Posted onOctober 24, 2018|Comments Off on Selecting The Appropriate Dental Practitioner For You
At present, almost every one of us is in the habit of visiting the dental practitioner at least twice every year. However, one will come across multiple choices when it comes to choosing an appropriate dentist for his or her dental requirements. A dentist is one individual who can make a significant difference in maintaining the health of the teeth as well as the gums. There are likewise different specialties in their profession as well. In other words, different types of dental physicians are adept at taking care of different components of our oral health. In fact, there is a specialty which will suit every single person out there when it comes to selecting the dentists. However, the good thing is that the majority of the towns and cities across the globe come with lots of dentists who are not only certified but also competent as well. In the subsequent paragraphs, we will throw some light on the different types of dentists available at present.
These professionals focus their practice on looking after the younger generation which includes infants as well as kids through puberty. As a matter of fact, you’ll come across many young children who require constant dental care so as to keep their gums tidy as well as healthy with the emergence of new teeth during this particular phase of their lives. Moreover, several pediatric dental practitioners likewise add video games to their clinics as well as colorful paintings on the walls which will help the toddlers to overcome their nervousness ahead of the consultation. In this way, this helps to make the atmosphere quite playful as well as amusing for everybody.
This category of dental practitioners usually concentrates on beautifying the smiles of their patients. Amongst the services offered by okc invisalign dentists, whitening of yellow or stained teeth, as well as bleaching, deserves special mention. Besides these, they are also known to take care of cracked enamel as well as apply veneers too.
A general dental practitioner will usually take care of the oral health of individuals of all ages, along with several other general dental issues which might include maintenance as well as repairs. In most cases, these types of dentists are known to serve the entire family as a whole.
In oklahoma city orthodontists are those dental physicians who work on straightening of the teeth. Although the majority of the patients consist of children, adults of every age are also quite common. At present, you’ll come across braces in different types of appearances and shapes. Unlike the past, when tin grins used to fill up the smiles, the contemporary method will be to create a more innovative and cool look by applying brightly colored and clear apparatuses.
These are those dental physicians who look after the pulp as well as tissue encircling each tooth. In fact, they will take care of the adjoining region of the teeth which consists of arteries, nerves, fibrous and lymphatic tissues, all of which are essential to oral health. They are also experienced enough to perform root canals, applying crowns and also repairing damaged or cracked teeth.
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If you want to achieve a bright, healthy and confident smile, then you must ensure that your oral cavity is in its ideal condition in terms of cleanliness, teeth alignment, spacing, gum support and the strength of the teeth. However, it may not be possible to achieve all these without proper dental care. Fortunately, there a number of fully equipped and professionally staffed dental clinics that can offer you the right kind of dental care with the best Cosmetic dentists in oklahoma city. For instance, they are known to offer;
Though your teeth may initially be spotless white, discoloration may happen because of aging, eating, drinking or smoking habits. Poor dental cleaning habits, tiny cracks and certain antibiotics can also cause teeth discoloration. If you have such a problem, you can get to the dental specialists and they will provide you with topnotchteeth whitening services in Okc. They do this by;
a) Applying teeth whitening products
b) Employing the laser whitening technique and
c) Using whitening toothpastes among others
2. Dental Implants
If you have one or several missing teeth, dental implants will offer you the best alternative to your natural teeth. These are synthetic structures which are normally placed in the area that was occupied by the root of your natural tooth. The implants are normally anchored to your jawbone or the metal framework that is fitted on the bone and function as the foundation for the artificial teeth, dentures or the dental bridge that is fitted into your mouth. Made of synthetic materials such as ceramic or metal, the implants are normally designed to perfectly resemble the feel and appearance of natural teeth.
If you have crooked, badly shaped or stained teeth, you can improve them by having veneers placed on their surfaces. These are ultra-thin pieces of plastic or porcelain materials that are usually cemented over the front part of one’s teeth so as to change either their color or even shape. They can be used on the teeth that are oddly-shaped, crooked, unevenly spaced, chipped, discolored, or those with uneven surfaces. Veneers are typically made by a qualified dental lab technician who works from the precise model that is offered by your own dentist.
4. Root Canal Therapy
Root canals are typically tiny passageways branching off from underneath the top part of your tooth all the way to the tip of its root. Most teeth problems usually involve the spreading of infections to the pulp; the inner chamber of one’s tooth that has nerves, blood vessels and other tissues. And when the infection worsens, it is likely start affecting the roots. However, root canal therapy is an efficient treatment option that usually involves the removal of the diseased tissue, putting a halt to the spread of the inspection as well as restoring your tooth’s health with root canal dentist okc.
You can also trust the dental care professionals to provide you with; braces, snoring and sleep apnea solutions, dental cleaning, dental sealants, bonding, dental crowns and bridges as well as cosmetic contouring among other procedures and services. The best part is that they normally employ some of the latest techniques that guarantee accuracy and efficiency. Moreover, they normally use sedatives and other numbing options for potentially painful procedures so as to minimize pain or discomfort.
Posted onMarch 15, 2018|Comments Off on Why Real Estate Will Always Be More Desirable Than Stocks
For most of my post college life, I’ve had a drastically larger exposure to real estate over stocks. I needed a place to live so I figured it was better to pay down a mortgage than to pay someone rent. When it was time to buy another property, I simply rented out my old place for positive cash flow, and enjoyed my new place until it was time to rent it out again and buy a new place.
I’ve gone through this buy-rent-buy cycle three times now, and it’s been by far the easiest way to make and save several million in tax-advantageous dollars. Within the next five years, our plan is to go through another cycle and buy a Hawaiian beach property and rent out our current San Francisco primary residence.
Now that my exposure to stocks and real estate are more equal after the sale of a SF rental in 2017, I’ve had time to think about the two asset classes more objectively. And during this time, I’ve noticed anti-housing crusaders reach deafening levels!
The main reason why there is so much rage against real estate is due to the human condition.
Why Real Estate Will Always Be More Desirable Than Stocks
You crave what you can’t have.
The people who are the most vocal against real estate are the ones who have the most desire for real estate.
They are the activists who push government to enact laws that tax foreign buyers, tax absentee property owners, and build more housing because their rent is too damn high.
They are the bloggers who cherry pick a bad home sale to prove prices are weakening in an obviously booming city.
They are your friends and acquaintances who call you a trust fund baby, don’t believe you scrimped and saved all those years, or try to make you feel bad about your purchase.
To buy real estate responsibly, you need to go through these steps:
Save enough for a 20% downpayment to avoid PMI.
Have a financial institution deem you creditworthy enough to qualify for a mortgage.
Make an attractive enough offer to be accepted by the seller.
Have the guts to agree to the terms and take on the property.
At each stage, there is risk of rejection or failure.
It takes a lot of discipline and sacrifice to save $300,000 for a down payment on a median priced home in New York City. Therefore, most people don’t and get pissed at those who do. The human condition assigns luck to the achievements of others and skill to our own.
Due to more stringent lending standards since the financial crisis, the average credit score for those qualifying for a mortgage is over 720 (excellent). Banks also won’t lend to folks with a debt-to-income ratio of over 43%. If you get rejected for a mortgage, which has happened to me because I didn’t have two years worth of freelance income at the time, you will naturally hate the lender and housing in general.
In competitive housing market, it’s common to get rejected multiple times before finally giving an offer good enough to be accepted. Each rejection beats you down because you always dream about what your life would be like in the property you are pursuing. Get rejected enough and you’ll either put out some crazy high offer to your detriment or get really bitter at the entire process.
Related: Spray And Pray: A Cheap Way To Potentially Buy A Property
Once your offer is accepted, you need to muster up the courage to transfer a good chunk of savings into escrow and in most cases assume a mortgage. Plenty of people get cold feet and back out from their offer. It takes guts to take such concentrated risk. If you backed out only to see the property resell years later for lots more than you could have bought it for, of course you’re going to be pissed off.
Related: No Financing Contingency: A Way To Offer All Cash Without Having All Cash
Now let’s look at how difficult it is to acquire stock.
The barrier to entry to buying stock is pretty much ZERO. Robo-advisors like Wealthfront can build you a stock portfolio for free starting with just $500. You can open up a Fidelity brokerage account with $100 and buy roughly 70 ETFs commission free. There’s even a new fintech company called Robinhood that allows you to trade everything commission free.
When anybody and everybody can buy stock, stock simply becomes less desirable. When there is only one panoramic ocean view property in on a 10,000 square foot lot with a hot tub time machine owned by someone who will never sell, of course the property will be more desirable than any stock on the planet.
Why do you think there’s not nearly the same level of rage against owning stocks?
Think about this: It’s somehow OK to rent all your life and be short the housing market. Yet if anybody decided to short the S&P 500 index their entire life, they’d be considered a buffoon.
Other Reasons Why Real Estate Is Attractive
1) You are the CEO, not a minority investor. Every physical real estate investment you make puts you in charge. As CEO, you are able to make improvements, cut costs (refinance your mortgage), raise rents, find better tenants, and market accordingly. Of course you are still at the mercy of the economic cycle, but overall you have much more leeway in making wealth optimizing decisions. When you invest in a public or private company, you are a minority investor who is putting his or her faith in management. Sometimes managers commit fraud or blow their companies to smithereens while making mega millions for themselves.
