $580,000 condo in San Francisco with a $464,000 mortgage in 2003.

In retrospect, I should have kept hunting for new VCSY’s every year. However, while my wealth continued to grow, I was too afraid to lose even small amounts of money. The dotcom crash had scarred my investing psyche because I personally knew many people who lost both their jobs and their paper fortunes. The subsequent housing bubble crash was even more devastating because so many more people were affected.

If only there was a system I could follow that would give me the confidence to consistently swing for the fences without losing my shirt.

Investing In Speculative Investments Without Losing Everything

We know we can get rich by gaining Maximum Exposure to risk assets in a bull market. We also know we can get rich by building a business where we own all the equity. The downside with leveraging up to buy property and stocks or forsaking a steady paycheck to start a company is the potential to lose A LOT of money and time.

What if there was a way to strike it rich without taking any risk? I never really thought about this possibility until a reader brought it up. Previously, I’ve always just allocated between 5% – 10% of my investable assets and swung for the fences.

Here’s what DoneAt53 wrote to another reader who is worried about current market valuations:

Start going to cash. Find a long term CD that pays 2.5% or toss money into savings bonds. With the proceeds buy S&P500 options. With 100K, you can use the $2,500 – $4,000 interest, depending on your risk free choice to purchase Dec 2018 265 options for 1400 each. Two will cost you $2,800 and you’ll have a 53% participation ratio, buy a third for a total of $4,200 and sell 2, Dec 2018 295’s for $200 credit each. You’ll have a 78% participation ratio up to 295 (11%) and 26% participation ratio above that and it will cost $3800 of your interest.

If the market tanks, you lost the interest on your money and very little of if any of the principle. If Mr. Market keeps going up, you get a nice percentage of the gain designed at your comfort level with (almost) none of the risk.

Understanding the options jargon is less important than understanding this concept:

With your risk-free investment income, invest in the most speculative investments that have the potential to give you the highest returns. Even if you lose your entire investment, you will never go to the poor house because you will never lose principal.

Examples Of Speculative Investments

* DoneAt53 discusses buying out-of-the-money options that provide higher returns on a specific stock or index versus buying the actual stock or index. The downside is that if your options expire out of the money, they are worthless.

* Cryptocurrencies like Bitcoin, Ethereum, and Litecoin are the hottest speculative investments at the moment and finally attracting mainstream capital. Bitcoin could easily collapse by 80% next week, but it could also continue to go up multiple times because of a surge in liquidity and world-wide adoption. You can by your slice of Bitcoin on an exchange like

Bitcoin versus other asset classes performance

* Internet and tech stocks in emerging markets. Buying the Googles, Facebooks, Ubers, Apples, of XYZ emerging markets is a straightforward investment thesis. Buying the next “Yahoo of China” was my investment thesis in 1999 when I bought VCSY. I continued this thought process in 2013 when I wrote, Should I Buy Chinese Stocks? Sina, Baidu, and RenRen have all done really well since.

* Angel investing where you provide seed stage capital is another way to earn massive returns. The problem with angel investing is that companies often have a minimum of $25,000 – $100,000. That’s unaffordable for most people, especially if you need to make $25,000- $100,000 in risk-free income. I’m no longer angel investing partly because of bad experiences. But if the minimums come down, I might do so again.

* The crappiest small cap IPO that has gotten bludgeoned since going public for whatever reason. One example is Blue Apron that IPOed at $10 and fell all the way down to $2.97/share. I decided to pick $10,400 worth up at $3.15 a share. They found a new CEO, lowered guidance, and fired a bunch of people since. The bar is low now and the stock shot up to $4.15 at one point. I hope they get bought out.

Blue Apron purchase price

Another example is Snapchat. It went IPO at $17, got foolishly hyped up to $27/share and then disappointed repeatedly in its quarterly results and fell to $12 a share. The problem with my SNAP purchase at $12.24 is that even at current levels, it’s still valued at $18 billion. It’s harder to move rapidly or get purchased for a large premium when the company is already huge.

Snapchat purchase

The recent crap IPO I missed was Funko (FNKO), a maker of toys. They priced the stock at $12, gapped up to $19.93 and closed that week at $7, all before reporting results. Now the stock is up 40%. You’ve really got to pay attention if you want to capture such opportunities.

