Wednesday, November 16, 2011

Financial Survivalist Launched

My new blog is up and running with over 30 Posts already. The Financial Survivalist is an effort to compile all of my blogs and passions.


  • Finance
  • Politics
  • Outdoors
  • Emergency Prep
  • Writing
Though I will always keep Richest Man in Zion, Financial Survivalist will receive the majority of my attention. Much thanks to all my supporters. Please continue to follow me at
Enjoy Already Posted Articles Such as:

Monday, October 10, 2011

Book Review: Killing Sacred Cows by Garrett Gunderson

Killing Sacred Cows is about debunking financial myths that infest our society. Not only do they infest our society, but these myths keep up from reaching our full potential. The majority of people do things like contribute to their 401k, try to get out of debt, and pay down their mortgage. These are all good things, right? Then why are the majority of people strugling to get by let alone retire rich? Dave ramsey says that you have to "get mad" in order to get out of debt. You have to live on rice and beans, beans and rice. However, Kim Hubbard made a very good point when he said, "I haven't heard of anybody that wanted to stop living on account of the cost."

In economics the majority is seldom right. I would argue the same is true for personal finance. This book will open you eyes and help you start living freely, and at the same time you can start to prosper financially. Garrett addresses many of the myths I have tried to address here on Richest Man In Zion. He goes a step further and debunks other myths, chiches, and faulty retirement planning advice.

If you are wanting to go from financial jellyfish to artful swimmer, then this book is for you. I think it is a well rounded approach at creating a new financial perspective. I have long proclaimed that our current financial service industry is corrupt and faulty. With recent turbulent times, people are starting to listen. This book will help you understand what is wrong with societies finances. Garret doesn't leave you hanging there. He gives you a formula and a plan to get yourself on the right path. After destroying everything you've been taught your entire life about personal finances, he puts you on your feet again.

My rating; 8.5 of 10. I especially recomend this book for anyone just starting to educate themselves financially. It's an easy read filled with quotes and little tidbits here and there. Hang on to it a bit and learn the formula for setting things right.

Tuesday, October 4, 2011

If You Are Prepared You Shall Not Fear!

I take a brief pause from my injury induced vacation to post a vital thought. We live in economically uncertain times. The financial markets more closely resemble a yoyo than an investment vehicle. Some communities experience 16-20% unemployment. Some streets look more like a massive real estate add than neighborhoods. Property values continue to fall along with retirement account balances. Europe seems like it's swimming up the debt default stream. The world is struggling to stay afloat. Anyone that thinks our economy, or the world economy, is healthy has been fooled by the same financial industry that stands to profit from it's own destruction.

From the beginning of currency, financial markets have lived and died. Some lasted longer than others, but they all die. Though many would like to think differently, our financial system is not immune to a normal life cycle. The difference is the world integration that has taken place since the 80's. Our financial system no longer belongs to the United States. It belongs to the world, and as such when it fails the world shall fail. It is possible that we may live through a time that will come to be know as the Great World Depression. It will make the Great Depression seem small and feeble. However, it is also possible that the otherwise gridlocked political systems, that we sometimes think protect us, will be able to turn the tables and bring us away from the brink of the great abyss. Today is not the first nor the last time that large portions of society believe the end is near.

Recently a group known as "Anonymous" posted a warning for Wall Street. Previously know for targeting and destroying several various websites, they say that on Oct. 10 they shall erase the New York Stock Exchange from the interent. What does this mean? It could mean nothing. It could be they will hack and crash the website, which would translate to nothing more than an inconvenient interruption of the NYSE. It could mean a larger interruption of trading. The point is that "Anonymous" represents an ever growing assault against our already ailing financial system.

HOWEVER, IF YOU ARE PREPARED YOU SHALL NOT FEAR! I have dedicated a large portion of my life preparing for the worst. The worst most likely will not happen, but I sleep soundly at night knowing that if it does my family and I will survive. I have studied financial markets, world and political history. I know how to prepare and I am prepared. Within the next few days I will launch my newest endeveor Financial Survivalist. It will be a website to help you prepare for the "Coming Insurrection." There is evil in this world. Evil's chosen battlefield is monetary. BE PREPARED AND YOU SHALL NOT FEAR.

