For fun we’re going to outline some extremely emotional topics where you’re better off avoiding discussions. If you want to polarize an audience to grow your social media platform, then you should certainly take a side on these topics. We bring them up once in a while just to stir the pot but at the end of the day, in any sort of meeting or real discussion, try to avoid the topics. Unless you’ve known the person for 10-years and they are not a client (IE. you won’t lose money) try to avoid these topics. People are extremely attached to their views and won’t listen to the other side. Even if the can readily open Microsoft excel and find the answer in less than five minutes. Time to jump in the ring!
Housing: There are actually two cults now: the “you must buy” and the “you must be a renter for life” cults. Neither of these are accurate but you’ll figure out where someone stands very quickly on the topic if you ask them about their living situation. In short, we think it is smarter to go ahead and remain a renter unless 1) you are over ~30 years old and 2) you are going to stay in the city for at least 10-years. These two items prevent you from losing out on money making opportunities (location) and also allow you to build equity if you love a specific city and plan on living there for a long time.
At the end of the day, you want to limit your housing expenses even if you can afford a bigger home or apartment. Why? Well the only three real expense lines are 1) housing, 2) taxes and 3) food/water/utilities. If your housing expense is 10% of your monthly income (renter or owner), it really doesn’t matter if you decide to rent or own. Why? Well it’s unlikely your expenses are significant beyond this payment. People who don’t understand how compounding works, will say “I don’t want to live in a car!” when in reality they should be thinking of ways to earn more money. If you were to earn a large amount, say $20,000 a month… This idea makes logical sense. By living in a basic place (one bedroom or studio) for just a year or two… You’ll be able to buy a better place outright due to the savings you incur in just 18-24 months. It’s really that simple. Rent or own is less relevant, what matters is how much you’re throwing into it.
The only real common mistake when it comes to housing (beyond the math above) is when people attempt to buy the “maximum house” they can afford. This rarely works out. Why? If you’re buying the maximum you can afford, much more of your payments go to interest and not principal (dollar basis) and any sort of downturn in the housing market (didn’t buy the bottom or mid-cycle) and your math gets ugly very quickly. The usual miscalculation here is the state tax expenses. While you do get to deduct a lot of costs when you own a home, the taxes, insurance and maintenance all add up. Over time, you’re essentially putting too many eggs into the real estate market. There is a reason why millionaires are defined by net worth excluding their home (many are “house rich” but cash poor).
Doctors and Lawyers: Since you were a kid, doctors and lawyers were supposedly the best professions. Unfortunately, if you were to actually run the math you’d realize these are not good professions for getting rich. Your average guy with no experience will always point out the top 5% of the people in the group (people who start their own medical businesses or lawyers who make partner) and completely ignore the other 80%+ that are not doing well relative to debt load and savings. People really believe that making $300-350K a year pre-tax in a high cost city (NYC/SF/LA) is a lot of money when a 2-bedroom apartment would cost you $1.5M+ or at least $5.5-6.0K in rent alone. While we would go ahead and put the numbers here, well just link to our blogging friend Financial Samurai instead who did this already. We already ran the math here a million times as well, but no matter what the math says… people will still inevitably make terrible financial decisions. Day in. Day out.
Pausing for a second, there is nothing wrong with doing the professions if you actually want to do them. Saying you’ll get rich is just not true though. Everyone has access to a wealth manager, just talk to 2-3 people in this industry and you’ll find the same tired old answer. The most common rich people are 1) small business and 2) real estate. After that you’re looking at Wall Street/Technology since the two industries allow for high saving rates beginning at age 21 or so. People have access to the facts without any serious effort (30 minutes of contacting people) and yet the belief is engrained in american society.
Sports: This is really the best. As usual when you follow the emotion you can make money. Overly logical people think you can’t earn money gambling. Lucky for you they are totally wrong. They are correct that the average person will fail. But. There are many many bookies who lose millions of dollars to “sharps” which run algorithms that win 60%+ of the time. With a math background you could create your own algorithm that legitimately wins and then you’re basically running around looking for accounts (you’ll get banned for being a perpetual winner and need other people to bet on your behalf… Ring a bell for another similar industry anyone?). Anyway. Sports get so emotional that you can even find ways to guarantee winnings through arbitrage (one book offering different lines from another).
