BiggerPockets Money Podcast - 46: Engineering Passive Income Streams to Fund the Life You Want with Financial Samurai

Episode Date: November 12, 2018

This week’s episode features Sam Dogen from Financial Samurai. After one month working for a top investment firm, Sam knew 70-hour workweeks were not the life he wanted. So Sam took action immediately. Instead of fancy cars and dinners out, Sam shared a studio apartment with a friend and socked away HUGE sums of money—50% of mediocre starting salary. He invested in real estate (shocker), stocks, and bonds—and continued his massive savings rate. Taking advantage of the economic downturn, Sam engineered his layoff and an enormous payout. Sam now lives the life he wants, having set up multiple passive income streams during his working years. He spends time with his family every day and embodies the concept of financially free. He no longer trades his time for money; his money just simply reproduces itself and does all the heavy lifting. This episode is a great look at how a little upfront discomfort can lead the your best life. Links from the Show Craigslist PayPal BiggerPockets Jobs Why Households Need To Earn $300,000 A Year To Live A Middle Class Lifestyle Today (blog) Don't Quite, Get Laid Off Instead (blog) Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Bigger Pockets Money show number 46, where we interview Sam from Financial Samurai. I mean, think about all the people, you know, 10 years from now, they wake up and they wonder, hey, where's all my money? Where did it all go? And I think it's because they didn't forecast their misery and realize, hey, 10 years later, you might love your job for the first three years. But, man, if you do the same thing 10 years in a row, or maybe 15, 20 years, you're probably not going to like it as much. It's time for a new American dream, one that doesn't involve working in a cubicle for 40 years barely scraping by. Whether you're looking to get your financial house in order, invest the money you already have, or discover new paths for wealth creation, you're in the right

place. This show is for anyone who has money or wants more. This is the Bigger Pockets Money podcast. How's it going to everybody? I'm Scott Tredge. I'm here with my co-host, Miss Mindy how you doing today, Mindy? Scott, I am doing fantastic as always. I am so excited for today's show. I've known Sam for about six years now through the blogging conference that everybody who listens is sick of hearing FinCon. And his story just always makes me smile from being super frugal while working in a fairly prestigious job to engineering his own layoff with a huge payout. His story is just really fun to listen to. And, you know, I want to remind everybody that we're listening to a guy who is post-financial independence. He no longer has a formal job.

he made smart money decisions his whole life. And he is just sharing his experiences. So I think it's fascinating. And I know that you're a big fan of Financial Samurai Scott. Yeah, I've read Financial Samurai for years. I think he's got some very well-dated-driven posts and some great personal perspective as well. Sam's the epitome of a guy who's just done it right. High school, college, great job out of college, smart investing decisions, taking chances, getting lucky,

having a couple of those backfire, but overall seeing the rewards of smart decision-making over and over and over and over and over the course of a long career. And now at 41, he's retired. He does exactly what he wants and what he thinks is best for him and his family. And I mean, what a payoff. What an awesome story. Yeah. And this episode runs really long. So it's worth every minute. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest

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Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. Okay, so Sam from Financial Samurai, welcome to the Bigger Pockets Money podcast. Thank you, Mindy. Thank you, Scott. I'm so excited to have you. I have known you or known of you for at least six years.

I know that your blog has been around longer than that. But for those of you listening, who maybe not familiar with Financial Samurai, can you walk us through where your journey with money begins because I really love your story? Well, to start, my parents were in the U.S. Foreign Service. So I grew up overseas in countries like Malaysia, Philippines, Japan, and Taiwan, and Zambia. And so when I was growing up, I was really aware of the dichotomy between the wealthy and the not wealthy, especially in Malaysia when I was in middle school. I would have friends who were very, very poor, family of five living in a studio. And then we were living in diplomat housing provided by the government. And it was just much nicer. So from a really young

age, I just realized, wow, there's so much poverty and wealth out there at the same time coexisting. And I decided when I was a kid that, I didn't want to be poor. I wanted to be comfortable. I wanted to be rich. And so it was from middle school onward that I really try to think more about money. And my parents were always really, really frugal. For example, we would go out to a restaurant and my dad would always scold me for trying to order a drink because he would say, hey, that's like the highest margin product at a restaurant. So just have some lemon water, son, and, you know, save us some money and be smart about it. And that was one of my first memories as a kid about money. After that, I came to the United States for high school and college. I went to the college of William and Mary in Williamsburg, Virginia. So it was the south, not the deep south. And there I was a minority there. There's only like 5% Asian folks there. Whereas when I was living in Asia, we were a majority. And after studying economics and Mandarin, I decided to join Wall Street

and joined Goldman Sachs in New York City in 1999. Wow. So going from like middle school is when you kind of started thinking about this. you know, to get a job at Goldman Sachs out of college requires a pretty big commitment through high school and college, right? You got to be getting pretty good grades and that's got to be something that you're kind of gunning for throughout both of those things. Was that a goal of yours going into high school as a result of your kind of experiences growing up in middle school and earlier? So in middle school, my goal was to be a businessman because I would go to these random events

and parties that my parents would take me to and we'd go to these really nice house parties with like a pool and some views of the hills and the city lights. And I always asked my dad, what do these guys do for a living? And he said, well, they're businessmen. One produced a beverage drink and another produced instant noodles and another was a chicken farmer. So the chicken farmer, we checked out his factory before. It was not really a sexy place, but he drove a Jaguar.

And I was like, wow, dad, this is so cool. Meanwhile, my parents are so frugal that they owned a paintless, 1976, Neese, on Dotson. I remember this to this day because I stole the car one midnight evening with my buddies and we took it out for a spin. It was like 1 a.m. and the hubcap fell off and the hubcap fell off because it was monsoon season in Kualaumpur Malaysia. And when we return, you know, we stopped. We tried to look for the hubcap. It disappeared. It went to a monsoon drain. And when we returned, you snuck the car back at around 2 a.m. I was just waiting for a whipping because there's no hubcap. And then a week went buy and parents didn't say anything because they too did not realize a hubcap was missing on our car.

There's a real benefit to owning cheap, inexpensive things. Yeah, that's my philosophy. If you own nice things, you got to straddle with other nice things. So if you just don't know anything nice, you're perfect. Yeah. But to answer your question, I want to be a businessman. And my parents were like, okay, you got to study hard in high school. Otherwise, you're going to start. screw your life up. And I remember a ninth grader telling me on the bus one day, hey, look, you have until the eighth grade to mess around. Once you start ninth grade, your grades start accumulating. So enjoy the last year of eighth grade, but, you know, hit crack in the books

in ninth grade. And when I came to the States, and for high school, I mean, I did okay. I was fine. It wasn't a spectacular GPA or SAT. And I went to the college of William May, which was a fine state school. Tuition was $2,800 a year back then. But I knew, you know, in college, like, wow, stock market looks really cool, international equities, because we lived abroad for 13 years in my life, looked really cool. And I felt like I basically won the lottery because I went to this career fair and one of the recruiters picked out my resume. And then it was seven rounds and 55 interviews later that I was able to get the job. Wait, it took you 55 interviews to get the job at Goldman Sachs? It was 55 interviews. It was crazy. So I was invited to the Super Day, which was about eight interviews all day, you know, six, seven hours. And I thought, oh, I think I did pretty well. And they invited me back. And then I met the entire team on the derivatives desk. And then the U.S. Sales Trading Desk. And then they said, come back and you need to meet more people and read this 1,000-page book called Stock Options as a viable investment by Nate McMillan. I remember it was a thousand-page book. And they asked me one question out of that book.

And they said, you know, probably not the right guy, but hey, we like you. So let's just try to find a spot for you. So I kept on interviewing around. And then finally, I met with the international equities folks, the Asian equities desk and the emerging markets desk. And they finally said, okay, welcome aboard. So it was really cool. 55 interviews.