Monday, September 26, 2011

2 Week Vacation

I have injured my wrist and my injury is aggravated by typing. In order to let me wrist heal I will take a brief vacation from blogginh. I will still update the tip of the day. Follow at Facebook or twitter to get it automatically. Thank you for understanding.

Thursday, September 22, 2011

Are You a "Financial Jellyfish?"

Are you a financial jellyfish? Jellyfish can look very beautiful in the water. As they get closer and closer to the shore, their true character is revealed. They begin to be tossed about by the currents. Then they are beaten by the waves, until they show up flattened and limp on the shore. Financial Jellyfish are the same. They tend to follow the crowd and do what society thinks is best. If multi-millionaires are rare, then why would anyone follow the crowd? However, there is hope for financial jellyfish. We can all learn and change. It's starts by financial education. If you answer yes to more than a few of the questions below, you might be a financial jellyfish.

  1. Do you carry a balance on your credit cards?
  2. Is your car worth more than your house/home?
  3. Do you purchase "new" cars?
  4. Do you max out your contributions to your 401k?
  5. Do you make extra principle payments on your mortgage?
  6. Do you think the S&P is going to give you 10% returns on into retirement?
  7. Do you plan on living off of social security when you retire?
  8. Do you live paycheck to paycheck?
  9. Do you save less than 20% of your income every month?
  10. Do you worship a financial ENTERTAINER (ie Dave Ramsey, Suze Orman)?
As I said, there is still hope. None of us are perfect. Just keep following Richest Man In Zion, and keep trying to make good financial decisions. True change takes time.

Monday, September 19, 2011

Last Chance Millionaire by Douglas Andrew

Today I am reviewing Last Chance Millionaire by Douglas Andrew. I think Doug is a genius. I think that he "gets it." With everything that's going on with our Reckless Government, I believe that the strategies discussed in this book are some of the best strategies for creating wealth. We are bombarded by thousands of people ever day with their own opinion on what we should do with our money. This book is a must read for anyone that desires to retire successfully.

First I want to define retirement. I define retirement as the point in which you have enough passive income to support your desired lifestyle. The way most people do this is by saving enough money until they have a large enough "nest egg." Then when the nest egg is large enough they live off of the interest. Most people do this in qualified plans (401k & IRA). That is good, but this book is better.

In this book Doug discusses common mistakes made by investors. He talks about what he calls "asset management strategies." These are strategies that he uses to maximise otherwise inefficiently held assets. He also talks about how to strategically use tax strategies that help you create additional passive income. He also talks about often misunderstood vehicles or tools for creating wealth.

Doug has directed this book toward mostly baby boomers and middle age workers that feel like they are falling behind. He makes a valiant and effective attempt at giving these people hope. Though, baby boomers will probably find the most use in his strategies, a younger person will be 10 steps ahead by understanding the same principles.  In fact, I feel like the principles discussed in this book are some of the most important principles to maximizing your wealth potential.

All in all I give this book an 8 out of 10. The only downside to the book is that I know Doug is using this book to market his financial firm. However, I think it might be worth it for you to meet with someone from his firm.

Saturday, September 17, 2011

Why Dave Ramsey is an Epic Fail Part 2

So if you haven't read Part 1, you should check it out. In Part 2 I will list yet another reason why Dave Ramsey is an epic fail. Dave does a great service helping a lot of people out of debt. He can help you get on a budget and get your expenses under control. I'll give him that much, but only that much. What I want to talk about today is paying off your home.

Some people try to pay their home off faster. In fact, Dave says that after you pay off all other debt you should start throwing everything at your mortgage in the form of extra principle payments. He aslo recommends 15 year mortgages over 30 year mortgages for the same reason. The problem is that by paying off your mortgage early you are killing your partner Uncle Sam. You see, parts of the interest paid on your first and second home is tax deductible. If you were instead to put the extra principle payments (or the difference in 15 and 30 year payments) in a secure, liquid investment you would have the money needed to pay off your home years earlier.

So, instead of paying off your mortgage faster you put the extra money in a side fund. Lets say that after 12 years you have saved in enough to pay off the remainder of your mortgage. As far as I'm considered you are out of debt, but I wouldn't recommend you use that money to pay it off. If you did you would loose the tax deduction. Instead keep that money in a secure, liquid investment and in another 15-18 years later you'll have thousands if not hundreds of thousands of dollars that you would not have any other way.

