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?
The post When Is It Time To Hire A Money Manager? Wealth Management Can Be A Full-Time Job appeared first on Financial Samurai.
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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.
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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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Posted onFebruary 21, 2018|Comments Off on Getting Rich Is About Willpower: Why Give Up When You Can Keep On Going
In the 1960s, Columbia University psychologist Walter Mischel conducted an experiment on children that is now often referred to as The Marshmallow Test.
Walter invited various aged children into a room individually and asked them to sit down in front of a table with one marshmallow. He told the preschooler that he could eat the marshmallow right now if he wanted, but if he waited for five minutes, Walter would return with another marshmallow and the preschooler could eat two.
Here’s a short video that highlights the delightful reactions these kids display as they do their best not to eat the marshmallow. Watch them close their eyes, tilt their heads, and come close to eating the dessert before pulling away.
Walter observed that of the kindergarteners (age 5), 72% caved in and ate the marshmallow. If they’re in the fourth grade however, only 49% yielded to temptation. By the 6th grade, the percentage dropped to 38%. Such improvement is rational given five minutes is a short time to wait for double the spoils.
More interestingly, Walter discovered in subsequent studies that children who delayed gratification by 15 minutes scored 210 points higher on their SAT’s than children who lasted one minute. And even more importantly, children who are able to demonstrate self-control have a higher Executive Function, which is responsible for controlling planning, foresight, problem solving, and goal setting.
The Importance Of Self-Control
I must have come across Walter’s test back in psych 101 as a freshman in college, but I was probably too hung over to remember the details. I’ve been reading the national best seller, Brain Rules For Babies: How To Raise A Smart And Happy Child From Zero To Five, and the author John Medina brought Walter’s test up on page 103.
Self-control is vital for building wealth over time because spending now involves giving up potential gains in the future. Here are some examples where delayed gratification can help build great wealth.
The classic example is spending money on a new car you don’t need. The median price for a new car in the US is now $34,000. $34,000 is equal to roughly the median income per person in America after tax. Yet Americans are spending like no tomorrow on the latest and greatest vehicles.
As soon as I graduated from college in 1999, the first thing I did was buy a car in Manhattan of all places. After I bought a car, I bought a racing motorbike! Talk about a wasteful spending after all those years of having no money. I should have just stuck with the subway.
After realizing the error of my ways, I came up with The 1/10th Rule For Car Buying to encourage folks to either buy a cheaper car or make lots more money. What I found was that if you are able to finally make 10X more than the value of the car you’ve been eyeing, you tend to no longer want to spend so much on a car because you realize how much effort and taxes it took to get there.
Years later, readers are still justifying their reasons to me for spending way more than 1/10th their income on their current car (YOLO, bad public transportation, safety, etc). Meanwhile, they could have made a small fortune in the stock market and retired much earlier if they didn’t spend so much on a depreciating asset.
Everybody knows that real estate has been one of the easiest ways to build wealth since the founding of our country in 1776 since everybody took American history in high school.
A 10% increase in a median priced $500,000 house would require someone earning $50,000 a year to save an impossible 100% of their gross salary just to stay even. Therefore, it is only logical to try and buy real estate as young as possible to prevent yourself from getting left behind.
The desire for owning real estate was why I lived so spartanly for the first four years after college. But I knew that buying in an expensive city like New York or San Francisco would require sacrifice. I didn’t have the bank of mom and dad to lend me a downpayment, so I lived in a studio with another guy for a couple years instead in order to save 50%+ of my after-tax salary.
The 20-something and early 30-year old folks today who’ve bought their first homes all either lived at home with their parents after school, took on side jobs to make more money, lived like monks for years, or figured out a way to convince their parents to hook them up.
If you’re spending money on fabulous vacations, going out to the finest restaurants, renting your own apartment instead of renting a room, and insisting on buying your first property in the best neighborhood, you’re likely going to have a very difficult time getting neutral real estate.
Graph by Paragon Real Estate Group
An Online Business
Do you know why most businesses fail after five years? It’s because most people don’t bother to grind for more than five years! Too many businesses shut down right before things start getting good.
For example, did you know that it sometimes takes two years for an article to be ranked on the front page of Google? Yet many sites run out of publishing steam after year two. It’s always something that gets in the publisher’s way: work, a baby, relocation, whatever.
