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Book Summary: Buy This, Not That – How to Spend Your Way to Wealth and Freedom

Buy This, Not That (2022) is your ultimate guide to achieving financial independence and freedom. It tells you what to buy, how much to spend, and how to make the most of your money.

Book Summary: Buy This, Not That - How to Spend Your Way to Wealth and Freedom

Content Summary

Genres
Introduction: Making the right decisions will help you achieve financial independence.
Tackle your debts, and avoid the temptations of buy-now-pay-later offers.
Design an investment strategy that will maximize your wealth potential.
Achieve financial independence earlier by optimizing your career and getting a side hustle.
Get yourself an education, and don’t forget about love!
Summary
About the author
Table of Contents
Overview
Review/Endorsements/Praise/Award
Video and Podcast
Read an Excerpt/PDF Preview

Genres

Money and Investments, Economics, Personal Finance, Business, Currency, Retirement Planning, Budgeting and Money Management, Introduction to Investing

Introduction: Making the right decisions will help you achieve financial independence.

If you’re reading this summary, you’re probably into the idea of financial independence. Who isn’t, right? But before you start working toward this goal, you should first understand why you want it. What exactly do you want to achieve? What does financial freedom actually mean to you?

Perhaps you’re seeking it for health or well-being. Financial independence can mean freedom from job-related stress and financial worries. Or maybe you want to feel secure about your ability to afford a hospital bill if you or a loved one falls ill.

Maybe you, like many others, are concerned about job security. Are you worried your boss doesn’t like you? Are you in a cut-throat industry and afraid a colleague might (figuratively) stab you in the back? Does your position mean a company merger could result in you being made redundant? Perhaps, generally speaking, job security just doesn’t seem as easy to come by as it used to. Financial independence would give you the freedom to work not because you need to but because you want to.

Or maybe you’re looking at the state of the world and the economy right now, and are worrying about a possible recession. Well, financial independence would give you the means to ride out that storm.

Of course, there are many other reasons you may be seeking financial independence. You might want to make your parents proud, for example. Or maybe you’d like to spend more time with your children or not work for a company that stands against your principles.

This summary to Buy This, Not That, by Sam Dogen, explores some of the considerations you should be making in your quest to achieve financial freedom. It answers questions like, How should I allocate my savings between financial assets? How much should I invest in real estate? What about my car? And, perhaps surprisingly, Where does love fit into the equation?

Let’s get started!

In this summary, you’ll learn

the order in which you should tackle your debts;

how the 30/30/3 rule for buying real estate works; and

why you should invest in education – and love.

Tackle your debts, and avoid the temptations of buy-now-pay-later offers.

Take a moment to think about your monthly income and how you use it. How much are you able to save each month? What are you doing to leverage your income toward achieving financial independence? What is financial independence?

First things first. Sam Dogen defines financial independence as being one of two things: either you have a net worth that’s 20 times greater than your average gross income, or you have sufficient investments to generate enough passive income to cover your expenses. Ideally, you have both.

How soon you become financially independent depends on the work you’re willing to put in, how much you save and invest, and how much risk you’re prepared to take. Again, think about your savings: if you can save 50 percent of your after-tax dollars, that’s the equivalent of one year’s living expenses. Seventy percent gets you two years’ living expenses. And if that’s simply not an option right now? At an absolute minimum, save 20 percent, and you’ll have one year’s living expenses within four years. The wise choice is to save and live frugally in your early years to reap the rewards later.

You need to earn, save, invest, and plan if you’re going to achieve financial freedom. But before we get into how to invest, we first need to tackle a thorny subject: debt.

Many of us get into debt because we try to live a life we simply can’t afford. Buy-now-pay-later offers are around every corner, tempting us to skip the hard work and go straight for the rewards. But giving in to them is a surefire way not to achieve financial independence.

Of course, debt is sometimes unavoidable – there’s a catastrophe, unexpected medical costs, or, as a single parent, your finances are just stretched too thinly. But if you’re serious about your quest for financial freedom, paying down debt must be your top priority.

Where do you start? Credit cards. Average APRs are around 15 percent, but some are as high as 29.99 percent. So pay off your cards immediately, and only use them for rewards and insurance. Never ever carry a balance forward – you’ll just find yourself being ripped off by the credit card companies.