* Original works of art from unknown artists who you think have the potential to go mainstream. If they don’t go mainstream, at least you can enjoy the work.

Speculative Investing Framework Example

To provide clarity, I’ve created a Speculative Investing Framework. The person below has $650,000 of low-risk capital returning $28,000 a year, or 4.3%. He proceeds to invest $28,000 in various speculative investments with a potential return of -75% to +625%.

The example has several assumptions that should be noted: 1) the low risk income is not required for survival, 2) rental income may or may not be considered low risk, 3) the time frame for the potential returns is unknown or up to the investor to decide, and 4) to deploy such a strategy, you must save aggressively and stop spending like a knucklehead, and 5) it’s up to you to figure out what else beyond CDs and muni bonds are considered low risk and invest accordingly.

Speculative Investing Framework Financial Samurai

Even if this person loses his entire $28,000 of low risk income in speculative investments, he’ll be fine. The key is to not get carried away by cutting into principal, much like a gambler does when he pulls out his wallet or goes to the ATM machine for more cash.

It’s Hard To Get Rich Quickly Investing In An Index Fund

Although earning a 16%+ return on your S&P 500 index fund in 2017 is excellent, it’s a relatively slow way to earn a fortune since the stock market averages around 8% – 9% a year long term. After all, one of my motto’s is achieving financial freedom sooner, rather than later.

If you want to get rich quicker, it’s worth carving out 5% – 10% of your investable assets and/or reinvesting your risk-free income into speculative investments that complement your plain vanilla investments each year. Just make sure your risk capital is capital you can afford to lose, because you will lose quite often. Also make sure you have a comfortable cash buffer to provide for you and your family in case Armageddon strikes again.

Because I hate losing money, I decided to invest time in my 30s building a lifestyle business. I figured worst case, I’d become a better communicator and learn something about the online publishing world. I knew I would not regret putting in an extra effort while I still had the energy.

My problem now is that at age 40 I’ve hit an inflection point where time is much more valuable than money. The desire for more time is why I’m happily farming out my capital to people who want to spend their careers looking at investments. It’s the same reason why I’m highly amenable to hiring a property manager the next time my tenants give me hell.

If you are lucky enough to strike it rich with a speculative investment, do your best to turn the funny money into a real asset that generates stable cash flow. If not, use some or all of your lucky winnings to pay for a better life.

Barring a natural disaster, the $580,000 property I bought in 2003 with my VCSY money will still be there generating $4,000+/month in rent forever. And if not, maybe I’ll make it into the Financial Samurai office or have my parents or sister live in it for free one day.

Remember: You only need to get rich once! Turn your lucky break into a gift that keeps on giving.

Related: Investment Ideas At The Top Of The Market

Readers, how much of your capital do you allocate to highly speculative investments? Do you have any big wins? If so, how did you spend or reinvest the proceeds? Note: On 9/25/2017, a condo unit next to mine with a similar layout sold for $1,360,000. 

The post How To Invest In Speculative Investments Like Bitcoin Without Losing Your Shirt appeared first on Financial Samurai.

How To Get Financial Aid Making Multiple Six Figures A Year

How to get financial aid making multiple six figures a yearDespite earning a six figure household income, many parents struggle to pay for their children’s education without going into debt. This post highlights how you can qualify for tuition assistance despite making $200,000, $300,000, $400,000, or even $500,000 a year.

I was talking to a parent of four who used to send his kids to a private grade school K-8 about the makeup of families who pay $30,000+/year in tuition per child. I cherished my time growing up in Africa and Asia up until middle school and enjoyed my experience attending a public high school in Virginia. To have my son attend a homogenous school where everybody looked the same and came from similar economic backgrounds would be a shame.

The dad mentioned the school tried to diversify its student body through financial aid. When I asked how the school determined which families got financial aid, he said something surprising.

“Households qualify for financial aid if they don’t make at least $100,000 a year per child.

In other words, if you have four children, you qualify for financial aid if you make $390,000 a year. Financial aid consists of low interest rate loans, but mostly free grant money. I thought this was a high threshold because $390,000 is right around the top 1% income level in the country.

Nobody needs to send their kids to private school given every child can go to public school for free. Further, I’m not sure if too many folks decide to have four children if they can’t afford to raise them. Sure, one or two children may be unplanned. But having four is definitely intentional.

