Speaker 1: Welcome to How the Money. I'm Joel and I am
Speaker 1: Matt and today we're talking about becoming a financial Samurai
Speaker 1: with Sam Dogan. That's right, Sam Dogan. He is the
Speaker 1: founder of Financial Samurai, which you probably had heard of, uh,
Speaker 1: and he is joining us today. Sam was one of
Speaker 1: the pioneers of fire back when he started writing at
Speaker 1: Financial Samurai over ten years ago. He retired at age
Speaker 1: thirty four after a career at Goldman Sachs. But then
Speaker 1: actually he came out of retirement because retired life was
Speaker 1: a little too boring for him. But he has written
Speaker 1: over twenty articles at his site and now his new
Speaker 1: book By This Not That it's about to be released
Speaker 1: very soon, which is an excellent guide on how you
Speaker 1: can optimies you your money to build wealth and live
Speaker 1: life on your own terms. And yeah, I'm looking forward
Speaker 1: to talking about financial independence, about maximizing your earning potential,
Speaker 1: engineering a layoff. That's something that he that we're gonna
Speaker 1: get to. We're excited to talk about all of that
Speaker 1: and more today. And by the way, we're gonna give
Speaker 1: away several copies of Sam's book By This Not That, uh,
Speaker 1: And so stick around to the end of the episode
Speaker 1: to learn how you can enter to win one of
Speaker 1: those copies. But Sam, thank you so much for joining
Speaker 1: us today. Hey guys, thanks so much for having me Sam.
Speaker 1: We're pumped to talk to you man. And the first
Speaker 1: question we ask everyone out of the gate is what
Speaker 1: their craft beer equivalent is. And that's because Matt and
Speaker 1: I love craft beer. We spent a lot of money
Speaker 1: on it while we're trying to be good with our money,
Speaker 1: save and invest for the future. So, yeah, do you
Speaker 1: have something like a craft beer equivalent in your life? Yeah?
Speaker 1: So craft beer equivalent would be chlorine tablets or chlorine granules.
Speaker 1: You know what that is for It sounds like the
Speaker 1: opposite of a splur sounds I am very confus used.
Speaker 1: I cannot wait to keep these are all about. Yeah,
Speaker 1: there you go. So I get a bottle of chlorine
Speaker 1: granular tablets once every three weeks maybe, and I dump
Speaker 1: them into my hot tub every other day to keep
Speaker 1: the water clear and clean. So that is the absolute
Speaker 1: best splurge I've ever spent. This was six years ago.
Speaker 1: I spent fifteen dollars to buy hot tub, set up
Speaker 1: the level cement platforms, set up the electronics, and then
Speaker 1: just go with it. So that is my splurge. How
Speaker 1: often are you using that hot tub? So I go
Speaker 1: about three times a week, and then since the pandemic started,
Speaker 1: I've been going about four or five times a week,
Speaker 1: and it's been a great outlet for my son. And
Speaker 1: I had a bond because the hot tub is actually
Speaker 1: at a rental property, but half of the rental property
Speaker 1: is open, and so it's kind of like our sanctuary,
Speaker 1: our escape. Oh so it's like, Okay, I see what
Speaker 1: you did here. This is an investment. You got to
Speaker 1: run off those expenses. It's definitely an investment and there yea.
Speaker 1: Hey that's important man. Okay, So Joe, you gonna gonna
Speaker 1: pull the trigger. Joel always talks about getting a hot
Speaker 1: tub like pool my kids love. Just two years ago,
Speaker 1: you thought about getting one of the inflatable hot tubs.
Speaker 1: I tried on Black Friday, Sam, there was one of
Speaker 1: those inflatable hot tubs on Walmart site for like, listen,
Speaker 1: two hundred bucks. But I'm a little hopped on at
Speaker 1: seven PM when it was supposed to be on sale
Speaker 1: and it was sold out to jerk the rug out
Speaker 1: from money, Yeah exactly, Yeah, I was bumped but maybe
Speaker 1: I need to like go all out and get one
Speaker 1: of those nice ones, like Sam Scott, you gotta get out,
Speaker 1: you gotta go big and get the hardwired hot tub
Speaker 1: with the twenty jets whatever. That is so worth it. Okay,
Speaker 1: Well if I if I proceed, I'm gonna reach out
Speaker 1: to you for with some questions to get you that
Speaker 1: Cadillac of hot tubs. Sam. So you first started writing
Speaker 1: about financial independence, I feel like before it was even cool, uh,
Speaker 1: way back in the day. What is it that inspired
Speaker 1: you to pursue that that lifestyle and to start documenting
Speaker 1: it all way back in two thousand nine. Yeah, So,
Speaker 1: I started working at Goldman sax In and they required
Speaker 1: me to get into the office at five thirty in
Speaker 1: the morning. And it wasn't just getting in a five thirty.
Speaker 1: I had to stay back beyond seven pm every night
Speaker 1: to connect with Asia because the Asian markets were opening.
Speaker 1: And so I knew right then and there in after
Speaker 1: one month, I couldn't last, you know, for hopefully until
Speaker 1: I was aged forty. I like, beyond that, there was
Speaker 1: just no way to have a multi decade career in finance.
Speaker 1: And I mean, you know, I gained weight, I got sciatica.
Speaker 1: You know, I was just always stressed, and so I decided,
Speaker 1: you know what, I'm gonna try to invest and save
Speaker 1: as much as possible the first month from work so
Speaker 1: that one day I could escape. And so in two
Speaker 1: thousand and nine, July is when I started financial Samurai,
Speaker 1: because I had been putting it off since two thousand
Speaker 1: and six after I graduated from business school part time.
Speaker 1: And July two tho nine was the bottom of the
Speaker 1: global financial crisis, and I lost thirty five pc of
Speaker 1: my net worth in six months. That's you know, that
Speaker 1: took ten years to build. And I just felt like
Speaker 1: a dummy, and I felt, you know what, there's gotta
Speaker 1: be a better way to get out of this. And
Speaker 1: writing was Mike Catharsis, Okay, So yeah, it was like
Speaker 1: partly Catharsis, part documentation, and I, I just I'm curious
Speaker 1: to seeing your network dropped by something like other people
Speaker 1: in like today's market might be feeling something like you
Speaker 1: were feeling back then. They might have seen, you know,
Speaker 1: their their their stock market holdings dropped by if if
Speaker 1: they're heavily exposed to crypto, potentially more so, Yeah, how
Speaker 1: would you how would you talk to talk people through
Speaker 1: maybe an experience like this. Since you've kind of dealt
Speaker 1: with it firsthand and have recovered handsomely well, the important
Speaker 1: thing to do is learn from your experience. So investing
Speaker 1: is a long term game. It's a psychological mind vendor.
Speaker 1: The person who lasts the longest and is the most
Speaker 1: calm usually wins because over time, right you see stocks
Speaker 1: go up ten percent a year, real estate is up
Speaker 1: unlevered about three to four and a half percent a
Speaker 1: year just on average, So you know that over a
Speaker 1: ten twenty year period, you're probably gonna be fine. It's
Speaker 1: the people who wig out and just sell and just
Speaker 1: get out of things when things are crashing that generally
Speaker 1: end up regretting it over time. So the key right now,
Speaker 1: let's say in two you're down huge on your investments,
Speaker 1: is to understand what your risk tolerance is. And it's
Speaker 1: a wake up call. If you feel bad right now,
Speaker 1: horrible that you're losing whatever you're losing, then it's probably
Speaker 1: because your risks exposure is too high and you have
Speaker 1: to adjust that downwards. So over the two thousand dot
Speaker 1: Com bomb, the two thousand and eight two thousand and
Speaker 1: nine financial crisis, I've been able to hone my net
Speaker 1: worth asset allocation to match my risk tolerance. And everybody's
Speaker 1: risk tolerance is different because everybody's goals and DNA are different, right,
Speaker 1: And so you've got to use this as an opportunity
Speaker 1: to figure out what your risk tolerance is and net
Speaker 1: worth asset allocate apprope really yeah, So, Sam, you know
Speaker 1: like you're focused in the new book. It it centers
Speaker 1: around spending, and you say that like most folks, they
Speaker 1: get told about the saving side of the equation, but
Speaker 1: that we're often lost when it comes to knowing how
Speaker 1: to actually spend our way to wealth. Can you explain
Speaker 1: to to listeners what you mean by that? Right, So,
Speaker 1: there's only so much you can save, but the income
Speaker 1: side is unlimited. All the wealthiest people in the world
Speaker 1: didn't get super wealthy by saving their way to wealth,
Speaker 1: but by making more money, building more equity, building companies
Speaker 1: and businesses. So it's really going from a defensive approach,
Speaker 1: which I think should be a given saving budgeting, to
Speaker 1: an offensive approach where you can get your vacuum money
Speaker 1: vacuum cleaner and then just soak up as much money
Speaker 1: as possible in the world. Because truly, there's trillions and
Speaker 1: trillions of dollars for the taking, And it's a mindset
Speaker 1: you have to say, I too deserve to be rich.
