2021-06-18_Friday_QA
00:00:00.000 | It's Friday. Today, live Q&A.
00:00:03.000 | (upbeat music)
00:00:05.580 | Welcome to Radical Personal Finance,
00:00:20.440 | a show dedicated to providing you with the knowledge,
00:00:22.040 | skills, insight, and encouragement you need
00:00:23.920 | to live a rich and meaningful life now,
00:00:25.880 | while building a plan for financial freedom
00:00:27.320 | in 10 years or less.
00:00:28.600 | My name is Joshua Sheets.
00:00:29.600 | I am your host.
00:00:30.440 | Today is Friday, June 18, 2021.
00:00:34.480 | And today on the show, we do live Q&A.
00:00:37.920 | (upbeat music)
00:00:40.500 | These Friday call-in shows work just like
00:00:53.440 | any other call-in talk radio show
00:00:55.240 | that you have ever listened to,
00:00:56.680 | just a little bit less scratchiness in the background
00:00:59.000 | than you get on the AM dial.
00:01:01.920 | But basically, you call in and we chat about anything
00:01:05.000 | that you wanna talk about.
00:01:06.560 | We talk about questions, comments, suggestions,
00:01:10.160 | anything that you want to discuss.
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00:01:31.800 | Broadcasting now from the beautiful sunshine state,
00:01:34.640 | state of Florida.
00:01:35.920 | This is my home state in these United States.
00:01:39.160 | And we'll see, maybe towards the end of the show,
00:01:41.920 | at the moment I only have a few callers on the line,
00:01:43.520 | towards the end of the show,
00:01:44.340 | I'll talk to you about why I think that Florida
00:01:47.020 | is almost certainly one of the best states
00:01:51.360 | in the United States to live in, to work in, et cetera.
00:01:55.560 | It's not perfect.
00:01:56.400 | I have a few things that I don't love
00:01:58.200 | about the state of Florida,
00:01:59.800 | but we'll save that segment for the end
00:02:02.160 | and see if I can persuade you that I think that Florida
00:02:05.440 | is one of the best places that you can possibly be.
00:02:07.680 | We begin, however, with Tyler, who is not in Florida.
00:02:10.200 | At least I don't think you are, Tyler.
00:02:11.280 | Tyler, you're in California.
00:02:12.200 | Welcome to the show.
00:02:13.040 | How can I serve you today, sir?
00:02:14.160 | - So I have a question about Michael Burry.
00:02:18.960 | Michael Burry was one of the early predictors
00:02:21.220 | of the real estate financial crash,
00:02:23.780 | and recently he's been warning of another crash,
00:02:27.280 | this one involving crypto and the different meme stocks
00:02:31.040 | and everybody going crazy with that.
00:02:33.720 | Personally, I've stayed out of that section,
00:02:36.480 | and just 'cause I'm unfamiliar with it,
00:02:38.440 | didn't want to get into the hype,
00:02:40.080 | but what's your opinion on, if you know anything about him,
00:02:43.760 | what's your opinion on the crash that he is predicting,
00:02:47.360 | and if there is a crash, what would be the strategy
00:02:50.420 | for somebody who is saving up money
00:02:54.180 | and could invest in that type of stuff
00:02:56.520 | once it does happen, if it happens?
00:02:58.480 | - Yeah, for anyone who's not familiar
00:03:00.000 | with the name of Michael Burry,
00:03:01.040 | he reached fame more broadly, I would say,
00:03:04.560 | through Michael Lewis's book called The Big Short,
00:03:07.640 | and then the subsequent movie based upon that book.
00:03:10.720 | He was a very intelligent guy who unraveled,
00:03:14.800 | basically, as I understand the story,
00:03:16.440 | single-handedly, just sitting himself.
00:03:18.760 | He saw the danger in the CDO marketplace
00:03:23.000 | back in the mid-2000s.
00:03:25.200 | He saw what was happening with all of the mortgage companies
00:03:29.120 | buying, packaging up, and then reselling as securities
00:03:33.680 | all of these really poorly underwritten loans.
00:03:36.480 | And so he bet extremely heavily against that marketplace
00:03:40.640 | and made a ghastly amount of money for himself
00:03:45.000 | and for the investors into his fund.
00:03:46.960 | And that was where he came to public prominence.
00:03:49.680 | And so I was aware of some of his predictions.
00:03:52.720 | It was something kind of funky.
00:03:54.120 | He was talking on Twitter, as I understand the story,
00:03:57.400 | a few months back, talking about how
00:04:00.040 | there's gonna be a crash of the dollar,
00:04:01.560 | this, that, and the other thing,
00:04:02.380 | and then he wound up basically deactivating
00:04:03.960 | his Twitter account and somewhat disappearing.
00:04:06.040 | I haven't heard yet this most recent thing
00:04:08.880 | that you're referring to, but I'm happy
00:04:10.680 | to answer the question just kind of
00:04:12.000 | with a more broad framework.
00:04:13.600 | Before I do that, do you have any more specifics,
00:04:16.320 | since I did not read his latest warnings,
00:04:18.240 | any more specifics on what specifically he said?
00:04:20.640 | - Yes, so basically he's been shorting GameStop
00:04:27.720 | for a while now, heavily, because of everything
00:04:30.600 | that's been going on.
00:04:31.760 | And he's just saying with all the hype, speculation,
00:04:34.740 | and over-leverage of these giant hedge funds
00:04:38.400 | who are getting into crypto,
00:04:39.920 | getting into the, and everybody else is getting into it,
00:04:43.000 | that people are just getting over-leveraged
00:04:45.140 | and the same thing's kind of happening again.
00:04:47.280 | - Okay, fair enough.
00:04:48.760 | So let's begin with people and their predictions.
00:04:53.760 | I respect Michael Burry and his intelligence
00:04:59.000 | and his thoughtfulness.
00:05:00.800 | I don't know of any reason why I wouldn't
00:05:02.880 | respect his intelligence.
00:05:04.880 | And when people make warnings, I try to listen carefully,
00:05:08.520 | especially if those people have previously made good bets
00:05:13.520 | and have been willing to put their money
00:05:14.840 | where their mouth is, as Michael Burry very famously did,
00:05:18.080 | because that demonstrates that they've got
00:05:19.840 | a good amount of skin in the game
00:05:21.120 | and they're ready to make something important happen.
00:05:25.200 | And so I respect him greatly.
00:05:27.420 | That said, somebody's being right in the past
00:05:33.320 | doesn't necessarily make them more likely to be right
00:05:37.920 | or less likely to be right this time.
00:05:40.640 | And especially in the world of something
00:05:43.700 | like stock trading or investment markets,
00:05:47.360 | you can be an investor
00:05:52.040 | and you can see a situation in front of you.
00:05:54.760 | You can study the situation.
00:05:56.980 | You can hit the situation exactly right, as Burry did,
00:06:01.720 | execute the perfect trade, and yet the next situation,
00:06:06.720 | the next trade is a fresh new set of circumstances,
00:06:11.240 | a fresh new set of facts.
00:06:14.000 | So just because somebody was right in the past
00:06:17.500 | doesn't necessarily mean that they're right this time.
00:06:20.560 | You always have to look at what they're saying
00:06:22.780 | and take it on its face and study the evidence.
00:06:26.740 | I do think that we should give more weight
00:06:29.640 | to those who have been right in the past.
00:06:33.100 | But just because somebody was right in the past
00:06:35.100 | doesn't mean that they're right now,
00:06:36.900 | just because they have been right before.
00:06:38.540 | Let me give a more human example
00:06:39.820 | to try to drive the point home.
00:06:41.600 | Let's say that your father encouraged you to go to college.
00:06:45.900 | And he said, "Son, if you go to college
00:06:48.420 | "and you get a college degree,
00:06:51.260 | "that will allow you to be more effective in the marketplace.
00:06:56.260 | "You'll probably have a lower lifetime
00:06:59.160 | "level of unemployment.
00:07:00.400 | "I think it's a good idea for you to go
00:07:02.320 | "and get a college degree."
00:07:04.400 | So your dad was probably right about that.
00:07:07.180 | You went to college, got a college degree.
00:07:09.140 | Maybe you're very grateful
00:07:10.460 | that you did get a college degree
00:07:11.880 | because, hey, this degree has been useful
00:07:14.140 | and I'm likely, statistically,
00:07:16.500 | to have lower levels of lifetime unemployment
00:07:19.280 | than one of my friends who didn't get
00:07:21.420 | this particular college degree.
00:07:23.660 | But then your father comes to you afresh
00:07:26.620 | and you're asking his advice
00:07:28.180 | on whether you should stay in your corporate job
00:07:30.420 | or whether you should leave and start a business.
00:07:33.480 | The fact that he was right about the college degree
00:07:36.060 | doesn't necessarily mean that he's right about the fact
00:07:38.840 | that you should stay in your corporate job.
00:07:40.520 | It's a separate situation.
00:07:42.880 | And so what you have to do is not say,
00:07:44.920 | "Well, dad was right before,
00:07:46.560 | "so therefore dad is right this time."
00:07:49.400 | What you need to do is say, "Dad was right before
00:07:51.800 | "and I thought he had a good idea about that.
00:07:54.320 | "So let me understand what he's saying this time
00:07:57.000 | "and why he's saying what he's saying
00:07:58.700 | "and then judge for myself."
00:08:00.480 | Because dad could be right before
00:08:02.160 | and could be completely wrong now
00:08:04.240 | or he could be right now and right before
00:08:06.840 | or he could be wrong before and wrong now.
