2020-07-20_Friday_QA-Equity_Stripping_a_House_in_Divorce_Buy_Whole_Life_Insurance_in_a_Sabbatical_Affirmations_in_Personal_Development

00:00:00.000 | Today on Radical Personal Finance, it's live Q&A.

00:00:19.320 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,

00:00:22.040 | skills, insight, and encouragement you need to live a rich and meaningful life now, while

00:00:26.120 | building a plan for financial freedom in 10 years or less.

00:00:28.760 | My name is Joshua, I am your host.

00:00:30.560 | Today is not Friday, today is Monday, July 20, 2020, but we are recording a live Q&A

00:00:35.880 | show.

00:00:36.880 | I wasn't able to get in front of the computer last week to do it on Friday, so I'm doing

00:00:39.400 | it this morning.

00:00:40.720 | Welcome to a new week.

00:00:51.120 | Each week that I'm able to arrange the technology with my travel schedule and with the internet

00:00:55.160 | and the computer and all of that, I record a live Q&A show, works just like live radio

00:00:59.280 | call-in show.

00:01:00.480 | My listeners get a phone number, they call in and we chat.

00:01:03.000 | I'm happy to talk about any questions, listen to any feedback, have any commentary, discuss

00:01:07.880 | anything you want, open lines.

00:01:10.600 | So if you'd like to join next week for a live Q&A show, go to patreon.com/radicalpersonalfinance,

00:01:15.120 | sign up to support the show on Patreon at patreon.com/radicalpersonalfinance, and that

00:01:18.720 | will give you access to the weekly live Q&A call.

00:01:21.920 | We'd love to have more of you there at patreon.com/radicalpersonalfinance.

00:01:26.400 | We begin with Mark.

00:01:27.400 | Mark, welcome to Radical Personal Finance.

00:01:28.560 | How can I serve you today, sir?

00:01:30.560 | Thanks, Joshua.

00:01:33.520 | I'm calling about my friend.

00:01:36.480 | He's in the unfortunate position that his wife divorced him.

00:01:40.240 | Your friend, uh-huh, yes.

00:01:41.240 | Sorry.

00:01:42.240 | I was making a joke and all of a sudden I made the joke over top and it wasn't very

00:01:45.200 | funny because you talked about a very serious situation.

00:01:47.600 | So I hereby retract the joke.

00:01:49.320 | I'm sorry for interrupting you.

00:01:51.240 | Oh, no, that's fine.

00:01:54.200 | That's fine.

00:01:56.400 | And so they're kind of getting down to the final details of the divorce and they're stuck

00:02:02.280 | over what to do with the house.

00:02:03.760 | She would like to keep it, but they want to divide the equity.

00:02:07.200 | And so I was wondering if you had advice or suggestions on how to equity strip that so

00:02:13.160 | that he can get half the equity of the house, but she could retain ownership.

00:02:17.700 | Why does she want to keep the house?

00:02:21.600 | You know, I haven't had that conversation with them.

00:02:24.800 | I believe she's just comfortable with it and likes it.

00:02:28.240 | And that's as far as that's my guess.

00:02:31.360 | I don't know the exact reason.

00:02:33.440 | Okay.

00:02:34.440 | Well, there can be good reasons to keep the house.

00:02:36.600 | So I want to begin.

00:02:37.600 | I'm not saying, you know, don't do it.

00:02:40.300 | Some people really love a certain house.

00:02:42.320 | They really want to have that house.

00:02:44.480 | It's just, you know, maybe it's the family home.

00:02:46.800 | Maybe it's a brick, you know, a brick straw roofed family cottage that they've lived in

00:02:54.380 | since the 1600s, you know, or something like that.

00:02:58.120 | But very rarely is that the case.

00:03:01.320 | Usually a house is just a house.

00:03:03.220 | Now if we were asking her, do they have children?

00:03:08.540 | They do not.

00:03:09.540 | Okay.

00:03:10.540 | So another thing is when couples have children, a lot of times they say, "Well, we want to

00:03:12.900 | keep the children.

00:03:13.900 | We want to stay in this house for the stability of the children."

00:03:16.700 | After all, these are their rooms and we're going through a traumatic experience and these

00:03:20.400 | are their rooms in the house or they're in this particular school because of the school

00:03:24.260 | district and we want them to stay in that school so their lives are as, you know, maintain

00:03:28.240 | as much continuity as possible.

00:03:29.880 | Those are some reasons that people want to keep a house.

00:03:32.480 | But in general, I think it's a bad idea to try to keep the house.

00:03:36.380 | And I'll give you a few reasons why to think about that, to present to them before we try

00:03:41.080 | to actually solve the problem.

00:03:43.580 | The first thing is when keeping the house, it's often financially messy and it's often

00:03:48.480 | messy when working through divorce court documents, working through refinancing, etc.

00:03:54.180 | If they have followed the normal path when couples buy houses, they own the house jointly

00:03:59.340 | and they have a jointly held mortgage on the house.

00:04:02.260 | It's simpler if the house were in her name and she held the mortgage, but that's not

00:04:05.360 | the common path.

00:04:06.360 | The common path is that they own the house jointly and that they have a joint mortgage.

00:04:12.220 | So a lot of times couples will try to settle this in a divorce decree.

00:04:15.100 | They'll say, "Okay, well, he's going to—she's going to keep the house, but he's going to

00:04:20.180 | move out.

00:04:21.180 | She's going to get the house in the divorce decree, but she's going to pay the mortgage."

00:04:25.380 | The problem is can she actually refinance that?

00:04:27.820 | And so, for example, if she's going to stay in the house, but they're going to keep the

00:04:30.740 | mortgage as a joint mortgage, that puts him in a tremendously dangerous position because

00:04:34.700 | he's legally liable to the mortgage company to pay the mortgage if she doesn't pay.

00:04:40.260 | No matter what the divorce document says, what matters is the mortgage that he signed.

00:04:45.780 | And so if I were giving him advice, I would make sure, I would say never ever maintain

00:04:51.220 | yourself on the mortgage.

00:04:52.220 | It's just simply too big of a risk for you to be basically a cosigner on a debt that

00:04:57.300 | you're not in charge of anymore.

00:04:59.140 | And if she gets behind, she gets sick, she becomes unemployed or something like that

00:05:02.340 | and she can't make those mortgage payments, it's a tremendous risk for him.

00:05:06.820 | Now how could that be solved?

00:05:08.140 | Well, it could be solved if she bought the house, if she bought him out of the house

00:05:12.140 | and she refinanced it.

00:05:14.060 | Why is that usually difficult?

00:05:15.220 | Well, it's usually difficult because most couples buy a house based upon a dual income

00:05:20.820 | household.

00:05:21.820 | Most couples, especially most couples who don't have children, do their financial planning

00:05:25.300 | based upon a dual income household.

00:05:27.460 | And so if those incomes are split apart, the house is probably more than she could comfortably

00:05:32.080 | afford on a single income.

00:05:34.900 | And if there are no children involved, I don't know if they've worked out any kind of alimony

00:05:38.780 | payments or not, but usually her income would be lower.

00:05:42.620 | And it's even worse if it's just a single income because then she has no source of income

00:05:47.200 | until she goes out and reestablishes herself in a job and in a career.

00:05:50.940 | And the house that a couple would buy, especially a couple that's planning for marriage, planning

00:05:55.820 | for children, is probably a very different house than an individual single person would

00:06:00.620 | buy.

00:06:01.620 | And so it's probably not a great fit because there were different ideas in mind.

00:06:07.060 | And then the final component is what about if there's a profit, if there's profit in

00:06:12.020 | the house?

00:06:13.020 | So it gets complex with the tax planning, for example.

00:06:15.460 | If they own the house jointly and they sell the house, then if there's a profit on the

00:06:19.780 | house, a gain, then they can just split the profit.

00:06:22.180 | They may qualify for the Section 121 exclusion of capital gains from the sale of a personal

00:06:27.460 | residence.

00:06:28.460 | Are they living in the United States?

00:06:29.460 | I didn't ask that.

00:06:30.460 | They are living in the United States.

00:06:33.180 | And if this is relevant, when they got the house, she was a paralegal and has now passed

00:06:38.140 | the bar.

00:06:39.140 | And so her income, I believe, would have jumped sufficiently enough that she could sustain

00:06:42.780 | the current mortgage payments.

00:06:44.740 | I don't know all the details, but that would be my guess is that she's at that level where

00:06:48.460 | she could sustain it.

00:06:49.460 | Perfect.

00:06:50.460 | So we'll get to that.

00:06:51.460 | That is very important because that will make all the difference in the world.

00:06:53.460 | Let me just finish kind of the general advice and then we'll go to the specific solutions

00:06:58.300 | there.

00:06:59.300 | So the tax situation is complex because what do you do?

00:07:06.140 | How do we qualify that?

00:07:07.140 | If he sells the house to her, does he receive the exclusion on the gain in the property?

00:07:14.100 | What do we actually – how do we qualify for this?

00:07:17.940 | Now is it possible to do?

00:07:19.980 | Yes.

00:07:20.980 | You can do it.

00:07:22.760 | You can separate the property.

00:07:24.540 | But the basic point that I'm driving at is you don't want to continue on in a business

00:07:29.180 | relationship after the fact.

00:07:30.620 | If you look at people who get divorced, divorce stinks all around the world.

00:07:35.300 | But why does divorce stink?

00:07:36.860 | Well, basically it turns into a really bad, nasty business partnership in almost every

00:07:41.780 | circumstance, even in the best of divorces where everyone's talking to each other,

00:07:47.220 | etc.

00:07:48.220 | Because you've got a financial life gathered together with somebody who was a romantic

00:07:52.980 | partner, a life partner and is now a business partner but the business partner has gone

00:07:57.940 | wrong or the business partnership has gone wrong.

00:08:00.380 | So unwinding all of that is really hard and the best thing to do is to unwind it as quickly

00:08:06.100 | as possible so that you can go on with your life.

00:08:08.980 | So you want to work towards complete and total financial separation.

00:08:12.600 | You don't want to continue with, "Okay, I'm going to be on the mortgage for a while,"

00:08:16.420 | etc.

00:08:17.420 | So that's my goal is complete and total financial separation and do it as quickly

00:08:21.740 | as possible to minimize years of pain, minimize frustration going on.

00:08:27.700 | Complete and total financial separation.

00:08:29.140 | That's usually best achieved by simply selling the house.

00:08:31.780 | And if you sell the house, sell all the property, the only assets you usually don't want to

00:08:36.900 | just sell completely are business assets.

00:08:38.660 | That's harder than a house.

00:08:39.900 | But houses are a dime a dozen.

00:08:41.140 | There's a house on every street corner.

00:08:42.460 | A house is a house is a house basically in almost every circumstance.

00:08:46.260 | So it's best usually just sell it, split it, pay off all the debts and part ways and not

00:08:51.700 | have anything going forward.

00:08:53.540 | Now, if on the other hand she has the money and she can put herself in a situation where

00:09:03.940 | she can comfortably afford the house, she says, "I want to live in this house.

00:09:06.940 | This is where I want to live," for her own reasons, then the answer is simple.

00:09:11.260 | Have her refinance the house, have her get a new mortgage, get him off the mortgage and

00:09:16.980 | have him sell or deed his ownership interest to her.

00:09:22.460 | That's the answer.

00:09:26.260 | But it just depends on her borrowing capacity if she can do that.

00:09:31.420 | Okay.

00:09:32.420 | That's good to know.

00:09:39.380 | In doing that, I assume that turns out technically as a sale.

00:09:44.980 | Is that correct how that would be treated for tax purposes?

00:09:47.780 | Sort of.

00:09:50.500 | So in a divorce settlement, you have some unique tax transfer rules that are available

00:09:58.100 | to you.

00:09:59.220 | And so in divorce tax planning, there are three – let's talk about the section 120.

00:10:11.420 | What I'm assuming you're asking about is how does the 120 – first of all, do they

00:10:14.620 | have a gain on the property?

00:10:15.620 | Does this matter at all?

00:10:16.620 | Do you know if they have a gain?

00:10:18.740 | I'm assuming so.

00:10:20.020 | I'm assuming so.

00:10:21.020 | They've had the house about six years.

00:10:23.020 | Okay.

00:10:24.020 | So if there's a transfer by one spouse to the other of their interest in the home so

00:10:29.740 | that one spouse owns the whole home and there's a – then in that situation, the acquiring

00:10:37.860 | spouse would just pay the other spouse and the spouse that is selling should qualify

00:10:42.300 | for the exclusion on capital gains.