Speaker 1: Why can't I stop up all this money as well?
Speaker 1: So it's really about thinking on the offense rather than
Speaker 1: the defense. Yeah, well, you talk about the root of
Speaker 1: inaction in your book and you say that, like that
Speaker 1: part of the reason so many of us don't take
Speaker 1: action when it comes to investing is because we desire
Speaker 1: absolute certainty. So in your mind, for folks who are
Speaker 1: like I would love to invest, it just feels a
Speaker 1: little risky. How how can we overcome maybe that tendency
Speaker 1: that so many of us have towards inaction, towards really
Speaker 1: kind of standing pat right. So it's important to realize
Speaker 1: that the fear in your head is often worse than
Speaker 1: the reality. And the other point to know is it's
Speaker 1: important to think in probabilities, not absolutes. So what do
Speaker 1: I mean by that? When you think in absolutes you
Speaker 1: short change yourself. You think you need a hun certainty
Speaker 1: to go ask out that girl or boy, You need
Speaker 1: a hun certainty to apply for that job or bid
Speaker 1: on that house before proceed And what a shame because
Speaker 1: you will likely miss out on so many opportunities. So instead,
Speaker 1: I encourage you to think in probabilities using a seventy
Speaker 1: thirty decision making framework. And this decision making framework can
Speaker 1: be used for investing, for having children, for doing a
Speaker 1: lot of tackling a lot of life's biggest dilemmas. And
Speaker 1: the Frameworkers says, if you believe there's a seventy percent
Speaker 1: probability or better that you will make the right choice,
Speaker 1: you go for it while having the humility in knowing
Speaker 1: that thirty percent of the time you're gonna make the
Speaker 1: wrong choice, but that's okay because you're gonna learn from
Speaker 1: that choice and make better decisions going forward, right. I mean,
Speaker 1: I guess the problem there, though, is that it's difficult
Speaker 1: to determine when you are kind of crossing that seventy
Speaker 1: percent threshold, right, and so so much of this, I
Speaker 1: mean it kind of comes down to you as an
Speaker 1: individual to kind of weigh the risk to kind of
Speaker 1: determined to figure out on your own that like, Okay,
Speaker 1: you know this, this feels like something that's seventy I
Speaker 1: think that's the pushback. I think a lot of folks
Speaker 1: might say that why. I get that theoretically, I get
Speaker 1: that as a principle, but in practice I think that
Speaker 1: can be difficult, right, right, So there's two ways to
Speaker 1: approach this um. One is by making calculations. Making calculations
Speaker 1: for everything, whether it's from the NBA Finals who's gonna
Speaker 1: win by how many games? To who's gonna win the
Speaker 1: Dog Show, to how long that marriage is going to last,
Speaker 1: to whether you're going to get into that incubator for
Speaker 1: your startup and so forth. And what you do is you,
Speaker 1: before something happens, you make a prediction, and then you
Speaker 1: write down why you think it's gonna happen that way,
Speaker 1: and then sooner or later you're gonna find out the result.
Speaker 1: And then you do a post mortem and try to
Speaker 1: analyze why things didn't go the way it did or
Speaker 1: why it did go. But are you sure it went
Speaker 1: the way it did because of those reasons you highlighted
Speaker 1: or big as is something else? You don't want to
Speaker 1: be delusional in your thought. So this takes experience and practice,
Speaker 1: really intentional practice. And that's something that I learned on
Speaker 1: the trading for working for a couple of Wall Street
Speaker 1: firms for thirteen years. You really need to make some
Speaker 1: probability estimates. The other way to get around this to
Speaker 1: overcome your fear is to listen and to read from
Speaker 1: people who have been there before. And so that's the
Speaker 1: whole point behind by this, not that how to spend
Speaker 1: your way to wealth and freedom. Not only is it
Speaker 1: a book about helping you achieve financial freedom in a
Speaker 1: risk appropriate way, it also tackles some of life's biggest dilemmas.
Speaker 1: You know, things such as should you marry for money
Speaker 1: or marry for love, Should you live in an expensive
Speaker 1: city um for the greater career potential, or should you
Speaker 1: relocate to a lower cost area, should you have kids
Speaker 1: later or younger? So all of these big dilemmas are
Speaker 1: approached using the seventy framework in my book. Yeah, I
Speaker 1: thought it was interesting that you said that people should
Speaker 1: go to the anemic coal Smith route and always just
Speaker 1: marry someone who's really rich and really old, and that's
Speaker 1: what you're set for life, right exactly, And then then
Speaker 1: you just leap frog generations of hard work and struggles.
Speaker 1: It's so simple, that's the real trick. Let other people
Speaker 1: do the compounding for you, and then you just meet
Speaker 1: them there at the end. The easy button at the
Speaker 1: easy button. Well one of the things too, you know,
Speaker 1: you're talking about the probabilities, and I thought that was
Speaker 1: a great, great framework, But it's also important probably to
Speaker 1: think about the potential negative consequences of something that you
Speaker 1: could do. And when, for instance, when you're talking about
Speaker 1: asking somebody out on a date, and like, how bad
Speaker 1: is the negative potential consequence of being talked about? Uh?
Speaker 1: And I had the distinctly remember when I was, you know,
Speaker 1: in my early twenties before I met my lovely wife,
Speaker 1: trying and I was like so bad at asking girls out,
Speaker 1: and I was like, finally, like what is the possible
Speaker 1: worst possible outcome. I'm gonna feel like crap for maybe
Speaker 1: twenty minutes and then I'll get over it. And so
Speaker 1: it was one of those things where I just kind
Speaker 1: of started with breathless abandoned to start asking people out
Speaker 1: on dates and UH. And so that's another thing like
Speaker 1: when you think about the worst possible outcome of not investing, man,
Speaker 1: it is so severe that you better get started. But
Speaker 1: when it comes to something else out the negative possibilities
Speaker 1: might be so infantestively small that you better just go
Speaker 1: ahead and do it. Yeah, A lot of about financial
Speaker 1: independence is about having the courage to change in sub
Speaker 1: optimal situation. So one test to see if you are
Speaker 1: truly financially independent is to see if you can change,
Speaker 1: to take action to change a bad situation. If you
Speaker 1: feel you're financially independent, but you're still coming into or
Speaker 1: getting oppressed by, you know, a terrible boss and doing
Speaker 1: something you don't like, well you're probably not financially independent yet.
Speaker 1: Well all that note about financial independence, I mean same,
Speaker 1: can you talk about like the evolution of the fire
Speaker 1: movement because you know, like folks who saved a huge
Speaker 1: chunk of their income, like they existed before, you know,
Speaker 1: the modern fire movement, but I feel that like you
Speaker 1: kind of helped to bring it mainstream. Like what's your
Speaker 1: take on where the movement stands right now? Well, it's
Speaker 1: really interesting. So in two thousand and nine, UM, when
Speaker 1: I helped kickstart the modern day fire movement. The basic
Speaker 1: definition of fire is if you have enough passive income
Speaker 1: or passive investment income to cover your basic living expenses,
Speaker 1: then you're financially independent. So what I've noticed over time
Speaker 1: is that definition of financial independence has changed, where there's
Speaker 1: terms such as Coast Fire, Barista fire, Lean fire, and
Speaker 1: all sorts of fire and what it is terminology has spread. Yeah,
Speaker 1: I mean it's it's pretty interesting to watch. And what
Speaker 1: it is is based off human psychology because it really
Speaker 1: is hard to accumulates enough capital to generate that passive income.
