Sam Dogen teaches us the way of the Financial Samurai so that we too can achieve long-term financial freedom while living our best lives.
Sam Dogen, founder of Financial Samurai, retired at age 35 after years of working towards financial freedom. In this episode, he teaches us the way of the Financial Samurai so that we too can achieve long-term financial freedom while living our best lives.
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Srini Rao
Sam, welcome to the Unmistakable Creative. Thanks so much for taking the time to join us.
Sam Dogen Financial Samurai
Srini Rao , thank you so much for having me.
Srini Rao
Yeah, it is my pleasure to have you here. You and I go way back to probably 2009. I think we both started blogs roughly around the same time. I think we've met in person like once, from what I remember, somewhere in San Francisco at a diner or a coffee shop. You have a new book out called By This, Not That, all of which we will get into. But as you know from having heard the show, I want to start with a question that has absolutely nothing to do with.
Sam Dogen Financial Samurai
Way back.
Sam Dogen Financial Samurai
I think so.
Srini Rao
the book and kind of something to do with the book. What was the very first job you ever had and how did that influence the way that you think about careers, life, and money?
Sam Dogen Financial Samurai
My first real job was flipping burgers at McDonald's for $4 an hour in high school
I was a sophomore, I needed some money to try to take a girl out on a date and I had none. Well, I had $10 a week in allowance. So that was one of the worst jobs I ever experienced because we had a power tripping manager who yelled at us for speaking Spanish because he thought we were talking bad about him or the customers. And it was also a really humbling job because I had to work the cash register on the weekends and I would sometimes see my friends and I felt embarrassed. I felt embarrassed with the purple, you know, color.
shirt and the black pants and then the visor and so I hid away to make some apple pies but that experience really kind of you know set me up for a desire not to work at McDonald's after college and also to appreciate service jobs minimum wage jobs so I could never take anything I had for granted
Srini Rao
Yeah.
Well, I don't know if you knew this, but my very first job was working at McDonald's for a power tripping manager as well. An angry Jamaican lady who yelled at me constantly. And I think that one of the things that I recognized only in retrospect was, you know, I was a senior in high school. I was applying to college and I distinctly remember thinking to myself like, wait a minute, this is just a stepping stone for me. For most of these people, this is everyday life.
Sam Dogen Financial Samurai
Hahaha
Sam Dogen Financial Samurai
Yeah.
Srini Rao
circumstance you're in even if you're you know not as poor as the people that were working at McDonald's. So one of the things that you actually talk about in the book is your parents and the fact that you guys grew up without a lot of money. I mean what did that do for your personal narrative around money? Like how did that shape the way that you think about all of this and career choices?
Sam Dogen Financial Samurai
Well, my parents were firmly middle class. They worked for the US government, and they were Foreign Service officers.
And it's just, my parents were just super frugal. When I was in Malaysia for middle school, we had government housing, which is a nice house, but he wasn't willing to buy a new car. He bought a 1976 Datsun, which was before Nissan. And it didn't have any paint, and it only had one hubcap. And so, I was again really, really embarrassed getting chauffeured around anywhere with my parents. But it showed me humility, it showed me frugleness
food, he wouldn't allow me to order anything but water and a slice of lemon. And so it was this constant frugality and this purposefulness of using money that I think has really made me the way I am today in terms of spending money and saving money and investing for the future.
Srini Rao
Yeah, I mean, I think one of the things that really struck me in the book was when you said we lived in a modest townhouse in a grungier part of town. I never had a Nintendo growing up. And all I knew of Air Jordans was a pair of hand me downs from a friend that was two sizes too large. We were by no means poor. We just never had more than we truly needed. And it's funny because to listen to your story, I feel like we have led such parallel lives in some ways and such divergent ones and others, because this was literally my experience growing up. You know, same thing.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
ordering drinks, the Air Jordan thing, trust me, the first thing I did when I had a job at Intuit, even though I don't play basketball at all, was I went and bought a pair of Air Jordans just to like, you know, heal that sort of childhood wound, you know, from that experience. But given all of that, what was the sort of narrative about making career choices and making your way in the world?
Sam Dogen Financial Samurai
Yeah.
All right.
Yeah.
Sam Dogen Financial Samurai
Well, so.
My father sat me down at the breakfast table to show me stock tickers behind the newspaper one day. And he just explained to me what stocks are and investing. And so I said, hey, you know, if you can invest in something and not have to work and it might make you money, that sounded great. So I decided to study economics in Chinese in college. And then I decided, hey, why not work in the investment field? I mean, obviously it's hard to get a job there, but I got lucky. I was able to get my first job at Goldman Sachs in New York City
College of William & Mary, which is a state school and not a target school. And I decided why not make a career out of trying to invest and make money because actually that's what I wanted because I didn't have any.
But I soon found out the first day on the job when they required us to get in at 5.30 in the morning and leave after 7 p.m. that there was no way I could last for decades like my parents did in the government. So very quickly, I had to figure out a way to save and invest so that I could one day be free.
Srini Rao
I want to come back to that, but I want to talk about your sort of pre-college and high school periods because I know one of the things that you talked about was playing tennis and how much that shaped your life. I'm always curious with athletes, as somebody who was a terrible fucking athlete for pretty much my entire junior high and high school careers, when I realized I was meant to be a musician, not an athlete, what are the things that you got from playing tennis about discipline and habit that have informed and shaped the work that you do today?
Sam Dogen Financial Samurai
So athletics has always been a part of my life. I believe it's important to have a mental and physical balance. And pity the person who's seven feet tall who doesn't play basketball. It's gotta sad. For me, I'm only 5'10". I have nothing special about me, I'm quite average. But tennis really instilled in me work ethic and facing the fear of an...
Srini Rao
What a waste, right?
Sam Dogen Financial Samurai
intimidating opponent and then just soaking in that anxiety and that need to prepare and to prepare yourself mentally for battle. And you know, I lost many, many times before, but it taught me really that the worst that can happen is that you lose and you learn from your mistakes and you try to get better. And so till this day, I still play competitive tennis, USTA league tennis, and it's just so thrilling because of that battle, that need for preparation, that need for figuring out your strategy, adapting.
You know not failing because of a lack of effort because if you lose a match because you didn't try your best You're always going to regret it. You're always going to regret it So this is totally instilled a lot of might work ethic in every other part of my life
Srini Rao
Let's talk about the state college Goldman Sachs thing, because having gone to Berkeley as an undergrad, I know exactly what you're talking about. Berkeley was one of the handful of target schools, and even at a place like Berkeley, they took one person every year. And one of my friends was actually that one person, and his wife was the one person that got hired by McKinsey the year that she graduated. So we always joke, it's like these two are like the ultimate power couple. But I think that what that shows me, at least, as somebody who made the transition for the
Sam Dogen Financial Samurai
Yeah.
Oh, nice.
Sam Dogen Financial Samurai
Wow.
Srini Rao
from Berkeley to Pepperdine where same thing that you experienced happened to me, but in graduate school is a level of resourcefulness that I often don't see in a lot of people who are like, oh, these doors aren't gonna be open. And you and I both know, I mean, you said it yourself in the book. At the end of the day, like these luxury schools, these prestigious schools, they open doors that aren't always open to you otherwise. You managed to figure out how to kick the door down. Tell me about that. What is it that enables that?
Sam Dogen Financial Samurai
Mm.
Sam Dogen Financial Samurai
So I would have to say a lot of it has to do with luck and with showing up. I basically signed up for a career fair in Washington DC, two hours north of Williamsburg, Virginia, where the College of William and Mary resided. And I showed up at 6 a.m. on a Saturday morning on a bus. And supposedly 20 other kids or more showed up.
but signed up, but nobody showed up. So after about an hour, the bus driver said, ah, screw those guys, let's change vehicles. So he drove me in the bus to some random shack. He parked the bus and he pulled out of this wooden garage barn, a black Lincoln Town car.
and he drove me two hours, chauffeur limo two hours to Washington DC to the career fair. And so that was a great lesson of just showing up because nobody else did. And I was there, I met with the recruiter, she was very, very hard on me, she just grilled me about the federal rate, federal reserve and the various rate cuts, various stocks and everything. And then she invited me to Super Day. So she was my angel on my shoulder who saw something in me.
and said, you know what, Sam has some potential, let's invite him to Super Day, but that's all she could do. She could invite, but she couldn't make them hire me. And then on Super Day, there were 12 interviews all day, it was like eight, nine hours. And then after that, I said, oh, okay, I think I did well, I think I got the job, but I didn't get the job because apparently I didn't do well and I was kind of a misfit. You know, I came from a non-target school, public school, I didn't have, you know, connections
And so they invited me for five more rounds of interviews in New York City. And that was five more rounds and 55 total interviews overall. And so after about like the 30th interview or 35th interview, I was like, this is ridiculous. But clearly I'm on the right path. They can't deny me now, can they? And so eventually, you know, they found a home for me, which was in the international equities desk, because I had been bounced around from the US trading desk to the derivatives desk.
Sam Dogen Financial Samurai
So eventually, it just worked out and I survived.
Srini Rao
Well, let's talk briefly about education, because I know that you actually later in the book go on to talk about education, but given the order of this conversation is going in, I think it's important that we actually address this. I mean, we're in a really kind of bizarre situation where higher education gets more and more expensive by the day, and it seems to be less and less of a guarantee that it's actually going to lead to anything. And I want to bring back a clip from an episode that we had with Scott Galloway that actually also recently another episode. I want to hear your thoughts on this.
Sam Dogen Financial Samurai
that they could never get into their alma mater today. But that's a bad thing, because on a risk-adjusted basis, it's likely that your children will be somewhere in your weight class.
Srini Rao
Given that you've written a lot about this, what's your take on what he said?
Sam Dogen Financial Samurai
Mm-hmm.
Sam Dogen Financial Samurai
So I firmly believe that education is what will set us all free, but at the same time education is free nowadays. You're listening to this great podcast, you can read a lot of financial literature, anything you want you can learn for free if you have internet access or access to the library. And so for the idea that tuition continues to rise at or quicker than the pace of inflation is ridiculous.
Sam Dogen Financial Samurai
educate the masses and you know educations for all but then exclude the majority of people is also inconsistent with thought and action. So my thought is this ah
Go to the best school you can get into and that you can afford. Because over time, after you get your first job, nobody really cares about where you went. At the same time, it's that education that's gonna provide you that first opportunity. So unfortunately, I mean, society is really bifurcated in this way. And I like to say, the reason why William & Mary and UC Berkeley and other public schools are so great is because you can't buy yourself,
in. You cannot buy your way in. You might a little bit but not like the private schools who can decide who can get in and who can't. And so I think there's actually a change on the way. I think Forbes, they re-ranked their rankings and they put Berkeley at number one because it took into consideration what percentage of students were getting Pell Grants. So these grants for lower income kids to help educate smart, hardworking, talented lower income
And I thought that was a great variable to include in the rankings. So I think there's going to be a sea of change going forward where viewing that prestigious private school degree is going to be bifurcated. There's always going to be people who want it, but there's going to be practical people and more and more people who realize it's really not necessary to get ahead and do what you want.
