Learn why you should Buy This, Not That
Let’s face it, saving and investing should be simple.
- Save, automate your savings to buy stocks.
- Invest in stocks and/or low-cost products that invest in stocks to avoid mutual fund salespeople.
- Disaster-proof your life by having some cash stashed.
- Rinse and repeat.
But simple is not easy.
All too often, we humans love to make things far more complex than things need to be.
We’re wired that way unfortunately. Egos often get in the way.
Given many people continue to struggle with personal finance, every day, there are tens of thousands of books published out there on this subject – building and maintaining a responsible investment portfolio is only part of the personal finance success equation…
Learn why you should Buy This, Not That
Sam Dogen (aka Financial Samurai) knows a thing or two about personal finance success.
Sam founded FinancialSamurai.com in July 2009 during the depths of the global financial crisis.
Sam’s goal through that site was to deliver and share a cathartic way to make sense of the chaos at the time. Fast forward to today, more than 90 million people have visited Financial Samurai, and tens of millions more have read his work on publications such as CNBC, Yahoo Finance, and Business Insider.
Sam was previously at Goldman Sachs and Credit Suisse for 13 years – but he’ll share more details below!
When Sam is not writing or playing with his kids, you can find him on a tennis court or softball field in San Francisco, or on My Own Advisor giving away a book!
Sam is a graduate of The College of William & Mary and received his MBA from UC Berkeley.
I got a chance to chat with Sam recently about his new book: Buy This, Not That – How to Spend Money Your Way to Wealth and Freedom.
Here is our interview below before Sam offers up a FREE, autographed copy of his book, to one lucky reader!
Sam, welcome to the site – I know you’ve left a few comments over the years and nice to see you back!
Mark, a pleasure. I enjoy reading about your personal finance independence journey in Canada and seeing you help others with their journeys at the same time as well!
Sam, maybe not everyone is aware of your financial journey and Financial Samurai beginnings. Can you share a bit of your bio with my readers? Where do you live, what have you invested in, and “how did you get here” to writing this book?
Sure thing, Mark.
I grew up in The Philippines, Zambia, Japan, Taiwan, and Malaysia before coming to America for high school and college at William & Mary. My parents were in the U.S. foreign service.
After college, I joined Goldman Sachs in NYC in their international equities department. It was a dream job, except for the fact I had to get in at 5:30 am and often leave after 7 pm! As a result, I decided to save and invest 50% of my after-tax paycheck so I could one day have options to escape.
In July 2009, I started Financial Samurai and helped kickstart the modern-day FIRE movement. It’s been great to see so many people embrace their financial independence journey since then. My definition of financial independence is having enough passive investment income to pay for your basic living expenses.
I decided to write Buy This, Not That because I felt it had to be written. When I started Financial Samurai, there weren’t a lot of personal finance bloggers with finance backgrounds. I noticed when I first got my book offer in early 2020, there weren’t many finance authors with finance backgrounds either! So, I decided to fill this hole and provide my perspective.
Instead of scratching the surface, I decided to go deep into many financial topics. I then tackled some of life’s biggest dilemmas many of us all face.
Sam, in your book, you wrote:
“My first hope with Buy This, Not That is to help you let go of the fear of making a wrong financial choice. Let that sink in: there are no wrong money choices, just as there are no perfect choices, only optimal or suboptimal.”
Talk to me about your investing and wealth-building journey. What mistakes did you make? What successes did you have? What did this teach you and what do you hope to pass along to others in the book?
Mark, I made the suboptimal choice of buying a vacation property I didn’t need in 2007. I got it for 15% off, but it ended up declining by another 40% during the financial crisis! Luckily, most of its value has recovered and I’ve been taking my kids there since 2018.
Not extrapolating my income into the future was my biggest lesson learned. I was paid very well in 2007 and thought my income was just going to go higher. Life is full of ups and downs. Therefore, please be conservative with your income and return forecasts.
One of the key takeaways from the book is to encourage readers to think in probabilities, not absolutes. Don’t think you need 100% certainty to make a choice. Otherwise, you’re going to miss out on a lot of great opportunities.
In The Psychology of Money, Morgan Housel wrote effectively:
You don’t have to be a perfect investor. Getting wealthy and staying wealthy is “about consistently not screwing up.”
I agree with this/have always agreed with this and this aligns nicely to your 70/30 decision making philosophy. Can you explain that for readers and why is that framework so important to you to convey in the book when it comes to investing and wealth-building?
Use my 70-30 decision-making framework to build wealth and make more optimal choices. The framework states that if you believe there’s a 70% probability or greater your choice is the correct one, go for it, while having the humility knowing that 30% of the time, you’re going to get it wrong. And when you do, you will learn from your mistakes and get better.