00:10:46.340 | So it's a fairly clear thing.

00:10:51.780 | Now they can make various changes to it but yeah, that would be the simplest thing.

00:10:56.540 | Just have her buy him out on his share of the property.

00:10:59.740 | He'll get the section 121 exclusion on the gain and she can have the property and the

00:11:03.820 | debt that goes with it.

00:11:05.860 | Okay.

00:11:07.780 | And then he would also qualify then for the 1031 exchange?

00:11:10.380 | No.

00:11:11.380 | You can't do a 1031 exchange on a privately held residence.

00:11:14.020 | So this is – I'm just talking about the – the 1031 exchange is where you have capital

00:11:18.780 | gain property that's business or investment property that you transfer for other business

00:11:23.740 | or investment property of a like kind and you avoid triggering capital gains tax on

00:11:28.540 | the sale.

00:11:29.540 | But in this situation, we're talking about the $250,000 exclusion for a single person

00:11:34.060 | or $500,000 exclusion for a married couple on the sale of their personal residence that

00:11:39.020 | they have lived in for two out of the last five years.

00:11:41.980 | Got it.

00:11:43.540 | Got it.

00:11:44.860 | That makes sense.

00:11:46.380 | Well, awesome.

00:11:47.380 | Yeah.

00:11:48.380 | In the divorce, there is – it's called section 1041 of the tax code.

00:11:52.020 | In the divorce, then property transfers between spouses don't generally recognize gains or

00:11:58.300 | losses and so they can transfer the property around.

00:12:02.300 | So back to your equity stripping question, if there's a way that they can sit down

00:12:06.140 | and adjust the assets based upon their individual balance sheet, yeah, they can do that.

00:12:11.860 | The court will generally ignore embedded tax obligations.

00:12:16.060 | They consider that to be basically hypothetical and so most judges and courts will ignore

00:12:20.820 | embedded tax obligations.

00:12:22.780 | But what they should do is not ignore them.

00:12:24.260 | They should look at them.

00:12:25.900 | And I think that the general – again, the general goal is part ways, have everything

00:12:31.020 | finished, sell the property, incur the taxes if necessary and just part ways.

00:12:37.460 | I would – even though it may work out financially and again, she's a smart girl.

00:12:41.760 | She says, "I want to live in this house."

00:12:43.100 | Fine.

00:12:44.100 | I don't think that's a bad idea even just for her.

00:12:46.260 | I think it's just a better idea.

00:12:47.380 | Sell the house, start fresh, especially even if she has a much higher income, start – rent

00:12:52.380 | a little condo, rent a little apartment, start fresh.

00:12:55.220 | Get a clean start, have a clean break, start a new life and make fresh decisions so that

00:12:59.860 | that chapter of your life is gone.

00:13:01.900 | Okay.

00:13:02.900 | Thank you for that.

00:13:04.900 | I appreciate it.

00:13:05.900 | I've got a couple of other questions but I'll go ahead and let you move on and if

00:13:10.980 | no one else pops in, would there be time?

00:13:12.820 | Yeah, go ahead.

00:13:13.820 | We've got one other caller on the line right now so go ahead.

00:13:15.540 | We've got time for you.

00:13:16.940 | Oh, awesome.

00:13:18.220 | Okay.

00:13:19.220 | So like you, I'm looking to invest in real estate and like you, I live overseas.

00:13:24.660 | So I was wondering just what your plan was for finding a deal for closing it, for managing

00:13:30.940 | renters from overseas.

00:13:33.340 | Are you looking family, management companies?

00:13:35.860 | Have you built up a team in place?

00:13:39.860 | And alongside that, I know margins are tight.

00:13:42.060 | So if you're paying all those people to manage a property while you're overseas, what

00:13:46.220 | are you thinking in terms of margins?

00:13:48.100 | I think it depends on the market and I am not – I don't know.

00:13:53.940 | I have not purchased any property overseas yet.

00:13:56.420 | I'm still kind of stuck in this back and forth situation of am I going to go back to

00:14:01.340 | the United States or am I going to stay outside of the United States and I'm sitting and

00:14:05.220 | watching and waiting.

00:14:06.420 | So I can't answer from personal experience because I haven't developed a large property

00:14:11.800 | portfolio outside of the United States.

00:14:14.260 | I have some plans.

00:14:15.460 | I have some specific markets that I'm looking at but I can't speak from a place of experience.

00:14:21.380 | That said, I think the answer is as with any real estate option is move slowly and contact

00:14:27.460 | local experts and get local expertise.

00:14:30.300 | The most important – in my opinion, one of the very important differences between

00:14:35.820 | working in the United States and working in some other markets is going to be access to

00:14:39.500 | local resources, local people.

00:14:43.780 | One of the great benefits of investing in the United States is you have a largely commoditized

00:14:48.140 | market.

00:14:49.140 | For example, you have the MLS that every real estate agent has access to.

00:14:52.180 | There's a very commoditized market.

00:14:54.780 | The marketplace in the United States works well from hands off or arm's length transactions.

00:15:00.740 | You don't have to get involved and know somebody.

00:15:03.820 | But in other markets around the world, that is very different where you have to get involved

00:15:07.140 | and know somebody.

00:15:08.140 | Now, there's a big difference between Cambodia and Portugal.

00:15:13.980 | There's a big difference between Panama and Kuala Lumpur.

00:15:19.340 | There's a big difference between buying a Singapore apartment versus buying teak land

00:15:26.180 | in Nicaragua or something like that.

00:15:30.100 | So every investment is going to come with its unique things.

00:15:34.380 | But I think number one, you need local people because some markets, especially some of the

00:15:38.700 | more profitable markets, you need insiders.

00:15:40.980 | You need inside people in the market.

00:15:42.940 | Number two, I think you need to be really careful and thoughtful about being slow to

00:15:47.580 | get into it.

00:15:48.580 | The thing that bothers me most about a lot of overseas investments is that many markets

00:15:52.660 | are much less liquid.

00:15:54.260 | So in the United States, what we're accustomed to in the real estate market, we're accustomed

00:15:57.780 | to a very liquid market.

00:15:59.540 | You can go into a deal and you can know, "All right, if I put the property on the market

00:16:04.140 | at this price, then it'll sell in one week at this price.

00:16:09.460 | This is my fire sale price."

00:16:11.340 | There are many markets around the world that just simply do not work like that.

00:16:13.900 | They don't have a fire sale price.

00:16:16.660 | The markets are not based upon the ability to sell quickly.

00:16:21.220 | I have a lot of friends who own a decent amount of real estate throughout Latin America.

00:16:25.300 | It's one of the interesting vagaries of the Latin American marketplace is that a lot of

00:16:31.660 | times you don't need the right price, you need the right buyer.

00:16:35.620 | And so it's not so much that you're price sensitive, you're buyer sensitive.

00:16:39.500 | And so there can be an extremely long lead time on those scenarios.

00:16:44.900 | I would say it's complex.

00:16:46.220 | And so you can, and if you're going to get the highest margins, you're going to have

00:16:50.540 | to choose an area, you're going to have to develop a local team, and largely you're probably

00:16:54.580 | going to have some kind of local business come with you.

00:16:57.020 | Now, many people who buy property, they just buy, "Hey, I want to buy a beach condo in

00:17:01.940 | Costa Rica."

00:17:02.940 | So they buy some retail beach condo in Costa Rica.

00:17:08.860 | That's not exactly what we're talking about here.

00:17:10.180 | I think if you're going to do income property, then you need to choose a market, develop

00:17:14.260 | a local team, and answer some of those questions.

00:17:16.420 | But I couldn't answer them on a global basis.

00:17:18.620 | They're too localized in nature.

00:17:21.140 | I'm sorry, it was probably unclear.

00:17:26.580 | I live outside the US, but I'm looking to buy inside the United States.

00:17:29.940 | I don't know if that gives a little more focus in terms of finding renters, managing property,

00:17:35.700 | etc.

00:17:36.700 | I'm sorry, I didn't say that before.

00:17:37.700 | Yeah, totally different.

00:17:38.700 | I mean, well, actually not totally different.

00:17:42.580 | I mean, the answer is if you're not going to be in the United States, then you're going

00:17:46.980 | to have to find someone that's going to work with you.

00:17:49.500 | So either you have a house – I would say that in the US market, my number one focus

00:17:54.100 | would be to try to find low-maintenance tenants.

00:17:56.700 | And so I think you find low-maintenance tenants by having a certain quality of house and a

00:18:00.420 | certain kind of market.

00:18:01.540 | I would look for that middle-income market.

00:18:04.140 | There are places in the South Florida market where just standard developments where you

00:18:09.220 | can buy a big three-bedroom, four-bedroom house and the kind of tenant that you put

00:18:13.340 | in there at $2,000 a month or $2,200 a month, at $2,400 a month, that kind of tenant is

00:18:19.060 | going to be generally a low-maintenance tenant.

00:18:21.380 | You can get a very high – someone's got a high credit score, they're a working professional.

00:18:26.660 | It's a very different scenario than if you're managing a trailer park in Central Florida.

00:18:32.660 | The trailer park in Central Florida will have higher yields, but it's going to be very

00:18:37.460 | management-intensive.

00:18:39.660 | So I would focus – if I'm going to be outside the United States and buying property

00:18:42.940 | in the United States, I would focus on low-management properties.

00:18:47.020 | So I would try to find upper-class, middle-class and upper-middle-class tenants.

00:18:53.340 | And then you're going to need somebody local to help you and then just hire professionals

00:18:58.020 | for the various maintenance tasks that are needed.

00:19:02.580 | Is it probably even also just worth thinking about – I don't love condo investing generally.

00:19:07.860 | I think it's less advisable, but there may be plimes and places where you just go ahead

00:19:11.940 | and invest in condos because then your maintenance tasks are handled by your homeowner's fees.

00:19:19.620 | So run the numbers on that.

00:19:24.060 | Or you might just walk away from the rental properties completely and invest in some kind

00:19:28.500 | of property fund.

00:19:29.500 | There are wonderful property funds available.

00:19:32.100 | There are lots of investors who would be happy to do the management for you.

00:19:35.100 | And I think for an absentee landlord, that should be seriously considered.

00:19:39.100 | Excellent.

00:19:40.100 | Thank you for that input.

00:19:43.100 | I appreciate it.

00:19:44.100 | Cool.

00:19:45.100 | I'm going to go on, Mark.

00:19:46.100 | Do you have one more question?

00:19:47.100 | I'm going to go on to the next caller, but I can come back at the end if you've got

00:19:48.820 | another question.

00:19:51.740 | I do have several more, but I will gladly wait until the end.

00:19:54.820 | I'll swing back to you at the end.

00:19:56.100 | All right.

00:19:57.100 | Speaking of overseas, we go to Al in Tbilisi, Georgia.

00:19:58.100 | Al, welcome to the show.

00:19:59.100 | How can I serve you today, sir?

00:20:00.100 | Josh, first off, I very much appreciate what you do.

00:20:05.340 | And I want to thank you for that.

00:20:07.140 | Truly, it's great.

00:20:08.140 | My pleasure.

00:20:09.140 | So I'm a relatively new listener, but I do believe that I've gone back and listened to

00:20:14.060 | most if not all of your episodes that touch upon whole life.

00:20:18.060 | But I wanted to call personally and get your thoughts on this because I've got my annual

00:20:22.140 | review with my insurance agent coming up.

00:20:24.660 | And bottom line, I kind of want to go into this call better armed with a plan, some information

00:20:30.060 | than I have generally in the past.

00:20:33.140 | And normally these calls, my agent will say, "Well, how much more money can you put in

00:20:37.620 | the policy?"

00:20:38.620 | And that's a hard question for me to answer.

00:20:41.780 | It could be a lot, it could be a little.

00:20:43.100 | I don't know where these policies sit in my priorities.

00:20:46.900 | So I'm trying to understand, should I have a goal?

00:20:50.300 | Should it be like a certain death benefit, a certain amount?

00:20:53.380 | Or should the premiums be a certain percentage of our income or the premiums are a certain

00:20:56.740 | percentage of our investment allotments?

00:20:58.780 | I'm trying to understand how these policies fit into our broader framework.

00:21:03.020 | And I can give you detailed numbers if that will help.

00:21:06.340 | But the last piece of background is that I'm looking at taking a one to two year sabbatical

00:21:12.460 | and probably six to eight years roughly.

00:21:15.900 | When I look across my expenses, it's really the only one to me that seems I have no control

00:21:21.020 | over that as far as drastically reduced.