I told myself before starting Financial Samurai that I would publish three times a week for five years, no matter what. And if after five years I saw no progress, then I would shut the site down. But after five years, there was progress. And even if there was very little progress, it didn’t matter because it costs so little to keep the site up.
Willpower means working for a couple hours on your side hustle before going to work at 7:30am for years instead of sleeping in. Self-control means not spending three hours watching TV or going down a social media rabbit hole and producing work instead. Do this for at least three years and be amazed at how much you can accomplish.
Who knew blogging about food could be so lucrative
Related: The 10 Best Reasons To Start an Online Business
Relaxing Is Fine Too
At some point, we’ve got to figure out when it’s time to live it up. We can’t delay gratification forever since we can’t live forever. Therefore, I believe the time to start letting loose is after we’ve put in at least 10 years of intense work. I define intense work equivalent to giving 50% more effort than normal e.g. 60 hours a week.
After 10 years of intense work, you will have much more wealth and many more options to live your dream life than if you just did the average.
The Average Net Worth For The Above Average Person
The Best Financial Move I Made Is Something Everyone Can Do
Readers, what are some of the things where you’ve demonstrated willpower or delayed gratification? What causes people to fall off the wagon before things start getting good? Why give up when you can just keep on going? BTW, besides self-control/willpower, the other attributes that make up a child’s intelligence are the desire to explore, creativity, verbal communication, and interpreting nonverbal communication.
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Posted onFebruary 19, 2018|Comments Off on Five Steps To Improving Productivity: A Quora Case Study
Since making money from our investments might be getting more difficult, it’s good if everybody figures out how to improve productivity. During a downturn, corporations try to squeeze employees to do more after letting go of a bunch of people.
But working more is not my definition of being more productive. Working the the same and generating more output, working less and generating the same output, or working less and generating more output is a much better definition.
We often get stuck in a rut, doing the same thing and expecting things to improve. We’re also creatures of habit despite knowing there are better ways to get things done.
One example of being inefficient is tracking your net worth on an excel spreadsheet despite the proliferation of free net worth tracking software. Another example of inefficiency is vegging out in front of the TV instead of also doing something brainless at the same time, like folding laundry. Another example is watching a terrible movie on a 5-hour flight instead of doing some work on a laptop.
In this post I’d like to introduce my 5-step productivity framework using writing answers on Quora as a case study.
Step #1: Identify The Pain Points
Since running out of energy last year, I needed to figure out what were the things that were sucking up my time or causing unnecessary grief. I zeroed in on three things:
1) Responding to comments without getting acknowledgement or a response back when I ask for follow up.
2) Responding to questions when the answer is clearly in the post.
3) Debating about a topic with a reader only to discover they don’t have the relevant experience.
At one point, I was seriously deliberating disabling comments or responding to nobody since all these activities takes around three hours a week. Given I try to keep my work load to no more than 25 hours a week, I was wasting 12% of work time.
Step #2: Replace Wasted Time With Potentially Useful Time
Since identifying my pain points, I’ve stopped responding to obvious questions, included a warning in my comment system about not approving low value commentary, and decided to use the remaining time answering questions on Quora, a Q&A platform with roughly 80 million users who don’t follow Financial Samurai.
My goal is to encourage FS readers to become more involved in the community by providing their own thoughts to other readers’ comments. Further, I want readers who have questions to improve their self-sufficiency by typing their questions into my search box or typing “XYZ Question Financial Samurai” in Google. As I’ve been writing about personal finance since 2009, I’ve covered most financial topics.
Here are the main benefits I thought of writing on Bay Area-based Quora.
Tap a new audience that is unfamiliar with Financial Samurai.
Build link backs to key pillar articles on Financial Samurai.
Build my reputation in Personal Finance, Real Estate, Investing, and San Francisco
Meet potentially interesting people online outside of the personal finance blog echo chamber
Have fun and be intellectually stimulated
Step #3: Establish A Short Window For Testing
I gave myself 30 days to focus on building my profile on Quora.
In one month, I was able to generate 1.1 million answer views, or 33,333 views a day on average. I answered 70 questions in the 30 day time frame. I’m not sure how good this is, but I think the median number of views a user gets is around 1,000 a day.
The summary shows I answered 84 questions. The additional 14 are answers I wrote years ago when Quora first started. Back then, I thought it was a waste of time since it wasn’t very popular and they made you earn credit in order to ask question, which I thought was stupid.