2) Leverage other people’s money cheaply. Thanks to mortgage interest rates coming down for 30+ years, qualified real estate investors can borrow money at 30+ year lows. Given the cost of capital is lower, the returns tend to be higher. Cheap interest rates also attract more borrowers, bringing more liquidity to the real estate market, which in turn puts upward pressure on prices. Even if real estate only tracks inflation over the long run, a 3% increase on a property where you put 20% down is a 15% cash-on-cash return. At this rate, in five years you will have more than doubled your equity. Just don’t get caught being overly levered in a down market.
3) More tax advantages. Not only can you deduct the interest on up to $750,000 in mortgage indebtedness on your primary home in 2018 and beyond, you can also sell your primary home for tax free profits up to $250,000 for singles and $500,000 for married couples if you live in the home for at least two of the last five years. Thanks to depreciation, a non-cash expense, you can shield your rental income as well. All expenses associated with managing your rental properties are also deductible against your rental income. If you are in the 32% marginal federal income tax bracket or higher, all the more reason to own your primary residence.
2018 Federal Income Tax Rates
4) Tangible asset. Real estate is something you can see, feel, and utilize. Life is about living, and real estate can provide a higher quality of life compared to a rental that is not properly maintained. I always believe in buying real estate for living first, cash flow second, and principal appreciation third. With stocks, there is no utility unless you spend the dividends or sell positions to purchase something. As a majority investor, the feeling of owning my primary residence is 1000X greater than the feeling of owning this Macbook I’m typing this post on, despite owning $150,000 in Apple stock.
5) Easier to analyze and make better investment decisions. It is much more difficult to analyze a company’s income statement, cash flow statement, and balance sheet than it is to analyze a property’s financial statements. This is why it’s often better to just buy an S&P 500 index fund for your stock allocation and call it a day. If you buy an individual stock, it may doincredibly well, or you might lose your shirt because you misjudged competitive pressures. For example, anybody who bought Blue Apron stock at the IPO is now down 75% because they misjudged Amazon coming into the market and crushing them. Anybody who bought Lehman Brothers or Enron lost everything. With real estate, it’s easier to estimate rental income, occupancy levels, new supply, job growth, and population growth.
6) Less visible volatility. Your house value could be tanking and you would never know it since there isn’t a daily ticker symbol. During the 2008-2009 downturn, I still got to enjoy my vacation property in Lake Tahoe 20 days a year even though its value was plunging. Meanwhile, looking at the TV or computer screen just made me mad at how much I was losing in my stock portfolio. When your investment is less volatile, it’s much easier to stay the course and not sell at the bottom.
7) A greater source of pride. After a while, making money for money’s sake is a pretty empty feeling. Money needs to be used for something, such as buying real estate to raise a family. Every time I drive by my rental property I feel proud to have made the purchase in 2003. It reminds me of the time when I was 26 years old and still trying to make a name for myself at the job. I have zero sense of pride with my stock portfolio, partly because nobody sees it and nobody uses it.
8) More insulated. Real estate is local. If you’ve made a good decision to buy in an economically strong region, you will be more insulated from the national economy or the global economy. Look at prices in superstar cities such as NYC, Hong Kong, Singapore, London, Paris, and San Francisco. They fall the least, recover the soonest and gain the most. Of course if tech ever collapses, my real estate holdings will be crunched. Therefore, I sold one SF property and reinvested $500,000 of the proceeds in real estate crowdfunding projects everywhere else but San Francisco for diversification purposes.
9) The government is on your side. There are two organizations not worth fighting against: the Federal Reserve and the Central Government. Not only do you get generous mortgage interest tax deductions and tax free profits, the government sometimes bails out overextended homeowners during bad times. I got a free loan modification on my vacation property mortgage from Bank of America, even though I didn’t need it. The government forced BoA to cut my 30-year fixed mortgage from 5.875% down to 4.25%. Programs such as HARP 1.0 and HARP 2.0 allowed folks without hefty downpayments to get in on the action. There are plenty of non-recourse states such as California and Nevada which don’t go after your other assets if you decide to stop paying your mortgage and squat for months.
10) You’ll save your children from angst and despair. When you die, you can pass on your real estate holdings to your children using a stepped up cost basis to let them create their own memories, tax free. With the estate tax limit threshold now $11 million per person, you’ve got twice the room to pass on assets tax free than during the last administration. All the people who are anti-housing could have been saved if their parents decided to invest in real estate 30 years ago. Life is so much easier once housing is cheap or free. If you’re willing to provide an education for your children, perhaps you should also be willing to provide housing just in case they need it.
Related: Why I Wanted To Build A Real Estate Empire
Real Estate FOMO Is The Illest
In a bull market, the average person’s day job income will likely never catch up with their local real estate market. For example, when the San Francisco median home price jumped from $1,000,000 to $1,100,000, the median income of $80,000 would have to jump 125% just to stay even.
The good thing is that real estate goes in cycles. You are finally seeing markets like Toronto, New York City, London, and San Francisco soften due to new supply, rising mortgage rates, residents moving away, and property prices that have far outstripped wage increases. Healthy downturns will usually last 2-3 years before stabilizing and then resume their upward trajectory.
Hopefully during soft times, folks who want to buy homes will have already aggressively saved and figured out ways to boost their income. Otherwise, it’ll be the same cycle of angst, anger, and despair over and over again.
Why I’m Investing In The Heartland of America
BURL: The Real Estate Investing Rule To Follow
Readers, do you agree that real estate will always be more desirable than stocks for the reasons I’ve stated? If not, please share why!
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Posted onMarch 12, 2018|Comments Off on What Does Early Retirement Feel Like? The Positives And Negatives Of Not Working For A Living
Financial independence and retirement are used interchangeably, but there are some subtle differences. Financial independence is usually applicable to people across their entire lifespan. Those who cashed out $5 million dollars worth of Facebook stock at the age of 30 are financially independent just like those who saved $5 million in their retirement funds by the age of 65.
Retirement, on the other hand, is a term often used to describe someone in the last quarter of their lives e.g. ages 65 and up. This is why some folks get so hot and bothered if you aren’t in the upper ages but say you are retired. They don’t think you deserve retirement because you’re not old enough! If you don’t want unwanted attention as an early retiree, just say you are unemployed, on sabbatical, or an entrepreneur.
The reality is all of us would rather be financially independent earlier, so we have more time to enjoy our wealth. When the director of admissions at UC Berkeley asked why I was applying so early (25), I told her it was because I knew what I wanted to do and felt it best to leverage an MBA degree sooner, for a longer period of time. Little did I know I’d be done 10 years later.
Although I’m no longer considered an early retiree due to the endless hours it takes being a full-time dad and maintaining this website, I did have at least one year of early retirement life after 2012 where I was completely carefree. For those curious about what early retirement feels like, I’m going to highlight all the positives and negatives I can think of since leaving the workforce in 2012.
The Positives Of Early Retirement
* No longer having to commute in traffic feels like heaven. It’s funny that not riding the bus was the first positive that came to mind as opposed to workplace politics, stress, or more common answers. I used to leave the house around 7:20am every morning to catch the 7:23am bus around the corner. Despite my punctuality, the bus would either not arrive on time or be so full of people I’d have to walk another 5 blocks just to get on. Now when I see folks crammed in buses I can’t help but smile.
* Running errands is easy. I do all my errands around 10:45am or 2:30pm, because that is when most people are still at work. There’s no traffic or lines at the store during these hours and I’m much more efficient in getting things done. I continue to wonder why everybody wants to come to work at 8am and leave at 5pm. It took me 1.5 hours to drive 20 miles to pick up my parents at Oakland Airport due to traffic the other month. It only takes 35 minutes during off peak hours. Come into work earlier and leave a little earlier. Your stress level will go way down.
* Lots of free entertainment. There is an incredible amount of free entertainment during the week. Part of it is because organizations want to show their community support and free access on weekdays provides the lowest amount of damage to their bottom lines. Museums that cost $15-$20 to enter are usually free at least once a month. There are also free cooking classes by Williams Sonoma, free interior design parties by AirBnb, free rock climbing lessons by REI, and so on. There are always free music festivals at various public parks as well here in SF.
* You learn to become more self-sufficient. When I was busy working, I didn’t have time to figure out how to fix the leaky toilet. I would call the plumber and pay him $150-$250 at a time. Nowadays, I simply search on YouTube for a home maintenance tutorial and voila! Call me handyman Sam. If I can’t fix something I’ll chat up the local hardware store attendee and see if he can tell me what’s wrong. Having a smartphone to videotape the issues helps tremendously. Learning how to do things myself has also saved me a lot of time and money on rental property maintenance.
* Better nightlife. Because I used to start work by 7:30am every morning for the past 10 years, I was tired by 10pm. I just wanted to stay in and watch some TV after work. Now I’m always down to go out for dinner or drinks with friends during the weekdays. I’ve attended multiple events that last until 11pm and am ecstatic to not have to go to work the next day.
* Better friendships. I spend more time cultivating my offline relationships now that I don’t work. Those thin relationships one has on Facebook become stronger as you actually send them personal messages to see what’s up and hang out. The more you go out, the more friends you’ll meet. This is especially helpful for single folks. Social integration is vital for happiness.
* Better family relationships. I spend much more time speaking to and visiting my family now that I have more time. Spending more time with family is probably the most rewarding part about retirement. The younger you are, the more you appreciate it because you likely have more family still around. While I was working, literally months would go by where I didn’t interact with my parents because I was too busy.
* More comprehensive posts. Good posts can take a long time to write. But with so much more time now, I can afford to write meatier content that can help more folks. Meatier content also tends to do better in the search engines, bringing in more traffic, and more revenue. In the past, I’d write 750 word posts. Now I’m able to spend more time researching to produce posts that are double in length on average.