00:21:23.620 | That makes sense.

00:21:25.980 | That is a major disadvantage of whole life insurance.

00:21:28.420 | Now it can be pitched either as an advantage or as a disadvantage.

00:21:31.980 | So the advantage is it's a forced savings program.

00:21:36.460 | That's the way that it's often positioned.

00:21:38.300 | So for somebody who has poor self-control, who needs to be forced to make a premium payment,

00:21:42.500 | being forced to make a premium payment into a whole life insurance policy can be an advantage.

00:21:48.380 | On the other hand, for somebody who wants to keep maximum flexibility of their expenses,

00:21:53.100 | take a sabbatical, do an early retirement, have total flexibility, it's a major disadvantage

00:21:58.180 | to whole life insurance.

00:21:59.180 | And you should be very cautious there with the numbers.

00:22:02.500 | To begin with, tell me just broadly about your financial situation, your income, your

00:22:06.340 | assets, your investment component, your investment portfolio, etc.

00:22:11.300 | Yeah.

00:22:12.500 | So roughly about 125 annual.

00:22:17.780 | I am in the military, so a good portion of that is non-taxed.

00:22:21.540 | That's why I'm overseas.

00:22:24.420 | We've got probably another 150, 175 in various IRAs or TSP combos between myself and my wife.

00:22:39.140 | We are continuing to probably save probably 12, maybe 12% of our income into those accounts.

00:22:47.860 | Then we have these policies, which are about maybe 450 in whole life and then another a

00:22:58.380 | million in term, term till 80 with some conversion options there.

00:23:06.500 | We own two rental properties and I think that's kind of where we're at.

00:23:11.740 | How old are your life insurance policies?

00:23:17.260 | First one was in 2013 and I've converted a few years, 14, 2018, 2019.

00:23:27.340 | Sure.

00:23:28.420 | And total annual premiums into whole life insurance right now?

00:23:31.820 | About 680 a month.

00:23:34.860 | 680 a month.

00:23:38.420 | So 680 a month would come out to be about 8,000 a year, which on an income of 125,000.

00:23:47.900 | Does your wife have additional income on top of your 125?

00:23:52.420 | She does, but it's almost completely separate because we don't count on that income.

00:23:58.140 | So that's kind of just getting socked away.

00:24:01.080 | So we're saving about probably 15 to 20,000 a year that's going into investments, taxable

00:24:07.060 | events, investments, vendors.

00:24:09.220 | If you took a sabbatical in six to eight years, a one to two year sabbatical in six to eight

00:24:14.260 | years, what would be your guess, not including your $8,000 of life insurance premiums, what

00:24:20.700 | would you guess would be your living expenses at that time?

00:24:25.660 | I think we could safely probably get down to maybe 2,000.

00:24:33.380 | We could get into one of our rentals that's paid off.

00:24:36.220 | We have some flexibility there.

00:24:38.580 | And how old are you and your wife?

00:24:43.340 | I'm 36, she's 34.

00:24:45.380 | Do you guys hope to have children in the future?

00:24:49.180 | We have a nine month old and hope to have more.

00:24:56.820 | So the answer to the question is there is no precise answer.

00:25:01.700 | Now I'll give you a couple of rules of thumb, but the rules of thumb that you hear will

00:25:05.740 | vary based upon somebody's commissions that they're going to earn based upon the sale

00:25:10.380 | of life insurance.

00:25:11.700 | For example, somebody who sells whole life insurance will generally recommend a higher

00:25:15.740 | amount of whole life insurance than somebody who sells stocks.

00:25:19.420 | So you got to filter the advice that you hear through that.

00:25:22.780 | So if we start with the assumption that we appreciate the benefits of a whole life insurance

00:25:29.300 | policy, a well-built policy with a good company, we appreciate the features and attributes

00:25:34.980 | that it gives us.

00:25:36.980 | It's got some unique wrinkles that make it disadvantageous in some circumstances, but

00:25:42.140 | on the whole we're comfortable with it.

00:25:44.500 | The most important thing is to get clear about what our plan is for it.

00:25:48.980 | Now what you've heard me say in the past is I'm comfortable with whole life insurance

00:25:53.980 | being a component of an overall financial plan where we keep some of our longer term

00:26:00.300 | safer dollars.

00:26:01.740 | That's the positioning that's always made sense to me.

00:26:05.300 | I don't want to prioritize whole life insurance over a Roth IRA.

00:26:08.940 | That would be a mistake because a Roth IRA is superior to a whole life insurance policy

00:26:12.660 | as long as it's filled with good investments.

00:26:14.940 | I don't want to prioritize a whole life insurance policy frankly over any kind of tax advantaged

00:26:18.940 | account including TSPs, 401ks.

00:26:21.920 | Although I don't have that as a hard and fast rule, maybe if somebody's – let's say somebody's

00:26:26.140 | earning $100,000 a year and they're putting $2,000 a year in a whole life insurance policy

00:26:32.060 | and they're putting $12,000 into a 401k, I'm not going to freak out, right?

00:26:36.860 | But I do like to see Roth IRAs funded and I like to see tax qualified accounts funded

00:26:41.060 | first.

00:26:42.060 | Those accounts are generally superior to whole life insurance as long as the investments

00:26:46.180 | work out.

00:26:47.180 | They're better from a tax perspective and they're better – and they have the potential

00:26:52.180 | for longer term growth, for higher longer term growth.

00:26:55.900 | On the whole, stocks and equities should outperform whole life insurance because life insurance

00:27:02.220 | is more of a fixed income perspective.

00:27:04.820 | And so if we flip the question and you just simply said, "What percentage of my investments

00:27:10.740 | or my income should I invest into fixed income investments?"

00:27:14.620 | Then we start to get closer to the answer.

00:27:16.900 | Now I don't like that analogy perfectly because it still has some trouble.

00:27:23.220 | For example, I wouldn't recommend to a 36-year-old that you have very much money in fixed income

00:27:28.740 | investments unless it's part of your chosen investment strategy.

00:27:31.820 | So for example, I'm a fan of the permanent portfolio and you say, "I'm going to put

00:27:35.540 | 25% into bonds because that works during this particular economic situation."

00:27:40.460 | Great.

00:27:41.460 | No problem with that because that's a plan.

00:27:42.580 | But in general, as far as the mainstream financial planning, should you have a 60/40 portfolio?

00:27:48.060 | No.

00:27:49.060 | I think that equities in the long run will outperform fixed income and as long as you

00:27:54.020 | don't need the income in the short term or need the money in the short term so you can

00:27:57.380 | deal with the volatility, you're more concerned about outdoing inflation than you are with

00:28:02.100 | temporary short term volatility.

00:28:04.360 | But life insurance is unique though because unlike some other fixed income portfolios

00:28:09.100 | or especially unlike a fixed income portfolio in your retirement accounts, you have the

00:28:14.740 | ability to access the money temporarily.

00:28:16.660 | So if you've got a hundred grand in there and you need 50 grand for a down payment on

00:28:19.420 | another rental, boom, you grab 50 grand, do the down payment, refinance the property and

00:28:23.980 | then go ahead and pay it back.

00:28:25.640 | So it's a really useful asset that doesn't fit well into the mainstream planning solutions

00:28:32.900 | and that's where it's so hard to find the advice.

00:28:35.100 | You have the anti-whole life crowd that says don't ever have any kind of whole life insurance,

00:28:40.820 | only buy term insurance, don't have any more.

00:28:43.820 | I think that's – although that plan can work fine, I don't think that that's a thoughtful

00:28:51.340 | approach that appreciates the benefits of whole life insurance.

00:28:54.460 | Then you've got the totally 100% whole life insurance crowd, the bank on yourself, put

00:28:58.380 | all the money in life insurance, don't buy stocks, don't buy anything else.

00:29:01.100 | I think that's really – I'm uncomfortable with that and so we're stuck in this frustrating

00:29:06.460 | middle.

00:29:07.460 | So here are some things that I think make sense.

00:29:09.260 | Number one, if you have hard numbers to your situation, so you specifically have a plan

00:29:14.460 | to take a sabbatical, you need to look at what your expected income would be during

00:29:18.300 | that period of time.

00:29:19.820 | Now maybe you look at your rental properties and it sounds like you have one rental paid

00:29:24.620 | off and that pays you a thousand a month or how much is your income on that?

00:29:30.020 | That rental will be paid off by the time the sabbatical will come around and yeah, it would

00:29:35.180 | be like 800 a month.

00:29:36.620 | So you could look at that rental and you could say, "You know what?

00:29:39.260 | This rental, what this rental is going to do is during the sabbatical, this rental is

00:29:43.700 | going to pay my life insurance.

00:29:44.700 | Now I'm going to have other money of course that I need to pay for living expenses but

00:29:47.860 | this rental is going to pay for life insurance."

00:29:50.200 | You need to be really careful if you're going to take time off, okay, that life insurance

00:29:53.740 | policies are properly structured.

00:29:55.740 | So you've got six to eight years of runway between here and your sabbatical.

00:30:01.300 | That's enough time to get a policy working pretty well.

00:30:06.220 | That's enough time where the policies that you bought last year or the year before.

00:30:09.620 | If you for example make a plan that I'm going to pay these for six to eight years but then

00:30:13.780 | at that point in time I'm going to have dividends reduce the premium instead of having dividends

00:30:17.440 | by paid up additions, I'm going to turn the dividends to reduce the premium and my net

00:30:20.740 | premium outflow instead of being $8,000 a year, my net premium outflow is going to be

00:30:25.700 | $2,500 a year.

00:30:28.260 | That's okay but I don't want you to keep buying more life insurance every single year for

00:30:32.340 | the next six years to where you got $15,000 of annual premiums and the policies are too

00:30:37.120 | new to cover it.

00:30:39.320 | So that's a big concern.

00:30:41.020 | You've got to make sure that you plan for that.

00:30:42.500 | Now if you've got plenty of cash in the bank, you could cover it for a year, it's no problem.

00:30:47.580 | I've always liked the 5% number.

00:30:50.100 | I've always felt like and depending on someone's – there's no science to this number but

00:30:55.300 | when you sit down and you say what feels right, to me someone to say I'm going to put 5% of

00:31:01.620 | my income into something that's conservative, that's safe, etc. that feels pretty good to

00:31:06.820 | me.

00:31:07.820 | It doesn't feel like extreme.

00:31:08.820 | Just like I said the same thing, it's almost like if somebody says the same thing with

00:31:13.900 | gold and silver.

00:31:15.580 | I get really nervous when somebody says I'm going to put 100% of my investments into gold

00:31:19.060 | and silver.

00:31:20.060 | I get nervous when somebody says I'm going to put 50% of my investments in gold and silver

00:31:23.140 | but if someone says I'm going to put 5% or 10% of my investments or 5% or 10% of my net

00:31:27.660 | worth into gold and silver, okay that doesn't seem extreme.

00:31:31.020 | So I feel the same way with life insurance.

00:31:32.660 | 5% of your income feels about right because it's not going to control your life.

00:31:36.920 | You have the ability to reduce your income, etc.

00:31:39.520 | So that's often been my number.

00:31:41.320 | If it starts to get higher than that and right now you're at 7%, I feel like that's a little

00:31:46.100 | excessive and it doesn't give you enough flexibility.

00:31:48.460 | So two answers to your question.

00:31:51.280 | Number one, model the specific numbers.

00:31:53.880 | What I would ask my insurance agent to do, I would ask him to do a projection and I would

00:31:57.620 | say listen, take all my policies together.

00:32:00.640 | If all your policies are with the same company, I would say take all my policies together,

00:32:04.560 | aggregate them under one sheet.

00:32:06.960 | Illustrate that I pay the premiums for the next six years with the dividends going to

00:32:12.960 | paid up additions and then in six years illustrate what my premiums would be if I then use my

00:32:18.840 | dividends to reduce my premiums.

00:32:21.720 | So now you would know if your total annual premiums are going to go from $8,000 to $4,000.

00:32:31.000 | And then if in your mind you simply say $8,000, I'm going to have $4,000 of expense, I've

00:32:36.520 | got this rental property over here that's going to produce $9,000 or $10,000 of net

00:32:41.200 | rental income, that's going to pay my life insurance premiums for me, then I'm okay with

00:32:45.720 | that.

00:32:46.720 | But that's the projection that your insurance agent needs to do.

00:32:48.760 | I'm uncomfortable if you get much more than 5%.

00:32:51.080 | I feel like that's too heavy.

00:32:53.000 | I made the mistake when I was a new insurance agent, I made the mistake of selling people

00:32:58.240 | too much whole life insurance.