00:08:09.760 | And so you can have somebody, for example,
00:08:11.860 | who makes very poor financial decisions
00:08:14.640 | and has no wealth, but then they come to you
00:08:17.640 | and they say, "You know, you probably shouldn't buy
00:08:19.380 | "this certain thing."
00:08:20.220 | And they could be totally right about that.
00:08:22.160 | So just because it's Michael Burry who is speaking
00:08:26.440 | doesn't make what he's saying correct.
00:08:29.200 | Another example.
00:08:30.320 | I recently, when I was talking about cryptocurrency,
00:08:32.520 | I was talking about Charlie Munger and Warren Buffett's
00:08:36.280 | perspectives and opinions on Bitcoin.
00:08:39.160 | And so Charlie Munger very famously deeply dislikes Bitcoin.
00:08:43.320 | Does the fact that Charlie Munger has been,
00:08:47.120 | is the fact that he is an amazing investor
00:08:50.780 | with a tremendous track record,
00:08:52.840 | does that mean that he is right on Bitcoin?
00:08:55.800 | It doesn't necessarily mean that he's right.
00:08:58.440 | What it means is you should listen
00:08:59.520 | to what he says carefully.
00:09:00.440 | So that's the first thing,
00:09:01.600 | is that when anybody smart says something,
00:09:04.520 | don't just think that just because he got
00:09:06.880 | the other trade right, he's right this time.
00:09:09.520 | All of us are flawed.
00:09:12.120 | All of us are fallible.
00:09:14.040 | Okay, second big warning flash.
00:09:17.200 | Every single market will have a continual stream of people
00:09:24.160 | who say, "This market is a bubble.
00:09:29.160 | "This market is going to crash."
00:09:31.940 | I've personally been paying attention to this stuff
00:09:33.880 | for something like 20 years now, 15 to 20 years.
00:09:38.560 | And I have for many years been attracted to the doomsayers,
00:09:43.560 | to those who say, "Everything is going to fall apart."
00:09:48.020 | When I was younger, I thought they were absolutely right.
00:09:53.060 | Today, I no longer think that
00:09:55.120 | because I've had enough time pass to say,
00:09:58.120 | "Look, these guys have been wrong for a long time."
00:10:00.960 | But they continue to make the same predictions.
00:10:03.560 | They continue to just boldly say exactly the same thing.
00:10:06.960 | And this really bothers me because I wonder,
00:10:09.760 | number one, are they true believers
00:10:12.360 | that they genuinely have believed that they're right
00:10:15.400 | in predicting doom and gloom and the crash of this market
00:10:18.280 | for a very long time?
00:10:19.920 | Or are they just con artists who know
00:10:22.820 | that they can continue to say
00:10:24.200 | that the market's going to crash,
00:10:26.320 | and at some point, the market will crash
00:10:27.760 | because markets always crash.
00:10:29.720 | Think back to 2020 and the market declines of 2020.
00:10:34.720 | It sure looked, during March, April of 2020,
00:10:39.480 | it sure looked that perhaps all of the bearers were right.
00:10:43.440 | It sure looked like they were right,
00:10:44.940 | like everything was going to come apart.
00:10:49.360 | I was distinctly nervous myself,
00:10:51.880 | very concerned about where certain things could go.
00:10:55.580 | There was a very good chance, a very plausible scenario,
00:10:59.680 | in which you just saw widespread bankruptcies
00:11:02.840 | of major companies, widespread economic nightmares
00:11:07.840 | all across the board.
00:11:09.480 | We're very fortunate, extremely fortunate,
00:11:12.820 | that the coronavirus pandemic did not turn out
00:11:15.160 | to be worse than it was.
00:11:16.720 | It very easily could have had just simply double
00:11:19.940 | the rate of severe sickness and death very easily,
00:11:24.640 | and we would be in a totally different world today.
00:11:27.160 | And so when you hear somebody saying
00:11:30.080 | there's going to be a crash,
00:11:31.360 | recognize that there's always somebody saying
00:11:33.280 | there's going to be a crash.
00:11:35.160 | And almost any market seems to defy that particular crash.
00:11:39.600 | So whether it's the stock market generally,
00:11:42.360 | I've known people since the 1990s
00:11:44.040 | who've said the stock market was a waste of time,
00:11:45.640 | but the stock market continues to head up.
00:11:47.380 | Whether it's the US dollar,
00:11:49.060 | I've known people my entire lifetime
00:11:50.840 | who've been saying the US dollar is going to implode
00:11:52.620 | because we're printing too much money,
00:11:53.800 | and it's all debt, and it's all debt,
00:11:56.600 | and the dollar continues to march on.
00:11:58.480 | Whether it's Bitcoin, there have been people
00:12:01.080 | since Bitcoin was $50 a coin who've been saying
00:12:03.240 | this is overpriced, this is a nightmare,
00:12:04.720 | this is all going to collapse.
00:12:06.680 | Latest iterations, things like NFTs,
00:12:09.600 | some of these other currencies,
00:12:12.540 | there's always going to be someone predicting them.
00:12:15.080 | So my answer is, number one, study the market
00:12:20.080 | and make your own personal bet based upon the information
00:12:23.680 | and the arguments that you see.
00:12:26.120 | Because at some point in time,
00:12:27.800 | you've got to actually put your money where your mouth is,
00:12:29.720 | and you've got to make your own bets.
00:12:31.560 | Number two, engage in good personal financial planning
00:12:37.800 | so that you don't run the risk of getting wiped out
00:12:40.600 | because your bets were wrong.
00:12:43.500 | One of the things that makes me sad
00:12:46.240 | is in the modern world when we teach investing,
00:12:48.640 | we don't teach better insurance policies.
00:12:51.240 | A good professional investor
00:12:52.720 | will very frequently cover their positions.
00:12:56.100 | And they'll buy insurance on any trade
00:12:58.040 | that they can possibly do.
00:12:59.660 | Now you and I might not be a sophisticated trader
00:13:02.320 | who's hedging our position on every single trade,
00:13:07.320 | but we can do that in our own personal finances
00:13:10.740 | fairly easily by choosing the amount of our wealth
00:13:14.280 | that we dedicate to a certain thing
00:13:15.980 | or by thinking through the scenarios personally.
00:13:18.760 | So I don't believe,
00:13:21.400 | I want to hear what Michael Burry has to say,
00:13:23.920 | I respect him, but I want to recognize
00:13:26.360 | that he's just one guy.
00:13:27.740 | He's one guy who made a killer trade,
00:13:30.960 | but he's still just one guy.
00:13:32.800 | And that doesn't necessarily mean that he's right or wrong.
00:13:35.180 | I want to hear his arguments and think for myself.
00:13:37.680 | Number two, I want to make my own predictions
00:13:40.640 | based upon where I think the world is going
00:13:43.520 | and what I think is happening.
00:13:45.400 | And then finally, I want to protect myself
00:13:47.860 | using just good basic personal financial planning
00:13:50.780 | so that I don't get overextended.
00:13:52.420 | And I don't have to have an opinion
00:13:54.200 | on what Michael Burry says.
00:13:55.880 | I can wait and just simply let the marketplace
00:13:58.900 | prove him right or prove him wrong.
00:14:00.760 | That's my perspective, Tyler.
00:14:02.200 | What do you think? - Thank you, sir.
00:14:04.200 | Appreciate it.
00:14:05.040 | Yeah, it makes total sense.
00:14:08.120 | That's why I don't really like to get
00:14:09.400 | into these hype situations,
00:14:10.880 | but I see what he's saying to an extent.
00:14:13.080 | I'm just gonna kind of protect myself
00:14:15.540 | and my family as much as I can.
00:14:18.360 | And I have another question later
00:14:20.540 | if you have time for me.
00:14:21.940 | Yes, go ahead.
00:14:22.780 | - Okay, I was listening to your Harrison,
00:14:26.840 | Hurricane Harris episode and the corn
00:14:30.000 | that you guys were talking about
00:14:32.360 | where it can feed people for weeks and weeks and weeks.
00:14:35.600 | Because of the pandemic, I have that,
00:14:39.360 | when we went into the grocery store,
00:14:40.960 | all the food was gone.
00:14:42.840 | I'd never want that to happen again
00:14:44.400 | where we were just underprepared.
00:14:46.360 | And so we live in a one-bedroom apartment,
00:14:48.400 | obviously not a whole lot of room for stuff.
00:14:50.640 | So if I could get one food item
00:14:52.880 | that we can at least stock up on and be ready
00:14:54.880 | in case something like that happens, I would like to.
00:14:57.560 | And so I was trying to find more detail
00:14:59.440 | on what kind of corn you guys were discussing
00:15:02.800 | and how to prepare it and keep it.
00:15:04.880 | Do you have any resources for that?
00:15:07.040 | - That was just, in that discussion,
00:15:08.480 | that was just standard feed corn.
00:15:10.720 | Do you have a tractor supply anywhere near your house?
00:15:14.120 | - Yes.
00:15:14.960 | - So go to tractor supply, look for feed corn.
00:15:17.920 | They'll have a pallet of it somewhere.
00:15:19.680 | That's what stuff you guys put in their deer feeders to feed
00:15:22.480 | and you can just buy a 50-pound bag of feed corn
00:15:25.560 | and that's what it is.
00:15:27.640 | I'm not sure, however, if I only had a one-bedroom apartment,
00:15:32.200 | I'm not sure that I would start there.
