Hello everybody, it's Sam from Financial Samurai and in this episode I want to talk about financial blind spots on our road to financial independence. So every month I treat myself to a chair massage. The chair massage at the mall is about 80 cents to a dollar a minute and I'm hoping to get 30 minutes because that's I think the sweet spot, but I usually only get 10 minutes.

Why? Because every time I go to this chair massage place there's this guy that I'm trying to avoid and every time I get there he's like, "Hey, welcome, welcome to the chair massage place. Come sit in my chair and do you want a 30 minute, 45 minute, 60 minute?" You know, the more the better for them because they make more money.

And every time I see him I say, "Well, no." I start pretending I actually don't have that much time. I've got to go pick up my kid or something and I can only do 10 minutes. And the reason why I say 10 minutes, which is the minimum chair massage time at the place, is because I don't know if I can take his torture.

I have told him time and time again, "Please go a little bit lighter because it's a little bit too sensitive after tennis and softball." And every time he says, "Sure, no problem." And then within three seconds he starts kneading away, kneading and he's like digging into something like trying to find gold in the ground or something and I'm just dying.

I'm making audible noises showing discomfort and he just keeps on going. So there's a disconnect here. He believes what he's doing is the right way even though the client, me, is suffering. And I actually just don't want to suffer. I know there's therapeutic massages where in order to get better you've got to feel that pain and crush those knots and stuff.

But I just kind of want to relax and enjoy myself and just drift away and feel good. But because of this financial blind spot, I would say he's missing out on 100% to 200% of income because he just doesn't listen to his clients. I would happily pay him for 30 minutes if not 60 minutes if he was a great masseuse.

But he just wants to go to town and do his own thing. So financial blind spots I think really impede us on the road to financial independence. And in this episode I just want to talk about several financial blind spots and also a latest financial blind spot that I think is really, really interesting in modern day society.

So one, the first common financial blind spot I see is comparing someone's middle to your beginning. Some of the most clueless people about their money are in their 20s because hey, you're just starting to make money, right? Nobody can blame you. Yet ironically some of the most vociferous people who think they know it all also happen to mostly be in their 20s.

And I think this is a huge and fascinating disconnect. They rage against the people who bought their own house by 28, accumulated a million dollars in after tax investments by 35, 40 and started making over $100,000 a year after going to graduate school. Yet they haven't given their life enough time to compound.

It's as if they want to get ahead by refusing to work more than 40 hours a week. It's as if they want to go straight to the corner office. And that's a no-no. You cannot compare your beginning and with no experience, relevant experience to someone who's been grinding away for 10, 15, 20 years.

So what's the repercussion? Well, I think you generate resentment, anger and bitterness towards a large swath of people. And with so much resentment you end up going to your local hardware store and buying a pitchfork to stab anybody who has more than you. Instead of taking action to improve your own financial situation, you use your negative energy to attack others and to try to bring them down to your level instead of working on yourself to bring yourself up.

Two, thinking parenting is easier and cheaper than it is. For those suffering from this blind spot, they either don't have kids or are a parent working outside the home. Being a stay-at-home parent to a baby or a toddler is harder than almost any job I can think of because it is 24/7 and the stakes are so high.

One look away could mean a bloody bonk on the head or a drowning, the number one cause of death of children under 4. As a result, when looking after a child, you can never mentally or physically relax 100% of the time. And over time, your nerves will begin to fray without relief.

I've met so many working dads who think raising a child is easy simply because they don't take care of their kids most of the day. It's either their spouse or daycare that takes care of the child. And that's fine, that's normal, that's just the way some arrangements are. But what happens is that working spouse tends to take the stay-at-home spouse for granted and then the relationship begins to break down because nobody wants to feel this type of resentment.

I've also encountered childless couples who criticize stay-at-home parents for hiring help. They think it's nuts for a stay-at-home parent to hire relief for several hours a week or a day so that the parent can take a shower, go to the bathroom in peace, exercise or spend quality time with friends and loved ones.

Folks, it's hard being a stay-at-home parent. So if you don't have kids or you're not the stay-at-home parent, give some slack, otherwise there's going to be resentment, fighting, unhappiness, neglected kids, rebellious kids, divorce, financial ruin, and many more years of pain. The third financial blind spot is thinking everybody can just move to a lower-cost area of the country and be happy.

Everybody knows the Midwest and South are lower-cost areas of the country than the coast. That's just a no-brainer and I'm actively investing in these heartland states and cities. The demographic trend is inward because the cost of living is so much cheaper and there's technology that allows us to work from home and do telecommuting and so forth.

