Category: Finance

You don’t need to be a great investor to make lots of money. You just need to be a good-enough investor. Once you’re good enough you’ll be able to ride an almost constant tailwind toward financial independence. Further, you’ll learn to no longer blow yourself up and lose all your progress.

One of my favorite things about investing is that it is a relatively meritocratic activity. You don’t need a fancy college degree, a good personality, or be of a certain race or sex to invest. So long as you have internet access and at least $10, you can get started.

My Investing Background

I’ve been investing since 1996 when I opened my first Ameritrade account while still a student at The College of William & Mary. Back then, I would day trade like a banshee between classes. It took me about seven years to realize day trading is a waste of time and money.

I studied Economics, got my MBA at Cal, and worked at Goldman Sachs and Credit Suisse for 13 years before retiring in 2012. I continue to be an active investor with 20% – 30% of my portfolio.

Since 1996, I’ve lost plenty of money during the Asian Financial Crisis, the 2000 Dotcom bust, the 2008-2009 global financial crisis, and now the 2022 post-pandemic letdown. From making too concentrated bets in single stocks to buying a vacation property I didn’t need, I’ve made plenty of errors.

However, despite all the mistakes, I still managed to accumulate a million dollars by 30. At 45, my investment portfolio has grown large enough to provide enough passive income to take care of a family of up to five in expensive San Francisco.

How To Become A Good-Enough Investor

If you can get your investments right at least 51% of the time and avoid blowups, you’re going to come out ahead. Ideally, if you can get to a ~70% win rate or greater over the long run, you will likely accumulate way more money than you’ll ever need.

1) Start with the objectives

To become a better investor you first need to understand why you are investing. List all yours reasons. Some common ones include:

Characteristically, bad investors do not invest with a clear purpose. Instead, they invest for the thrill of trying to make more money for money’s sake. When this happens, they tend to lose discipline and turn into gambling addicts full of investing FOMO. Once you’ve adopted a gambling addict’s mentality, your risk parameters get thrown out the window.

As soon as you’ve identified your key reasons for investing, you will reverse engineer how you will get there and take action. A good-enough investor is a rational investor who will take the steps necessary to achieve his or her results.

For example, you have a newborn who you’d like to go to college in 18 years. You estimate college will cost $500,000 for four years by 2040. Therefore, you will calculate how much you will need to earn, save, invest, and return to accumulate $500,000.

Next, you will learn about the 529 plan and the Roth IRA to save and invest for college. Finally, you will make a decision within 18 years whether paying 100% of your child’s college expenses is a good idea or not. A good-enough investor plans for the future.

2) Understand your risk tolerance

The hardest thing about becoming a better investor is understanding your risk tolerance. It takes at least two bear markets to truly know. During your first bear market, you will have likely underestimated your risk tolerance as you may feel worse than you thought you would be about losing money.

During your second bear market, you will also still feel bad losing money. However, the shock won’t be as painful because you likely made some adjustments to your asset allocation to better match your risk tolerance. Further, you’re likely making a higher income to better be able to recoup your losses.

By the time the third bear market comes, 15-30 years later, you will already be a grizzled investing veteran. You’ve adjusted your asset allocation further to get as close to your true risk tolerance as possible. The key to quantifying your risk tolerance is to translate potential losses into lost time.

Knowing what you don’t know is hard, which is why I’ve offered net worth allocations by age, work experience, and personality types in my book, Buy This, Not That. The people who blow themselves up investing are those who have significantly mismatched investments.

You cannot afford to listen to investing advice from someone who has not experienced at least two bear markets. I know it’s easy to market yourself as an expert in anything nowadays. But please spend time understanding someone’s track record and background before spending any money on them or their products.

3) Have enough skin in the game to feel some pain

There’s an insulting saying from George Bernard Shaw’s 1905 play, Man and Superman, “Those who can, do; those who can’t, teach.” One translation of the quote is to have enough skin in the game to matter.

We can pontificate all we want about an investment. But to become a good-enough investor, we need to invest enough money in an asset to make it sting if things go wrong. If there is not enough skin in the game, you won’t care enough to do your due diligence.

Rationally, the more you believe in your conviction, the more you will invest. The more you invest in a particular asset class, the more research you will do before investing. You’ll also pay lots more attention to protecting your investment.

A good investor invests enough to pay attention. Then presses once they have a solid grasp of the investment thesis. A bad investor either invests too little or too much based on their risk tolerance or doesn’t invest at all.

Real Estate Investment Case Study

I first became interested in real estate crowdfunding in 2016, The idea of investing in my favorite asset class without having to deal with tenants and manage maintenance issues was enticing. Further, I wanted to diversify away from my expensive San Francisco real estate holdings.

Due to my lack of knowledge about real estate crowdfunding and commercial real estate at the time, I decided to start with a $10,000 investment. I read all the quarterly reports, filed my taxes according, and then did a post-mortem analysis of the successful real estate investment.

A $10,000 investment was enough to keep me interested, but not enough to keep me up at night. During the investment experience, I also realized it would take too much time to assemble a meaningful portfolio of individual investments and track them. Therefore, I decided to invest $250,000 into various private real estate funds instead. I was happy to pay a committee to invest in deals for me.

In 2017, I wanted to invest a greater amount in private real estate because I had sold a San Francisco rental property and needed to reinvest the funds. My son was born in April 2017 and I wanted to simplify life and spend more time with him. Further, I had a strong conviction in my heartland real estate thesis which I came up with in 2016.

Investing Enough To Make A Difference

In total, I ended up investing $810,000 in various private real estate funds and deals. I would have invested more, but one of the early real estate platforms went under (not the investments), COVID beat up commercial office real estate, and I had to recalibrate my risk exposure.

Now that I’ve received over $624,000 in distributions back, I will be increasing my risk exposure to private real estate investing again in 2023 and beyond. I think the timing is right as real estate slows. Heartland real estate is a 20+-year investment thesis for me.

4) A good investor knows baseline returns and valuations

As a stock investor, you know the historical annual return of the S&P 500 since 1926 is about 10%, with dividends reinvested. A good-enough stock investor also stays on top of valuations versus historical averages.

Every good investor knows it is impossible to consistently outperform the S&P 500 index over the long term. Hence, every good investor knows to invest the majority of their assets (80%+) in low-cost index funds.