* More purpose in life. Most people I know don’t believe their purpose in life is to do whatever they do at their jobs. Plenty of folks start getting depressed when they talk about spending all their time at a job that doesn’t really make a positive impact. They see a job as a stepping stone for something greater and can’t wait to get out. Once you no longer have to work for a living, you hone in on exactly what you want to do that provides meaning.
* In better shape. Without having to sit in a chair for hours at a time, you’ll naturally burn more calories being more active. At 5’10”, I used to struggle maintaining a weight of ~165 lbs, now it requires less effort because I now play tennis, bike, walk, or hike at least three times a week compared to just once or twice a week while working. Being in better shape feels great. It might even extend your life, who knows!
* You can always keep busy. One of the biggest fears working people have before retirement is figuring out what they are going to do with all their free time. I worried how I was going to go from working 70 hours a week to just writing for 20 hours a week and playing sports in the afternoon. If you have a hobby you are passionate about, you don’t have to worry about not being able to fill the void in retirement. There is an endless amount of things to do.
* No fear of getting fired. No employee is ever safe in this hyper competitive world. You could be a star performer, but if your new boss hates you for whatever reason, you’re done. I used to worry about whether I’d be called into the HR’s office due to a recession, underperformance, complaint, error on my expense report, etc. Now there is no worry.
* A more positive disposition. Do you know that smile you get after carving down a black diamond or riding a jet ski over some waves? You will catch yourself smiling without even knowing because people will randomly smile back at you because you’re smiling at them. Smiling when you don’t even know it is probably the #1 outward signal for true happiness.
* The ability to be present with your kids. Our baby boy is the most precious thing in the world and has crystalized the value of early retirement. Before our son was born, it was nice to travel, sleep in, play sports, and write. But now, I’m excited each morning to give my son a hug and play with him for hours. Every day we thank our lucky stars that we get to spend the critical first five years of his life raising him before kindergarten. They grow up so fast!
The Negatives Of Early Retirement
* Become more impatient with delays and waste. Traffic and long lunch lines used to annoy me, but now they really annoy me because I hardly ever experience them anymore. I get annoyed with myself for going anywhere during peak rush hour. I really try not to meet anybody if I have to commute during the hours of 7am-10am and 4pm-7pm. I have to remind myself when it’s bumper to bumper thank goodness I no longer have to deal with such jams on a regular basis.
* Gets lonely sometimes. While your friends and acquaintances are busy working, you’re sometimes busy doing nothing. If you don’t have a partner or family, then you might end up having breakfast, lunch, and dinner alone. I’ve built a small network of work-from-home, unemployed, or work at night friends to play tennis and hang out with. I’m trying to meet more people through a softball meetup that I’ve joined, but I haven’t met anybody I’d like to hang out with so far. It’s easy to feel disconnected if you’re always working from home.
* Easy to get lazy. Before my son was born, I found myself taking hour long naps after lunch, watching too much sports on TV, and chilling in the hot tub for hours. It takes a lot more discipline once you’ve retired to push yourself to do something meaningful because nobody is telling you what to do.
* Potentially less money. This one is obvious, but maybe not. You only voluntarily retire and stay retired if you have enough money to support your desired lifestyle. It’s a different situation if you are forced into retirement. It did sting a little bit to no longer have a healthy W2 income the first six months. However, just like how we adapt quickly to a nice bonus or raise, we also adapt quickly to a loss of income. The fear of running out of money in retirement is overblown.
* Vacations aren’t as exciting anymore. I used to love taking five to six weeks of vacation every year. If my old job could grant 10 weeks of vacation a year, I would have stayed on for at least another five years. Now that we can go on vacation 365 days a year, it’s just not that exciting anymore. We did travel for 6-8 weeks between 2012 – 2016, but by the end of 2016 we were completely traveled out. All the churches in Europe started looking the same.
Other Observations After Retirement
* Spend less time on social media. I spend probably 50% less time on Twitter than when I was working. Perhaps it’s because Twitter was a great way to pass the time during commutes or in between meetings. I also continue to spend very little time on Facebook except for my tennis team group page.
* Know a lot of unemployed people. No matter what time during the day I go out between Monday and Friday, there are tons of people out on the street or hanging out at the tennis courts. When you’re working, you think everybody is holed up in an office building and only comes out during lunch or when the clock strikes 5pm. In reality, plenty of people are unemployed or have flexible work schedules.
* Discover so many different ways to live. When I was working I just figured most people just had a normal 8am – 5pm day job. But during my time away from work I’ve met dog walkers, nannies, professional athletes, teachers during summer vacations, government employees who retired early with great pensions, bartenders, strippers, bouncers, tennis teachers, coffee shop owners, small business owners, and plenty of online entrepreneurs who enjoy a lot of freedom during the day. Related: Abolish Welfare Mentality: A Janitor Makes $271,000 A Year
* No desire to play golf. The cliché is that once guys retire we end up playing golf all day. I thought I would love to play at least once a week with all my free time, but instead, I found the game to be absolutely boring when I had to play it alone or with strangers. Further, the game takes way too long.
* Feel inspired by older workers. Every time I go grocery shopping, I bump into cashiers and baggers who are over 60 years old. They probably only make around $13 an hour. Their hard work inspires me to not take things for granted and keep this site going. Everybody starts off with different opportunities in life. We’ve got to make the most of what we’ve got.
* Just want to feel useful. If I don’t feel useful to someone, I feel like a loser. Hence, I try and stay busy writing online, volunteering as a foster kid mentor, doing work around the house, and coaching high school tennis while I’m not taking care of my baby boy. Retirement takes away that good feeling of having someone depending on you for guidance.
* Constantly wonder what else is there in life. When I was busy working, I didn’t have much time left to think about philosophy. With so much more free time I sometimes think, is this all there is to life? Starting Financial Samurai has given me a strong sense of purpose. I recommend all retirees start their own site as well to find their tribe online.
* It gets harder to stay retired over time. The first six months of retirement were full of excitement, fear, and joy. As time went on, I adapted to my newfound freedom by creating a routine that best suited my desires. Once I mastered my routine life got incredibly easy. When life gets easy, life also begins to get boring. With such a strong economy since 2012, I couldn’t help be do some consulting with several fintech companies and see if I could build Financial Samurai into something larger. See: Staying Retired Is Impossible Once You Retire Early
* You need much less money than you think to be happy. My biggest surprise since leaving my day job is realizing how much less I need to be happy by about 30% – 50%. One of the reasons is that once you’re retired, you no longer have to save for retirement. It feels foreign to spend 100% of your retirement income or passive income, but that’s what you get to do if you truly have enough. Further, you are so much happier in retirement that you don’t need to spend a lot of money to make you happy.
Early Retirement Is So Worth It
There are studies that show death comes quicker after retirement due to a lack of purpose. With the internet and so much good we can do once we have our free time back, I can’t see how anybody would ever feel permanently lost in retirement. Try volunteering at a charity or mentoring a child if you start feeling aimless. Everybody could use a helping hand.
Retiring early is a blessing because our bodies still allow us to climb the steepest Mayan steps and start the most daunting businesses when we still have the energy. Hopefully this post gives you some inspiration to get up a little earlier, save more money, and take calculated risks to retire early as well. The feeling of being able to do whatever you want is priceless.
The Dark Side Of Early Retirement
How Much Do I Need To Save To Retire Early?
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Posted onMarch 10, 2018|Comments Off on Your Investment Mistake May Actually Be An Investment Win
In my post discussing how managing your family’s money can be a full-time job, I reveal how I didn’t realize my wife’s SEP-IRA account was sitting on 25% cash for who knows how long. With so many accounts to manage, this mistake ended up costing us several thousand dollars in opportunity cost. As a result, I’ve been considering hiring a money manager to help us out.
I’d like to highlight a couple insightful comments from the post that have made me realize several things that may be beneficial to all of you doing your best to achieve financial freedom.
“I am bothered that your WIFE did not notice that HER SEP-IRA was not in alignment with your agreed-upon investment framework!
Perhaps the solution, instead of hiring an outside money manager, is to let your wife, the one person in your life that you can trust 100% and who has nothing but the best interest of your family at heart, take a greater role in managing your investments. Not only would that reduce your burden, it would give you peace of mind knowing that your financially hands-on wife and mother of your child would be ready and able to keep everything on track financially if the day ever comes when you aren’t able to.”
Dunny’s response to OlderandWiser,
“I am in agreement that both partners should be involved in financial matters in order to be able to help with plans and decisions and to take over if required. On the other hand, “mistakes” like leaving some cash sitting around are not serious.
There will be other places where you make more than expected to more than offset the places where you make less than expected. What matters is total return and constantly increasing net worth. So you made a 20% overall return instead of 20.01% overall return that year.
You can’t always optimize everything and simplifying is probably going to make optimizing easier so you don’t miss anything serious. Family matters and health sometimes take more of a priority.“
These comments are insightful because they highlight several things:
1) OlderandWiser’s comment should give us all hope that we will eventually stop making financial mistakes the older we get. I asked him whether he has ever made any financial mistakes before and it doesn’t seem like he has recently. His comment also reminds us to have regular financial checkups with our partners.
2) It’s easy to judge someone’s errors, especially when they make them public. What folks should realize is that the division of labor in each household is different and should be respected based on what works for them. I’m comfortable sharing my errors because I want to get better. Every day I realize how little I know. And to learn from others is one of the best ways to improve. Further, I know other people can learn from my mistakes as well.