I'm sorry. I just can't get over that. Scott, I'm sorry. I interrupt you. Go ahead. So your career starts at Goldman Sachs, which is a kind of stereotypical way to start a career that's going to be successful financially on the income front. Can you describe kind of like what that was like and how that kind of, what kind of your view with accumulating personal wealth and early

retirement and how that kind of shaped out over your career there? Sure. So I was interviewing in 1998 when Goldman was private. And I finally got the job in 1999 when they had just went public. So all the partners there were suddenly worth tens of millions of dollars, maybe hundreds of millions of dollars. I'm not sure. And I just remember, you know, meeting. with my classmates. We call them classmates. And there were some really wealthy kids. I think one kid was the son of the Canadian Prime Minister at the time. Another kid was the son of one really senior Chinese government official. So in other words, I realized there was a lot of nepotism and wealth already established by the people these companies, at least back then recruited. But I wasn't one of

them. My parents worked in the government in middle class. We lived in a townhouse and we had a 1976 Dotson, right? So I knew that I was really behind. And so I was like, okay, I got to get my crap together because I feel like I won the lottery. And so I lived in a studio with another friend from high school for two years. And we just really buckled down, whereas my classmates were, you know, their parents were buying them condos or they're living in really nice places. and after the first month of working, I realized I couldn't last because we were getting in around 5.30 a.m. and then we were leaving around 7.30, 8 p.m. sometimes 10 p.m. every single day, right? So that really puts a grind on your body. And for me, I just couldn't take it. And I knew right then

and there, I was really miserable. And I knew that I couldn't last 20, 30 years in a typical, you know, career path like my parents did. So I figured I might as well save as much as possible now in order to give me options in the future. And that was when I realized it was important to forecast your misery. And that's, it's like the best way to forecast your happiness. If you can forecast ahead how miserable you will be in five, 10, 15 years, whether it's with your relationship or with your job or with your business, then you can take steps, really concrete steps to free yourself of that misery. What a great saying. That is a great way to put it. Because it's really easy to forecast your happiness. Oh, I'm going to be happy for five years. Great. That's awesome. How long

my goods to be miserable for? I've never heard a phrase that way. That's brilliant. I'm glad you like it. I mean, think about all the people, you know, 10 years from now, they wake up and they wonder, hey, where's all my money? Where did it all go? And I think it's because they didn't forecast their misery and realize, hey, 10 years later, you might love your job for the first three years. But man, if you do the same thing 10 years in a row or maybe 15, 20 years, you're probably not going to like it as much. But if you didn't forecast that, then you're probably not going to save as much or build as much passive income. So quick question here. You know, the hours of investment banking at Goldman Sachs are legendary, in an 80, 100 hour work weeks.

And what you're referencing there is along those lines, 530 to 1030. And you're saying literally every day of the week, including Saturdays and Sundays. Not every day. So Saturdays, maybe we would only work like six to seven hours. But I was in equities, which is different from M&A corporate finance. So I was dealing with the markets, but I was dealing with the Asian markets. So their markets would open up during our night times. And Sunday afternoon, evening would be Monday morning in Asia. So you'd have to always be on. It can literally be a 24-7 job, but it was much more fun than corporate finance and M&A and working on pitch books and stuff. Gotcha. And how long into it did you kind of come to that realization? Was that a month in or

five months in or a year? Oh, I mean, the first month, it was brutal. to get in by 530. You know, we stayed until 7.30 because, well, one, we wanted to stay after our bosses left because it would be, like, bad if we left before them since we were Kossens and didn't know anything. But two, the cafeteria at 85 Broad Street, I remember clearly opened up. I think it was 730 and it was free food. So then we'd go and eat free food and we gorge ourselves like we were hibernating. And then we'd take, you know, some fruit and some, you know, a little small box.

a cereal and put in our bag and then have some free breakfast in the morning. Nice. Okay. So how long did you work at Goldman Sachs? I did it for two years and then I got a new job in San Francisco at a competitor. And it was interesting because this was 2001. The NASDAQ started rolling over in March 2000 and I was worried and a lot of people were worried about their job security, especially as second year financial analysts. So a recruiter called my desk and they were talking to the VP and one of the VPs, and she said, oh, I'm not interested, but you should talk to my colleague who covers the West Coast, because I was covering the West Coast clients who were investing in Asia. And she said, yeah, I talked to my colleague, and I talked to the recruiter.

And then so I took, you know, a couple of sick days, and I flew out to San Francisco, met with a different firm. And they recruited me, which was great, because Goldman ended up not renewing many, I would say, most of our 30-year analyst options. And then, they ended up letting go, or just not renewing, I would say 80% of my class over the next couple of years. Like, nobody could survive. So some of the very special few would go from analysts to associate, whereas most people just got cut and they had to go to business school or do something else.

What was your financial position kind of graduating college? And then how did that change in terms of your personal situation, net worth and all that kind of stuff coming out of the Goldman Sachs two years? So my financial situation was, I remember I had $3,000 after I graduated college. One, because I decided to go to William and Mary really purposefully because it was only $2,800 in tuition a year. My sister had gone to Smith College, which was $25,000 a year. And I knew what my parents were making, kind of.

So I graduated with no debt. I had $3,000 from savings and from summer jobs, working minimum wage jobs. And I saw so much wealth around me. and I figured, wow, I'm so far behind. I decided to save, save, save. But I had a lucky break. So if you're around in 2000, you may have invested in some random internet stocks. And I was on the trading floor.

And so I had a lucky break. I invested $3,000 in a company called VCSY, which was a penny stock. And all it was, it had a dial pad on the homepage. This is 2000s. It was pretty cool. And it was like you press different numbers to try to get to different pages. and it was supposed to be a Chinese internet stock. So this is the beginning of the Chinese internet boom.

And I was on the trading floor at Goldman Sachs. So I said, hey, so I bought the stock. I talked to my other buddies at different trading desks. And they bought the stock. And then suddenly it spread like wildfire. And the stock went from like $3 a share to $160 a share. Oh, wow. Yeah.

So it was crazy. It was something like that. In what time frame? It wasn't within six months. Okay. Anyway, what I remember is that it was a $3,000 investment that went to $160,000 in six months. And all I kept on thinking was, man, I wish I had $5,000 or something. I was like, why do I only invest $3,000?

So obviously, greed was speaking. And then it went to $160,000. I was feeling amazing. And then started fading rapidly because everything was selling off. And then I sold it for like $150,000 or something like that. So it was really good. And then everything collapsed, right? dot com, bust, everything. But I didn't reinvest the money because I was transferring jobs to San

Francisco. So I wanted to keep cash. So that was kind of a lucky break. And then I realized, well, you know what? That was scary. And that felt unreal. So let me try to convert this funny money into real assets. And so that's when I really started looking into real estate and trying to get something that wouldn't go poof overnight. So that's when I bought my first place in 2003 in San Francisco. So you have $150,000 that you generate in a really high speculative investment, and that kind of allows you to build your, you know, make that first investment in San Francisco. What were you accumulating? What was kind of your accumulation rate while working at those first two years? So I don't remember exactly, but I know we didn't get paid well, believe it or not. My first year base salary was $40,000. And I remember when I got the offer letter, I was like, wait, that's it? 40,000? Which is not a lot. a lot in Manhattan. So that's why partially we lived in a studio and it was $1,800 or something like that,

$17, $1, $1 for the two of us. But what I would do was, I would, again, I would max on my 401k, I would live like a pauper. I would save and invest 100% of every single bonus, literally 100%. So the first year we didn't make a lot. It's 40,000 base. Maybe there was like a 10, 20,000 stub bonus. and then the next year, our base was only like $55,000. And, you know, maybe we had like a 30 to 40,000 bonus. It wasn't massive. But obviously, when you're that young, it's pretty good. So awesome.