A good-enough real estate investor knows that historical annual returns are about 2% above the annual rate of inflation. Good-enough real estate investors also know what an area’s historical cap rate average is versus the current cap rate average.

A good investor also understands past performance is not indicative of future results. Past performance only provides clues into the future. From there, a good-enough investor has to decide how the future will change.

An Example Of A Change In Future Baseline Returns

In August 2020, I came out with my post suggesting retirees lower their safe withdrawal rate to about 0.5% at the time. Alternatively, employees should strive to accumulate more capital before retiring.

The idea was to incorporate a dynamic safe withdrawal rate to match with the volatile times. A good-enough investor is able to see things for what they are and change when variables change.

A lower safe withdrawal rate or accumulating more capital not only would better protect you if we were to fall back into the abyss (another bear market), it would also benefit investors if the markets continued to rally. And rally we did in 2021 with most asset classes having banner years.

Then a year later, in 2021, Vanguard came out with its 10-year median forecast for U.S. stocks, U.S. bonds, and inflation. At the time, the return forecasts looked to be overly conservative.

But if you believed in these new baseline return assumptions, you would have adjusted your investments accordingly. In 2022, the stocks and bonds forecast is now looking prescient. However, not so much for the inflation forecast.

This leads us to another lesson on how to become a better investor.

5) Don’t be delusional and attribute the results to your wrong reasoning

Although the dramatically lower return forecasts for U.S. stocks and U.S. bonds are looking right for Vanguard so far, its reasoning could be off. Conduct a post-mortem analysis of your investment thesis once the results are in.

For example, Vanguard assumed inflation would move even lower, meaning the risk-free rate would also move even lower. With a lower risk-free rate, returns for stocks and bonds may decline since investment returns are relative to the risk-free rate. Total returns = risk-free rate + risk premium.

However, the risk-free rate (10-year Treasury bond) went way up because inflation skyrocketed. The pace and magnitude of rate increases caught investors by surprise, thereby bringing about a bear market.

In other words, Vanguard got its call directionally correct, but for the exact wrong reason. A good-enough investor knows whether the results were due to his original investment thesis or not. A bad investor confuses the two.

Examples Of Confusing The Result With Your Thesis

Example #1. You got into an elite university because you thought you have superior intelligence. In reality, you were a legacy admit and your parents bribed your way in as revealed in Operation Varsity Blues. 20 years from now, you might end up depressed and confused about why your career or business never took off. Only when you recognize your merit was an illusion will you find peace.

Example #2. For my buy heartland real estate thesis in 2016, things were muddling along in 2017, 2018, 2019, and 2020, as indicated by Fundrise’s Heartland eREIT returns. Then in 2021, the returns exploded higher due to the pandemic. More people started relocating to the heartland and buying up cheaper property.

My investment thesis turned out right. But it took a while to significantly outperform. I have to be careful confusing brains with luck. If the pandemic didn’t happen, 2021 might have shown a more normal 9-15% return versus a 41.7% return. Nowhere in my original heartland investment thesis did I have a pandemic accelerating such a dramatic demographic shift.

Although the Heartland fund is closed, all of Fundrise’s funds are predominantly focused on Sunbelt / Heartland real estate.

6) Become a better investor by inviting dissension

We all have had high-conviction investment ideas go wrong. Bad results are why post-mortem investment analysis is so important. We don’t want to make similar logical but incorrect assumptions in the future.

Having blindspots is extremely dangerous when it comes to investing. As a result, good investors ask others with differing points of view for feedback. They ask other people to highlight what they may be missing.

As an investor, it is easy to develop groupthink. Groupthink is common in corporate management, team sports, personal finance, social media, etc. Eventually, you might find yourself in one big echo chamber driving off a cliff. Be careful!

If you’re mainly interacting with people who look like you with the same socioeconomic background, you are likely suffering from groupthink.

Are you being contrarian for contrarian’s sake? Or are you really seeing something others are not? With my Series I Bond interest rate decline bullish thesis, it seemed to me like other investors were not connecting the dots. The bullish thesis seemed obvious, which made me wonder what the hell was I missing?

Luckily, I have a platform that invites open commentary. In addition, you or anybody can read Financial Samurai for free and comment as well.

Adopt Emotional Agility

Based on experience gained since 2009, when Financial Samurai started, I can now usually tell who is likely not a good investor from their dogmatic responses.

The angrier and nastier a commenter is, the more likely the person is less educated about personal finance. In addition, I’ve noticed the longer you spend time in school (e.g. PhD) the more rigid your are in your investing analysis. Academics has a way of boxing in your thinking.

For example, some folks raged against my thesis that families need to earn $300,000 a year to live a middle-class lifestyle in a big city. I can understand their anger if they are earning much less. However, these folks probably don’t live in a big city with kids. They are incapable of imagining a cost-of-living lifestyle different from their own.

It’s hard to know what you don’t know. Listen to other viewpoints with as open a mind as possible. Meet new people from different cultures. Travel the world. Get out of your echo chamber.

The more emotional agility you have the better the investor you will become. Having too much emotion kills investment returns. Ideally, you want to invest like a disciplined robot. Unfortunately, none of us are emotionless.

If you find yourself getting easily angered by the news, social media, or even blog posts, please work on your emotional issues first before making large investment decisions.

7) A good-enough investor is the man or woman in the arena

Do you know who never wins? It is the person who never steps into the arena and fights. Instead, they sit in the cheap seats and criticize people for doing while not being willing to do anything themselves. Be the man or woman in the arena.

Yes, it may feel embarrassing if you get your investment thesis wrong. Yes, people may make fun of you for failing and losing gobs of money. But who are they to criticize?! After all, it was your money at stake. Don’t look back at your life with regret having never tried!

The people who try to make you feel bad are those who are unwilling to try themselves. Conversely, the people who are supportive after you’ve failed understand what you’re going through because they’ve been there themselves. Failure is an inevitability. Embrace it!

You will learn from your mistakes and make more optimal decisions going forward.

8) A good-enough investor knows when to take profits

If you never take profits then there is no point in investing. Yes, the ideal holding period for the S&P 500 and real estate is likely forever. But do you really want to be 92 years old and be worth over $100 billion like Warren Buffett? Maybe for a month.