3) What is considered an error is different for everyone. My error was not making my wife a potential 20% return from her 25% cash balance in 2017. Others believe an error is buying Bitcoin at $19,500 with a credit card charging a 25% APR.
4) If you’ve already reached financial independence where you no longer have to work, there’s no reason to stress out about always optimizing your finances to the max.
5) Finally, perhaps the error is not an error at all, but a win.
Viewing A Financial Error As A Financial Win
Since 1999, my goal has been to build as much wealth as possible through capital appreciation. If my goal was to get to a $10 million liquid net worth, I wanted to find ways to get to $10 million quickly, not slowly through dividends. The best way I knew how was to buy growth stocks, San Francisco real estate, and an online business.
Once I achieved my financial goal, the strategy was to shift from capital appreciation to capital preservation. The capital preservation strategy would beat inflation by 2-3X while also providing steady income during retirement. After all, once you’ve won the game, there’s really no need taking excessive risk anymore.
I reached a baseline level of financial independence in 2012 that has since grown thanks to an incredible run in the stock market, real estate market, and online business. As a result, it’s not a bad idea for us to dial back risk.
Instead of viewing the 25% cash allocation as a loss in my wife’s SEP-IRA, I now see it as a win to be able to deploy her cash during an 11% stock market correction in February while also purchasing bonds at lower prices with higher yields. If the stock market had tanked by 50% in 2017, you could easily argue that holding cash was a win.
You see, unless our passive income dries up and our online business goes bankrupt, there will always be new cash to invest. The same goes for anybody with a no . You’ll never get the perfect cash balance or the perfect investment allocation at any given time.
Therefore, don’t stress about fnancial perfection, enjoy the overall accumulation process instead. Nitpicking about every single financial detail is unneeded stress.
There’s a great Chinese saying that I hope you guys follow, “If the direction is correct, sooner or later you will get there.”
Related: The Three Levels Of Financial Independence: Because Money Is Only Part Of The Equation
Readers, have you ever turned an investment mistake into an investment win? Does it really matter about always optimizing your finances given nobody really knows how the future will play out? Do you think excessive focus on your finances can hurt your overall well-being? Illustration by CKongSavage.com
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Posted onMarch 7, 2018|Comments Off on A Day In The Life Of Two Stay At Home Parents Who Also Work
The purpose of this article is to:
Help folks realize that working from home and taking care of a child is not as easy as you might think. It’s actually much easier to drop your kid off at daycare.
Discuss ways to be a better parent and more efficient producer while at home.
Encourage the 3% of the male parent population who are stay at home dads to speak up about their experiences. And of course hear from stay at home moms as well.
According to Pew Research, two-parent households where both parents work full-time today make up 46 percent of the population, compared to 31 percent in 1970. We didn’t want to be one of the 46 percent so we carefully planned for a life where we could both spend much as time raising our son while also keeping intellectually stimulated.
Working from home is more efficient than working in an office. You don’t have to waste time commuting. You’ll never get interrupted by colleagues and there aren’t as many meetings. I can get done in four hours what it takes 10 hours to do in the office.
Before my son was born, I thought it’d be relatively easy to be a stay at home and work from home dad as well. But I was wrong. Here are some reasons why it’s difficult to do both:
1) A life is in your hands. One look away and your baby or toddler could suffocate from a pillow, fall off the sofa, bonk his head while trying to stand, impale his eyes with a stick, or die in his sleep. You are always on duty as a stay at home parent. The only time you can rest is if your little one rests. Even then, rest may be a rarity as he may wake up constantly for the first several years. If you slack off at work, like most people do, generally nothing bad happens. If you slack off with your baby, it could be a disaster.
2) It’s impossible to create good work and provide quality care at the same time. Because you can’t lose site of your baby for more than several seconds, the idea of concurrently working and caring is impossible. I can hold my baby on the floor and read my phone at the same time, but that’s about it. Goodness forbid you have to do something like write, draw, or design for work. When taking care of a little one, it’s best to be 100% present.
3) You lose your independence. There is never a regular schedule to follow when you are a stay at home parent. Your day is dictated by your little one’s sleep schedule, bathroom schedule, eating schedule, and doctor’s visits. You are working whenever there is a glimpse of free time like I’m doing now at 11pm. The more independent you were before having kids, the harder the adjustment.
4) You relive all the unpleasantries of life. Most of us who are healthy don’t see the doctor more than once a year. But if you have a little one, you are visiting a pediatrician about every three months and visiting other specialists if your baby has other developmental issues. While at the pediatrician, your baby is examined thoroughly and gets injected with vaccines, which hopefully cause no harm. And if you have to visit the hospital or a specialist, you may see other patients with issues much worse than your little one’s.
5) You are always tired. Getting enough sleep is one of the keys to a happy and productive life. Your cognitive ability literally declines by 80%+ if you are sleep deprived. Having to take care of your little one while also having the responsibility of financially providing for your family drastically cuts into the amount and quality of sleep you can get. For the first three months of my baby’s life, I felt like I pulled an all-nighter at work every other night. You get through the exhaustion by telling yourself, “this too shall pass.”
6) You feel their pain. If you are a normal, sympathetic human being, you will feel the pain your child goes through as if it were your own. When your baby or toddler is crying, your body will naturally tense up trying to figure out what’s wrong. Is he hungry? Is he tired? Does he have a tummy ache? A cold? Is he too hot? Does he have a blocked nasal passage? The longer your little one cries, the more pain you will feel until it can sometimes become unbearable.
Division Of Labor
Having a partner makes life easier. For all the single parents out there, you deserve ALL the respect in the world for trying to make things work. Your ability to multi-task is truly extraordinary.
My wife and I work well together because I spent my career in a client facing role that was responsible for revenue generation and she spent her career in an operations role to help make the system work. I would not be where I am today without my wife.
Primary Dad Responsibilities
* Writing articles and creating podcasts (iTunes channel link)
* Revenue generation and business development
* Social media
* Mass media outreach
* Attending business functions
* Conducting written and oral interviews
* Reading and researching about a baby’s developmental milestones
* Driving the family
* Ordering and preparing food
* Cleaning bottles, dishes, kitchen, and dining room
* Investing cash flow and managing our net worth, which can be a full-time job
* Gardening and home maintenance
* HS tennis coaching (3.5 months a year) and foster kid mentoring (once a week)
* Provide at ~6 hours of care for our son (1-3 hours in the morning, 1-3 hours in the afternoon, and 2-4 hours in the evening, depending on afternoon/evening functions)
Source: Census Bureau.
Primary Mom Responsibilities
* Business accounting and bookkeeping
* Calculating and paying business taxes and California state business filings
* Managing business office
* General operations including payroll, health insurance, dental insurance, workers comp insurance
* Graphics and working with graphic designers
* Miscellaneous business related functions such as coming up with promotional codes, coordinating with our system administrator to fix bugs, customer support
* Taking care of our son from bedtime to morning (this is is huge because he wakes up multiple times a night)
* Ordering all baby food, clothing, diapers, supplies, toys, carriers, strollers, chairs, and books
* Scheduling doctors appointments
* Handles all communications and troubleshooting with insurance agents, back end partners, and vendors such as Aweber, Comcast, AT&T, utility companies etc.
* Manages all back end functions for the e-book store
* Occasional editing of articles
* Diaper changing
* Working on achieving gross motor and fine motor milestones
* Estate planning
* Keeping the house tidy
Phew! After writing out all the responsibilities, it’s no wonder why they say a stay at home parent is worth about $100,000 a year in salary while working 90 hours a week on average. There’s a lot to do!
A Day In The Life Of A Work From Home And Stay At Home Parent
After about the third month, I could not take staying up all night and working all day anymore. As a result, I asked my wife to be the sole caretaker once our little one went to bed. Thank God for her because I wouldn’t be able to continue my writing cadence on Financial Samurai without her. So please give my wife a big THANK YOU if you’ve enjoyed Financial Samurai this year.
My wife is the CEO of our little one, and I’m the COO. For our business, I’m the CEO and she’s the COO. Since I’m an extrovert and she’s an introvert, this works well.
Here’s a typical schedule PST:
6am – 8am: Freshen up, read comments, respond to e-mails, follow up on loose ends, write a post, check investments, and make investment allocation decisions. My goal is to get 80%+ of my work done before my wife and my baby wake up so I can relieve her for 1-3 hours in the morning.
7:45am – 8:00am: Wash bottles, put away dishes, clean kitchen countertops, clean dining table. The goal is to do as much cleaning before our little one wakes up.
8am – 11am: Watch the little one for 1-3 hours so mama can shower, change, pump, catch up on news, e-mail, and rest. The rougher the night, the longer I will takeover. During this time I or we will change his diaper and feed him breakfast. We try our best to go for a walk outside in our Baby Bjorn carrier to get some fresh air and exercise.
I’ve had to do some major work adjustment this year because I’m a morning person, and for the past 5.5 years, I’ve written the majority of my posts during this time period. The mornings are when I’m most creative. By the evening, my creative energy disappears because I’m more tired.
11 am – 1pm: Our son will nap between 30 minutes – 1.5 hours in the late morning. We’ll try to use this time to catch up on work or take a power nap ourselves.
1pm – 2pm: Lunch time! Our goal is to feed him 40+ bites of solid food and have him drink 4-6 ounces of milk. He’s not that picky of an eater, thank goodness. But he doesn’t eat that much compared to other babies his each.
