So I want to do a couple of things I Mean again you’ve you’ve got one of These really Relatable but Extreme stories it’s what You did is kind of extreme Retiring super young and you were able To do so and it also is something that So many people would love to do and then Now you’re in kind of a new phase you’ve Done this now for the better part of a Decade and almost a half so maybe let’s Just start I know a lot of people might Know at least the the beginnings of your Story but in your words I’d love to hear What was going through your mind in the Great financial crisis and then you Being able to Essentially Semi-gray Zone whatever you want to call It retire super early tell that story Well I would say 10 years ago 10 years Ago was 2012. and I was just sick of Work I had been working in finance for 13 years just gone through the global Financial crisis lost about 35 percent Of my net worth in a matter of six Months that took 10 years of diligence Saving and investing to accumulate and Create and I just didn’t like Finance Anymore we were the bad guys I wanted to Do something new and I had started Financial Samurai during the crisis in 2009 Three years before I left Finance
Completely and I found myself always Just wanting to write I would wake up at 6am I would do some writing before going To work I’d come back and I do more Writing because it was so fun to connect With other people who are going through Similar issues and it just felt like Almost like an addiction where that’s All I wanted to do and eventually I was Thinking to myself you know what this is Probably not healthy always thinking About financial Samurai when I’m working So I wanted to figure out a way out And I figured out that way by Negotiating a severance because I Learned during the global financial Crisis a lot of my friends got Severances and I was always asking them Are you guys okay do you need a job and They said we’re actually okay because we Got two to three weeks worth of pay per Year work and I was like oh maybe so is It grind and you did this and you were Probably making Good money but it was still earlier in Your career so at what point did you Start to say I’m gonna so you’re writing For financial samarin I guess that’s When I started reading it so I I was Reading it while you were still working Back in 09 right And then you got a a severance Opportunity and and then that was the Prompt to say I’m gonna go I’m gonna
Stop working now and did you think it Was going to be For how long are we were you going to Try to be retired forever or did you Know you were going to go back at some Point and I want to talk about your your Thought around you you call yourself a Fake retiree or fake retired so what was You what were you thinking back when you When you did you took the plunge Well I was thinking man I’m burned out And I didn’t enjoy my life my lifestyle Anymore so I needed to find a way out Instead of just complaining at the water Cooler every single morning to my Colleagues you know why work sucked Right and so I devised the plan to Negotiate a severance and I knew that if I could get all my deferred cash and Stock compensation over the past three Years plus this private investment Management forced us to invest in in 2010 I was good to go and if I could get a Severance check Then there was no reason at the age of 34 not to take that leap of faith I was Burned out and I needed a break and also I wanted to write I wanted to travel the World and write on financial Samurai on The deck of a nice boat or somewhere Somewhere in Mallorca Spain and so That’s what I ended up doing uh for 2012 And 2013. traveled to 20 countries
Visited too many churches and just had a Good time but after about a year I Decided you know what this is Kind of getting boring after you see Five Gothic churches in Europe you’ve Seen them all and I had lived overseas For 13 years of my life in Asia and I Had Um worked in international equities for 13 years so I’d gone to China India and It was so exhilarating so fun to go to These conferences so after about a year I said you know what I’m not going to be Considering myself uh early retiree Anymore I’m just gonna say I’m a writer And so that’s what I’ve I’ve been doing Ever since and I want to embrace that Term fake retirement introduce it to the World because there’s a lot there’s been A lot of criticism Um to um regarding my retirement Situation or other people who retired Like some people have working spouses But they say they’re retired all this Stuff and I said yes Fake retirement I’m a fake retiree I’m Just doing what I want so that’s it when When you went and took that break at age 34 for a year really yeah you Were you making income yet during that Period of time from Financial Samurai so It was it was do it was a lot or is it Just a little bit to something though I mean so mainly
Um I had my severance package that paid For about five years of living expenses As frugal living expenses but that was Just you know I could live in San Francisco by myself Wow for on that servants back 67 000 Yeah five years And then I did have about eighty Thousand dollars a year in passive Investment income so rental property Income CD income money market Bond Income dividend income those are the Main factors and so I knew look with the Severance and the passive income of 80 000 it’s like let’s get out of here and Let’s just try to do something I wanted To do because worst case I would just go Back to work after one or two years if Things didn’t work out and also my wife Who was three years younger than me uh Was also working and I told her look if Things work out over the next three Years when you are 34 you too can leave Your job and I’ll help you negotiate a Severance so we can live this life Together and so that’s what what’s That’s what happened things when did you Get married Uh 2008 during the yeah Global financial Crisis okay so you were me so you were Married during this period of time yeah And then and so your wife traveled with You or did she stay so much uh five six Weeks off that year