There are a few keys to this strategy. One, you must be disciplined enough to put the extra money into a side fund. Second, the side fund MUST be liquid and secure. Stock, bonds and mutual funds do not qualify. I would never risk money that you have allocated to pay off your house if ever needed. Third, the investment must earn a consistant return equal too or greater than the interest on your mortgage. As long as you choose the right place for your side fund you will be fine.

A few other reasons why you shouldn't pay off your home at a faster rate:

1. The equity in your home comes and goes with the market. And at any time is an asset earning 0%. There is a way to lock in your equity when the value of your house appreciates.

2. If your home is destroyed by a flood or earthquake that is not covered by your home owners insurance you loose EVERYTHING!

3. In the even of financial troubles, the bank will forclose fastest on home that have a higher equity to loan ration. They won't tell you that, but it's true. So while you are paying extra payments on your home, all that money can easily be lost in a matter of three months.

4. Home equity is not liquid. The only ways to access it are to sell your home or take out a loan. In a financial emergency you may not be able to get a loan because might have lost your job. Don't think it can happen to you? It can. Instead you may have to sell your home at a discounted rate in order to sell quickly.

5. If you are ever sued your home equity is not safe. Don't think you'll be sued? Do you ever work with children? Is there ever dirt, snow or cracks on your sidewalk? It can happen. Don't be paranoid, be prepared.

Wednesday, September 14, 2011

People are Poor for a Reason

This going to be a tough one for you to take. It's a good thing no one reads this. ;) I want to preface this post by saying there are exceptions to every rule. That being said, rich people are rich for a reason and poor people are poor for a reason. I once read that if all the wealth in the world was dispersed evenly throughout the world's population, within in 10 years the same distributions of wealth would return.

Yesterday the Census Bureau released it's findings that poverty hit a record numbers last year. The thing that gets me is that according to the U.S. Department of Energy (Residential Energy Consumption Survey, 2005) the people that are "poor" have it pretty well off. Below are a few of the facts that bother me.

        Item                   % Poor That Have It             Do I Have It?
        AC                            76.7%                                Yes (used)
More Than 1 TV                80.7%                                 No
Cable or Satellite TV          61.8%                                 No
       Stereo                        58.4%                                 No
Video Game System          53.9%                                 Yes (gift)
Internet Service                36.7%                                 Yes
Separate Freezer               21.2%                                  No
Big Screen TV                  23.4%                                  No

It took my wife bugging me for months before I finally agreed to buy a USED airconditioning unit for a single room. Over 1/2 of poor households own a video game system! I only have mine because it was given to us as a gift. My TV is one of those box TVs that they stopped making over 10 years ago. It as well was given to us.

I wish that this survey had asked how often they ate out, or what is the total value of their cars. I've spent a significant amount of time working in lower income neighborhoods. Without fail there is always numerous households that have nicer cars than homes. I've talked to several people that were struggling to pay their rent and yet their cable bill got paid on time every month. To them, cable is a necessity.

My point is not that poor people aren't poor. My point is that poor people are poor because of the things they spend their money on. Instead of saving and investing their money they spend it on toys and status symbols. They go into debt in order to buy a nicer car. They use credit cards to purchase nicer clothes. They go out to eat every night so they don't have to cook.

I once read a story of a man that made himself a multi-millionaire three different times. The first was in an Asian country that decided to take his money from him and left him penniless. He traded the few things he had to escape to another asian country. Within a few years he had made himself a multi-millionaire again. He traded all his money and everything he had to get himself and his wife to America. There he had a cousin that gave him a job in a bakery. He and his wife slept in the back of the shop for a year while he saved enough money to buy the bakery. Within a few years he had opened several more bakeries and was once again a multi-millionaire.

Every day I see people on the corner begging for money. With in a mile from that same corner there is a homeless medical clinic, a food bank, two soup kitchens, a large homeless shelter and employment services. I already knew that those people were begging because they chose too. Then one day I saw a man that was renting one of my apartments. He receives about $1,300 in SS income each month, his rent is paid for by the city, his utilities are paid for by the utility company, and he gets food stamps. Yet there he was, on the very same corner holding a cardboard sign.