2pm – 4pm: When we have the energy, we’ll go for a walk in the botanical gardens, the science museum, or go to a local playground. Otherwise, we’ll just have him roam the house and discover new things we’re constantly getting him.
4pm – 6pm: More time spent diaper changing, playing, and helping our little one reach milestones. We’ll also do a lot of fun cognitive exercises like trying to stack toys and constantly read stories. Currently we’re working on clapping, waving, finger pointing, and walking at 11 months old.
6pm – 7:30pm: We give him a warm bath to signal it’s sleep time within the next hour or so. I’ll either make the bath or watch over him while my wife makes the bath. We’ll then dry him up and try and feed him a 6-8 ounce bottle. If we are successful, my wife will sit him up right for 20-30 minutes while we read him several of his favorite books. During this time, it’s important to get a burp out of him to minimize his chances of spitting up during the night and choking.
7:30pm – 12midnight: My wife and I try to spend at least one hour of alone time together each night. 60% of the time it works. 40% of the time we’re either too tired or have to catch up on work that we missed during the day.
I’m awake until midnight to provide assistance if my wife needs a bottle warmed up, a diaper change, or some tag team soothing. All she has to do is text me. If no assistance is needed, I do about an hour of online work and unwind.
Midnight – 7:30am: Despite a long day, my wife is now flying solo. She is constantly waking up to soothe our son, feed him, and pump. Sometimes he cries out for no good reason and then goes back to bed. But the random cries always wake up my wife because she is so in tune with his rhythm. Knowing my wife takes care of the entire night now is the reason why I’m motivated to keep working hard on the business during the day.
Source: 2014 Census Bureau
Tips For Better Work And Childcare
Here’s what we’ve learned to make things better at home for the first year. They say that the first year of care is the toughest. Feel free to share whether you think this is true or not.
1) Get as much sleep as possible. Without enough sleep everything goes downhill. You will be dumber, slower, crankier, less patient, and less attentive. Your relationships will suffer without sleep. Therefore, if it’s a choice between going down the Facebook rabbit hole or sleep, always choose sleep.
2) Find help. If you have a spouse that works or you have work to do at home and don’t have a fellow stay-at-home spouse, find help ASAP. It is a PITA to find someone you can trust and depend on, therefore you must start the interview process as soon as possible. The cost is well worth it. Further, the cost won’t last forever since your son or daughter will eventually go to school.
3) Set time and space boundaries. If you don’t set boundaries, there will be constant interruption when it’s time to work. Lock yourself in a room to work more efficiently. Nobody can bother you unless it’s an emergency. You will feel so much better if you can get the most important work out of the way in the morning. If not, your mind will wander about the things left undone when its your turn to take care of your little one.
4) Communicate, communicate communicate. There can never be enough communication. Always remind your partner about your upcoming schedule so they don’t make assumptions about your availability. If you have a particularly long day in the future, let it be known so your partner can mentally prepare beforehand. Use shared Notes and Calendar reminders on your phone.
Things Get Better Over Time
I’ve noticed an improvement in the quality of our lives as each month goes by. The first three months were brutal due to the tremendous lack of sleep for everyone. By the sixth month, our son would often sleep at least three hours in one stretch, and sometimes 4-5 hours at a time.
We made a conscience decision NOT to sleep train our baby using the cry-it-out method because we have nowhere to go the next morning. It also hurts us too much to abandon him in the crib and hear him cry until he hyperventilates. As a result, our days and nights are long. But we believe that by the time our son is 3, he should be able to sleep at least 8 hours a night uninterrupted, so we soldier on.
Even though it’s hard being a stay at home parent who also has a business to run, I’ve never felt so much love, satisfaction, and gratitude as I have during the first year of my son’s life. My son has crystallized the value of financial independence and having a lifestyle business.
We’ve had our rough moments mostly due to my lack of patience, a loss of freedom, constant worry as first-time parents, and her sleep deprivation. But we know that in the end, we will look back and know we did the best we could no matter how our son turns out.
Thoughts On Becoming A Better Father
When Is The Best Age To Have A Baby? An Economic And Biological Analysis
Is Private Kindergarten Through High School Worth It?
Readers, anybody a stay at home and work from home parent? How do you make things work? What are some of the difficult moments you’ve had to overcome? Again, please thank my wife because without here, there wouldn’t be as much content on Financial Samurai.
* My wife joins me on the podcast to share her perspectives.
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Posted onMarch 5, 2018|Comments Off on Five Lessons From Doing My Taxes For Over 10 Years
This post is sponsored by H&R Block.
In 2000, I paid a CPA $500 to file my incredibly simple tax return because I had no idea what I was doing. Granted, I had a lot of trades in 1999 to calculate since it was the dotcom mania back then.
After realizing $500 was expensive, I paid $250 for an H&R Block CPA to do my taxes and show me the ropes for a couple years. After getting comfortable with all the forms and jargon, I started doing my taxes myself using H&R Block’s tax software. They started with a CD-ROM that I had to buy at an electronics retailer, but now everything is online, thank goodness.
I’m probably never going to pay a CPA to do my taxes again because H&R Block’s tax preparation software is so easy to use from home. It will ask you questions about your situation before getting started so it has the right forms for you to fill out. Further, the tax software is always up to date with the latest tax rules.
For those of you who want to have a H&R Block tax professional do your taxes remotely (because who wants to go to an office), they’ve come up with the H&R Block Tax Pro Go program. I tried them for one year because I had questions regarding a couple K-1 filings from my private investments. It was very helpful to talk to a tax professional who inputted the information for me when I was stuck.
The product provides remote tax preparation with just a few easy steps.
1. Tax Pro Match & Upfront Pricing: Answer a few questions about yourself, get matched with the best Tax Pro for your needs based on your answers, and see your actual price upfront, starting at less than $60 for one federal and one state return.
2. Tax Document Upload: You upload your digital tax documents securely. If you don’t have a document ready, you can save your progress and resume where you left off.
3. Talk With a Tax Pro: Your Tax Pro personally calls you once your forms are received. You can also securely message them at any time throughout the process.
4. Virtual Tax Preparation: You return is completed within 5 business days and sent to
you, along with an explanation of your credits and deductions for review and approval before you pay.
5. Pay & File: You approve your return and choose how to pay. Or use your refund and pay nothing out of pocket. Then H&R Block files your return on your behalf.
Five Things I Learned Doing My Own Taxes
1) Make sure you input your cost base for all trades. A decade ago I had a $250,000+ erroneous tax bill because I forgot to input around $1,000,000 in cost base for various trades. My real profit was less than $150,000, but the IRS thought I had $1,000,000 in profits. Never again will I make this mistake!
2) Private investments will often require you to file an extension. Whether you invest in private equity, venture debt, or various alternative investments, there’s a good chance you’ll have to file an extension because their tax forms seldom ever arrive by the April 15-17 deadline to do your taxes. You’ll have to do an initial filing and pay any estimated taxes owed, file an extension, and then revisit your taxes before the October 10 deadline.
3) The IRS is not as scary as they seem. When I had my missing cost base debacle, I called the IRS to get some help. They were very empathetic and helpful in explaining to me what I should do next. I filed everything appropriately and didn’t pay a penalty. I also double counted my home mortgage interest deduction once and simply paid the penalty of the overage. The movies make the IRS out to be scary monsters. But in reality, I’ve found them to be caring folks who realize errors do happen.
4) You learn how to optimize your taxes. Nobody cares more about your money than you. When you do your own taxes you are able to input pro-forma figures to see what your tax liability will look like if you take that job, sign up a new freelance client, relocate to a different state, or buy that 6,000 pound SUV for your business. Inputting various income and expense figures helps you figure out how you want to best earn and spend your money.
5) You learn how to maximize your life. When you do your own taxes, you realize how inefficient it is to earn W2 income or only earn W2 income. You also see how unrewarding it is to make a high income due to our progressive tax structure. As a result, you are less inclined to do uninspiring work just because of they pay. You’ll strive to earn passive income that is often taxed at lower rates, figure out an ideal income where happiness no longer increases, and care less about chasing the almighty buck. Once you become highly involved with your taxes, you take steps to live more freely.
Understand Your Taxes At The Very Least
You don’t need to do your own taxes, but at the very least, you should understand how your income and investments are taxed, and what you can legally do to minimize your tax liability. Taxes will likely be your largest ongoing expense.
What I suggest everybody do is try to do your own taxes once with the help of tax software and a CPA to answer all your questions. If the time you spent is beneficial, then do your taxes yourself with online software, especially if your taxes are relatively simple. If your taxes are complicated, then go the hybrid route or hire a CPA whom you can guide.
You can visit https://hrblock.com/taxprogo to start your return. I’ll be starting my return the first week of April and ultimately file an extension due to three private investment K-1s that will arrive past the deadline.
Readers, what are some lessons you’ve learned from filing your own taxes? With tax software so easy to use and tax documents all downloadable online, what are some of the reasons why some people still pay someone to do their taxes?
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Posted onMarch 2, 2018|Comments Off on When Is It Time To Hire A Money Manager? Wealth Management Can Be A Full-Time Job
When I sold my rental house, I thought my stress would go down at least 80%. After all, my tenants and the maintenance issues were really bumming me out. But what I didn’t anticipate was the rise in stress from having to reinvest a sum 4X greater than I had ever invested before. The last thing I wanted to do was turn a strong performing investment into a poor one.