However, not everybody can just go to the middle of America and feel happy. Well, one, they might not have family there, two, no friends, three, they might feel like a fish out of water. People naturally gravitate to people who look like them, talk like them, and have similar backgrounds.

You look at it in the boardrooms. If one guy went to, let's say, Dartmouth, suddenly he or she has a lot of other friends who have gone to Dartmouth. If one man is from Zimbabwe, suddenly there's other people from Zimbabwe surrounded by him in the boardroom. And you look at your friends, probably they all tend to have similar backgrounds or they tend to look alike.

So just to ask someone to move from, let's say, one city like San Francisco where the minority are the majority to, let's say, Des Moines where they would be the absolute minority would be harder for some than others. So what's the repercussion for missing this blind spot? Well, I think the number one repercussion is homogeneity in your offline community or online community and what happens is that an echo chamber is created where nobody can think for themselves because they're just all finding belief and truth from other people to portress their own beliefs.

Okay, the fourth blind spot on the road to financial independence is underestimating healthcare costs in retirement. Because employers subsidize most and sometimes all of their employees' healthcare costs, employees either don't know what their true healthcare costs are or they take these benefits for granted. It's the same reason why so many freelancers get into trouble when it comes time to pay their taxes.

When they were working full time as employees, their employer facilitated the payment of an estimated tax from each paycheck. If the government didn't require this practice, it would have a very difficult time collecting the majority of its tax revenue come year end because most people would have just spent it all.

So if you suffer from this blind spot, it can be very devastating to your finances because you will likely not save or accumulate enough capital to generate enough passive income. To give you an example of how much healthcare costs, my family of three is going to pay $1,940 a month in premiums in the year 2020.

It's a platinum plan, it's a great plan, but $1,940 a month is a lot of money and if we were to add a second child, we asked, the plan is going to go up $440 a month. So we're talking $30,000 a year in healthcare premiums. And if you don't account for that in your financial plans, independent plans, that's going to be a tough nut to swallow.

Now of course there are other options, right? You can earn below 400% of the federal poverty limit to get subsidized healthcare. I don't know how good it's going to be, but you can definitely save on costs that way. You can go to health care ministries or you can just roll the dice and not have healthcare.

But I tell you, if you have kids, little ones are always getting sick, they're always getting in trouble, they're getting hurt, and you don't really know the health of your child fully until maybe they're five years old or maybe 10 years old. So please, please account for healthcare costs before you leave your job.

Don't take your job's healthcare benefits and other benefits for granted. Alright, the fifth blind spot on the road to financial independence is believing the only path to financial independence is through a high income. Since 2009, I've heard this complaint over and over again, how someone made a higher income, therefore he or she obviously was able to achieve financial independence by the time they were 40 or whatever the age may be.

Everybody knows that the more you make, often the more you spend. You've seen countless examples and countless data showing this to be the case. It's often harder to stay financially disciplined if you have a higher cash flow. Think about all the athletes who've made millions and millions of dollars who ended up broke because that allure to spend because you have so much money is so easy and nobody told them otherwise.

If you believe the only way to wealth is through a high income, then unfortunately you've already defeated yourself, you have weakened your money mindset. You'll believe working on a side hustle like driving a car, assembling furniture or flipping burgers is beneath you. You won't be willing to put in your dues.

You probably won't be willing to put endless hours in an online entrepreneurial endeavor either because you think only "special people" with money can do something unique. And sadly, that's just not true. Think about when you were a kid, and I'm living this now as a high school tennis coach and as a father to a toddler.

The ideas and the creativity and the hustle is endless. And somehow or another when we become, I don't know, 21, 25, we just get beaten down by the workplace and our creativity and hustle disappears. I am sure that all of you guys have something else to offer besides your day job that will allow you to make money.

Please don't believe that other jobs are beneath you. Nothing is beneath you if you want to achieve financial independence. You got to go out and do it. You got to save your money and you got to find other ways to make extra money. Curing blind spots is hard. And the reason why I introduced so many different financial archetypes is because it allows people to ponder and consider what their future might entail.

One such financial archetype is a family of four with two kids under 18 living in a high cost of living area. There's nothing unusual about this financial archetype. According to the National Oceanic and Atmospheric Administration, coastal counties of the US are home to over 126 million people or 40% of the nation's total population.

Meanwhile, according to Statista, the average family has 1.9 aged under 18 children. In other words, a family of four living in an expensive city is quite common. And to understand and describe the pressures of raising two children in a high cost of living area where 40% of the American population lives, I wrote a guest post on CNBC entitled "It Now Costs $350,000 a Year to Live in a Big City with Family." And then it did well and then MarketWatch decided to pick it up and write their own spin that said "This budget shows a $350,000 salary barely qualifies as middle class." And then with one last final poke, MarketWatch tweeted out the budget and they said "$350,000 and still struggling" and highlighted my $350,000 budget.