Once you start approaching everything with a probability matrix in mind, you’re going to gain a tremendous competitive advantage compared to those who don’t.
I like that.
Sam, I personally equate the definition of Financial Independence (FI) as your investments generate enough passive income to cover your day to day living expenses. I’m not into this Barista FIRE, etc. What’s your take? Agree? Disagree? Why?
Yes, since 2009, I’ve stated that being financially independent means having enough investment income to cover your basic living expenses. However, I think Barista FIRE is a reasonable stop gap where you can earn extra income and receive subsidized health care while working a traditionally lower-wage job.
But at the end of the day, don’t fool yourself. If you still need to work, then you are probably not financially independent.
When I left work in 2012 at age 34, I had about $80,000 a year in passive investment income. I knew I wouldn’t starve, but I also wasn’t 100% confident I was doing the right thing. Therefore, I had my wife, who is three years younger than me, keep on working until age 34. If everything worked out with my new adventure, she could join me. In 2015, she was also able to negotiate a nice severance and hasn’t been back to work since.
So, when did you realize FI (Financial Independence)?
In 2012 when I was 34. At the time, I had a net worth of about $3 million that generated about $80,000 a year in passive income. But the biggest catalyst was negotiating a severance that paid for 5-6 years’ worth of regular living expenses. My severance paid all my deferred cash and stock compensation over the next three years. I also had a private investment made in 2010 that wouldn’t come due until 2017 that was fully paid out.
Thanks to a lucky bull market since I left, my net worth and passive income have compounded with the market. Even though we have to provide for two young children now, our passive income is enough to keep us both unemployed until they leave the house.
I believe there are many paths to FI. You can invest in the stock market, real estate, be a private equity investor, start, run and sell a business and more. What was your path to FI? What role did luck or good fortune have in your path to FI?
I would say 60% of my ability to achieve FI by age 35 was due to luck (post highlights my lucky breaks). I got lucky landing a job at Goldman Sachs in NYC because the firm didn’t recruit at William & Mary. Instead, I got on a bus to attend a career fair and made it through six rounds, seven months, and 55 interviews.
Because I knew I was lucky, I felt like my luck would eventually run out. As a result, I decided to live frugally and save and invest as much as possible.
Today, I feel very lucky to have learned from so many mistakes I made since starting my FI journey in 1999. As a result, we should be better able to weather the various storms for an indefinite period of time.
Buy This, Not That was a lucky break too. I got rejected by every literary agent I contacted back in 2012. But at the end of 2019, an editor from Portfolio Penguin Random House pitched me to write a book with them! Given the opportunity and the fact that we’d be locked down for an unknown period of time, I decided to write the book and make the best out of a suboptimal situation. The book made the Wall Street Journal bestseller list, which was a combination of hard work and luck.
In Buy This, Not That, you wrote:
“The best passive-income investment is investing in dividend-paying stocks.” Can you share with readers your bias for that decision and why you feel so strongly about that?
You, from your book:
Mark, I think there is always a tug of war between dividend stocks and real estate for the #1 passive income investment. Dividend stocks win out for most people because they are easier to buy, require no effort, and have a favorable tax rate in America.
However, I love real estate because it is less volatile than stocks, it can be renovated to boost its value, and it usually provides a higher rental yield. However, the older I get, the less I want to manage tenants and deal with maintenance issues. As a result, I’ve turned more toward private real estate investments for 100% passive income and diversification of my expensive San Francisco real estate holdings. So far, I’ve invested $810,000 in a couple funds and individual private real estate deals.
A lot of folks that read my site, are either aspiring for FI, approaching semi-retirement or retirement, or in retirement – looking at ways to sustain their portfolios including finding an ever-magical asset allocation.
What’s your take on asset allocation as you get older? How much cash should you keep? How much fixed income? At what ages and why?
As they say, once you’ve won the game, there’s no need to keep on playing. But everybody’s risk tolerance and desires are different. Buy This, Not That provides three net worth allocation frameworks by age based on risk tolerance and goals. You’ve highlighted one framework below and my reply to that model!
And my model:
In terms of cash, I also like to have around 5% of my net worth in cash.
So, do you agree with any Equity Glide Path?
Reference: Michael Kitces work as one example:
In general, I do believe equity exposure should decrease as we age. You will find the recommendations in my various frameworks. But again, it’s up to you to decide your own risk tolerance. Just know that your risk tolerance is likely an illusion. You will only know what your true risk tolerance is until you start losing a lot of money (30%+) with significant assets in a bear market.