I went through many hours of deliberation regarding where to invest the proceeds. I wrote quarterly investment reports to track my progress. I stayed glued to the laptop during market hours for months trying to buy stocks and bonds during pullbacks. Further, I went out to dinner with the RealtyShares investment committee twice to do more due diligence on their investment process before deploying $500,000 in additional capital. It was exhausting.
As someone who worked in the finance industry, consulted with a couple digital wealth advisors, and who has been investing his own money for over 20 years, I was familiar with the entire process of managing money. However, I’ve finally reached an inflection point.
Too Many Investment Accounts
Because I’m actively working from home and helping take care of my little one, my time is stretched. When you earn money, the path of least resistance is to simply hoard cash. At least by doing nothing, you won’t lose money. But hoarding cash since 2009 has been a huge mistake.
What happens as you get older is that your finances tend to get more complicated. Job changes create dilemmas for whether you should rollover your 401(k) into an IRA or not. You might start a business and launch your own SEP-IRA or Solo 401(k). Or you might have some nice liquidity windfall after selling your company. The list goes on and on.
If I was just managing one family investment account, staying on top of our investments would be a piece of cake. But as a middle age parent who feels its important to diversify, I’ve had a lot of investment changes and opportunities since college.
I currently manage or keep track of 17 financial accounts at multiple financial institutions. Each financial institution has something different to offer. Further, we spread out risk, partly due to the $500,000 FDIC insurance cap.
Financial Institution 1 – Sam
After-tax investment account
Profit Sharing Keough (Solo 401k)
Son’s 529 Plan
Financial Institution 1 – Wife
After-tax investment account
Financial Institution 2 – Sam
After-tax investment account
Financial Institution 2 – Wife
After-tax investment account
Financial Institution 3 – Sam
CD (used to have 3 CDs to track)
Financial Institution 4 – Sam
After-tax investment account
Venture Debt – Sam
Real Estate Crowdfunding – Sam
RealtyShares Domestic Equity Fund
Conshy, PA Commercial Property
Every single account requires the following:
Keeping track of asset allocation
Keeping track of cash balance
Selecting the right investments
Reducing commission fees
Meeting capital calls from private investments
Keeping track of when capital is returned
Figuring out how each piece fits into a passive income target
As you can see, doing everything right for all accounts can take a lot of time. Further, the more money you have to manage, the more time you will naturally spend because there’s simply more at stake to lose and win.
Here is the perfect example where more money does not bring financial peace of mind. When I had just $100,000 to manage, I couldn’t care less if the market corrected 20%+. I had nobody to support and a job that could easily make up for any losses and then some.
With a sudden $1.8M liquidity event from selling my home on top of managing my existing investments, I was forced to dedicate a lot more brain power to money management.
My Latest Money Management Error
After the market meltdown in early February 2018, I asked my wife to cut three checks: one to my SEP-IRA, one to her SEP-IRA, and one to our son’s 529 account. As business owners, a business can contribute 25% of our salaries to our individual SEP-IRA accounts, e.g., $120,000 salary = $30,000 contribution. As I had already superfunded my son’s 529 plan in 2017, only my wife and others are eligible to contribute up to $14,000 a year.
I invested some of the proceeds based on our agreed upon investment framework in all accounts when I realized about 25% of my wife’s SEP-IRA had been sitting in cash for who knows how long. I was completely surprised because I try to keep all our investment accounts 100% invested. Our cash needs are met separately through various savings accounts.
Due to too much cash in my wife’s SEP-IRA account, her account lost out on potentially thousands of dollars in lost paper profits in 2017. But I’m not sure exactly how much she lost because I don’t remember how long the cash had been sitting there!
Busy buying stocks during the depths of the February sell-off in one account.
Refocusing My Efforts
From now on, I need to go through each account and not only check the holdings and asset allocation, but also make sure there is no excess cash sitting around doing nothing.
What’s also important is making sure my investments makes sense in each account. For example, I’m more inclined to invest and trade more aggressively in my pre-tax investment accounts because I know I won’t be touching them until age 60 and there are no taxes to file.
For my after-tax investment accounts, they are more conservative as they are accounts that will be first accessed during a liquidity crunch or when I finally buy that Hawaiian dream home. Since I’ve got to pay taxes on any dividends or capital gains, my after-tax investment accounts have lower turnover and house all my tax-free municipal bonds.
Finally, I’ve got to do a top down asset allocation of all my accounts to make sure the overall investment asset allocation fits my risk profile and investment objectives. I used to do this manually, but since 2012 I’ve linked my investment accounts to Personal Capital’s dashboard and can just click their Investment Checkup tab to get a snapshot. Below is an example:
Log onto dashboard and click Investing -> Holdings to get an overview of all accounts
When Is It Worth Paying A Money Manager?
I’m close to paying a money manager to manage our finances, but I am still reluctant to pull the trigger because I’ve always managed my money, dislike paying fees, and realize a wealth manager can only manage some of my accounts, not all.
The only accounts a wealth manager can manage are our four after-tax investment accounts. This means I would still have to manage 13 other investment accounts. As a result, I presently don’t think it’s worth hiring a money manager. Only if the money manager could manage the large majority of my investment accounts would I consider hiring one.
Some considerations for when you should hire a wealth manager:
1) When they can manage most of your investments.
2) When you have no desire to manage your money.
3) When you have no understanding of investing.
4) When investing stresses you out and keeps you up at night.
5) When your job, business, or family keep you too busy to even review your investments.
6) When you can do a much better job making money elsewhere.
7) When they’ve showed a fantastic long-term track record.
8) When you calculate the estimated annual fee and feel you’d happily pay the amount to not have to manage your own money.
9) When you have a significant amount of assets and would feel better if someone or some team were keeping watch every day.
If I had a digital money manager managing my investments, I never would have had a 25% cash weighting in my wife’s SEP-IRA for months. They would have automatically invested my cash based on a pre-determined investment asset allocation, which I’d agreed upon. I would have had to pay a 0.25% fee, but I wouldn’t have missed out on 20% gains on the cash balance in 2017.
Unfortunately, as far as I can tell, digital wealth advisors can’t manage a SEP-IRA account, so the responsibility to manage our pre-tax investment accounts will always fall on me.
As I conclude this post, I realize that I no longer enjoy managing our investments. They give me unwanted stress, even in good times – although things are looking dicey now. I get bent out of shape when I don’t buy at the low of the day. When the stock market corrects 10%, it’s hard for me to think of anything else until I see stabilization. When an investment soars 50%, I don’t get pleasure either because I’m not using the profits for anything.
Maybe it’s better to outsource my money management responsibilities and the stress it comes with after all. If I’m not happy with managing money during good times, I definitely won’t be happy managing our family’s money during bad times.
Readers, anybody spend a significant amount of time managing their money? Do you feel like investing can sometimes be a full-time job? Do you feel more stressed managing money when there’s more to manage? If you have a money manager, what are some reasons why you hired them?
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Posted onFebruary 26, 2018|Comments Off on Financial Samurai Passive Income Portfolio Update 2018
Ever since landing my first job post college in 1999, I’ve been determined to build enough passive income in order to not have a job. A future that included getting into work by 5:30am and leaving after 7:30pm each day for decades seemed too brutal to endure.
In 2010 I decided that if I could earn about $80,000 in passive income, I would leave my job permanently and work on Financial Samurai while traveling instead. So I left work in 2012. Then once Financial Samurai started growing, I decided to shoot for $200,000 in passive income with the funny money I was earning online.
With $200,000 a year in passive income, I would have enough income to provide for a family of up to four in San Francisco or Honolulu given that my housing costs in either city would be low due to low purchase prices. Now that we have a son, I’m happy to say that $200,000 indeed does seem enough, especially if you don’t have to save for retirement.
Almost Took A Big Passive Income Hit
In 2017, I sold my San Francisco rental home which had been generating roughly $60,000 a year in cash flow after expenses, but before taxes. Selling the house brought my passive income down to roughly $150,000 a year, which was a significant 28% step backwards.
Within six months of selling, however, I had reinvested the proceeds from the home sale and brought total passive income for 2018 back up to an estimated $203,724. Without a clear plan for reinvesting the proceeds, I’m not sure I would have sold the house since I’m bullish on the SF housing market long term. However, because I did have a plan and the challenges of raising a newborn and dealing with rowdy tenants left me feeling a bit stretched, I decided to simplify and sell.
Interest Income ($7,620/year, 3.7% of total)
I’ve got a $185,000 CD generating 3% interest coming due this summer. Although the return is low, it’s guaranteed. The CD gave me the confidence to investment more aggressively in risk over the years. My online interest income has come down since I aggressively deployed some capital at the beginning of the year and again during the February market correction. You’ll see these figures in my quarterly investment income update.
Don’t underestimate the value of your cash and risk-free income, especially during times of uncertainty. The last thing you want to do is be a forced seller in a downturn because panic will be everywhere. Cash allows you to take advantage of corrections, pay for unexpected expenses, and worry less about your risk assets.
Related: How Much Savings Should I Have Accumulated By Age
Stocks & Bonds Income ($103,344/year, 50.7% of total)
In 2017, I ended up deploying roughly $611,000 into stocks and $604,327 into municipal bonds. The stock allocation should boost dividend income by ~$12,500 a year and the municipal bond portion should boost income by ~$18,000 a year after tax ($26,000 pre-tax). Therefore, total passive income gets a ~$38,500 lift, which recovers over half of my $60,000 loss from selling the house.