Finally, this tweet caught the attention of Alexandria Ocasio-Cortez, AOC, who retweeted the budget and said "struggling? With what, math?" And I thought this was a great response because it was humorous and she retweeted it out to her 5.6 million followers. This is great because it got people talking about important things such as money and happiness, the purpose of grinding so hard at your day job to make money that I don't think will make you any happier, the importance of staying on top of your finances and living within your means, whether it's worth being a two-income household when you have kids and have to pay for daycare, the importance of contributing to your retirement plan, and so forth.

It got America talking, which is all a personal finance educator can talk about. I'm not here to judge how you spend your money, but I'm here to show you how money can be spent quickly and look at these various blind spots. And what AOC doesn't realize is that as an unmarried 30-year-old woman, she might very well turn into the family of four one day who has to survive off $350,000 raising two kids in an expensive city like Washington DC.

I fully expect her to be a rising star in the Democratic party for at least another decade if not two, and as a result she should prepare herself for financial life in DC or if she goes back to the New York City area. Same thing, it's equally as high cost to live there if not more.

AOC makes $174,000 a year, which is pretty good, it puts her in the top 5% of all income earning Americans. However, the salary has been capped since 2009 given objections by the American people who give Congress a low approval rating, so I don't think that income is going up anytime soon and if AOC wants to buy a house, it's going to be tough in Washington DC where the median price detached home is around $820,000 as of the fourth quarter of 2019.

And if she wants to send her kids to private school, which many Congress men and women do, well that's going to set her back even more. It's crazy how much private school is in the DC area, just look at Georgetown Prep, it's around $40,000 a year for high school, and if you look at Sidwell Friends where Obama's daughters went, it's $45,000 and up.

And if you assume a 3% to 5% annual tuition inflation, there's just no way on a $174,000 income she can provide all this for her children. And let's also forget about sending the two kids to AOC's alma mater, Boston University, according to their own website, it costs $72,000 a year to attend.

And again if you assume inflation, I would say by the time her fictitious children, let's say who were miraculously born today, attend in 18 years, the cost is going to be about $170,000 a year. So what are the solutions? Well, one, be okay with public grade school and university.

Don't think just because you went to a private university, your kids have to go there as well. We've talked about this ad nauseum, it's okay to go to public grade school like the majority of the American population. Two, do some side hustling. Members of Congress are supposedly able to earn an additional 15% of the annual rate of basic pay, so that's another $28,400 a year of outside earned income.

Three, lose or quit. She is a very popular woman, there is an unlikely chance she will lose when she's up for re-election on November 3rd, 2020, but if she does or decides to quit, I'm sure she could get a multi-million book deal like every popular politician before her. Four, find a spouse or a wealthier spouse.

It's a little funny that she highlighted my budget of $350,000 a year, where if she found a spouse that made an equal amount of money of $174,000 a year, their combined income would be $350,000 a year. It's funny how that goes full circle, doesn't it? When AOC is in the top 0.1% of power, she will naturally run in circles with other people of power and great wealth, so I see no reason why she can't find an equal partner who makes at least $174,000, if not more.

And then the final solution, have fewer children or no children because children are expensive and it should be a reasonable ask to not have children before first being able to take care of yourself. Thinking about how many better adjusted children there would be if parents had a stable household with stable finances, maybe there would be less angry people, less murders, less crime.

Good things could happen if more parents are more present and more financially stable. So in conclusion, I hope everybody is aware of their blind spots on the road to financial independence. We all have them. You have them. I have them, which is part of the reason why I write and podcast so much, is because I want the financial samurai community to tell me where I'm missing something.

The best teacher is experience and why not get those who have experienced what you or I will eventually go through to share their thoughts and their wisdom. I know it's easy to make fun of people who are different from you, who live in a coastal city, who make $350,000 a year, who's a different race, speaks a different language, all that stuff.

But I challenge you to keep an open mind, keep an open mind and realize that might be you one day or maybe someone is living a different life than you and going through different types of struggles. And one person's struggle is no different than another person's struggle. So hopefully through reading and listening, we can all be more empathetic and understanding to different situations because who knows, we might find ourselves there one day.

Thanks everyone for listening. I always appreciate it. And if you enjoyed this podcast, I'd appreciate a positive review on iTunes or wherever you listen to this podcast. I plan to continue for a long, long time, at least one podcast a week, maybe more once I get more in the groove with my free time now that my boy's in school.

And if you want to see AOC's budget, go ahead and check out the post on my website. I spent a little bit too much time trying to get all the details right. Have a great week everyone and I'll see you guys around.