Next, you should tackle your car debt. Your car depreciates in value every month – even if your car loan interest rate is low. Follow “the one-tenth rule for car buying.” That is, don’t spend more than one-tenth of your gross annual income on purchasing a car. After all, driving around in your five-year-old, more-milage-on-the-clock-than-I-care-to-mention hatchback won’t kill you until you can afford to buy your spiffy, new car outright!

Third, get your student loans cleared. If you haven’t yet been to college and would like to pursue a degree, choose a school that’s affordable. That way, you can pay off your loan within four years of graduating.

Finally, think about your mortgage. This is a complex area, which we’ll delve into in the next chapter.

Design an investment strategy that will maximize your wealth potential.

Like with most things in life, you need a plan if you want to achieve financial independence. It’s important to consider where and when to invest your savings to maximize your wealth. The more you save, the sooner you’ll achieve financial independence. You should also contribute the maximum to your country’s tax-advantaged retirement accounts and, at the same time, build up your taxable accounts as much as you can.

Where to put your money depends on your life stage and circumstances – but aim to own stocks, bonds, and real estate. Put a small amount of your savings into risk-free assets as an “emergency fund” too. Later, if you want to diversify, consider alternative investments such as art, wine, farmland, cryptocurrencies, and collectibles.

Dogen offers three allocation models for consideration, depending on your personality and age.

The first model, Conventional, is a low-risk option. Invest in stocks, bonds, real estate, and risk-free assets. This is great for those who are fine with working until their state retirement age.

The second, New Life, is more aggressive in its risk-taking. This is for people who want to start life anew when they reach the age of around 40. Consider some alternative investments – perhaps venture capital, private equity, and cryptocurrencies.

The third model, the Financial Samurai, is the most aggressive. Here, you invest in yourself, build your own business, and, as a consequence, find financial freedom at an earlier age. Start creating some passive income streams while you’re in your twenties. And get a side hustle going that’ll generate enough money to pay for your basic living expenses.

Whichever model you choose, you’ll most likely have built more wealth than the average person by the age of 60. Remember, though, your financial returns are not guaranteed. The trick is to diversify in order to cope with economic downturns and recessions. Here are some general rules: Don’t have more than 50 percent of your net worth in any single asset class after the age of 40. And after you’ve built your wealth, switch to capital preservation.

Now let’s return to real estate and take a closer look at your options.

First and foremost, it’s important to remember that you’re pursuing financial freedom here, so your optimal choice may not be the prettiest – the cheaper town apartment might be the choice for now, as opposed to the country cottage.

Consider renting only as a short-term solution to your housing needs. It allows you to keep your options open while you’re establishing your career and deciding where to live. But once you’ve identified that you’re going to be in one place for five years or longer, you should buy.

And how much can you spend on your principal home when you’re ready?

Dogen has developed the 30/30/3 home-buying rule to ensure you don’t overspend. First, you should spend a maximum of 30 percent of your gross income on your monthly mortgage payment. The smaller your income, the more important this is – if you spend more, your available funds for other things will be severely squeezed.

Second, make sure you have 30 percent of the value of the home saved in cash or semiliquid assets. Two-thirds of that is for a down payment. The other third is your cash buffer in case of unexpected difficulties. Avoid any temptation to make a down payment of less than 20 percent. Homeowners who do this and don’t have a buffer suffer most in a recession.

And third, don’t spend more than three times your annual gross income on your house. So if your income is $100,000, don’t exceed a purchase price of $300,000. This will keep your monthly payment within your means.

Owning real estate beyond your primary residence is also a great way to build wealth – but apply the 30/30/3 rule to this purchase too. Real estate usually outperforms stocks and bonds during a downturn, and when there’s a robust economy it benefits from rising rents and property prices. Consider the effect of the COVID-19 pandemic, for instance: stocks collapsed in March 2020, but real estate values were steady. Then, as the outlook improved, there was a boom in real-estate demand.

Achieve financial independence earlier by optimizing your career and getting a side hustle.

When you’re young, your career fuels your ability to invest – which in turn generates more cash and eventually leads to your financial freedom. Ideally, you want a well-paid job that you love. But if you can’t find a job you love, make sure that you’re at least well-paid for what you do. You can always do the things you love in your own time.

Use the first 21 years of your career to build the best foundation possible. This will then give you more options when you’re in your forties.