So, I mean, that's just pure hustle for the first two years there, plus $150,000. And a nice, in a nice win there. But like the majority of the fundamentals of what you were doing were going to work. It was just a lot of a big slog. And then you also have your lucky break through an advantage that you kind of spot with your job. synergistically, right? Yeah, there was synergies, but you have to take all I had with $3,000 to my name. I mean, obviously starting to make money, but $40,000 after taxes in Manhattan is not

that much, even back then. And so you have to take risk. Three thousand wasn't a lot, absolute terms, but as a percentage of my total net worth, which was $4,000 then, I mean, it wasn't a lot. I was going all in with what I had. And then you just kind of recognize, you got to recognize luck. You got to recognize when to get out. And you got to recognize. how to make your money last for as long as possible. Yeah, I think it's great. So you go into San Francisco, you buy a place or your situation. I think it sounds like changes.

What's your financial, what's your income and investing approach look like after you move? I think I got a raise to like $85,000 base. And I got a promotion to associate, which is cool because I could skip the business school route or go skip the full-time business school route. But I continuously being frugal because I went on Craigslist and I found a two-bedroom, one-bath, really dumpy place at the edge of Chinatown in San Francisco, which was a pretty rough neighborhood. So I remember it was just really loud, really noisy, and it wasn't that expensive. It was actually cheaper. It was $1,600 for the two of us. So I got a

raise, and then I lowered my rent by a couple hundred dollars a month total. And then my girlfriend moved in, and then she contributed a little bit as well. So I lowered it. I lowered it. I lowered it even further. But I was pretty focused on not renting for my entire life because, you know, I was at 1,600 for the two-bedroom, so I was paying $800. And we finally moved to a one-bedroom was like $1,600. We were there for like a year. And then we just hated our neighbors. He was just like this drunk guy. He always played house music until 2 a.m. It was like that methodical, non-stop bass sound when I had to go to work at 530. And so I was like, ah, you know what, let's go buy a place. And I've got some games.

and some savings from that stock and from the bonuses, let's go buy a place. So like a day after my 26th birthday in 2003, I bought out two-bedroom, two-bathom condo for about $580,000. And that was good. I thought it was cheap back then, actually. Would you do with that? Did you, like, would you move in just you and your girlfriend?

Did you have a tenant or a roommate that was renting out the other room? How'd that work? It was just my girlfriend and I. And it was not that expensive. It was $2,300 gross plus property. tax. But then after the deductions and everything, it was maybe like $2,000, which was kind of on par with, almost on par with what we'd want to rent for. Like $2,000 a month was our cutoff, where if we had to, we wanted a nicer place, but we didn't want to spend more than $2,000

rent. And if we had to do that, then we were going to go buy a place. So that was, I remember that was the line and the sand. And San Francisco is so much cheaper back then than Manhattan. And it's still so much cheaper than Manhattan right now, no matter what the media says, because the media says, oh, San Francisco is more expensive than New York City. But I'm comparing more apples to apples, San Francisco, seven miles by seven miles, and Manhattan. Manhattan's ridiculous. It's like, it's still 30 to 50% more expensive. Okay. So do you still own this property now? I do. I do. I paid off the mortgage, I think, in 2015. And it's good. I've got some tenants there. They're paying about $4,300 a month in rent.

They haven't bothered me in four months, which is great. They continue to not pop. Yeah, it's there. Now I look at it as a piece of diversification and kind of an insurance for when my son, if he grows up and decides a lot of live in San Francisco, I can't imagine what rental prices will be in 24 years. But it's kind of an insurance that, hey, here's a place and pay for you. for the cost of maintaining the place and give me some rent as well.

Yeah, you said it's renting for $4,500 a month right now. 43. Oh, 43. Okay. And it's already paid off. So is there an association fee? Yes, it's like 600. So the net is probably about $3,000, $3,100.

It just goes into your pocket that can contribute to your living expenses. Yeah. So we kind of earmark that maybe to make it fun or, more purposeable. We earmarked the income from the rental property of that condo to actually, yeah, paying off paying off our property today, our mortgage today. We have a mortgage on our primary residence right now, but that's because we locked in 2.5%. So that turns out to be a really good investment. $580,000. Now, in 2003, I was looking at $580,000 and thinking, wow, that's a lot of money, but I also wasn't living in San Francisco.

So you said that New York is more expensive than San Francisco. Is that why you didn't buy in New York? I mean, you were making $40,000 a year. Was there anything even affordable? I'm not that familiar with New York. I know there's five boroughs and I don't understand what a borough is. Well, I mean, again, I was 22 to 24 years old in New York. I didn't have a big base income.

I didn't have a lot of credit history. And my parents weren't rich. So, yeah, I had the $150,000 gross win. fall before taxes. And I definitely would have tried to buy in New York. I was looking at this awesome place, two bedroom, two about 1300 square feet, double balcony facing the Chrysler building. It's like on 22nd in Madison. Amazing. $700, yeah, $7.99, I remember. And I thought, man, that's a good deal. And if I had bought that, it would be $2.5 million today, for sure, for sure. But again, I wasn't going to last at Goldman because, you know, I was like the public school guy

that just snuck in the back door and, you know, the market was falling, falling apart. So I had to leave. I won the San Francisco. And then it took like an year and a half to figure out where I wanted to live. And then I bought the place in 2003. Okay. So what is that property worth now, the condo in San Francisco? So here's the thing. So my neighbor last year sold, which is the same layout sold for, it's a little bit, it's remodeled a little bit better than mine for sure. I sold for $1.36 million. So maybe mine, let's say it's worth 1.3 million. So if you take $3,100 net that I make from it times 12, that's 37,200. And then if you divide it by $1.3 million, that's only 2.8%. So if you think about it that way, it's actually not great rental income. 2.8% net return and you've got to maintain the property and deal with

tenants is less than what you can get on the risk-free rate of return for the 10-year bond yield right now at 3.15%. So you can invest money in a 10-year bond yield, do nothing, relax, and earn 3.1% and it's state income tax-free, and you just have to pay federal income tax. But you get appreciation on it. And if you ever wanted to, you could theoretically move back into the property for two years and sell for a huge chunk of that tax-free, right? Yes, you might get appreciation. Historically, San Francisco has increased by 6 to 7% a year for sure. Yes, you could move back in and get a pro-rated exclusion, but I'm never going to move back into that place for two years. But I'm just saying overall compared to the Heartland of America where I'm definitely moving a lot of my money to,

you know, Heartland real estate, you can get 10% and you can do it maintenance free now because you can invest in real estate crowdfunding. So I think there's like an obvious arbitrage going on where you take your expensive coastal city money and you plow some of that into heartland real estate, get the higher net rental yields and live passively, and then go rent. Rent in places like San Francisco, New York, Honolulu. Because even though rent on an absolute level is high, it's great value compared to the cost of buying the place. So what happens after you buy this place? Like what's kind of the next period? It seems like this is where you start having a nice financial cushion. You got a real estate investment and you're starting to go a little better. Can you, what?

What happens next for you? So 2003 was a great time. I bought this place. I was going to see business school part-time at Berkeley. Finally, that was like 20 hours a week on top of 60, 70 hours of, you know, work a week. So that was brutal. But I finally graduated in 2006 or something. And things were going well, got promoted.

And I ended up buying another property two years later in 2005 because I felt, you know, this property is just not good enough for me. I don't know, something like that. And I was doing well in my career. So I ended up buying a single family house in the north end of San Francisco for 1.5 million. And I remember putting $300,000 down, which was all my money at the time. Again, this is another theme, trying to go all in. Remember, it was $3,000 for that stock. Now it's $300,000 all in for the down payment of this house because I felt I needed a house. Even though I didn't have a family, I needed a house. And so I bought, the place and I was immediately sweating bullets afterwards because I had a $1.2 million mortgage. And then, of course, a couple years later, well, I bought it in 2005. And then about 2007, you can really start seeing the cracks in the housing market and then things got crushed in 2008 and 2009. But the story's not over yet. In 2007, I bought another place, a Lake Tahoe vacation property because I got promoted to VP and I was on top of the world. I was making more money

that I ever thought possible. So I was like, you know what? Not only do I need a single family home that I don't need, I need a vacation property in Lake Tahoe for my family that I don't have because I like to snowboard. And so I bought that because I was like, well, this is good value. The original buyers bought it for like $810,000 and they sold it to me for only $718,000. I was like, wow, that was a great deal. And then of course, the financial crisis happened. and that property ended up losing, I would say, 40 to 50% further in value, which was crazy because everybody started foreclosing on their loans. And I was the only idiot who was like, well, I'm not going to do that.

