2020-07-03_Friday

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00:00:30.000 | It's Friday. That means live Q&A.

00:00:33.000 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight,

00:00:53.000 | and encouragement you need to live a rich and meaningful life now,

00:00:56.000 | while building a plan for financial freedom in 10 years or less.

00:00:59.000 | My name is Joshua. I am your host.

00:01:01.000 | And today is Friday, July 3, 2020.

00:01:04.000 | And every Friday when I can arrange the technology to do so, we record a live Q&A show.

00:01:08.000 | And that is what we've got up today. I've got four callers on the line.

00:01:12.000 | Live Q&A, just like talk radio. Let's go.

00:01:21.000 | I love doing these shows. It gives me a chance to go to the phone lines, hear from you.

00:01:25.000 | If you would like to join me for one of these shows, I would welcome your participation.

00:01:28.000 | You can call in every Friday. You can ask a question.

00:01:31.000 | You can talk about a situation in your life or any random thing that you want to talk about with me.

00:01:36.000 | It can be comments on the show. It can be questions. It can be anything that you would like to do.

00:01:39.000 | If you'd like to gain access to these shows, please sign up to support the show on Patreon, patreon.com/radicalpersonalfinance.

00:01:45.000 | Just go to Patreon, search "Radical Personal Finance." You'll find the page.

00:01:47.000 | And if you sign up to support the show on Patreon, you will be able to gain access to these Friday Q&A shows.

00:01:53.000 | Let's go to Austin in Louisiana. Austin, welcome to the show. How can I serve you today, sir?

00:01:59.000 | Hi, Joshua. I'm calling today because I've been listening to the show for a while.

00:02:05.000 | And it kind of brought about some, I guess, some thought shifts for me.

00:02:11.000 | And I'm also about to experience some major transitions in my life.

00:02:15.000 | And so I kind of have some questions around the idea of privacy and asset protection.

00:02:21.000 | I'm in a position now where I'm starting to build a small real estate business for myself.

00:02:28.000 | And I'm also in the position where I'm about to inherit a large property that's going to essentially triple my net worth once that's in my possession.

00:02:39.000 | And so my question is really about steps to take in terms of protecting privacy when having a lot of new income coming in, as well as creating a business,

00:02:48.000 | as well as protecting the assets that I've worked hard to accumulate at this point as I move forward with creating this business and with this kind of windfall coming in.

00:02:59.000 | What's going to be the nature of the business?

00:03:02.000 | Mainly rental real estate, single families, small multi-family.

00:03:06.000 | Are you going to be working as a property manager or are you just going to be running your own properties?

00:03:12.000 | So I'll be just running my own properties.

00:03:15.000 | The goal is to kind of purchase and fix up and rent one to two a year over the next five to seven years.

00:03:20.000 | Okay.

00:03:22.000 | So how hardcore do you want to be with your privacy and your asset protection plans?

00:03:30.000 | I guess I would just want to be able to prevent myself from any, you know, in the event that I was involved in a lawsuit or something like that,

00:03:41.000 | that I'm just kind of protecting me and my family from any unscrupulous lawsuits or things like that.

00:03:48.000 | I'm not looking to completely drop off the grid, but to the extent possible, you know, I like to keep private things private.

00:03:56.000 | Sure, of course.

00:03:57.000 | Have you listened yet to my series that I did on asset protection here on the show?

00:04:01.000 | I have.

00:04:02.000 | That's kind of what got the ball rolling for me.

00:04:04.000 | So your first defense is very simple.

00:04:08.000 | From the perspective of privacy, just keep a low profile.

00:04:12.000 | That's one of the simplest things you can do is just keep a relatively low profile.

00:04:17.000 | Now, sounds like that's probably not going to be too hard for you, but it's exceedingly hard for some people.

00:04:22.000 | It's very important to many people when they have wealth that they flaunt it, that they flash it, that they be able to enjoy it publicly.

00:04:28.000 | But in general, one of the basic concepts is you shouldn't be disappointed if somebody looks at you and thinks that you're broke.

00:04:36.000 | That would be basically one of the things that you can do.

00:04:39.000 | Because if you don't look particularly wealthy, then you'll automatically lower your risk profile.

00:04:48.000 | Now, in your industry, this would be fairly simple.

00:04:52.000 | For example, if I were running a property management system, I would drive a Ford F-150 that was two or three models out of date.

00:05:01.000 | Just some random $3,000, $5,000 Ford F-150, and that's all my tenants would ever see me in.

00:05:06.000 | A little beat up is fine.

00:05:07.000 | It doesn't have to be -- you don't want it to be falling apart at the seams and completely rusted out, but you want it to be a couple of years old.

00:05:14.000 | You want to basically give the impression that you're a dude who's got a house and that this is what you do.

00:05:22.000 | And you can keep your mouth shut on a lot of things.

00:05:25.000 | You don't have to lie to anybody about what you don't have.

00:05:31.000 | The best thing is just simply keep your mouth shut about what you do have.

00:05:34.000 | And so think that through.

00:05:36.000 | In industries and businesses where it's important to look wealthy, this is harder.

00:05:42.000 | So, for example, if you're going to be an attorney, depending on the type of law that you practice, if you're going to develop the reputation of being a very low, you know, a very modest-appearing guy, that can really harm your career.

00:05:56.000 | There's a case for an attorney to drive a Mercedes and wear fancy clothes and dress sharply, et cetera.

00:06:03.000 | But in your situation, it's very easy for you to maintain that personal lifestyle.

00:06:09.000 | And just simply keep your own cards close to the vest.

00:06:12.000 | If you're looking for an ideal scenario, you own a property, and no one else needs to know anything that you own beyond that.

00:06:19.000 | Now, if you want to go hardcore with this, you can even go to the point where nobody knows where you live.

00:06:24.000 | Many landlords, that would be a little bit too far.

00:06:26.000 | But you can just do everything through a, you know, a local business place or have a little office, and you can keep your house private.

00:06:34.000 | If I had a million-dollar house, then I don't want my tenants coming to my million-dollar house to see the million-dollar house.

00:06:40.000 | Some of those kinds of decisions, those lifestyle decisions, I guess we could call them, are a little bit annoying.

00:06:46.000 | But they really are one of the best defenses that you can make for your overall risk profile.

00:06:53.000 | It's just simply don't develop a high profile.

00:06:56.000 | In addition, you want to limit the publicity that, you know, the amount of publicity that you're engaged in.

00:07:01.000 | It's not particularly wise for you to become known as an up-and-coming successful real estate investor.

00:07:06.000 | Better for you not to appear in a newspaper.

00:07:08.000 | Better for you not to receive publicity.

00:07:11.000 | Those are all things you can do for free that will help to protect your privacy.

00:07:15.000 | And if you just keep a low profile, I'm not expecting you to go, you know, hardcore.

00:07:19.000 | But if you keep a low profile, the chances of your needing significant protection beyond that are probably fairly low.

00:07:26.000 | Basic techniques you can use in your rental portfolio, there's cost associated with all of these and hassle.

00:07:33.000 | In a perfect world, every single asset would be siloed off from every other asset.

00:07:38.000 | And so look in your state to see what's permissible in terms of a series LLC, whether you need individual LLCs.

00:07:46.000 | You could put together a system of land trusts and LLCs.

00:07:50.000 | The land trusts give you privacy.

00:07:51.000 | The LLCs give you asset protection and silo or segment each one of your properties off from each other.

00:07:57.000 | So that there's no interplay between the properties.

00:07:59.000 | That adds some expense, but it is the best form of protecting each of your assets between each other.

00:08:05.000 | From the perspective of a firewall, you want to think of your assets as being within a series of watertight compartments or within a series of firewalled boxes.

00:08:17.000 | So that any risk that arises within a certain compartment.

00:08:24.000 | So let's say that you have something terrible happens and you have a tenant that sues you in one of your properties.

00:08:30.000 | Well, the property that the tenant lives in is going to be available of course for the tenant's claims.

00:08:36.000 | But in an ideal legally perfect world, all of the rest of your assets are all segmented off so that they're not available to the tenant.

00:08:44.000 | So you can do that with a series of entities.

00:08:47.000 | It's hard to weigh whether it's worth it.

00:08:49.000 | The hassle of the paperwork, the hassle of the cost of maintaining the entities, of setting it all up.

00:08:56.000 | You'll have to do the research.

00:08:57.000 | Talk to the relevant people who can help you with that and see.

00:09:02.000 | But if you're going to be hardcore, you would want to do that.

00:09:04.000 | I think it's simpler oftentimes to maximize the stuff, the low hanging fruit that I talked about in that show.

00:09:10.000 | Maximize your qualified accounts.

00:09:13.000 | Maximize the property that's protected due to the exemptions and the bankruptcy code.

00:09:18.000 | And if you do that and then you're simply thoughtful about where you keep the money, that's probably good enough for most people.

00:09:25.000 | I have an extreme personality so I quickly go to the extreme in a lot of these kinds of things and want to recommend the hardcore scenarios.

00:09:32.000 | But the reality is a lot of times the most extreme plans are hard to live with, especially with regard to privacy.