Step #4: Come Up With Specific Goals You Want To Achieve In The Testing Window
Without specific goals, you’ll end up going down a rabbit hole. Improving productivity requires laser focus.
My goals were to:
Become a “Most Viewed Writer” on the subjects I cared most about: San Francisco, San Francisco Bay Area, Personal Finance, and Real Estate.
Try to achieve 1 million views
Stay consistent for 30 days
Build some repertoire with SF media
I became a “Most Viewed Writer” in all subjects I focused on. I’m pleased with my results in the Real Estate section where I achieved the #1 spot with only 13 answers versus the #2 guy with less views, but with 1,242 answers! 1,242 answers is ridiculous and clearly shows an addiction or a lack of efficiency! I don’t even know how he finds the time to eat and go to the bathroom answering 41.2 answers a day on average.
Most Viewed Writer in San Francisco
Financial Samurai most viewed writer in Personal Finance
Financial Samurai most viewed writer San Francisco Bay Area
Financial Samurai most viewed writer on Real Estate. 13 answers versus 1,242 answers for the #2 guy
In the beginning, it was fun to answer the questions. They kept notifying me that my answers had been sent to their Quora e-mail digest of over 1,000, 2,000, and sometimes 100,000+ people. Positive reinforcement felt great.
But over time, Quora started making me feel like a slave to their system until I finally told myself I had had enough and stopped answering every question I had detailed knowledge about. I became pickier. I turned off Quora notifications on my phone as well. As a result, I became happier, much the same way people who use Facebook become happier when they delete it from their phone.
Endless bombardment of annoying Quora answer requests
Step #5: Thoroughly Analyze The Results Of Your Efforts
After 1.1M views, I only received around 20,000 visits from Quora to Financial Samurai. That’s only a 1.9% click through rate.
Think about all the time spent answering questions to only get 1.9% of the traffic while Quora gets to keep 98.1% of the traffic. Further they get to control and reuse your content. I can easily spend $500 in advertisement on Facebook to get 20,000 visitors to Financial Samurai instead.
Do note that having a large site does not preclude you from being able to also generate 1.1M views in a month either. If you can generate 1.1M views on Quora and have a site that gets just 20,000 visitors a month, you will likely double your traffic. Unfortunately for me, traffic only increased by ~2% because I already generate about 1M visitors a month on Financial Samurai.
The only immediate positive I experienced with Quora seems to be a boost in online revenue. Although Quora boosted my online January traffic by only ~2%, my online revenue improved by 10% because of new visitors. Further, there will probably be some long term benefit for now having ~1,700+ followers on Quora and 84+ answers on their platform for their users and search engines to find and read.
Why I No Longer Plan To Focus On Quora
On the 23rd day of Quora answering, I got a notification out of the blue that one of my answers, which I had spent at around 30 minutes to write and had 220K views and 2,277 upvotes was deleted due to a “violation of their writing policy,” which I had not read. It was odd because the answer was no different in format from all the other answers I had written.
You would think that an answer with this many upvotes and views would be a good thing for the community, but somehow it was flagged, probably by a competing answerer to the question. Quora didn’t even ask me if I could edit the post to comply with their policy. They just outright deleted my work. See below:
My initial reaction was not anger that I lost the view count, but annoyance that I had wasted my time and lost my content. After all, my month long goal was to save time or improve my use of time. As a writer, good content should not be wasted.
Luckily, I was able to click a link to view what they deleted, copied the answer and created a new page on Financial Samurai with my deleted answer: Do Wealthy People Think About Retiring At A Young Age? Phew, it feels so good to have saved my work and add my own recommendations at the end without fear of deletion.
Know this. If you are writing on Quora, you are making Quora rich. You are improving their content and traffic. Instead, you should be writing on your own platform and making yourself rich. I recommend everybody have their own website to own their own brand and own their own content and traffic.
You would think they’d treat someone who was able to write 70 answers in a month and generate 1.1M views better, but they haven’t even bothered to respond to my appeal.
If I knew Quora wouldn’t delete my answers, I would continue to give Quora a go. But their apparent random deletion of a popular answer with no response makes spending any significant amount of time on their platform risky and inefficient. Therefore, the smarter move is to first publish on Financial Samurai and then use some of my content to republish shorter answers on Quora if I have nothing else to do with my life.
I plan to now write little to nothing on Quora for the next 30 days to see how much organic views and traffic I achieve from my existing answers.