Speaker 1: It takes you know, ten twenty years, and a lot
Speaker 1: of people just can't wait too long and they will
Speaker 1: lose steam. So what has happened is instead of waiting
Speaker 1: that long, people have created these new terminologies to help
Speaker 1: fit where they are on their journey. Right. So for example,
Speaker 1: if you say, let's say Barista fire is basically working
Speaker 1: part time where you know, you get a job at
Speaker 1: Starbucks and they provide healthcare helps supplement your chilled, chilled
Speaker 1: out life. Uh. Coast Fire is is a is a
Speaker 1: fascinating one where it talks about having enough retirement income
Speaker 1: that if it compounds at the historical rate of return,
Speaker 1: you'll eventually be living the good life in retirement. But
Speaker 1: that's just defining what most people are doing right now
Speaker 1: is just saving for retirement. So it's really a psychological
Speaker 1: motivating tool to redefine what financial independence is for various
Speaker 1: people so they can continue saving and investing for the future, right,
Speaker 1: I mean, do you see that as a good thing,
Speaker 1: because I mean I hear all these things that what
Speaker 1: it does to me is it makes it sound a
Speaker 1: little more inclusive, which in my mind, the more folks
Speaker 1: you can kind of get on the boat, right even
Speaker 1: though it's like, well you're not you're not totally there yet. Man,
Speaker 1: you're still working a job or you're still clock in
Speaker 1: thirty hours a week and benefits necessarily want to quit altogether,
Speaker 1: which and so like, on one hand, I like I
Speaker 1: kind of see it as almost like a like a
Speaker 1: good thing because it gets folks on the boat that
Speaker 1: they're they're thinking in that direction, even though they might
Speaker 1: have years or even maybe decades of part time work
Speaker 1: ahead of them. Yeah, I definitely think it's a good
Speaker 1: thing to be more inclusive, because again, the journey is
Speaker 1: very long and sometimes it can be very hard, and
Speaker 1: it's easy to quit. I mean, how many of us
Speaker 1: try to go on diets and then we just quit
Speaker 1: after three months because we're like screw that, right, So
Speaker 1: the more inclusive it can be to help people go
Speaker 1: along on their journey, the better. It's just sometimes it
Speaker 1: can give get a little bit funny where there's another
Speaker 1: term called why WiFi so wife wife financial independence. In
Speaker 1: other words, you know, so men, we men have really
Speaker 1: fragile egos, and so when we leave our jobs and
Speaker 1: we've become stay at home fathers, a lot of men,
Speaker 1: it seems like, are not willing to say that they
Speaker 1: are stay at home dad's. Instead they'll say they retired
Speaker 1: early and while they have a working wife making good
Speaker 1: money and providing for healthcare. So again it's that yeah,
Speaker 1: so it's it's but you know I I I was
Speaker 1: like for me, it's like more prior to you, whatever
Speaker 1: you want to do to you know, help your situation,
Speaker 1: whatever is best for your household. I think that's the
Speaker 1: most important thing. And however you can frame it, that
Speaker 1: means that you're going to be able to pursue it
Speaker 1: with the most vigor in a way that's sustainable for
Speaker 1: for your life. Right right, All right, Sam, We've got
Speaker 1: more questions for you. Man. We want to specifically talk
Speaker 1: more about fire. We want to talk about how real
Speaker 1: estate can factor in to the financial independence lifestyle, and
Speaker 1: then we also want to talk about debt. You've got
Speaker 1: kind of some interesting thoughts on that, so we'll get
Speaker 1: to those questions right after this. Alright, well we are
Speaker 1: back from the break. We're talking with Sam Dougan about
Speaker 1: becoming a financial samurai. Angel. I know you're excited to
Speaker 1: talk about real estate with Sam here in a second.
Speaker 1: But uh, before we move on, Sam, let's let's talk
Speaker 1: about how you know that you've reached five How how
Speaker 1: you know you once you reach financial independence or achieve
Speaker 1: some sort of sense of financial freedom. Because we know
Speaker 1: you're not the biggest fan of the coming up with
Speaker 1: five times your your annual expenses, how do you suggest
Speaker 1: that folks think about what they'll need to have saved
Speaker 1: up in order to hit that five mark? Right? So,
Speaker 1: the times expenses is fine. It's based off the inverse
Speaker 1: of the four percent rule, which was started in the
Speaker 1: ninety nineties, when you can get a risk free return
Speaker 1: of five to six percent from a ten year bond yield. So,
Speaker 1: in other words, of course you can withdraw at a
Speaker 1: four percent rate because you were getting a risk free
Speaker 1: return of five to six percent. But obviously times have
Speaker 1: changed over the past thirty years, and so should we.
Speaker 1: In my mind, it's more important to base your financial
Speaker 1: independence number based on a multiple of your gross annual income,
Speaker 1: not your expenses. And why is that because when you
Speaker 1: base it off your expenses, there's a propensity to cheat. Right,
Speaker 1: So let's say expenses are a hundred thousand dollars and
Speaker 1: you want to do twenty five times to get to
Speaker 1: financial independence. That's two point five million. But let's say
Speaker 1: you're just tired of it all and it's just you
Speaker 1: want to just get out quicker, so you just say, well,
Speaker 1: I'm gonna do lower my expenses to fifty thousand dollars
Speaker 1: a year. So based on twenty five times, you know
Speaker 1: you only need to generate what one point to five million.
Speaker 1: So with the multiple based on income, you can't cheat.
Speaker 1: And many of us who are pursuing this, you know,
Speaker 1: obviously by definition, are younger, right forty, And if we
Speaker 1: base a multiple by income, as your income grows, as
Speaker 1: most people's income will grow over time, you have to
Speaker 1: force yourself to save and invest more, there's no cheating.
Speaker 1: And so the ultimate number that I've come up with
Speaker 1: is twenty times your annual gross income, which is a
Speaker 1: huge number, and I know some people will get married
Speaker 1: very mad at that. But the idea is to change
Speaker 1: your mindset again from defense to offense, and once you
Speaker 1: get to about ten times your growth annual income, that's
Speaker 1: really when you feel like you're you're on a great
Speaker 1: path of financial independence. So it is a stratus. Do
Speaker 1: you do you think that number and kind of that
Speaker 1: mindset is because you're probably more in like the fat
Speaker 1: fire camp talking about different fire terminology. Maybe because yeah,
Speaker 1: you're you're less. You're not looking forward to that Barista
Speaker 1: fire lifestyle. That's not that's not your jam. So do
Speaker 1: you think that's maybe part of why you kind of
Speaker 1: come up with with that methodology. It might be, But
Speaker 1: the good thing about multiples is that it works whatever
Speaker 1: the absolute dollar amount is. And so again it's back
Speaker 1: to the philosophy of focusing on income and growth and
Speaker 1: less so much about budgeting and saving. We should all
Speaker 1: be budgeting and saving, but this is like a standard
Speaker 1: operating procedure that should be a default setting. Really, you know,
Speaker 1: it's just changing that mindset to a number based on income.
Speaker 1: And I think that's very consistent with my whole philosophy
Speaker 1: of the book. Okay and okay, so when it comes
Speaker 1: to real estate, want to talk about real estate? Matt
Speaker 1: and I we talk about real estate A decent amount
Speaker 1: on the show, we're both you know, small time mom
Speaker 1: and pop landlords here in Atlanta have a small stable
Speaker 1: rental properties, and we are we think it's something that
Speaker 1: more people should consider, and we're constantly like you know,
Speaker 1: pushing people, hopefully gently in that direction. But um, yeah,
Speaker 1: how does real estate factor into the wealth building journey
Speaker 1: for you? Because it could be you know, a bit
Speaker 1: daunting for some folks to think about buying a single
Speaker 1: family home or a duplex renting it out and and
Speaker 1: you know that's kind of a part time job in
Speaker 1: addition to your day job. Maybe, So yeah, what are
Speaker 1: your favorite ways for folks to have some real estate exposure?
Speaker 1: So my absolute favorite way to build a rental property
Speaker 1: portfolio to generate passive income is to buy your primary residents,
Speaker 1: get neutral real estates. You're going up and down with
Speaker 1: the market, living it for three to five years, maybe longer,
Speaker 1: rent out that property by another property, living it for
Speaker 1: three to five years, maybe longer rented out, and over
Speaker 1: a forty year career post high school to college, you
Speaker 1: can easily build a three to four rental property portfolio
Speaker 1: which will most likely pay for all your living expenses
Speaker 1: by the time you know you're fifty or sixty, and
Speaker 1: so that's the easiest way to do it. Another easy
Speaker 1: way to do it is obviously to buy public rates
Speaker 1: or invest in private real estate funds. UH. You don't
Speaker 1: need to borrow money. You can just invest as it
Speaker 1: is to gain that exposure as you're building your down
Speaker 1: payment for your primary residence or your rental property portfolio.