00:09:39.000 | You can be very, very private, but it's very hard to live with and very hard to maintain it all the time.

00:09:46.000 | And so you'll have to just simply start at it and then see what's livable and see what's useful for you.

00:10:02.000 | Go ahead with your response, Austin.

00:10:05.000 | Do you have any feedback on, I had mentioned the property that I'd be inherited in about being able to keep that transaction private.

00:10:12.000 | I will be inheriting that while the person who is passing it on is alive.

00:10:17.000 | So maybe being able to keep that property private.

00:10:21.000 | What's the value of the property?

00:10:22.000 | Public knowledge that it belongs to me.

00:10:25.000 | Approximately between $400,000 and $500,000.

00:10:28.000 | Well, I think in that situation then it would be well worth sitting down with an attorney and talking about just simply transferring it into a trust, into a family trust with you as the beneficiary of the trust instead.

00:10:41.000 | What would you do with the property?

00:10:42.000 | Are you going to use it?

00:10:43.000 | Are you going to rent it?

00:10:44.000 | What's the plan?

00:10:45.000 | I currently live there and have been remodeling it for a couple of years.

00:10:50.000 | But yeah, it's going to be kind of like a homestead farm situation.

00:10:53.000 | That'll be my main residence.

00:10:55.000 | I wish I knew the law in your state to understand the trust law, but my suspicion would basically be that would be a good fit for a trust.

00:11:10.000 | If somebody's going to give a property, so let's talk it through.

00:11:13.000 | Well, first of all, why do you want them to give it to you while you're alive?

00:11:17.000 | While they're alive, I mean?

00:11:19.000 | It's just something that we've kind of discussed as a family, and that's been, I guess that's the plan, but the plan is flexible.

00:11:27.000 | And if the property is worth, let's say, $500,000, do you know what the owner's tax basis in the property is?

00:11:34.000 | In terms of their annual tax?

00:11:37.000 | How much they paid for it.

00:11:39.000 | It was purchased for approximately $70,000 about 25 to 30 years ago.

00:11:47.000 | Okay. How old is the owner?

00:11:50.000 | 80.

00:11:52.000 | Okay. In this situation, first, I would move very slowly to make the transfer while the owner is alive.

00:11:59.000 | There may be a compelling reason to do that, given, for example, if the owner has significant creditor concerns,

00:12:07.000 | or if they're concerned about running out of money for long-term care or something like that, and that's why you're trying to do the property transfer.

00:12:13.000 | But if the owner transfers a $500,000 property to you, that property has a $430,000 taxable gain,

00:12:20.000 | and you will inherit that tax obligation on the transfer because it's going to be transferred to you with the tax basis intact.

00:12:31.000 | Now, if you wait, and if the owner continues to hold the property until their death, then they'll get a step up in tax basis.

00:12:41.000 | So let's say that the owner dies today at 80 years old and leaves you the property worth $500,000.

00:12:48.000 | All of that $430,000 of taxable gain disappears because it receives a step up in tax basis at the date of the owner's death.

00:12:57.000 | And so then you receive the property worth $500,000, and if you keep it, you could turn around and sell it for $500,000,

00:13:06.000 | and you would pay no income taxes on the gain.

00:13:08.000 | So with that amount of gain, it's well worth considering just simply holding onto the property until the date of death.

00:13:16.000 | How much is, would you guess, is the net worth of the owner?

00:13:21.000 | Are we talking millions and millions of dollars or more modest net worth?

00:13:25.000 | I would say including all assets, probably in the range of $1 million to $2 million.

00:13:32.000 | Okay. Just wanted to make sure we don't have to worry about estate tax planning here.

00:13:36.000 | So if the owner just simply holds the asset until death, then you would be able to inherit the property with a step up in tax basis.

00:13:46.000 | That would be the first thing.

00:13:47.000 | Now, the second thing, with regard to your receiving the property, there's a difference between privacy and asset protection.

00:13:57.000 | So privacy, what could you do if you wanted to receive the property privately?

00:14:01.000 | Well, you could establish a land trust and just simply move the property into a land trust.

00:14:09.000 | That could be done now. There's no reason why it would have to wait.

00:14:11.000 | A land trust would not affect the tax planning.

00:14:14.000 | But then the property is simply owned by the land trust, and your name does not appear on it.

00:14:20.000 | However, if you're the beneficiary of the trust, a land trust wouldn't do anything for your asset protection perspective, for any kind of asset protection planning.

00:14:30.000 | Now, if you're living, are you living in Texas or Louisiana?

00:14:34.000 | Louisiana.

00:14:35.000 | Louisiana. Okay. I don't know Louisiana bankruptcy law, but Louisiana probably protects the property to some degree.

00:14:43.000 | And so you can get privacy without getting asset protection, and that may be sufficient for you.

00:14:48.000 | On the other hand, if you wanted asset protection, then the owner of the property, instead of giving that property to you, the owner of the property could give the property into a trust.

00:14:59.000 | If it simply went into a trust where you had the right to live in the property, but not the right to sell it, then you would have an asset that was genuinely protected from the claims of creditors.

00:15:09.000 | And so this is where trusts do really shine.

00:15:12.000 | Let's say that you have $10 million and you're trying to figure out how to leave your child $5 million, but you want to protect that money completely against any creditors.

00:15:23.000 | Well, what you do is you put it into a trust, and then your child simply has the right to receive income from the trust, but they don't have the right to invade the corpus of the trust.

00:15:31.000 | And in that situation, now if somebody sues them, it is possible that a judgment can be levied against them where they have to pay something out of their income.

00:15:40.000 | But you can write the – you can structure the trust language with some flexibility for the trustee so that the trustee doesn't have the requirement of dispersing funds if those funds are going to be taken by a creditor.

00:15:51.000 | And so you could do the same thing with a property if you wanted to have an attorney draw it up.

00:15:56.000 | You could have the property put into a trust where you had the right to live in the property but didn't have the right to own the property or to sell the property.

00:16:04.000 | If you're going to get hardcore into asset protection planning and you start talking to attorneys, you start reading the books, the ultimate dream is to own nothing but to control everything.

00:16:14.000 | Now, that's easier said than done, but that's the ultimate dream is own nothing but control everything.

00:16:21.000 | And so the level of control has to be varied, but in a situation like you're describing, you could protect that by transferring the property into a trust.

00:16:29.000 | Okay. Awesome. That gives me some good stuff to think about.

00:16:34.000 | Yeah. Talk to an attorney. You're going to need to – I don't know Louisiana law. Every state is unique, and every state is going to have a unique situation.

00:16:42.000 | What I would say is the thing that I have struggled with, and I simply don't know how to – I don't know how to answer it, but the thing that I would struggle with is is it worth it, right?

00:16:54.000 | You always struggle with this stuff when it comes to risk management planning. How big is the actual risk?

00:16:59.000 | Do I really need to worry about this? Is it worth going through the hassle of putting the property into a trust and then having to have a trustee to administer the property?

00:17:09.000 | And what's the cost of having the documents drawn up and then making sure they're done competently, et cetera, versus what's the risk that I'm really going to get sued and this house is going to be taken away from me?

00:17:20.000 | I don't know, and I've never figured out a way to answer that question, but it is a real tension that you have to think about because all of this stuff costs money.

00:17:28.000 | It costs hassle. It costs time. And so don't just immediately jump into things saying, "Yeah, I'm going to go hardcore."

00:17:36.000 | I've been there, done that, and hardcore is often difficult. So get some good advice, and at this point, yeah, I would recommend you talk to an attorney.

00:17:45.000 | Okay, awesome. Thank you.

00:17:47.000 | Great. Thank you, Austin. We go now to Michael in Texas. There was where my Texas came from. Michael, welcome to the show. How can I serve you today, sir?

00:17:54.000 | Hi, Joe. I was hoping you could talk about early access to an IRA or a 401(k) based on the CARES Act change just generally, and then I can give you my situation and get your opinion on that.

00:18:07.000 | Yeah, go ahead and get to your situation. The general system is simple. You have access to funds with less restrictions, but go ahead and give me your situation, please.

00:18:17.000 | Okay, so I was brilliant, and I took off from work in February instead of sticking around and getting unemployment. So I took off and continued.

00:18:28.000 | Don't you hate that?

00:18:30.000 | Well, I took off to raise my kids, so it timed in with spring break.

00:18:33.000 | Right.

00:18:34.000 | Timed in with COVID. Perfect. So my ultimate goal is to take three to five years off. I have that sitting in cash so that I can do that to raise my children. I have about $500,000 in my – I've rolled it over to an IRA, but it was 401(k) money.

00:18:51.000 | So I was wondering if it made sense based on – I'm looking at probably $20,000 a year in non-capital gains income. So if it made sense to pick up $100,000 for the next three years, even if I decide to go back and work again in the next two, I have that right to then put the money back in if I had to.

00:19:14.000 | And so I'm 40 years old, and so I didn't know the balance between having 25 years of tax-free gain or if I could take that money and then roll some into a Roth IRA, which I normally couldn't contribute it to because of my income, those kinds of things.

00:19:30.000 | How much is your wife's income? Are you just living on savings, or do you have another income in the family?

00:19:36.000 | No income.