No matter the challenges we face, we can overcome them. It is the way we use our money that determines our wealth or lack thereof. Most people are in their current financial situation because of ignorance or choice. Educate yourself. Rent books from a public library. Use the free internet at the public library. Choose to use your money wisely. Change your stars.

Monday, September 12, 2011

Sweat Equity

Over the past four days I have been replacing the roof on a parking structure for one of my rental properties. I've learned a lot, and I guess the point of blogging is to share endless pointless information with anyone who is actually reading. Does anyone read this? Please comment.

1. I'm not as young as I use to be. After the first day of clearing shingles every part of me ached. Not only that but my right hand kept going numb. In fact it has been four days and it seems that my right hand goes numb ever hour or so. I've started stretching my wrist and it seems to be helping, but for three nights now I've been waking up several times with a numb hand. For being numb it is quite painful. Also, my back aches. Bending over all day has got to be illegal. I think this torture can only be compared to the pain I once experienced while trying to relieve my bowels in a mosquito invested valley of Yellowstone back country. We are talking thousands of mosquitos! It looked like I had the chicken pox, but much worse. Any way, I don't know how people can do this for a living. Four days of it and I want to die.

2. Sometimes you don't want to go cheap. I figured I could use the three 90 gallon trashcans at this property to get rid of all the old shingles. Little did I know there were FOUR layers of shingles on the roof. Yeah, that doesn't fit into three 90 gallon trash cans. Now I have a huge pile of shingles and trash and no where to put it. I should have paid the money to order the dumpster. I still might.

3. Sweat Equity: what is your time worth. When it all comes down to it our time is what we sell. Whether it's a 9-5 or a 1099, we sell our time for a price. What is your time worth. When it comes to me working on my properties, should I contract the work out or do it myself? First there is my time? Is it worth it or could I make more money doing something else? Second, I like working with my hands. Whether it is on a car or a house, something about using my hands to create makes me happy. So YES. Yes it is worth it. Working on my own rental properties is the best way I can think of to create equity/money for my labor. When it's all said and done (still have the pile of trash) I love being able to look at my roof and say, "I did that."

4.  My hamsters are fighting.

Friday, September 9, 2011

Misallocation of Funds

Something I was reminded of yesterday is misallocation of funds. In the last few posts we made the assumption that we would be able to get 10% ROR (rate of return) through retirement. That assumption is based on the fact that the S&P averages 10% annual return. We already talked about the flaws of averaging percentages, but I almost forgot to mention time frame.
The reason why the S&P can get an average return of 10% is because we average it over many years. As someone approaches and enters retirement their time frame on that money is not as long as it use to be. When a persons time frame is shorter than 10-15 years their investments need to reflect that. The money that they plan on using in the next few years should be protected.
There are a few options to invest money safely and still average 8%. However, the majority of people will be happy with some sort of annuity giving them 5-6%. The point I'm making is that the investment philosophy of Dave's Ramsey failed in distribution as well. I don't think it is realistic to plan on a consistant ROR of more than 6%. In retirement you often need your rate of return to be consistant.
This topic does depend a lot on the choice of investments. The choices are almost endless. That is why I am a huge proponent of financial education. It is why I am writing this blog.

Thursday, September 8, 2011

Why Dave Ramsey is an Epic Fail

            If you love Dave, great. He helps a lot of people. He is amazing at helping people get out of debt, but he is not an investment advisor. He is not a financial strategist. He is a salesman and an entertainer. I too love Dave for helping a lot of people, but it is important to know are realize that he is not a one size fits all answer. The Following is a very common scenario implementing Dave's strategy.
            If someone needed $50,000 a year in order to retire, and they think they can get a 10% return, then theoretically they will need to have $500,000 in order to retire. This is a modest living, but possible. If they retire in1998, and they didn’t make any withdrawals until the end of each year, then their account balance would look like this.