Speaker 1: For me, real estate accounts for about of my net worth,
Speaker 1: excluding the value of my online business. And the reason
Speaker 1: why it's so high, whereas stocks it's only about is
Speaker 1: because I'm focused on generating cash flow so I don't
Speaker 1: have to go back to work, and real estate is
Speaker 1: something that's more stable generates higher yields. You are the
Speaker 1: king or the queen of your asset. You can do
Speaker 1: things to improve the asset, not only just remodeling and expanding,
Speaker 1: but hustling harder to find better tenants to pay you
Speaker 1: a closer to market rate. So it's a much more
Speaker 1: stable and attractive way to go to generate income, especially
Speaker 1: with the higher yields compared to stock divd and yields.
Speaker 1: Because you don't wake up one day and see your
Speaker 1: property down thirty You just continue to you know, collect
Speaker 1: that rental income where it's with stocks crypto, it's like, man,
Speaker 1: you know, look at the tech stocks they're down. Sure, yeah,
Speaker 1: well I guess the biggest downside right too. I mean,
Speaker 1: and we think people should save up. We encourage people
Speaker 1: to do. This is kind of the nest egg that
Speaker 1: you have to have on hand for a down payment
Speaker 1: to buy that house. And um, and we want people
Speaker 1: to challenge themselves to save more for a bigger down payment.
Speaker 1: But that that for a lot of people. That's why
Speaker 1: maybe people might go in the direction of real estate
Speaker 1: investment trust a publicly traded reats instead of a single
Speaker 1: family home or a multi family home, right just because
Speaker 1: just because it's more accessible, right, and so it's important.
Speaker 1: So it is daunting to come up with a ten
Speaker 1: or twenty or thirty percent down pay and on the
Speaker 1: value of the home. Right now, the median price in
Speaker 1: America is like four four and fifty thousands, so you're
Speaker 1: talking eighty to nine dollars. But it's all about perspective too,
Speaker 1: because the first time home buyer in America is in
Speaker 1: their early thirties, let's say two to thirty four. So yeah,
Speaker 1: you know, when you're twenty two or twenty. Yeah, you're
Speaker 1: you don't get that money usually, right, But it's about perspective.
Speaker 1: So the average is, let's say thirty four first time
Speaker 1: home buyer. Just try to beat the average. Maybe you
Speaker 1: can get long by age thirty, thirty one or eight.
Speaker 1: It's all about being understanding where other people are in
Speaker 1: general with your age group. The one other thing about
Speaker 1: the down payment is, and I talked about this in
Speaker 1: the book, it's about, um, how do you access to
Speaker 1: the bank of Mom and Dad as well? So here
Speaker 1: in San Francisco, of homes we're purchased in cash and
Speaker 1: something like first time home buyers had the help of
Speaker 1: bank of Mom and Dad and in the past, right,
Speaker 1: like if you if you just bought a property on
Speaker 1: your own, you probably poopoo the people who leveraged the
Speaker 1: bank of Mom and Dad. And that was me too,
Speaker 1: I was. I was. And it's barely because I don't
Speaker 1: even have access to that. So yeah, exactly, Yeah, I'm
Speaker 1: like jealous. I'm like, you know, scool, you I had
Speaker 1: to I had to cut myself to save this. You know,
Speaker 1: I'm just jealous. Basically, you're just jealous, right, I was
Speaker 1: just jealous. But if you think about it if your
Speaker 1: parents are you know, fifties sixty seventy, they've been able
Speaker 1: to save and invest so much and take advantage of
Speaker 1: the massive bull market we've had. And as a parent now,
Speaker 1: I totally understand why every parent you know I love
Speaker 1: their child and why they want everything to be best
Speaker 1: for their child. And if you're a responsible parent who
Speaker 1: has saved invested over the past thirty to forty years,
Speaker 1: you're probably going to die with too much money, and
Speaker 1: so it's probably better to help your children and loved
Speaker 1: ones while you're still alive then after you're dead, because
Speaker 1: after you're dead, you know your children might be fifty
Speaker 1: plus years old. So what's the point of that, right.
Speaker 1: I completely agree with that philosophy, and I think, yeah,
Speaker 1: there are way too many people hoping to leave some
Speaker 1: sort of massive inheritance when they would be using it
Speaker 1: in here now to help their kids and uh and
Speaker 1: get to actually experience the joy on their kids faces
Speaker 1: as were able to maybe buy a house that they
Speaker 1: otherwise wouldn't have been able to. I mean and and yes,
Speaker 1: I totally believe that as a parent, um. And the
Speaker 1: key is obviously not to brag about it. If you're
Speaker 1: receiving all this help from bank of mom and dad.
Speaker 1: You know, it's to be humble, it's to be low key,
Speaker 1: it's to be set helf, and to actually pay your
Speaker 1: parents back to It's just even if they don't need
Speaker 1: the money, I'm sure they'll feel even more great that. Wow,
Speaker 1: you know, my kids are such responsible individuals that they
Speaker 1: want to pay me back. Yeah. Well, when it comes
Speaker 1: to taking out a mortgage, it's interesting because you've been
Speaker 1: a proponent of adjustable rate mortgages, where the interest rate right,
Speaker 1: it can move around after a set period of time.
Speaker 1: So I guess I'm curious because interest rates have been
Speaker 1: on the rise lately, so people with adjustable rate mortgages
Speaker 1: might be shaking in their boots a little bit. How
Speaker 1: do you feel about those those products right now? Yeah,
Speaker 1: So I love this debate. I love this debate, and
Speaker 1: I've been encouraging people to take out adjustable rate mortgages
Speaker 1: since I started in two thousand and nine. And the
Speaker 1: reason why is because of perspective. First of all, interest
Speaker 1: rates have been coming down since the late nineteen eighties.
Speaker 1: Literally it's been a forty year decline. And why is that.
Speaker 1: It's because the world has gotten smaller. The federal reserve
Speaker 1: boards around the country, central banks around the country have
Speaker 1: become tighter, they've become more coordinated, and we better, We've
Speaker 1: been able to better manufacture inflation. Further, with a smaller world,
Speaker 1: you have input costs that have come down. Right, So China, India, Vietnam,
Speaker 1: they're creating goods, They're creating goods and exporting it to
Speaker 1: more developed countries and lowering the cost of goods. Right,
Speaker 1: And this is all you're going to continue over time. Now,
Speaker 1: sure you we're gonna have um, you know, short term
Speaker 1: spikes in inflation and therefore interest rates as we are
Speaker 1: experiencing right now. But right now is a special situation.
Speaker 1: You know, we've at war in Ukraine. Who would have thought,
Speaker 1: you know, Russia would have invade Ukraine. We had COVID
Speaker 1: pandemic which hopefully is not going to last for more
Speaker 1: than five years. And we've had massive, massive amount of stimulus,
Speaker 1: which obviously percolates through the system. But think about it,
Speaker 1: if you are an arm holder, you're basically borrowing money
Speaker 1: at the shorter end of the yield curve. And when
Speaker 1: you borrow at the shorter end of the yield curve,
Speaker 1: the interest rate is lower. So the spread between let's
Speaker 1: say an average thirty year fixed rate mortgage and let's
Speaker 1: say a seven one ARM might be like one and
Speaker 1: a half percent. So for seven years during that fixed
Speaker 1: rate period, you're saving one and a half percent in
Speaker 1: terms of interest cost for a year. So you're only
Speaker 1: going to start losing seven years later after if the
Speaker 1: thirty year fixed rate mortgage or a new rate mortgage
Speaker 1: is one and a half percent or higher. So, in
Speaker 1: other words, let's say you did get an ARM, I'll
Speaker 1: just use my example. I got a seven one ARM
Speaker 1: at two point one two five because I bought another home. Then, right,
Speaker 1: so am I quaking in my boots? I'm not quaking
Speaker 1: in my boots because it doesn't reset until and if
Speaker 1: it does reset, there's a limit to how much it
Speaker 1: can reset. It's not like endless reset, right, It's like
Speaker 1: two or three percent limit, and then it only resets
Speaker 1: at a limit a year after that. However, it's in
Speaker 1: my opinion that inflation will ultimately moderate and therefore in
Speaker 1: st right, So I could easily see a scenario by
Speaker 1: three where inflation starts moderating because there's demand destruction. Right,
Speaker 1: The higher prices go the less demand comes, and if
Speaker 1: inflation starts rolling over, let's say in August, there's going
Speaker 1: to be a decline in the bond yields and there's
Speaker 1: gonna be a client in mortgage rates, and you're right
Speaker 1: back to long term forty year trend. And here's the
Speaker 1: other thing, And sorry for blabbing around so much, but
Speaker 1: it's interesting. This is good. But the average person, the
Speaker 1: median home ownership duration was about at four and a
Speaker 1: half years before the financial crisis in two thousand and
Speaker 1: eight two thousand nine. Today, the average homeownership duration is
Speaker 1: closer to ten and a half eleven years. Okay, so
Speaker 1: it doesn't make sense to take out a thirty year
Speaker 1: fixed rate mortgage and pay a higher rate if you're
Speaker 1: only going to hold your property for ten or eleven years,
Speaker 1: or hold onto that mortgage for ten or eleven years. Instead,
Speaker 1: it's a much more optimal financial decision to match your
Speaker 1: fixed rate duration to the length of ownership of your home.