In 2012 2013 yeah how long did it take You to build up Sam the the passive Income that eighty thousand dollars Worth of passive income and is that Still going strong today is it is it More today is it less so it took 13 Years I was very diligent very Intentional in 2000 in 1999 when I first Started working at Goldman Sachs I said I can’t last more than 18 20 years in this business getting in At 5 30 leaving at 7 30. I needed to Save and invest as much as possible so That hopefully by the time I was age 40 I’d have enough money to have options to Do something else And so I’ve always had this mentality And that’s one of the best things about Having a difficult job Is that it forces you to think of Alternatives because you know you can’t Last yeah that’s a really good point When you know you’re maxed out Particularly in any sort of Investment Bank your institutional equities it Really is about as grinding as you can Get I mean 5 30 to 9. do you do that one Day and and most people are burned out You had to do it for you did it for Years yeah but you also knew that you Were gonna the the reward was that you Would maybe be able to get out and have A much well what’s your schedule like Now let’s let’s start with that how how
I have two questions what’s your Schedule like now and then when you were Traveling that first year was it Was it you were such a unique position To be 34 in doing that was it lonely was It weird for a little while So two questions the schedule and the Traveling um schedule now is I wake up By five five thirty in the morning Um and I do some writing from about 6 6 30 to 8 8 30. and I try to do my writing Which is it’s kind of like meditation And it’s kind of like therapy and it’s Kind of something like exercise and I Try to do it all before the kids wake up Because once the little ones are up There’s no focusing on the writing it’s It’s about playing with them and being With them And then um by the way same five and a Half and two and a half okay so still Not in your five and a half is still Wait kindergarten kindergarten this fall Okay And two and a half not sleeping well but Fingers crossed you will Um but you know the whole goal is to try To spend as much time with them as Possible until full-time school starts And so the day is uh do some writing Spend time with the children Try to outperform the average amount of Time the typical parent spends with the Child in America which is 120 minutes so
I try to do 200 to 300 minutes a day And try to play some tennis late at late Morning have some lunch and then take a Nap while the little one is also taking A nap I’d never heard that stat before Sam I really like that is it so the Average per day is 120 Minutes for College educated parent in America is 120 Minutes Um it’s a little bit less for for Dad Yeah a day and so there’s a lot of What’s interesting is that The work life balance for a parent is Really difficult and so there’s a lot of Guilt involved in Parenthood and you Know should we work for more money to Take care of our kids or should we spend More time with our kids and one of the Things that I found that I’ve written in My book by This Not That is that if you Want to get rid of your guilt of working Instead of spending time with your Children try to spend at least the Average amount of time per day A parent in America spends with a child Which is 120 minutes and so if you can Get to let’s say 200 minutes so three Hours Plus that guilt starts to go away Because everything at the end of the day Is relative and then one day your kids Will grow up and not want to spend time With you at all yeah so so again is There
And I’ve never come up with a perfect Name here and this is I think this is Why I was like I gotta get Sam on Retired senior podcast is that you Called fake retired I called it Retirement grade Zone where you kind of Have enough to retire but maybe not Completely enough to have no income I’ve Done uh I didn’t Um interview with the author of second Act career she calls it semi Semi-retired which is a pretty good word I’ve never come up with the perfect word But there’s also this worry this this Like are you is there any shame in it Um uh I don’t think there’s shame in Doing what you want to do and I would Say don’t let anybody tell you otherwise And one of the Privileges of being able To run Financial Samurai is having so Many people read my work and offering Their two cents and perspectives and I Actually love the perspectives from Everyone from all Races all countries And different parts of the country and It just elucidates a lot of the blind Spots that I have and then I think other People have it’s one of the best ways to Learn to listen to other people and so Some of the times you know there’s Criticism which I do welcome because it Highlights something that I might be Doing wrong and I would say there’s Never any shame in doing your best
Taking risks and living the lifestyle That’s true to yourself And for those people who are trying to Shame you into doing something or else They’re trying to work on their own System I mean there’s something going on With themselves that uh you know we need To recognize what’s an example I mean What’s the criticism I mean is it like Hey oh easy for you to say you were at Goldman Sachs you know it’s like is that Part of it that you were able to make so Much money so quickly or what is the Common criticism I would say sure that Definitely could be one of them Um you know they could say you worked at Goldman Sachs and Credit Suisse and then I can say yes I got very lucky in Getting those jobs after graduating from A state school And not being Um a Target school you know I was able To get on a bus at 6 a.m on a Saturday Morning when nobody else was willing to Get on that bus And then they switched buses because it Was just me and the driver drove me in a Black Lincoln Town Car to New York City I went through 55 interviews over six Rounds in seven months and I found that Job and I would say that 70 80 luck but It’s 20 30 showing up and trying to do Your best and so what I say is you have To have this positive mindset you know