00:15:34.240 | Although, without question, that is one of the cheapest ways
00:15:37.220 | for you to just have a bunch of calories.
00:15:39.580 | I think the most important thing would be learn,
00:15:42.240 | with something like that.
00:15:44.000 | So let's pull back for a second, okay?
00:15:48.620 | If you have space and are committed to a program
00:15:53.620 | of long-term food storage, one of your cheapest ways
00:15:57.820 | that you can possibly do that for a very long period of time
00:16:01.200 | is to buy for yourself and put up the four basics,
00:16:05.240 | which are corn, beans, rice, and wheat.
00:16:10.240 | Corn, beans, rice, and wheat.
00:16:13.780 | So somebody who is committed to personal preparedness
00:16:16.260 | will often just have giant stacks and stacks of buckets
00:16:19.620 | of corn, beans, rice, and wheat.
00:16:23.340 | I think that's great if you have the space
00:16:26.880 | to store that stuff and if you have the space to store it
00:16:31.540 | and the place to do it and the motivation to actually do it.
00:16:34.660 | So what I would encourage you to start by
00:16:37.100 | is go get one bag and then figure out some ways to cook it.
00:16:40.500 | A lot of people have never cooked rice and beans
00:16:42.980 | from scratch, from dry beans, dry rice.
00:16:45.700 | Figure out how to cook rice and beans
00:16:47.060 | and make them interesting.
00:16:48.820 | Figure out how to take a bucket of just raw wheat
00:16:51.620 | and turn it into something that's edible.
00:16:54.500 | Grab some corn and figure out how to use it.
00:16:57.000 | Stephen Harris has a lot of resources on that
00:16:59.580 | on his website, lots of recipes and things like that.
00:17:02.660 | So start with one before you do it.
00:17:05.200 | I would personally focus on higher value foods
00:17:07.980 | that are compact and more easily divided into smaller places
00:17:11.420 | before I would go out and buy big bags of corn
00:17:14.460 | if I were living in a small apartment.
00:17:16.300 | So smaller packages, just five pound packages of rice,
00:17:21.300 | smaller canned foods, things like that.
00:17:23.500 | Those are things that are more convenient to store.
00:17:25.460 | You can tuck them aside into little nooks and crannies,
00:17:28.040 | put them underneath the furniture, et cetera,
00:17:30.180 | put them in the cabinets and have huge amounts of food
00:17:32.660 | on hand without having to figure out
00:17:34.860 | what to do with 50 pound bags.
00:17:36.380 | And then what I would do is have as part of kind of
00:17:38.580 | my last hour preparations.
00:17:41.020 | If you saw that something was happening,
00:17:43.140 | then I would have a plan to go and get some of that stuff.
00:17:46.300 | So if you know that Tractor Supply
00:17:48.060 | sells that kind of feed corn,
00:17:49.860 | and if you know that you always keep
00:17:51.340 | a few hundred dollars in cash on hand,
00:17:53.120 | if there's an event that's happening
00:17:55.100 | and you recognize that this could affect the food supply,
00:17:58.220 | then you know the first place I'm going
00:17:59.900 | is Tractor Supply with a few hundred dollars in cash
00:18:01.900 | and I'm gonna go ahead and load up the back of my car
00:18:03.880 | with feed corn and in that situation
00:18:05.900 | I'm gonna stack it up high.
00:18:07.700 | But I wouldn't personally start with that
00:18:10.260 | with a one bedroom apartment.
00:18:11.500 | I would start by just a deeper pantry
00:18:14.180 | of smaller, more normal foods that you regularly eat
00:18:17.140 | that are shelf stable myself.
00:18:18.740 | - Wonderful, thank you sir, appreciate it.
00:18:22.340 | - My pleasure.
00:18:23.460 | Your big winner also on that subject is going to be pasta.
00:18:27.340 | So pasta and tomato sauce,
00:18:30.460 | that kind of stuff stores really, really well.
00:18:33.100 | All right, we go to Peter in New York.
00:18:34.940 | Peter, welcome to the show.
00:18:35.780 | How can I serve you today, sir?
00:18:39.100 | - Hi Joshua, life insurance question for you.
00:18:42.440 | What's the best way to figure out
00:18:45.580 | how much life insurance you actually need?
00:18:47.620 | - Do a needs analysis.
00:18:48.980 | So a needs analysis.
00:18:52.980 | - What's the easiest way to do that?
00:18:54.420 | - Well, let's do it right now, okay?
00:18:56.660 | First thing you do is you figure out how much,
00:18:59.900 | you calculate how much debt you would want to pay off
00:19:03.260 | from your life insurance policy if you died.
00:19:06.940 | - So do you have any debt that you would want
00:19:09.140 | to have paid off for your family if you died?
00:19:11.340 | - Yes.
00:19:14.060 | - Okay, how much?
00:19:14.880 | - Let's say, let's use a round number,
00:19:24.220 | let's call it a million dollars.
00:19:27.540 | - Okay, so a million dollars of debt.
00:19:29.820 | The second thing is how much cash would you want
00:19:32.660 | to make sure that your family had?
00:19:34.060 | Not income, we'll get to income in just a moment.
00:19:36.340 | But how much cash would you want to make sure
00:19:38.940 | that your family had in the bank
00:19:40.720 | to cover any kind of expenses, one-time expenses,
00:19:43.620 | lump sum expenses, funeral costs,
00:19:45.980 | emergency funds, things like that?
00:19:47.780 | - Let's say 100,000.
00:19:51.660 | - Okay, now then we look at income needs.
00:19:55.420 | And there are usually two parts of income needs
00:19:58.020 | that a family wants.
00:19:59.340 | Number one is income for any kind of big picture expenses
00:20:03.340 | that are short in time.
00:20:05.340 | So for example, if you have children,
00:20:06.840 | a lot of times a father will say,
00:20:09.340 | right now my kid's in a private school,
00:20:11.700 | my kid's in fourth grade, I wanna make sure
00:20:13.580 | that he has enough money coming in
00:20:15.300 | to where he can stay in that private school
00:20:16.940 | from fourth grade through 12th grade,
00:20:18.540 | and I wanna make sure I cover college.
00:20:20.700 | So do you have children, and are there any education
00:20:23.540 | expenses associated with children
00:20:25.020 | that you would wanna cover?
00:20:26.380 | - Not yet, but that's coming soon.
00:20:29.980 | - Okay, we'll come back to that in a moment then.
00:20:32.540 | And then the second thing is how much income
00:20:36.060 | would you want to provide for your wife and children
00:20:39.060 | to live on and for how long?
00:20:41.100 | Any ideas?
00:20:41.940 | - Probably, let's pick a round number,
00:20:47.500 | let's say 250,000 a year for five years.
00:20:52.500 | - Okay, and then after five years, what would she do?
00:21:00.700 | - I would say flex the muscles,
00:21:02.820 | she's currently flexing more.
00:21:04.580 | - Okay.
00:21:05.420 | - And hopefully we've found someone else by then.
00:21:07.500 | - Understood, okay, so we'll come back to this
00:21:09.420 | in just a second, and then if you did have children,
00:21:12.160 | how much money would you wanna set aside
00:21:13.900 | for an educational fund?
00:21:15.220 | - Oof, man, I'd probably just say,
00:21:19.540 | let's just say half a million per child,
00:21:21.500 | just 'cause who knows where that's going.
00:21:23.540 | - So $500,000 per child, and do you have any idea
00:21:26.780 | of how many children you hope to have?
00:21:30.300 | - Probably just one.
00:21:31.140 | - Okay, so if we total this up,
00:21:33.820 | we wanna pay off a million dollars in debt,
00:21:36.340 | we wanna have 100,000 of cash, that's 1.1 million,
00:21:39.140 | we wanna have $500,000 set aside for educational costs
00:21:43.060 | for one child, that brings us up to 1.6,
00:21:46.380 | and then we wanna have $250,000 of income for five years,
00:21:49.840 | that's a total of $1.25 million of cash.
00:21:53.020 | I'm ignoring any kind of investment returns
00:21:55.300 | in this situation, just to make the math simple.
00:21:57.580 | So if we add 1.6 plus 1.25 million,
00:22:01.540 | we wind up with $2,850,000.
00:22:05.900 | So that's our total need, is just under three million,
00:22:08.500 | $2,850,000.
00:22:11.540 | Now, how much money is available,
00:22:14.860 | or investments is available now,
00:22:17.460 | that if you died, those things would be sold?
00:22:19.340 | How much cash do you have,
00:22:20.400 | how much liquid investment money do you have, et cetera?
00:22:26.900 | - And retirement accounts as well?
00:22:28.420 | - Yes.
00:22:29.260 | - And house as well?
00:22:32.540 | - Yes.
00:22:33.380 | - That is about two million.
00:22:40.300 | - Okay, so if you have $2 million of stuff
00:22:43.980 | that you would want sold for your wife, et cetera,
00:22:47.780 | then you just take $2.85 million, subtract $2 million,
00:22:51.300 | and you wind up with a need of life insurance
00:22:52.940 | of basically $850,000, or a million dollars among friends.
00:22:56.940 | Now, let me, first of all,
00:22:59.540 | how much do you earn per year right now?
00:23:01.540 | - About four.
00:23:06.100 | - 400,000?
00:23:07.220 | - Yep.
00:23:09.660 | - Okay, so that's probably a little bit light,
00:23:12.580 | and let me come back and put on
00:23:14.980 | kind of my life insurance advisor's hat.
00:23:17.560 | The process that we just used is a needs analysis.
