​Back in 2017 I learned about the rapid rise in popularity of Japanese whisky, more specifically Yamazaki. Here is a little history lesson about the company’s background and meteoric rise to popularity:

Yamazaki became Japan’s first whisky distillery in 1923. Japanese whisky was still barely a blip on the map until in 2012 Yamazaki 25 won the “Best Single Malt” award at the World Whisky awards and then in 2015, both Yamazaki 18 and Yamazaki 25 won the coveted “Double Gold Metal Award” at the San Francisco World Spirits Competition. Before, much of the single malt whisky market was dominated by the Scotch with well-known names such as Macallan and Highland Park.

Suddenly, everyone was clamoring to get their hands on a bottle of Yamazaki, so much so that Yamazaki decided to discontinue the Yamazaki 25, which got its name from the fact that it is aged in sherry casks for 25 years. They simply could not produce enough supply and wait 25 years to reap the profits given the newfound demand and began to focus more on their no-age-statement whiskeys that are still great but do not require such extensive ageing. To no surprise, the price of Yamazaki products have skyrocketed on the secondary market in part riding the tailwinds of Chinese consumerism and exuberance as the Chinese have driven up the price by hoarding the expensive golden ichor. You used to be able to buy a bottle of Yamazaki 25 from the distillery for just a couple hundred dollars, now it costs a cool $10,000 on Dekanta which is one of the largest retailers of Japanese whisky online.
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​The price has just gone up over the years for as people drink their bottles, supply is reduced as there is no more Yamazaki 25 coming from the distillery to supplement the market – but demand hasn’t waned.

Back in 2017 I realized the supply crunch would soon ensue for the Yamazaki 18 as Suntory (who owns Yamazaki) begins to focus its efforts on producing lower margin but higher volume products to attempt to quell demand and capitalize on their popularity.

As a result, I spent time researching online and one day found a boutique liquor store in New York that was selling bottles of Yamazaki 18 for just $400 (actually $360 since I used a coupon) when the going price for a bottle on the open market was about $600!

I immediately bought out their whole stock of 3 bottles.

At the time, I was home in Charleston and they did not offer out of state delivery so I shipped the bottles to my uncle in New York who then shipped them down to me in Charleston on a bus.
As it turns out, this was my best investment ever! Since then, the price of a bottle of Yamazaki 18 has risen to about $1,000. Garnering me a nice return of 277% or compounded annual growth rate of 41%, far exceeding the growth rate of my other traditional investments.

Now I am hoping Suntory decides to discontinue the Yamazaki 18 which if history holds true, should make the value of my bottles go through the roof.

The Yamazaki 12 was actually the first Japanese whisky to win gold at the International Spirits Challenge in 2003. I found this price chart for a Yamazaki 12 showing the whisky boom that occurred in 2018, where at today’s rates, 12,000 Yen equals $112 and 21,000 Yen equals about $197.

Prices have since consolidated and a bottle now trades for about $177 according to Wine-Searcher. If you are interested in getting into the whisky market, this might be a good place to start, especially if you think one day Suntory might discontinue Yamazaki 12.

​While I boast that purchasing these bottles were my best investment as it is incredibly difficult nowadays to get your hands on a bottle for a good price, I realize one day it may turn out that purchasing these bottles may turn into one of my worst investments from a book value standpoint.

Why? Well, being an alternative asset which is defined as an investment that does not conform to the traditional asset classes of stock, bond, or certificate like works of art, fine wine, or real estate, there is no open exchange that provides seemingly instant liquidity. If I want to sell a building, a Van Gough, or one of my coveted bottles of Yamazaki, I would most likely have to list or auction my asset and wait until I find the perfect buyer that will value the asset as much or more than I do to purchase it. Furthermore, there are liquor control laws meaning that I would need a liquor license to sell my bottle on an open marketplace.

In the future I still may be able to sell them as a collectible in a private party person-to-person transaction but to be completely honest, I never plan to sell my bottles. I have actually already gifted one away to a family friend has helped out my family tremendously, and will probably break open my remaining bottles to mark extremely special occasions such as the day my kids graduate. In this way, I will never be able to reap the true market value of my bottles, but that is simply because I do not want to.

However, I still implore you to look into investing in alternative assets to diversify as famed economist and Nobel Prize winner Harry Markowitz called diversification “the only free lunch in finance.” Alternative assets may exhibit low liquidity, especially in troubled times where you might have to let assets go at fire sale prices, but because of these factors, they often generate higher expected returns and offer portfolio protection being that they are often less correlated with capital markets.