Instead, it’s better to have a smoother consumption curve. Not only will you enjoy your wealth more, you’ll also save yourself a lot of time and stress as a younger person trying to accumulate such wealth. I’m confident the majority of Financial Samurai readers will die with too much money, hence why decumulation is eventually in order.

If you are a growth stock investor, selling stock from time to time is important. Given growth stocks tend not to pay dividends, you must occasionally extract some of the value of your investments by selling. Bear markets destroy capital gains in a hurry.

When valuations get to one standard deviation above trend, it’s best to reduce some risk. When valuations get to two standard deviations above trend, you may want to sell your entire position.

One of the biggest mistakes bad investors make is extrapolating good times for too long into the future. I did this in 2007 when I bought a vacation property for too great a percentage of my net worth. I had made the most money I had ever made in 2007 and thought my income would just continue to go up. Oh how wrong I was.

Mean reversion is real. A good-enough investor takes profits when valuations get out of hand. You can be right for the short term. But you may not be right forever.

9) Never stop studying the markets

If you really want to be a good-enough investor, you have to treat investing like a second job or at least a side hustle. The larger your investment portfolio, the more you should pay attention. If you don’t take investing seriously, you could quickly lose a boatload of money.

In 2009, I lost 35% – 40% of my net worth that had taken me 10 years to build. That year of pain was enough for me to right-size my asset allocation and pay more attention. If you’ve lost a lot in the latest bear market, don’t let the pain go to waste.

Conduct quarterly reviews of your net worth and investment. Subscribe to investment newsletters from people with experience. Read books and blogs about personal finance. Good investors immerse themselves in finance, economics, and the ways of the world.

But you know what? Having a second job as an investor is also damn tiring, especially during bear markets. Therefore, do you really want to be a good investor or just a good-enough investor? I choose the latter.

A Good-Enough Investor is Good Enough!

It takes decades to become a good investor. Even after investing since 1996, I still don’t think I’m very good at all. Instead, I’m a good-enough investor who generates enough passive income to live my desired life.

Unless you want to become an investment professional, there’s no need to be a great investor. Heck, even great investors can’t outperform their respective indices over the long term, so why should you bother trying? Instead, focus on the things you’re good at as a DIY investor.

Your investments are meant to operate in the background so you can live your ideal lifestyle. If your investments are sucking joy out of your life, you likely need to recalibrate your risk exposure. The same thing goes for if you feel high after every win.

Be aware of who you are. You don’t have to be a great or even a good investor to get ahead. As with most things in life, being good enough is good enough!

Readers, do you think you are a good investor? What are some other recommendations on how we can become better investors over time?

Resources To Help You Become A Better Investor

Personal Capital is the best free tool to help you become a better investor. With Personal Capital, you can track your investments, see your asset allocation, x-ray your portfolios for excessive fees, and more. Staying on top of your investments during volatile times is a must.

Buy This, Not That is an instant Wall Street Journal bestseller. The book helps you make more optimal investing decisions using a risk-appropriate framework by age and work experience. Arm yourself with the knowledge you need so your money will work harder for you.

For more nuanced personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

During the pandemic, we learned that Americans can save a lot more money if we want to. Take a look at the historical American personal saving rate chart according to the U.S. Bureau of Economic Analysis and the St. Louis Fed.

After lockdowns began on March 18, 2020, the U.S. personal saving rate skyrocketed from a respectable 9.3% pre-pandemic to an impressive 33.8% in April 2020! Americans suddenly decided that saving money during a time of great uncertainty was a priority. So that is what we did.

As the initial six-month shock of the pandemic began to wear off, Americans decided to lower our saving rate to 13.3% in November 2020. Then, when news of a new strain of COVID emerged in the beginning of 2021, Americans decided to increase our saving rate again, reaching 26.3% in April 2021.

Since April 2021, the personal saving rate has steadily declined thanks to vaccines, experience, and the desire for most of us to get on with our lives.

Today, the U.S. personal saving rate is around 3.1%, which is a low not seen since January 2008.

Americans Can Save More If We Want Or Need To

Since 2009, when I first started writing on Financial Samurai, I’ve noticed some people like to bag on the state of America’s personal finances. I was one of them, with posts such as Retirement Savings By Age Show Why We’re Screwed.

At the time, I thought to myself: How is it possible the median retirement savings amount for 32 – 37-year-olds was only $480 using 2013 data? Meanwhile, the median retirement savings amount for 56 – 61-year-olds was only $17,000.

Even if we quadrupled the amounts for 2023 and beyond, the retirement savings amounts aren’t enough to live a comfortable retirement lifestyle.

I got fired up to write more personal finance articles to help people save and invest more for their future. But what I realize now is I simply hadn’t lived long enough to see how well people can adapt.

Almost a decade has passed and the typical retired American is not screwed. We’re not hearing about a retirement crisis where 60+-year-olds are getting thrown on the streets because they don’t have enough money to pay their bills.

Instead, the typical American has grown wealthier. We might not be happier, but at least as a whole we’re more financially secure than in the past.

Why Are Americans Doing So Well?

Despite paltry median retirement savings amounts, the typical American is doing fine.

The majority of Americans have benefitted from an extraordinary rise in home prices since 2013. The combination of rising home prices, rising home equity, and declining mortgage balances is a huge win for the ~68% of Americans who own real estate.

For the 32% of Americans who don’t own real estate, the common belief is that renters save and invest the difference. Thus, the stock percentage ownership amongst renters may be even greater than the estimated 56% of all Americans who own stock. Stocks have also had a fantastic run since the 2013 Consumer Finance Report.

Real median household income also bottomed in 2012 at around $60,000. In 2021, real median household income peaked at around $71,000.

Finally, both federal and state governments have been supportive during the pandemic. They’ve injected trillions of dollars into the economy via stimulus checks, PPP loans, and more.

Recommended Saving Percentage For Financial Freedom

Whenever someone asks me how much they should save to get to financial freedom, my default answer is 50% of your after-tax income.

A 50% saving rate means that every year you save is one year of freedom bought. Save 50% for 20 years and you’ve bought yourself 20 years of freedom on the back end. The math is intuitive and easy.

A more nuanced recommended saving percentage answer is to have everybody max out their tax-advantaged retirement accounts. Once that is done, save at least 20% of your after-tax, after-retirement contributions income.