00:23:22.100 | You simply say, here's what I would want to do,
00:23:25.660 | here's what I would want to provide
00:23:28.260 | if I died for my family,
00:23:30.300 | and then here's what assets we have available.
00:23:33.700 | And those are the numbers that you can pull apart.
00:23:36.680 | So if you wanna pay off a million dollars in debt
00:23:39.620 | and have those other numbers, $250,000 for five years,
00:23:43.140 | there you go, it's $2.85 million.
00:23:45.860 | Now, if you want to allocate all of the cash,
00:23:49.220 | like for example, does paying off the debt,
00:23:51.260 | does that reflect paying off your personal mortgage?
00:23:53.340 | And then all of a sudden, your wife's gonna sell the house,
00:23:54.940 | what's she gonna do then?
00:23:56.380 | Well, then you have to think those things through,
00:23:58.900 | talk them through with her, see how much she needs, et cetera.
00:24:02.340 | But let's say that you said, okay, retirement accounts,
00:24:05.060 | I wanna make sure that the retirement accounts
00:24:06.600 | are still there for her retirement,
00:24:08.460 | I wanna make sure that the house is still there
00:24:11.900 | for her to live in, and then now,
00:24:14.380 | if I provide $250,000 for five years,
00:24:16.600 | it feels a little bit better.
00:24:18.460 | And then, so maybe the number is three million.
00:24:20.820 | So let me ask you a question, okay?
00:24:22.580 | Let's say that you died, sorry,
00:24:24.700 | let's say that your wife died, and you have a son,
00:24:28.180 | and you're not working.
00:24:29.440 | Would you feel economically secure
00:24:34.460 | with the numbers that you went over?
00:24:39.340 | Would you feel economically secure in that scenario,
00:24:42.380 | if your wife were the one who died,
00:24:43.660 | and she had a million dollars of life insurance,
00:24:46.400 | and then you sold all these assets?
00:24:49.160 | - And I stopped working. - Right.
00:24:51.280 | - I think, yeah, yeah, I think I would, actually.
00:25:00.280 | - Okay, so if you would,
00:25:01.680 | then that may be close to the right number.
00:25:03.520 | Now, the big kind of blind spots for many men
00:25:07.160 | come into these things.
00:25:08.680 | The first thing is, how long do you want
00:25:11.520 | the income for your wife?
00:25:13.760 | What I would do is I would try to model the income
00:25:17.120 | for her entire lifetime.
00:25:20.120 | Now, you and she might be different, right?
00:25:22.560 | She might be making a lot of money, et cetera.
00:25:24.800 | There's always variations,
00:25:26.340 | and this is probably not the forum to do it.
00:25:28.580 | But what I try to encourage husbands to do
00:25:31.360 | is to make sure that their wife has more income
00:25:35.020 | for a longer period of time,
00:25:36.600 | especially as that relates to having children, right?
00:25:40.640 | My wife is very smart, okay?
00:25:42.280 | She's a hard worker, she's very good with money.
00:25:45.480 | She will, if I die and I leave her a penny,
00:25:47.940 | she'll pinch the penny, right?
00:25:49.280 | She's good at that.
00:25:51.200 | The question is this, right?
00:25:52.840 | We have a certain lifestyle that we have dreamed of,
00:25:56.120 | a way of living, a type of lifestyle
00:25:58.400 | that we wanna give to our children.
00:26:01.040 | And so I wanna make sure that if I'm dead,
00:26:04.740 | she can still accomplish that goal
00:26:07.740 | regardless of whether I'm here or not, right?
00:26:10.780 | I don't want her to have to worry,
00:26:12.880 | okay, for example, we plan to homeschool our children.
00:26:15.240 | I don't know how long, maybe all the way through
00:26:18.240 | their primary and secondary education, I don't know.
00:26:20.680 | But I don't want her to ever come to a school year
00:26:23.880 | and feel like, you know what, we have to go and put,
00:26:26.200 | I have to put my children into a government school
00:26:28.560 | because otherwise we're not gonna have any money.
00:26:30.800 | That's just unacceptable to me.
00:26:32.800 | I wanna make sure that she has enough money
00:26:34.660 | that she can continue to raise our children
00:26:36.460 | in the way that she wants to be.
00:26:38.040 | If I'm dead and gone, I hope that my wife would remarry.
00:26:41.240 | I would love it if she would find another husband
00:26:43.800 | who she can live happily for the rest of her lifetime with.
00:26:47.000 | I'd be thrilled to hear that.
00:26:48.600 | However, I don't want her to be thinking about
00:26:51.360 | going and marrying someone else for his money.
00:26:53.800 | I want her to know that she's taken care of
00:26:56.160 | regardless of what happens
00:26:57.520 | and if she wants to marry someone else
00:26:59.000 | because he's a good fit for her or not, then that's ideal.
00:27:02.760 | And so these numbers, in my opinion,
00:27:05.440 | you're probably a lot below where what would be actually
00:27:08.620 | be necessary for your wife to live at your custom lifestyle.
00:27:12.680 | Now you can play with the numbers
00:27:13.760 | just doing the needs analysis.
00:27:14.960 | How much of a lump sum do I need to pay off debt?
00:27:17.240 | How much lump sum of cash?
00:27:18.440 | And then how much income and for how long?
00:27:20.640 | And then you just simply back those numbers up
00:27:22.080 | to a present value analysis.
00:27:23.840 | But for a guy making $400,000 a year
00:27:25.800 | to have a million dollars of life insurance,
00:27:27.760 | especially when, you know, unless you're sick
00:27:30.020 | and have a heart attack or something,
00:27:31.180 | you could probably buy a million dollars of life insurance
00:27:32.920 | for something like, I don't know, 40 or 50 bucks a month,
00:27:35.240 | seems a little silly to me to not have more of it.
00:27:38.760 | And so usually when you do this analysis
00:27:42.360 | and you really think it through and you run the numbers,
00:27:45.040 | usually, unless you're already financially independent,
00:27:48.080 | you usually wind up with somewhere around 10 to 20 times
00:27:50.600 | your income of life insurance.
00:27:53.080 | Now, if you have not yet accumulated any assets
00:27:56.840 | because you're just getting started,
00:27:58.600 | that number is often 20 times, right?
00:28:00.520 | I'll frequently work with, you know,
00:28:02.760 | a young doctor just out of residency,
00:28:04.680 | making his first time 400,000.
00:28:06.320 | Well, in his situation, you know,
00:28:07.720 | having $6 million of life insurance
00:28:09.740 | is not in any way excessive
00:28:11.800 | because what he's protecting is the value of his income
00:28:15.200 | for his wife and children for a very long period of time.
00:28:18.160 | If you have some assets,
00:28:19.500 | then you start to become self-insured.
00:28:21.600 | And that sounds like where you are, right?
00:28:23.760 | Where you're somewhere on the way to being self-insured.
00:28:26.600 | And then once you become self-insured,
00:28:28.120 | of course, you don't need life insurance.
00:28:29.920 | But when I look at it and you look at the cost
00:28:33.300 | of a term life insurance policy,
00:28:36.000 | which is just usually quite negligible,
00:28:39.920 | then you wind up recognizing
00:28:42.520 | that this is probably some of the best money
00:28:44.440 | that I can spend just to have
00:28:46.320 | a cheap term life insurance policy in force.
00:28:48.900 | - Okay, sounds good.
00:28:52.680 | - Let me do a quick--
00:28:53.520 | - Should the term--
00:28:54.760 | - Yeah, go ahead.
00:28:55.760 | - Which I was just gonna say,
00:28:56.600 | should the term reflect the time
00:29:00.240 | that you want the income replacement
00:29:02.540 | in this type of analysis, or are they unrelated?
00:29:05.280 | - Yes and no.
00:29:07.460 | So how old are you now?
00:29:09.080 | - Ballpark, more or less.
00:29:10.800 | - Early 40s.
00:29:12.760 | - Okay, and are you healthy and do you smoke cigarettes?
00:29:15.840 | - I'm healthy, I don't smoke.
00:29:18.080 | - And you live in the state of New York, is that right?
00:29:20.520 | - Yep.
00:29:22.280 | - All right, so let's do a 40-year-old male
00:29:24.360 | in the state of New York.
00:29:25.400 | I'm gonna do an insurance quote here for you.
00:29:27.800 | And let's do a 10-year term,
00:29:32.180 | a 15-year term, and a 20-year term, okay?
00:29:36.480 | And let's run this for $4 million of death benefit,
00:29:40.160 | okay, 10 times your income.
00:29:41.840 | No riders, and let's run it at preferred best non-tobacco,
00:29:46.280 | the very best rating that you're gonna get, okay?
00:29:48.760 | And I'll give you some premiums here.
00:29:51.240 | So to your term question, so here,
00:29:55.600 | for $4 million of 10-year level term insurance
00:29:59.080 | for preferred non-tobacco,
00:30:01.360 | here's principal insurance company, $1,065 a year
00:30:05.960 | for $4 million of coverage.
00:30:07.720 | Protective, $1,186 per year.
00:30:10.160 | Lincoln, $1,264 per year.
00:30:12.640 | Nationwide, $1,395 per year.
00:30:15.200 | Equitable, $1,595.
00:30:16.600 | US Life, $1,628.
00:30:18.000 | John Hancock, $1,800 a year.
00:30:19.560 | Banner, $1,800 a year.
00:30:21.680 | Prudential, $2,165.