Return (%)
Return ($)

 $           -  
 $  500,000
 $  143,650
 $    50,000
 $  593,650
 $  125,320
 $    50,000
 $  668,970
 $   (60,943)
 $    50,000
 $  558,026
 $   (66,852)
 $    50,000
 $  441,175
 $   (98,250)
 $    50,000
 $  292,925
 $    84,128
 $    50,000
 $  327,053
 $    35,387
 $    50,000
 $  312,440
 $    14,966
 $    50,000
 $  277,406
 $    43,664
 $    50,000
 $  271,070
 $    14,800
 $    50,000
 $  235,871
 $   (87,791)
 $    50,000
 $    98,080
 $    26,589
 $    50,000
 $    74,669

            They did great when the market did great. Their account balance even grew when they were taking out their needed income. But as you notice their balance goes from $500,000 to $74,669 over the course of ten years. They are likely to run out of money in the next year or two. Most of us plan on being retired for longer than 10 years. If this person retired at age 65 they would run out of money by age 76 or 77. When someone runs out of retirement funds they often are not in the condition to work which leaves them two options; move in with family, or live in extreme poverty. Yes there is Social Security and Medicaid and Medicare for now, but that is never ideal nor desirable.
            You may ask, “What happened? Why didn’t it work?” The simple answer in this case is timing. The market doesn’t just go one way. It goes up, down, and sideways. This person only makes money on up years, and they still have to withdrawal money when they haven’t made any. This person just didn’t time his retirement right. It’s not an easy thing to do.
            The root of the problem is the assumptions of needs based planning that the market will always go up on an average 10%. That assumption allows people to plan on living off their interest rate, or their returns each year. However, as we talked about averages last post, it doesn't work. When their return is not enough, they will likely not be able to reduce their expenses sufficiently. The result is a withdrawal of the basis, or the amount from which they earn returns used to pay living expenses. This means that the amount of returns they will receive from year to year will be less. Essentially their retirement income will be less. Unless they decrease their expenses to match their decreased income the result will be fatal.

Wednesday, September 7, 2011

Average Rate of Return

It is said that the S&P 500 index averages a 10% annual rate of return. That means that year to year the S&P’s average annual return is 10%. Even though most people accept the average rate of return as 10%, between 1971 and 2009 it is actually 10.59%. This means that when investors are trying to beat or match the S&P 500 as a bench mark they usually expect about a 10% return. However, average and actual returns are two different things, and averages can be very tricky. I’ll give you an example of what I mean. Let’s say that we invest $100 in the stock market. In Year 1 we receive a return of 100%. So after Year 1 we have $200. In Year 2 we lose 50% (return of -50%). We now have $100 again. Then in Year 3 we gain 100% again. In Year 4 we lose 50%. In Year 5 we gain 100%, and in Year 6 we again lose 50%. After 6 years we now have $100. This is demonstrated by the chart below.

            So, our average rate of return is 25%, but if we started with $100 and ended with $100, then our actual rate of return is 0%. If we account for three years of inflation our $100 now has the buying power of about $83. Obviously this is as pretty extreme example, and my first thought was that this would likely never happen to a market index. Upon further research I realized that not only could it happen, but it has happened, and could be happening right now!
            As you see below the Dow Jones Industrial Average between 1963 and 1983 peaked five times at or around the 1000 level, and then dropped back down to or below the 775 level five times. This is a real life example of what we just illustrated. If someone put $100 into the market in 1964 they would still only have $100 18 years later in 1982. This is known as a sideways market. This particular sideways market lasted for almost 20 years.

            Our current situation is not too far off from the same thing. When you look at a chart from 1997 to 2009 you can see that the market has gone up and back down to a starting point twice just like it had in 1971. When the S&P 500 bottomed out at 666 people began calling this situation the “Lost Decade” because if you invested $100 ten years ago you would only have $100. It’s like you didn’t do anything. As we look at the situation of 1971 they still had 10 more years of a sideways market? Does this mean that we have another 10 years of a sideways market today?

            This concept demonstrates how averages can be manipulated to say what the manipulator wants, and the difference between average and actual. If you would like to know the actual annualized (year over year) rate of return for the S&P 500 between 1871 and 2009 it is 8.89%. However, that comes with an average standard deviation of 18.94%. For those of you who are not statisticians, this means that any given year can have a return that varies at least18.94% in either direction. For example in 2008 the return of the S&P 500 was -37.22%. In 2009 it was 27.11%.  What does this mean to the average investor? It means that your actual return depends on your timing. If you put $100 into the market at the beginning of 2008 at the end of that year you would have $62.72. If I want to gamble I will go to Vegas, but when it comes to my retirement I don't mess around.