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For the past two weeks, I’ve felt sharp nerve pain thanks to a splinter in my right thumb. I’ve looked closely, hoping to see a tip so that I can use a pair of tweezers to pull the splinter out. Unfortunately, I’ve seen nothing.

I’m resigned to leaving the splinter wedged deep inside, letting my body hopefully one day absorb the foreign object into my bloodstream. For now, I’m treating the splinter as a reminder to never get too comfortable.

Samurai September was supposed to be a month of relaxation. I was going to purposefully write less and spend more time doing nothing when I was off childcare duty. However, after doing nothing productive for about one hour, a restlessness built inside that willed me to get busy again. Things have to change.

Here’s a recap of September 2020 so I don’t forget life during the pandemic when I’m older. To be frank, I’m most excited about doing these recaps for my family.

September 2020 Recap

Family (5/5)

My son missed the first full month back to preschool. We thought we’d feel FOMO for keeping him home, but we didn’t. Part of the reason why was because we were able to set up his first 1:1 playdate with one of his old classmates from preschool. Hooray! The lack of social interaction is the main issue I’ve been worried about for my son during the lockdown.

The month flew by and we enjoyed teaching him math, Mandarin, and Japanese. I’ve been working on teaching him one of my favorite song’s by Jay Chou called, Listen To Mama as well.

The lyrics are perfect for when he finally understands them all. The song is about respecting your mother, understanding her sacrifices, and taking care of her after you grow up. He’s got the chorus down so far.

It was also fun taking him on field trips to Chinatown and the TransAmerica building downtown. We had been showing him a “then and now” San Francisco book for over a year, so he was super excited to finally see some of the sites from the book.

We randomly found this one playground right across where I used to work at 650 California Street downtown. Only when you become a parent does your radar for playgrounds turn on, especially an unlocked one during a pandemic. It was surreal playing with my son in front of my old office building. So much can happen in your life in a few short years!

In terms of cognitive development, I really think homeschooling has an advantage. The one thing I plan to work on is helping him ride his scooter, tricycle, and maybe a pushbike. He’s still quite hesitant about movement and balance.

My daughter is nine months old and is finally crawling. Yay! We’ve thoroughly childproofed the house and put on her little head a bumper helmet. It’s really nice to reuse a lot of the things we bought for our son.

She always provides me a lift because she is always smiling. I hope her cheerful personality continues to shine throughout her entire life. We match really well.

They say it’s best to spend more time with your oldest since s/he will remember the most and needs the most love. But I think I’ve gone too far and need to recalibrate my time. I’m really going to miss the baby phase.

Here is something to think about: If the logic goes that kids are the biggest blessing in a parent’s life, shouldn’t parents want to have as many little blessings as possible?

If I could snap my fingers, I would want four children. Alas, I started too late. Maybe we will look at adopting! For those who want to have kids and are over 30, I wouldn’t wait another month.

Finances (2/5)

September was a poor month for the S&P 500 and NASDAQ, selling off by around 5% and 10%, respectively. I’m not worried about us going back to the lows of March 2020. I expect to see another stimulus package pass to support us through the rest of the year.

That said, it’s sad to no longer be making money hand over fist with stocks like Apple, Tesla, Amazon, Redfin, and more. It feels like the good times are going to take a while to come back given all the uncertainty surrounding the presidential election on November 3, 2020. Further, ballots may not be fully counted until mid-November.

Net Worth Growth

According to Personal Capital, the free financial tool I’ve been using since 2012, my overall net worth grew by a dismal 0.2% in September due to a poor showing in stocks. YTD net worth growth is up about 11.5%, which hits my +10% annual target.

The only reason why my net worth was essentially flat was due to continued online income and passive investment income. But that’s kind of a bummer right? You spend an entire month working at your day job or generating revenue from your business to see no net worth progress.

September 2020 review
Flat net worth growth for Sept 2020

The point where your investment performance overtakes your active income is a double-edged sword. Hence, if you’ve got a comfortable amount of capital to live off of, please continue to do your best to protect it from major corrections.