As of now, I know that I have sunk $1,080 into three bottles of Yamazaki 18 that one day may be worth $430,000 (such as this bottle of Yamazaki 50-year-old). Regardless, in the meantime they sure do look pretty in my collection!
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First let’s look at the difference between a Traditional IRA and a Roth IRA:

Traditional IRA – you can contribute using pre-tax income and then pay taxes on withdrawals later. This type of IRA is beneficial for those who make a lot of income today and will likely make less income in retirement. If you are in this boat, which is the case for the majority of people, the benefit comes from the fact that by contributing pre-tax income, you can invest more into the market and generate compounded growth from a larger base, and pay less in taxes because when you make distributions as you retire, you will probably fall into a lower tax bracket now than where you are now.

Roth IRA – you contribute using after-tax income and then do not have to pay any taxes when you withdraw. This type of IRA is more beneficial to those who are not making as much income today, and therefore fall in a lower tax bracket. You would get taxed upfront on your earnings, hopefully at a lower tax rate today than what you would experience when you retire.

However, these tax benefits come at a cost. The government is forgoing some tax income so that Americans can have more saved for retirement, but they cannot allow you to put all of your money into an IRA or else they would not be able to collect any taxes from capital gains.

Therefore, there are certain stipulations associated with IRAs:

1. For Roth IRAs, as of 2020, if single tax filers must have a modified adjusted gross income (MAGI) greater than $124,000 contributions start being phased out until you hit a MAGI of $139,000 in which case you are not allowed to contribute. Anyone with earned income can contribute to a Traditional IRA, but tax deductibility is based on income limits and participation in an employer plan.
2. You cannot withdraw gains from your IRA until the age of 59 ½ or else you will have to not only pay taxes on your capital gains, but also pay a 10% penalty for withdrawing early.
3. You can only contribute $6,000 a year to an IRA, or $7,000 if you are 50 or older.
4. Traditional IRA (NOT Roth IRA) distributions are required after age 70 ½.

 
Now there are also big differences regarding early withdrawals:

For Traditional IRAs, there are a number of ways to avoid the 10% early withdrawal penalty such as using the withdrawn money to pay for qualified higher education expenses, qualified first time home-buyer expenses, medical expenses that are not reimbursed by health insurance, and more.

For Roth IRAs, you can withdraw any amount of money you contributed at any time without having to pay a penalty or taxes, but you cannot withdraw any earnings before the age of 59 ½ without paying the 10% early withdrawal penalty except in a few instances. These are that you must have had the Roth IRA for at least five years AND have a permanent disability, die and the money is withdrawn by your beneficiary or estate, or use the money (up to $10,000) for a first-time home purchase.

To really put this in perspective, imagine Sally put $6,000 of after-tax income into her Roth IRA today. Then in a year her account value grows 10% to $6,600. She can withdraw her original $6,000 at any time but cannot withdraw any of the $600 of earnings without paying the 10% penalty. This means if she wanted to withdraw all of the money from her Roth IRA, she would get back $6,540 (still probably better than paying taxes on the $600 of earnings). Because of this provision, the Roth IRA offers increased flexibility in case of the worst. However, Sally will never be able to put back in the $6,000+ that was contributed in 2019. She can still put in $6,000 for next year’s contribution but will never be able to add money retroactively. This is why starting early is so beneficial, once a year passes, you will never be able to go back and contribute for that year!

To further harp on this point, let’s look at two scenarios. Historically, the stock market has returned about 10% annually, but to be conservative let’s use 7%.
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If Tom starts his Roth IRA at the age of 20 and consistently invests $6,000 until he is 60, with continuous compounding at a 7% annual rate of return, Tom will have $1,287,657 for retirement.
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Sally on the other hand started contributing at the age of 30, simply ten years later than Tom, and ends up with $612,438, about half of what Tom has for retirement.​
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​In total, Tom put in $6,000 for 40 years equating to $240,000, meaning with $1,287,657, he multiplied his contribution by 5.37x. The first $6,000 he put in at the age of 20 grew into $89,847, increasing by a factor of 15x!
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​Sally however put in $6,000 for 30 years equating to $180,000, meaning with $612,438 at the age of 60, Sally multiplied her total contribution by only 3.4x The first $6,000 she put in at the age of 30 grew into $45,674, increasing by a factor of 7.61x.
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​This means that Tom had each dollar he first contributed increase to $15, while Sally’s only increased to $7.61. Tom’s first dollar increased by almost double what Sally’s first dollar increased by, by simply starting his IRA and contributing 10 years earlier when he was 20 instead of 30.