The second way to do it is the good old fashioned hobby way to do it. Actually be good at one of them. For fun we troll twitter with extremes but the reality is that we’d define good as anyone who competed at a decent College (leave it open ended as the worst private D3 school likely doesn’t count). High school is not legitimate as anyone can make the team and if your team won a state title then you likely played in college as well. Neither here nor there. There are sports like boxing where you know the “edge” will go to the A side of the card and there are nuances to match ups in any sport where the stats won’t line up appropriately. Most people who bet here and earn money do it as a hobby (not emotionally attached to the players) and make mid 5-figures a year. Nothing terrible, nothing amazing. Just a fun way to make the event more exciting (sure beats movies and TV shows when you’re sitting in an ice bath recovering from a hard workout).
Fitness and Diet Cults: This market never seems to die. The routines are well known and people still find ways to put a spin on it. Fast for 16 hours instead of 15 hours. Cross fit (the injury Olympics). Plant based gluten free vegan tacos… So on and so forth. No one likes the real answer since it’s too basic. Only eat healthy foods, drink a lot of water and work out 4-5 days a week (hard, where you’re sweating and sore/tired the next day). If you decide to tell someone this they will more than likely tell you how their “special routine” is the best on the planet. Then you ask them for their performance numbers and they have their tail between their legs screaming that you’re “mean”… Sigh.
Anyway, the best way to avoid these topics is to simply avoid these discussions. Don’t join fitness forums. Avoid new fads and stick to the basics. “Does this make sense”. That’s the best way to see if a fad will hold up. Training at max potential every day (cross fit)… does that make sense? No. Eating only meat and zero carbs for life does this make sense? No. Eating healthy and working out hard with a few rest days between without counting every single calorie? Yes. Pretty simple logic. This will then allow you to pick up some new routines as you learn about a few different specialized muscle workouts for your body type. Doesn’t get any easier than that.
Superstition Cults: This is a growing phenomenon. Didn’t realize how emotional people get about them but there are people who will battle to death about their specific “skills” related to astrology and your birthday (other such things like this). While great if it works, we stop when people claim they can predict the future but make $150K a year. This makes no sense at all. While it’s perfectly natural to be a mis superstitious (we are as well), we’re not going to take life advice from someone who hasn’t accomplished anything just because he gets a few predictions correct. If the guy was actually that accurate he’d be very rich. And. If he’s really rich, then we’ll go ahead and listen.
Feel free to do what you please as it relates to superstition. Ours is a lot easier. Avoid unlucky people. Attach to lucky people. Don’t think about it on a daily basis. Pretty simple. So if you know person A always seems to have things go his way, stay close to that person. If person B always seems to get screwed over at the very last second, it’s best to avoid them. This will naturally cause your relationships to skew towards people with better luck who will naturally be better off in life. Besides, it’s better to be lucky than smart.
Recent Minimalism Cult: Did a big number on the minimalist cult with our fashion posts. If you’re worth $100M and drive a Ferrari, no one should care. If you’re worth $1M and drive a Ferrari there is a problem. Really is that simple. People think that every single person with nice things is a “loser with personality problem who can’t get laid”, in our experience this isn’t the case. Just like any bar/club there is always an exception. Ask it a different way. If you had to bet your life on getting lucky on a Saturday night, would you really choose to drive up in a Honda Civic or an Aston Martin? Would you really choose to wear no watch or brand new Patek and custom fitted clothing. Everyone knows the real answer they just aren’t being honest about it. The only significant exception here is probably if you’re under 25 where the easiest answer is to just go on Spring Break in Mexico where you basically have to be autistic to fail.
The whole idea of living a basic life is very cool when you’re young. It prevents you from spending on meaningless things like splitting bottle service with a bunch of people. But. At some point, you have to ask what the point of making money was. If you really only want to live on $30-40K a year you probably shouldn’t even read this blog (in fact we don’t know why anyone would read this blog if they didn’t want to be rich). You want to scale your spending with something that is sustainable long-term. No one in their right mind would wake up, have $10M hit their bank account and say “I’m just going to eat lentils and bike around the city for the next 50 years”. That’s so boring it hurts. As usual, we’ll be reasonable here and say to lean on the side of conservatism when increasing spending. And. You don’t want to become a boring guy after getting rich… Otherwise what was the point?