That's like dishonorable. And so I kept that. Thank you for saying that. I understand people who, why they did, because they're so under and they're like, you know, there's no hope ever. But I didn't lose my job. And so I was like, well, me just own up to my obligations.

Okay. I want to clarify my thank you. You had a job. I'm assuming that you could still afford the payment on the house. And it was still worth to you the payment. What bothers me is not the people that lost their job and then had to quit paying because there was no money to pay their mortgage. That sucks.

But the people who could still afford to pay the mortgage, but now the house is so upside down, oh, I'm just going to walk away. That's not how it works. Well, that's how it works. Do you know Carl Richards from the New York Times? I do know Carl Richards. I mean, not personally. He's a New York Times columnist.

He's got a book on teaching people how to be financially independent, all that stuff. But he wrote a big op-head piece saying how he foreclosed on his home strategically during the crisis. And yet after that, he was able to get book deals and the column and everything. So it's interesting. In America, do we really not like people who welch on their debt or do we praise them for being strategic? So I made a mistake for paying, I don't think it's a mistake because that's part of my culture to just obligate, be irresponsible. But it's interesting to see his rise to the top after not paying his debt. I think it's good perspective.

And I think that, you know, regardless of your opinion on bankruptcy protection, the fact that there is bankruptcy protection, you can do that is a good thing for the country overall because the alternative is kind of like perpetual servitude in some ways. you can never pay off the debt. You're just completely hopelessly out of this situation. So I love the law itself and the protections it offers to people to give them a chance to go around. But I agree that there's something a little that's, you go bankrupt or you foreclosed and you lose your asset because of irresponsible ability to handle your financial situation. Maybe that's not the right way to give advice to other people or suggest as a practice. And that was an example. I have so many examples where I knew that I could make it in America.

if he could foreclose on his property and be able to write two bestsellers and be employed on the New York Times and get a huge fault. I knew that that was a great example where anything bad happens to me because not that, I didn't do that, but I could succeed as well. So I always find these funny stories and funny idiosyncrasies in society that motivate me to do better. Like, you know, the Yahoo president who crushed his company and lied on his resume by got a hundred million dollar exit package or the latest guy from CBS Les MoonVest who got a $150 million exit package for being a serial predator over the past 30 years at his career. And I was like, wow, that's amazing. So I'm trying to tell my readers and my listeners, hey, this guy got a hundred,

$150 million severance package. Why can't you negotiate a severance package? And you're a normal person. You know, believe in yourself. Well, let's talk about this for a second. So over the course of 2003 to you know, this 2007 now, you see the property value. What's your income trajectory looking like? What's your career looking like during that period? So I got promoted a VP, I think that was in 2007. So that's why I bought the, partly why I bought the vacation property. And then I made the huge error of extrapolating my career and my income for the next 10 years. So my forecasting was wrong. So I failed to forecast my misery there. And so, you know, when you're a VP, you probably make I don't know, back then it was like 150,000 base, 200,000 base, something like that, and then you had a bonus.

But then everything went away. There's like, you know, terrible bonuses. The bonuses down 50%, 100%, and everybody was getting fired, right? And so I quickly realized I made a huge financial mistake with the vacation property. The single family home was like, nah, it went up. And then I went down. And maybe it was down maybe 5% to 10% where I bought it. But it was not that big of a deal. But I remember sitting in my living room, room, I was thinking, man, I had spent so many years doing the right thing, saving, investing, taking calculated risks, working 70, 80 hours a week. And I lost 30 to 40% of my net worth in like six months. That took 10 years, right, to build. And so I was like, you know what? I'm going to start financial samurai. I'm going to start this site as a way to get over my fears and my grief of losing so much money so quickly. And I thought about starting financial ceremony in 2006, but I had just graduated from business school. And I was, you know, who has time for that? You know, economy is so good. But once the economy melted down, I thought, you know what, now is best time ever to not

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All eight episodes now streaming, only on Disney Plus. Well, so in 2007, the economy rebounds, and it sounds like Financial Samurai is getting going. What's the buildup to you exiting your career? So the buildup is financial samurai started in 2009. 2009, okay. When basically the bottom of the market, literally the bottom of the market, July 2009. If you look at the chart, I started it. I hired some dude from Craigslist to help me set it up. I think I spent like a thousand bucks then or something. It was kind of painful, but I didn't know what I was doing.

So I got some help. I said, you know what? The hardest is to get going. So I'm going to hire someone who knows what he's doing to help me get going. Once I started, I had so much fun. You know, I was just writing and writing probably three to four times a week, just about everything from investing to getting your finances right to the crazy San Francisco real estate. state market to the downturn to people losing their money. It was just so fun and it was so easy to do and it was so easy to connect with people. So after about a year, it started making some shuckles and then after a couple of years, it started making a decent amount of money, like not a huge amount of money, but it was like several thousand a month. And so I remember in October 2011, my wife and I were in Santorini Greece. And so Financial Samurai had been running for two years. And we were walking around for three hours, you know, hiking up the hill,

riding the donkeys and looking at overpriced shops to buy some overpriced scarves. And I told her, I was going to go have a beer. So I went to this amazing bar at the top of the crater overlooking the water. It was 78 degrees. And there it was Wi-Fi access, right? 2011. So I had my phone. So I whipped out my phone and I checked my emails. And there was this guy who basically said, hey, Sam, I would like to advertise on your site. And I said, okay, I'm in Santorini. What do you want me to do? And he said, hey, can you put up this link to some random product on your homepage and I'll pay you? I think it was like $1,100 or $1,200. And I said, oh, $1,200 sounds good because this beer is like $10. It's killing me. And so he sent over the code. I copied and pasted

the code onto my website. And I said, hey, it's up. And then within 30 minutes, he transferred over $1,200 over PayPal. And I was like, wow, this is awesome. And so I immediately ordered another beer. I was like, let's stop break. And that was my light bulb moment, October 2011, where, hey, this is so fun. There is life after finance. I'm bored out of my mind doing this for 13 years. And everybody who works in finance is a bad person, according to Main Street. So I want to get out and do something else. But I still had one fear, and that was the fear of obviously losing a steady paycheck. So I came up with the idea of engineering my layoff. And engineering my layoff is simply a way to negotiate a severance in a win-win scenario for the employer and the employee

to get out. And so you have money in your pocket for a nice long financial runway so you can do whatever you want. You're prompting the question here. We were waiting in anticipation. How does what engineer laugh and what was yours? Wow. Well, thank you for asking. I wrote 150 page book on that, but the essence is you have to understand that if you are employed, you provide more value to your employer than your cost. Otherwise, you'd be unemployed. So that's 101 basics. So a lot of people, they think the honorable way is to say, hey, hey, boss, I love this place, see you later, smelly later. I'm going to give you my two weeks

notice. And that is exactly the wrong thing you got to do because you're going to drive your boss crazy and scrambling to find your replacement. And so I knew as a producer, I generated revenue for the firm that I had value. And I knew that if I left or if I had gone a competitor, that would be a net negative for them. So I had talked to other people who actually got laid out during the financial crisis and I understood what they got in terms of severance. And basically I had a conversation with my boss when I got the courage to say, hey, you know what, I'd be okay without a job if I had a severance. And I said, hey, look, I'm looking to exit and I'd be willing to transition my accounts to the junior

person I hired a couple years ago. So we can have a seamless, seamless transition in return. I would love to get all my deferred compensation of stock and cash. I would like to get my investment the company made for me during the financial crisis, which had a seven-year vest. unbelievably. And I would like to get a severance. And initially he was like, wait, what are you talking about? But as he thought about it, as I sold him on the idea that, look, I was no longer as hungry as the guy that I once was when I joined 10 years ago. And we've got this great replacement. Who is younger? Who is hungrier? He warmed up to the idea. So the key is really to recognize what your company's needs are, what your boss's needs are, and have an honest conversation about how to negotiate.

a separation agreement, that's a win-win for all. Instead of just quitting and leaving your boss in the lurch, nowadays, there's, you know, back then, I guess social media wasn't as huge, but nowadays, you can torch reputations over social media. So every single company out there is afraid that some ex-employee is going to badmouth them about some product, some inside information or something. And so I think companies are well aware now that they need to treat their employees right if they want to continue the business operation lines. So this is a different, most people I think are not leaving their jobs unless they have something else lined up or other options.