Maxing out your 401(k) should become automatic. Your focus should be on building as large of a taxable investment portfolio as possible. It is your taxable investments that will spit out enough passive income so you can live more freely.

Your saving rate will be determined by your income and your expenses. But your saving rate will also be determined by how badly you want to retire early and do something new. As we’ve seen in the personal saving rate chart by the St. Louis Fed, we can save more if we really want to.

Financial Freedom Saving Rate Recommendation Chart

Here is my financial freedom saving rate chart from Buy This, Not That. The higher your saving rate, the sooner you will be free.

My book has plenty of charts as financial guides to help you build more wealth in a risk-appropriate way. When it comes to your money, don’t just wing it. Be all over your money.

Don’t Count Out The American Saver

No longer do I believe the typical American is going to face a difficult retirement. Many of us have the ability to save more money when situations deem it necessary. We will also rationally spend more money when we feel more secure.

Think about it. If your doctor told you there is a 90% chance you’ll die within one year if you don’t lose 10 pounds in the next three months, don’t you think you would do everything possible to lose weight? Most able-bodied people would.

Don’t count out free will!

We can also accept the new three-legged retirement stool where we rely only on ourselves for retirement. Relying on other people to save us is not a good financial strategy!

Then, when we reach a traditional retirement age, Social Security provides us with an added “bonus.” The maximum Social Security benefit is over $4,200 a month in 2023. Surely, most of us can live just fine off $50,000 a year once our homes are paid off.

We May Be Saving Too Much

For personal finance enthusiasts with above average net worths, we will likely die with too much money. A lifetime of frugality and savvy investing is hard to change. Therefore, we must work on decumulating our wealth so we don’t ultimately waste our youth.

Of course, there will always be people hurting for money. But I’m confident these people will rationally take action to improve their financial situation over time.

With so many free resources online and affordable personal finance books to read, personal finance education is heading up and to the right! The average person will rationally take the right steps to improve a suboptimal situation.

Let’s just hope the average person also doesn’t get into revolving credit card debt. Now that would be irrational!

Reader Questions And Recommendations

Readers, do you believe Americans can save a lot more money if we want to? Why do you think Americans don’t save more money like citizens from other countries do? Is our low saving rate a sign of financial health? What is your personal saving rate?

In addition to buying Treasury bonds with your savings, CIT Bank also offers an attractive 18-month CD rate at 4.5%. Before the Fed started aggressively raising rates, Treasury bond yields and CD rates were under 1%. You can check out the 18-month CD here to take advantage of higher guaranteed returns.

For more nuanced personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

There are very few occupations that provide the ideal combination of riches and status. Being a professor is one of them.

Tenured professors are able to make six-figure incomes and earn valuable pensions. Getting a PhD or a post-doctorate is the pinnacle of academic achievement. Meanwhile, most people respect professors for their positive contributions to society.

After I retired from finance in 2012, I considered getting a PhD. Given I had enough passive income, I could afford to return to school for several years. With a PhD, I would then have the option of becoming a university professor.

Teaching is something I thoroughly enjoy doing, as hopefully evidenced by my writing on Financial Samurai. I’m always curious about new concepts and theories because the world is always changing.

My Quest To Become An Academic Professor

Stanford University had a Communications Department that offered a PhD program so I drove down to meet with some professors. I showed them what I was up to on Financial Samurai and they were not impressed.

But I did meet with the head of the Master’s program for Journalism who was really nice. She encouraged me to apply. But I decided not to after auditing one of their courses on starting your own WordPress site. At the time, I had been operating Financial Samurai on WordPress for almost four years. I also already have a Master’s degree in Business Administration.

Within a month time period, I realized getting a PhD and becoming a professor was not possible for me. First, you have to have taken the prerequisite courses. Second, you have to have great grades and test scores. Third, you need to have a clear idea of what problem you want to solve or research.

Even if I got my PhD in communications, it is extremely difficult to get a professor job at a major university. Only the best of the best get tenure at a top 25 university. Most remain associate or assistant professors for their entire careers. See the comments section from department chairs and professors for more insights on the difficulty of becoming a tenured professor.

Not one to give up on my dreams, I looked into becoming a public school teacher instead. Then I found the ultimate job of being a high school tennis coach. The job would fulfill my desire to teach a subject I was passionate about.

Three Reasons Why Being A Professor Is The Best Occupation

Recently, three things happened that made me want to consider becoming a professor again. These reasons show why being a professor has the ideal blend of riches and status.

1) Professors are able to buy multi-million dollar properties

Reuters reported official property records show that Sam Bankman-Fried’s FTX, his parents, and senior executives of the failed cryptocurrency exchange bought at least 19 properties worth nearly $121 million in the Bahamas over the past two years.

Given real estate is my favorite asset class to build wealth, my eyes lit up once I saw the news. An eight-figure real estate portfolio is a great way to set up my family for life.

The average Stanford professor makes about $250,000. Given Sam’s parents are tenured professors in their late-60s, let’s say Joseph Bankman makes $400,000 and Barbara Fried also makes $400,000.

A combined income of $800,000 is a top 1% income. With a 20% down payment, Bankman and Fried could comfortably buy up to a $4,000,000 vacation property in the Bahamas.

But from the sound of the Reuters article, it looks like Bankman and Fried bought a vacation property worth $16.4 million in the Bahamas!

Here are some pics of a $16 million property in the Bahamas called the Hibiscus Estate Residence in Crescent Bay. I love the infinity pool on one side and the beach on the other side.

Here’s a great view from one of the main bedrooms overlooking the ocean and sunset. You can grade papers in the outdoor hot tub while having a yummy beverage! It’s great to be an elite!

Professors make more than we realize

We can conclude being a professor is a very lucrative profession. Using my income formula for buying property, Bankman and Fried would have to have made over $3.28 million to afford a $16.4 million vacation property.

Or, Sam Bankman-Fried misappropriated client funds to buy properties for his company, himself, his executives, and his parents. It is hard to say because private companies have the right to buy properties for business use.

Or maybe Sam Bankman-Fried and his executives are simply following my guide on turning funny money into real assets to remain rich. Creating a conglomerate is a popular way to hold onto a fortune and build an empire. If FTX disappeared, at least they would have luxury properties to enjoy.