Srini Rao
Yeah. Well, I mean, I know that you're a parent now and you weren't the last time we spoke, which was probably close to a decade ago. Then I know your kids are young, but I wonder, how do you think about what the future is going to look like when it comes to education for your own children?
Sam Dogen Financial Samurai
All right.
Sam Dogen Financial Samurai
Yeah.
So one of the reasons why I'm a stay-at-home father is because I wanna educate my own children as much as possible, while also allowing them to have a traditional education growing up in school. Because I think it's brutally difficult. The world is just becoming smaller. There's just gonna be more and more competition. People from China, India, other emerging markets are just gonna eat our lunch. And so the way I look at it is, I wanna be a stay-at-home father to educate my children along the way until they no longer wanna...
from me, speak with me or hang out with me, right? Like after I think age 12 to 14, it's kind of like, see you later, right?
Srini Rao
Hahaha!
Srini Rao
Yeah, you're going to be the most horrible person on the planet, as all of our parents are when we become teenagers.
Sam Dogen Financial Samurai
Exactly, and I'm bracing for that. I'm hoping it's not gonna be terrible, but I'm bracing for that. So I see myself, I see like 10 years, 10 to 14 years of educational opportunity. And so one of the reasons why I've kept Financial Samurai going for so long and publishing three times a week since 2009 is because I wanna show my children my work ethic, what I do, how to write, how to speak, how to market,
to PR, to all that stuff online, because frankly everything is gonna be internet and technology. If you're not on there, you're gonna be at a disadvantage. And my other thought process is, I expect them not to get in anywhere. You know, I just think it's just ultra competitive. 5%, 10% acceptance rates, really? That's like, okay, by definition, most will not get in.
And so I expect them not to get in anywhere great. I expect them not to have amazing jobs, but I do expect to be there for them. And if they fail, I will be there for them. And if they need a job, they can come work at Financial Samurai.
Srini Rao
Yeah, yeah, we'll talk about I know you talk about that a little later in the book in terms of employing your kids Which I thought was pretty hilarious. I've never seen anything explained like that Yeah, no, I mean, it's absolutely true. You know what Galloway said like, you know people joke about the fact that they wouldn't get into their alma mater I don't know about you, but I definitely wouldn't get into Berkeley today with the grades that I had in high school
Sam Dogen Financial Samurai
Yeah, I didn't get into Berkeley. I don't even bother applying because I couldn't get in. I just feel like if you have an expectation you can't get in anywhere, you figure out on your own. And I think people who attend prestigious, elite private schools need to be a little careful about understanding where the wind is blowing.
Because again, with the Operation Varsity Blues showing that wealthy parents have been able to buy their kids' way into these elite private schools and how there's a more bifurcated gap between the rich and the poor, the gap is widening. Do you really wanna tell people that you went to some elite school that costs $80,000 a year in tuition alone? I think you probably wanna stay more mum about it as the world changes.
Srini Rao
Yeah, absolutely. Well, talk to me about that moment when you get to Goldman Sachs, this thing that you've worked so hard for, you know, busted your ass for, you know, knock down doors for, and you come to this realization that you don't want to spend your life this way. Why do you think you had it so early and so many other people spend half a decade before or even a close to a decade before they wake up one day and they realize like this is not what I wanted?
Sam Dogen Financial Samurai
Well, first they made us get in at 5.30 a.m. And so I dropped calculus in college because the class started at 8 a.m. So 5.30 a.m. was like super torture for me. And then just the pressure of hustling and getting this information for this person. And you were getting yelled at a lot. There was not a lot of respect when you're a junior person on Wall Street. And so that's not me. I mean, my dad is from Hawaii. I'm competitive, but I'm also pretty relaxed. I'm pretty easygoing.
I knew right then and there I couldn't last and it wasn't for me. And the other thing is I saw like so I was interviewing at Goldman in 1998 when it was private and then the company went public in 1999 and all the partners got very wealthy and so I looked at my bosses the VPs the partners the partner MDs and I said do I want to be like that?
Maybe, but not really. I don't feel like they're that much happier. And so it was really like, man, what is the point of all this? And the other thing is when 9-11 happened, two years after I started working in finance, it really hit home that, man, life is precious. I was at the top of one of the World Trade Center buildings, Windows of the World, for the Latin America Goldman Conference.
And then 9-11 happened months later. And that was like a wake up call for me too, saying, you know, I gotta really find some more purpose in life. This is good, I need to make money because I don't have money. And then I was in Mumbai in 2008. And then two weeks after I left the Oberoi Hotel in Mumbai, the terrorist attacks happened. And they shot up the place at...
the Taj and the Oberoi Hotel. And that was another wake up call for me nine years into my career. I was like, wow, it seems like death is coming for me. I want to live my life as best that I can as a hedge, just in case of an early death.
Srini Rao
Well, I think that makes a perfect segue into the actual content of the book, because you open the book by saying life is both long and short, fast and slow. We must try to make the most of each day so we can minimize looking back with regret. Financial freedom sooner than later is a personal mantra and guiding theme of financial samurai. The website and community have been running since 2009. But then you also go on to say, but the truth is, it's difficult to become financially independent simply by putting money in the bank to achieve financial freedom. We need to know how to spend our money in ways
build wealth now and in the long run. So let's define financial freedom first because I think that's really important. I know you talk about the fact that everybody's definition of this is different.
Sam Dogen Financial Samurai
Yeah, so the definition of financial independence or financial freedom.
is when you have enough passive income to cover your basic living expenses. So passive income can come from your investments such as stock dividends, bond coupon payments, rental income, and even your entrepreneurial activities such as let's say book sales. And so the idea is you're financially independent when you don't have to work for money and you can do what you want. Now everybody has different levels of wants and needs and that's up to you to define.
But that's basically it. And once you have your basic living expenses, food, clothing, shelter, you can take more risks and live a life more true to yourself.
Srini Rao
Well, you know, I think that one of the things that really struck me in the opening of the book was when you said, this is a book about making optimal choices for some of life's most important decisions. So in my mind, like I said, this is not just a book about money. It's about a book about making decisions as much as it is a book about money with money as the backdrop.
Sam Dogen Financial Samurai
Right. So the longer you live, the more regrets you will have.
And the more regrets you will have, the more it'll eat you up inside. Because you'll say, gosh, I wish I did it differently, or I wish I went with that choice, or I wish I asked her out, or I wish I wrote that book or started a business. So over a lifetime, you're gonna accumulate all these regrets and it's gonna kinda tear you up inside. And so the idea of buy this, not that, is to help you build wealth sooner in a risk-appropriate manner, so you can use that money to make more optimal decisions.
And I suggest to everybody to think in probabilities, not absolutes. Because when you start thinking in absolutes, you believe with 100% certainty you have to, you need that 100% certainty to be able to make a decision. And that means that you're going to miss out on a lot of opportunities. So instead, if you think of probabilities for anything, really, it helps open things up. So I have a 70-30 decision-making framework, which states that if you believe with a 70%
that the decision you're making will be the right one, go for it while having the humility and understanding knowing that 30% of the time you're gonna get it wrong, but unless it's something catastrophic like death, you're gonna bounce back, learn from your mistakes, and make better decisions going forward.
Srini Rao
Yeah.
Well, let's talk about some of the benefits of financial freedom. I mean, some of the certain ones are kind of obvious, you know, freedom. And I think working fearlessly was a big one for me because I think I saw that firsthand. I mean, when you're me and you've been fired from every job you've ever had, you suddenly kind of get a reality check. And to me, it was like a company for life was gone. Yeah. I think the day I entered the workforce, I was like, Oh, no such thing. Nobody's ever going to keep me. And you say that financial freedom lets you enter jobs, projects or gigs without this fear.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
on bigger risks, it also lets you explore new areas without always worrying about pay. And that, I think really in a lot of ways to me, is a strong case for why you should find other ways to make money other than a job.
Sam Dogen Financial Samurai
Absolutely. You know, we've got this society right now, it seems that because of social media, you know, we want things now, we want to go straight to the corner office without putting in our dues. But the reality is you have to make some sacrifices in the beginning because in the beginning, after high school to college, you don't know that much, you're learning. So you better be busting your butt getting in before your boss, working after, networking, building a support network that's going to pull you up so you can make more money and build more wealth.
Because if you have the money to not fear Repercussion
you can do great things. Imagine if you had enough money so that you can actually speak your mind instead of just bite your tongue when your boss says something really offensive. Or imagine if you had enough money where you can create a great product that people might poo and boo on social media or online, but you're confident in yourself and you're not gonna fail, you're not gonna starve. I mean, you can take more risks and that's how creators create. A lot of people, sadly, a lot of the wealthiest people
Wealthier because they started with wealth. Like if you think about Bill Gates III, you know, he was already rich. You know, if he failed out of Harvard, he would just chill out at his vacation home. Evan Spiegel at Snapchat, he was very rich already. So the idea is to get your basics down. And if you don't have your basics down, at least know that you're on the right path so that sooner or later, you're gonna get your financial life in order. And that'll give you the courage and confidence to be a better creator.
Srini Rao
There's one thing that stood out to me in the benefits, where you say, the discrimination I've experienced from the playground to the boardroom was one of my main motivations for working toward financial freedom. It was a big reason why I decided to save so much and work aggressively on passive income dreams. My desire to have absolute choice and be beholden to no one was and still is a huge motivating factor. I wanted to talk about that. I mean, you and I are both people who are minorities. So to me, that really stood out
Sam Dogen Financial Samurai
Yeah.
Srini Rao
I remember one of my friends says, how can you call this racism? He's like, maybe you're just a shitty employee. I was like, yeah. And I also saw things that very blatantly were racism. I remember when I worked on a sales team at a market research company, my boss said, you're gonna stay here and basically answer phones or whatever and everybody else is gonna go to this offsite.
Sam Dogen Financial Samurai
Well, I've had plenty of experiences of racism after coming to Virginia for high school. Again, I was living abroad for 13 years of my life. One clear example was I was at Williamsburg at Denny's, and I was with my girlfriend at the time, it was midnight, and she was beautiful, half Chinese, half Caucasian, I'm Asian, and then these football players came to the booth right next to us as we were eating the pancakes, and one guy looked over to me and said,
What the hell are you looking at you chink, right?
And I said, what? What are you talking about? And then his three other burly offensive linemen started talking smack as well. And so all I wanted to do was pick up a knife and basically attack him and defend our honor. But then I figured, you know what? It's probably not a good idea because there's four guys who weigh 1,000 pounds versus me who's at 165. And so we left. So if that's not blatant racism to threaten me and to call me derogatory words, I don't know what is.