Speaker 1: So if it's ten years you plan to own it
Speaker 1: before you sell it or pay off the mortgage, then
Speaker 1: you should match it with a ten one arm. This
Speaker 1: is something I've kind of come around on because I
Speaker 1: used to be like, oh no, no no, you've got to
Speaker 1: do the fifteen year fix. You got to do the
Speaker 1: thirty year fixed. But that, like you said, that assumes
Speaker 1: that you're gonna be there for the next fifteen years,
Speaker 1: in the next thirty years. And one thing I've realized
Speaker 1: is that folks they like to move. There are opportunities
Speaker 1: that draw them to different cities or two different parts
Speaker 1: of the country, or to close closer to family for
Speaker 1: just a desire for a big your or different house.
Speaker 1: Life changes. I mean, your your wealth now will be
Speaker 1: different from your wealth twenty years from now or thirty
Speaker 1: years from now. To be able to match your flexibility
Speaker 1: is actually much smarter and so and but the reality
Speaker 1: is ninety plus percent of mortgages are thirty or fixed mortgages.
Speaker 1: It's something like five to our arms. And and I
Speaker 1: get a lot of pushback from that. But if you
Speaker 1: live your life and you observe other people living their lives,
Speaker 1: you will notice change in their their homes over time.
Speaker 1: And you just have to do the math. If you
Speaker 1: ever have doubt, just run the scenarios on the break
Speaker 1: even point. Because I'm I'm very happy, i I'm holding
Speaker 1: an arm and The other thing is you're not stuck, right, Like,
Speaker 1: let's say when my arm resets in two thousand seven,
Speaker 1: I'm assuming I will have some more cash. I can
Speaker 1: pay down principle when at a time comes so that
Speaker 1: my payment is lower, or I could sell the property.
Speaker 1: I can do a lot of other things. So I
Speaker 1: think the optionality of paying less and having flexibility it
Speaker 1: is very valuable. That's true. Yeah, So let' let's talk
Speaker 1: about a different kind of debt, Sam, because you say
Speaker 1: that most of us get into debt because we want
Speaker 1: to live a lifestyle that we don't deserve. So can
Speaker 1: you explain what you mean by this? And how does
Speaker 1: debt factor into someone's ability to achieve financial independence? Yeah,
Speaker 1: if you think about how we consumed and purchased goods
Speaker 1: hundreds of years ago, just a hundred years ago, we
Speaker 1: pay mostly cash because the debt markets weren't built out yet.
Speaker 1: But very smart and wise people have been able to
Speaker 1: recognize that we're greedy. We want things now, and we
Speaker 1: don't want to you know, we want to go straight
Speaker 1: to the corner office without putting in our dues. And
Speaker 1: that's just human nature, right. So we've created credit cards,
Speaker 1: pay day loans by now pay later to get people
Speaker 1: to get what they want what without having to be
Speaker 1: able to afford, you know, whatever they want in full value.
Speaker 1: And so I think getting into debt is something that
Speaker 1: UM people really need to get out of, especially it's
Speaker 1: consumer debt. If you have credit card debt, revolving credit
Speaker 1: card debt, the average illustrated something like SEV which is
Speaker 1: seven to eight percent higher than the average SMP five
Speaker 1: return over since and it is also higher than the
Speaker 1: average return UH. The illustraus Warren Buffett has been able
Speaker 1: to generate in his career and he's one of the
Speaker 1: top ten richest people in the world. And so if
Speaker 1: you have this revolving credit card debt or consumer debt
Speaker 1: and you're buying things that don't have a chance of
Speaker 1: appreciating and value, I think you're doing yourself a disservice.
Speaker 1: So you have to ask yourself how much do you
Speaker 1: really want and you want to do you want to
Speaker 1: get rich or do you want to make the lender
Speaker 1: yet rich. That's the mindset. And the other thing UM
Speaker 1: I think you're asking about is you know, debt and investing.
Speaker 1: So many of us have debt, but we also want
Speaker 1: to invest. So I have a framework called the financial
Speaker 1: Samurai debt and investment ratio, which basically states, if you
Speaker 1: have debt and you also want to invest, you should
Speaker 1: use that debt interest rate as a barometer for what
Speaker 1: percentage of your monthly cash flo you're going to use
Speaker 1: to pay down that debt. So, in other words, if
Speaker 1: you have debt at seven, you multiply that by ten
Speaker 1: to get seventy, so you would take sevent of your
Speaker 1: monthly cash flow to pay down debt and then to invest.
Speaker 1: So this way you're always winning and you're always hedged. Now,
Speaker 1: after ten percent, which is also the SPI historical average return,
Speaker 1: you would allocate one of your casual to paying off
Speaker 1: that debt because you can't really really launch if you're
Speaker 1: getting dragged down by ten plus percent debt interest rates. Yeah,
Speaker 1: now that makes sense. And really the only caveat to that,
Speaker 1: I'm sure you agree is if you're getting some sort
Speaker 1: of company match on some of those four one dollars
Speaker 1: right where you might want to avoid paying off something
Speaker 1: it's like eight or nine percent interest rate in order
Speaker 1: to get that max that match out before you start
Speaker 1: attacking that thing like gangbusters, right, I mean the company
Speaker 1: matches a hundred percent return, so yes, definitely fulfilled that
Speaker 1: return up to the match maximum and then start paying
Speaker 1: down that debt. I mean, you want to change your
Speaker 1: mindset to say, well, what is the return on my debt?
Speaker 1: Pay down? It's obviously the interest rate that you don't
Speaker 1: have to pay. Yeah, all right, we want to talk
Speaker 1: about some career stuff with you, Sam, including you know,
Speaker 1: one of the coolest things. I feel like I read
Speaker 1: this on Financial Samurai years ago, and uh if for
Speaker 1: some reason, it sticks in my mind more than anything
Speaker 1: else when it comes to like the content that you've
Speaker 1: put out, and it's about basically getting paid to walk
Speaker 1: away from your job. So we'll talk about career advice
Speaker 1: that you've got and more right after this. All right,
Speaker 1: we are back talking with Sam Dogan and Sam, we're
Speaker 1: gonna spend this last section talking a good bit about
Speaker 1: career advice. We're gonna talk about how you were able
Speaker 1: to engineer a layoff before we dive into that. Can
Speaker 1: you share the story of actually about how you got
Speaker 1: your first job. You you tell a pretty good story
Speaker 1: in the book about yeah, scoring that that first position
Speaker 1: there at Goldman Sacks and how it wasn't necessarily about grades,
Speaker 1: but yeah, share how that came to be. So it
Speaker 1: all came about because there was a career fair in Washington,
Speaker 1: d C. And Williamsburg, Virginia, where the College of William
Speaker 1: and Mary Is is about a two and a half
Speaker 1: hour drive south or north to Washington, d C. And
Speaker 1: so I signed up for a career fair and Goldman
Speaker 1: Sachs said they wanted to to see me. I was like, okay,
Speaker 1: sounds good, and so I woke up at five thirty
Speaker 1: am to get on a bus at six am from
Speaker 1: Williamsburg to d C. And nobody showed up, and supposedly
Speaker 1: twenty five to thirty people signed up to go go
Speaker 1: on this bus to go to d C. And so
Speaker 1: after about forty five minutes, the driver said, you know what,
Speaker 1: screw this, nobody's showing up. Let's go change vehicles. So
Speaker 1: he drove me in the bus to some random shack
Speaker 1: in Williamsburg and out popped a black Lincoln town car.
Speaker 1: And then so he drove me like a shave limo
Speaker 1: for two and a half hours to the career fair,
Speaker 1: and I had a lot of series of tough interviews
Speaker 1: and then I was invited to super Day where there
Speaker 1: were twelve interviews that one day, and I thought, all right,
Speaker 1: twelve interviews, let's rock, let's do it. You know, you
Speaker 1: drink your caffeine and you go. And I felt great
Speaker 1: afterwards and they said, oh, thanks for your interviews, let's
Speaker 1: come back. So all told, I ended u up doing.