00:19:37.000 | Okay, no income.

00:19:38.000 | Not married.

00:19:39.000 | Got it. Okay. So the first thing is the eligibility restrictions. There are eligibility restrictions. The CARES Act rules are not that just anybody can take it out.

00:19:52.000 | There's a system, a series of requirements. I think it's supposed to be that either you were diagnosed with COVID, had a spouse or a dependent that was diagnosed with COVID-19, experiencing a layoff, furlough, reduction in hours or inability to work due to COVID-19 or lack of childcare because of COVID-19, have had a job offer rescinded or a job start date delayed due to COVID-19, and experiencing adverse financial consequences due to an individual or the individual spouse's finances being affected due to COVID-19

00:20:21.000 | or the closing or reducing hours of a business owned or operated by an individual or their spouse due to COVID-19.

00:20:27.000 | And so in theory, when it comes time to file tax returns, we're supposed to probably prove one of those conditions.

00:20:33.000 | Now, of course, those are fairly broad conditions, and I think there's a decent argument that be made that most of us are being affected by COVID-19, but you do need to be aware of that technical hurdle.

00:20:43.000 | Now, within that technical hurdle, you can take an early distribution of up to $100,000 from your account without paying the 10% penalty tax, but you will still pay the income tax.

00:20:56.000 | So in general, I think there are two major things that I would think about as far as why do I want money inside of a retirement account.

00:21:06.000 | The number one reason I want money inside of a retirement account is for longer term tax deferral.

00:21:14.000 | It's powerful to be able to let money compound inside the retirement account without paying taxes.

00:21:19.000 | And the early distribution due to the CARES Act does not eliminate your tax liability.

00:21:25.000 | It eliminates the 10% penalty tax for an early distribution.

00:21:28.000 | The second reason that I like money in retirement accounts is for asset protection.

00:21:33.000 | For U.S. persons, the money that's in retirement accounts is some of your simplest and lowest cost asset protection planning, as I was talking about in the previous call.

00:21:43.000 | And many times, that's actually more important to me than the tax deferral, because you can get tax deferral in a number of different ways.

00:21:48.000 | So balancing between those two, assuming that you don't have any pressing reason why you have to have the money in a retirement account for asset protection, then you look at your income and you say, "What's my income?"

00:22:03.000 | Well, if your income is zero, then yeah, when my income is zero, I'd like to take as much out of my retirement accounts as possible, because that's going to allow me to pay zero taxes.

00:22:15.000 | And so I'd rather do that, and especially if you can put it into a Roth IRA instead and do those conversions, I definitely would rather do that.

00:22:23.000 | So fundamentally, as long as you still maintain funds in qualified accounts and you don't have any major risks from an asset protection standpoint, I do like the idea of distributing assets, and especially of doing conversions during a time when your income is zero.

00:22:41.000 | So you'll have to jigger the numbers, but yeah, I'm in favor of it.

00:22:46.000 | Take advantage of it if you're – if you qualify, take advantage of the $100,000 to do an early distribution, and then convert the money if possible into a Roth or invest it elsewhere.

00:22:56.000 | Most of the money is coming from a 401(k), is that correct?

00:22:59.000 | That is correct.

00:23:01.000 | Yeah. So anytime that I can get money out of the 401(k) at a very low tax cost, I like to do that, because it gives you back control of your money.

00:23:08.000 | When you're working and earning an income, it's really important and valuable for you to be funding that 401(k).

00:23:14.000 | But as soon as you can take it out, and if you can take it out with a cost of $0, if you're living on savings, not earning any money, and thus have no income, you can go ahead and take out as much as you can at that 0% tax rate or even that low tax rate.

00:23:28.000 | Because if after your children are older, you go back and you start working again, you're going to be filling up the 401(k) again, you're going to then have larger distributions, required minimum distributions, and you'll probably be back in a higher tax bracket.

00:23:41.000 | So whenever my income is $0, I definitely want to take advantage of that and use that, among other things, to do Roth conversions and take money out of 401(k)s.

00:23:50.000 | And that's where my thought was, too. And that way, if I actually end up going back to work early, then I can have the three years by law to pay it back. If that was something where it actually bumped me up into a tax bracket.

00:24:05.000 | Right. If you needed to, exactly, yes.

00:24:07.000 | Yep.

00:24:08.000 | Cool. I like it. Good idea. And thank you for being willing to focus on your children and give them what they need. I really applaud you for that.

00:24:16.000 | It's an unusual man who will take time off from work in order to care for his children. So I thank you for doing that. Your children will thank you down the road.

00:24:22.000 | Thanks. I didn't plan on doing it full time. I figured they'd be in school, but it's been nice teaching them as well.

00:24:27.000 | Of course. Of course. You've got one of the biggest opportunities. And you'll have to adjust with whatever your children need.

00:24:35.000 | And obviously, not everybody has the luxury of being able to take time off. But it is such a blessing if you can pour into your children. And there's that those few years where it's so valuable.

00:24:47.000 | And whether it's an adventure, whether it's just simply teaching them, whether it's traveling the world with them. I've often thought, "What would I do if my wife died and I were a single father?"

00:24:57.000 | And no question, one of the things that I definitely would do, I would draw close to my children and really invest the time in them. So good for you.

00:25:07.000 | Thank you.

00:25:09.000 | Cool. All right. We'll go to Kyle in Georgia. Kyle, welcome to the show. How can I serve you today, sir?

00:25:14.000 | Hi, Joshua. I had a question. I guess it's kind of a "what would Joshua do" scenario, and it's more so, I guess you could say, career related or work related in terms of income.

00:25:27.000 | So just to give you, I guess, kind of the quick 60 second kind of background.

00:25:32.000 | My wife and I, we've been married for a little over three years now. After we got married, we paid off all of our debt. And somewhere during that time, we decided that we would take an adult gap year of sorts, or kind of a year off to travel and then transition into some different work when we got back.

00:25:51.000 | And so we saved up some money and did that. And we left in December last year. So we got to travel for maybe about four or five months. We spent two of them in Columbia on lockdown.

00:26:04.000 | And so we had started a travel blog and everything, and we started doing all that. We have a website, all that kind of stuff. Obviously, traveling and everything like that isn't really taking off, so to speak, right now.

00:26:15.000 | So we are both kind of learning different things right now as far as online work.

00:26:22.000 | And what we're trying to figure out is we don't have a ton of money saved up right now.

00:26:28.000 | We have some money tied up in a property that we get income from and all of that.

00:26:32.000 | And we're just trying to figure out, you know, kind of what the best direction to go is.

00:26:36.000 | So I'm turning 30 next month, and she's 29. And so now that we're back here in the U.S. and we know that kind of traveling full time and all that stuff really wouldn't make sense right now,

00:26:48.000 | what we're trying to do is figure out, should I just go get another job from a corporate standpoint?

00:26:54.000 | Should I keep trying to do some work online and just maybe do a basic, like, you know, at night Amazon type job?

00:27:01.000 | But what we're trying to do is we want to start having children and all of that. So we're just really trying to figure out what the path forward looks like, given our current financial situation and what would make the most sense, I guess.

00:27:14.000 | How much money do you have saved right now?

00:27:17.000 | So right now we have, I would say, around 15K. It's a little more than that in terms of cash.

00:27:25.000 | We have some stocks and investments, about $8,000. That's kind of in a just like a S&P fund.

00:27:32.000 | That's like non-retirement money. And then the property that we have is actually, we funded a deal with one of our associates that does real estate full time.

00:27:47.000 | And so we have about $20,000 in that property, and then we get about $250 a month coming off of that. But that's kind of our only income right now.

00:27:55.000 | You have $15,000 in savings plus $8,000 in stocks plus $20,000 of equity in a property?

00:28:02.000 | Correct.

00:28:04.000 | Okay. And where are you living now? What are your monthly living expenses and your current living arrangements?

00:28:10.000 | So we actually moved back in with my parents. And so we're staying with them now. We give them about $400 a month or so, but nothing crazy expensive.

00:28:22.000 | But that's what our current living situation is. So we sold it. We don't have a car or anything right now. We sold everything we left and all that.

00:28:28.000 | Great. Do you have any debt?

00:28:34.000 | No, no debt at all.

00:28:36.000 | Is the living situation with your parents, is it comfortable or is it antagonistic?

00:28:41.000 | It's comfortable. It's very comfortable. We would like to get our own space, but it's extremely comfortable.

00:28:48.000 | Do either you or your wife have specific career ambitions and a specific type of job or a specific industry? Or is your desire more general? I'd like to create an income online, do something that we work really great online, or do you have something specific that you're targeting?

00:29:07.000 | There's nothing specific that either one of us is targeting at this point. So right now I'm learning about copywriting and online marketing and all of that. And she's doing some other stuff online. But there isn't a specific career path that either one of us is engaged in at this point.

00:29:25.000 | Okay. So what would WWJD, what would Joshua do? I think that if I were in your shoes, I would double down and refuse to take anything except a location independent, highly leverageable online income doing something that I think I'm well suited to.

00:29:52.000 | And here's how I get there because I think you're perfectly positioned to pursue this. In life, there are a number of different periods I think of as almost lock-in periods. So an example would be when you're in high school, you need to go to high school and finish your degree.

