After gaining 12 lbs during my freshman year in college, I had to spend $35 to buy a pair of new jeans. $35 might not sound like a lot to you, but it was a lot to me at the time because I only made $4/hour working at McDonald’s.
Wasting 10 hours of my life because I couldn’t resist the buffet line pissed me off. So of course I did a lot of dieting research and discovered the magic bullet to weight loss: eat less.
With such simple logic, I decided to keep track of what I ate and slowed my food intake as I approached 2,000 calories. I also educated myself about world hunger. Knowing there are over 700 million malnourished people in the world became harder to stuff my face.
By the middle of sophomore year, I was back down to my fighting weight of 160 lbs. Given I’m not an infallible machine, I’d have a cheat day once a week. This release day has helped keep my pant size the same for the last 22 years. Although I admit, old jeans are getting very snug nowadays!
Samurai September: Your Financial Cheat Month
If you’ve been following Financial Samurai since 2009, you’ve seen your net worth surge higher because you’ve been focusing on saving and investing as much money as possible. The S&P 500 is at a record high and most real estate markets around the world are also at record highs.
While many people were spending big bucks on cars, clothes, and other things they didn’t need, you’ve been feeding your investments like a hungry hippo and watching your returns compound like a champ.
Heavy spenders missed out on one of the biggest recoveries in history. As a result, they are stuck in the muck, while you’ve come that much closer to financial freedom, if you’re not there already.
Since many of you have done so well since the financial crisis, I’d like to propose a brief respite from your financial ways. At the rate you’re going, you will die with way too much money, or you might simply burn out. It’s time to course correct a bit and spend more than usual.
Let’s not let all those people who take on massive credit card debt to fund their fabulous lifestyles have all the fun!
Samurai September Challenge Rules
The Samurai September Challenge simply encourages you to spend more than you usually do on yourself and the people you care about for one month, once a year.
Samurai September is a challenge because after years of practicing good financial habits, it’s hard as hell to spend up. Samurai September is also a challenge because in order to participate, you must meet at least five of the following conditions:
1) Grown your net worth by at least 100% in five years
2) Read Financial Samurai for three years or longer
3) Saved at least 20% of your after-tax income for five years or more
4) Tracked your net worth every month for at least 12 quarters
5) Own your primary residence for at least three years
6) Have a side hustle that earns at least $100 a month for at least two years
7) Worked on building an after-tax passive income portfolio for at least five years
8) Spent no more than 1/10th your gross income on your current car
9) Have a net worth of at least $250,000
10) Maxed out your 401(k) for at least five years
11) Maxed out your IRA for at least 10 years
12) Haven’t blamed anybody for your failures for at least three years
13) Got a graduate degree part-time while working full-time
14) Spent at least 20 hours a year volunteering
15) Donated at least $1,000 to charity for at least five years
16) Negotiated a severance instead of quitting
17) Did not vote on a law to raise taxes on others without paying more yourself
If you’ve met at least five of these conditions, congratulations! You are now free to spend more money for one month. If you haven’t met at least five conditions, better luck next year.
To those eligible for the Samurai September Challenge, here are some guidelines for how much more you can spend in Samurai September compared to usual. The goal is to reward your performance and enjoy life a little more.
Net Worth Growth Condition
- Boost spending for one month by 5% if you have increased your net worth by 100% over the past five years.
- Boost spending for one month by 10% if you have increased your net worth by 200% over the past five years.
- Boost spending for one month by 20% if you have increased your net worth by 300% over the past five years.
- Boost spending for one month by 50% if you have increased your net worth by 400% or more over the past five years.
For example, if you increased your net worth from $200,000 to $600,000 since 2010, you can now spend $500 more this month on whatever you want if your normal monthly spending is $5,000. But if you increased your net worth from $200,000 to $1,000,000 since 2010, then you’re free to increase your spending by 50% to $7,500 in Samurai September.
Savings / Investing Condition
- If you have been saving and investing at least 20% of your after-tax income every year for five years, you can boost your spending by 5% in Samurai September.
- If you have been saving and investing at least 30% of your after-tax income every year for five years, you can boost your spending by 10% in Samurai September.
- If you have been saving and investing at least 40% of your after-tax income every year for five years, you can boost your spending by 20% in Samurai September.
- If you have been saving and investing at least 50% of your after-tax income every year for five years, you can boost your spending by 50% in Samurai September.
For example, if you have been maintaining a 50% after-tax savings rate every year for five years and have plowed a majority of it into the stock market, you are free to raise your monthly spending from $10,000 to $15,000.
Home Ownership Condition
- If you’ve owned a primary residence for two years, you can increase your spending by 5% in Samurai September.
- If you’ve owned a primary residence for three years, you can increase your spending by 10% in Samurai September.
- If you’ve owned a primary residence for four years, you can increase your spending by 20% in Samurai September.