Mobilizing Cash Hoard

After taking a relatively aggressive long bet in stocks in March, I’ve been very cautious since the S&P 500 hit 3,000. I’ve mainly been saving as much cash as possible and paying down some mortgage principal here and there. We’re back to having about five years of living expenses in cash, which is way beyond the one year I’m generally comfortable with having.

But with so much cash, I now have the fire power to comfortably buy another rental property. The value of rental income has gone way up, but rental property values have not. Therein lies an opportunity, especially in San Francisco.

The Splinter In My Thumb: September 2020 Recap 2
Playing in front of my old office building

The exciting benefit of owning rental property that I had forgotten is that it might help our children. Imagine if you were a child and actually grew up in the various rental properties. Your parents followed the strategy of buying one home every 2-5 years, living in it, and then renting it out.

Over the years, you followed your mom or dad to visit the rental properties to do some maintenance work. Surely, with this experience, you will develop a natural affinity for these properties. You will likely want to take care of them when you grow older if given the option because they are a part of your childhood. As an adult, you may want to learn as much as possible about this asset class.

Some time over the next 2-3 years, I expect to see a large rebound in big city living interest. I’ve been here since 2001 and it’s always the same thing. Therefore, I want to position this cash accordingly. At the same time, for the past four years, I continue to have real estate exposure in 18-hour cities.

Passive Income Through 3Q2020

Passive income through 3Q2020 is roughly $298,971. However, this figure contains my original capital investment as well, so it’s not pure gains. Because I invest in a couple private funds with multiple holdings each, I can’t figure out the exact composition of the returns because the funds don’t break them down.

I won’t know exactly what my passive income figures will be until after year-end. My guess is that out of the $298,971 through 3Q, at least $100,000 is original principal invested. Therefore, my true passive income through 3Q2020 is likely closer to $200,000.

This dilemma of counting passive income is why I wrote the post What Is Considered Passive Income? All capital received from my investments I made years ago feel like passive income. However, it’s good to separate out capital gains and original capital invested to gauge performance.

FS Passive Income 3Q2020

Two Examples Of Opaque Distributions

1) I received $30,555 in distributions from my venture debt fund on September 15, 2020. I’m assuming about $15,000 is my original capital investment. To make things a little more accurate, I recorded 75% of the amount for my passive income chart ($22,914 instead of $30,555). Come year-end, when I know a little more, I’ll reconcile the books.

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Structural Capital distribution

2) I received a total of $191,679 in distributions from my real estate crowdfunding portfolio this year. I’m guessing at least $100,000 of the distribution is my original capital investment. I recorded 75% of the distributions through 3Q ($143,757 instead of $191,679) and I will reconcile the books in the new year as well.

Real estate crowdfunding distributions through 3Q2020 Financial Samurai

There’s probably a 40% chance I end up receiving no more distributions from my private funds for the remainder of the year. If so, I’ll end up including 100% of my venture debt and real estate crowdfunding portfolio distributions instead of 75%.

However, I’m certain to receive continued passive income from my various other sources like rental property income, dividend income, and bond income. Therefore, for the year, I’m guessing pure passive income will come in at between $260,000 – $280,000.

Finally, the Monthly Passive Income column is calculated by dividing total distributions I’ve received through 3Q by 12 and annualizing the more predictable income streams. For example, I know with high certainty I’ll receive at least $6,900 in online savings interest income. Again, the Monthly Passive Income includes original capital invested for the private funds. Therefore, the figure is inflated. However, the actual cash flow is not.

If you’re interested in real estate investing, for the average investor, I think Fundrise offers the best solution. Fundrise has diversified eFunds that generate passive income.

Financial Samurai (4/5)

When I wrote about taking it down a notch in September, I really meant reverting back to my normal posting schedule of 3X a week.

In July and August, I decided to ramp up my posting schedule to 4X a week, refurbish old posts, publish a weekly newsletter, and record several podcasts. I didn’t want to feel like I had wasted my time during a pandemic when I look back. However, it was simply too much.