This effect is further propounded the longer you leave your money in, same as the earlier you start. Just for fun, say both Tom and Sally decided to start a Traditional IRA and left in their money until the maximum age when distributions become required at 70 (70 ½ actually).
If Tom starts at the age of 20, he will have over $2.6M! A pretty solid nest egg if you ask me.
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​Conversely, Sally will have $1.3M, which is still great! (But not nearly as cushy as Tom)
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​The best part of all of this is that if it is a Roth IRA, you can withdraw your millions TAX FREE! If it is a Traditional IRA, you would have put in the money TAX FREE and then hopefully when you retire somewhere between age 50-70 you will be in a lower tax bracket of say 18% instead of 35%, which makes a huge difference when you are talking about this much money!
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How to Open an IRA

So by now you must be wondering how to open an account! Pretty much any institutional financial firm offers the ability to open an IRA such as Fidelity, Charles Schwab, TD Ameritrade, Wells Fargo, Betterment, Vanguard, etc. I choose to use Vanguard because I find them easy to use, and I buy Vanguard products anyways in my IRA so there are no fees. Best of all, Vanguard offers some of the lowest expense ratios (which is the annual fee they charge for creating and running their mutual funds or ETFs) which in the long run may matter.

I choose to hold most of my IRA money in VOO which is a Vanguard ETF that tracks the S&P500 which is a market-weighted fund with exposure to the largest 500 companies in the US (although there are actually 505 companies in the S&P500). The S&P500 is generally used as a proxy to represent the US economy and VOO has the smallest expense ratio that I have come across at 0.03% which is really next to nothing. That’s 3 cents for every $100 invested each year. Historically, investing in the US economy has been a solid bet, here is a snippet of the market’s performance.
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​Allocation wise, many would argue that everyone’s portfolio should include some bonds for safety, even if it is just 10%. To achieve that goal, Vanguard also has a broad bond market ETF with the ticker BND. I choose to also hold some VFTAX which is the ticker for one of Vanguard’s social index funds to invest in socially responsible companies (it just so happens that the fund is beating the S&P500). While I tout broad market ETFs, the beauty of an IRA is that you can invest in virtually any asset you want – bonds, CDs, individual stocks, mutual funds, ETFs, etc. However, before you go dump all your retirement money into Tesla, I would read about the skewedness effect which is why most active managers cannot even come close to passive management.
 
In summary, you basically want to pay minimal taxes to maximize the returns on your investments for in the wise words of Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes”. You should therefore choose which type of IRA is best for you – Traditional or Roth, invest your money prudently and consistently, and do not touch it until you retire. In this way, you will have a nice nest egg and can mitigate both evils by minimizing taxes so that you can enjoy retirement.
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Do note that these offers are subject to change and may no longer be valid by the time you click on the links, but hopefully I will keep updating WalletHax with updated offers so keep checking in and join my email newsletter (once I get it up)!

​I don’t read a lot of books. I guess there are just so many stimulating distractions in this day and age, I find it hard to sit down in a quiet place and read. However, when I do read a book it’s usually a finance related book to help me invest in myself. Here’s my short list, in order of where I think you should start if you choose to do so.
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​Naked Economics: Undressing the Dismal Science – Charles Wheelan

My all-time favorite book. Takes utilitarian data driven approach to economic, and honestly social issues. It is an incredibly insightful, life-changing book. Everyone that I have recommended this book to or let borrow my book has loved it. To think I first read it in my high school AP Statistics class…but I learn something new every time I reread it.
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​Rich Dad Poor Dad – Robert T. Kiyosaki

A great book that summarizes a lot of valuable yet simple financial advice in a clear and concise way. I would highly suggest this this book to anyone new to finance or even if you are a seasoned finance professional, with the enthralling way Kiyosaki writes his stories, you won’t get bored.
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​King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone – David Carey
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Fascinating book recommended to me by a finance mentor. If you did not live through the burgeoning era of Private Equity you honestly probably could not fathom how crazy the industry used to be. Companies were so incredibly mispriced then, and maybe many still are. The PE industry was propped up on massive bridge loans that in turn led to some of the largest corporate buyouts in history that changed the game forever.
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​Start-up Nation: The Story of Israel's Economic Miracle – Dan Senor & Saul Singer
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This book was recommended to me by the CEO and Founder of the first company I interned for. It really champions agile thinking and bridges the fact that Israel is a tiny nation, surrounded by enemies and in a constant state of war, yet has the most startups per capita in the world – it’s an environment that fosters and necessitates a different way of thinking. I hope to visit some day soon.