And it's used the term financial runway, which I think is a great term for that. And you're saying you had us all built up in advance prior to coming into this. You were ready to go. and that's from a position of power, you were ready to kind of have this negotiation rights. This is not for someone that's like, like most people go in and they're like, I need a job, but I'm going to switch jobs,

and this job's going to pay me five grand more a year. So I'm going to give my two weeks notice and go take that one. You're saying this is a different approach here, right? Well, so this is a different but similar approach. You know, every single job is just kind of a step into something else, whether it's early retirement, traveling around the world, spending more time to your kids, being a stay-in-ho parent, or finding another job,

or going to business school. The bottom line is, never quit, get laid. Never quit, get laid off, right? Another great tagline, never quit get laid. Anyway, so the idea, again, is if you want another job, don't be a fool and quit on Friday and start a job on Monday. If you have another job lined up, you also want to negotiate with the other employer. Hey, let's start in a month or two months so I can have a wonderful vacation.

And that gives you the buffer to negotiate with your existing employer. hey, let's work on a transition here where I do X, Y, and Z, and you give me a severance, and, you know, X, Y, and Z, like, you know, deferred stock options or whatever it is, there's always an ability to negotiate. And what I'm trying to teach people and tell people is you have more power than you realize as an employee. I think people feel, oh, it's David versus Goliath. The big corporations have lawyers and HR people and they're afraid of their bosses. What I'm trying to do is tell all you guys, look,

when you get out of the office, you guys are all equals, right? This is not like high school and you're afraid of the bully or the public kid or whatever. This is, you guys are all equals. You actually have more power than you realize in today's social media, internet world and, you know, where doing the right thing is really, really important. So it's about having a conversation and being a wise negotiator because the easiest way is to quit. That's the easy way, right? You break up with someone, you text them, hey, I don't like you.

But the hard way is to sit them face to face, you know, buy them. them a beer and then say, I don't like you, and then leave them bill, right? So that's, yeah. Okay. So I want to take this idea and kind of use it with in the context of people who are in financial independence. Like, let's say I was going to quit my job. I don't want to quit my job, but let's say that I was going to. What are some things that I can do and negotiate on with my company because there aren't layoffs happening right now. Right now, BiggerPockets is hiring. You can find our jobs available at biggerpockets.com slash jobs.

But, you know, so we're not in the layoffs. And when I think it would almost, I don't, this sounds so mean. I don't mean it to be mean. Like I think it would almost be easier when there are layoffs. Hey, I'll go too. Yeah. What's something that you can do when you can't, when layoffs aren't happening? You know, I love the idea that transitioning it to the younger guy or, you know,

being around the new person, yeah, being around to smooth it over, whatever. What are some other things you can offer your employer when you're trying to engineer your own laid off? Let's hear an outstanding employee or let's say, yeah, your company is not letting anybody go at the moment because it's booming. Well, number one, no manager wants an employee who doesn't want to be there. You have to telegraph, hey, look, you have to say your value proposition, but in reverse.

You know, everybody is trying to sell themselves on why they should get hired. You need to sell yourself on why you should get laid off. Just think about it in reverse. And if you don't want to be there, this is what happens. You start taking sick days or you might take all your vacations. Oh my gosh, God forbid in America, you take all your vacations, but it's a faux pa in America. You might take your family medical leave act, which is by law what is required. Every employer allows that.

or you might want to talk about taking a sabbatical. So you put these seeds in your employer's mind that, hey, you know what? Actually, they really don't want to be here and there are hungry people who want your job. Let's figure out a solution. My wife, I helped her engineer layoff at 34 in 2015 as well. And they were really scared that she was just going to leave. And because she basically stayed on, one of the strategies was, look, I want to leave. I've been here for nine years. I want to do something else. Okay, instead of five days a week,

I'll work two or three days a week. In exchange, the business doesn't fall down, you know, everything runs smoothly. We're going to give you time to hire people from New Jersey to come to San Francisco. In exchange, you're going to give me full pay. So if you only work two days, or let's say you work three days out of five days, you suddenly work 40% less, but you're getting paid the same. It's kind of like getting a 30% raise. So, I'm using this as an example to show, hey, times are okay. If you're a great employee, you still have options because once they realize you don't 100% want to be there, they're not going to want to keep you there. At the same time, they don't want to insult you and make you

angry. So it's a really delicate balance. And also, no manager wants to lay anybody off. It's the worst conversation you can ever have to tell someone they're no longer needed. So you can help them help you breach that topic, a lot of good things happen. Because it's not money out of their pocket. It's a corporation's pocket. And they want some harmony there. I think it's great. And I think that maybe one of the things that is more difficult here is it sounds like in your position, you were a power player at your company. You're producing revenue. You leaving was a hit to like very tangible value that your firm could kind of attribute to your career and what you'd kind of produce there. What if you're more of like a frontline customer support or, you know,

early in marketing? Like, how does that negotiation different? Or what is that kind of topic? It's not really different because the fundamental reason why anybody has a job is because they produce more value than they cost. It doesn't matter what they do. Yeah, some might make more because they produce more revenue or more valuable. Some might make less. But it will always be that case that there is a margin where the employer gains more of a benefit than you cost. And that is why every single employee can ask for a raise, but most people don't because they're afraid. And so it's about believing in what you're worth. And so, for example, if you're employed by bigger pockets and you're doing this podcast, maybe you guys can do some numbers on the growth of the podcast numbers,

see what kind of revenue it generates, the traffic figures, how much time you, you know, you spend. And And you say, hey, guys, look at this trajectory. But hey, my salary has been flat for the past 12 months. It's time to follow that line upward. Sam, I'm going to call you when we're done here. Scott, can I schedule a meeting with you tomorrow? Nice. So, you know, whatever the case, again, know you're worth,

because if you have a job, you're worth more than what your salary is. That's really true. That's really awesome. And so I'm going to ask you in a minute, where you can discover your worth. Is there any place like online that you can go? But I want to address this to specifically the ladies. I don't know about men because I'm not a man.

But there is this common theme among a lot of women who they don't push for themselves. They don't advocate for themselves. They don't want to, you know, put it out there. There's guys who do that too, but I'm not talking about them. I'm talking about the ladies right now. And this is really important. and you are worth more or you're worth something. So if you're working for free, stop.

And look at your salary. I worked at a job for four years. I never had one raise because we were having financial problems. Well, but I was still bringing value. And, you know, I could have used this podcast 12 years ago when I was working there. Okay. So let's talk about where you can look up what your worth is. I know there's like glass door.

Is there any place else that you could look? And there's big discrepancies in, you know, different jobs in different areas and whatever. But, you know, to give a general idea, if you're making $30,000 a year, but the going salary in your area is $80,000 a year, you should have a conversation. Oh, yeah. I mean, obviously, I think a rough rule of thumb is if you go on the open market to do your same job elsewhere, you can get a 25% to 30% raise immediately. I would think that's a standard. Whatever you do, you know, more or less, it's about there. and for my case, you know, I was helping my, I was coaching my wife, engineer her layoff.