00:30:11.000 | And so you're kind of locked in. Now you're not as locked in as most people think, but to a degree you are. Or let's say that you're in college. Okay. You're kind of locked in. Not as much as most people do. I know that a lot of people drop out, but that's never been mine. I'm a finisher. You know, I check, I check, I give me a list, I check it off, you know. So you're kind of locked in for that four year period until you do that.

00:30:30.000 | Or if you are going to law school, you're locked in. But there are other kinds of lock-in locks, locks in, lock-ins that happen. So an example would be when you're in a job. Let's say you're in a job and you're in the middle of a big project. Well, a lot of times that's kind of a lock-in where, hey, we're kind of stuck in this job and it's hard to get out of that.

00:30:49.000 | Now, of course you can leave any job at any time, but for most of us who live our lives in a, what we perceive to be more of a responsible adult way, we don't just walk off the job. We don't just leave the job. And especially if you have two jobs, you don't just walk off and leave two jobs.

00:31:04.000 | A lot of other lock-in, examples of a lock-in would be renting an apartment, having a lease on an apartment, having a car payment where you have, you know, we've got to pay this car off or finish off the car lease. Another example would be having a mortgage. We own a house. We have a mortgage.

00:31:23.000 | When you have children, there are different parts of a lock-in that happens with children where, you know, for example, we want our children to be in this school. This is the best school for them. We want them to be in this school or we want them to be stable during this period of their life.

00:31:38.000 | Or we don't want to be moving because we're right next to their cousins and they live next door to their cousins and isn't that awesome. And so there are different points in life where you kind of get locked in.

00:31:49.000 | Now, all of those things can be walked away from if there's a reason to walk away from them. But at the moment, you've already done the hard work of walking away from those things. You terminated your lease or you sold your house. You sold your cars. You loaded up some backpacks and you started traveling the world and the plan was to travel the world for a year.

00:32:08.000 | And now you're back but you've got a place to live. You've got a more or less comfortable living situation. You've got a roof over your head and you don't have any major financial commitments. You can give them $400 a month of rent, buy a little bit of food, you know, a little bit of a cell phone plan or whatever you've got. But your monthly expenses, I mean, could you live on – can you live on $700 or $800 a month right now?

00:32:31.000 | Yeah, our living expenses are very low.

00:32:34.000 | Yeah. So this is really remarkable and it's really important especially at this phase of your life because while you're excited about having children, the reality is going to be very quickly that when you have children, it's harder to live on $800 a month.

00:32:50.000 | Now, it's not that hard when they're babies, right? They sleep a lot. But when a baby gets to be about one year old, sleeps less, two years old, sleeps less. Now, they're all over and so you kind of get into another lock-in. It's a great lock-in but it's a lock-in.

00:33:03.000 | So then we come back to what are you looking for? What do you want? What you want, and you've told me explicitly and also with your actions, what you want is a location-independent income.

00:33:17.000 | And I would say that you should enhance that with a location-independent income that has high degrees and high probability of the ability for you to grow it, for it to be leverageable.

00:33:29.000 | So you want to be able to do something through the internet. You want to be able to do something that allows you to generate that income from anywhere in the world.

00:33:36.000 | That is exceedingly doable, exceedingly reasonable, and exceedingly possible in hundreds and hundreds of circumstances.

00:33:48.000 | But it usually takes a little time to develop. It takes time to choose an area of interest.

00:33:53.000 | You might say copywriting, I'm interested in copywriting. Great. Well, there's going to be months of practice. There's going to be months until you get your first client.

00:34:00.000 | Now, it doesn't have to be that long, right? Maybe it's two months or three months and you can go ahead and make $600 or $800 or $1,000 or $6,000.

00:34:08.000 | But there is a ramp-up period. And the thing that keeps people usually from exploring those opportunities, from saying, "I want to be a copywriter and I love copywriting.

00:34:19.000 | It was one of my things when I was younger that I bought a course on copywriting and I had this dream of being able to sit at my computer anywhere in the world and be a copywriter."

00:34:27.000 | Still, if I went broke, it's still very high on my list because it's a profoundly useful skill. It's a profoundly marketable skill. It's a very leverageable skill.

00:34:38.000 | It's just a very useful area of focus for you where you're not playing games. You're not building some kind of online Ponzi scheme.

00:34:46.000 | You're just actually making people money with your ability to create effective copy. But it takes time to learn those skills.

00:34:54.000 | And so the reason most people don't do it, well, they can't afford to make the switch because they can't afford to figure out how do I make $4,000 a month to support my living expenses.

00:35:03.000 | And $4,000 a month for the kind of person who's likely to pursue one of those activities is probably pretty low, I mean.

00:35:10.000 | Many people who wake up and they say, "I want to make a lot of money online," they don't have $4,000 a month of expenses. They got $6,000 a month of expenses or more.

00:35:17.000 | And it just takes – it's longer and harder. And so you wind up in this lock-in where you're working 40 hours a week at a job and you're working 40 hours a week at a job and you are writing copy at night.

00:35:31.000 | Can you do it? You absolutely can do it. But it's a lot easier if you only need 600. It's a lot easier if you can go and work on copywriting all day and all night rather than doing a bunch of other things.

00:35:42.000 | And so WWJD, what would Joshua do? I would dedicate myself wholeheartedly to my online business and say, "Our plan to travel the world for a year was disrupted. We came back after six months.

00:35:56.000 | But I've still got money in the bank. I have very low expenses. We don't have an uncomfortable living situation. And this is a very special time in our life."

00:36:05.000 | And I would invest the next year of my life into building my online income. And I think that it would be reasonable that a year from now you could expect to make a few thousand dollars a month if you develop the skills and work hard.

00:36:18.000 | And once you've got that, once you've got that ability to work through an internet connection, you and your wife both, to work through an internet connection and make a few thousand dollars a month, that low, relatively low bar, that buys you global freedom.

00:36:33.000 | You can move right back to Colombia and have your baby and have a little, you know, go to Villa de Leyva and buy yourself a little colonial-style ranch house and just relax and live on $400 a month there.

00:36:46.000 | You can go anywhere in the world, and that's a freedom that is profoundly attainable and yet most people can only dream of. And so what would I do? I would keep on going.

00:36:56.000 | Now, what you don't like is probably two things. Number one, it's hard to live with your parents. So I would just make that situation as good as possible.

00:37:04.000 | And I would focus on making it a positive thing. As long as your parents are not overbearing or somehow, you know, doing, making your life difficult in an unnecessary way, I would focus on the enjoyment of it.

00:37:18.000 | The fact that we get to enjoy the adult relationships. It's a blessing to be able to be with your parents. Think about this, right?

00:37:25.000 | Let's say your dad was diagnosed with cancer. What would he want? He'd want to be with his children. So why do we wait until our dads are diagnosed with cancer to go and spend time with them?

00:37:34.000 | So enjoy the time. Don't view it as I'm a failure. Enjoy the time with them that you can help them out.

00:37:40.000 | And you're not in one of those situations where it has to be forever, but enjoy the time.

00:37:45.000 | And so I would take that off and I would let them help you to establish yourself with a new business.

00:37:50.000 | Number two, it wouldn't be that hard for you to pick up. First of all, it's not that hard for you to pick up some $500,000 contracts in almost anything.

00:37:59.000 | If you put two weeks in on any skill, learning it, you should be able to pick up $500 or $1,000.

00:38:05.000 | And I don't want you to walk away from high income potential opportunities and go and pursue some, you know, throwing boxes at UPS unless you have to.

00:38:15.000 | Because what happens is if you spend all your time throwing boxes for UPS or you spend all your time delivering pizzas, it's going to dull the sharpness.

00:38:25.000 | And I've worked night and day on business and it's a lot easier to work in the daytime.

00:38:30.000 | It's a lot easier to wake up in the morning at a normal time, have a cup of coffee and work a normal schedule than it is to work 70 hours a week trying to maintain two jobs.

00:38:37.000 | I've done it. I did it to start Radical Personal Finance.

00:38:39.000 | But if you can't, so I would set a timeline. Let's say that you said two months, right? From two months from now, I'm going to make enough money to live on, $600.

00:38:47.000 | If I can't make that in two months, then I'm going to get a job. And then I would go get a job and just do some, you know, sideline birdbrain thing that doesn't require me to be really connected to anything long term or make commitments.

00:38:59.000 | But something that would allow you. But most jobs are going to be – maybe there would be, again, throw boxes with UPS or something.

00:39:09.000 | But I wouldn't get locked in. I wouldn't buy a car. I would just keep my expenses low so I could start the business.

00:39:17.000 | Have you heard of the Tropical MBA?

00:39:19.000 | No, I haven't.

00:39:21.000 | Okay. The Tropical MBA is a brand that was started – I forget the name of the guy that started it.

00:39:24.000 | But he started it a number of years ago. And his whole point was he was trying to say, "Listen, there's a lot of people that want to start a business. And so let's figure out how to help them do it."

00:39:32.000 | So he set up shop in Thailand. And that – what's the name of that little town in Thailand that everyone likes to go to that's – I forget.