You I could say look I came to America As a high school student I was a Minority I am a minority only six Percent of people look like me in the United States maybe I don’t get that Same Fair shake or that same opportunity Because it’s just the way it is people Like to take care of people who are like Themselves Or I can say you know what I have a Great opportunity to come to the United States and make my own dreams and look There’s trillions of dollars out there For the taking there are people making Millions of dollars playing sports Driving their companies into the ground And getting 10 million Severance Packages Adam Newman just raised 350 Million dollars from Andreessen Horowitz After wework lost like billions and Billions of dollars my mindset is why Can’t I be rich too why can’t I live the Life that I want if I work hard at it You know one of the I mean this gets to Kind of number two for you I think one Of my early criticisms of fire and super Early retirees was that hey like these People are 35 or 40. try having kids and Putting them through school and multiple Kids and I remember my early criticism Of the fire movement Financial Independence retire early is that sure You can live super frugally and at a Really early age but it’s almost once
You start having a family it does almost It it’s expensive to live in the big City it’s expensive to live in America So that was one of my issues with fire But again fire is a concept it’s not a Black and white so let’s talk about Number two for you financial needs Evolve and and I like this likely grow Yeah over time also the sooner you quit Your day job uh maybe maybe you’ll Realize Um sooner or later that your needs will Evolve right so I left at 34 I was Married but we have no children we Wanted children but they didn’t come for A while but once we had our first son in 2017 something within me said wow I Think I need to make more money to take Care of them in expensive San Francisco You know there is Health Care insurance That we don’t get subsidies for we pay Now about 2 300 a month in unsubsidized Healthcare insurance Um preschool is generally private unless You’re from low-income housing and so That costs 2 000 to 3 000 a month here In San Francisco and so the evolution of Our passive income figure just kept on Going up it went from 80 000 just me to 150 000 for both of us because we we Believed in equality once she left her Day job to let’s say hey let’s add Another 50 000 for our son who was born You know out fifty thousand after taxes
Is 35 40 000 and then once our daughter Was born in 2019 why not add another Fifty thousand because heck tuition Costs are sure not going down they’re Just going to go up up and up and so we Kept an open mind to see that our Passive income wasn’t enough and it Would evolve with the additions of our Fam family and additions of our desires And needs as well Okay so did your so your wife then went Well she never did she ever stop working At all she stopped working in 2015 at Age 34 35. so it was our agreement I Could go first and then once she you Know reached 34-35 she too could leave Her job as well And then did she did she right now too Or what does she what is she currently Doing she writes maybe one out of every 80 articles uh but she helps me edit she Files the taxes make sure you know stuff Like that and then and she spends so Much time taking care of our children You know right now she’s the night watch Woman because her little one is waking Up several times a night and she’s just Amazing in terms of taking care of our Children and also doing a lot of the Back end with financial Samurai because There’s all the stuff that comes comes When you have this little business that We have and we never thought about it as A little business we just thought about
It I thought about it as like a journal As somewhere I could you know just write My thoughts and share my ideas and just Help people anybody who cared Well okay so but you did say when you’re Saying Sam that you ended up saying hey We need another 50 in income where is That from what and when you say hey We’ve got to maybe increase our spending Because tuition where does that then Come from So it comes from the cost of raising a Child tuition and added Healthcare uh Expenses and it was just our Target Number 50 000 gross income extra for Passive income Let’s go try it okay so you’re saying Let’s rate okay let’s now let’s continue To double down on the business to Increase our overall income per year so That’s that’s the yeah so originally we Had a target of you know a hundred Thousand dollars in passive income for The both of us and we got there we’re Like uh okay it seems okay let’s let’s Shoot for 150. and then we had a for the Longest time a target of 200 uh to have A family Um but as you know inflation housing Costs everything have gone up Tremendously over the past two years in Particular so we said well we better Keep up with inflation at least but now We’re good we are good we found our