And then so in the workplace, I quickly realized that at the end of the day people will take care of people who Come from their same backgrounds who look like them who went to the same school and so forth It's just human nature. We take care of people who are more similar to us and who therefore we like more And it's just the way it is And so if you're an Asian person in America you account for about six percent of the population
you count for about 60% of the population. So even if I got 100% support from Asian people in America, I still would not be able to overcome a white person who has 10.1% support, right? Because 6.1% is greater than 6%. And so that's just math. It's human nature and it's math. So as a minority, you just gotta deal with it, right? You gotta recognize the way the world is,
Sam Dogen Financial Samurai
criticism but use that as fire, as motivation to build your own wealth, to achieve financial freedom sooner so you can do more of what you want. It was such an amazing motivator to experience all this stuff coming to America for high school and beyond.
Srini Rao
Yeah, absolutely. I mean, it's funny because I you mentioned, you know, working hard, Ed, you like you said, you hear this passive income thing. And I never forgot, you know, when I was working with my mentor, Greg, he said, You want to know what the best way to earn passive income spend years working your ass off.
Sam Dogen Financial Samurai
Right, exactly. No passive income starts with doing nothing. You gotta work your ass off. And to say, anybody to say, oh yeah, I'll just come, well maybe they just were born into a wealthy family. But here's the other thing. I pity the fool who has everything given to them.
Srini Rao
Yeah.
Sam Dogen Financial Samurai
Because then you don't experience what it's like to struggle, what it's like to work on something for so long and finally make it true. I mean, that is a true gift, that journey, that struggle to create something that you really, really want. It's an amazing feeling, and as a parent now, I have to be very careful not to give everything to my kids because that's all I wanna do. I need to have them struggle.
Srini Rao
Well, yeah, actually that brings up a question that I've asked a handful of people. I mean, your kids are growing up in what is probably a relatively privileged existence at this point. How do you think about making sure they remain aware of how much privilege they've been born into?
Sam Dogen Financial Samurai
That's a tough question and the answer is you got to do the work. You got to do the work. So we have a rental property portfolio.
and I bring my son to paint, and he sees me sanding, mudding, painting, every time there's turnover, every time there's new construction. And then I have him come with me to pull the weeds, pull the weeds at our house and at our rental properties, and I say, look, you're gonna pull the weeds with your daddy, and you're gonna make a dollar, I don't know, every 30 minutes, and you're gonna use that money to save and invest for a toy that you want. Sound good? And he goes, sounds good, daddy. So the kids really need to see you
the work. And one of the benefits of working from home is they can see you do the work. They can see you in your office, typing on your computer, doing whatever, and then you tell your kids really explicitly the reason why I'm doing the work is so I can make the money to take care of you. You have to explain to your children what you're doing and they have to see you do the work.
Srini Rao
What's?
talk briefly about debt because there's just so much more stuff I want to get to. You basically go over four types of debt credit cards, automobiles, student loans and mortgages and you know I'd be lying to you if I told you I didn't have student loan debt. I think half of the damn country is drowning in student loan debt. So I think debt weighs on you in a number of different ways. It's psychological and then there's also this sort of balancing act of okay am I going to basically starve myself to death and do the Dave Ramsey way of like eating beans and rice
Sam Dogen Financial Samurai
Yeah.
Srini Rao
the rest of my life. That's not realistic either. So I'm just curious, you know, when you think about somebody like Rameet or, you know, your philosophy, I mean, I know nobody wants to have debt. And in a lot of cases, people didn't end up there. Some definitely ended up there out of poor choices. Some of them ended up out of, you know, circumstance. Like for me, I graduated April 2009 from business school and, you know, December 2000 from undergrad. You know, you could not have planned such poor timing.
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
Right.
Sam Dogen Financial Samurai
Right.
Yeah, I mean, death is a necessary evil in terms of education for many people.
Again, I believe education is so powerful. Hopefully we go into debt in the right ways to learn something practical that will make us money that will build us wealth. But there's different levels of debt. Consumer debt obviously is terrible. If you're having revolving credit card debt with an average interest rate of between 17 to 18%, your debt cost...
is a seven to eight percent greater return than the average return of the S&P 500 since 1926. And your credit card revolving debt cost is a greater percentage than the illustrious Warren Buffett has made in his career, and he's worth over $100 billion. So in terms of consumer debt, you gotta get out of the consumer debt. That is where you are buying things you frankly don't deserve and you don't need, if it's revolving. You have to cut that out.
one. But the other types of debt, student debt...
Sam Dogen Financial Samurai
You know, it's sad that colleges don't have a guaranteed job offer waiting for you for all the money you take out to go to that school. And so that is something where we all need to be a little bit more intentional in what we study and where we go. But I wouldn't say that student loan debt is terrible because again, it's buying you that education to help you make better choices going forward. So
Obviously, there's this debt, the student debt moratorium right now, but for the next level of debt, usually it's real estate debt.
mortgage debt. And the idea is, you know, since the history of time, real estate has kept up with or beat inflation. And so if you can take on debt in a responsible manner, and I talk about, you know, home buying guide in my book, then it's probably going to be to your benefit. So the idea of bottom line is get debt to buy things that will improve quality of your life and that will give you a greater chance to build wealth. And don't get into debt to buy things that are going to ruin your life.
life.
Srini Rao
Yeah, I think that's a perfect way to sum it up. Well, let's talk about what you call these asset allocation models, which are the conventional, the new life, and the financial samurai model. Can you explain each one of those to us?
Sam Dogen Financial Samurai
Sure.
So one of the things that I see wrong in people planning their finances is that they don't have a model, a net worth allocation model or an asset allocation model to follow by age. And as a result, their risk exposure is off. They take too much risk or they take not enough risk for their age. And so these models, conventional, new life and financial samurai, are there for people with various levels of risk tolerance.
And as you go towards the financial samurai model, it's more and more about betting on yourself So if you look at the wealthiest people in the world, they all are entrepreneurs because they took risks They bet on themselves. They created companies and they have massive amounts of equity And so not all of us are like that right all a lot of us Most of us are happy with jobs and that's totally fine That's the conventional model, but you need to follow an appropriate asset allocation model So you can do well during the bull market
and not blow yourself up during the bear markets. And so, you know, we all have experienced the internet and it's something that I think more and more of us should leverage to make more money and to live more free lifestyles. And so that is the idea, to go from the conventional way, retire at 60, work at a job for 30, 40 years, hopefully you find that job you like, you save and invest aggressively.
or you go and be more entrepreneurial, by the time you're 30, you're starting a business and you're doing a side hustle, and that could one day account for greater than 50% of your net worth.
Srini Rao
Well, let's talk about what you call optimizing investments. You break them down into two categories, taxable and tax advantaged. How do those work? I think that one of the things that kind of kept going through my head as I was going through your book was, fuck, I'm 40 years old. Like, I should have been doing this years ago. And I don't think I'm alone in that.
you know, part of that, as I said, is circumstantial. And, you know, there are probably other people who feel like, you know, damn, like, I feel like I'm going to be playing catch up for the rest of my life. So can you address this from both those standpoints?
Sam Dogen Financial Samurai
Sure. So.
I mean the idea is you, so taxes, taxes are gonna be most of our ongoing greatest liabilities for the rest of our lives. As a result, we need to figure out ways to tax optimize as much as possible so that the drag is less, so that we can build more wealth. And so the idea is if you have a day job, take advantage, full advantage of your tax advantage retirement accounts, namely the 401k, right? Because you put money in pre-tax. It grows without the...
and then when you exit, you know, you've got to pay taxes on withdrawals.
And so that money is there for you after the age of 59 and a half. And then you should take advantage of the Roth IRA because you put money in post-tax, but hopefully when your tax rate is low, the money compounds without a tax drag over decades. And then when you withdraw, there's no tax penalty because you already paid that tax. And then if your parents take advantage and contribute to the 529 plan, even though the money is after tax, it compounds tax without the tax drag.
for appropriate educational expenses without paying tax or any fees. So the idea is to get into the mindset of if the amount you're saving investing doesn't hurt every single month, you are not saving or investing enough because you're not, you're just winging it. You're not being intentional with the money that you're investing and saving and spending. So that's the whole idea, tax optimization.
Srini Rao
I love it that actually simplifies that entire chapter for me so much
Sam Dogen Financial Samurai
Ha ha.
Srini Rao
Well, let's talk about real estate in particular, because I think it's funny. You hear so much sort of contradictory advice about real estate, right? You know, like the James Altucher's, like, you know, buying a house is the worst decision you'll ever make. For me personally, I value mobility, so I don't wanna be locked down, but I started to see that whole mindset very differently when I read through your idea of real estate fundamentals, where you break it up into what you call short, neutral, and long. So explain those to us.
Sam Dogen Financial Samurai
Yeah.
This is a really important concept that I hope more people will understand and talk about. You are only neutral real estate if you own your primary residence. So your primary residence, you own it, you go up and down with the real estate market. You're short real estate when you're a renter. And why is that? Because you're at the mercy of ever rising rents and ever rising prices. You're only benefiting by renting if rents go down and property prices go down.
Shorting the S&P 500 over the long term isn't a good idea. Shorting the real estate market by renting over the long term is not a good idea. And then finally, your only long real estate. You can only really benefit from real estate if you own more than one property because you have to live somewhere. So if you own your primary residence and you own a rental property, you can benefit from the rise in the real estate market because you can rent out your rental property and or you could sell it for a profit.
Srini Rao
Well, speaking of real estate, let's look at two things here. Let's talk about, you know, job choices and choices of location. Because I know choice of location matters when it comes to real estate. I mean, you and I both know San Francisco is insanely expensive to live in at this point. I think the apartment that I used to rent in San Francisco across the street from Golden Gate Park was a two bedroom with a garage and we paid $1500 a month. I think that place goes for $4000 a month now.
Sam Dogen Financial Samurai
Well there goes the point of...
you know, renting is short, the real estate market, you cannot benefit. Inflation is too powerful of a force to combat, especially now, right? The latest print on inflation was 9.1%. I think it's definitely gonna fade in the second half of 2022 and 2023, but don't fight inflation and don't fight the Fed. These are really important topics. It doesn't matter. I mean, look, I understand if you don't own real estate, you're probably against real estate
We are all biased to the choices we make, but we have to look at reality and we have to look at economics and we have to look at historical rates of return. Once you can lock down your real estate costs or at least control them a little bit.
You free up a lot of ability to do other things because you don't have to constantly worry about you know You're rising your home cost going up And that is different look, you know, I know you as a digital nomad in the past and currently in the present value that flexibility However, you have to think about if you didn't buy real estate Where did you put your money and if you put that money? Let's say in the stock market. Well, then it's probably Doing fine, right?
have is they don't put their money into an alternative investment other than real estate because real estate is like four savings as well as you pay down your mortgage. And so people will tend to blow their money on things they don't need and that's called economic leakage. And then five to ten years from now you wonder where is my money? So
Srini Rao
No, no, absolutely. So that actually so there's one other thing I wanted to bring away. There's another clip from Scott Galloway that I wanted to bring back. And this one in particular, I brought up specifically for our conversation. This is something he said that I thought was really interesting. And I wanted to hear your take on it. Take a listen.