Speaker 1: I believe it was fifty five interviews over seven rounds
Speaker 1: to get my first job in New York City, and
Speaker 1: the reason why it took so long is most likely
Speaker 1: because I was a poor candidate. You know, they couldn't
Speaker 1: fit me in the right bucket. You know. I was
Speaker 1: interviewing on the on the US trading floor and then
Speaker 1: the options derived of desk they made me read a
Speaker 1: thousand page book called Options as a Strategic Investment Way.
Speaker 1: I think it was Nate McMillan, and then they asked
Speaker 1: me one question about what is a butterfly spread? So
Speaker 1: that was it was like the gauntlet and so but
Speaker 1: after you know, like about the fourth round, you're like, okay,
Speaker 1: if they're not gonna hire me, and that's ridiculous. I
Speaker 1: started feeling confident and so they finally hired me, and
Speaker 1: then then I had to go through the mean Grinder
Speaker 1: again about getting into Ork at five thirty and then
Speaker 1: realizing is this what my life is going to be? Yeah,
Speaker 1: well it's fascinating to that just your basically your pursuit
Speaker 1: of that job, your work ethic, your your willingness to
Speaker 1: show up when when nobody else did it set you
Speaker 1: apart in a way that maybe you didn't go to
Speaker 1: one of the schools that they typically mine. It was
Speaker 1: not a target school at all. I mean, you gotta
Speaker 1: show up, folks. Showing up, I really is like fifty
Speaker 1: plus percent of the battle. You know. I promised myself
Speaker 1: in two thousand and nine I would write publish a
Speaker 1: new post three times a week for ten years to
Speaker 1: see what would happen, because I I strongly felt plus
Speaker 1: probability greater that something good would happen if that were
Speaker 1: to come true. And so it's now it's been over
Speaker 1: thirteen years, and I'm just going to continue because if
Speaker 1: you can speak forever, you can write forever. There's so
Speaker 1: much interesting stuff to talk about every day. Yeah. Well,
Speaker 1: one of the things you talking about in the book too,
Speaker 1: is you talk about how not many folks pick a
Speaker 1: place to live based on income potential. And I love
Speaker 1: that you actually dedicated a whole chapter to it in
Speaker 1: your new book. But like, salaries in coastal cities are
Speaker 1: often higher, but it's also much cheaper to live in
Speaker 1: like the American heartland. So so how does someone decide
Speaker 1: that that conundrum of where to live? And you know,
Speaker 1: when it comes to job opportunities. Fortunately, now I guess
Speaker 1: maybe it's a little bit easier with more work from
Speaker 1: home opportunities. But how do you think about that? So
Speaker 1: when you first start off, you're learning instead of earning,
Speaker 1: and eventually you're gonna start earning. But when you first off,
Speaker 1: if you don't have that much knowledge, you don't have
Speaker 1: that much experience by definition, So you should go where
Speaker 1: the job opportunity, the salary is the highest, the greatest,
Speaker 1: And even if that means living in a studio apartment
Speaker 1: with two other people in New York City because it's
Speaker 1: so expensive, that's where you should go. Again, we're talking
Speaker 1: about growing income versus saving money to generate wealth. Because look,
Speaker 1: so many people talk about San Francisco and New York
Speaker 1: City is they're so expensive, how do people afford to
Speaker 1: live there? But it's it's it's economics, folks. You can't
Speaker 1: talk about, you know, a one point eight million dollar
Speaker 1: medium price home without talking about the median household income
Speaker 1: of the buyers of those homes. Right, you have to
Speaker 1: look at both sides of the equation, and because eventually,
Speaker 1: eventually your income, well this is the whole will will
Speaker 1: skyrocket far beyond the cost of living. And this is
Speaker 1: what people don't tell you who have been able to
Speaker 1: generate a lot of wealth in the more expensive places. Yes,
Speaker 1: it costs a lot to live, to buy home, to
Speaker 1: send your kids to school, whatever, but that income growth
Speaker 1: is huge. People are making two thousand dollars right out
Speaker 1: of school working at Facebook, Google, Apple, and by the
Speaker 1: time they're thirty they're making four hundred thousand. And then
Speaker 1: if two people shack up, they're making seven eight hundred
Speaker 1: thousand dollars. So suddenly, maybe that one point a million
Speaker 1: dollar home on a seven thousand dollar household income isn't
Speaker 1: that expensive. So it's it's important to look at it
Speaker 1: that way. Now, I love the heartland because of the
Speaker 1: opportunity to invest as a real estate investor. Post COVID.
Speaker 1: Now we're seeing much more segregation spreading out of America,
Speaker 1: where you can work from home, you can go. So
Speaker 1: if you are in a relatively senior position, people trust
Speaker 1: you and they know you're going to do your job.
Speaker 1: I would take advantage of, you know, relocation closer to
Speaker 1: where your family is. Maybe you can save some money,
Speaker 1: have a better lifestyle. Um that is that makes tons
Speaker 1: of sense. However, here's the one thing a lot of
Speaker 1: people again starting on the career of twenties and thirties,
Speaker 1: need to be cautious about because out of sight is
Speaker 1: often out of mind. So if you are that person
Speaker 1: who wants to get promoted and paid and go places
Speaker 1: and you're earlier on your financial journey, if you're out
Speaker 1: out of sight physically in a satellite office, you might
Speaker 1: be missing out on those in person opportunities. And when
Speaker 1: it comes time to lay people off, it's so much
Speaker 1: easier to lay people off who you don't see often,
Speaker 1: So please be aware of that. Also when it comes
Speaker 1: time to get a raise, like you probably aren't going
Speaker 1: to be the first person when it comes to a
Speaker 1: promotional raise on your manager's mind. Yeah, let's imagine a
Speaker 1: scenario where there's a conference room, you know it's it's
Speaker 1: hybrid work from home whatever. There's like five people in
Speaker 1: the room, and then there's five people dialing in and
Speaker 1: you see them on TV. I will promise you that
Speaker 1: the relationships in that office are going to be stronger,
Speaker 1: and the people who are dialing it in are probably
Speaker 1: not going to be called on as much to participate.
Speaker 1: And this is based on my talks. I've already given
Speaker 1: talks at Google, Yelp, some other large firms and they're
Speaker 1: talking about this dynamic now. So it depends on where
Speaker 1: you are in your career too, and how much you
Speaker 1: want it. Totally agree. Yeah, So, Sam, can we talk
Speaker 1: about your experience negotiating a severance package because you basically
Speaker 1: got paid handsomely to leave your job when you're itching
Speaker 1: to leave anyway. Yeah, share how that went down please. Yeah. So,
Speaker 1: one of my biggest failures as a financial writer and
Speaker 1: blogger is that I haven't been able to create a
Speaker 1: movement where if you're going to quit your job anyway
Speaker 1: or retire early anyway, you should try to negotiate a
Speaker 1: severance because what's the downside. You're gonna leave anyway, your
Speaker 1: two week notice, you're just gone. Why not create a
Speaker 1: win win scenario where you try to get a severance
Speaker 1: based on your good work, your good relationships while you
Speaker 1: help the firm find your replacement and you train your replacement.
Speaker 1: Because I was a manager once, and every manager will
Speaker 1: agree that losing people who have done decent work or
Speaker 1: even just social work is really painful, especially in this
Speaker 1: market tight labor market. Right. So my my story is essentially,
Speaker 1: in two thousand eleven, I was really burned out from
Speaker 1: finance financial crisis. You know, the correlation with effort and
Speaker 1: reward was no longer there, and so I really wanted
Speaker 1: to get the hell out of finance. You know, it's
Speaker 1: just enough, twelve years enough, and I really liked financial
Speaker 1: Samurai and just writing and connecting with people online. So
Speaker 1: after I got a Bagel bonus in twenty eleven, I
Speaker 1: was like, you know what, this is really not worth
Speaker 1: it anymore. I got to find a way out. And
Speaker 1: I recognized from you know, basically we were going through
Speaker 1: like three to five rounds of layouts almost every year
Speaker 1: for a couple of years. I recognized that people were
Speaker 1: getting laid off with pretty decent servance packages, you know,
Speaker 1: based on two to three they were getting paid two
Speaker 1: to let's see, two to three weeks of pay for
Speaker 1: every year worked. And also they were getting their deferred
Speaker 1: cash and stock compensation. So in finance, there was more
Speaker 1: senior you rise, the more of your compensation, your your
Speaker 1: arin bonus will be in deferred cash and stock. So
Speaker 1: it's like a golden cancuff. So you you can never
Speaker 1: eve right because there's no like retirement part of your pensions.
