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2018-04-25T20:17:36.027Z
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I was expecting much more backlash from coastal city folks in my article, Why Real Estate Will Always Be More Desirable Than Stocks, but instead, I got heat from folks who live in the Midwest. The general feedback was that Midwesterners never felt anti-housing rage and that I’m a fool for preferring real estate over stocks since they’ve made more money in the stock market.

Well obviously you aren’t going to feel a lot of anti-housing rage if you can buy a beautiful house for $280,000 a couple years out of school! And obviously you have a better chance of making a larger absolute return on your investment with stocks since housing is so cheap. We already know that in the long run, stocks outperform real estate, un-levered.

What I do predict with great confidence is that 20-30 years from now, the anti-housing rage will have spread to the Midwest. Money is fungible. It will go where the returns are highest. Residents from San Francisco, LA, Seattle, New York, Washington DC, and Miami will bring their bags of cash and either buy up non-coastal real estate directly through REITs or through real estate crowdfunding deals.

Making a fortune is about predicting long-term trends, and I’m certain diversity will continue to spread across America. Technology will make paying $4,600 a month for a two bedroom...

Art by CKongsavage.com

Now that tax season is over, it’s a good time to reflect on why you are saving and investing so diligently. Reminding yourself of the why is an important motivator to keep going. Goodness knows it’s too easy to eat one more cookie and find ourselves unrecognizable 10 years later when we live in a free and abundant country.

Since graduating from college in 1999, I’ve been motivated to max out my 401(k) and save as much as possible because I knew there was no safety net. My parents drove an eight year old Toyota Camry to their government jobs. We lived in a cozy townhouse. And they worked until their 60s. After sending my big sister to college, I wasn’t sure they had much to spare if I faltered.

After saving enough money to live off ~$80,000 a year in passive income in 2012, I continued to try and save as much of my after tax income as possible because I was unsure whether I had made the right move. Walking away from a six figure salary at the age of 34 is not normal. Some might even call it stupidly stupid.

Given I’ve survived more than six years of unemployment, there’s a growing chance I’ll continue to stay unemployed for the foreseeable future. That said, I...

Whenever I meet a fresh college graduate at a random mixer, I’m inevitably hit with a wave of bubbly enthusiasm that’s rarely found in my circle of older friends. Phrases such as, “I love my job,” “I believe in my company’s mission,” “this city is so amazing,” and “we’re making the world a better place,” are quite common.

It’s refreshing to hear so much enthusiasm, since my older acquaintances are a little too scarred to blindly believe that everything will be sunshine and rainbows. One friend is going through a bitter divorce. An old co-worker recently died at the age of 44 to breast cancer. While another person had to take out a second mortgage to keep his startup afloat. Life is hard. But you won’t know until you live it.

I was fortunate at the age of 22 to experience a miserably exhilarating time working in New York City. From day one, I knew that getting in at 5:30am and leaving after 7:30pm every day was going to lead to a miserable existence. Therefore, I did everything possible to figure out a way to escape early

Accept Misery In All Its Glory

If you can forecast your misery, I’m positive you will ironically lead a happier life. Here are three examples of what happens when you don’t properly forecast your misery:

1)...

For the past several years I’ve filed a tax extension. A tax extension allows taxpayers to file for a six-month extension if they need more time to prepare their tax returns. The neat thing is that you can obtain an extension for any reason, so long as you submit Form 4868 electronically or on paper by the April filing deadline.

By filing a tax extension, you’ll also avoid failure-to-file penalties, which can add up to 25% of the tax due. That said, you must still pay your estimated taxes if you owe anything by the April deadline, despite getting an extension.

So why the heck would anybody file an extension? Here are the main reasons.

Main Reasons To File An Extension

1) Your K-1s are late. Late K-1s are by far the main reason why taxpayers need to file an extension. A K-1 is a document given to partners in a business, S-Corporations, or trust and estate beneficiaries. Most of people who get K-1s are investors in private businesses. For businesses that operate as partnerships, it’s the partners who are responsible for paying taxes on the business’ income, not the business.

I’ve got to file an extension this year because the K-1s for my private gin investment and one venture debt fund are late. I’m pleased to have received my real estate crowdfunding K-1s on time....

If you decided to sell your house to simply life, lock in gains, downsize, or relocate for a job, this article will help you minimize your tax bill.

According to the IRS, most home sellers do not incur capital gains due to the $250,000 and $500,000 exclusion for single and married couples. This makes sense since the median home price is roughly $210,000 in 2018.

There are three tests you must meet in order to treat the gain from the sale of your main home as tax-free up to $250,000 / $500,000:

  • Ownership: You must have owned the home for at least two years during the five years prior to the date of your sale. It doesn’t have to be continuous, nor does it have to be the two years immediately preceding the sale.
  • Use: You must have used the home you are selling as your principal residence for at least two of the five years prior to the date of sale.
  • Timing: You have not excluded the gain on the sale of another home within two years prior to this sale.

But let’s say you plan to sell a property in an expensive coastal city where your gains are much greater than $250,000 / $500,000. There’s a good chance you still won’t owe much in capital gains tax if any if you keep proper records.