A good portion of my stock allocation is in growth stocks and structured notes that pay no dividends. The dividend income that comes from stocks is primarily from S&P 500 index ETFs. Although this is a passive income report, as I’m still relatively young, I’m more interested in building a large financial nut through principal appreciation rather than through dividend investing. As an entrepreneur, I can’t help but have a growth mindset.
With interest rates reaching two-year highs, I will be allocating more cash flow to bonds for the remainder of the year, thereby boosting passive income. In fact, I will probably reinvest 70% of my $185,000, 3% CD into municipal bonds that now pay 4.5%-5% gross yields.
Real Estate Income ($43,080/year, 21.1% of total)
I’ve now only got a SF rental condo and a Lake Tahoe vacation rental in my real estate rental portfolio. Although I miss my old house, I certainly don’t miss paying $23,000 a year in property taxes, another mortgage, dealing with leaks and managing terrible tenants. I drove by the other day and couldn’t believe how much noisier and busier the street was than where I currently live. I wouldn’t be comfortable raising my son there.
In January 2018, I missed my chance of raising the rent on my new incoming tenants because it didn’t come to mind until very late in the interview process. I didn’t write about my previous tenant’s sudden decision to move out in December 2017 after 1.5 years because they provided a relatively seamless transition by introducing their long time friends to replace them. I didn’t miss a month of rent and didn’t have to do any marketing so I felt I’d just keep the rent the same.
After these tenants move out, I’m thinking of just keeping the rental empty with furniture. It sounds stupid to give up $4,200/month, but I really hate dealing with the HOA, move-in/move-out rules, and maintenance issues. Given the condo doesn’t have a mortgage and I have to pay taxes on some of the rental income, I’m not giving up that much. The condo can be a place for my sister, parents, or in-laws to crash when they want to stay in SF for longer than a week or two.
The Lake Tahoe property continues to be 100% managed by a property management company. It feels amazing not to have to do anything. I can’t wait to bring up my boy this coming winter to play in the snow! I could go up this winter, but I want him to be able to walk and run comfortably before he goes. I’ve been dreaming of this moment for over 10 years now. The income from the property is highly dependent on how much it snows. Summer income is always very strong.
Alternative Income ($49,680, 24.4% of total)
Book sales ($36,000/year): Sales of How To Engineer Your Layoff continue to be steady. I don’t see book sales really taking off unless I start pitching the book hard on TV or radio or speaking at conferences or writing a lot of guest posts about the subject. I just have no interest promoting it heavily, probably because I don’t like selling anything to anybody. The only way book sales will go up drastically without me doing anything is if the economy starts weakening. People often wait until the very end to do something about a bad situation. Only the smart ones will read the book before they feel they need to make a change.
I did get this pretty cool e-mail at the beginning of the year from one of my newsletter readers:
Hey Sam, just wanna say thank you for “How To Engineer Your Layoff.”
I wasn’t one of those amazing cases where I negotiated a $60,000 settlement, BUT thanks to your book, I…
…figured out how much my severance package would total
…waited until they offered me to relocate
…turned it down, knowing very well what my severance package was worth
The grand total was $13,000, which is nothing compared to some of your case studies, but listen what happened next. I took $9k of that and put it into Bitcoin when it was $3,000. Bitcoin itself has now 5x’d, while my portfolio has done 10x. That $9k has effectively become $90k of unrealized gains, which will keep growing for a long time…
The $13k is not much, but your book gave me the confidence and tools to prepare for the layoff. I am eternally grateful for your book.
What’s crazy is that my book income is more than my SF rental condo income. Yet, I didn’t have to come up with $1,200,000 of capital (minimum cost to buy my condo) to create my book. All I needed to create my book was energy, effort, and creativity. I truly believe developing your own online product is one of the best ways to make money.
Venture Debt ($12,240/year): The first venture debt fund has returned almost all my initial capital so I decided to invest $200,000 in the second fund. I took a risk investing $150,000 in my friend’s first fund, so I’m hoping there’s less risk in the second fund given he has four more years of experience on top of his 12+ years experience running a venture debt portfolio for another company.
The whole idea of investing in venture debt is trying to get a mid-to-high teens annual return with less risk than private equity. Venture debt lends money to well-funded private companies with a 1-3 year terms. They go in and out, collect their interest and sometimes gets a warrant. They’re higher on the capital structure as well.
P2P Lending ($1,440/year): I’ve lost interest in P2P lending since returns started coming down. You would think that returns would start going up with a rise in interest rates, but I’m not really seeing this yet. Prosper missed its window for IPO in 2015-16, and LendingClub lowered its growth estimates for this year. I won’t be putting in new capital until I see returns go back to the 10% range versus 6%-7% for top rated loans. I hate it when people default on their debt obligations, which is why I haven’t invested large sums of money in P2P.
Real Estate Crowdfunding ($9,600/year)): Once I sold my SF rental, it was natural to reinvest some of the proceeds into real estate crowdfunding to keep sector exposure. I didn’t invest a lot in some of my favorite REITs like OHI and O because I felt a rising interest rate environment would be a stronger headwind for REITs. But if I could be more surgical with my real estate investments by identifying specific investments in stronger employment growth markets, I thought I could do better.
In the summer of 2017, I first reinvested $250,000 into a RealtyShares Domestic Equity Fund. I already had $250,000 invested with them and I liked the projects they were choosing. After spending the rest of the year making low ball offers on SF real estate and losing, I invested another $300,000 in the fund in December 2017. Given 100% of my real estate crowdfunding are equity investments, there is no set monthly dividend. Each of the 12 investments in the fund have different timetables and objectives. I’m simply estimating that I’ll earn $9,600 for the year.
$800K invested in an equity fund and $10K in a PA commercial property equity deal.
If the RealtyShares fund achieves its objective return of 15% a year, I could earn a compounded $70,000 – $120,000 a year, which would really boost my passive income returns. However, I don’t expect them or any fund to achieve their target. Instead, I’m hoping for a solid 8% a year return instead.
Feels Good To Simplify In 2018
It was easier recouping the lost $60,000 in rental income than I expected. For so long, my primary mindset for passive income was rental income. Having $815,000 less debt, but still generating roughly the same amount of passive income with a much larger cash balance feels great. Meanwhile, having less debt during the 10%+ February 2018 stock market correction and all the recent natural disasters also made me feel more at ease. Finally, my passive income portfolio got even more passive, which is good to a newly minted father.
I’m no longer interested in generating much more passive income because of my marginal tax rate, even though it has come down due to tax reform. Hopefully when I do my 2018 taxes in 2019, there will indeed be a cut in small business pass through income as promised, but who knows until then.
In a sense, I’ve been trying to throttle back my income or at least shift the income to the future through equity investments when my energy and business income fades. So far they hasn’t, but it’s always good to plan for the future.
If you want financial freedom, you must get your passive income squared away. Once you’ve done so, you’ll be able to comfortably do anything you want.
Related: Ranking The Best Passive Income Investments
Readers, how is your passive income portfolio coming along? With the rise in interest rates, are you finding higher income opportunities? Note: the top picture in this post was taken in November 2011 at the top of Santorini. It was then that I finalized my plan to negotiate a severance and leave work for good.
The post Financial Samurai Passive Income Portfolio Update 2018 appeared first on Financial Samurai.
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Posted onFebruary 24, 2018|Comments Off on What’s In A Home Insurance Policy: Know The Details Before Your House Burns Down
Sam asked me to write this post after we lost our home overnight to the Tubb’s Fire in Northern California. We were living a good doctor’s life. A $1.2 million dollar home with a killer sunset view. Life was good, but with my mortgage and student debt I was still quite stressed. The kind that affected me not only internally, but also externally. Affecting bothwork and relationship with my wife.
Crazy to think that stress and a mortgage can be that powerful, but it was. In fact, I would walk around my home and think about how we had about 1,000 square foot of home more than we needed. It was 3,300 square foot and I determined that 2,000 to 2,500 square foot were a much better fit for us.
But here we sat, 11 months after buying a big home without many financially reasonable options. Then overnight… POOF! It all went up in a flash. We were lucky. Someone knocked on our door at 2 am waking us up. We left with our lives and health, although not much more. Others were not as fortunate and I have seen and felt the impact of those losses in our community. So I write this post knowing how lucky we are. And I am thankful for that.
Interesting points from EJ’s guest post:
Why being a homeowner may be better than being a renter when disaster strikes
How home insurance can make you much wealthier
Know exactly what is covered under your home insurance plan
Itemize everything in a spreadsheet and a picture catalog
It may be better to have a complete loss rather than partial damage
Breaking Down A Home Insurance Policy
Our home before the fire
Here’s a home insurance primer on what is important when purchasing a policy. We lost our home, but by being well insured we are covered for not only our possessions and rebuilding, but also for our rental.
After the fires, both home prices (for sale) and rental prices sky rocketed. Classic market supply and demand with a steroid boost of large amounts of insurance money. So not really classic market supply and demand.
That is why Loss of Use Coverage is so important and the first thing we talk about today.
Coverage D: Loss of use and rental
Renters Get Squeezed
In the land of fire and mass chaos, owning is way better than renting (seems counterintuitive, but true). I talked to many people who are renters who have been evicted since the fire. The landlords asked their tenants to leave so that either the landlord or one of their family/friends who lost a home can move in.
This puts the tenants in a bad position because now they are stuck in a town with a housing shortage and now a high price point. They have no choice, either pay more for a similar rental in town or move further out of town. Plus, unlike those who are insured and lost their home, tenants being evicted have no insurance to help them through this. Lose lose.