Because the dad and mom could not afford to continue paying $120,000 a year in after-tax tuition for their kids, they moved their family to the suburbs to attend free public school. Ah hah, at least they decided to take action instead of complain why life was so hard making $500,000 a year!

Financial Aid While Making $500,000 A Year

Despite finding a solution, the dad seemed a little bitter about not being able to get financial aid for his kids because he asked me the following,

Is it better to provide financial assistance to underrepresented minorities and lower income households whose kids have a much higher probability of dropping out after several years at the school because they don’t have enough parental support? Or is it more worthwhile to help families like mine who make just over $100,000 a kid, but whose kids will likely graduate from school?

His argument was that social engineering in private school wasn’t working, just like how the lottery system for public schools in San Francisco is arbitrary and a waste of property tax dollars. In San Francisco, living in a neighborhood where you want your kids to go to school gives you no edge.

Part of every private school’s wish is for as many of its students as possible to graduate so the school can score higher marks when rated. The higher the marks, the greater the school´s demand, prestige, and tuition revenue. Further, the more successful the graduate, the higher the donation rate, which over time has grown in importance.

I still believe trying to diversify the student body to better reflect the makeup of the city is a more worthwhile goal than trying to help families who make just over $100,000 a kid, but who all look the same. Diversity is worth it because the real world is diverse. If you spend your entire life in an un-diverse bubble, you will have a tougher time getting ahead.

Before taking out the pitchforks, let’s take a look at why this $500,000/year family could no longer afford sending their four kids to private school. A recent divorce might also have something to do with it.

Budget Breakdown For A $500,000 Household

Financial Aid For $500,000 A Year Household

Based on a 36% effective tax rate, the couple needs to earn $203,125 a year just to cover the cost of private school tuition for four kids. What I haven’t included are the additional givings every family is pressured to offer each year.

Although a $1,700,000 home sounds like a lot, the median home price in San Francisco is $1,500,000. With a six person household, you need at least four bedrooms and preferably three bathrooms. The median house size in San Francisco is closer to three bedrooms, two bathrooms.

I’ve gone through the budget in detail, and there is very little left to cut, except for contributing less to their respective 401ks for 2018, taking one less vacation a year, and donating less than 2% of their gross income to charity.

Even if they donated $0 to charity and spent $0 on vacation, they’d still be $3,620 a year in the hole without lowering their 401k pre-tax contributions.

The problem with this family is that they are not accumulating any liquid savings to pay for any emergency expenses. With six people in the household, something always comes up. In other words, this family was scraping by on $500,000 a year and now has $130,000+ of breathing room by sending their kids to public school.

If this family is ~$23,620 in the hole each year on a $500,000 household income, then a family making only $390,000 a year is certainly going to be hemorrhaging money if they send their four kids to private school. Let’s take a look at their budget.

Why A $390,000 Household Qualifies For Financial Aid

Financial Aid for A $390,000 A Year Household

As you can see from the chart above, even after lowering the student loan debt, donating less to charity, spending less on vacations, and lowering their effective tax rate by 4%, this household is $70,440 in the red every year. From a school administrator’s point of view, financial aid is warranted.

Kids Are As Expensive As You Want Them To Be

A quality education is becoming the biggest contention point between the rich and poor. I know many ultra wealthy parents who donate heavily to every level of education to increase their child’s chances of getting in. And then there is a whole swath of multiple six figure income parents who feel downright middle class because they can’t get any assistance.

The great thing about the internet is that it makes knowledge accumulation free. And when something can be obtained for free, the value of anything that requires payment declines.

For those who like to plan, it’s good to realize the $100,000 income per child threshold for financial aid is becoming more common among private grade school and universities today.

If you’re making $199,000 a year and have two kids, it might not be worth the extra hours and stress to make $50,000 more. And if you have kids under five, it’s probably best to spend as much time with them as possible anyway.

At the same time, if you’re making $380,000 a year and are considering adopting a fourth child, knowing you’ll be eligible for tuition assistance may make helping a little one easier.


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Readers, what are your thoughts about being eligible for financial aid when earning multiple six figures a year? Should financial aid be focused more on underrepresented minorities and lower income families instead? What do you think the right income per kid threshold is when financial aid kicks in? Should the government do more to subsidize parents who decide to have a lot of kids?

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