00:33:00.200 | And it felt good in the short term because I'm like, yeah, this is great, you know, I

00:33:04.440 | set them up with a good well-built policy, etc.

00:33:07.560 | But what I learned was that they would change, right?

00:33:09.520 | They would leave a job, they would just decide I'm going to quit and something would happen.

00:33:13.480 | And then what happened is that then they started canceling the policies.

00:33:16.580 | And when you cancel a policy two years in, three years in, it stinks.

00:33:20.000 | You lose all your money.

00:33:21.000 | It's a terrible thing.

00:33:22.580 | And so I learned, even as an insurance agent who had the bias of getting paid commissions,

00:33:27.560 | I learned that I would rather pull back and sell less, but have it enforced over the long

00:33:32.480 | term.

00:33:33.520 | And that in order to do that, I needed to make sure that my clients always had tons

00:33:36.640 | of flexibility in their cash flow.

00:33:39.480 | Yeah, that makes a lot of sense.

00:33:43.640 | I really appreciate that.

00:33:45.000 | I've heard in the past you talk about having additional premiums.

00:33:51.120 | Or is that, am I too late for that?

00:33:52.560 | Because that would have had to been written into the policy when I purchased it.

00:33:57.220 | Not necessarily too late.

00:33:58.540 | And so it depends on if you're willing to do additional underwriting.

00:34:01.580 | So that would be a good option.

00:34:02.660 | If you've got a little bit of extra cash right now, talk to the insurance agent and tell

00:34:07.620 | the insurance agent, listen, I've got some extra money right now that I could put in,

00:34:12.020 | but I don't want to convert any more insurance.

00:34:14.120 | What I'd like to do is see if I can go ahead and add some additional premiums to any of

00:34:18.340 | my previous policies.

00:34:20.300 | And what the insurance agent can do is they can calculate how much additional premiums

00:34:25.140 | your policies can absorb without turning them into a modified endowment contract, a MEC,

00:34:30.860 | which you don't want to do at this stage of your life.

00:34:33.400 | So they'll calculate how much additional premiums your policies can absorb.

00:34:37.580 | Now anytime you go up with a whole life insurance policy, anytime you go up in amount, face

00:34:43.140 | amount, anytime you go up in premium, the insurance company has the right to request

00:34:47.780 | additional underwriting.

00:34:48.900 | So there's no guarantee that you can add additional premiums to the policies now.

00:34:52.940 | But they may allow it with additional underwriting.

00:34:56.220 | That underwriting can be simple.

00:34:57.420 | It might be as simple as a health questionnaire.

00:34:59.680 | It might be a review of your medical records or it might be a fresh new physical.

00:35:03.700 | But if you feel like, you know what, I'd like to go ahead and increase a little bit, but

00:35:06.900 | I don't want to sign up for new policies, then that would be one good way for you to

00:35:11.220 | go ahead and for you to go ahead and for you to go ahead and add the premiums.

00:35:19.020 | The other option you could take, as long as you're at that eight year time horizon for

00:35:22.620 | your sabbatical, if you want to convert more insurance, then this time instead of converting

00:35:29.260 | a traditional whole life insurance contract, build a contract with an eight year premium

00:35:34.540 | target.

00:35:35.540 | So in US tax rules, you need to pay premiums on a life insurance policy for at least seven

00:35:41.200 | years.

00:35:42.200 | Otherwise, the policy becomes a modified endowment contract.

00:35:46.500 | And the reason you don't want the policy to become a modified endowment contract is that

00:35:50.620 | instead of having tax free access to the cash values in the form of a loan, or instead of

00:35:56.980 | being able to have tax free distributions of premiums first from the contract, what

00:36:04.140 | happens is the money becomes instantly taxable when it comes out as ordinary income.

00:36:09.140 | You lose those benefits if the policy becomes a modified endowment contract.

00:36:13.780 | And a policy becomes a modified endowment contract if it is either paid in fewer than

00:36:19.480 | seven years.

00:36:20.480 | So for example, a single premium whole life policy is automatically a MEC from day one.

00:36:25.460 | So either if it's paid for fewer than seven years or if it breaks the seven pay test,

00:36:30.140 | which is a test that has to do with how much premium versus how much face amount.

00:36:35.820 | But you can design a contract that won't trigger the MEC rules, but that is designed to be

00:36:40.140 | paid up in seven or eight years.

00:36:43.340 | So if you've got a six to eight year time horizon, that could work well.

00:36:46.960 | So what you would do is have the, instead of buying a traditional whole life contract,

00:36:51.480 | you know, a life paid up at 90 or 100 or life paid up at 65, have them design an aggressive

00:36:57.200 | contract with a short term quick pay option with lots and lots of additional premiums

00:37:04.180 | and have them target eight years to have the premium paid up in eight years and have the

00:37:08.140 | policy and have no additional premiums go in after seven years.

00:37:13.160 | And they can design that for you.

00:37:14.680 | And so that way you'll know if you buy that contract and you go ahead and convert, you

00:37:19.020 | know, a $50,000 policy from your term to your whole life, that contract will be scheduled

00:37:24.220 | to be paid up in, again, in seven years.

00:37:29.380 | Now you may be able to quick pay some of your other contracts.

00:37:32.940 | So again, if the insurance company will allow you to do it based upon underwriting, and

00:37:37.140 | each contract is different, it has to do with what they'll allow, but the insurance company

00:37:41.540 | may allow you to go ahead and start quick paying and putting additional premiums into

00:37:44.660 | your other contracts, which would accomplish the same thing.

00:37:47.740 | You should do that first before you buy a new policy.

00:37:52.460 | Your most efficient contracts to work with are always your older contracts.

00:37:56.260 | So if the older contracts will allow additional premiums into them and you want to quick pay

00:38:00.980 | them, then you should do that before you buy a new policy.

00:38:06.620 | Do you understand that, that the older contracts are more efficient because you bought them

00:38:09.260 | when you were younger, they have fewer commissions, et cetera, associated with them?

00:38:13.540 | Okay.

00:38:14.900 | Now the only reason why you would change that would be what would you project your cash

00:38:18.800 | flow to be after you are, after your sabbatical?

00:38:23.620 | So if I were your insurance agent and you're sitting here and let's say you come in and

00:38:27.500 | say, "I just heard this guy on a podcast that told me I could put additional premiums on

00:38:31.100 | all my contracts and quick pay them all in seven years," I would say, "Yes, maybe," right,

00:38:35.500 | depending on the specific language of the contract, if the insurance company will let

00:38:39.060 | you do that subject to additional underwriting, but then what are you going to do nine years

00:38:42.380 | from now after your sabbatical?

00:38:44.260 | Do you not want to be able to put more insurance into the contract?

00:38:46.980 | Sorry, put more money into the contract at that point in time?

00:38:50.100 | If you didn't want to do that, then quick paying them in seven years would be fine,

00:38:54.060 | but that's the reason why that not every contract is a seven-pay contract because you want to

00:39:01.620 | be able to get more money into it.

00:39:03.180 | So if you put all the money in front loaded over the life of the contract, you'll be able

00:39:06.740 | to get less money in over the life of the contract.

00:39:10.060 | And then you don't want to necessarily be buying more insurance when you're 43 years

00:39:13.460 | old and buying new contracts then and starting the process all over would have been better

00:39:17.940 | for you to get those, keep those policies that you bought at 33, but where you plan

00:39:21.980 | to pay them longer.

00:39:22.980 | I know this is confusing when it's over audio, but there's a balance because when you design

00:39:27.820 | a whole life contract, you have the death benefit and the cash value.

00:39:32.580 | And so there's a ratio between these.

00:39:35.380 | Sometimes as an insurance agent, you design a contract that has a minimal premium for

00:39:41.820 | the maximum death benefit because the client says, "I need a lot of death benefit."

00:39:47.300 | The obvious example there is when you're doing estate planning.

00:39:49.540 | You need a policy that's enforced forever, so it's got to be a whole life policy.

00:39:53.140 | Term doesn't work in that situation.

00:39:54.420 | We're not talking about protecting my children while I got young children.

00:39:57.360 | That's what term insurance is for.

00:39:58.780 | We're talking about I want a policy that's enforced for the duration of my life and I

00:40:02.620 | want a lot of death benefit.

00:40:03.820 | Well, you can design a very lean policy that has low premiums, but that will keep the death

00:40:10.440 | benefit enforced.

00:40:11.780 | But the cash value in it is very modest.

00:40:14.460 | If you were doing a rate of return analysis, it would be a very, very low rate of return.

00:40:19.120 | On the other hand, you can have a policy that's designed for minimal death benefit and maximum

00:40:24.260 | cash value.

00:40:25.260 | Why do you want to do that?

00:40:26.260 | Well, because the death benefit costs money, whereas the cash value doesn't really cost

00:40:31.020 | money.

00:40:32.020 | You've got to follow the rules and have an adequate death benefit, but you can cut the

00:40:36.540 | death benefit down.

00:40:37.700 | You can ramp up the premium as maximum possible, and those policies will perform at the highest

00:40:43.300 | possible margin.

00:40:44.980 | So a quick pay, a seven-pay life insurance policy where you design it with seven years

00:40:49.980 | of premiums and then no premiums for then on, will have your highest – with lots of

00:40:54.300 | additional premiums inside the policy – will have your highest cash value rate of return

00:40:58.060 | of cash on cash.

00:40:59.480 | So if somebody wants a very rich policy and they say, "Eh, the death benefit, yeah,

00:41:02.660 | I mean it's nice to have, but my primary goal is cash accumulation," then you shorten

00:41:06.900 | up the policy.

00:41:08.480 | But then that creates the problem of you're limited as to how much cash you can get into

00:41:13.100 | it.

00:41:14.100 | So that's where you often stretch it out and you say, "Okay, well, if you're going

00:41:18.500 | to put $10,000 a year in and you only do this for seven years, you can only get $70,000

00:41:23.860 | of cash into it.

00:41:25.140 | But if you're going to put $10,000 a year in for 25 years, you can get $250,000 of cash

00:41:29.660 | into it."

00:41:30.660 | When you project forward 20, 25, 30 years, there's going to be a huge difference in

00:41:35.380 | the value of those policies based upon the amount of cash that's in them.

00:41:39.500 | But you've got to build them in the early years.

00:41:43.300 | And the earlier you start, it's going to be better for you in the long run if you

00:41:47.500 | buy the policy when you're 30 years old with $10,000 a year into it, planning to go

00:41:51.620 | into it for 35 years because you start the contract at 30 years old under the mortality

00:41:57.080 | table of a 30-year-old who's very unlikely to die rather than doing a seven-pay at 30

00:42:03.140 | and then doing another seven-pay at 37 and then doing another seven-pay at 43 because

00:42:08.100 | those mortality tables make a big difference in the overall cash value of the contract.

00:42:13.580 | So that's why every insurance agent doesn't recommend a seven-pay life from the beginning.

00:42:17.860 | Man, we got deep into the weeds here.

00:42:20.060 | The point for your situation is those are your options.

00:42:23.020 | If you feel like, "I've got excess money that I don't have other profitable investments

00:42:27.580 | for.

00:42:28.580 | I don't want to put more money in my TSP.

00:42:29.860 | I don't want to put more money into real estate.

00:42:31.940 | I don't want to put more money into something else," which I want to be clear, at 7% of

00:42:36.460 | your income, I feel like that's enough in life insurance.

00:42:39.300 | That's enough.

00:42:40.300 | It doesn't need to be more.

00:42:41.300 | Okay.

00:42:42.300 | When your income goes up, I don't think you need much more life insurance.

00:42:44.740 | So my first goal, my first recommendation is focus on more aggressive investments, investments

00:42:50.100 | with a higher rate of return.

00:42:52.180 | Can you get rich with life insurance?

00:42:54.700 | Maybe but it's going to take a really long time.

00:42:57.080 | You can get a lot richer a lot quicker by investing the money in much higher returning

00:43:01.300 | activities.

00:43:02.540 | So I don't think you need more life insurance.

00:43:04.780 | If at 7% of your income, unless there's some other factor, I'm unconvinced you need more.

00:43:12.180 | Number two, second option, if you have excess cash flow that you'd like to put into life

00:43:16.700 | insurance policies, investigate the option of adding additional premiums onto some of

00:43:23.300 | the policies that you have now.

00:43:24.840 | If the insurance company will allow that, subject to almost assuredly additional underwriting.

00:43:29.860 | If you can qualify based upon the additional underwriting, fine.