My perspective is somewhat different from most people writing about retirement because both my wife and I don’t have day jobs. So, we pay 100% of our $2,300 a month health care insurance bill and have to carefully manage our investments so we don’t lose too much.
It’s very different writing about asset allocation in retirement when you are still gainfully employed with a pension. It feels different once that steady paycheck goes away.
To wrap, Sam, for folks on their FIRE/FI journey, what advice do you have for folks a few years away from their target income? Inflation? Other? Sequence of Returns Risk?
What advice do you have for folks who have achieved their FI number and are now transitioning to the “other side” as part of your Buy This, Not That summary…
Mark, if you’re only a few years away from your target passive income and net worth, I encourage you to step on the gas. A favorite saying I have for my readers is: If the amount of money you’re saving and investing doesn’t hurt each month, you’re not saving enough!
And since you’re very close to hitting FI yourself Mark, I also encourage you to pretend like you no longer have a paycheck. Instead, try to live off your passive investment income instead. This is your test drive to see if what your investments are generating is truly enough.
For those on the other side of FIRE, make sure you find something meaningful and purposeful to do. There are a lot of negatives of early retirement I’ve written about in the past. Losing your identity and purpose can be very jolting. It’s best to find something you want to do before you leave your day job behind. But if not, make sure you put yourself out there and find a community of people who share your same interests. FIRE can be very lonely, especially if you pull the ripcord at a younger age.
Even though writing Buy This, Not That took two years to write and edit, it gave me purpose during the pandemic. Further, I was motivated to write the best personal finance book possible to give people the courage to live their ideal lives. Finally, just the thought of my kids being able to take the book to show-and-tell class one day provided the greatest motivation to keep going.
I could have asked Sam a dozen more questions, but I figured we’d stop here and offer you a chance, to win an autographed copy of Sam Dogen’s book Buy This, Not That below.
Alternatively, you can buy Sam’s best-selling book on demand via his site right here.
I look forward to sharing more reviews and offering more giveaways again on my site, soon!!
I appreciated his thinking of things as optimal or sub optimal vs. wrong. This makes it less stressful thinking you have to make a perfect decision. I also liked he acknowledged luck in his success. For example i bought my condo at a good time and got a good price. This makes me more empathic to people today who are buying at a time of high prices.
Real estate prices are wild, Christina. No doubt. I suspect housing/real estate may hold up well in our upcoming recession overall but some people are not going to be as lucky – many Canadians are in way over their heads when it comes to debt. They believed interest rates would stay low and housing prices also always go higher. Sadly.
The thing with dividend investing is that you have to know (at least a little) what you’re doing. Maybe I’m too lazy, but I dont think that kind of research work is for me, and I feel I would be too afraid of making a mistake and suffer from analysis-paralysis. That’s why I think asset allocation ETFs are more for me. But I agree with the strong equity content until as late as possible. Thanks for the review!
Oh, I totally agree Paddy, you can’t just own anything so asset allocation ETFs are a great equalizer. You can certainly build wealth with those!
Great article us always.
I am big fun of the Financial Samurai blog, following him for the last 8 year and implementing some of Sam recommendation.
Would love to have a book signed by Sam.
Thank you very much Mark and Sam for this opportunity.
Thanks for your comment and good luck, with the giveaway!
“Therefore, I had my wife, who is three years younger than me, keep on working until age 34.”
Ha. Not my decision!
Very informative interview and blog this week. I am looking forward to reading this book
Good luck Sue!
Great article Mark. Appreciate the info from yourself and Sam, great insights. Hope I win!
Good luck Jay!
I 100% agree with test driving your retirement when you think you are close. We lived off our dividends for 2 years while socking away the one pay cheque in a HISA that we didn’t touch. This eventually became our emergency fund. We also made sure to try out some of the activities we were hoping to focus on while retired to make sure we weren’t bored. I assure you we are NEVER bored!
Oustanding, Sabrina and seems super smart to me!
Thanks for your readership and hope you’ve not having any sort of boring weekend!
Hi Mark, I’d like to win in order to help me fine tune my strategy of growth. My timeline has gotten smaller as I 55 and starting late on this journey. But my risk tolerance is fairly wide and I am good with the 70/30 thought process. My goal is to be well on my way to FI in 10 years but plan on working till I’m 70 or 75. Cheers!
Nothing wrong with working well into your 70s if you enjoy it and it is not stressful nor taking any from other joys in your life!
Good luck, John and thanks for reading!
Mark – thanks for posting the interview with the Financial Samurai. I have 2 teenagers who I am educating about financial independence so I am hoping to add Sam’s book to their reading list. Keep up the great work, I look forward to your Saturday reading blog every week!