Srini Rao
What do you make of that?
Sam Dogen Financial Samurai
Well, I think it's human nature to say if you don't have mega millions that someone is poor and you try to make yourself feel better about whatever you have. So I don't agree with that. Clearly the person making 5 to 7 million is rich, he or she has the optionality to reduce their burn. Whereas the person who with 48,000 has less optionality.
So unless you're a complete donkey and don't know how to cut costs or change your taste or adjust to different times, I think more people would agree that having five to seven million a year is better than having 48,000 a year. So that's... Yeah.
Srini Rao
Yeah
Yeah.
I didn't agree with you on that, which I think that actually makes a perfect segue into talking specifically about career choices. One of the things that you say is company loyalty is overrated in this day and age. Long gone are the days of pensions and opportunities to work at one company for life. Being loyal is sadly now a 30 70 move. Instead, for maximum financial gain, you should job hop every two to five years during your 20s and 30s. Too many people make the mistake of thinking that if they do a good job, they'll eventually get promoted and paid what they're worth.
that's not how it works in most companies, meritocracy is a lost art. I think that makes some people who have full-time jobs think what the hell.
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
What the hell, why am I not leaving and jumping? Well, it's true. So you get your first job and you hopefully get paid market rate. And then every year that time goes by.
Srini Rao
Yeah, exactly.
Sam Dogen Financial Samurai
there is this growing gap between the market rate and the rate that you earn. And it's up to you, and it's very difficult to try to close that gap without sounding like a greedy employee. And so the easiest way to get back to market rate is to job hop every two to five years. I was a loyal soldier at Credit Suisse for 11 years, and that probably cost me over a million dollars because I was comfortable. You know, I was accepting of getting paid below market rate.
hard enough to get those raises. And I do recommend that once a year, every year, you show what you've done, all the value you've added, especially at the beginning of the year, because your managers will not remember anything you did in the first half of the year unless you remind them. So you really have to be fighting for yourself. And I think it's worth job hopping three to four to five times in the first 15, 20 years of your career to get that market rate, to make the most amount you can. And so long as you're joining,
companies that have a good purpose and good people, why not? I think loyalty and sadly is overrated. Companies are going to fire you or lay you off as soon as they need to cut costs.
Srini Rao
Yeah, trust me, I've experienced that firsthand. So let's talk specifically about side hustles. There's one thing that you said about side hustles and I really like it. It's funny because it actually inspired the title for a blog post that I wanna write.
You said the best time to start a side gig is when you have a stable job with benefits, when you have no source, not when you have no source of income. Consider the first two years of growing your endeavor and incubation period with downside risks. See if you enjoy the process. And you and I both know this. I can't tell you how many people will basically say, I don't have time. Time comes up over and over and over as like the most frequent excuse that people give me for, oh, I can't do this. And I remember I sent you a DM with what
Sam Dogen Financial Samurai
Mm.
Srini Rao
said was my favorite quote from the entire book. So with those two things in mind, talk about that in more detail.
Sam Dogen Financial Samurai
Well, working 40 hours a week is an artificial construct.
And the thing is when people say they don't have time, what they mean is they just simply don't wanna do it. You will do something if you want it bad enough because I believe long-term everything is rational. If you hit your job enough, or if you wanna do something else enough, or if you want that wealth enough, you're gonna find ways to make time. And so don't come to us, don't come to me and say, I don't have time, but I still want this. Because the reality is you don't want this. You don't want it, because otherwise you would make time. For me, I wanted to get out of finance.
after 11 years I was like this is not fun. You know, the recession, financial crisis, and not making as much money, the correlation with effort and reward is off. And so I decided, you know what, I'm gonna start Financial Samurai finally in 2009, July, bottom of the market, because I was scared. I was scared that I was gonna lose my job. And I wanted to do something new, and I needed a backup plan, because I already graduated from business school. And therefore I woke up a little bit earlier, you know, 5 a.m., 6 a.m.
worked on it for an hour or two hours and then after I ate around 9 p.m. I worked on it some more. You will make time if something you care about is great enough.
Srini Rao
Yeah, I mean, I said Laura Vander Kim in one of her books said, everything you say you don't have time for is just not a priority.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
So I want to go to this quote in particular because this, like I said, was my favorite quote in the entire book. And that is that you can't do extraordinary things if you do what everybody else is doing.
Sam Dogen Financial Samurai
That's true, because if you do what everybody else is doing, you're just going to hug the middle, right? It's just the bell curve. And you've got to be able to put your hard hat on.
If you want to do something different, do something new, you're going to ruffle so many feathers. Man, I've got to tell you, I've gotten so much backlash writing about so many things and different concepts over the past 13 years on Financial Samurai. But the good thing is, you just get used to it. And if you say it in a respectful and logical way, I think people will come around. And there's no way I would have imagined that I would be able to leave my job at age 34 and be free and to do what I want.
if I didn't take more risks, if I didn't think, hmm, maybe I can negotiate a severance package. Just like, you know, you're trying to negotiate your way into a job, what if I could negotiate my way out of a job? You know, that's unconventional thinking, and a lot of people still don't do that, even though I've written a book about how to negotiate a severance in 2012, because people are too afraid of doing something different, they're too afraid of confrontation, they'd rather text you instead of break up with you, and that's a shame.
Srini Rao
Well, it's funny because I remember going through parts of the book and this is something that occurred to me as I was thinking about the fact that you and I are going to connect again because I remember there were times that you would write things and they would trigger me and you might even remember some of these. And I realize now looking back why they triggered me, it's because there was a grain of truth to them. You know?
Sam Dogen Financial Samurai
Yeah, and I do remember what I wrote. It was called, do people really work only 40 hours a week or less and complain why they can't get ahead? And I know I pissed you off and I'm sorry for that.
Srini Rao
Yeah, and I remember because I was like, you said swimming, not surfing. I still remember that. But the funny thing is, and I realize now, especially after working with a mentor who rode my ass like no tomorrow, often what you want to hear feels good. What you need to hear doesn't.
Sam Dogen Financial Samurai
Ha ha ha!
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
Yeah, people don't care. They're just gonna tell you what you wanna hear and just move on. They don't have time for your stuff, right? Everybody has their own problems. But if people care, if people wanna shake you to change, they're gonna tell you the truth, and then you're either gonna accept it and try to learn from it, or you're gonna be stubborn and not, and then you're gonna accept whatever that comes your way.
Srini Rao
Well, speaking of things that piss people off, this is one final place that I want to actually go to, and this is marriage. And I think this really struck me as something that stood out. And you even say, I know that what I'm about to say will rub some people the wrong way, but I believe it to be true. All else being equal, if you have a choice, marrying someone you love who is well off is an optimal decision, versus marrying someone who's struggling financially. By marrying someone who's financially secure, you get to leapfrog a generation of struggle. I think that is
so sort of practical and logical because so often, when we get sort of starry-eyed, we don't think about the practicality of any of this.
Sam Dogen Financial Samurai
now.
We don't think about anything. I didn't think about that at all when I was in high school, college. I just wanted to be with someone who I found very, very attractive and nice. But now that I'm a parent, and if you think about your parents in Indian culture, I think you told a story about setting your parents, trying to set you up with other people, right? You were even on that show on Netflix. That was awesome, right? And so the idea is you want what's best for your kids. You want them to have love, but you also want to not worry about them financially.
Srini Rao
Hmm?
Yeah, yeah.
Sam Dogen Financial Samurai
It's just being practical and look, if all else being equal, right? Not everything is equal, but I'm saying all else being equal. If you can find someone you love who is actually well off or on the right path, go for it because look, if 40 to 50% of marriages fail and money is one of the one or two greatest reasons for that marriage failing, then obviously finding someone with the right, if you're on the same page financially, makes better sense than not.
Srini Rao
Yeah, no, absolutely. I mean, yeah, that was one of those things that I realized after having girlfriends where I had no boundaries around money and was willing to spend money I didn't have, I finally realized, I was like, this is actually important. This is one of those things where I need to be okay with things that I'm gonna say are deal breakers.
Sam Dogen Financial Samurai
Yeah, I mean, you're a team. You gotta find your best teammate who's got your back, who's got the same goals, same philosophies. Otherwise, things are gonna get really contentious real quick.
Srini Rao
Yeah, it's kind of funny because I feel like these huge life events just amplify underlying problems that you're ignoring.
Sam Dogen Financial Samurai
Yes.
Srini Rao
One last thing, so you make this distinction between passion and money and startups and big companies. Let's finish there. Because I really appreciated the fact that you mentioned that the sort of stories that we hear about startup success are primarily outliers. And it's so true, like I mean, in general, if you think about almost all the literature around successful people, it's all basically about outliers.
Sam Dogen Financial Samurai
Yeah.
Yeah, I would say be careful. There's a lot of starry eyed people who wanna join startups because they think they're gonna ride the rocket ship to mega millions. And that's especially true here in the San Francisco Bay area. But as someone who's lived here for 20 plus years, I've spoken to many, many startup employees, nine times out of 10, you don't get rich joining a startup. You get rich going to a traditional job where that pays market rate and you're saving and investing and you're staying there and you're all your job,
established industry. So I would say it just depends on what you want to do and how much you believe in the company and how much you want to bet on yourself.
Srini Rao
Wow, well this has been awesome, man. I mean, you've really packed it with so much insight and wisdom, so I want to ask you my final question, which it's funny because I don't think you've ever actually been a guest since we called the show The Unmistakable Creative, even though you were when we had the first version of the show. What do you think it is that makes somebody or something unmistakable?
Sam Dogen Financial Samurai
I think being able to live true to yourself, whatever it is that you believe, you do. So that means having congruency with thought and with action.
Because if you think one way and you're doing something else, you're incongruent and you're very forgettable. But if you think in one way and you continuously do and you stick with it over time, I think that makes you unmistakable because too many people, they'll quit way before the good gets good. And so I hope people can really be able to be congruent in their lifestyles.
Srini Rao
Well, I can't thank you enough for taking the time to join us to share your stories, your wisdom, and your insights below our listeners. Where can people find out more about you, your work, the book, and everything else you're up to?
Sam Dogen Financial Samurai
Yeah, well thank you so much for having me. You can go to financialsamurai.com and leave a comment on any article that you find. You can buy, buy this, not that. How to spend your way to wealth and freedom at financialsamurai.com forward slash BTNT. And you can subscribe to my free weekly newsletter at financialsamurai.com forward slash newsletter.