Speaker 1: And so if you quit your job in finance, just
Speaker 1: like if you quit your job in tech or any
Speaker 1: industry that provides deferred compensation, you tend to lose it all.
Speaker 1: And so after being in my one firm for eleven years,
Speaker 1: I had three years of deferred compensation and generally I
Speaker 1: got paid thirty five percent of my total compensation in
Speaker 1: deferred compensation. So in other words, I had like a
Speaker 1: year of deferred a year of income that I was
Speaker 1: just gonna lose, and that was in the hundreds of
Speaker 1: thousands of dollars. And not only that, the company forced
Speaker 1: all employees to invest a portion of their bonus in
Speaker 1: the toxic assets of all these mortgage backed securities to
Speaker 1: get that off the company balance sheet, and which was
Speaker 1: I think a really smart and wise move that we
Speaker 1: all shared the pain. But those investments in turned out
Speaker 1: to be multi multi baggers and if I left that,
Speaker 1: I would have lost that as well. And so the
Speaker 1: bottom line was I was able to to my manager
Speaker 1: and talk to my HR person and say, hey, look,
Speaker 1: you know these are tough times right now, and I've
Speaker 1: hired my replacement. I'll do whatever it takes to train
Speaker 1: him make the transition as seamless as possible, if you
Speaker 1: can reward me with all my deferred compensation and a severance.
Speaker 1: And it took about a month of going back and forth,
Speaker 1: and ultimately I convinced them to let me go and
Speaker 1: pay me out. So it's exactly the opposite of trying
Speaker 1: to convince someone to hire you and pay and promote you.
Speaker 1: But it's actually the same because it's actually about understanding
Speaker 1: what the other side needs. The other side, you know,
Speaker 1: they would like to cut the salary and conversation of
Speaker 1: a director like myself whose heart was no longer in it,
Speaker 1: to promote and pay less a younger person, and then
Speaker 1: to move on. So it was it was great win
Speaker 1: win situation, and it's better. It's just easier emotionally to
Speaker 1: act somebody who who wants to leave than to like
Speaker 1: find somebody who's like yes, it's the hardest thing to it.
Speaker 1: It's one of the hardest things to lay people off.
Speaker 1: And if someone can volunteer to get laid off when
Speaker 1: you have to lay someone off anyway, it is a
Speaker 1: huge relief on the managers, uh, Psyche. And so I
Speaker 1: really hope that more people if they're going to leave
Speaker 1: their job anyway. You know, I think actually giving a
Speaker 1: two week notice is kind of cruel because what are
Speaker 1: the chances that you know, your boss, your colleagues are
Speaker 1: going to find your replacement within two weeks that's good,
Speaker 1: and you know your colleague is gonna be left holding
Speaker 1: the bag where they got to do all the work.
Speaker 1: So my transition out took a couple of months because
Speaker 1: I was trying to help make things smooth. Yeah, I
Speaker 1: like that. One. One of the other things you mentioned
Speaker 1: briefly in the book too, is that there are additional
Speaker 1: benefits to getting laid off as opposed to quitting or
Speaker 1: getting fired, whether it's governmental benefits, U and so cobra,
Speaker 1: things like that. So those are important things to think about.
Speaker 1: But I guess I want to ask you about this
Speaker 1: this situation because you were in a kind of an
Speaker 1: interesting job that most people they might think Okay, cool,
Speaker 1: maybe this works in high finance, But isn't that sort
Speaker 1: of an outlier scenario? U? Yeah, what would you say
Speaker 1: to that person and can they make this a reality
Speaker 1: in their kind of everyday sort of work wherever wherever
Speaker 1: they're at. So I would say anybody who has uh
Speaker 1: the courage to confront their manager or hi person to
Speaker 1: try to get laid off is an outlier. But I
Speaker 1: think we're all outliers if we want to do something
Speaker 1: different or special. I would say everybody has the ability
Speaker 1: to negotiate a severance because everybody has emotions, everybody has needs.
Speaker 1: Paying a serverance is voluntary. The warn Act pay, which
Speaker 1: a lot of people confuse with a servants, is actually law.
Speaker 1: If you're a big company, you have to give severance
Speaker 1: in the form of warn Act pay, which is mandatory
Speaker 1: one to three months of pay. A severance is voluntary.
Speaker 1: So let's just put I don't know myself as an example,
Speaker 1: I have a hard working employee. I'm a private company.
Speaker 1: I don't have to pay a severance. Let's have a
Speaker 1: great employee five years just added so much value, so,
Speaker 1: you know, always nice, great, friendly to work with, easy,
Speaker 1: and they say, Sam, you know I I gotta move on.
Speaker 1: I got another opportunity. You know, thanks so much. Is
Speaker 1: there anything I can do? Um, you know, maybe get
Speaker 1: a severance or something. It's like a going away gift.
Speaker 1: If I like that person and they try to help
Speaker 1: me find their replacement, I'm happily giving them a severance, because,
Speaker 1: if you think about it from a corporation's point of view,
Speaker 1: a severance the amount is not huge in terms of
Speaker 1: the overall earnings, but the good will is huge. It's
Speaker 1: about treating people well so that it can attract more
Speaker 1: people in the future. If you're like a big employee.
Speaker 1: One of the biggest actually for all companies, one of
Speaker 1: the biggest fears is gaining a bad reputation as a
Speaker 1: bad place to work, as a place where they don't
Speaker 1: treat their employees with respect, as disaster with social media
Speaker 1: and everything, you know, I mean, if I want it,
Speaker 1: I can blow people left and right with my platform, right,
Speaker 1: I mean, that's you don't want to do that, but frankly,
Speaker 1: anybody can do that right now. So it's really about
Speaker 1: create um that that collegiate atmosphere, collegial atmosphere and creating
Speaker 1: win wins with situations and anybody can do it in
Speaker 1: any kind of job setting. It might not be a
Speaker 1: specifically like a severance. I mean it could be you
Speaker 1: know what you can how about you work four hours
Speaker 1: a day for the next three months. That's kind of
Speaker 1: like getting double pay for three months. Or how about
Speaker 1: just come in two days a week and you know,
Speaker 1: just do hybrid two days a week and then take
Speaker 1: Friday off. You get three day weekend every every weekend
Speaker 1: for one year. That's kind of like a severance because
Speaker 1: it's about creating matching a scenario of demand and supply
Speaker 1: as well. Yes, not black or white. There are a
Speaker 1: lot of options out there, not black or white. Everything.
Speaker 1: Every problem is there, there's a solution, there's a more
Speaker 1: optical solution where both sides can win. And that's what
Speaker 1: I encourage people to do is always think about the
Speaker 1: other side so you can make a better situation for yourself,
Speaker 1: totally make it win win for for both parties involved.
Speaker 1: With all the talk about severance, Sam, did you happen
Speaker 1: to watch the TV show Severance on Apple TV? Yeah,
Speaker 1: I've watched the first episode, so I'm actually gonna watch more.
Speaker 1: But I gotta sign up Joel both so you got
Speaker 1: to get that first episode get so good, and uh,
Speaker 1: I mean, I'm sure it's gonna kig. I'm not taking
Speaker 1: that show. I just finished Peaky Blinders season six. I
Speaker 1: gotta do the severance. Well, San, thank you so much
Speaker 1: for joining us. Man. Where where can folks learn more
Speaker 1: about you? Well? Obviously at Financial Samurai dot com. I'm
Speaker 1: gonna go ahead and say it, but where can folks
Speaker 1: learn more about your books? Specifically, you can buy buy this,
Speaker 1: not that, How to Spend Your Way to Wealth and
Speaker 1: Freedom anywhere that they sell books, Amazon, Barnes and Nobles,
Speaker 1: Powells Books, Indie Books, and at your bookstore. It's coming
Speaker 1: out July. I think that's it's gonna be the best book.
Speaker 1: And obviously I'm biased because it not only talks about
Speaker 1: helping you achieve financial freedom based on real life experience
Speaker 1: and examples, but it really tackles a lot of life's
Speaker 1: biggest dilemmas. What's the point of money, right is to
Speaker 1: live a better life and to look back with no regret.