She was always the one who's, ah, you know, I'm happy. I don't want to look at elsewhere. And I just said, look, you are worth more than you think. Let's go. So talk to your competitors. Just have over-conversation. They want to know just as much as you do. Have open dialogues. Can you give me some guidance on how much you get paid when you're talking to some competitor? Yes, you can look online. But all those online figures, all seem funny enough really light. They're always lighter than reality. So talk to people, talk to people and find out what your competitors are getting paid. And if you are not getting paid that, then you're getting underpaid. It's the market. It's efficient market. But people are

inefficient because of fear and because of laziness. They just don't want to rock any boats. And you're going to regret in five, 10, 20 years that you didn't fight for yourself as hard as you should, that you weren't as direct as you should, because nobody cares more about you than you. Perfect. Well, so let's go through years. So I'm thinking of this right. In 2012, you negotiated this for yourself. What happened after that?

So 2012, in the spring, I negotiated a severance. I got, I think it was three months of Warn Act pay, which is called Worker Adjustment Retraining notification pay. It's a law. A lot of people confuse the mandatory Warn Act pay of one to three months as a severance, which it's not. It's the law. And then I got a severance, you know, severance check. And then I got over the next five years my deferred cash and stock compensation every single year for the next five years. So my last severance associated payment was in the spring of 2017. So I knew that if all outs failed, If I miscalculated my passive income figures, if the market's rolled over again, if financial samurai never went anywhere, I could live off my severance for the next five to six years. And from there, you know, I was like, well, my wife still didn't want to leave. So I told her, look, she's three years younger than me.

So I said, if I'm still alive and we're still okay after two years, you know, you'll be, what, 33, we'll consider negotiating severance for you as well. And for the first year, she's like, no, I love my job. And the second year, I was like, I hate this. And 30 years, she got passed over and she was really pissed off. And then we said, all right, let's go. Let's negotiate. She's 34, you're 34, 34, 34 and a half years old.

Let's, you know, we believe in equality. So I left at 34.5. And I was like, let's do it. Let's do 34.5 as well. And so during that time, we basically traveled around eight weeks a year. We've checked off all our bucket lists, did all. that and I negotiated servants in 2015. And then basically we try to start having a family and just building financial samurai and living free. And our son finally came in 2017. Well, congrats on all

of those things. Thank you. Thank you. Particularly the most recent one with your son. That's awesome. So in transitioning here, you kind of followed the standard financial advice of live extraordinarily frugally on like $40,000, $50,000 a year and only spend 4% of your income each year. is that correct? I'm kidding, obviously. Yeah, no, no, that's not really correct. No, it's not 4% of your income. Or 4% of your net worth. I'm sorry, yes. Yeah, no. So basically when I left, I had $80,000 a year in passive income.

And that was from real estate, dividend stocks, CDs, savings, and just some random private investments. So I knew $80,000 a year in passive income would allow me not to starve in San Francisco. Further, my housing by that time was, not that expensive. And then my wife worked, right? So I was like, well, I'm going to get on her health care. I'll go first. She's three years younger. I'll go on her health care. So I knew that 80,000 plus health care, plus my wife, we're fine. And then of course, there's the severance. So I either looked at the severance. So what I did actually was I reinvested the entire severance check into the stock market in 2012. Again. Nice timing. Yeah, I mean, because I saw, I thank you.

I thought it was just free money. It was like, wow, this is like winning the lottery. Let me just invest the money. It was a six-figure lump sum into the stock market. And I said, okay, I'll live frugally, passive income. I tried. Oh, this is the thing. I tried so hard, not so hard. I put my house that I bought for $1.5 to $2 million on the market in 2012 for $1.7 to $75 million. And I said, you know what? I'm unemployed now or retired. I need to live more frugally. So let's sell this house while the market recovered, right? Because it was probably worth only like 1.4, 1.45 during the depths of the crisis. But I think I thought maybe I could sell for 1.7, you know, maybe a $200,000 gross gain.

And I thought, okay, we're going to sell this house. It was like a 2,100 square foot house, 3 bedroom, 2 and a half bath plus one bedroom, one bath bonus room. Too big for us. There's only two of us. And we're going to go rent a two-bedroom one bath place, like the place that we rented back in 2003 at the edge of Chinatown for like, you know, 24. 100 a month and live really, really frugally. $2,400 a month might not sound like that little,

but it's little for San Francisco, for two people as well. And so I put the house on the market. Facebook had just gone public. I was like, you know what, there's going to be all these multi-millionaires. They're going to snatch this house in a jiffy. And so my tennis buddy was my listing agent. So we showed it multiple times, like, you know, 15 times private party. It was off market, but still kind of on market, but off market. And nobody put in an offer. and my agent friend said, oh, I got some whispers for way under asking, you know, like maybe 1-5-1-6. I was like, screw that, forget that.

I'm just going to hold on to the house. And thank goodness I did because 2012 was literally the beginning of the real estate market taking off in San Francisco. So we lived in that house until 2014. And I still had a really frugal mindset, mind you. So I had like a CD that came due. It was a large CD. like $400,000 CD. It was a seven-year CD earning 4%. And I said, you know what? What should I do with

the CD? And so I was looking at properties on the west side of San Francisco, which is actually much cheaper. It's like 40% cheaper. And I found this fixer upper for $1.25 million. But it had panoramic ocean views on both levels. And I was saying, wow, I've never seen the ocean before and I'm in San Francisco. It didn't make sense. And so we basically took that property down and rented out the old house that I tried to sell in 2012. And that was the house that gave me a lot of headache because it became like a party house. It was four to five dudes all the time. You know, you think about tech bros in San Francisco. Well, I swear to God, like 90 plus percent of the prospective tenants were all guys. And they're all these, there's all dudes. So given I'm an equal opportunity person, I rented out to all dudes. And, you know,

they threw parties and they ran on the roof across a neighbor and I got complaints and they tore up things. It was just ridiculous. But I was getting $8,800 a month in rent. A three bedroom house. So it was four bedroom three and a half bath, really. Okay. Which is a lot, right? Because I would never, see, this is what people think about. I would never pay $8,800 a month in rent for my house. And when I realized that, I was like, I've got rented out because I'm not willing to pay that much for my house. Although I'm just, this is like economic waste, right? So I rented that out for several years until my son was born in 2017, I was like, there's no way I can be a good dad and still have to deal

with these crazy tenants who are not paying on time, wrecking the house and everything. And so I was like, you know what? My original plan was to own this property forever. You know, it would be kind of like our insurance policy for all of us just in case, because I believe in 20, 30 years, San Francisco's property would be more expensive. But I just couldn't, it was like a war of attrition. I could not survive being a landlord. And I could not survive paying 23,000 a year in property tax alone for this house. And so I said, okay, let's try again. Let's try again. And I did a pocket listing again. And I said, if I can get 2.5, right? So remember, I tried to sell for 1.7. And I didn't get anything. It was after 30 days. So I took it off because I was embarrassed. And I was mad. And then I

said, if I can get 2.5, I will sell this house. And I'll forget my dreams of owning a nice single family home in the north side of San Francisco. She said, okay, I think we might be able to get it. Let's let me ask around. And so in one week, we got an interested party who often. And that's all the time we have for today's episode, everybody. So, sorry. And then, so I was like, okay, two five. Come on, baby. Two five. Doesn't that sound good? To me, it sounded ridiculous. Two, five. Nobody wanted to buy five years ago for one seven. And then she goes, Sam, I've got an offer.

Okay, what is it? You're going to be happy with this. I said, okay, tell me. Two six. I was like, what? Two six. And here it is in writing. I was like, wow, that's amazing.