00:43:32.740 | And there's no reason not to try that if they'll allow you to.

00:43:35.340 | They can't, based upon additional underwriting, they can't cancel what you've got.

00:43:38.860 | They'll just allow you to do that.

00:43:39.980 | Now the insurance agent won't make as much as he will on a new commission for a new policy.

00:43:44.500 | So the insurance agent might not be really anxious to do that, but that if the company

00:43:49.260 | will allow it, that's your most efficient way to increase your coverage.

00:43:53.500 | Number three, on the sabbatical, model the income that you expect during the sabbatical,

00:43:58.940 | the amount of savings that you expect to have to cover your living expenses on the sabbatical,

00:44:03.660 | and consider if there's a cash flowing asset that will simply pay for your policies.

00:44:11.380 | Ask the insurance agent to model for you what the totality of your life insurance portfolio

00:44:16.540 | would look like six years from now, seven years from now, if you then put all the dividends

00:44:21.380 | to reducing the premium, and how much your net premium requirement would be.

00:44:26.860 | And it would probably drop your premiums from $8,000 to maybe $4,000 or $3,500 in the year.

00:44:32.620 | That solves your cash flow problem.

00:44:34.580 | Number four, if you do decide to buy more life insurance and you're going to do the

00:44:37.700 | sabbatical, consider adding a quick pay policy to your portfolio and keeping the rest of

00:44:43.740 | them at the standard table.

00:44:46.500 | So add a seven-pay or an eight-pay life policy to your portfolio, and that's a policy that

00:44:51.220 | you can just have now, that you can pay extra into for the next seven or eight years.

00:44:55.900 | And then the rest of the policies will just continue over the long term.

00:45:01.340 | But you don't want to sign up to where you've got always increasing premiums.

00:45:04.340 | You want your life insurance premiums to slope off as your income goes down.

00:45:09.340 | That's why the classic 65 life is such a great policy.

00:45:14.740 | The classic 65 life policy is a great balance between these things, where it's front-loaded,

00:45:21.220 | but it's also lined – meaning that it produces more cash value internally than a

00:45:26.380 | 90 life or an ordinary life paid up at 120 under the current mortality tables.

00:45:31.140 | The 65 life is an aggressive policy, but the premiums are scheduled to stop at 65.

00:45:36.300 | So it works really well where when you go into retirement, it eliminates the need to

00:45:40.740 | budget for life insurance.

00:45:42.140 | I like that idea a whole lot more than I like the idea of you having to budget for life

00:45:46.740 | insurance off of a volatile equity portfolio, for example.

00:45:53.740 | This has absolutely been great.

00:45:54.740 | I definitely will have to probably re-listen a few times to fully digest, but I feel confident

00:45:59.700 | now going into this review.

00:46:03.100 | And thanks for that advice.

00:46:05.420 | I was thinking that I was getting a little too heavy, and you absolutely confirmed that

00:46:09.180 | with a lot more knowledge than I had going into this.

00:46:13.140 | You're balancing two things.

00:46:15.740 | If you put all your money into some aggressive investment, what's the benefit of that?

00:46:21.700 | Well, the benefit of that is that you might make a million, right?

00:46:26.060 | You put all your money to some super aggressive business venture or some super aggressive

00:46:30.220 | speculative investment opportunity, you might come out like a king.

00:46:35.460 | Fortunes are minted very quickly doing that.

00:46:38.820 | On the other hand, you might lose it all, and fortunes are lost very quickly doing that.

00:46:43.940 | And so if we're talking about an aggressive investment opportunity, we want to balance

00:46:49.660 | it.

00:46:50.660 | We want to say it's useful, but we've got to be careful.

00:46:54.660 | Now on the flip side, the exact same analysis applies for a very conservative investment

00:47:00.220 | or savings vehicle like a life insurance policy.

00:47:03.400 | On the one hand, if everything is super conservative, it could work out, and that's what life insurance

00:47:08.660 | does well.

00:47:10.140 | It's guaranteed to go up, and that is awesome in times of great volatility.

00:47:14.160 | But the problem is it's never going to go up very much, and so you're never going to

00:47:18.100 | get rich quick.

00:47:19.520 | And so I'm nervous about somebody taking 100% of their wealth and putting it all into an

00:47:24.420 | aggressive investment.

00:47:25.420 | I think that's foolish.

00:47:26.920 | But I still say have the aggressive investment, and by the same method of analysis, I'm nervous

00:47:32.000 | about somebody getting too heavy into a conservative investment.

00:47:35.220 | Somebody who doesn't have any conservative stable income, I think that's a mistake.

00:47:40.060 | But – sorry, stable investments.

00:47:41.140 | I think that's a mistake.

00:47:43.300 | I think there are a lot of people right now sweating bullets who all their money is in

00:47:48.420 | an S&P 500 index fund, and they've got three months of living expenses.

00:47:52.220 | All of a sudden when there's a global pandemic on hand, and you're looking at three months

00:47:58.020 | and saying, "If I lose my job today, how on earth am I going to get employed again

00:48:01.180 | in three months, I'm going to be doing door dash deliveries trying to make my bills,"

00:48:05.540 | now all of a sudden it seems foolish when you have such massive market volatility to

00:48:09.260 | have all the money in the market and have a three-month emergency fund.

00:48:12.720 | And so that's always where my opinion on life insurance has come in really nicely,

00:48:17.220 | that if you've got a couple hundred thousand dollars sitting in a life insurance policy,

00:48:20.540 | you have a huge amount of cash which buys you the ability to keep investing aggressively,

00:48:26.180 | to keep going for those home run opportunities, but to do it with a vehicle that's far superior

00:48:32.300 | to keeping a couple hundred thousand dollars in a savings account in your local bank.

00:48:36.620 | And so after years of doing it, that's where I've come to with life insurance.

00:48:41.820 | I gave you a lot of lingo.

00:48:43.420 | I talked about quick pay.

00:48:44.420 | I talked about additional premiums.

00:48:46.540 | The insurance agent will know all those terms.

00:48:48.540 | That's just a bunch of insurance lingo that usually agents don't use with customers

00:48:54.020 | because it makes their eyes glaze over, but the insurance agent will know those terms.

00:48:59.620 | And so if you'll give them those instructions and have them model those things for you,

00:49:02.860 | you'll be able to get the right answer.

00:49:04.140 | Mike: Awesome.

00:49:05.140 | Thanks, Josh.

00:49:06.140 | I appreciate it.

00:49:07.140 | Josh: Thanks, Al.

00:49:08.140 | All right.

00:49:09.140 | Our other caller dropped off, so we'll pivot back to Mark.

00:49:11.420 | Mark, go ahead with your next question.

00:49:12.740 | You probably got 22 of them, but go ahead with your next one.

00:49:15.780 | Mark: Well, I keep a list, so I'll try not to overwhelm you.

00:49:21.300 | Josh: I like it.

00:49:22.300 | All right.

00:49:23.300 | The question I have next is, I heard you mention in some call-in show about affirmations, and

00:49:29.980 | you spoke of it in the context of what you do to encourage yourself when you're down

00:49:34.060 | and things like that.

00:49:35.060 | And I just wanted to hear you talk a little bit more about those because I've heard

00:49:39.900 | self-help gurus speak of it, self-hypnosis, affirmations, things like that, and it just

00:49:45.180 | seemed like a lot of psycho mumbo jumbo to me.

00:49:49.300 | You're intelligent, and you're doing some kind of affirmation.

00:49:53.620 | And so I was just wondering if you could share a little bit more why, what influence you've

00:49:57.540 | seen in your life, how you've done it, what purpose they're serving, and how do you

00:50:03.660 | deal with the already-not-yet aspect of your character that this is who you want to be,

00:50:09.980 | and yet it is also often not who you actually are.

00:50:13.980 | It's hard to imagine anybody who's consumed anything out there with regard to self-help

00:50:28.340 | or anything who hasn't come across affirmations.

00:50:31.460 | Usually, I've never seen the movie The Secret.

00:50:35.620 | It made the big notes, but from what I heard about it, I assumed, I may have assumed wrongly,

00:50:42.020 | but I assumed like, "This is not for me.

00:50:43.780 | I have no interest in the silliness of just sit and visualize checks flowing into your

00:50:50.980 | mailbox," which is how it was caricatured.

00:50:53.700 | Sit and visualize checks flowing into your mailbox, and then it'll just happen.

00:51:01.540 | I think that's silly.

00:51:03.620 | Now, again, I never saw it, so I've never said a negative thing about The Secret because

00:51:09.500 | I've never seen it, and I don't say negative things about things I haven't seen other than,

00:51:12.380 | I guess, maybe I just did.

00:51:14.900 | But I'm unattracted to most of that stuff.

00:51:18.540 | I find it very non-attractive because it's just psychological mumbo-jumbo, and a lot

00:51:25.640 | of it doesn't work.

00:51:27.340 | On the other hand, if we take a more nuanced view of things, can we say that affirmations

00:51:46.180 | don't work?

00:51:47.180 | Well, I think that the way we speak to ourself is really, really important.

00:51:50.700 | For example, I like to use this with my children.

00:51:53.420 | If I come across my children and if I hear my child saying, "I'm so stupid," I immediately

00:52:00.500 | correct them.

00:52:01.500 | I say, "Don't ever call yourself stupid.

00:52:02.500 | You're not stupid," or, "I'm worthless."

00:52:04.300 | I stop them.

00:52:05.300 | I say, "Don't ever say things about yourself that aren't true."

00:52:07.700 | Now, I want to always be honest, so if there's an honest outward expression of, "This is

00:52:14.220 | the way that I actually am," then fine.

00:52:18.380 | But I'm not going to allow one of my children to say that they're stupid because they're

00:52:21.220 | not stupid.

00:52:22.580 | They may have made a foolish mistake.

00:52:24.920 | They may have failed.

00:52:26.380 | They may have gotten something wrong.

00:52:27.940 | They may have been careless.

00:52:29.220 | Those are all fine.

00:52:30.620 | I want to affirm the truth, but the truth is that we're not stupid.

00:52:34.780 | It's like one of the things that my wife is super hardcore about, and I am too, but she's

00:52:38.620 | hardcore about it.

00:52:39.620 | She never calls the dogs bad dogs.

00:52:43.080 | We never say to the dogs, "You're a bad dog," because they're not bad dogs.

00:52:46.500 | They're good dogs, but they're dogs.

00:52:49.900 | They make a mistake.

00:52:51.060 | This behavior is unacceptable.

00:52:52.620 | This digging or this boisterousness of something is unacceptable, but I'm not going to do that,

00:52:56.860 | and I'm not going to say things about myself that tear myself down because the reality

00:53:01.060 | is that I am a child of the King.

00:53:03.020 | That's where I start my affirmations.

00:53:04.660 | I am a child of the King, right?

00:53:07.580 | And so for me as a Christian, when I believe that I am a child of God Most High, the God

00:53:13.580 | who spoke heaven and earth into existence, and that God loves me, and that God died for

00:53:19.220 | me, and that God forgives me, and that God doesn't hold my past against me, then how

00:53:23.180 | on earth can I slap Him in the face and say, "Well, I'm worthless.

00:53:27.380 | I'm no good.

00:53:28.380 | I'm worth nothing."

00:53:29.380 | Nonsense.

00:53:30.380 | That's an absolute lie.

00:53:31.780 | And so I start every single…every time I do an affirmation, I begin with, "I am a

00:53:38.220 | child of the King," right?

00:53:40.980 | I am a child of the King, of God Most High, and there's a reality that flows from that

00:53:46.820 | that flows into everything else.

00:53:48.420 | Now, I want to always be honest, and so here's where I think we draw the line.

00:53:53.700 | What can we say honestly about ourselves?

00:53:56.540 | Well, if I'm not achieving something, then I'm going to honestly acknowledge I'm not

00:54:03.900 | achieving this because I'm doing something this way, but I'm not going to say to my

00:54:09.780 | brain something that is not true.

00:54:11.620 | For example, I am not stupid, okay?

00:54:15.380 | We use these crass, disgusting, like harsh words.

00:54:19.100 | I am not stupid.

00:54:21.060 | I may behave foolishly, and I will always acknowledge I made a foolish mistake.

00:54:26.340 | I may behave insensitively, right?

00:54:29.420 | I may acknowledge I was insensitive.

00:54:31.940 | I spoke harshly to you.

00:54:33.380 | Will you please forgive me?

00:54:34.740 | I may make a mistake.

00:54:35.940 | I may be ignorant.