00:39:41.000 | But he set up shop in Thailand. And he tried to get a bunch of people. And he succeeded in getting a bunch of people to come from all over the world to fly to Thailand.

00:39:48.000 | And basically they set up kind of a business incubator. And the idea was you come to Thailand. You can live on $500 a month.

00:39:55.000 | And you can start your business. And you can start an online business.

00:39:58.000 | And he created a website out of it. He created a podcast, created a coaching program. And it's been very successful.

00:40:04.000 | The point is that for many people, it's very hard once you get into an adult lifestyle, which you and your wife have experienced, it's very hard to then downsize back to that cheap lifestyle.

00:40:15.000 | And it's especially hard to do this in the country that you're from. So what I would say is you've achieved that.

00:40:22.000 | And so what I would do is I would double down on it. I would say, "This is my tropical MBA. With COVID, travel is going to be difficult for a while.

00:40:29.000 | So let's live with mom and dad. Let's work on getting this business going. Let's set a goal of three months from now making $1,000 a month with these new skills that I'm developing.

00:40:40.000 | Six months from now making $4,000 a month." And then if at that point in time, I decide that we want to go and get a house or get our own stuff, that's fine.

00:40:48.000 | But I would say by then, very likely, some of the borders will start to open up. And you'll be able to then go back to your travels.

00:40:55.000 | But now, you have a different type of travel. Now, you can travel with income. Now, you can travel and have a baby. Go have your baby in Mexico.

00:41:05.000 | Now, the world's open to you. I try not to gush too much about the power of a location-independent income because I've never chosen – like they make that my brand.

00:41:18.000 | But I've often thought if there's something that's so powerful, that thing that buys you financial independence is being able to earn an income on the internet from anywhere in the world

00:41:27.000 | because that allows geo-arbitrage. That allows a totally different time schedule. It's the most incredible point of freedom and you're this close. So don't walk away from it prematurely.

00:41:39.000 | Got it. That was helpful because that's what we were kind of trying to figure out is how long do we go at it before I go try to get a job or something.

00:41:51.000 | Between the two of us, we were making a couple hundred thousand dollars before we left. We had corporate jobs and all that.

00:41:57.000 | So now that we've downsized and everything, it was just kind of nerve-wracking coming back and coming into, "Okay, how long do we give this before we say – not give up on the dream, so to speak,

00:42:10.000 | but just where, like you said, you lock in and it becomes a lot more difficult." But that was very helpful.

00:42:15.000 | $50,000 a year online from work that you are decent at, that you're skilled for and that you enjoy is much more valuable than $120,000 from a corporate job.

00:42:29.000 | $50,000 online will give you a much better lifestyle, a much more interesting lifestyle than that $120,000 corporate job.

00:42:39.000 | Now, I don't want you to think small. I'm trying to use small numbers to encourage you that you can do it. But the right thing online, you can make half a million dollars a year as a copywriter.

00:42:49.000 | There's no question about it. There are so many more opportunities. But the point is that that online income, there's a reason why the internet is full of how to make money online courses because it works and it's so much more valuable.

00:43:05.000 | Again, $50,000 a year is going to be so much more valuable for you if it comes in online with work that you do and the hours that you set than $120,000 your corporate job ever will be.

00:43:17.000 | And you're experiencing that right now with the low expenses. The corporate job comes with so many costs. You got to live in a certain place, right?

00:43:25.000 | If you're in Atlanta, you got to live in a certain suburb that's within driving distance of the downtown. It comes with an hour a day in traffic.

00:43:32.000 | It comes with having to own a car and all that stuff. In the situation you're in right now, you don't have to do any of that stuff.

00:43:37.000 | And that's what's so powerful about an online income. When you don't have to own a car, when you don't have to do any of that stuff, it opens everything up.

00:43:48.000 | It opens up – I mean, you've heard my stuff. I don't need to repeat all my previous shows. It's worth it.

00:43:54.000 | What I would focus on is we've got plenty of time. If we're spending $600 a month and we've got $15,000 to save, we've got plenty of runway.

00:44:01.000 | I wouldn't spend it all. I would never spend – spend a couple thousand dollars, give it a couple of months, set yourself a target.

00:44:08.000 | Two months to cover our living expenses or three months or something like that. You figure out the area.

00:44:14.000 | But three months to cover your living expenses is doable, especially when your living expenses are that low.

00:44:20.000 | And I'm not sad about you spending three months of just spending on savings.

00:44:25.000 | If at that point in time it's still not working, I would not give up the dream.

00:44:29.000 | I would just go and get a job that made me $1,000 a month so we could keep on hammering away at the dream until it works. That's what I would do.

00:44:36.000 | Okay, thanks. That was very helpful.

00:44:39.000 | All right, my pleasure. We go now to Guy in Pennsylvania. Guy, welcome to the show. How can I serve you today, sir?

00:44:46.000 | Hey there, Joshua. Good afternoon. Thanks for taking my call.

00:44:51.000 | I have a question regarding moving my side business in the direction of how to generate income for – kind of for my kids.

00:45:04.000 | So here's what I'm – kind of where I'm at. It's kind of a two-fold question.

00:45:07.000 | I've been keeping bees, for example, as a side business for several years now, and I've sort of been in the process of ramping that up to try and make a little bit more legitimate side income rather than hobby money.

00:45:21.000 | And so kind of expanding beyond honey, the wax products, bees themselves, things like that, so that I can make more.

00:45:29.000 | And so I'm laying the groundwork for that, and any advice you have on that. I've even looked into some online options for growing – helping other people grow online, grow sideline bee businesses by engaging in different ways.

00:45:44.000 | I could build an online business helping people take it – go from a hobby beekeeper to a sideliner actually making money doing it.

00:45:51.000 | So I've thought about – and that's one part of my question is kind of direction, guidance, or ideas you have on that.

00:45:56.000 | And the other side of my question is I would really like to – my kids are under the age of five, and I would really like to teach them in the discipline and the understanding of investing to help guide them into their future.

00:46:13.000 | So I've looked at the kind of whether or not there's wisdom in – and I can do that with my own money and show them certain things, but I was looking at the difference between a UTMA and using the beekeeping business to help them generate a kid-earned income so that I can put into a Roth IRA for them at an early age.

00:46:37.000 | And it's not like about setting them up or anything. It's about teaching them and getting things in the direction. So maybe the gift kind of thing would be best.

00:46:44.000 | So I'm just – just wanted to pick your brain on some of those ideas. How would you get your kids involved in the business on such a small scale even so that they can have earned income, I can start the Roth IRA, deal with all those sorts of things.

00:47:01.000 | So just wanted to pick your brain on some of those. Do you have any questions?

00:47:06.000 | So let's begin with the bee business. First, the bee business itself can be highly profitable. It is the kind of business that can be scaled if you wanted it to. It can certainly be a full-time thing or it can be a hobby business. There's a number of different ways that you can go.

00:47:24.000 | When I was younger, one of the jobs that I had, I worked for a beekeeper. And I've cleaned out many hives over the years and scraped all the frames and put in new wire and new – I forgot all the names, all the nomenclature. But I've been there, done that.

00:47:41.000 | And I've known some very highly profitable beekeepers that made a lot of money. So the business in and of itself can be really great. And the interesting thing about it is that the business done even on a large scale, if you became a large scale beekeeper as – I've got friends in the business.

00:47:59.000 | It is still even on a large scale. It's an interesting business where there can be engagement. I was from Florida and people would go out and they'd ship their bees up to Maine every year or out to California. And they take their family along and they kind of live this interesting back and forth lifestyle. Now, that kind of thing gets old after a time. But on a high level, it can be an interesting business. It can be very profitable.

00:48:21.000 | On a more modest level, it can still be a very profitable business. I know a beekeeper who's very effective, does it all himself part time. He's financially independent. But he does it himself part time, makes a lot of money. And half the money that he makes, he's just trading honey for stuff all over town.

00:48:39.000 | He always goes around with honey in the trunk of his car and trades honey for people to get himself some deals on stuff that he needs because it's a more efficient way of running his business. But it's a very profitable business. Now, you know all that with what you're doing, right? You're selling honey, selling honey products, selling wax, selling royal jelly, selling nukes. All that stuff matters.

00:49:05.000 | But almost any business can be turbocharged if you add on to it additional layers of revenue. And so that may be classes. If you run the math, let's say that you put together a seminar and you charge people $50 to come to a really well done seminar on backyard beekeeping.

00:49:22.000 | And you charge $50 and you've got 20 people that come to your backyard beekeeping course, then that can turn a Saturday's work into $1,000, which is a very handsome profit. And so you don't have to immediately go to doing everything online. Just add some of what you're doing to that already.

00:49:40.000 | I've known a number of people who've done this over the years. And just a simple thing like a monthly seminar can make a big, big difference. And it's something that you know and it's something that people are interested in. So backyard beekeeping is a big interest to people and it creates and it can create for you a broader area of connection with your overall marketplace.

00:50:07.000 | So one of the things that you want to make sure that you're doing is you want to do a really good job of building your list, building the list of your customers. So you want to make sure that you have an email list for all of your customers in your town. You want to make sure that you have good connection with them so that you can connect them to your products and services that you have and so that you can also market additional products and services to them.