Passive income Target we’re unable to Have any more kids now probably in our 40s so we’ve come to a steady state and We found our forever home uh which we Probably will not be forever but Probably live in for the next 10 years And so we’ve been you’re still in San Francisco So we’re still in San Francisco which is The one number one or two most expensive City in America yeah so if we were ever Ever able to decide to leave we might go To Honolulu for example which is Expensive but it’s about 30 percent Cheaper than San Francisco so it’s Actually a cool stat the fact that going To Hawaii which is like you know ten Dollars a gallon and six dollars for an Egg to think that that’s cheaper than San Francisco how about this one which I This is a really compelling one of your Six which is you’re gonna still feel the Pull of traditional work so I felt the Pull of traditional work three times uh The first time was immediately after I Negotiated a severance and left and I Thought am I an idiot I’m 34 years old I Give up uh what was my base salary at The time two hundred thousand two I Don’t know what it was something like That yeah I know what it was 200 There’s 250 000 I think Um I was like wow that’s crazy my Friends are all still working all day I
Couldn’t find anybody to play tennis With at 11 A.M Maybe this is a mistake right so that Was sure yeah the second pool was in 2017 when my son was born I think there Must be some kind of DNA evolutionary Thing that goes on in every single Parent once they have a child they say You know what I’m gonna quit my bad Habits I’m gonna try to make more money And I’m gonna be a better parent Provider provider right we got to Provide no matter how much you got or How much you think you have enough you Got to provide and so I went through That and then about a year into the Pandemic was my third pool going back to Work so that was 2021 and I realized wow Every time I go to the beach on a sunny Day it is packed on a weekday and wow When I go to my club or a public park to Play tennis at 10 A.M 11 A.M on a nice Day it is packed now it didn’t ever be It wasn’t packed before And so what I realized was uh many of my Friends who are in the knowledge economy Were able to have this flexible Lifestyle working from home during the Pandemic so I thought to myself heck if I can go back to work get a nice Paycheck and subsidize health care and Not have to work that hard sign me up You know we’d say that again so you’ve Got all you’ve got folks in the
Knowledge economy which is again you’re In the I guess a lot of us are in the Knowledge economy we’re the services Economy in general providing advice is a Huge part of the American economy what So what does that prompt you to do Again Sam So I realized let’s say you’re working In Tech banking just a lot of these jobs You can work from home Um every time I went out to play The courts were packed the beaches were Packed during the weekdays and so what I Realized was that if you could get paid Working from home not really working While you’re supposed to be working from Home okay I see might as well try to get A job working from home so you can go to The beach and play tennis you know Because I mean I just saw it with my Eyes the pre-pandemic and post-pandemic Um you know flexibility yeah it was like Oh well I was living this life but I Wasn’t getting paid so I might as well Try to get a job and get paid and have a Flexible life But but that was the pull of traditional Work it didn’t mean it didn’t mean you Did it I didn’t do it because at the end Of the day I realized After 10 years well nine years at the Time of not having to report to anybody Um I just didn’t want to be beholden to Anybody and so right now you know I’m on
This this media tour because I just came Out with my book buy This Not That on July 15th what a good idea to frame the Cover right behind you that’s a great That’s a cool idea oh so I was gonna say Like just for this interview for example I had to set my alarm at 10 minutes Beforehand because I cannot see any of The pop-up reminders that come up on my Phone or a laptop I’m so not used to it That it just disappears and then ten and Then five minutes before this interview I actually forgot I had this interview Even though I had a 10 minute alarm Clock reminding me that there was this Interview so in other words I’m so not Used to being on a schedule on anybody’s Schedule wow it just felt so I’m like Terrible at that that Um I was just like man I just can’t be On schedules anymore I can’t so then so The media tour is reminding you what it Would be like if you had to answer to a Direct managing director somewhere and You were constantly having to check in Yeah just there it creates this anxiety Where I’m like okay one I have to Remember I have a meeting and then two Oh I’ve actually got to say something uh Insightful during this conversation and And I and I have to like push off things Like you know I can’t take my daughter To the playground at 11 30 a.m for some So it it reminds me that time is so
Valuable and you’ve got to be really Intent with doing what you want Otherwise you’re going to get bitter and And want to like just I don’t know give Up yeah wow the the by the way I was Thinking gosh Sam didn’t even remember He had an interview with the retire Sooner podcast I was like I was excited I was excited I did remember it I and I got the email From two forms two alarms but what it is Is that I’m so distracted by other Things that it’s like oh it’s like oh it Crowds out like my mind is it just Thinks differently nowadays I love this Next one where you’re able to speak your Mind more freely when you’re no longer At a big company or you’re a Semi-retired fake retire Well the idea is that if you have enough Money uh to survive and live the life That you want you don’t have to deal With any BS anymore right if your Colleague is uh needling you or abusing You or if you’re a manager is Favoritizing someone else you can just Speak out and say hey what’s up why why Are you doing that to me if someone you Know offends you you can just offend Them right back there’s no there’s no Consequence I mean it is pretty amazing To be able to say and do what you want And obviously you want to be a good Citizen right but if someone wants to