Call me naive, but it doesn’t make sense for tenured law professors at a prestigious university to be a part of misappropriating funds. It would ruin their reputations and their remaining years of life. Who would want to spend over a decade in jail during your twilight years?

When I’m 67 years old, I’d rather just enjoy what I have and lead a simple life. Upholding the family name for my children would be important. But maybe I’ll change my mind in 22 years.

2) Professors have great benefits for their kids who attend college

One of my son’s friends has a mom who works at Stanford. She’s not a professor, but a scientist with a PhD. When her son graduates high school, her son will have a leg up in admissions if he applies to Stanford. And if he gets in, he only has to pay half the cost of tuition.

My tennis buddy, who also works at Stanford corroborated this benefit. In fact, he joked he’d be willing to adopt my kids when they are in high school to help get them in, for a fee of course. Even if they didn’t get into Stanford, they would still get half the Stanford tuition a year toward any school my kids attend.

In other words, let’s say Stanford’s tuition is $60,000 a year. If my kids attend The College of William & Mary, we would get $30,000 a year to pay for their attendance at William & Mary. Not bad! Other universities pay 100% of tuition for faculty and staff children who attend their parent’s university.

The Students For Fair Admissions v. Harvard University lawsuit provided an unprecedented look at how Harvard makes admissions decisions. Using publicly released reports, here are the preferences Harvard gives for recruited athletes, legacies, those on the dean’s interest list, and children of faculty and staff (ALDCs).

A 46.7% admit rate for ALDCs versus a 6.6% admit rate for non-ALDCs is a huge difference! If you’re an Asian applicant, then it becomes even more tempting to become a university professor to help equalize the admissions process for your kids.

3) Professors can make lots of side income

From point one, we learn some professors can afford extremely expensive properties on their salaries. But how exactly? Let’s look at legitimate ways in which professors can earn more money.

I spent two-and-a-half years writing, editing, and marketing my book, Buy This, Not That. During this time, I realized there are many bestselling nonfiction authors who are professors.

Here are just a few from Portfolio Penguin, the imprint that represents me.

• Cal Newport (Georgetown)
• Scott Galloway (NYU)
• Arthur C. Brooks (Harvard)
• Jeremy Utley (Stanford)

These professors have smartly leveraged their status as professors at leading universities to become authorities in their respective fields. With such authority and status, they are then able to sign lucrative book deals every couple of years.

Given one of a professor’s responsibilities is to publish, publishing a book on their expertise is right down their alley. With so many connections, a professor can easily draw on many other experts to provide great value and referrals to promote their book.

Let’s say you make $250,000 as a professor. Due to your status and platform, you sign a $100,000 – $1 million book deal. Just from salary and book deals alone, you could make $300,000 to $750,000 each year as a professor. Books usually take two years to produce and advances are paid out in three or four installments.

See: Making Money Traditionally Publishing A Book

More Ways A Professor Can Make More Money

After publishing a Wall Street Journal bestseller, professors can then make extra money speaking. A one-hour speaking gig can pay anywhere from $1,000 – $50,000. Since speaking to a classroom is part of the job, doing paid speaking gigs should be a cinch.

I’m sure when we invited Malcolm Gladwell to speak at the Credit Suisse Asia Investment Conference in Hong Kong, my firm paid him somewhere in the six-figures. Flights, hotel, and meals were all paid for.

Then there are the consulting fees a professor can earn in their respective fields. Corporations or wealthy benefactors will pay professors to do research on a project to advance their product or ideology.

In 2022, Stanford professor Jo Boaler charged $40,000 for eight hours of consulting work to the Oxnard School District. $5,000/hour to help public school teachers teach mathematics better is pretty good!

In other words, there are endless ways in which professors can make a lot of money beyond their day jobs. Intellectuals with expertise in their field are always in high demand.

It is simply not true the saying, “Those who can’t, teach.” Instead, some professors are not only teaching but are also making bank.

Being A Professor Is The Ideal Blend Of Riches And Status

The income potential and status combination of being a professor may be unbeatable. The only other profession that combines both riches and status is being a doctor. Lawyers, bankers, strategy consultants, and techies get paid well, but don’t command as much respect.

Being an author is not bad on the status front. However, it is brutally difficult to make a living as a writer alone. Most authors need day jobs to survive. Even if you are one of the ~0.3% of authors who make a national bestseller list, the money from one book advance may only be enough to support you.

As a professor, you could make a top 0.1% income and nobody would know. In true stealth wealth fashion, you could easily blend in with the middle class and actually be embraced by the majority. To feel included and respected is wonderful. So is job security and a lifetime pension!

Being Adjunct Professor Is Another Option

The only problem with becoming a professor is the amount of education one needs to become one. Tenured professor positions at universities are scarce. Therefore, maybe the second-best solution is to become an adjunct professor.

An adjunct instructor is a part-time faculty member who is hired on a contractual basis. They may teach for only a few semesters before they return to their industry full-time.

Although you won’t make a lot of money as an adjunct professor, you will gain some status. Hopefully, as an adjunct professor, you’re already making plenty of money elsewhere.

If there is anybody from Berkeley or Stanford out there looking for an adjunct professor to teach personal finance, investing, real estate, branding, book publishing, and online entrepreneurship, shoot me an e-mail! Once my daughter attends preschool three days a week in 2023, I’ll have more time.

All I request is a private parking spot near campus and a lunch voucher! Thanks for your consideration.

Reader Questions

Readers, do you think being a professor is the ideal occupation for income and status? If not, what occupation do you think provides a better combination?

For more nuanced personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai, started in 2009, is one of the largest independently-owned personal finance sites.

Despite the pandemic and a bear market making things difficult for so many, there is still so much to be thankful for.

We need to all be thankful for the luck we’ve had so far. Personally, I’m thankful for luck. The more we can recognize luck in our lives, the happier we will be.

I’ve been a super-optimist all my life and I plan to continue being one until the day I die…. a 100 years from now.

During this Thanksgiving holiday, I wanted to re-share one extremely lucky event that occurred in my life. Without this lucky event, my life today would be totally different.

Thankful For Luck That Changed My Life

The year is 2001 and the Nasdaq, down 50%, just celebrated its one year anniversary of hitting its peak. I’m finishing up the second year of my analyst program at GS, paranoid that I won’t be getting a offer back for my third year.