If you’re just starting out in your career, look for a job in a lucrative industry and work hard to get good at something. If you’re still in college, find a course that will give you a qualification to work in a high-paying industry – optimally, one that pays six figures straight out of school or will do so within five years of joining. Industries that do this include venture capital, investment banking, strategic consulting, IT, engineering, real estate, and oil. Also, don’t forget to look at the future pension arrangements that jobs offer – especially in the public sector.

But high-paying jobs are highly competitive. You probably only have a 1 percent chance of getting an interview. And after the interview, you might have a 25 percent chance of getting the job. So apply, apply, and apply again until you get the job you want.

If you find yourself in a low-paying job or in a situation where you can’t leave or switch jobs, it’s time to get your side hustle on.

Dogen has a mantra he’d like all financial freedom seekers to embrace: “Work while others are sleeping so you can eventually play while others are working.” Your job is likely to be your main source of income, so you should maximize that through promotions and raises. But you also need a side hustle to speed up the journey toward financial independence.

Your side hustle can be big or small. If you’re a morning person, get up a couple of hours earlier to work on it before you go to work. If not, work on it in the evening. Two hours per day gives you over 700 extra productive hours each year. Although it’s never too late to start, ideally you want to start your side hustle when you’re young; your energy may wane as you get older. But what can you actually do?

Well, you can join the “gig economy” by getting a second job – whether it’s a freelance or contract gig – that you can do outside your normal working hours. It can be physical, such as a night-shift at McDonald’s, driving for Uber or Lyft, or delivering packages for Amazon. Or maybe it’s online, like designing logos for startups, freelance writing, or doing voice-over work.

With all of those examples, though, you’re still working for someone else. Better yet, find a long-term side hustle building something of your own – your own brand. For example, instead of teaching piano one-on-one or giving group lessons online, you can create a set of piano lessons under your own brand name. You can then sell your course to others without having to do extra work.

Eventually, your side hustle might even become your main hustle. The right time for that is when you are sure of two things: you truly enjoy doing it, and you make enough money to cover your basic needs.

Get yourself an education, and don’t forget about love!

In the final chapter of this summary, we’ll turn our attention to education and love.

Let’s look at education first. More than anything else, education sets you free. It helps you make choices in terms of your career path, investments, and life partner. It also helps you build your business and feel more confident. Ultimately, it helps you be happy.

It doesn’t have to be formal education – you can find a lot of free courses online. You can even learn from people who disagree with you. What’s key is to be open and in a continuous learning mode. There’s always something new to learn!

If you’re considering getting a degree, remember that it’s not so important to go to a prestigious school. Yes, it may give your parents something to brag about – and when you’re fresh out of school, hiring managers may be more impressed. But, after a few years of experience at work, nobody cares anymore; they have your track record to go on. The bottom line is that you should go for the best school you can afford – but don’t get yourself into six figures worth of student debt just to improve your chances of getting a job out of school.

Let’s turn to love now. Here’s the all-important question: Would you rather be rich and alone or poor and in love? You don’t actually have to answer that! Neither situation is optimal. It’s much better to have money and spend it with your partner – and eventually maybe your kids.

The truth is, we need money just as much as we need love. Without it, we might find ourselves financially strained. And when it comes to having kids, we’d stress over whether we could give them the opportunities we want for them. Sadly, it’s also a fact that 36 percent of all divorces result from financial woes.

But there is good news: you can have both love and money. If you’re single, make finding a life partner your priority. If you already have one, nurture your relationship – every day! And remember that if you truly love someone, you’ll want to help them become financially independent too.

Having found love, your next question might be: Should we get married? If you look at it from a purely financial viewpoint, there are two things to consider: tax and social security. High earners – those with $500,000 combined income – could have an income-tax penalty, so it may be better to cohabitate. But rules change from time to time, so check in with your tax advisor. And don’t forget that being married may offer more financial benefits when it comes to collecting social security – especially if one partner dies. In that case, the surviving spouse continues to receive the deceased spouse’s social security benefits.

If you do decide to get married, keep the wedding costs down! Dogan suggests spending no more than either 10 percent of your combined income, 3 percent of your combined pretax retirement plans, 50 percent of your combined side-hustle gross income, or 10 percent of your annual passive investment income. A final alternative is to spend as much as your parents want to spend. After all, why would you turn down their generosity?