How To Minimize...

When I was 30, my goal was to retire in 2017 at the age of 40. I figured, after spending my 20s learning, I should spend my entire 30s earning.

Now that I’m almost 41, I’m glad I didn’t wait until 40 to leave the workplace for good. Life doesn’t end once you retire. It simply morphs.

Although I no longer consider myself retired with all the work that goes into running this site and being a stay at home dad, here are some things that have happened since 2012:

1) Written a book called, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.

2) Traveled to 30+ new countries in Europe and Asia with my wife. Angkor Wat, Cambodia was truly amazing.

3) Gotten my USTA tennis ranking up from 4.5 to 5.0. This would have not been possible without all the newly found time to practice.

4) Consulted for several financial technology startups ranging from seed stage to series C.

5) Built this site into over a million organic pageviews a month with no forum.

6) Grew passive income by 2.5X.

7) Bought and remodeled a fixer.

8) Became a foster child mentor.

9) Became a high school tennis coach

10) Became a father.

I’m excited what the future will bring!

Factors Involved In Retiring

Before we discuss the ideal age to retire, let’s take a look at what the average retirement age is in America. As you can see...

One way to tell whether buying a home right now is a good time or not is seeing what the stock market is doing. The stock market reflects earnings expectations 6 – 24 months in advance. You can investigate further and look at sectors in which your location has large exposure e.g. tech in San Francisco, oil in Houston, and banks in New York City.

With the stock market seemingly stuck down 10% from its peak, there is a growing chance that you might be buying at the top of the market in 2018. Exactly what that percentage chance is, nobody knows. Maybe the chance is now 50% for expensive coastal city markets, up from 40% in 2017.

Stocks correct swiftly, while real estate corrects slowly until everybody knows real estate is weakening. Then liquidity dries up and the floor drops out. If the stock market is correcting, it’s time to pay closer attention to any investment you make, especially with leverage.

What we do know about the real estate market is that it moves in cycles due to the desire for economic profits i.e. new construction to meet new demand. Peak new construction tends to occur past peak demand, which ultimately leads to temporary oversupply and lower prices. This bust phase usually lasts between 1-3 years before a price floor is found. We are...

Hopefully everyone got some laughs this April Fool’s! It’s always good to poke fun at yourself once in a while to stay grounded. Yes, Twitter is indeed like high school where there are gang ups, non-stop gossiping, and outbursts of hormonal rage. One of the main reasons why Disney decided to back out from their purchase of Twitter was due to the fear that all the hate would spill over and tarnish its reputation.

Anyway, I stand by my belief that if you are a happy person with a healthy dose of self-esteem, it’s hard to tell others to f off once you have f you money. Money simply magnifies who you already are. Let’s show empathy to the ones who dislike us the most.

For 2018 and beyond, I’ve decided to do things a little differently by taking away the absolute dollar amounts I invest. Given that there’s been so much rage against the middle class in expensive coastal cities, I don’t want the numbers to be a distraction. Only my family cares about how much we invest anyway.

Stock Market Overview And Outlook

After rising as much as 7.22% in January, the Dow and S&P 500 closed down ~4% for after April 2. The initial ascent was unsustainable since such continued performance would lead to an...

A buddy of mine who so happens to be a very successful frugal blogger gave me some incredible advice recently. He said,

Sam, you’re doing it all wrong focusing on the mass affluent / aspirational niche. Instead of writing about investing, entrepreneurship, and real estate, you should focus on frugal living. I teach people how to save money on groceries, encourage people to walk or ride a bike to work, tell people to never turn on the heat, and of course never buy anything new. As a result, people love me for it! Teaching people how to be more frugal is possible for 100% of the population, which is why my site is so popular.

Whereas you, you talk about how earning $300,000 is middle class, establish tough net worth targets by age, and write super long posts on investment strategies in retirement while most of your readers are still working with less. Of course people are going to end up hating your guts because you’re excluding the vast majority of the population!

Showing tough love should only be reserved for the people you care about the most, not your readers who pay you nothing. If they end up getting crushed by inflation 20 years from now because they didn’t invest or thought they could cruise through life, it’s not your...

This article is for:

* Students who want to understand the true cost of their education and the sacrifices their parents make in order to make better choices with their careers.

* Parents who make too much to get financial aid, but not enough to feel like they can comfortably afford private school.

* Students and parents who feel bad for attending or sending their kids to public school or have a tinge of envy for those kids who do go to private school.

Congratulations for getting accepted to your grade school or college of choice! You’ve now got to make a decision on how to spend what will likely be your parent’s money if you aren’t getting a scholarship.

I’ve been a proponent of attending public schools over private schools because I’m biased. I attended international private schools when I lived in Asia, attended a public high school, and went to a public college. I found very little difference in education between my private middle school and public high school. Upon graduating from William & Mary, I got a good enough job that helped me reach financial independence a little sooner than normal.

We all know there’s no guarantee of doing anything special or being anything special just because you went to a private school. With the internet making education free, it’s hard to justify paying record high tuition for a private education. Yet, many parents pay for religious...