00:54:37.820 | I may not be knowledgeable in a certain area, but I am not stupid, and I will never say

00:54:42.860 | that I'm stupid, and I will never allow anybody else to say that I'm stupid because I'm not

00:54:47.740 | stupid.

00:54:48.740 | And in every aspect of life, to me, that's the proper thing.

00:54:52.260 | Let's say that I'm broke, okay?

00:54:55.220 | I think it's fine to acknowledge I'm broke, right?

00:54:58.020 | I'm broke.

00:54:59.020 | Don't—and that's where—why lie to yourself?

00:55:01.380 | Don't say I'm rich.

00:55:02.980 | Say I'm broke, but acknowledge that I don't have to be this way and focus on it.

00:55:08.580 | Now, to your brain, I think there's very good evidence to believe that what you feed your

00:55:14.460 | brain makes all the difference in the world.

00:55:17.220 | So I feed my brain the fact that I am a child of the king, a child of God Most High.

00:55:22.860 | That transforms my psychology.

00:55:24.740 | It's one of the most empowering things in the world.

00:55:26.420 | You know, it's funny.

00:55:27.820 | I obviously—I think a lot about Christian theology.

00:55:31.140 | I think a lot about theology of other religions.

00:55:33.700 | I think a lot about the current debates with secularism in the United States that are very,

00:55:38.540 | very strong.

00:55:39.540 | And I often think—I've had this thought.

00:55:41.980 | I've never formalized it in an essay, but I've often had this thought that one of the

00:55:45.980 | healthiest things about believing in the existence of God, especially the Christian God, is that

00:55:52.180 | you create this guaranteed-for-success mindset.

00:55:56.380 | So I believe that God is conspiring and supernaturally ordering all of the circumstances of the universe

00:56:04.060 | for my own good.

00:56:06.500 | That's my belief.

00:56:07.500 | That's my hardcore conviction.

00:56:09.060 | I believe that the God of the universe who controls the affairs of the world is conspiring

00:56:14.020 | for me, is conspiring to divinely arrange every circumstance in my life for my own good.

00:56:22.580 | And so when something comes in that I look and I see that this is a blessing, it seems

00:56:27.000 | like a stroke of luck, right?

00:56:29.140 | I'm talking—I'm trying to conjure in your mind the positive things, the ideas that there's

00:56:35.540 | a—you know, something happens to you, right?

00:56:37.780 | You get a lot of money or you get somebody—you win, price is right, or something like that.

00:56:42.860 | Then I believe that God is divinely ordering that for my good.

00:56:46.260 | And then when I face a challenge, when I face a circumstance that doesn't seem pleasant

00:56:50.700 | from the outside, I believe that God is divinely ordering that for my good, because I don't

00:56:55.100 | believe that only the things that feel like blessings are actually blessings.

00:56:58.380 | I believe that the hard times are blessings.

00:57:00.300 | I believe that the difficult circumstances are blessings.

00:57:02.460 | I believe that God disciplines those he loves.

00:57:04.220 | So if I'm under the discipline of God, I know that God loves me.

00:57:07.480 | And what this creates is it creates this fabulously robust psychology where you basically go through

00:57:12.980 | life being convinced that the world is conspiring for your good.

00:57:17.300 | Now if I compare that to the psychology of some of my friends who are—my friends who

00:57:23.580 | don't believe in God, right?

00:57:24.580 | They don't believe that God exists.

00:57:26.620 | They have to contend—and so I begin with God foreknew me.

00:57:31.560 | Before he created the world, God foreknew me.

00:57:33.740 | He knew that he was going to create Joshua sheets with these unique characteristics and

00:57:37.260 | attributes.

00:57:38.260 | And then God foreknew that he was going to divinely order Joshua's life in the perfect

00:57:44.860 | way for Joshua's good, so that Joshua's life on earth could be richly meaningful and

00:57:50.740 | satisfactory and fulfilling, and so that Joshua's eternal life can be filled with joy in the

00:57:56.180 | presence of God.

00:57:57.900 | Now compare that to my friends who, by virtue of their worldview, are forced to believe

00:58:06.380 | that their existence is an accident of time, that their existence is pure happenstance

00:58:13.660 | of biological chemical properties over which they have no control.

00:58:18.180 | And in fact, the very essence of their life, their very ability to make decisions, is actually

00:58:23.400 | something that's out of their control, because they're subject to random mutations of cells,

00:58:31.380 | random chemical processes, and that creates the stuff of life.

00:58:35.020 | Well, you could imagine why it's difficult for people with that worldview to stay away

00:58:40.260 | from abject nihilism, right?

00:58:42.820 | It's hard.

00:58:43.820 | Now there are people who do it, but they usually ignore the natural consequences of their worldview.

00:58:47.820 | And so when I think about affirmations, I want to affirm what is true, and so I have

00:58:52.100 | no problem affirming what is true, that God loves me.

00:58:55.260 | I'm a child of the King.

00:58:56.260 | He divinely foreknew me.

00:58:57.860 | Before he knit me in my mother's womb, he knew who I was going to be.

00:59:02.100 | And every circumstance in my life is providentially provided for my good.

00:59:07.700 | And so if that circumstance is joyful, if that circumstance feels really fun, if I'm

00:59:14.300 | rich, if I'm well-liked, et cetera, praise the Lord.

00:59:19.380 | If that circumstance seems like a trial, if I'm poor, if I'm abused, if I'm discriminated

00:59:26.660 | against, praise the Lord.

00:59:29.140 | This is something that God has provided for me.

00:59:32.020 | So I didn't mean to get so theological, but to me, that's an empowering, a powerful psychology.

00:59:38.420 | And again, I've often thought that—now, I think we should be honest, right?

00:59:43.140 | Honesty is important.

00:59:44.140 | If someone just doesn't believe that God exists, you're not.

00:59:46.140 | If someone's on the fence, I often thought, like, "Dude, you ought to just embrace a

00:59:49.660 | theistic worldview because it'll radically transform your experience of life."

00:59:53.540 | When you believe that the world is conspiring against you for your good and that everything

00:59:58.220 | that comes into your life is providentially arranged for your benefit, it totally transforms

01:00:03.780 | your experience of life.

01:00:04.780 | Now, back to affirmation.

01:00:06.860 | You could take a softer view of affirmations, and you could say that affirmations activate—I

01:00:12.380 | call it the reticular activating system.

01:00:14.220 | I've never looked it up and seen if that's actually true, but all the self-help people

01:00:17.340 | say it.

01:00:18.660 | And so the example that's always used is the red sports car.

01:00:21.620 | You think about buying a red sports car, or your brother buys a red sports car, and all

01:00:25.660 | of a sudden you see red sports cars everywhere.

01:00:28.460 | To me, I think that's absolutely, unequivocally, without question true, that what you focus

01:00:33.880 | on is what you see.

01:00:35.700 | And so think about this, right?

01:00:37.460 | In the current scenario, if you focus on racism and you spend all your days talking about

01:00:45.940 | racism, thinking about racism, reading about racism, worrying about racism, railing against

01:00:52.820 | racism, basically all you see in your life is racism.

01:00:58.140 | Now, on the other hand, if you look around and you say, "I'm going to look for—" and

01:01:05.420 | you focus on non-racism, or anti-racism, or racial reconciliation, and you look around

01:01:11.380 | and all you think about is racial reconciliation and cooperation, and all you talk about is

01:01:16.780 | racial reconciliation and cooperation, and all you read about is racial reconciliation

01:01:21.420 | and cooperation, what happens is basically all you see is racial reconciliation and cooperation.

01:01:26.700 | Now that doesn't require you to ignore what is.

01:01:29.340 | It's fine to acknowledge what racism is.

01:01:32.180 | Okay, this bad exists.

01:01:34.460 | I think it's foolish to be ignorant and say that this bad exists.

01:01:37.740 | But what you focus on is where your attention goes, and where your attention goes is where

01:01:42.340 | you wind up spending most of your time.

01:01:45.060 | And so to the extent that I spend my time focused on opportunity for myself, I see nothing

01:01:50.780 | but opportunity.

01:01:52.140 | To the extent that I focus on the good things happening in the world, right?

01:01:56.000 | In the last decade, millions of people have come out of poverty, and to me, that's exciting.

01:02:01.060 | And so because I spend all my time focusing on that, then I see it.

01:02:04.740 | Now every time I let myself go away from that, if I start thinking about catastrophe, or

01:02:12.460 | economic crisis, or all this stuff, what happens is it just builds, and you see this again

01:02:16.640 | and again.

01:02:17.640 | Somebody starts worrying about, "Well, there's going to be an economic crisis," and then

01:02:20.180 | it just gets a hold of them, and they focus, and they focus, and they focus, and they focus,

01:02:23.260 | and it almost becomes this self-fulfilling prophecy.

01:02:26.100 | So I try to handle it with honesty.

01:02:28.060 | I try to acknowledge economic catastrophe could come.

01:02:31.860 | Racism could happen.

01:02:33.940 | But I'm not going to spend time there.

01:02:35.060 | I'm going to focus on what's good.

01:02:36.060 | And so what affirmations do is they always focus your mind, and they focus your attention.

01:02:44.340 | Now the final thing that's been helpful for me, what I have always sought to do is be

01:02:48.140 | honest in affirmations, and to use things that are areas where I'm convinced they're

01:02:55.460 | skills.

01:02:56.460 | So the person who made this click for me, the motivational person, was Zig Ziglar.

01:03:01.860 | And Zig Ziglar made a statement.

01:03:03.140 | I used to drive to work every day, and I have binders of Zig Ziglar CDs, and I would listen

01:03:07.740 | to Zig.

01:03:08.980 | And I liked his personality.

01:03:10.140 | I liked his kind of charming, down-home, southern accent and everything.

01:03:16.020 | And I would listen to Zig, and Zig made the point, and he talked about almost all of the

01:03:20.540 | attributes that we admire are not things that are put into you, but they are skills.

01:03:28.460 | And when he used that word "skill" and hammered that into my head, it radically transformed

01:03:32.700 | the way that I think about things.

01:03:34.620 | And it's even radically transformed my parenting.

01:03:36.700 | Like with my children, I don't talk about attributes.

01:03:39.860 | I don't talk about things that are there.

01:03:41.940 | I believe there are immutable attributes.

01:03:43.740 | I can't change my height.

01:03:45.420 | I can't change my skin color.

01:03:47.620 | I can't change my eye color or my hair color without the obvious cosmetic solutions.

01:03:53.660 | What I can change, though, are my skills.

01:03:56.540 | And when I realized that the vast majority of the things that matter in life are skills

01:04:02.380 | that can be learned and practiced and developed, it allowed me to make affirmations in a really

01:04:08.580 | positive and without fear of error.

01:04:12.620 | So the self-taught card that I memorized when I was younger was Zig's self-taught card.

01:04:18.940 | And I still have this.

01:04:20.340 | What I have done—I'll share my geeky secrets—what I do is I go to YouTube and I put on movie

01:04:30.980 | soundtracks.

01:04:31.980 | And so they have these movie soundtracks, you know, Pirates of the Caribbean or Lord

01:04:35.660 | of the Rings.

01:04:36.660 | These are these rich, uplifting music.

01:04:38.380 | And I play the music as a music bed.

01:04:40.620 | And then I record my own voice saying my affirmation and I keep that on my phone.

01:04:44.660 | So anytime I want to, I can just hit play and I can hear myself actually doing my affirmations.

01:04:52.580 | And you know, hold on a second, Mark.

01:04:54.340 | I hate this.

01:04:55.340 | It makes me feel weird, but I'll play it.

01:04:57.940 | Just a moment.

01:04:58.940 | Hold on a moment.

01:04:59.940 | Mark, you're not going to be able to hear this because it's not going to come through,

01:05:03.340 | but you'll be able to listen to this later.

01:05:04.340 | But I'll just play this for a minute for the audience.

01:05:06.340 | And this is my morning affirmation.

01:05:10.100 | This is Geeky Joshua.

01:05:11.100 | So a good payoff for those who are an hour and five minutes into a podcast.

01:05:15.780 | Here we go.

01:05:36.300 | I am a child of the king.

01:05:39.620 | I live each and every day in the will of God.

01:05:44.060 | I listen for the voice of the Holy Spirit in every moment of every day.

01:05:49.180 | And I am sensitive to his leading in all things.

01:05:55.300 | I pray without ceasing, asking God to give me the wisdom, discernment, and strength that

01:06:01.000 | I need in every moment.

01:06:04.940 | I can do all things through Christ who gives me strength.