When it comes to bank accounts, the optimal setup is to have both joint and separate accounts. Having your own separate account gives you some independence to spend what you want; it also acts as an insurance policy in case of an event that ties up your spouse’s and joint assets in probate.

And, finally, what about kids? Dogan says that if you want kids, the optimal time to have them is when you’re both financially and emotionally stable. Taking into account both biology and economics, he believes that’s around the age of 32. But, in any case, you must have your finances in order – otherwise, you’ll be constantly worried and exhausted (not to mention stressed)!

When your kids grow up, by all means help them financially. But charge interest, and set a target for when they should pay you back. When they’re ready to return the money, that’s when you can decide to forgive the loan – not before. Let them be proud that they too were able to make it on their own.

Summary

You’ve just finished the summary to Buy This, Not That, by Sam Dogen.

The most important things to take away from all this is:

To become financially independent, start by identifying your why – this will help you focus your efforts. Second, pay down your debts, beginning with your credit cards. Third, remember the rules for buying a car (spend no more than 10 percent of your annual income on it), and the 30/30/3 rule for purchasing a house (mortgage payments should be no greater than 30 percent of your monthly income; save 30 percent of the purchase price for the down payment and buffer; and don’t spend more than 3 times your gross annual income on it). And fourth, make room for love – after all, what is wealth without someone to share it with?

Here’s an extra bit of actionable advice: Follow the 70/30 philosophy of decision-making.

We often don’t have enough information to make confident decisions. But if we think in terms of probability rather than binary absolutes, we not only develop a stronger decision-making mindset but also become more likely to make winning decisions.

So what is the 70/30 philosophy? It means that if you can predict that a decision has at least a 70 percent chance at success, you should go for it. At the same time, it’s realizing that 30 percent of the time, your decision will be suboptimal – and you’ll have to live with the consequences of that decision.

If you adopt this philosophy, you’ll still undoubtedly have some regrets along the way – but you’ll learn from them. And, in the long run, your decision-making will almost certainly be more profitable.

Thanks for reading – and good luck on your path to financial independence!

About the author

Sam Dogen founded Financial Samurai in 2009. One of the pioneers of the modern-day FIRE movement, he was previously at Goldman Sachs and Credit Suisse, from which he retired at age 34. Dogen is a graduate of The College of William & Mary and received an MBA from University of California Berkeley. His passive investment income exceeds $300,000 annually. Dogen lives in San Francisco with his wife and two children. This is his first book.

Sam Dogen | Website
Sam Dogen | Facebook @financialsamurai
Sam Dogen | Twitter @financialsamura

Sam Dogen

Table of Contents

Introduction: Financial Freedom, Sooner Than Later ix

Part 1 Adopt the Right Money Mindset to Get Rich
1 Find Your Happiness Equation 3
2 Do the Math and the Plan Will Come 15
3 Get the Cash, Put It to Work 33
4 Master Your Debt 49

Part 2 Put Your Money to Work
5 Follow a Proper Allocation Model 67
6 Optimize Your Investments 89
7 Understand Real Estate Fundamentals 111
8 Choose Where to Live for Maximum Wealth Potential 133
9 Go Long on Real Estate 153

Part 3 Work While Maximizing Your Wealth
10 Think Strategically About Your Career 175
11 Make Your Money and Then Make Your Exit 191
12 Get Your Side Hustle On 205

Part 4 Focus on the Most Important Things in Life
13 Invest in Education 225
14 Nurture Your Love 243
15 Live Like a Financial Samurai 269

Take Your Shot 283
Acknowledgments 289
Further Reading 291
Notes 299
Index 305

Overview

SPEND YOUR WAY TO FREEDOM LIKE A TRUE FINANCIAL SAMURAI

Sam Dogen, creator of the Financial Samurai blog, knows that you need to spend money to make money. He’s taught over 90 million readers how to invest wisely in all facets of life, from education to parenting to relationships to side hustles, even choosing where to work and play.