Going back to posting 3X a week feels just right again. In general, I like to do Financial Samurai-related stuff for 3-4 hours a day. Anything more and the site would start to feel like work, which would increase the chance of burnout.

For those interested in learning how to make money from home, I’ll share my thoughts about online entrepreneurship in a future post. Although I’ve been able to generate more revenue over the past 12 months, I’m definitely not happier.

Pillar Post Of The Month

The most important post I published in September was The Proper Safe Withdrawal Rate: 4% Rule Is Outdated. The post was highlighted on Bloomberg, MarketWatch and several other larger outlets. It has guided me towards thinking more logically about financial planning and generating more tax-efficient income.

Despite receiving a lot of ridicule and criticism suggesting a 0.5% withdrawal rate may be more appropriate due to a potential structural decline in returns, I’m not bothered. Ridicule has always been part of my life.

Good examples of past ridicule:

  • Working at McDonald’s as a teenager so I could make $4/hour to take my girlfriend to the movies. Some classmates made fun of me that I put on a uniform on the weekends and made breakfast. But thanks to my time working at McDonald’s I’ve developed a work ethic and appreciation for money that hasn’t left me since I was 15.
  • Telling colleagues in 2012 that I was going to retire from finance and do some traveling and blogging instead. I’ll always remember one colleague making a funny face while typing on an air keyboard when I told him my intention at a team dinner. Taking a leap of faith at 34 has been the best lifestyle choice I’ve made by far. If I had stayed, I probably would be extremely unhealthy right now.
  • Getting bullied online for wanting to profile other teachers’ stories on FS. People weren’t happy that I identified as a high school tennis teacher instead of as a retiree or a blogger. It’s funny how people try to pigeon hole others. Be who you want to be folks!
  • Writing a bullish article about the stock market and the real estate market in 1Q2020. People told me over social media I was an idiot and the declines would be much worse than the 2008-2009 financial crisis. I hope they didn’t short too much.

Despite the constant ridicule, I’ve grown to embrace it. I use critical feedback to help me make hopefully better financial and life decisions. I believe my safe withdrawal rate post will help you think more logically about your financial future too.

Remember, you don’t need to win a financial argument. You just need to win by getting rich. Once you’re rich, you stop worrying as much about money. You also tend to obtain more freedom.

Lessons To Learn

I will teach my son and daughter how to embrace criticism and follow their own paths. Helping my kids develop strong self-esteem is one of my key goals as a father. As a high school tennis coach, I’ve seen firsthand how instilling in kids self-confidence creates winning results.

Further, I will encourage my kids to always be intellectually curious – to not be afraid to ask questions. There are no dumb questions.

Finally, I will encourage my kids to try and understand where their critics are coming from. Do they have a point? Is there a blindspot that needs addressing? One of the best ways to learn is through conflict.

September Was Just OK (3/5)

September felt like a warmup for a potentially tumultuous 4Q. The wildfires in California continued to test our resolve by producing poor air quality that limited our outdoor activities. Check out this picture below taken at around 11 am on 9/9/2020.

Sepia day in San Francisco, Sept 9, 2011

Restaurants, playgrounds, museums, zoos, and restaurants are opening up in October. It’s been a long time coming and I’m excited to take my kids to the science museum. I really want to show my daughter the penguins and all the fishies.

At the same time, we will stay as vigilant as ever in wearing masks and practicing good hygiene. We should be optimistic knowing that if any of us get COVID-19 now, at least doctors know way more about the virus than six months ago. We have also kept up with our fitness this year, which may help with recovery.

I’m hopeful life will continue to get better. Perhaps October will be the last great month until the cold starts kissing our cheeks. Maybe once the election is over, there will be a huge sense of relief, regardless of who wins.

Goals For October

  • Go to bed a little hungry 5X a week and start doing 60 push-ups and 150 sit-ups again after every tennis match 3X a week
  • Spend more time squeezing my daughter
  • Help my son learn how to ride a scooter
  • Go on a family vacation to Lake Tahoe
  • Publish 3X a week on average on Financial Samurai, record at least two podcasts, and send out at least two newsletters

How was your September? What are you looking forward to in October and beyond?

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