I always knew my chances for getting a third-year analyst role were slim since only strong performers get to continue. Unfortunately, I was an odd duck who didn’t belong at one of the best investment banks in the world at the time.

I dressed poorly because I didn’t know better as a public school kid who never had to dress up. Once, my VP barked at me, “Get that dog collar off your neck!” referencing a Hawaiian puka shell necklace my girlfriend had given me. I guess there is a benefit of going to an expensive prep school after all.

I annoyed people. 

One time, I was humming something indistinguishable while reading some research material. An MD on the Latin America desk named Michelle told me to keep quiet. She was the same MD I had had to get permission from to buy an MCI Worldcom call option. The option quickly went to zero after my purchase.

I’m sure she thought I was an idiot.

There was a reason why I had to go through 7 rounds and 55 interviews to get my job. No desk wanted me. I was an outsider who was forced into their vaunted club by a recruiter named Kim Purkiss. She plucked me out of a career fair and I owe her so much.

The Secret Phone Call That Determined My Fate

As an analyst on the sales trading floor, one of my jobs was to pick up and screen phone calls for all our senior colleagues. Our desks were arranged in I-formation, with my boss sitting at one base of the I and me sitting on the side. His face was always obscured by a couple Bloomberg trading monitors. We communicated by shouting.

At 9 am, my boss’s phone rang and I hit his button on my large 20-line turret as quick as lightning. The trading floor was buzzing with activity in anticipation of the market open at 9:30 am.

“Hello, can I speak to Tom, please? It’s Jim,” said the man on the other end. Jim was calling from Hong Kong, where it was 10 pm. Jim was the Head of the Asian Equities business at the time. He was the big, big boss.

“Hi Jim! It’s Sam. Nice to hear from you. It’s late there. Hope all is well. Let me see if Tom is available. One sec.” I blurted out, nervous like a middle school boy trying to talk to a girl.

I zoomed in between Tom’s monitors and saw he was staring at his screen while pounding away at his keyboard.

“Tom! Jim is on line one!” I yelled as the buzz on the 49th floor of 1 New York Plaza started to crescendo.

Overheard The Danger Of Being Let Go

Tom didn’t acknowledge my call, but he picked up the line by saying “hello.” Not wanting to hang up on big bossman Jim in the middle of the night in Hong Kong, I stayed on to ensure they connected.

In the past, I had sometimes accidentally hung up on the caller before a teammate hopped on. Our phone turrets were confusing as hell.

Jim immediately blurted out after Tom said hello, “I need to talk to you about new third-year analyst opportunities, including Sam’s. We need to make a decision on whether to keep him or not.“

My ears perked up! Ethically, I should have hung up. But out of sheer curiosity and survival, I pressed mute instead. My future depended on it.

“Jim, it sounds like we have a position open in Taiwan? But I don’t think Sam would be a good fit, despite his Mandarin skills. He’s unfocused because he’s always trading stocks while at work.“

Oh crap! I knew all my day trading would come back to haunt me.

I was already given a talk a couple times before about how I was spending too much time trading stocks, and not enough time focusing on my job. It would have been a dream come true to move to Taiwan to work.

“OK Tom, we’ll look elsewhere to fill these open positions. Guess that’s it for Sam. Goodnight.“

My heart sank. My boss didn’t like me and I knew my days were numbered. It was mid-April, 2001.

On The Hunt For A New Job

Knowing my last day for employment would be sometime in June was depressing. It felt like I was waiting for the electric chair, especially since we were in a bear market.

Some people I knew were starting to get laid off and I was starting to panic mentally. Tom, my boss, hadn’t explicitly told me I wouldn’t be asked back. But I wasn’t going to wait to see if he did.

That evening I went home and brushed up my resume and looked for new job opportunities in New York City. One opportunity did come up, another analyst role on Bear Stearn’s Asian Equities desk.

I visited Bear Stearns the next week to meet with Toby and the rest of his team. The space was even more cramped than the cramped offices we had at GS.

Bears Stearns felt like a let down, but I had no choice but to play along if I wanted to remain employed.

The Lucky Break Came

There didn’t seem to be a sense of urgency for Bear Stearns to hire me in the current environment. As I was waiting on a next round of interviews in early May, another phone call came in. This time, there was no need for me to pick it up because Elaine, the GS VP sitting next to me did.

During my job interview process, Elaine had been my harshest interviewer. A graduate of Barnard College and The Wharton School of Business for an MBA, she was a strong woman you did not want to cross. Just when I thought I had gotten the job, she requested to interview me again over coffee and asked more grilling questions.

My lack of pedigree didn’t seem to sit right with her. But she eventually gave me the green light. More than two decades later, Elaine is still working in finance as a senior managing director. Impressive!

She Passed Over The Phone

After about a minute of conversation, Elaine said while on the phone, “I think you might want to speak to my colleague here.” She turned to me, told me to pick up the phone and have a chat.

I was confused, but I did as I was told. On the line was a guy named Michael. He had a nervous stutter.

“Hi there. Your colleague Elaine said you might be interested in working for a competitor covering west coast clients in San Francisco. Are you interested?” Michael said.

Are you kidding me? Hell yeah, I’m interested! I thought to myself. But I didn’t tell him that. Instead, I responded calmly, “I’m not sure Michael. I’m in a really good spot here. The offer would have to be extremely compelling for me to leave.“

“Sure, I understand. Let’s talk more in private when you’re off the desk about what it would take to make you move.” Michael responded.

I was thrilled! I turned to Elaine after I had hung up and thanked her. She was looking out for me because she also knew my days were numbered.

The Job Offer, So Thankful

A couple of weeks later, I took a day off in order to fly out to San Francisco and meet the team at Credit Suisse on a Friday. This was at the end of May 2001, a month before I was to be let go from Goldman.

They were a great group of fellas and I especially liked the guy I was going to work directly under. Bart was intelligent, hardworking, and loved to enjoy life. At Berkeley, where he went to undergrad, he was the Bud Light rep on campus. Everybody loved hanging out with him.

One thing led to another and the new firm offered me everything I had asked for:

• An Associate title, reserved for those who had gone to business school or those who continued to be strong employees after finishing their third or fourth year as an analyst.

• A 64% base salary raise to $85,000 from $55,000.

• A guaranteed bonus of $50,000 for the year, even though there would be only six months left if I joined.