And then I talked to my wife and I was like, man, I really feel bad selling this property. I mean, you know, I want it for my family and all that. And so we rejected them. and he said, how about 2.8? Why not? Because we actually didn't want to sell the house. But we're also stressed out of our minds as new parents. And so long story short, they came back and four, and then we went back forward and they finally agreed to 275. Wow. And they were terrible on hitting their contingency deadlines. They failed the financing contingency, the inspection contingency. Everything went late. But 45 or 50 days later, we closed.

and that was the end of my single family home that I bought in 2005. That's fantastic. You made 1.25 off of that. Gross. Yes, yes. Okay. Well, so that's an interesting number. I wrote down 1.25 for the fixer with the panoramic views of the ocean.

Did I write that number down right? Yeah. That's what I bought in 2014. So in 2014, I bought a house for $250,000 or about 20% less than I purchased a house for in 2005 when I was 28 years old. And what was this fixer-upper? So the fixer upper was $1.25 million in 2014. And how many beds and baths and all that?

Three-bedroom two-bath. Just a really standard 1,900-square-foot house. Nothing fancy. So, you know, everything is relative, right? So in 2014, I spend less than I spent in 2005, yet my net worth is much higher. And I just because I realize the key again is don't let obviously your lifestyle and your expenses inflate with your net worth. There has to be some kind of break. I love it.

What is your kind of situation right now and what are kind of your plans for the future going forward from all this? Yeah. So I walked away with $1.8 million from the $2.75 million after fees and all that stuff because I was paying down the mortgage all those years as well. So I reinvested $1.8 in 30%. basically it was like 30, 30, 30, 30% bonds, 30% stocks, and then the rest in real estate crowdfunding. So that was my shift. So I did $550,000 of $1.8 into real estate crowdfunding to take advantage of higher rental yields and lower valuation markets.

And so far it's been good. So far it's been good, although you're seeing cracks in the real estate market. But whatever happens, I feel fine because the happening. that I sold for 2.75, I had an $815,000 mortgage. So by selling it, I at least de-leverage by $815,000. And then diversified the proceeds from one single expensive home in San Francisco to bonds, stocks, and real estate crowdfunding at a lower valuation. So I feel fine. I think things are going to be okay. I've always feel a little bit nervous that there's going to be another downturn again because, you know, again, I lost 30 to 40% of my net worth in six

months in the last downturn. And I don't want that to happen again. That's like rural number one after you become unemployed is never lose money again. I think that's worth it up. It's rule number one, never lose money. Rule number two, see rule number one. Exactly. Exactly. And there's more at stake here.

I have a, my wife doesn't work, I have a child to take care of, I have no job, and the net worth figure is much larger. Yeah. But you're in bonds. I'm surprised to see you say you're 30% in bonds from that reinvesting. No, from the reinvest. Right. Reinvesting for $1.8 million in bonds because you are fairly young and you've got a lot of growth potential. Although after the week, the stock markets had, maybe that looks a lot smarter.

Well, I can't time the mark or anything, but I can properly asset allocate based on my risk tolerance. And even though I'm 41 years old, I am investing like maybe a traditional 60-year-old, again, because I'm not willing to go back to work to make a full-time income. because I don't want to miss out the first five years of my son's life before he goes to kindergarten. So after he goes to kindergarten, I've told my wife, and we can go get full-time jobs if we want or need to when he's in school most of the day. But before then, we're like, ah, let's see if we can go all in and be parents. You know, I'll write on financial seminar, keep that thing alive, and we'll see what happens. And because I don't, I feel that I have a saying, and I'll teach my son this, never fail due to a lack of effort.

because effort requires no skill. I never had much skill or talent in much of anything, but I really wanted to try really, really hard because my biggest regrets all the time were if I looked back and I didn't give everything I had. And so as a parent, I don't know exactly how to be a parent because there's no manual. There's all these books I've read, but I don't really know.

So I want to look back and just in case my son turns into a problem child or something, I can say, hey, we did our best in this time period. And there's nothing more we can do. Maybe we could have neglected them a little bit more and maybe it would turn out better. But I think we didn't want to regret not doing our best in that case. Okay. Before we transition to the famous four questions, I would like to know one last thing. What is your passive income now?

Passive income now is about $215,000 to $225,000, something like that. A year. Oh, so that's not bad. No, it's great. I mean, it's good from 80,000 in 2012. And the passive income is obviously generated from active income from financial samurai. I've continued to basically plow the large majority of revenue from financial samurai into passive investments. But also, we've had a huge bull market since 2012. It's not, you know, it's not skill. It's just, hey, the markets are up huge. And again, remember in San Francisco real estate market, it was up like 80% since 2012.

And I sold in 2017. And then I converted that $1.8 million into more passive income. So I'm really trying to continuously build passive income. If you check out my site, I have a post that says $300,000 in San Francisco as a middle class lifestyle. And people might scoff at that. But if you read the Department of Housing and Urban Development, they say $100,000 per kid is low income. And all the reports, after I published that post, all the reports say, hey, look, you need $300,000 a year to afford a home in San Francisco.

And I go through the detailed budget of where that $300,000 goes. And it goes pretty quick, not just to taxes, but if you don't win the San Francisco public school lottery system, which we think we won't win, then we're going to have to go to private school. And private school is 20 to $50,000 a year after tax. So it's always good to have goals. So we're at like 220,000 now. And our goal is to get to 300,000.

By the time our son doesn't win the lottery and has to go to private school, probably, in four years. So one of the things I think is interesting about just your commentary in general here at a high level is you planned initially on the fairly frugal lifestyle and your income and assets expanded. And now that you have the situation, you are retired, you have lots of assets, millions and millions of dollars and hundreds of thousands of dollars in passive income. and you're still worried because you're thinking, hey, this is my kid, this is my lifestyle. I want exactly what I want. And I want the absolute best situation here. And I'm going to continue going after things

and creating a situation that's capable of sustaining exactly what I want. And I think that's an interesting commentary, or if I'm picking up on that correctly, because I think a lot of people go into this with, I'm going to live at this expected level of income and lifestyle forever. And my needs and wants may change after. as life goes on and will probably increase in terms of that. I mean, it'll definitely increase because of just inflation.

But, you know, what happens is once you have a kid, you will love your kid more than anything in the world. And two things will happen. One, I think you'll wish you had your kid earlier so he or she can be a greater percentage of your life because you think about your life and your mortality more. But two, even if you can afford or you can't afford things, you know, you have two options for your kid. The problem is this is why tuition is so inelastic. It's so expensive because they know that parents are going to be like, well, for 10,000 more, are we really willing to sacrifice or risk our kid not getting the best? So this is a thing that I think a lot of parents struggle with, at least here in San Francisco and maybe New York and all.

lot of the bigger cities. And it's such a grind. So the grind and the rat race go from work to how to best provide for your kid. And that's one of the reasons why I want to get out of San Francisco. It's one of the reasons why I left at the north end of San Francisco, where it's a wealthier neighborhood. And I moved to the west side, which it's a very middle class neighborhood. You know, the price that I bought $1.25 million was under the median home price in San Francisco. Again, everything is relative, right? And it's just a much more middle class neighborhood. I just want to get out of that grind. I don't want to go downtown.

I don't want to hang out with people who are going to get, talk about their next tech startup and their billions of dollars. It's just annoying. And so I hope if we can go to Honolulu, it's a really family atmosphere, right? We have the word Ohana. We have multi-generations living under one roof. And it's one of the highest child per capita populations in the country. Maybe it is the highest, whereas in San Francisco, we're the lowest.

there's a different stage in my life, and I'm going to have to try to figure out how much to give and how much not to give to allow my kid to be independent and not be spoiled rotten. It's a real challenge, and I hope that based on our frugality and our lifestyles, us growing up, and we're still really frugal, that he can learn to only believe that he deserves only what he's earned. And I think if he can believe in that and some other principles, I talk about all the time, like never failing due to lack of effort because effort requires no skill, I think he'll be fine. I don't know. I'm a new parent, so I'm just going to do my best. That's really all that you can do. It doesn't get any easier as they get older. Sorry to spoil. No, I'm sure it will be quite a journey.