Srini Rao
And for everybody listening, we will wrap the show with that. Oh, man.
Sam Dogen Financial Samurai
Thank you Srini Rao .
Srini Rao
Sam, welcome to the Unmistakable Creative. Thanks so much for taking the time to join us.
Sam Dogen Financial Samurai
Srini Rao , thank you so much for having me.
Srini Rao
Yeah, it is my pleasure to have you here. You and I go way back to probably 2009. I think we both started blogs roughly around the same time. I think we've met in person like once, from what I remember, somewhere in San Francisco at a diner or a coffee shop. You have a new book out called By This, Not That, all of which we will get into. But as you know from having heard the show, I want to start with a question that has absolutely nothing to do with.
Sam Dogen Financial Samurai
Way back.
Sam Dogen Financial Samurai
I think so.
Srini Rao
the book and kind of something to do with the book. What was the very first job you ever had and how did that influence the way that you think about careers, life, and money?
Sam Dogen Financial Samurai
My first real job was flipping burgers at McDonald's for $4 an hour in high school
I was a sophomore, I needed some money to try to take a girl out on a date and I had none. Well, I had $10 a week in allowance. So that was one of the worst jobs I ever experienced because we had a power tripping manager who yelled at us for speaking Spanish because he thought we were talking bad about him or the customers. And it was also a really humbling job because I had to work the cash register on the weekends and I would sometimes see my friends and I felt embarrassed. I felt embarrassed with the purple, you know, color.
shirt and the black pants and then the visor and so I hid away to make some apple pies but that experience really kind of you know set me up for a desire not to work at McDonald's after college and also to appreciate service jobs minimum wage jobs so I could never take anything I had for granted
Srini Rao
Yeah.
Well, I don't know if you knew this, but my very first job was working at McDonald's for a power tripping manager as well. An angry Jamaican lady who yelled at me constantly. And I think that one of the things that I recognized only in retrospect was, you know, I was a senior in high school. I was applying to college and I distinctly remember thinking to myself like, wait a minute, this is just a stepping stone for me. For most of these people, this is everyday life.
Sam Dogen Financial Samurai
Hahaha
Sam Dogen Financial Samurai
Yeah.
Srini Rao
circumstance you're in even if you're you know not as poor as the people that were working at McDonald's. So one of the things that you actually talk about in the book is your parents and the fact that you guys grew up without a lot of money. I mean what did that do for your personal narrative around money? Like how did that shape the way that you think about all of this and career choices?
Sam Dogen Financial Samurai
Well, my parents were firmly middle class. They worked for the US government, and they were Foreign Service officers.
And it's just, my parents were just super frugal. When I was in Malaysia for middle school, we had government housing, which is a nice house, but he wasn't willing to buy a new car. He bought a 1976 Datsun, which was before Nissan. And it didn't have any paint, and it only had one hubcap. And so, I was again really, really embarrassed getting chauffeured around anywhere with my parents. But it showed me humility, it showed me frugleness
food, he wouldn't allow me to order anything but water and a slice of lemon. And so it was this constant frugality and this purposefulness of using money that I think has really made me the way I am today in terms of spending money and saving money and investing for the future.
Srini Rao
Yeah, I mean, I think one of the things that really struck me in the book was when you said we lived in a modest townhouse in a grungier part of town. I never had a Nintendo growing up. And all I knew of Air Jordans was a pair of hand me downs from a friend that was two sizes too large. We were by no means poor. We just never had more than we truly needed. And it's funny because to listen to your story, I feel like we have led such parallel lives in some ways and such divergent ones and others, because this was literally my experience growing up. You know, same thing.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
ordering drinks, the Air Jordan thing, trust me, the first thing I did when I had a job at Intuit, even though I don't play basketball at all, was I went and bought a pair of Air Jordans just to like, you know, heal that sort of childhood wound, you know, from that experience. But given all of that, what was the sort of narrative about making career choices and making your way in the world?
Sam Dogen Financial Samurai
Yeah.
All right.
Yeah.
Sam Dogen Financial Samurai
Well, so.
My father sat me down at the breakfast table to show me stock tickers behind the newspaper one day. And he just explained to me what stocks are and investing. And so I said, hey, you know, if you can invest in something and not have to work and it might make you money, that sounded great. So I decided to study economics in Chinese in college. And then I decided, hey, why not work in the investment field? I mean, obviously it's hard to get a job there, but I got lucky. I was able to get my first job at Goldman Sachs in New York City
College of William & Mary, which is a state school and not a target school. And I decided why not make a career out of trying to invest and make money because actually that's what I wanted because I didn't have any.
But I soon found out the first day on the job when they required us to get in at 5.30 in the morning and leave after 7 p.m. that there was no way I could last for decades like my parents did in the government. So very quickly, I had to figure out a way to save and invest so that I could one day be free.
Srini Rao
I want to come back to that, but I want to talk about your sort of pre-college and high school periods because I know one of the things that you talked about was playing tennis and how much that shaped your life. I'm always curious with athletes, as somebody who was a terrible fucking athlete for pretty much my entire junior high and high school careers, when I realized I was meant to be a musician, not an athlete, what are the things that you got from playing tennis about discipline and habit that have informed and shaped the work that you do today?
Sam Dogen Financial Samurai
So athletics has always been a part of my life. I believe it's important to have a mental and physical balance. And pity the person who's seven feet tall who doesn't play basketball. It's gotta sad. For me, I'm only 5'10". I have nothing special about me, I'm quite average. But tennis really instilled in me work ethic and facing the fear of an...
Srini Rao
What a waste, right?
Sam Dogen Financial Samurai
intimidating opponent and then just soaking in that anxiety and that need to prepare and to prepare yourself mentally for battle. And you know, I lost many, many times before, but it taught me really that the worst that can happen is that you lose and you learn from your mistakes and you try to get better. And so till this day, I still play competitive tennis, USTA league tennis, and it's just so thrilling because of that battle, that need for preparation, that need for figuring out your strategy, adapting.
You know not failing because of a lack of effort because if you lose a match because you didn't try your best You're always going to regret it. You're always going to regret it So this is totally instilled a lot of might work ethic in every other part of my life
Srini Rao
Let's talk about the state college Goldman Sachs thing, because having gone to Berkeley as an undergrad, I know exactly what you're talking about. Berkeley was one of the handful of target schools, and even at a place like Berkeley, they took one person every year. And one of my friends was actually that one person, and his wife was the one person that got hired by McKinsey the year that she graduated. So we always joke, it's like these two are like the ultimate power couple. But I think that what that shows me, at least, as somebody who made the transition for the
Sam Dogen Financial Samurai
Yeah.
Oh, nice.
Sam Dogen Financial Samurai
Wow.
Srini Rao
from Berkeley to Pepperdine where same thing that you experienced happened to me, but in graduate school is a level of resourcefulness that I often don't see in a lot of people who are like, oh, these doors aren't gonna be open. And you and I both know, I mean, you said it yourself in the book. At the end of the day, like these luxury schools, these prestigious schools, they open doors that aren't always open to you otherwise. You managed to figure out how to kick the door down. Tell me about that. What is it that enables that?
Sam Dogen Financial Samurai
Mm.
Sam Dogen Financial Samurai
So I would have to say a lot of it has to do with luck and with showing up. I basically signed up for a career fair in Washington DC, two hours north of Williamsburg, Virginia, where the College of William and Mary resided. And I showed up at 6 a.m. on a Saturday morning on a bus. And supposedly 20 other kids or more showed up.
but signed up, but nobody showed up. So after about an hour, the bus driver said, ah, screw those guys, let's change vehicles. So he drove me in the bus to some random shack. He parked the bus and he pulled out of this wooden garage barn, a black Lincoln Town car.
and he drove me two hours, chauffeur limo two hours to Washington DC to the career fair. And so that was a great lesson of just showing up because nobody else did. And I was there, I met with the recruiter, she was very, very hard on me, she just grilled me about the federal rate, federal reserve and the various rate cuts, various stocks and everything. And then she invited me to Super Day. So she was my angel on my shoulder who saw something in me.
and said, you know what, Sam has some potential, let's invite him to Super Day, but that's all she could do. She could invite, but she couldn't make them hire me. And then on Super Day, there were 12 interviews all day, it was like eight, nine hours. And then after that, I said, oh, okay, I think I did well, I think I got the job, but I didn't get the job because apparently I didn't do well and I was kind of a misfit. You know, I came from a non-target school, public school, I didn't have, you know, connections
And so they invited me for five more rounds of interviews in New York City. And that was five more rounds and 55 total interviews overall. And so after about like the 30th interview or 35th interview, I was like, this is ridiculous. But clearly I'm on the right path. They can't deny me now, can they? And so eventually, you know, they found a home for me, which was in the international equities desk, because I had been bounced around from the US trading desk to the derivatives desk.
Sam Dogen Financial Samurai
So eventually, it just worked out and I survived.
Srini Rao
Well, let's talk briefly about education, because I know that you actually later in the book go on to talk about education, but given the order of this conversation is going in, I think it's important that we actually address this. I mean, we're in a really kind of bizarre situation where higher education gets more and more expensive by the day, and it seems to be less and less of a guarantee that it's actually going to lead to anything. And I want to bring back a clip from an episode that we had with Scott Galloway that actually also recently another episode. I want to hear your thoughts on this.
Sam Dogen Financial Samurai
that they could never get into their alma mater today. But that's a bad thing, because on a risk-adjusted basis, it's likely that your children will be somewhere in your weight class.
Srini Rao
Given that you've written a lot about this, what's your take on what he said?
Sam Dogen Financial Samurai
Mm-hmm.
Sam Dogen Financial Samurai
So I firmly believe that education is what will set us all free, but at the same time education is free nowadays. You're listening to this great podcast, you can read a lot of financial literature, anything you want you can learn for free if you have internet access or access to the library. And so for the idea that tuition continues to rise at or quicker than the pace of inflation is ridiculous.
Sam Dogen Financial Samurai
educate the masses and you know educations for all but then exclude the majority of people is also inconsistent with thought and action. So my thought is this ah
Go to the best school you can get into and that you can afford. Because over time, after you get your first job, nobody really cares about where you went. At the same time, it's that education that's gonna provide you that first opportunity. So unfortunately, I mean, society is really bifurcated in this way. And I like to say, the reason why William & Mary and UC Berkeley and other public schools are so great is because you can't buy yourself,
in. You cannot buy your way in. You might a little bit but not like the private schools who can decide who can get in and who can't. And so I think there's actually a change on the way. I think Forbes, they re-ranked their rankings and they put Berkeley at number one because it took into consideration what percentage of students were getting Pell Grants. So these grants for lower income kids to help educate smart, hardworking, talented lower income
And I thought that was a great variable to include in the rankings. So I think there's going to be a sea of change going forward where viewing that prestigious private school degree is going to be bifurcated. There's always going to be people who want it, but there's going to be practical people and more and more people who realize it's really not necessary to get ahead and do what you want.