• Subsidized housing for two months and $6,000 for relocation expenses

• More responsibility and career upside

I went from being out on the streets in a month to getting a raise and a promotion in a new city with a new firm! This series of events was absolutely one of the luckiest turnarounds of my life.

When it’s all said and done, that one phone call may have been worth tens of millions of dollars.

Didn’t Waste The Opportunity

Getting a better job right before I was about to get laid off felt like I was playing with the house’s money. Therefore, I decided to take full advantage of the opportunity.

For the next seven years, my boss and I competed against my old firm and we often won. When my boss decided to leave to a large client, I ended up running the business and hiring a couple of people to work for me for the next four years. That was another lucky break.

Of course, since my boss and I had such a good relationship, we ended up doing a lot of business together. As we get older, our network gets stronger.

I ended up working at Credit Suisse for 11 years. It was a fantastic ride that culminated with me engineering my layoff in 2012. I was so thankful they allowed me to keep 100% of my deferred compensation.

In retrospect, I may have had the opportunity to join Bear Stearns if I stayed more patient. However, if I did, my career would have been cut short given Bear Stearns went under on March 16, 2008.

Be Thankful For Luck

It’s easy to get down on ourselves, especially during a bear market or a pandemic. I’m my worst critic by far. But sometimes, we’ve got to look back and appreciate all the good that has happened to us. Let’s not take our good fortune for granted.

If you want to be more thankful, try give writing a go. Being able to write about my time earning only $40,000 a year in Manhattan reminded me of this lucky memory that had so long been shelved away. Writing will extend your life because you will remember more of it.

Finally, I strongly believe the more thankful we are the happier we will be. When we have unreasonable expectations, don’t appreciate what we have, and constantly compare ourselves to others, we lose our happiness.

Stop focusing on the negatives. Think about all the lucky breaks you’ve had in your life. If you do, I’m sure you’ll become more thankful and happier as a result.

I’d love to hear about your lucky breaks in the comments section below!

Manage Your Luck Better

One of the best things about investing is that the longer you invest, the luckier you will feel. At some point, the money you make will feel like free money since you didn’t do anything to earn it.

As you build your wealth, you must diligently track your wealth. Check out Personal Capital, my favorite free tool for tracking your net worth, x-raying your portfolio for excessive fees, and planning your retirement.

I’ve used Personal Capital since 2012 and have seen my net worth skyrocket since, partially thanks to better money management. Link up all your financial accounts and feel the power of managing your finances all in one place.

Personal Capital is free to sign up and use for everyone.

Related posts about being thankful:

The Best Financial Move I Made Is Something Everyone Can Do

The Best Time To Work May Be During Or After A Pandemic

Readers, what are you thankful for this holiday season? Please share a lucky break that you may have forgotten or taken for granted until now. If you’re interesting in reading more finance-related stories, you can join 55,000+ others and sign up for my free newsletter here.

I have a love-hate relationship with owning rental property.

On the one hand, my rental properties are one of the main reason why I had the confidence to leave work behind. On the other hand, my rental properties are my main source of investment stress.

Whenever there is a tenant issue or a maintenance issue, my mood sours. Weird situations always arise that are hard to predict.

To counteract this change in mood, I’ve had to change the framing. Instead of seeing my rental properties as a source of passive income, I now view them as having a part-time job.

As a fake retiree, it took years for me to accept this mental shift because it felt like going in reverse. But the shift has made a positive mental health difference whenever I need to spend time dealing with rental property issues. Now when issues arise, I no longer feel as stressed because it’s just a part of the job.

Let me share an example of why I hate being a landlord and an example of why I love being a landlord. Then maybe you can better decide whether owning rental property is right for you.

Why I Hate Being A Landlord: Random Stressful Issues

In August, I had my sister and boyfriend come to visit from New York City. They stayed at one of my rentals that used to be our old home. The ground floor is vacant, which I use as an office and as a place to stay for friends and family. The upstairs is rented.

Supposedly, when my sister and boyfriend came in that night they forgot to lock the side door. Or perhaps it didn’t fully latch. They thought they locked it, but there’s no proof that they did or did not. Not a big deal 99.9% of the time.

Unfortunately, that night, a burglar went in and stole the upstairs tenant’s $3,000+ bike from the garage, which wasn’t locked to anything. The security cameras somehow didn’t pick up anything. So there is also no proof a burglar stole a bike.

The garage is a common area meant for a car. But my tenants use it as storage and put a lot of valuable stuff there. We’re talking a bike, skis, furniture, new tires, and more. When we used to live there, all we had in the garage was our car and paint cans.

Am I responsible for the thief’s actions? Debatable. All I did was provide my sister and boyfriend a place to stay for a week instead of them having to pay $300+/night at a hotel. My good deed backfired.

Luckily my tenant had renter’s insurance, which I require for all tenants. The bike was 100% covered by insurance. Hooray! He got a new bike. But then my tenant asked me to pay for his $500 insurance deductible.

Different Philosophies On Responsibility

At first, I was taken aback because I didn’t feel responsible for a thief’s bad actions. If a thief stole something of mine from the garage because my tenants left the garage door open accidentally, I would just chalk it up to bad luck. It was my decision to leave things in the common space. Further, I’ve always paid my insurance deductible when something unfortunate happens to me.

When I was a tenant, there was a ceiling leak that leaked onto my laptop all night. What are the chances?! The leak ended up destroying my laptop so I filed a claim, paid the deductible, and got a new one. I didn’t ask my landlord for money. I just chalked it up to bad luck and moved on.

But I realize I’ve always had an independent personality. I readily accept bad luck as a part of life. Nor do I like to rely on anybody for help.

I have written articles such as The New Three-Legged Retirement Stool: You, You, And You and Financial Dependence Is The Worst, to explain the importance of not depending on the government or others for your financial future.

I certainly would never ask anybody for money. It feels icky, especially if I have enough to cover unforeseen circumstances.

The thing is, not everybody thinks like me. Owning rental property makes you respect other people’s points of view. Good landlords are flexible and compromise.

The Compromise

Instead of making a fuss, I offered to split the cost of the $500 deductible. My tenants, who make over $300,000 a year agreed. It was important I stand my ground because what if something else is stolen in the future? There needs to be skin in the game.