A lot of people do not know about the Fair Isaac Corporation but may have heard about the term FICO Score. Well, The Fair Isaac Corporation was founded in 1956 and created the FICO Score which is maybe one of the most influential numbers you will track and follow for the rest of your life, as it dictates a lot about what life you will lead. It essentially is one number that represents your credit worthiness and will determine what credit cards you qualify for, car loans, and probably most importantly, your mortgage rate. The score ranges from 300 – 850 and is rated in these brackets:


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While the inner workings of the FICO scoring system are a closely guarded secret, the Fair Isaac Corporation has opened up about the five general components of a FICO credit score and how much influence each component has on the wrapped FICO score. Over time, we have been able to kind of dissect the FICO credit score and break it down. Here are the general guidelines to follow and how to build your credit score and game the system.

1. Payment History - by far the most important component of your credit score as it makes up 35% of your overall credit score.

FICO monitors your revolving loans (credit cards), and installment loans (mortgages, student loans, car loans), and takes into consideration the frequency, recency, and severity of reported missed payments. Therefore, the MOST IMPORTANT thing you can do to get to or keep a good credit score is to NEVER MISS A PAYMENT. This means do not take on debt you cannot service and always pay your credit cards in full and on time. A lot of credit cards now offer auto-pay functionality connected with your bank account. While in general I like this feature and use it myself, there are potential downsides that I will cover later in this blog post.

2. Credit Utilization – is the percentage of available credit that has been borrowed and makes up 30% of your overall credit score.

If you own a credit card and max it out every month, odds are you are not using your money wisely – and FICO knows this. According to FICO, the people with the best scores tend to have a credit utilization ratio of less than 6%. In general, you should never really be exceeding 20% utilization of your limit but should still use your credit cards to some capacity to build viewable credit history.

To increase your score in this category, you can do two things:

1. Spend less / Pay down your revolver more frequently.
   
   FICO only checks your current utilization about once a month, but you do not know when. Therefore, if you do not spend too much on your credit card or pay off your balance whenever you accumulate one, odds are when FICO does check your utilization, it will be low.
   
   Here is where auto-pay comes into play. Auto-pay fully extends your days outstanding for your credit line as if your payment is due on the 15th of the month, it will automatically withdraw from your bank account on the 15th, extending your credit for the full month. This is a helpful feature as often people pay back early when there is not this functionality because they are afraid of being late. However, this kind of ensures that when FICO checks your spend, it will be near the maximum possible which may hurt your credit score in the near term (although if you are still under 20% of your limit I would say the effect is negligible). However, the other potential pitfall is if you do not have enough money at the time in your checking account and forget, your credit card statement will not be paid and you will most probably incur checking account overdraft fees. Together this is very bad for your financial health which is again why I implore you to NEVER SPEND MONEY YOU DO NOT HAVE. I myself keep my checking account balance at the minimum possible – about one to two months of spend as you should never leave exorbitant amounts of money in a low interest bearing checking account. If you want to know why and how to get a bunch of free money from your bank, check out my article on checking accounts.
   
   In my opinion, if you are nowhere near hitting 20% of your overall limit with your monthly spend and will not have your credit checked anytime soon, turn on auto-pay and make sure you have enough money in your checking account to pay your credit card bills. On the other hand, if you do not have a high limit or want to maximize your credit score by displaying low credit utilization, still turn on auto-pay as a safety but pay your credit card bill twice a month or once a week if needed.
   
   
2. Increase your limit (which is easy to do). Let’s explore the ways to do that.
   
   When you apply for a credit card you self-report a lot of information such as your yearly income, monthly rent payment, other financial assets, and other streams of revenue. After running your credit score through computer algorithms and taking into account your inputs, the issuing credit card company decides whether to approve you or not based on set thresholds. If you do not make a lot of income, the issuing company will not want to extend you a large revolving credit line in fear of not getting paid back. This is especially true if you are new to the game and do not have a lot of credit history.
   
   However, once you have had your card for about a year, you can should call into your bank and ask to increase your credit limit. They will ask you to self-report your income similar as before, take into account how responsible you have been with your card, and interestingly the credit card company often asks if you have other streams of supporting income. This can be your parent’s salary or anything that can reasonably be used to prevent you from missing on payments – by including your parent’s salary you can increase your income input dramatically. Then you play this fun little game where they ask YOU how much you want your limit increased to and then you shyly ask to double or triple your current limit (use your other card limits as a gauge) and they either say Approved or Denied (honestly its usually approved). Do this process often to increase your overall limit as your credit utilization is calculated based by dividing your monthly spend by your monthly limit. This means you can max out your best card for rewards and as long as you have a bunch of retired cards stashed away increasing your overall limit, you can spend significantly more on your credit card without passing the soft 20% max utilization guideline.
   