Thanks very much, Rob 🙂
Sam’s book is likely to open their eyes a bit!
Have a great weekend and good luck!
I’m not sure if this book would answer my question. I realize you probably don’t like to answer questions on individual stocks but I’m hoping you can point me in the right direction. I have shares of CI Financial. Over the last year it has dropped from $30 to about $13. The analysts have the price at about $23 right now. I bought at $18 so my loss isn’t that bad yet. Insider buying is up to 14 million so it’s not like everyone is abandoning ship.
Can you tell me how to determine if it is a good stock or point me to a site that explains how to delve in to stocks like this to find out what’s going on?
Hey Terry, thanks for your readership.
Yes, hard to comment on individual stocks, so many reasons why some stocks move up and down, really. I would say for CI Financial, like many financial stocks, they are getting beaten up with some negative sentiment on this sector overall. Another reason could be they’ve taken on some debt and with rates higher, not always great of course, to buy some U.S. assets. Finally, could be some negativity for the business as a whole. CI is in the dying mutual fund business and advisory business too. With one-ticket ETFs, I’m personally not convinced many investors need a financial advisor. I haven’t had one in decades. 🙂
If you want to buy stocks in Canada, either consider owning ETF XIU or following a BTSX strategy or just index invest.
I hope that helps 🙂
Good interview Mark, Sam! This book will give another great perspective for so many looking to improve their chances with their savings. Thank you.
To hear stories of success and then read about them in books can be helpful to many DIY investors. And I’ll have to check this out. If you start investing early, you have room to make mistakes and learn from them. But as we get older and have assets like or houses, we don’t need to be so obsessed with a Cash Wedge. Enough already. As you always say, investment is individual, let people decide for themselves if this is wise or not. If you have too much income and feel better having a lot of cash around, fine. But for it to be a fundamental part of retirement planning is not useful. We are retired and living of dividends, no CPP, or OAS yet. And our emergency fund is a line of credit secured by the house. There is no need to sit on a lot of idle cash for an emergency that may never come for many people. For Canadian investors the most useful info is probably https://dividendstrategy.ca/. Useful information without and agenda.
I see it that way too, Div. Investing is a learning process, if not lifelong. If you don’t start early, like riding a bike, it can be hard to acquire such life skills as you get older.
Cash is good but I do prefer cashflow over just cash wedge.
Thanks for your comment and check this out too with Matt:
Have a great long weekend,
Loved the interview and Sam’s perspective on asset allocations. Would love to win the autographed book and am following his website now!
Really appreciate Mark and Sam sharing their hard-earned knowledge. Thanks so much guys! You’re both generating good karma with your generosity.
Thanks, Mona!! 🙂
very enjoyable interview. I have read many financial books over the years and hope I can win this one. If not I will have to buy it as Sam sounds very downto earth with his financial advice.
Great stuff Murray and thanks for the comment!
Like Mark’s great site..gaining any type of financial knowledge I can from the many great bloggers out there is something that is priceless and hopefully something I can pay forward……
Great stuff, Dale – very kind words! 🙂
I really like the idea of experimenting with just living off passive income in the year or two leading up to retirement as a test drive. I’m not sure exactly how that would work in my case (as I’m not focused on dividend stock so my plan is to actually sell some shares to generate my income) but I’m thinking I could at least model it — keep track of how many shares I’d need to sell, from which account, and determine both the tax implications and the impact on my future net worth. Thanks for the inspiration!
That’s a very good idea. We’ll be monitoring our expenses VERY closely in 2023 just to see our spend, if we are ready for some form of semi-retirement in 2024. You can’t manage what you don’t measure.
Good luck on your journey! It’s really hard to know what retirement life will be like unless you do a test drive. Really force yourself to pretend that you have no more active income and see how it goes.
Thanks for this review. I found it very interesting your recommendations for alloctions, stocks to bonds and dividend stocks to growth stocks. I am retired but have been focusing my taxable accounts in that direction. What a great success story.
Yes, Sam has done VERY well for himself and family for sure.
Smart to work on taxable accounts if you don’t have any TFSA nor RRSP room left.
Buying anything when things are down?
I hope you’re enjoying your retirement! Thanks for reading.
I always appreciate to hear perspectives for people who grew up in a different culture/environment. I believe this influences their investment philosophy and how they view money. Although Sam is an American, I am sure those days spent in Asia and Africa have shaped him one way of the other. And it should give the book a slightly different taste.
I think it would, that’s a good perspective – you wonder how much that influenced Sam and his decision-making. I bet it did.