00:50:28.000 | And so adding something simple like a Saturday morning 8 o'clock a.m. to 12 o'clock p.m. and everybody goes home with the basics of what they need for their own backyard beehive makes all the difference in the world. If you got 50 bucks, again 50 bucks times 10 people is $500 for Saturday's work.

00:50:49.000 | And then what that also does is it enhances your market. So now you can sell a nuc, now you can sell a ready to go bee box, now you can have your kids take a bee box and whatever system you're using but take a box and personalize it. Maybe you sell to your attendees a really nice personalized bee box that's kind of cute and quaint and it's going to look great in their backyard and that's part of the work that your children do is to paint it and make it look a little bit more personalized.

00:51:18.000 | You know a little bit modern and artsy and you know kitschy and you know what I'm talking about. And then you sell that and that's additional stuff. There's tons of people who would be happy to come to a Saturday morning seminar, pay 50 bucks at that Saturday morning seminar for a great seminar and then walk out the door with $250 worth of bee stuff in the trunk of their car and then to have you come over for an additional fee and make sure that they set it all up right.

00:51:44.000 | You know there's tons of people who would do that. So little businesses like that don't scoff at them because you know an extra $1000 here, extra $1000 there and pretty soon you're talking about real money.

00:51:53.000 | In addition then you can go online and so almost any business can be enhanced by adding on an online component and by adding on some area. It can be just consulting or it can be some kind of course.

00:52:08.000 | And definitely if you've got knowledge and you've got expertise then you can take that knowledge and that expertise and you can figure out how to niche it down to an appealing level. So maybe there's something special about you know there's tons of courses on backyard beekeeping online but you're living in Pennsylvania.

00:52:25.000 | And so there's some unique things about beekeeping in Pennsylvania that other people aren't going to cover. Well there's an easy niche right backyard beekeeping in Pennsylvania where you're going to show people here's how you winterize a hive, here's how we deal with the local fruits, the local flowers and that has a major appeal and also enhances your business opportunities.

00:52:45.000 | So I love the business, I love that you're doing it as a side hustle and I love the ways that it can expand. Let's pivot to the financial aspects of it. First I don't see any reason why you would get involved with an ATM account, of course uniform transfer to minors act or an UGMA account.

00:53:01.000 | ATMs and UGMAs are basically ways of transferring money from you to your children. But what I don't like about them is it puts restrictions on you that you have to manage it now as a trustee for the children which actually opens up a legal liability to your children.

00:53:18.000 | Your children could sue you if you didn't manage it in their best interest. And then what's worse is that when your children become adults they automatically inherit the money and you have no ability to stave that off. And so if you got a drug, you know a druggy son or someone that wouldn't be good for him to earn money, to inherit money, you can't legally stop him from inheriting the money.

00:53:40.000 | So I have never in my life recommended, although I concede that there might be situations, I have personally never recommended to anybody a UTMA or a UGMA account. Now that doesn't mean anything that is dead with regard to your business. Definitely you want your children involved in your business as much as possible.

00:54:00.000 | And you also want them involved in their own businesses. Now five is where they're just getting started. There's going to be a big difference between five and seven. But at five they can be doing it. My ambition is to have these same lessons learned with my children and my son at five years old. He was starting to be able to engage in some things but it's fairly limited.

00:54:21.000 | What I think you want to do is start by, what I've tried to do is start with selling stuff. And so actually selling honey was one of the things that I did. I had my children buy honey, local honey from a local producer at wholesale cost and then flip it to friends and family members for a retail markup and then save the profit.

00:54:42.000 | And so the simplest thing, I would put them to work selling the honey. And so if you have enough that you probably sell out, but if you can generate enough where you have excess honey, put them to work selling it. I would definitely participate in a farmer's market, partly just for the experience of the children so they start to develop those in-person sales skills, that ability to speak without fear and hesitation to potential customers, treating people respectfully and performing good sales.

00:55:10.000 | I think that would be well worth doing. And then expand out. Basically anything that you do in your business, try to bring your children along with you, try to have them do it with you and then anything that they express an interest in, give them an opportunity to help to learn it.

00:55:29.000 | And so in the early years, it's running the separator or it's putting labels on the bottles or whatever those, it's cleaning out the hives. It's that grunt work. But then it'll expand outward and if they show an interest in writing, then you go ahead and move them in the direction where they're starting to help you write your newsletter.

00:55:49.000 | And maybe the writing assignment when they're 13 is write this month's monthly newsletter to our clients or update the copy on our website, etc. And so there's not really any magic to it. Just bring them in and have them be around in it and involved in it. And then as they show ability, then have them more and more take things over.

00:56:10.000 | I think that from financially, what would work the best in many of these things is of course you assign an hourly wage. And so let's say that you do have a task. The task is to put labels on bottles of honey. Well, if you've got an hour's worth of work, just simply estimate what would it cost me to hire somebody to do this.

00:56:33.000 | And if you don't know that, then call a temp agency and get a quote from them and say, "How much would you charge me to send out a temporary worker to my business to help me paste labels on a bottle?" And if they tell you, "We'd charge you $12 an hour," then you pay your child $12 an hour. And you keep that as part of your tax planning to show that you're paying a market wage to your children.

00:56:54.000 | You can pay your children a commission. So maybe you sell honey for $12 a bottle, but you sell it or you retail it for $15 a bottle, but you wholesale it for $10 a bottle. Well, then you can pay your children a $5 commission for every bottle of honey that they sell. There's nothing wrong with paying a commission. And that commission can be calculated in different ways.

00:57:15.000 | And so as you generate wages for them, as a sole proprietor, you can hire your children under the age of 18. You don't have to pay any employment taxes, so no need to pay Social Security and Medicare taxes. And in addition to that, they're not going to earn enough to where they're going to really be owing many income taxes.

00:57:37.000 | And then for a Roth IRA, yes. What I'd recommend is pay them their wages and then just make them every year an annual gift equal to their wages, but put the annual gift into the Roth IRA. That way, they've generated the earned income, which qualifies them for the Roth IRA, and they get the money to save, but you put the money into their account.

00:57:59.000 | Now, what I do with my children is I teach them to divide their money into three piles. And when they're young, I just make them three equal piles. And so a third, a third, a third. So if they earn $3, they're going to put $1 into their giving funds. I use Ziploc bags. They have a Ziploc bag for giving money.

00:58:20.000 | They put $1 into investing, and they put $1 into spending. And I use those three words specifically. Notice I didn't say saving. And so my theory is, number one, I want them to give money, and so that way they always have money to give. And I don't put any strings on what they can give it to. Sometimes they can use it to buy a present for somebody. They can give it away to somebody in need, whatever. But I want them to have money, giving money of whatever we – giving money.

00:58:48.000 | The second of investing, my rule that I teach them is you should never get poor. You should never in your life get poor, because any time you earn money, a third of it goes into your investing bag, and investment money never, ever, ever gets spent. It just never gets spent. The only thing that happens with investment money is you invest it into something that's going to grow.

00:59:10.000 | And so when my children were selling honey, they bought the honey out of their investment money. They used the money from their investment bag. They bought the honey. Then they sold the honey. Then we calculated the profit. Then a third of the profit went into giving. A third of the profit went back into investing, and then a third of the profit went into spending.

00:59:27.000 | And so the investing – if a child is taught from an early age that you always invest a third of your income and you never spend that investment money, that's your financial nut. That's the freedom fund that you never spend.

00:59:44.000 | And so as long as you don't ever violate that rule, there should never be a time in our lives where we don't get richer, because we always are putting money back into that, and that's the nut. That's the seed money that we always invest. Now, of course, we might make a bad investment and lose it, but conceptually, we should never, ever get poor, because we have our investment funds that always grow for the rest of our life.

01:00:07.000 | And then number three, the spending, what I encourage them to do is just simply to accumulate, i.e. save, but to accumulate in their spending bags until they have money that they want to spend. And I specifically avoid using the word "saving" because I think that what happens is people often fail to differentiate between saving for consumption versus saving for financial freedom.

01:00:31.000 | And so they think, "Oh, well, I saved up $50,000 to buy a car. Look at me. I'm so great." And I look at that and I say, "Well, good for you for saving the money, of course, but that's a failure, because it'd be better for you to save $50,000, buy an investment, and then use the investment to pay for your car."

01:00:49.000 | And so that's where I think a lot of kind of child's money management goes wrong, is we teach children to save, but we teach children to save to spend. That's where, you know, I have a piggy bank. Well, what are you doing? Well, I'm saving money so that someday I can spend it. And that keeps people on the treadmill of consumption rather than on the growth path towards financial freedom.

01:01:08.000 | And so they have a spending bag and then they just automatically accumulate money in that spending bag until or unless there's something to buy. So that's what I teach my children. And what I've learned is when I started, I started too young to try to teach them to keep records. And I was overly enthusiastic and it didn't work. And so I've kind of just quit with the record keeping for now.