Come at me I’m just like okay that’s Cool or I can come at them back and I Have this platform and then we can just I guess we can go to war but it doesn’t Really matter to me because I’m able to Provide for my family and nobody is Dictating my future Speaking more freely and you have so Many visitors to your site and you Probably get lots and lots of emails and Opinions and pushback and compliments And a whole host is that really Is is that what sparked the book and the Fact that you have all this interaction That’s helped you create more and more Content And the fact that you’re able to really Be fully transparent say whatever the Hell you want to say is that been part Of writing the book Yeah I mean it’s unbelievable all the Perspectives people provide and all the News that happens every single day it’s It’s it’s unbelievable there’s never uh A dirt uh you know a lonely moment in Writing there’s always something new to Write about whether it’s Politics and something happening to your Finances tax laws you know the meme Stock craze it’s just crazy like I had An accident Um in Lake Tahoe and I didn’t even do it Uh the guys valeted my car and then I Woke up the next day and they brought it
Around they said hey why do you have a Big gash in your car I’m like I don’t Know I have no idea what’s going on and So I had to look about research on car Insurance and all that so it’s just it’s Just an endless amount of fun things to Talk about and it’s real life you know Real life dilemmas uh is something that I tackle in my book That again the book by This Not That how About the Legacy as you now have a Couple kids you’re starting to think More about that in general uh being Retired early or as you call yourself a Fake retiree let’s what are your Thoughts on Legacy and what is how does That change your perspective Well Legacy is is something interesting I think that really starts you know once You hit around 40 it makes you think About your life what you’ve done in your Life what you want to leave behind on This Earth and if you have children uh Automatically they are part of your Legacy but also you want to think about Teaching them the right way so they can Go on and fulfill their own legacy and It’s Legacy something selfish it’s about You frankly And self-actualization is important so One of the reasons why I wrote the book Was because I wanted to write something That was a physical copy of something That I could share my thoughts to the
World and what kept me going writing This book was knowing that my kids would One day be able to bring it to show and Tell class and say oh this is what my Daddy does So Legacy is so important as you get Older maybe not for everybody but it’s Something where I think you just want to Leave the world at peace knowing that You did something better and he left it In a better place than you first started Out for me this is the one of my fav This is my favorite of all of these is The thought around thinking and maybe Not everyone’s favorite but this is my Favorite Thinking in terms of probabilities and Not and not absolutes what that really Hit with me Because I think that But what is again you’d describe why That’s so important to you and why this Is one of your six lessons if you in Early retirement probabilities as Opposed to absolutes Yeah I encourage everyone to think in Probabilities not absolutes and this Comes from my experience as an investor And when you know you’re investing in Risk assets you also know you’re going To lose money so if you can win 51 of The time over the long term you’re going To make a lot of money and you’re going To make a lot of right decisions
My encouragement to all readers of Financial Samurai and the book is to Think in probabilities because if you as Soon as you start thinking in absolutes In other words 100 probability you’re Going to miss out on too many Opportunities and if you miss out on too Many opportunities you’re going to look Back on your life with regret having not Tried and that is the biggest thing if You don’t try on something you’re going To regret it and it’s going to eat you Up inside for a long time How about the new book by this thought That it came out it just came out so You’ve been forced to actually be on a Schedule because you got to go out and Do some podcasts get people to learn About it it’s already be doing doing Very well wsj bestseller what how long Did it take did you take years and years Of writing and and this is the other Thing I think people that write a lot And I’ve faced this is like oh I’ve Written so many articles and so many Things I can just kind of collect it all Up and we can make it a book and that Just it didn’t work for me it doesn’t Really at least I’ve never found it to Be that way the book is its own medium And its own journey in its own uh flow Through so how about for you how long Did it take and How did it come together well you know
I’ve written over 25 articles 2500 Articles on financial Samurai since 2009 And the book took about two years to Write because there are a lot of cooks In the kitchen Good Cooks to make the dish better and Then it took about six months to rewrite And edit and it was a really Introspective process and before I wrote The book I read about 20 personal Finance books to understand what worked What didn’t work And I also realized that the best books Were actually kind of thin and kind of Just it was like dessert it scratched The the surface and it made you feel Good but I don’t know if it made it Taught you anything or made you you know More knowledgeable or or act in a better Way and so I decided to take a risk and Write a much more thorough book a deeper Book that not only helped people Achieve Financial Freedom sooner based on a 70 30 decision making framework but I also Wanted to tackle some of life’s biggest Dilemmas because at the end of the day Money is just a means to an end right We’re gonna face a lot of these dilemmas In life and I wanted to tackle them with Some really good logic and rationale to Help readers gain more confidence to Make better decisions what give me an Example give our listeners what biggest Dilemma I want to hear this oh great