Now, in his Wall Street Journal bestseller, Buy This, Not That, the Financial Samurai takes the guesswork out of financial planning and shows you exactly what to buy, how much to spend, and how to optimize every dollar you earn so you can maximize wealth building and live life on your terms. The good news? You don’t need to be a millionaire or a genius to achieve financial freedom. It’s about making the most of your money, now and forever—and it’s never too late to get started. You’ll learn:

  • The Financial Samurai’s 70/30 framework for optimal financial decision-making
  • What is “good debt” and “bad debt,” and the right way to pay down debt or invest
  • Strategies and tips for building passive income streams that work for your goals and risk tolerance
  • How to invest in real estate, even if you can’t afford to buy property
  • Rules for spending—from coffee and cars to mortgages and marriage
  • And so much more!

Review/Endorsements/Praise/Award

“Financial Samurai and this book have prepared me for life after basketball! A straightforward guide to live a balanced, financially free life.” – SHAUN LIVINGSTON, three-time NBA champion

“A no-nonsense guide to living your best life now while also ensuring a financially independent future.” – EMILY CHANG, anchor and executive producer of Bloomberg Technology and bestselling author of Brotopia

“A one-of-a-kind book! Bold advice from someone who’s not just done the math, he’s lived it. A must read!” – KUMIKO LOVE, founder of The Budget Mom and bestselling author of My Money My Way

“Step-by-step, chapter-by-chapter, Sam shows how to make optimal money choices that focus on wealth building—not just saving for saving’s sake, but for living life on your terms.” – DAVID MCKNIGHT, bestselling author of The Power of Zero and Tax-Free Income for Life

Video and Podcast

Read an Excerpt/PDF Preview

Book Preface

Starting in 1999, my alarm clock began going off at 4:30 a.m. so I could get to work by 5:30 a.m. For someone who had dropped calculus because he had difficulty thinking straight at 8:00 a.m., sitting at my desk under bright fluorescent lights at 5:30 a.m. felt like a special type of torture.

Not only did I have to get to work while it was still dark, but I often had to stay until after sunset to connect with my colleagues in Asia. Over the next two years, I gained twenty pounds, I developed plantar fasciitis, sciatica, allergies, and chronic back pain, and my scalp started creating daily snowstorms because I was incessantly scratching my head due to stress.

Working in international equities at Goldman Sachs in New York City was supposed to be my dream job, but I quickly realized that if I made a career out of banking, I would probably die prematurely.

So I came up with an escape plan. Like Andy Dufresne from The Shawshank Redemption, I knew I would have to crawl through a tunnel of excrement to achieve freedom. But unlike Andy, who was trapped in prison for nineteen years until he escaped at fifty-eight, my plan was to escape by age forty.

I figured hustling for eighteen years after college was about as much work stress as I could handle. If I saved and invested aggressively, eighteen years would also be a long enough runway to build a passive-income portfolio that could pay for all my living expenses. With potentially forty years left to live after age forty, I would have time enough to heal and enjoy life to its fullest.

In the end, I was able to leave banking in 2012 at the age of thirty-four, partially thanks to negotiating a severance package that paid for about six years of living expenses. In other words, the severance package bought me the most precious commodity of all: time.

Life is both long and short, fast and slow. We must try to make the most of each day so we can minimize looking back with regret. “Financial freedom, sooner than later” is a personal mantra and the guiding theme of Financial Samurai, the website and community I have been running since July 2009.

It is also at the heart of this book.

Financial Freedom Means Something Different for Everyone

Ultimately, financial freedom means you get to do what you want when you want.

Financial freedom is also a defensive and offensive position at the exact same time.

Defensive because when the shiitake mushroom hits the fan in ways that are completely out of your control (hello, 2008–9 financial crisis; hello, 2020–21 pandemic; hello, never-ending geopolitical risks), you and your family will still be okay. Your finances are strong enough that you get to live your life mostly unimpeded.

Life is hard, and we all experience significant stress at times. None of us are immune. So hopefully this book, among other things, will be able to make a strong contribution toward reducing that kind of emotional upheaval and contributing to your peace of mind.

Just as important as living life on your own terms, financial freedom is also an offensive position. This is the mental difference between playing to win and playing not to lose. Once you nail survival mode, you can level up to win mode.

When you’re free to play offense, you can make new investments, spin up cool projects, and work on crazy entrepreneurial ideas that you’d never have tried otherwise. Some of the wealthiest people in the world owe their wealth to being able to afford to take tremendous risks.

Success is often a numbers game, and money itself is just a means to an end. But money, applied, can open doors to things you want to do with your finite time. Understand how you ultimately want to spend your time each day and use money to achieve your goals.