Srini Rao
Yeah. Well, I mean, I know that you're a parent now and you weren't the last time we spoke, which was probably close to a decade ago. Then I know your kids are young, but I wonder, how do you think about what the future is going to look like when it comes to education for your own children?
Sam Dogen Financial Samurai
All right.
Sam Dogen Financial Samurai
Yeah.
So one of the reasons why I'm a stay-at-home father is because I wanna educate my own children as much as possible, while also allowing them to have a traditional education growing up in school. Because I think it's brutally difficult. The world is just becoming smaller. There's just gonna be more and more competition. People from China, India, other emerging markets are just gonna eat our lunch. And so the way I look at it is, I wanna be a stay-at-home father to educate my children along the way until they no longer wanna...
from me, speak with me or hang out with me, right? Like after I think age 12 to 14, it's kind of like, see you later, right?
Srini Rao
Hahaha!
Srini Rao
Yeah, you're going to be the most horrible person on the planet, as all of our parents are when we become teenagers.
Sam Dogen Financial Samurai
Exactly, and I'm bracing for that. I'm hoping it's not gonna be terrible, but I'm bracing for that. So I see myself, I see like 10 years, 10 to 14 years of educational opportunity. And so one of the reasons why I've kept Financial Samurai going for so long and publishing three times a week since 2009 is because I wanna show my children my work ethic, what I do, how to write, how to speak, how to market,
to PR, to all that stuff online, because frankly everything is gonna be internet and technology. If you're not on there, you're gonna be at a disadvantage. And my other thought process is, I expect them not to get in anywhere. You know, I just think it's just ultra competitive. 5%, 10% acceptance rates, really? That's like, okay, by definition, most will not get in.
And so I expect them not to get in anywhere great. I expect them not to have amazing jobs, but I do expect to be there for them. And if they fail, I will be there for them. And if they need a job, they can come work at Financial Samurai.
Srini Rao
Yeah, yeah, we'll talk about I know you talk about that a little later in the book in terms of employing your kids Which I thought was pretty hilarious. I've never seen anything explained like that Yeah, no, I mean, it's absolutely true. You know what Galloway said like, you know people joke about the fact that they wouldn't get into their alma mater I don't know about you, but I definitely wouldn't get into Berkeley today with the grades that I had in high school
Sam Dogen Financial Samurai
Yeah, I didn't get into Berkeley. I don't even bother applying because I couldn't get in. I just feel like if you have an expectation you can't get in anywhere, you figure out on your own. And I think people who attend prestigious, elite private schools need to be a little careful about understanding where the wind is blowing.
Because again, with the Operation Varsity Blues showing that wealthy parents have been able to buy their kids' way into these elite private schools and how there's a more bifurcated gap between the rich and the poor, the gap is widening. Do you really wanna tell people that you went to some elite school that costs $80,000 a year in tuition alone? I think you probably wanna stay more mum about it as the world changes.
Srini Rao
Yeah, absolutely. Well, talk to me about that moment when you get to Goldman Sachs, this thing that you've worked so hard for, you know, busted your ass for, you know, knock down doors for, and you come to this realization that you don't want to spend your life this way. Why do you think you had it so early and so many other people spend half a decade before or even a close to a decade before they wake up one day and they realize like this is not what I wanted?
Sam Dogen Financial Samurai
Well, first they made us get in at 5.30 a.m. And so I dropped calculus in college because the class started at 8 a.m. So 5.30 a.m. was like super torture for me. And then just the pressure of hustling and getting this information for this person. And you were getting yelled at a lot. There was not a lot of respect when you're a junior person on Wall Street. And so that's not me. I mean, my dad is from Hawaii. I'm competitive, but I'm also pretty relaxed. I'm pretty easygoing.
I knew right then and there I couldn't last and it wasn't for me. And the other thing is I saw like so I was interviewing at Goldman in 1998 when it was private and then the company went public in 1999 and all the partners got very wealthy and so I looked at my bosses the VPs the partners the partner MDs and I said do I want to be like that?
Maybe, but not really. I don't feel like they're that much happier. And so it was really like, man, what is the point of all this? And the other thing is when 9-11 happened, two years after I started working in finance, it really hit home that, man, life is precious. I was at the top of one of the World Trade Center buildings, Windows of the World, for the Latin America Goldman Conference.
And then 9-11 happened months later. And that was like a wake up call for me too, saying, you know, I gotta really find some more purpose in life. This is good, I need to make money because I don't have money. And then I was in Mumbai in 2008. And then two weeks after I left the Oberoi Hotel in Mumbai, the terrorist attacks happened. And they shot up the place at...
the Taj and the Oberoi Hotel. And that was another wake up call for me nine years into my career. I was like, wow, it seems like death is coming for me. I want to live my life as best that I can as a hedge, just in case of an early death.
Srini Rao
Well, I think that makes a perfect segue into the actual content of the book, because you open the book by saying life is both long and short, fast and slow. We must try to make the most of each day so we can minimize looking back with regret. Financial freedom sooner than later is a personal mantra and guiding theme of financial samurai. The website and community have been running since 2009. But then you also go on to say, but the truth is, it's difficult to become financially independent simply by putting money in the bank to achieve financial freedom. We need to know how to spend our money in ways
build wealth now and in the long run. So let's define financial freedom first because I think that's really important. I know you talk about the fact that everybody's definition of this is different.
Sam Dogen Financial Samurai
Yeah, so the definition of financial independence or financial freedom.
is when you have enough passive income to cover your basic living expenses. So passive income can come from your investments such as stock dividends, bond coupon payments, rental income, and even your entrepreneurial activities such as let's say book sales. And so the idea is you're financially independent when you don't have to work for money and you can do what you want. Now everybody has different levels of wants and needs and that's up to you to define.
But that's basically it. And once you have your basic living expenses, food, clothing, shelter, you can take more risks and live a life more true to yourself.
Srini Rao
Well, you know, I think that one of the things that really struck me in the opening of the book was when you said, this is a book about making optimal choices for some of life's most important decisions. So in my mind, like I said, this is not just a book about money. It's about a book about making decisions as much as it is a book about money with money as the backdrop.
Sam Dogen Financial Samurai
Right. So the longer you live, the more regrets you will have.
And the more regrets you will have, the more it'll eat you up inside. Because you'll say, gosh, I wish I did it differently, or I wish I went with that choice, or I wish I asked her out, or I wish I wrote that book or started a business. So over a lifetime, you're gonna accumulate all these regrets and it's gonna kinda tear you up inside. And so the idea of buy this, not that, is to help you build wealth sooner in a risk-appropriate manner, so you can use that money to make more optimal decisions.
And I suggest to everybody to think in probabilities, not absolutes. Because when you start thinking in absolutes, you believe with 100% certainty you have to, you need that 100% certainty to be able to make a decision. And that means that you're going to miss out on a lot of opportunities. So instead, if you think of probabilities for anything, really, it helps open things up. So I have a 70-30 decision-making framework, which states that if you believe with a 70%
that the decision you're making will be the right one, go for it while having the humility and understanding knowing that 30% of the time you're gonna get it wrong, but unless it's something catastrophic like death, you're gonna bounce back, learn from your mistakes, and make better decisions going forward.
Srini Rao
Yeah.
Well, let's talk about some of the benefits of financial freedom. I mean, some of the certain ones are kind of obvious, you know, freedom. And I think working fearlessly was a big one for me because I think I saw that firsthand. I mean, when you're me and you've been fired from every job you've ever had, you suddenly kind of get a reality check. And to me, it was like a company for life was gone. Yeah. I think the day I entered the workforce, I was like, Oh, no such thing. Nobody's ever going to keep me. And you say that financial freedom lets you enter jobs, projects or gigs without this fear.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
on bigger risks, it also lets you explore new areas without always worrying about pay. And that, I think really in a lot of ways to me, is a strong case for why you should find other ways to make money other than a job.
Sam Dogen Financial Samurai
Absolutely. You know, we've got this society right now, it seems that because of social media, you know, we want things now, we want to go straight to the corner office without putting in our dues. But the reality is you have to make some sacrifices in the beginning because in the beginning, after high school to college, you don't know that much, you're learning. So you better be busting your butt getting in before your boss, working after, networking, building a support network that's going to pull you up so you can make more money and build more wealth.
Because if you have the money to not fear Repercussion
you can do great things. Imagine if you had enough money so that you can actually speak your mind instead of just bite your tongue when your boss says something really offensive. Or imagine if you had enough money where you can create a great product that people might poo and boo on social media or online, but you're confident in yourself and you're not gonna fail, you're not gonna starve. I mean, you can take more risks and that's how creators create. A lot of people, sadly, a lot of the wealthiest people
Wealthier because they started with wealth. Like if you think about Bill Gates III, you know, he was already rich. You know, if he failed out of Harvard, he would just chill out at his vacation home. Evan Spiegel at Snapchat, he was very rich already. So the idea is to get your basics down. And if you don't have your basics down, at least know that you're on the right path so that sooner or later, you're gonna get your financial life in order. And that'll give you the courage and confidence to be a better creator.
Srini Rao
There's one thing that stood out to me in the benefits, where you say, the discrimination I've experienced from the playground to the boardroom was one of my main motivations for working toward financial freedom. It was a big reason why I decided to save so much and work aggressively on passive income dreams. My desire to have absolute choice and be beholden to no one was and still is a huge motivating factor. I wanted to talk about that. I mean, you and I are both people who are minorities. So to me, that really stood out
Sam Dogen Financial Samurai
Yeah.
Srini Rao
I remember one of my friends says, how can you call this racism? He's like, maybe you're just a shitty employee. I was like, yeah. And I also saw things that very blatantly were racism. I remember when I worked on a sales team at a market research company, my boss said, you're gonna stay here and basically answer phones or whatever and everybody else is gonna go to this offsite.
Sam Dogen Financial Samurai
Well, I've had plenty of experiences of racism after coming to Virginia for high school. Again, I was living abroad for 13 years of my life. One clear example was I was at Williamsburg at Denny's, and I was with my girlfriend at the time, it was midnight, and she was beautiful, half Chinese, half Caucasian, I'm Asian, and then these football players came to the booth right next to us as we were eating the pancakes, and one guy looked over to me and said,
What the hell are you looking at you chink, right?
And I said, what? What are you talking about? And then his three other burly offensive linemen started talking smack as well. And so all I wanted to do was pick up a knife and basically attack him and defend our honor. But then I figured, you know what? It's probably not a good idea because there's four guys who weigh 1,000 pounds versus me who's at 165. And so we left. So if that's not blatant racism to threaten me and to call me derogatory words, I don't know what is.