01:01:31.000 | But in the future, I'll teach them back then to keep records so that very carefully all of the funds are tracked just with – I keep a little ledger inside the account – inside the bags. And that's what I do at this stage. And that way, they always have money. And so if they've got – and the idea is by having an investment fund and by having a spending fund and by having a giving fund, you're looking for opportunities to give money away.

01:01:55.000 | You're looking for opportunities to spend money, but you're looking for opportunities to invest. And so whatever it is, you see it. And when you have investment money sitting in your pocket, then you notice the investment opportunities that come along. And to me, that's the basic skill set that children need for financial success. So that's my plan, Guy.

01:02:12.000 | Well, Joshua, thank you very, very much for that answer. That's a fabulous answer. I'm going to listen to the show when you publish this with the pen and the notepad to get all that down. So thank you very, very much.

01:02:28.000 | Awesome, man. I appreciate it. And thank you for teaching your children what you're doing. And I appreciate you being part of the community very much. And I enjoy your videos. All right. We go now to – back to the great state of Texas. Welcome to the show. How can I serve you today?

01:02:42.000 | Hi, is it me?

01:02:43.000 | It's you.

01:02:44.000 | Yes. Okay. Thank you, Joshua. I've been listening to you for a couple of years now. And I just wanted you to riff on something that kind of feels like a disconnect between two major subjects that you talk about.

01:02:59.000 | One of which is the whole idea of the mobile worker and the ability to move anywhere around the world and kind of the pursuit of that as a means of pursuing a less expensive lifestyle or financial independence.

01:03:23.000 | But then the others are all of the values that you have clearly around people and family. And so I just – as somebody who lives close to extended family, my father, my sister, my in-laws, a church community that I care about.

01:03:50.000 | And it just seems to be – while it's intellectually and financially very interesting and intriguing to think about all that you can do in moving anywhere around the world, it just seems to be so lacking in this idea of, okay, what about the people in your life?

01:04:11.000 | And the contribution that you make and the way we – if you enjoy living in community with people. And so I just wondered how you – how do you resolve that in your experience?

01:04:30.000 | I'm not sure that there is a resolution. I think the tension between those two things is acute. And I'm not sure it is resolvable. And it's something that I personally wrestle a lot with.

01:04:45.000 | You've identified two strong convictions that I hold. Number one, I share that strong conviction of the tremendous importance and tremendous value of having a local community, that community made up of neighbors, of family, of extended family, of church family.

01:05:11.000 | I believe that that is one of the most valuable assets that somebody can build, even including financially, the asset of simply having a network of people, having a network available to you for helping you in a time of need or for giving you a job or for buying from you, a network of political connections so that if you want to get something done, you can make it happen.

01:05:40.000 | Having the network of people to call, it's a tremendously valuable asset. And I'm acutely aware of how valuable that asset is. It's very, very important.

01:05:54.000 | On the other hand, intellectually, I'm also aware of how powerful the mobility solutions are at elegantly solving some of the problems that you think about. The problems of desire for adventure. I think I certainly am one who's more prone to enjoy that desire for adventure.

01:06:19.000 | I tend to be kind of a restless soul. My wife and I talk about it and I've just come to acknowledge that I'm a restless soul. And I acknowledge the tremendous value of community in the local area, but I also recognize that I get really bored really quickly.

01:06:38.000 | And so maybe that's just a unique character trait for me that some other people don't have. I also can focus on the fact that some of the mobile solutions that I advocate, they do elegantly solve certain problems.

01:06:53.000 | For example, I advocate for mobility with regard to helping to avoid some kinds of major crises. It doesn't really help that much during a global pandemic. But for a financial crisis, I advocate that being able to leave the country of crisis and go to a place where there isn't a crisis solves the problem in a much more efficient way than stockpiling years of reserves.

01:07:19.000 | I advocate that being able to be mobile elegantly solves the tax problem. And it does it legally, it does it ethically, it does it morally, it does it in a really powerful way. Being mobile solves oftentimes employment problems.

01:07:35.000 | Many people wind up stuck in a place with a dying economy, in the proverbial little dying coal town in Pennsylvania or something like that, and they don't have opportunities because they're not mobile. And if they were to become mobile, then it opens up opportunities.

01:07:51.000 | But there's also a real loss that comes with that. The loss of that network is acute. When you go to a new country or to a new town and you don't know anybody, you don't know where to get the deals, it's bewildering at times.

01:08:05.000 | You're often left paying retail prices. As I have moved around the world, I have found myself again and again overpaying for stuff because I didn't know where to get the deal. And I've often just thought, "Well, that was expensive."

01:08:19.000 | And it's just due to my ignorance, due to my not knowing how to do it, how to arrange things. And there is a cost. There is a profound cost to living that vagabond lifestyle in terms of less of a sense of connectedness.

01:08:36.000 | Some people would say that the cost is lesser now due to the ease of communications. The fact that I can sit in Ushuaia, Argentina, and talk to you in Dallas, Texas, just as easily as if I were in Fort Worth, Texas. There's no functional difference in the technology.

01:08:57.000 | That may be true, but still, I think there is a cost. So I acknowledge you're right, and it's a tension that I haven't figured out necessarily how to solve.

01:09:09.000 | I don't hear you talk much about that. And so I just, as I think about some of the options you talk about sometimes, like even the thought of moving an hour away from where I am now to save dramatically on housing costs.

01:09:27.000 | There's a part of that that's tempting, but then I think about, well, I'm uprooting me and to some extent my kids, although they're kind of college age, but from my close by family and a church community.

01:09:47.000 | Obviously, you might do that as a major decision a couple of times in life, and you establish new community, but certainly you don't want to do that lightly, I wouldn't think, and your values would not do that lightly.

01:10:05.000 | No, no. And so even just moving an hour away, no question, there is a world of difference between being in a 10-minute circle from your friends and family members versus being in a 25-minute circle.

01:10:20.000 | 10 minutes is just so easy to pop over randomly on a Tuesday night for an hour or pop over, "Hey, can you come help me move something?"

01:10:27.000 | "Absolutely, I'll be there." That's just so much more powerful than 25 minutes away, and it's so definitely more powerful than an hour away.

01:10:34.000 | And I have always given a high priority in where I live to being with people.

01:10:41.000 | If I move back to the United States, it will be over this reason, and it will be because I've basically found peace with some of the things happening in the United States and decided that, you know what, this is the place that I want to do it.

01:10:52.000 | And at the cost, my wife and I wrestle, literally, you know, talk about a lot, that what is the identity that we're going to give to our children, because that stuff matters, right?

01:11:03.000 | If I'm, you know, we're coming up on July 4 tomorrow, I'm not in the United States, am I going to give my children an American identity?

01:11:13.000 | Are we going to get an American flag and kind of wave the flag?

01:11:16.000 | You know, what am I going to do?

01:11:18.000 | Am I going to give them another identity?

01:11:23.000 | It's hard because these things matter, and I do get concerned about it, because even with regard to children, what is the cultural identity that you give your children?

01:11:34.000 | The sociologists talk about this in the context of third culture kids.

01:11:51.000 | But you're probably also not going to really fit into the Rwandan culture, and so you're kind of a third culture, you're a mixture.

01:11:58.000 | And there are some things that are really valuable about it.

01:12:00.000 | Yeah, like a lot of missionary kids.

01:12:01.000 | Yeah, there's some things that are valuable about it.

01:12:03.000 | You know, missionary kids or third culture kids can often move among cultures better, but there are also some real psychological things that can emerge where kind of this lack of identity.

01:12:15.000 | It's not, I'm a Texan and I'm American.

01:12:17.000 | It's like, I'm not really sure.

01:12:21.000 | Like, I have an American passport, but I don't really feel American.

01:12:23.000 | And I don't know the answer other than to say that I wrestle with it, and I think it is a significant thing.

01:12:31.000 | What I have tried to do is, here's how I have, here's one of the things that I have said.

01:12:36.000 | I've said, number one, having the option to leave is really valuable.

01:12:40.000 | And having the option to leave doesn't mean that you have to leave.

01:12:45.000 | And so it's nice to know that you could move an hour away, right?

01:12:48.000 | The guy that called in earlier who was working in Atlanta.

01:12:51.000 | Just because he can earn an income from anywhere in the world doesn't mean he's going to want to live anywhere but in Atlanta.

01:12:55.000 | It's really nice, though, if you're living in Atlanta, that you can have the choice to buy a house that's five minutes away from your mom and dad because of the ability to work through the internet.

01:13:03.000 | You know, something like that is helpful.

01:13:04.000 | He doesn't have to move to Mexico just because he can.

01:13:07.000 | Number two, also, having the option to leave a country and go somewhere else is very, very valuable.

01:13:12.000 | I think a lot, my heart is heavy for people living in Hong Kong right now.

01:13:17.000 | I love Hong Kong.

01:13:18.000 | There are people day after day moving out of Hong Kong because of the increased dangers that they're facing as the Chinese Communist Party expands its influence and control over Hong Kong.

01:13:28.000 | And so if you're a dissident, you know, if you've been labeled as a dissident, it's nice to have another place to go.

01:13:35.000 | I have a friend of mine that fled Europe and sought religious asylum in the United States because he was experiencing severe persecution, severe religious persecution.