For now, as a father with two young children, having financial freedom for me looks like this: spending as much time as possible with my family, writing, playing tennis and softball, and constantly looking for new ways to learn from and connect with people.

The Motivation to Keep Going

Figuring out how to best apply (grow, spend, save, invest, give) your money, at whatever age and stage of life you’re in, is what I have been writing about at Financial Samurai since 2009.

As of this writing, more than ninety million people have stopped by Financial Samurai, most of them looking for a change. I’ve been privileged to hear from readers around the world who have eradicated their debt, fixed their spending habits, bought their first homes, left toxic environments, created thriving side hustles, built substantial retirement portfolios, and so much more.

Success stories like these are what drive me to keep writing about money issues that impact real life, and I make it a point to write directly from personal experience. Money matters are just too important to be left to guesswork. In the pages that follow, I’ll take the mystery out of achieving financial independence so you can take the necessary steps to get there yourself.

Taking the Fear Out of Financial Decision-Making

I wrote Buy This, Not That because I know, from my own experience and hearing from thousands of my readers, how hard it can be to take action with your money. The breadth of choices is intimidating. The fear of making a wrong move is paralyzing. On a very basic level, this book will help make your financial decisions simple, or at least simpler, in this chaotic world.

A big challenge holding folks back is the fact that most of us grew up on financial advice centered around saving. We’re urged to budget, avoid consumer debt, stash an emergency fund—and it’s all solid advice. But the truth is, it’s difficult to become financially independent by simply putting money in the bank. To achieve financial freedom, we need to know how to spend our money in ways that will build wealth now, and in the long run. The spending piece is where most financial advice falls flat, and where the most opportunity lies. It’s also where most people panic because they’re scared of making the wrong move with their money.

Here’s another truth: there are no “perfect choices” when it comes to making financial decisions. Let’s get that common misconception out of the way. The best we can do is make optimal financial decisions using logic, clear reasoning, and an understanding of how things worked in the past. Every money decision I discuss in this book is rooted in those three factors.

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. That fear of making a wrong move stops too many people from spending in ways that will build wealth. Fear keeps us clinging to safety (and cash). It’s easier to do nothing when the fear of failure and embarrassment has such a strong hold on us. It’s the same fear that prevents us from asking someone out, asking for a promotion, or starting that new project. Fear stops us from taking chances that can change our lives.

But even when we set fear aside, figuring out the optimal choices can be overwhelming. For many Americans, financial decision-making feels like a never-ending trade-off between now and later. How can we make sense of the yin and yang of finances? Spend or save? Save or invest? Invest here or there? Rent or buy? Stay at the job or quit? Kids or travel? Big city or little city? Private or public school? Go corporate or go start-up? Invest in 401(k) or pay off debt? Organic or conventional? The list goes on and on.

That’s why the title of this book is Buy This, Not That. There is an avalanche of decisions rushing down at you every day. More choices often create more stress, anxiety, and confusion. Amid skyrocketing costs, debt out of control, jobs in constant flux, and decreased spending power, I will help you tune out the noise. Step by step, chapter by chapter, I will show you how to make optimal money choices that focus on wealth building—not saving for saving’s sake—in order to live your best life now while also ensuring a financially independent future.

Buy This: You Have the Power to Become Financially Independent

The title of this book is a bit of a sleight of hand, for two reasons. First, because financial decisions are never quite that binary. There are always many nuances, sacrifices, and cross-category effects. “This or that” is rarely the full expression of your options.

For example, sure, you could decide to buy the Honda Fit over the Porsche 911, but that’s not going to help you accumulate any wealth if you are also afraid to put money in the stock market, or you’re sitting complacently in a low-paying job, or you go and blow it all at the craps table. That’s why the “this or that” method challenges you to look at your complete financial picture as you gauge money choices in any area of your life.

Yes, you will eventually need to choose this or that. If you don’t, you’re sitting idle and accomplishing nothing. Taking action is the way. But backing those choices with a full understanding of your money situation will get you closer to the optimal move.

The second trick of the Buy This, Not That title is more cultural. Society at large paints a certain picture about wealth. It’s flashy. It’s rude. It’s a winner-takes-all, get-ahead-at-all-costs story.