Thanks for your comment and readership, Ye.
Being able to grow up for 13 years overseas and work in international equities for 13 years was a blessing. What’s wrong with the way that if we all travel more, lived abroad, and learned a second and third language, the world would be much more peaceful because we would be much more empathetic and understanding of different cultures.
Couldn’t agree with this more… I’ve had the good fortune so far of travelling many different places in my lifetime, and there is nothing more humbling than to being able to immerse yourself in a different culture and see how others live. Definitely gives one a different perspective and a good reminder to cherish and appreciate who and what one has in their lives. After all, we are all human at the end of the day, with the same goals and ambitions… no matter where we come from. Thanks for the insight Sam
Great interview and article!
Time is going by so fast since I last wrote you regarding early retirement. I’m less than than 5 months till I qualify for early retirement… fun part is they request 4 months notice now so they can process everything. It’ll soon be time to decide!
Thank you for the opportunity to win a copy of the book.
Love you articles!
Nice to hear from you, Melissa. Yes, time flies…
5 months? Wow. Awesome. Anything you are second guessing and if so, what?
Thanks for your readership.
Good luck on your early retirement! If you can, And if you don’t have a pension, consider negotiating a severance to walk away with money in your pocket. That’s what I did and what my wife did as well. It felt like winning the lottery, getting money from a company that we wanted to leave anyway.
Very interesting article/interview. I would love to win a copy of this book. Thanks!
Thanks Kim, good luck with the giveaway!
Thanks for the opportunity to win his book. Sam’s stock/bond asset allocation by age resonated with me, as that is closer to the model that I use, than the conventional model is.
I think Sam’s higher bias to stocks vs. bonds is smart in general terms, as long as you keep cash on hand to cover any near-term expenses. Remember that Sam has about 5% of his entire porfolio (in millions 🙂 ) – in cash. That’s a huge buffer.
“In terms of cash, I also like to have around 5% of my net worth in cash.”
A good lesson there as we take on more stock/equity risk. Something to consider!
While I may never reach your early retirement goals Mark, I use what I can from your journey. This was an interesting interview and I’d like to win the book to learn more about how Sam moved beyond relying on his good luck to become financially independent.
Hey, there are MANY folks that are far ahead of me, I just do what I can on my own path and I think the same applies to you.
Thanks for your readership and sharing this site with others too.
Good luck with the giveaway.
Please enter me for a copy of his book 😎
Please add me to the draw. I follow the My Own Advisor blog and have found it useful. I have referred many people to the site as well as referenced it in discussion. Seems that the book will help me on my financial journey. Thanks, Ian
Done, Ian 🙂 Thanks very much for your readership and I always enjoy chatting with you on investing.
I have been a fan ot Sam/F Samurai for several years and find him very pratical and – increasingly, perhaps with age(!) balanced in his perspective. It is easy enough for a Canadian to make allowances for his American references – markets and taxes, in particular – and still get lots of wise advice.
I would agree, John, his advice can easily cross geographical boundaries. Good luck with the giveaway!
Good to hear John! At the end of the day, most of us want the same freedoms to do as we please and live a life of purpose.
So I hope my book Trans Am is all types of cultures. When we are young I think we know so much. As we get older, we realize how little we know and to always ask questions. Fascinating!
Great interview and insights. I’ve been working on my finances a lot for the last several years and appreciate as many tips as I can get. Thanks for hosting the giveaway.
Great stuff Charlie, good luck! 🙂
Thanks for the opportunity to win a copy of the book.
Good luck and thanks for reading!
Three powerful take away for me:
Learn to let go of your fear of making (financial) mistakes. It tried to teach my students to not be afraid to fail and never be afraid to try. Mistakes are how we learn. Don’t make life altering mistakes.
Probability Model: I like to think in terms of possibility vs probability. It’s possible all my stock could go to zero, but not probable. It’s possible for an extended market collapse but historically not probable.
Higher percentage equity vs fixed income: I’m 100% equity in my personal accounts because I consider pension, CPP and OAS as fixed income. That represents 80% fixed income to 20% equity. If the equity portion goes to zero (not probable), the fixed income meets my living expenses and therefore we are FI.
Please add me to the draw.
Great sharing and insights – really liked your possibility vs. probability thought 🙂
I love books that go deep into a subject and provides actionable advice. Reading books for entertainment is one thing, but I actually reading a book that tells me what to do based on thesis is fascinating and super helpful.
Thanks for reviewing! I’ll pick up a hardcopy right now.
Go for it, Andy. Let Sam know what you make of his book too – he’s very open to feedback.