Dilemmas include Um whether to have children young in Your career or later in your career Whether to send your kids to private School or public school whether to join A startup or an established firm or There to move to expense of New York or San Francisco for a potential job Opportunity or a move to the Midwest to Save money So many dilemmas that we face that it’s Just hard and as a result it creates Analysis paralysis people just end up Not doing anything over the years I have Had many readers come to me and say I’ve Had my entire Roth IRA or 401K in cash Because I don’t know what to do I’m just Paralyzed and so the book by this now That helps give you the knowledge and The confidence to make a rational Decision hopefully with a 70 plus Percent probability you’re going to make The right one and if you don’t make the Right one it’s okay unless you’re gonna Die or something catastrophic happens You’re going to learn from your mistakes And make better decisions going forward Enter the 70 30 principle yeah 70 30 principle is essentially If you believe there’s a 70 chance or Greater you’re making the right decision Go for it While having the humility knowing that 30 of the time you might get it wrong
But you’re going to be able to learn From your mistakes and get better okay So if you’re in your mind it’s a coin Flip 50 50 this could work or not then You that’s when you say let’s shy away From it but if it’s a 70 I think this Could work but it’s okay if it doesn’t That’s that that’s a really nice way to Think about it and it’s any of these big Life dilemmas right children young not Private public school it’s funny these Are all really tough ones like there’s No right perfect answer for private or Public The startup or established city or Country yeah to be you know city mouse Or country mouse either one of those Like that’s tough it’s a tough one it’s Tough But that’s the whole idea of the book There’s a great saying if I knew then What I know now things would be better So to never say that saying again all You’ve got to do is read a book from Someone who’s been through what you Might go through to learn where they Went through and then learn from them And so it’s just it’s just whether you Want to learn or not and I it just seems Like life is very hard it’s very long And it’s also very short but there are Really easy steps to be able to make Your life better and easier How about bad debt versus good debt I
Mean I think uh debt is also on a Spectrum so bad debt is obviously Consumer Debt we buy things uh we don’t Need on credit card revolving credit Card debt because we think we deserve Something we don’t yet deserve it’s kind Of like uh maybe the C student who Believes he or she deserves an a Lifestyle or the first year employee who Believes he or she should go straight to The corner office if you really think About why you have this Consumer Debt Which is Evol revolving at a 17 to 18 Interest rate which is five percent six Percent higher than Warren Buffett’s Returns over the past 40 50 years for Sure yeah yeah uh why are you in this Resolve a revolving credit card debt It’s probably something to do with some Insecurity or some understanding of Yourself that you need to get right and So that type of debt is bad but good Debt is any debt that you can use to Acquire wire some asset that has a Chance to go up in value so that one Obviously is a mortgage that’s the most Common type of good debt so long as you Get that mortgage and buy that house in A proper home buying ratio which I’ve Introduced before I think you’re going To be okay yeah can you share your home Buying ratio with us well so the home Buying rule is the 3033 rule for home Buying so to cut to the three three is
Don’t buy a house more than three times Your household income Um but I’ve stretched it to five times Because rates were low and are still Going to be low and I think they’re Going to be low for a while but that’s That’s it three to five times your Household income got it a 30 percent Is having a 20 down payment on your home And having a 10 buffer in terms of cash Or semi-liquid Securities after you Purchase your home and then the other 30 Is spending no more than 30 of your Gross income On your mortgage on your home No more than 30 percent of your gross Income yeah right so if you make ten Thousand a month try to keep it to three Thousand a month on your home Okay which is okay so that’s your Payment the the three to five And and I guess to some extent it Depends on where we are in the country But housing prices just in general for The last couple of years have gone Through the roof so you’re able to Stretch this a little closer to three Four five times your household income Which gets you which also helps you keep On that that 30 ratio yeah it does and It’s easy to lose your mind with any Kind of investment any kind of house you Know you get really attached to it and When you lose your mind and you lose
Um those proper Frameworks sometimes you Get hurt as we saw in the global Financial crisis I don’t want people to Get hurt I want people to think Rationally obviously if your income is On a upward trajectory you know you’re 30 years old you just got promoted you Think your income is going to be 50 100 Higher in three years you can stretch That but you’ve got to have this kind of Framework in mind so that you don’t go Overboard Speaking of I’m going to ask you kind of More of a current events question just Your perspective your thoughts the fact That housing is so expensive the You can there’s a lot of reasons why Houses are more expensive Um One of them I think is that the the Utility of a home has gone up as it Becomes more of an office as well Um and do you think that was a one-time Bump up because of the unlocking of Virtual or do you think we’re in a real Estate bubble uh the the common question Concern I get is like hey I’d love to Sell my house it’s worth so much more Than I paid but then what am I going to Do I have to go do the same I have to Spend more money than I would otherwise Want to somewhere else yeah to buy Another house because all almost all Real estate is higher what is your