And then so in the workplace, I quickly realized that at the end of the day people will take care of people who Come from their same backgrounds who look like them who went to the same school and so forth It's just human nature. We take care of people who are more similar to us and who therefore we like more And it's just the way it is And so if you're an Asian person in America you account for about six percent of the population
you count for about 60% of the population. So even if I got 100% support from Asian people in America, I still would not be able to overcome a white person who has 10.1% support, right? Because 6.1% is greater than 6%. And so that's just math. It's human nature and it's math. So as a minority, you just gotta deal with it, right? You gotta recognize the way the world is,
Sam Dogen Financial Samurai
criticism but use that as fire, as motivation to build your own wealth, to achieve financial freedom sooner so you can do more of what you want. It was such an amazing motivator to experience all this stuff coming to America for high school and beyond.
Srini Rao
Yeah, absolutely. I mean, it's funny because I you mentioned, you know, working hard, Ed, you like you said, you hear this passive income thing. And I never forgot, you know, when I was working with my mentor, Greg, he said, You want to know what the best way to earn passive income spend years working your ass off.
Sam Dogen Financial Samurai
Right, exactly. No passive income starts with doing nothing. You gotta work your ass off. And to say, anybody to say, oh yeah, I'll just come, well maybe they just were born into a wealthy family. But here's the other thing. I pity the fool who has everything given to them.
Srini Rao
Yeah.
Sam Dogen Financial Samurai
Because then you don't experience what it's like to struggle, what it's like to work on something for so long and finally make it true. I mean, that is a true gift, that journey, that struggle to create something that you really, really want. It's an amazing feeling, and as a parent now, I have to be very careful not to give everything to my kids because that's all I wanna do. I need to have them struggle.
Srini Rao
Well, yeah, actually that brings up a question that I've asked a handful of people. I mean, your kids are growing up in what is probably a relatively privileged existence at this point. How do you think about making sure they remain aware of how much privilege they've been born into?
Sam Dogen Financial Samurai
That's a tough question and the answer is you got to do the work. You got to do the work. So we have a rental property portfolio.
and I bring my son to paint, and he sees me sanding, mudding, painting, every time there's turnover, every time there's new construction. And then I have him come with me to pull the weeds, pull the weeds at our house and at our rental properties, and I say, look, you're gonna pull the weeds with your daddy, and you're gonna make a dollar, I don't know, every 30 minutes, and you're gonna use that money to save and invest for a toy that you want. Sound good? And he goes, sounds good, daddy. So the kids really need to see you
the work. And one of the benefits of working from home is they can see you do the work. They can see you in your office, typing on your computer, doing whatever, and then you tell your kids really explicitly the reason why I'm doing the work is so I can make the money to take care of you. You have to explain to your children what you're doing and they have to see you do the work.
Srini Rao
What's?
talk briefly about debt because there's just so much more stuff I want to get to. You basically go over four types of debt credit cards, automobiles, student loans and mortgages and you know I'd be lying to you if I told you I didn't have student loan debt. I think half of the damn country is drowning in student loan debt. So I think debt weighs on you in a number of different ways. It's psychological and then there's also this sort of balancing act of okay am I going to basically starve myself to death and do the Dave Ramsey way of like eating beans and rice
Sam Dogen Financial Samurai
Yeah.
Srini Rao
the rest of my life. That's not realistic either. So I'm just curious, you know, when you think about somebody like Rameet or, you know, your philosophy, I mean, I know nobody wants to have debt. And in a lot of cases, people didn't end up there. Some definitely ended up there out of poor choices. Some of them ended up out of, you know, circumstance. Like for me, I graduated April 2009 from business school and, you know, December 2000 from undergrad. You know, you could not have planned such poor timing.
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
Right.
Sam Dogen Financial Samurai
Right.
Yeah, I mean, death is a necessary evil in terms of education for many people.
Again, I believe education is so powerful. Hopefully we go into debt in the right ways to learn something practical that will make us money that will build us wealth. But there's different levels of debt. Consumer debt obviously is terrible. If you're having revolving credit card debt with an average interest rate of between 17 to 18%, your debt cost...
is a seven to eight percent greater return than the average return of the S&P 500 since 1926. And your credit card revolving debt cost is a greater percentage than the illustrious Warren Buffett has made in his career, and he's worth over $100 billion. So in terms of consumer debt, you gotta get out of the consumer debt. That is where you are buying things you frankly don't deserve and you don't need, if it's revolving. You have to cut that out.
one. But the other types of debt, student debt...
Sam Dogen Financial Samurai
You know, it's sad that colleges don't have a guaranteed job offer waiting for you for all the money you take out to go to that school. And so that is something where we all need to be a little bit more intentional in what we study and where we go. But I wouldn't say that student loan debt is terrible because again, it's buying you that education to help you make better choices going forward. So
Obviously, there's this debt, the student debt moratorium right now, but for the next level of debt, usually it's real estate debt.
mortgage debt. And the idea is, you know, since the history of time, real estate has kept up with or beat inflation. And so if you can take on debt in a responsible manner, and I talk about, you know, home buying guide in my book, then it's probably going to be to your benefit. So the idea of bottom line is get debt to buy things that will improve quality of your life and that will give you a greater chance to build wealth. And don't get into debt to buy things that are going to ruin your life.
life.
Srini Rao
Yeah, I think that's a perfect way to sum it up. Well, let's talk about what you call these asset allocation models, which are the conventional, the new life, and the financial samurai model. Can you explain each one of those to us?
Sam Dogen Financial Samurai
Sure.
So one of the things that I see wrong in people planning their finances is that they don't have a model, a net worth allocation model or an asset allocation model to follow by age. And as a result, their risk exposure is off. They take too much risk or they take not enough risk for their age. And so these models, conventional, new life and financial samurai, are there for people with various levels of risk tolerance.
And as you go towards the financial samurai model, it's more and more about betting on yourself So if you look at the wealthiest people in the world, they all are entrepreneurs because they took risks They bet on themselves. They created companies and they have massive amounts of equity And so not all of us are like that right all a lot of us Most of us are happy with jobs and that's totally fine That's the conventional model, but you need to follow an appropriate asset allocation model So you can do well during the bull market
and not blow yourself up during the bear markets. And so, you know, we all have experienced the internet and it's something that I think more and more of us should leverage to make more money and to live more free lifestyles. And so that is the idea, to go from the conventional way, retire at 60, work at a job for 30, 40 years, hopefully you find that job you like, you save and invest aggressively.
or you go and be more entrepreneurial, by the time you're 30, you're starting a business and you're doing a side hustle, and that could one day account for greater than 50% of your net worth.
Srini Rao
Well, let's talk about what you call optimizing investments. You break them down into two categories, taxable and tax advantaged. How do those work? I think that one of the things that kind of kept going through my head as I was going through your book was, fuck, I'm 40 years old. Like, I should have been doing this years ago. And I don't think I'm alone in that.
you know, part of that, as I said, is circumstantial. And, you know, there are probably other people who feel like, you know, damn, like, I feel like I'm going to be playing catch up for the rest of my life. So can you address this from both those standpoints?
Sam Dogen Financial Samurai
Sure. So.
I mean the idea is you, so taxes, taxes are gonna be most of our ongoing greatest liabilities for the rest of our lives. As a result, we need to figure out ways to tax optimize as much as possible so that the drag is less, so that we can build more wealth. And so the idea is if you have a day job, take advantage, full advantage of your tax advantage retirement accounts, namely the 401k, right? Because you put money in pre-tax. It grows without the...
and then when you exit, you know, you've got to pay taxes on withdrawals.
And so that money is there for you after the age of 59 and a half. And then you should take advantage of the Roth IRA because you put money in post-tax, but hopefully when your tax rate is low, the money compounds without a tax drag over decades. And then when you withdraw, there's no tax penalty because you already paid that tax. And then if your parents take advantage and contribute to the 529 plan, even though the money is after tax, it compounds tax without the tax drag.
for appropriate educational expenses without paying tax or any fees. So the idea is to get into the mindset of if the amount you're saving investing doesn't hurt every single month, you are not saving or investing enough because you're not, you're just winging it. You're not being intentional with the money that you're investing and saving and spending. So that's the whole idea, tax optimization.
Srini Rao
I love it that actually simplifies that entire chapter for me so much
Sam Dogen Financial Samurai
Ha ha.
Srini Rao
Well, let's talk about real estate in particular, because I think it's funny. You hear so much sort of contradictory advice about real estate, right? You know, like the James Altucher's, like, you know, buying a house is the worst decision you'll ever make. For me personally, I value mobility, so I don't wanna be locked down, but I started to see that whole mindset very differently when I read through your idea of real estate fundamentals, where you break it up into what you call short, neutral, and long. So explain those to us.
Sam Dogen Financial Samurai
Yeah.
This is a really important concept that I hope more people will understand and talk about. You are only neutral real estate if you own your primary residence. So your primary residence, you own it, you go up and down with the real estate market. You're short real estate when you're a renter. And why is that? Because you're at the mercy of ever rising rents and ever rising prices. You're only benefiting by renting if rents go down and property prices go down.
Shorting the S&P 500 over the long term isn't a good idea. Shorting the real estate market by renting over the long term is not a good idea. And then finally, your only long real estate. You can only really benefit from real estate if you own more than one property because you have to live somewhere. So if you own your primary residence and you own a rental property, you can benefit from the rise in the real estate market because you can rent out your rental property and or you could sell it for a profit.
Srini Rao
Well, speaking of real estate, let's look at two things here. Let's talk about, you know, job choices and choices of location. Because I know choice of location matters when it comes to real estate. I mean, you and I both know San Francisco is insanely expensive to live in at this point. I think the apartment that I used to rent in San Francisco across the street from Golden Gate Park was a two bedroom with a garage and we paid $1500 a month. I think that place goes for $4000 a month now.
Sam Dogen Financial Samurai
Well there goes the point of...
you know, renting is short, the real estate market, you cannot benefit. Inflation is too powerful of a force to combat, especially now, right? The latest print on inflation was 9.1%. I think it's definitely gonna fade in the second half of 2022 and 2023, but don't fight inflation and don't fight the Fed. These are really important topics. It doesn't matter. I mean, look, I understand if you don't own real estate, you're probably against real estate
We are all biased to the choices we make, but we have to look at reality and we have to look at economics and we have to look at historical rates of return. Once you can lock down your real estate costs or at least control them a little bit.
You free up a lot of ability to do other things because you don't have to constantly worry about you know You're rising your home cost going up And that is different look, you know, I know you as a digital nomad in the past and currently in the present value that flexibility However, you have to think about if you didn't buy real estate Where did you put your money and if you put that money? Let's say in the stock market. Well, then it's probably Doing fine, right?
have is they don't put their money into an alternative investment other than real estate because real estate is like four savings as well as you pay down your mortgage. And so people will tend to blow their money on things they don't need and that's called economic leakage. And then five to ten years from now you wonder where is my money? So
Srini Rao
No, no, absolutely. So that actually so there's one other thing I wanted to bring away. There's another clip from Scott Galloway that I wanted to bring back. And this one in particular, I brought up specifically for our conversation. This is something he said that I thought was really interesting. And I wanted to hear your take on it. Take a listen.