Productivity Steps Review
I hope my case study gives you an idea of how to improve productivity in something you care about. If you’ve been doing anything for several years, I’m pretty sure there’s a better way of doing it today.
Identify the pain points
Replace wasted time with a potential better use of time
Establish a short window for testing your new use of time
Come up with specific objectives for your new use of time
Thoroughly analyze the results and make logical next decisions
Having a productivity mindset is also important for reaching financial freedom. With such a mindset, you will focus on how to generate more passive income streams to buttress your active income streams so that you might one day be free. It is amazing once you can get your money working hard for you, so you don’t have to.
Readers, what are some pain points you’ve experienced and how did you go about improving your productivity? Any readers out there spending their time making Quora rich instead of themselves?
How Much Can You Make Blogging For A Living?
The 10 Best Reasons Why Everyone Should Start Their Own Online Business
Why Blogging Is The Best Business In The World
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Posted onFebruary 16, 2018|Comments Off on The Marriage Penalty Tax Has Been Abolished, Hooray!
In the past, I used to wonder why two individuals with high incomes or two individuals with a large income differences would ever want to get married. Paying thousands of dollars in marriage penalty taxes didn’t make sense. It seemed obvious that the government wanted one spouse to give up his or her career to stay at home, even if there were no children to raise.
Otherwise, why would the top tax rate of 39.6% for a married couple not kick in starting at a combined income of $836,802+? For 2017, married folks begin paying at the 39.6% tax rate once their combined income surpasses only $470,701.
In the eyes of the government, 1 + 1 literally only equaled 1.12. This is blatant anti-marriage discrimination. Discrimination is not OK even if you aren’t being discriminated against. Below are examples that demonstrate the marriage penalty tax that used to occur under the old tax structure. I used the Tax Policy Center Calculator.
Example #1: Marriage Penalty
Each person makes $200,000. They don’t own a home, and have two children. The results are the same if they have no children. They pay a whopping $15,162 marriage penalty tax.
Example #2: Marriage Penalty
One person makes $500,000, the other person makes $80,000. They own a home with a mortgage and have one child. Lucky for the person making $80,000 to marry the person making $500,000. Not so lucky financially for the $500,000 income earner.
After 20 years, this person will have paid $270,000 more in taxes than if he or she had stayed single or unmarried. Marriage forced this person to pay an average of $13,434 more in taxes a year. Think about what this couple can do with all this money!
Example #3: Marriage Tax Credit
One person makes $60,000, the other person makes $40,000. There is no mortgage and zero kids. We have a winner! Because the combined income is under $110,000, the couple can decide to have a kid and claim $1,000 per child to lower their taxes even further to $10,638 from $11,638.
Example #4: Marriage Tax Credit
Here is the real home-dinger. One person makes $300,000 and marries another who makes $0. They pay $35,000 in State taxes, $25,000 in mortgage interest, $2,000 in charity and have a child. The $300,000 a year earner saves $11,162 a year in taxes. I tried higher than $300,000 a year and the marriage tax credit starts to decline.
Based on the above examples, from a tax perspective it seems clear that you should only get married if your contemplated partner makes a similar level of income up to around $100,000 a year or you anticipate your spouse having zero income. If both of you made much more than $100,000 a year, you paid a marriage penalty tax. How much you paid depended on the number of kids and deductions you had. And given most $100,000+ a year jobs are located in high cost of living cities where housing, education, and taxes are already high, paying a marriage penalty tax was infuriating.
Related: Scraping By On $500,000 A Year: Why It’s So Hard To Escape The Rat Race
There’s Hardly Any Marriage Tax Penalty Anymore
With the passage of new tax reform for 2018 and beyond, the marriage penalty tax is now practically abolished. Based on the new federal income tax brackets below, there is tax EQUALITY up until $300,000 per person. In other words, two individuals who make $300,000 and get married for a combined income of $600,000 will pay roughly the same amount of tax (35% marginal tax rate) as if they were single. Not bad given in the past, they had to pay a 39.6% rate on any income above $470,701.
There are many income permutations to consider when calculating whether or not there is a marriage penalty tax or bonus. However, the key math to consider is at the 10%, 12%, 22%, 24%, 32%, and 35% tax brackets – there is a logical doubling of income thresholds if individuals get married. Therefore, there is no tax penalty for any individual making up to $300,000 a year or married couple making up to $600,000 a year.