Thought on that So that question that you often receive Is one of the core principles I have in The book for real estate and that is You’re only long real estate If you own more than one property more Than your primary residence your neutral Real estate when you only own your Primary residence you go up and down With the market and your short real Estate when you’re a renter because you Are a price taker of ever Rising rents And property prices and so just like how You would in short the S P 500 long term You probably don’t want to short the Housing market long term by renting yes You get a place to say but you don’t Have any optionality in Building Wealth Through real estate and so in terms of Your specific question on what about the Real estate market today I believe the Real estate market will fade over the Next 12 months I think January February 2022 was a high and I think you can buy Real estate you should look to buy real Estate at about a five to ten percent Discount from the early 2022 highs Because real estate is generally a Lagging sector to the stock market so It’s interesting right now right because The S P 500 went down about 21 in the First half of 2022 and now it’s gained Back about half so we don’t know exactly What’s going to happen but we do see
Inflation rolling over in July we got an 8.5 print and so we are seeing the 10-year bond yield rollover from a high Of about 3.5 percent to 2.85 which means The average 30-year fixed rate has gone From about a six percent High to now Back down to about a five percent level And so you’re probably going to see Incremental demand come back but I would Be very patient and look for deals Because inventory is coming It is here and you’re going to be able To get better deals five to ten percent Where do you think inventory is coming From so I think inventory is generally Stable but what I think the reason why Inventory is higher is because demand is Lower because people are taking a wait And see approach in general inventory is Relatively like this but it’s demand That has a higher volatility One thing um I think people should be Aware of there’s two things for Real Estate Investors one I think work from Home is going to be here for the rest of Our lives we’ve accepted it we’ve gone Through two and a half years technology Is only going to get better and that’s What’s going to happen so demographic Shifts are going to go towards lower Cost areas of the country so you want to Be investing in the Heartland and the Sun Belt because there is no reason why San Francisco has to be a Monopoly City
On the tech sector or VC sector and then Two this is really important that nobody Really talks about is that foreign Investors are coming again So the pandemic has been bad for a lot Of reasons but it has been good in Throttling wealthy foreign investors From Coming to America and buying up our Property So once the pandemic opens the borders Open you’re going to probably see over a Hundred billion dollars in foreign real Estate demand come to the coast first And then slowly gradually move inward Because America no matter all of our Problems we have outperformed 95 plus Percent of countries in terms of the Stock market in terms of Lifestyle in Terms of being able to get access to Vaccines and less corruption so if you Think about it if you’re a wealthy Investor you’re going to want to Diversify your assets to the countries That outperform the most and America is In the top tier I love that perspective the I really do And so you think that we’re going to see A lot more foreign investment coming Here to the United States so the demand Curve is shifted shifted to the right And it’s going to shift more to the Right as foreign investors come and buy Property I looked at the data before the Pandemic it was 100 to 120 billion
Dollars in foreign real estate demand And then the pandemic hit it’s throttled Down to about 30 billion so that is Pent-up demand of about 250 billion in Foreign real estate Demand on top of the Regular demand that would have you know Come so I would be careful and I would Try to buy your piece of America now Before the foreigners come I really Would By America now it’s going to be my new Bumper sticker I do a lot of research Around the habits that that tie happy Retirees together relative to unhappy Financial habits lifestyle habits social Habits yeah and uh marriage family Etc Consumer habits and that’s what I’ve Done for the better better for 10 years Now One of the financial categories is to as The number of different not necessarily The amount but the number of different Income streams increases two three four Five different ways we have income or Passive income in retirement The higher levels of happiness we tend To say and I We call that more peace of mind more Diversification multiple streams of Income give you a a greater peace of Mind would you rather get one paycheck For ten thousand a month or ten one Thousand dollar paychecks there’s more Comfort in the ten one thousands okay