01:06:10.700 | I claim the following attributes because I have the mind of Christ, the power of the

01:06:15.700 | indwelling Holy Spirit, and I am a son of the most high God, maker of heaven and earth.

01:06:22.860 | Although I am weak in some of these qualities, I am specifically commanded to let the weak

01:06:28.060 | say that I am strong.

01:06:30.580 | Thus, I am strong.

01:06:35.460 | By God's grace, I am strong.

01:06:39.660 | Through Christ who gives me strength, I am strong.

01:06:44.020 | By claiming and developing these biblical qualities, I will become the person God created

01:06:48.500 | me to be.

01:06:49.700 | I will glorify God in all things and my life will benefit mankind.

01:06:54.740 | I am an honest, intelligent, organized, responsible, committed, and teachable person who is sober,

01:07:05.420 | loyal, and who clearly understands that regardless of who signs my paycheck, I am self-employed.

01:07:12.860 | I am an optimistic, punctual, enthusiastic, goal-setting, smart-working self-starter who

01:07:20.220 | is a disciplined, focused, dependable, persistent positive thinker.

01:07:26.900 | I have tremendous self-control and I am an energetic and diligent team player.

01:07:33.380 | I'm a hard worker who appreciates the opportunity that my business and the free enterprise system

01:07:38.500 | offer me.

01:07:40.100 | I am thrifty with all of my resources and I apply common sense to my daily tasks.

01:07:46.020 | I take honest pride in my competence, appearance, and manners.

01:07:50.740 | I am motivated to be and do my best so that my healthy self-image will remain on solid

01:07:56.780 | ground.

01:07:58.900 | These are the qualities which enable me to manage myself and give me the stable character

01:08:03.240 | that I need to succeed in all things to which I put my hand.

01:08:08.420 | I am a compassionate, respectful, encourager of others who is a considerate, generous,

01:08:16.100 | gentle, patient, caring, sensitive, personable, attentive, and fun-loving person.

01:08:23.420 | I am supportive of others in their needs and goals.

01:08:26.820 | I am a giving person, quick to forgive all people for all things, clean, kind, unselfish,

01:08:34.500 | affectionate, loving, family-oriented human being, and I am a sincere and open-minded

01:08:41.660 | good listener and good finder.

01:08:48.300 | I am trustworthy.

01:08:50.540 | These are the qualities which enable me to build good relationships with my associates,

01:08:54.420 | neighbors, spouse, and family.

01:08:57.380 | I am a man of integrity with the faith and wisdom to know what I should do and the courage

01:09:02.220 | and convictions to follow through.

01:09:04.460 | I have the vision to manage myself and to lead others.

01:09:08.180 | I am authoritative, confident, and humbly grateful for the opportunity life offers me.

01:09:14.580 | I am fair, flexible, resourceful, creative, knowledgeable, decisive, and an extra miler

01:09:23.060 | with a servant's attitude who communicates well with others.

01:09:26.660 | I am a consistent, pragmatic teacher with character, and I have a finely tuned sense

01:09:32.180 | of humor.

01:09:33.660 | I am an honorable man and am balanced in my personal, family, and business life.

01:09:39.940 | I have a passion for being, doing, and learning more today so I can be, do, and have more

01:09:45.940 | tomorrow.

01:09:47.260 | These are the qualities of the winner I was born to be, and today I will develop these

01:09:51.140 | qualities to achieve my worthy objectives.

01:09:54.380 | Today is a brand new day, and it's mine to use in a marvelously productive way.

01:10:01.340 | Thank you, Lord, for allowing me to be awake and alive today.

01:10:05.420 | May I know your strength, power, and wisdom in every moment of this day.

01:10:12.220 | So, it's probably a little embarrassing to acknowledge that stuff, but for me, the nice

01:10:24.700 | thing is it's a five-minute audio file that I can just simply play easily for myself.

01:10:30.140 | It sits on my phone.

01:10:31.740 | It's a five-minute audio file, and the nice thing about it at five minutes is that five

01:10:35.940 | minutes is exactly the amount of time that I need to do a French press, to wait for my

01:10:40.300 | French press coffee to go down in the morning.

01:10:42.900 | And so, when you begin a day with that, and everything that I said in that, and I've never

01:10:47.540 | planned for that to be played, but everything that I said in that is absolutely unequivocally

01:10:52.580 | true.

01:10:53.780 | I'm an optimistic person, and so whenever I hear and say that every day, "I'm optimistic,"

01:10:57.900 | then it reminds me, "I'm optimistic."

01:11:00.260 | And what happens is when you declare things that are true, you notice the ways that you're

01:11:05.980 | slipping.

01:11:06.980 | You notice where things are starting to go, but all of those things are skills.

01:11:12.020 | All of those things are things that can be developed, and so that was the thing that

01:11:15.060 | brought me the fresh understanding of my willingness to use an affirmation.

01:11:20.260 | Now, there are other things as well.

01:11:22.380 | I do this weird, again, I'm not going to play this one, but I do this weird thing as well

01:11:25.740 | where I put the movie soundtrack on, and I often record my goals, and I have my list

01:11:30.680 | of goals, and I can do that, because a lot of times, I don't feel like sitting and standing

01:11:34.780 | in front of the mirror and staring at myself.

01:11:36.220 | I don't like to make my goals obvious, but I like to listen to them, and so it makes

01:11:39.860 | me happy to listen to my goals, and I got a good soundtrack underneath, and I record

01:11:44.540 | myself, and I listen to myself sketching those out, because as those pictures in my head

01:11:48.620 | affirm, then what happens is they become clearer.

01:11:52.740 | And to the extent that those character qualities, those affirmations, if I say that I am confident,

01:12:00.300 | if I say again and again, "I am authoritative, confident, and humbly grateful for the opportunity

01:12:05.060 | life offers me," then it allows me to recognize, "You know what?

01:12:08.100 | I'm not behaving confidently at the moment.

01:12:11.220 | I'm not doing this right now."

01:12:14.980 | And almost every day, when you listen to that list of attributes and that list of characteristics,

01:12:19.500 | you think about one thing that you can change, and then that progress just creates a self-fulfilling

01:12:24.340 | prophecy where you change one thing day after day after day, and then you become more and

01:12:28.320 | more and you embody these character qualities.

01:12:31.060 | So I think that's why affirmations matter, is you have to model for yourself.

01:12:35.180 | You have to clearly sketch out exactly what you're going for, exactly what you're building,

01:12:40.780 | exactly the kind of person that you want to be, and then hold that clearly in your head.

01:12:45.620 | And the way that your brain gets input is through your eyes, through your ears, and

01:12:49.900 | through your other senses.

01:12:52.100 | And so, you know, people who put things on their wall, I used to do that.

01:12:55.740 | I used to, you know, create a vision board, but at this point I've found that most of

01:12:59.220 | those things, they're not particularly visualizable, although I still do have that.

01:13:04.260 | I keep them on my iPad.

01:13:06.900 | And so you can be simple as you create an album on your phone that has pictures of things

01:13:10.620 | that inspire you, but most of the things that inspire me are non-physical, they're non-tangible.

01:13:14.980 | And so I find the audio description of them really powerful.

01:13:19.460 | So that's my lengthy answer to your question about affirmations, is that I only affirm

01:13:24.380 | things that are true, because I'm not—one of my most important affirmations is that

01:13:30.620 | I'm honest, right?

01:13:31.940 | I am an honest man, and honesty starts with myself, and so I've never been able to lie

01:13:37.300 | to—I've never been willing to lie to myself and then claim honesty to other people.

01:13:41.860 | And so—but all of those things that I said in that, they're true.

01:13:47.100 | They are absolutely true.

01:13:48.100 | Now, they might be true in small quantities, which is totally fine, right?

01:13:53.540 | I'm happy to acknowledge that these are things that I have in modest qualities, but I'm getting

01:13:59.380 | better, right?

01:14:00.380 | Today's a good day.

01:14:01.380 | I have this, and I'm getting better.

01:14:02.380 | And that's what I teach my children, is that life is a function of skills.

01:14:07.660 | And so you have this.

01:14:09.220 | I never use "you are" language unless it's something that you actually are.

01:14:13.740 | So I'm happy to say to my children, "You are a child of the king."

01:14:17.900 | But I'm not willing to say to my child, "You are lazy."

01:14:21.260 | I'll say, "You're behaving in a lazy way.

01:14:25.180 | You're practicing laziness.

01:14:27.180 | You need to change your behavior," because those things are behavior.

01:14:29.580 | You're not lazy.

01:14:30.580 | "You are diligent, and you're proving that to yourself by behaving diligently."

01:14:34.780 | So hopefully that's a balance of between kind of the mystical world.

01:14:41.100 | Some people like it.

01:14:42.100 | I just feel like there's so many lies in that world that it causes—it can be a real danger.

01:14:47.100 | Everybody is so focused on only saying things that are positive, only being optimistic.

01:14:53.260 | There are times in life when you need to run, run away, and you don't just sit there and

01:14:57.140 | if somebody's coming and attacking you, don't just close your eyes and say, "I live a peaceful

01:15:02.900 | life."

01:15:03.900 | No, you turn around and run away, or you go and fight.

01:15:05.740 | And so a lot of the namby-pamby world of self-development, I feel like it's just simply not honest.

01:15:10.700 | But there's also a point in which you find freedom when you're honest, but you find freedom

01:15:16.340 | when you continually focus on the things that are positive.

01:15:19.060 | So Mark, I know you couldn't hear the five-minute audio file that I played.

01:15:22.860 | You can come back and listen to it later, but did that get close to some of your concerns

01:15:25.940 | and give you some thoughts from my perspective?

01:15:30.420 | That was awesome.

01:15:31.420 | That was exactly what I was looking for.

01:15:32.940 | Thank you for sharing that and for the vulnerability of—or maybe not—but the vulnerability of

01:15:37.860 | sharing your affirmations.

01:15:38.860 | I look forward to listening to that.

01:15:40.460 | Cool.

01:15:41.460 | All right, man, I got one more caller who popped on after the other one left.

01:15:44.340 | So I'll call back in next week with your other questions, and I thank you for the questions.

01:15:47.540 | We'll finish up in the great state of Indiana.

01:15:49.260 | Welcome to the show.

01:15:50.260 | How can I serve you today?

01:15:51.260 | Hey, Joshua.

01:15:52.260 | This is Andy.

01:15:53.260 | This fits in with the theme you've had so far, but a question about sort of in this

01:16:01.620 | particular time, developing the home strategy that you've talked about for troubled times

01:16:10.140 | versus a place to go.

01:16:14.020 | I have a piece of property.

01:16:17.100 | We have some acreage, but we're fairly new to it, and it's not super self-sufficient

01:16:22.700 | yet.

01:16:23.700 | I'd like for it to be someday, and I'm just sort of wondering how you would go about

01:16:30.220 | thinking of continuing to develop that right now today with the money that I have and more

01:16:36.140 | in the near future versus something more along the lines of taking a vacation somewhere we

01:16:44.820 | want to move potentially if we needed to leave the area that we're in and just sort of not

01:16:53.020 | necessarily setting down roots there, but getting that idea of could we live here, do

01:16:56.940 | we like it, is it as safe as it looks online, that sort of thing versus putting in solar

01:17:02.900 | panels or buying animals or whatever to make our current place more sustainable?

01:17:08.180 | I need to do an update show with kind of what I see happening with the current pandemic,

01:17:14.580 | the current coronavirus pandemic, but I do not see at the moment, I do not see any kind

01:17:22.060 | of precipitous event in the United States.

01:17:28.980 | I have been – so first, one of the surprising things that I have learned from this current

01:17:35.820 | pandemic is how excruciatingly slow it is, and I had thought that intellectually.

01:17:42.820 | If you go back and listen to the shows I did on the pandemic at the end of January, I said

01:17:46.340 | that one of the reasons a pandemic is really bad is because it's really, really slow

01:17:50.140 | to come on, and it's really slow to hang around, and it's really slow to go away,

01:17:54.940 | and the slowness is frustrating and furious because you never know if you're making the

01:17:58.140 | right decision.

01:17:59.520 | If your house is on fire, literally, then you know I've got to move now, and you immediately

01:18:04.700 | spring into action and you respond.

01:18:06.960 | If there's an earthquake, then you know that, yes, I should go and use my stores of

01:18:11.300 | water, right, because there's been an earthquake, but a pandemic is not like that.

01:18:16.100 | It's so slow.

01:18:17.100 | You never know, am I preparing appropriately?

01:18:20.020 | Am I overpreparing?