I no longer have to spend hours coming up with different married income permutations to figure out when tax penalties start hitting. I can just tell based on looking at the graph. Perhaps this is why the tax industry is so afraid of streamlining the tax system. When things are easier to understand, they lose business.
The only visible marriage penalty tax comes in the form of two individuals making over $500,000 a year. In this case, the marriage penalty tax is 2% X $100,000 = $2,000, which is not much for a $1,000,000+ income family, especially since the past married income threshold was only $470,701+ at a 2.6% higher income rate.
In other words, a $500,000 income earner can always pay a maximum 35% marginal income tax rate. But once that $500,000 individual marries someone who makes $100,000 or more, all income over $600,000 gets taxed at 37%. If the $100,000 income earner stayed single, s/he could have only paid a 24% marginal income tax rate.
Almost Everyone Should Rejoice
Given we know that the top 1% income earner makes roughly $400,000 a year, it’s safe to say that less than 1% of Americans will still pay a marriage penalty tax. Therefore, if you’ve been holding off on getting married until the tax situation gets sorted out, now is the time! If the marriage penalty tax ever gets reinstated, you can always get a divorce.
The only clear financial benefit I see for getting married is Social Security survivor benefits. Under current law, if your spouse dies, you get to keep all the accrued benefits. If you are not legally married, then the government gets to keep all the taxes you’ve paid into the system if you have no children. Talk about a bad deal for the American people.
Since everyone believes in equality, everybody should be rejoicing at our new federal income tax rates. I personally believe that a married couple earning up to $315,000 after deductions is the ideal income for maximum happiness. You’re paying a 24% federal marginal income tax rate and can pretty much live a comfortable life anywhere in our great country.
Readers, why do you think people were willing to pay thousands of dollars in the past for the privilege of having a marriage certificate? Wouldn’t you rather save all that money to buy a house, pay down some debt, go on a great annual vacation, or invest? Is there an married income level that is paying a marriage penalty tax that I missed?
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Posted onFebruary 13, 2018|Comments Off on The Key To Living Longer: Fear Being Alone Far More Than Going Broke
I’ve always told my wife that if all goes to hell, at least we’ll still have each other. After all, we met during college when neither of us had any money. We were happy just spending time together between classes in the Sunken Gardens at The College of William & Mary. Having to start over with nothing wouldn’t be so bad.
I’m convinced part of the reason why some couples choose to have so many children despite the cost, the stress, and the time commitment is because they too, fear being alone one day. Having nobody visit you in the hospital when sick is depressing. Having to play children’s games at a nursing home is no way to live out your remaining years.
For me, being alone is far scarier than going broke. When you lose someone, there’s no guarantee you’ll ever be able to find someone as good. But if you lose all your money, there’s a good chance you’ll recover through some ingenuity and hustle.
The Risk Of Social Isolation
I truly believe the key to living longer is having someone to love, something to do, and something to look forward to. Having close personal relationships and a strong community to interact with are the top findings why certain communities have longer lifespans than others. Check out the chart from Susan Pinker’s TED Talk.
Living to 100 and beyond. Click to watch the Ted talk
I’m thankful for all the detailed comments left on Financial Samurai, even the unpleasant ones, because they share windows into different people’s souls and promotes new topics of discussion.
Here’s a comment left by JD on my uncontroversial post entitled, Things Worth Spending Max Money On For A Better Life that is incredibly insightful about why someone people are alone. If you read the post, you know it simply provides suggestions, not commandments, on where you might want to pay a premium to live a better life.
Why not just put anything down? Couldn’t disagree more. With this advice you’d go from frugal to broke in no time at all. You could justify buying anything and everything.
Mattress at the top? My mother was conned into buying a pricey new one by her brother. When you’re old and in pain the bed you’re lying upon in immaterial. I’ve tried it from time to time. It’s okay but not worth $1,000+ but when I’m tired I can sleep anywhere on anything. The people pushing beds are making killings on TV because people are foolish to believe their hype.
Home Appliances & Home Theater systems are Scams. They’re built cheaply designed to break down–All of em! The more money you pump into them doesn’t guarantee quality or quality or longevity anymore. A crap movie is still a crap movie regardless of how big the screen or high the resolution. Maybe you’d like to push Kueric coffee machines too. Fear and Status sell. Means nothing.