Many Owners With Insurance Came Out Fine
For owners it is better, but it is only as good as the home owners insurance purchased. I am well insured. My insurance pays for my rental up to two years because the Tubb’s Fire was a Federally declared disaster. If it was just a run of the mill house fire, I would still be covered for 1 year. There is no monetary limit to my rental. Insurance covers an equivalent rental to my home.
So I was able to get a nice rental and not worry about the monthly rent. I will potentially be living in my rental until October 2019. While insurance is paying a lot for my rental, it still is not as much as one friend who has insurance paying $34K a month…yup, $34,000 a month. On the other end is one of my friends, who has a maximum cap of $14,000 for her rental. That means that her insurance will only pay a total of $14,000 for the entire 2 years. Ouch.
First lesson of insurance – make sure you are well insured for not only dwelling and personal property, but also loss of use. This will make your housing situation much better after the loss of your home. Clarify how much coverage you have.
What Type Of Home Insurance To Get?
We have determined that being a owner versus a renter at the time of a disaster likely puts you in a better financial situation with insurance, but what insurance should home owners (and renters to some extent) obtain?
I personally am insured by a large, reputable insurance company who is always on your side. Thus far they have gone by the books and been quite helpful. In fact, by the end of this process I will likely own my land out right, have no mortgage, and have increased my net worth by about $600,000. Granted, I have to replace all of my possessions but that can be done deliberately and slowly. Oh, but I don’t own a home anymore.
But still, a massive increase in net worth is quite the silver lining from this tragedy. Plus all the stress from owning a massive house with a massive mortgage is now gone.
Onto the insurance policy
Insurance coverage is broken down into various coverages.
Dwelling: Coverage A: Dwelling
Other structures: Coverage B
Personal property: Coverage C
Loss of use: Coverage D
Personal liability: Coverage E
Medical pay each person: Coverage F
The limits for these items are visible on the insurance policy declaration page.
These are each important, but Coverage A is the most important.
Coverage A: Dwelling
This is the most important part of the insurance coverage. Coverage A dictates how much the insurance company pays for rebuilding a home. By law, if I rebuild they have to give me at least my Dwelling maximum to rebuild.
There are also extensions to this coverage. For instance, I had a 125% coverage extension. This means that they will pay an additional 25% of my maximum if I rebuild. This is an additional $200k for me to rebuild. I even realized after the fact that I could have purchased a “guaranteed replacement cost extension”.
If I had purchased a guaranteed replacement cost extension, then there would be no question about rebuilding as insurance would cover it all. There are 3 companies I know of that have guaranteed replacement cost: Chubb’s, Nationwide, and AIG. If insured with one of these insurers, it may be worth switching to guaranteed replacement cost.
I thought that insurance will pay out all 100% right off the bat, but unfortunately that is not the case. The insurance company will come up with their own build estimate and from that depreciate the cost of things such as paint, roofs, flooring, etc.
It is not as bad as it sounds. For instance, in my case they depreciated about 1.5% of the home. Once I rebuild, they will pay the full amount.
Also remember that this initial payout is a starting/negotiation point. Right now I have received one big check but am coming back to the insurance company with my builders estimates which are higher than what the insurance company estimated. Time to negotiate!
Coverage A (i.e. dwelling) is the most important part of the insurance coverage. This needs to be enough to rebuild an equivalent home and it is up to you to make sure it is adequate. Generally, increasing the limit leads to only a small increase in the overall annual policy premium.
Another important part of Coverage A is to be insured for “Replacement Cost.” Some insurances offer “Actual Cash Value.” Actual cash value only pays the depreciated cost of the home, meaning the insurance company will only pay for a 20 year old roof and not the cost of a new roof. The difference in reconstruction costs will be covered by out of the owner’s pocket. Not so good if you ask me.
With a “replacement cost”policy, the insurance company may depreciate the home for the initial payout, but will pay that actual replacement cost once the item is built or purchased. This can lead to thousands of dollars when rebuilding.
Coverage B: Other Structures
Another reason the price point of Coverage A is important is because all of other Coverage limits are set by the Coverage A limit.
For instance, I am covered for Other Structures via Coverage B. This includes patios, external fireplaces, fences, and the outdoor kitchen. The maximum insurance will pay me for Other Structures is 10% of my Coverage A. So if I have a $1,000,000 Coverage A limit, I get $100,000 for Other Structures. If my Coverage A limit is $500,000, then I only get $50,000 for Coverage B.
Coverage C: Personal Property
Coverage C or Personal Property coverage is the amount given for all of the items lost. T-shirts, speakers, kitchen appliances…all that stuff we accumulate over a life time. Another way to think of it is that if I took my home and turned it upside down, anything that falls out is paid for by Coverage C.
Getting the insurance company to pay Coverage C can be a bit painful. While they paid a portion of the money up front, I. Had to itemize everything in my home to receive full payment. From underwear to Q-tips. Rugs, couches, and stuffed animals. We spent approximately 75 to 100 hours to itemize every single item.
This was probably the most painful part of the process. We had lostour home and now had to revisit each item again for the insurance company. This was accompanied by a 3 hour recorded interview. Brutal. Please take pictures and itemize all your belongings in a spreadsheet before you need to.
The insurance company will take the list and depreciate it based on age and condition. They will pay out the depreciated cost. Again make sure you are insured for “Replacement Cost” and not “Actual Cash Value”. If you have “Replacement cost” coverage you can submit receipts as you buy items for the insurance company to pay the difference.
Side note, to be able to claim casualty losses in my 2017 taxes, I had to itemize. For the IRS I can deduct the difference between my depreciated value of items and what insurance paid me for these items. Unfortunately with the 2018 tax overhaul I believe this deduction goes away in the future.
Once again, Coverage A (Dwelling) limit dictates the Coverage C limit. For us it was 60% of our Coverage A limit and I think that is fairly standard.
There are also other coverages that come with good insurance.We had coverage for Debris Removal (10% of Coverage A), Landscaping (5% of Coverage A), and Building Code Upgrade (20% of Coverage A).
There is also coverage for Personal Liability (Coverage E) and Medical Pay for Each Person (Coverage F), and these limits can be adjusted as needed.
I am actually surprised as to how cheap good insurance is. My insurance cost approximately $1,300 annually with a $1,500 deductible. After this experience I would happily pay $2,000 annually for a higher coverage amount. Nothing is worse then being underinsured after loosing a home. Insurance has by far been the best return on investment I have ever made.
Finally it is worth noting that I did not have additional insurance. I had my regular old home insurance and it covered all of the loss. This is not like an earthquake or flood that needs an additionally purchased insurance policy.
My policy covered the fire whether it was a natural disaster or a house fire. Some of the additional protections I received were due to this being a Federally declared disaster and living in a consumer protection state like California. But no, I did not need fire insurance.
This is good, because I would never have thought to ask separately for it. In fact, when I went to bed at 1 AM I saw a red glow over the hill and did not even realize it was a fire.
If there is going to be a fire though, in many ways it is best to have a complete loss like we did. Total destruction so that the insurance company can not argue about what is salvageable.
My neighbor was not so lucky. His home is standing between 2 burnt homes. He had a lot of smoke damage and is house is not habitable currently. He is fighting tooth and nail with the insurance company about his coverage. The insurance company is arguing everything should be cleaned. He has two young kids and is arguing that the home needs to be stripped to the studs.
It is brutal to hear his stories of the back and forth discussions he is having. Not a fight I want to have. He did loose everything, but because his home is still standing receives much less support. I am moving forward while he is still arguing with insurance.
Our home after the fire
Home Insurance Is A Life Saver
It pays to be well insured. I will not claim I knew much about property insurance when I bought my home. In fact, my insurance broker set this policy up for me and has been working with me throughout the claims process. I never even read the entire policy before this. I was by no means an expert, but now have a lot of first hand experience.
This is what I recommend:
Call the insurance company and ask for a copy of the full policy. This document should be 50 to 70 pages long.
Make sure to have an adequate Coverage A (Dwelling) limit. This is the coverage that will dictate all of the other coverages. It should be high enough to cover rebuilding a equivalent home.
Purchase “Replacement Cost” insurance and not “Actual Cash Value” for both Coverage A (Dwelling) and Coverage C (Personal Property).
Consider an extension for the Coverage A limit. My extension was for 125%, but other’s have 150%, 175%, or even guaranteed replacement cost. It is worth the small increase in annual cost if ever needed.
Jump through the hoops that the insurance company lays out. I am impressed by my insurance company thus far. As long as I am doing what they ask, they have been quick and reasonable with payments.
There you have it. One man’s experience with insurance after a major fire.
Sam’s note: Hopefully everyone calls their respective home insurance companies this week and asks what their coverage entails. Although it’s terrible to lose a home to a natural disaster, what a silver lining to be $600,000 wealthier thanks to a mandatory home insurance policy that only cost $1,500 a year in premiums. Further, EJ was in his house for less than a year, so the sentimental attachment wasn’t as great compared to someone who had owned their home for 20 years. His story about the night the fire came is a gripping read that will spur you into action.
A natural disaster destroying my home was always in the back of my mind. Only after I sold my rental house in 2017 did I feel a sense of relief that I was able to get out unscathed since my rental house was in the Marina, an area prone to liquefaction during a large earthquake. It’s very interesting how our minds insulate us from potential disaster risk by making us forget.
Related: Reinvestment Ideas After A Big Home Insurance Payout
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