At the same time, there’s also a long history of sucking it up in a single career—a kind of “live with the cards you’re dealt” industrial mentality. Sure, there’s a noble work ethic in this attitude, but not a lot of creative thinking about how to achieve financial independence.

The punch line is don’t buy it. Buy this, not that. Buy your new mindset. Buy this idea that you are in control of your path to financial freedom. Don’t buy the old story that you are stuck.

My goal for this book is to provide you with at least a hundred times more value in the short term than what you paid for it. In other words, if you bought this book for $30, I want you to come away with at least $3,000 in value through the knowledge you will accumulate and the actions you will subsequently take. In the long term, I want this book to create at least one thousand times more value for you, thanks to making optimal financial moves that will compound over time.

Each chapter will provide you the tools you need to make optimal choices in some of life’s most common and biggest decisions.

My Method for Slicing Through Money’s Mysteries

Back in 2009, the world was falling apart and my net worth declined by roughly 35% in six short months. I had been putting off starting Financial Samurai since 2006. But once the financial crisis hit, I decided to finally launch the site. If I got laid off, I needed a backup plan.

I also thought it would be a good idea to start writing to help myself and others make sense of chaos. After all, by that point I had spent ten years working in the finance industry, studied economics at William & Mary, gotten my MBA from UC Berkeley, saved aggressively, diversified my investments, and . . .

I still got financially rocked.

I wanted to help others learn from my experience and from my mistakes. And, to be frank, I also needed some therapy to cope with all the fear and uncertainty. Chaos is a great motivator to change. The pain and suffering you feel today might be the best thing that could ever happen to you. Still, wouldn’t it be much better if you could make some changes before the pain happens?

For example, instead of waiting for a heart attack to force us to eat better and exercise more, why not start now? Instead of getting a divorce because we neglected to work on our communication skills, why not actively work on listening better today?

As I started writing, I created a methodology for developing the advice and conclusions I’d share with my readers. It’s the same methodology I bring to this book, and it comes in four parts:

  1. I draw from my education, experience, and writing. I worked in finance for thirteen years, and have published two thousand–plus personal finance–related articles.
  2. I spend the bulk of my time on research and rigorous analysis. I put days into researching minutiae and always “show my work” in the analysis. I’ve never met an Excel sheet I didn’t love. Real numbers tell real stories.
  3. All analysis is paired with firsthand experience because money is too important to be left up to pontification. This is my favorite part of what I do, and I sometimes get weird looks for it. For example, a few years back I decided to become an Uber driver. I set a goal of five hundred rides, not the three or four I saw some others do before writing their story. My friends called me crazy, but firsthand learning is what makes Financial Samurai special, and it’s a big part of my approach.
  4. I incorporate as many viewpoints as possible to provide well-rounded perspectives. Given that there are no perfect choices, only optimal and suboptimal ones, it’s important to listen to other people’s experiences, especially divergent ones. So many times I’ve dogmatically believed one point of view, only to see the other side of the story once I’ve taken time to listen.

The chapters ahead are driven by this methodology.

Part 1 starts with a personal reality check so you can figure out what financial freedom looks like to you. It lays out the math required to achieve your goals, the hard questions you need to answer on your journey to building wealth, and smart changes you can make right now to improve your outcomes.

Part 2 shows you where to put your money to maximize your wealth potential. I’ll help you design an investment strategy that will generate passive income to cover your best life’s expenses sooner than later. We’ll cover stock market investing, along with my favorite way for everyday people to build wealth: real estate.

Part 3 helps you optimize your career. You’ll see why everyone has the ability to earn more money, and I’ll show those on the lookout how to target high-paying industries and get paid and promoted quickly once you’re hired. We’ll also explore side hustles so you can have multiple income streams contributing to your wealth.

And finally, part 4 helps ensure that your money choices are contributing to a lifestyle that keeps you fulfilled and at peace today. Not when you retire “someday.” Yes, you’ll need to work hard and sacrifice in your early days, but even those sacrifices should put your wellness first. If your grind has you running on three hours of sleep and a diet of Spam and Cheerios, you won’t be here long enough to enjoy the fruits of your sacrifices. I’ll help you see where to set boundaries as you make lifestyle choices that influence your bottom line.

In the end, Buy This, Not That will give you an approach to your finances that will bring you peace of mind and financial freedom sooner than you ever thought possible.