00:30:23.800 | So depending on the health rating,
00:30:25.520 | you could get a thousand,
00:30:27.600 | for between $1,000 and $2,000 per year in premiums,
00:30:30.920 | you could get $4 million of term life insurance
00:30:33.440 | in force for the next 10 years.
00:30:35.080 | Does that seem like a lot of money to you?
00:30:37.000 | - No. - All right.
00:30:40.640 | So 20-year term, 20-year term.
00:30:42.520 | - I mean, the pay outside, the premiums are low.
00:30:44.480 | - Exactly. - The premiums are ideal
00:30:45.760 | for the amount of coverage.
00:30:46.600 | - Right, okay, so you can get 20-year term, right?
00:30:49.320 | And I ran you as a 40-year old,
00:30:51.520 | probably a little bit early,
00:30:52.400 | I just ran it as a 40-years old.
00:30:54.160 | A 40-year old non-tobacco, super preferred
00:30:57.040 | for 20-year level term with principal,
00:30:58.840 | you're at $2,134 a year.
00:31:01.320 | Equitable, $2,155.
00:31:03.280 | Protective, $2,214.
00:31:05.320 | Lincoln, $2,500.
00:31:06.560 | Nationwide, $3,000.
00:31:08.280 | So between $2,000 to $3,000 a year,
00:31:10.900 | you can get $4 million of 20-year level term coverage.
00:31:14.860 | So when I look at that,
00:31:16.760 | I mean, I've done this so many times over the year,
00:31:18.840 | I mean, for a guy making $400,000 a year,
00:31:21.000 | if I give you the offer and I say,
00:31:22.120 | "Listen, you write me a check for $2,000 a year,
00:31:25.080 | "if you die in the next 20 years,"
00:31:26.520 | I stroke your wife a check for $4 million,
00:31:29.800 | "if you don't die and we're at $2,000 a year,
00:31:32.940 | "max out-of-pocket is every year you're at 2,000,
00:31:35.540 | "so 10 years you paid me 20 grand,
00:31:37.380 | "20 years you paid me 40 grand."
00:31:39.360 | Is that a bad bet to make?
00:31:41.680 | Is that gonna wreck your world?
00:31:43.240 | - Oh no, absolutely.
00:31:46.120 | I've spent more money on much dumber things.
00:31:48.600 | - Right, right.
00:31:49.960 | And so I always just start there.
00:31:51.680 | So I like having a lot of life insurance.
00:31:55.160 | It makes me feel good when I'm doing something dumb.
00:31:57.560 | It makes me feel good when I'm in an airplane
00:31:59.120 | bouncing up and down.
00:32:00.040 | And even though I know everything about aeronautical science
00:32:02.680 | and know I'm pretty safe,
00:32:03.760 | I still feel good knowing,
00:32:04.840 | all right, if this plane goes down,
00:32:06.160 | at least my wife doesn't have to worry about money.
00:32:09.000 | So the amount of time that you have term insurance in force
00:32:12.920 | should go for the amount of time
00:32:15.440 | that you're really gonna need it.
00:32:16.720 | In your situation, I'd be okay,
00:32:19.400 | based upon what I'm,
00:32:21.080 | you've got $2 million in the bank
00:32:22.680 | and in cash and investments, et cetera.
00:32:25.040 | Even 10-year term would probably be fine
00:32:26.840 | because chances are, if you still need term insurance
00:32:29.000 | after 10 years, you could still get it.
00:32:31.160 | It's probably not a risk.
00:32:32.880 | You're probably gonna be in the point
00:32:34.360 | where you could easily consider yourself self-insured
00:32:36.440 | within 10 years based upon the trajectory you're on.
00:32:39.240 | And so if you just went with the cheapest,
00:32:41.360 | a 10-year term product, that would be fine.
00:32:43.960 | What I might do in a situation like yours,
00:32:46.440 | if I were an insurance agent, is I would do a ladder.
00:32:50.160 | I would do $2 million of 10-year level term.
00:32:53.880 | And then I would do maybe a million dollars
00:32:56.320 | of 15-year level term
00:32:57.560 | and a million dollars of 20-year level term.
00:32:59.720 | And that would take you to basically retirement age
00:33:02.560 | with somewhere between a million and two million,
00:33:04.720 | depending on how we split those policies up.
00:33:07.320 | It'll cover you big time for the next 10 years
00:33:10.160 | where you're gonna be working a lot, making a lot,
00:33:12.520 | and it'll allow you to see where you are 10 years from now
00:33:15.440 | in terms of your wealth.
00:33:16.320 | And so I would kinda do some kind of ladder approach.
00:33:19.680 | - Awesome, appreciate the advice.
00:33:24.080 | - Last point, how much life insurance does your wife have?
00:33:27.040 | (silence)
00:33:29.200 | - About half a million, if I'm not mistaken.
00:33:35.920 | - Okay, so I'd love to see you have about half as much,
00:33:40.920 | if possible, does she earn income to your household?
00:33:44.400 | - Yes.
00:33:47.020 | - Okay, so if she earns income,
00:33:48.440 | if she makes a lot of money, then you need more.
00:33:50.320 | Okay, but if she doesn't earn any income,
00:33:51.880 | I'd love to see her have at least half of what you have.
00:33:54.740 | And here is why, all right.
00:33:56.920 | As a high-income male, you would imagine that,
00:34:00.840 | okay, if my wife died, I'm still gonna have my career.
00:34:04.000 | And I think that's probably true.
00:34:05.760 | I'm the one who generates the income into our household.
00:34:09.000 | The problem goes back to this.
00:34:11.340 | My wife and I, we have four children.
00:34:12.960 | We have certain dreams, certain lifestyle
00:34:14.880 | about how we want to live.
00:34:17.760 | If my wife died, could I keep working?
00:34:21.600 | I could, right?
00:34:22.840 | But I would have a hard time doing the exact same thing
00:34:27.120 | and raising our children the way that we wanna raise them.
00:34:30.200 | And so it's very hard for me to imagine,
00:34:32.920 | hey, you know, guys, mom died,
00:34:35.560 | and now I'm gonna keep on working 50 or 60 hours a week,
00:34:39.960 | and you're just gonna sit over here in the corner
00:34:41.560 | and take care of yourself.
00:34:42.680 | I'm not gonna go put 'em in a government school.
00:34:45.120 | Am I gonna hire a nanny?
00:34:46.720 | Maybe, but I would much rather not have money
00:34:50.160 | be the thing that keeps me going,
00:34:51.640 | 'cause I'm not going to work on Monday
00:34:53.320 | with the same level of energy enthusiasm
00:34:55.400 | that I went to work last Monday if my wife dies.
00:34:58.080 | So it's very important that even if you do earn
00:35:01.440 | a lot of money, that you make sure that you still have
00:35:04.760 | a large amount of life insurance coverage on your wife,
00:35:07.680 | so that if she dies, you can still build
00:35:10.520 | the kind of family life that you guys
00:35:12.000 | have dreamed of building.
00:35:13.240 | - Sounds great, thanks so much.
00:35:18.240 | - All right, my pleasure.
00:35:20.480 | I guess I just don't see,
00:35:22.960 | when we're talking about those numbers,
00:35:24.280 | I just don't see why people wouldn't have
00:35:27.320 | a lot of term life insurance,
00:35:28.880 | unless it's just a principle thing,
00:35:32.040 | but when you actually quote life insurance.
00:35:33.800 | Now, if a guy can't get super preferred non-tobacco
00:35:36.680 | and he gets table three tobacco rates,
00:35:39.800 | then all of this changes.
00:35:41.880 | All of a sudden, it's hard to say,
00:35:43.680 | yeah, you should spend $15,000 a year
00:35:45.880 | to buy $4 million a year of coverage that you don't need,
00:35:49.320 | but that's probably not the situation that we're in there.
00:35:53.160 | Let me finish up today's show.
00:35:54.560 | We're at 35 minutes and I'm gonna just switch now
00:35:57.840 | to let's talk about the state of Florida.
00:36:00.240 | So my family and I, we've been traveling a lot.
00:36:02.960 | As you know, we got rid of our house
00:36:06.080 | and we have become perpetual travelers now again,
00:36:09.680 | nomads living out of a handful of suitcases,
00:36:12.840 | kind of bouncing around the world.
00:36:15.080 | In March, we were in Mexico, excuse me,
00:36:19.120 | in April, we were in Mexico,
00:36:20.600 | in May, we were in Costa Rica,
00:36:22.640 | here in June, we are in Florida, back in the United States.
00:36:26.920 | And I've talked quite a bit about expatriating
00:36:30.540 | from the United States, leaving the United States,
00:36:32.200 | and it's always interesting to me to come back.
00:36:34.900 | So let me just share a couple of ideas
00:36:36.600 | about the United States and about Florida in particular.
00:36:40.860 | Having been gone from the United States
00:36:45.820 | for almost three years at this point,
00:36:49.920 | I am much more at peace with the United States
00:36:53.200 | than I was back then.
00:36:54.660 | The reason that I'm at peace is that
00:36:56.480 | I'm no longer reliant on one country.
00:36:59.480 | What made me incredibly nervous a few years ago
00:37:01.960 | was when I woke up and I realized that my future
00:37:05.600 | and my children's future was entirely connected
00:37:09.480 | to one country.
00:37:10.840 | It was reflected to, connected to a very good country
00:37:15.760 | in many ways, the greatest empire in the world at present,
00:37:19.640 | right, the only empire in the world at present,
00:37:23.200 | with tremendous benefits, tremendous opportunities,
00:37:26.040 | tremendous blessings, et cetera, but one country.