Dental Care is overrated and relies upon Fear to sell. A magical sonic toothbrush? Really? They pay you a few bucks to hype this? Just basic brushing, a minimum of once a day is all that’s needed. Even flossing has been proven to be excessive if not dangerous.
Work clothes & shoes – Hint: if you’re Retired (i.e. Not Working!) it matters not!
Especially if you’re not a socialite and enjoy doing things by yourself.
Food – Some of us Enjoy the Simple pleasures of Simple food. I’m surprised you’re not hyping caviar here as well! Junk food is only bad for you if you thrive on it excessively and make meals of it. For some of us it’s what makes life worth living.
Car Safety is another one of those things relying on Fear to scare people into shelling out money. Once upon a time frugal sites said the same thing. All cars made today are basically safe but it is the Drivers behind the wheels one must watch out for. You’re safer driving a stripped-down basic car than one loaded with electronics so you drive while watching a DVD and yelling on a phone while studying a schematic of your car!
Such detailed intentional objection. I figured there must be more to JD’s story so I asked him to share more about himself, and he did.
I’m frugal, and the real deal. I’m financially independent with a high net worth. I’m also not a hypocrite. The simple things in life are free and once you get used to them, luxury living is rather petty and obviously to impress the masses. Furthermore, everything I’ve typed up there is true and I can back each and every statement up.
I’m not negative, I’m real and honest. I’ve also debated people to death and I don’t intend to waste my time doing so online again. Everyone lives in their own realities with their own priorities, petty as they may be. It’s why my personal relationships have never worked out. My own preferences have been exotic and queer to most people at times. I’ve turned down steaks for Big Macs, for instance. Because they taste better to me.
If you want me to reiterate a few. Planned Obsolescence pretty much wipes out the need to buy “the biggest, best, most popular, and coolest” of appliances (in conjunction with the “bathtub” curve regarding breakdowns). A $300 refrigerator will last as long, if not longer than a $3,000 one with a ridiculous touch-screen and wi-fi system, and certainly require less maintenance and make life. Easier for you. Oh, sorry, no bragging rights with an Ordinary refrig.
That’s what it’s all about: Status; impressing the guy next door. Maybe you need such recognition, but I do not. The bottom line is that I saved $2,700 which is more money in the bank making interest. Plus, I’m not pulling my hair out over a touch screen that’s malfunctioning and a unit that needs software updates etc. I could extend this analogy to include all manner of modern “smart” tech which makes live miserable in the long-run, including fancy thermostats which need their batteries replaced constantly and maybe even recalibration. All for Look At Me I’m Better Than You gratification, and a cumulative drop in wallet dough. If you’re secure in Yourself you care not about appearances to project upon others. You are indeed Comfortable and truly at peace. I’ve splurged in the past and I almost invariably feel guilty afterwards. Because the outcome simply was never worth it. Maybe I just need a shrink.
Frankly, I’ve found this website a disappointment. Your early articles were generally good, but you’ve changed over the years. Perhaps this wife of yours has had an influence on your psyche. It’s why I’m not married. If you want real financial know-how, checkout Bell’s Living Stingy blog. Not 100% in agreement of course but I do tend to agree mostly with his lifestyle (minus the BMWs and his sometimes quirky politics).
Although JD said a lot of unflattering things about me and this site, it’s good he followed up with details about his beliefs. Here are some of my observations:
1) There may be some self-esteem issues because he thinks having a nice TV, refrigerator, bath tub and wi-fi system is for showing off to your neighbors instead of for the owner’s personal satisfaction. I’m not sure how our neighbors will ever know about our nice equipment unless we invite them over to a bath tub or online gaming party.
2) Guilt for spending money despite having a high net worth. Many of us have this problem because part of the reason why we got to a high net worth is by being frugal. Old habits are hard to quit.
3) JD is alone. By comparing things with others, bringing up my wife, his shrink, and his failed relationships, it seems he either enjoys being alone or desperately wants to find someone.
How Not To Be Alone
If you want to live longer and happier, then it’s probably beneficial to find someone to go through life with according to the research. To be loved and accepted is all we can ever ask. Although there is no guarantee of finding someone, we can at least improve our odds by doing some of the following:
1) Ask whether you’d be happy hanging out with yourself for hours. Pretend you’re stuck for five hours at an airport due to a computer system malfunction. Would you enjoy your company? Or would you not be able to stand yourself? The airport test is one of the key determinants every applicant must pass when applying for a job that demands rigorous work hours and plenty of travel.