   This is a great segue into another strategy and my personal favorite as it makes/saves me a lot of money – credit card churning. By having more open cards (that have $0 annual fees as you don’t want to pay that for life) you can increase your overall credit limit easily, have more open accounts which boosts your score (see how below), decrease your credit utilization, and mitigate the average credit age hit when you get new cards in the future. Plus you make/save almost half off everything you buy, and I buy everything on my cards and never use cash. I only use the card that gives me the greatest reward/bonus at the time and am comfortable spending a lot on it as I know I have lots of retired cards that increase my overall credit limit, allowing me to max out my best card if I choose to do so without even coming close to 20% utilization.

3. Length of Credit History – is a simple average of the length of time each credit account has been open and makes up 15% of your overall credit score.

Here is where the importance of starting early really makes a difference. I remember being in high school and getting my first credit card with a paltry 1% back on purchases. However, that account is now my oldest credit account of about 4 years. See the trick here is that the length of credit history category is calculated as a simple average, and to maximize the score in this category, you have to start early and have a lot of accounts.
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I remember the day my high school Economics teacher explained how the credit cards system works. While the overarching idea is pretty easy to understand considering how commonplace the concept and reality of credit cards is, the key sticking point I learned is that for many Americans, credit cards are a slippery slope that will entrap you in what many deem “the rat race” – an inescapable cycle of liabilities that never allow you to find financial freedom. However, because the credit business is highly lucrative and profits off of vendor fees and those who do not understand or mismanage their credit, the competing companies offer incredible bonus and rewards to lure in consumers. In this blog post, I am going to teach you how to take advantage of this system and discount all of your future purchases by up to 45%. The system we built greatly rewards those who do understand how to manage credit and relies on the fact that the majority of the population is financially illiterate, or sometimes, have no other choice.

Before I get into the nitty-gritty, I implore you to check out my blog post on the components of credit score to understand why credit card churning is actually beneficial to your financial health, especially if you are just starting on your credit journey.

The idea behind credit card churning is that many companies offer massive bonuses after you spend a certain amount of money on your new card. They count on consumers either being too lazy to pick up a new card after receiving one, not knowing the benefits of accumulating credit cards, or missing a payment and paying insane annual interest rates of +20% and not even being able to consider spending more as they are trapped in a vicious debt cycle.

By churning credit cards you are; increasing your number of open accounts, dampening the effect of new credit cards on your average credit age history, building credit history, increasing your overall credit limit so you can decrease your credit utilization, and in effect getting +40% off of all of the money you spend!

This is how to Credit Card Churn:

1. Open a zero annual fee credit card starting with the ones with the best theoretical return.
2. Spend the required amount needed to get the bonus.
3. Retire the card and stick it in a drawer.
4. Get a new card and start over.
   *Make sure to use each card about once every two years so it does not get deactivated.​

Here is a rank ordered list of the top credit cards I have come across.

Let’s take for example the:
Chase Freedom Unlimited Credit Card
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Chase offers a $200 bonus after you get the card and spend $500 in the first three months of owning the card. That’s in essence a whopping 40% off of the $500 that you spend!
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On top of that you get 1.5% cash back on every purchase, and a lot more perks I will outline in my more in-depth blog post about credit card perks.

This means if you spend $500 on anything within three months of signing up for the Chase Freedom Unlimited credit card, you will receive $207.50 in statement credit and essentially be getting 41.5% off all of your purchases!
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After spending $500 on things you would spend normally, AND ALWAYS PAYING IT OFF IN FULL, retire the card, stick it in a drawer, and make sure to use it once every two years or so (depends on the company) to make sure that the card does not get deactivated. Since I spent that $500 on things I would have spent anyways, Ta-Da! Its free money!

In summary, by credit card churning I bolster my long-term credit score (but not short term as I take a small ding for the hard credit check and my average credit age history drops), and get huge discounts on everything I purchase, and nowadays I purchase EVERYTHING on credit. I just make sure that I do not spend money I do not have and again, ALWAYS PAY MY BALANCE IN FULL ON TIME. Never ever miss a payment as your credit score will take a huge hit, and never put yourself in the position to be paying crazy high interest rates – you will not come out on top. If you want to learn more about how credit card churning affects your credit score, read my blog post on How to Maximize your Credit Score.