Making Decisions Using the 70/30 Philosophy

In Buy This, Not That, I hope to give you a new framework for decision-making across all of life’s big buckets. Because while life is rarely black-and-white, we need to make definitive choices all the time. Rent this house or buy that apartment? Invest in a growth stock or an index fund? Live in San Francisco, California, or Raleigh, North Carolina? Order sushi delivery or suck it up and cook?

These choices all involve an expense of time and capital and bring risk and reward. I will help you navigate each with a focus on smarter spending for building wealth. We will go through the reasons why the optimal choices vary for each person based on their specific circumstances as we develop the habits that will kill the self-doubt that stops many people from making even the first steps to financial freedom.

You see, the problem, most of the time, is that we don’t have enough information to confidently choose this or that. My approach helps you overcome that information gap. And you’ll do this by thinking in probabilities instead of in binary terms, where it’s an all-or-nothing proposition. If you start thinking in probabilities instead of absolutes, you will develop a stronger analytical mindset to make more winning decisions over time. You will also likely be able to make more winning decisions on risks that others never dare take.

One of the biggest decision-making fallacies people fall victim to is thinking they must take action only when there is 100% certainty. Here are three examples.

  1. Only if you are certain someone likes you—because they told their friend, who told you—do you feel confident asking them out. But you might find out years in the future that they liked you as well and were just waiting on you to make the first move. What a shame to miss out on love due to the desire for absolute certainty.
  2. Most people put in an offer on a house only once it’s listed for sale. But at any given moment, there may be several homeowners in your neighborhood looking to sell, unsure whether they want to go through the hassle of listing their property. By sending out friendly letters of interest, you could very well start a dialogue and end up buying one of the most coveted houses on the block for a good price.
  3. Or consider that the typical job seeker applies to jobs only once they are posted online—a 100% probability that a company is hiring. However, there are always plenty of job openings that are not publicized. If you take the initiative to inquire with your manager or a hiring manager at another firm, you just might get a coveted job because you decided to take initiative on imperfect information.

Your goal is to constantly make positive-expected-value decisions in everything you do. A positive-expected-value decision is when you have a greater than 50% probability of your desired outcome coming true.

Some decisions have higher expected values than others, such as accepting a job offer with a guaranteed raise and promotion with a growing company rather than staying at a place that just got acquired by a company known to cut costs. Some decisions, on the other hand, have murkier expected values due to an overwhelming amount of incomplete information.

It is up to you to do your due diligence to bring your probability of success as close to 100% as possible (while also accepting that very few decisions ever have 100% positive outcomes).

There are few sure things in life. So think in probabilities.

When you go to a casino, the house always has an edge. The edge ranges from as low as 0.5% in blackjack and 0.8% in craps to 17% for slot machines and 25%+ for keno. In the long run, the house always wins. Therefore, if you must gamble, you should gamble at games where the house’s edge is the lowest. But an even better scenario is gambling on only those decisions where the odds are in your favor.

The more important the decision you need to make, the higher the edge or positive expected value you should have.

The 70/30 Philosophy

Now that you understand the importance of making positive-expected-value decisions, let me introduce you to my 70/30 philosophy in decision-making.

The 70/30 philosophy states that you should seek to make a decision only if you have at least a 70% probability of making an optimal decision. At the same time, you have the humility to understand that 30% of the time, you will make a suboptimal decision and have to live with the consequences and adapt.

With more than a two-to-one reward-to-risk ratio, over the long run you will become very profitable with your overall decision-making philosophy. You will most certainly have regrets where you will wish for do-overs. However, you will also constantly be learning from your mistakes so that you can make even higher positive-expected-value decisions in the future.

Just be careful not to get too cocky. That’s when you run the risk of financial and personal ruin. There’s a classic saying on Wall Street: “Bulls make money, bears make money, pigs get slaughtered.” Being overconfident and not properly recognizing risks will be your downfall. The worst mistake you can make is not realizing when a good decision was mostly due to luck, not skill. Proper risk management is paramount.

Expert marketing has also made so many things seem like attractive products, experiences, or investments. But of course, not everything you spend money on or invest in turns out to be as great as expected. Therefore, it’s up to you to continually hone the accuracy of your predictions so that they aren’t too far off from reality. If your predictions are way off, it’s imperative that you study why—and make adjustments.

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