00:37:28.800 | And I was sitting, I sit and look at long-term trends,
00:37:31.480 | and I look at things like we'd mentioned before
00:37:33.320 | about the national debt and things like that,
00:37:35.960 | and I just sat and said, it makes no sense to me
00:37:39.000 | that my children should be indentured servants
00:37:44.080 | to the future of the greatest debtor nation
00:37:47.720 | in the history of the world.
00:37:49.560 | Now, will that debt turn out to be a problem
00:37:52.200 | in the long run or not?
00:37:53.560 | I don't know, but I think there are good reasons
00:37:56.000 | to think that it could be a problem,
00:37:57.640 | and if it were a problem, why on earth
00:37:59.280 | should my children be burdened with that?
00:38:01.960 | There are a number of escape hatches, right?
00:38:03.480 | I don't really think that our children
00:38:06.120 | are gonna ever pay back any kind of national debt.
00:38:08.680 | I think they'll default on the debt,
00:38:10.120 | and they'll just move on with life.
00:38:11.640 | And I don't, I'm not a catastrophist.
00:38:13.520 | I don't think it's gonna be a bad thing.
00:38:15.000 | Defaulting on debt is not necessarily a bad thing.
00:38:17.360 | But I realize this incredible vulnerability.
00:38:19.520 | I realize that I and my children are vulnerable,
00:38:21.800 | and so for the last three years,
00:38:23.320 | I've worked hard to eliminate that vulnerability
00:38:26.040 | to the point now where I could divorce myself
00:38:29.440 | from the United States if I wanted to,
00:38:32.160 | and fully divorce, leave, never come back.
00:38:35.040 | And that feels really good to know
00:38:37.160 | that I have that option.
00:38:39.760 | That feels really, really good.
00:38:43.220 | Along the way, I've become more peaceful
00:38:46.260 | because of knowing that I have that option.
00:38:48.700 | And so now it's easier for me to come back
00:38:50.660 | to the United States and just let some of the stuff go by
00:38:53.460 | and come to appreciate so many things about this country.
00:38:58.460 | Things that a few years ago,
00:39:00.780 | because I was so personally, emotionally
00:39:02.980 | kind of tied up in knots, I couldn't see as honestly
00:39:07.260 | and objectively as I would have liked.
00:39:09.340 | But now that my personal emotions have been relieved,
00:39:12.900 | that I know I don't have to be here anymore,
00:39:15.620 | then you come to appreciate a lot of things
00:39:18.780 | about this country.
00:39:20.540 | And I'll share some of those because I want you
00:39:25.140 | to appreciate things about where you may live,
00:39:27.820 | wherever that happens to be.
00:39:29.080 | And so I'll just share some of those things,
00:39:30.880 | speaking generally.
00:39:32.480 | Financially, the United States is one of the best
00:39:37.700 | and easiest places in the world that you can live
00:39:40.500 | if you want to get ahead.
00:39:42.040 | This is so underappreciated, in my opinion.
00:39:47.940 | I have lived internationally, I live internationally,
00:39:52.540 | I travel internationally.
00:39:54.500 | I'm interested in the international living approach, right?
00:39:57.580 | Where people think about a certain country,
00:39:59.880 | a certain place that they can go
00:40:01.260 | and where they can live better on less.
00:40:05.460 | But having been to most of those places,
00:40:07.580 | I am convinced that if I were a retiree
00:40:11.260 | living on a very modest social security income,
00:40:14.820 | there is no place in the world that I would rather be
00:40:17.900 | than the United States of America.
00:40:20.340 | I do not see it in any place that I have traveled,
00:40:23.320 | including Mexico, other places that retirees enjoy being,
00:40:27.460 | places in Latin America, Dominican Republic,
00:40:29.780 | and things like that.
00:40:32.500 | I just do not see a better lifestyle
00:40:35.660 | on less than in the United States of America.
00:40:39.260 | If I had to live on $1,000 a month,
00:40:41.660 | I would not want to be in Mexico.
00:40:43.860 | I would want to be in the United States of America.
00:40:46.760 | Now, there are a couple of categories
00:40:48.620 | that are very difficult to save money on in the US.
00:40:51.820 | One category is housing.
00:40:55.300 | But I think that you can save money on housing
00:40:58.060 | with more of a creative, strategic approach
00:41:01.700 | and by relocation.
00:41:04.420 | There are areas, right, if I were gonna live in Manhattan
00:41:07.820 | on $1,000 a month, I wouldn't want to do it.
00:41:10.300 | I wouldn't do it.
00:41:11.300 | In Miami, I wouldn't do it.
00:41:14.660 | But there are all kinds of places
00:41:17.260 | all across the United States
00:41:18.780 | that have very low costs of housing.
00:41:22.020 | Just like there are in other countries,
00:41:23.820 | there are places in the United States that have low costs.
00:41:27.380 | And so even if you have a very modest amount of money
00:41:30.420 | available to spend on rent,
00:41:32.700 | you can find options all across the country
00:41:36.020 | if you're willing to relocate.
00:41:37.300 | And it's a lot easier to relocate from the downtown city
00:41:41.200 | to a small country town two hours outside of the city
00:41:44.880 | than it is to relocate from the downtown city
00:41:47.740 | in the United States to the rural city in Ecuador.
00:41:51.500 | It's just a lot easier to do,
00:41:52.860 | a lot cheaper to get back and forth,
00:41:54.140 | a lot easier to relocate,
00:41:55.180 | a lot easier to check things out, et cetera.
00:41:57.780 | In addition, what people are doing right now
00:42:00.020 | in the United States is they're solving
00:42:02.020 | the housing kind of question
00:42:04.980 | with more of a creative approach, right?
00:42:08.260 | They're living in a van or in a camper, something like that.
00:42:12.500 | And I'm convinced that living in a van
00:42:15.340 | is probably a better lifestyle
00:42:18.260 | than living in cheap housing in Ecuador
00:42:21.040 | or living in cheap housing in Mexico.
00:42:23.500 | You can go and you can put up a shack
00:42:25.740 | in many places in the world.
00:42:27.140 | The shack that you cannot build in the United States
00:42:29.220 | because of building codes,
00:42:31.100 | but you still would be better off with a nice RV
00:42:34.700 | or even just a modest RV
00:42:36.500 | than you are living in that shack in terms of an adjustment.
00:42:39.900 | So think carefully about the location
00:42:41.340 | and recognize that if housing is expensive
00:42:43.940 | where you live in the United States,
00:42:45.960 | you don't necessarily have to go to another country
00:42:48.020 | because housing is often more expensive in other countries,
00:42:51.060 | at least for the kind of housing that you're accustomed to.
00:42:54.180 | The United States,
00:42:55.020 | building supplies are relatively inexpensive.
00:42:57.700 | There are all kinds of things that you can do.
00:42:59.300 | And then of course you can live in a more interesting
00:43:02.540 | and kind of creative approach.
00:43:04.500 | Again, RVs are very popular for this.
00:43:07.380 | There are also lots of ways
00:43:08.700 | that you can cut your housing costs, right?
00:43:11.060 | You could become a caretaker for somebody of a property.
00:43:14.380 | You can manage an apartment.
00:43:16.420 | There's lots of ways that you can cut that.
00:43:18.620 | So while housing costs are often high in the United States,
00:43:22.180 | you can adjust them by location
00:43:24.180 | and it's easier for you to move from New York
00:43:27.500 | or from Pennsylvania to Mississippi
00:43:29.300 | than it is for you to move from New York
00:43:30.940 | or Pennsylvania to Mexico.
00:43:32.860 | The second big cost that is high in the United States
00:43:36.120 | is healthcare expenses.
00:43:38.620 | Healthcare expenses are high in the United States.
00:43:42.700 | And so this is where when people are really satisfied
00:43:46.820 | with their international relocation,
00:43:48.260 | I often hear them talk about healthcare.
00:43:50.280 | They talk about how, look, I can afford to live in Ecuador.
00:43:53.460 | I can afford to live in Mexico
00:43:54.820 | because of the low cost of healthcare.
00:43:57.980 | And I think that's entirely valid.
00:43:59.980 | If you are facing some kind of personal situation
00:44:03.060 | where that specifically can be adjusted by healthcare,
00:44:05.780 | by living in another country, then that's worth considering.
00:44:09.060 | There are a couple of caveats, however.
00:44:12.740 | The first thing is recognize
00:44:14.900 | you don't necessarily have to move somewhere full-time
00:44:18.180 | in order to get the benefits, the lower cost of healthcare.
00:44:21.580 | I had some dental work done when I was in Costa Rica.
00:44:25.380 | Costa Rica is a very popular dental tourism destination.
00:44:30.180 | And so if you have thousands of dollars of dental work done,
00:44:33.100 | go ahead and grab yourself a plane ticket to Costa Rica
00:44:36.300 | and have some dental work done in Costa Rica
00:44:38.180 | instead of necessarily in the United States.
00:44:40.580 | You can do medical tourism in Mexico
00:44:42.340 | without living there full-time,
00:44:44.180 | without relocating full-time.
00:44:46.540 | For someone who does have a chronic condition,
00:44:49.400 | something for which just one-time medical tourism
00:44:51.420 | isn't necessarily the best solution,
00:44:53.580 | I think you should be very thoughtful
00:44:55.740 | and just make sure that you understand
00:44:57.220 | what you're getting into.
00:44:58.680 | Very rarely do I hear of an international expat
00:45:03.620 | who is satisfied with the local healthcare system
00:45:07.380 | that's specifically government-run.