- If you bought a primary residence between 2010 – 2012, you can increase your spending by 50% in Samurai September because you bottom-ticked it baby!
- If you’ve been renting since 2010 when you could have bought, then you need to go run a marathon and think about what went wrong.
Car Ownership Condition
- If you purchased a car for up to 30% of your gross annual income, you can buy yourself a cookie.
- If you purchased a car for up to 20% of your gross annual income, you can increase your spending by 10% in Samurai September.
- If you purchased a car for up to 10% of your gross annual income, you can increase your spending by 20% in Samurai September.
- If you don’t own a car and use public transportation and the occasional rideshare, you can also increase your spending by 20%, provided that you’ve also increased your net worth by 100% over the past five years.
Starting Your Own Side Hustle / Business
- If you started a side hustle this year, you can treat yourself to a nice business expense dinner.
- If you started an online business last year and stuck with it, you can spend 10% more in Samurai September.
- If you started an online business two years or more years ago and stuck with it, you can spend 20% more in Samurai September.
- If you’ve had a side job after normal work hours for a year, you can spend 10% more in Samurai September. With Fivver, Upwork, Craigslist, Task Rabbit, WordPress, Uber, and Lyft, it’s easy to make extra income if you want to.
I firmly believe that anybody who sticks with their online business or side hustle for at least two years will see meaningful financial reward. You will learn from your failures, build your endurance, and find your “lucky” break.
Boosting Spending With A Combination
The above items are not mutually exclusive. If you increased your net worth by 200% since 2010 (+10% spending boost), consistently saved 20% of your after-tax income since 2010 (+5%), bought a primary residence in 2013 (+20%), purchased a car that cost 20% of your gross annual income (+10%), and started a side hustle in 2015 (+20%), you are free to increase your spending percentage by 65% in Samurai September or until you spend 100% of your after-tax income, whichever comes first.
You are encouraged not to spend more than 100% of your after-tax income during Samurai September because then you might turn into the average American who lacks impulse control and gets easily triggered by other people’s opinions. Seriously folks. It’s important we never relapse!
Moderation is key.
The typical American is doomed to financial misery with a median retirement balance of less than $100,000.
Excessive spending is one of the reasons why roughly 41% of Americans can’t come up with $400 in an emergency according to the Federal Reserve. I can’t fathom this to be true for the Financial Samurai community.
Have Fun, Don’t Get Carried Away
September is the chance for you to buy or do those things you’ve been putting off because you’re overly frugal. Use this month to have fun! And if you can’t stand spending more on yourself, you can always spend more on other people in need.
Here are some small and large things I plan to spend money on this September:
* New boxes of daily contacts for $200. I’ve been reusing my daily contacts to save money for years. Now I plan to use a fresh pair even if I just use them for several hours playing tennis.
* Flights for parents and in-laws for $1,000. Given I don’t want to travel on a plane with our boy until he’s at least three, I’m happy to pay for my parents and in-laws to come visit us.
* Supreme unleaded fuel for $10. I drive around 150 miles a month. My vehicle gets about 20 miles a gallon. Hence, I’m willing to see if using supreme fuel makes a lick of difference. It probably doesn’t, but who cares. It’s only $10.
* Toro sashimi for $200. Tuna belly tastes so good, but paying $10+ per slice feels like highway robbery when I can get a filling In N’ Out cheeseburger for $2. But gosh darn it, one evening I’m gonna eat to my belly’s content.
* Tinted windows in the house for $1,400. It turns out having magnificent western-facing ocean views has some downside: heat and glare. Although the new windows I installed in 2015 have some tint, I’d like to have more. It was a scorcher last Fall.
* New jogging pants with zippers for $130. Nowadays, I just like to wear athletic gear. But I need pants that have zipper pockets. Otherwise, my wallet will end up falling out, and that would be a disaster.
* Two couple massages for $400. Massages are the best, especially if you work out a lot or play sports. I have an app on demand that sends the masseuse with massage table to our house for $99 / hour, including tip.
* New air conditioning units for my parents in Hawaii for $8,000. My dad told me several of the AC units in their house died due to geckos getting stuck in the units. Ouch, this is a big expense.
* Take four personal days to save my sanity: priceless. Recently, I’ve had too many 6am – 1am days due to my writing schedule, reader and business requests, and fatherly duties. Fall is the time to take it easy since San Francisco weather is so good and the kids are back in school.
Total cash outlay: $11,439, $9,000 of which is going to my parents and in-laws. Hmm, I think I need to come up with more things to spend on my family! Any ideas? The only thing I really want are more good experiences. This challenge to spend more money than normal is going to be harder than I thought.
Have a great Labor Day weekend!
Readers, are you ready to join the Samurai September Challenge? With the stock market and real estate market making us so rich since the last recession, how do you ensure your consumption level is appropriate to your situation and you do not die with too much?
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