Dating Complainers: As soon as we saw this form we had to stop answering questions about it forever. There are really people who say that it’s hard to date women in New York, Miami or Los Angeles (highest concentration of attractive women in the USA). What are they really saying? They are not of high value. The only thing that needs to be said about dating is that women will go for the best man in the group since she wants the best she can get. Men on the other hand go for the best looking woman. Surprise, surprise, neither sex is doing anything illogical here. The only thing people should be worried about is if the city has enough attractive women. Why? We’ll if you actually have your life together: in shape, rich, good amount of free time… You would be at the top of the pack. Makes logical sense then that the only people who complain about the three best cities are not at the top of the pack, not even close. (for fun to be in the top 1% of income it’s somewhere around $450K… So you don’t even need to get there since around the top 10-20% of men do well in the dating category).
Assuming you make it, which many reading will, you’ll eventually go down the private party route. This is because it’s a natural filter for everyone involved. The girls who show up know that everyone there is at least well off and the guys don’t have to worry about unattractive women showing up and interviewing them in front of their better looking friend. Sure you’ll still go out and party here and there. But. The preference will shift to events where everyone knows the people are not complete losers. While it’s still fun to go out and meet random people, it’s kind of sad to imagine a guy trying the same old tactics as a 27 year old.
Company Man Cult: These are much more common on the coasts, but there are still people who talk about prestige and take pride in working for some major Company. It doesn’t make any sense. 99.99999% of people are replaceable in a Company and the only reason that Company is hiring someone is so everyone on top can make more money. Tell this to a “career man/woman” and you’ll immediately kill the social interaction (we’ve tried for fun and it gets ugly very quickly). While it’s sad to see, it’s also impressive. The Company has made the employees legitimately feel like they are part of something bigger and important… When all they are doing is making someone else richer. Nothing wrong with working at the best possible company you can get into on day one… But being proud of wearing that sweater vest and lap top bag? Quite insane.
The most interesting thing about the Company man is that you know he is easily brainwashed. You can actually tell what they will believe in after 5-10 minutes so you can adjust your positions on the fly if you need to establish rapport with him/her (hopefully a her if you’re in a new social situation). The downside of this is that you’re not going to change their view on this stuff. They are *sold*. Entirely sold on their decision. Instead of trying to get them to see the light, you’re better off making them feel smart/special. When it comes to making money, telling someone they made a bad choice is equivalent to telling someone they are ugly and gross as soon as you say hello.
Debt: There are many people who don’t believe in any type of debt. This is an interesting topic as there are many wealthy people who get rich with zero personal leverage. It’s rare, but it happens. The problem is that this type of thinking is far too risk averse. Without any sort of leverage at any point in time, mathematically their net worth is lower than it should be. By way of example, if someone gives you a loan at just 2% and you can’t figure out a way to make more than 2%… you’re in a lot of trouble.
This creates two camps of people: 1) never use debt and 2) people who got rich off of a lot of leverage – typically real estate people. We’re somewhere in the middle. The easiest way to figure out how much leverage you can take is based on your passive income. Once that gets to say $100,000 a year, that means you can take your annual interest payment up to $100,000 in a maximum scenario. It’s unlikely you’ll do that as it implies $2.5M worth of debt, but you certainly shouldn’t be debt free if your investment returns can beat the standard 4% rate on the debt.
So if you’re running a finance blog, you can quickly cause debate with the classic “how much leverage is too much” question. There is never an answer here but you’ll quickly see how cult like both camps are. Guys who took out massive loans on homes at the bottom of the market (under 10% down payments) will say the debt free people are foolish. Meanwhile the debt free person might have all his money tied up into some high risk high reward biotechnology stock that could be a $0 or up 10,000%. Hence the natural debate.
Gambling: Ah yes leaving the best for last. Gambling. There are many people who can consistently make money gambling. This is not in roulette or black jack but in sports/poker. Any time the “line” is set by humans, you know there is an opportunity.
So people who are not familiar with statistics or arbitrage will complain and say it’s not a way to make money. But. It is. Just ask them basic questions about sharps and algorithms and see if they actually know what they are talking about. 100/100 times they will not know what they are talking about. And. There are also people with significant sports knowledge that can make money with their knowledge of the sport. On that note, we’re loaded up on Canelo for the weekend fight.
Just remember, when you talk about gambling it’s actually a good way to weed out boring people from fun ones. At minimum if someone doesn’t have $5,000 to bet on a game once and a while (entertainment) they are either 1) broke or 2) too boring to hang out with. No one can stand the guy who never gambles in his life, it shows he’s never willing to make irrational decisions once in a while. Essentially a robot.