Speaker 1: So I really think you guys love it? Yeah? No,
Speaker 1: well we enjoyed reading it, Sam, and yeah, we think
Speaker 1: how the money listeners are gonna love it too, So
Speaker 1: Thank you so much for taking the time out of
Speaker 1: your day to join us. We appreciate it man, And yeah,
Speaker 1: I hope to talk to you soon. Thanks so much, guys,
Speaker 1: I really feel honored that you have me on. Well, Sam,
Speaker 1: we are honored to have had you on the show today.
Speaker 1: Thanks again for joining us, Joel Man. Great conversation here
Speaker 1: with the financial Samurai. The man himself, Sam was one
Speaker 1: of the o g uh he he was just on
Speaker 1: the space. He was on the scene very early on
Speaker 1: when it came to folks who were writing about personal
Speaker 1: finance and specifically on you know, about the different ways
Speaker 1: that you can achieve some sense of financial freedom. So
Speaker 1: it was really cool to have him on today. But yeah,
Speaker 1: what were your Did you have a big takeaway from
Speaker 1: this episode? I think maybe I know, there's a lot
Speaker 1: of great stuff for sure, and I love the way
Speaker 1: so I'm Sam talks about engineering a layoff, and I
Speaker 1: just think that's like such beneficial advice for so many
Speaker 1: people who are interested in changing careers or just tired
Speaker 1: of their job and want something different and they want
Speaker 1: maybe a little bit of peace out money to to
Speaker 1: help them navig eight uh those few months in between
Speaker 1: finding something else, but I think I don't know. The
Speaker 1: main thing that that stuck out to me talking to
Speaker 1: him was when he said investing is a psychological mind bender,
Speaker 1: and he said stay calm um, And basically what he
Speaker 1: said was that the fear is worse than the reality itself.
Speaker 1: And I think it's true. I think it's very true
Speaker 1: that we get fearful and we let that fear override
Speaker 1: the reality of the situation. Um, we we we let
Speaker 1: our emotions overly influence our behavior. So I think, yeah,
Speaker 1: staying calm is staying reasonable in a time where everyone
Speaker 1: else is running around like chickens with their with their
Speaker 1: heads cut off. I think is is sage advice and
Speaker 1: it's something that we should all be following during this time.
Speaker 1: There is no need to look at your account balance
Speaker 1: every day or every week. There's no need to read
Speaker 1: the headlines. And the calmer you can stay in the
Speaker 1: midst of chaos, the more wealth you're gonna be able
Speaker 1: to build. That's right. Yeah, you just set up fear
Speaker 1: is bigger than the actual reality, and so all parlay
Speaker 1: that into negotiating that severance. And one of the things
Speaker 1: that took out to me was that in reality, for
Speaker 1: a business. We're not talking about a large amount of
Speaker 1: money in the grand scheme of things, and you know
Speaker 1: when you're taking the zoomed out big picture look at things,
Speaker 1: but the amount of goodwill that you are fostering by
Speaker 1: working with your boss or your manager or your employer
Speaker 1: to make sure that they're not the ones left holding
Speaker 1: the bag, because a lot of times it's not. It's
Speaker 1: it's less about the money, and it's more about the work.
Speaker 1: It's more about the different tasks. It's more about the
Speaker 1: client relations that you have, and if you are able
Speaker 1: to make that transition stretched out over a period of time,
Speaker 1: or if there are just some ways that you can
Speaker 1: make that happen more smoothly, like he said, while you
Speaker 1: train the new person who's going to be taking over
Speaker 1: your role. That is worth the money, and that is
Speaker 1: something that a manager is willing to pay for. And
Speaker 1: so I mentioned that because you're you're talking about fear,
Speaker 1: and I think a lot of times folks are afraid
Speaker 1: to step out and do something like that. But he
Speaker 1: positioned it where it's presumptuous, it feels presumptious, or it
Speaker 1: feels like or it feels like maybe mean or something
Speaker 1: like that, but what he was saying is that it's
Speaker 1: it's seems more rude to give a two week's notice
Speaker 1: where you're doing all right, because that seems like the
Speaker 1: clean when something that it makes complete sense that that
Speaker 1: is actually maybe a better way to go about it.
Speaker 1: And I just want to say that I was able
Speaker 1: to do this exact same thing. Like I read what
Speaker 1: Sam wrote on this and I was like, dang it,
Speaker 1: that makes a whole lot of sense. And I was
Speaker 1: like looking to to leave, but there was a perfect
Speaker 1: outlet to say, what if I stick around for a
Speaker 1: little bit longer? And I helped with this transition and ultimately, like,
Speaker 1: I see that you're actually trying to get rid of people,
Speaker 1: get rid of me. And so when your employer was
Speaker 1: better off for it though, because you were to stick around.
Speaker 1: And yeah, I think a lot of times folks see
Speaker 1: the two week noticed thing. I was like, Okay, that's
Speaker 1: just how you do it. There's a reason why everybody
Speaker 1: remembers that. I don't know, it's got a good marketing platform.
Speaker 1: Like for whatever reason that is stuck in our minds,
Speaker 1: that's what you're supposed to do. But in reality, maybe
Speaker 1: there are some alternatives where everybody is able to win
Speaker 1: where everybody's going to come out a little more ahead.
Speaker 1: But yeah, that was my big take away. Uh, Foster
Speaker 1: that goodwill with with your employer. Don't be afraid to
Speaker 1: start having some of those conversations. But unless get back
Speaker 1: to the beer that you and I enjoyed during this episode,
Speaker 1: we both enjoyed a daily serving and this is a
Speaker 1: tropical punch berlinavice. This is by Trillium. I didn't know
Speaker 1: that Trillium makes Berlino vices. I think most of the
Speaker 1: beers I've ever had by them have been I P
Speaker 1: A s. And so this is a quite a surprise
Speaker 1: to to be able to enjoy something so delicious that
Speaker 1: I'm not used to these guys making. But what were
Speaker 1: your thoughts on I think we've had like a coffee
Speaker 1: stop from them before too, but everything we've had from
Speaker 1: them has everything else. It's been incredible. Yeah, and and
Speaker 1: so this one was no exception to me. If this
Speaker 1: could count as my serving of daily fruit, I would
Speaker 1: drink it every day because it is just like it's
Speaker 1: bursting at the seams with fruit flavor and so just
Speaker 1: incredibly juicy, luxurious amounts of fruit in this I would say,
Speaker 1: like they must have used a ton because the fruit
Speaker 1: vibes come forward in a big way. But yeah, again,
Speaker 1: like everything Trillium does, I'm impressed. It's so good. Right,
Speaker 1: So some of the flavors they don't like bash you
Speaker 1: over the head all ryeah, it's just not like this
Speaker 1: perfume kind of over the top fruit flavor. It's it's
Speaker 1: it's real, like you can tell that there there there
Speaker 1: is real fruit in here. And like you said, I
Speaker 1: think that's why they called it daily serving, because it
Speaker 1: truly is real fruit in this beer. Honestly, it kind
Speaker 1: of reminds me of Humble Forger because they do a
Speaker 1: really good job of incorporating a lot of that fruit
Speaker 1: flavor without it feeling like this perfumey artificial fruitiness. Um.
Speaker 1: And so I think Trillium has done an incredible job.
Speaker 1: And this was another beer that was sent to us,
Speaker 1: by the way, by Sean. He is up there in Boston,
Speaker 1: I'm pretty sure, and so for him this is maybe
Speaker 1: this is a daily thing because it might be his
Speaker 1: daily serving. Gonna be able to enjoy something this delicious,
Speaker 1: I'm jealous, But Sean, thank you so much for sending
Speaker 1: this one. Hour away. Seriously, thanks Sean, we appreciate it.
Speaker 1: By the way, Matt, we should announce how to enter
Speaker 1: the book. We almost forgot that you mentioned at the
Speaker 1: beginning of the episode. We are giving away five copies
Speaker 1: of Sam's new book by this, not that, And all
Speaker 1: you gotta do is be a How to Money newsletter subscriber.
Speaker 1: If you already subscribed, you realize how glorious it is,
Speaker 1: and you are already entered. Uh. But if you have
Speaker 1: not yet subscribed, you should and it's free, and you
Speaker 1: will get entered to win one of these five copies,
Speaker 1: and we will mention the winners in next week's newsletter
Speaker 1: a week from tomorrow. That's right, and you can sign
Speaker 1: up for that newsletter at how to Money dot com
Speaker 1: Ford slash newsletter. I love how we got that. You
Speaker 1: are l just nailed right, We got it all right man.
Speaker 1: That's gonna be it for this episode, buddy. Until next time,
Speaker 1: Best Friends Out, Best Friends Out.