01:13:44.000 | And so I've often thought, you know, thankfully, you know, I don't know, his asylum case hasn't been finalized yet, but at least he had the opportunity to file for asylum.

01:13:52.000 | But it would have been nicer if he knew that he had a second option so that if his asylum case, you know, were to fail, he's not in fear of his life every day.

01:14:01.000 | So having the option to go somewhere else is helpful.

01:14:04.000 | What I've tried to do is say my children are young.

01:14:06.000 | I haven't had to worry too much about that identity.

01:14:09.000 | It's not like I pulled a 13-year-old out of high school and said, "That's it.

01:14:12.000 | We're moving to Rwanda."

01:14:13.000 | It was a little bit easier for me, and I still have had some time.

01:14:17.000 | And so I've been setting up all my options all around the world, and then we'll see.

01:14:21.000 | There's a decent chance that I may move back to the United States.

01:14:24.000 | There's a decent chance that I won't.

01:14:25.000 | And so I don't know, but I point out, I agree with you.

01:14:29.000 | It is a major tension.

01:14:31.000 | I don't have it perfectly resolved.

01:14:33.000 | I think there are some people who probably very – their solution is very obvious, but there are some of us in the middle who appreciate things about both.

01:14:43.000 | And I've got some ideas that I'm considering of some interesting lifestyles that you can put together that would solve some of the issues, that would still allow you to have a sense of connectedness.

01:14:56.000 | There are people – I've thought a lot about the snowbird strategy, right?

01:14:59.000 | There are people in the United States who are snowbirds who, year after year, they kind of just are part of two communities.

01:15:04.000 | They live in the north, and then they go south in the wintertime.

01:15:07.000 | You can do that on an international basis.

01:15:09.000 | Andrew Henderson, the nomad capitalist, teaches something he calls a trifecta strategy, which basically you choose, in essence, three places around the world that are your home bases.

01:15:22.000 | And so an example would be – you could do a North American.

01:15:25.000 | Like let's say that you chose that I want to spend up time in Toronto, in Miami, and in Bogota, Colombia, or Mexico City.

01:15:33.000 | Or maybe you're a big city person, like Mexico City, Miami, and Toronto.

01:15:39.000 | And you could have an apartment in all three of those, and basically you have your communities, but you move between those homes, you move between those places.

01:15:46.000 | That solves some interesting issues from a tax perspective, but it still allows you to have some sense of community because you have your home.

01:15:53.000 | You have your people. You have your local church that you go to when you're there, etc.

01:15:58.000 | Not as perfect, I think, as being there all the time, but maybe there's kind of a half-and-half solution that gets some of it.

01:16:03.000 | But what you're talking about is something that my wife and I talk about every week, so you're right. It's a major tension.

01:16:09.000 | Yeah, I was going to say I would think the wife would have a major say in a lot of that. Men tend to be more kind of mission-oriented maybe, and go get the financial aspect or the work aspect of it and capture that.

01:16:29.000 | And a little bit less focused on connections. But how much of a problem is that for the women in our lives, I'm wondering?

01:16:44.000 | And also, what I try to do, because certainly you're right, what I try to do is be honest about the priority of things.

01:16:52.000 | What I have said to myself and to my wife is that I am not going to allow finances to be the determinant of the life that we want to live.

01:17:05.000 | For example, I live in a very tax-efficient lifestyle right now. I like it. It's great. I've saved tens of thousands of dollars per year, and there are times in the future where it may be hundreds of thousands of dollars per year in taxes.

01:17:20.000 | I'm grateful for that. But at the end of the day, I'm not going to arrive at the end of my life and say, "What did you do, Joshua?"

01:17:27.000 | "Well, I just legally avoided taxes." That's stupid. I'm not going to let the money tail wag the dog of life. I'm going to live in the best place.

01:17:36.000 | But the question is always, if there are ways that you can have all or at least most of the things that you have in life otherwise, then why not also be efficient from taxes?

01:17:51.000 | Or why not also pay attention to those other things?

01:17:59.000 | That's part of the challenge for us frequent listeners who love getting the nuggets and getting the win on some of these strategies and making those work is that we do have to remind ourselves not to let the finances run the lifestyle.

01:18:20.000 | Yeah. And I probably could do a better job of affirming and reaffirming and triple affirming that. I feel like I even need to do that with regard to location.

01:18:30.000 | So, for example, I think it's hard because when you talk as much as I do, you talk out of what you're doing. You talk out of what you're excited about.

01:18:38.000 | And when you see, for me also, when you're excited about the technical superiority of something, you're like, "Look, this is the best plan from a technical perspective."

01:18:48.000 | It's exciting. But then what happens is my words, people hear my words and they think, "Well, this is the only solution."

01:18:54.000 | And I've tried even over recent weeks in the United States, there's been so much tension.

01:18:58.000 | And I've had friends and people say, "Well, I just feel like I need to move." And I don't think you need to move.

01:19:03.000 | I think that being able to move is a good solution. And if there's somewhere you want to move, that can solve some problems.

01:19:10.000 | But at the end of the day, I don't think that you need to move. I don't think that you need to move out of Atlanta.

01:19:15.000 | I don't think you need to move out of Dallas. I don't think you need to move anywhere.

01:19:18.000 | Everywhere in the world has problems, and any lifestyle has problems.

01:19:24.000 | So, I just hope that people – and I just want to express here that what I try to do is share what I think is – I try to share ideas that I think are useful, share why those ideas are useful.

01:19:42.000 | But at the end of the day, all of us have to be really thoughtful about the uniqueness of our situations.

01:19:48.000 | Because simple things like the personality of our spouses or the age of our children or the kinds of activities that our children are involved in.

01:19:58.000 | If you've got a child who's world-class at basketball and you pluck that child up and move them somewhere else,

01:20:04.000 | that can be the kind of thing that sows a root of bitterness in your relationship with your children that just lasts forever.

01:20:12.000 | I've had many people – I would never – I would be cautious of saying absolute statements.

01:20:18.000 | When I work with individual consulting clients, time after time after time, I recommend to them things that I would not personally do because their situations are warranted.

01:20:28.000 | You live in New York City, but you've got a 15-year-old daughter. I think it'd be very unwise to just willy-nilly pluck your 15-year-old daughter up out of a lifestyle in New York City,

01:20:39.000 | where she – if she's happy and thriving, and plunk her down in rural Texas just because you're worried about social unrest in New York City.

01:20:47.000 | I think that's probably not good.

01:20:50.000 | Now, on the other hand, if your child is not thriving in New York City, it could be a real blessing for them to be released from that situation.

01:20:57.000 | All of us need wisdom and discernment in our own situation, and I'll try to do a good job of continuing to talk about that in the future.

01:21:05.000 | I appreciate the question. It's a question I don't have a good answer for other than to say there is a tension, it is real, and I'm not sure the answer that I'll find even next year.

01:21:13.000 | I'm open to the future, and we'll see what happens.

01:21:16.000 | Well, I appreciate the transparency, as always.

01:21:19.000 | My pleasure. Thank you for calling in. I appreciate it very much.

01:21:23.000 | And with that, we wrap up our Friday Q&A show. Some interesting calls today. I think you got a good mixture.

01:21:30.000 | Just think if there's anything I need to reprise here or review. Good mixture here.

01:21:35.000 | What I would say is – I guess I would want to close just by focusing on the importance of personality, a personalization of a plan.

01:21:49.000 | What I do my best to do is to share with you ideas and let you hear me ask questions.

01:21:58.000 | And I hope that you hear that, and that makes you a better thinker, even for your own situation.

01:22:03.000 | But ask good questions, and if you ask good questions to clarify the things that are important, then you'll know.

01:22:12.000 | If my wife were discontented because of some weird tax thing that I'm trying to do, I would give up the tax thing,

01:22:21.000 | because I want my marriage and my family to be strong.

01:22:26.000 | And I think that in many situations, you can do that.

01:22:29.000 | You might move into a neighborhood that you wouldn't ordinarily want to live in, but you're there for a purpose.

01:22:34.000 | And so the most important thing is usually going to be to find purpose in your life.

01:22:37.000 | And it's very easy to talk about the purpose of hedonism, making decisions that just feel good because they fit what you're trying to do.

01:22:47.000 | But that can't be always the ultimate thing.

01:22:49.000 | There are many times in life where you're going to make sacrifices, because you believe that they're genuinely in the best interest of you,

01:22:56.000 | or of your family, or of somebody that you're serving.

01:22:58.000 | So please, if I've not done a good job of articulating various things, call me up and ask about it, as a caller there today did.

01:23:06.000 | But think about your situation, recognize that your circumstances may vary.

01:23:12.000 | Thank you for listening to Radical Personal Finance.

01:23:14.000 | If you'd like to join me on next week's Q&A call, please support the show on Patreon.

01:23:16.000 | Go to patreon.com/radicalpersonalfinance.

01:23:18.000 | patreon.com/radicalpersonalfinance.

01:23:21.000 | Sign up to support the show there, and we'll be back with you.

01:23:25.000 | You'll be able to join us for a show next Friday.

01:23:27.000 | Thank you for listening.

01:23:28.000 | [music]

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