00:45:09.860 | You can go to Russia and you can sign up
00:45:11.580 | and become a part of the National Healthcare Service,
00:45:13.580 | but very rarely does somebody want to use that.
00:45:16.820 | And so your money can go farther in a private hospital,
00:45:20.180 | get a higher standard of care.
00:45:21.660 | Took my children for a doctor visit in Costa Rica
00:45:26.580 | and just to get a checkup and whatnot.
00:45:29.100 | You sit there, it's wonderful, right?
00:45:30.420 | You sit and talk to the doctor for an hour.
00:45:32.260 | It's a totally different scenario
00:45:34.520 | and you can easily afford it, right?
00:45:35.820 | You're not worried about the cost.
00:45:39.140 | It's just a totally different thing.
00:45:40.940 | So those are good, but you have to count in the cost then
00:45:44.460 | of the private healthcare options.
00:45:46.380 | So that is a really good reason to move abroad.
00:45:48.500 | I think another good reason to move abroad
00:45:50.540 | is if you want to get better care for a chronic condition,
00:45:53.500 | things like in-home healthcare.
00:45:55.740 | I've spoken to people all around the world
00:45:57.900 | and for example, one big problem in the United States
00:46:00.860 | is how do I provide care for my aging mother,
00:46:03.700 | my aging father?
00:46:05.100 | Oftentimes to have a 24/7 private duty nurse,
00:46:08.220 | that's certainly a six-figure sum,
00:46:10.660 | perhaps as much as 130, $150,000 a year
00:46:14.080 | for high-quality care.
00:46:15.860 | Well, you can have a very high-quality,
00:46:19.060 | 24/7 nursing relationship for your aging parents in Mexico
00:46:24.060 | for a third of that cost and really do better.
00:46:28.660 | So this is something that is well worth
00:46:31.540 | paying careful attention to if you're in those situations.
00:46:36.460 | Beyond that though, I find that a lot of the cost,
00:46:39.940 | beyond those two things,
00:46:40.780 | I find a lot of the costs of living abroad are simply higher
00:46:44.340 | and most US Americans do not understand
00:46:47.060 | how good they have it in the United States.
00:46:50.340 | Almost everything you can possibly buy
00:46:53.540 | is cheaper in the United States
00:46:55.300 | than almost anywhere else in the world.
00:46:57.380 | Even the good stuff,
00:46:59.020 | even the higher-quality products, et cetera.
00:47:02.340 | The big-ticket items in the United States
00:47:04.740 | are cheaper than almost anywhere else, cars for example.
00:47:08.300 | In the United States,
00:47:09.340 | you have such a massive new car marketplace
00:47:14.340 | that people are frequently buying new cars,
00:47:17.780 | they're buying good cars.
00:47:19.740 | Because of that massive new car marketplace,
00:47:22.420 | the used marketplace is extraordinarily robust.
00:47:26.340 | Anybody who wants to go out
00:47:27.860 | and buy a high-quality family minivan,
00:47:31.620 | you can do that with 4,000 bucks.
00:47:33.380 | 4,000 bucks, you can find a six-year-old or eight-year-old,
00:47:36.700 | Toyota Sienna, Honda Odyssey, something like that,
00:47:39.260 | which can last you for years.
00:47:41.620 | It's reliable, it's safe, it's economical,
00:47:43.860 | it's just a wonderful vehicle
00:47:44.980 | and it costs practically nothing
00:47:46.900 | compared to the costs in many other places.
00:47:49.180 | The United States has very low import taxes,
00:47:51.700 | so the actual cost of a vehicle is low
00:47:54.300 | compared to the import taxes in other places.
00:47:57.100 | So you have this robust new car marketplace
00:47:59.540 | that is more robust than most places
00:48:03.100 | and that leads to an incredibly robust used car marketplace.
00:48:06.420 | For household goods, appliances,
00:48:09.300 | you know, in the United States, it's common
00:48:11.660 | that when you rent an apartment,
00:48:12.900 | it comes with the appliances built in.
00:48:14.780 | That's not common in many places in the world.
00:48:16.980 | Many places in the world, you rent an apartment
00:48:19.740 | and you have to then go and buy all the appliances.
00:48:21.820 | And so where do you get a bunch
00:48:23.000 | of high-quality used appliances?
00:48:24.700 | Well, in the United States, they're very readily available.
00:48:27.200 | There's tons of good used ones available
00:48:29.020 | because there's tons of new ones available that are cheap.
00:48:31.420 | And so just everything is cheap.
00:48:34.240 | In the United States, you have a tremendous library system,
00:48:37.380 | all kinds of free books, free computer access,
00:48:41.660 | free movies, free music, everything is available for free.
00:48:46.660 | And so with that internet connection,
00:48:48.460 | those DVD collections, et cetera,
00:48:50.780 | you can have entertainment that's very inexpensive.
00:48:53.900 | There are some places in the United States that are unsafe,
00:48:56.780 | but in general, you can live most places
00:48:59.380 | without worrying too much about security concerns.
00:49:02.580 | That's a tremendous benefit
00:49:04.400 | because in some other places, it's not that way.
00:49:07.000 | You're gonna wind up having to incur the cost
00:49:10.260 | of living in some places in a gated neighborhood
00:49:12.660 | or in a place with community levels of security.
00:49:16.840 | That's not necessary in the United States.
00:49:19.080 | Cost of cell phone plans, cost of cell phones, right?
00:49:22.300 | You can go on OfferUp
00:49:23.340 | and grab yourself a very good cell phone for cheap.
00:49:26.280 | That marketplace doesn't exist in some other places.
00:49:30.320 | And so just on down the list, even food.
00:49:32.660 | Now, food is kind of an interesting variation.
00:49:36.140 | Calories, you can buy calories in the United States
00:49:39.420 | cheaper than almost anywhere else in the world.
00:49:41.060 | You have subsidized bulk food.
00:49:42.760 | So if you wanna buy wheat and corn, et cetera,
00:49:44.860 | I mean, it's just so insanely cheap to buy a bag of flour.
00:49:49.220 | Specialty foods in the United States certainly cost more,
00:49:52.700 | but it's relatively easy for you to adjust them
00:49:55.620 | and to get them where they're not even available
00:49:58.300 | in many places in the world.
00:50:00.080 | So I don't plan to move back to the United States right now,
00:50:05.080 | but I wanna point out to you just for the sake of honesty
00:50:08.940 | that if you're just pining to go away for some other reason,
00:50:12.980 | recognize that it probably is pretty good
00:50:15.340 | where you are in the United States.
00:50:17.700 | You can probably live cheaper here
00:50:19.860 | than virtually anywhere else that I know of,
00:50:22.820 | especially if you know the systems.
00:50:24.820 | I've spent a lot of time over the last few years
00:50:26.900 | going through government offices and doing this
00:50:29.700 | and doing that and going through
00:50:30.720 | all these different procedures and whatnot.
00:50:33.060 | This stuff is so time-consuming.
00:50:35.140 | It is so time-consuming and expensive.
00:50:40.140 | And then I came back and one of the things
00:50:44.820 | I've done here in Florida was renew my driver's license.
00:50:46.860 | I couldn't renew it online at this point,
00:50:48.540 | so I had to renew it in person.
00:50:50.180 | And with the exception of the fact that because of COVID,
00:50:53.260 | I had to get an appointment for it,
00:50:55.060 | it was just in and out and it cost me 60 bucks, right?
00:50:58.400 | Done.
00:50:59.340 | It was much more efficient than many other places
00:51:02.780 | that I have been involved in this kind of
00:51:07.100 | bureaucratic approach.
00:51:08.700 | So I wanna encourage you that the United States
00:51:11.580 | really is a very good place to live
00:51:15.000 | and you can live here cheaper than almost anywhere else.
00:51:18.900 | Also in terms of business opportunities
00:51:20.620 | and opportunities for work, you can make money here
00:51:23.860 | in ways that you cannot in other places.
00:51:26.940 | There is plenty of employment opportunities
00:51:29.780 | available for you in the United States.
00:51:31.220 | And that's why so many people who are underemployed
00:51:33.620 | all around the world want to move to the United States
00:51:36.300 | because of employment opportunities.
00:51:37.940 | It's just a tremendously powerful and robust market
00:51:42.280 | with so much diversity and so much strength.
00:51:46.140 | There are options all across the country.
00:51:48.340 | I'm reminded also of that while I think
00:51:52.240 | that Americans' confidence and personal freedom
00:51:56.140 | is highly overrated, there are indeed significant levels
00:52:00.540 | of personal freedom that are useful.
00:52:02.620 | And so whether it's medical freedom,
00:52:04.740 | educational freedom, personal freedom,
00:52:07.000 | there are high levels of personal freedom that you see.
00:52:10.260 | Now that's been tested a lot during the pandemic
00:52:14.060 | of the last year, been really tested.
00:52:16.540 | And in some places, people failed the test.
00:52:18.940 | In some places, they passed the test,
00:52:20.520 | but that's been really, really good.
00:52:22.140 | Let me talk now about the state of Florida.
00:52:24.940 | When you look across the United States,
00:52:27.900 | there are, of course, many different regions
00:52:31.500 | that you can choose from.
00:52:33.120 | The reason why most of us live where we live
00:52:35.380 | is gonna be because, number one,
00:52:36.820 | that's where our family is from,
00:52:38.220 | those that we love and we wanna be around them
00:52:40.620 | with very good reason.