We made lemonade and discussed ways in which to bolster the property’s security system. Safety trumps all issues. I also told my tenants that I will not be responsible for future thefts in the garage and they agreed.

Finally, in my future tenant lease agreements, I will explicitly include a clause that states tenants are responsible for their property in common areas. I thought this was standard, but apparently not.

Funny enough, one security measure we agreed to of always locking the side door to the garage is not always being followed. About 25% of the time I come over and the door is unlocked.

Another time I stopped by and the tenant’s house and car keys were left in the front entrance for all to see! Good thing I was there to take them out and notify them. Otherwise, what other mishaps may happen?

You can see how having to deal with these inconsistencies can be a real pain in the ass. Alas, such issues are part of the job of being a landlord.

Why I Love Rental Property: Fewer Exogenous Variables

Now that I’ve shared an example of why I hate being a landlord, let me share an example of why I love owning rental property.

Almost three years have passed since the pandemic began, yet China is still going through COVID lockdowns. The country has a “zero COVID” policy, yet their COVID case count is surging to all-time highs. As a result, the government is barricading citizens in their condominiums and setting up quarantine camps.

If you want to appreciate your freedom, spend time on social media checking out the videos and pictures of the Chinese government’s crackdowns. Here’s a milder example below.

No protests of this scale…demanding political reforms…have been seen since the Tiananmen Protests in 1989 that led to a massacre of unarmed protesters.
No widespread crackdown yet. But authorities trying to stop this in its tracks & erase all evidence @OutFrontCNN @cnn pic.twitter.com/lYlrw5ziDB

— Selina Wang (@selinawangtv) November 29, 2022

Given the intense crackdowns, stock investors are now worried about rolling supply chain issues. After all, if people are protesting in China, who are going to make our iPhones, Nikes, and many other goods?

The S&P 500 recovered from an October 2022 low of 3,577 to 4,030 on November 25, 2022. Equity investors were feeling hopeful the Fed won’t ruin the world thanks to clear signs of moderating inflation.

Unfortunately, once the world recognized China’s dire COVID situation, stocks sold off once more. Thankfully, on November 30, Jerome Powell finally indicated the pace of rate hikes may slow.

Stock Investors Have No Control Over The Future

Being a passive investors feels great when your investments go up. But sometimes you feel hopeless and just want to do something when your investments go down.

If you are an active investor or have the majority of your net worth in stocks, the situation in China may be maddening. Just when you thought stocks turned the corner, another exogenous variable outside of your control rears its ugly head.

What’s next? The invasion of Taiwan? A terrorist attack? A uncovered Ponzi scheme that goes unpunished due to huge political donations? Another COVID mutation? The number of exogenous variables that can negatively affect stocks in the short term are endless.

China may never ease up on its zero COVID policy. As a result, global stock investors will always be at the mercy of how many people the Chinese government decides to round up.

If a citizen journalist so happens to capture a video of a Chinese policeman in a white hazmat suit beating up an old lady for wanting her freedom, stocks may sell off again. It looks like all the protesting has made a difference. On Dec 5, 2022, the Chinese government is starting to relax COVID restrictions.

I’ll still always have at least 25% of my net worth in public stocks due to its 100% passive nature and historical performance. However, stocks are not my favorite way to build wealth due to its volatility and lack of control.

More Clarity Investing In Real Estate

With real estate, there are no supply chain issues or endless exogenous variables to worry about. In fact, severe COVID restrictions actually helped rental property owners because more people demanded and appreciated housing. During times of uncertainty, the demand for real assets go up.

Most of the time, all I have to do is make sure each rental property is in good condition so that my tenants are happy. When random situations pop up I get them resolved in as efficient a manner as possible. So long as my tenants are compliant with the lease terms, life is good for both parties.

Yes, I have to pay attention to interest rates and the strength of the local economy. A natural disaster or accident could occur, which is why I have homeowner’s and auto insurance. And sometimes the government passes detrimental laws against real estate. But for the most part, if you screen your tenants well, real estate provides more clarity and peace of mind.

Without any daily updates on a rental property’s value, a landlord can just focus on operations. The long-term combination of paying down principal while seeing property appreciation is a powerful wealth generator.

Related: Real Estate Or Stocks As A Better Investment

Find Your Ownership Limit And Then Simplify

These random issues that keep occurring for landlords are the main reason why I am no longer buying rental properties. I self-manage three rental properties in San Francisco. But that’s all I can comfortably handle. If I were to buy a fourth rental, I’d probably hire a property manager.

Since we bought our “forever home” in mid-2020, all new capital allocated to my real estate bucket is invested in 100% passive private real estate. Give me the income and stability of real estate without having to do any work!

Follow the simple wealth-building strategy of buying a primary residence to get neutral real estate. After 2-10 years, rent out your home and buy a nicer primary residence. Repeat this process in your lifetime and you’ll build a healthy rental property portfolio to take care of you in retirement.

Discover your rental property ownership limit and do not surpass it. Because once you surpass your limit, your rental properties will bring you more dismay than joy.

Sticking to an appropriate asset allocation based on your risk tolerance, age, time, and goals is important. This way, money will seldom ever overtake your life so you can do more of what you want.

Reader Questions And Recommendations

Readers, do you have a love / hate relationship with owning rental property? What are some of the things you appreciate about being a landlord? What are some things you hate about being a landlord? What’s your rental property ownership limit?

To invest in private real estate passively, check out Fundrise, my favorite real estate investing platform. Fundrise invests predominantly in Sunbelt single-family and multi-family homes, where valuations are cheaper and yields are higher.

To get an affordable homeowner’s and auto insurance policy, check out PolicyGenius. You can compare real, free quotes in minutes. 

For more nuanced personal finance content, join 55,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

While the best savings accounts used to come from traditional brick-and-mortar institutions, this is no longer the case at all. The reality is, many online banks and fintech companies offer savings accounts with lower fees (or no fees) these days, and their interest rates are much more competitive than you’ll find elsewhere.

Don’t believe me? Once you do some digging, you’ll quickly find that banks like Chase and Wells Fargo are offering a paltry .01% rate on their regular savings accounts.

Since you definitely want to secure the highest rates you can on your savings, it’s crucial to compare banks and their savings account offers side-by-side. We just did exactly that to help you in your search, and we highlight the best savings accounts of 2022 below.