Srini Rao
What do you make of that?
Sam Dogen Financial Samurai
Well, I think it's human nature to say if you don't have mega millions that someone is poor and you try to make yourself feel better about whatever you have. So I don't agree with that. Clearly the person making 5 to 7 million is rich, he or she has the optionality to reduce their burn. Whereas the person who with 48,000 has less optionality.
So unless you're a complete donkey and don't know how to cut costs or change your taste or adjust to different times, I think more people would agree that having five to seven million a year is better than having 48,000 a year. So that's... Yeah.
Srini Rao
Yeah
Yeah.
I didn't agree with you on that, which I think that actually makes a perfect segue into talking specifically about career choices. One of the things that you say is company loyalty is overrated in this day and age. Long gone are the days of pensions and opportunities to work at one company for life. Being loyal is sadly now a 30 70 move. Instead, for maximum financial gain, you should job hop every two to five years during your 20s and 30s. Too many people make the mistake of thinking that if they do a good job, they'll eventually get promoted and paid what they're worth.
that's not how it works in most companies, meritocracy is a lost art. I think that makes some people who have full-time jobs think what the hell.
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
What the hell, why am I not leaving and jumping? Well, it's true. So you get your first job and you hopefully get paid market rate. And then every year that time goes by.
Srini Rao
Yeah, exactly.
Sam Dogen Financial Samurai
there is this growing gap between the market rate and the rate that you earn. And it's up to you, and it's very difficult to try to close that gap without sounding like a greedy employee. And so the easiest way to get back to market rate is to job hop every two to five years. I was a loyal soldier at Credit Suisse for 11 years, and that probably cost me over a million dollars because I was comfortable. You know, I was accepting of getting paid below market rate.
hard enough to get those raises. And I do recommend that once a year, every year, you show what you've done, all the value you've added, especially at the beginning of the year, because your managers will not remember anything you did in the first half of the year unless you remind them. So you really have to be fighting for yourself. And I think it's worth job hopping three to four to five times in the first 15, 20 years of your career to get that market rate, to make the most amount you can. And so long as you're joining,
companies that have a good purpose and good people, why not? I think loyalty and sadly is overrated. Companies are going to fire you or lay you off as soon as they need to cut costs.
Srini Rao
Yeah, trust me, I've experienced that firsthand. So let's talk specifically about side hustles. There's one thing that you said about side hustles and I really like it. It's funny because it actually inspired the title for a blog post that I wanna write.
You said the best time to start a side gig is when you have a stable job with benefits, when you have no source, not when you have no source of income. Consider the first two years of growing your endeavor and incubation period with downside risks. See if you enjoy the process. And you and I both know this. I can't tell you how many people will basically say, I don't have time. Time comes up over and over and over as like the most frequent excuse that people give me for, oh, I can't do this. And I remember I sent you a DM with what
Sam Dogen Financial Samurai
Mm.
Srini Rao
said was my favorite quote from the entire book. So with those two things in mind, talk about that in more detail.
Sam Dogen Financial Samurai
Well, working 40 hours a week is an artificial construct.
And the thing is when people say they don't have time, what they mean is they just simply don't wanna do it. You will do something if you want it bad enough because I believe long-term everything is rational. If you hit your job enough, or if you wanna do something else enough, or if you want that wealth enough, you're gonna find ways to make time. And so don't come to us, don't come to me and say, I don't have time, but I still want this. Because the reality is you don't want this. You don't want it, because otherwise you would make time. For me, I wanted to get out of finance.
after 11 years I was like this is not fun. You know, the recession, financial crisis, and not making as much money, the correlation with effort and reward is off. And so I decided, you know what, I'm gonna start Financial Samurai finally in 2009, July, bottom of the market, because I was scared. I was scared that I was gonna lose my job. And I wanted to do something new, and I needed a backup plan, because I already graduated from business school. And therefore I woke up a little bit earlier, you know, 5 a.m., 6 a.m.
worked on it for an hour or two hours and then after I ate around 9 p.m. I worked on it some more. You will make time if something you care about is great enough.
Srini Rao
Yeah, I mean, I said Laura Vander Kim in one of her books said, everything you say you don't have time for is just not a priority.
Sam Dogen Financial Samurai
Yeah.
Srini Rao
So I want to go to this quote in particular because this, like I said, was my favorite quote in the entire book. And that is that you can't do extraordinary things if you do what everybody else is doing.
Sam Dogen Financial Samurai
That's true, because if you do what everybody else is doing, you're just going to hug the middle, right? It's just the bell curve. And you've got to be able to put your hard hat on.
If you want to do something different, do something new, you're going to ruffle so many feathers. Man, I've got to tell you, I've gotten so much backlash writing about so many things and different concepts over the past 13 years on Financial Samurai. But the good thing is, you just get used to it. And if you say it in a respectful and logical way, I think people will come around. And there's no way I would have imagined that I would be able to leave my job at age 34 and be free and to do what I want.
if I didn't take more risks, if I didn't think, hmm, maybe I can negotiate a severance package. Just like, you know, you're trying to negotiate your way into a job, what if I could negotiate my way out of a job? You know, that's unconventional thinking, and a lot of people still don't do that, even though I've written a book about how to negotiate a severance in 2012, because people are too afraid of doing something different, they're too afraid of confrontation, they'd rather text you instead of break up with you, and that's a shame.
Srini Rao
Well, it's funny because I remember going through parts of the book and this is something that occurred to me as I was thinking about the fact that you and I are going to connect again because I remember there were times that you would write things and they would trigger me and you might even remember some of these. And I realize now looking back why they triggered me, it's because there was a grain of truth to them. You know?
Sam Dogen Financial Samurai
Yeah, and I do remember what I wrote. It was called, do people really work only 40 hours a week or less and complain why they can't get ahead? And I know I pissed you off and I'm sorry for that.
Srini Rao
Yeah, and I remember because I was like, you said swimming, not surfing. I still remember that. But the funny thing is, and I realize now, especially after working with a mentor who rode my ass like no tomorrow, often what you want to hear feels good. What you need to hear doesn't.
Sam Dogen Financial Samurai
Ha ha ha!
Sam Dogen Financial Samurai
Yeah.
Sam Dogen Financial Samurai
Yeah, people don't care. They're just gonna tell you what you wanna hear and just move on. They don't have time for your stuff, right? Everybody has their own problems. But if people care, if people wanna shake you to change, they're gonna tell you the truth, and then you're either gonna accept it and try to learn from it, or you're gonna be stubborn and not, and then you're gonna accept whatever that comes your way.
Srini Rao
Well, speaking of things that piss people off, this is one final place that I want to actually go to, and this is marriage. And I think this really struck me as something that stood out. And you even say, I know that what I'm about to say will rub some people the wrong way, but I believe it to be true. All else being equal, if you have a choice, marrying someone you love who is well off is an optimal decision, versus marrying someone who's struggling financially. By marrying someone who's financially secure, you get to leapfrog a generation of struggle. I think that is
so sort of practical and logical because so often, when we get sort of starry-eyed, we don't think about the practicality of any of this.
Sam Dogen Financial Samurai
now.
We don't think about anything. I didn't think about that at all when I was in high school, college. I just wanted to be with someone who I found very, very attractive and nice. But now that I'm a parent, and if you think about your parents in Indian culture, I think you told a story about setting your parents, trying to set you up with other people, right? You were even on that show on Netflix. That was awesome, right? And so the idea is you want what's best for your kids. You want them to have love, but you also want to not worry about them financially.
Srini Rao
Hmm?
Yeah, yeah.
Sam Dogen Financial Samurai
It's just being practical and look, if all else being equal, right? Not everything is equal, but I'm saying all else being equal. If you can find someone you love who is actually well off or on the right path, go for it because look, if 40 to 50% of marriages fail and money is one of the one or two greatest reasons for that marriage failing, then obviously finding someone with the right, if you're on the same page financially, makes better sense than not.
Srini Rao
Yeah, no, absolutely. I mean, yeah, that was one of those things that I realized after having girlfriends where I had no boundaries around money and was willing to spend money I didn't have, I finally realized, I was like, this is actually important. This is one of those things where I need to be okay with things that I'm gonna say are deal breakers.
Sam Dogen Financial Samurai
Yeah, I mean, you're a team. You gotta find your best teammate who's got your back, who's got the same goals, same philosophies. Otherwise, things are gonna get really contentious real quick.
Srini Rao
Yeah, it's kind of funny because I feel like these huge life events just amplify underlying problems that you're ignoring.
Sam Dogen Financial Samurai
Yes.
Srini Rao
One last thing, so you make this distinction between passion and money and startups and big companies. Let's finish there. Because I really appreciated the fact that you mentioned that the sort of stories that we hear about startup success are primarily outliers. And it's so true, like I mean, in general, if you think about almost all the literature around successful people, it's all basically about outliers.
Sam Dogen Financial Samurai
Yeah.
Yeah, I would say be careful. There's a lot of starry eyed people who wanna join startups because they think they're gonna ride the rocket ship to mega millions. And that's especially true here in the San Francisco Bay area. But as someone who's lived here for 20 plus years, I've spoken to many, many startup employees, nine times out of 10, you don't get rich joining a startup. You get rich going to a traditional job where that pays market rate and you're saving and investing and you're staying there and you're all your job,
established industry. So I would say it just depends on what you want to do and how much you believe in the company and how much you want to bet on yourself.
Srini Rao
Wow, well this has been awesome, man. I mean, you've really packed it with so much insight and wisdom, so I want to ask you my final question, which it's funny because I don't think you've ever actually been a guest since we called the show The Unmistakable Creative, even though you were when we had the first version of the show. What do you think it is that makes somebody or something unmistakable?
Sam Dogen Financial Samurai
I think being able to live true to yourself, whatever it is that you believe, you do. So that means having congruency with thought and with action.
Because if you think one way and you're doing something else, you're incongruent and you're very forgettable. But if you think in one way and you continuously do and you stick with it over time, I think that makes you unmistakable because too many people, they'll quit way before the good gets good. And so I hope people can really be able to be congruent in their lifestyles.
Srini Rao
Well, I can't thank you enough for taking the time to join us to share your stories, your wisdom, and your insights below our listeners. Where can people find out more about you, your work, the book, and everything else you're up to?
Sam Dogen Financial Samurai
Yeah, well thank you so much for having me. You can go to financialsamurai.com and leave a comment on any article that you find. You can buy, buy this, not that. How to spend your way to wealth and freedom at financialsamurai.com forward slash BTNT. And you can subscribe to my free weekly newsletter at financialsamurai.com forward slash newsletter.
Srini Rao
And for everybody listening, we will wrap the show with that.
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