Okay. So this was super fun. I'm very glad you were able to come on the show with us. We just have a few more questions for you before we let you go today. I know we've gone really long because you just had a lot of really great information to share. The next portion of our show is called the famous four questions. These are the same five questions that we ask all of our guests. The last one is easy for you to answer. The first one is what is your favorite finance book? Yeah, so besides how to engineer your layoff, make a small fortune by saying goodbye, written by me, and should be read by everyone. I don't have a favorite finance book. My favorite book is Healing Back Pain by Dr. Sarno, S-A-R-N-O. And it's a wonderful book that talks about what the hell is going on with the explosion and lower back pain and chronic pain like sciatica. And it's because society has just gotten crazy and we're also stressed out. and that, hey, this is how you heal this chronic pain. I remember I had chronic pain for a couple of years. It was terrible. I couldn't even sit down. I read this book, and two months later, I was back pain free, and I've been pretty much back pain free for at least 10 years.

That's good. Back pain is, that was not the answer that I was expecting. It has never been mentioned on our show before. But you know what? I have had some pain in, like not chronic pain because it did go away. But when you're in pain, you can't really focus on anything else. No. Being pain-free is super important.

Health, right? Feeling good. You get that down. You can do a lot more with your life. Very true. What was your biggest money mistake? Biggest money mistake was what I mentioned in the podcast, buying a Lake Tahoe vacation property in 2007. I thought it was like a 10% discount and it went down another 40 to 50%.

But I still own it and I didn't welch on my debt. And I'm excited, excited, excited to take. take my boy to touch the snow. This is something that I've been dreaming about for 11 years. So I'm excited to take him there. Awesome. Doesn't sound like a big money mistake to me. At the end of the day.

Yeah, what is it worth now? It might be worth $700,000, but probably not. It's probably still under what I bought it for. But thankfully, what happens is that, you know, as you get older, you get wealthier, hopefully, it just becomes a smaller and smaller percentage in your net worth. So therefore, the mistake gets small and smaller as well. That's a good way to look at that. Okay, what is your best piece of advice for people who are just starting out?

Okay, the best piece of advice I can give is if the amount of money you're saving each month doesn't hurt, you're not saving enough. Love that. I like that a lot. I never heard that. Yeah, it's like if you've ever had braces, if you're not feeling the pain in your teeth, then it's not doing anything. Here's the most difficult the famous for. What is your favorite joke to tell at parties? Oh, man.

gosh, I should have prepared for this because I think you guys gave me a heads up. I don't have a joke. Oh, my gosh. I have really bad jokes. I can't say online. Perfect. No, no, I can't say online. I should have prepared for this.

I don't have a joke. That's okay. I have people who send me jokes. Yeah, I got to get someone just sent me a joke today. I want to hear your all's jokes. All right. So this one comes from Vaughn who emails me a joke fairly regularly now. And this joke was, I like taking photos of myself staying next to boiling water.

My doctor says, I've got selfie steam issues. Oh, man, that's terrible. That's a kind of joke that gets told on this show. So if you don't have one, that's totally fun. I really bad, like, just can't be talked about jokes. They're terrible jokes. So I'm going to have to pass. I don't know if, yeah.

I'm going to work on that, though. So you think I don't go out much anymore because I'm going to stay. at home dad. And so I don't have to entertain anybody anymore. We have to entertain your son. Pretty soon he's going to be telling you these terrible jokes. So I don't remember who sent this in and I can't find it in my email. I'm sorry for you who sent it in. What do you get when you cross an elephant with a rhinoceros? A big animal. Elifino. There you go.

Okay. So there you go, Scott. Terrible, terrible, terrible, horrible joke. My daughter just had one. it was really funny. I need to remember it. She actually has a lot of really good jokes. When they come out of her mouth, they're funny. When they come out of Scott's mouth, they're even funnier. Where can people find out more about you? You can just go to a financial samurai, S-A-I-com. And I'll be there. And you can see all my articles and go to your about page. And that's the best way. And actually, I have a forums. I haven't told anybody really, except from my newsletter guys because I'm really too busy. But financial samurai.com forward slash forums with the S.

Nice. Awesome. Definitely go check out financial samurai.com. You've got incredible data-driven posts going for years. And I've used the resource for many years myself personally. So it's been a huge privilege to chat with you today and get to know you. And definitely recommend that all the listeners go and check it out because there's some really good data and really good perspective on your site.

Thank you very much. and I'm going to work on my jokes. It was really a privilege to speak to you guys as well. It's like literally nobody asked me to do anything. So whenever someone says, hey, come on board. I'm like, okay, sure. Because I feel like I'm just like out here and no man's land in San Francisco.

No man's land in San Francisco. Yeah, there's just nothing as far as the eye can see out there. I don't even have internet out there. There's nothing here. Literally, I mean, I wish there was a bigger community of people in the finance space. But it's New York and it's the heartland. and maybe Portland or something, but nobody here for some reason. Yeah, the Portland has a big, the Heartland definitely.

Well, I think it's because it's so much cheaper to live. Yeah, but Portland, I guess it was not that expensive, but now it's getting more expensive. Portland has a really good personal finance and also location independent lifestyle type folks. So that's pretty cool. Okay. Well, should we get out of here for this episode?

We should. Thank you so much, Sam, for coming on and share your story, and we'll talk to you soon. Thanks a lot. All right. That was Sam from Financial Samurai.com. What do you think, Mindy? That is a whole life lived in half of the time. So now he's got the rest of his life to kind of do more stuff.

It sounds like he's not going to stop, which I think is very interesting. You know, a lot of talk in the media lately about financial independence and, you know, oh, what are you going to do afterwards or why do you want to just quit your job? And I think that this has been said several times by a lot of different people, but the drive that gets you to the point of financial independence is the drive that isn't going to allow you to just sit around and watch TV and do nothing for the rest of your life. And Sam now has a little boy to keep him on his toes. No, I mean, you can tell that Sam is a wealthy man. He's a guy who's made smart choices over a long career. And for all the retired, stay at home, dad, all that.

Like, this is a man who's going to become wealthier and wealthier over time and is not going to. to end up 30 years from now less well off than he is today. I mean, he is a smart, high-level view of finances. He understands what he needs to do to advance his position. And I think that, frankly, more people need to think like him in order to get ahead. I mean, the theme that I was picking up from him was a ferociousness about standing up for himself and his interests. We talked about the severance package, those kinds of things. Like, why aren't you sticking up for your interests as a way that Sam does? putting yourself in those positions to get lucky the way he is.

I like what he said in the show, nobody cares more about you than you. Yep. So start caring more about you. Stand up for yourself. That's absolutely right. And there's nothing wrong with standing up for yourself. When you're being picked on by a bully, you stand up for yourself. You're taught to stand up for yourself.

Well, stand up for yourself in all areas of finance as well. And put yourself in a position of power, right? Like, you know, I observed earlier, you know, maybe you're marketing specialist one or something. You're just starting off in your career. the power that Sam had was built up over the course of him applying this mindset consistently, right? It's not no Sam's unrelatable or ahead of my career, a different career, I had a different position. It's how do you put yourself in a position of power like Sam over the course of a career and make those smart investments? And look, it was a combination of living frugally, investing aggressively, and going all out for his career that kind of got him ahead.

What's unrepeatable about that? effort doesn't take skill, right? Yeah, yeah. What was his quote there? He had a great one. He had a great one. Never failed due to a lack of effort because effort takes no skill. I really can't add to any of that, Scott.

That's just like spot on. So I am going to say from episode 46 of the Bigger Pockets of Money podcast, this is Mindy Jensen and Scott Trench. And Scott has to catch playing. So goodbye. Bye.