2) Find ways to look at the positive. JD decided to look at my post as an offense to his frugality. Even though my post wasn’t forced upon him or cost him anything to read, he got triggered by my suggestions. Meanwhile, most other people decided to see the positives of the post and share some of the things they value the most. The more you can see the good in things, the more people will start seeing the good in you.
3) Turn on your grateful switch. Whenever I sprain my ankle, I’m thankful I didn’t break my ankle. Whenever my wife is feeling tired after a long night, she is thankful she has a son to be tired for. In the very simplest terms, if we can be grateful for just being alive, our world will change for the better.
4) Smile. Nobody can resist a big toothy smile. Strangers will automatically smile back at you for no reason. A smile is like a powerful magnet that draws people to you. The next time you’re zooming down fresh powder, dancing to your favorite tune, or riding a jet ski, notice how sore your cheek muscles get after the session is over. It’s because you’ve been smiling nonstop without anybody noticing. The more you can smile, the happier and healthier you will feel.
5) Focus on solutions. Problem solvers don’t just accept a bad scenario, they find a way to go around the wall. There is no greater turn-off than the person who complains why life isn’t fair and then sits on their ass all day. The water cooler gossipers at work invariably are the first ones fired. One of the reasons why blogs have taken off is because journalists only report the news, while bloggers not only share the news but also offer actionable steps. When you can build some credibility by consistently doing what you say, attracting others is an inevitability.
6) Take care of your mental and physical health. Nobody will love you if you can’t love yourself. Loving yourself starts with taking care of your mental and physical well-being. You don’t have to look like a swimsuit model or have the mind of the Dalai Lama, you just have to consistently work at reaching your healthiest potential. Stay active. Keep an open mind. Read voraciously. Practice what you’ve learned. Forgive yourself and others.
7) The more people you meet, the higher your chances. Meeting someone you can connect with is a numbers game. Sharing a common interest is the easiest catalyst to start a meaningful relationship. I have one friend who is always on a date despite not being particularly attractive. He’s not afraid to ask every person he meets for their contact information because he’s not afraid of rejection.
8) Stay hygienic. For the love of God, shower, wash your face, brush your teeth, and floss no matter what JD says about not buying a Sonicare tooth brush! If you smell and are dirty, nobody will want to come close to you, let alone kiss you. Ask your friend(s) if you smell, because some people do and have no idea. Let your natural pheromones attract other people in ways that only science can explain.
9) Develop emotional intelligence. If you’re clueless, it’s dangerous because you may not know you’re clueless. This is also called the Dunning-Krueger effect. An emotionally intelligent person understands another person’s viewpoint and works to socialize in a manner that’s agreeable. An example of an emotionally unintelligent person is one who asks things like, “can I pick your brain” without first developing a relationship or providing something of value. Communication skills are key to a high EI.
10) Be generous and kind. Showing generosity and kindness is one thing if you have everything. Showing generosity and kindness when you have nothing is next level humanity. A woman by the name of Kate McClure raised over $360,000 for a homeless man through a GoFundMe campaign after she ran out of gas on an interstate in Philadelphia. Johnny Bobbitt Jr., walked a few blocks and bought her some with his last $20 and asked for nothing in return. Johnny has a second chance in life after drugs and alcohol derailed his plans.
We Are Programmed For Companionship
Having a lot of money is pointless if you have nobody to share it with. During my days in finance, I met plenty of wealthy, but lonely folks who had let their desire for wealth consume them. Every single one of them regretted working so much in their 20s and 30s, and not working more at finding someone they could come home to.
There’s no denying that luck plays a role in finding a companion. But I’m certain we can all do more to increase our chances at finding someone if that’s what we want.
Relationships are hard to maintain because we tend to take each other for granted. Marriage is constantly a work in progress. But I say it is better to have loved than to never have loved at all.
The Average Net Worth For The Above Average Couple
Marrying Your Equal Is Better Than Marrying Rich
Financial Dependence Is The Worst: Why Each Spouse Needs Their Own Bank Account
Readers, why do you think some people remain alone? What are some other ways to improve our chances of finding the one? You can read more of JD’s comments on love and life in the post, The Best Financial Move I Made Is Something Everyone Can Do. They are fascinating to me because they are the opposite of my beliefs.
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