The only time I want a mega mansion is when my in-laws or parents come to visit. I fantasize how it’d be nice to put my guests in a separate wing with their own kitchen, bathroom, and living area. This way, we can all keep our independence while also sharing family time every day.

Alas, my family only lives in a 1,920 square foot, three bedroom, two bathroom house. We downsized from a 2,300 square foot, four bedroom, three and a half bathroom house in 2014 because it was simply too much space. We also wanted to generate more passive income to avoid having to go back to work. There was no way we would be willing to rent our own house at the then $8,800 market rate.

We enjoy living in our current house. Every single room is fully utilized now that we have a little one. There’s a nice view of the ocean and enough space for a hot tub and kids to run around outside. The neighborhood is also extremely quiet, which is a big change from our previous residence that recurrently experienced drunken frat bros screaming nonsense at 2am when walking by.

During the gut remodel of our fixer, we thought of everything we could to make our current residence the perfect house for the next 5-10 years....

Whenever I publish posts with six figure household incomes and detailed expenses my comments section and social media light up with displeasure.

Instead of accepting the fact that higher income leads to higher taxes and that living in large metropolitan areas result in higher expenses than in less densely populated parts of the country, there is denial. There’s also a segment of people who display hatred for high income earners, as if living in a three bedroom house and wanting to eat healthier in order to be around to see their children grow up is an affront to their way of life.

Based on my observations, here are the types of people most triggered by others paying a lot of taxes while also trying to raise kids and save for retirement in an expensive city:

  • People who don’t live in an expensive coastal city.
  • People who don’t have kids.
  • Students who haven’t even gotten a job yet.
  • People who see a $1.5M house price tag and scoff, but don’t understand that if the median house price is $1.5M, then the house is quite average.
  • People who work 40 hours a week or less and think they should be far ahead of the game compared to their peers who work 60 hours a week or more.
  • People who are too afraid to make a change in their career or are too afraid to move for an opportunity.
  • People who don’t tell...

In order to comfortably raise a family in an expensive coastal city like San Francisco or New York, you’ve got to make at least $300,000 a year. You can certainly raise a family earning less as many do, but it won’t be easy if your goal is to save for retirement, save for your child’s education, own your own home instead of rent, and actually retire by a reasonable age.

Although $300,000 is a lot compared to the median household income in the United States of ~$59,000, it’s not an outrageous sum of money once you look at the realistic income statement I’ve put together for this post. All expenses in my example use current prices. I’ve also cross checked the expenses with my family’s monthly expenses to make sure they are within reason.

Finally, I use $300,000 in this post because I believe it is the ideal income for up to a family of four to experience maximum happiness. At $300,000, you aren’t paying an egregious amount in taxes, you probably aren’t killing yourself at work, but you’re still earning enough to live a comfortable lifestyle anywhere in the world.

Half the US population lives on the coasts, therefore, this post is directly targeted at folks who need to live on the coasts because of their jobs. This post should also provide insights to...

For most of my post college life, I’ve had a drastically larger exposure to real estate over stocks. I needed a place to live so I figured it was better to pay down a mortgage than to pay someone rent. When it was time to buy another property, I simply rented out my old place for positive cash flow, and enjoyed my new place until it was time to rent it out again and buy a new place.

I’ve gone through this buy-rent-buy cycle three times now, and it’s been by far the easiest way to make and save several million in tax-advantageous dollars. Within the next five years, our plan is to go through another cycle and buy a Hawaiian beach property and rent out our current San Francisco primary residence.

Now that my exposure to stocks and real estate are more equal after the sale of a SF rental in 2017, I’ve had time to think about the two asset classes more objectively. And during this time, I’ve noticed anti-housing crusaders reach deafening levels!

The main reason why there is so much rage against real estate is due to the human condition. 

Why Real Estate Will Always Be More Desirable Than Stocks

You crave what you can’t have.

The people who are the most vocal against real estate are the ones who have...

Financial independence and retirement are used interchangeably, but there are some subtle differences. Financial independence is usually applicable to people across their entire lifespan. Those who cashed out $5 million dollars worth of Facebook stock at the age of 30 are financially independent just like those who saved $5 million in their retirement funds by the age of 65.

Retirement, on the other hand, is a term often used to describe someone in the last quarter of their lives e.g. ages 65 and up. This is why some folks get so hot and bothered if you aren’t in the upper ages but say you are retired. They don’t think you deserve retirement because you’re not old enough! If you don’t want unwanted attention as an early retiree, just say you are unemployed, on sabbatical, or an entrepreneur.

The reality is all of us would rather be financially independent earlier, so we have more time to enjoy our wealth. When the director of admissions at UC Berkeley asked why I was applying so early (25), I told her it was because I knew what I wanted to do and felt it best to leverage an MBA degree sooner, for a longer period of time. Little did I know I’d be done 10 years later.

Although I’m no longer considered an early retiree due to the endless hours it takes being...

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.

OlderandWiser says,

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...

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...

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...

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 since 2005 into a poor one going forward.

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...

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,...