00:52:41.540 | Number two, it's going to be
00:52:43.460 | because that's where we earn money.
00:52:45.000 | That's where our economic opportunities are.
00:52:47.740 | And these are really good reasons to live where you live.
00:52:51.120 | But when you wanna look for a good mixture
00:52:55.120 | of freedoms, of costs, et cetera,
00:52:58.320 | I think Florida offers a tremendous value proposition.
00:53:03.320 | It really does.
00:53:04.880 | And so you really should seriously consider Florida
00:53:09.520 | as an option for you if you're thinking about relocating.
00:53:13.480 | Florida is not the best in everything,
00:53:15.660 | but it's very good in many things.
00:53:19.500 | So I care a lot about your freedom,
00:53:22.240 | your personal freedom, and your financial freedom.
00:53:24.840 | Florida is pretty good on the majority of laws
00:53:29.640 | that are gonna affect your personal freedoms.
00:53:32.420 | Things that are important to me,
00:53:33.880 | things like home education laws, they're not onerous.
00:53:37.960 | Things like child-related laws, they're not onerous.
00:53:42.720 | Things like gun laws, they're not bad, they're pretty good.
00:53:47.840 | Overall, you can pretty well be left alone in Florida.
00:53:51.740 | In terms of the costs, the costs of Florida,
00:53:54.500 | no state income taxes, we all know that.
00:53:56.960 | No really just overbearing government costs,
00:54:03.100 | for example, we don't have
00:54:05.060 | the California Franchise Tax Board, et cetera.
00:54:07.700 | It's pretty cheap to start a business,
00:54:09.220 | maintain an LLC, et cetera, in the country.
00:54:13.180 | Most of the costs of things like registering a vehicle,
00:54:16.860 | et cetera, are pretty modest.
00:54:19.080 | Things that are high in Florida,
00:54:20.580 | property taxes can be high,
00:54:23.140 | especially in the more built-up areas.
00:54:26.980 | If you're in Dade County, Broward County,
00:54:29.300 | Palm Beach County, to some extent in Orlando,
00:54:33.420 | Tampa, Jacksonville, property taxes are not low.
00:54:37.460 | That's how the state
00:54:39.940 | and the local governments fund themselves.
00:54:42.580 | But they're not, I don't think, crazy.
00:54:45.820 | I often will hear, talk to people in the Northeast,
00:54:47.820 | talk about their property taxes,
00:54:49.140 | and they're much higher than they are in Florida.
00:54:51.740 | So they're not low in Florida,
00:54:54.040 | but they are low in other places.
00:54:56.800 | And so you can be in other places.
00:54:58.860 | Right now, I'm in Central Florida,
00:55:01.860 | looking out at one of the lakes in Central Florida,
00:55:04.860 | and the property taxes on this house that I'm staying in
00:55:07.240 | are just extremely modest,
00:55:09.580 | even though I've got a lake view right outside the window.
00:55:12.780 | So a lot of these costs really are pretty modest.
00:55:16.780 | Florida is a wonderful place for wealthy people.
00:55:22.820 | Again, you have a cultural respect for wealth
00:55:26.780 | and a desire to attract wealth.
00:55:29.140 | It's built into the culture.
00:55:31.860 | It's built into the government infrastructure.
00:55:34.660 | You have the no state income tax,
00:55:37.900 | and that is very deeply entwined in the Florida culture.
00:55:42.540 | I don't see that changing any time soon,
00:55:44.940 | because Floridians are used to it,
00:55:46.700 | and they're not gonna stand for it.
00:55:48.420 | You have the very good asset protection coverages, right?
00:55:53.020 | Complete exemption of your house, right?
00:55:55.260 | You can live in a $50 million house
00:55:57.460 | on Palm Beach Island or Jupiter Island.
00:55:59.340 | It's completely protected.
00:56:00.740 | And then that extends to 401ks, of course,
00:56:05.460 | on the federal regulation level,
00:56:06.700 | but then IRAs, Roth IRAs, 529s,
00:56:09.360 | cash value life insurance policies, annuities, et cetera,
00:56:12.600 | that are protected from the claims of creditors.
00:56:14.440 | There's lots of very good,
00:56:15.980 | very robust asset protection laws.
00:56:18.580 | And so on the whole, I think from the legal framework,
00:56:22.720 | Florida is very, very good.
00:56:25.400 | Do other states have something to offer?
00:56:27.460 | Does Texas have a lot to offer?
00:56:29.160 | I think absolutely.
00:56:30.040 | Does Wyoming have a lot to offer?
00:56:31.980 | Without question.
00:56:33.360 | But what Florida has that a lot of those other places
00:56:36.760 | don't have is a much more interesting culture,
00:56:40.540 | cultural variety.
00:56:42.300 | If you wanna live the flashy downtown lifestyle,
00:56:46.820 | you'll be so comfortable in Miami.
00:56:49.560 | If you want to live the kind of hometown redneck lifestyle
00:56:54.560 | and go gator hunting and fishing every day,
00:56:58.200 | you'll love Belle Glade or Cluiston.
00:57:01.680 | If you wanna live the laid back,
00:57:04.480 | white sandy beaches lifestyle,
00:57:06.360 | but in the city, you'll love Tampa, Clearwater.
00:57:10.040 | If you want the laid back old Florida,
00:57:13.920 | Apalachicola will treat you so well,
00:57:15.920 | or Tallahassee, or something that's like that.
00:57:18.560 | If you want kind of the interesting built up city,
00:57:23.080 | you've got Jacksonville.
00:57:24.240 | I mean, if you want theme parks, you wanna go to Orlando.
00:57:27.880 | If you want beautiful rolling,
00:57:29.600 | like things that remind you of the rolling hills
00:57:32.300 | of Kentucky and horse farms,
00:57:34.640 | you've got, what's the town south of Gainesville,
00:57:38.240 | where you just have this incredible equestrian lifestyle.
00:57:43.240 | So there are options, even up to North Florida,
00:57:47.640 | if you want more cool, if you don't like the weather,
00:57:50.720 | right, you don't want the heat and the humidity.
00:57:52.680 | That is the downside of Florida,
00:57:54.440 | the heat and the humidity during the summer.
00:57:56.760 | Well, you can't get away from the heat and humidity
00:57:59.560 | in North Florida, but you can get more
00:58:00.780 | of the cold inland scenario up in North Central Florida.
00:58:05.120 | So it's a huge state.
00:58:07.520 | The Keys has a totally different lifestyle to offer.
00:58:10.500 | So the more time I've spent traveling
00:58:14.100 | around the United States, looking at these options,
00:58:15.960 | more time I spend traveling around the world,
00:58:18.880 | more impressed I am with my home state.
00:58:21.540 | And I really think it is well worth your consideration
00:58:25.200 | if you're thinking about relocating somewhere.
00:58:28.960 | Florida is extremely well connected, right?
00:58:31.720 | If you do business in the Americas,
00:58:34.620 | I think South Florida is a tremendous place to be based.
00:58:38.780 | You have connections in Miami and Fort Lauderdale.
00:58:42.140 | In Miami and Fort Lauderdale,
00:58:43.180 | you have two massive international airports
00:58:46.140 | that reach the world very, very easily.
00:58:49.220 | Palm Beach International is good
00:58:51.580 | for US connections as well.
00:58:54.300 | But with Miami and Fort Lauderdale,
00:58:55.900 | you've got connections to every Caribbean island,
00:58:57.860 | every Central and South American country for cheap, right?
00:59:00.940 | For cheap.
00:59:01.920 | We flew from Costa Rica to Fort Lauderdale
00:59:04.420 | on Spirit Airlines, one of the low budget airlines
00:59:06.920 | for 100 and something dollars a ticket.
00:59:09.920 | That's phenomenal to have one-way tickets
00:59:11.780 | back and forth to Central America.
00:59:13.160 | South America is cheap,
00:59:14.360 | well connected all through South America.
00:59:16.440 | Obviously you can hit Europe directly.
00:59:17.960 | I'll be flying out of Miami directly into Paris
00:59:21.320 | in a few weeks.
00:59:22.440 | And so on Air France, it's well connected to Europe.
00:59:25.680 | And so it's pretty well connected
00:59:27.240 | in yet most of the countries within striking distance.
00:59:29.760 | You can fly to, there've been times in the past,
00:59:32.800 | I flew to New York in the morning one time
00:59:34.280 | and flew back in the evening.
00:59:35.680 | So if you've got business in the Northeast,
00:59:37.320 | you can genuinely make it a day trip
00:59:38.800 | on one of the commuter flights.
00:59:39.840 | It's really, really very good.
00:59:43.080 | You can fly directly from Palm Beach to JFK.
00:59:46.300 | Small airport, fast to get in and out.
00:59:48.480 | Don't have to arrive at the airport too much in advance.
00:59:51.600 | It's just a really convenient place to go.
00:59:54.440 | So I don't have any agenda
00:59:56.220 | other than just to share with you what I observe
00:59:58.880 | and try to be honest.
01:00:02.340 | I think that sometimes people are so gung ho
01:00:05.480 | on getting out of the United States
01:00:07.320 | that they don't honestly appreciate
01:00:08.960 | the things about the United States.
01:00:11.060 | And so I feel like that kind of honesty
01:00:13.080 | should be represented.
01:00:15.040 | Thank you so much for listening to today's podcast.
01:00:17.840 | I will be back with you very soon.
01:00:20.000 | Remember, if you'd like to join me on next week's Q&A,
01:00:22.120 | go to patreon.com, search for Radical Personal Finance
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