But my my question though so it’s very Positive as a retiree to be to have Multiple income streams how do you think About multiple income streams and how Does that really affect to real estate For you because that’s a big part of What you do How can we build that Well I advise following some type of Network net worth asset allocation Framework My net worth asset allocation framework Changes by age and it’s in the book this Goes through a detail but my current is 50 real estate 30 percent equities so Stocks about 10 percent municipal bonds Five percent risk free and the rest in Private Investments Venture debt venture Capital And sure the more money soldiers I have Working for me fighting for me the more Comfortable I feel because if one guy Goes down there are other money soldiers There I.E passive income streams to keep Me afloat and I’ve thought about this From an investment point of view where I Love dividend income because you just Don’t have to do anything but I don’t Like the yields because they’re quite Low so I love rental income because the Yields are quite high but I don’t love The work it requires to do maintenance To fix things and so forth I love online Real estate because it has higher yields
And there’s no need for you to do Anything So that’s why I’ve been putting more of My money and I do like what do you mean By online yields what do you mean by Online meals real estate so private real Estate syndication deals where a sponsor Buys a property refurbishes it you know Increases occupancy sells it for a Profit I like that I like real estate in General because it’s a tangible asset That doesn’t go down 35 overnight Because you know it missed quarterly Earnings by five percent right and the Yields are higher And so that is like one portion of it um The passive traditional passive Investments the other portion is Actually online Investments so what do I Mean by that for example Financial Samurai can be considered in an online Investment it can generate passive Revenue not not passive actually you Know these podcasts don’t speak Themselves the Articles don’t write Themselves but they’re enjoyable so they Generates Revenue it can be sold and you Can do things like uh you know you can Write a book and maybe if it does well Enough it might earn royalties so you Just want to keep on creating keep on Making progress in retirement because It’s actually really fun yeah I love how You call them the money soldiers how
About as we as we wrap here today what Is your just general overview of Spending Your spending rules Relatives my spending rules man so I do Have this one non-spending rule which is If the amount of money you’re saving Each month doesn’t hurt You’re not saving enough and the idea Behind that is to say look Do you really want to wing it with your Finances because if you wing it and if You’re not purposeful you’re gonna wake Up 10 years from now and wonder where All your money went and I don’t want That to happen to you So that is the opposite of the spending Rule in terms of spending rule you got To spend money on the things that you Value that’s it spend on quality spend On the things you value you don’t spend On lots of stuff and hoarding things the Things you value you know is that one Pair of jeans they will wear over and Over again or that baseball glove you’re Just going to use over and over again Forever and then starts smelling great You know focus on that quality because That quality is going to last you and be More valuable to you for a longer period Of time I feel like you’ve done that With a tennis racket well tennis rackets It’s good for about three years but then It starts losing its pop so if you want
To stay competitive you probably want to Get a new tennis racket well it is the I Think of this as ppw’s price per wears Blue I don’t know of anything that’s a Better lower ppw than than a good pair Of blue jeans yeah and some people they End up getting 10 blue jeans and Spending 200 on each blue jeans and then They end up not wearing a single one one Out of ten exactly So uh what else would you as we kind of Wrap here today uh You you’ve got the book that just came Out what in July so it just came out Uh by This Not That how to spend your Way to wealth and freedom and where else Can people find you and do you do online Courses are you thinking about doing That is it mostly through writing how do We get more of Sam Dogan You know it’s funny they always say you Know you write a book uh not to make Money and I totally believe that don’t Get rich if you wanna don’t write a book If you want to get rich Um I don’t plan to do any courses I just Don’t want to focus on spending my time Trying to make money I want to focus my Time on being with my kids and just Writing about the random things that pop Up in life and in the economy on Financial Samurai so just go to Financial samurai.com everything is free If you want to subscribe to my free
Newsletter you can go to financial Samurai.com forward slash news I put one Out every week recapping the most Interesting things of the week my Thoughts on the economy stock market Real estate market whatever it is and It’s from a perspective from someone who Worked in finance who’s actually Doesn’t have a day job and is trying to Figure things out as well and I think People enjoy it and then finally I guess You can go on Twitter I don’t spend much Time on Twitter it’s at Financial Samurai without an eye because there’s Not enough character spaces that I Discovered back in 2009 and then uh you Can buy the book buy the book Financial Samurai.com forward slash Btnt well listen this is so good and so Fun and this was uh everything I hoped It would be to be able to talk with you Sam again I’ve been reading your work For many many years and I wish you Continued success with everything I hope You sell a million copies of buy this Not that I think hopefully our audience Will go to Amazon right now and pick up A copy and uh and and also sign up for Your newsletter so it’s you just have I Love your perspective I think it’s Wonder It’s a Wonderful perspective I Think it’s as bad as objective as you Can get in the financial industry so Just keep up the awesome work man thank
You so much for being here I appreciate it and I’m glad I had the Alarm on 10 minutes before because I Hate being late being late is like my Biggest pet peeve so that was the thing I’m glad I wasn’t late and I’m honored That you had me on