01:18:21.020 | Am I underpreparing, et cetera?

01:18:23.140 | It's just maddening, and even through this current scenario, we're living in a disaster,

01:18:29.340 | but on the whole, it's not the end of the world as we know it.

01:18:33.140 | The internet still works.

01:18:34.140 | The power still works.

01:18:35.140 | There's still been food on the shelves.

01:18:36.740 | There were some real concerns about food shortages some months ago.

01:18:40.660 | I was concerned about those things, but thankfully, most of them, although there were shortages

01:18:45.540 | in the United States, and there are shortages around the world right now, most of those

01:18:49.460 | shortages were not as severe as feared, and so that's great.

01:18:54.060 | Now, on the other hand, we're stuck in this maddening middle of the ground world, so right

01:18:58.100 | now nonpayment of rent, massive increase.

01:19:04.980 | They're going to start to be – we're starting to head into foreclosure season.

01:19:07.260 | We're coming up on the end of the excess unemployment compensation that the US government

01:19:10.820 | authorized.

01:19:12.580 | The pandemic is just really in many countries of the world kicking off, and where it's

01:19:17.740 | got an exponential curve in many places, and it's growing and growing and growing.

01:19:21.860 | You still see borders closed.

01:19:23.260 | You still see – the risk has not gone away.

01:19:26.580 | Meanwhile, in the United States, what is really frustrating is it's not been an isolated

01:19:32.340 | medical problem.

01:19:34.060 | In some places, it is more treated and has been more treated as an isolated medical debate,

01:19:40.740 | but in the United States, all of the political strife and all of the tension in the society

01:19:46.300 | has exacerbated the decision about – the arguments about the medical stuff, and so

01:19:51.700 | it's almost impossible right now to separate most people's opinions about the medical

01:19:55.860 | stuff from their political views, and that's really frustrating because it makes it for

01:20:01.020 | kind of a more volatile situation.

01:20:05.020 | But that said, I don't see why the pandemic should cause a precipitous, immediate calamity.

01:20:14.540 | I think that the economic effects have been less severe than I worried about, and I think

01:20:20.500 | that we should be grateful that they're less severe due to our ability to be connected

01:20:25.860 | by knowledge work done through the Internet.

01:20:28.660 | If we were to go back to the early 20th century and we were to relive this pandemic in that

01:20:32.620 | situation, just imagine how devastating it would be when you can only work face-to-face

01:20:37.700 | with people, and yet businesses are shut down and people are not able to – no one's

01:20:42.660 | able to interact.

01:20:43.820 | But in today's world, the majority of the most productive people, the highest earning

01:20:48.140 | people, the most productive people who keep most companies going, most of that is knowledge

01:20:51.220 | work, and they've been able to keep going because they're just entering into a new

01:20:55.500 | situation of working from home, doing knowledge work.

01:20:59.120 | So I don't see a precipitous, calamitous scenario in the current environment.

01:21:04.540 | I think that even – like, what's concerning?

01:21:07.660 | Well, I think the election is going to be really concerning in November, because no

01:21:12.300 | matter who wins, I think that there's going to be a whole lot of people who are angry

01:21:16.860 | and frustrated about that.

01:21:18.500 | It's hard for me to see a scenario in which we don't come out the other side with a

01:21:23.180 | whole bunch of people angry and ready to be the resistance, no matter the outcome.

01:21:28.340 | But at the end of the day, that's fairly isolated, even though, yes, there are riots

01:21:33.940 | in lots of cities.

01:21:34.940 | That's a big city problem.

01:21:35.940 | So if you're living in downtown New York, I would be saying, "Don't put a solar

01:21:40.700 | panel on your roof.

01:21:41.940 | Go and get your extended – your property out in the country."

01:21:47.020 | If you're living in downtown Chicago, no, you need a place to go, and so that should

01:21:50.820 | go up.

01:21:51.820 | But for you, living on some acreage in Indiana, I don't see any reason why that wouldn't

01:21:56.620 | be a perfectly viable place to be.

01:21:59.820 | And so I would just do more of the same, and I would focus on more on the long, slow decline,

01:22:07.040 | and how do I do well in the midst of it, building local community, et cetera, rather than worrying

01:22:12.340 | about running to the other side of the country.

01:22:14.980 | One of the things that has been remarkable is how travel freedom has basically imploded.

01:22:21.980 | As a US passport holder, there's not many places in the world you can go.

01:22:27.460 | And for all of the strengths of my conversation and advice about the value of being able to

01:22:34.900 | translate from one place to another, the pandemic, the global pandemic, certainly shows that

01:22:41.460 | it does not work in the global pandemic, at least not with just one – not with one passport.

01:22:48.000 | When I first released my "How to Survive and Thrive During the Coming Economic Crisis"

01:22:52.380 | course, I focused a lot in that course on how my students could gain multiple passports,

01:22:58.460 | multiple citizenships, how they could establish residency permits in other countries, et cetera.

01:23:02.900 | Then after about six months of even doing all the stuff that I recommended in that course,

01:23:07.980 | I came to the other side and I released an update to my students.

01:23:11.460 | And I said, "One of the things that I've changed my opinion on is that a lot of this

01:23:15.660 | stuff is no longer necessary."

01:23:17.540 | I said, "If you've got a passport from a strong country, a US passport, a Canadian

01:23:21.460 | passport, a British passport, a German passport, whatever, like a good strong passport, not

01:23:25.500 | a Pakistani passport, not a Syrian passport, but a strong passport with significant levels

01:23:30.780 | of travel freedom, my answer was, you probably don't need residence permits.

01:23:34.820 | You probably don't need passports, second passports, et cetera.

01:23:37.900 | Just having one is good to go."

01:23:41.820 | Seeing the pandemic though, I've changed my mind again and I've been willing to raise

01:23:48.940 | the importance of some of those things.

01:23:50.820 | Right now, if a US passport holder had a simple, you know, Dominica passport or a St. Lucia

01:23:59.420 | passport or a Granada passport or a St. Kitts passport, a Caribbean citizenship by investment

01:24:05.140 | passport that they paid $100,000 to $150,000 for depending on the family structure, that

01:24:11.020 | person has untold travel freedom that US passport holders simply don't have on a global basis

01:24:16.900 | right now.

01:24:18.340 | And how long will this continue?

01:24:20.460 | I don't know.

01:24:21.460 | But I'm not – I got off track there, Andy.

01:24:23.580 | I'm not worried about a precipitous thing at the moment.

01:24:25.900 | I think it's always good to be familiar with the precipitous thing, but I'm not freaking

01:24:30.460 | out.

01:24:31.460 | I think that this is much more likely to be a long, hard recession and not as long or

01:24:34.540 | hard as I feared several months ago, but a long, hard recession of more ordinary quality

01:24:40.540 | rather than any kind of Mad Max, end of the world as we know it, shooting our neighbors

01:24:44.660 | in the street kind of scenario.

01:24:46.140 | >>Andrew: Okay, thanks.

01:24:48.060 | So you'd say, I guess I wasn't necessarily speaking about the current pandemic situation

01:24:55.500 | so much as just if I – you wouldn't see a problem with continuing to the next year

01:25:00.940 | or two to pretty well pour all of my excess money into a fixed location and improving

01:25:09.580 | that while having very undeveloped other places to go.

01:25:15.900 | >>Steve: I wouldn't.

01:25:16.900 | Do you have a car or a pickup truck or a trailer?

01:25:20.260 | >>Andrew: Yeah.

01:25:21.260 | >>Steve: So you've got more than a lot of people.

01:25:24.540 | And at the end of the day, maybe you pick up a $1,000 travel trailer somewhere, an old

01:25:28.980 | kind of junky travel trailer that you can have beds in and have your children in.

01:25:35.180 | But I think that having some simple plans like that is sufficient.

01:25:38.380 | If you've got a pickup truck and a couple thousand dollar travel trailer, then you've

01:25:42.900 | got the ability to go somewhere.

01:25:45.220 | And what I've always done is just have camping gear and I could roll up in a national park

01:25:51.340 | two states away and if I've got – you don't have to have the travel trailer, right?

01:25:55.460 | A tent is fine or a van or a trailer.

01:25:59.020 | A cargo trailer with some cots inside can be very, very comfortable.

01:26:03.340 | But if I can roll up on a national park, I can set up a propane stove and I got a couple

01:26:09.180 | bottles of propane.

01:26:10.180 | That doesn't cost much.

01:26:11.540 | I've got cookware.

01:26:12.660 | I've got food including shelf stable and storage food that's easy to toss in the trailer and

01:26:17.420 | take with me.

01:26:18.420 | I've got cots that are comfortable to sleep in so we're not going to be sleeping on the

01:26:21.540 | ground like millions of people around the world are doing right now.

01:26:25.300 | I've got a battery or a generator and some stored fuel.

01:26:29.380 | I've got the ability to have electric lights and that makes all the difference in the world.

01:26:34.940 | If I've got the ability to get some water so that we can keep clean, I can live very

01:26:39.140 | comfortably and I guess to me, yes, that should be done.

01:26:43.420 | But your total cost in that is probably – I mean you probably have all that stuff already.

01:26:47.580 | It's just a matter of thinking through what would I take and where.

01:26:51.660 | And so in the United States, right now I've been continuing to be involved in relief work

01:27:00.740 | in Venezuela and one of the things that's happening right now is that many Venezuelans

01:27:04.900 | left Venezuela.

01:27:07.500 | They went to other places, Colombia to try to find work.

01:27:11.420 | But what's happening is due to the nightmare of coronavirus, the economy in Colombia has

01:27:18.140 | collapsed.

01:27:19.140 | And so now all the refugees are going back the other way.

01:27:22.540 | And there's one church that we support that's involved at the border and they provide food

01:27:27.180 | for refugees and they provide supplement for nursing mothers in a place where they can

01:27:32.940 | breastfeed their babies and clean water sources for the travelers, etc.

01:27:37.380 | In the last three months, they've quadrupled in the number of people that they're serving

01:27:42.800 | in the last three months.

01:27:44.880 | But it's primarily now people going back the other way of people fleeing from Venezuelans,

01:27:50.740 | leaving Colombia, heading back into Venezuela simply because it's bad in both situations,

01:27:56.900 | but they're provided – but at least it's familiar in Venezuela.

01:28:01.300 | And so – but what it is though is those people – and I don't publish this stuff

01:28:05.780 | online, but those people are sleeping on dirt, right?

01:28:09.500 | They have a sheet that they carry and they spread out a sheet on an empty soccer field

01:28:14.460 | that has a dirt floor, not even grass, and they spread out the sheet and that's where

01:28:17.340 | they sleep and they got nothing or one little blanket to put over them.

01:28:20.580 | And so when you come to the context that you live in as an American, to have a little cargo

01:28:26.140 | trailer that you can hook up to your pickup truck and have some cots in that so you can

01:28:29.260 | be out of the rain, have a tent that you can set up to store your stuff in if you're

01:28:33.100 | sleeping in the cargo trailer, have a propane stove that you can cook on, have some food,

01:28:36.900 | have some water, I think that's sufficient.

01:28:38.980 | I think that to go beyond that is not necessary for the vast majority of people.

01:28:45.700 | If you got 10 million bucks, get the missile – build the bunker in the missile silo,

01:28:49.860 | no question.

01:28:50.860 | But for ordinary circumstances, I don't think you need anything more than that.

01:28:54.540 | >>Steve: Great, thank you.

01:28:56.580 | >>Adam: My pleasure.

01:28:58.580 | Thank you all for listening to today's Q&A show.

01:29:00.860 | I appreciate your being here.

01:29:02.260 | If you'd like to join us next week on the Q&A show, as you can see, you can talk to

01:29:05.460 | me about anything.

01:29:07.380 | Sometimes when you get me on a Q&A show, I'm willing to share things honestly.

01:29:11.540 | I never would put out a recording of my morning affirmation thing in a normal show.

01:29:21.420 | I would just never expose myself like that.

01:29:23.220 | It's too humbling to do that.

01:29:25.200 | But a lot of times you catch me in a Q&A show, sometimes you get that out of me.

01:29:28.260 | So I invite you to go to patreon.com/radicalpersonalfinance, sign up for the show on Patreon, patreon.com/radicalpersonalfinance,

01:29:34.700 | and join me on next week's Q&A show.

01:29:36.060 | Have a great week, everybody.

2020-07-20_Friday_QA-Equity_Stripping_a_House_in_Divorce_Buy_Whole_Life_Insurance_in_a_Sabbatical_Affirmations_in_Personal_Development_Etc.